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Previous: SALOMON INC, 8-K, 1996-07-12 |
Next: STAODYN INC, 10QSB, 1996-07-12 |
<PAGE> 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, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
EXCHANGE ACT
For the transition period from ---------- to ---------------
0-5954
Commission File No.-------------------------
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:
4,014,300
- -------------------------------------
<PAGE> 2
PART I - FINANCIAL STATEMENTS
ITEM I
A. COMPUTER RESEARCH, INC. BALANCE SHEET
MAY 31, 1996 AND AUGUST 31, 1995
ASSETS
<TABLE>
<CAPTION>
MAY 31, AUGUST 31,
1996 1995
--------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $1,884,241 $ 873,508
Accounts Receivable - Trade
(net of allowance for doubtful accounts
of $45,000 and $30,000 at 5/31/96 and
8/31/95 respectively) 904,167 776,099
Inventories
(first-in, first-out) or market 49,404 80,518
Prepaid Expenses 46,760 75,911
---------- ----------
Total Current Assets 2,884,572 1,806,036
---------- ----------
EQUIPMENT and LEASEHOLD IMPROVEMENTS - At Cost
Data Processing Equipment 4,325,247 4,255,912
Data Processing Equipment Under Capital Leases 162,031 104,339
Other 818,775 798,889
---------- ----------
5,306,053 5,159,140
Less Accumulated Depreciation and Amortization 4,995,697 4,879,610
---------- ----------
310,356 279,530
---------- ----------
OTHER ASSETS -0- 1,341
$3,194,928 $2,086,907
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
A. COMPUTER RESEARCH, INC. BALANCE SHEET - CONT'D.
MAY 31, 1996 AND AUGUST 31, 1995
LIABILITIES
<TABLE>
<CAPTION>
MAY 31, AUGUST 31,
1996 1995
-------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note Payable to Bank $ - $ 25,000
Current Portion of Long-Term Obligations 72,668 45,852
Accounts Payable 80,228 82,057
Accrued Payroll 241,610 157,036
Accrued Income Taxes 215,300 27,500
Accrued Vacation 311,970 281,720
Customer Deposits 127,938 70,350
Accrued Rent 41,650 103,847
Accrued Lease Obligation 15,516 20,204
Other Current Liabilities 5,268 4,746
---------- ----------
Total Current Liabilities 1,112,148 818,312
LONG-TERM OBLIGATIONS 22,108 35,885
ACCRUED LEASE OBLIGATION 7,444 17,909
---------- ----------
Total Liabilities 1,141,700 872,106
---------- ----------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common Stock - No Par Value; $.0008 Stated Value;
5,000,000 Shares Authorized; 4,014,300 and
3,887,895 Shares Issued and Outstanding
at 5/31/96 and 8/31/95, Respectively 3,211 3,110
Additional Paid-In Capital 744,361 715,842
Retained Earnings 1,305,656 495,849
---------- ----------
Total Stockholders' Equity 2,053,228 1,214,801
---------- ----------
$3,194,928 $2,086,907
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
B. COMPUTER RESEARCH, INC. CAPITALIZATION AND STOCKHOLDERS' EQUITY
MAY 31, 1996
<TABLE>
<CAPTION>
DEBT AMOUNT
---------
<S> <C>
Short-Term Loans, Notes $ -
Long-Term Debt (Including $72,668 due within one year) 94,776
----------
Total Debt $ 94,776
----------
STOCKHOLDERS' EQUITY
SHARES ISSUED AMOUNT
------------- ---------
<S> <C> <C>
Preferred Stock -0-
Common Stock 4,014,300 $ 3,211
Capital in Excess of Par Value 744,361
Retained Earnings -
Balance at Beginning of Current Fiscal Year 495,849
Net Income for Period 809,807
----------
1,305,656
----------
Total Stockholders' Equity $2,053,228
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
C. COMPUTER RESEARCH, INC. STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED MAY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
REVENUES
Sales of Services $5,463,468 $4,321,124
Sales of Equipment, Software and Supplies 48,971 70,083
Rental Income From Operating Leases 28,205 36,545
Other Income 63,761 34,412
---------- ----------
5,604,405 4,462,164
---------- ----------
COSTS AND EXPENSES
Operating Expenses 3,029,025 2,861,565
Selling and Administrative Expenses 1,392,315 1,281,147
Depreciation and Amortization 116,087 63,844
Cost of Equipment, Software and Supplies Sold 37,347 45,322
Interest Expense 9,824 8,581
---------- ----------
4,584,598 4,260,459
---------- ----------
INCOME BEFORE INCOME TAXES 1,019,807 201,705
LESS: PROVISION FOR INCOME TAXES 210,000 9,000
---------- ----------
NET INCOME $ 809,807 $ 192,705
---------- ----------
Average Number of Shares Outstanding 4,014,300 3,883,895
---------- ---------
Earnings Per Common Share $ .20 $ .05
---------- ----------
DIVIDENDS PER COMMON SHARE $ - $ -
---------- ----------
</TABLE>
The results for the period ended May 31, 1996, 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, 1996.
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
C. COMPUTER RESEARCH, INC. STATEMENT OF INCOME
FOR THE FISCAL THIRD QUARTER ENDED MAY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C>
REVENUES
Sales of Services $1,784,830 $1,526,074
Sales of Equipment, Software and Supplies 29,375 61,690
Rental Income From Operating Leases 7,565 11,640
Other Income 24,613 13,086
---------- ----------
1,846,383 1,612,490
---------- ----------
COSTS AND EXPENSES
Operating Expenses 1,055,769 1,008,696
Selling and Administrative Expenses 458,262 439,545
Depreciation and Amortization 46,949 22,050
Cost of Equipment, Software and Supplies Sold 23,391 42,295
Interest Expense 3,072 2,981
---------- ----------
1,587,443 1,515,567
---------- ----------
INCOME BEFORE INCOME TAXES 258,940 96,923
LESS: PROVISION FOR INCOME TAXES 60,000 9,000
---------- ----------
NET INCOME $ 198,940 $ 87,923
---------- ----------
Average Number of Shares Outstanding 4,014,300 3,883,895
---------- ----------
Earnings Per Common Share $ .05 $ .02
---------- ----------
DIVIDENDS PER COMMON SHARE $ - $ -
========== ==========
</TABLE>
The results for the period ended May 31, 1996, 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, 1996.
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
D. COMPUTER RESEARCH, INC. STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED MAY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
(USED) BY OPERATING ACTIVITIES:
Net Income $ 809,807 $ 192,705
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 116,087 63,844
Provision for Losses on Doubtful Accounts 15,000 10,000
Change in Assets and Liabilities:
Accounts Receivable (143,068) (257,212)
Inventories 31,114 (779)
Prepaid Expenses 29,151 1,972
Other Assets 1,341 3,280
Accounts Payable, Accrued Expenses and
Other Current Liabilities 239,120 28,355
Customer Deposits 57,588 42,723
Accrued Lease Obligation (15,153) (56,411)
---------- ----------
Total Adjustments 331,180 (164,228)
---------- ----------
Net Cash (Used In) Provided by Operating Activities 1,140,987 28,477
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Equipment and Leasehold Improvements (89,221) (48,713)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Stock 28,620 3,611
Proceeds From Line of Credit - 100,000
Payments on Capital Lease Obligations (44,653) (4,794)
Payments on Line of Credit (25,000) (120,000)
---------- ----------
Net Cash Provided by (Used In) Financing Activities (41,033) (21,183)
---------- ----------
Net Increase (Decrease) in Cash 1,010,733 (41,419)
Cash and Cash Equivalents at August 31, 1995 and 1994 873,508 691,881
---------- ----------
Cash and Cash Equivalents at May 31, 1996 and 1995 $1,884,241 $ 650,462
========== ==========
CASH PAID DURING THE PERIOD
5/31/96 5/31/95
---------- ----------
Interest $ 9,824 $ 8,581
========= ==========
Income Taxes $ 22,500 $ -
========= ==========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
For the nine months ended May 31, 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 statements.
7
<PAGE> 8
COMPUTER RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED MAY 31, 1996
NOTE A - COMPANY'S ANNUAL REPORT UNDER FORM 10-KSB
The accompanying financial information should be read in conjunction
with the Company's 1995 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
<PAGE> 9
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
1. CAPITAL RESOURCES AND LIQUIDITY
The cash and cash equivalents on hand for the first nine months
of the current year increased from approximately $873,000 to
approximately $1,885,000. The primary reason for this increase
was due to an approximate $810,000 net income generated by
operations during the first nine months of the current year.
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 last quarter of the 1997 fiscal year, the Company
intends to complete an ongoing project to have the software of
its product line operational on IBM computer equipment. At that
time, the Company will have the option to purchase computer
processing time on the IBM equipment from an outside supplier or
if justified business wise, purchase and install IBM computer
equipment of its own for its service business processing needs.
2. RESULTS OF OPERATIONS
REVENUES
The Company's principal source of revenue is derived from
providing computerized accounting and support services to
securities brokerage firms, banks and other financial
institutions. The Company's revenues are directly affected by
securities trading volume and the number of transactions
processed for its clients. Due to the volatile nature of the
industry served, the results of operations for the period
represented are not necessarily indicative of the results of
operations to be expected for the full year or any specific
period.
The revenues for the first nine months of the current year
increased by approximately 26% over the previous year to a
figure of approximately $5,604,000. While revenues from banking
clients accounted for the majority of this increase, revenues
from brokerage clients, as well as programming fees, also
increased.
9
<PAGE> 10
The revenues for the fiscal third quarter of the current year
increased by approximately 15% over the comparable period of the
previous year. This is primarily attributable to increased
service fees from the brokerage and banking clients of the
Company's service business.
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 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 revenues from existing clients and
potential new service clients will serve to offset any decrease
in revenues that might occur.
COSTS AND EXPENSES
The total costs and expenses for the first nine months of the
current year increased by approximately 8% over the previous
year to $4,584,598. An allocation of Company funds to an
employee profit sharing plan, in addition to the cost of an
additional computer configuration installed during the second
quarter of the current year, were contributors to this increase.
The total costs and expenses for the fiscal third quarter of the
current year increased by approximately 5% over the comparable
period of the previous year to $1,587,443.
NET INCOME
The net income for the first nine months of the current fiscal
year was $809,807 or $.20 per share. The net income for the
first nine months of the previous year was $192,705 or $.05 per
share.
The net income for the fiscal third quarter of the current year
was $198,940 or $.05 per share as compared to $87,923 or $.02
per share for the comparable period of the previous year.
10
<PAGE> 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)
/s/ JAMES L. SCHULTZ
--------------------------------------
Date 7/12/96 James L. Schultz, President & Treasurer
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000201511
<NAME> COMPUTER RESEARCH, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 1,884,241
<SECURITIES> 0
<RECEIVABLES> 949,167
<ALLOWANCES> 45,000
<INVENTORY> 49,404
<CURRENT-ASSETS> 2,884,572
<PP&E> 5,306,053
<DEPRECIATION> 4,995,697
<TOTAL-ASSETS> 3,194,928
<CURRENT-LIABILITIES> 1,112,148
<BONDS> 94,776
0
0
<COMMON> 3,211
<OTHER-SE> 2,050,017
<TOTAL-LIABILITY-AND-EQUITY> 3,194,928
<SALES> 48,971
<TOTAL-REVENUES> 5,604,405
<CGS> 37,347
<TOTAL-COSTS> 4,584,598
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15,000
<INTEREST-EXPENSE> 9,824
<INCOME-PRETAX> 1,019,807
<INCOME-TAX> 210,000
<INCOME-CONTINUING> 809,807
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 809,807
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
|
|