<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-20735
------------------------
RESTRAC, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 04-2935271
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
91 HARTWELL AVENUE
LEXINGTON, MA 02173
(Address of principal executive offices) (zip code)
</TABLE>
(617) 869-5000
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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.
Yes X No __
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:
TITLE OF EACH CLASS
Common stock, $.01 par value, shares outstanding at August 4, 1997: 8,160,216
shares
================================================================================
<PAGE> 2
RESTRAC, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at June 30, 1997 and September 30, 1996........... 3
Consolidated Statements of Operations for the three and nine months ended:
June 30, 1997 and June 30, 1996............................................... 4
Consolidated Statements of Cash Flows for the nine months ended: June 30, 1997
and June 30, 1996............................................................. 5
Notes to Consolidated Financial Statements.................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................... 8
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings............................................................. 12
Item 2. Changes in Securities......................................................... 12
Item 3. Defaults upon Senior Securities............................................... 12
Item 4. Submission of Matters to a Vote of Security Holders........................... 12
Item 5. Other Information............................................................. 12
Item 6. Exhibits and Reports on Form 8-K.............................................. 12
PART III -- SIGNATURES.................................................................. 13
Exhibit # 11............................................................................ 14
Exhibit # 27............................................................................ 15
</TABLE>
2
<PAGE> 3
RESTRAC, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1996
----------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents......................................... $10,867,294 $20,367,641
Short-term investments............................................ 5,979,659 --
Accounts receivable, less allowance for doubtful accounts of
$350,000........................................................ 2,937,782 3,387,010
Other current assets.............................................. 1,443,031 229,577
Deferred income taxes............................................. 770,965 770,965
----------- -----------
Total Current Assets......................................... 21,998,731 24,755,193
Property and equipment, net....................................... 3,056,559 1,520,893
Other assets...................................................... 776,416 33,898
----------- -----------
Total Assets................................................. $25,831,706 $26,309,984
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt................................. $ -- $ 5,060
Accounts payable.................................................. 1,261,790 570,603
Accrued expenses.................................................. 1,835,508 3,339,895
Deferred revenue.................................................. 4,014,625 3,140,801
Accrued income taxes.............................................. -- 280,917
----------- -----------
Total Current Liabilities.................................... 7,111,923 7,337,276
----------- -----------
Other liabilities................................................. 127,927 --
----------- -----------
Stockholders' equity
Preferred stock, $.01 par value--Authorized--5,000,000 shares,
Issued and outstanding--none.................................... -- --
Common stock, $.01 par value--Authorized--30,000,000 shares,
Issued--8,821,579 shares at June 30, 1997 and 8,569,711 shares
at September 30, 1996........................................... 88,215 85,697
Additional paid in capital........................................ 18,762,970 18,222,648
Treasury stock.................................................... (830,764) (830,764)
Retained earnings................................................. 571,435 1,495,127
----------- -----------
Total Stockholders' Equity................................... 18,591,856 18,972,708
----------- -----------
Total Liabilities and Stockholders' Equity................... $25,831,706 $26,309,984
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
RESTRAC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Product revenue...................... $ 2,815 $ 3,481 $ 7,269 $ 9,581
Services revenue..................... 2,938 2,116 8,243 5,919
---------- ---------- ---------- ----------
Total revenue................... 5,753 5,597 15,512 15,500
---------- ---------- ---------- ----------
Cost of revenue:
Product revenue...................... 105 299 492 1,231
Services revenue..................... 1,641 1,297 4,496 3,489
---------- ---------- ---------- ----------
Total cost of revenue........... 1,746 1,596 4,988 4,720
---------- ---------- ---------- ----------
Gross margin.................... 4,007 4,001 10,524 10,780
---------- ---------- ---------- ----------
Operating expenses:
Research and development............. 1,379 600 3,582 1,476
Sales and marketing.................. 2,228 2,158 6,283 6,068
General and administrative........... 987 708 2,629 1,866
---------- ---------- ---------- ----------
Total operating expenses........ 4,594 3,466 12,494 9,410
---------- ---------- ---------- ----------
Income (loss) from operations............. (587) 535 (1,970) 1,370
Other income, net......................... 154 64 529 165
---------- ---------- ---------- ----------
Income (loss) before (benefit) provision
for income taxes........................ (433) 599 (1,441) 1,535
(Benefit) provision for income taxes...... (153) 249 (518) 660
---------- ---------- ---------- ----------
Net income (loss)......................... $ (280) $ 350 $ (923) $ 875
========== ========== ========== ==========
Net income (loss) per common and common
equivalent share........................ $ (0.03) $ 0.05 $ (0.12) $ 0.13
========== ========== ========== ==========
Weighted average number of common and
common equivalent shares outstanding.... 8,115,898 6,914,397 8,022,502 6,921,946
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
RESTRAC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)............................................ $ (923,692) $ 875,203
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 884,625 641,681
Compensation expense related to stock option grants..... 194,222 --
Development expense related to issuance of stock
warrants............................................. 98,643 --
Deferred income taxes, net.............................. (201,488)
Changes in assets and liabilities:
Accounts receivable................................ 449,228 302,017
Prepaid expenses/other current assets.............. (1,213,454) 123,487
Accounts payable................................... 691,187 150,380
Accrued expenses................................... (935,861) 185,680
Accrued taxes...................................... (280,917) (5,530)
Deferred revenue................................... 873,824 100,080
Other liabilities.................................. 127,927 (40,000)
------------ ------------
Net cash (used in) provided by operating
activities................................. (34,268) 2,131,510
------------ ------------
Cash Flows from Investing Activities:
Purchases of short-term investments, net..................... (5,979,659) --
Purchases of property and equipment.......................... (2,420,291) (724,381)
Increase in other assets..................................... (742,518) (110,617)
------------ ------------
Net cash used in investing activities......... (9,142,468) (834,998)
------------ ------------
Cash Flows from Financing Activities:
Payments on capital lease obligations........................ (5,060) (5,595)
Proceeds from employee stock purchase plan................... 78,973 --
Payment of accumulated dividends............................. (568,526) --
Proceeds from exercise of stock options...................... 171,002 67,015
Purchase of treasury stock................................... -- (25,794)
------------ ------------
Net cash (used in) provided by financing
activities................................. (323,611) 35,626
------------ ------------
Net (Decrease) Increase in Cash and Cash Equivalents.............. (9,500,347) 1,332,138
Cash and cash equivalents, beginning of period.................... 20,367,641 2,966,637
------------ ------------
Cash and cash equivalents, end of period.......................... $ 10,867,294 $ 4,298,775
============ ============
Supplemental disclosure of cash flow information
Cash used for interest....................................... $ 284 $ 1,275
============ ============
Cash used for income taxes................................... $ 442,020 $ 665,226
============ ============
Supplemental disclosure of noncash investing and financing
activities:
Dividend accretion........................................... $ -- $ 210,228
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
RESTRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Restrac, Inc. and its wholly-owned subsidiary, Restrac Securities Corporation,
collectively referred to in these Notes to Consolidated Financial Statements as
"the Company". All intercompany accounts and transactions have been eliminated
in consolidation.
The consolidated financial statements of the Company presented herein,
without audit except for balance sheet information at September 30, 1996, have
been prepared pursuant to the rules of the Securities and Exchange Commission
for quarterly reports on Form 10-Q and do not include all of the information and
footnote disclosures required by generally accepted accounting principles. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended September 30, 1996 ("Fiscal
1996") included in the Company's Form 10-K filed with the Securities and
Exchange Commission on December 29, 1996.
The consolidated balance sheet as of June 30, 1997, the consolidated
statements of operations for the three and nine month periods ended June 30,
1997 and 1996, and the consolidated statements of cash flows for the nine month
periods ended June 30, 1997 and 1996, are unaudited but, in the opinion of
management, include all adjustments (consisting solely of normal, recurring
adjustments) necessary for a fair presentation of results for these interim
periods.
The consolidated results of operations for the nine month period ended
June 30, 1997 are not necessarily indicative of the results to be expected for
the fiscal year ending September 30, 1997 ("Fiscal 1997").
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application
of certain significant accounting policies described below and elsewhere in the
notes to the Fiscal 1996 consolidated financial statements referenced above.
(a) Revenue Recognition
Product revenue includes software license fees and royalty revenue. For
Fiscal 1996, product revenue also includes revenue from the resale of
third-party hardware. Services revenue includes customer maintenance fees and
fees for training, installation, consulting and resume scanning. The Company
recognizes product and services revenue in accordance with the provisions of
Statement of Position No. 91-1, Software Revenue Recognition.
Product revenue from software license fees is recognized upon delivery
provided there are no significant Company obligations remaining and
collectibility of the revenue is probable. If an acceptance period is allowed,
revenue is recognized upon the earlier of the customer acceptance or the
expiration of the acceptance period, as defined in the applicable software
license agreement.
Services revenue from customer maintenance fees for postcontract support is
recognized ratably over the maintenance term, which is typically 12 months. The
Company includes first year maintenance with the purchase of a system license;
however, for accounting purposes, generally 15% of the software license fee is
treated as a maintenance fee and is recognized ratably over the 12-month
maintenance period. The amount allocated to customer maintenance fees for the
first year is comparable to customer maintenance fees charged separately by the
Company. Other services revenue from training, installation, consulting and
resume scanning is recognized as the related services are performed.
Deferred revenue represents payments received by the Company in advance of
product delivery or service performance.
6
<PAGE> 7
RESTRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997
(b) Net Income (Loss) per Share Calculation
For the three and nine month periods ended June 30, 1997, net income per
common and common equivalent share was based on the weighted average number of
common shares outstanding during the period. Common equivalent shares
outstanding during the period, computed in accordance with the treasury stock
method, were not used as their inclusion would have been anti-dilutive. For the
three and nine month periods ended June 30, 1996, net income per outstanding
common and common equivalent share was based on the weighted average number of
common and common equivalent shares outstanding during the period, computed in
accordance with the treasury stock method, plus the number of shares of common
stock issuable upon conversion of the redeemable convertible preferred stock and
the number of shares of common stock issued pursuant to the initial public
offering sufficient to generate proceeds for the payment of approximately
$569,000 of estimated redeemable convertible preferred stock dividends payable
upon the closing of an initial public offering. The weighted average number of
common and common equivalent shares assumes that common stock options granted
and shares issued one year prior to the initial filing of a registration
statement for the Company's initial public offering were outstanding for the
periods presented computed in accordance with the treasury stock method.
In March 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share. This pronouncement
is effective for fiscal years ending after December 15, 1997. One of the more
significant changes is the replacement of primary earnings per share with
"basic" earnings per share. Basic earnings per share is computed by dividing
reported earnings available to common stockholders by weighted average shares
outstanding, with no consideration given for any potentially dilutive
securities. Fully diluted earnings per share, now called "diluted" earnings per
share, is still required. As net losses were presented for the 1997 periods in
the accompanying consolidated financial statements, the pro forma loss per
share, computed under the new statement, is the same as the loss per share
presented. The computational differences in fully diluted earnings per share
under the new pronouncement would have no impact on earnings per share as
presented for the Fiscal 1996 periods.
(c) Reclassifications
Certain reclassifications have been made to the Fiscal 1996 consolidated
financial statements to conform to the Fiscal 1997 presentation. Such
reclassifications have no effect on previously reported income.
(d) Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with an original
maturity of three months or less. Cash and cash equivalents are stated at
amortized cost, which approximates market.
(e) Short-Term Investments
Short-term investments consist of U.S. Government securities, municipal
securities and commercial paper with original maturities between three and
twelve months. The Company classifies these short-term investments as
held-to-maturity, and accordingly, they are carried at amortized cost, which
approximates market.
7
<PAGE> 8
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 1997
CONSOLIDATED RESULTS OF OPERATIONS
Revenue
Total revenue for the three and nine month periods ended June 30, 1997 was
$5,753,000 and $15,512,000, respectively, as compared to $5,597,000 and
$15,500,000 for the respective three and nine month periods ended June 30, 1996.
Product revenue was $2,815,000 for the three months ended June 30, 1997
compared to $3,481,000 for the three months ended June 30, 1996. For the nine
months ended June 30, 1997, product revenue was $7,269,000 compared to
$9,581,000 for the comparable 1996 period. The reduction in product revenue for
the third fiscal quarter of 1997 resulted largely from lower unit shipment
volumes as compared to the comparable 1996 period, partially offset by an
increase in average sales price. For the nine month period ended June 30, 1997,
the decrease in product revenue related to a combination of lower unit shipment
volumes and proportionately smaller sales transactions. Because the Company's
product revenue consists of a relatively small number of large dollar
transactions, the average sales price and number of units shipped can fluctuate
widely from period to period. Such fluctuations are not necessarily indicative
of future results.
Services revenue of $2,938,000 for the three months ended June 30, 1997
increased 39% from $2,116,000 for the three months ended June 30, 1996. For the
nine months ended June 30, 1997, services revenue increased 39% to $8,243,000
from $5,919,000 for the comparable 1996 period. Maintenance revenue accounted
for approximately 60% and 72% of the total increase for the respective three and
nine month periods, due to the continued growth in the Restrac Hire and Resume
Reader for PeopleSoft installed base. Scanning services, which commenced late in
the third fiscal quarter of 1996, accounted for approximately 28% and 26% of the
total increase in services revenue for the respective three and nine month
periods.
Cost of Revenue
Cost of product revenue of $105,000 for the three months ended June 30,
1997 decreased 65% from $299,000 for the three months ended June 30, 1996. For
the nine months ended June 30, 1997, cost of product revenue of $492,000
decreased 60% from $1,231,000 for the comparable 1996 period. Cost of product
revenue represented 4% and 7% of total product revenue for the three and nine
month periods, respectively, of Fiscal 1997 as compared to 9% and 13%,
respectively, for the comparable three and nine month periods of Fiscal 1996.
Certain costs and charges were experienced in the Fiscal 1996 first half which
are not present in Fiscal 1997, including the costs associated with the
reselling of scanning hardware. Cost of product revenue was also affected by the
proportionate mix of Resume Reader for PeopleSoft sales, which carried a royalty
burden through April, 1997.
Cost of services revenue increased 27% to $1,641,000 for the three months
ended June 30, 1997 from $1,297,000 for the three months ended June 30, 1996.
For the nine months ended June 30, 1997, cost of services revenue increased 29%
to $4,496,000 from $3,489,000 for the comparable 1996 period. The increases in
absolute dollars are principally attributable to proportionately higher services
revenue. Cost of services revenue represented 56% and 55% of total services
revenue for the respective three and nine month periods of Fiscal 1997 as
compared to 61% and 59% for the respective three and nine month periods of
Fiscal 1996.
The higher mix of services revenue in the 1997 periods is reflected in the
slight decrease in gross margin during the three and nine month periods ended
June 30, 1997 to 70% and 68%, respectively, from 71% and 70% in the comparable
Fiscal 1996 periods.
8
<PAGE> 9
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 1997
CONSOLIDATED RESULTS OF OPERATIONS -- (CONTINUED)
Operating Expenses
Research and development expenses were $1,379,000 or 24% of total revenue
and $3,582,000 or 23% of total revenue during the three and nine months ended
June 30, 1997, respectively, as compared to $600,000 and $1,476,000 or 11% and
10%, respectively, of total revenue for the comparable Fiscal 1996 periods. This
significant increase in both absolute dollars and as a percentage of total
revenue is primarily due to increases in both personnel and consulting expenses
in support of the Company's new and existing product development initiatives and
its quality assurance programs. The Company had 35 employees dedicated to
research and development efforts at June 30, 1997 as compared to 21 employees at
June 30, 1996. The Company considers investment in research and development to
be integral to its future success. Research and development spending may vary
from quarter to quarter as a percentage of total revenue. All of the Company's
research and development costs have been expensed as incurred.
Sales and marketing expenses were $2,228,000 and $6,283,000 or 39% and 41%,
respectively, of total revenue for the three and nine months ended June 30, 1997
as compared to $2,158,000 and $6,068,000 or 39% of total revenue for the
comparable Fiscal 1996 periods. The Company made significant investments in its
sales organization in the first fiscal quarter of 1997, adding an Area Director
and increasing the number of direct sales personnel by 50% as compared to Fiscal
1996. During the second fiscal quarter of 1997, the Company expanded its West
Coast and Central U.S. facilities to accommodate the geographic distribution of
sales and services personnel and to better support the customer base. The
increases related to these investments were offset in part by lower marketing
expenses for the nine months ended June 30, 1997 as compared to 1996. The
Company expects that sales and marketing expenses will continue to increase in
absolute dollars; however, such expenses may vary from quarter to quarter as a
percentage of total revenue.
General and administrative expenses were $987,000 and $2,629,000 or 17% of
total revenue for the three and nine month periods ended June 30, 1997,
respectively, compared to $708,000 or 13% and $1,866,000 or 12% of total revenue
for the comparable Fiscal 1996 periods. The increase for the quarter and year to
date, both in absolute dollars and as a percentage of total revenue, is largely
the result of personnel increases in support of the Company's infrastructure,
increased costs associated with the Company's having gone public, investments in
internal systems and a one-time charge in the second fiscal quarter of 1997
related to the move of the Company's corporate headquarters.
The Company leases office space in several locations. The annual rental
payments under these leases are approximately $1,500,000 and expire at various
dates through December 31, 2003. These lease payments will result in an
approximate $1,000,000 increase in facilities costs in Fiscal 1997 as compared
to Fiscal 1996. Facilities costs are allocated among expense categories based
principally on functional headcount.
Other Income, Net
Other income increased to approximately $154,000 and $529,000 for the three
and nine month periods ended June 30, 1997, respectively, from $64,000 and
$165,000 for the comparable 1996 periods. These increases are due to higher cash
and cash equivalents and short-term investment balances during the 1997 periods,
representing the proceeds raised from the Company's initial public offering in
July, 1996. The Company expects to continue to yield investment income on its
average balance of combined cash and cash equivalents and short-term investments
at an average rate comparable to that experienced for the nine months ended June
30, 1997.
9
<PAGE> 10
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 1997
CONSOLIDATED RESULTS OF OPERATIONS -- (CONTINUED)
(Benefit) Provision for Income Taxes
The Company's effective tax rate for the three and nine month periods ended
June 30, 1997 was 35% and 36%, respectively, as compared to 42% and 43% for the
respective three and nine month periods ended June 30, 1996. The effective tax
rate represents the Company's best estimate of the rate expected to be
applicable for the full fiscal year. The reduction in rate anticipated for
Fiscal 1997 as compared to Fiscal 1996 is principally due to favorable state tax
ramifications expected for Restrac Securities Corporation and to projected
tax-exempt investment income at the Federal tax level.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had cash and cash equivalents and short-term
investments of $16,847,000, a decrease of $3,521,000 from $20,368,000 at
September 30, 1996. Working capital was $14,887,000 at June 30, 1997 as compared
to $17,418,000 at September 30, 1996, a decrease of $2,531,000.
Cash used in operating activities was $34,000 during the nine months ended
June 30, 1997. Use of cash in operating activities consisted mainly of the net
loss for the nine months, the offsetting effect of depreciation and
amortization, and the timing of receipts and disbursements, resulting in
prepayment of certain expenses, reductions in accounts receivable and
fluctuations in certain liabilities.
The Company used $9,142,000 in investing activities during the first nine
months of Fiscal 1997. Investing activities consisted principally of the net
purchase of short-term investments of $5,980,000; the purchase of property and
equipment (primarily computer and networking equipment, peripherals and
software) which approximated $2,420,000 to support the corporate infrastructure;
and a cash deposit of $720,000 for the Company's new lease for its corporate
headquarters. This lease deposit (included in Other Assets) is interest-bearing
and its investment can be directed by the Company.
Net cash used in financing activities for the nine months ended June 30,
1997 was $324,000. The most notable financing activity was the payment of
accumulated dividends of $569,000 related to redeemable convertible preferred
stock which was converted to common stock as a result of the initial public
offering. This outflow was partially offset by the combined proceeds from the
exercise of stock options and from the employee stock purchase plan totaling
$250,000.
To date, the Company has not invested in derivative securities or any other
financial instruments that involve a high level of complexity or risk. Cash has
been, and the Company contemplates that it will continue to be, invested in
interest-bearing, investment grade securities.
From time to time, the Company may evaluate potential acquisitions of
products, businesses and technologies that may complement or expand the
Company's business. The Company currently does not have any understandings,
commitments or agreements with respect to any such acquisitions. Any such
transactions consummated may use a portion of the Company's working capital or
require the issuance of equity or debt.
The Company believes that its current cash and cash equivalent and
short-term investment balances and cash provided by future operations will be
sufficient to meet its working capital expenditure requirements for at least the
next twelve months. Although operating activities may provide cash in certain
periods, operating and investing activities may use cash in other periods.
Consequently, any future growth may require the Company to obtain additional
equity or debt financing.
10
<PAGE> 11
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTH PERIODS ENDED JUNE 30, 1997
CONSOLIDATED RESULTS OF OPERATIONS -- (CONTINUED)
CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Statements made or incorporated in this Form 10-Q include a number of
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements include, without limitation, statements containing
the words "anticipates", "believes", "expects", "intends", "future", and words
of similar import which express management's belief, expectations or intentions
regarding the Company's future performance. The Company's actual results could
differ materially from its historical operating results and from those set forth
in the forward-looking statements herein and may fluctuate between operating
periods. Factors that might cause such differences and fluctuations include the
following: risks related to the management of change, product development risks,
new product announcements and introductions, market acceptance of the Company's
products and those of its competitors, changes in technology and industry
standards, increased competition, changes in pricing policies by the Company and
its competitors, the Company's ability to attract, train and retain qualified
personnel, the timing of the receipt of orders from customers, the size and rate
of growth of the market for human resources staffing software, dependence on
certain strategic partnerships, development and promotional expenses relating to
the introduction of new products and general economic conditions. In addition, a
significant portion of product revenue within a quarter is typically not
realized until late in the quarter. As a result, it may be difficult for the
Company to predict its total revenue for the quarter or adapt its spending
levels within a quarter to reflect changes in demand for its products. The
market price of the Company's common stock has been, and in the future will
likely be, subject to significant fluctuations in response to variations in
quarterly operating results and other factors, such as announcements of
technological innovations or new products by the Company or its competitors, or
other events.
11
<PAGE> 12
RESTRAC, INC.
FORM 10-Q
JUNE 30, 1997
PART II -- OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any pending legal proceedings other than
those arising in the ordinary course of the Company's business. Management
believes that the resolution of these matters will not materially affect the
Company's business or the financial condition of the Company.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS FURNISHED AS EXHIBITS HERETO:
Exhibit 11- Statement Regarding: Computation of Earnings per Share
Exhibit 27- Financial Data Schedule Pursuant to Regulation S-X Article 5
(B) NO REPORTS ON FORM 8-K WERE FILED BY THE COMPANY DURING THE QUARTER ENDED
JUNE 30, 1997.
12
<PAGE> 13
RESTRAC, INC.
FORM 10-Q
JUNE 30, 1997
SIGNATURES
Pursuant to the requirements 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.
RESTRAC, INC.
Date: August 14, 1997
/s/
--------------------------------------
LARS D. PERKINS
CHIEF EXECUTIVE OFFICER
/s/
--------------------------------------
CYNTHIA G. EADES
CHIEF FINANCIAL OFFICER
13
<PAGE> 1
RESTRAC, INC.
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------ -----------
ENDED JUNE 30, 1997
<S> <C> <C>
Net Loss (in thousands).............................................. $ (280) $ (923)
========== ==========
Weighted Average Shares of Common Stock Outstanding.................. 8,115,898 8,022,502
Dilutive Options..................................................... -- --
---------- ----------
Weighted Average Number of Common and Common Equivalent Shares
Outstanding........................................................ 8,115,898 8,022,502
========== ==========
Net Loss Per Share................................................... $ (0.03) $ (0.12)
========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------ -----------
ENDED JUNE 30, 1996
<S> <C> <C>
Net Income (in thousands)............................................ $ 350 $ 875
========== ==========
Weighted Average Shares of Common Stock Outstanding.................. 3,870,000 3,870,000
Dilutive Effect of Options Issued Prior to 5/10/95................... 337,098 344,647
Effect of Cheap Stock Options........................................ 152,875 152,875
Conversion of Preferred Stock........................................ 2,502,696 2,502,696
Shares Issuable in IPO to Fund Cumulative Dividends.................. 51,728 51,728
---------- ----------
Weighted Average Number of Common and Common Equivalent Shares
Outstanding........................................................ 6,914,397 6,921,946
========== ==========
Net Income Per Share................................................. $ 0.05 $ 0.13
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 10,867,294
<SECURITIES> 5,979,659
<RECEIVABLES> 2,937,782
<ALLOWANCES> 350,000
<INVENTORY> 0
<CURRENT-ASSETS> 21,998,731
<PP&E> 5,766,441
<DEPRECIATION> 2,709,882
<TOTAL-ASSETS> 25,831,716
<CURRENT-LIABILITIES> 7,111,923
<BONDS> 0
0
0
<COMMON> 88,215
<OTHER-SE> 18,762,970
<TOTAL-LIABILITY-AND-EQUITY> 25,831,706
<SALES> 5,753,000
<TOTAL-REVENUES> 5,753,000
<CGS> 1,746,000
<TOTAL-COSTS> 4,594,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (587,000)
<INCOME-TAX> (154,000)
<INCOME-CONTINUING> (433,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (280,000)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
