U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
S
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended July 31, 2012
£
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _______________ to _________________
Commission file number: 0-11485
ACCELR8 TECHNOLOGY
CORPORATION
(Exact name of Registrant as Specified in Its
Charter)
Colorado
|
84-1072256
|
(State or Other Jurisdiction
|
|
of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
|
|
7000 North Broadway, Bldg 3-307
|
|
Denver, Colorado
|
80221
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s telephone number, including
area code:
(303) 863-8088
SECURITIES REGISTERED PURSUANT TO SECTION 12
(b) OF THE ACT:
Name of each exchange on which registered:
The NYSE AMEX EQUITIES
COMMON STOCK, NO PAR VALUE PER SHARE
SECURITIES REGISTERED PURSUANT TO SECTION 12
(G) OF THE ACT:
NONE
Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
£
Yes
S
No
Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
£
Yes
S
No
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
S
Yes
£
No
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
S
Yes
£
No
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
£
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer
£
|
Accelerated
filer
£
|
Non-accelerated filer
£
|
Smaller reporting
company
S
|
|
|
(Do not check if a smaller reporting company)
|
|
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
£
Yes
S
No
The aggregate market value of the shares of
Common Stock, no par value per share, of the registrant held by non-affiliates on January 31, 2012 was $12,274,828, which was computed
based upon the closing price of the Registrant’s Common Stock on that date.
There were 25,231,939 shares of Common Stock of the registrant outstanding
as of October 15, 2012.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive
Proxy Statement relating to its 2012 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual
Report on Form 10-K where indicated. Such Proxy Statement will be filed with the U.S. Securities and Exchange Commission within
120 days after the end of the fiscal year to which this report relates.
2
TABLE OF CONTENTS
PART I
|
|
|
|
|
Item 1
|
Business
|
3
|
|
Item 1A
|
Risk Factors
|
8
|
|
Item 1B
|
Unresolved Staff Comments
|
13
|
|
Item 2
|
Properties
|
13
|
|
Item 3
|
Legal Proceedings
|
13
|
|
Item 4
|
Mine Safety Disclosures
|
13
|
|
|
|
|
PART II
|
|
|
|
|
Item 5
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
14
|
|
Item 6
|
Selected Financial Data
|
15
|
|
Item 7
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
15
|
|
Item 7A
|
Quantitative and Qualitative Disclosures About Market Risk
|
20
|
|
Item 8
|
Financial Statements and Supplementary Financial Data
|
20
|
|
Item 9
|
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
37
|
|
Item 9A
|
Controls and Procedures
|
37
|
|
Item 9B
|
Other Information
|
37
|
|
|
|
|
PART III
|
|
|
|
|
Item 10
|
Directors, Executive Officers and Corporate Governance
|
38
|
|
Item 11
|
Executive Compensation
|
38
|
|
Item 12
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
39
|
|
Item 13
|
Certain Relationships and Related Transactions, and Director Independence
|
39
|
|
Item 14
|
Principal Accountant Fees and Services
|
39
|
|
|
|
|
PART IV
|
|
|
|
|
Item 15
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
39
|
Introductory Note
Except as otherwise indicated
by the context, references in this Annual Report on Form 10-K (this “Form 10-K”) to the “Company,” “Accelr8,”
“we,” “us” or “our” are references to the combined business of Accelr8 Technology Corporation.
Special Note Regarding Forward-Looking Statements
This report contains forward-looking
statements and information relating to Accelr8 that are based on the beliefs of our management as well as assumptions made by and
information currently available to us. When used in this Form 10-K, forward-looking statements include, but are not
limited to, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,”
“plan” and similar expressions, as well as statements regarding technologies and products we are developing or intend
to develop in the future, the ability of such technologies and products to work as intended and bring to market, opportunities
for the Company and its technologies, statements regarding competition, the market and industry in which we intend to compete,
demand and acceptance of new products, any statements of the plans, strategies and objectives of management for future operations,
any statements regarding future economic conditions or performance, any statements of belief or intention, and any statements or
assumptions underlying any of the foregoing. These statements reflect our current view concerning future events and
actions and are subject to risks, uncertainties and assumptions. There are important factors that could cause actual
results to vary materially from those described in this Form 10-K as anticipated, estimated or expected, including, but not limited
to the factors listed in Item 1A – Risk Factors in this Annual Report on Form 10-K. Except as required by law, we assume
no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially
from those anticipated in any forward- looking statements, even if new information becomes available in the future.
2
PART I
Item 1. Business
Overview
Accelr8 Technology Corporation
is focused on developing and commercializing innovative instrumentation for the rapid identification and antibiotic susceptibility
testing of infectious pathogens. The Company’s BACcel
TM
platform utilizes a proprietary culture-free process with
both genomic and phenotypic detection technologies that decrease time to result while maintaining high sensitivity and specificity.
Background
Every six minutes another
American dies from a hospital-acquired infection (HAI). The US Centers for Disease Control and Prevention estimates that almost
100,000 HAI fatalities occur annually that are attributable to bacterial infections acquired in a US healthcare facility. HAI occurs
when a patient enters the hospital for some reason other than an infectious disease, then contracts infection more than two days
after admission. The HAI mortality rate is more than double that from auto accidents, far more than any type of cancer except lung
cancer, and more than seven and one-half times that from AIDS. Despite intensive efforts to improve prevention and care, mortality
has remained the same for more than ten years.
Yet, in theory, none of
these patients should die. An effective antibiotic exists for almost every HAI. Although bacterial strains exist that may resist
any particular drug, strains that resist all antibiotics remain rare.
Lab delay is a major culprit
leading to the high HAI mortality rate. Medical experts believe that inadequate initial therapy substantially elevates the risk
of severe morbidity and mortality in critically ill patients. For critically ill patients, the physician must start adequate antibiotics
within 2-4 hours of symptom onset. But lab cultures typically take 2-3 days to identify organisms and assess their antibiotic susceptibility.
The physician has no choice but to start therapy without knowing the organism or its drug susceptibility. Most often, the physician
must choose a combination of two or three broad-spectrum antibiotics, based on the patient’s history, clinical indicators,
and the hospital’s recent history of antibiotic effectiveness in similar infections. Unfortunately, widespread and increasingly
complex multiple antibiotic resistance typically causes such “empiric therapy” to prove inadequate in 20% to 40% of
cases.
Further, switching to adequate
therapy as soon as the next day fails to improve outcomes. Once an infection passes a critical point, antibiotics have little to
no impact on its condition.
Popular news media have
reported widely about methicillin-resistant Staphylococcus aureus (“MRSA”) as a multi-resistant "superbug."
Organizations such as the US Centers for Disease Control and Prevention (“CDC”) and the Infectious Diseases Society
of America have also identified other multi-drug resistant organisms as presenting even greater threats. They include Pseudomonas,
Acinetobacter, and Klebsiella. In the hospital intensive care unit (“ICU”), “Staph” infections (including
MRSA) typically cause approximately 30% of fatal HAI’s. This increase in multi-drug resistant organisms creates an opportunity
for the Company by driving demand for rapid identification.
We believe that the development
of new classes of antibiotics has significantly declined. Improved prevention and infection control have limited potential. In
the meantime, bacteria continue to evolve and develop additional drug resistance. Bacteria have become so well adapted to the hospital
that even the best preventive efforts do not eradicate them. Hospitals that lead in best preventive practices still suffer from
endemic hospital-adapted strains that continue to cause high rates of attributable morbidity and mortality. Such examples suggest
that each passing year sees a reduction in the number of cases that can be treated successfully with any particular drug.
3
We believe that dramatically
speeding up laboratory diagnostics will help to improve the success rate for initial therapy for HAIs.
Products
BACcel™ System Development
Since 2004, we have focused
our efforts on the development of an innovative rapid diagnostic platform, the BACcel™ system, intended for rapid diagnosis
in life-threatening bacterial infections. Our goal is to reduce the failure rate of initial therapy by shortening the lab turnaround
time to less than eight hours, rather than the 2-3 days now required. Rapid testing would provide guidance in time to influence
initial therapy.
The BACcel™ system
applies our proprietary technology to eliminate time-consuming bacterial culturing, thus eliminating the major source of delay
with current testing methods. Our system includes a fixed instrument and proprietary single-use (disposable) test cassettes. Each
cassette tests a single patient specimen and is then discarded.
BACcel™ uses long-accepted
bacteriological testing principles, but applies our proprietary technology to adapt them to analyze live bacteria extracted directly
from a patient specimen. The instrumentation uses automated digital microscopy to measure the responses of extracted live bacterial
cells to various test conditions. Our system analyzes thousands of these individual cells to arrive at organism identification
and antibiotic resistance characteristics.
Based on internal lab data,
we believe that the BACcel™ system will identify the organisms present in a patient's specimen and count the number of organisms
of each type in less than one hour after receiving a specimen. We believe that the BACcel™ system will then additionally
report antibiotic resistance for each type of organism within a total of 4-6 hours after receiving a specimen. The clinical purpose
of reporting antibiotic resistance is to narrow the drug choices available for therapy and rule out antibiotic classes that are
most likely to fail. Quantitative identification in less than one hour enables first-dose therapy guidance that can improve the
efficacy of antimicrobial treatment. In addition, de-escalation before the second dose helps to prolong the effectiveness of broad-spectrum
antibiotics when lower-cost and older narrow-spectrum agents can provide at least equivalent activity (drug “stewardship”).
Additional Products
In addition to BACcel™
system development, we have developed and licensed OptiChem surface coatings for use in microarraying components. As a coating
for analytical devices, management believes that OptiChem offers superior noise rejection (non-specific binding by interfering
substances) and high capacity for target binding, compared with other bio-coatings. For example, in microarraying this results
in higher sensitivity and simplified sample preparation. OptiChem also offers the ability to apply micro-patterns, enabling novel
advanced analyzer designs. The coating is widely adaptable to virtually any base material, such as plastics, and even highly sophisticated
designs can be economically scaled to high-volume production. We have licensed various OptiChem microarraying coatings to SCHOTT
(Germany), NanoString (WA), and Nanosphere (IL). See “Sales, Licensing, and Alliances” below.
Research and Development
We have used two developmental
instruments in our laboratory since 2006. In March 2011 we upgraded one of the systems to test engineering improvements. In April
2011, we installed a completely upgraded third system that substantially increases analytical sensitivity and scanning speed. This
next-generation system includes a separate fluidic robot and a custom high-speed scanning microscope. The latest prototype increases
scan rate approximately 40-fold relative to the original prototypes. This speed substantially improves detection sensitivity for
working with specimens that have low microbial counts. It also improves our ability to analyze specimens that require dilution
because of high levels of interfering materials, such as endotracheal aspirates used to monitor treatment effectiveness during
therapy for pneumonia. We have used the latest prototype for formal proof of concept testing under independent outside observation
of testing and outside performance assessment.
4
During the fiscal year
ended July 31, 2008, the Company placed two identical development systems in collaborating research institutions: Denver Health
, and Barnes-Jewish Hospital at Washington University in St. Louis. The two institutions have replicated and extended the Company’s
own pre-clinical research using analytical methods developed by the Company. Both institutions have also begun pilot clinical studies
on specimens from ICU patients using experimental protocols authorized by their respective Institutional Review Boards.
Management believes that
joint studies will expand and continue and will be presented periodically to the relevant scientific and medical communities. Since
2006, we have made 21 technical presentations at major peer-reviewed national scientific and clinical congresses. The 12 most recent
were co-authored with principal investigators at Denver Health, and Barnes-Jewish Hospital. At the annual meeting of the American
Thoracic Society in March 2011, our principal investigators at Denver Health presented preliminary results from a prospective clinical
pilot study with ICU patients under informed consent. This was our first presentation of a clinical study solely to specialists
in Critical Care Medicine. We intend to continue our presentation and publication program as a permanent part of our business development
program. (See Note 13 to the footnotes to the consolidated financial statements included in this Annual Report on Form 10-K.)
In June 2010, the Company
entered into an Evaluation Agreement and Letter of Intent with Novartis Vaccines and Diagnostics, Inc. (“Novartis”),
a division of Novartis Corporation. Pursuant to the Evaluation Agreement, Novartis evaluated the results of the Company’s
BACcel™ system in identifying the type and quantity of bacterial pathogens in clinical specimens. Pursuant to the Letter
of Intent, the Company and Novartis agreed to negotiate in good faith a formal business relationship and definitive agreement regarding
the design, development, commercialization and support strength of each party. The Letter of Intent was non-binding and granted
Novartis the exclusive right (the “Exclusive Right”) to evaluate and negotiate a license or other comparable agreement
for access to the Company’s BACcel™ system intellectual property.
In connection with the
Evaluation Agreement, the Company successfully performed a series of technical studies, including formal Proof of Concept studies,
with Novartis that demonstrated performance of the advanced BACcel™ laboratory prototype. Further, Novartis independently
tested Accelr8’s key business assumptions and found general concurrence.
Pursuant to the Evaluation
Agreement and the Letter of Intent, Novartis made up-front payments and funded the project on a monthly basis until September 30,
2011. Novartis also funded additional activities within its own organization, funded independent engineering firms to advance the
product technology, and retained other outside providers to perform due diligence investigations on relevant business areas.
The Evaluation Agreement
with Novartis expired on September 30, 2011 without Novartis exercising its option for licensing the Company’s BACcel™
system intellectual property.
In ongoing technical development
of the BACcel™ system, our internal technical team designs the analytical methods and validates them through well-controlled
experiments. Studies include comparisons of results between standard methods and the BACcel™ system using well-characterized
bacterial strains and clinical patient specimens. Examples of patient specimens tested to date include lower respiratory tract
specimens (endotracheal aspirates, visually-guided bronchoalveolar lavage – BAL, and mini-BAL,) urine and cerebrospinal fluid.
We have also tested positive blood cultures that originally contained extremely low numbers of infectious pathogens.
In addition to developing
analytical methods, our internal team proactively guides engineering development and originates additional new technology. As one
example, we internally conceived and proved feasibility of a rapid specimen preparation method that appears to enable complete
and practical automation for all BACcel™ associated operations. We filed a patent application for this technology in March
2011. This subsystem can also stand alone as a product, and integrate into other medical devices that require specimen pre-processing
by automated methods. We created specifications for an outside engineering firm to provide test fixtures and advance toward product
development.
5
In
May 2012, the Company and Denver Health were notified that the Defense
Medical Research and Development Program ("DMRDP") recommended $2 million of
funding for a proposed 35-month project of which the Company estimates it
will receive direct monies for internal research and development of
$750,000. The joint proposal became the sole recipient under the Military
Infectious Diseases Applied Research Award program for rapid detection of
serious antibiotic-resistant infections. The project will apply the
Company’s BACcel rapid diagnostic system to wound infections and other
serious infections secondary to trauma.
In June 2012, the company
began a reorganization, resulting in a significant planned increase in internal research and development staff. This team - including
engineers, chemists, and microbiologists - has significant experience in the diagnostics field, having developed and commercialized
numerous IVD instruments and tests.
During the fiscal years
ended July 31, 2012 and 2011, we spent $431,906 and $454,997 respectively, on research and development activities.
Sales, Licensing, and Alliances
The Company signed a licensing
agreement for microarraying slides using OptiChem coatings with Schott Jenaer Glas GmbH ("SCHOTT") on November 4, 2004.
Since this time, SCHOTT and the Company have extended this license. On August 15, 2011, Schott Technical Glass Solutions GmbH renewed
and expanded its licenses for OptiChem microarray slide products, designated as Schott Nexterion Slide H and Slide HS. The terms
remain substantially the same as in previous agreements, with the expansion to include microarray slide products intended for use
in medical diagnostic devices. Previous agreements excluded medical applications. This expansion makes SCHOTT the second company
that intends to use OptiChem coatings on medical devices.
The new agreement extends
the non-exclusive license through November 24, 2014. SCHOTT paid the Company $150,000 comprised of a one-time license fee ($50,000)
and non-refundable prepaid royalties ($100,000). Royalties consist of 5% of SCHOTT’s net product sales. For medical applications,
SCHOTT agrees to refer individual customers directly to the Company for licensing if annual purchases by a customer exceed 20,000
units.
On October 5, 2007, the
Company entered into an exclusive seven-year license with NanoString Technologies, Inc. (“NanoString”). The license
grants NanoString the right to apply OptiChem coatings to NanoString's proprietary molecular detection products.
Effective June 14, 2010,
the Company entered into the Evaluation Agreement and Letter of Intent with Novartis discussed above. During the fiscal years ended
July 31, 2012 and 2011, total revenues from Novartis were $140,000 and $842,408, respectively or 59.3% and 75.1% of total revenues.
On July 9, 2010 the
Company entered into a non-exclusive license to Nanosphere, Inc. The license grants to Nanosphere the right to apply OptiChem coatings
to Nanosphere’s proprietary analytical products. The products may also include FDA-regulated diagnostics devices. Pursuant
to the license agreement, Nanosphere paid the Company a non-refundable first-year fee of $150,000 plus a $15,000 technology transfer
fee. On each anniversary of the agreement date, the license calls for Nanosphere to pay to the Company the amounts of $350,000
in 2011; $600,000 in 2012, and $750,000 in 2013 in order to complete the payments for rights under the remaining patent life. Pursuant
to the Company’s revenue recognition policies and generally accepted accounting principles, all of the amounts due from Nanosphere
were recognized as OptiChem revenue during the fiscal year ended July 31, 2010.
Competition
To the best of our knowledge,
no other company now has a product with capabilities similar to those of the BACcel™ system. However, the industry in which
we compete is subject to rapid technological changes, and we may face competition for the BACcel™ system.
6
Publicity frequently appears
in the press concerning new products for rapid bacterial identification using genes or other molecular markers (“molecular
diagnostics”). Numerous acquisitions, licenses, and distribution arrangements have been announced over the last few years
for such products. However, we do not believe that any of these technologies appears applicable to treatment decision support for
active, life-threatening infections. For example, gene detection can be highly sensitive and specific, but very few antibiotic
resistance mechanisms are simple enough to allow accurate guidance for drug selection only by using the presence or absence of
specific genes. Even in those rare instances that have a direct relationship between a gene and effective resistance, such as “MRSA”
strains, leading literature has reported novel mutations that escape detection by recently commercialized tests.
Fundamental biological
limitations arise from the complexity of the majority of drug resistance expression mechanisms. This complexity precludes direct
interpretation of molecular marker presence or absence and extrapolating to prescription guidance. Many new diagnostic technologies
also require prior isolation of cultured colonies in order to assure accuracy. The time required to obtain such isolates, with
a minimum of overnight turnaround, prevents these technologies from serving as rapid diagnostics for treatment decision support.
Nevertheless, commercial
suppliers of gene marker tests, such as Cepheid, have gained approval for direct analysis of positive blood cultures. Blood cultures
also typically require a minimum of overnight growth to produce enough organisms to detect. Existing marker-based tests identify
a very small number of organism genera or species, and none identify enough of the high-threat organisms to provide an alternative
to standard culturing. Furthermore, the inability to identify multiple drug resistance mechanisms precludes them from effective
treatment decision support for critically ill patients.
The leading companies with
automated microbiological testing include Becton Dickinson, bioMerieux, MicroScan, and Trek Diagnostics. These companies provide
products for the broad-based culturing and analysis of a wide variety of bacteria. Such products require purified bacterial strains
or “isolates” for analysis, which requires at least overnight culturing to produce enough organisms to test. These
products then require at least one additional growth cycle as part of the test. These products use standard culturing methods,
including enrichment growth and colony isolation, and therefore cannot achieve the necessary speed for the applications addressed
by the BACcel™ system.
Another new technology
receiving wide attention is mass spectrometry, and particularly the MALDI-TOF (matrix-assisted laser desorption ionization time
of flight) version, such as the Biotyper® system from Bruker which awaits FDA clearance. Bruker has agreements with a number
of companies for distribution, including Becton Dickinson, Trek, and Siemens. bioMerieux has a similar system for distribution
with Shimadzu Corporation. These systems build an empiric database from protein spectra acquired from many thousands of purified
bacterial and fungal strains. They require a pure strain isolate for analysis, and enrichment culturing to produce enough material
to analyze. Some research papers report attempts to directly analyze isolate or blood culture smears, but results are not as reliable
as those from samples prepared using a cleanup process to produce crude protein extracts.
MALDI-TOF systems have
a major advantage over other molecular methods in identifying a very broad range of organisms. Cost of ownership is also substantially
below that of older molecular methods. But the requirement for extensive organism enrichment and purification, as well as the inability
to quantify live organisms or distinguish samples derived from viable organisms, substantially limits this technology from time-critical
decision support. Finally, as with the older molecular methods, MALDI-TOF systems cannot identify major drug resistance expression
and faces the same fundamental biological barriers as gene detection.
Many potential competitors
have greater research and development, financial, manufacturing, marketing and sales resources than we do. In addition, some potential
competitors may, individually or together with companies affiliated with them, have greater human and scientific resources than
we do. Potential competitors could develop technologies and methods for materials that render the BACcel™ system and our
technologies and methodologies less competitive. However, management is not aware of any development programs that address the
same applications as the BACcel™ system.
7
Operations
We own all of our laboratory
equipment. We lease approximately 6,400 square feet of laboratory and administrative space in Denver, Colorado. Within our laboratory
facility, we constructed a cleanroom for research and development and pilot production. We are also under contract to Denver Health
for approximately $3,000 per month for use of its facilities and oversight by an ICU Physician.
BACcel™ system development
requires certain components that are custom-fabricated to our specifications. Such components include injection-molded plastic
components, die-cut laminates, and machined mechanical components. In all applicable cases, we own the production tooling and believe
that we will be able to qualify secondary sources. We plan to maintain inventory levels sufficient to bridge second-source response
times and include an adequate safety factor to support ongoing development.
Intellectual Property
We rely upon a combination
of patent, copyright, trademark and trade secret laws; employee and third party non-disclosure agreements, license agreements and
other intellectual property protection methods to protect our proprietary rights. We are committed to developing a continuing stream
of intellectual property and aggressive protection of our position in key technologies. As of July 31, 2012, we have eight issued
patents plus four United States and eight international patent filings pending.
Accelr8's first patent
on the OptiChem technology, U.S. Patent No. 6,844,028 titled "Functional Surface Coating" was issued on January 18, 2005.
The patent specification covers the core OptiChem technology. On June 27, 2006, the United States Patent Office issued Patent No.
7,067,194 which awarded the Company a patent for devices that use OptiChem coatings.
Accelr8's first patent
on the core BACcel™ technology, U.S. Patent No. 7,341,841 titled "Rapid Microbial Detection and Antimicrobial Susceptibility
Testing" was issued on March 11, 2008. The patent specification covers methods used to derive identification and antibiotic
susceptibility from tests on individual immobilized bacterial cells.
There can be no assurance
that third parties will not assert infringement or other claims against us with respect to any existing or future products. We
cannot assure you that licenses would be available if any of our technology was successfully challenged for infringement by a third
party, or if it became desirable to use any third-party technology to enhance the Company's products. Litigation to protect our
proprietary information or to determine the validity of any third-party claims could result in a significant expense to us and
divert the efforts of our technical and management personnel, whether or not such litigation is determined in our favor.
While we have no knowledge
that we are infringing upon the proprietary rights of any third party, there can be no assurance that such claims will not be asserted
in the future with respect to existing or future products. Any such assertion by a third party could require us to pay royalties,
to participate in costly litigation and defend licensees in any such suit pursuant to indemnification agreements, or to refrain
from selling an alleged infringing product or service.
Employees
We have six full-time employees.
We have not entered into any collective bargaining agreements and consider our labor practices and employee relations to be good.
Item 1A. Risk Factors
Investing in our securities
involves risk. In evaluating the Company, careful consideration should be given to the following risk factors, in addition to the
other information included or incorporated by reference in this Annual Report. Each of these risk factors could materially adversely
affect our business, operating results or financial condition, as well as adversely affect the value of an investment in our common
stock. In addition, the “Forward-Looking Statements” located in this Form 10-K, and the forward-looking statements
included or incorporated by reference herein describe additional uncertainties associated with our business that should be carefully
evaluated prior to making a decision to invest in our securities.
8
Risks Relating to Our Business
Our future success,
profitability and continued existence is dependent in large part upon the successful development of the BACcel
™
system.
We have spent a significant amount of resources developing the BACcel™ system and intend to spend a significant amount more
in the future and there can be no assurance that we will successfully develop the BACcel™ system. If we are not successful
in the development of the BACcel™ system, or if we are unable to sell it into the marketplace or license it to a third party
strategic partner for its development, manufacturing and marketing, it would have a material adverse effect upon the Company’s
revenues and results of operations, it could lead to impairment of certain of our intellectual property and would likely have a
material adverse effect upon the price of the our Common Stock, our results of operations and may result in us having to cease
operations.
Our success depends
partly on our ability to successfully introduce and the market acceptance of our current and new products.
In a market primarily
driven by the need for innovative products, our revenue growth will depend on overcoming various technological challenges to successfully
introduce our current and new products, including but not limited to the BACcel™ system or other technology based upon the
intellectual property included in the BACcel™ system into the marketplace in a timely manner. In addition, we must continue
to develop new applications for our existing technologies, including but not limited to, additional commercial applications for
the BACcel™ system proprietary technology. Market acceptance of these products will depend on many factors, including, but
not limited to, demonstrating that our technologies perform as intended and are superior to other technologies and products that
are currently available or may become available in the future. If we are unable to successfully develop new products or if the
market does not accept our products, or even if we experience difficulties or delays in the development of our products, including
the BACcel™ system, we may be unable to attract additional customers for our products or license our products to other strategic
partners, which would seriously harm our business and future growth prospects.
Limited revenues from
our products and no assurance of future revenues.
We have received limited revenue from sales based on products using our OptiChem
technology. There is no assurance that we will be successful in marketing our OptiChem products in the future or will receive any
revenue from such products. Further, there can be no assurance that we will be successful in marketing the BACcel™ system
or will receive any revenues from it. During the fiscal years ended July 31, 2012 and 2011, we experienced losses from operations.
If we are unsuccessful in completing the development of the BACcel™ system and generating revenues from such product, we
will likely continue to experience losses from operations and negative cash flow as we have in the past, which may have a material
adverse effect upon the Company, its results of operations and the price of our Common Stock may be adversely affected.
Dependence on key employees.
The loss or failure to attract and retain key personnel could significantly impede our performance, including product development,
strategic plans, marketing and other objectives. Our success depends to a substantial extent not only on the ability and experience
of our senior management, but particularly upon Lawrence Mehren, our Chief Executive Officer and President. We do not have key
man life insurance on Mr. Mehren. To the extent that the services of Mr. Mehren would be unavailable to us, we would be required
to find another person to perform the duties Mr. Mehren otherwise would perform. We may be unable to employ another qualified person
with the appropriate background and expertise to replace Mr. Mehren on terms suitable to us. Further, we believe that our future
success will depend in large part upon our ability to attract and retain highly skilled technical, managerial, sales and marketing
personnel. There can be no assurance that we will be successful in attracting and retaining the personnel we require to develop
and market our products, develop new products and to conduct our operations successfully.
9
If we are unable to
effectively protect our intellectual property, we may be unable to prevent infringement.
Our success depends in part on our
ability to obtain and maintain patent protection for the technology underlying our products, especially that used in the BACcel™
system, both in the United States and in other countries. We cannot assure you that any of the presently pending or future patent
applications will result in issued patents, or that any patents issued to us or licensed by us will not be challenged, invalidated
or held unenforceable. Further, we cannot guarantee that any patents issued to us will provide us with a significant competitive
advantage. If we fail to successfully enforce our proprietary technology or otherwise maintain the proprietary nature of our intellectual
property with respect to our significant current and proposed products, our competitive position, our ability to complete the development
of the BACcel™ system and future sales or license of this product or technology could suffer, which would have a material
adverse effect upon the Company and its results of operations. Notwithstanding our efforts to protect our intellectual property,
our competitors may independently develop similar or alternative technologies or products that are equal to or superior to our
technology and proposed products without infringing on any of our intellectual property rights or design around our proprietary
technologies. If customers prefer these alternative technologies and products as compared to our technology and proposed products,
it may have a material adverse effect upon the Company, our results of operations and the price of our Common Stock may be adversely
affected.
Our products could infringe
on the intellectual property rights of others.
Due to the significant number of U.S. and foreign patents issued to, and other
intellectual property rights owned by entities operating in the industry in which we operate, we believe that there is a significant
risk of litigation arising from infringement of these patents and other rights. Third parties may assert infringement or other
intellectual property claims against us or our licensees. We may have to pay substantial damages, including treble damages, for
past infringement if it is ultimately determined that our products infringe on a third party's proprietary rights. In addition,
even if such claims are without merit, defending a lawsuit may result in substantial expense to us and divert the efforts of our
technical and management personnel. We may also be subject to significant damages or injunctions against development and sale of
some of our products, which could have a material adverse effect on our future revenues. Furthermore, claims of intellectual property
infringement may require us to enter into royalty or license agreements with third parties, and we may be unable to obtain royalty
or license agreements on commercially acceptable terms, if at all.
Third parties may seek
to challenge, invalidate or circumvent issued patents owned by or licensed to us or claim that our products and operations infringe
their patent or other intellectual property rights.
In addition to our patents, we possess an array of unpatented proprietary
technology and know-how and we license intellectual property rights to and from third parties. The measures that we employ to protect
this technology and these rights may not be adequate. We may incur significant expense in any legal proceedings to protect our
proprietary rights or to defend infringement claims by third parties. In addition, claims of third parties against us could result
in awards of substantial damages or court orders that could effectively prevent us from manufacturing, using, importing or selling
our products in the United States or abroad.
Competition.
The
industry in which we compete is subject to rapid technological changes, and we face and expect to continue to face competition
for our products. We may also face competition from non-medical device companies, including pharmaceutical companies that may offer
alternatives to our products. Many of our competitors have greater research and development, financial, manufacturing, marketing
and sales resources than we do. In addition, some of our competitors may, individually or together with companies affiliated with
them, have greater human and scientific resources than we do. Our competitors could develop technologies and methods that render
our technologies and methodologies less competitive. Accordingly, if competitors introduce products that are more effective than
our current and proposed technologies, including but not limited to the BACcel™ system, it could have a material adverse
effect upon the Company, our results of operations and the price of our Common Stock may be adversely affected.
Ability to respond to
technological change.
Our future success will depend significantly on our ability to enhance our current products and develop
or acquire and market new products that keep pace with technological developments and evolving industry standards as well as respond
to changes in customer needs. There can be no assurance that we will be successful in developing or acquiring product enhancements
or new products to address changing technologies and customer requirements adequately, that we can introduce such products on a
timely basis or that any such products or enhancements will be successful in the marketplace. Our delay or failure to develop or
acquire technological improvements or to adapt our products to technological change would have a material adverse effect on our
business, results of operations and financial condition.
10
We use hazardous materials
in some of our research, development and manufacturing processes.
Our research activities sometimes involve the controlled
use of various hazardous materials. Although we believe that our safety procedures for handling and disposing of such materials
comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. We could be held liable for any damages that might result from any accident or release
involving such materials. Any such liability could have a material adverse effect on our business, financial condition and results
of operations.
Changes in governmental
regulations may reduce demand for our products or increase our expenses.
We compete in markets in which we or our customers
must comply with federal, state, local and foreign regulations, such as environmental, health and safety and food and drug regulations.
We develop, configure and market our products to meet customer needs created by these regulations. Any significant change in these
regulations could reduce demand for our products.
We have a single research
and development facility and we may lose revenue and be unable to continue to conduct our research and development and product
development activities if we lose this facility.
We currently conduct all of our research and development and product development
activities in our existing facility in Denver, Colorado. The lease expires in February 2013, at which time we intend to move into
a single facility in Tucson, Arizona. If we were unable to use these facilities to conduct our research and development and product
development activities, we would have no other means of conducting such activities until we were able to restore such capabilities
at the current facility or develop an alternative facility. Further, in such an event, we may lose revenue and significant time
during which we might otherwise have conducted research and development and product development activities. Further, we may not
be able to maintain our relationships with our licensees or customers. While we carry a nominal amount of business interruption
insurance to cover lost revenue and profits, this insurance does not cover all possible situations. In addition, our business interruption
insurance would not compensate us for the loss of opportunity and potential adverse impact on relations with our licensees or customers.
The loss of facility may have a material adverse effect upon the Company and its results of operations.
Our business strategy
approach may be adversely affected by additional healthcare reform and changes in managed healthcare.
Our vision is to develop
and commercialize the BACcel™ system, an innovative, integrated system for rapid identification of bacterial and its antibiotic
resistance in critically ill patients. Healthcare reform and the growth of managed care organizations have been considerable forces
in the medical diagnostics industry and in recent political discussions. These forces continue to and are expected in the future
to place constraints on the levels of overall pricing and thus could have a material adverse effect on our future profit margins
of our products or the amounts that we are able to receive from third parties for the licensing of such products. Such continuing
changes in the United States healthcare market could also force us to alter our approach to selling, marketing, distributing and
servicing our products and customer base. In and outside the United States, changes to government reimbursement policies could
reduce the funding that healthcare service providers have available for diagnostic product expenditures, which could have a material
adverse impact on the use of the products we are developing and our future sales, license and royalty fees and /or profit margin.
We have and intend to
make significant additional investments in research and development, but there is no guarantee that any of these investments will
ultimately result in a commercial product that will generate revenues.
The BACcel™ system integrates several of our component
products, systems and processes. For the year ended July 31, 2012, we spent $431,906 and during the fiscal year ended July 31,
2011 we spent $454,997 on research and development expenses and we intend to spend significantly more on research and development
activities during the fiscal year ending July 31, 2013 and thereafter. Notwithstanding these investments, we anticipate that we
will have to spend additional funds in the research and development of the BACcel™ system. There can be no assurance that
the BACcel™ system will be successful, or even if it is successful will be accepted in the marketplace. Further, we might
also encounter substantial delays in getting products to market in a timely fashion. There can be no assurance that we will complete
the development of the BACcel System, will bring it to market or will generate revenues from licensing or sales.
11
Changes in our business
strategy or plans may adversely affect our operating results and financial condition.
If our business strategy or plans change,
whether in response to changes in economic conditions or developments in the diagnostics industry, or otherwise, we may be required
to expend significantly more resources than planned to develop the BACcel™ system, may have to cease developing the BACcel™
system or develop other products. The expense of such change could adversely affect our operating results and financial condition.
The
regulatory clearance or approval process is expensive, time consuming and uncertain, and the failure to obtain and maintain required
clearances or approvals could prevent us from commercializing our future products.
We are investing in the research
and development of new diagnostic tests, as well as to develop our novel
BACcel™ system.
Our products are subject to 510(k) clearance or pre-market approval by the FDA prior to their marketing for commercial use in the
United States, and to any approvals required by foreign governmental entities prior to their marketing outside the United States.
The 510(k) clearance and pre-market approval processes, as well as the process of obtaining foreign approvals, can be expensive,
time consuming and uncertain. It generally takes from four to twelve months from submission to obtain 510(k) clearance, and from
one to three years from submission to obtain pre-market approval; however, it may take longer, and 510(k) clearance or pre-market
approval may never be obtained. Delays in receipt of, or failure to obtain, clearances or approvals for future products, including
tests that are currently in design or development, would result in delayed, or no, realization of revenues from such products and
in substantial additional costs which could decrease our profitability. We have limited experience in filing FDA applications for
510(k) clearance and pre-market approval. In addition, we are required to continue to comply with applicable FDA and other regulatory
requirements once we have obtained clearance or approval for a product. There can be no assurance that we will obtain or maintain
any required clearance or approval on a timely basis, or at all. Any failure to obtain or any material delay in obtaining FDA clearance
or any failure to maintain compliance with FDA regulatory requirements could harm our business, financial condition and results
of operations.
Colorado law and our
Articles of Incorporation may protect our directors from certain types of lawsuits.
Colorado law provides that our directors
will not be liable to us or our stockholders for monetary damages for all but certain types of conduct as directors. Our Articles
of Incorporation permit us to indemnify our directors and officers against all damages incurred in connection with our business
to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from
recovering damages against our directors caused by their negligence, poor judgment or other circumstances. The indemnification
provisions may require us to use our limited assets to defend our directors and officers against claims, including claims arising
out of their negligence, poor judgment, or other circumstances.
Risks Related to Our
Common Stock
Our stock price has
been volatile and may continue to be volatile; Dividend Policy.
The trading price of our Common Stock has been, and is likely
to continue to be, highly volatile, in large part attributable to developments and circumstances related to factors identified
in "Forward-looking Statements" and "Risk Factors" and the markets response to our operations and financial
condition. The market value of your investment in our Common Stock may rise or fall sharply at any time because of this volatility,
and also because of significant short positions that may be taken by investors from time to time in our stock. During the fiscal
year ended July 31, 2012, the closing sale price for our Common Stock ranged from $0.77 to $3.80 per share. The market prices for
securities of medical technology companies historically have been highly volatile, and the market has experienced significant price
and volume fluctuations that are unrelated to the operating performance of particular companies. Further, we do not intend to pay
any cash dividends on our Common Stock in the foreseeable future.
We may require additional
capital in the future and you may incur dilution to your stock holdings.
We have historically relied upon our existing
cash balance, revenues and capital from the sale of our securities to fund our operating losses and we expect that we will continue
to incur operating losses until we are able to complete the development of the BACcel™ system and sell it into the marketplace
or license it to a third party. If capital requirements vary materially from those currently planned, we may require
additional capital sooner than expected. There can be no assurance that such capital will be available in sufficient
amounts or on terms acceptable to us, if at all. Further, any sale of a substantial number of additional shares will
cause dilution to an investment in our Common Stock and could also cause the market price of our Common Stock to decline. We have
the authority to issue up to 45,000,000 shares of Common Stock, of which, as of October 15, 2012, 25,231,939 shares were outstanding)
and to issue options and warrants to purchase shares of our Common Stock (of which 4,140,000 options and 14,171,430 warrants to
acquire shares of our Common Stock were issued and outstanding). Issuances of additional shares of our stock in the
future could dilute existing shareholders and may adversely affect the market price of our Common Stock.
12
Item 1B. Unresolved Staff Comments
Not Applicable.
Item 2. Properties
We lease approximately
6,400 square feet of office and laboratory space in Denver, Colorado. The monthly rent and utilities average approximately $6,000
per month. The lease was due to expire on September 30, 2012. On August 3, 2012, the Company entered into an extension of this
lease on similar terms whereby it will now expire on February 1, 2013.
On August 20, 2012, the
Company entered into a Lease Agreement (“Lease”) with Pima County, a political subdivision of the State of Arizona
(“Landlord”), pursuant to which the Company will lease approximately 15,100 square feet of office space located in
Tucson, Arizona for a period of three years (the “Initial Term”), which may be extended by the Company for up to three
additional one-year periods (each a “Renewal Term”). The Lease also provides that the Company has the option, with
six months prior notice to Landlord, to lease either or both of two additional areas with an aggregate size of approximately 7,900
square feet.
Pursuant to the Lease,
the Company agreed to: (i) pay rent equal to $9.25 per usuable square foot per year (approximately $139,600 per year or approximately
$11,600 per month) during the Initial Term and $19.80 per usuable square foot per year (approximately $298,900 per year or approximately
$24,900 per month) during any Renewal Term; (ii) relocate its corporate offices to the Tucson area and begin operations within
30 days of the date that the tenant improvements are substantially completed (the “Commencement Date”); and (iii) within
18 months of the Commencement Date, employ at least 30 individuals with a median salary of at least $70,000, which median salary
must be maintained throughout the term of the Lease. If the Company fails to satisfy the condition described in clause (iii) of
the preceding sentence, the rental rate under the Lease will be increased by a percentage that is twice the percentage by which
the Company’s annual payroll has fallen short of the specified goal (subject to a cap equal to $19.80 per usuable square
foot per year). The Lease also provides that Landlord will pay for tenant improvements (up to a cap of $1,400,000) as well as certain
repairs, utilities and insurance. When completed, the Company believes this facility will be adequate for its needs for the foreseeable
future.
Item 3. Legal Proceedings
We are not currently a
party to any material legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
13
PART II
Item 5. Market for Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
Market Information
The Company's Common Stock
is traded on the NYSE Amex Equities Exchange under the trading symbol AXK. The information in the following table sets forth the
high and low sales price information for our Common Stock for the period from August 1, 2010 through July 31, 2012.
Quarter Ended
|
|
|
|
High
(1)
|
|
|
|
Low
(1)
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2010
|
|
|
$
|
1.16
|
|
|
$
|
0.67
|
|
January 31, 2011
|
|
|
$
|
1.37
|
|
|
$
|
0.89
|
|
April 30, 2011
|
|
|
$
|
4.90
|
|
|
$
|
1.30
|
|
July 31, 2011
|
|
|
$
|
7.17
|
|
|
$
|
3.54
|
|
October 31, 2011
|
|
|
$
|
3.80
|
|
|
$
|
2.42
|
|
January 31, 2012
|
|
|
$
|
2.98
|
|
|
$
|
1.12
|
|
April 30, 2012
|
|
|
$
|
2.86
|
|
|
$
|
0.77
|
|
July 31, 2012
|
|
|
$
|
3.80
|
|
|
$
|
2.25
|
|
(1)
The above
table sets forth the range of high and low closing prices per share of our Common Stock as reported by the finance page at
www.yahoo.com
for the periods indicated.
Holders
As of October 15, 2012,
we had approximately 226 record owners of our Common Stock.
Dividends Paid and Dividend Policy
Holders of Common Stock
are entitled to receive dividends as may be declared by the Board of Directors out of funds legally available therefore. To date,
no dividends have been declared by the Board of Directors. We currently intend to retain all available funds and any future earnings
for use in the operation of our business and do not anticipate paying any cash dividends on our Common Stock for the foreseeable
future.
Future cash dividends,
if any, will be at the discretion of our Board of Directors and will depend upon our future operations and earnings, capital requirements
and surplus, general financial condition, contractual restrictions and other factors as our Board of Directors may deem relevant.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
14
Equity Compensation Plan Information
The table set forth below
presents the securities authorized for issuance with respect to compensation plans under which equity securities are authorized
for issuance as of July 31, 2012:
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted
average exercise price of available outstanding options,
warrants and rights
|
Number
of securities remaining for future issuance under equity compensation plans (excluding securities
reflected in the 1st
column
)
|
Equity compensation plans approved by security holders
|
3,180,000
|
$1.56
|
2,812,500
|
Equity compensation plans not approved by security holders
|
-
|
-
|
-
|
Total
|
3,180,000
|
$1.56
|
2,812,500
|
Item 6. Selected Financial Data.
Not applicable to smaller reporting companies.
Item 7. Management's Discussion and Analysis and Results of Operation
Overview
On June 26, 2012, we closed
upon the sale to Abeja at a purchase price of $1.03 per share for an aggregate purchase price of $14,420,000 of 14,000,000 shares
of the Company’s Common Stock, a warrant to purchase 7,000,000 shares of the Company’s Common Stock at an exercise
price of $1.03 per share and another warrant to purchase 7,000,000 shares of the Company’s Common Stock at an exercise price
of $2.00 per share (collectively the “Investment”).
On
August 22, 2012, the Company entered into a Grant Agreement (the “Grant Agreement”) with the Arizona Commerce Authority,
an agency of the State of Arizona (the “Authority”), pursuant to which the Authority will provide certain state and
county sponsored incentives for the Company to relocate its corporate headquarters to, and expand its business within, the State
of Arizona (the “Project”). Pursuant to the Grant Agreement, the Authority agreed to provide a total grant in the amount
of $1,000,000 (the “Grant”) for the use by the Company in the advancement of the Project. The Grant is payable out
of an escrow account in four installments, upon the achievement of the following milestones:
|
·
|
Milestone 1 – Relocation of Company’s operations and
corporate headquarters to Arizona and creation of 15 Qualified Jobs (as defined below).
|
|
·
|
Milestone 2 – Creation of 30 Qualified Jobs (including Qualified
Jobs under Milestone 1).
|
|
·
|
Milestone 3 – Creation of 40 Qualified Jobs (including Qualified
Jobs under Milestones 1 and 2).
|
|
·
|
Milestone 4 – Creation of 65 Qualified Jobs (including Qualified
Jobs under Milestones 1, 2 and 3) and capital investment of at least $4,520,000.
|
For purposes of the Grant Agreement,
a “Qualified Job” is a job that is permanent, full-time, new to Arizona, and for which the Company pays average (across
all Qualified Jobs identified by the Company in its discretion) annual wages of at least $63,000 and offers health insurance benefits
and pays at least 65% of the premiums associated with such benefits. The amount of each installment payment will be determined
in accordance with a formula specified in the Grant Agreement. The Grant Agreement also contains other customary provisions, including
representations, warranties and covenants of both parties.
During the fiscal year
ending July 31, 2013 we intend to continue technical validation of the BACcel™ system methods, continue field studies including
pilot clinical studies at Denver Health and Barnes-Jewish Hospital among others, and continue to publish the results of internal
and collaborative studies.
Changes in Results of Operations: Year ended
July 31, 2012 compared to year ended July 31, 2011
Technical development fee
revenues were $140,000 for the year ended July 31, 2012 as compared to $842,408 for the year ended July 31, 2011, a decrease of
$702,408 or 83.4%. The decrease in technical development fees was the result of the conclusion of work under the Novartis Technical
Development Agreement during the 2012 fiscal year.
15
OptiChem slide revenues
for the year ended July 31, 2012 were $45,910 as compared to $34,279 for the year ended July 31, 2011, an increase of $11,631,
or 33.9%. The increase in OptiChem revenues was primarily due to an increase in revenue recognized under our license arrangements
with NanoString and SCHOTT.
License fees for the year
ended July 31, 2012 were $50,000 as compared to $0 during the fiscal year ended July 31, 2011. The increase in license fees was
the result of the licensing agreement executed with SCHOTT during the period which consisted of an upfront license fee of $50,000
and $100,000 in prepaid royalties. Pursuant to the Company’s revenue recognition policy and generally accepted accounting
policies, the upfront payment was recognized upon receipt and the prepaid royalties recognized in the period in which they are
earned based on sales reported by SCHOTT.
During the fiscal year
ended July 31, 2011, we received a Qualified Therapeutic Discovery Grant in the amount of $244,479 that was not presented during
the 2012 fiscal year.
During the fiscal year
ended July 31, 2012 and 2011, there were no cost of sales due to the fact that the slides are manufactured by SCHOTT and NanoString
pursuant to license agreements.
Research and development
expenses for the year ended July 31, 2012, were $431,906 as compared to $454,997 during the year ended July 31, 2011, a decrease
of $23,091 or 5.1%. This decrease was primarily the result of reductions in clinical trial expenditures. Clinical trial expenditures
decreased to $27,342 for the year ended July 31, 2012 from $35,871 for the year ended July 31, 2011, a decrease of $8,529 or 23.8%.
General and administrative
expenses for the year ended July 31, 2012 were $2,945,309 as compared to $810,078 during the year ended July 31, 2011, an increase
of $2,135,231 or 264.0%. The following summarizes the major components of the changes:
|
|
|
2012
|
|
|
|
2011
|
|
|
|
Increase/(Decrease
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit and Accounting
|
|
$
|
49,849
|
|
|
$
|
79,539
|
|
|
$
|
(29,690
|
)
|
Consulting and change of control fees
|
|
|
2,159,043
|
|
|
|
90,021
|
|
|
|
2,069,022
|
|
Corporate and Shareholder
|
|
|
100,749
|
|
|
|
84,598
|
|
|
|
16,151
|
|
Corporate Insurance
|
|
|
35,619
|
|
|
|
34,704
|
|
|
|
915
|
|
Deferred Compensation
|
|
|
106,936
|
|
|
|
95,985
|
|
|
|
10,951
|
|
Employee Benefits
|
|
|
3,751
|
|
|
|
3,402
|
|
|
|
349
|
|
Payroll Taxes
|
|
|
42,949
|
|
|
|
32,804
|
|
|
|
10,145
|
|
Salaries
|
|
|
327,429
|
|
|
|
316,421
|
|
|
|
11,008
|
|
Travel
|
|
|
4,952
|
|
|
|
3,489
|
|
|
|
1,463
|
|
Legal
|
|
|
69,804
|
|
|
|
21,770
|
|
|
|
48,034
|
|
Other General Administrative Expenses
|
|
|
44,228
|
|
|
|
47,345
|
|
|
|
(3,117
|
)
|
|
|
$
|
2,945,309
|
|
|
$
|
810,078
|
|
|
$
|
2,135,231
|
|
The increase in consulting
fees of $2,069,022 was primarily due to an increase in the charge against earnings, as calculated using the Black-Scholes method,
for the cost of stock options granted or extended and the obligation to pay a change of control payment to a former officer of
$1,350,000 in each case relating to the Investment.
The decrease in amortization
for the year ended July 31, 2012 was negligible.
16
Depreciation for the year
ended July 31, 2012 was $2,097 as compared to $2,396 during the year ended July 31, 2011 a decrease of $299 or 12.4%. The decreased
depreciation was primarily due to equipment becoming fully depreciated.
Marketing and sales expenses
were $8,315 for the year ended July 31, 2012 as compared to $9,621 during the year ended July 31, 2011, a decrease of $1,306 or
13.6%. The decrease was primarily the result of decreased travel during the fiscal year 2012 to industry trade shows.
As a result of these factors,
loss from operations for the year ended July 31, 2012 was $5,351,760 as compared to a loss of $409,425 for the year ended July
31, 2011, resulting in a greater loss of $4,942,335.
Interest and dividend income
for the year ended July 31, 2012 was $16,297, consistent with $16,092 for the year ended July 31, 2011.
During the fiscal years
ended July 31, 2012 and 2011, the Company maintained a deferred compensation trust held for the benefit of a director and a former
executive officer of the Company. Unrealized gains on marketable securities (which specifically excludes shares of the Company’s
Common Stock held in the deferred compensation trust) held in the deferred compensation trust for the year ended July 31, 2012
was $23,987 as compared to an unrealized gain of $14,572 during the year ended July 31, 2011. The increased unrealized gain was
a result of market fluctuations on the securities that are held in the deferred compensation trust.
As a result of these factors,
net loss for the year ended July 31, 2012 was $5,310,476 as compared to a net loss of $378,761 during the year ended July 31, 2011,
a greater loss of $4,931,715.
Capital Resources and Liquidity
During the fiscal year
ended July 31, 2012, we did not generate positive cash flows from operating activities, as compared with cash provided by operations
for fiscal year 2011. Our primary sources of liquidity have been from sales of shares of our Common Stock and revenues from operations.
As of July 31, 2012, the Company had $14,263,248 in cash and cash equivalents, an increase of $13,487,392 from $775,856 at July
31, 2011. The primary reasons for the change in cash and cash equivalents was the infusion of $14,420,000 for issuance of Common
Stock from the Investment. The Company has recently entered into a Lease Agreement whereby it plans to move the Company’s
principal offices to Tucson, Arizona. The Company has contractual obligations to a director and a former officer of the Company
in the amount of $876,000 during the fiscal year ending July 31, 2013 and $40,000 during the fiscal year ending July 13, 2014.
As of July 31, 2012, management
believes that current cash balances will be sufficient to fund our capital and liquidity needs for the next fiscal year.
The following summarizes
the Company’s capital resources at July 31, 2012 compared with July 31, 2011:
|
|
|
July
31, 2012
|
|
|
|
July
31, 2011
|
|
|
|
Amount
of Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,263,248
|
|
|
$
|
775,856
|
|
|
$
|
13,487,392
|
|
Accounts receivable (short term)
|
|
$
|
750,947
|
|
|
$
|
596,128
|
|
|
$
|
154,819
|
|
Current assets
|
|
$
|
15,042,386
|
|
|
$
|
1,422,839
|
|
|
$
|
13,619,547
|
|
Total assets
|
|
$
|
17,213,742
|
|
|
$
|
6,264,338
|
|
|
$
|
10,949,404
|
|
Current liabilities
|
|
$
|
1,391,716
|
|
|
$
|
69,340
|
|
|
$
|
1,322,376
|
|
Working Capital
|
|
$
|
13,650,670
|
|
|
$
|
1,353,499
|
|
|
$
|
12,297,171
|
|
Net cash (used)/provided by operating activities
|
|
$
|
(815,672
|
)
|
|
$
|
448,481
|
|
|
$
|
(1,264,153
|
)
|
Net cash (used in)/provided by investing activities
|
|
$
|
(245,505
|
)
|
|
$
|
(150,336
|
)
|
|
$
|
(95,169
|
)
|
Net cash (used) provided by financing activities
|
|
$
|
14,548,569
|
|
|
$
|
194,438
|
|
|
$
|
14,354,131
|
|
17
Our primary use of
capital has been for the research and development of the BACcel™ system. We believe our capital requirements will
continue to be met with our existing cash balance, revenues provided by licensors of our products and/or, additional issuance
of equity or debt securities. Further, if capital requirements vary materially from those currently planned, we may require
additional capital sooner than expected. There can be no assurance that such capital will be available in sufficient amounts
or on terms acceptable to us, if at all. Additional issuances of equity or convertible debt securities will result in
dilution to our current Common Stockholders.
Off-Balance Sheet Arrangements
For the year ended July
31, 2012, we did not have any off-balance sheet arrangements.
Recent Accounting Pronouncements
In May 2011, the FASB issued
additional guidance on fair value disclosures. This guidance contains certain updates to the measurement guidance as well as enhanced
disclosure requirements. The most significant change in disclosures is an expansion of the information required for Level 3 measurements
including enhanced disclosure for: (1) the valuation processes used by the reporting entity; and (2) the sensitivity of the fair
value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any. The Company’s
adoption of this guidance on February 1, 2012 did not have a material effect on the Company’s financial statements.
In June 2011, the Financial
Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2011-05, “Comprehensive
Income (Topic 820).” This ASU seeks to improve comparability, consistency, and transparency of financial reporting with respect
to comprehensive income by eliminating the option to present components of other comprehensive income as part of the statement
of changes in stockholder’s equity, among other amendments. The amendments of this ASU require all non-owner changes in stockholder’s
equity to be presented either in single continuous statement of comprehensive income or two separate but consecutive statements.
This ASU is effective for fiscal years and interim periods beginning after December 15, 2011 and early adoption is permitted. The
Company’s adoption on February 1, 2012 did not have a material effect on the Company’s financial statements.
In December 2011, the FASB
issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities” (Topic 210). This ASU seeks to enhance current
disclosures and increase the comparability of Balance Sheets prepared on the basis of U.S. generally accepted accounting principles
and those prepared on the basis of International Financial Reporting Standards, by requiring all entities to disclose both gross
information and net information about both instruments and transactions eligible for offset in the statement of financial position
and instruments and transactions subject to an agreement similar to a master netting arrangement. This scope would include derivatives,
sale and repurchase agreements, and reverse sale and repurchase agreements and securities borrowing and securities lending arrangements.
This ASU is effective for fiscal years and interim periods beginning after January 1, 2013. The adoption of ASU 2011-11 is not
expected to have any effect for the Company.
Application of Critical Accounting Policies
Use of Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
18
Revenue Recognition
We recognize revenue in
accordance with ASC 605, “Revenue Recognition,” when persuasive evidence of an arrangement exists, the price is fixed
or determinable, collection is reasonably assured and delivery of products has occurred or services have been rendered.
From time to time, we may
enter into collaborative arrangements with multiple deliverable elements including items such as licensing rights, development
milestones and royalties from product sales. If we determine that such deliverables can be separated, the associated revenue is
allocated among the separate units based on relative fair value. We recognize revenue as follows:
|
·
|
OptiChem revenue is recognized upon shipping
of the product to the customer or receipt of the applicable royalty.
|
|
·
|
Deferred revenue is recognized upon receipt
and the prepaid royalties recognized in the period in which they are earned based on sales reported by the customer.
|
|
·
|
Technical development
fees are recorded as received.
|
Deferred Taxes
We recognize deferred tax
assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and
liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on historical
taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences. As
of July 31, 2012 and July 31, 2011, we have established a valuation allowance equal to our net deferred tax asset, as we have not
been able to determine that we will generate sufficient future taxable income to allow us to realize the deferred tax asset.
Intangible Assets
We amortize our intangible
assets over the period the asset is expected to contribute directly or indirectly to our future cash flows. We evaluate the remaining
useful life of each intangible asset that is being amortized each reporting period to determine whether events and circumstances
warrant a revision to the remaining period of amortization.
We review our intangible
assets for impairment each reporting period as discussed below under “Impairment of Long-Lived and Intangible Assets.”
An impairment loss will be recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount
exceeds its fair value.
Impairment of Long-Lived and Intangible
Assets
We assess the impairment
of identifiable intangibles and long-lived assets whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors we consider important which could trigger an impairment review include the following:
|
·
|
Significant under performance
relative to
expected historical or projected future operating results;
|
|
·
|
Significant
changes in the manner of our use of the acquired assets or the strategy for our overall business;
|
|
·
|
Significant
negative industry or economic trends;
|
|
·
|
Significant decline in our stock price for a sustained period; and
|
|
·
|
Our market capitalization relative to net book value.
|
When we determine that
the carrying value of intangibles and long-lived assets may not be recoverable based upon the existence of one or more of the above
indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate determined
by our management to be commensurate with the risk inherent in our current business model. Our judgments regarding the existence
of impairment indicators are also based on legal factors, market conditions and expected future operational performance of related
product lines of the identifiable intangible. Future events could cause us to conclude that impairment indicators exist and that
our identifiable assets are impaired. We also evaluate the remaining estimated useful lives of each asset each reporting period
and determine whether events or circumstances require revised useful lives.
19
During the fiscal year
ended July 31, 2012, Management determined that certain amounts carried on our balance sheet are no longer recoverable or abandoned
its plan to pursue marketability and accordingly reduced the amortized book values by $1,996,583 and recognized the loss in its
reported loss from operations.
Research and Development
Research and development
expenses are expensed as incurred. Research and development expenses include salaries and related expenses associated with the
development of our technology and include compensation paid to engineering personnel and fees to consultants.
Contractual Obligations
The Company has certain
contractual obligations and commercial commitments as disclosed in this Annual Report on Form 10-K and in the Company’s 2012
Proxy Statement that is incorporated herein by reference that existed as of July 31, 2012 that do not meet the definition of long
term debt obligations, capital leases, operating leases or purchase obligations. Subsequent to July 31, 2012, the Company has subsequently
entered into a Lease Agreement as described in Item 2. Properties above.
Item 7A. Qualitative and Quantitative Disclosures About Market
Risk
Not applicable to smaller reporting companies.
Item 8. Financial Statements and Supplementary Data
Financial Statements of Accelr8 Technology
Corporation
Report of Independent Registered Public Accounting Firm
|
|
Balance Sheets as of July 31, 2012 and 2011
|
|
Statements of Operations for the years ended July 31, 2012 and 2011
|
|
Statements of Shareholders Equity for the years ended July 31, 2012 and 2011
|
|
Statements of Cash Flow for the years ended July 31, 2012 and 2011
|
|
Notes to Financial Statements
|
|
20
Report of Independent Registered Public Accounting
Firm
Board of Directors
Accelr8 Technology Corporation
Denver, Colorado
We have audited the accompanying
balance sheets of Accelr8 Technology Corporation (a Colorado corporation) as of July 31, 2012 and 2011, and the related statements
of operations, shareholders’ equity and cash flows for the years ended July 31, 2012 and 2011. These financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits
in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial
statements referred to above present fairly, in all material respects, the financial position of Accelr8 Technology Corporation
as of July 31, 2012 and 2011, and the results of its operations and changes in its cash flows for the years ended July 31, 2012
and 2011, in conformity with U.S. generally accepted accounting principles.
Denver, Colorado
October
19
, 2012
/s/ COMISKEY & COMPANY
PROFESSIONAL CORPORATION
|
21
ACCELR8 TECHNOLOGY CORPORATION
|
BALANCE SHEETS
|
JULY 31, 2012 AND 2011
|
|
ASSETS
|
|
|
|
|
|
|
2012
|
|
|
|
2011
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,263,248
|
|
|
$
|
775,856
|
|
Trade accounts receivable
|
|
|
750,947
|
|
|
|
596,128
|
|
Inventory (Note 3)
|
|
|
10,263
|
|
|
|
30,278
|
|
Prepaid expenses and other (Note 4)
|
|
|
17,928
|
|
|
|
20,577
|
|
Total current assets
|
|
|
15,042,386
|
|
|
|
1,422,839
|
|
Long term accounts receivable, net of current
portion
|
|
|
—
|
|
|
|
745,440
|
|
Property and equipment, net (Note 5)
|
|
|
3,956
|
|
|
|
3,528
|
|
Investments, net (Note 10)
|
|
|
1,486,459
|
|
|
|
1,304,522
|
|
Intellectual property, net (Note 6)
|
|
|
680,941
|
|
|
|
2,788,009
|
|
Total Assets
|
|
$
|
17,213,742
|
|
|
$
|
6,264,338
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
63,029
|
|
|
$
|
34,961
|
|
Accrued compensation and other liabilities
|
|
|
1,243,342
|
|
|
|
24,582
|
|
Deferred revenue (Note 11)
|
|
|
85,345
|
|
|
|
9,797
|
|
Total current liabilities
|
|
|
1,391,716
|
|
|
|
69,340
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
Deferred compensation
|
|
|
986,459
|
|
|
|
1,379,522
|
|
Total liabilities
|
|
$
|
2,378,175
|
|
|
$
|
1,448,862
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity (Notes 7):
|
|
|
|
|
|
|
|
|
Common stock, no par value;
|
|
|
|
|
|
|
|
|
45,000,000 shares authorized; 25,231,939 (2012) and 11,103,367 (2011) shares issued and outstanding
|
|
|
22,985,809
|
|
|
|
14,333,258
|
|
Contributed capital
|
|
|
7,924,880
|
|
|
|
1,246,864
|
|
Accumulated deficit
|
|
|
(15,801,522
|
)
|
|
|
(10,491,046
|
)
|
Shares held for employee benefit (1,129,110 shares at cost)
|
|
|
(273,600
|
)
|
|
|
(273,600
|
)
|
Total shareholders' equity
|
|
|
14,835,567
|
|
|
|
4,815,476
|
|
Total liabilities and shareholders' equity
|
|
$
|
17,213,742
|
|
|
$
|
6,264,338
|
|
See accompanying notes to financial statements.
22
ACCELR8 TECHNOLOGY CORPORATION
|
STATEMENTS OF OPERATIONS
|
FOR YEARS ENDED JULY 31, 2012 and 2011
|
|
|
|
|
|
Revenues (Note 9 and 11):
|
|
|
2012
|
|
|
|
2011
|
|
Technical development fees
|
|
$
|
140,000
|
|
|
$
|
842,408
|
|
OptiChem revenue
|
|
|
45,910
|
|
|
|
34,279
|
|
License fees
|
|
|
50,000
|
|
|
|
—
|
|
Qualified discovery therapeutic grant
|
|
|
—
|
|
|
|
244,479
|
|
Total revenues
|
|
$
|
235,910
|
|
|
$
|
1,121,166
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
431,906
|
|
|
|
454,997
|
|
General and administrative
|
|
|
2,945,309
|
|
|
|
810,078
|
|
Amortization (Note 6)
|
|
|
203,460
|
|
|
|
253,499
|
|
Depreciation (Note 5)
|
|
|
2,097
|
|
|
|
2,396
|
|
Marketing and sales
|
|
|
8,315
|
|
|
|
9,621
|
|
Other expense, impairment of intangibles
|
|
|
1,996,583
|
|
|
|
—
|
|
Total costs and expenses
|
|
$
|
5,587,670
|
|
|
$
|
1,530,591
|
|
Income (Loss) from operations
|
|
|
(5,351,760
|
)
|
|
|
(409,425
|
)
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
|
16,297
|
|
|
|
16,092
|
|
Unrealized holding gain (loss) on investments (Note 10)
|
|
|
23,987
|
|
|
|
14,572
|
|
Unrealized holding gain (loss) on asset sale
|
|
|
1,000
|
|
|
|
—
|
|
Total other income
|
|
|
41,284
|
|
|
|
30,664
|
|
Net income(loss)
|
|
$
|
(5,310,476
|
)
|
|
$
|
(378,761
|
)
|
Net income (loss) per share: Basic and diluted net income(loss) per share
|
|
$
|
(0.43
|
)
|
|
$
|
(0.04
|
)
|
Weighted average shares outstanding
|
|
|
12,430,060
|
|
|
|
10,791,597
|
|
See accompanying notes to financial statements.
23
ACCELR8 TECHNOLOGY CORPORATION
|
STATEMENTS OF SHAREHOLDER’S EQUITY
FOR YEARS ENDED JULY 31, 2012 AND 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Common
Stock Amount
|
|
|
|
Contributed
Capital
|
|
|
|
Accumulated
Deficit
|
|
|
|
For
Employee Benefit
|
|
|
|
Total
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, July 31, 2010
|
|
|
10,757,317
|
|
|
$
|
14,138,820
|
|
|
$
|
1,156,843
|
|
|
$
|
(10,112,285
|
)
|
|
$
|
(273,600
|
)
|
|
$
|
4,909,778
|
|
Net Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(378,761
|
)
|
|
|
—
|
|
|
|
(378,761
|
)
|
Exercise of Options and Warrants
|
|
|
346,050
|
|
|
|
194,438
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
194,438
|
|
Equity Based Compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
90,021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
90,021
|
|
Balances, July 31, 2011
|
|
|
11,103,367
|
|
|
$
|
14,333,258
|
|
|
$
|
1,246,864
|
|
|
$
|
(10,491,046
|
)
|
|
$
|
(273,600
|
)
|
|
$
|
4,815,476
|
|
Net Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,310,476
|
)
|
|
|
—
|
|
|
|
(5,310,476
|
)
|
Issuance of Common Stock and Warrants
|
|
|
14,000,000
|
|
|
|
8,523,982
|
|
|
|
5,896,018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,420,000
|
|
Exercise of Options and Warrants
|
|
|
128,572
|
|
|
|
128,569
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
128,569
|
|
Equity Based Compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
781,998
|
|
|
|
—
|
|
|
|
—
|
|
|
|
781,998
|
|
Balances, July 31, 2012
|
|
|
25,231,939
|
|
|
$
|
22,985,809
|
|
|
$
|
7,924,880
|
|
|
$
|
(15,801,522
|
)
|
|
$
|
(273,600
|
)
|
|
$
|
14,835,567
|
|
See accompanying notes to financial statements.
24
ACCELR8 TECHNOLOGY CORPORATION
|
STATEMENTS OF CASH FLOWS
|
FOR YEARS ENDED JULY 31, 2012 and 2011
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
2012
|
|
|
|
2011
|
|
Net loss
|
|
$
|
(5,310,476
|
)
|
|
$
|
(378,761
|
)
|
Adjustments to reconcile net loss to net cash (used in)/provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,097
|
|
|
|
2,396
|
|
Amortization
|
|
|
203,460
|
|
|
|
253,499
|
|
Equity based compensation
|
|
|
781,998
|
|
|
|
90,021
|
|
Other expense, impairment loss
|
|
|
1,996,583
|
|
|
|
—
|
|
Unrealized gain on investments
|
|
|
(23,987
|
)
|
|
|
(14,572
|
)
|
Realized
(gain) loss on sale of investments, interest and
|
|
|
|
|
|
|
|
|
dividends reinvested
|
|
|
(7,944
|
)
|
|
|
(6,413
|
)
|
(Increase) decrease in assets:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
590,621
|
|
|
|
411,477
|
|
Inventory
|
|
|
20,015
|
|
|
|
2,342
|
|
Prepaid expense and other
|
|
|
2,649
|
|
|
|
(1,182
|
)
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
28,068
|
|
|
|
2,826
|
|
Accrued liabilities
|
|
|
718,760
|
|
|
|
1,291
|
|
Deferred revenue
|
|
|
75,548
|
|
|
|
(10,428
|
)
|
Deferred compensation
|
|
|
106,936
|
|
|
|
95,985
|
|
Net cash (used in)/provided by operating activities
|
|
|
(815,672
|
)
|
|
|
448,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of equipment and patent costs
|
|
|
(95,505
|
)
|
|
|
(75,336
|
)
|
Contribution to deferred compensation trust
|
|
|
(150,000
|
)
|
|
|
(75,000
|
)
|
Net cash used in investing activities
|
|
|
(245,505
|
)
|
|
|
(150,336
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Exercise of Warrants and Options
|
|
|
128,569
|
|
|
|
194,438
|
|
Issuance of Common Stock and warrants
|
|
|
14,420,000
|
|
|
|
—
|
|
Net cash provided by financing activities
|
|
|
14,548,569
|
|
|
|
194,438
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
13,487,392
|
|
|
|
492,583
|
|
Cash and cash equivalents, beginning of year
|
|
|
775,856
|
|
|
|
283,273
|
|
Cash and cash equivalents, end of year
|
|
$
|
14,263,248
|
|
|
$
|
775,856
|
|
See accompanying notes to financial statements.
25
ACCELR8 TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION AND NATURE OF BUSINESS
Accelr8 Technology Corporation
is a Colorado C-Corporation focused on developing and commercializing innovative instrumentation for the rapid identification and
antibiotic susceptibility testing of infectious pathogens. The company’s BACcel
TM
platform utilizes a proprietary
culture-free process with both genomic and phenotypic detection technologies that decrease time to result while maintaining high
sensitivity and specificity.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents and accounts receivable,
including receivables from major customers.
The Company periodically
maintains cash balances at a commercial bank in excess of the Federal Deposit Insurance Corporation insurance limit of $250,000.
At July 31, 2012 and 2011, the Company's uninsured cash balance was approximately $14,013,248 and $229,575, respectively.
The Company grants credit
to domestic and international clients in various industries. Exposure to losses on accounts receivable is principally dependent
on each client's financial position. The Company performs ongoing credit evaluations of its clients' financial condition.
Estimated Fair Value of Financial Instruments
The carrying amounts of
cash and cash equivalents, investments and other long-term liabilities approximates fair value at July 31, 2012 and 2011.
The carrying value of all
other financial instruments potentially subject to valuation risk, principally consisting of accounts receivable and accounts payable,
also approximates fair value.
The following methods and
assumptions were used to estimate the fair value of financial instruments:
Cash and
Cash Equivalents - Generally, cash held by the Company is invested in US Treasury securities. The carrying amount
approximates fair value. Investments - The carrying amount is based on quoted market prices plus cash. Long-Term Receivables
- discounted future cash flows. Other Long-Term Liabilities - The carrying amount approximates fair value.
26
Cash and Cash Equivalents
All highly liquid investments
with an original maturity of three months or less at time of purchase are considered to be cash equivalents.
Investments
The Company accounts for
its investments in accordance with ASC 320. All investments are recorded as trading and reported at fair value with unrealized
gains and losses reported with current earnings.
Inventory
Inventory is maintained
by specific identification and valued at cost using the first-in first out method. Amounts of any particular inventory item are
small and are used depending on particular characteristics.
Property and Equipment
Property and equipment
are recorded at cost. Maintenance and repairs are charged to expense as incurred and expenditures for major improvements are capitalized.
Gains and losses from retirement or replacement are included in costs and expenses. Depreciation of property and equipment is computed
using the straight-line method over the estimated useful life of the assets, ranging from five to seven years.
Research and Development
Research and development
costs charged to operations for the years ended July 31, 2012 and 2011 were $431,906 and $454,997, respectively.
Intellectual Property
Intellectual property is
amortized over the period the asset is expected to contribute directly or indirectly to the Company's future cash flows. The Company
evaluates the remaining useful life of each intellectual property that is being amortized each reporting period to determine whether
events and circumstances warrant a revision to the remaining period of amortization. Included in intellectual property are patents,
trademarks and technology. Intellectual properties are currently being amortized over their estimated useful lives of 20 years.
Long-lived Assets
Long-lived assets and certain
identifiable intangibles to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The Company continuously evaluates the recoverability of
its long-lived assets based on estimated future cash flows from and the estimated fair value of such long-lived assets, and provides
for impairment if such undiscounted cash flows or the estimated fair value are insufficient to recover the carrying amount of the
long-lived asset. During the fiscal year ended July 31, 2012, Management determined that certain amounts carried on our balance
sheet are no longer recoverable or abandoned its plan to pursue marketability and accordingly reduced the amortized book values
by $1,996,583 and recognized the loss in its reported loss from operations. See Note 6 below.
Revenue Recognition
We recognize revenue in
accordance with ASC 605, "Revenue Recognition," when persuasive evidence of an arrangement exists, the price is fixed
or determinable, collection is reasonably assured and delivery of products has occurred or services have been rendered.
From time to time, we may
enter into collaborative arrangements with multiple deliverable elements including items such as licensing rights, development
milestones and royalties from product sales. If we determine that such deliverables can be separated, the associated revenue is
allocated among the separate units based on relative fair value.
27
Technical Development Fees
Technical development fee
revenue was recorded as received.
OptiChem Revenues
Revenue is recognized when the Company ships
the product to customers or upon the receipt of royalty payments from our licenses.
License Fees
The Company estimates its
performance period used for recognition of licensing fees based on the specific terms of each agreement and the applicable facts
and circumstances.
Sales Returns and Allowances
Allowances on accounts
receivable and notes receivable are recorded when circumstances indicate collection is doubtful for particular accounts receivable.
Receivables are written off if reasonable collection efforts prove unsuccessful. The Company provides for sales returns and allowances
on a specific account basis.
Deferred Revenue
Deferred revenue represents
amounts received but not yet earned under existing agreements.
Income Taxes
Deferred tax assets
and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets
and liabilities and amounts reported in the accompanying balance sheets. The change in deferred tax assets and liabilities
for the period represents the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws in
deferred tax assets and liabilities are reflected as an adjustment to the tax provision or benefit in the period of enactment.
The Company
follows the provisions of ASC 740,
Income Taxes
, to account for any uncertainty in income taxes with respect to the
accounting for all tax positions taken (or expected to be taken) on any income tax return. This guidance applies to all open
tax periods in all tax jurisdictions in which the Company is required to file an income tax return. Under GAAP, in order to
recognize an uncertain tax benefit the taxpayer must be more likely than not of sustaining the position, and the measurement
of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon resolution of the
benefit. The Company determined that no uncertain tax positions have been taken or are expected to be taken that could have a
material effect on the Company’s income tax liabilities. Interest and penalties, if any, would be recorded to general
and administrative expenses.
Earnings Per Share
The Company follows ASC
260, "Earnings Per Share," which requires companies to present basic earnings per share and diluted earnings per share.
Basic earnings (loss) per share includes no dilution and is computed by dividing income (loss) available to common shareholders
by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution
of securities that could share in the earnings of an entity.
The Company's net income
(loss) for the periods presented cause the inclusion of potential Common Stock instruments outstanding to be antidilutive. For
the fiscal year ended July 31, 2012 and July 31,2011 there were Common Stock options and warrants exercisable for 17,151,430 and
950,000 shares of Common Stock which were not included in diluted loss per share as the effect was antidilutive.
28
Equity Based Compensation
The Company awards stock
options and other equity-based instruments to its employees, directors and consultants. Compensation cost related to equity based
awards is based on the fair value of the instrument on the grant date, and is recognized over the requisite service period. The
Company estimates the fair value of stock option awards, including modifications of stock option awards, using the Black-Scholes
option pricing model. This model derives the fair value of stock options based on certain assumptions related to expected stock
price volatility, expected option life, risk-free interest rate and dividend yield. The Company's expected volatility is based
on the historical volatility of the Company's stock price over the most recent period commensurate with the expected term of the
stock option award. The estimated expected option life is based primarily on historical employee exercise patterns. The Company
has not paid dividends in the past and does not have any plans to pay any dividends in the future. See Note 7 for further information.
Comprehensive Income (loss)
The Company follows ASC
220, "Reporting Comprehensive Income," which establishes standards for reporting and displaying comprehensive income
(loss) and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. The Company
has no other items that would be included in comprehensive income (loss).
Recent Accounting Pronouncements
In May 2011, the FASB issued
additional guidance on fair value disclosures. This guidance contains certain updates to the measurement guidance as well as enhanced
disclosure requirements. The most significant change in disclosures is an expansion of the information required for Level 3 measurements
including enhanced disclosure for: (1) the valuation processes used by the reporting entity; and (2) the sensitivity of the fair
value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any. The Company
adoption on February 1, 2012 did not have a material effect on the Company's financial statements.
In June 2011, the Financial
Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2011-05, "Comprehensive
Income (Topic 820)." This ASU seeks to improve comparability, consistency, and transparency of financial reporting with respect
to comprehensive income by eliminating the option to present components of other comprehensive income as part of the statement
of changes in stockholder's equity, among other amendments. The amendments of this ASU require all non-owner changes in stockholder's
equity to be presented either in single continuous statement of comprehensive income or two separate but consecutive statements.
This ASU is effective for fiscal years and interim periods beginning after December 15, 2011 and early adoption is permitted. The
Company's adoption on February 1, 2012 did not have a material effect on the Company's financial statements.
In December 2011, the FASB
issued ASU 2011-11, "Disclosures about Offsetting Assets and Liabilities (Topic 210). This ASU seeks to enhance current disclosures
and increase the comparability of Balance Sheets prepared on the basis of U.S. generally accepted accounting principles and those
prepared on the basis of International Financial Reporting Standards, by requiring all entities to disclose both gross information
and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments
and transactions subject to an agreement similar to a master netting arrangement. This scope would include derivatives, sale and
repurchase agreements, and reverse sale and repurchase agreements and securities borrowing and securities lending arrangements.
This ASU is effective for fiscal years and interim periods beginning after January 1, 2013. The adoption of ASU 2011-11 is not
expected to have any effect for the Company.
29
NOTE 3 INVENTORY
The Company purchases raw
materials (custom chemicals and glass substrates) for producing OptiChem coated slides. Raw material on hand at the end of each
reporting period is priced at cost based on the first-in first-out method. There was no work-in-process or finished goods inventory
as of July 31, 2012 and July 31, 2011.
NOTE 4 PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other
current assets as of July 31, 2012 totaled $17,928 as compared to $20,577 as of July 31, 2011.
NOTE 5 PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost
|
and consisted of the following at July 31:
|
|
|
|
|
2012
|
|
|
|
2011
|
|
Computer equipment
|
|
$
|
22,551
|
|
|
$
|
22,551
|
|
Laboratory and scientific equipment
|
|
|
301,338
|
|
|
|
303,281
|
|
Furniture and fixtures
|
|
|
16,601
|
|
|
|
16,601
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
340,490
|
|
|
|
342,433
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
(336,534
|
)
|
|
|
(338,905
|
)
|
Net property and equipment
|
|
|
|
|
|
|
|
|
|
|
$
|
3,956
|
|
|
$
|
3,528
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for
the years ended July 31, 2012 and 2011 was $2,097 and $2,396, respectively.
NOTE 6 INTELLECTUAL PROPERTY
Intellectual property consisted of the following
at July 31:
|
|
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
OptiChem Technologies
|
|
$
|
192,954
|
|
|
$
|
4,454,538
|
|
Patents
|
|
|
697,767
|
|
|
|
604,792
|
|
Trademarks
|
|
|
—
|
|
|
|
49,018
|
|
|
|
|
890,721
|
|
|
|
5,108,348
|
|
Accumulated amortization
|
|
|
(209,780
|
)
|
|
|
(2,320,339
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
680,941
|
|
|
$
|
2,788,009
|
|
|
|
|
|
|
|
|
|
|
Future amortization expense for the intangible
assets is estimated as follows:
Years
Ending July 31,
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
$
|
44,536
|
|
2014
|
|
|
|
44,536
|
|
2015
|
|
|
|
44,536
|
|
2016
|
|
|
|
44,536
|
|
Thereafter
|
|
|
|
502,797
|
|
Total
future amortization
|
|
|
$
|
680,941
|
|
|
|
|
|
|
|
30
Intellectual properties
are recorded at cost and are being amortized on a straight-line basis over their estimated useful lives of 20 years, the patent
and patent application life of the OptiChem Technologies. Amortization expense was $203,460 and $253,499 respectively, for the
years ended July 31, 2012 and 2011. The Company routinely evaluates the recoverability of its long-lived assets based upon estimated
future cash flows from and estimated fair value of such long-lived assets. If in management's judgment, the anticipated undiscounted
cash flows or estimated fair value are insufficient to recover the carrying amount of the long-lived asset, the Company will determine
the amount of the impairment and the value of the asset will be written down.
During the fiscal year
ended July 31, 2012, Management determined that certain amounts carried on our balance sheet are no longer recoverable or abandoned
its plan to pursue marketability and accordingly reduced the amortized book values by $1,996,583 and recognized the loss in its
reported loss from operations.
NOTE 7 SHAREHOLDERS' EQUITY
Stock Purchase
On April 20, 2012, we entered
into a Securities Purchase Agreement with Abeja Ventures, LLC (“Abeja”), pursuant to which the Company agreed to sell
and issue to Abeja at a purchase price of $1.03 per share for an aggregate purchase price of $14,420,000; (i) 14,000,000 shares
of the Company’s Common Stock; (ii) a warrant to purchase 7,000,000 shares of the Company’s Common Stock at an exercise
price of $1.03 per share; and (iii) another warrant to purchase 7,000,000 shares of the Company’s Common Stock at an exercise
price of $2.00 per share, with each warrant exercisable prior to the fifth anniversary of the closing of the transactions contemplated
by the Securities Purchase Agreement. The purchase of Common Stock and warrants pursuant to the Investment qualified for equity
treatment under Generally Accepted Accounting Principles. The respective values of the warrants and Common Stock were calculated
using their relative fair values and classified both classified under Contributed Capital. The value therefore recorded for the
warrants is $5,896,018 and for the Common Stock is $8,523,982.
Stock Option Plans
The Company has option
agreements with key executives and three stock-based compensation plans, which are discussed below:
Option and Warrant Agreement With Director and Former Officer
In fiscal 1998, options
for the purchase of 1,129,110 shares held by our then Chief Executive Officer ("Executive Options and Warrants") were
exercised and placed into a "Rabbi" Trust. Such shares are issuable upon the occurrence of retirement, death or termination
of such person’s employment over a ten-year period after such occurrence, unless the Board of Directors determines otherwise.
In accordance with generally
accepted accounting principles, the Company has included the assets and liabilities of the "Rabbi" Trust in its financial
statements, and the shares of the Company's Common Stock held by the "Rabbi" Trust have been treated as treasury stock
for financial reporting purposes and have no voting rights.
Qualified Stock Option Plan
The Qualified Stock Option
Plan (the “Qualified Plan”) is a shareholder approved plan that provides for stock option grants to employees, including
executive officers. The exercise price of each option, which has a maximum ten-year life, is established by the Company's Compensation
Committee on the date of grant.
As of July 31, 2012, there
were 317,500 options exercised under the Qualified Plan, 375,000 that remain outstanding and 7,500 available for grant.
31
Non-qualified Stock Option Plan
The Non-Qualified Stock
Option Plan (the “Non-Qualified Plan”) is a shareholder approved plan that provides for stock option grants to independent
contractors, technical advisors and directors of the Company. The exercise price of each option, which has a maximum ten-year life,
is established by the Company's Compensation Committee on the date of grant.
As of July 31, 2012, there
were 185,000 options exercised under the Non-Qualified Plan, 90,000 that remain outstanding and 25,000 available for grant.
Omnibus Stock Option Plan
On December 14, 2004 the
Company’s shareholders approved the Omnibus Stock Option Plan and reserved 500,000 shares of its authorized but unissued
Common Stock for stock options to be granted to employees, independent contractors, technical advisors and directors of the Company.
The authorized shares in this plan were increased by 5,000,000 shares to an aggregate amount of 5,500,000 upon shareholder approval
during the fiscal year ended July 31, 2012.
As of July 31, 2012, 5,000
options had been exercised pursuant to the Omnibus Plan, 2,715,000 that remain outstanding, leaving 2,780,000 available for grant.
Accounting for Employee Based Option Plans
As is discussed in Note
2, the Company accounts for all option grants using the Black-Scholes option pricing model in accordance with ASC 718 for options
granted or extended.
As of July 31, 2012 and
2011, total unrecognized share-based compensation cost related to unvested stock options was approximately $763,999 and $0. For
the years ended July 31, 2012 and 2011, the Company recognized $781,998 and $29,177 in stock based compensation costs related to
the issuance of options to employees under ASC 718.
The following weighted-average
assumptions were used for grants for the year ended July 31, 2012: no dividend yield; risk free interest rate between 0.28% and
1.00%; expected life between 2 and 5 years; and expected volatility between 97% and 133%. The weighted average fair value of options
granted during the fiscal year ended July 31, 2012 was $0.57 and during the fiscal year ended July 31, 2011 was $2.59. The weighted
average remaining contractual life of options outstanding at July 31, 2012 was 7.8 years. The expected forfeiture rate used was
23%.
The following table summarizes
information on stock option activity for the Omnibus Plan, the Qualified Plan and the Non-Qualified Plan.
|
|
|
Number
of Shares
|
|
|
|
Exercise
Price Per Share
|
|
|
|
Weighted
Average Exercise Price Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding July 31, 2010
|
|
|
1,010,000
|
|
|
|
$0.73-4.5
|
|
|
$
|
2.57
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
260,000
|
|
|
|
$0.73-2.25
|
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Options Outstanding July 31, 2011
|
|
|
750,000
|
|
|
|
$0.73-4.50
|
|
|
|
2.91
|
|
Granted
|
|
|
2,510,000
|
|
|
|
$1.04-3.13
|
|
|
$
|
1.17
|
|
Cancelled
|
|
|
80,000
|
|
|
|
$2.50-2.69
|
|
|
$
|
2.67
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Options Outstanding July 31, 2012
|
|
|
3,180,000
|
|
|
|
$0.73-4.50
|
|
|
$
|
1.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
As of July 31, 2012 and
2011, 1,530,000 and 985,000 options outstanding were currently exercisable and carried weighted average exercise prices of $2.08
and $4.05 respectively. The following table summarizes information about stock options outstanding and exercisable at July 31,
2012:
|
|
|
|
Outstanding
|
|
Exercisable
|
Range of Exercise Price
|
|
Number
|
|
Weighted Average Remaining Contractual Life
|
|
Weighted Average Exercise Price
|
|
Number
|
|
Weighted Average Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
$0.00-1.00
|
|
|
|
10,000
|
|
|
|
7.4
|
|
|
$
|
0.73
|
|
|
|
10,000
|
|
|
$
|
0.73
|
|
$1.01-2.00
|
|
|
|
2,305,000
|
|
|
|
9.7
|
|
|
$
|
1.05
|
|
|
|
685,000
|
|
|
$
|
1.06
|
|
$2.01-3.00
|
|
|
|
632,500
|
|
|
|
2.6
|
|
|
$
|
2.56
|
|
|
|
632,500
|
|
|
$
|
2.56
|
|
$3.01-4.50
|
|
|
|
232,500
|
|
|
|
4.1
|
|
|
$
|
3.92
|
|
|
|
202,500
|
|
|
$
|
4.04
|
|
Total
|
|
|
|
3,180,000
|
|
|
|
|
|
|
|
|
|
|
|
1,530,000
|
|
|
|
|
|
NOTE 8 INCOME TAXES
The following comprises
the components of the income tax provision (benefit) as of July 31:
Year Ended July 31,
|
|
|
|
2012
|
|
|
|
2011
|
|
Current
|
|
|
|
—
|
|
|
|
—
|
|
Deferred
|
|
|
$
|
(1,799,606
|
)
|
|
$
|
(140,000
|
)
|
Total
|
|
|
$
|
(1,779,606
|
)
|
|
$
|
(140,000
|
)
|
Deferred income taxes reflect
the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows:
July 31,
|
|
|
2012
|
|
|
|
2011
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Intangible assets, definite lived
|
|
$
|
184,262
|
|
|
$
|
(249,000
|
)
|
Property & equipment
|
|
|
97
|
|
|
|
—
|
|
Deferred revenue
|
|
|
31,953
|
|
|
|
4,000
|
|
Charitable contributions
|
|
|
6,000
|
|
|
|
6,000
|
|
Stock options
|
|
|
219,888
|
|
|
|
206,000
|
|
Officer’s compensation
|
|
|
259,000
|
|
|
|
—
|
|
Deferred compensation
|
|
|
275,566
|
|
|
|
236,000
|
|
General business credits
|
|
|
144,000
|
|
|
|
144,000
|
|
Net operating loss carry-forward
|
|
|
4,381,715
|
|
|
|
3,367,000
|
|
Valuation allowance
|
|
|
(5,502,481
|
)
|
|
|
(3,714,000
|
)
|
Net deferred tax asset:
|
|
$
|
—
|
|
|
$
|
—
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Unrealized gain on investment
|
|
$
|
(8,875
|
)
|
|
$
|
—
|
|
Valuation allowance
|
|
|
8,875
|
|
|
|
—
|
|
Net Deferred Tax Liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
Total net deferred taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
33
As of July 31,
2012, the Company has generated regular tax net operating losses of approximately $12,300,000. For federal and state
purposes, net operating losses can be carried forward for up to 20 years. The Company’s net operating losses will begin
to expire in 2019.
The net deferred tax
asset valuation allowance is $5,493,606 as of July 31, 2012 compared to $3,714,000 as of July 31, 2011. The
valuation allowance is based on management’s assessment that it is more likely than not that the net operating loss
will not be realized in the foreseeable future. The Company’s ability to realization tax benefit from the net operating
loss is also subject to annual limitation under Internal Revenue Code Section 382. Due to the change in control which
occurred as a result of Abeja Ventures, LLC’s investment in the company on June 26, 2012, the Company estimates that
the annual Section 382 limitation on utilization of net operating losses will be $500.000.
The difference
between the U.S. federal statutory income tax rate and the Company’s effective tax rate is as follows:
Year Ended July 31,
|
|
|
2012
|
|
|
|
2011
|
|
U.S. Federal statutory income tax rate
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
State taxes, net of federal tax benefit
|
|
|
(3.0
|
)
|
|
|
(3.0
|
)
|
Non-deductible equity and other compensation
|
|
|
5.19
|
|
|
|
(0.1
|
)
|
Prior period net operating loss correction
|
|
|
(1.70
|
)
|
|
|
—
|
|
Valuation allowance
|
|
|
33.51
|
|
|
|
37.1
|
|
|
|
|
0
|
%
|
|
|
0
|
%
|
NOTE 9 MAJOR CUSTOMERS AND FOREIGN REVENUE
For the years ending July
31, 2012 and 2011, revenues were $235,910 and $1,121,166, respectively. Of the total revenues, revenues from one customer were
$140,000 (59.3%) in the year ended July 31, 2012 and $842,408 (75.14%) for the year ended July 31, 2011.
Foreign Revenues were as follows for the fiscal
years ended July 31:
Foreign Revenues
|
|
|
2012
|
|
|
|
2011
|
|
OptiChem Revenues
|
|
$
|
27,649
|
|
|
$
|
23,073
|
|
License Fees
|
|
|
—
|
|
|
|
—
|
|
Technical Development Fees
|
|
|
—
|
|
|
|
—
|
|
Consulting Fees
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
27,649
|
|
|
$
|
23,073
|
|
34
NOTE 10 COMMITMENTS
Investments and Deferred Compensation Arrangement
In January 1996, the Company
established a deferred compensation plan for key employees. Contributions to the plan are provided for under the employment agreement
with Thomas V. Geimer, which is detailed at the end of this note. For the fiscal year ended July 31, 2012, the Company contributed
$75,000 to the plan.
The following information
is provided related to the trust assets, which consist of cash and equity securities as of July 31, 2012 and 2011. These assets,
which based upon the Company's intended use of the investments, have been classified as trading securities. Unrealized holding
gains or loss on trading securities are included in other income (expense).
|
|
|
2012
|
|
|
|
2011
|
|
Cost basis
|
|
$
|
1,462,472
|
|
|
$
|
1,289,950
|
|
Unrealized holding gain (loss)
|
|
|
23,987
|
|
|
|
14,572
|
|
Aggregate fair value
|
|
$
|
1,486,459
|
|
|
$
|
1,304,522
|
|
Deferred compensation related
to the Rabbi Trust was $1,486,459 and $1,304,522 as of July 31, 2012 and 2011, respectively.
Operating Lease
The Company is a party
to a lease for its office and laboratory space that expires on September 30, 2012. Total rent expense including common area charges
was approximately $73,965 and $68,330 during the years ended July 31, 2012 and 2011, respectively. Future minimum lease payments,
of $3,339 per month plus the pro rata share of taxes, insurance and common facility charges are payable monthly through September
30, 2012. The lease was extended through February 2013 at similar terms. See Note 13 below.
Employment Agreement and Consulting Agreement
Effective December 1, 2007,
we entered into an Employment Agreement with Mr. Geimer. The agreement provided for an annual base salary of $165,000 with annual
deferred compensation of $75,000 and was to have expired on December 31, 2012. On June 26, 2012, Thomas V. Geimer resigned as the
Company’s Chief Executive Officer, Chief Financial Officer and Secretary. In connection with his resignation, Mr. Geimer
entered into an Amendment to Employment Agreement with the Company, as well as a new Consulting Agreement. Pursuant to the Amendment
to Employment Agreement, Mr. Geimer and the Company agreed to stagger certain payments due to him such that $650,000 was paid to
Mr. Geimer upon the closing of the Investment and $700,000 will be payable to him on July 1, 2013. Any payments due to Mr. Geimer
under his Employment Agreement (as amended) but not timely paid by the Company will bear interest at a rate of 18% per annum. In
addition, the $75,000 deferred compensation payment for the Company’s fiscal year ending July 31, 2012 was contributed prior
to the closing of the Investment. Pursuant to the Consulting Agreement, Mr. Geimer agreed to provide certain transition and other
services to the Company. In exchange, for the remainder of 2012, the Company will pay Mr. Geimer an amount equal to $24,000 per
month. From January 1, 2013 through December 31, 2013, Mr. Geimer’s aggregate consulting fee will be $96,000 ($8,000 per
month).
NOTE 11 DEFERRED REVENUE
Deferred revenue recognized
was $85,345 and $9,797, respectively; for the fiscal years ended July 31, 2012 and 2011. Deferred revenue consists of prepaid royalty
fees from Nanostring and SCHOTT. During the year ended July 31, 2012 an additional $100,000 was received from SCHOTT as prepaid
royalties of which $3,903 was recognized during the fiscal year ended July 31, 2012 and $10,428 recognized during the fiscal year
ended July 31, 2011 and are reflected as OptiChem revenues.
35
NOTE 12 FAIR VALUE MEASUREMENTS
The fair value hierarchy
in ASC 820 prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as described in the
following list.
Level 1 Inputs are
quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access
at the measurement date. A quoted price in an active market provides the most reliable evidence of fair value.
Level 2 Inputs
other than quoted prices included within level 1 that are observable for the asset, either directly or indirectly. Level 2 inputs
include:
|
·
|
Quoted prices for similar assets in active markets
|
|
·
|
Quoted prices for identical or similar assets
in markets that are not active, prices are not current, or price quotations vary substantially over time, or among markets for
which little information is released publicly
|
|
·
|
Inputs other than quoted prices that are
observable for the asset
|
|
·
|
Inputs that are derived principally from
or corroborated by observable market data by correlation or other means
|
Level 3 Inputs are
unobservable inputs for the asset. Unobservable inputs are used to measure fair value to the extent that observable inputs are
not available. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants
would use in pricing the asset, including risk.
At July 31, 2012
and 2011, investments of $1,486,459 and $1,304,522 were carried at fair value, and were classified within Level 1 of the valuation
hierarchy.
NOTE
13 Subsequent Events
Colorado Lease Amendment
On August 3, 2012, the
Company entered into an extension of its lease for office and laboratory space in Denver, Colorado. The amended lease extended
the term of the lease until February 1, 2013 on similar terms as its current lease.
Arizona Lease and Grant
Agreement
On August 20, 2012, the
Company entered into a Lease Agreement (“Lease”) with Pima County, a political subdivision of the State of Arizona
(“Landlord”), pursuant to which the Company will lease approximately 15,096 square feet of office space located in
Tucson, Arizona for a period of three years (the “Initial Term”), which may be extended by the Company for up to three
additional one-year periods (each a “Renewal Term”). The Lease also provides that the Company has the option, with
six months prior notice to Landlord, to lease either or both of two additional areas with an aggregate size of approximately 7,920
square feet.
Pursuant to the Lease,
the Company agreed to: (i) pay rent equal to $9.25 per usable square foot per year (approximately $139,600 per year or approximately
$11,600 per month) during the Initial Term and $19.80 per usable square foot per year (approximately $298,900 per year or approximately
$24,900 per month) during any Renewal Term; (ii) relocate its corporate offices to the Tucson area and begin operations within
30 days of the date that the tenant improvements are substantially completed (the “Commencement Date”); and (iii) within
18 months of the Commencement Date, employ at least 30 individuals with a median salary of at least $70,000, which median salary
must be maintained throughout the term of the Lease. If the Company fails to satisfy the condition described in clause (iii) of
the preceding sentence, the rental rate under the Lease will be increased by a percentage that is twice the percentage by which
the Company’s annual payroll has fallen short of the specified goal (subject to a cap equal to $19.80 per usable square
foot per year). The Lease also provides that Landlord will pay for tenant improvements (up to a cap of $1,400,000) as well as certain
repairs, utilities and insurance. When completed, the Company believes this facility will be adequate for its needs for the foreseeable
future.
36
On
August 22, 2012, the Company entered into a Grant Agreement (the “Grant Agreement”) with the Arizona Commerce Authority,
an agency of the State of Arizona (the “Authority”), pursuant to which the Authority will provide certain state and
county sponsored incentives for the Company to relocate its corporate headquarters to, and expand its business within, the State
of Arizona (the “Project”). Pursuant to the Grant Agreement, the Authority agreed to provide a total grant in the
amount of $1,000,000 (the “Grant”) for the use by the Company in the advancement of the Project. The Grant is payable
out of an escrow account in four installments, upon the achievement of the following milestones:
|
·
|
Milestone 1 – Relocation of Company’s operations and
corporate headquarters to Arizona and creation of 15 Qualified Jobs (as defined below).
|
|
·
|
Milestone 2 – Creation of 30 Qualified Jobs (including Qualified
Jobs under Milestone 1).
|
|
·
|
Milestone 3 – Creation of 40 Qualified Jobs (including Qualified
Jobs under Milestones 1 and 2).
|
|
·
|
Milestone 4 – Creation of 65 Qualified Jobs (including Qualified
Jobs under Milestones 1, 2 and 3) and capital investment of at least $4,520,000.
|
For purposes of the Grant Agreement,
a “Qualified Job” is a job that is permanent, full-time, new to Arizona, and for which the Company pays average (across
all Qualified Jobs identified by the Company in its discretion) annual wages of at least $63,000 and offers health insurance benefits
and pays at least 65% of the premiums associated with such benefits. The amount of each installment payment will be determined
in accordance with a formula specified in the Grant Agreement. The Grant Agreement also contains other customary provisions, including
representations, warranties and covenants of both parties.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure Controls
and Procedures
Based on an evaluation
under the supervision and with the participation of the Company’s Management, the Company’s Principal Executive Officer
and Principal Financial Officer have concluded that the Company’s disclosure controls and procedures as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act were effective as of July 31, 2012 to ensure that information required to be disclosed
by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and
communicated to the Company’s Management, including its Principal Executive Officer and Principal Financial Officer, as
appropriate to allow timely decisions regarding required disclosure.
Management’s Annual
Report on Internal Control over Financial Reporting
Management is responsible
for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with GAAP. The Company’s internal control over financial reporting
includes those policies and procedures that:
|
·
|
Pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our
assets;
|
|
·
|
Provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with US GAAP, and that our receipts and expenditures
are being made only in accordance with authorizations of our management and our directors; and
|
|
·
|
Provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial
statements.
|
37
Management, including the
Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls
will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all
control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future
periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the
effectiveness of our internal control over financial reporting as of July 31, 2012. In making this assessment, we used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated
Framework. Based on that assessment, management concluded that, during the period covered by this report, such internal controls
and procedures were effective as of July 31, 2012.
This Annual Report does
not include an attestation report of the Company’s independent registered public accounting firm regarding internal control
over financial reporting. Management’s assessment was not subject to attestation by the Company’s independent registered
public accounting firm pursuant to rules of the Securities and Exchange Commission.
Changes in Internal Control Over Financial
Reporting
There was no changes in
the Company's internal control over financial reporting during the Company's fiscal quarter ended July 31, 2012 that materially
affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9B. Other Information
Not Applicable.
PART III
Item 10. Directors, Executive Officers
and Corporate Governance.
The information required
by this Item is set forth under the heading “Directors, Executive Officers and Corporate Governance” in the Company’s
2012 Proxy Statement to be filed with the U.S. Securities and Exchange Commission (“SEC”) in connection with the solicitation
of proxies for the Company’s 2012 Annual Meeting of Shareholders (“2012 Proxy Statement”) and is incorporated
herein by reference. Such Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year to which
this report relates.
Item 11. Executive Compensation.
The information required by this Item is set
forth under the headings “Executive Compensation” in the Company’s 2012 Proxy Statement and is incorporated herein
by reference.
38
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
The information required by this
Item is set forth under the headings “Security Ownership of Certain Beneficial Owners and Management” in the Company’s
2012 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related
Transactions, and Director Independence.
The information required
by this Item is set forth under the heading “Certain Relationships and Related Transactions, and Director Independence”
in the Company’s 2012 Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accountant Fees and
Services.
The information required
by this Item is set forth under the heading “Fees Paid to Auditors” in the Company’s 2012 Proxy Statement and
is incorporated herein by reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules
|
(
a)
|
Documents filed as part of this report
|
(
1)
|
All financial statements
|
|
|
Page
|
|
Report of Independent Registered Public Accounting Firm
|
21
|
|
Balance Sheets as of July 31, 2012 and 2011
|
22
|
|
Statements of Operations for the years ended July 31, 2012 and 2011
|
23
|
|
Statements of Shareholders Equity for the years ended July 31, 2012 and 2011
|
24
|
|
Statements of Cash Flow for the years ended July 31, 2012 and 2011
|
25
|
|
Notes to Financial Statements
|
26
|
(
2)
|
Financial Statement Schedule
s
|
All financial statement schedules have been
omitted, since the required information is not applicable or because the information required is included in the financial statements
and notes thereto.
(
b)
|
Exhibits required by Item 601 of Regulation S-K
|
The information required by this Item is set forth on the exhibit
index that follows the signature page of this report.
39
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
ACCELR8 TECHNOLOGY CORPORATION
|
|
|
|
October 26, 2012
|
By:
|
/s/ Lawrence Mehren
|
(Date Signed)
|
|
Lawrence Mehren, President and Chief Executive Officer
|
Power of Attorney
KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below constitutes and appoints Lawrence Mehren, as his attorney-in-fact, with the power of substitution,
for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming
all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the date indicated.
Signature
|
|
Capacity
|
|
Date
|
|
|
|
|
|
/s/ Lawrence Mehren
|
|
President, Chief Executive Officer and Director
|
|
October 26, 2012
|
Lawrence Mehren
|
|
|
|
|
|
|
|
|
|
/s/ Steve Reichling
|
|
Chief Financial Officer and Chief Accounting Officer
|
|
October 26, 2012
|
Steve Reichling
|
|
|
|
|
|
|
|
|
|
/s/ John Patience
|
|
Chairman of the Board of Directors
|
|
October 26, 2012
|
John Patience
|
|
|
|
|
|
|
|
|
|
/s/ Thomas V. Geimer
|
|
Director
|
|
October 26, 2012
|
Thomas V. Geimer
|
|
|
|
|
|
|
|
|
|
/s/ Jack Schuler
|
|
Director
|
|
October 26, 2012
|
Jack Schuler
|
|
|
|
|
|
|
|
|
|
/s/ Matthew W. Strobeck
|
|
Director
|
|
October 26, 2012
|
Matthew W. Strobeck, Ph.D.
|
|
|
|
|
40
Exhibit Index
Exhibit No.
|
Description
|
Filing Information
|
|
|
|
3.1.1
|
Articles of Incorporation of Accerl8 Technology Corporation, as amended from time to time
|
Filed herewith
|
3.1.2
|
Amendment to Articles of Incorporation of Accerl8 Technology Corporation
|
Incorporated by reference to Annex B of the Registrant’s Definitive Proxy Statement on Schedule 14A filed on May 17, 2012
|
3.2
|
Bylaws of Accelr8 Technology Corporation
|
Filed herewith
|
4.1
|
Warrant No. 1 issued by Accelr8 Technology Corporation to Abeja Ventures, LLC on June 26, 2012
|
Filed herewith
|
4.2
|
Warrant No. 2 issued by Accelr8 Technology Corporation to Abeja Ventures, LLC on June 26, 2012
|
Filed herewith
|
10.1
|
Accelr8 Technology Corporation 2004 Omnibus Stock Option Plan*
|
Incorporated by reference to Appendix A of the Registrant’s Definitive Proxy Statement on Schedule 14A filed on November 15, 2004
|
10.2
|
Amendment to the Accelr8 Technology Corporation 2004 Omnibus Stock Option Plan*
|
Incorporated by reference to Annex C of the Registrant’s Definitive Proxy Statement on Schedule 14A filed on May 17, 2012
|
10.3
|
Form of Stock Option Award Agreement*
|
Incorporated by reference to Exhibit 4.4 filed with the Registrant’s Form S-8 Registration Statement (No. 333-182930) on July 30, 2012
|
10.4
|
Securities Purchase Agreement between Accelr8 Technology Corporation and Abeja Ventures, LLC, dated as of April 20, 2012
|
Incorporated by reference to Exhibit 10.1 filed with the Registrant’s Form 10-Q/A for the quarterly period ended April 30, 2012
|
10.5
|
Registration Rights Agreement between Accelr8 Technology Corporation and Abeja Ventures, LLC, dated as of June 26, 2012
|
Filed herewith
|
10.6
|
Employment Agreement between Accelr8 Technology Corporation and Thomas V. Geimer*
|
Filed herewith
|
10.7
|
Amendment to Employment Agreement between Accelr8 Technology Corporation and Thomas V. Geimer*
|
Filed herewith
|
10.8
|
Consulting Agreement between Accelr8 Technology Corporation and Thomas V. Geimer*
|
Filed herewith
|
10.9
|
Offer Letter between Accelr8 Technology Corporation and Lawrence Mehren, dated as of June 24, 2012*
|
Filed herewith
|
10.10
|
CFO Offer Letter, dates as of August 8, 2012
|
Filed herewith
|
10.11
|
Lease Agreement between Accelr8 Technology Corporation and Pima County, dated as of August 20, 2012
|
Filed herewith
|
10.12
|
Grant Agreement between Accelr8 Technology Corporation and the Arizona Commerce Authority, dated as of August 22, 2012
|
Filed herewith
|
23
|
Consent of Independent Registered Public Accounting Firm
|
Filed herewith
|
31.1
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Filed herewith
|
41
31.2
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Filed herewith
|
32
|
Certificate of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Filed herewith
|
101**
|
XBRL Instance Document
|
|
101**
|
XBRL Taxonomy Extension Schema Document
|
|
101**
|
XBRL Taxonomy Calculation Linkbase Document
|
|
101**
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101**
|
XBRL Taxonomy Label Linkbase Document
|
|
101**
|
XBRL Taxonomy Presentation Linkbase Document
|
|
42
Accelr8 (AMEX:AXK)
過去 株価チャート
から 6 2024 まで 7 2024
Accelr8 (AMEX:AXK)
過去 株価チャート
から 7 2023 まで 7 2024