_____________________________________________________________________
_____________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended April 30, 1996
OR
[ ] Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission file number 1-9115
COMPUTRAC, INC.
(Exact name of small business issuer as specified in its charter)
TEXAS 75-1540265
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
222 Municipal Drive
Richardson, Texas 75080
(Address of principal executive offices)
Telephone No. (214) 234-4241
________________
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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: Yes X No _____
As of May 31, 1996 there were 6,227,767 shares of the registrant's
$.01 par value common stock outstanding.
Transitional Small Business Disclosure Format (Check One): Yes ___
No X
_____________________________________________________________________
_____________________________________________________________________
<PAGE>
CompuTrac, Inc.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements:
Consolidated Balance Sheets (unaudited) -
April 30, 1996 and January 31, 1996 3-4
Consolidated Statements of Operations
(unaudited) - Three-month period ended
April 30, 1996 and 1995 5
Consolidated Statements of Cash Flows
(unaudited) - Three-month period ended
April 30, 1996 and 1995 6-7
Notes to Consolidated Financial Statements
(unaudited) 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-11
PART II. OTHER INFORMATION
Item 6(a.) Exhibits 12
Item 6(b.) Reports on Form 8-K 12
Signatures 13
______
Note: Items 1 through 5 of Part II are omitted because they are not
applicable.
<PAGE>
<TABLE>
CompuTrac, Inc.
CONSOLIDATED BALANCE SHEETS (unaudited)
<CAPTION>
April 30, January 31,
1996 1996
<S> <C> <C>
Current assets:
Cash and cash $ 692,205 $ 807,965
equivalents
Short-term 4,717,889 4,648,774
investments
Accounts receivable, net of allowance
of $180,000 and
$170,000, respectively 983,424 1,161,224
Unbilled revenue 223,096 338,774
Other current assets 307,128 224,022
Total current assets 6,923,742 7,180,759
Property, furniture and equipment, net of
accumulated depreciation of
$7,172,337 and $7,035,682, respectively 2,143,867 2,152,718
Capitalized software, net of accumulated
amortization of $2,016,856 and
$1,932,856, respectively 1,271,104 1,150,575
Other assets 399,862 391,256
Total assets $ 10,738,575 $ 10,875,308
See accompanying Notes to Financial Statements (unaudited) and
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
</TABLE>
<PAGE>
<TABLE>
CompuTrac, Inc.
CONSOLIDATED BALANCE SHEETS (unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
April 30, January 31,
1996 1996
<S> <C> <C>
Current liabilities:
Accounts payable $ 337,039 $ 448,965
Accrued expenses 244,226 264,002
Accrued contract completion costs 210,500 214,100
Deferred systems revenues 72,066 89,915
Short-term mortgage note payable 71,193 69,706
Total current liabilities 935,024 1,086,688
Long-term mortgage note payable 257,555 274,031
Total liabilities 1,192,579 1,360,719
Shareholders' equity:
Preferred stock, $1.00 par value,
2,000,000 shares authorized,
no shares issued and outstanding
Common stock, $.01 par value,
13,000,000 shares
authorized, 6,988,706 and 7,048,947
shares issued, respectively 69,887 70,489
Additional paid-in capital 9,902,143 10,131,927
Retained earnings 2,172,626 2,171,460
Less:
Treasury stock, 765,338 and 842,106
shares, at cost, respectively (2,598,660) (2,859,287)
Total shareholders' equity 9,545,996 9,514,589
Total liabilities and shareholders'
equity $ 10,738,575 $ 10,875,308
See accompanying Notes to Financial Statements (unaudited) and
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
</TABLE>
<PAGE>
<TABLE>
CompuTrac, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three-month period
ended April 30,
1996 1995
<S> <C> <C>
Operating revenues:
System sales $ 119,823 $ 140,109
Services and support 1,054,326 1,160,325
1,174,149 1,300,434
Costs and expenses:
Cost of system sales 84,447 90,554
Cost of services and 72,028 83,521
support
Operating expenses 337,160 399,599
Selling, general and administrative
expenses 562,944 517,941
Amortization of capitalized
software 84,000 72,000
Software research and development costs 88,000 48,100
1,228,579 1,211,715
Operating (loss) income (54,430) 88,719
Interest income, net 55,596 64,925
Income before income
taxes 1,166 153,644
Income tax benefit 0 0
Net income $ 1,166 $ 153,644
Net income per common
share $ .00 $ .03
Weighted average shares
outstanding 6,324,736 6,098,603
See accompanying Notes to Financial Statements (unaudited) and
Management's Discussion and Analysis of Financial Condition and Results
of Operations.
</TABLE>
<PAGE>
<TABLE>
CompuTrac, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three-month period
ended April 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,166 $ 153,644
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property, furniture and
equipment 136,655 162,989
Amortization of capitalized software costs 84,000 72,000
Changes in assets and liabilities:
Accounts receivable 177,800 62,578
Unbilled revenue 115,678 (48,752)
Other current assets (83,106) 27,895
Accounts payable and accrued expenses (135,302) (108,847)
Deferred systems revenues (17,849) 26,953
Net cash provided by operating activities 279,042 348,460
See accompanying Notes to Financial Statements (unaudited) and
Management's Discussion and Analysis of Financial Condition
and Results of Operation.
</TABLE>
<PAGE>
<TABLE>
CompuTrac, Inc.
CONSOIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
<CAPTION>
Three-month period
ended April 30,
1996 1995
<S> <C> <C>
Cash flows from investing activities:
Additions to property, furniture and
equipment $ (127,804) $ (58,225)
Additions to capitalized software (204,528) (174,646)
Purchase of certificates of deposit (24,000) (251,861)
Purchase of U.S. Treasury Bills (45,115) 0
Additions to other assets (8,606) (16,180)
Net cash used in investing activities (410,053) (500,912)
Cash flows from financing activities:
Issuance of common stock from treasury 30,842 24,604
Payments of mortgage note payable (14,989) (15,295)
Other (602) 0
Net cash provided by financing
activities 15,251 9,309
Net decrease in cash (115,760) (143,143)
Cash and cash equivalents at beginning
of period 807,965 1,499,733
Cash and cash equivalents at end of
period $ 692,205 $1,356,590
Supplemental disclosures of cash flow
information:
Interest expense paid $ 9,860 $ 9,549
See accompanying Notes to Financial Statements (unaudited) and
Management's Discussion and Analysis of Financial Condition and
Results of Operation.
</TABLE>
<PAGE>
CompuTrac, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The unaudited consolidated financial information furnished herein
reflects all adjustments which in the opinion of management are
necessary to fairly state the Company's financial position, the
changes in its financial position and the results of its
operations for the periods presented. This report on Form 10-QSB
should be read in conjunction with the Company's consolidated
financial statements and notes thereto included on pages 7
through 25 of the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1996. The Company presumes that
users of the interim financial information herein have read or
have access to the audited financial statements for the preceding
fiscal year and that the adequacy of additional disclosure needed
for a fair presentation may be determined in that context.
Accordingly, footnote disclosure which would substantially
duplicate the disclosure contained in the Company's Annual Report
on Form 10-K for the fiscal year ended January 31, 1996 has been
omitted. The results of operations for the three-month period
ended April 30, 1996 are not necessarily indicative of results
for the entire year ending January 31, 1997.
(2) The Company capitalizes software production costs and the costs
incurred in testing new or significantly enhanced software
products in accordance with the provisions of Statement of
Financial Accounting Standards No. 86, _Accounting for the Costs
of Computer Software to be Sold, Leased or Otherwise Marketed_.
(3) Included in accrued expenses at April 30, 1996 are sales taxes
totaling $100,231.
(4) The unaudited interim consolidated financial statements reflect
all adjustments which are, in the opinion of management,
necessary to ensure a fair statement of the results for the
interim periods presented.
<PAGE>
CompuTrac, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Consolidated Operations
Total revenues from operations declined $126,285, or 10%, from
$1,300,434 for the quarter ended April 30, 1995 to $1,174,149 for the
quarter ended April 30, 1996. System sales revenues decreased
$20,286, or 14%, from $140,109 at April 30, 1995 to $119,823 at April
30, 1996. System sales revenues for both fiscal quarters were
primarily comprised of peripheral hardware and software sales to
existing customers. The Company expects decreased sales activity to
continue until the release of its next generation, Windows-based, law
firm management software called _Dimension_. The Dimension products
have been in development during the previous three years and have been
designed to utilize current Microsoft technology to address current
software market demands. In March 1996, the Company began beta-
testing the Dimension software. The Company anticipates it will begin
accepting orders for the Dimension products in mid-June 1996 and that
product shipments will begin in September 1996. Although the
Dimension product line has been well received at recent convention and
tradeshow demonstrations, there can be no assurance that the new
Dimension products will successfully compete with competitive products
or that the Company's revenues or results of operations will improve
in future periods with the introduction of the Dimension product line.
Services and support revenues decreased $105,999, or 9%, from
$1,160,325 for the quarter ended April 30, 1995 to $1,054,326 for the
quarter ended April 30, 1996. The decrease in services and support
revenues relates primarily to reduced maintenance revenues associated
with maintenance contract cancellations initiated by clients opting to
continue maintenance on a _time and materials_ basis only. In
addition, reduced training, support and conversion service revenues
contributed to the decrease due to fewer new system sales in the first
quarter of fiscal 1997.
Costs of system sales as a percentage of system sales revenue
rose from 65% for the April 30, 1995 quarter to 70% for the April 30,
1996 quarter due to reduced volume discounts associated with fewer
system sales in the current period. Cost of services and support as
a percentage of services and support revenues remained consistent at
7% for both fiscal quarters. Costs of services and support is
primarily comprised of personnel costs directly associated with the
performance of client services and certain third party costs
associated with maintenance revenue included in services and support
revenue.
Operating expenses decreased $62,439, or 16%, from
$399,599 for the quarter ended April 30, 1995 to $337,160 for the
quarter ended April 30, 1996. The decrease in operating expenses
relates to reclassified software research and development costs as
shown in the Consolidated Statements Of Operations. Selling, general
and administrative expenses increased $45,003, or 9%, from $517,941
for the quarter ended April 30, 1995 to $562,944 for the quarter
ended April 30, 1996. The increase primarily relates to legal fees
incurred by the Company in protecting its intellectual property
rights and are not considered material to the Company's business
operations as a whole.
<PAGE>
Amortization of capitalized software costs increased 17%,
or $12,000, from $72,000 at April 30, 1995 to $84,000 at April 30,
1996. The increase in amortization is primarily due to management's
reassessment of the remaining estimated economic life of certain
existing software products.
Software research and development costs increased 83%, from
$48,100 for the quarter ended April 30, 1995 to $88,000 for the
quarter ended April 30, 1996. The increase reflects costs associated
with minor enhancements to the Company's existing law firm management
software product line not individually significant for capitalization.
Capitalized software costs associated with the Dimension product
line were approximately $200,000 for the first quarter ended April 30,
1996. The Company expects its Dimension software production efforts
to continue through the first half of fiscal 1997 and that
enhancements and improvements to the product will be made on an on-
going basis thereafter. The Company will begin amortization of
Dimension software production costs when the product is available for
general release, currently anticipated for the later half of fiscal
1997.
Interest income decreased $9,329, or 14%, from $64,925 for the
quarter ended April 30, 1995 to $55,596 for the quarter ended April
30, 1996. Interest income at April 30, 1995 was comprised of $66,045
in interest income and $1,120 in interest expense. Interest income at
April 30, 1996 was comprised of $65,456 in interest income and $9,860
in interest expense. For both fiscal periods, interest income was
primarily comprised of interest earned on short-term investments and
interest expense was primarily comprised of mortgage interest paid on
the Company's corporate facility.
Net income for the quarter decreased $152,478, or 99%, from
$153,644 at April 30, 1995 to $1,166 at April 30, 1996. This decrease
is reflective of reduced operating revenues from system sales,
services and support. As noted above, the Company expects this
revenue trend to continue until it releases its Dimension software
product line later this year.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, _Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be
Disposed of_ (SFAS 121). SFAS 121 establishes accounting standards
for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used
and for long-lived assets and certain intangible assets to be disposed
of. The adoption of SFAS 121 did not have a material effect on the
Company's financial position or results of operations for the current
quarter ended April 30, 1996.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, _Accounting for
Stock-based Compensation_ (SFAS 123). SFAS 123 establishes financial
accounting and reporting standards for stock-based employee
compensation plans. This statement requires the fair value of stock
options and other stock-based compensation issued to employees to
either be included as compensation expense in the income statement, or
the pro forma effect on net income and earnings per share of such
compensation expense to be disclosed in the footnotes of the Company's
financial statements. The Company will adopt SFAS 123 on a footnote
<PAGE>
disclosure only basis in the Company's fiscal 1997 Form 10-KSB filing.
As such, implementation of SFAS 123 is not expected to impact the
Company's financial position or results of operations.
Fluctuations in Interim Period Operating Results
Management of the Company believes that historically, interim
results and period-to-period comparisons have been neither predictable
nor an accurate measure of the annual performance of the Company. The
Company has experienced and expects to continue to experience period-
to-period fluctuations in the number of systems sold, revenues and net
income. Although recent operating revenues of the Company have mostly
been derived from services and support revenues, fluctuations in
system sales revenues have historically resulted from the revenues of
the Company being generated principally by the sale of a small number
of relatively expensive systems, the policy of the Company of
recognizing revenue upon delivery of the hardware, delivery and
acceptance of the software, the equipment availability of hardware
from the Company's hardware supplier, and the desire of the customer
to accelerate or delay the date of delivery. These factors tend to
distort the operating results of an interim period. Additionally,
sales are not made or recognized evenly throughout the fiscal year or
any interim period, thus making meaningful interim period comparisons
difficult. These fluctuations may also have a significant impact on
profitability in any interim period as a result of the relatively
fixed nature of operating costs and selling, general and
administrative expenses.
Liquidity and Capital Resources
Net cash provided by operating activities was $279,042 for the
quarter ended April 30, 1996 compared with $348,460 in the prior
comparable quarter. The change in the Company's operating cash flows
position is primarily due to decreased sales activities during the
current quarter. Cash used in investing activities for the current
quarter was $410,053 as compared with $500,912 in the comparable prior
quarter. Investments in the current quarter were primarily for
purchases of property, furniture and equipment and capitalized
software costs. In the comparable prior quarter, investments of
$232,871 were made for property, furniture and equipment and
capitalized software costs and $251,861 for purchases of certificates
of deposit. Cash flows from financing activities for both quarters
consisted of cash receipts obtained from employee common stock
purchases and cash disbursements made on the Company's mortgage note
payable.
The Company recently committed to investing in major improvements
to its corporate facilities at an estimated cost of $150,000, expected
to be incurred in the Company's second quarter of the current fiscal
year. In addition, the Company anticipates substantial expenditures
in the next several quarters in the areas of development, sales,
marketing and support to complete and introduce its next generation
Dimension software products. The Company believes that cash flows
from operating activities should be sufficient to fund its capital
expenditures and operating activities for fiscal year 1997.
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 5 are not applicable.
Item 6(a): Exhibits
Exhibit 11 (Pg. 14) - Calculation of weighted average number of common
shares outstanding during the three-month period ended April 30, 1996
and 1995.
Item 6(b): Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended April
30, 1996.
<PAGE>
CompuTrac, Inc.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the issuer caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: June 11, 1996
/S/ CompuTrac, Inc.
(Issuer)
/S/ Harry W. Margolis
Harry W. Margolis
Chief Executive Officer
(Principal Executive Officer)
/S/ George P. McGraw
George P. McGraw
President - Legal Division
(Principal Operating Officer)
/S/ Cheri L. White
Cheri L. White
Vice President of Finance and
Chief Financial Officer
<PAGE>
<TABLE>
EXHIBIT 11
CompuTrac, Inc.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
<CAPTION>
1996 1995
<S> <C> <C>
Net Income $1,166 $153,644
Primary Calculation
Three-month period ended April 30:
Shares issued and outstanding at
beginning of period 6,206,841 6,071,436
Issuance of common stock 7,652 11,233
Common stock equivalents 110,243 15,934
Primary weighted average number of
shares outstanding 6,324,736 6,098,603
Earnings Per Share:
Net income $ .00 $ .03
Fully Diluted Calculation
Three-month period ended April 30:
Shares issued and outstanding at
beginning of period 6,206,841 6,071,436
Issuance of common stock 7,652 11,233
Common stock equivalents 168,994 15,934
Fully diluted weighted average
number of shares outstanding 6,383,487 6,098,603
Earnings Per Share:
Net income $ .00 $ .03
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> APR-30-1996
<CASH> 692,205
<SECURITIES> 4,717,889
<RECEIVABLES> 1,163,424
<ALLOWANCES> 180,000
<INVENTORY> 0
<CURRENT-ASSETS> 6,923,742
<PP&E> 12,604,164
<DEPRECIATION> 9,189,193
<TOTAL-ASSETS> 10,738,575
<CURRENT-LIABILITIES> 935,024
<BONDS> 257,555
0
0
<COMMON> 69,887
<OTHER-SE> 9,476,109
<TOTAL-LIABILITY-AND-EQUITY> 10,738,575
<SALES> 119,823
<TOTAL-REVENUES> 1,174,149
<CGS> 84,447
<TOTAL-COSTS> 156,475
<OTHER-EXPENSES> 1,072,104
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,860
<INCOME-PRETAX> 1,166
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,166
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,166
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
