-----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, SjtqPjJyqCHnNq/JeFylPoA7pHVlFOnzToZdk8NVfgS6NqETm+o8dY1bdGiNgtM3 j2gKIczL8u01g4PEioV5hw== 0000950128-99-000862.txt : 19990715 0000950128-99-000862.hdr.sgml : 19990715 ACCESSION NUMBER: 0000950128-99-000862 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990531 FILED AS OF DATE: 19990714 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: 99663953 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: SOUTHPOINT PLZ I STREET 2: 400 SOUTHPOINTE BLVD STE 300 CITY: CANONSBURGH STATE: PA ZIP: 15317-8539 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 May 31, 1999 --------------------- [ ] 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) (724) 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 May 31, 1999) - ------------------------------ 2 PART I - FINANCIAL STATEMENTS ITEM I A. COMPUTER RESEARCH, INC. BALANCE SHEET May 31, 1999 (Unaudited) and August 31, 1998 (Audited)
ASSETS ------ MAY 31, AUGUST 31, 1999 1998 ---------- ---------- CURRENT ASSETS Cash and Cash Equivalents $ 460,513 $ 766,823 Short-Term Investments 2,151,273 1,996,700 Accounts Receivable - Trade (net of allowance for doubtful accounts of $37,500 and $30,000) 1,165,590 721,239 Inventories at the Lower of Cost (first-in, first-out) or market 41,621 43,891 Prepaid Expenses 58,695 79,955 ---------- ---------- Total Current Assets 3,877,692 3,608,608 ---------- ---------- EQUIPMENT and LEASEHOLD IMPROVEMENTS - At Cost Data Processing Equipment 1,725,495 1,672,213 Data Processing Equipment Under Capital Leases 446,471 256,471 Leasehold Improvements 171,816 154,551 Office Equipment 572,402 535,887 ---------- ---------- 2,916,184 2,619,122 Less Accumulated Depreciation and Amortization 2,190,411 2,064,718 ---------- ---------- 725,773 554,404 ---------- ---------- OTHER ASSETS 59,109 39,905 ---------- ---------- $4,662,574 $4,202,917 ========== ==========
The accompanying notes are an integral part of these financial statements. 2 3 A. COMPUTER RESEARCH, INC. BALANCE SHEET - CONT'D. May 31, 1999 (Unaudited) and August 31, 1998 (Audited) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------
MAY 31, AUGUST 31, 1999 1998 ---------- ---------- LIABILITIES - ----------- CURRENT LIABILITIES Line of Credit Payable $ 50,000 $ -0- Current Portion of Long-Term Obligations 84,555 37,765 Accounts Payable 120,681 149,382 Accrued Payroll and Related Costs 124,588 76,281 Accrued Income Taxes 20,000 13,000 Accrued Vacation 278,230 281,058 Customer Deposits 90,400 97,650 Other Liabilities 94 330 ---------- ---------- Total Current Liabilities 768,548 655,466 LONG-TERM OBLIGATIONS 180,370 97,061 ---------- ---------- Total Liabilities 948,918 752,527 ---------- ---------- STOCKHOLDERS' EQUITY Common Stock - No Par Value; $.0008 Stated Value; 10,000,000 Shares Authorized; 4,037,255 Shares Issued and Outstanding 3,230 3,230 Additional Paid-In Capital 744,342 744,342 Retained Earnings 2,966,084 2,702,818 ---------- ---------- Total Stockholders' Equity 3,713,656 3,450,390 ---------- ---------- $4,662,574 $4,202,917 ========== ==========
The accompanying notes are an integral part of these financial statements. 3 4 B. COMPUTER RESEARCH, INC. CAPITALIZATION AND STOCKHOLDERS' EQUITY May 31, 1999 (Unaudited)
DEBT AMOUNT ---- ------ Short-Term Line of Credit $ 50,000 Long-Term Debt (Including $84,555 due within one year) 264,925 -------- Total Debt $314,925 ========
STOCKHOLDERS' EQUITY - -------------------- SHARES ISSUED AMOUNT ------------- ------ Common Stock 4,037,255 $ 3,230 Capital in Excess of Par Value 744,342 Retained Earnings - Balance at Beginning of Current Fiscal Year 2,702,818 Net Income for Period 263,266 ---------- 2,966,084 ---------- Total Stockholders' Equity $3,713,656 ==========
The accompanying notes are an integral part of these financial statements. 4 5 C. COMPUTER RESEARCH, INC. STATEMENT OF INCOME For the Nine Months Ended May 31, 1999 and 1998 (Unaudited)
1999 1998 ---------- ---------- REVENUES - -------- Sales of Services $5,650,543 $4,870,821 Sales of Equipment, Software and Supplies 27,500 10,293 Other Income 85,874 110,080 ---------- ---------- 5,763,917 4,991,194 ---------- ---------- COSTS AND EXPENSES - ------------------ Operating Expenses 3,365,520 2,895,258 Selling and Administrative Expenses 1,841,200 1,600,984 Depreciation and Amortization 133,929 121,998 Cost of Equipment, Software and Supplies Sold 21,111 7,593 Interest Expense 19,759 10,660 ---------- ---------- 5,381,519 4,636,493 ---------- ---------- INCOME BEFORE INCOME TAXES 382,398 354,701 LESS: PROVISION FOR INCOME TAXES 119,132 128,000 ---------- ---------- NET INCOME $ 263,266 $ 226,701 ========== ========== Average Number of Shares Outstanding 4,037,255 4,037,255 ---------- ---------- EARNINGS PER COMMON SHARE $ .07 $ .06 (Basic and Diluted) ========== ========== DIVIDENDS PER COMMON SHARE $ -- $ -- ========== ==========
The results for the periods ended May 31, 1999 and 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 nine months ended May 31, 1999 and 1998. The accompanying notes are an integral part of these financial statements. 5 6 C. COMPUTER RESEARCH, INC. STATEMENT OF INCOME For the Three Months Ended May 31, 1999 and 1998 (Unaudited)
1999 1998 ---------- ---------- REVENUES - -------- Sales of Services $2,019,438 $1,478,402 Sales of Equipment, Software and Supplies -0- -0- Other Income 27,136 34,044 ---------- ---------- 2,046,574 1,512,446 ---------- ---------- COSTS AND EXPENSES - ------------------ Operating Expenses 1,202,379 926,567 Selling and Administrative Expenses 579,233 535,456 Depreciation and Amortization 54,501 41,949 Cost of Equipment, Software and Supplies Sold -0- -0- Interest Expense 7,610 3,175 ---------- ---------- 1,843,723 1,507,147 ---------- ---------- INCOME BEFORE INCOME TAXES 202,851 5,299 LESS: PROVISION FOR INCOME TAXES 75,000 2,000 ---------- ---------- NET INCOME $ 127,851 $ 3,299 ========== ========== Average Number of Shares Outstanding 4,037,255 4,037,255 ---------- ---------- EARNINGS PER COMMON SHARE $ .03 $ .00 (Basic and Diluted) ========== ========== DIVIDENDS PER COMMON SHARE $ -- $ -- ========== ==========
The results for the period ended May 31, 1999 and 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 May 31, 1999 and 1998. The accompanying notes are an integral part of these financial statements. 6 7 D. COMPUTER RESEARCH, INC. STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED MAY 31, 1999 AND 1998 (UNAUDITED)
1999 1998 ----------- ----------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net Income $ 263,266 $ 226,701 ----------- ----------- ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation and Amortization 133,929 121,998 Provision for Losses on Accounts Receivable 7,500 -0- Change in Assets and Liabilities: Accounts Receivable (451,851) (72,065) Inventories 2,270 (106,357) Prepaid Expenses 21,260 (4,943) Accounts Payable, Accrued Expenses and Other Current Liabilities 23,542 (47,989) Customer Deposits (7,250) 17,666 ----------- ----------- Total Adjustments (270,600) (91,690) ----------- ----------- Net Cash Provided by (Used by) Operating Activities (7,334) 135,011 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Equipment and Leasehold Improvements (107,062) (198,037) Short-Term Investment Maturities 2,125,000 1,519,033 Additions to Other Assets (27,440) (47,454) Additions to Short-Term Investments (2,279,573) (900,000) ----------- ----------- Net Cash Provided by (Used by)Investing Activities (289,075) 373,542 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on Capital Lease Obligations (59,901) (46,938) Proceeds from Line of Credit 200,000 -0- Payment on Line of Credit (150,000) -0- ----------- ----------- Net Cash (Used by) Financing Activities (9,901) (46,938) ----------- ----------- Net Increase (Decrease) in Cash (306,310) 461,615 Cash and Cash Equivalents at August 31, 1998 and 1997 766,823 336,259 ----------- ----------- Cash and Cash Equivalents at May 31, 1999 and 1998 $ 460,513 $ 797,874 =========== =========== CASH PAID DURING THE PERIOD Interest $ 19,759 $ 10,660 =========== =========== Income Taxes $ 85,000 $ 97,000 =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES In December 1998, the Company entered into a long term capital lease for additional computer equipment at a cost of $190,000. Additionally, 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 statements. 7 8 COMPUTER RESEARCH, INC. NOTES TO FINANCIAL STATEMENTS NINE MONTHS ENDED MAY 31, 1999 NOTE A - COMPANY'S ANNUAL REPORT UNDER FORM 10-KSB The accompanying financial information should be read in conjunction with the Company's 1998 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. REVENUES The total revenues for the first nine months of the 1999 fiscal year increased approximately 16% over the previous year to a total of $5,763,917. This is attributable to increased revenues from some existing clients, as well as from new clients added during the period. The total revenues for the third quarter of the 1999 year were $2,046,575 or an increase of approximately 35% over the previous year. This increase resulted primarily from additional clients during the current year, as well as increased revenues from some existing clients. COSTS AND EXPENSES The total costs and expenses for the first nine months of the 1999 fiscal year increased approximately 16% over the comparable period of the previous year to a figure of $5,381,519. The primary contributors to this increase were increased data communications costs and fees for outside services, as well as increased payroll costs. 9 10 The total costs and expenses for the third quarter of the 1999 fiscal year increased approximately 22% over the previous year to a figure of $1,836,113. This increase is attributable to the items mentioned above, as well as to the cost associated with the increased business generated by the Company. PROVISION FOR INCOME TAXES Tax expense is normally accrued at 36% of income before taxes for financial reporting purposes. In filing the year-end 1998 tax returns, the Company generated tax refunds of approximately $20,000 higher than had been previously estimated. This tax benefit is recorded as a reduction of current year tax expense. NET INCOME The net income for the first nine months of the 1999 fiscal year was $263,266 or $.07 per share as compared to $226,701 or $.06 per share for the previous year. The net income for the fiscal third quarter of the current year was $127,851 or $.03 per share as compared to $3,299 or $.00 per share for the previous year. 2. CAPITAL RESOURCES AND LIQUIDITY The Company had approximately $2.6 million in cash, cash equivalents and short- term investments at the end of the third quarter of the 1999 fiscal year. In addition, approximately $700,000 of a $750,000 line of credit was available at the end of the third quarter. This, along with funds generated by operations, should adequately support the operating needs of the Company in the near term. 3. SOFTWARE MODIFICATION FOR YEAR 2000 The software product line of the Company had been originally designed to reflect the year as two digits (i.e, 99 = 1999). This design would have created problems for processing at the turn of the century since the 00 representation for the year 2000 would have been interpreted by the software to be 1900. However, as part of the conversion project to the IBM AS/400, each date field in the entire product line was modified to contain a four digit representation for the year. This new design format should enable the software to accurately handle transactions beginning in the year 2000. During the first nine months of the 1999 fiscal year, the Company completed extensive securities industry mandated testing for predetermined critical 10 11 calendar dates in the year 2000 and above in order to verify system processing accuracy. While it would be impossible to guarantee that there will be no problems with the system at the turn of the century, the management of the Company is confident that there will be little, if any, disruptions. In any event, the Company has developed contingency plans which require management, staff members and other resources to be available to react promptly should a problem occur. Additionally, the Company is continuing to monitor and evaluate its third party software and hardware suppliers, as well as firms with which it has a communications interface to determine that these suppliers will also be year 2000 compliant. The Company does not expect to incur any substantial cost in the system testing and vendor evaluation. 4. CONVERSION OF OPERATIONS TO THE IBM AS/400 COMPUTER CONFIGURATION During the third quarter of the 1999 fiscal year, the Company completed the project of converting its service business to operating on the IBM AS/400 platform. As of the end of the third quarter of the current year, all of the Company's service business is now operational on the IBM platform. As a result, the Company is no longer dependent upon previously utilized computer mainframe equipment which was not year 2000 compliant. 5. "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. 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 detailed 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. 11 12 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 July 14, 1999 /s/ James L. Schultz -------------- --------------------------------------- James L. Schultz, President & Treasurer 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000201511 COMPUTER RESEARCH, INC. 1 U.S. DOLLARS 9-MOS AUG-31-1999 SEP-01-1998 MAY-31-1999 1 460,513 2,151,273 1,203,090 37,500 41,621 3,877,692 2,916,184 2,190,411 4,662,574 768,548 264,925 0 0 3,230 3,710,426 4,662,574 27,500 5,763,917 21,111 5,381,519 0 7,500 19,759 382,398 119,132 263,266 0 0 0 263,266 .03 .03
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