_____________________________________________________________________
_____________________________________________________________________
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, 1998
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, 1998 there were 6,225,367 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, 1998 and January 31, 1998 3-4
Consolidated Statements of Operations
(unaudited) - Three-month period ended
April 30, 1998 and 1997 5
Consolidated Statements of Cash Flows
(unaudited) - Three-month period ended
April 30, 1998 and 1997 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>
<CAPTION>
CompuTrac, Inc.
CONSOLIDATED BALANCE SHEETS (unaudited)
ASSETS
------
April 30, January
31,
1998 1998
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 294,329 $ 558,818
Short-term investments 3,110,078 3,226,330
Accounts receivable, net of allowance for
doubtful accounts of $92,000 and $100,000,
respectively 576,422 513,744
Other current assets 319,675 335,485
--------- ---------
Total current assets 4,300,504 4,634,377
Property, furniture and equipment, net of
accumulated depreciation of $8,142,776 and
$8,059,618, respectively 1,424,817 1,476,824
Land held for sale 254,122 254,122
Capitalized software, net of accumulated
amortization of $2,874,849 and $2,782,083,
respectively 1,887,950 1,833,938
Other assets 483,137 470,799
--------- ---------
Total assets $8,350,530 $8,670,060
========== ==========
See accompanying Notes to Financial Statements (unaudited) and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CompuTrac, Inc.
CONSOLIDATED BALANCE SHEETS (unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
April 30, January 31,
1998 1998
----------- -----------
<S> <C> <C>
Current liabilities:
Accounts payable $ 83,587 $ 183,330
Accrued expenses 231,277 218,331
Accrued contract completion costs 10,000 10,000
Deferred systems revenues 165,390 99,006
Short-term portion of mortgage payable 85,967 84,015
--------- ---------
Total current liabilities 576,221 594,682
Long-term portion of mortgage payable 93,329 115,546
--------- ---------
Total liabilities 669,550 710,228
--------- ---------
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 69,887 69,887
issued
Additional paid-in capital 9,681,636 9,718,527
Retained earnings 204,308 460,507
Less:
Treasury shares, at cost, 739,513 and
711,008 shares, respectively (2,274,851) (2,289,089)
--------- ---------
Total shareholders' equity 7,680,980 7,959,832
--------- ---------
Total liabilities and shareholders'
equity $8,350,530 $ 8,670,060
========== ==========
See accompanying Notes to Financial Statements (unaudited) and
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CompuTrac, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three-month period
ended April 30,
1998 1997
------ ------
<S> <C> <C>
Revenues:
System sales $ 140,922 $ 143,010
Services and support 926,624 970,334
--------- --------
1,067,546 1,113,344
--------- ---------
Costs and expenses:
Cost of system sales 74,537 77,746
Cost of services and support 73,192 71,175
Amortization of capitalized software 92,766 144,844
Operating expenses 308,269 270,940
Selling, general and administrative expenses 704,550 719,893
Software research and development costs 113,915 86,909
--------- ---------
1,367,229 1,371,507
--------- ---------
Loss (299,683) (258,163)
Interest income, net 43,483 66,595
--------- ---------
Loss before taxes (256,200) (191,568)
Income taxes - -
--------- ---------
Net loss $ (256,200) $ (191,568)
========== ==========
Loss per share - basic and diluted $ (0.04) $ (0.03)
========== ==========
Weighted average number of common shares -
basic and diluted 6,257,897 6,273,753
========== ==========
See accompanying Notes to Financial Statements (unaudited) and
Management's Discussion and Analysis of Financial Condition and Results
of Operations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CompuTrac, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three-month period
ended April 30,
1998 1997
----- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(256,200) $(191,568)
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Depreciation of property, furniture and
equipment 83,158 110,770
Amortization of capitalized software costs 92,766 144,844
Changes in assets and liabilities:
Accounts receivable (62,678) 71,754
Other current assets 15,810 (36,823)
Other assets (12,338) (11,395)
Accounts payable and accrued expenses (86,797) (39,272)
Deferred systems revenues 66,384 13,051
--------- ----------
Net cash (used in) provided by operating
activities $(159,895) $ 61,361
========== ==========
See accompanying Notes to Financial Statements (unaudited) and
Management's Discussion and Analysis of Financial Condition and Results
of Operation.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CompuTrac, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(unaudited)
Three-month period
ended April 30,
1998 1997
----- -----
<S> <C> <C>
Cash flows from investing activities:
Additions to property, furniture and equipment $ (31,151) $(150,093)
Additions to capitalized software
(146,778) (200,000)
(Purchase) sale of certificates of deposit (12,000) 96,000
Sale of U.S. Treasury Bills 128,252 369,988
-------- --------
Net cash (used in) provided by investing
activities (61,677) 115,895
======== ========
Cash flows from financing activities:
Issuance of treasury shares 12,659 23,425
Principal payments of mortgage note payable (20,265) (18,435)
Purchase of treasury shares (35,312) -
Other - 1
-------- --------
Net cash (used in) provided by financing
activities (42,918) 4,991
-------- --------
Net (decrease) increase in cash (264,490) 182,247
======== ========
Cash and cash equivalents at beginning of period 558,819 449,304
-------- --------
Cash and cash equivalents at end of period $ 294,329 $ 631,551
======== ========
Supplemental disclosures of cash flow
information:
Interest paid $ 4,718 $ 6,445
Income taxes paid - -
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 22 of the Company's Annual Report on Form 10-KSB for the
fiscal year ended January 31, 1998. 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 add itiona l d isclos ure
nee ded for a fa ir prese ntatio n may be det ermine d in
tha t co ntext. Accordingly, footnote disclosure, which would
substantially duplicate the disclosure contained in the
Compan y's Annual Report on Form 10-KSB for the fiscal year
ended January 31, 1998 has been omitted. The results of
operations for the three-month period ended April 30, 1998 are
not necessarily indicative of results for the entire year ending
January 31, 1999.
(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, 1998 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 "forward-looking" statements, as
defined in Section 21E of the Securities Exchange Act of 1934, as
amended, that are based on current expectations, estimates and
projections. Statements that are not historical facts, including
statements about the Company's beliefs and expectations, are forward-
looking statements. These statements contain potential risks and
uncertainties and, therefore, actual results may differ materially.
There are numerous factors, which are not within the Company's
control, that may cause actual results to differ from those
contemplated by such forward-looking statements, including but not
limited to the rapid rate of change in computer hardware and software
technology and the potential obsolescence of the Company's existing
products; the development of superior products by competitors;
increased competition from existing and new competitors; the lack of
acceptance of the Company's new or existing products by customers;
dependence on Hewlett-Packard for the availability of hardware to
support the LFMS software; and adverse changes in economic conditions
in the legal profession or the economy generally. The Company
recently introduced its new CompuTrac LFMS for Windows software
products and there can be no assurance that the CompuTrac LFMS for
Windows products will be successful in competing with competitors'
software products in the law firm management software market. The
Company undertakes no obligation to update publicly any forward-
looking statements whether as a result of new information, future
events or otherwise.
Results of Consolidated Operations
Total revenues decreased $45,798, or 4%, from $1,113,344 for the
quarter ended April 30, 1997 to $1,067,546 for the quarter ended April
30, 1998. System sales revenues decreased a nominal 1%, from $143,010
for the quarter ended April 30, 1997 to $140,922 for the quarter ended
April 30, 1998. Approximately 86% of system sales in the current
quarter were comprised of sales of peripheral hardware and software
products and 14% of system sales were comprised of upgrades to
existing client systems. In January 1998, the Company announced the
release of its CompuTrac LFMS for Windows software products designed
for law firms with ten or more timekeepers. The Company estimates a
six month sales cycle for the new software products, measured from the
time the software is demonstrated to a prospective client, to the time
an order is placed, and remains cautiously optimistic that sales of
these new products will improve as the current year progresses. As
with the introduction of any new products, however, there can be no
assurance that these new products will successfully compete with
competitive products or that the Company's revenues or results of
operations will improve in future periods with the CompuTrac LFMS for
Windows software products.
Services and support revenues decreased $43,710, or 5%, from
$970,334 for the quarter ended April 30, 1997 to $926,624 for the
quarter ended April 30, 1998. Service and support revenues are
comprised of software and hardware maintenance fees, programming
support charges and various other service fees such as training,
installation and conversion revenues. The decrease in services and
support revenues in the current quarter was attributable to a lack of
new system sales revenues, which typically contribute to the services
and support revenue stream.
<PAGE>
Cost of system sales as a percentage of system sales revenues was
54% for the three-month period ended April 30, 1997 compared to 53%
for the current comparable three-month period. Cost of services and
support as a percentage of services and support revenues was 7% for
the three-month period ended April 30, 1997 compared to 8% for the
current comparable three-month period. Cost of services and support
is primarily comprised of programming and support staff costs directly
associated with the performance of the requested service and certain
third party costs associated with maintenance fee revenues included in
services and support revenues.
Amortization of capitalized software decreased $52,078, or 36%,
from $144,844 for the quarter ended April 30, 1997 to $92,766 for the
quarter ended April 30, 1998. The decrease in amortization expense
was related to various capitalized software products becoming fully
amortized during fiscal year 1998.
Operating expenses increased $37,329, or 14%, from $270,940 for
the quarter ended April 30, 1997 to $308,269 for the quarter ended
April 30, 1998. The increase in operating expenses over the prior
comparable three-month period relates primarily to a prior year
programming salary accrual that was released in the quarter ended
April 30, 1997.
Selling, general and administrative expenses decreased a nominal
$15,343, or 2%, from $719,893 for the quarter ended April 30, 1997 to
$704,550 for the current three-month period. The decrease in selling,
general and administrative expenses in the current three-month period
was due to decreased advertising and legal expenses and was partially
offset by increased salary costs associated with additional sales
personnel to staff the Company's direct sales efforts.
Software research and development costs increased $27,006, or
31%, from $86,909 in the prior comparable three-month period to
$113,915 in the current three-month period. The increase in software
research and development costs during the quarter ended April 30, 1998
was primarily related to research and development costs associated
with software products not qualifying for capitalization during the
quarter. The Company will capitalize those costs associated with
continued enhancements and improvements to the CompuTrac LFMS for
Windows software product line. Those software costs not qualifying for
capitalization will be expensed when incurred.
Net interest inc ome decreas ed $23,112 , or 35% , from $ 66,595
for the three mont hs e nded April 30, 1997 to $43,483 for the
current three-month period. Interest income was primarily comprised
of interest earnings from investments in U.S. Treasury Bills, money
market and certificate of deposit accounts. The decrease in interest
earnings over the prior comparable quarter was primarily due to the
Company utilizing investment earnings to meet current working capital
requirements. Until the Company is able to improve its cash flow from
operations, invested funds will continue to be utilized in meeting the
Company's short-term working capital obligations.
Recent Accounting Pronouncements
In 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. The provision of SFAS No. 130 established new rules for the
reporting and display of comprehensive income and its components in a
full set of general-purpose financial statements. The new rules
require that all items that are recognized under accounting standards
as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements. The Company adopted SFAS No. 130 in fiscal 1999.
<PAGE>
The adoption of SFAS No. 130 required no additional disclosure for the
Company and did not have a material effect on the Company's financial
position or results of operations.
In 1997, the FASB issued SFAS no. 131, Disclosures About Segments
of an Enterprise and Related Information. The provisions of SFAS No.
131 require public companies to use a management approach to
determining their operating segments. This management approach model
defines operating segments as revenue-producing components of the
enterprise for which separate financial information is produced
internally and are subject to evaluation by the chief operating
decision maker in deciding how to allocate resources to segments.
SFAS No. 131 also expands the financial and descriptive information
disclosures relative to the identified operating segments. The
Company adopted SFAS No. 131 in fiscal 1999. The adoption of SFAS No.
131 required no additional disclosure for the Company and did not have
a material effect on the Company's financial position or results of
operations.
Fluctuations in Interim Period Operating Results
Management of the Company believes that historically, interim
results and period-to-period comparisons have been neither predictable
nor an accurate measure of the annual performance of the Company. The
Company has experienced and expects to continue to experience period-
to-period fluctuations in the number of systems sold, revenues and net
income. Although recent operating revenues of the Company have mostly
been derived from services and support revenues, fluctuations in
system sales revenues have historically resulted from the revenues of
the Company being generated principally by the sale of a small number
of relatively expensive systems, the policy of the Company of
recognizing revenue upon delivery of the hardware, delivery and
acceptance of the software, the equipment availability of hardware
from the Company's hardware supplier, and the desire of the customer
to accelerate or delay the date of delivery. These factors tend to
distort the operating results of an interim period. Additionally,
sales are not made or recognized evenly throughout the fiscal year or
any interim period, thus making meaningful interim period comparisons
difficult. These fluctuations may also have a significant impact on
profitability in any interim period as a result of the relatively
fixed nature of operating costs and selling, general and
administrative expenses.
Liquidity and Capital Resources
Net cash used in operating activities was $159,895 for the
quarter ended April 30, 1998 compared to cash provided by operating
activities of $61,361 for the prior comparable three-month period.
The increase in cash used in operating activities during the current
quarter compared to the prior comparable quarter was due to a higher
net loss in the current quarter, a net decrease in non-cash items and
to a reduction in accounts payable and deferred systems revenues over
the prior comparable three-month period. Net cash used in investing
activities was $61,677 for the current three-month period compared to
cash provided by investing activities of $115,895 in the prior
comparable three-month period. The decrease in cash provided by
investing activities was primarily due to a net decrease in the
liquidation of invested funds to finance current operating needs in
the current quarter compared to the prior comparable quarter,
partially offset by fewer additions to property, furniture and
equipment and capitalized software during the current three-month
period. Net cash used in financing activities was $42,918 for the
quarter ended April 30, 1998 compared to cash provided by financing
activities of $4,991 for the prior comparable three-month period. The
increase in cash used in financing activities over the prior
comparable three-month period was primarily due to the Company's
purchase of $35,312 in treasury shares in the current quarter.
<PAGE>
The Company has not made any material commitments for capital
expenditures, however, it anticipates capital expenditures in fiscal
1999 to approximate fiscal 1998 capital expenditures. The Company
also anticipates continued expenditures will be made during fiscal
1999 primarily in expanding the Company's direct sales staff to
promote sales of its CompuTrac LFMS for Windows software products.
PART II. OTHER INFORMATION
Items 1 through 5 are not applicable.
Item 6(a): Exhibits
Exhibit 11 - Calculation of weighted average number of common
shares outstanding during the three-month period
ended April 30, 1998 and 1997.
Exhibit 27 - Financial Data Schedule
Item 6(b): Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended
April 30, 1998.
<PAGE>
CompuTrac, Inc.
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the issuer caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: June 11, 1998
/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>
<TABLE>
<CAPTION>
EXHIBIT 11
CompuTrac, Inc.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
1998 1997
----- -----
<S> <C> <C>
Net loss $(256,200) $(191,568)
-------- ========= =========
Basic EPS
---------
Three-month period ended April 30:
Shares issued and outstanding at beginning
of period 6,277,698 6,266,075
Issuance of common stock 8,704 7,678
-------- --------
Weighted average number of shares
outstanding 6,286,402 6,273,753
========= =========
Basic Earnings Per Share:
Net loss $ (.04) $ (.03)
========= =========
Diluted EPS
-----------
Three-month period ended April 30:
Shares issued and outstanding at beginning
of period 6,277,698 6,266,075
Issuance of common stock 8,704 7,678
-------- --------
Diluted weighted average number of shares
outstanding 6,286,402 6,273,753
========= =========
Diluted Earnings Per Share:
Net loss $ (.04) $ (.03)
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 27
CompuTrac, Inc.
FINANCIAL DATA SCHEDULE
Year Ended
January 31, 1999
<S> <C>
Fiscal Year End 01/31/99
Period End 04/30/98
Period Type 3-MOS
Cash $ 294,329
Securities $ 3,110,078
Receivables $ 668,422
Allowances $ 92,000
Inventory 0
Current Assets $ 4,300,504
PP&E $ 14,584,514
Depreciation $ 11,017,625
Total Assets $ 8,350,530
Current Liabilities $ 576,221
Bonds $ 93,329
Preferred - Mandatory 0
Preferred 0
Common $ 69,887
Other SE $ 7,611,093
Total Liabilities and Equity $ 8,350,530
Sales $ 1,067,546
Total Revenue $ 1,067,546
CGS $ 147,729
Total Costs $ 147,729
Other Expenses $ 1,219,500
Loss Provision 0
Interest Expense $ 4,718
Income - pretax $ (256,200)
Income - tax 0
Income - continuing $ (256,200)
Discontinued 0
Extraordinary 0
Changes 0
Net Income $ (256,200)
EPS - Primary $ (0.04)
EPS Diluted $ (0.04)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> APR-30-1998
<CASH> 294,329
<SECURITIES> 3,110,078
<RECEIVABLES> 668,422
<ALLOWANCES> 92,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,300,504
<PP&E> 14,584,514
<DEPRECIATION> 11,017,625
<TOTAL-ASSETS> 8,350,530
<CURRENT-LIABILITIES> 576,221
<BONDS> 93,329
0
0
<COMMON> 69,887
<OTHER-SE> 7,611,093
<TOTAL-LIABILITY-AND-EQUITY> 8,350,530
<SALES> 1,067,546
<TOTAL-REVENUES> 1,067,546
<CGS> 147,729
<TOTAL-COSTS> 147,729
<OTHER-EXPENSES> 1,219,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,718
<INCOME-PRETAX> (256,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (256,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (256,200)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
