-----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, QbFypDqr163D9cCeULuD/GtXvfu0KDUvlTroYOV05ll4pW1oz/lGGOw1k2YGODxY V9xcYXeW1CNe8/KCuBHz+g== 0000950128-97-000023.txt : 19970115 0000950128-97-000023.hdr.sgml : 19970115 ACCESSION NUMBER: 0000950128-97-000023 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970114 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-05954 FILM NUMBER: 97505522 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 10QSB 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 NOVEMBER 30, 1996 [ ] 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 NOVEMBER 30, 1996) 2 PART I - FINANCIAL STATEMENTS ITEM I A. COMPUTER RESEARCH, INC. BALANCE SHEET NOVEMBER 30, 1996 (UNAUDITED) AND AUGUST 31, 1996 (AUDITED) ASSETS
NOVEMBER 30, AUGUST 31, 1996 1996 ------------ ---------- CURRENT ASSETS Cash and Cash Equivalents $1,152,424 $1,486,924 Short-Term Investments 1,000,000 741,146 Accounts Receivable - Trade (net of allowance for doubtful accounts $30,000 each year) 922,272 831,421 Inventories (first-in, first-out) or market 47,577 41,958 Prepaid Expenses 65,941 64,411 ---------- ---------- Total Current Assets 3,188,214 3,165,860 --------- --------- EQUIPMENT and LEASEHOLD IMPROVEMENTS - At Cost Data Processing Equipment 4,360,903 4,355,558 Data Processing Equipment Under Capital Leases 143,615 143,615 Other 835,388 813,221 ---------- ---------- 5,339,906 5,312,394 Less Accumulated Depreciation and Amortization 5,067,649 5,019,740 --------- --------- 272,257 292,654 ---------- ---------- $3,460,471 $3,458,514 ========== ==========
The accompanying notes are an integral part of these financial statements. 2 3 A. COMPUTER RESEARCH, INC. BALANCE SHEET - CONT'D. NOVEMBER 30, 1996 (UNAUDITED) AND AUGUST 31, 1996 (AUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY
NOVEMBER 30, AUGUST 31, 1996 1996 ------------ ---------- LIABILITIES CURRENT LIABILITIES Current Portion of Long-Term Obligations $ 53,650 $ 64,731 Accounts Payable 92,673 128,232 Accrued Payroll 322,064 232,112 Accrued Income Taxes 107,050 272,000 Accrued Vacation 308,364 301,614 Customer Deposits 115,554 88,450 Accrued Rent 17,855 63,642 Accrued Lease Obligation 13,427 13,952 Other Liabilities 4,147 5,911 ---------- ---------- Total Current Liabilities 1,034,784 1,170,644 LONG-TERM OBLIGATIONS 4,808 12,019 ACCRUED LEASE OBLIGATION 989 3,953 ---------- ---------- Total Liabilities 1,040,581 1,186,616 --------- --------- COMMITMENTS -- -- ---------- ---------- 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 1,672,318 1,524,326 ---------- ---------- Total Stockholders' Equity 2,419,890 2,271,898 ---------- ---------- $3,460,471 $3,458,514 ========== ==========
The accompanying notes are an integral part of these financial statements. 3 4 B. COMPUTER RESEARCH, INC. CAPITALIZATION AND STOCKHOLDERS' EQUITY NOVEMBER 30, 1996 (UNAUDITED) DEBT AMOUNT --------- Short-Term Loans, Notes $ -0- Long-Term Debt (Including $53,650 due within one year) 58,458 ------- Total Debt $58,458 =======
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 147,992 ---------- 1,672,318 ---------- Total Stockholders' Equity $2,419,890 ==========
The accompanying notes are an integral part of these financial statements. 4 5 C. COMPUTER RESEARCH, INC. STATEMENT OF INCOME FOR THE THREE MONTHS ENDED NOVEMBER 30, 1996 AND 1995
1996 1995 ---- ---- REVENUES Sales of Services $1,741,452 $1,757,843 Sales of Equipment, Software and Supplies 25,181 530 Rental Income From Operating Leases 5,310 11,565 Other Income 34,204 15,752 ---------- ---------- 1,806,147 1,785,690 ---------- ---------- COSTS AND EXPENSES Operating Expenses 1,047,380 953,549 Selling and Administrative Expenses 450,772 462,184 Depreciation and Amortization 47,909 23,162 Cost of Equipment, Software and Supplies Sold 17,643 -- Interest Expense 2,451 3,709 ---------- ---------- 1,566,155 1,442,604 ---------- ---------- INCOME BEFORE INCOME TAXES 239,992 343,086 LESS: PROVISION FOR INCOME TAXES 92,000 65,000 ---------- ---------- NET INCOME $ 147,992 $ 278,086 ========== ========== Average Number of Shares Outstanding 4,037,255 3,887,338 Earnings Per Common Share $ .04 $ .07 ---------- ---------- Dividends Per Common Share $ -- $ -- ========== ==========
The results for the period ended November 30, 1996, 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 November 30, 1996 and 1995. The accompanying notes are an integral part of these financial statements. 5 6 D. COMPUTER RESEARCH, INC. STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED NOVEMBER 30, 1996 AND 1995
1996 1995 ---- ---- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Net Income $ 147,992 $ 278,086 ---------- ---------- ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation and Amortization 47,909 23,162 Provision for Losses on Doubtful Accounts -- 5,000 Change in Assets and Liabilities: Accounts Receivable (90,851) (197,217) Inventories (5,619) 2,772 Prepaid Expenses (1,530) 5,479 Accounts Payable, Accrued Expenses and Other Current Liabilities (151,358) 114,200 Customer Deposits 27,104 38,829 Accrued Lease Obligation ( 3,489) (5,052) ---------- ---------- Total Adjustments (177,834) (12,827) ---------- ---------- Net Cash (Used In) Provided by Operating Activities (29,842) 265,259 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Equipment and Leasehold Improvements (27,512) (7,310) Short-Term Investment Maturities 361,000 -- Additions to Short-Term Investments (619,854) -- ---------- ---------- Net Cash (Used In) Investing (286,366) (7,310) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Reacquisition of Stock -- (176) Payments on Capital Lease Obligations (18,292) (11,851) Payments on Line of Credit -- (20,000) ---------- ---------- Net Cash (Used In) Financing Activities (18,292) (32,027) ---------- ---------- Net Increase (Decrease) in Cash (334,500) 225,922 Cash and Cash Equivalents at August 31, 1996 and 1995 1,486,924 873,508 ---------- ---------- Cash and Cash Equivalents at November 30, 1996 and 1995 $1,152,424 $1,099,430 ========== ========== CASH PAID DURING THE PERIOD 11/30/96 11/30/95 ---------- ---------- Interest $ 2,451 $ 3,709 ========== ========== Income Taxes $ 256,950 $ 1,630 ========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES There were no noncash investing and financing activities for the three months ended November 30, 1996 and 1995. The accompanying notes are an integral part of these financial statement. 6 7 COMPUTER RESEARCH, INC. NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED NOVEMBER 30, 1996 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. November 30, 1995, income statement amounts have been reclassified for comparative purposes. 7 8 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. Our revenues are directly affected by stock and bond market trading volume which indirectly impacts the number of transactions we process for our 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 we serve, 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. 8 9 REVENUES The total revenues for the first three months of the current year ended November 30, 1996, were $1,806,147 which is approximately 1% above the first three months of the previous year. While service revenues for the period decreased approximately 6% from the previous year due to a decrease in transactions processed, there was a corresponding increase in systems and programming revenues as well as in interest income. The total revenues for the first three months of the previous year ending November 30, 1995, increased approximately 35% over the previous year primarily due to an increase in transactions processed for the brokerage and banking clients of the firm. 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 anticipated to occur during the fourth quarter of the Company's 1997 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. Management believes the ability to generate software license revenues and continued growth in recurring service revenues from existing clients and potential new clients will serve to offset any decrease in revenues that might occur. COSTS AND EXPENSES The total costs and expenses for the first three months of the current year increased approximately 9% over the previous year. This increase is primarily due to the cost of additional computer equipment installed during the second quarter of the previous year as well as to the one time installation and training costs associated with transferring some existing clients to the ongoing Company product 9 10 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 first three months of the previous year increased approximately 12% primarily due to an increase in data communications costs as well as costs associated with systems development. NET INCOME The net income for the first three months of the current fiscal year was $147,992 or $.04 per share as compared to $278,088 or $.07 per share for the comparable period of the previous year. This decrease is attributable to additional shares outstanding in the current year due to exercised employee stock options, increased costs and expenses as indicated above, as well as 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. 3. CAPITAL RESOURCES AND LIQUIDITY Cash and cash equivalents on hand as of November 30, 1996, were approximately $1.1 million. In addition, the Company has approximately $1 million in short-term investments. Should it be needed, the Company has a $750,000 line of credit available for future use. The Company's operating cash flow, borrowing capacity, and liquidity should provide adequate funds for continuing operations for the foreseeable future. During the second quarter of the current year, approximately $212,000 will be utilized to fund the Company's fiscal year 1996 contribution to the employee qualified profit sharing plan. The management of the Company currently anticipates the leasing or purchase of an IBM computer system during the fourth quarter of the current fiscal year. 10 11 PART II - OTHER INFORMATION Not applicable. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COMPUTER RESEARCH, INC. --------------------------------------- (Registrant) Date -------------------- --------------------------------------- James L. Schultz, President & Treasurer 11 EX-27 2 COMPUTER RESEARCH 10-QSB
5 0000201511 COMPUTER RESEARCH, INC 3-MOS AUG-31-1997 SEP-01-1996 NOV-30-1996 1,152,424 1,000,000 952,272 30,000 47,577 3,188,214 5,339,906 5,067,649 3,460,471 1,034,784 0 0 0 3,230 2,416,660 3,460,471 25,181 1,806,147 17,643 1,566,155 0 0 2,451 239,992 92,000 147,992 0 0 0 147,992 .04 .04
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