<PAGE> 1
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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, 1999
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
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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 3, 1999 there were 6,406,995 shares of the registrant's $.01 par
value common stock outstanding.
Transitional Small Business Disclosure Format (Check One): Yes No X
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CompuTrac, Inc.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
<S> <C> <C> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets (unaudited) -
October 31, 1999 and January 31, 1999 3
Consolidated Statements of Operations (unaudited) -
Three-month and nine-month periods ended October
31, 1999 and 1998 4
Consolidated Statements of Cash Flows (unaudited) -
Three-month and nine-month periods ended October
31, 1999 and 1998 5
Notes to Consolidated Financial Statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-8
Item 3. Exhibit I - Annual Report to Shareholders
for the fiscal year ended January 31, 1999
PART II. OTHER INFORMATION
Item 6(a) Exhibits 9
Item 6(b) Reports on Form 8-K 9
Signatures 10
</TABLE>
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Note: Items 1 through 5 of Part II are omitted because they are not applicable.
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CompuTrac, Inc.
CONSOLIDATED BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
October 31, January 31,
1999 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 455,346 $ 1,000,959
Short-term investments 2,197,151 2,092,828
Accounts receivable, net of allowance for doubtful accounts
of $96,000 and $131,000, respectively 965,000 672,873
Other current assets 450,057 344,350
----------- -----------
Total current assets 4,067,554 4,111,010
Property, furniture and equipment, net of accumulated
depreciation of $8,498,047 and $8,328,136, respectively 1,186,677 1,288,679
Land held for resale 254,122 254,122
Capitalized software, net of accumulated
amortization of $3,431,445 and $3,153,147 respectively 2,114,923 1,963,937
Other assets 532,208 491,444
----------- -----------
Total assets $ 8,155,484 $ 8,109,192
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 109,212 $ 216,840
Accrued expenses 164,704 100,869
Deferred systems revenues 273,814 308,210
Short-term portion of mortgage note payable 47,107 92,353
----------- -----------
Total current liabilities 594,837 718,272
Long-term portion of mortgage note payable 23,193
----------- -----------
Total liabilities 594,837 741,465
----------- -----------
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 8,686,615 8,782,504
Retained earnings 93,457 (168,178)
----------- -----------
8,849,959 8,684,213
Less: treasury shares, at cost, 586,845 and 521,509 shares, respectively (1,289,312) (1,316,486)
----------- -----------
Total shareholders' equity 7,560,647 7,367,727
----------- -----------
Total liabilities and shareholders' equity $ 8,155,484 $ 8,109,192
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements (unaudited) and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
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CompuTrac, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
<TABLE>
<CAPTION>
Three-month period Nine-month period
ended October 31, ended October 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Systems sales $ 231,704 $ 177,312 $ 957,700 $ 484,525
Services and support 1,047,997 1,000,113 3,260,916 2,896,208
----------- ----------- ----------- -----------
1,279,701 1,177,425 4,218,616 3,380,733
Costs and expenses:
Cost of system sales 90,084 97,655 363,732 249,022
Cost of services and support 61,659 112,071 184,471 262,093
Amortization of capitalized software 92,766 92,766 278,298 278,298
Operating expenses 298,517 327,196 927,412 955,303
Selling, general and administrative expenses 603,351 658,576 1,938,744 2,169,962
Software research and development costs 127,000 103,400 360,130 324,958
----------- ----------- ----------- -----------
1,273,377 1,391,664 4,052,787 4,239,636
Operating income (loss) 6,324 (214,239) 165,829 (858,903)
Interest income, net 32,783 30,852 95,806 112,530
----------- ----------- ----------- -----------
Net income (loss) $ 39,107 $ (183,387) $ 261,635 $ (746,373)
=========== =========== =========== ===========
Income (loss) per share - basic and diluted $ 0.01 ($ 0.03) $ 0.04 ($ 0.12)
=========== =========== =========== ===========
Weighted average number of common shares -
Basic 6,394,620 6,243,651 6,393,621 6,256,288
=========== =========== =========== ===========
Diluted 6,491,111 6,243,651 6,552,346 6,256,288
=========== =========== =========== ===========
</TABLE>
See accompanying Notes to Financial Statements (unaudited) and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
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CompuTrac, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
Nine-month period
ended October 31,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 261,635 $ (746,373)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation of property, furniture and equipment 169,911 211,377
Amortization of capitalized software costs 278,298 278,298
Changes in operating assets and liabilities:
Accounts receivable (292,127) (84,175)
Other current assets (105,707) 33,343
Other assets (40,764) (20,645)
Accounts payable and accrued expenses (43,793) (10,185)
Deferred systems revenues (34,396) 108,744
----------- -----------
Net cash provided by (used in) operating activities 193,057 (229,616)
Cash flows from investing activities:
Additions to property, furniture and equipment (67,909) (60,431)
Additions to capitalized software (429,284) (382,967)
(Purchase) sale of certificates of deposit (1,500,000) 86,000
Sale of U.S. Treasury Bills 1,395,677 564,230
----------- -----------
Net cash (used in) provided by investing activities (601,516) 206,832
Cash flows from financing activities:
Issuance of treasury shares 48,431 51,074
Principal payments of mortgage note payable (68,439) (62,261)
Purchase of treasury shares (117,146) (80,130)
----------- -----------
Net cash used in financing activities (137,154) (91,317)
----------- -----------
Net decrease in cash and cash equivalents (545,613) (114,100)
Cash and cash equivalents at beginning of period 1,000,959 558,818
----------- -----------
Cash and cash equivalents at end of period $ 455,346 $ 444,718
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ 8,113 $ 12,532
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements (unaudited) and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
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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 9 through 20 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended January 31, 1999. 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, 1999 has been omitted. The
results of operations for the three and nine-month periods ended
October 31, 1999 are not necessarily indicative of results for the
entire year ending January 31, 2000.
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CompuTrac, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Consolidated Operations
Total revenues from operations increased $102,276, or 9%, from
$1,177,425 for the quarter ended October 31, 1998 to $1,279,701 for the current
quarter ended October 31, 1999. For the nine-month period ended October 31,
1999, total revenues from operations increased $837,883, or 25%, from $3,380,733
for the nine-months ended October 31, 1998 to $4,218,616. Total sales revenues
increased $54,392, or 31% from $177,312 for the quarter ended October 31, 1998
to $231,704 for the current quarter ended October 31, 1999. For the nine-month
period ended October 31, 1999, total sales revenues increased $473,175, or 98%,
from $484,525 for the nine-months ended October 31, 1998 to $957,700 in the
current period. Services and support revenues increased $47,884, or 5%, from
$1,000,113 for the quarter ended October 31, 1998, to $1,047,997 for the current
quarter ended October 31, 1999. For the nine-month period ended October 31,
1999, services and support revenues increased $364,708, or 13%, from $2,896,208
for the nine-months ended October 31, 1998 to $3,260,916. Both the increases in
systems sales and service and support revenues are attributable to an increase
in the number of new systems sales and related installation services of the
Company's LFMS for Windows software products during the period.
Cost of systems sales as a percentage of system sales revenue was 39%
for the quarter ended October 31, 1999 versus 55% for the quarter ended October
31, 1998. Systems sales revenues in the prior period contained a greater amount
of upgrade and hardware sales, which have a significantly lower gross margin
than the Company's software products. Similarly, cost of systems sales as a
percentage of system sales revenue was 38% for the nine-month period ended
October 31, 1999 versus 51% in the prior comparable period. This decrease is
attributable to a higher component of software sales during the current
nine-month period. Cost of services and support as a percentage of services and
support revenues decreased from 11% to 6% between the quarterly periods.
Similarly, cost of services and support as a percentage of services and support
revenues decreased from 9% to 6% between the nine-month periods. The percentage
decrease is attributable to the increased revenues between periods and a
decrease in certain third party costs associated with maintenance revenue
included in services and support revenue.
Amortization of capitalized software was unchanged, totaling $92,766
for each quarterly period and $278,298 for each nine-month period, as software
development costs capitalized between periods are not yet subject to
amortization.
Operating expenses decreased $28,679, or 9% from $327,196 for the
three-month period ended October 31, 1998, to $298,517 for the current
three-month period. For the nine-months ended October 31, 1999, operating
expenses were $927,412, down $27,891 or 3% from $955,303 during the prior
nine-months ended October 31, 1998. The variance is primarily attributable to a
fluctuation in software development personnel between periods. Selling, general
and administrative expenses decreased $55,225, or 8%, from $658,576 for the
three-month period ended October 31, 1998, to $603,351 for the current
three-month period. For the nine-months ended October 31, 1999, selling, general
and administrative expenses decreased $231,218 or 11% from $2,169,962 in the
comparable prior period to $1,938,744. This decrease is in accordance with a
planned overall decrease in expenditures between periods as well as the absence
of a non-recurring expense accrual recognized during the quarter ending July,
1998.
Software research and development costs increased $23,600, or 23%, from
$103,400 for the three-month period ended October 31, 1998 to $127,000 for the
current three-month period. For the nine-months ended October 31, 1999, software
research and development costs increased $35,172 or 11% from $324,958 in the
comparable prior period to $360,130 in the current period. This increase in
software research and development costs primarily relates to research and
development costs associated with software products not qualifying for
capitalization during
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<PAGE> 8
the period. The Company capitalizes those costs associated with continued
enhancements and improvements to the CompuTrac LFMS for Windows software product
line. Those software costs not qualifying for capitalization are expensed when
incurred.
Net interest income increased $1,931, or 6%, from $30,852 for the
three-month period ended October 31, 1998, to $32,783 for the current
three-month period. For the nine-months, net interest income decreased $16,724
or 15% from the prior comparable period. The decrease in interest earnings was
primarily due to a decrease in funds available for investment purposes between
periods.
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. Fluctuations in system sales revenues have
historically resulted from the revenues of the Company being generated
principally by the sale of a small number of relatively expensive systems, as
well as the policy of the Company of recognizing revenue upon delivery of the
hardware, delivery and acceptance of the software, the equipment availability of
hardware from the Company's hardware supplier, and the desire of the customer to
accelerate or delay the date of delivery. These factors tend to distort the
operating results of an interim period. Additionally, sales have not occurred or
been recognized evenly throughout the fiscal year or any interim period, thus
making meaningful interim period comparisons difficult. These fluctuations may
also have a significant impact on profitability in any interim period as a
result of the relatively fixed nature of operating costs and selling, general
and administrative expenses.
Liquidity and Capital Resources
Net cash provided by operating activities was $193,057 for the
nine-months ended October 31, 1999 compared to cash used of $229,616 for the
prior comparable period. The increase in cash provided by operating activities
during the period was attributable to the recognition of net income during the
period versus a net loss. Net cash used in investing activities was $601,516 for
the current period versus $206,832 provided by investing activities in the prior
comparable period. The variance in cash provided by investing activities was due
to an increase in the purchase of short-term investments between periods. Net
cash used in financing activities was $137,154 compared to $91,317 in the prior
period. The increase in cash used in financing activities was due to an increase
in the amount of funds used to purchase treasury shares during the period.
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<PAGE> 9
PART II. OTHER INFORMATION
Items 1 through 5 are not applicable.
Item 6(a): Exhibits
Exhibit 11 - (Page 11 - 12) Calculation of weighted average
number of common shares outstanding during the
three-month and nine-month periods ended October 31,
1999 and 1998.
Exhibit 27 - (Page 13) Financial Data Schedule
Item 6(b): Reports on Form 8-K
No reports on form 8-K have been filed during the quarter ended October
31, 1999
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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 13, 1999
/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)
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<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
11 - (Page 11 - 12) Calculation of weighted average number of common
shares outstanding during the three-month and nine-month periods
ended October 31, 1999 and 1998.
27 - (Page 13) Financial Data Schedule
</TABLE>
<PAGE> 1
CompuTrac, Inc. Exhibit 11.1
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Basic EPS
Three-month period ended October 31:
Net income (loss) $ 39,107 $ (183,387)
Shares issued and outstanding at beginning of period 6,384,854 6,229,438
Issuance of common stock 9,766 14,213
----------- -----------
Weighted average number of shares outstanding 6,394,620 6,243,651
=========== ===========
Basic earnings per share:
Net income (loss) $ 0.01 $ (0.03)
=========== ===========
Nine-month period ended October 31:
Net income (loss) $ 261,635 $ (746,373)
Shares issued and outstanding at beginning of period 6,467,197 6,277,698
Issuance of common stock 29,623 35,062
Purchase of treasury shares (103,199) (56,472)
----------- -----------
Weighted average number of shares outstanding 6,393,621 6,256,288
=========== ===========
Basic earnings per share:
Net income (loss) $ 0.04 $ (0.12)
=========== ===========
</TABLE>
<PAGE> 2
CompuTrac, Inc. Exhibit 11.2
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Diluted EPS
Three-month period ended October 31:
Net income (loss) $ 39,107 $ (183,387)
Shares issued and outstanding at beginning of period 6,384,854 6,229,438
Issuance of common stock 9,766 14,213
Common stock equivalents 96,491 --
----------- -----------
Weighted average number of shares outstanding 6,491,111 6,243,651
=========== ===========
Diluted earnings per share:
Net income (loss) $ 0.01 $ (0.03)
=========== ===========
Nine-month period ended October 31:
Net income (loss) $ 261,635 $ (746,373)
Shares issued and outstanding at beginning of period 6,467,197 6,277,698
Issuance of common stock 29,623 35,062
Purchase of treasury shares (103,199) (56,472)
Common stock equivalents 158,725 --
----------- -----------
Weighted average number of shares outstanding 6,552,346 6,256,288
=========== ===========
Diluted earnings per share:
Net income (loss) $ 0.04 $ (0.12)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> OCT-31-1999
<CASH> 455,346
<SECURITIES> 2,197,151
<RECEIVABLES> 1,061,000
<ALLOWANCES> 96,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,067,554
<PP&E> 15,100,271
<DEPRECIATION> 11,929,492
<TOTAL-ASSETS> 8,155,484
<CURRENT-LIABILITIES> 594,837
<BONDS> 0
0
0
<COMMON> 69,887
<OTHER-SE> 7,490,760
<TOTAL-LIABILITY-AND-EQUITY> 8,155,484
<SALES> 1,279,701
<TOTAL-REVENUES> 1,279,701
<CGS> 90,084
<TOTAL-COSTS> 151,743
<OTHER-EXPENSES> 1,121,634
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,360
<INCOME-PRETAX> 39,107
<INCOME-TAX> 0
<INCOME-CONTINUING> 39,107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,107
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
