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, 1998           
        
                          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  incorporate d by ref erence 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, 1998 were
       $4,816,343.

       As of April  23, 1998, the aggregate market value  of the voting stock
       held by non-affiliates of the issuer was $3,473,042.

       As of April 23, 1998, the number of shares outstanding of the issuer's
       common stock was 6,263,103.

                       DOCUMENTS INCORPORATED BY REFERENCE

       Parts of  the issuer's  Proxy Statement for  the issuer's  1998 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)

       <PAGE>

                                       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 these systems  have been
       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. 

            During the  latter half of fiscal  1998, the Company  shifted its
       sales  and  marketing  focus  away   from  the  Dimension  (registered
       trademark) software products, which targeted small law firms, and from
       the reseller  network for  which the sale  of these  software products
       were originally  designed.  The Company's  emerging product line  is a
       new time  and billing system  designed for small  and medium  size law
       firms  called CompuTrac  (registered  trademark)  Law Firm  Management
       System  for   Windows  (registered  trademark)  (CompuTrac   LFMS  for
       Windows).   This product, which was  introduced in January 1998,  is a
       client/server  software  system  created  exclusively  with  Microsoft
       (registered trademark) development  tools operating on micro-computers
       with  32-bit   Windows  (registered  trademark)   95  or   Windows  NT
       (registered trademark) operating environments. 

       Software

            Software which enables law firms to  more efficiently perform and
       evaluate  administrative   and  business  functions   constitutes  the
       Company's principal  products.  The Company's  earlier generation core
       products designed for  medium and large size law firms  are called the
       Law  Firm Management  System (LFMS)  products. These  products 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 (registered trademark), Banyan Vines
       (trademark), 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
       (registered  trademark) (native  HP),  MS-DOS (registered  trademark),
       Windows (registered trademark) 95 and Windows NT.

            The core  of the  LFMS 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.

       <PAGE>

            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 will 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.

       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 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 1998
       the  Company  expended approximately  $366,000  in  its marketing  and
       advertising  efforts  to  promote  its   CompuTrac  LFMS  for  Windows
       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.

            Earlier plans to  develop and train a reseller  network to market
       and sell the Company's software products  did not produce results that
       were  satisfactory  to the  Company  and  have  been replaced  by  the
       Company's  more  traditional  direct  sales  approach.    The  Company
       currently  employs approximately  10 staff  members in  its sales  and
       marketing departments.  The Company expects to employ additional sales
       staff in fiscal 1999 to sell and market its CompuTrac LFMS for Windows
       software products.

       Installation and Maintenance

            The Company  and Hewlett-Packard  coordinate the  installation of
       hardware for  the LFMS products at  the customer's premises.   In most
       cases, representatives of the Company, Hewlett-Packard and the

       <PAGE>

       customer meet  at the  site where  the system is  to be  installed and
       examine and approve the suitability of  the ambient environment at the
       installation  site.     Subsequently,  Hewlett-Packard   installs  the
       hardware  and   provides  its  standard  warranty.     Hewlett-Packard
       maintains and services the hardware pursuant  to an agreement with the
       customer.   Following  hardware installation,  Company personnel  then
       assist the customer with the installation of the LFMS software.

            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  will  be
       installed by Company representatives on  personal computers located at
       the law firm client site.  Training for the products will be 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 will be conducted by  trained Company personnel.
       Additionally,  law firm  personnel  will  soon 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.

       Employees

            As of March 31, 1998, the Company employed 59 full-time employees
       and 3 part-time  employees. During fiscal 1998,  35 employees provided
       technical support and product development services, 10 were engaged in
       sales and  marketing and 17 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 each of the two years ended January 31, 1998 and 1997, the
       Company  expended approximately  $1.2  million  on software  research,
       development and production costs.   Net software research, development
       and  production expenses,  after  capitalization  of certain  software
       development costs, amou nted to $4 51,000 for  the fis cal year  ended
       Januar y 31, 1998, and $407,000 for the fiscal  year ended January 31,
       1997.    The  Company  anticipates   its  expenditures  for  research,
       development  and production  in fiscal  1999 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

       <PAGE>

       support the LFMS software; and adverse  changes in economic conditions
       in  the  legal profession  or  the  economy  generally.   The  Company
       recently  introduced  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.

       Year 2000 Issues

            The Company  is aware  of the issues  related to  the programming
       code in  existing computer  systems as the  year 2000  approaches. The
       issue  is whether  new  or existing  computer  systems will  correctly
       recognize date sensitive information when the year rolls over to 2000.
        Obviously, systems  that do not correctly  recognize this information
       could create data errors or even cause  a system to fail.  The Company
       relies on its internal systems in operating and monitoring all aspects
       of its business.   The Company also relies on  the external systems of
       its  vendors, customers  and other  organizations with  which it  does
       business.  Management has  taken action  to ensure  both the  internal
       readiness  of its  computer  systems and  the  compliance of  computer
       products  and software  sold by  it  to customers  for handling  dates
       beginning in the  year 2000.  Management does not  anticipate that the
       Company  will incur  significant  expenses or  be  required to  invest
       heavily in computer  systems improvements to be year  2000 compliant. 
       To date,  no material  issue has  been identified as  a result  of the
       Company's efforts to identify year 2000  issues.  However, despite the
       Company's  efforts  thus far  to  address  year 2000  compliance,  the
       Company cannot guarantee that all internal or external systems will be
       compliant,  or that  its  business will  not  be materially  adversely
       affected by any such non-compliance.

       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,  1998,  these
       facilities were  subject to a $200,000  mortgage note payable .    The
       Company  believes its  current  facility is  adequate  to conduct  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 1000  computer, one HP
       3000 Micro Classic, one HP 3000  Series 937LX, one HP 3000 Series 957,
       one HP 9000 Series 827S and one HP 9000 Series 837S.  The Company also
       owns  and  operates  various  other  peripheral  equipment,  including
       printers,  micro-computers,  UNIX  workstations,  scanners  and  other
       equipment.

       Item 3.  Legal Proceedings

            The Company  is a party to  certain legal proceedings  arising in
       the  ordinary course  of business,  none of  which is  believed to  be
       material to the financial position of the Company.  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.

       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,
       1998.

       <PAGE>

                                       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 23, 1998, there were approximately 300 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.



                                                     Market Price

                                               High        Low

       1997 Fiscal Year:
            First Quarter                      2   7/16         1    1/2
            Second Quarter                     3   3/4          1    7/8
            Third Quarter                      2   7/8          1    7/8
            Fourth Quarter                     2   1/2          1    5/8

       1998 Fiscal Year:
            First Quarter                      2   1/4         1     1/8
                 Second Quarter                1  15/16        1     1/16
            Third Quarter                      1   5/16        1
            Fourth Quarter                     1   3/16             11/16



            The cl osing sales  price per sh are of the C ommon Stock  on the
       Americ an Stock Exch ange on April 23, 1998 was $  13/16.

       <PAGE>

       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>
                                                      Year Ended January 31,
                                                       --------------------
                                                      1998       1997
       <S>                                           <C>        <C>
                                                      ----        ----
       Revenues:
         System sales                                   20 %        11%
         Services and support                           80          89
                                                       ----       ----
                                                       100         100

       Costs and expenses:
         Cost of system sales                           13           8
         Cost of services and support                    6           6
         Amortization of capitalized software           11           7
         Operating expenses                             23          29
         Selling, general and administrative expenses   64          60
         Software research and development costs         9           9
                                                      ----       ----
                                                       126         119
                                                      ----       ----
       Loss                                           (26)        (19)
       Interest income, net                              5           5
                                                      ----       ----
       Loss before taxes                              (21)        (14)
       Income taxes                                     -          -
                                                      ----       ----

         Net loss                                     (21) %      (14)%
                                                     =====      =====

       </TABLE>
       <PAGE>

       Year Ended January 31, 1998 compared to Year Ended January 31, 1997

            Total revenues rose slightly from $4.6  million in fiscal 1997 to
       $4.8 million in  fiscal 1998, an increase of $168,000,  or 4% over the
       prior fiscal year.   System sales revenues increased  $444,000, or 86%
       from $515,000 in fiscal 1997 to $959,000 in fiscal 1998.  The increase
       in system sales revenue was a result of a significantly greater number
       of  client   upgrade  and  peripheral  hardware   and  software  sales
       activities in fiscal 1998 than in  the prior fiscal year.  The Company
       also recognized  $56,000 in  sales of its  Dimension time  and billing
       software  products during  fiscal 1998.   Disappointing  sales of  the
       Dimension software products, sold primarily through a reseller network
       to  the small  law firm  market,  necessitated management  instituting
       several changes in the Company's sales and marketing strategies. These
       changes  were implemented  in January  1998  and resulted  in (1)  the
       expansion of  the Company's  software products  to form  the currently
       marketed  time  and  billing management  system,  CompuTrac  LFMS  for
       Windows and, (2) replacing the Company's recently established reseller
       network with the  Company's more traditional direct  sales approach to
       selling its  products.   The CompuTrac LFMS  for Windows  products add
       more sophisticated features and functionality, allowing the Company to
       focus its sales and marketing efforts on the small and medium size law
       firm market.   The  Company currently anticipates  the release  of its
       Microsoft SQL  server-based products  sometime in  the latter  half of
       fiscal 1999.  These products will allow the Company to compete for the
       large law  firm market.  The  initial responses to the  CompuTrac LFMS
       for Windows products have led the  Company to be cautiously optimistic
       that a return to profitability may  be seen sometime during the latter
       half of the  current fiscal year.  However, there  can be no assurance
       that the CompuTrac LFMS for Windows products will successfully compete
       with competitive products or that the Company's revenues or results of
       operations will improve in future periods  with the CompuTrac LFMS for
       Windows time and billing management system.      

            Services and support revenues declined 7%,  or $276,000 from $4.1
       million in fiscal  1997 to $3.9 million in fiscal  1998.  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
       decrease in  services and support revenues  in fiscal 1998 was  due to
       the  lack of  new system  sales  revenues as  opposed  to upgrade  and
       peripheral  sales  activities,  which   typically  do  not  contribute
       significantly to the services and support revenue stream.  

            Cost of system sales as a percentage of system sales revenues was
       64% in fiscal 1998 compared to 69% in the prior fiscal year.  The cost
       margin  on system  sales  generally varies  depending  on  the mix  of
       hardware sales, Company  software and third party  software sales, and
       the various cost  margins associated with each.  Cost  of services and
       support as a percentage of services and support revenue rose slightly,
       from 7%  in fiscal 1997 to  8% in fiscal 1998.   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  increased $213,000, or 67%,
       from  $318,000 in  fiscal  1997  to $531,000  in  fiscal  1998.   This
       increase was due to first year  amortization expense recognized on the
       Company's windows-based  legal software products introduced  in fiscal
       1998.  

            Operating expenses  decreased $244,000, or 18%  from $1.4 million
       in fiscal 1997 to $1.1 million  in fiscal 1998.  This decrease relates
       primarily to a fiscal 1997 charge of approximately $200,000 to reflect
       management's estimate of reduced computer equipment residual values on
       older or obsolete equipment.

            Selling, general and  administrative expenses increased $285,000,
       or 10%,  from $2.8 million  in fiscal 1997  to $3.1 million  in fiscal
       1998.    The increase in selling, general  and administrative expenses
       was primarily attributable  to increased sales and  marketing staff to
       develop  the Company's  direct sales  efforts in  connection with  the
       CompuTrac LFMS  for Windows products, increased  advertising costs and
       various  other  administrative  fee increases.  These  increases  were
       partially off-set  by fiscal 1998 decreases  in both bad  debt expense
       and certain other professional corporate fee expenses.

       <PAGE>

            Software research and development  expenses increased $44,000, or
       11% from $407,000  in fiscal 1997 to  $451,000 in fiscal 1998.    This
       increase  primarily   relates  to   research  and   development  costs
       associated with  software products  not 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 software products line.

            Net  interest income  increased a  nominal 3%,  from $221,000  in
       fiscal 1997 to $227,000 in fiscal  1998.  In fiscal 1997, net interest
       income comprised  approximately $278,000 of interest  income, relating
       primarily  to  investment  interest income,  offset  by  approximately
       $44,000 of interest  expense of which $32,000 was  related to mortgage
       interest  expense.   In  fiscal 1998,  net  interest income  comprised
       approximately  $240,000  of  interest income,  relating  primarily  to
       investment  interest  income,  offset   by  approximately  $23,000  of
       mortgage interest expense.

        Recent Accounting Pronouncements

            In   February   1997 ,  Statement   of   Financial   Accounting
       Standards No. 128,  "Earnings  per Share"  (FAS 128) was issued.  FAS
       128   specifies   the   computation,   presentation   and   disclosure
       requirements for earnings  per share (EPS) for  entities with publicly
       held common stock  or potential common stock.  FAS  128 simplifies the
       standards for computing EPS previously  found in Accounting Principles
       Board Opinion  No. 15, "Earnings  per Share" (APB  15) and  makes them
       comparable  to   international  EPS  standards.     It   replaces  the
       presentation of primary EPS with a presentation of basic EPS.  It also
       requires dual presentation of basic and diluted EPS on the face of the
       statement  of  operations  for  all   entities  with  complex  capital
       structures  and  requires  a  reconciliation   of  the  numerator  and
       denominator  of  the  basic  EPS  computation  to  the  numerator  and
       denominator of  the diluted EPS  computation.  FAS 128  is effective
       for fi nancial stat ements issue d for periods ending  after December
       15, 1997, including interim periods.   FAS 128 requires restatement of
       all prior-period EPS  data presented.  The Company adopted  FAS 128 in
       its financial statements for the fiscal year ended January 31, 1998. 

            In 1997,  the FASB issued  SFAS No. 130,  Reporting Comprehensive
       Income.  The  provision of SFAS No. 130 established  new rules for the
       reporting and display of comprehensive income  and its components in a
       full  set of  general-purpose  financial statements.    The new  rules
       require that all items that are  recognized under accounting standards
       as  components of  comprehensive  income be  reported  in a  financial
       statement  that  is  displayed  with  the  same  prominence  as  other
       financial statements.   The Company will adopt SFAS No.  130 in fiscal
       1999  and does  not expect  that such  adoption will  have a  material
       impact on results of operations, financial position or cash flows.

            In 1997, the FASB issued SFAS No. 131, Disclosures About Segments
       of an Enterprise and Related Information.   The provisions of SFAS No.
       131  require  public  companies  to  use   a  management  approach  to
       determining their operating segments.   This management approach model
       defines  operating segments  as  revenue-producing  components of  the
       enterprise  for  which  separate  financial  information  is  produced
       internally  and  are subject  to  evaluation  by the  chief  operating
       decision maker  in deciding  how to allocate  resources to  segments. 
       SFAS No.  131 also expands  the financial and  descriptive information
       disclosures  relative  to  the identified  operating  segments.    The
       Company will  adopt SFAS No.  131 in fiscal  1999 and does  not expect
       that  such  adoption  will  have  a  material  impact  on  results  of
       operations, financial position or cash flows.

       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

       <PAGE>

       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, 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 $11,000 during fiscal
       1998 compared to  $532,000 during fiscal 1997.   Reduced cash provided
       by operating activities  was attributable to a higher net  loss in the
       current year, a net decrease in non-cash items and a marginal increase
       in working capital requirements. Cash provided by investing activities
       during fiscal 1998 was $139,000 compared to $943,000 used in investing
       activities during  fiscal 1997.  The  improvement in cash  provided by
       investing activities was  primarily due to a $795,000  net increase in
       the sale of short-term investment maturities to fund current operating
       needs and a $295,000 decrease in property, furniture and equipment and
       capitalized software additions from the prior  fiscal year.  Cash used
       in financing  activities during  fiscal 1998  was $40,000  compared to
       cash provided by financing activities during  fiscal 1997 of $52,000. 
       The increase in cash used in financing activities was primarily due to
       the Company's  purchase of $45,000 in  treasury shares in  fiscal 1998
       and  to  a $38,000  decrease  in  cash  receipts from  employee  stock
       purchases from the prior fiscal year.

            The Company  has not  made any  material commitments  for capital
       expenditures, however, the  Company anticipates continued expenditures
       will be  made during fiscal 1999  in the areas of  development, sales,
       marketing  and support  of  its CompuTrac  LFMS  for Windows  software
       products. Until  the Company  is able to  generate positive  cash flow
       from operations, these  expenditures will be funded  primarily by cash
       flow from investment activities of the Company. 

            At January 31, 1998 and 1997,  the Company has established a 100%
       valuation  allowance  to  fully offset  the  net  deferred  tax  asset
       balances of $1,361,000 and $970,000, 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,  and (2) financial  and economic  pressures in
       the Company's primary customer market (i.e. legal industry).

          Working  capital  and  the  ratio  of  current  assets  to  current
       liabilities are as follows:


                                        Working          Current 
                                       Capital            ratio      
                   At January 31:

                   1998              $ 4,039,695         7.8 to 1

                   1997              $ 5,217,305         8.3 to 1


          Current assets consist primarily of cash, short-term investments,
       accounts receivable and unbilled revenues from system sales and
       services.

       <PAGE>
       Item 7.   Financial Statements

       <TABLE>
       CONSOLIDATED BALANCE SHEETS
       <CAPTION>
                                                        Year Ended January 31,
                                                       -----------------------
                                                          1998         1997
                                                       ----------  -----------
       <S>                                            <C>          <C>
       ASSETS

       Current assets:
         Cash and cash equivalents                      $  558,818   $  449,304
         Short-term investments                          3,226,330    4,334,869
         Accounts receivable, net of allowance for
           doubtful accounts of $100,000 and $180,000
           at January 31, 1998 and 1997, respectively      513,744      722,683
         Unbilled revenue                                   13,351      122,584
         Other current assets                              322,134      304,211
                                                       ----------   -----------
           Total current assets                          4,634,377    5,933,651
       Property, furniture and equipment, net of
         accumulated depreciation                        1,476,824    1,627,226
       Land held for sale                                  254,122      254,122
       Capitalized software, net of accumulated
         amortization                                    1,833,938    1,637,025
       Other assets                                        470,799      429,898
                                                       ----------   -----------
           Total assets                                 $8,670,060   $9,881,922
                                                       ==========   ==========
       LIABILITIES AND SHAREHOLDERS' EQUITY

       Current liabilities:
         Accounts payable                               $  183,330   $  191,349
         Accrued expenses                                  218,331      247,424
         Accrued contract completion costs                  10,000      110,400
         Deferred systems revenues                          99,006       90,744
         Short-term portion of mortgage payable             84,015       76,429
                                                       ----------   -----------
           Total current liabilities                       594,682      716,346
         Long-term portion of mortgage payable             115,546      199,561
                                                       ----------   -----------
           Total liabilities                               710,228      915,907
                                                       ----------   -----------

       Commitments and contingencies (Note 9)
       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                      9,718,527    9,846,543
         Retained earnings                                 460,507    1,503,255
                                                       ----------   -----------
                                                        10,248,921   11,419,685
         Less:  treasury shares, at cost, 711,008 and
           722,631 shares, respectively                (2,289,089)  (2,453,670)
                                                       ----------   -----------
           Total shareholders' equity                    7,959,832    8,966,015
                                                       ----------   -----------

           Total liabilities and shareholders' equity   $8,670,060   $9,881,922
                                                       ===========  ===========



       See accompanying notes to consolidated financial statements.
       </TABLE>
       <PAGE>
       <TABLE>
       CONSOLIDATED STATEMENTS OF OPERATIONS

       <CAPTION>
                                                    Year Ended January 31,
                                                   ------------------------
                                                      1998          1997
                                                  -----------    -----------
       <S>                                       <C>             <C>
       Revenues:
         System sales                               $   958,714    $ 514,830
         Services and support                         3,857,629    4,133,548
                                                    -----------   ----------

                                                      4,816,343    4,648,378
                                                    -----------   ----------

       Costs and expenses:
         Cost of system sales                           609,243      355,730
         Cost of services and support                   294,313      297,121
         Amortization of capitalized software           531,148      318,079
         Operating expenses                           1,110,777    1,354,423
         Selling, general and administrative
           expenses                                   3,089,484    2,804,975
         Software research and development costs        451,358      406,998
                                                    -----------   ----------

                                                      6,086,323    5,537,326
                                                    -----------   ----------

       Loss                                         (1,269,980)    (888,948)
       Interest income, net                             227,232      220,743
                                                    -----------   ----------
                                                                   
       Loss before taxes                            (1,042,748)    (668,205)
       Income taxes                                     -              -       
                                                    -----------   ----------

       Net loss                                    $(1,042,748)   $(668,205)
                                                    ===========   ==========

       Net loss per common share                   $     (0.17)   $   (0.11)
                                                    ===========   ==========


       Weighted average shares                            
       outstanding                                    6,302,531    6,237,291
                                                    ===========   ==========



       See accompanying notes to consolidated financial statements.

       </TABLE>
       <PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>


                                 Common Stock      Additional                       Treasury          Share- 
                                ------------------   paid-in     Retained     ----------------------  holders'
                                Shares    Amount     capital     earnings     Shares      Amount      equity
                                ------------------ -----------  -----------  --------- ------------ ----------
<S>                           <C>        <C>        <C>         <C>          <C>        <C>          <C>

Balance at February 1, 1996   6,988,706  $  69,887   $9,928,011   $2,171,460   842,106  $(2,654,769)  $9,514,589
                
Treasury shares reissued                                (81,468)              (119,475)     201,099      119,631
Net Loss                                                                         
                                                                    (668,205)                           (668,205)
                              -----------  --------- -----------  -----------  --------   ----------- -----------


Balance at January 31, 1997   6,988,706  $  69,887   $9,846,543   $1,503,255   722,631  $(2,453,670)  $8,966,015
                              ----------  ----------  -----------  ----------- ---------  ----------- -----------


Purchases of treasury shares                                                    50,100      (44,969)     (44,969)
Treasury shares reissued                               (128,016)               (61,723)     209,550       81,534
Net loss                                                          (1,042,748)                         (1,042,748)
                             -----------  ----------  -----------  ---------  ----------  ----------  -----------


Balance at January 31, 1998   6,988,706    $69,887   $9,718,527   $  460,507   711,008  $(2,289,089)   $7,959,832
                             ===========  ==========  ===========  =========  ==========  ==========  ===========
       
       </TABLE>
       <PAGE>
       <TABLE>
       CONSOLIDATED STATEMENTS OF CASH FLOWS

       <CAPTION>
                                                    Year Ended January 31,
                                                  --------------------------
                                                       1998         1997
                                                  ------------- ------------
       <S>                                        <C>           <C>
       Cash flows from operating activities:

         Net loss                                   $(1,042,748) $ (668,205)
         Adjustments to reconcile net loss to net
          cash (used in) provided by operating
          activities:
           Depreciation of property, furniture
            and equipment                                392,053     723,610
           Amortization of capitalized software
            costs                                        531,148     318,079
           Changes in assets and liabilities:
             Accounts receivable                         208,939     438,541
             Unbilled revenue                            109,233     216,190
             Other current assets                       (17,923)    (80,189)
             Other assets                               (40,901)    (38,642)
             Accounts payable and accrued
               expenses                                (137,512)   (377,894)
             Deferred systems revenues                     8,262         829
                                                    ------------ -----------
           Net cash provided by operating
            activities                                    10,551     532,319
                                                    ------------ -----------
       Cash flows from investing activities:

         Additions to property, furniture and
          equipment                                    (241,651)   (460,606)
         Additions to capitalized software             (728,061)   (804,528)
         Purchase of certificates of deposit              -        (499,000)
         Sale of certificates of deposit                 666,000     624,000
         Sale of U.S. Treasury Bills                     442,539     188,905
         Sale of fixed assets                             -            8,365
                                                    ------------ -----------
          Net cash provided by (used in) investing                          
          activities                                     138,827   (942,864)
                                                    ------------ -----------
       Cash flows from financing activities:

         Issuance of treasury shares                      81,534     119,631
         Principal payments of mortgage note
          payable                                       (76,429)    (67,747)
         Purchase of treasury shares                    (44,969)        -  
                                                    ------------ -----------
          Net cash (used in) provided by financing                          
          activities                                    (39,864)      51,884
                                                    ------------ -----------
       Net increase (decrease) in cash and cash
         equivalents                                     109,514   (358,661)
       Cash and cash equivalents at end of year          449,304     807,965
                                                    ------------ -----------
       Cash and cash equivalents at beginning
         of year                                     $   558,818  $  449,304
                                                    ============ ===========

       Supplemental disclosures of cash flow
          information:
         Interest paid                               $    23,061  $   43,970
         Income taxes paid                                  -          -    


       See accompanying notes to consolidated financial statements.

       </TABLE>
       <PAGE>
       NOTES TO CONSOLIDATED 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
       generally accepted  accounting principles 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.

          Principles of Consolidation

            The consolidated financial statements include the accounts of the
       Company and its subsidiary.  All significant intercompany transactions
       and accounts have been eliminated.

          Revenue Recognition and Company Operations

            The  Company develops,  markets, services  and supports  computer
       systems for  the legal profession.  The Company develops  the software
       and is  a Distributor Authorized  Reseller of  Hewlett-Packard systems
       hardware.   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 of
       the American  Institute of Certified Public  Accountants' Statement of
       Position  No. 91-1,  "Software Revenue  Recognition"  (SOP 91-1),  the
       Company  recognizes  software license  revenue  upon  delivery of  the
       hardware,  software and  confirmation of  customer acceptance  per the
       terms of the  contract.  Each software license  agreement is evaluated
       by  management  to  determine   if  significant  vendor  obligations
       exist,  suc h as  post-contract  customer  support,  and to  determine
       whether  collection of  the associated  receivable is  probable. Post-
       contract customer support  revenue is deferred and  amortized over the
       period  of  the service,  usually  not  exceeding  one year  from  the
       inception 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.

          In  October  1997,  the  American  Institute  of  Certified  Public
       Accountants issued  Statement of Position  No. 97-2  "Software Revenue
       Recognition" (SOP  97-2).  SOP  97-2 replaces the  SOP 91-1  method of
       distinguishing   between   significant    and   insignificant   vendor
       obligations as a basis for recording revenue with a requirement that

       <PAGE>

       each  element  of  a  software  licensing  arrangement  be  separately
       identified and accounted for based on the relative fair values of each
       element.   SOP  97-2 is  effective  for fiscal  years beginning  after
       December 15, 1997.  Management does not expect the adoption of SOP 97-
       2 to  have a material  effect on the  Company's financial  position or
       results of operations.

          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.

          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,
       "Accou nting  for  the  Costs  of  Com puter  Software  t o  be  Sold,
       Leased  or Otherw ise Markete d_ (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.

          Income Taxes

            The  Company  presents  income ta xes pursu ant to  Statement  of
       Financial  Accounting  Standards  No.  109, "Accounting  for  Income
       Taxes," (FAS  109).  FAS 109  uses an asset and  liability approach to
       account  for income  taxes.   In  the  event  differences between  the
       financial reporting  basis and the tax  basis of the  Company's assets
       and liabilities  result in deferred tax  assets, an evaluation  of the
       probability of being able to realize  the future benefits indicated by
       such assets  is required.   A  valuation allowance  is provided  for a
       portion or  all of the  deferred tax assets  when there  is sufficient
       uncertainty regarding the Company's ability  to recognize the benefits
       of the assets in future years.

          Accounting for Stock-Based Compensation

            Statement of Financial Accounting Standards No. 123, "Accounting
       for  Stock-Based  Compens ation" (FAS  123), encourages, but  does not
       require,  companies  to  record   compensation  cost  for  stock-based
       employee compensation plans at fair value.  The Company has elected to
       continue to  account for stock-based compensation  using the intrinsic
       value method prescribed in Accounting Principles Board Opinion No. 25,

       <PAGE>

       "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

            In the fourth quarter of the  fiscal year ended January 31, 1998,
       the  Company   adopted  the  provisions  of   Statement  of  Financial
       Accounting  Standards No.  128 "Earnings  Per Share"  (SFAS 128).   In
       accordance with SFAS  128, the Company computes  basic earnings (loss)
       per common share 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,  1998 and  1997, all  potential common  shares were
       anti-dilutive.  Accordingly, the adoption of SFAS 128 had no effect on
       1998 and 1997 earnings per share amounts.

          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

       <TABLE>
             Property, furniture and equipment costs are summarized as
             follows:
       <CAPTION>
                                                           January 31,
                                                      ---------------------
                                                        1998          1997
                                                      --------      -------
             <S>                                    <C>           <C>
             Equipment                               $ 7,031,969    $6,882,189

             Building                                  1,420,735     1,410,297

             Furniture, fixtures and leasehold                                
             improvements                                783,738       758,925
                                                     -----------   -----------
                                                       9,236,442     9,051,411

             Less accumulated depreciation           (8,059,618)   (7,724,185)
                                                     -----------   -----------
                                                     $ 1,176,824    $1,327,226

             Land                                        300,000       300,000
                                                     -----------   -----------
                                                     $ 1,476,824    $1,627,226
                                                     ===========   ===========
       </TABLE>
       <PAGE>
       Note 3 - Capitalized Software

       <TABLE>
             Capitalized software costs are summarized as follows:
       <CAPTION>
                                                     January 31,
                                              -------------------------
                                                 1998           1997
                                              ----------     ----------
       <S>                                   <C>            <C>
             Capitalized software costs        $ 4,616,021   $ 3,887,960

             Less accumulated amortization     (2,782,083)   (2,250,935)
                                               -----------   -----------
                                               $ 1,833,938   $ 1,637,025
                                               ===========   ===========

       </TABLE>

       Note 4 - Income Taxes

       <TABLE>
             The effective income tax rates differed from the
       Following reasons:
       <CAPTION>
                                                   January 31,
                                                -----------------
                                                 1998      1997
                                               --------   -------
       <S>                                     <C>       <C>
       Federal income tax benefit at             (34) %     (34)%

            Change in valuation                   37         36 

                                                  (3)        (2)
                                               ------     ------
                                                   0  %       0 %
                                               ======     ======
       </TABLE>
       <TABLE>
       The components of the deferred tax accounts consist of the following:

       <CAPTION>
                                                       January 31,
                                               ---------------------------
                                                  1998              1997
                                               -----------        --------
       <S>                                   <C>                <C>
       Deferred tax assets:
       Net operating loss carryforward          $(1,463,000)     $  (952,000)
       Accounts receivable                          (38,000)         (68,000)
       Deferred revenue                             (14,000)         (22,000)
       Fixed assets                                (405,000)        (256,000)
       Accrued liabilities                           (2,000)         (42,000)
       Other                                        (81,000)         (58,000)
                                                ------------      -----------
          Total deferred tax assets              (2,003,000)      (1,398,000)
       Deferred tax liabilities:
       Capitalized software costs                    611,000          387,000
       Other                                          31,000           41,000
                                                ------------      -----------

          Total deferred tax liabilities             642,000          428,000
                                                ------------      -----------
       Net deferred tax asset before               1,361,000          970,000

       Less valuation allowance                    1,361,000          970,000
                                                ------------      -----------
                                                  $     -       $      -    
                                                ============      ===========

       </TABLE>
       <PAGE>
            At January 31, 1998 and 1997,  the Company had net operating loss
       carryforwards    of   approximately    $3,800,000   and    $2,506,000,
       respectively, which begin to expire in 2010.

       Note 5 - Mortgage Note Payable

            Mortgage note  payable consists  of a new,  ten year,  9.5% fixed
       rate mortgage  secured by the  Company's corporate headquarters.   The
       amount of principal maturities for the years subsequent to January 31,
       1998, are:

                                                Principal
                          Fiscal Year           Maturities

                              1999               $84,015

                              2000               $92,353

                              2001               $23,193

       Note 6  - Related Party Transactions

            The Company  entered into a  five-year employment  agreement with
       its Chairman dated January 1, 1998.   The agreement currently provides
       for an annual salary of $590,000, and entitles the Chairman to receive
       minimum raises equivalent to any annual increase in the Consumer Price
       Index  for Dallas,  Texas  during the  previous  calendar  year.   The
       current employment agreement will expire on December 31, 2002.

       Note 7 - 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, 1998,  981,198
       shares of the  Company's Common Stock had been sold  pursuant to these
       plans.

          1990 Stock Option Plan

            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 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.   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.  During fiscal 1998, the Board of Directors
       adopted and the shareholders approved an  amendment to the Option Plan
       to increase by 300,000 the number of shares  reserved for future stock
       option  grants.   At  January  31,  1998,  there were  296,004 shares
       available for future grant.

       <PAGE>

          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,  1998, the
       Company had  purchased 50,100 shares  of its outstanding  Common Stock
       pursuant to the terms of the program.

          Stock-Based Compensation

            Effective   in  1997,   the   Company   adopted  the   disclosure
       requirements of  Statement of Financial  Accounting Standards  No. 123
       (FAS 123),  "Accounting for Stock-Based  Compensation".   As permitted
       under  FAS  123, the  Company  will  continue to  measure  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.

            FAS 123  requires disclosure of pro  forma net income  (loss) and
       pro forma  net income (loss)  per common share  as if the  fair value-
       based method had been applied in measuring compensation cost of stock-
       based awards granted in fiscal 1998 and 1997. Management believes that
       1998 and 1997 pro forma amounts  are not representative of the effects
       of stock-based  awards on future pro  forma net income (loss)  and pro
       forma  net income  (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, 1998 and  1997,
       respectively, are set forth below:                                 

                                                1998                1997  
            Reported
            Net (loss)                    $ (1,042,748)       $ (668,205)
            Net (loss) per share          $      (0.17)       $    (0.11)

            Pro forma (unaudited)
            Net (loss)                    $ (1,098,902)       $ (739,149)
            Net (loss)                    $      (0.17)       $    (0.12)


            During  fiscal 1998  and 1997,  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:
                                          1998           1997

            Risk free interest rate         5.7%           6%
            Expected life                 6 years        5 years
            Expected volatility              55%          60%
            Expected dividend yield           0%           0%

       <PAGE>
       <TABLE>
       Stock option activity for 1998 and 1997 is set forth below:

       <CAPTION>
                                            1998                     1997
                                    --------------------   -----------------------
                                               Weighted                 Weighted
                                               Average                   Average
                                               Exercise                 Exercise
                                     Options    Price        Options      Price
                                    --------  -----------  ----------  ------------
       <S>                          <C>      <C>           <C>        <C>
           Outstanding at beginning
             of year                 679,346    $ 1.74        609,346    $ 1.65
           Granted                    18,785      1.11         70,000      2.90
           Canceled                 (83,015)      2.37          -    
                                    --------                ---------
           Outstanding at end of                                             
           year                      615,116     1.68         679,346      1.78
                                    ========                =========
           Exercisable at end of                                     
           year                      535,498     1.63         491,540      1.74
                                    ========                =========
           Weighted average fair
            value of options
            granted during the year            $ 0.61                    $ 1.65


       </TABLE>
       <TABLE>

       Stock options outstanding at January 31, 1998:

       <CAPTION>
                            Options Outstanding                     Options Exercisable
                          ----------------------                   --------------------
                                     Weighted
                                      Average        Weighted                 Weight
                                     Remaining        Average                 Average
           Range of                 Contractual      Exercise                 Exercise
        Exercise Price    Options      Life            Price       Options     Price
        ---------------   -------  -------------   ------------    -------- ----------
       <C>       <C>     <C>      <C>              <C>            <C>      <C>

       $ 0.69 to $ 1.25   177,996    4.2 years        $ 1.00        131,711    $ 0.98
                          

       $ 1.26 to $ 2.57   397,120    3.6 years        $  1.80       390,454   $  1.79
                          

       $ 2.58 to $ 3.50    40,000    5.3 years        $  3.50        13,333   $  3.50
                          -------                                  --------
                          615,116                                   535,498
                          =======                                  ========

       </TABLE>

       Note 8 - 401(k) Retirement Plan

            In December, 1987, the Board of Directors authorized a simplified
       401(k) Retirement Plan which was implemented in February, 1988.  Under
       the terms of the 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.

       <PAGE>
       Note 9 - 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 10 - 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.

       <PAGE>

       REPORT OF GRANT THORNTON LLP, INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


       Board of Directors and Shareholders
       CompuTrac, Inc.


       We  have  audited  the  accompanying  consolidated  balance  sheet  of
       CompuTrac, Inc. and subsidiary as of  January 31, 1998 and the related
       consolidated statements of operations, changes in shareholders' equity
       and cash  flows for the year  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 audit.

       We conducted our audit in accordance  with generally accepted auditing
       standards.  Those standards require that we plan and perform the audit
       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 audit provides a reasonable basis for our opinion.

       In our  opinion, the  financial statements  referred to  above present
       fairly, in all material respects,  the consolidated financial position
       of CompuTrac,  Inc. and  subsidiary as  of January  31, 1998,  and the
       consolidated results  of their operations and  their consolidated cash
       flows for the  year then ended, in conformity  with generally accepted
       accounting principles.




       GRANT THORNTON LLP

       Dallas, Texas
       March 25, 1998

       <PAGE>

               REPORT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS



       To the Board of Directors and Shareholders of
       CompuTrac, Inc.


       In our  opinion, the accompanying  consolidated balance sheet  and the
       related consolidated statements of operat ions, of ca sh flows and of
       changes in  shareholders' equity  as of and for the year ended
       January 31, 1997  present  fairly,  in  all material  respects,  the
       financial position, results of operations and cash flows of CompuTrac,
       Inc. and its subsidiary as of and  for the year ended January 31 1997,
       in conformity  with generally accepted  accounting principles.   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 of
       these  statements  in  accordance  with  generally  accepted  auditing
       standards which require  that we plan and perform the  audit 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, assessing  the accounting  principles used  and
       significant estimates  made by management, and  evaluating the overall
       financial statement presentation.  We believe  that our audit provides
       a  reasonable basis  for the  opinion expressed  above.   We have  not
       audited the  consolidated financial statements of  CompuTrac, Inc. for
       any period subsequent to January 31, 1997.




       PRICE WATERHOUSE LLP

       Dallas, Texas
       March 25, 1997

       <PAGE>

       Item 8.   Changes In and Disagreements  with Accountants on Accounting
                 and Financial Disclosure

            On January 5, 1998,  the Company dismissed the accounting firm of
       Price  Waterhouse LLP,  Dallas, Texas,  who have  acted as  certifying
       accountants  for the  Company for  the years  ending January  31, 1984
       through January 31,  1997.  None of the  prior certifying accountants'
       reports on the  Company's financial statements for the  past two years
       contained  an  adverse  opinion or  disclaimer  of  opinion,  or  were
       qualified or  modified as  to uncertainty,  audit scope  or accounting
       principle.   In connection  with its  audits for  the two  most recent
       fiscal  years  and  through  January  5,  1998,  there  have  been  no
       disagreements with Price  Waterhouse LLP, on any  matter of accounting
       principle  or practice,  financial statement  disclosure, or  auditing
       scope  or  procedure, which  disagreements,  if  not resolved  to  the
       satisfaction  of  Price  Waterhouse  LLP,   would  have  caused  Price
       Waterhouse  LLP, to  make  reference to  the  subject  matter of  such
       disagreements in  their reports on  the financial statements  for such
       years.

            Effective  January 5,  1998, the  Company engaged  the accounting
       firm  of Grant  Thornton  LLP, Dallas,  Texas,  to  act as  certifying
       accountants  for the  year ending  January 31,  1998.   The change  of
       principal accountants was approved by the Company's Board of Directors
       on December 29, 1997.

            There were  no written or oral consultations  between the Company
       and  Grant  Thornton  LLP  or  Price   Waterhouse  LLP  regarding  the
       application  of  accounting  principles to  a  specific  completed  or
       contemplated transaction, or  to the type of audit  opinion that might
       be  rendered  in connection  with  the  Company's decision  to  change
       accounting firms.

                                      PART III

            The information required by Part III  is omitted from this Report
       and  will  be  included in  the  registrant's  1998  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 1998 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  1998 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 1998 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 1998 Annual Meeting.

       <PAGE>

       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                                  23
                 Report of Price Waterhouse LLP, Independent
                    Accountants                                         24
                 Consolidated Balance Sheets at January 31, 1998
                    and 1997                                            11
                 Consolidated Statements of Operations for the two
                    years ended January 31, 1998                        12
                 Consolidated Statements of Changes in Shareholders'
                    Equity for the two years ended January 31, 1998     13
                 Consolidated Statements of Cash Flows for the two
                    years ended January 31, 1998                        14
                 Notes to Consolidated Financial Statements          15-22


                 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 (filed herewith)

                 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.

                 23.1      -    Consent  of Grant  Thornton LLP,  Independent
                                Certified Public Accountants

                 23.2      -    Consent of Price  Waterhouse LLP, Independent
                                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.

       Management Contracts and Compensatory Plans

            The documents filed as Exhibits 10.1,  10.2, 10.3, 10.4, 10.8 and
       10.9  constitute   management  contracts  or  compensatory   plans  or
       arrangements within the meaning of SEC rules.

             (b) Reports on Form 8-K.   On January 5, 1998, the Company filed
                 Form  8-K with  the Securities  and  Exchange Commission  to
                 report a change in the Company's certifying accountant.

       <PAGE>

                                     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 29, 1998

                 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.

            Signature                    Title                     Date    


       /S/ Harry W. Margolis      Chairman of the Board of     April 29, 1998
          Harry W. Margolis       Directors and Chief
                                   Executive Officer


       /S/ George P. McGraw            President               April 29, 1998
          George P. McGraw    (Principal Operating Officer)


       /S/ Cheri L. White      Vice President - Finance        April 29, 1998
          Cheri L. White      and Chief Financial Officer
                             (Principal Financial and
                                     Accounting Officer)
                                              

       /S/ Dana E. Margolis      Secretary, Treasurer          April 29, 1998
          Dana E. Margolis           and Director


       /S/ Kenneth R. Nicholas         Director                 April 29, 1998
          Kenneth R. Nicholas


       /S/ Gerald  D. Harris           Director                 April 29, 1998
          Gerald D. Harris