_______________________________________________________________________
__
_______________________________________________________________________
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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, 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 November 30, 1998 there were 6,519,538 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, 1998 and January 31, 1998 3-4
Consolidated Statements of Operations (unaudited) -
Three-month and nine-month periods ended
October 31, 1998 and 1997 5
Consolidated Statements of Cash Flows (unaudited) -
Nine-month period ended October 31, 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
Item 3. Exhibit I - Annual Report to Shareholders
for the fiscal year ended January 31, 1998
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>
CompuTrac, Inc.
CONSOLIDATED BALANCE SHEETS (unaudited)
ASSETS
[CAPTION]
<TABLE>
October 31, January 31,
1998 1998
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 444,718 $ 558,818
Short-term investments 2,576,100 3,226,330
Accounts receivable, net of allowance for
doubtful accounts of $110,000 and
$100,000, respectively 597,919 513,744
Other current assets 302,142 335,485
------------ -----------
Total current assets 3,920,879 4,634,377
Property, furniture and equipment, net of
accumulated depreciation of $8,270,995 and
$8,059,618, respectively 1,325,878 1,476,824
Land held for sale 254,122 254,122
Capitalized software, net of
accumulated amortization of $3,060,381 and
$2,782,083, respectively 1,938,607 1,833,938
Other assets 491,444 470,799
------------ -----------
Total assets $ 7,930,930 $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>
CompuTrac, Inc.
CONSOLIDATED BALANCE SHEETS (unaudited)
LIABILITIES AND SHAREHOLDERS EQUITY
[CAPTION]
<TABLE>
October 31, January 31,
1998 1998
--------- -----------
<S> <C> <C>
Current liabilities:
Accounts payable $ 144,686 $ 183,330
Accrued expenses 256,790 218,331
Accrued contract completion costs - 10,000
Deferred systems revenues 207,750 99,006
Current portion of mortgage payable 90,194 84,015
----------- -----------
Total current liabilities 699,420 594,682
Long-term portion of mortgage payable 47,107 115,546
----------- -----------
Total liabilities 746,527 710,228
----------- -----------
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 issued 69,887 69,887
Additional paid-in capital 9,535,508 9,718,527
Retained earnings (accumulated deficit) (285,866) 460,507
----------- -----------
9,319,529 10,248,921
Less: treasury shares, at cost, 735,198
and 711,008 shares, respectively (2,135,126) (2,289,089)
----------- -----------
Total shareholders' equity 7,184,403 7,959,832
----------- -----------
Total liabilities and shareholders' equity $ 7,930,930 $ 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>
CompuTrac, Inc
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
[CAPTION]
<TABLE>
Three-month period Nine-month period
ended October 31, ended October 31,
------------ ---------- ----------- ---------
1998 1997 1998 1997
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues:
System sales $ 177,312 $ 129,546 $ 484,525 $ 843,160
Services and support 1,000,113 962,216 2,896,208 2,959,797
------------ ---------- ---------- ---------
1,177,425 1,091,762 3,380,733 3,802,957
------------ ---------- ---------- ---------
Costs and expenses:
Cost of system sales 97,655 49,267 249,022 574,921
Cost of services and
support 112,071 72,373 262,093 223,708
Amortization of
capitalized software 92,766 121,146 278,298 410,002
Operating expenses 327,196 315,086 955,303 900,000
Selling, general and
administrative expenses 658,576 801,132 2,169,962 2,231,050
Software research and
development costs 103,400 126,534 324,958 302,406
------------ ---------- ---------- ---------
1,391,664 1,485,538 4,239,636 4,642,087
------------ ---------- ---------- ---------
Loss (214,239) (393,776) (858,903) (839,130)
Interest income, net 30,852 45,309 112,530 171,255
----------- --------- --------- ---------
Net loss $(183,387) $(348,467) $ (746,373) $(667,875)
========== ========= ========== =========
Loss per share - basic and
diluted $ (0.03) $ (0.06) $ (0.12) $ (0.11)
========== ========= ========= =========
Weighted average number of
common shares -
basic and diluted 6,243,651 6,312,633 6,256,288 6,295,461
========= ========= ========= =========
See accompanying Notes to Financial Statements (unaudited) and
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
</TABLE>
<PAGE>
CompuTrac, Inc,
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
[CAPTION]
<TABLE>
Nine-month period
ended October 31,
1998 1997
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (746,373) $(667,875)
Adjustments to reconcile net loss to net cash
(used in)provided by operating activities:
Depreciation of property, furniture and 211,377 264,031
equipment
Amortization of capitalized software costs 278,298 410,002
Changes in operating assets and liabilities:
Accounts receivable (84,175) 110,330
Unbilled revenue 55,617
Other current assets 33,343 (33,874)
Other assets (20,645) (32,635)
Accounts payable and accrued expenses (10,185) (128,875)
Deferred systems revenues 108,744 (11,450)
---------- ----------
Net cash used in operating activities $ (229,616) $ (34,729)
========== ==========
See accompanying Notes to Financial Statements
(unaudited) and Management's Discussion and
Analysis of Financial Condition and Results of
Operations.
</TABLE>
<PAGE>
CompuTrac, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(unaudited)
[CAPTION]
<TABLE>
Nine-month period
ended October 31,
1998 1997
---------- ---------
<S> <C> <C>
Cash flows from investing activities:
Additions to property, furniture and equipment $ (60,431) $(260,486)
Additions to capitalized software (382,967) (567,819)
Sale of certificates of deposit 86,000 282,000
Sale of U.S. Treasury Bills 564,230 290,481
Sale of fixed assets 56,620
Other - (1)
---------- ---------
Net cash provided by (used in) investing
activities 206,832 (199,205)
---------- ----------
Cash flows from financing activities:
Issuance of treasury shares 51,074 71,010
Principal payments of mortgage note payable (62,260) (56,638)
Purchase of treasury shares (80,130) -
Net cash (used in) provided by financing
activities (91,316) 14,372
--------- ---------
Net decrease in cash (114,100) (219,562)
---------- ----------
Cash and cash equivalents at beginning of period 558,818 449,304
---------- ----------
Cash and cash equivalents at end of period $ 444,718 $ 229,742
========= =========
Supplemental disclosures of cash flow information:
Interest paid $ 12,532 $ 17,976
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 15
through 23 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 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, 1998 has been
omitted. The results of operations for the three and nine-month
periods ended October 31, 1998 are not necessarily indicative of
results for the entire year ending January 31, 1999.
<PAGE>
CompuTrac, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Consolidated Operations
Total revenues from operations increased $85,663, or 8%, from
$1,091,762 for the quarter ended October 31, 1997 to $1,177,425 for the
current quarter ended October 31, 1998. For the nine-month period
ended October 31,1998, operating revenues decreased $422,224, or 11%
from $3,802,957 at October 31, 1997 to $3,380,733 at October 31, 1998.
System sales revenues increased $47,766, or 37% from $129,546 for the
quarter ended October 31, 1997 to $177,312 for the current quarter
ended October 31, 1998. For the nine-months ended October 31, 1998,
system sales decreased $358,635, or 43%, from $843,160 at October 31,
1997 to $484,525 at October 31, 1998. In February 1998, the Company
announced the release of its CompuTrac LFMS for Windows software
product line and re-organized its direct sales force, focusing on end-
user customers and sales. In general, sales of the Company's software
systems take anywhere from six to twelve months to complete. During
the quarter ended October 31, 1998, the Company recognized a slight
improvement in systems sales revenues from these efforts; however, and
as previously announced, the Company signed new customer contracts of
approximately $250,000 during the period. The Company anticipates that
it will recognize a significant portion of the revenue attributable to
these new contracts during its fourth quarter ending January 31, 1999.
Services and support revenues increased $37,897, or 4%, from
$962,216 for the quarter ended October 31, 1997, to $1,000,113 for the
current quarter ended October 31, 1998. For the nine month period,
services an d support revenu es decreased $63 ,589, or 2%, from
$2,959,797 at October 31, 1997 to $2,896,2 08 at October 31, 1998.
The decrease in services and support revenues relates primarily to
reduced maintenance revenues and services and support revenues
attributable diminished new sales activities in prior periods.
Cost of system sales as a percentage of system sales revenue
was 55% for the quarter ended October 31, 1998 versus 38% for the
quarter ended October 31, 1997. The higher costs in the current
quarterly period were due to a higher component of hardware sales,
which have a lower gross margin than the Company's software products.
Cost of services and support as a percentage of services and support
increased from 8% to 11% in the current quarterly period. 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. The increase during the period was attributable
to a non-recurring increase in third party costs.
Amortization of capitalized software decreased $28,380 or 23%,
from $121,146 for the quarter ended October 31, 1997, to $92,766 for
the current quarter ended October 31, 1998. For the nine month period,
amortization of capitalized software decreased $131,704 or 32%, from
$410,002 at October 31, 1997 to $278,298 for the current nine month
period. The decrease in amortization expense was related to various
capitalized software products becoming fully amortized during fiscal
1998.
Operating expenses rose $12,110, or 4% from $315,086 for the
three month period ended October 31, 1997, to $327,196 for the
current three month period. For the nine months ended October 31,
1998, operating expenses increased $55,303, or 6% from $900,000 for the
nine months ended October 31, 1997 to $955,303 for the nine months
ended October 31, 1998. Selling, general and administrative expenses
decreased $142,556, or 18%, from $801,132 for the three month period
ended October 31, 1997, to $658,576 for the current three month period.
For the nine month period, selling, general and administrative
expenses decreased $61,088 or 3%, from $2,231,050 at October 31, 1997
to $2,169,962 for the current nine month period. In general, these
decreases are attributable to employee attrition and reduced spending
plans initiated by Company management.
<PAGE>
Software research and development costs decreased $23,134 or 18%,
from $126,534 for the three month period ended October 31, 1997 to
$103,400 for the current three month period. For t he nine months
ended Oct ober 31, 1998, software research and developmen t costs
rose $22,5 52 or 7% , from $ 302,406 at October 31, 1997, to $324,958
for the current nine-month period. The increase in software research
and development costs primarily relates to research and development
costs associated with software products not qualifying for
capitalization during the quarter. The Company continues to invest in
its research and development activities and those costs not qualifying
for capitalization are expensed when incurred.
Net interest income decreased $14,457, or 32%, from $45,309 for
the three month period ended October 31, 1997, to $30,852 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, passive investment funds will continue to be utilized to
meet 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. 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 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.
<PAGE>
Liquidity and Capital Resources
Net cash used in operating activities was $229,616 for the
nine months ended October 31, 1998 compared to $34,729 for the prior
comparable nine-month period. The increase in cash used in operating
activities during the current nine-month period compared to the prior
comparable period was attributable to a larger net loss in the current
period, a net decrease in non-cash expenditures and a net decrease in
working capital over the prior comparable nine-month period. Net cash
provided by investing activities was $206,832 for the current nine-
month period, versus a $199,205 use of cash in the prior comparable
period. The increase in cash provided by investing activities was due
to fewer additions to property, furniture and equipment and capitalized
software during the current period and the sale of short-term
investments to meet working capital needs. Net cash used in financing
activities was $91,316 for the nine-month period ended October 31, 1998
compared to cash provided by financing activities of $14,372 for the
prior comparable period. The increase in cash used in financing
activities over the prior comparable period was primarily due to the
Company's purchase of $80,130 in treasury shares in the current period.
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 5 are not applicable.
Item 6(a): Exhibits
Exhibit 11 (Page 14-15) - Computation of Earnings per Common and
Common Equivalent Share during the three-month and nine-month periods
ended October 31, 1998 and 1997.
Item 6(b): Reports on Form 8-K
No reports on form 8-K have been filed during the quarter ended
October 31, 1998.
<PAGE>
CompuTrac, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: December 10, 1998
/S/ CompuTrac, Inc.
(Registrant)
/S/ Harry W. Margolis
Harry W. Margolis
Chief Executive Officer
(Principal Executive Officer)
/S/ D. Bruce Walter
D. Bruce Walter
President
(Principal Operating Officer)
/S/ Shawn E. Anderson
Shawn E. Anderson
Controller
(Principal Accounting Officer)
<PAGE>
CompuTrac, Inc. EXHIBIT 11.1
COMPUTATION OF EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARES
[CAPTION]
<TABLE>
1998 1997
--------- ---------
<S> <C> <C>
Basic EPS
Three-month period ended October 31,
Net loss $(183,387) $(348,467)
========== ==========
Shares issued and outstanding at beginning
of period 6,229,438 6,305,394
Issuance of common stock 14,213 7,239
--------- ---------
Basic weighted average number of shares
outstanding 6,243,651 6,312,633
========== =========
Basic Loss Per Share:
Net loss $ (.03) $ (.06)
========== =========
Nine-month period ended October 31,
Net loss $(746,373) $(667,875)
========== ==========
Shares issued and outstanding at beginning
of period 6,277,698 6,266,075
Issuance of common stock 35,062 29,386
Treasury stock purchases (56,472) -
--------- ---------
Basic weighted average number of
shares outstanding 6,256,288 6,295,461
========== =========
Basic Loss Per Share:
Net loss $ (.12) $ (.11)
========== =========
</TABLE>
<PAGE>
CompuTrac, Inc. EXHIBIT 11.2
COMPUTATION OF EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARES
[CAPTION]
<TABLE>
1998 1997
---------- ---------
<S> <C> <C>
Diluted EPS
Three-month period ended October 31,
Net loss $(183,387) $(348,467)
========== ==========
Shares issued and outstanding at beginning
of period 6,229,438 6,305,394
Issuance of common stock 14,213 7,239
--------- ---------
Diluted weighted average number of shares
Outstanding 6,243,651 6,312,633
========== =========
Diluted Loss Per Share:
Net loss $ (.03) $ (.06)
========== =========
Nine-month period ended October 31,
Net loss $(746,373) $(667,875)
========== ==========
Shares issued and outstanding at beginning
of period 6,277,698 6,266,075
Issuance of common stock 35,062 29,386
Treasury stock purchases (56,472) -
--------- ---------
Diluted weighted average number of
shares outstanding 6,256,288 6,295,461
========== =========
Diluted Loss Per Share:
Net loss $ (.12) $ (.11)
========== =========
</TABLE>
<PAGE>
FINANCIAL DATA SCHEDULE
<TABLE>
Year Ended
January 31, 1999
<S> <C>
Fiscal Year End 01/31/99
Period End 10/31/98
Period Type 3-MOS
Cash $ 444,718
Securities $ 2,576,100
Receivables $ 707,919
Allowances $ 110,000
Inventory 0
Current Assets $ 3,920,879
PP&E $14,849,983
Depreciation $11,331,376
Total Assets $ 7,930,930
Current Liabilities $ 699,420
Bonds $ 47,107
Preferred - Mandatory 0
Preferred 0
Common $ 69,887
Other SE $ 7,114,516
Total Liabilities and Equity $ 7,930,930
Sales $ 1,177,425
Total Revenue $ 1,177,425
CGS $ 209,726
Total Costs $ 209,726
Other Expenses $ 1,181,938
Loss Provision 0
Interest Expense $ 12,532
Income - pretax $ (183,387)
Income - tax 0
Income - continuing $ (183,387)
Discontinued 0
Extraordinary 0
Changes 0
Net Income $ (183,387)
EPS - Primary $ (0.03)
EPS Diluted $ (0.03)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> OCT-31-1998
<CASH> 444,718
<SECURITIES> 2,576,100
<RECEIVABLES> 707,919
<ALLOWANCES> 110,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,920,879
<PP&E> 14,849,983
<DEPRECIATION> 11,331,376
<TOTAL-ASSETS> 7,930,930
<CURRENT-LIABILITIES> 699,420
<BONDS> 47,107
0
0
<COMMON> 69,887
<OTHER-SE> 7,114,516
<TOTAL-LIABILITY-AND-EQUITY> 7,930,930
<SALES> 1,177,425
<TOTAL-REVENUES> 1,177,425
<CGS> 209,726
<TOTAL-COSTS> 209,726
<OTHER-EXPENSES> 1,181,938
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,532
<INCOME-PRETAX> (183,387)
<INCOME-TAX> 0
<INCOME-CONTINUING> (183,387)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (183,387)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
