______________________________________________________________________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-QSB
[ X ] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended July 31, 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 August 31, 2000 there were 6,333,289 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) -
July 31, 2000 and January 31, 2000 3
Statements of Operations (unaudited) -
Three-month and Six-month periods ended
July 31, 2000 and 1999 4
Statements of Cash Flows (unaudited) -
Six-month period ended
July 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 4. Submission of Matters to a Vote of Security Holders 9
Item 6(a) Exhibits 9
Item 6(b) Reports on Form 8-K 9
Signatures 10
______
Note: Items 1 through 3 and Item 5 of Part II are omitted because they are
not applicable.
<PAGE>
<TABLE>
CompuTrac, Inc.
BALANCE SHEETS (unaudited)
<CAPTION>
July 31 January 31,
2000 2000
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 257,688 $ 352,970
Short-term investments 1,400,000 2,200,000
Accounts receivable, net of allowance
for doubtful accounts of $152,000 and
$119,000, respectively 391,390 610,510
Other current assets 246,882 376,953
---------- ----------
Total current assets 2,295,960 3,540,433
Property, furniture and equipment, net of
accumulated depreciation of $8,499,996
and $8,387,463, respectively 1,099,663 1,181,846
Land held for resale 254,122 254,122
Capitalized software, net of accumulated
amortization of $3,709,743 and $3,524,211
respectively 2,190,910 2,140,252
Other assets 568,724 551,274
---------- ----------
Total assets $ 6,409,379 $ 7,667,927
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 92,933 $ 142,573
Accrued expenses 177,992 144,716
Stock purchase payable 132,500 434,625
Deferred systems revenues 109,643 190,750
Short-term portion of mortgage note payable - 23,193
---------- ----------
Total liabilities 513,068 935,857
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 8,396,771 8,478,866
Retained losses (1,192,126) (332,242)
---------- ----------
7,274,532 8,216,511
Less: treasury shares, at cost, 655,417 and
720,391 shares, respectively (1,378,221) (1,484,441)
---------- ----------
Total shareholders' equity 5,896,311 6,732,070
---------- ----------
Total liabilities and shareholders' equity $ 6,409,379 $ 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 Six-month period
ended July 31, ended July 31,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Systems sales $ 59,453 $ 413,724 $ 145,022 $ 725,996
Services and support 749,558 1,071,655 1,569,751 2,212,919
----------- ----------- ----------- -----------
809,011 1,485,379 1,714,773 2,938,915
Costs and expenses:
Cost of system sales 29,010 235,216 54,538 273,648
Cost of services and support 58,027 63,868 114,992 122,812
Amortization of capitalized
software 92,766 92,766 185,532 185,532
Operating expenses 279,580 306,589 570,921 628,895
Selling, general and
administrative expenses 695,630 614,638 1,453,220 1,335,393
Software research and
development costs 113,550 101,400 258,400 233,130
----------- ----------- ----------- -----------
1,268,563 1,414,477 2,637,603 2,779,410
Operating (loss) income (459,552) 70,902 (922,830) 159,505
Interest income, net 29,890 32,524 62,946 63,023
----------- ----------- ----------- -----------
Net (loss) income $ (429,662) $ 103,426 $ (859,884) $ 222,528
=========== =========== =========== ===========
(Loss) income per share -
basic and diluted ($0.07) $0.02 ($0.14) $0.03
=========== =========== =========== ===========
Weighted average number of
common shares -
Basic 6,328,557 6,380,646 6,314,964 6,426,025
=========== =========== =========== ===========
Diluted 6,328,557 6,569,019 6,314,964 6,582,964
=========== =========== =========== ===========
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)
Six-month period
ended July 31,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (859,884) $ 222,528
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Depreciation of property, furniture
and equipment 112,534 115,386
Amortization of capitalized software costs 185,532 185,532
Changes in operating assets and liabilities:
Accounts receivable 219,120 (369,663)
Other current assets 130,071 21,088
Other assets (17,450) (37,889)
Accounts payable and accrued expenses (16,364) 87,005
Deferred systems revenues (81,107) (49,470)
--------- ---------
Net cash (used in) provided by operating
activities (327,548) 174,517
Cash flows from investing activities:
Additions to property, furniture and equipment (30,351) (55,183)
Additions to capitalized software (236,190) (311,189)
(Purchase) sale of certificates of deposit 800,000 (500,000)
Sale of U.S. Treasury Bills - 1,404,203
--------- ---------
Net cash provided by investing activities 533,459 537,831
Cash flows from financing activities:
Issuance of treasury shares 24,125 36,284
Principal payments of mortgage note payable (23,193) (45,085)
Purchase of treasury shares (302,125) (117,146)
--------- ---------
Net cash used in financing activities (301,193) (125,947)
--------- ---------
Net (decrease) increase in cash and cash
equivalents (95,282) 586,401
Cash and cash equivalents at beginning of period 352,970 1,000,959
--------- ---------
Cash and cash equivalents at end of period $ 257,688 $1,587,360
========= =========
Supplemental disclosures of cash flow information:
Interest paid - $4,753
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 six-month period ended July 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 $676,368, or 46%, from $1,485,379
for the quarter ended July 31, 1999 to $809,011 for the current quarter
ended July 31, 2000. For the six-month period ended July 31, 2000, total
revenues from operations decreased $1,224,142, or 42%, from $2,938,915 for
the six-months ended July 31, 1999 to $1,714,773. Total sales revenues
decreased $354,271, or 86% from $413,724 for the quarter ended July 31, 1999
to $59,453 for the current quarter ended July 31, 2000. For the six-month
period ended July 31, 2000, total sales revenues decreased $580,974, or 80%,
from $725,996 for the six-months ended July 31, 1999 to $145,022 in the
current six-month period. Services and support revenues decreased $322,097,
or 30%, from $1,071,655 for the quarter ended July 31, 1999, to $749,558 for
the current quarter ended July 31, 2000. For the six-month period ended
July 31, 2000, services and support revenues decreased $643,168, or 29%,
from $2,212,919 for the six-months ended July 31, 1999 to $1,569,751. 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 49% for
the quarter ended July 31, 2000 versus 57% for the quarter ended July 31,
1999. Systems sales revenues in the current period contained a lesser
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 38% for both the six-month period
ended July 31, 2000 and July 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 six-month periods.
The percentage increase is attributable to decreased revenues associated
with maintenance revenue included in services and support revenue.
Amortization of capitalized software was unchanged, totaling $92,766 for
each quarterly period and $185,532 for each six-month period, as software
development costs capitalized between periods were not yet subject to
amortization.
<PAGE>
Operating expenses decreased $27,009, or 9% from $306,589 for the
three-month period ended July 31, 1999, to $279,580 for the current three-
month period. For the six-months ended July 31, 2000, operating expenses
decreased $57,974 or 9% from $628,895 to $570. The decrease is primarily
attributable to a fluctuation in software development personnel between
periods. Selling, general and administrative expenses increased $80,992, or
13%, from $614,638 for the three-month period ended July 31, 1999, to
$695,630 for the current three-month period. For the six-months ended July
31, 2000, selling, general and administrative expenses increased $117,827 or
9% from $1,335,393 in the comparable prior period to $1,453,220. This
increase is primarily attributable to foreign tax receivables written off in
the current period.
Software research and development costs increased $12,150, or 12%, from
$101,400 for the three-month period ended July 31, 1999 to $113,550 for the
current three-month period. For the six-months ended July 31, 2000,
software research and development costs increased $25,270 or 11% from
$233,130 in the comparable prior period to $258,400 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 $2,634, or 8%, from $32,524 for the three-
month period ended July 31, 1999, to $29,890 for the current three-month
period. For the six-months, net interest income was almost unchanged. The
decrease in quarterly 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 $327,548 for the six-months
ended July 31, 2000 compared to cash provided of $174,517 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
$533,459 for the current period which is relatively unchanged from $537,831
in the prior comparable period. Net cash used in financing activities was
$301,193 compared to $125,947 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.
PART II. OTHER INFORMATION
Items 1 through 3 are not applicable.
Item 4.Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of CompuTrac, Inc. was held on July
14, 2000. The record date for stockholders entitled to notice of, and to
vote at, the meeting was May 26, 2000. The purpose of the meeting was to
elect five directors for the ensuing year and to transact such other
business as might properly come before the meeting or any adjournment
thereof. At the meeting, the following matter was submitted to and approved
by the company's stockholders:
The stockholders elected the following persons set forth in the table
below to serve as directors of the company until the next Annual Meeting of
Stockholders and until their successors have been elected and qualified:
Votes
Nominee Votes For Withheld
----------------- --------- --------
Harry W. Margolis 6,130,020 89,905
Dana E. Margolis 6,130,020 89,905
D. Bruce Walter 6,219,524 401
Kenneth R. Nicholas 6,216,674 3,251
Gerald D. Harris 6,216,674 3,251
Item 6(a): Exhibits
Exhibit 27 - Financial Data Schedule
Item 6(b): Reports on Form 8-K
No reports on form 8-K have been filed during the quarter ended
July 31, 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: September 13, 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/ Shawn E. Anderson
______________________
Shawn E. Anderson
Controller
(Principal Accounting Officer)
