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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
[ X ] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended October 31, 2000
OR
[ ] Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission file number 1-9115
COMPUTRAC, INC.
(Exact name of small business issuer as specified in its charter)
TEXAS 75-1540265
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
222 Municipal Drive
Richardson, Texas 75080
(Address of principal executive offices)
Telephone No. (972) 234-4241
________________
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days:
Yes X No _____
As of November 30, 2000 there were 6,354,025 shares of the registrant's $.01
par value common stock outstanding.
Transitional Small Business Disclosure Format (Check One): Yes ___ No X
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______________________________________________________________________
<PAGE>
CompuTrac, Inc.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements:
Balance Sheets (unaudited) -
October 31, 2000 and January 31, 2000 3
Statements of Operations (unaudited) -
Three-month and nine-month periods ended
October 31, 2000 and 1999 4
Statements of Cash Flows (unaudited) -
Three-month and nine-month periods ended
October 31, 2000 and 1999 5
Notes to Consolidated Financial Statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-8
Item 3. Exhibit I - Annual Report to Shareholders
for the fiscal year ended January 31, 2000
PART II. OTHER INFORMATION
Item 6(a) Exhibits 9
Item 6(b) Reports on Form 8-K 9
Signatures 10
______
Note: Items 1 through Item 5 of Part II are omitted because they are not
applicable.
<PAGE>
<TABLE>
CompuTrac, Inc.
BALANCE SHEETS (unaudited)
<CAPTION>
October 31 January 31,
2000 2000
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 678,607 $ 352,970
Short-term investments 600,000 2,200,000
Accounts receivable, net of allowance for
doubtful accounts of $91,213 and
$119,000, respectively 297,751 610,510
Other current assets 188,212 376,953
---------- ----------
Total current assets 1,764,570 3,540,433
Property, furniture and equipment, net of
accumulated depreciation of $8,552,699
and $8,387,463, respectively 1,059,843 1,181,846
Land held for resale 259,904 254,122
Capitalized software, net of accumulated
amortization of $3,859,743 and $3,524,211
respectively 2,159,005 2,140,252
Other assets 568,724 551,274
---------- ----------
Total assets $ 5,812,046 $ 7,667,927
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 94,460 $ 142,573
Accrued expenses 203,979 144,716
Stock purchase payable 53,000 434,625
Deferred systems revenues 97,560 190,750
Short-term portion of mortgage note payable - 23,193
---------- ----------
Total liabilities 448,999 935,857
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 8,380,900 8,478,866
Retained losses (1,731,631) (332,242)
---------- ----------
6,719,156 8,216,511
Less: treasury shares, at cost, 639,683 and
720,391 shares, respectively (1,356,109) (1,484,441)
---------- ----------
Total shareholders' equity 5,363,047 6,732,070
---------- ----------
Total liabilities and shareholders' equity $ 5,812,046 $ 7,667,927
========== ==========
See accompanying Notes to Financial Statements (unaudited) and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
</TABLE>
<PAGE>
<TABLE>
CompuTrac, Inc.
STATEMENTS OF OPERATIONS (unaudited)
Three-month period Nine-month period
ended October 31, ended October 31,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Systems sales $ 32,085 $ 231,704 $ 177,107 $ 957,700
Services and support 707,450 1,047,997 2,277,201 3,260,916
----------- ----------- ----------- -----------
739,535 1,279,701 2,454,308 4,218,616
Costs and expenses:
Cost of system sales 18,463 90,084 73,001 363,732
Cost of services and support 55,669 61,659 170,661 184,471
Amortization of capitalized
software 150,000 92,766 335,532 278,298
Operating expenses 277,870 298,517 848,791 927,412
Selling, general and
administrative expenses 667,811 603,351 2,121,031 1,938,744
Software research and
development costs 131,650 127,000 390,050 360,130
----------- ----------- ----------- -----------
1,301,463 1,273,377 3,939,066 4,052,787
Operating (loss) income (561,928) 6,324 (1,484,758) 165,829
Interest income, net 22,423 32,783 85,369 95,806
----------- ----------- ----------- -----------
Net (loss) income $ (539,505) $ 39,107 $ (1,399,389) $ 261,635
=========== =========== =========== ===========
(Loss) income per share -
basic and diluted ($0.09) $0.01 ($0.22) $0.04
=========== =========== =========== ===========
Weighted average number of
common shares -
Basic 6,342,447 6,394,620 6,326,298 6,393,621
=========== =========== =========== ===========
Diluted 6,342,447 6,491,111 6,326,298 6,552,346
=========== =========== =========== ===========
See accompanying Notes to Financial Statements (unaudited) and Management's Discussion and Analysis
of Financial Condition and Results of Operations.
</TABLE>
<PAGE>
<TABLE>
CompuTrac, Inc.
STATEMENTS OF CASH FLOWS (unaudited)
Nine-month period
ended October 31,
2000 1999
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $(1,399,389) $ 261,635
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation of property,
furniture and equipment 165,236 169,911
Amortization of capitalized
software costs 335,532 278,298
Changes in operating assets and liabilities:
Accounts receivable 312,759 (292,127)
Other current assets 188,741 (105,707)
Other assets (23,232) (40,764)
Accounts payable and accrued expenses 11,150 (43,793)
Deferred systems revenues (93,190) (34,396)
---------- ---------
Net cash (used in) provided by operating
activities (502,393) 193,057
---------- ---------
Cash flows from investing activities:
Additions to property, furniture and equipment (43,233) (67,909)
Additions to capitalized software (354,285) (429,284)
(Purchase) sale of certificates of deposit 1,600,000 (1,500,000)
Sale of U.S. Treasury Bills - 1,395,677
---------- ---------
Net cash provided by (used in)
investing activities 1,202,482 (601,516)
Cash flows from financing activities:
Issuance of treasury shares 30,366 48,431
Principal payments of mortgage note payable (23,193) (68,439)
Purchase of treasury shares (381,625) (117,146)
---------- ---------
Net cash used in financing activities (374,452) (137,154)
---------- ---------
Net increase (decrease) in cash and
cash equivalents 325,637 (545,613)
Cash and cash equivalents at beginning of period 352,970 1,000,959
---------- ---------
Cash and cash equivalents at end of period $ 678,607 $ 455,346
========== =========
Supplemental disclosures of cash flow information:
Interest paid - $8,113
See accompanying Notes to Financial Statements (unaudited) and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
</TABLE>
<PAGE>
CompuTrac, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The unaudited consolidated financial information furnished herein
reflects all adjustments which in the opinion of management are
necessary to fairly state the Company's financial position, the changes
in its financial position and the results of its operations for the
periods presented. This report on Form 10-QSB should be read in
conjunction with the Company's consolidated financial statements and
notes thereto included on pages 9 through 20 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended January 31, 2000. The
Company presumes that users of the interim financial information herein
have read or have access to the audited financial statements for the
preceding fiscal year and that the adequacy of additional disclosure
needed for a fair presentation may be determined in that context.
Accordingly, footnote disclosure which would substantially duplicate
the disclosure contained in the Company's Annual Report on Form 10-KSB
for the fiscal year ended January 31, 2000 has been omitted. The
results of operations for the three and nine-month period ended October
31, 2000 are not necessarily indicative of results for the entire year
ending January 31, 2001.
<PAGE>
CompuTrac, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Consolidated Operations
Total revenues from operations decreased $540,166 or 42%, from $1,279,701
for the quarter ended October 31, 1999 to $739,535 for the current quarter
ended October 31, 2000. For the nine-month period ended October 31, 2000,
total revenues from operations decreased $1,764,308, or 42%, from $4,218,616
for the nine-months ended October 31, 1999 to $2,454,308. Total sales
revenues decreased $199,619, or 86% from $231,704 for the quarter ended
October 31, 1999 to $32,085 for the current quarter ended October 31, 2000.
For the nine-month period ended October 31, 2000, total sales revenues
decreased $780,593, or 82%, from $957,700 for the nine-months ended October
31, 1999 to $177,107 in the current nine-month period. Services and support
revenues decreased $340,547, or 32%, from $1,047,997 for the quarter ended
October 31, 1999, to $707,450 for the current quarter ended October 31,
2000. For the nine-month period ended October 31, 2000, services and
support revenues decreased $983,715 or 30%, from $3,260,916 for the nine-
months ended October 31, 1999 to $2,277,201. Both the decreases in systems
sales and service and support revenues are attributable to a decrease in the
number of new systems sales and related installation services of the
Company's LFMS for Windows software products during the period. The Company
attributes this decrease to a continuing lag in the overall market and the
recent introduction of the Company's new LFMS 2000 product. It is the
Company's experience that a major product introduction, such as what is now
under way, results in near-term decreases in revenues.
Cost of systems sales as a percentage of system sales revenue was 58%
for the quarter ended October 31, 2000 versus 39% for the quarter ended
October 31, 1999. Systems sales revenues in the current period contained a
larger amount of upgrade and hardware sales, which have a significantly
lower gross margin than the Company's software products. Cost of systems
sales as a percentage of system sales revenue was 41% for the nine-month
period ended October 31, 2000 compared with 38% for the quarter October 31,
1999. Cost of services and support as a percentage of services and support
revenues increased from 6% to 8% between quarterly periods. Cost of services
and support as a percentage of services and support revenues increased from
6% to 7% between the nine-month periods. The percentage increase is
attributable to decreased revenues associated with maintenance revenue
included in services and support revenue.
Amortization of capitalized software increased $57,234 from $92,766 during
the quarter ended October 31, 1999 to $150,000 during the quarter ended
October 31, 2000. Similarly, the increase during the nine-month period was
$57,234 from $278,298 in the prior period to $335,532 in the current period.
The company began amortizing certain capitalized software development costs
in the current quarterly period that had not previously been subject to
amortization.
<PAGE>
Operating expenses decreased $20,647, or 7% from $298,517 for the
three-month period ended October 31, 1999, to $277,870 for the current
three-month period. For the nine-months ended October 31, 2000, operating
expenses decreased $78,621 or 8% from $927,412 to $848,791. The decrease
is primarily attributable to a fluctuation in software development personnel
between periods. Selling, general and administrative expenses increased
$64,460, or 11%, from $603,351 for the three-month period ended October 31,
1999, to $667,811 for the current three-month period. This increase is
primarily attributable to a lesser amount of capitalized software
development costs between periods. For the nine-months ended October 31,
2000, selling, general and administrative expenses increased $182,287 or 9%
from $1,938,744 in the comparable prior period to $2,121,031. This increase
is attributable to the capitalized software development variance above as
well as prior period foreign tax receivables written off in the nine-month
period.
Software research and development costs increased $4,650 or 4%, from
$127,000 for the three-month period ended October 31, 1999 to $131,650 for
the current three-month period. For the nine-months ended October 31, 2000,
software research and development costs increased $29,920 or 8% from
$360,130 in the comparable prior period to $390,050 in the current period.
This increase in software research and development costs primarily relates
to research and development costs associated with software products not
qualifying for capitalization during the quarter. The Company capitalizes
those costs associated with continued enhancements and improvements to the
CompuTrac LFMS for Windows software product line. Those software costs not
qualifying for capitalization are expensed when incurred.
Net interest income decreased $10,360 or 32%, from $32,783 for the three-
month period ended October 31, 1999, to $22,423 for the current three-month
period. For the nine-months, net interest income was down $10,437 from
$95,806 to $85,369 in the current nine-month period. The decrease in
interest earnings was primarily due to a decrease in funds available for
investment purposes between periods.
Fluctuations in Interim Period Operating Results
Management believes that, historically, interim results and period-to-period
comparisons have been neither predictable nor an accurate measure of the
annual performance of the Company. The Company has experienced and expects
to continue to experience period-to-period fluctuations in the number of
systems sold, revenues and net income. Fluctuations in system sales revenues
have historically resulted from the revenues of the Company being generated
principally by the sale of a small number of relatively expensive systems,
as well as the policy of the Company of recognizing revenue upon delivery of
the hardware, the delivery and acceptance of the software, the equipment
availability of hardware from the Company's hardware supplier, and the
desire of the customer to accelerate or delay the date of delivery. These
factors tend to distort the operating results of an interim period.
Additionally, sales have not occurred or been recognized evenly throughout
the fiscal year or any interim period, thus making meaningful interim
period comparisons difficult. These fluctuations may also have a
significant impact on profitability in any interim period as a result of the
relatively fixed nature of operating costs and selling, general and
administrative expenses.
<PAGE>
Liquidity and Capital Resources
Net cash used in operating activities was $502,393 for the nine-months ended
October 31, 2000 compared to cash provided of $193,057 for the prior
comparable period. The decrease in cash provided by operating activities
during the period is attributable to the recognition of a loss during the
period versus net income. Net cash provided by investing activities was
$1,202,482 versus net cash used of $601,516 in the prior comparable period.
The Company sold $1,600,000 of certificates of deposit during the current
nine-month period to meet its working capital needs. Net cash used in
financing activities was $374,452 compared to $137,154 in the prior period.
The increase in cash used in financing activities was due to an increase in
the amount of funds used to purchase treasury shares during the period.
In November, 2000, the Company sold certain land held for resale. The net
cash proceeds from the sale were $1,500,265 which will be used for future
working capital needs.
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 5 are not applicable.
Item 6(a): Exhibits
Exhibit 27 - (Page 11) Financial Data Schedule
Item 6(b): Reports on Form 8-K
No reports on form 8-K have been filed during the quarter ended
October 31, 2000
<PAGE>
CompuTrac, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 14, 2000
/s/ CompuTrac, Inc.
____________________
(Registrant)
/s/ Harry W. Margolis
____________________
Harry W. Margolis
Chief Executive Officer
(Principal Executive Officer)
/s/ D. Bruce Walter
_____________________
D. Bruce Walter
President
(Principal Operating Officer)
/s/ Steven M. Crane
______________________
Steven M. Crane
Chief Financial Officer
(Principal Accounting Officer)
