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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 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
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As of May 31, 1999 there were 6,401,774 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>
Item 1. Financial Statements:
Consolidated Balance Sheets (unaudited) -
April 30, 1999 and January 31, 1999 3
Consolidated Statements of Operations (unaudited) -
Three-month periods ended April 30, 1999 and 1998 4
Consolidated Statements of Cash Flows (unaudited) -
Three-month periods ended April 30, 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>
April 30, January 31,
1999 1999
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 527,533 $ 1,000,959
Short-term investments 2,266,407 2,092,828
Accounts receivable, net of allowance for doubtful accounts
of $80,000 and $131,000, respectively 863,603 672,873
Other current assets 382,242 344,350
----------- -----------
Total current assets 4,039,785 4,111,010
Property, furniture and equipment, net of accumulated
depreciation of $8,386,229 and $8,328,136, respectively 1,266,118 1,288,679
Land held for resale 254,122 254,122
Capitalized software, net of accumulated
amortization of $3,245,913 and $3,153,147 respectively 1,989,265 1,963,937
Other assets 522,293 491,444
----------- -----------
Total assets $ 8,071,583 $ 8,109,192
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 148,063 $ 216,840
Accrued expenses 156,036 100,869
Accrued contract completion costs
Deferred systems revenues 276,328 308,210
Short-term portion of mortgage note payable 93,270 92,353
----------- -----------
Total current liabilities 673,697 718,272
Long-term portion of mortgage note payable 23,193
----------- -----------
Total liabilities 673,697 741,465
----------- -----------
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 8,744,393 8,782,504
Retained earnings (49,076) (168,178)
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8,765,204 8,684,213
Less: treasury shares, at cost, 606,905 and 521,509 shares, respectively (1,367,318) (1,316,486)
----------- -----------
Total shareholders' equity 7,397,886 7,367,727
----------- -----------
Total liabilities and shareholders' equity $ 8,071,583 $ 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
ended April 30,
1999 1998
---- ----
<S> <C> <C>
Revenues:
Systems sales $ 312,272 $ 140,922
Services and support 1,141,264 926,624
----------- -----------
1,453,536 1,067,546
Costs and expenses:
Cost of systems sales 38,432 74,537
Cost of services and support 58,944 73,192
Amortization of capitalized software 92,766 92,766
Operating expenses 322,306 308,269
Selling, general and administrative expenses 720,755 704,550
Software research and development costs 131,730 113,915
----------- -----------
1,364,933 1,367,229
Income (loss) from operations 88,603 (299,683)
Interest income, net 30,499 43,483
----------- -----------
Net income (loss) $ 119,102 $ (256,200)
=========== ===========
Income (loss) per share - basic and diluted $ 0.02 ($ 0.04)
=========== ===========
Weighted average number of common shares -
basic and diluted 6,596,908 6,257,897
=========== ===========
</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>
Three-month period
ended April 30,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 119,102 $ (256,200)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation of property, furniture and equipment 58,093 83,158
Amortization of capitalized software costs 92,766 92,766
Changes in operating assets and liabilities:
Accounts receivable (190,730) (62,678)
Other current assets (37,892) 15,810
Other assets (30,849) (12,338)
Accounts payable and accrued expenses (13,610) (86,797)
Deferred systems revenues (31,882) 66,384
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Net cash used in operating activities (35,002) (159,895)
Cash flows from investing activities:
Additions to property, furniture and equipment (35,532) (31,151)
Additions to capitalized software (118,094) (146,778)
Purchase of certificates of deposit (800,000) (12,000)
Sale of U.S. Treasury Bills 626,421 128,252
----------- -----------
Net cash used in investing activities (327,205) (61,677)
Cash flows from financing activities:
Issuance of treasury shares 18,042 12,659
Principal payments of mortgage note payable (22,276) (20,265)
Purchase of treasury shares (106,985) (35,312)
----------- -----------
Net cash used in financing activities (111,219) (42,918)
----------- -----------
Net decrease in cash and cash equivalents (473,426) (264,490)
Cash and cash equivalents at beginning of year 1,000,959 558,819
----------- -----------
Cash and cash equivalents at end of year $ 527,533 $ 294,329
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ 2,716 $ 4,718
</TABLE>
See accompanying Notes to Financial Statements (unaudited) and Management's
Discussion and Analysis of Financial Condition and Results of Operation.
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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-month
period ended April 30, 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 $385,990, or 36%, from
$1,067,546 for the quarter ended April 30, 1998 to $1,453,536 for the current
quarter ended April 30, 1999. Systems sales revenues increased $171,350, or
122% from $140,922 for the quarter ended April 30, 1998 to $312,272 for the
current quarter ended April 30, 1999. Services and support revenues increased
$214,640, or 23%, from $926,624 for the quarter ended April 30, 1998, to
$1,141,264 for the current quarter ended April 30, 1999. 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 12%
for the quarter ended April 30, 1999 versus 53% for the quarter ended April 30,
1998. Systems sales revenues in the prior period were composed primarily of
upgrade and hardware sales, which have a significantly lower gross margin than
the Company's software products. Cost of services and support as a percentage
of services and support revenues decreased from 8% to 5% between periods. The
percentage decrease is attributable to the increased revenues 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 period, as software development costs capitalized between periods are
not yet subject to amortization.
Operating expenses rose $14,037, or 5% from $308,269 for the
three-month period ended April 30, 1998, to $322,306 for the current
three-month period. The increase is primarily attributable to an increase in
software development personnel and related expenses between periods. Selling,
general and administrative expenses increased $16,205, or 2%, from $704,550 for
the three-month period ended April 30, 1998, to $720,755 for the current
three-month period. The slight increase in selling, general and administrative
expenses in the current period was primarily due to an increase in sales and
support travel expenses associated with the increase in sales volume during the
period.
Software research and development costs rose $17,815, or 16%, from
$113,915 for the three-month period ended April 30, 1998 to $131,730 for the
current three-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 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 decreased $12,984, or 30%, from $43,483 for the
three-month period ended April 30, 1998, to $30,499 for the current three-month
period. The decrease in interest earnings over the prior comparable quarter 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
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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 used in operating activities was $35,002 for the three-months
ended April 30, 1999 compared to cash used of $159,895 for the prior comparable
period. The decrease in cash used in 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 $327,205 for the current period
versus $61,677 in the prior comparable period. The increase in cash used in
investing activities was due to an increase in the net purchases of short-term
investments. Net cash used in financing activities was $111,219 compared to
$42,918 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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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 periods ended
April 30, 1999 and 1998.
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, 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: June 14, 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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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
Exhibit 11 - Calculation of weighted average number of common shares
outstanding during the three-month periods ended
April 30, 1999 and 1998
Exhibit 27 - Financial Data Schedule
</TABLE>
<PAGE> 1
CompuTrac, Inc. Exhibit 11
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Net income (loss) $ 119,102 $ (256,200)
=========== ===========
Basic EPS
Three-month period ended April 30:
Shares issued and outstanding at beginning of period 6,467,197 6,277,698
Issuance of common stock 9,986 8,704
Purchase of treasury shares (42,698) (28,505)
Common stock equivalents 162,423 --
----------- -----------
Weighted average number of shares outstanding 6,596,908 6,257,897
=========== ===========
Basic earnings per share:
Net income (loss) $ 0.02 $ (0.04)
=========== ===========
Diluted EPS
Shares issued and outstanding at beginning of period 6,467,197 6,277,698
Issuance of common stock 9,986 8,704
Purchase of treasury shares (42,698) (28,505)
Common stock equivalents 162,423 --
----------- -----------
Diluted weighted average number of shares outstanding 6,596,908 6,257,897
=========== ===========
Diluted earnings per share:
Net income (loss) $ 0.02 $ (0.04)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> APR-30-1999
<CASH> 527,533
<SECURITIES> 2,266,407
<RECEIVABLES> 943,603
<ALLOWANCES> 80,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,039,785
<PP&E> 15,141,647
<DEPRECIATION> 11,632,142
<TOTAL-ASSETS> 8,071,583
<CURRENT-LIABILITIES> 673,697
<BONDS> 0
0
0
<COMMON> 69,887
<OTHER-SE> 7,327,999
<TOTAL-LIABILITY-AND-EQUITY> 8,071,583
<SALES> 1,453,536
<TOTAL-REVENUES> 1,453,536
<CGS> 97,376
<TOTAL-COSTS> 97,376
<OTHER-EXPENSES> 1,267,557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,716
<INCOME-PRETAX> 119,102
<INCOME-TAX> 0
<INCOME-CONTINUING> 119,102
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 119,102
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
