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 October 31, 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. (972) 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 December 10, 1996 there were 6,258,805 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) -
October 31, 1996 and January 31, 1996 3-4
Consolidated Statements of Operations
(unaudited) - Three-month and nine-month
periods ended October 31, 1996 and 1995 5
Consolidated Statements of Cash Flows
(unaudited) - Nine-month period ended
October 31, 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
Item 3. Exhibit I - Annual Report to Shareholders
for the fiscal year ended January 31, 1996
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)
ASSETS
<CAPTION>
October January
31, 31,
1996 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 563,758 $ 807,965
Short-term investments 4,484,344 4,648,774
Accounts receivable, net of allowance of
$200,000 and $170,000, respectively 829,422 1,161,224
Unbilled revenue 120,510 338,774
Other current assets 335,529 224,022
Total current assets 6,333,563 7,180,759
Property, furniture and equipment, net
of accumulated depreciation of
$7,615,862 and $7,035,682, respectively 1,929,027 2,152,718
Capitalized software, net of accumulated
amortization of $2,180,822 and $1,932,856,
respectively 1,507,138 1,150,575
Other assets 423,166 391,256
Total assets $ 10,192,894 $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>
October 31, January 31,
1996 1996
<S> <C> <C>
Current liabilities:
Accounts payable $ 185,960 $ 448,965
Accrued expenses 376,067 264,002
Accrued contract completion costs 110,400 214,100
Deferred systems revenues 57,296 89,915
Short-term portion of mortgage note
payable 74,643 69,706
Total current liabilities 804,366 1,086,688
Long-term portion of mortgage note
payable 219,351 274,031
Total liabilities 1,023,717 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, 6,988,942 and
7,048,947 shares issued, respectively 69,889 70,489
Additional paid-in capital 9,876,462 10,131,927
Retained earnings 1,746,662 2,171,460
11,693,013 12,373,876
Less: Treasury stock, 743,534 and
842,106 shares, respectively (2,523,836) (2,859,287)
Total shareholders' equity 9,169,177 9,514,589
Total liabilities and shareholders'
equity $ 10,192,894 $ 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 Nine-month period
ended October 31, ended October 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating revenues:
System sales $ 95,751 $ 131,078 $ 440,582 $ 555,745
Services and support 1,065,765 1,137,533 3,173,349 3,442,212
1,161,516 1,268,611 3,613,931 3,997,957
Costs and expenses:
Cost of system sales 56,306 81,245 308,070 355,351
Cost of services and
support 78,395 79,134 226,549 252,956
Operating expenses 236,862 321,815 1,059,651 1,075,861
Selling, general and
administrative expenses 827,790 489,756 2,073,888 1,548,124
Amortization of
capitalized software 81,983 81,983 247,966 247,966
Software research and
development costs 98,170 48,200 286,702 151,400
1,379,506 1,102,133 4,202,826 3,631,658
Operating (loss) income (217,990) 166,478 (588,895) 366,299
Interest income, net 68,394 57,506 164,097 193,569
(Loss) income before
income taxes (149,596) 223,984 (424,798) 559,868
Income tax benefit - - - -
Net (loss) income $ (149,596) $ 223,984 $ (424,798) $ 559,868
Net (loss) income per
common share $ (.02) $ .04 $ (.07) $ .09
===== ===== ===== ====
Weighted average shares
outstanding 6,241,281 6,323,371 6,229,167 6,270,140
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>
Nine-month period
ended October 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (424,798) $ 559,868
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation of property, furniture
and equipment 615,287 417,922
Amortization of capitalized software
costs 247,966 247,966
Changes in assets and liabilities:
Accounts receivable 331,802 380,648
Unbilled revenue 218,264 624,664
Other current assets (111,507) 131,862
Other assets (31,910) (42,276)
Accounts payable and accrued expenses (254,640) (515,753)
Deferred systems revenues (32,619) (52,619)
Net cash provided by operating
activities 557,845 1,752,282
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.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(unaudited)
<CAPTION>
Nine-month period
ended October 31,
1996 1995
<S> <C> <C>
Cash flows from investing activities:
Additions to property, furniture and
equipment $ (399,962) $ (168,811)
Additions to capitalized software (604,528) (537,253)
Sale (purchase) of certificates of
deposit 224,000 (482,000)
Purchase of U.S. Treasury Bills (59,570) (627,674)
Other 8,365 37,922
Net cash used in investing activities (831,695) (1,777,816)
Cash flows from financing activities:
Issuance of common stock - 154,923
Issuance of treasury shares 79,386 -
Purchase of treasury shares - (6,770)
Payments of mortgage note payable (49,743) (46,992)
Net cash provided by financing
activities 29,643 101,161
Net (decrease) increase in cash (244,207) 75,627
Cash and cash equivalents at beginning
of period 807,965 1,499,733
Cash and cash equivalents at end of
period $ 563,758 $ 1,575,360
Supplemental disclosures of cash flow
information:
Interest expense paid $ 45,864 $ 21,917
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 and nine-month
periods ended October 31, 1996 are not necessarily indicative of
results for the entire year ending January 31, 1997.
(2) Included in accrued expenses at October 31, 1996 are sales taxes
totaling $100,231 and legal expenses of $100,000.
(3) 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
This Form 10-QSB contains historical information and forward-
looking statements. Statements looking forward in time are included
in this Form 10-QSB pursuant to the _safe harbor_ provision of the
Private Securities Litigation Reform Act of 1995. They involve known
and unknown risks and uncertainties including, but not limited to, the
timely availability of new products, market acceptance of the
Company's new products and products under development, the impact of
competing products and pricing, and quarterly fluctuations in
operating results. The Company's actual results in future periods may
be materially different from any future performance suggested herein.
In the context of the forward-looking information provided in this
Form 10-QSB, please refer to the discussion of risk factors detailed
in, as well as the other information contained in, the Company's Form
10-K and the Company's other filings with the Securities and Exchange
Commission.
Results of Consolidated Operations
Total revenues from operations declined $107,095, or 8%, from
$1,268,611 for the quarter ended October 31, 1995 to $1,161,516 for
the quarter ended October 31, 1996. For the nine month period,
operating revenues declined $384,026, or 10%, from $3,997,957 at
October 31, 1995 to $3,613,931 for the current nine month period.
All sales, services and support revenues are a result of activity
generated from the Company's existing line of products and services.
The Company's next generation, Windows-based, law firm management
software, _Dimension_, will be available for shipment beginning in
the Company's fourth quarter of the current fiscal year. In the
interim, the Company is actively recruiting and training certified
resellers for the distribution of the Dimension products, along with
promoting the Dimension products through various marketing and
advertising campaigns. Although the Company continues to receive
favorable responses from attendees at Dimension product
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.
System sales revenues for the current and prior quarterly and
nine month periods were primarily comprised of peripheral add-on
sales revenue. New system sales efforts have been, and will be,
minimal until the Company releases its new, Windows-based Dimension
product line. Services and support revenues for the current
quarter decreased $71,768, or 6%, from $1,137,533 at October
31, 1995 to $1,065,765 at October 31, 1996. For the nine month
period, services and support revenues decreased $268,863, or 8%, from
$3,442,212 at October 31, 1995 to $3,173,349 for the current nine
month period. The decrease in services and support revenues relates
primarily to two factors: 1) a reduction in maintenance revenues
associated with maintenance contract cancellations initiated by
clients opting to continue maintenance on a _time and materials_
basis only and, 2) a reduction in training, support and conversion
service revenue due to diminished new sales activities during the
year.
<PAGE>
Cost of system sales as a percentage of system sales revenue was
59% and 62% for the comparable three month periods ended October 31,
1996 and 1995, respectively, and was 70% and 64% for the comparable
nine month periods ended October 31, 1996 and 1995, respectively.
Cost of services and support as a percentage of services and support
revenues remained relatively unchanged at 7% for all periods
presented. Cost of services and support is primarily comprised of
personnel costs directly associated with the performance of the
service and certain third party costs associated with maintenance
revenues included in services and support revenues.
Operating expenses for the current quarter decreased $84,953, or
26%, from $321,815 at October 31, 1995 to $236,862 at October 31,
1996. This decrease primarily results from a reallocation of
programming personnel to research and development efforts. For the
nine month period, operating expenses decreased a nominal $16,210, or
2%, from $1,075,861 at October 31, 1995 to $1,059,651 for the current
nine month period. Selling, general and administrative expenses were
$827,790 in the current quarter, an increase of $338,034, or 69%,
from $489,756 in the comparable prior quarter. For the nine month
period, selling, general and administrative expenses increased
$525,764, or 34%, from $1,548,124 at October 31, 1995 to $2,073,888
at October 31, 1996. The increase in selling, general and
administrative expenses relates primarily to a ramp-up in marketing
and advertising costs associated with the Company's Dimension product
in addition to other expenses associated with the Company's current
business activities.
Amortization of capitalized software remained unchanged for the
comparable three month and nine month periods ended October 31, 1996
and 1995. Software research and development costs for the current
three month period increased measurably from $48,200 at October 31,
1995 to $98,170 at October 31, 1996. For the nine month period,
software research and development costs increased $135,302, or 89%,
from $151,400 at October 31, 1995 to $286,702 at October 31, 1996.
Increases in software research and development costs are primarily
associated with a reallocation of personnel into research and
development departments.
Net interest income increased $10,888, or 19%, in the current
quarter ended October 31, 1996 as compared with the prior comparable
quarter. Interest income for the current quarter was comprised of
$80,250 in interest income and $11,856 in interest expense compared
with $68,528 in interest income and $11,022 in interest expense in
the comparable prior quarter. For the nine month period, net
interest income decreased $29,472, or 15%. Interest income for the
current nine month period was comprised of $209,961 in interest
income and $45,864 in interest expense compared with $215,486 in
interest income and $21,917 in interest expense for the comparable
prior nine month period.
Decreased operating revenues coupled with increased expenses
resulted in the Company reporting a net quarterly loss of $149,596 or
$(.02) per share and a nine month loss of $424,798 or $(.07) per
share.
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 Company's adoption of SFAS 121 effective February
1, 1996 did not have a material effect on the Company's financial
position or results of operations for the nine months ended October
31, 1996.
<PAGE>
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
statements of operations, or the pro forma effect on net income and
earnings per share of such compensation expense to be disclosed in
the footnotes to the Company's financial statements. The Company
will adopt SFAS 123 on a 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 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 systems sales, revenues and net income.
Recent operating revenues of the Company have primarily 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, as well as 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 have not occurred or been 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
The Company's liquidity remains strong with working capital of
$5.5 million at October 31, 1996. Net cash provided by operating
activities was $557,845 for the nine months ended October 31,
1996 compared with $1,752,282 for the prior comparable nine month
period. The decrease in net cash provided by operating activities
results primarily from decreased system sales activities and
increased expenses associated with the Dimension product launch. Net
cash used in investing activities was $831,695 at October 31, 1996
compared to $1,777,816 at October 31, 1995. During the current nine
month period, cash flows from investing activities were made to
purchase property, furniture, equipment and capitalized software
totaling $1,004,490. In addition, $224,000 of available investment
funds was used to satisfy current working capital needs during the
nine month period. Remaining investments are primarily short-term
investments comprised of U.S. Treasury Bills and certificates of
deposit. An increase in net cash from financing activities was
provided by occasional sales of the Company's stock through various
employee benefit plans.
During the first quarter of fiscal 1997, the Company committed
funds towards major improvements to its corporate facilities at an
estimated cost of $150,000, of which approximately $84,000 was
incurred in the Company's second quarter of fiscal 1997 and the
remainder in the third quarter of fiscal 1997. 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 Dimension product line. The Company
expects to fund these expenditures with current working capital and
available investment funds.
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 5 are not applicable.
Item 6(a): Exhibits
Exhibit 11 (Page 14-15) - Computation of Earnings per Common and
Common Equivalent Share during the three-month and nine-month periods
ended October 31, 1996 and 1995.
Item 6(b): Reports on Form 8-K
No reports on form 8-K have been filed during the quarter ended
October 31, 1996.
<PAGE>
CompuTrac, Inc.
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.
Date: December 10, 1996
/s/ CompuTrac, Inc.
(Registrant)
/s/ Harry W. Margolis
Harry W. Margolis
Chief Executive Officer
(Principal Executive Officer)
/s/ George P. McGraw
George P. McGraw
President
(Principal Operating Officer)
/s/ Cheri L. White
Cheri L. White
Vice President of Finance and
Chief Financial Officer
<PAGE>
<TABLE>
EXHIBIT 11.1
CompuTrac, Inc.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
<CAPTION>
1996 1995
<S> <C> <C>
Primary Calculation
Three-month period ended:
October 31,
Net (loss) income $ (149,596) $ 223,984
Shares issued and outstanding at
beginning of period 6,234,117 6,109,398
Issuance of common stock - 60,615
Issuance of treasury
shares 7,164 -
Common stock equivalents - 153,358
Primary weighted average number of
shares outstanding 6,241,281 6,323,371
Earnings Per Share:
Net (loss) income $ ( .02) $ .04
Nine-month period ended:
October 31,
Net (loss) income $ (424,798) $ 559,868
Shares issued and outstanding at
beginning of period 6,206,841 6,071,436
Issuance of common stock - 45,346
Issuance of treasury
shares 22,326 -
Common stock equivalents - 45,517
Primary weighted average
number of shares outstanding 6,229,167 6,162,299
Earnings Per Share:
Net (loss) income $ ( .07) $ .05
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 11.2
CompuTrac, Inc.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
<CAPTION>
1996 1995
<S> <C> <C>
Fully Diluted Calculation
Three-month period ended:
October 31,
Net (loss) income $ (149,596) $ 223,984
Shares issued and outstanding at
beginning of period 6,234,117 6,109,398
Issuance of common
stock - 60,615
Issuance of treasury
shares 7,164 -
Common stock
equivalents - 153,358
Fully diluted weighted
average number of shares
outstanding 6,241,281 6,323,371
Earnings Per Share:
Net (loss) income $ ( .02) $ .04
Nine-month period ended:
October 31,
Net (loss) income $ (424,798) $ 559,868
Shares issued and outstanding at
beginning of period 6,206,841 6,071,436
Issuance of common
stock - 45,346
Issuance of treasury
shares 22,326 -
Common stock
equivalents - 153,358
Fully diluted weighted
average number of shares
outstanding 6,229,167 6,270,140
Earnings Per Share:
Net (loss) income $ ( .07) $ .09
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> OCT-31-1996
<CASH> 563,758
<SECURITIES> 4,484,344
<RECEIVABLES> 1,029,422
<ALLOWANCES> 200,000
<INVENTORY> 0
<CURRENT-ASSETS> 6,333,563
<PP&E> 13,232,849
<DEPRECIATION> 9,796,684
<TOTAL-ASSETS> 10,192,894
<CURRENT-LIABILITIES> 804,366
<BONDS> 219,351
0
0
<COMMON> 69,889
<OTHER-SE> 9,099,288
<TOTAL-LIABILITY-AND-EQUITY> 10,192,894
<SALES> 95,751
<TOTAL-REVENUES> 1,161,516
<CGS> 56,306
<TOTAL-COSTS> 134,701
<OTHER-EXPENSES> 1,244,805
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,856
<INCOME-PRETAX> (149,596)
<INCOME-TAX> 0
<INCOME-CONTINUING> (149,596)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (149,596)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
