<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 July 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
----------------
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 August 31, 1999 there were 6,390,947 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) -
July 31, 1999 and January 31, 1999 3
Consolidated Statements of Operations (unaudited) -
Three-month periods ended July 31, 1999 and 1998 4
Consolidated Statements of Cash Flows (unaudited) -
Three-month periods ended July 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 4. Submission of Matters to a Vote of Security Holders 9
Item 6(a) Exhibits 9
Item 6(b) Reports on Form 8-K 9
Signatures 10
</TABLE>
- ---------------
Note: Items 1 through 3 and Item 5 of Part II are omitted because they are not
applicable.
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<PAGE> 3
CompuTrac, Inc.
CONSOLIDATED BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
July 31, January 31,
1999 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,587,360 $ 1,000,959
Short-term investments 1,188,625 2,092,828
Accounts receivable, net of allowance for doubtful accounts
of $82,000 and $131,000, respectively 1,042,536 672,873
Other current assets 323,262 344,350
----------- -----------
Total current assets 4,141,783 4,111,010
Property, furniture and equipment, net of accumulated
depreciation of $8,443,522 and $8,328,136, respectively 1,228,476 1,288,679
Land held for resale 254,122 254,122
Capitalized software, net of accumulated
amortization of $3,338,679 and $3,153,147, respectively 2,089,594 1,963,937
Other assets 529,333 491,444
----------- -----------
Total assets $ 8,243,308 $ 8,109,192
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 260,021 $ 216,840
Accrued expenses 144,693 100,869
Accrued contract completion costs
Deferred systems revenues 258,740 308,210
Short-term portion of mortgage note payable 70,461 92,353
----------- -----------
Total current liabilities 733,915 718,272
Long-term portion of mortgage note payable 23,193
----------- -----------
Total liabilities 733,915 741,465
----------- -----------
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 8,717,325 8,782,504
Retained earnings 54,350 (168,178)
----------- -----------
8,841,562 8,684,213
Less: treasury shares, at cost, 603,852 and 521,509 shares, respectively (1,332,169) (1,316,486)
----------- -----------
Total shareholders' equity 7,509,393 7,367,727
----------- -----------
Total liabilities and shareholders' equity $ 8,243,308 $ 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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<PAGE> 4
CompuTrac, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
<TABLE>
<CAPTION>
Three-month period Six-month period
ended July 31, ended July 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Systems sales $ 413,724 $ 166,290 $ 725,996 $ 307,213
Services and support 1,071,655 969,471 2,212,919 1,896,095
----------- ----------- ----------- -----------
1,485,379 1,135,761 2,938,915 2,203,308
Costs and expenses:
Cost of system sales 235,216 72,830 273,648 151,367
Cost of services and support 63,868 76,830 122,812 150,022
Amortization of capitalized software 92,766 92,766 185,532 185,532
Operating expenses 306,589 343,287 628,895 628,107
Selling, general and administrative expenses 614,638 787,386 1,335,393 1,511,386
Software research and development costs 101,400 107,643 233,130 221,558
----------- ----------- ----------- -----------
1,414,477 1,480,742 2,779,410 2,847,972
Income (loss) from operations 70,902 (344,981) 159,505
(644,664)
Interest income, net 32,524 38,194 63,023 81,678
----------- ----------- ----------- -----------
Net income (loss) $ 103,426 $ (306,787) $ 222,528 $ (562,986)
=========== =========== =========== ===========
Income (loss) per share - basic and diluted $ 0.02 ($ 0.05) $ 0.03 ($ 0.09)
=========== =========== =========== ===========
Weighted average number of common shares -
Basic 6,517,406 6,226,121 6,557,157 6,280,880
=========== =========== =========== ===========
Diluted 6,569,019 6,226,121 6,582,964 6,280,880
=========== =========== =========== ===========
</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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<PAGE> 5
CompuTrac, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
Six-month period
ended July 31,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 222,528 $ (562,986)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation of property, furniture and equipment 115,386 156,026
Amortization of capitalized software costs 185,532 185,532
Changes in operating assets and liabilities:
Accounts receivable (369,663) (68,640)
Other current assets 21,088 3,517
Other assets (37,889) (13,290)
Accounts payable and accrued expenses 87,005 (89,041)
Deferred systems revenues (49,470) 85,473
----------- -----------
Net cash provided by (used in) operating activities 174,517 (303,409)
Cash flows from investing activities:
Additions to property, furniture and equipment (55,183) (53,070)
Additions to capitalized software (311,189) (264,872)
(Purchase) sale of certificates of deposit (500,000) 2,000
Sale of U.S. Treasury Bills 1,404,203 343,344
Other 3,695
----------- -----------
Net cash provided by investing activities 537,831 31,097
Cash flows from financing activities:
Issuance of treasury shares 36,284 37,060
Principal payments of mortgage note payable (45,085) (41,015)
Purchase of treasury shares (117,146) (80,130)
----------- -----------
Net cash used in financing activities (125,947) (84,085)
----------- -----------
Net increase (decrease) in cash and cash equivalents 586,401 (356,397)
Cash and cash equivalents at beginning of period 1,000,959 558,818
----------- -----------
Cash and cash equivalents at end of period $ 1,587,360 $ 202,421
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ 4,753 $ 8,934
=========== ===========
</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 six-month period ended July 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 $349,618, or 31%, from
$1,135,761 for the quarter ended July 31, 1998 to $1,485,379 for the current
quarter ended July 31, 1999. For the six-month period ended July 31, 1999, total
revenues from operations increased $735,607, or 33%, from $2,203,308 for the
six-months ended July 31, 1998 to $2,938,915. Total sales revenues increased
$247,434, or 149% from $166,290 for the quarter ended July 31, 1998 to $413,724
for the current quarter ended July 31, 1999. For the six-month period ended July
31, 1999, total sales revenues increased $418,783, or 136%, from $307,213 for
the six-months ended July 31, 1998. Services and support revenues increased
$102,184, or 11%, from $969,471 for the quarter ended July 31, 1998, to
$1,071,655 for the current quarter ended July 31, 1999. For the six-month period
ended July 31, 1999, services and support revenues increased $316,824, or 17%,
from $1,896,095 for the six-months ended July 31, 1998 to $2,212,919. 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 57%
for the quarter ended July 31, 1999 versus 44% for the quarter ended July 31,
1998. Systems sales revenues in the current 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 six-month period ended July
31, 1999 versus 49% in the prior comparable period. This decrease is
attributable to a higher component of software sales during the current
six-month period. Cost of services and support as a percentage of services and
support revenues decreased from 8% to 6% between both quarterly and the
six-month 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 quarterly period and $185,532 for each six-month period, as software
development costs capitalized between periods are not yet subject to
amortization.
Operating expenses decreased $36,698, or 11% from $343,287 for the
three-month period ended July 31, 1998, to $306,589 for the current three-month
period. For the six-months ended July 31, 1999, operating expenses were almost
unchanged at $628,895 compared with $628,107 during the prior six-months ended
July 31, 1998. The quarterly variance is primarily attributable to a fluctuation
in software development personnel between periods. Selling, general and
administrative expenses decreased $172,748, or 22%, from $787,386 for the
three-month period ended July 31, 1998, to $614,638 for the current three-month
period. For the six-months ended July 31, 1999, selling, general and
administrative expenses decreased $175,993 or 12% from $1,511,386 in the
comparable prior period to $1,335,393. 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 31,
1998.
Software research and development costs decreased $6,243, or 6%, from
$107,643 for the three-month period ended July 31, 1998 to $101,400 for the
current three-month period. For the six-months ended July 31, 1999, software
research and development costs increased $11,572 or 5% from $221,558 in the
comparable prior period to $233,130 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 the
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<PAGE> 8
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 $5,670, or 15%, from $38,194 for the
three-month period ended July 31, 1998, to $32,524 for the current three-month
period. For the six-months, net interest income decreased $18,655 or 23% 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 $174,517 for the
six-months ended July 31, 1999 compared to cash used of $303,409 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 provided by investing activities was $537,831 for
the current period versus $31,097 in the prior comparable period. The increase
in cash provided by investing activities was due to an increase in the net sales
of short-term investments. Net cash used in financing activities was $125,947
compared to $84,085 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.
-8-
<PAGE> 9
PART II. OTHER INFORMATION
Items 1 through 3 are not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of CompuTrac, Inc. was held on
July 15, 1999. The record date for stockholders entitled to notice of, and to
vote at, the meeting was May 28, 1999. The purpose of the meeting was to elect
five directors for the ensuing year, to approve the adoption of the Company's
1999 Stock Option Plan, and to transact such other business as might properly
come before the meeting or any adjournment thereof. At the meeting, the
following matters were submitted to and approved by the company's stockholders:
1) The stockholders elected the following persons set forth in the table
below to serve as directors of the company until the next Annual
Meeting of Stockholders and until their successors have been elected
and qualified:
<TABLE>
<CAPTION>
VOTES
NOMINEE VOTES FOR WITHHELD
------- --------- --------
<S> <C> <C>
Harry W. Margolis 6,042,015 10,626
Dana E. Margolis 6,043,515 9,126
D. Bruce Walter 6,049,465 3,176
Kenneth R. Nicholas 6,044,515 8,126
Gerald D. Harris 6,044,515 8,126
</TABLE>
2) The stockholders approved the adoption of the company's 1999 Stock
Option Plan:
<TABLE>
<CAPTION>
DESCRIPTION VOTES
- ----------- -----
<S> <C>
Votes For 3,364,925
Votes Against 153,107
Abstain 12,985
</TABLE>
Item 6(a): Exhibits
Exhibit 11 - Calculation of weighted average number of common
shares outstanding during the three-month and
six-month periods ended July 31, 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 July
31, 1999
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<PAGE> 10
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: September 10, 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 NO. DESCRIPTION
----------- -----------
<S> <C>
11 Calculation of weighted average number of common
shares outstanding during the three-month and
six-month periods ended July 31, 1999 and 1998.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
CompuTrac, Inc.
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES
<TABLE>
<CAPTION>
Basic EPS
- --------- 1999 1998
----------- -----------
<S> <C> <C>
Three-month period ended April 30:
Net income (loss) $ 119,102 $ (256,200)
=========== ===========
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)
=========== ===========
Three-month period ended July 31:
Net income (loss) $ 103,426 $ (306,787)
=========== ===========
Shares issued and outstanding at beginning of period 6,376,437 6,249,193
Issuance of common stock 8,990 9,372
Purchase of treasury shares (6,375) (32,444)
Common stock equivalents 138,354 --
----------- -----------
Weighted average number of shares outstanding 6,517,406 6,226,121
=========== ===========
Basic earnings per share:
Net income (loss) $ 0.02 $ (0.04)
=========== ===========
Six-month period ended July 31:
Net income (loss) $ 222,528 $ (562,986)
=========== ===========
Weighted average number of shares outstanding 6,557,157 6,280,880
=========== ===========
Basic earnings per share:
Net income (loss) $ 0.03 $ (0.09)
=========== ===========
</TABLE>
<PAGE> 1
CompuTrac, Inc.
EXHIBIT 11.2
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES
<TABLE>
<CAPTION>
Diluted EPS
- ----------- 1999 1998
----------- -----------
<S> <C> <C>
Three-month period ended April 30:
Net income (loss) $ 119,102 $ (256,200)
=========== ===========
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
=========== ===========
Diluted earnings per share:
Net income (loss) $ 0.02 $ (0.04)
=========== ===========
Three-month period ended July 31:
Net income (loss) $ 103,426 $ (306,787)
=========== ===========
Shares issued and outstanding at beginning of period 6,376,437 6,249,193
Issuance of common stock 8,990 9,372
Purchase of treasury shares (6,375) (32,444)
Common stock equivalents 189,967 --
----------- -----------
Weighted average number of shares outstanding 6,569,019 6,226,121
=========== ===========
Diluted earnings per share:
Net income (loss) $ 0.02 $ (0.04)
=========== ===========
Six-month period ended July 31:
Net income (loss) $ 222,528 $ (562,986)
=========== ===========
Weighted average number of shares outstanding 6,582,964 6,280,880
=========== ===========
Diluted earnings per share:
Net income (loss) $ 0.03 $ (0.09)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> JUL-31-1999
<CASH> 1,587,360
<SECURITIES> 1,188,625
<RECEIVABLES> 1,124,536
<ALLOWANCES> 82,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,141,783
<PP&E> 15,354,393
<DEPRECIATION> 11,782,201
<TOTAL-ASSETS> 8,243,308
<CURRENT-LIABILITIES> 733,915
<BONDS> 0
0
0
<COMMON> 69,887
<OTHER-SE> 7,439,506
<TOTAL-LIABILITY-AND-EQUITY> 8,243,308
<SALES> 1,485,379
<TOTAL-REVENUES> 1,485,379
<CGS> 299,084
<TOTAL-COSTS> 299,084
<OTHER-EXPENSES> 1,115,393
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,037
<INCOME-PRETAX> 103,426
<INCOME-TAX> 0
<INCOME-CONTINUING> 103,426
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,426
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
