<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended January 31, 2000
Commission File Number 1-9115
COMPUTRAC, INC.
(Name of small business issuer in its charter)
TEXAS 75-1540265
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
222 MUNICIPAL DRIVE, RICHARDSON, TEXAS 75080
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (972) 234-4241
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- --------------------
COMMON STOCK, $.01 PAR VALUE AMERICAN STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 ( )
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [X]
The issuer's revenues for the fiscal year ended January 31, 2000 were
$5,227,332.
As of April 27, 2000, the aggregate market value of the voting stock held by
non-affiliates of the issuer was $5,456,515.
As of April 27, 2000, the number of shares outstanding of the issuer's common
stock was 6,272,631.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the issuer's Proxy Statement for the issuer's 2000 Annual Meeting of
Shareholders are incorporated by reference in Part III of this Form 10-KSB
Report.
Transitional Small Business Disclosure Format (check one) Yes ( ) No (X)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Company was organized under the laws of the State of Texas in January,
1977. The Company develops, markets, services and supports integrated computer
systems and software applications designed for law firms. The Company's products
assist its customers in such applications as timekeeping, tracking
disbursements, billing, accounting, management and financial reporting, conflict
of interest and other law firm management applications. The Company markets its
systems throughout the United States and Canada.
The Company believes that, historically, it has been one of the major
suppliers of computer systems and services for medium size law firms (21 to 50
timekeepers) and large size law firms (51 plus timekeepers). The majority of
customer systems currently in place utilize Hewlett-Packard equipment, which the
Company is authorized to resell to end-users. Prices for these systems have
ranged from $60,000 for a small law firm (up to 20 timekeepers) to $650,000 or
more for an integrated system for accounting and practice support applications
for a large law firm. All of the systems marketed by the Company are sold in
conjunction with services including a separately priced annual maintenance
agreement, customized conversion services, customer training, customer support,
product enhancements and software maintenance services. Annual maintenance
agreements and ongoing support services relative to these systems provide the
Company with a continuing source of revenue during the term of the agreement.
LAW FIRM MANAGEMENT SYSTEM
Software which enables law firms to more efficiently perform and evaluate
administrative and business functions constitutes the Company's principal
products. These products are called the Law Firm Management System ("LFMS"). The
Company's earlier generation products, designed for medium to large law firms,
run on mini-computers in either the HP3000 Series or the HP9000 Series, while
some peripheral products run on IBM-compatible micro-computers. Full
interoperability support is provided for all popular network operating systems,
including Novell Netware(R), Banyan Vines(TM), and Microsoft NT, thus enabling a
law firm to upgrade its computer hardware without having to replace its
operating system software. The Company's software applications run in several
different operating system environments, including UNIX, MPE/iX(R) (native HP),
MS-DOS(R), Windows(R) 95, Windows 98, and Windows NT. The Company's LFMS for
Windows product line is a next generation time and billing system designed for
small and medium size law firms. This product, which was introduced in January
1998, is a client/server software system created exclusively with Microsoft(R)
development tools operating on micro-computers with 32-bit Windows(R) 95,
Windows 98 or Windows NT(R) operating environments. In January 2000, the Company
introduced its LFMS 2000 product line designed for larger law firms and
providing for complete compatibility with Windows 95, Windows 98, Windows NT,
and Windows 2000 environments. LFMS 2000 provides for three-tier architecture
running over Microsoft SQL Server 7.0.
The core of the Company's software includes the ability to capture time and
disbursements incurred on behalf of clients, billing, trust accounting, accounts
payable, accounts receivable, general ledger, drill-down inquiry, profitability
analysis, and management and financial reporting. Practice management software
included within the LFMS software system consists of modules such as conflict of
interest software developed by the Company and products developed by third-party
software vendors to accomplish functions including marketing, file management,
and overall better management of the client's business environment.
Additionally, the CompuTrac LFMS for Windows products provide the ability
for small and medium size law firms to manage their business using professional
business products. These products were created exclusively with Microsoft
development tools such as MSAccess, SQL-Server, C++, OLE and ODBC. Use of these
products allow law firms to integrate with Microsoft Office products to
accomplish tasks such as uploading budgets from Excel, alerting professionals
within the firm when a value has reached a specified percentage of the budget,
and generating client invoices as Microsoft Word files to forward to the client
via the Internet.
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INTELLECTUAL PROPERTY RIGHTS
The Company regards all of its software products as proprietary. The
Company does not sell or transfer title to its software. The Company's software
products are generally licensed to end-users on a "right to use" basis pursuant
to a perpetual non-transferable license that restricts the use of the software
to the customer's operations at one or more designated computer sites. The
Company relies on a combination of copyright, trademark, and trade secret laws,
as well as non-disclosure agreements, to establish and maintain its proprietary
rights. Computer software generally cannot be patented and existing copyright
laws afford only limited protection. Also, there can be no assurance that the
Company's competitors will not independently develop software that is equivalent
to the Company's. Further, no assurance can be given that the Company will have
the financial resources to engage in litigation against parties who may infringe
its intellectual property rights. While the Company realizes that its
competitive position may be affected by its ability to legally protect its
software, the Company believes the impact of this protection is less significant
to its commercial success than factors such as the level of experience of the
Company's personnel, name recognition, and the successful development and
marketing of new products.
HARDWARE
The earlier generation LFMS software is designed for use in conjunction
with various network operating systems operating with either the HP3000 or
HP9000 UNIX-based computer systems, which the customer typically purchases from
the Company. The CompuTrac LFMS for Windows client/server software version was
designed to be installed on personal computers connected through a Microsoft or
Novell network environment.
MARKETING
The Company markets its products through presentations at state, regional
and national conferences of lawyers, law firm administrators and information
system managers. The Company also advertises in regional and national
publications and engages in telemarketing and direct mail campaigns focused on
the legal market. During fiscal 2000 and 1999, the Company expended
approximately $130,000 and $41,000 in its marketing and advertising efforts to
promote its products.
The CompuTrac LFMS for Windows products offer a significantly expanded
potential market to the Company. With the LFMS earlier generation products,
market focus historically concentrated on medium and large size law firms. In
their current release, the CompuTrac LFMS for Windows products are designed to
meet the needs of small and medium size law firms. Subsequent releases will
again accommodate the requirements of larger law firms.
MAINTENANCE, INSTALLATION AND TRAINING
The Company provides software maintenance for a fixed monthly fee which
covers enhancements, modifications and improvements to the licensed software.
Such services do not generally require customer site visits by Company
personnel.
The CompuTrac LFMS for Windows software products are installed by Company
representatives on personal computers located at the law firm client site.
Customer training on the products is conducted either on-site at the law firm
office or at the Company's training center located at the Company's corporate
offices in Richardson, Texas. All training is conducted by trained Company
personnel. Additionally, law firm personnel utilize computer-based training
tutorials developed by the Company for selected software modules within the
CompuTrac LFMS for Windows suite of products.
COMPETITION
The computer software systems industry is highly competitive. Software
designed to accomplish substantially the same purposes as the products of the
Company is readily available from numerous competitors. The Company competes on
the basis of the quality of its products and services, its insights into the
needs of law firms and its reputation. The Company believes that its pricing
policies are competitive with those of its competitors.
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EMPLOYEES
As of March 31, 2000, the Company employed 51 full-time employees and 3
part-time employee of which 33 employees provided technical support and product
development services, 7 were engaged in sales and marketing and 14 were employed
in finance, accounting and administration. No employees are represented by a
union or covered by a collective bargaining agreement. The Company believes that
its relationship with its employees is good.
RESEARCH AND DEVELOPMENT
During the two years ended January 31, 2000 and 1999, the Company expended
approximately $1.1 million and $1.2 million on software research, development
and production costs, respectfully. Net software research, development and
production expenses, after capitalization of certain software development costs,
amounted to $505,000 for the fiscal year ended January 31, 2000, and $673,000
for the fiscal year ended January 31, 1999. The Company anticipates its
expenditures for research, development and production in fiscal 2000 will
approximate current levels.
CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-KSB 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 has recently begun selling and installing 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.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns its corporate headquarters and operating facilities
located in Richardson (Dallas County), Texas. The building contains
approximately 20,000 square feet and has a parking area of approximately 50,000
square feet. At January 31, 2000, these facilities were subject to a mortgage
note payable with a remaining balance of approximately $23,000. The Company
believes its current facility is of adequate size for the conduct of its
business. The Company also owns 10.97 acres of undeveloped land located in
Frisco, Texas, which it has listed for sale.
In connection with its systems development and servicing programs, the
Company owns and operates one HP 3000 Micro Classic, one HP 3000 Series 937LX,
one HP 3000 Series 957, one HP 9000 Series 887 and one HP 9000 Series 817. The
Company also owns and utilizes various local area networks, personal computers
and other peripheral equipment including printers, micro-computers, scanners and
other equipment.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings. The Company is not
aware of any pending or contemplated proceeding against it by governmental
authorities concerning environmental matters. The Company knows of no legal
proceedings, pending or threatened, or judgments entered against any Director or
Officer of the Company in his or her capacity as such.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders of the Company during
the fourth quarter of the fiscal year ended January 31, 2000.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the American Stock Exchange under
the trading symbol "LLB". The Company has not declared or paid cash dividends
since fiscal 1988 and does not anticipate any dividends will be declared or paid
in the foreseeable future. The Company intends to retain any earnings to finance
the development and expansion of the Company's operations.
At April 27, 2000, there were approximately 245 holders of record and
approximately 1,000 beneficial owners of the Company's Common Stock. For the
periods indicated below, the following table sets forth the high and low sales
prices as reported by the American Stock Exchange.
<TABLE>
<CAPTION>
Market Price
------------
High Low
---- ---
<S> <C> <C>
1999 Fiscal Year:
First Quarter 1 1/16 3/4
Second Quarter 1 3/4
Third Quarter 13/16 3/8
Fourth Quarter 1 1/16 7/16
2000 Fiscal Year:
First Quarter 1 1/4 3/4
Second Quarter 1 3/16 14/16
Third Quarter 1 9/16
Fourth Quarter 2 13/16 9/16
</TABLE>
The closing sales price per share of the Common Stock on the American Stock
Exchange on April 27, 2000 was $1 5/16.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the fiscal years indicated, items in
the Consolidated Statements of Operations expressed as a percentage of
operating revenues:
<TABLE>
<CAPTION>
Year Ended January 31,
2000 1999
------ ------
<S> <C> <C>
Revenues:
Systems sales 21 % 19 %
Services and support 79 81
------ ------
100 100
Costs and expenses:
Cost of system sales 8 8
Cost of services and support 5 6
Amortization of capitalized software 7 7
Operating expenses 23 22
Selling, general and administrative expenses 53 59
Software research and development costs 10 14
------ ------
106 116
Loss from operations (6) (16)
Interest income, net 3 3
------ ------
Net loss (3)% (13)%
====== ======
</TABLE>
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YEAR ENDED JANUARY 31, 2000 COMPARED TO YEAR ENDED JANUARY 31, 1999
Total revenues rose from $4.9 million in fiscal 1999 to $5.2 million in
fiscal 2000, an increase of $316,000, or 6% over the prior fiscal year. System
sales revenues increased $150,000, or 16% from $929,000 in fiscal 1999 to just
under $1.1 million in fiscal 2000. The increase in systems sales revenue was a
result of an increase in the number of new systems sold and the average system
selling price between periods.
Services and support revenues increased 4%, or $165,000 from just under $4
million in fiscal 1999 to $4.1 million in fiscal 2000. Services and support
revenues are comprised of software and hardware maintenance fees, programming
support charges and various other service revenue fees such as training,
installation and conversion revenues. The increase in services and support
revenues in fiscal 2000 is attributable to increased services associated with
the increase in new systems sales during the period.
Cost of system sales as a percentage of system sales revenues was almost
unchanged between periods at 40% in fiscal 2000 compared to 41% in the prior
fiscal year. This decrease is associated with a greater mix of LFMS for Windows
systems sales in the current year which do not have any material hardware
component. Cost of services and support as a percentage of services and support
revenue decreased slightly, from 7% in fiscal 1999 to 6% in fiscal 2000. 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 fees included in services
and support revenues.
Amortization of capitalized software was unchanged, totalling $371,064
during both fiscal periods, as software development costs capitalized between
periods were not yet subject to amortization.
Operating expenses increased $139,000, or 13% from just under $1.1 million
in fiscal 1999 to $1.2 million in fiscal 2000. This overall increase relates
primarily to an increase in personnel costs associated with the company's
computer support and training services.
Selling, general and administrative expenses decreased $146,000, or 5%,
from $2.9 million in fiscal 1999 to $2.7 million in fiscal 2000. This decrease
was primarily attributable to a decrease in staff and other personnel expenses
during the year.
Software research and development expenses decreased $168,000, or 25% from
$673,000 in fiscal 1999 to $505,000 in fiscal 2000. This decrease is
attributable to a decrease in costs classified as expense and an increase in
research and development costs associated with software products qualifying for
capitalization during the year. The Company will continue to capitalize those
costs associated with continued enhancements and improvements to the CompuTrac
LFMS for Windows and LFMS 2000 software product lines.
Net interest income decreased 11%, from $151,000 in fiscal 1999 to $134,000
in fiscal 2000 due to lower interest rates and fewer funds available for
investment purposes between periods. In fiscal 1999, net interest income was
comprised of approximately $168,000 of interest income, relating primarily to
investment interest income, offset by approximately $17,000 of interest expense.
In fiscal 2000, net interest income was comprised of approximately $143,000 of
interest income, relating primarily to investment interest income, offset by
approximately $9,000 of non-operating expense of which $7,000 was mortgage
interest expense.
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 revenues of the
Company have primarily been derived from service and support revenues,
fluctuations in LFMS system sales revenues have historically resulted from the
sale of a small number of relatively expensive systems, the policy of the
Company of recognizing revenue upon delivery of the hardware and delivery and
acceptance of the software, the equipment availability of hardware from the
Company's hardware supplier,
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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
Cash provided by operating activities was $254,000 during fiscal 2000
compared with $62,000 used in operating activities during fiscal 2000. The
company attributes this positive result to the significant decrease in its net
operating loss during the period. Cash used in investing activities during
fiscal 2000 was $772,000 compared to $552,000 provided by investing activities
during fiscal 1999. This decrease in cash is attributable to an increase in
expenditures for property, furniture and equipment and capitalized software
between periods and an increase of short-term investments purchased during the
period. Cash used in financing activities during fiscal 2000 was $129,000
compared with $47,000 used during fiscal 1999. The increase in cash used in
financing activities was attributable to a decrease in treasury share issuances
and an increase in principal payments associated with the Company's mortgage
note payable between periods.
The Company has not made any material commitments for capital expenditures,
however, the Company anticipates continued expenditures will be made during
fiscal 2001 in the areas of development, sales, marketing and support of its
CompuTrac LFMS for Windows software products. Until the Company is able to
generate consistent positive cash flow from operations, these expenditures will
be funded in part by cash flow from investment activities of the Company.
At January 31, 2000 and 1999, the Company has established a 100% valuation
allowance to fully offset the net deferred tax asset balances of $1,657,000 and
$1,595,000, respectively. Factors considered in management's assessment that
significant uncertainties exist regarding the realization of these assets
include (1) uncertainty regarding the future success and timing of sales of the
Company's new Windows-based products, (2) financial and economic pressures in
the Company's primary customer market (i.e. legal industry) and (3) historical
operating losses over the last several years.
Working capital and the ratio of current assets to current liabilities are
as follows:
<TABLE>
<CAPTION>
Working Current
Capital ratio
------- -----
<S> <C> <C>
At January 31:
2000 $ 2,604,576 3.8 to 1
1999 $ 3,392,738 5.7 to 1
</TABLE>
Current assets consist primarily of cash, short-term investments, accounts
receivable and unbilled revenues from system sales and services.
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ITEM 7. FINANCIAL STATEMENTS
BALANCE SHEETS
<TABLE>
<CAPTION>
Year Ended January 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 352,970 $ 1,000,959
Short-term investments 2,200,000 2,092,828
Accounts receivable, net of allowance for doubtful accounts
of $119,000 and $131,000, respectively 610,510 672,873
Other current assets 376,953 344,350
----------- -----------
Total current assets 3,540,433 4,111,010
Property, furniture and equipment 1,181,846 1,288,679
Land held for resale 254,122 254,122
Capitalized software 2,140,252 1,963,937
Other assets 551,274 491,444
----------- -----------
Total assets $ 7,667,927 $ 8,109,192
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 142,573 $ 216,840
Accrued expenses 144,716 100,869
Stock purchase payable 434,625
Deferred systems revenues 190,750 308,210
Short-term portion of mortgage note payable 23,193 92,353
----------- -----------
Total current liabilities 935,857 718,272
Long-term portion of mortgage note payable -- 23,193
----------- -----------
Total liabilities 935,857 741,465
----------- -----------
Commitments and contingencies
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 8,478,866 8,782,504
Retained earnings (332,242) (168,178)
----------- -----------
8,216,511 8,684,213
Less: treasury shares, at cost, 720,391 and 521,509 shares, respectively (1,484,441) (1,316,486)
----------- -----------
Total shareholders' equity 6,732,070 7,367,727
----------- -----------
Total liabilities and shareholders' equity $ 7,667,927 $ 8,109,192
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended January 31,
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Systems sales $ 1,078,903 $ 928,550
Services and support 4,148,429 3,983,059
----------- -----------
5,227,332 4,911,609
----------- -----------
Costs and expenses:
Cost of system sales 431,052 382,968
Cost of services and support 249,293 288,662
Amortization of capitalized software 371,064 371,064
Operating expenses 1,215,014 1,076,189
Selling, general and administrative expenses 2,753,699 2,899,667
Software research and development costs 505,130 672,751
----------- -----------
5,525,252 5,691,301
Loss from operations (297,920) (779,692)
Interest income, net 133,856 151,007
----------- -----------
Net loss $ (164,064) $ (628,685)
=========== ===========
Loss per share - basic and diluted $ (0.03) $ (0.10)
=========== ===========
Weighted average number of common shares -
Basic and diluted 6,391,463 6,320,311
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Stock Paid In Retained Treasury Total
Shares Amount Capital Earnings Shares Amount Equity
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at February 1, 1998 6,988,706 $ 69,887 $ 9,718,527 $ 460,507 711,008 $(2,289,089) $ 7,959,832
Purchase of treasury stock 158,332 (147,036) (147,036)
Treasury stock reissued (936,023) (347,831) 1,119,639 183,616
Net loss (628,685) (628,685)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 1999 6,988,706 69,887 8,782,504 (168,178) 521,509 (1,316,486) 7,367,727
Purchase of treasury stock 359,396 (578,271) (578,271)
Treasury stock reissued (303,638) (160,514) 410,316 106,678
Net loss (164,064) (164,064)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 2000 6,988,706 $ 69,887 $ 8,478,866 $ (332,242) 720,391 $(1,484,441) $ 6,732,070
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
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STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended January 31,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (164,064) $ (628,685)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation of property, furniture and equipment 224,811 268,518
Amortization of capitalized software costs 371,064 371,064
Changes in operating assets and liabilities:
Accounts receivable 62,363 (159,129)
Other current assets (32,603) 47,818
Other assets (59,830) (20,645)
Accounts payable and accrued expenses (30,420) (93,952)
Deferred revenues (117,460) 152,521
----------- -----------
Net cash provided by (used in) operating activities 253,861 (62,490)
----------- -----------
Cash flows from investing activities:
Additions to property, furniture and equipment (117,978) (80,373)
Additions to capitalized software (547,379) (501,063)
(Purchases) sales of certificates of deposit (2,200,000) 186,000
Sales of U.S. Treasury Bills 2,092,828 947,502
----------- -----------
Net cash (used in) provided by investing activities (772,529) 552,066
----------- -----------
Cash flows from financing activities:
Issuance of treasury shares 106,678 183,616
Principal payments of mortgage note payable (92,353) (84,015)
Purchase of treasury shares (143,646) (147,036)
----------- -----------
Net cash used in financing activities (129,321) (47,435)
----------- -----------
Net (decrease) increase in cash and cash equivalents (647,989) 442,141
Cash and cash equivalents at beginning of year 1,000,959 558,818
----------- -----------
Cash and cash equivalents at end of year $ 352,970 $ 1,000,959
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ 9,318 $ 15,674
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CompuTrac, Inc. (the "Company") was formed in 1977 to develop, market,
service and support integrated turnkey computer systems for law firms. The
Company's significant accounting policies are as follows:
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION AND COMPANY OPERATIONS
The Company is a software development company that develops, markets,
services and supports computer systems for the legal profession. System sales,
service and support revenues are generally realized pursuant to a contract with
the customer. Contracts typically provide for the shipment of hardware direct
from the supplier to the customer, where it is installed by Hewlett-Packard
personnel. After hardware installation, personnel from the Company install the
software components. Hardware and software installation is generally provided
for all significant components within four to six weeks after the hardware
delivery process begins.
The Company enters into software license agreements whereby the Company
licenses software to a customer, providing that customer with the right to use
the software. In accordance with the provisions the American Institute of
Certified Public Accountants issued Statement of Position No. 97-2 "Software
Revenue Recognition" (SOP 97-2), each element of the Company's software license
contracts is separately identified and accounted for based on the relative fair
values of that element. Accordingly, the Company recognizes software license
revenue upon delivery and installation of the software and confirmation of
customer acceptance per the terms of the contract. Other contractual services
may include data conversion and training conducted by Company personnel
following installation of the major components of hardware and software.
Revenues related to these services are deferred and recognized as revenue at the
time the services are rendered, usually not exceeding one year from inception of
the contract. In addition, the contract may provide for add-on software
applications which are still under development and which complement the core
system, but are not integral to the basic functionality of the core system.
Uncompleted add-on software application revenue is deferred until delivery
occurs and evidence of customer acceptance has been obtained. Unbilled revenue
represents the excess of system sales contracts over progress billings. Accrued
contract completion costs represent estimated software project completion costs
necessary to fulfill client contract obligations.
CASH EQUIVALENTS
The Company considers investments with original maturity dates of 90 days
or less to be cash equivalents.
SHORT-TERM INVESTMENTS
The Company considers investments with original maturity dates that are
greater than 90 days, but less than one year, to be short-term investments. The
carrying values of these investments are approximately equal to their fair
market values at the end of each fiscal year.
-13-
<PAGE> 14
CAPITALIZED SOFTWARE
The Company capitalizes the costs of developing and 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" (SFAS 86). Under
SFAS 86, the costs incurred to establish the technological feasibility of a
computer software product are charged to expense as incurred. After
technological feasibility is established, costs of producing the computer
software product are capitalized until the product is available for general
release to customers. Capitalized software development costs are amortized on a
product-by-product basis using the greater of the amount computed by the ratio
of current year net revenue to estimated future net revenue, or the amount
computed by the straight-line method over a period which approximates the
estimated economic life of the products, which historically has been four years.
The amount by which unamortized software costs exceed the net realizable value,
if any, is recognized in the period the excess is determined.
PROPERTY, FURNITURE, EQUIPMENT AND DEPRECIATION
Property, furniture and equipment are recorded at cost. The cost of such
assets, other than land, is depreciated on a straight-line basis over the
estimated useful life of the asset (generally three to seven years). The
Company's corporate facility is being depreciated using the straight-line method
over an estimated useful life of 30 years. Maintenance and repair expenditures
are charged to operations; renewals and betterments are capitalized.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. The Company incurred
approximately $130,000 and $41,000 in advertising costs in fiscal 2000 and 1999,
respectively.
-14-
<PAGE> 15
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has elected to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25), and related
interpretations. Accordingly, compensation cost for stock options is measured as
the excess, if any, of the fair market value of the Company's stock at the date
of the grant over the amount the employee must pay to acquire the stock.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per common share is based on the weighted-average
number of common shares outstanding. Diluted earnings (loss) per share is
computed based on the weighted-average number of common shares outstanding plus
the number of additional common shares that would have been outstanding if all
dilutive potential common shares had been issued. For the years ended January
31, 2000 and 1999, all potential common shares were anti-dilutive.
FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments, consisting of cash
and cash equivalents, short-term investments, accounts receivable, accounts
payable and debt, approximate their carrying values.
RECLASSIFICATION
Certain prior year financial statement information has been reclassified to
conform to the current year presentation.
NOTE 2 - PROPERTY, FURNITURE AND EQUIPMENT
Property, furniture and equipment costs are summarized as follows:
<TABLE>
<CAPTION>
January 31,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Equipment $ 7,038,136 $ 7,101,376
Building 1,426,935 1,426,935
Furniture, fixtures and leasehold improvements 804,238 788,504
----------- -----------
9,269,309 9,316,815
Less accumulated depreciation (8,387,463) (8,328,136)
----------- -----------
881,846 988,679
Land 300,000 300,000
----------- -----------
$ 1,181,846 $ 1,288,679
=========== ===========
</TABLE>
-15-
<PAGE> 16
NOTE 3 - CAPITALIZED SOFTWARE
Capitalized software costs are summarized as follows:
<TABLE>
<CAPTION>
January 31,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Capitalized software costs $ 5,664,463 $ 5,117,084
Less accumulated amortization (3,524,211) (3,153,147)
----------- -----------
$ 2,140,252 $ 1,963,937
=========== ===========
</TABLE>
NOTE 4 - INCOME TAXES
The effective income tax rates differed from the statutory federal income
tax rates for the following reasons:
<TABLE>
<CAPTION>
January 31,
------------------
2000 1999
------ ------
<S> <C> <C>
Federal income tax benefit at statutory rate (34)% (34)%
Change in valuation allowance 38 37
Other (4) (3)
------ ------
0% 0%
====== ======
</TABLE>
The components of the deferred tax accounts consist of the following:
<TABLE>
<CAPTION>
January 31,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 1,966,000 $ 1,778,000
Accounts receivable 45,000 50,000
Deferred revenue 14,000 14,000
Fixed assets 473,000 365,000
Other 61,000 80,000
----------- -----------
Total deferred tax assets 2,559,000 2,287,000
Deferred tax liabilities:
Capitalized software costs
(870,000) (660,000)
Other (32,000) (32,000)
----------- -----------
Total deferred tax liabilities (902,000) (692,000)
----------- -----------
Net deferred tax asset before valuation allowance 1,657,000 1,595,000
Less valuation allowance 1,657,000 1,595,000
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
At January 31, 2000 and 1999, the Company had net operating loss
carryforwards of approximately $5,100,000 and $4,600,000, respectively, which
begin to expire in 2010.
-16-
<PAGE> 17
NOTE 5 - SHAREHOLDERS' EQUITY
STOCK PURCHASE PLANS
In December 1985, the Company's Board of Directors adopted the CompuTrac,
Inc. Employee Stock Purchase Plan and in May 1991, adopted the CompuTrac, Inc.
1991 Employee Stock Purchase Plan. The Company reserved 300,000 and 500,000
shares, respectively, of its Common Stock for purchase by its employees pursuant
to the terms of these plans. Under both plans, eligible participating employees
of the Company may elect to have an amount up to, but not in excess of, 10% of
their regular salary or wages withheld for the purpose of purchasing the
Company's Common Stock. The Company contributes to the participant's account an
amount of money equal to 33 1/3% of the aggregate contribution made by each
participant since the immediately preceding stock purchase date. All Common
Stock of the Company purchased by the participating employees pursuant to the
plans may be voted by the employee; any shares not so directed to vote are not
voted. During fiscal 1996, the Company amended the 1991 Employee Stock Purchase
Plan to increase by 500,000 the number of shares reserved for future employee
stock purchase activities. At January 31, 2000, 1,142,752 shares of the
Company's Common Stock had been sold pursuant to these plans.
STOCK OPTION PLANS
In May, 1991, the Board of Directors adopted and the shareholders approved
the 1990 Stock Option Plan. Under the terms of the plan, the Company's Board of
Directors was authorized to grant options to purchase up to 500,000 shares of
Common Stock to key employees of the Company, including officers and directors.
During fiscal 1998, the Board of Directors adopted and the shareholders approved
an amendment to the plan to increase by 300,000 the number of shares reserved
for future stock option grants. In June, 1999, with 39,603 shares remaining
available for grant, the plan was terminated in connection with the adoption and
approval of the Company's 1999 Stock Option Plan. No further options may be
granted under the plan. However, the 1990 Stock Purchase Plan remains in effect
to the extent that its provisions govern outstanding options previously granted
under the plan.
In June, 1999, the Board of Directors adopted and the shareholders approved
the 1999 Stock Option Plan. Under the terms of the plan, the Company's Board of
Directors is authorized to grant options to purchase up to 500,000 shares of
Common Stock to key employees of the Company, including officers and directors.
At January 31, 2000, there were 360,000 shares available for future grant under
the plan.
Under both plans, option grants may be in the form of either Incentive
Stock Options or Non-Statutory Stock Options. Each option granted under the
Option Plan must be exercised, if at all, during a period established in the
grant by the Board of Directors, but not exceeding 10 years from the date of
grant. Options must be exercised by an optionee within three to twelve months
after termination of employment.
STOCK REPURCHASE PROGRAM
In December 1997, the Board of Directors authorized a stock repurchase
program whereby the Company may purchase, from time-to-time, up to 600,000
shares of its outstanding Common Stock in the open marketplace over a ten year
period. As of January 31, 2000, the Company had purchased 329,828 shares of its
outstanding Common Stock pursuant to the terms of the program.
EXECUTIVE STOCK PURCHASE
On January 6, 2000, the Company repurchased 238,000 shares of its common
stock from its Chief Executive Officer at a purchase price of $1.9375, the
closing market price of the common stock on the date of purchase. The purchase
price is payable in installments during the Company's fiscal 2001 year and had a
balance payable of $431,625 at January 31, 2000. Concurrent with the stock
purchase, the Chief Executive Officer's salary during the calendar 2000 year was
reduced by $319,000.
-17-
<PAGE> 18
STOCK-BASED COMPENSATION
The Company measures stock-based compensation cost using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25), and related
interpretations. Accordingly, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the Company's capital stock at
the grant date over the amount the employee must pay for the stock.
Statement of Financial Accounting Standards No. 123 (FAS 123), "Accounting
for Stock-Based Compensation," requires disclosure of pro forma net loss and pro
forma net loss per common share as if the fair value-based method had been
applied in measuring compensation cost of stock-based awards granted beginning
in fiscal 1997. Management believes that 2000 and 1999 pro forma amounts are not
representative of the effects of stock-based awards on future pro forma net loss
and pro forma net loss per share because those pro forma amounts exclude the pro
forma compensation expense related to unvested stock options granted before
fiscal 1996.
Reported and pro forma net loss and net loss per share amounts for the
fiscal year ended January 31, 2000 and 1999, respectively, are set forth below:
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Reported
Net loss $ (164,064) $ (628,685)
Net loss per share $ (0.03) $ (0.10)
Pro forma
Net loss $ (328,761) $ (725,521)
Net loss per share $ (0.05) $ (0.11)
</TABLE>
During fiscal 2000 and 1999, the fair values of the options granted were
estimated on the date of their grant using the Black-Scholes option-pricing
model based on the following weighted average assumptions:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Risk free interest rate 5.7% 5.5%
Expected life 5 years 5 years
Expected volatility 85% 52%
Expected dividend yield 0% 0%
</TABLE>
-18-
<PAGE> 19
Stock option activity for 2000 and 1999 is set forth below:
<TABLE>
<CAPTION>
2000 1999
--------------------------- --------------------------
Weighted Average Weighted Average
Options Exercise Price Options Exercise Price
-------- ---------------- -------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 677,496 $ .99 615,116 $ 1.68
Granted 199,770 .88 840,291 .62
Exercised (88,000) .55 (258,791) .46
Canceled -- -- (519,120) 1.47
-------- --------
Outstanding at end of year 789,266 1.01 677,496 .99
======== ========
Exercisable at end of year 499,069 1.19 372,922 1.10
======== ========
Weighted average fair value of
options granted during the year $ .62 $ .22
</TABLE>
Stock options outstanding at January 31, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------- ----------------------------------
Weighted
Range of Average Remaining Weighted Average Weighted Average
Exercise Price Options Contractual Life Exercise Price Options Exercise Price
- ---------------- ------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.38 to $ 0.76 263,167 3.5 years $ 0.56 88,748 $ 0.56
$ 0.77 to $ 1.54 430,099 4.4 years $ 0.92 314,321 $ 0.93
$ 1.55 to $ 3.50 96,000 3.1 years $ 2.63 96,000 $ 2.63
------- -------
789,266 499,069
======= =======
</TABLE>
NOTE 6 - 401(k) RETIREMENT PLAN
Under the terms of the Company's 401(k) Retirement Plan, eligible
participating employees of the Company may elect to have an amount up to, but
not in excess of, 15% of their regular salary or wages withheld for purposes of
setting aside funds available at retirement. Amounts withheld are invested in
one or more available investment alternatives as selected by the individual
employee. Under current tax law, amounts withheld under the plan, subject to
annual limitations, and any interest earnings thereon, are tax deferred until
such time as distributions are made to the employee. The Company does not
contribute to the employee's account. All costs and expenses of administering
the plan are paid by the Company.
-19-
<PAGE> 20
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company is subject to certain legal proceedings, claims and disputes
which arise in the ordinary course of its business. Although the Company cannot
predict the outcomes of these legal proceedings, the Company's management does
not believe these actions will have a material adverse effect on the Company's
financial position, results of operations or liquidity. However, if unfavorably
resolved, these proceedings could have a material adverse effect on the
Company's financial position, results of operations and liquidity.
NOTE 9 - TRADEMARKS
CompuTrac, Dimension and other names of CompuTrac products referenced
herein are trademarks or registered trademarks of CompuTrac, Inc. All other
product and brand names mentioned herein are the trademarks or registered
trademarks of their respective owners.
-20-
<PAGE> 21
REPORT OF GRANT THORNTON LLP, INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BOARD OF DIRECTORS AND SHAREHOLDERS
COMPUTRAC, INC.
We have audited the accompanying balance sheets of CompuTrac, Inc. as of January
31, 2000 and 1999 and the related statements of operations, changes in
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CompuTrac, Inc. as of January
31, 2000 and 1999, and the results of its operations and its consolidated cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States.
GRANT THORNTON LLP
Dallas, Texas
April 7, 2000
-21-
<PAGE> 22
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has reported no disagreements with or change of its independent
accountants during the 24 months prior to January 31, 2000.
PART III
The information required by Part III is omitted from this Report and will
be included in the registrant's 2000 definitive proxy statement pursuant to
Regulation 14A (the "Proxy Statement") which is expected to be filed not later
than 120 days after the end of the fiscal year covered by this Report, and the
information included therein is incorporated herein by reference.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this Item is incorporated by reference to
the information under the heading "Management" in the Company's Proxy Statement
for its 2000 Annual Meeting.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to
the information under the heading "Executive Compensation" in the Company's
Proxy Statement for its 2000 Annual Meeting.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to
the information under the heading "Security Ownership" in the Company's Proxy
Statement for its 2000 Annual Meeting.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
the information under the heading "Executive Compensation-Employment Agreements"
in the Company's Proxy Statement for its 2000 Annual Meeting.
-22-
<PAGE> 23
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements: Page
Report of Grant Thornton LLP, Independent Certified Public
Accountants 21
Consolidated Balance Sheets at January 31, 2000 and 1999 9
Consolidated Statements of Operations for the two years
ended January 31, 2000 10
Consolidated Statements of Changes in Shareholders' Equity
for the two years ended January 31, 2000 11
Consolidated Statements of Cash Flows for the two years
ended January 31, 2000 12
Notes to Consolidated Financial Statements 13-20
3.1* - Restated Articles of Incorporation of
Registrant
3.2** - Bylaws of the Registrant
3.3*** - Articles of Amendment to Articles of
Incorporation of the Registrant dated December
1, 1987
4.1 - Articles of Incorporation and Bylaws of the
Registrant constituting Instruments Defining
the Rights of Common Stockholders
(incorporated by reference to Exhibits 3.1,
3.2, and 3.3 hereto)
10.1****** - Employment Agreement and Indemnity Agreement
between the Registrant and Harry W. Margolis
dated January 1, 1998 and February 4, 1998,
respectively
10.2* - Incentive Stock Option Plan of the Registrant
10.3**** - CompuTrac, Inc. 1991 Employee Stock Purchase
Plan, as amended
10.4* - Cash Bonus Plan of the Registrant
10.5* - Form of Indemnification Agreement between the
Registrant and Texas E. Schramm, dated as of
July 11, 1983
10.6** - Contract of Sale, dated February 28, 1986,
between Harry W. Margolis and the Registrant
10.7*** - Form of Indemnification Agreement between the
Registrant and its Directors as ratified by
the Registrant's Shareholders in their Annual
Meeting of November 19, 1987
10.8***** - Employment Agreement between the Registrant
and George P. McGraw dated February 1, 1992
10.9***** - Form of Employment Agreement between the
Registrant and its Executive Officers.
-23-
<PAGE> 24
10.10 - 1999 Stock Option Plan
23 - Consent of Grant Thornton LLP, Independent
Certified Public Accountants
27 - Financial Data Schedule
99 - Annual Report on Form 11-K for the CompuTrac,
Inc. Employee Stock Purchase Plan
------------
* Incorporated by reference to the same numbered exhibit filed with
the Registrant's Registration Statement on Form S-1 and Amendment
Nos. 1 and 2 thereto, File No. 2-84218, which became effective July
19, 1983.
** Incorporated by reference to the same numbered exhibit filed with
the Registrant's Registration Statement on Form S-1 and Amendment
No. 1 thereto, File No. 33-4582, which became effective April 24,
1986.
*** Incorporated by reference to the same numbered exhibit filed with
the Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1988, Commission File No. 1-9115.
**** Incorporated by reference to the Registrant's Registration
Statement on Form S-8, File No. 33-61577, filed with the Commission
on August 4, 1995, Commission File No. 1-9115.
***** Incorporated by reference to the same numbered exhibit filed with
the Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1994, Commission File No. 1-9115.
****** Incorporated by reference to the same numbered exhibit filed with
the Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1998, Commission File No. 1-9115.
MANAGEMENT CONTRACTS AND COMPENSATORY PLANS
The documents filed as Exhibits 10.1, 10.2, 10.3, 10.4, 10.8, 10.9 and
10.10 constitute management contracts or compensatory plans or arrangements
within the meaning of SEC rules.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the year
for which this report filed.
-24-
<PAGE> 25
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COMPUTRAC, INC.
By: /s/ Harry W. Margolis
---------------------
Harry W. Margolis
Chairman of the Board of Directors and Chief Executive Officer
Date: April 27, 2000
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Harry W. Margolis Chairman of the Board of
- ------------------------- Directors and Chief Executive Officer April 27, 2000
Harry W. Margolis
/s/ D. Bruce Walter President
- ---------------------------- (Principal Operating Officer) April 27, 2000
D. Bruce Walter
/s/ Steven M. Crane Chief Financial Officer
- --------------------------- (Principal Financial and Accounting Officer) April 27, 2000
Steven M. Crane
/s/ Dana E. Margolis Secretary, Treasurer
- -------------------------- and Director April 27, 2000
Dana E. Margolis
/s/ Kenneth R. Nicholas Director April 27, 2000
- -------------------------
Kenneth R. Nicholas
/s/ Gerald D. Harris Director April 27, 2000
- ---------------------------
Gerald D. Harris
</TABLE>
-25-
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
3.1* - Restated Articles of Incorporation of Registrant
3.2** - Bylaws of the Registrant
3.3*** - Articles of Amendment to Articles of Incorporation of the
Registrant dated December 1, 1987
4.1 - Articles of Incorporation and Bylaws of the Registrant
constituting Instruments Defining the Rights of Common
Stockholders (incorporated by reference to Exhibits 3.1,
3.2, and 3.3 hereto)
10.1****** - Employment Agreement and Indemnity Agreement between the
Registrant and Harry W. Margolis dated January 1, 1998
and February 4, 1998, respectively
10.2* - Incentive Stock Option Plan of the Registrant
10.3**** - CompuTrac, Inc. 1991 Employee Stock Purchase Plan, as amended
10.4* - Cash Bonus Plan of the Registrant
10.5* - Form of Indemnification Agreement between the Registrant
and Texas E. Schramm, dated as of July 11, 1983
10.6** - Contract of Sale, dated February 28, 1986, between Harry
W. Margolis and the Registrant
10.7*** - Form of Indemnification Agreement between the Registrant
and its Directors as ratified by the Registrant's
Shareholders in their Annual Meeting of November 19, 1987
10.8***** - Employment Agreement between the Registrant and George P.
McGraw dated February 1, 1992
10.9***** - Form of Employment Agreement between the Registrant and
its Executive Officers.
10.10 - 1999 Stock Option Plan
23 - Consent of Grant Thornton LLP, Independent Certified Public
Accountants
27 - Financial Data Schedule
99 - Annual Report on Form 11-K for the CompuTrac, Inc.
Employee Stock Purchase Plan
</TABLE>
------------
* Incorporated by reference to the same numbered exhibit filed with
the Registrant's Registration Statement on Form S-1 and Amendment
Nos. 1 and 2 thereto, File No. 2-84218, which became effective July
19, 1983.
** Incorporated by reference to the same numbered exhibit filed with
the Registrant's Registration Statement on Form S-1 and Amendment
No. 1 thereto, File No. 33-4582, which became effective April 24,
1986.
*** Incorporated by reference to the same numbered exhibit filed with
the Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1988, Commission File No. 1-9115.
**** Incorporated by reference to the Registrant's Registration
Statement on Form S-8, File No. 33-61577, filed with the Commission
on August 4, 1995, Commission File No. 1-9115.
***** Incorporated by reference to the same numbered exhibit filed with
the Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1994, Commission File No. 1-9115.
****** Incorporated by reference to the same numbered exhibit filed with
the Registrant's Annual Report on Form 10-K for the fiscal year
ended January 31, 1998, Commission File No. 1-9115.
<PAGE> 1
EXHIBIT 10.10
COMPUTRAC, INC.
----------------------
1999 STOCK OPTION PLAN
----------------------
1. Purpose. The purpose of this Plan is to advance the interests of
CompuTrac, Inc., a Texas corporation (the "Company"), and its Subsidiaries by
providing an additional incentive to attract and retain qualified and competent
persons who provide management and director services and upon whose efforts and
judgment the success of the Company and its Subsidiaries is largely dependent,
through the encouragement of stock ownership in the Company by such persons.
2. Definitions. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Committee" shall mean the Compensation Committee of the
Board, or such other committee of the Board as may be designated by the Board to
administer the Plan; provided that the Committee shall consist of two or more
directors of the Company, all of whom are both a "Non-Employee Director" within
the meaning of Rule 16b-3 under the Exchange Act and an "outside director"
within the meaning of the definition of such term as contained in Treasury
Regulation Section 1.162-27(e)(3) interpreting Section 162(m) of the Code, or
any successor definitions adopted. The members of the Committee shall be
appointed from time to time by, and shall serve at the discretion of, the Board.
(d) "Company" shall mean CompuTrac, Inc., a Texas corporation,
or any successor thereto.
(e) "Director" shall mean a member of the Board.
(f) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(g) "Fair Market Value" of a Share on any date of reference
shall be the Closing Price of the Common Stock, par value $0.01 per share, of
the Company (the "Common Stock"), on the business day immediately preceding such
date, unless the Committee in its sole discretion shall determine otherwise in
good faith. For this purpose, the "Closing Price" of the Common Stock on any
business day shall be (i) if the Common Stock is listed or admitted for trading
on any United States national securities exchange, or if actual transactions are
otherwise reported on a consolidated transaction reporting system, the last
reported sale price of Common Stock on such exchange or reporting system, as
reported in any newspaper of general circulation, (ii) if the Common Stock is
quoted on the National Association of Securities Dealers Automated Quotations
System
<PAGE> 2
("NASDAQ"), or any similar system of automated dissemination of quotations of
securities prices in common use, the mean between the closing high bid and low
asked quotations for such day of Common Stock on such system, or (iii) if
neither clause (i) or (ii) is applicable, the mean between the high bid and low
asked quotations for the Common Stock as reported by the National Quotation
Bureau, Incorporated if at least two securities dealers have inserted both bid
and asked quotations for Common Stock on at least five of the ten preceding
days.
(h) "Incentive Stock Option" shall mean an incentive stock
option as defined in Section 422 of the Code.
(i) "Non-Statutory Stock Option" shall mean an Option which is
not an Incentive Stock Option.
(j) "Option" (when capitalized) shall mean any option granted
under this Plan.
(k) "Optionee" shall mean a person to whom a stock option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan by reason of the death of such person.
(l) "Plan" shall mean this CompuTrac, Inc. 1999 Stock Option
Plan.
(m) "Share(s)" shall mean a share or shares of the Common
Stock.
(n) "Subsidiary" shall mean any corporation (other than the
Company) in any unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3. Shares and Options. The Company may grant to Optionees from time to
time Options to purchase an aggregate of up to Five Hundred Thousand (500,000)
Shares from the authorized and unissued Shares of the Company or Shares
reacquired by the Company at the time; provided, however, that the maximum
number of Shares for which Options may be granted under the Plan to any one
person during a calendar year is Three Hundred Fifty Thousand (350,000). If any
Option granted under the Plan shall terminate, expire, or be canceled or
surrendered as to any Shares, new Options may thereafter be granted covering
such Shares. An Option granted hereunder shall be either an Incentive Stock
Option or a Non-Statutory Stock Option as determined by the Committee at the
time of grant of such Option and shall clearly state whether it is an Incentive
Stock Option or a Non-Statutory Stock Option. All Incentive Stock Options shall
be granted within 10 years of the effective date of this Plan.
4. Dollar Limitation. Options otherwise qualifying as Incentive Stock
Options hereunder will be treated as Non-Statutory Stock Options to the extent
that the aggregate Fair Market Value (determined at the time the Option is
granted) of the Shares, with respect to which Options meeting the requirements
of Section 422(b) of the Code are exercisable for the first time by any
- 2 -
<PAGE> 3
individual during any calendar year (under all plans of the Company and its
parent and subsidiary corporations), exceeds $100,000.00.
5. Conditions for Grant of Options.
(a) Each Option shall be evidenced by a written option
agreement between the Company and the Optionee that may contain any term deemed
necessary or desirable by the Committee, provided such terms are not
inconsistent with this Plan or any applicable law. In the event of a conflict
between an option agreement and the Plan, the terms of the Plan shall govern.
Optionees shall be those persons selected by the Committee from the class of all
regular employees of the Company and its Subsidiaries and all Directors, whether
or not employees; provided, however, that no Incentive Stock Option shall be
granted to a Director who is not also an employee of the Company or a
Subsidiary. Any person who files with the Committee, in a form satisfactory to
the Committee, a written waiver of eligibility to receive any Option under this
Plan shall not be eligible to receive an Option under this Plan for the duration
of such waiver.
(b) In granting Options, the Committee shall take into
consideration the contribution the person has made to the success of the Company
or its Subsidiaries and such other factors as the Committee shall deem to be
appropriate. The Committee shall also have the authority to consult with and
receive recommendations from officers and other personnel of the Company and its
Subsidiaries with regard to these matters. The Committee may from time to time
in granting Options under the Plan prescribe such other terms and conditions
concerning such Options as it deems appropriate, including, without limitation,
(i) prescribing the date or dates on which the Option becomes exercisable, (ii)
providing that the Option rights accrue or become exercisable in installments
over a period of years, or upon the attainment of stated goals or both, or (iii)
relating an Option to the continued employment of the Optionee for a specified
period of time, provided that such terms and conditions are not more favorable
to an Optionee than those expressly permitted in the Plan.
(c) Options granted to employees under this Plan shall be in
addition to regular salaries, pension, life insurance or other benefits related
to their employment with the Company or its Subsidiaries. Neither the Plan nor
any Option granted under the Plan shall confer upon any person any right to
employment or continuance of employment by the Company or its Subsidiaries.
6. Exercise Price. The price at which a Share may be purchased upon
exercise of an Option shall be determined by the Committee, but such exercise
price shall not be less than 100% of the Fair Market Value of a Share on the
effective date of the Option's grant.
7. Exercise of Options.
(a) An Option shall be deemed exercised when (i) the Company
has received written notice of such exercise in accordance with the terms of the
Option, (ii) full payment of the aggregate exercise price of the Shares as to
which the Option is exercised has been made, and (iii) arrangements that are
satisfactory to the Committee in its sole discretion have been made for the
Optionee's payment to the Company of the amount that is necessary for the
Company or Subsidiary
- 3 -
<PAGE> 4
employing the Optionee to withhold in accordance with applicable Federal or
state tax withholding requirements.
(b) Unless further limited by the Committee in any Option, the
exercise price of any Shares purchased shall be paid in cash, by certified or
official bank check, by money order, with Shares or by a combination of the
above; provided, however, that the Committee in its sole discretion may accept a
personal check in full or partial payment of any Shares. If the exercise price
is paid in whole or in part with Shares, the value of the Shares surrendered
shall be their Fair Market Value on the date the Option is exercised. The
Company in its sole discretion may, on an individual basis or pursuant to a
general program established in connection with this Plan, lend money to an
Optionee, guarantee a loan to an Optionee, or otherwise assist an Optionee to
obtain the cash necessary to exercise all or a portion of an Option granted
hereunder or to pay any tax liability of the Optionee attributable to such
exercise. If the exercise price is paid in whole or part with Optionee's
promissory note, such note shall (i) provide for full recourse to the maker,
(ii) be collateralized by the pledge of the Shares that the Optionee purchases
upon exercise of such Option, (iii) bear interest at the prime rate of the
Company's principal lender, and (iv) contain such other terms as the Board in
its sole discretion shall reasonably require.
(c) No Optionee shall be deemed to be a holder of any Shares
subject to an Option unless and until a stock certificate or certificates for
such Shares are issued to such person(s) under the terms of the Plan. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 10 hereof.
8. Exercisability of Options. Any Option shall become exercisable in
such amounts, at such intervals and upon such terms as the Committee shall
provide in such Option, except as otherwise provided in this Section 8.
(a) The expiration date of an Option shall be determined by
the Committee at the time of grant, but in no event shall an Option be
exercisable after the expiration of 10 years from the date of grant of the
Option.
(b) Unless otherwise provided in any Option, each outstanding
Option shall become immediately fully exercisable:
(i) if there occurs any transaction (which shall
include a series of transactions occurring within 60 days or occurring
pursuant to a plan), that has the result that stockholders of the
Company immediately before such transaction cease to own at least 51
percent of the voting stock of the Company or of an entity that results
from the participation of the Company in a reorganization,
consolidation, merger, liquidation or any other form of corporate
transaction;
(ii) if the stockholders of the Company shall approve
a plan of merger, consolidation, reorganization, liquidation or
dissolution in which the Company does not
- 4 -
<PAGE> 5
survive (unless the approved merger, consolidation, reorganization,
liquidation or dissolution is subsequently abandoned); or
(iii) if the stockholders of the Company shall
approve a plan for the sale, lease, exchange or other disposition of
all or substantially all the property and assets of the Company (unless
such plan is subsequently abandoned).
(c) The Committee may in its sole discretion accelerate the
date on which any Option may be exercised and may accelerate the vesting of any
Shares subject to any Option or previously acquired by the exercise of any
Option.
9. Termination of Option Period.
(a) The unexercised portion of any Option shall automatically
and without notice terminate and become null and void at the time of the
earliest to occur of the following:
(i) three months after the date on which the
Optionee's employment is terminated (or, in the case of a non-employee
Director, the date on which the Optionee ceases to be a Director) for
any reason other than by reason of (A) Cause, which, for purposes of
this Plan, shall mean the termination of the Optionee's employment (or,
in the case of a non-employee Director, the removal of the Optionee as
a Director) by reason of the Optionee's wilful misconduct or gross
negligence, (B) a mental or physical disability as determined by a
medical doctor satisfactory to the Committee, or (C) death;
(ii) immediately upon the termination of the
Optionee's employment (or, in the case of a non-employee Director, the
removal of the Optionee as a Director) for Cause;
(iii) one year after the date on which the Optionee's
employment is terminated (or, in the case of a non-employee Director,
the date the Optionee is removed as a Director) by reason of a mental
or physical disability (within the meaning of Section 22(e) of the
Code) as determined by a medical doctor satisfactory to the Committee;
(iv) (A) twelve months after the date of termination
of the Optionee's employment (or, in the case of a non-employee
Director, the removal of the Optionee as a Director) by reason of death
of the employee, or (B) three months after the date on which the
Optionee shall die if such death shall occur during the one year period
specified in Subsection 9(a)(iii) hereof.
(b) The Committee in its sole discretion may by giving written
notice ("cancellation notice") cancel, effective upon the date of the
consummation of any corporate transaction described in Subsections 8(b)(ii) or
(iii) hereof, any Option that remains unexercised on such date. Such
cancellation notice shall be given a reasonable period of time prior to the
proposed date of such cancellation and may be given either before or after
stockholder approval of such corporate transaction.
- 5 -
<PAGE> 6
10. Adjustment of Shares.
(a) If at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant under the Plan, so that
the same percentage of the Company's issued and outstanding Shares
shall continue to be subject to being so optioned; and
(ii) appropriate adjustment shall be made in the
number of Shares and the exercise price per Share thereof then subject
to an outstanding Option, so that the same percentage of the Company's
issued and outstanding Shares shall remain subject to purchase at the
same aggregate exercise price.
(b) Subject to the specific terms of any Option, the Committee
may change the terms of Options outstanding under this Plan, with respect to the
exercise price or the number of Shares subject to the Options, or both, when, in
the Committee's sole discretion, such adjustments become appropriate by reason
of a corporate transaction described in Subsections 8(b)(ii) or (iii) hereof.
(c) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to the number of or
exercise price of Shares then subject to outstanding Options granted under the
Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
11. Transferability of Options. Each Incentive Stock Option shall
provide that such Option shall not be transferable by the Optionee otherwise
than by will or the laws of descent and distribution, and each Incentive Stock
Option shall be exercisable during the Optionee's lifetime only by the Optionee.
Each Non-Statutory Stock Option shall provide that such Option shall be
exercisable only by the Optionee or by a person or entity to which the Optionee
is permitted to
- 6 -
<PAGE> 7
transfer the Option in accordance with this Section 11. A Non-Statutory Stock
Option granted under the Plan shall be transferrable by the Optionee only as
follows:
(a) By will or the laws of descent and distribution upon the
death of the Optionee;
(b) By gift or a domestic relations order to a "family member"
of the Optionee, as such term is defined in the instructions to Form
S-8 under the Securities Act of 1933, as amended, including without
limitation trusts in which family members of the Optionee have more
than 50% of the beneficial interest, foundations in which such family
members control the management of assets, and any other entity in which
such family members or the Optionee own more than 50% of the voting
interests; or
(c) To an entity in which more than 50% of the voting
interests are owned by the Optionee or the Optionee's family members in
exchange for an interest or interests in that entity.
Each permitted transferee will execute an agreement satisfactory to the Company
agreeing to be bound by the terms and provisions of this Plan and the Optionee's
original option agreement relating to the Option.
12. Issuance of Shares. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any such law or regulation including, but not limited to, the
following:
(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is acquiring
the Shares to be issued to him for investment and not with a view to,
or for sale in connection with, the distribution of any such Shares;
and
(ii) a representation, warranty and/or agreement to
be bound by any legends that are, in the opinion of the Committee,
necessary or appropriate to comply with the provisions of any
securities law deemed by the Committee to be applicable to the issuance
of the Shares and are endorsed upon the Share certificates.
In addition and notwithstanding anything contained in the Plan to the contrary,
the Company shall have no obligation to issue or deliver Shares under the Plan
prior to (a) the obtaining of any approval from any governmental agency which
the Company shall, in its sole discretion, determine to be necessary or
advisable, (b) the admission of such shares to listing on the stock exchange or
stock market on which the Common Stock may be listed and (c) the completion of
any registration of any governmental body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
- 7 -
<PAGE> 8
13. Administration of the Plan.
(a) The Plan shall be administered by the Committee, which
shall consist of one or more members of the Board. The Committee shall have all
of the powers of the Board with respect to the Plan. Any member of the Committee
may be removed at any time, with or without cause, by resolution of the Board
and any vacancy occurring in the membership of the Committee may be filled by
appointment by the Board.
(b) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of the Plan. The determinations and
the interpretation and construction of any provision of the Plan by the
Committee shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the unanimous written approval of the
members of the Committee.
14. Options for 10% Shareholders. Notwithstanding any other provisions
of the Plan to the contrary, an Incentive Stock Option shall not be granted to
any person owning directly or indirectly (through attribution under Section
424(d) of the Code) at the date of grant, stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company (or of its
parent or subsidiary as defined in Section 424 of the Code at the date of grant)
unless the exercise price of such Option is at least 110% of the Fair Market
Value of the Shares subject to such Option on the date the Option is granted,
and such Option by its terms is not exercisable after the expiration of five
years from the date such Option is granted.
15. No Fractional Shares. No fractional shares of Common Stock shall be
issued pursuant to any Option granted under the Plan, and no payment or other
adjustment shall be made in respect of any such fractional share.
16. Withholding Taxes. The Company shall be entitled to deduct from any
payment made under the Plan, regardless of the form of such payment, the amount
of all applicable income and employment taxes required by law to be withheld
with respect to such payment and may require the Optionee to pay to the Company
such withholding taxes prior to and as a condition of the making of any payment
or the issuance or delivery of any shares of Common Stock under the Plan. In
addition, the Company or Subsidiary employing the Optionee shall be entitled to
deduct from any other compensation payable to the Optionee any withholding
obligations with respect to Options under the Plan.
17. Binding Effect. The obligation of the Company under the Plan shall
be binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to all or substantially all of
the assets and business of the Company. The terms and conditions of the Plan
shall be binding upon each Optionee and his or her heirs, legatees, distributees
and legal representatives.
- 8 -
<PAGE> 9
18. Interpretation.
(a) The Plan shall be administered and interpreted so that all
Incentive Stock Options granted under the Plan will qualify as Incentive Stock
Options under section 422 of the Code. If any provision of the Plan should be
held invalid for the granting of Incentive Stock Options or illegal for any
reason, such determination shall not affect the remaining provisions hereof, but
instead the Plan shall be construed and enforced as if such provision had never
been included in the Plan.
(b) This Plan shall be governed by the laws of the State of
Texas.
(c) Headings contained in this Agreement are for convenience
only and shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
19. Amendment and Discontinuation of the Plan. The Board may at any
time suspend, terminate, amend or modify the Plan, in whole or in part;
provided, however, that no amendment or modification of the Plan shall become
effective without the approval of such amendment or modification by the
stockholders of the Company if the Company, on the advice of counsel, determines
that such stockholder approval is necessary or desirable. Upon termination of
the Plan, the terms and provisions of the Plan shall, notwithstanding such
termination, continue to apply to Options granted prior to such termination. No
suspension, termination, amendment or modification of the Plan shall adversely
affect in any material way any Option previously granted under the Plan, without
the consent of the Optionee holding such Option (except that such consent shall
not be required in the case of an amendment or modification required following a
change in law or interpretation thereof to cause the Options under the Plan to
continue to qualify as "performance- based compensation" within the meaning of
Section 162(m) of the Code).
20. Effective Date and Termination Date. The Plan shall be effective as
of June 4, 1999, the date of its adoption by the Board, provided it is duly
approved by the holders of at least a majority of the Shares of Common Stock
present or represented and entitled to vote at a meeting of the shareholders of
the Company duly held in accordance with applicable law within twelve months
after the date of adoption of the Plan by the Board. If the Plan is not so
approved, the Plan shall terminate and any Option granted hereunder shall be
null and void. If approved, the Plan shall terminate on the 30th anniversary of
the effective date, unless earlier terminated by the Board in accordance with
Section 16 hereof.
- 9 -
<PAGE> 10
IN WITNESS WHEREOF, this Plan has been executed this 4th day of June,
1999.
COMPUTRAC, INC.
By: /s/ Dana E. Margolis
-------------------------------
Name: Dana E. Margolis
Title: Secretary and Treasurer
- 10 -
<PAGE> 1
EXHIBIT 23
CONSENT OF GRANT THORNTON LLP, INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated April 7, 2000, accompanying the consolidated
financial statements included in the Annual Report of CompuTrac, Inc. on Form
10-KSB for the year ended January 31, 2000. We hereby consent to the
incorporation by reference of said report in the Registration Statement of
CompuTrac, Inc. on Form S-8 (filed March 6, 2000).
GRANT THORNTON LLP
Dallas, Texas
May 12, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> JAN-31-2000
<CASH> 352,970
<SECURITIES> 2,200,828
<RECEIVABLES> 729,510
<ALLOWANCES> 119,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,540,433
<PP&E> 15,487,894
<DEPRECIATION> 11,911,674
<TOTAL-ASSETS> 7,667,927
<CURRENT-LIABILITIES> 935,857
<BONDS> 0
0
0
<COMMON> 69,887
<OTHER-SE> 6,662,183
<TOTAL-LIABILITY-AND-EQUITY> 7,667,927
<SALES> 1,078,903
<TOTAL-REVENUES> 5,227,332
<CGS> 431,052
<TOTAL-COSTS> 680,345
<OTHER-EXPENSES> 4,844,907
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,318
<INCOME-PRETAX> (164,064)
<INCOME-TAX> 0
<INCOME-CONTINUING> (164,064)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (164,064)
<EPS-BASIC> (0.03)
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 99
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11- K
Annual Report Pursuant to Section 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
COMPUTRAC, INC. EMPLOYEE STOCK PURCHASE PLAN
1991 COMPUTRAC, INC. EMPLOYEE STOCK PURCHASE PLAN
(Full title of the plan)
COMPUTRAC, INC.
(Name of issuer of the securities held pursuant to the plans)
COMPUTRAC, INC. 222 MUNICIPAL DRIVE, RICHARDSON, TEXAS 75080
(Address of principal executive office)
<PAGE> 2
Item 1. Changes in the Plans
There were no material changes in the provisions of the plans during
the year ended December 31, 1999.
Item 2. Changes in Investment Policies
There were no changes in the investment policies of the plans during
the year ended December 31, 1999.
Item 3. Contributions under the Plan
The Company's contributions are not discretionary and are a specified
percentage of the employe's contributions.
Item 4. Participating Employees
There were 9 participating employees as of December 31, 1999.
Item 5. Administration of Plans
(a) The plans are administered by a committee designated by the board
of Directors and composed of the following members:
<TABLE>
<CAPTION>
Name and Address Position Position with Issuer
- ---------------- -------- --------------------
<S> <C> <C>
Harry W. Margolis Member Chairman of the Board
222 Municipal Drive and Director
Richardson, TX 75080
Shawn Anderson Member Controller
222 Municipal Drive
Richardson, TX 75080
</TABLE>
(b) No member of the committee received any compensation from the
plans during the year ended December 31, 1999.
-1-
<PAGE> 3
Item 6. Custodian of Investments
(a) Alliance Trust Company is the custodian of investments. The
address of Alliance is, 4835 LBJ Freeway, Suite 632, Dallas,
Texas 75244.
(b) The plans paid no compensation to the custodian for service in
any capacity for the year ended December 31, 1999.
Item 7. Reports to Participating Employees
During the year ended December 31, 1999, the plans provided
participants with a quarterly statement of activity, as well as an
annual report of the individual account activity.
Item 8. Investment of Funds
No substantial part of the assets of the plans are invested in
securities other than the Registrant's.
Item 9. Financial Statements and Exhibits
(a) Financial Statements: Page
Statements of Net Assets Available for Plan
Benefits- December 31, 1999 and 1998 4
Statement of Changes in Net assets Available
for Plan Benefits for the three years ended
December 31, 1999 5
Notes to Financial Statements 6
(b) Exhibits:
None
-2-
<PAGE> 4
COMPUTRAC, INC.
EMPLOYEE STOCK PURCHASE PLANS
Statement of Net Assets Available for Plan Benefits
(unaudited)
<TABLE>
<CAPTION>
December 31,
1999 1998
------- -------
<S> <C> <C>
Assets:
Cash $ 7 $ 8
Common stock of CompuTrac, Inc., 37,415 and 38,219
shares in 1999 and 1998, respectively, at market,
cost was $ 27,648 and $24,892, respectively 28,061 33,442
------- -------
Total assets 28,068 33,450
Liabilities: -- --
------- -------
Total liabilities -- --
Net assets available for plan benefits $28,068 $33,450
======= =======
</TABLE>
-3-
<PAGE> 5
COMPUTRAC, INC.
EMPLOYEE STOCK PURCHASE PLANS
Statement of Changes in Net Assets Available for Plan Benefits
(unaudited)
<TABLE>
<CAPTION>
December 31,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net assets available for plan benefit, January 31 $ 33,450 $ 6,765 $ 32,339
Additions:
Employer cash contributions 14,845 15,766 21,191
Employee cash contributions 44,581 47,346 63,635
Other miscellaneous receipts 88 8 1
Unrealized appreciation (depreciation) of
common stock of CompuTrac, Inc. (8,137) 10,390 (52,517)
-------- -------- --------
Total additions 51,377 73,510 32,310
-------- -------- --------
Deductions:
Distributions to participants 56,668 46,823 57,873
Other distributions 91 2 11
-------- -------- --------
Total deductions 56,759 46,825 57,884
-------- -------- --------
Net assets available for plan benefits, December 31 $ 28,068 $ 33,450 $ 6,765
======== ======== ========
</TABLE>
-4-
<PAGE> 6
EMPLOYEE STOCK PURCHASE PLANS
NOTES TO FINANCIAL STATEMENT
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) CompuTrac, Inc. (the "Company") established the Employee Stock Purchase
Plans to provide its employees with an employee benefit plan whereby its
employees can participate in the equity and growth of the Company.
(B) The investment in common stock of the Company is stated at market value
based upon the closing sales prices as transacted on the American Stock
Exchange. Such closing price was $.75 and $.875 per share at December 31, 1999
and 1998, respectively.
(C) The financial statements have been prepared on the accrual basis of
accounting.
NOTE 2 - THE PLAN:
The Company's Board of Directors adopted the CompuTrac, Inc. Employee Stock
Purchase Plan in December 1985 and in May 1991, adopted the CompuTrac, Inc. 1991
Employee Stock Purchase Plan. The Company reserved 300,00 and 500,000 shares of
its Common Stock for purchase by its employees pursuant to the terms of the
plans, respectively. Under the plans, eligible participating employees of the
Company can purchase Common Stock from the Company through salary withholding.
The plans are not subject to the provisions of the Employee Retirement Income
Securities Act of 1974, nor are they intended to qualify for special tax under
Section 401 (a) of the Internal Revenue Code. The Company filed registration
Statement in January 1986, and May 1991 and August 1995 covering stock that can
be purchased under the plans.
Each participating employee may elect to have an amount up to, but not in
excess of, 10% of his or her regular salary or wages withheld for the purpose of
purchasing the Company's Common Stock. On each monthly stock purchase date, the
Company contributes to each participating employee's account an amount equal to
33 1/3% of the aggregate contributions of such participant since the immediately
preceding stock purchase date, and funds then accumulated in the participant's
account, including the Company's contribution, are used to purchase authorized
but unissued shares of the Common Stock of the Company. Any funds remaining in
the participant's account after the purchase of the maximum number of the full
shares of Common Stock are retained in the participant's account and treated as
part of the accumulation for the next succeeding calendar month.
The purchase price of the Common Stock purchased pursuant to the plans is
the lessor of the average of the closing sales prices during the preceding
calendar month for the average of the closing sales prices for the last five
trading days proceeding the stock purchase date. No fees, commissions, or other
charges are paid by, or otherwise charged to, the participants or their accounts
in connection with the purchase of Common Stock under the plans. All expenses of
administering the plans are paid by the Company.
All Common Stock of the Company purchased by participating employees
pursuant to the plans may be voted by the employee or as directed by the
employee.
-5-
<PAGE> 7
The Employee Stock Purchase Plans do not discriminate, in scope, terms, or
operation, in favor of officers or directors of the Company and are available,
subject to the eligibility rules of the plans, to all employees of the Company
on the same basis.
NOTE 3 - FEDERAL INCOME TAXES:
The Employee Stock Purchase Plans are not subject to federal income taxes.
Under current federal income tax law, the difference between the fair market
value of the shares acquired under the plans, and the amount contributed by the
employee is treated as ordinary income to the employee for federal income tax
purposes. Accordingly, the Company withholds all applicable taxes from the
participating employee's salary. The fair market value of the shares is
determined as of the stock purchase date. The plans are not intended to qualify
for special tax treatment under Section 401(a) of the Internal Revenue Code.
-6-
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees have duly caused this annual report to be signed by the undersigned,
thereunto duly authorized.
COMPUTRAC, INC. EMPLOYEE STOCK PURCHASE PLAN
1991 COMPUTRAC, INC. EMPLOYEE STOCK PURCHASE PLAN
By: /s/ Shawn Anderson
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Shawn Anderson
Controller
Date: April 27, 2000
