-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J9j7Z5rohP9Nuk0wJ0US3I8LR1cjdZIOh2ZtQmd+z3y1SFNZb0nsb6Sf1XLQ+yhA qHNsM1RTX9y9pjV/CD83TA== 0000950128-97-000697.txt : 19970415 0000950128-97-000697.hdr.sgml : 19970415 ACCESSION NUMBER: 0000950128-97-000697 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970228 FILED AS OF DATE: 19970414 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER RESEARCH INC CENTRAL INDEX KEY: 0000201511 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 251201499 STATE OF INCORPORATION: PA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05954 FILM NUMBER: 97579830 BUSINESS ADDRESS: STREET 1: CHERRINGTON CORPORATE CTR BLDG 200 CITY: CORAOPOLIS STATE: PA ZIP: 15108 BUSINESS PHONE: 4122624430 MAIL ADDRESS: STREET 1: CHERRINGTON CORPORATE CENTER BLDG 200 CITY: CORAOPOLIS STATE: PA ZIP: 15108 10-Q 1 COMPUTER RESEARCH 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended February 28, 1997 --------------------- [ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT For the transition period from to --------- --------- Commission File No. 0-5954 COMPUTER RESEARCH, INC. - ------------------------------------------------------------------------------ (Exact name of small business issuer as specified in its charter) Pennsylvania 25-1201499 - ------------------------------- ------------------ (State or other jurisdiction of I.R.S. Employer incorporation or organization) Identification No. Cherrington Corporate Center, Building 200, Coraopolis, Pennsylvania 15108 - ------------------------------------------------------------------------------ (Address of principal executive offices) (412) 262-4430 - ------------------------------------------------------------------------------ (Issuer's telephone number) - ------------------------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) 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 ___ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ___ No ___ APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 4,037,255 (As of February 28, 1997) - ------------------------------------------------------- 2 PART I - FINANCIAL STATEMENTS ITEM I A. COMPUTER RESEARCH, INC. BALANCE SHEET February 28, 1997 (Unaudited) and August 31, 1996 (Audited) ASSETS
FEBRUARY 28, AUGUST 31, 1997 1996 ------------ ---------- CURRENT ASSETS Cash and Cash Equivalents $ 489,575 $1,486,924 Short-Term Investments 1,373,206 741,146 Accounts Receivable - Trade (net of allowance for doubtful accounts of $55,000 and $30,000 at 2/28/97 and 8/31/96 respectively) 1,207,799 831,421 Inventories (first-in, first-out) or market 82,883 41,958 Prepaid Expenses 70,925 64,411 ---------- ---------- Total Current Assets 3,224,388 3,165,860 ---------- ---------- EQUIPMENT and LEASEHOLD IMPROVEMENTS - At Cost Data Processing Equipment 4,400,416 4,355,558 Data Processing Equipment Under Capital Leases 143,615 143,615 Other 845,180 813,221 ---------- ---------- 5,389,211 5,312,394 Less Accumulated Depreciation and Amortization 5,118,231 5,019,740 ---------- ---------- 270,980 292,654 ---------- ---------- $3,495,368 $3,458,514 ========== ==========
The accompanying notes are an integral part of these financial statements. 2 3 A. COMPUTER RESEARCH, INC. BALANCE SHEET - CONT'D. February 28, 1997 (Unaudited) and August 31, 1996 (Audited) LIABILITIES AND STOCKHOLDERS' EQUITY
FEBRUARY 28, AUGUST 31, 1997 1996 ------------ ---------- LIABILITIES CURRENT LIABILITIES Current Portion of Long-Term Obligations $ 39,895 $ 64,731 Accounts Payable 154,465 128,232 Accrued Payroll 120,170 232,112 Accrued Income Taxes 74,140 272,000 Accrued Vacation 315,114 301,614 Customer Deposits 92,800 88,450 Accrued Rent 22,220 63,642 Accrued Lease Obligation 10,927 13,952 Other Liabilities 4,715 5,911 ---------- ---------- Total Current Liabilities 834,446 1,170,644 LONG-TERM OBLIGATIONS -0- 12,019 ACCRUED LEASE OBLIGATION -0- 3,953 ---------- ---------- Total Liabilities 834,446 1,186,616 ---------- ---------- COMMITMENTS -0- -0- ---------- ---------- STOCKHOLDERS' EQUITY Common Stock - No Par Value; $.0008 Stated Value; 5,000,000 Shares Authorized; 4,037,255 Shares Issued and Outstanding Each Year 3,230 3,230 Additional Paid-In Capital 744,342 744,342 Retained Earnings 1,913,350 1,524,326 ---------- ---------- Total Stockholders' Equity 2,660,922 2,271,898 ---------- ---------- $3,495,368 $3,458,514 ========== ==========
The accompanying notes are an integral part of these financial statements. 3 4 B. COMPUTER RESEARCH, INC. CAPITALIZATION AND STOCKHOLDERS' EQUITY February 28, 1997 (Unaudited)
DEBT AMOUNT ------ Short-Term Loans, Notes $ -0- Long-Term Debt (Including $39,895 due within one year) 39,895 ---------- Total Debt $ 39,895 ==========
STOCKHOLDERS' EQUITY
SHARES ISSUED AMOUNT ------------- ------ Preferred Stock -0- $ -0- Common Stock 4,037,255 3,230 Capital in Excess of Par Value 744,342 Retained Earnings - Balance at Beginning of Current Fiscal Year 1,524,326 Net Income for Period 389,024 ---------- 1,913,350 ---------- Total Stockholders' Equity $2,660,922 ==========
The accompanying notes are an integral part of these financial statements. 4 5 C. COMPUTER RESEARCH, INC. STATEMENT OF INCOME For the Six Months Ended February 28, 1997 and 1996
1997 1996 ---- ---- REVENUES Sales of Services $3,776,226 $3,678,635 Sales of Equipment, Software and Supplies 25,477 19,596 Rental Income From Operating Leases 10,620 20,640 Other Income 68,285 39,148 ---------- ---------- 3,880,608 3,758,019 ---------- ---------- COSTS AND EXPENSES Operating Expenses 2,175,756 1,973,256 Selling and Administrative Expenses 956,866 934,053 Depreciation and Amortization 98,491 69,138 Cost of Equipment, Software and Supplies Sold 17,842 13,955 Interest Expense 4,629 6,752 ---------- ---------- 3,253,584 2,997,154 ---------- ---------- INCOME BEFORE INCOME TAXES 627,024 760,865 LESS: PROVISION FOR INCOME TAXES 238,000 150,000 ---------- ---------- NET INCOME $ 389,024 $ 610,865 ========== ========== Average Number of Shares Outstanding 4,037,255 4,014,300 ---------- ---------- Earnings Per Common Share $ .10 $ .15 ---------- ---------- DIVIDENDS PER COMMON SHARE $ - $ - ========== ==========
The results for the period ended February 28, 1997, are unaudited and are not necessarily indicative of the results to be expected for the year. All known adjustments necessary for a fair presentation of the financial information of the Company have been reflected for the six months ended February 28, 1997 and 1996. The accompanying notes are an integral part of these financial statements. 5 6 C. COMPUTER RESEARCH, INC. STATEMENT OF INCOME For the Fiscal Second Quarter Ended February 28, 1997 and 1996
1997 1996 ---- ---- REVENUES Sales of Services $2,034,774 $1,920,796 Sales of Equipment, Software and Supplies 296 19,065 Rental Income From Operating Leases 5,310 9,075 Other Income 34,081 23,395 ---------- ---------- 2,074,461 1,972,331 ---------- ---------- COSTS AND EXPENSES Operating Expenses 1,128,375 1,019,709 Selling and Administrative Expenses 506,094 471,870 Depreciation and Amortization 50,582 45,976 Cost of Equipment, Software and Supplies Sold 198 13,955 Interest Expense 2,178 3,042 ---------- ---------- 1,687,427 1,554,552 ---------- ---------- INCOME BEFORE INCOME TAXES 387,034 417,779 LESS: PROVISION FOR INCOME TAXES 146,000 85,000 ---------- ---------- NET INCOME $ 241,034 $ 332,779 ========== ========== Average Number of Shares Outstanding 4,037,255 4,014,300 ---------- ---------- Earnings Per Common Share $ .06 $ .08 ---------- ---------- Dividends Per Common Share $ - $ - ========== ==========
The results for the period ended February 28, 1997, are unaudited and are not necessarily indicative of the results to be expected for the year. All known adjustments necessary for a fair presentation of the financial information of the Company have been reflected for the three months ended February 28, 1997 and 1996. The accompanying notes are an integral part of these financial statements. 6 7 D. COMPUTER RESEARCH, INC. STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 AND 1996
1997 1996 ---- ---- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Net Income $ 389,024 $ 610,865 ---------- ---------- ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation and Amortization 98,491 69,138 Provision for Losses on Doubtful Accounts 25,000 15,000 Change in Assets and Liabilities: Accounts Receivable (401,378) (168,677) Inventories (40,925) (7,872) Prepaid Expenses (6,514) (5,113) Accounts Payable, Accrued Expenses and Other Current Liabilities (312,687) 301,686 Customer Deposits 4,350 39,585 Accrued Lease Obligation (6,978) (10,104) ---------- ---------- Total Adjustments (640,641) 233,643 ---------- ---------- Net Cash (Used In) Provided by Operating Activities (251,617) 844,508 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Equipment and Leasehold Improvements (76,817) (72,711) Short-Term Investment Maturities -0- -0- Additions to Short-Term Investments (632,060) -0- ---------- ---------- Net Cash (Used In) Investing (708,877) (72,711) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Reacquisition of Stock -0- 28,620 Payments on Capital Lease Obligations (36,855) (24,019) Payments on Line of Credit -0- (25,000) ---------- ---------- Net Cash (Used In) Financing Activities (36,855) (20,399) ---------- ---------- Net Increase (Decrease) in Cash (997,349) 751,398 Cash and Cash Equivalents at August 31, 1996 and 1995 1,486,924 873,508 ---------- ---------- Cash and Cash Equivalents at February 28, 1997 and 1996 $ 489,575 $1,624,906 ========== ========== CASH PAID DURING THE PERIOD 2/28/97 2/29/96 ---------- ---------- Interest $ 4,629 $ 6,752 ========== ========== Income Taxes $ 441,860 $ 22,500 ========== ==========
Supplemental Schedule of Noncash Investing and Financing Activities For the six months ended February 29, 1996, the Company entered into a capital lease for the purchase of new equipment for $57,692. The accompanying notes are an integral part of these financial statement. 7 8 COMPUTER RESEARCH, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED FEBRUARY 28, 1997 NOTE A - COMPANY'S ANNUAL REPORT UNDER FORM 10-KSB The accompanying financial information should be read in conjunction with the Company's 1996 Annual Report on Form 10-KSB. NOTE B - ADJUSTMENTS In the opinion of management, all adjustments that were made, which are necessary to a fair statement of the results for the interim periods, were of a normal and recurring nature. 8 9 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS 1. "SAFE HARBOR" STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Statements regarding the Company's expectations as to its future operations and financial condition and certain other information presented in this report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that actual results will not differ materially from our expectations. Factors which could cause actual results to differ from expectations include a general downturn in the economy or the stock markets and related transaction activity, gain or loss of significant clients, unforeseen new competition, changes in government policy or regulation of unforeseen costs and other effects related to legal proceedings. 2. RESULTS OF OPERATIONS The Company's principal source of revenue is derived from providing computerized accounting and support services to securities firms, banks and other financial institutions. Service revenues are directly affected by stock and bond trading market volume which indirectly impacts the number of transactions processed for the clients. The clients served are subject to mergers and acquisitions and may choose to convert their business from self-clearing to a fully disclosed basis. The Company could be positively or negatively impacted by a merger involving one of its clients. Also, due to the volatile nature of the industry served, the results of operations for the period represented are not necessarily indicative of results to be expected for the coming year or any specific period. REVENUES The total revenues for the first six months of the current year ended February 28, 1997, were $3,880,608 which is approximately 3% higher than the previous year. The primary reason for the increase is due to additional systems and programming revenues generated during the current year. 9 10 The revenues for the fiscal second quarter of the current year were $2,074,460 or an increase of approximately 5% over the previous year. In March of 1996, the Company and Wachovia Operational Services Corporation, an affiliate of a major service client that accounts for more than 10% of the consolidated revenues of the Company, entered into an agreement to convert the Company's production software (Instant System) from its existing hardware platform to operate on an IBM AS/400 configuration. Upon successful completion of this project, which is currently scheduled to occur at the end of the current fiscal year, the Company intends to begin licensing the software to third parties for in-house utilization. The licensing of the software to Wachovia Operational Services Corporation will result in a reduction of service fees from the major client in the 1998 fiscal year. However, the conversion of the Company's existing software to the IBM AS/400 configuration will enhance the ability to secure software license revenues. In March of 1997, a client, which generated approximately 4% of the Company's revenues for the first six months of the current year, terminated its business due to financial problems. Management of the Company believes that while the revenues for the first quarter of fiscal year 1998 may be negatively impacted, the ability to generate software license revenues and continued growth in recurring service revenues from existing clients and potential new clients should serve to offset any decrease in revenues for the 1998 fiscal year. COSTS AND EXPENSES The total costs and expenses for the first six months of the current year increased approximately 9% over the comparable period of the previous year. This is primarily attributable to increased payroll costs and programming staff additions in support of the conversion of the Company's software for processing the Year 2000, as well as increased equipment costs and travel and living costs associated with transferring some existing clients to the ongoing Company product line (Instant System) from a processing system that will be terminated during the current year (BID/BOA System). The total costs and expenses for the fiscal second quarter of the current year increased by approximately 9% over the previous year. The primary reasons for these increases are consistent with what is defined for the first six months of the current year. 10 11 NET INCOME The net income for the first six months of the current fiscal year was $389,024 or $.10 per share compared to $610,865 or $.15 per share for the comparable period of the previous year. The decrease in income for the current year is attributable to increased costs and expenses as indicated above, as well as to an increase in income taxes due to the fact that the Company is now on a fully taxed basis as opposed to the previous year when a net operating loss carry forward was utilized to reduce taxes payable. The net income for the fiscal second quarter of the current year was $241,034 or $.06 per share as compared to $332,779 or $.08 per share for the second quarter of the previous year. The reasons for the reduced second quarter earnings is consistent with the six month explanation. 3. CAPITAL RESOURCES AND LIQUIDITY The Company had approximately $1.8 million in cash, cash equivalents and short-term investments as of the end of February 1997. In addition, a $750,000 unused line of credit is available. This, along with funds generated by operations, should adequately support the operating needs of the Company in the near term. During the third quarter of this year, the Company plans to enter into a lease for approximately $160,000 of computer equipment. In addition, the Company plans to enter into a lease for additional computer equipment during the 1998 fiscal year. 11 12 PART II - OTHER INFORMATION ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders of the Company was held on January 28, 1997. The following persons were elected to serve as the Company's Board of Directors until the next annual meeting of stockholders: James L. Schultz David J. Vagnoni Lynn M. Bushman Kenneth C. Ebbitt David K. Klotz SIGNATURES COMPUTER RESEARCH, INC. ----------------------------- (Registrant) Date --------------------- --------------------------------------- James L. Schultz, President & Treasurer 12 EX-27 2 COMPUTER RESEARCH 10-Q
5 0000201511 COMPUTER RESEARCH, INC. 1 U.S. DOLLARS 6-MOS AUG-31-1997 SEP-01-1996 FEB-28-1997 1 489,575 1,373,206 1,262,799 55,000 82,833 3,224,388 5,389,211 5,118,231 3,495,368 834,446 39,895 0 0 3,230 2,657,692 3,495,368 25,477 3,880,608 17,842 3,253,584 0 25,000 4,629 627,024 238,000 389,024 0 0 0 389,024 .10 .10
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