<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 November 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission File No. 0-5954
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COMPUTER RESEARCH, INC.
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(Exact name of small business issuer as specified in its charter)
Pennsylvania 25-1201499
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(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
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(Address of principal executive offices)
(724) 745-0600
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(Issuer's telephone number)
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(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
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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, 1999)
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PART I - FINANCIAL STATEMENTS
ITEM I
A. COMPUTER RESEARCH, INC. BALANCE SHEET
November 30, 1999 (Unaudited) and August 31, 1999 (Audited)
<TABLE>
<CAPTION>
ASSETS
NOVEMBER 30, AUGUST 31,
1999 1999
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<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 655,723 $ 449,698
Short-Term Investments 2,812,921 2,439,882
Accounts Receivable - Trade
(net of allowance for doubtful accounts
of $37,500) 914,833 1,058,999
Inventories at the Lower of Cost
(first-in, first-out) or market 16,675 7,152
Prepaid Expenses 92,660 52,689
Deferred Tax Asset 25,000 25,000
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Total Current Assets 4,517,812 4,033,420
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EQUIPMENT and LEASEHOLD IMPROVEMENTS - At Cost
Data Processing Equipment 1,820,831 1,765,116
Data Processing Equipment Under Capital Leases 446,471 446,471
Leasehold Improvements 185,008 185,008
Office Equipment 596,367 580,574
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3,048,677 2,977,169
Less Accumulated Depreciation and Amortization (2,303,803) (2,249,900)
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744,874 727,269
OTHER ASSETS 30,030 43,998
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$ 5,292,716 $ 4,804,687
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
A. COMPUTER RESEARCH, INC. BALANCE SHEET - CONT'D.
November 30, 1999 (Unaudited) and August 31, 1999 (Audited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
NOVEMBER 30, AUGUST 31,
1999 1999
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<S> <C> <C>
LIABILITIES
CURRENT LIABILITIES
Current Portion of Long-Term Obligations 75,644 81,072
Accounts Payable 141,938 125,117
Accrued Payroll and Related Costs 251,587 129,607
Accrued Income Taxes 161,117 42,000
Accrued Vacation 260,593 260,593
Customer Deposits 93,701 93,701
Other Liabilities 466 290
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Total Current Liabilities 985,046 732,380
LONG-TERM OBLIGATIONS 141,759 161,266
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Total Liabilities 1,126,805 893,646
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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 3,418,339 3,163,469
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Total Stockholders' Equity 4,165,911 3,911,041
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$5,292,716 $4,804,687
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</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
B. COMPUTER RESEARCH, INC. CAPITALIZATION AND STOCKHOLDERS' EQUITY
November 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
DEBT AMOUNT
---- ------
<S> <C>
Short-Term Line of Credit $ -0-
Long-Term Debt (Including $75,644 due within one year) 217,403
--------
Total Debt $217,403
========
</TABLE>
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
- --------------------
SHARES ISSUED AMOUNT
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<S> <C> <C>
Common Stock 4,037,255 $ 3,230
Capital in Excess of Par Value 744,342
Retained Earnings -
Balance at Beginning of Current Fiscal Year 3,163,469
Net Income for Period 254,870
----------
3,418,339
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Total Stockholders' Equity $4,165,911
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
C. COMPUTER RESEARCH, INC. STATEMENT OF INCOME
For the Three Months Ended November 30, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
REVENUES
Sales of Services $2,145,558 $1,643,708
Sales of Equipment, Software and Supplies 3,000 27,500
Other Income 34,787 30,946
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2,183,345 1,702,154
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COSTS AND EXPENSES
Operating Expenses 1,079,805 1,034,359
Selling and Administrative Expenses 623,537 604,858
Depreciation and Amortization 61,490 37,729
Cost of Equipment, Software and Supplies Sold 2,477 21,111
Interest Expense 5,166 2,552
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1,772,475 1,700,609
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INCOME BEFORE INCOME TAXES 410,870 1,545
LESS: PROVISION FOR INCOME TAXES 156,000 500
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NET INCOME $ 254,870 $ 1,045
========== ==========
Average Number of Shares Outstanding 4,037,255 4,037,255
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EARNINGS PER COMMON SHARE $ .06 $ .00
========== ==========
(Basic and Diluted)
DIVIDENDS PER COMMON SHARE $ -- $ --
========== ==========
</TABLE>
The results for the periods ended November 30, 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 November 30, 1999 and 1998.
The accompanying notes are an integral part of these financial
statements.
5
<PAGE> 6
D. COMPUTER RESEARCH, INC. STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Net Income $ 254,870 $ 1,045
------------ ------------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 61,490 37,729
Change in Assets and Liabilities:
Accounts Receivable 144,166 (396,463)
Inventories (9,523) 11,027
Prepaid Expenses (39,971) (30,316)
Accounts Payable, Accrued Expenses and Other Current Liabilities 258,094 99,504
Customer Deposits -0- (7,250)
Other Assets 6,381 (12,479)
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Total Adjustments 420,637 (298,248)
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Net Cash Provided by (Used by) Operating Activities 675,507 (297,203)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Equipment and Leasehold Improvements (71,508) (61,154)
Short-Term Investment Maturities 1,775,000 1,225,000
Additions to Short-Term Investments (2,148,039) (1,421,875)
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Net Cash Provided by (Used by)Investing Activities (444,547) (258,029)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Capital Lease Obligations (24,935) (14,275)
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Net Cash (Used by) Financing Activities (24,935) (14,275)
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Net Increase (Decrease) in Cash 206,025 (569,507)
Cash and Cash Equivalents at August 31, 1999 and 1998 449,698 766,823
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Cash and Cash Equivalents at November 30, 1999 and 1998 $ 655,723 $ 197,316
============ ============
CASH PAID DURING THE PERIOD
Interest $ 5,166 $ 2,552
============ ============
Income Taxes $ 36,883 $ -0-
============ ============
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
There were no noncash investing and financing activities during the periods.
The accompanying notes are an integral part of these financial statements.
6
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COMPUTER RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED NOVEMBER 30, 1999
NOTE A - COMPANY'S ANNUAL REPORT UNDER FORM 10-KSB
The accompanying financial information should be read in conjunction
with the Company's 1999 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.
7
<PAGE> 8
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. As the result of being acquired by a third party, a client
that accounted for 11.6% of the 1999 revenues of the Company will be
terminating the Company's services at the beginning of the fiscal third
quarter of the current year. 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 three months of the 2000
fiscal year increased approximately 28% over the comparable
period of the previous year to a total of $2,183,345. This is
attributable to increased revenues from new banking and
brokerage clients, as well as to increased revenues generated
by some existing clients.
COSTS AND EXPENSES
The costs and expenses for the first three months of the
current year increased approximately 4% over the comparable
period of the previous year.
NET INCOME
The net income for the first three months of the 2000 fiscal
year was $254,870 or $.06 per share as compared to $1,045 or
$.00 per share for the comparable period of the previous year.
8
<PAGE> 9
2. CAPITAL RESOURCES AND LIQUIDITY
The Company had approximately $3.4 million in cash, cash equivalents
and short-term investments at the end of the first quarter of the 2000
fiscal year. In addition, the Company maintains an approximate $750,000
line of credit, if needed. This, along with funds generated by
operations, should adequately support the operating needs of the
Company in the near term.
3. "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 any time, 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.
9
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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.
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(Registrant)
Date 1/12/00 /s/ JAMES L. SCHULTZ
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James L. Schultz, President & Treasurer
10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000201511
<NAME> COMPUTER RESEARCH, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
<EXCHANGE-RATE> 1
<CASH> 655,723
<SECURITIES> 2,812,921
<RECEIVABLES> 952,333
<ALLOWANCES> 37,500
<INVENTORY> 16,675
<CURRENT-ASSETS> 4,517,812
<PP&E> 3,048,677
<DEPRECIATION> 2,303,803
<TOTAL-ASSETS> 5,292,716
<CURRENT-LIABILITIES> 985,046
<BONDS> 217,403
0
0
<COMMON> 3,230
<OTHER-SE> 4,162,681
<TOTAL-LIABILITY-AND-EQUITY> 5,292,716
<SALES> 3,000
<TOTAL-REVENUES> 2,183,345
<CGS> 2,477
<TOTAL-COSTS> 1,772,475
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,166
<INCOME-PRETAX> 410,870
<INCOME-TAX> 156,000
<INCOME-CONTINUING> 254,870
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 254,870
<EPS-BASIC> .06
<EPS-DILUTED> .06
</TABLE>
