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, 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 December 10, 1997 there were 6,324,024 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, 1997 and January 31, 1997 3-4
Consolidated Statements of Operations (unaudited) -
Three-month and nine-month periods ended
October 31, 1997 and 1996 5
Consolidated Statements of Cash Flows (unaudited) -
Nine-month period ended October 31, 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 9-12
Item 3. Exhibit I - Annual Report to Shareholders
for the fiscal year ended January 31, 1997
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 31, January 31,
1997 1997
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 229,742 $ 449,304
Short-term investments 3,762,388 4,334,869
Accounts receivable, net of allowance
of $155,000 and $180,000, respectively 612,353 722,683
Unbilled revenue 66,967 122,584
Other current assets 338,085 304,211
Total current assets 5,009,535 5,933,651
Property, furniture and equipment, net of
accumulated Depreciation of $7,988,216
and $7,724,185, respectively 1,821,183 1,881,348
Capitalized software, net of accumulated
Amortization of $2,660,937 and
$2,250,935, respectively 1,794,842 1,637,025
Other assets 462,533 429,898
Total assets $ 9,088,093 $ 9,881,922
<FN>
See accompanying Notes to Consolidated 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,
1997 1997
<S> <C> <C>
Current liabilities:
Accounts payable $ 124,861 $ 191,349
Accrued expenses
235,436 247,424
Accrued contract completion costs 60,000 110,400
Deferred systems revenues 79,294 90,744
Short-term portion of mortgage note payable 82,051 76,429
Total current liabilities 581,642 716,346
Long-term portion of mortgage note payable 137,301 199,561
Total liabilities 718,943 915,907
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 9,745,188 9,846,543
Retained earnings 835,380 1,503,255
10,650,455 11,419,685
Less: treasury stock, 671,861 and 722,631
shares, respectively (2,281,305) (2,453,670)
Total shareholders' equity 8,369,150 8,966,015
Total liabilities and shareholders' equity $9,088,093 $9,881,922
<FN>
See accompanying Notes to Consolidated 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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Operating revenues:
System sales $129,546 $ 95,751 $843,160 $440,582
Services and support 962,216 1,065,765 2,959,797 3,173,349
1,091,762 1,161,516 3,802,957 3,613,931
Costs and expenses:
Cost of system sales 49,267 56,306 574,921 308,070
Cost of services and
support 72,373 78,395 223,708 226,549
Operating expenses 315,086 236,862 900,000 1,059,651
Selling, general and
administrative expenses 801,132 827,790 2,231,050 2,073,888
Amortization of
capitalized software 121,146 81,983 410,002 247,966
Software research and
development costs 126,534 98,170 302,406 286,702
1,485,538 1,379,506 4,642,087 4,202,826
Operating loss (393,776) (217,990) (839,130) (588,895)
Non-operating income 45,309 68,394 171,255 164,097
Loss before income taxes (348,467) (149,596) (667,875) (424,798)
Income taxes - - - -
Net loss $(348,467) $(149,596) $(667,875) $(424,798)
Net loss per common share $ (.06) $ (.02) $ (.11) $ (.07)
Weighted average shares
outstanding 6,312,633 6,241,281 6,295,461 6,229,167
<S>
See accompanying Notes to Consolidated 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,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $(667,875) $(424,798)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation of property, furniture
and equipment 264,031
615,287
Amortization of capitalized software
costs 410,002 247,966
Changes in assets and liabilities:
Accounts receivable 110,330 331,802
Unbilled revenue 55,617 218,264
Other current assets (33,874) (111,507)
Other assets (32,635) (31,910)
Accounts payable and accrued expenses (128,875) (254,640)
Deferred systems revenues (11,450) (32,619)
Net cash (used in)provided by
operating activities $(34,729) $ 557,845
<FN>
See accompanying Notes to Consolidated 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 (Continued)
(unaudited)
<CAPTION>
Nine-month period
ended October 31,
1997 1996
<S> <C> <C>
Cash flows from investing activities:
Additions to property, furniture and $(260,486) $(399,962)
equipment
Additions to capitalized software (567,819) (604,528)
Sale of certificates of deposit 282,000 224,000
Sale (purchase) of U.S. Treasury Bills 290,481 (59,570)
Sale of fixed assets 56,620 -
Other (1) 8,365
Net cash used in investing activities (199,205) (831,695)
Cash flows from financing activities:
Issuance of common stock from treasury 71,010 79,386
Payments of mortgage note payable (56,638) (49,743)
Net cash provided by financing
activities 14,372 29,643
Net decrease in cash (219,562) (244,207)
Cash and cash equivalents at beginning
of period 449,304 807,965
Cash and cash equivalents at end of
period $ 229,742 $ 563,758
Supplemental disclosures of cash flow
information:
Interest expense paid $ 17,976 $ 45,864
<FN>
See accompanying Notes to Consolidated Financial Statements
(unaudited) and Management's Discussion and Analysis of Financial
Condition and Results of Operations.
</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 15 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 and nine-month periods ended October 31, 1997 are
not necessarily indicative of results for the entire year ending
January 31, 1998.
(2) The Company capitalizes software production 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 October 31, 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
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.
Results of Consolidated Operations
Total revenues from operati ons d ecreased $69,754 , or 6%,
from $1,161,5 16 for the quar ter ended Octo ber 31, 1996 to
$1,091,762 f or the curre nt comparabl e quarter. For the nine month
period, oper ating revenu es increase d $189,026, or 5%, f rom
$3,613,931 for the nine months ended October 31, 1996 to $3,802,957
for the current nine month period. System sales revenues increased
$33,795, or 35%, from $95,751 for the quarter ended October 31, 1996
to $129,546 for the current comparable quarter. The incre ase in
system sa les in the th ird quar ter was due primarily to Dimension
sales activities, which accounted for approximately 17% of system
sales in the current quarter. For the nine month period ended October
31, 1997, system sales increased $402,578, or 91%, from $440,582 for
the nine months ended October 31, 1996 to $843,160 for the current
nine month period. The increase in system sales over the previous
nine month period was primarily due to a significant increase in
client system upgrades recognized in the current nine month period.
To date, sales of the Company's Dimension software product have
been minimal. In July 1997, the Company announced completion of
version 2.1 of its Dimension time and billing system, offering full
integration with general ledger and accounts payable modules, a data
import program and custom report writer utility. With the completion
of the integrated product, coupled with the Company's current efforts
aimed at reevaluating its Dimension sales and marketing activities,
the Company believes that Dimension revenues will begin to improve
with the anticipated realignment in sales and marketing strategies.
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 s upport revenu es decreased $103,5 49, or
10%, from $1,065,7 65 for the quar ter ended October 31, 1996 to
$962,216 for the quarter ended Oc tober 31, 1997. For the nine
month per iod, serv ices and support revenues decreased $213,552,
or 7%, fro m $3,173,34 9 for the nine month s ended October 31, 1996
to $2,959,797 for the current nine month period. The
<PAGE>
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 and support revenues are reflective of diminished new sales
activities to date in the current fiscal year.
Costs of system sales as a percentage of system sales revenue
decreased from 59% for the quarter ended October 31, 1996 to 38% for
the quarter ended October 31, 1997 due primarily to low cost margins
associated with the sale of Dimension products in the current three
month period. Cost of services and su pport as a percent age of
services and sup port revenues wa s 8% for the quarte r ended
October 31, 1997 compared with 7% for the quarter ended October 31,
1996. 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 e xpenses in creased $7 8,224, or 33%, fro m $236,862
for the quarter en ded October 31, 1996 to $315,086 for the quarter
ended October 31, 1997. Reduced operati ng expen ses reco rded in
the third quarter o f fiscal year 1997 were pr imarily du e to the
recognition of p reviously accr ued operating co sts associated
with vario us client contractua l obligati ons. Selling, general and
administrative expenses decreased a nominal $26,658, or 3%, from
$827,790 for the three months ended October 31, 1996 to $801,132 for
the three months ended October 31, 1997. For the nine month period,
selling, ge neral and administrati ve expense s increased $157,162,
or 8%, from $2,073,888 at October 31, 1996 to $2,231,050 at October
31, 1997. The overall increase in selling, general and administrative
expenses is primarily a result of increases in Dimension advertising
and marketing activities and other miscellaneous expenses associated
with the Company's current business activities.
Amortization of capitalized software increased $39,163, or 48%,
from $81,983 for the quarter ended October 31, 1996 to $121,146 for
the quarter ended October 31, 1997. The increase in amortization
expense is primarily due to the recognition of approximately $93,000
in amortization expense associated with capitalized Dimension software
production costs, off-set by approximately $54,000 in decreased
amortization expense associated with fully amortized software
products. Software research and development costs increased $28,364,
or 29%, from $98,170 for the quarter ended October 31, 1996 to
$126,534 for the quarter ended October 31, 1997. For the nine month
period, software research and develo pment cost s increase d $15,704,
or 5%, f rom $286,7 02 for t he nine month per iod ended October 31,
1996 to $302,406 for the current comparable nine month period. The
increase in software research and development costs primarily relates
to costs associated with software products not qualifying for
capitalization.
Non-operatin g income dec reased $23,0 85, or 34%, from $68,394
for the three mont hs ended October 31, 1996 to $45,309 for the
three months ended October 31, 1997. Non-operating income
for the quarter ended October 31, 1996 was comprised of $80,250 in
interest income and $11,856 in non-operating expense of which $7,399
was attributable to interest expense. Non-operating income for the
quarter ended October 31, 1997 was comprised of $50,854 in interest
income and $5,545 in interest expense. The decrease in non-operating
income relates to the sale of short term investments to fund current
working capital needs.
The Company reported a net loss of $149,596 for the quarter ended
October 31, 1996, or $(.02) per share, versus a net loss of $348,467,
or $(.06) per share, for the quarter ended October 31, 1997. For the
nine month p eriod ended October 3 1, 1996, t he Company reported a
net loss of $424,798, or $(. 07) per share, versus a net loss of
$667,875, or $(.11) per share for the nine month period ended October
31, 1997. Although the Company expe rienced an increase in
operating revenues for the nine month period ended October 31,
1997, this increase was more than offset by increased expenses
associated with the Company's Dimension sales and marketing efforts.
<PAGE>
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
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 ef fective for financial
statements issue d fo r pe riods 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 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 liquidit y remains strong w ith workin g capital
of $4.4 million at October 31, 1997. Net cash used in operating
activities was $34,729 at October 31, 1997 compared with cash
provided by operating activities of $557,845 for the prior comparable
period. The decrease in net cash provided by operating activities
results primarily from i ncreased expenses associate d with
Dimension marketing and sales efforts. Net cash used in investing
activities was $199,205 at October 31, 19 97 compa red to $831,695
at October 31, 1996. During the current nine month period, cash
flows from investing activities were comprised of $260,486 in
purchases of property, furniture and equipment, as well as $567,819
relating to capitalized software development activities. In
addition, $572,481 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
<PAGE>
and certificates of deposit. Net cash from financing activities was
provided by occasional sales of the Company's stock through various
employee benefit plans.
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, 1997 and 1996.
Item 6(b): Reports on Form 8-K
No reports on form 8-K have been filed during the quarter ended
October 31, 1997.
<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 11, 1997
/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>
1997 1996
<S> <C> <C>
Primary Calculation
Three-month period ended:
October 31,
Net loss $(348,467) $(149,596)
Shares issued and outstanding at
beginning
of period 6,305,394 6,234,117
Issuance of treasury
shares 7,239 7,164
Primary weighted average number of
shares
outstanding 6,312,633 6,241,281
Earnings Per Share:
Net loss $ (.06) $ (.02)
Nine-month period ended:
October 31,
Net loss $(667,875) $(424,798)
Shares issued and outstanding at
beginning of period 6,266,075 6,206,841
Issuance of treasury shares 29,386 22,326
Primary weighted average number of
shares outstanding 6,295,461 6,229,167
Earnings Per Share:
Net loss $ (.11) $ (.07)
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 11.2
CompuTrac, Inc.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
<CAPTION>
1997 1996
<S> <C> <C>
Fully Diluted Calculation
Three-month period ended:
October 31,
Net loss $(348,467) $(149,596)
Shares issued and outstanding at
beginning of period 6,305,394 6,234,117
Issuance of treasury shares
7,239 7,164
Fully diluted weighted average
number of shares outstanding 6,312,633 6,241,281
Earnings Per Share:
Net loss income $ (.06) $ (.02)
Nine-month period ended:
October 31,
Net loss $(667,875) $(424,798)
Shares issued and outstanding at
beginning of period 6,266,075 6,206,841
Issuance of treasury shares 29,386 22,326
Fully diluted weighted average
number of shares outstanding 6,295,461 6,229,167
Earnings Per Share:
Net loss $ (.11) $ (.07)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 229,742
<SECURITIES> 3,762,388
<RECEIVABLES> 767,353
<ALLOWANCES> 155,000
<INVENTORY> 0
<CURRENT-ASSETS> 5,009,535
<PP&E> 14,265,178
<DEPRECIATION> 10,649,153
<TOTAL-ASSETS> 9,088,093
<CURRENT-LIABILITIES> 581,642
<BONDS> 137,301
0
0
<COMMON> 69,887
<OTHER-SE> 8,299,263
<TOTAL-LIABILITY-AND-EQUITY> 9,088,093
<SALES> 1,091,762
<TOTAL-REVENUES> 1,091,762
<CGS> 121,640
<TOTAL-COSTS> 121,640
<OTHER-EXPENSES> 1,363,898
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,976
<INCOME-PRETAX> (348,467)
<INCOME-TAX> 0
<INCOME-CONTINUING> (348,467)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (348,467)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
