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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: MARCH 31, 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 April 30, 1997:
8,105,866 shares
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RESTRAC, INC.
INDEX
PART I -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at March 31, 1997 and September 30, 1996......... 3
Consolidated Statements of Operations for the three and six months ended:
March 31, 1997 and March 31, 1996............................................ 4
Consolidated Statements of Cash Flows for the six months ended: March 31,
1997 and March 31, 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
</TABLE>
2
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RESTRAC, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1996
----------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents....................................... $ 7,445,123 $20,367,641
Short-term investments.......................................... 8,754,433 --
Accounts receivable, less allowance for doubtful accounts of 3,387,010
$350,000..................................................... 3,157,024
Other current assets............................................ 992,895 229,577
Deferred income taxes........................................... 770,965 770,965
----------- -----------
Total Current Assets.................................... 21,120,440 24,755,193
PROPERTY AND EQUIPMENT, NET....................................... 2,947,749 1,520,893
OTHER ASSETS...................................................... 782,598 33,898
----------- -----------
Total Assets............................................ $24,850,787 $26,309,984
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long- term debt.............................. $ 753 $ 5,060
Accounts payable................................................ 476,788 570,603
Accrued expenses................................................ 2,105,795 3,339,895
Deferred revenue................................................ 3,416,578 3,140,801
Accrued income taxes............................................ -- 280,917
----------- -----------
Total Current Liabilities............................... 5,999,914 7,337,276
----------- -----------
OTHER LIABILITIES................................................. 64,690 --
----------- -----------
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, 85,697
Issued -- 8,781,015 shares at March 31, 1997 and 8,569,711
shares at September 30, 1996................................. 87,810
Additional paid in capital...................................... 18,676,523 18,222,648
Treasury stock.................................................. (830,764) (830,764)
Retained earnings............................................... 852,614 1,495,127
----------- -----------
Total Stockholders' Equity.............................. 18,786,183 18,972,708
----------- -----------
Total Liabilities and Stockholders' Equity.............. $24,850,787 $26,309,984
=========== ===========
</TABLE>
3
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RESTRAC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUE:
Product revenue................... $ 2,321 $ 2,949 $ 4,454 $ 6,103
Services revenue.................. 2,657 2,126 5,305 3,800
---------- ---------- ---------- ----------
Total Revenue............. 4,978 5,075 9,759 9,903
---------- ---------- ---------- ----------
COST OF REVENUE:
Product revenue................... 165 448 387 932
Services revenue.................. 1,441 1,131 2,855 2,192
---------- ---------- ---------- ----------
Total Cost of Revenue..... 1,606 1,579 3,242 3,124
---------- ---------- ---------- ----------
GROSS MARGIN........................ 3,372 3,496 6,517 6,779
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Research and development.......... 1,043 484 2,203 869
Sales and marketing............... 2,109 1,911 4,055 3,846
General and administrative........ 918 653 1,642 1,229
---------- ---------- ---------- ----------
Total Operating
Expenses................ 4,070 3,048 7,900 5,944
---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS....... (698) 448 (1,383) 835
Other income, net................... 171 55 375 101
---------- ---------- ---------- ----------
Income (loss) before (benefit)
provision for income taxes........ (527) 503 (1,008) 936
(Benefit) provision for income
taxes............................. (192) 201 (365) 409
---------- ---------- ---------- ----------
NET INCOME (LOSS)................... $ (335) $ 302 $ (643) $ 527
========== ========== ========== ==========
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE........... $ (0.04) $ 0.04 $ (0.08) $ 0.08
========== ========== ========== ==========
Weighted average number of common
and common equivalent shares
outstanding....................... 8,059,618 6,892,284 7,975,805 6,925,720
========== ========== ========== ==========
</TABLE>
4
<PAGE> 5
RESTRAC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
---------------------------
1997 1996
------------ ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................... $ (642,513) $ 526,670
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization................................ 559,527 491,171
Compensation expense related to stock option grants.......... 174,222
Development expense related to issuance of stock warrants.... 83,650
Provision for doubtful accounts.............................. 129,131
Deferred income taxes, net................................... (117,577)
Changes in assets and liabilities:
Accounts receivable..................................... 229,986 283,131
Prepaid expenses/other current assets................... (763,318) 75,120
Accounts payable........................................ (93,815) 58,329
Accrued expenses........................................ (665,574) 246,403
Accrued taxes........................................... (280,917) (31,902)
Deferred revenue........................................ 275,777 143,591
Deferred rent........................................... 64,690 (29,522)
------------ ----------
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES...................................... (1,058,285) 1,774,545
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments.......................... (8,754,433)
Purchases of property and equipment.......................... (1,986,383) (447,529)
Increase in other assets..................................... (748,700) (12,598)
------------ ----------
NET CASH USED IN INVESTING ACTIVITIES.............. (11,489,516) (460,127)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations........................ (4,307) (3,653)
Proceeds from employee stock purchase plan................... 50,256
Payment of accumulated dividends............................. (568,526)
Proceeds from exercise of stock options...................... 147,860 26,165
Tax benefit of stock option exercises........................ 35,000
Purchase of treasury stock................................... (25,794)
------------ ----------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES...................................... (374,717) 31,718
------------ ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............. (12,922,518) 1,346,136
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................... 20,367,641 2,966,637
------------ ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.......................... $ 7,445,123 $4,312,773
============ ==========
</TABLE>
5
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RESTRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 1997, the consolidated
statements of operations for the three and six month periods ended March 31,
1997 and 1996, and the consolidated statements of cash flows for the six month
periods ended March 31, 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 six month period ended March
31, 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, 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)
(b) Earnings (Loss) per Share Calculation
For the three and six month periods ended March 31, 1997, net loss 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 six month periods ended March 31, 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 cost
plus accrued interest, 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 MONTH AND SIX MONTH PERIODS ENDED MARCH 31, 1997
CONSOLIDATED RESULTS OF OPERATIONS
Revenue
Total revenue for the three and six month periods ended March 31, 1997 was
$4,978,000 and $9,759,000, respectively, as compared to $5,075,000 and
$9,903,000 for the respective three and six month periods ended March 31, 1996.
Product revenue of $2,321,000 for the three months ended March 31, 1997
decreased 21% from $2,949,000 for the three months ended March 31, 1996. For the
six months ended March 31, 1997, product revenue of $4,454,000 decreased 27%
from $6,103,000 for the comparable 1996 period. Hardware resales contributed
$358,000 to the first fiscal 1996 quarter. (The Company no longer serves as a
reseller of hardware). The remaining reduction in both the three and six month
periods of Fiscal 1997 resulted from proportionately smaller sales transactions
in the first half of Fiscal 1997. Because the Company's product revenue consists
of a relatively small number of large dollar transactions, the average sales
price can fluctuate widely from period to period. Such fluctuations are not
necessarily indicative of future results.
Services revenue of $2,657,000 for the three months ended March 31, 1997
increased 25% from $2,126,000 for the three months ended March 31, 1996. For the
six months ended March 31, 1997, services revenue increased 40% to $5,305,000
from $3,800,000 for the comparable 1996 period. Maintenance revenue accounted
for substantially all of the increase for the three month period and
approximately 79% of the total increase for the six month period, due to the
continued growth in the Restrac Hire and Resume Reader for PeopleSoft installed
base.
Cost of Revenue
Cost of product revenue of $165,000 for the three months ended March 31,
1997 decreased 63% from $448,000 for the three months ended March 31, 1996. For
the six months ended March 31, 1997, cost of product revenue of $387,000
decreased 58% from $932,000 for the comparable 1996 period. Cost of product
revenue represented 7% and 9% of total product revenue for the three and six
month periods, respectively, of Fiscal 1997 as compared to 15% for both the
three and six 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 is also affected by the proportionate mix of Resume Reader for
PeopleSoft sales, which carry a royalty burden. Product mix can vary from period
to period, and historic results are not necessarily indicative of future
results.
Cost of services revenue increased 27% to $1,441,000 for the three months
ended March 31, 1997 from $1,131,000 for the three months ended March 31, 1996.
For the six months ended March 31, 1997, cost of services revenue increased 30%
to $2,855,000 from $2,192,000 for the comparable 1996 period. The increases in
absolute dollars are principally attributable to proportionately higher services
revenue. Cost of services revenue represented 54% of total services revenue for
the three and six month periods of Fiscal 1997 as compared to 53% and 58% for
the respective three and six month periods of Fiscal 1996.
The change in mix from predominantly product revenue to predominantly
services revenue, which has a substantially lower profit margin, is reflected in
the slight decrease in gross margin during the three and six month periods ended
March 31, 1997 to 68% and 67%, respectively, from 69% and 68% in the comparable
Fiscal 1996 periods.
Operating Expenses
Research and development expenses were approximately $1,043,000 or 21% of
total revenue and $2,203,000 or 23% of total revenue during the three and six
months ended March 31, 1997, respectively, as
8
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RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED MARCH 31, 1997 -- (CONTINUED)
compared to approximately $484,000 and $869,000 or 9% 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 March
31, 1997 as compared to 18 employees at March 31, 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 approximately $2,109,000 and $4,055,000
or 42% of total revenue for the three and six months ended March 31, 1997,
respectively, as compared to $1,911,000 or 38% and $3,846,000 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 expanding the number of direct sales personnel by
50% as compared to Fiscal 1996. The increases related to these investments were
offset in part by lower marketing expenses for the six months ended March 31,
1997 as compared to the first half of Fiscal 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 approximately $918,000 or 18% of
total revenue and $1,642,000 or 17% of total revenue for the three and six month
periods ended March 31, 1997, respectively, compared to $653,000 or 13% and
$1,229,000 or 12% of total revenue for the comparable Fiscal 1996 periods. Over
50% of the year-over-year increase experienced in the second fiscal quarter is
attributable to certain one-time charges related to the move of the Company's
corporate headquarters and to certain personnel changes. The remaining 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.
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 $171,000 and $375,000 for the three
and six month periods ended March 31, 1997, respectively, from $55,000 and
$101,000 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 first half of Fiscal
1997.
(Benefit) Provision for Income Taxes
The Company's effective tax rate for the three and six month periods ended
March 31, 1997 was 36% as compared to 40% and 44% for the respective three and
six month periods ended March 31, 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.
9
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RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED MARCH 31, 1997 -- (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had cash and cash equivalents and short-term
investments of approximately $16,200,000, a decrease of approximately $4,168,000
from $20,368,000 at September 30, 1996. Working capital was $15,121,000 at March
31, 1997 as compared to $17,418,000 at September 30, 1996, a decrease of
$2,297,000.
Cash used in operating activities was approximately $1,058,000 during the
six months ended March 31, 1997. Use of cash in operating activities consisted
mainly of the net loss for the first half and of the timing of disbursements,
resulting in prepayment of certain expenses and reductions in certain
liabilities.
The Company used approximately $11,500,000 in investing activities during
the first half of Fiscal 1997. Investing activities consisted principally of the
purchase of short-term investments of $8,754,000; the purchase of property and
equipment (primarily computer and networking equipment, peripherals and
software) which approximated $1,986,000 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 six months ended March 31,
1997 was approximately $375,000. The most notable financing activity was the
payment of accumulated dividends of approximately $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 approximately $198,000.
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.
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, the Company's ability to
attract, train and retain qualified personnel, product development risks, new
product announcements and introductions, dependence on certain strategic
partnerships, development and promotional expenses relating to the introduction
of new products, changes in technology and industry standards, increased
10
<PAGE> 11
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED MARCH 31, 1997 -- (CONTINUED)
competition, changes in pricing policies by the Company and its competitors, the
timing of the receipt of orders from major customers, the size and rate of
growth of the market for human resources staffing software, market acceptance of
the Company's products and those of its competitors 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
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RESTRAC, INC.
FORM 10-Q
MARCH 31, 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
Annual Stockholders' Meeting on February 3, 1997: At the annual meeting of
the Company's stockholders, 7,188,465 shares, or 91.048% of the Company's
outstanding common stock as of the record date of December 16, 1996, voted on
the election of Russell J. Campanello as a Class I Director to serve until the
annual meeting of stockholders following the close of the Company's 1999 fiscal
year and until his successor is duly elected and qualified. Such shares were
voted as follows:
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD
------- --------- ---------
<S> <C> <C>
Russell J. Campanello 7,150,565 37,900
</TABLE>
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 March 31, 1997.
12
<PAGE> 13
RESTRAC, INC.
FORM 10-Q
MARCH 31, 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: May 13, 1997 /s/ LARS D. PERKINS
--------------------------------------
LARS D. PERKINS
Chief Executive Officer
/s/ CYNTHIA G. EADES
--------------------------------------
CYNTHIA G. EADES
Chief Financial Officer
13
<PAGE> 1
RESTRAC, INC.
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1997
------------------ ----------------
<S> <C> <C>
Net Loss............................................ $ (334,720) $ (642,517)
========== ==========
Weighted Average Shares of Common Stock
Outstanding....................................... 8,059,618 7,975,805
Dilutive Options.................................... -- --
---------- ----------
Weighted average number of common and common
equivalent shares outstanding..................... 8,059,618 7,975,805
========== ==========
Net Loss per share.................................. $ (0.04) $ (0.08)
========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1996
------------------ ----------------
<S> <C> <C>
Net Income.......................................... $ 301,156 $ 526,670
========== ==========
Weighted Average Shares of Common Stock
Outstanding....................................... 3,870,000 3,870,000
Dilutive Effect of Options Issued Prior to
5/10/96........................................... 314,986 348,422
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......................................... 51,727 51,727
---------- ----------
Weighted average number of common and common
equivalent shares outstanding..................... 6,892,284 6,925,720
========== ==========
Net Income per share................................ $ 0.04 $ 0.08
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 7,445,123
<SECURITIES> 8,754,433
<RECEIVABLES> 3,157,024
<ALLOWANCES> 350,000
<INVENTORY> 0
<CURRENT-ASSETS> 21,120,440
<PP&E> 5,332,525
<DEPRECIATION> 2,384,776
<TOTAL-ASSETS> 24,850,787
<CURRENT-LIABILITIES> 5,999,914
<BONDS> 0
0
0
<COMMON> 87,810
<OTHER-SE> 18,698,373
<TOTAL-LIABILITY-AND-EQUITY> 24,850,787
<SALES> 4,978,000
<TOTAL-REVENUES> 4,978,000
<CGS> 1,606,000
<TOTAL-COSTS> 4,070,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (527,000)
<INCOME-TAX> (192,000)
<INCOME-CONTINUING> (335,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (335,000)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
