_____________________________________________________________________
_____________________________________________________________________
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, 1997
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 May 31, 1997 there were 6,262,748 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, 1997 and January 31, 1997 3-4
Consolidated Statements of Operations
(unaudited) - Three-month period ended
April 30, 1997 and 1996 5
Consolidated Statements of Cash Flows
(unaudited) - Three-month period ended
April 30, 1997 and 1996 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)
ASSETS
<CAPTION>
April 30, January 31,
1997 1997
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 631,551 $ 449,304
Short-term investments 3,868,881 4,334,869
Accounts receivable, net of
allowance of $155,000 and
$180,000, respectively 650,929 722,683
Unbilled revenue 72,274 122,584
Other current assets 391,344 304,211
Total current assets 5,614,979 5,933,651
Property, furniture and
equipment, net of
accumulated depreciation
of $7,778,335 and $7,724,185,
respectively 1,920,671 1,881,348
Capitalized software, net of
accumulated amortization of
$2,395,779 and $2,250,935,
respectively 1,692,181 1,637,025
Other assets 441,293 429,898
Total assets $ 9,669,124 $ 9,881,922
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,
1997 1997
<S> <C> <C>
Current liabilities:
Accounts payable $ 211,087 $ 191,349
Accrued expenses 233,814 247,424
Accrued contract completion costs 65,000 110,400
Deferred systems revenues 103,795 90,744
Short-term mortgage note payable 78,259 76,429
Total current liabilities 691,955 716,346
Long-term mortgage note payable 179,296 199,561
Total liabilities 871,251 915,907
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 shares issued, respectively 69,887 69,887
Additional paid-in capital 9,824,882 9,846,543
Retained earnings 1,311,688 1,503,255
Less:
Treasury stock, 709,351 and 722,631
shares, at cost,respectively (2,408,584) (2,453,670)
Total shareholders' equity 8,797,873 8,966,015
Total liabilities and shareholders'
equity $ 9,669,124 $ 9,881,922
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,
1997 1996
<S> <C> <C>
Operating revenues:
System sales $ 143,010 $ 119,823
Services and support 970,334 1,054,326
1,113,344 1,174,149
Costs and expenses:
Cost of system sales 77,746 84,447
Cost of services and support 71,175 72,028
Operating expenses 270,940 337,160
Selling, general and administrative
expenses 719,893 562,944
Amortization of capitalized software 144,844 84,000
Software research and development costs 86,909 88,000
1,371,507 1,228,579
Operating (loss) income (258,163) (54,430)
Interest income, net 66,595 55,596
Income before income taxes (191,568) 1,166
Income tax benefit 0 0
Net income $ (191,568) $ 1,166
Net income per common share $ (.03) $ .00
Weighted average shares outstanding 6,273,753 6,324,736
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,
1997 1996
<S> <S> <S>
Cash flows from operating activities:
Net income $ (191,568) $ 1,166
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation of property, furniture
and equipment 110,770 136,655
Amortization of capitalized software
costs 144,844 84,000
Changes in assets and liabilities:
Accounts receivable 71,754 177,800
Unbilled revenue 50,310 115,678
Other current assets (87,133) (83,106)
Accounts payable and accrued (39,272) (135,302)
expenses
Deferred systems revenues 13,051 (17,849)
Net cash provided by operating
activities 72,756 279,042
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>
Three-month period
ended April 30,
1997 1996
<S> <C> <C>
Cash flows from investing activities:
Additions to property, furniture and
equipment $ (150,093) $ (127,804)
Additions to capitalized software (200,000) (204,528)
Sale (purchase) of certificates of
deposit 96,000 (24,000)
Sale (purchase) of U.S. Treasury Bills 369,988 (45,115)
Additions to other assets (11,395) (8,606)
Net cash provided by (used in)
investing activities 104,500 (410,053)
Cash flows from financing activities:
Issuance of common stock from treasury 23,425 30,842
Payments of mortgage note payable (18,435) (14,989)
Other 1 (602)
Net cash provided by financing
activities 4,991 15,251
Net increase (decrease) in cash 182,247 (115,760)
Cash and cash equivalents at beginning
of period 449,304 807,965
Cash and cash equivalents at end of
period $ 631,551 $ 692,205
Supplemental disclosures of cash flow
information:
Interest expense paid $ 6,445 $ 9,860
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 11
through 23 of the Company's Annual Report on Form 10-KSB for the
fiscal year ended January 31, 1997. 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-KSB for the fiscal year ended January 31, 1997 has
been omitted. The results of operations for the three-month
period ended April 30, 1997 are not necessarily indicative of
results for the entire year ending January 31, 1998.
(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, 1997 are sales taxes
totaling $60,000.
(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
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-KSB and the Company's other filings with the Securities and
Exchange Commission.
Total revenues from operations declined $60,805, or 5%, from
$1,174,149 for the quarter ended April 30, 1996 to $1,113,344 for the
quarter ended April 30, 1997. System sales revenues increased
$23,187, or 19%, from $119,823 for the quarter ended April 30, 1996
to $143,010 for the quarter ended April 30, 1997. System sales for
both quarters were primarily comprised of sales of hardware, CompuTrac
software, and various other third party software products the Company
is authorized to resell to its clients. Sales of the Company's
Dimension time and billing product have been minimal in the Company's
first fiscal quarter of fiscal year 1998. The Company attributes the
lack of Dimension sales in its first fiscal quarter to a delay in
providing a fully integrated general ledger product to the Dimension
time and billing system. The Company is currently in the process of
completing work to integrate its Dimension time and billing product
with third party software that will allow for full integration with
accounts payable and general ledger software products the Company is
authorized to resell. The Company anticipates release of the
integrated system in the Company's second quarter of the current
fiscal year and believes that sales of the Dimension time and billing
product will improve with completion of the integrated functionality.
Although the Company believes that completion of the integrated
product to the Dimension time and billing system will significantly
improve Dimension sales, 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 $83,992, or 8%, from
$1,054,326 for the quarter ended April 30, 1996 to $970,334 for the
current quarter. 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. Reduced
training, support, custom programming and installation service
revenues also contributed to the decrease in service and support
revenues due to fewer new system sales and upgrade activities, which
normally produce additional service-related revenue for the Company.
<PAGE>
Costs of system sales as a percentage of system sales revenue
decreased 16%, from 70% for the quarter ended April 30, 1996 to 54%
for the quarter ended April 30, 1997 due to increased sales of Company
software in the current quarter compared to the prior comparable
quarter. Cost of services and support as a percentage of services and
support revenues remained unchanged 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 $66,220, or 20%, from
$337,160 for the quarter ended April 30, 1996 to $270,940 for the
quarter ended April 30, 1997. The decrease in operating expenses
relates primarily to the release of prior period accruals associated
with client software projects completed in the current fiscal
quarter. Selling, general and administrative expenses increased
$156,949, or 28%, from $562,944 for the quarter ended April 30, 1996
to $719,893 for the quarter ended April 30, 1997. This increase
relates to staff additions associated with Dimension sales and
marketing activities in addition to increased advertising in regional
and national law journals and publications.
Amortization of capitalized software costs increased 72%,
or $60,844, from $84,000 at April 30, 1996 to $144,844 at April
30, 1997. The increase in amortization expense is due to the
recognition of approximately $93,000 in amortization expense
associated with capitalized Dimension software production costs,
offset by approximately $32,000 in decreased amortization expense
associated with fully amortized software products. Software research
and development costs decreased a nominal 1%, from $88,000 for the
quarter ended April 30, 1996 to $86,909 for the quarter ended April
30, 1997.
Interest income, net increased $10,999, or 20%, from
$55,596 for the quarter ended April 30, 1996 to $66,595 for the
quarter ended April 30, 1997. Interest income at April 30, 1997 was
comprised of $73,040 in interest income and $6,445 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 interest paid on the Company's corporate
facility mortgage note.
The Company reported a net loss for the quarter of $191,568
versus net income of $1,166 for the prior comparable quarter. This
decrease is reflective of reduced operating revenues from system
sales, services and support coupled with increased expenses associated
with Dimension marketing and advertising activities.
Recent Accounting Pronouncements
In February 1997, Statement of Financial Accounting Standards No.
128, _Earnings per Share_ (FAS 128) was issued. FAS 128 specifies the
computation, presentation and disclosure requirements for earnings per
share (EPS) for entities with publicly held common stock or potential
common stock. FAS 128 simplifies the standards for computing EPS
previously found in Accounting Principles Board Opinion No. 15,
_Earnings per Share_ (APB 15) and makes them comparable to
international EPS standards. It replaces the presentation of primary
EPS with a presentation of basic EPS. It also requires dual
presentation of basic and dilutive EPS on the face of the statement of
operations for all entities with complex capital structures and
<PAGE>
requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the dilutive
EPS computation. FAS 128 is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods;
earlier application is not permitted. FAS 128 requires restatement of
all prior-period EPS data presented. The Company plans to adopt FAS
128 in its financial statements as of and for the year ended January
31, 1998. Based on current circumstances, the adoption of this
pronouncement would not have had a material effect on the January 31,
1997 and 1996 EPS amounts reported. Pro forma basic EPS and pro forma
dilutive EPS computed assuming FAS 128 had been adopted are equivalent
to the historical amounts reported for primary EPS and dilutive EPS,
respectively.
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 $72,756 for the
quarter ended April 30, 1997 compared with $279,042 at January 31,
1997. The change in the Company's operating cash flows position is
primarily due to decreased sales activities during the current quarter
coupled with increased expenses associated with Dimension-related
marketing and advertising costs. Cash provided by investing
activities for the current quarter was $104,500 as compared with
$410,053 used in investing activities at January 31, 1997.
Investments in the current quarter were primarily for purchases of
property, furniture and equipment and capitalized software costs
totaling $350,093. In addition, approximately $466,000 of available
investment funds were sold to satisfy anticipated working capital
needs. 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.
As of April 30, 1997, the Company had cash, cash equivalent and
short-term investments of $4,500,432, compared to $4,784,173 at
January 31, 1997, and working capital of $4,923,024 compared to
working capital of $5,217,305 at January 31, 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, 1997
and 1996.
Item 6(b): Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended April
30, 1997.
<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 14, 1997
/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
(Principal Operating Officer)
/S/ Cheri L. White
Cheri L. White
Vice President of Finance and
Chief Financial Officer<PAGE>
<PAGE>
<TABLE>
EXHIBIT 11
CompuTrac, Inc.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
<CAPTION>
1997 1996
<S> <C> <C>
Net (loss) income $(191,568) $1,166
Primary Calculation
Three-month period ended April 30:
Shares issued and outstanding at
beginning of period 6,266,075 6,206,841
Issuance of common stock 7,678 7,652
Common stock equivalents 110,243
Primary weighted average
number of shares outstanding 6,273,753 6,324,736
Earnings Per Share:
Net (loss) income $ (.03) $ .00
Fully Diluted Calculation
Three-month period ended April 30:
Shares issued and outstanding at
beginning of period 6,266,075 6,206,841
Issuance of common stock 7,678 7,652
Common stock equivalents 168,994
Fully diluted weighted
average number of shares 6,273,753 6,383,487
outstanding
Earnings Per Share:
Net (loss) income $ (.03) $ .00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> APR-30-1997
<CASH> 631,551
<SECURITIES> 3,868,881
<RECEIVABLES> 805,929
<ALLOWANCES> 155,000
<INVENTORY> 0
<CURRENT-ASSETS> 5,614,979
<PP&E> 13,786,966
<DEPRECIATION> 10,174,114
<TOTAL-ASSETS> 9,669,124
<CURRENT-LIABILITIES> 691,955
<BONDS> 179,296
0
0
<COMMON> 69,887
<OTHER-SE> 8,727,986
<TOTAL-LIABILITY-AND-EQUITY> 9,669,124
<SALES> 1,113,344
<TOTAL-REVENUES> 1,113,344
<CGS> 148,921
<TOTAL-COSTS> 148,921
<OTHER-EXPENSES> 1,222,586
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,445
<INCOME-PRETAX> (191,568)
<INCOME-TAX> 0
<INCOME-CONTINUING> (191,568)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (191,568)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
