-----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, Ey9YZjB90b2CgJz1B7JPvxdkASPPDOFgpzpEIoSa4Zlvt955fTne6VIUqQohjZDZ XqLqnnifW8MIfTXvxRrPQQ== 0000950128-98-000720.txt : 19980415 0000950128-98-000720.hdr.sgml : 19980415 ACCESSION NUMBER: 0000950128-98-000720 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980414 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: SEC FILE NUMBER: 000-05954 FILM NUMBER: 98592881 BUSINESS ADDRESS: STREET 1: 400 SOUTHPOINTE BLVD STREET 2: STE 300 CITY: CANONSBURG STATE: PA ZIP: 15317-8539 BUSINESS PHONE: 4122624430 MAIL ADDRESS: STREET 1: CHERRINGTON CORPORATE CENTER BLDG 200 CITY: CORAOPOLIS STATE: PA ZIP: 15108 10QSB 1 COMPUTER RESEARCH, INC. 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, 1998 ------------------- / / 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. Southpointe Plaza I, Suite 300, 400 Southpointe Boulevard, Canonsburg, PA 15317 - -------------------------------------------------------------------------------- (Address of principal executive offices) (412) 745-0600 - -------------------------------------------------------------------------------- (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, 1998) - ------------------------------------------------------- 2 PART I - FINANCIAL STATEMENTS ITEM I A. COMPUTER RESEARCH, INC. BALANCE SHEET February 28, 1998 (Unaudited) and August 31, 1997 (Audited)
ASSETS ------ FEBRUARY 28, AUGUST 31, 1998 1997 ---- ---- CURRENT ASSETS Cash and Cash Equivalents $ 515,806 $ 336,259 Short-Term Investments 1,988,331 2,378,249 Accounts Receivable - Trade (net of allowance for doubtful accounts of $30,000 at 2/28/98 and 8/31/97) 1,031,058 856,223 Inventories (first-in, first-out) or market 55,187 40,770 Prepaid Expenses 104,472 66,713 ---------- ---------- Total Current Assets 3,694,854 3,678,214 ---------- ---------- EQUIPMENT and LEASEHOLD IMPROVEMENTS - At Cost Data Processing Equipment 4,626,905 4,439,883 Data Processing Equipment Under Capital Leases 256,471 319,163 Leasehold Improvements 302,958 271,610 Office Equipment 596,196 577,004 ---------- ---------- 5,782,530 5,607,660 Less Accumulated Depreciation and Amortization 5,262,991 5,182,993 ---------- ---------- 519,539 424,667 ---------- ---------- OTHER ASSETS 45,359 -0- ---------- ---------- $4,259,752 $4,102,881 ========== ==========
The accompanying notes are an integral part of these financial statements. 2 3 A. COMPUTER RESEARCH, INC. BALANCE SHEET - CONT'D. February 28, 1998 (Unaudited) and August 31, 1997 (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ FEBRUARY 28, AUGUST 31, 1998 1997 ---- ---- LIABILITIES CURRENT LIABILITIES Current Portion of Long-Term Obligations $ 56,488 $ 12,017 Accounts Payable 141,710 84,216 Accrued Payroll 62,374 237,068 Accrued Income Taxes 61,000 -0- Accrued Vacation 332,114 328,613 Customer Deposits 87,900 96,800 Accrued Rent -0- 4,888 Accrued Lease Obligation -0- 37,765 Other Liabilities 246 115 ---------- ---------- Total Current Liabilities 741,832 801,482 LONG-TERM OBLIGATIONS 105,951 108,882 ACCRUED LEASE OBLIGATION -0- 3,949 ---------- ---------- Total Liabilities 847,783 914,313 ---------- ---------- COMMITMENTS -0- -0- ---------- ---------- STOCKHOLDERS' EQUITY - -------------------- Common Stock - No Par Value; $.0008 Stated Value; 10,000,000 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 2,664,397 2,440,996 ---------- ---------- Total Stockholders' Equity 3,411,969 3,188,568 ---------- ---------- $4,259,752 $4,102,881 ========== ==========
The accompanying notes are an integral part of these financial statements. 3 4 B. COMPUTER RESEARCH, INC. CAPITALIZATION AND STOCKHOLDERS' EQUITY February 28, 1998 (Unaudited) DEBT AMOUNT ---- ------ Short-Term Loans, Notes $ -0- Long-Term Debt (Including $56,488 due within one year) 162,439 ----------- Total Debt $ 162,439 ========== 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 2,440,996 Net Income for Period 223,401 ---------- 2,664,397 ---------- Total Stockholders' Equity $3,411,969 ========== 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, 1998 and 1997
1998 1997 ---- ---- REVENUES - -------- Sales of Services $3,392,419 $3,776,226 Sales of Equipment, Software and Supplies 10,293 25,477 Rental Income From Operating Leases 120 10,620 Other Income 75,916 68,285 ---------- ---------- 3,478,748 3,880,608 ---------- ---------- COSTS AND EXPENSES - ------------------ Operating Expenses 1,968,691 2,175,756 Selling and Administrative Expenses 1,065,528 956,866 Depreciation and Amortization 80,049 98,491 Cost of Equipment, Software and Supplies Sold 7,593 17,842 Interest Expense 7,486 4,629 ---------- ---------- 3,129,347 3,253,584 ---------- ---------- INCOME BEFORE INCOME TAXES 349,401 627,024 LESS: PROVISION FOR INCOME TAXES 126,000 238,000 ---------- ---------- NET INCOME $ 223,401 $ 389,024 ========== ========== Average Number of Shares Outstanding 4,037,255 4,037,255 ---------- ---------- EARNINGS PER COMMON SHARE $ .06 $ .10 (Basic and Diluted) ---------- ---------- DIVIDENDS PER COMMON SHARE $ -- $ -- ========== ==========
The results for the period ended February 28, 1998, 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, 1998 and 1997. 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, 1998 and 1997
1998 1997 ---- ---- REVENUES - -------- Sales of Services $1,525,061 $2,034,774 Sales of Equipment, Software and Supplies 10,293 296 Rental Income From Operating Leases 30 5,310 Other Income 34,601 34,081 ---------- ---------- 1,569,985 2,074,461 ---------- ---------- COSTS AND EXPENSES - ------------------ Operating Expenses 939,415 1,128,375 Selling and Administrative Expenses 570,247 506,094 Depreciation and Amortization 41,517 50,582 Cost of Equipment, Software and Supplies Sold 7,593 198 Interest Expense 3,632 2,178 ---------- ---------- 1,562,404 1,687,427 ---------- ---------- INCOME BEFORE INCOME TAXES 7,581 387,034 LESS: PROVISION FOR INCOME TAXES 4,000 146,000 ---------- ---------- NET INCOME $ 3,581 $ 241,034 ========== ========== Average Number of Shares Outstanding 4,037,255 4,037,255 ---------- ---------- EARNINGS PER COMMON SHARE $ .00 $ .06 ========== ========== (Basic and Diluted) DIVIDENDS PER COMMON SHARE $ -- $ -- ========== ==========
The results for the period ended February 28, 1998, 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, 1998 and 1997. 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, 1998 AND 1997
1998 1997 ---- ---- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net Income $ 223,401 $ 389,024 ----------- ----------- ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation and Amortization 80,049 98,491 Provision for Losses on Doubtful Accounts -0- 25,000 Change in Assets and Liabilities: Accounts Receivable (174,835) (401,378) Inventories (14,417) (40,925) Prepaid Expenses (37,759) (6,514) Accounts Payable, Accrued Expenses and Other Current Liabilities (52,568) (312,687) Customer Deposits (8,900) 4,350 Accrued Lease Obligation (8,836) (6,978) ----------- ----------- Total Adjustments (217,266) (640,641) ----------- ----------- Net Cash Provided by (Used In) Operating Activities 6,135 (251,617) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Equipment and Leasehold Improvements (137,809) (76,817) Short-Term Investment Maturities 1,089,918 -0- Additions to Other Assets (45,410) -0- Additions to Short-Term Investments (700,000) (632,060) ----------- ----------- Net Cash Provided by (Used In) Investing 206,699 (708,877) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on Capital Lease Obligations (33,287) (36,855) ----------- ----------- Net Cash (Used In) Financing Activities (33,287) (36,855) ----------- ----------- Net Increase (Decrease) in Cash 179,547 (997,349) Cash and Cash Equivalents at August 31, 1997 and 1996 336,259 1,486,924 ----------- ----------- Cash and Cash Equivalents at February 28, 1998 and 1997 $ 515,806 $ 489,575 =========== =========== CASH PAID DURING THE PERIOD 2/28/98 2/28/97 ----------- ----------- Interest $ 7,486 $ 4,629 =========== =========== Income Taxes $ 71,000 $ 441,860 =========== ===========
Supplemental Schedule of Noncash Investing and Financing Activities There were no noncash investing and financing activities for the six months ended February 28, 1997. In December 1997, the Company entered into a long term capital lease for a new phone system at a cost of $37,061. 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, 1998 NOTE A - COMPANY'S ANNUAL REPORT UNDER FORM 10-KSB The accompanying financial information should be read in conjunction with the Company's 1997 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. 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. In addition, the clients serviced could be involved in mergers and acquisitions or may choose to convert their business from self-clearing to a fully disclosed basis which would eliminate the need for the accounting services provided by the Company. 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. In March of 1996, the Company and Wachovia Operational Services Corporation (WOSC) entered into an agreement to convert the Company's production software to operate on an IBM AS/400 configuration. WOSC is an affiliate of Wachovia Investments, Inc. (WII), a major service client of the Company that accounted for approximately 20% of the service revenues in fiscal year 1997. In consideration for providing funds for the joint conversion project, WOSC has secured a perpetual software license agreement from the Company for servicing its affiliate, WII. The Company has retained sole ownership of the converted software and will continue to offer its services to its clients on a service bureau basis from the IBM AS/400 platform. At the start of the second quarter of the current fiscal year, WOSC began utilizing its software license agreement to offer processing services to WII. As a result, beginning in the second quarter of the current year, WII no longer utilizes the Company's data processing services, but will utilize maintenance and other services offered by the Company. The Company is currently in contract discussions with several prospective new clients and believes it can replace a portion of the revenues previously attributed to WII during the remainder of its 1998 fiscal year. However, because of the relatively fixed cost element of the Company's operations, to the extent that such revenues are not replaced, the percentage decrease in net income will exceed the percentage decrease in lost revenues. 9 10 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. Since these statements involve risks and uncertainties and are subject to change at anytime, the Company's actual results could differ materially from expected results. The Company's forward looking statements are based upon operating budgets and many other detailed business assumptions. While the Company believes that its assumptions are reasonable, it cautions that there are inherent difficulties in predicting certain important factors which could directly affect the business. Some 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, or costs and other effects related to unanticipated legal proceedings. REVENUES -------- The total revenues for the first six months of the current year were $3,478,748 or a decrease of approximately 10% from the comparable period of the previous year. The loss of the major client revenues at the beginning of the second quarter of the current year, as explained above, was the primary reason for this decrease. The total revenues for the fiscal second quarter of the current year were approximately $1,569,985 or a decrease of approximately 24% as compared to the previous year. This decrease is the result of the loss of the WII revenues as explained above. COSTS AND EXPENSES ------------------ The total costs and expenses for the first six months of the current year decreased approximately 4% as compared to the previous year. A reduction in computer operations personnel, repairs and maintenance and the reduction of an allocation amount to a company profit sharing plan were the primary reasons for this decrease. The total costs and expenses for the fiscal second quarter of the current year decreased approximately 7% as compared to the comparable period of the previous year. 10 11 NET INCOME ---------- The net income for the first six months of the current year was $223,401 or $.06 per share as compared to $389,024 or $.10 per share for the previous year. The reduction in net income is attributable to the reduced revenues. The net income for the fiscal second quarter of the current year was $3,581 or $.00 per share as compared to $241,034 or $.06 per share for the previous year. 2. CAPITAL RESOURCES AND LIQUIDITY The Company had approximately $2.5 million in cash, cash equivalents and short-term investments at the end of the second quarter of the 1998 fiscal year. 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. In the third quarter of the 1998 fiscal year, the Company will enter into a lease commitment of approximately $4,300 per month for computer equipment. 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 27, 1998. 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 4/14/98 /s/ JAMES L. SCHULTZ --------------------------- --------------------------------------- James L. Schultz, President & Treasurer 12 EX-27 2 COMPUTER RESEARCH, INC.
5 0000201511 COMPUTER RESEARCH, INC. 1 US DOLLARS 6-MOS AUG-31-1998 SEP-01-1997 FEB-28-1998 1 515,806 1,988,331 1,061,058 30,000 55,187 3,694,854 5,782,530 5,262,991 4,259,752 741,832 162,439 0 0 3,230 3,408,739 4,259,752 10,293 3,478,748 7,593 3,129,347 0 0 7,486 349,401 126,000 223,401 0 0 0 223,401 .06 .06
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