Accelr8's Accounting, Y2K Claims Questioned by SEC

Updated 4:19 PM ET November 16, 1999

By Peter Ramjug

WASHINGTON (Reuters) - Software firm Accelr8 Technology Corp. and three executives misrepresented its Y2K software and used questionable accounting methods, the Securities and Exchange Commission charged on Tuesday.

But the Denver-based company's legal counsel disputed the charges, saying Accelr8 has always properly represented the capabilities of its products and feels its accounting practices are appropriate.

An SEC complaint filed in federal court in Denver alleges that from 1997 through 1999, Accelr8, its Chief Executive Officer Thomas Geimer and President Harry Fleury made false claims about the utility of its Navig8 2000 software.

The SEC said Navig8 2000 was allegedly created to only analyze computer programs for the VAX/VMS computer system made by Digital Equipment Corp., which was bought by Compaq Computer Corp. in 1998.

But the company and the two executives claimed in press releases, SEC filings and on the Internet that Navig8 2000 also analyzed programs for International Business Machines Corp.'s UNIX and Microsoft Corp.'s NT operating systems, the complaint said.

The regulatory agency further accused Accelr8 of filing false quarterly and annual statements from April 1998 through April 1999.

For the quarter ended April 30, 1998, Accelr8 improperly booked revenue on three unfulfilled contracts that together overstated quarterly revenue by about $1.2 million, $380,000 of which should have never been recognized, the commission charged.

Among other alleged accounting discrepancies, the SEC contended that Accelr8, in the quarter ended Jan. 31, 1999, accelerated recognition of maintenance revenue on a major contract by $310,000, taking the company to a pre-tax profit of $82,000 from a pre-tax loss of $228,000.

The financial statements were prepared by Accelr8's controller, James Godkin, and approved by Geimer, who was also the chief financial officer and chairman as well as CEO, the SEC said.

But the company's lawyer, David Zisser, said Accelr8 has gone over its accounting practices with experts that it retained and is satisfied that its practices were appropriate.

In defending the Navig8 2000 claim, Zisser said: "The company has always properly represented the capabilities of its products. I think the SEC may be trying to take some things out of context; but the company's materials, taken as a whole, were based on those materials taken as a whole."

"Nobody was or could have been mislead by the capabilities of the company's products," added the Accelr8 lawyer.

Accelr8 shares fell 1/4 to 1 5/16 in Nasdaq trading.

======================================== End

Ray

-- Ray (ray@totacc.com), November 16, 1999