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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, 2000
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[ ] 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 _____
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, 2000)
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PART I - FINANCIAL STATEMENTS
ITEM I
A. COMPUTER RESEARCH, INC. BALANCE SHEET
May 31, 2000 (Unaudited) and August 31, 1999 (Audited)
<TABLE>
<CAPTION>
ASSETS
MAY 31, AUGUST 31,
2000 1999
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<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 654,003 $ 449,698
Short-Term Investments 2,993,523 2,439,882
Accounts Receivable - Trade
(net of allowance for doubtful accounts
of $37,500) 760,325 1,058,999
Inventories at the Lower of Cost
(first-in, first-out) or market 6,900 7,152
Prepaid Expenses 106,914 52,689
Deferred Tax Asset 43,750 25,000
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Total Current Assets 4,565,415 4,033,420
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EQUIPMENT and LEASEHOLD IMPROVEMENTS - At Cost
Data Processing Equipment 975,439 1,765,116
Data Processing Equipment Under Capital Leases 388,778 446,471
Leasehold Improvements 218,724 185,008
Office Equipment 601,324 580,574
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2,184,265 2,977,169
Less Accumulated Depreciation and Amortization (1,297,663) (2,249,900)
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886,602 727,269
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OTHER ASSETS 18,787 43,998
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$ 5,470,804 $ 4,804,687
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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A. COMPUTER RESEARCH, INC. BALANCE SHEET - CONT'D.
May 31, 2000 (Unaudited) and August 31, 1999 (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MAY 31, AUGUST 31,
2000 1999
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<S> <C> <C>
LIABILITIES
CURRENT LIABILITIES
Current Portion of Long-Term Obligations $ 76,028 $ 81,072
Accounts Payable 90,122 125,117
Accrued Payroll and Related Costs 214,254 129,607
Accrued Income Taxes 196,670 42,000
Accrued Vacation 260,593 260,593
Customer Deposits 76,700 93,701
Other Liabilities 532 290
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Total Current Liabilities 914,899 732,380
LONG-TERM OBLIGATIONS 104,342 161,266
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Total Liabilities 1,019,241 893,646
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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 3,703,991 3,163,469
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Total Stockholders' Equity 4,451,563 3,911,041
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$5,470,804 $4,804,687
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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B. COMPUTER RESEARCH, INC. CAPITALIZATION AND STOCKHOLDERS' EQUITY
May 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
DEBT AMOUNT
<S> <C> <C> <C>
Short-Term Line of Credit $ -0-
Long-Term Debt (Including $76,028 due within one year) 180,370
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Total Debt $ 180,370
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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 3,163,469
Net Income for Period 540,522
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3,703,991
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Total Stockholders' Equity $4,451,563
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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C. COMPUTER RESEARCH, INC. STATEMENT OF INCOME
For the Nine Months Ended May 31, 2000 and 1999 (Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
REVENUES
Sales of Services $5,953,913 $5,650,543
Sales of Equipment, Software and Supplies 46,621 27,500
Other Income 123,108 85,874
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6,123,642 5,763,917
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COSTS AND EXPENSES
Operating Expenses 3,070,685 3,365,520
Selling and Administrative Expenses 1,962,444 1,841,200
Depreciation and Amortization 191,822 133,929
Cost of Equipment, Software and Supplies Sold 40,914 21,111
Interest Expense 13,902 19,759
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5,279,767 5,381,519
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INCOME BEFORE INCOME TAXES 843,875 382,398
LESS: PROVISION FOR INCOME TAXES 303,353 119,132
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NET INCOME $ 540,522 $ 263,266
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Average Number of Shares Outstanding 4,037,255 4,037,255
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EARNINGS PER COMMON SHARE $ .13 $ .07
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(Basic and Diluted)
DIVIDENDS PER COMMON SHARE $ -- $ --
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</TABLE>
The results for the periods ended May 31, 2000 and 1999 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, 2000 and 1999.
The accompanying notes are an integral part of these financial statements.
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C. COMPUTER RESEARCH, INC. STATEMENT OF INCOME
For the Three Months Ended May 31, 2000 and 1999 (Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
REVENUES
Sales of Services $1,762,998 $2,019,438
Sales of Equipment, Software and Supplies 1,621 -0-
Other Income 47,289 27,136
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1,811,908 2,046,574
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COSTS AND EXPENSES
Operating Expenses 970,243 1,202,379
Selling and Administrative Expenses 677,809 579,233
Depreciation and Amortization 59,143 54,501
Cost of Equipment, Software and Supplies Sold 1,437 -0-
Interest Expense 4,175 7,610
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1,712,807 1,843,723
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INCOME BEFORE INCOME TAXES 99,101 202,851
LESS: PROVISION FOR INCOME TAXES 19,279 75,000
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NET INCOME $ 79,822 $ 127,851
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Average Number of Shares Outstanding 4,037,255 4,037,255
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EARNINGS PER COMMON SHARE $ .02 $ .03
(Basic and Diluted) ========== ==========
DIVIDENDS PER COMMON SHARE $ -- $ --
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</TABLE>
The results for the periods ended May 31, 2000 and 1999 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, 2000 and
1999.
The accompanying notes are an integral part of these financial statements.
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D. COMPUTER RESEARCH, INC. STATEMENT OF CASH FLOWS
For the Nine Months Ended May 31, 2000 and 1999 (Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Net Income $ 540,522 $ 263,266
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ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 191,822 133,929
Provision for Losses on Accounts Receivable -0- 7,500
Change in Assets and Liabilities:
Accounts Receivable 298,674 (451,851)
Inventories 252 2,270
Prepaid Expenses (54,225) 21,260
Accounts Payable, Accrued Expenses and Other Current Liabilities 204,564 23,542
Customer Deposits (17,001) (7,250)
Deferred Tax Asset and Other Assets (7,329) -0-
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Total Adjustments 616,757 (270,600)
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Net Cash Provided by (Used by) Operating Activities 1,157,279 (7,334)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Equipment and Leasehold Improvements (335,819) (107,062)
Short-Term Investment Maturities 3,750,000 2,125,000
Additions to Other Assets (1,546) (27,440)
Additions to Short-Term Investments (4,303,641) (2,279,573)
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Net Cash Provided by (Used by)Investing Activities (891,006) (289,075)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Capital Lease Obligations (61,968) (59,901)
Proceeds from Line of Credit -0- 200,000
Payment on Line of Credit -0- (150,000)
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Net Cash Provided by (Used by) Financing Activities (61,968) (9,901)
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Net Increase (Decrease) in Cash 204,305 (306,310)
Cash and Cash Equivalents at August 31, 1999 and 1998 449,698 766,823
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Cash and Cash Equivalents at May 31, 2000 and 1999 $ 654,003 $ 460,513
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CASH PAID DURING THE PERIOD
Interest $ 13,902 $ 19,759
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Income Taxes $ 246,933 $ 85,000
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</TABLE>
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.
The accompanying notes are an integral part of these financial statements.
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COMPUTER RESEARCH, INC.
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED MAY 31, 2000
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.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
1. ACQUISITION OF COMPANY
On July 7, 2000, Computer Research, Inc. announced that it had entered
into a Purchase Agreement providing, subject to certain conditions, for
CRI Acquisition, Inc., a new corporation formed by Rodger O. Riney, the
founder and President of Scottrade, Inc. of St. Louis, Missouri, to make a
tender offer for all outstanding shares of the Company at a price of $2.42
per share. The tender offer for all outstanding shares of common stock of
the Company will be made on or before August 7, 2000.
The Company had previously entered into a Letter of Intent as of June 7,
2000, to be acquired by SunGard Data Systems, Inc. at $2.00 per share.
Prior to entering into the agreement with CRI Acquisition, Inc., the
Letter of Intent with SunGard Data Systems, Inc. was terminated.
2. RESULTS OF OPERATIONS
The Company's principal source of revenues 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 and by the overall
condition of the financial services industry. The clients serviced could
become involved in mergers and/or acquisitions or may choose to convert
their business from self-clearing to a fully disclosed basis which could
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 or by a consolidation trend in the financial
services industry involving services or products.
Due to the volatile nature of the industry served, the results of
operations, as reported for the period represented, are not necessarily
indicative of results to be expected for the coming year or any specific
period.
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REVENUES
The total revenues for the first nine months of the current fiscal year
(2000) increased approximately 6% over the comparable period of the
previous year to $6,123,642. This increase is primarily attributable to
an increase in the number of trade transactions processed for banking
clients.
The total revenues for the third quarter of the 2000 fiscal year were
$1,811,907 or a decrease of approximately 12% from the previous year.
The revenues declined during the third quarter due to the fact that a
client of the Company, that accounted for approximately 11% of the
firm's revenues during the fiscal year 1999, terminated at the
beginning of the third quarter of the current year.
During the third quarter of the current year, the Company obtained a
contract from an additional broker/dealer that will begin utilizing the
Company's services at the start of the new fiscal year (2001). In
addition, a banking client that currently accounts for approximately
20% of the firm's revenues has notified the Company that they are
exploring the possibility of terminating its services with the firm.
Should this occur, revenues will be impacted in the second or third
quarter of fiscal year 2001.
COSTS AND EXPENSES
The total costs and expenses for the first nine months of the year 2000
decreased approximately 2% from the previous year to a figure of
$5,279,767.
The total costs and expenses for the fiscal third quarter of the
current year decreased approximately 7% from the comparable period of
the previous year. The primary contributors were a decrease in the cost
of outside services as well as reduced payroll costs due to staff
reductions.
NET INCOME
The net income for the first nine months of the current year was
$540,522 or $.13 per share as compared to $263,266 or $.07 per share
for the previous year.
The net income for the fiscal third quarter of the current year was
approximately $79,822 or $.02 per share as compared to $127,851 or $.03
per share for the comparable period of the previous year.
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3. CAPITAL RESOURCES AND LIQUIDITY
The Company had approximately $3.6 million in cash, cash equivalents and
short- term investments at the end of the first nine months 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.
4. "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.
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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 July 14, 2000 /s/ James L. Schultz
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James L. Schultz, President & Treasurer
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