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 July 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. (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 August 30, 1996 there were 6,238,223 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) -
July 31, 1996 and January 31, 1996 3-4
Consolidated Statements of Operations (unaudited) -
Three-month and six-month periods ended
July 31, 1996 and 1995 5
Consolidated Statements of Cash Flows (unaudited) -
Six-month period ended July 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 4. Submission of Matters to a Vote of Security
Holders 12
Item 6(a) Exhibits 12
Item 6(b) Reports on Form 8-K 12
Signatures 13
______
Note: Items 1 through 3 and Item 5 of Part II are omitted because
they are not applicable.
<PAGE>
<TABLE>
CompuTrac, Inc.
CONSOLIDATED BALANCE SHEETS (Unaudited)
ASSETS
<CAPTION>
July 31, January 31,
1996 1996
<S> <C> <C>
Current assets:
Cash and cash $ 563,540 $ 807,965
equivalents
Short-term investments 4,898,091 4,648,774
Accounts receivable, net of
allowance of $200,000 and
$170,000, respectively 964,835 1,161,224
Unbilled revenue 198,533 338,774
Other current assets 301,753 224,022
Total current assets 6,926,752 7,180,759
Property, furniture and
equipment, net of accumulated
depreciation of $7,478,700
and $7,035,682, respectively 1,933,764 2,152,718
Capitalized software, net of
accumulated amortization of
$2,098,839 and $1,932,856,
respectively 1,389,121 1,150,575
Other assets 412,575 391,256
Total assets $ 10,662,212 $ 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>
July 31, January 31,
1996 1996
<S> <C> <C>
Current liabilities:
Accounts payable $ 485,736 $ 448,965
Accrued expenses 335,256 264,002
Accrued contract completion costs 178,000 214,100
Deferred systems revenues 66,602 89,915
Short-term portion of mortgage note
payable 72,897 69,706
Total current liabilities 1,138,491 1,086,688
Long-term portion of mortgage note
payable 238,679 274,031
Total liabilities 1,377,170 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 9,892,376 10,131,927
Retained earnings 1,896,258 2,171,460
11,858,521 12,373,876
Less: Treasury stock, 754,589 and
842,106 shares, at cost, respectively (2,573,479) (2,859,287)
Total shareholders' equity 9,285,042 9,514,589
Total liabilities and shareholders'
equity $ 10,662,212 $ 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 Six-month period
ended July 31, ended July 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating revenues:
System sales $ 225,008 $ 284,558 $ 344,831 $ 424,667
Services and support 1,053,258 1,144,354 2,107,584 2,304,679
1,278,266 1,428,912 2,452,415 2,729,346
Costs and expenses:
Cost of system sales 167,317 183,552 251,764 274,106
Cost of services and
support 76,126 82,939 148,154 166,460
Operating expenses 485,628 383,793 822,789 783,392
Selling, general and
administrative
expenses 683,155 540,426 1,246,098 1,058,368
Amortization of
capitalized software 81,983 72,000 165,983 144,000
Software research and
development costs 100,532 55,100 188,532 103,200
1,594,741 1,317,810 2,823,320 2,529,526
Operating (loss) income (316,475) 111,102 (370,905) 199,820
Interest income, net 40,107 71,138 95,703 136,063
(Loss) income before
income taxes (276,368) 182,240 (275,202) 335,883
Income tax benefit - - - -
Net (loss) income $ (276,368) $ 182,240 $ (275,202) $ 335,883
Net (loss) income per
common share $ (.04) $ .03 $ (.04) $ .05
===== ===== ==== ====
Weighted average shares
outstanding 6,231,922 6,142,635 6,223,009 6,132,951
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>
Six-month period
ended July 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (275,202) $ 335,883
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation of property, furniture
and equipment 478,125 318,177
Amortization of capitalized software
costs 165,983 144,000
Changes in assets and liabilities:
Accounts receivable 196,389 132,398
Unbilled revenue 140,241 386,121
Other current assets (77,731) 93,184
Other assets (21,319) (27,072)
Accounts payable and accrued 71,925 (373,786)
expenses
Deferred systems revenues (23,313) (29,094)
Net cash provided by operating
activities 655,098 979,811
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>
Six-month period
ended July 31,
1996 1995
<S> <C> <C>
Cash flows from investing activities:
Additions to property, furniture and
equipment $ (267,538) $ (113,287)
Additions to capitalized software (404,528) (356,645)
Purchase of certificates of deposit (164,976) (578,000)
Purchase of U.S. Treasury Bills (84,341) (393,575)
Other 8,366 32,411
Net cash used in investing activities (913,017) (1,409,096)
Cash flows from financing activities:
Issuance of common stock - 41,502
Purchase of treasury shares 45,655 -
Payments of mortgage note payable (32,161) (30,956)
Net cash provided by financing
activities 13,494 10,546
Net decrease in cash (244,425) (418,739)
Cash and cash equivalents at beginning
of period 807,965 1,499,733
Cash and cash equivalents at end of
period $ 563,540 $ 1,080,994
Supplemental disclosures of cash flow
information:
Interest expense paid $ 19,692 $ 9,775
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 six-month
periods ended July 31, 1996 are not necessarily indicative of
results for the entire year ending January 31, 1997.
(2) Operating expenses include a charge of approximately $200,000 to
reflect management's estimate of reduced residual values
associated with older or obsolete equipment.
(3) Included in accrued expenses at July 31, 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 $150,646, or 11%, from
$1,428,912 for the quarter ended July 31, 1995 to $1,278,266 for the
quarter ended July 31, 1996. For the six month period ended
July 31, 1996, operating revenues declined $276,931, or 10%, from
$2,729,346 at July 31, 1995 to $2,452,415 at July 31, 1996. System
sales revenues decreased $59,550, or 21%, from $284,558 for the
quarter ended July 31, 1995 to $225,008 for the quarter ended July 31,
1996. All sales, service and support revenues year-to-date are a result
of activity from the Company's existing line of products and services.
The Company's next generation, Windows-based, law firm management
software, _Dimension_, is expected to be available for shipment in the
Company's third fiscal quarter ended October 31, 1996. In the interim,
the Company is actively recruiting and training certified resellers for
the distribution of the Dimension products. Although Dimension product
demonstrations have received favorable response from attendees at recent
conventions and tradeshows, 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 for the quarter decreased
$91,096, or 8%, from $1,144,354 at July 31, 1995 to $1,053,258 at July
31, 1996. For the six month period, services and support revenues
decreased $197,095, or 9%, from $2,304,679 at July 31, 1995 to
$2,107,584 at July 31, 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, overall reduced services revenues are reflective of diminished
new sales activities.
Costs of system sales as a percentage of system sales revenue rose
from 65% for the quarter ended July 31, 1995 to 74% for the quarter
ended July 31, 1996 due primarily to reduced volume discounts associated
with fewer system sales in the current period and year-to-date. Cost
of services and support as a percentage of services and support revenues
remained unchanged at 7% for the three month period ended July 31, 1996
and July 31, 1995. Cost 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 for the three months ended July 31, 1996
increased $101,835, or 27%, from $383,793 at July 31, 1995 to $485,628
at July 31, 1996. This increase primarily relates to a charge of
approximately $200,000 to reflect management's estimate of reduced
computer equipment residual values on older or obsolete equipment. The
effect of this change is partially off-set by miscellaneous operating
expense reductions and by a decrease associated with certain expense
reclassifications. Selling, general and administrative expenses
increased $142,729, or 26%, from $540,426 for the three months ended
July 31, 1995 to $683,155 for the three months ended July 31, 1996.
This increase is primarily a result of increases in Dimension
advertising and marketing activities and other miscellaneous expenses
associated with the Company's current business activities.
<PAGE>
Amortization of capitalized software increased 14% from
$72,000 for the quarter ended July 31, 1995 to $81,983 for the
quarter ended July 31, 1996. The increase in amortization is primarily
due to management's reassessment of the remaining estimated life of
certain existing software products. Software research and development
costs for the three months increased $45,432, or 82%, from $55,100 at
July 31, 1995 to $100,532 at July 31, 1996. This increase reflects
costs associated with minor enhancements to the Company's existing core
Law Firm Management Software product line which are not individually
significant for capitalization.
Interest income decreased $31,031, or 44% from $71,138 for the
three months ended July 31, 1995 to $40,107 for the three months
ended July 31, 1996. Interest income for the quarter ended
July 31, 1995 was comprised of $80,913 in interest income and $9,775 in
interest expense. Interest income for the quarter ended July 31, 1996
is comprised of $64,255 of interest income and $24,148 of interest
expense, of which approximately $12,000 relates to interest charged on a
Texas franchise tax audit that was settled during the current quarter.
Net income decreased $458,625, from net income of $182,240 for the
quarter ended July 31, 1995 to a net loss of $276,368 for the quarter
ended July 31, 1996. This decrease is reflective of reduced operating
revenues from system sales, services and support, coupled with increased
expenses associated with the Company's preparation for the release of
its next generation Dimension software product line.
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 six months ended July 31, 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 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.
<PAGE>
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
Net cash provided by operating activities was $655,098 for the six
months ended July 31, 1996 compared with $979,811 in the prior
comparable period. The change in the Company's operating cash flows is
primarily due to decreased system sales activities and increased
expenses during the period. Cash used in investing activities for the
six month period was $913,017 as compared with $1,409,096 in the
comparable prior period. Investments in the current period were
primarily for purchases of property, furniture and equipment and
capitalized software costs totaling $672,066. Purchases of certificates
of deposit and U.S. treasury bills were $249,317 for the current six
month period. In the comparable prior period, investments of $469,932
were made for property, furniture and equipment and capitalized software
costs. Purchases of certificates of deposit and U.S. treasury bills
were $971,575. Cash flows from financing activities for both periods
consisted of cash receipts obtained from employee common stock purchases
and cash disbursements made on the Company's mortgage note payable.
During the first quarter of fiscal 1997, the Company committed to
an investment in 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. 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 3 are not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of CompuTrac, Inc. was held on
July 24, 1996. The record date for stockholders entitled to notice
of, and to vote at, the meeting was May 31, 1996. The purpose of the
meeting was to elect five directors for the ensuing year and to
transact such other business as might properly come before the meeting
or any adjournment thereof.
The nominees for directorship were elected in their entirety to
serve as directors of the Company until the next Annual Meeting of
Stockholders and until their successors have been elected and
qualified. The directors of the Company elected during the Annual
Meeting of Stockholders were as follows:
Harry W. Margolis Chairman of the Board and
Chief Executive Officer
CompuTrac, Inc.
Dana E. Margolis Secretary and Treasurer
CompuTrac, Inc.
Cesar L. Alvarez Director
Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
Miami, Florida
Gerald D. Harris Owner
Harris Typesetting Services
Plano, Texas
Kenneth R. Nicholas Managing Director
Nicholas, Flanagan & Bard, P.C.
Dallas, Texas
There being no other matters presented for a vote, the meeting
was duly adjourned.
Item 5 is 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 six-month periods
ended July 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
July 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: September 13, 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>
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:
July 31,
Net (loss) income $ (276,368) $ 182,240
Shares issued and outstanding at
beginning of period 6,223,368 6,092,986
Issuance of common stock - 9,275
Issuance of treasury shares 8,554 -
Common stock equivalents - 21,473
Primary weighted average number of
shares outstanding 6,231,922 6,123,734
Earnings Per Share:
Net (loss) income $ ( .04) $ .03
Six-month period ended:
July 31,
Net (loss) income $ (275,202) $ 335,883
Shares issued and outstanding at
beginning of period 6,206,841 6,071,436
Issuance of common stock - 21,141
Issuance of treasury shares 16,168 -
Common stock equivalents - 20,400
Primary weighted average number
of shares outstanding 6,223,009 6,112,977
Earnings Per Share:
Net (loss) income $ ( .04) $ .05
</TABLE>
<PAGE>
<TABLE>
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:
July 31,
Net (loss) income $ (276,368) $ 182,240
Shares issued and outstanding at
beginning of period 6,223,368 6,092,986
Issuance of common stock - 9,275
Issuance of treasury shares 8,554 -
Common stock equivalents - 40,374
Fully diluted weighted average
number of shares outstanding 6,231,922 6,142,635
Earnings Per Share:
Net (loss) income $ ( .04) $ .03
Six-month period ended:
July 31,
Net (loss) income $ (275,202) $ 335,883
Shares issued and outstanding at
beginning of period 6,206,841 6,071,436
Issuance of common stock - 21,141
Issuance of treasury shares 16,168 -
Common stock equivalents - 40,374
Fully diluted weighted average
number of shares outstanding 6,223,009 6,132,951
Earnings Per Share:
Net (loss) income $ ( .04) $ .05
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1996
<CASH> 563,540
<SECURITIES> 4,898,091
<RECEIVABLES> 1,164,835
<ALLOWANCES> 200,000
<INVENTORY> 0
<CURRENT-ASSETS> 6,926,752
<PP&E> 12,900,424
<DEPRECIATION> 9,577,539
<TOTAL-ASSETS> 10,662,212
<CURRENT-LIABILITIES> 1,138,491
<BONDS> 238,679
0
0
<COMMON> 69,887
<OTHER-SE> 9,215,155
<TOTAL-LIABILITY-AND-EQUITY> 10,662,212
<SALES> 225,008
<TOTAL-REVENUES> 1,278,266
<CGS> 167,317
<TOTAL-COSTS> 243,443
<OTHER-EXPENSES> 1,351,298
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,692
<INCOME-PRETAX> (276,368)
<INCOME-TAX> 0
<INCOME-CONTINUING> (276,368)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (278,368)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
