<PAGE>   1
                                  FORM 10-KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended August 31, 1996
                           Commission File No. 0-5954

                            COMPUTER RESEARCH, INC.
                            -----------------------
               (Exact name of issuer as specified in its charter)

          Pennsylvania                                  25-1201499
-------------------------------            ------------------------------------
(State or other jurisdiction of            (IRS Employer Identification Number)
Incorporation or organization)

        Cherrington Corporate Center, Building 200, Coraopolis, PA 15108
        ----------------------------------------------------------------
          (Address of principal executive offices, including zip code)

Issuer's telephone number, including area code:  (412) 262-4430
                                                 --------------

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                  Common Stock, Without Par Value

         Indicate by check mark whether the Issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
                             ---                       ---

         Check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is contained herein, and will not be contained, to the best of
the Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

         The Issuer's Revenue during the Fiscal Year 1996:  $7,461,733

         The aggregate market value of 2,268,353 voting shares held by
non-affiliates of the Issuer, computed by reference to $1.30 (which is the
average of the bid and ask prices of the Issuer's Common Stock on October 31,
1996, of $1.25 and $1.34 respectively) is $2,948,859.

         As of October 31, 1996, the Issuer had 4,037,255 shares of Common
Stock, without par value, outstanding.

         Documents Incorporated by Reference:

                  1.       Proxy Statement for the Registrant's next annual
                           meeting of shareholders, which is to be filed not
                           later than December 31, 1996, is incorporated by
                           reference into Part III of this Form 10-KSB.

<PAGE>   2

                                     PART I

ITEM 1.           BUSINESS

                  Computer Research, Inc. (Registrant), a Pennsylvania
corporation organized in July 1969, is a data processing service company
providing accounting services to securities firms, banks and other financial
institutions. The principal office and data center for the Registrant is
located at the Cherrington Corporate Center, Building 200, Coraopolis,
Pennsylvania, which is in the vicinity of the Pittsburgh International Airport
and approximately 20 miles from downtown Pittsburgh, Pennsylvania. The
Registrant also maintains a full service data center staffed with systems,
programming and client service personnel at One Denver Place, 999 18th Street,
Denver, Colorado.  A service and sales support office is located in the Wall
Street area of New York City.

                  The principal data processing service offered by the
Registrant is a computerized "Accounting and Recordkeeping System", that is
utilized by stock and bond brokerage clients, as well as brokerage subsidiaries
and capital markets divisions of banks. A fully integrated subsystem of
software modules, when operated on the Registrant's high speed electronic
computing equipment, offers a comprehensive on-line automated system for
serving financial institutions with brokerage accounting, institutional
safekeeping, capital markets and portfolio accounting. The system provides such
firms with on-line retrieval, reports and records on a day-to-day basis
utilizing data supplied by the client. Presently, this service is being
utilized by approximately 55 financial institutions throughout the country.

                  The Registrant is also engaged, on a limited basis, in
selling communications equipment, micro- and mini-computer equipment, software
and equipment maintenance services to the clients of the data processing
accounting service.

                  The Registrant's competition for its "Accounting and
Recordkeeping System" is primarily from three sources, (a) other independent
data processing service companies, (b) in-house computer systems, and (c)
correspondent clearing firms that offer trade clearing and recordkeeping
services to securities firms on a "fully disclosed basis". The Registrant's
"Accounting and Recordkeeping System" is also designed to support banks who
offer safekeeping services to other banks, and brokerage houses who offer
clearing services on a "fully disclosed basis" to their correspondent firms.

                  In April of 1995, the Registrant announced it has entered
into a joint project with Wachovia Operational Services Corporation for
converting the Registrant's entire actively marketed software product line to
operate on IBM computer equipment in place of the currently utilized Honeywell
Bull configuration. Note J of the Registrant's Financial Statements contains
information regarding this joint project. The project, which will require no
major incurment of debt by the Registrant, is scheduled for completion at the
close of

                                       2

<PAGE>   3

the 1997 fiscal year. Upon the successful completion of the joint project, the
Registrant will continue to retain sole ownership of the converted software and
will continue to offer its services on a service bureau basis. In addition, the
Registrant will be able to license the software to firms desiring to utilize
the system on an in-house basis. In consideration for entering into the joint
project with the Registrant, Wachovia Operational Services Corporation will
secure an in-house software license agreement for servicing Wachovia
Investments, Incorporated, a current client of the Registrant.

                  The Registrant currently is finalizing an agreement that will
provide an option to purchase computer processing time from Wachovia
Operational Services Corporation for some of its processing needs. In addition,
the Registrant will have AS/400 computer processing capacity at its own
facility to compliment its processing needs.

                  During fiscal year 1998, Wachovia Operational Services
Corporation will utilize its Software License Agreement to offer processing
services to Wachovia Investments, Incorporated, a current client of the
Registrant. Wachovia Investments, Incorporated currently accounts for
approximately 20% of the Registrant's service revenues. While this event could
have an adverse affect on the revenues generated by the Registrant in 1998, the
impact on the financial condition cannot, at this time, be totally quantified.
The Registrant is currently in discussion with several prospective new clients
and believes it can replace the lost revenues prior to the end of the 1998
fiscal year. In addition, it will eliminate approximately $300,000 of annual
maintenance expenses associated with the outgoing Honeywell Bull computer
equipment.

                  Statements regarding the Registrant's expectations as to its
future operations and financial condition and certain other information
presented in this statement constitute forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Although the
Registrant believes that its expectations are based on reasonable assumptions
within the bounds of its knowledge of its business and operations, there can be
no assurance that actual results will not differ materially from its
expectations. Factors which could cause actual results to differ from
expectations include a general downturn in the economy or the stock market and
related transaction activity, gain or loss of significant clients, unforeseen
new competition, changes in government policy or regulation or unforeseen costs
and other effects related to legal proceedings.

                  The Registrant presently employs approximately 50 persons. In
general, Registrant's relations with its employees have been satisfactory.

                                       3

<PAGE>   4

ITEM 2.           PROPERTIES

                  Registrant's principal facilities, all of which are leased,
are as follows:

<TABLE>
<CAPTION>
                                                    APPROX. SQ.      LEASE EXPIRATION
                                                      FT. OF         DATE (INCLUDING
 LOCATION                  TYPE OF FACILITY         FLOOR SPACE      RENEWAL OPTIONS)
 --------                  ----------------         -----------      ----------------
<S>                        <C>                         <C>               <C>
Coraopolis, PA             Executive Offices           25,024            12/31/97
                           and Pittsburgh Data
                           Center As Well As
                           8,333 Sq. Ft. Which
                           are Subleased to a
                           Tenant

Denver, CO                 Offices & Operations         8,566            12/31/96
                           of the Denver Data
                           Center

New York, NY               Branch Office                  850             8/31/98
</TABLE>

                  The Registrant's aggregate rental expense for the above
properties for the year ended August 31, 1996, was approximately $469,000. The
Registrant intends to renew its lease for the Denver facility prior to December
31, 1996. As a result, the rental expense to be incurred by the Registrant for
rentals during the fiscal year ending August 31, 1997, is anticipated to be
approximately $494,000. Due to a reduced requirement for office space, which
resulted from the termination of a business segment in February of 1992, the
Registrant obtained a sublease tenant for approximately 8,333 square feet at
its Coraopolis, Pennsylvania, location. The sublease tenant has committed to
rent the space for the duration of the Registrant's lease obligation which is
until the end of December of 1997.

                  The Registrant owns and operates three Honeywell Bull DPS7000
computer mainframe systems; two located at the Denver data center and one
located at the Pittsburgh data center. The Registrant also owns and operates a
Honeywell Bull DPS7 mainframe system which is located at its Pittsburgh data
center. In addition, the Registrant has a DPS7000 computer mainframe system
located at its Denver facility on a 24 month lease expiring in June of 1997.
Also, the Registrant has a DPS7000 computer mainframe system located at its
Pittsburgh facility on a 24 month lease expiring in January of 1998.

ITEM 3.           LEGAL PROCEEDINGS

                  The Registrant has no knowledge of any material litigation or
pending legal proceedings against it or affecting its assets or operations.

                                       4

<PAGE>   5

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  (Not applicable)

                                    PART II

ITEM 5.           MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
                  SECURITY HOLDER MATTERS

                  The Company's Common Stock is traded in the Over-the-Counter
market and is quoted on the NASD Bulletin Board Trading System under the NASDAQ
symbol CRIX.

                  As of October 31, 1996, there were approximately 990
shareholders.

                  The following tables set forth the range of high and low
closing bid prices of the Company's Common Stock for the periods indicated and
were derived from sources the Company deems reliable. All prices represent
inter-dealer quotations, without retail mark-up, mark-down or commission and
may not represent actual transactions.

<TABLE>
<CAPTION>
                               Bid Prices
                            ----------------
Ended August 31, 1996

                            High         Low
                            ----         ---
   <S>                     <C>          <C>
   First quarter           13/16        7/16
   Second quarter          2 1/8        5/8
   Third quarter           3 1/8        1 5/8
   Fourth quarter          1 7/8        1 1/4
</TABLE>

<TABLE>
<CAPTION>
                               Bid Prices
                            ----------------
Ended August 31, 1995

                            High         Low
                            ----         ---
   <S>                      <C>          <C>
   First quarter            9/16         7/16
   Second quarter           5/8          3/8
   Third quarter            7/16         3/8
   Fourth quarter           7/16         3/8
</TABLE>

                                       5

<PAGE>   6

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATION

I.       RESULTS OF OPERATIONS

         The Registrant's principal source of revenue is derived from providing
computerized accounting and support services to securities firms, banks and
other financial institutions. The Registrant's revenues are directly affected
by stock and bond market trading volume which indirectly impacts the number of
transactions processed for its clients. The clients serviced are subject to
mergers and acquisitions and may choose to convert their business from
self-clearing to a fully disclosed basis. The Registrant 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 the results of operations
to be expected for the coming year or any specific period.

     REVENUES:

          The total revenues for the year ended August 31, 1996, increased by
approximately 20% over the previous year. This was primarily due to an
approximate 25% increase in the number of transactions processed for the
current year as compared to the previous year. In addition, revenues from
systems and programming also increased.

          The total revenues for the year ended August 31, 1995, increased by
approximately 13% over the previous year, primarily due to the addition of new
business and a general increase in trading activity for existing clients.

     COSTS AND EXPENSES:

         The total costs and expenses for the year ended August 31, 1996,
increased approximately 6% over the previous year. Salary increases, plus
matching funds, contributed to the Registrant's 401(k) Plan were partly
responsible for this increase.

         The costs and expenses for the year ended August 31, 1995, increased
approximately 7% over the previous year.

     NET INCOME:

         The net income for the year ended August 31, 1996, was $1,028,478 or
$.26 per share.

         For the year ended August 31, 1995, the net income was $398,139 or
$.10 per share.

                                       6

<PAGE>   7

II.      LIQUIDITY AND CAPITAL RESOURCES

         Due to the relatively stable operating costs of the data processing
service business, the working capital requirements of the Registrant are
normally predictable. Cash or cash equivalents on hand at the end of the year
ended August 31, 1996, were approximately $613,000 above the previous year.
This increase was attributable to cash generated from profitable operations
during the year. The management of the Registrant believes that current cash on
hand, along with revenues generated by operations, will adequately satisfy the
cash requirements of the Registrant for the coming year. In addition, if
needed, the Registrant has a $750,000 working line of credit which it intends
to renew in January of 1997.

         During the 1997 fiscal year, the Registrant intends to have the
software of its product line operational on IBM computer equipment. At that
time, the Registrant will have the option to purchase computer processing time
from an outside supplier. In addition, it intends to install an IBM AS/400
computer system of its own near the end of the 1997 fiscal year in support of
its service business.

ITEM 7.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                  (See Item 13, below, for list of Financial Statements of the
Registrant which are attached hereto and included herein.)

ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE

                  Not applicable.


                                    PART III

ITEM 9.           DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                           See Note 1.

ITEM 10.          EXECUTIVE COMPENSATION

                           See Note 1.

ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

                           See Note 1.

                                       7

<PAGE>   8

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                           See Note 1.

NOTE 1            -        Items 9, 10, 11 and 12 are incorporated herein by
                           reference to the Registrant's Proxy Statement which
                           will be filed with the Commission no later than 120
                           days from fiscal year end.

ITEM 13.          EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K

                  (a)  The following documents are filed as part of this
report.

                           (1) & (2) A list of Financial Statements and
Schedules are set forth in the Index to the Financial Statements attached
hereto on Page 10.

                           (3) Exhibits:

                                    (3) Articles of Incorporation are
incorporated by reference to the Registrant's Form 10, and exhibits thereto;
which is currently on file with the Commission. The Registrant's By-Laws are
incorporated by reference to the Form 10-K Annual Report for the fiscal year
ended August 31, 1990.

                                    (4) Form of certificates of common stock
are incorporated by reference to Form 10 and exhibits thereto.

                                    (10)(i) The lease for the Registrant's data
center in Denver, Colorado, is incorporated by reference to the Form 10-K
Annual Report for the fiscal year ended August 31, 1990.

                                    (10)(ii) Lease for Registrant's principal
offices and data center in Coraopolis, Pennsylvania, executed June 4, 1986, and
effective beginning October 23, 1986, is incorporated by reference to the
Registrant's Annual Report on Form 10-K for the period ending August 31, 1987.

                                    (22) List of the Registrant's Subsidiaries
is incorporated by reference to the Registrant's Annual Report on Form 10-K for
the period ending August 31, 1987.

                                    (27) Financial Data Schedule              

                                       8

<PAGE>   9

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                               COMPUTER RESEARCH, INC.
                                               (Registrant)

                                               By:  /s/ James L. Schultz
                                                    ---------------------------
                                                    James L. Schultz, President

Dated:          November 27, 1996

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


                                       By:   /s/ James L. Schultz
                                             ---------------------------------
                                             James L. Schultz, Director
                                             Chief Executive Officer,
                                             Treasurer and Principal Financial
                                             and Accounting Officer

                                       Date: November 27, 1996



                                       By:   /s/ David J. Vagnoni
                                             ---------------------------------
                                             David J. Vagnoni, Director
                                             Executive Vice President

                                       Date: November 27, 1996



                                       By:   /s/ Lynn M. Bushman
                                             ---------------------------------
                                             Lynn M. Bushman, Director

                                       Date: November 27, 1996



                                       By:   /s/ David K. Klotz
                                             ---------------------------------
                                             David K. Klotz, Director

                                       Date: November 27, 1996

                                       9

<PAGE>   10

                       INDEX TO FINANCIAL STATEMENTS AND
                         FINANCIAL STATEMENT SCHEDULES

                   COVERED BY REPORT OF INDEPENDENT AUDITORS

                                  (Item 13(a))

Report of Independent Certified Public Accountants

Balance Sheets -- Pages 12 and 13
         August 31, 1996 and 1995

Statements of Earnings -- Page 14
         Years Ended August 31, 1996 and 1995

Statements of Changes in Stockholders' Equity -- Page 15
         Years Ended August 31, 1996 and 1995

Statements of Cash Flows -- Page 16
         Years Ended August 31, 1996 and 1995

Notes to Financial Statements -- Pages 17 to 24

                                       10

<PAGE>   11

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
COMPUTER RESEARCH, INC.

We have audited the accompanying balance sheets of Computer Research, Inc. as
of August 31, 1996 and 1995, and the related statements of earnings, changes in
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe our audits provide a reasonable basis for
our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Computer Research, Inc. as of
August 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.

                                                              GRANT THORNTON LLP

Cleveland, Ohio
October 16, 1996

                                       11

<PAGE>   12

                            COMPUTER RESEARCH, INC.

                                 BALANCE SHEETS

                                   August 31,

ASSETS

<TABLE>
<CAPTION>
                                                                                              1996                  1995
                                                                                           ----------            ----------
<S>                                                                                        <C>                   <C>
CURRENT ASSETS
   Cash and cash equivalents                                                               $1,486,924            $  873,508
   Short-term investments (note A)                                                            741,146                    --
   Accounts receivable - trade (net of allowance for
      doubtful accounts of $30,000 in each year)                                              831,421               776,099
   Inventories (notes A and B)                                                                 41,958                80,518
   Prepaid expenses                                                                            64,411                75,911
                                                                                           ----------            ----------

               Total current assets                                                         3,165,860             1,806,036


PROPERTY AND EQUIPMENT - AT COST
   (notes A, D and F)
      Data processing equipment                                                             4,355,558             4,255,912
      Data processing equipment under capital leases                                          143,615               104,339
      Leasehold improvements                                                                  271,610               268,745
      Office equipment                                                                        541,611               530,144
                                                                                           ----------            ----------
                                                                                            5,312,394             5,159,140
      Less accumulated depreciation and amortization                                        5,019,740             4,879,610
                                                                                           ----------            ----------
                                                                                              292,654               279,530


OTHER ASSETS                                                                                       --                 1,341
                                                                                           ----------            ----------


                                                                                           $3,458,514            $2,086,907
                                                                                           ==========            ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       12

<PAGE>   13

                            COMPUTER RESEARCH, INC.

                            BALANCE SHEETS CONTINUED

                                   August 31,

LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                 1996                     1995
                                                                                              ----------               ----------
<S>                                                                                           <C>                      <C>
CURRENT LIABILITIES
   Note payable to bank (note C)                                                              $       --               $   25,000
   Current portion of long-term obligations (note D)                                              64,731                   45,852
   Accounts payable                                                                              128,232                   82,057
   Customer deposits                                                                              88,450                   70,350
   Accrued liabilities
      Compensation and payroll taxes                                                             232,112                  157,036
      Vacation                                                                                   301,614                  281,720
      Rent                                                                                        63,642                  103,847
      Lease obligations                                                                           13,952                   20,204
   Income taxes                                                                                  272,000                   27,500
   Other current liabilities                                                                       5,911                    4,746
                                                                                              ----------               ----------

               Total current liabilities                                                       1,170,644                  818,312


LONG-TERM OBLIGATIONS (NOTE D)                                                                    12,019                   35,885

ACCRUED LEASE OBLIGATIONS                                                                          3,953                   17,909

COMMITMENTS  (NOTE E)                                                                                 --                       --

STOCKHOLDERS' EQUITY (NOTE G)
   Common stock - no par value; $.0008 stated value;
      5,000,000 shares authorized; 4,037,255 and
      3,887,895 shares issued and outstanding in 1996
      and 1995, respectively                                                                       3,230                    3,110
   Additional paid-in capital                                                                    744,342                  715,842
   Retained earnings                                                                           1,524,326                  495,849
                                                                                              ----------               ----------
                                                                                               2,271,898                1,214,801
                                                                                              ----------               ----------

                                                                                              $3,458,514               $2,086,907
                                                                                              ==========               ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       13

<PAGE>   14

                            COMPUTER RESEARCH, INC.

                             STATEMENTS OF EARNINGS

                         For the years ended August 31,

<TABLE>
<CAPTION>
                                                                                       1996                      1995
                                                                                    ----------                ----------
<S>                                                                                 <C>                       <C>
REVENUES (NOTE J)
   Sales of services                                                                $7,150,358                $5,957,412
   Sales of equipment and supplies                                                      95,719                    86,571
   Operating lease income (note F)                                                      31,275                    48,160
   Other income                                                                        184,381                   112,004
                                                                                    ----------                ----------

                                                                                     7,461,733                 6,204,147

COSTS AND EXPENSES
   Cost of services                                                                  4,126,695                 3,901,126
   Cost of equipment and supplies sold                                                  75,144                    69,082
   Selling and administrative expenses                                               1,813,747                 1,700,509
   Depreciation and amortization                                                       140,130                    95,904
   Interest expense                                                                     12,540                    12,587
                                                                                    ----------                ----------

                                                                                     6,168,256                 5,779,208
                                                                                    ----------                ----------

          Earnings before income taxes                                               1,293,477                   424,939


Provision for income taxes (notes A and H)                                             265,000                    26,800
                                                                                    ----------                ----------


          NET EARNINGS                                                              $1,028,477                $  398,139
                                                                                    ==========                ==========


Earnings per common share                                                                 $.26                      $.10
                                                                                    ==========                ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       14

<PAGE>   15

                            COMPUTER RESEARCH, INC.

                 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                  For the years ended August 31, 1996 and 1995

<TABLE>
<CAPTION>
                                                                   ADDITIONAL
                                                 COMMON              PAID-IN             RETAINED
                                                 STOCK               CAPITAL             EARNINGS                TOTAL
                                                 ------            ----------           ----------             ----------
<S>                                              <C>                <C>                 <C>                    <C>
Balance, August 31, 1994                         $3,092             $711,489            $   97,710             $  812,291

  Net earnings                                       --                   --               398,139                398,139

  Stock options exercised                            18                4,353                    --                  4,371
                                                 ------             --------            ----------             ----------

Balance at August 31, 1995                        3,110              715,842               495,849              1,214,801

  Net earnings                                       --                   --             1,028,477              1,028,477

  Stock options exercised                           121               29,139                    --                 29,260

  Common stock redeemed                              (1)                (639)                   --                   (640)
                                                 ------             --------            ----------             ----------

Balance at August 31, 1996                       $3,230             $744,342            $1,524,326             $2,271,898
                                                 ======             ========            ==========             ==========
</TABLE>

                                       15

<PAGE>   16

                            COMPUTER RESEARCH, INC.
                            STATEMENTS OF CASH FLOWS
                         For the year ended August 31,

<TABLE>
<CAPTION>
                                                                                            1996                     1995
                                                                                         ----------                ---------
<S>                                                                                      <C>                       <C>
Net earnings                                                                             $1,028,477                $ 398,139
Adjustments to reconcile net earnings to net cash
   provided by operating activities
      Depreciation and amortization                                                         140,130                   95,904
      Provision for losses on doubtful accounts                                                  --                   10,000
      Change in assets and liabilities
         Accounts receivable                                                                (55,322)                (205,961)
         Inventories                                                                         38,560                   20,829
         Prepaid expenses                                                                    11,500                  (17,765)
         Other assets                                                                         1,341                    1,427
         Accounts payable, accrued liabilities and other
             current liabilities                                                            102,105                  (16,021)
         Customer deposits                                                                   18,100                   29,500
         Accrued lease obligations                                                          (20,208)                 (62,495)
         Income taxes                                                                       244,500                   27,500
                                                                                         ----------                ---------
                                                                                            480,706                 (117,082)
                                                                                         ----------                ---------

                 Net cash provided by operating activities                                1,509,183                  281,057

Cash flows from investing activities
   Purchases of short-term investments                                                     (741,146)                      --
   Additions to property and equipment                                                      (95,562)                 (63,967)
                                                                                         ----------                ---------

                 Net cash used in investing activities                                     (836,708)                 (63,967)

Cash flows from financing activities
   Issuance of common stock                                                                  29,260                    4,371
   Common stock redeemed                                                                       (640)                      --
   Payments on long-term obligations                                                        (62,679)                 (14,834)
   Net payments on line of credit                                                           (25,000)                 (25,000)
                                                                                         ----------                ---------

                 Net cash used in financing activities                                      (59,059)                 (35,463)
                                                                                         ----------                ---------

                 NET INCREASE IN CASH                                                       613,416                  181,627

Cash and cash equivalents at beginning of year                                              873,508                  691,881
                                                                                         ----------                ---------

Cash and cash equivalents at end of year                                                 $1,486,924                $ 873,508
                                                                                         ==========                =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       16

<PAGE>   17

                            Computer Research, Inc.

                         NOTES TO FINANCIAL STATEMENTS

                            August 31, 1996 and 1995

NOTE A - SUMMARY OF ACCOUNTING POLICIES

         A summary of the significant accounting policies consistently applied
         in the preparation of the accompanying financial statements follows.

         NATURE OF OPERATIONS

         Computer Research, Inc. (the Company) provides data processing,
         accounting, and recordkeeping services for securities brokerage firms,
         banks, and other financial institutions across the continental United
         States. The Company's brokerage accounting and recordkeeping systems
         which can be utilized in either an on-line/real time mode or a
         distributed batch processing mode are located in data centers in
         Pittsburgh, Pennsylvania and Denver, Colorado.

         SHORT-TERM INVESTMENTS

         In accordance with the provisions of Statement of Financial Accounting
         Standards No. 115, the Company has classified all of its short-term
         investments which consist of various debt securities as "available for
         sale" at August 31, 1996. The estimated market value of such
         investments held at August 31, 1996 approximated the carrying value.
         All investments in debt securities held by the Company at August 31,
         1996 have an original maturity date of thirteen months or less.

         INVENTORIES

         Inventories are stated at the lower of cost or market. Cost is
         determined by the first-in, first-out (FIFO) method.

         PROPERTY AND EQUIPMENT

         The Company provides for depreciation and amortization using the
         straight-line method for financial reporting purposes over the
         following estimated useful lives:

<TABLE>
              <S>                                                      <C>
              Data processing equipment................................5 years
              Data processing equipment under
                capital leases.........................................Lease term
              Leasehold improvements...................................Lease term
              Office equipment.........................................5 years
</TABLE>

    Accelerated depreciation methods are used for tax purposes. Maintenance and
    repairs are charged to operations as incurred.

                                       17

<PAGE>   18

                            Computer Research, Inc.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                            August 31, 1996 and 1995

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

         REVENUE RECOGNITION

         Sales of services, equipment and supplies are recognized when services
         are performed or when a product is installed. Rental income from
         operating leases is recognized over the respective lease terms.

         INCOME TAXES

         The Company utilizes the asset and liability method in accounting for
         income taxes. The asset and liability method requires the recognition
         of deferred tax liabilities and assets for the expected future tax
         consequences of temporary differences between tax bases and financial
         reporting bases of assets and liabilities.

         USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amount of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements and the reported amounts of revenues
         and expenses during the reporting period. Actual results could differ
         from those estimates.

         EARNINGS PER SHARE

         Earnings per common share is computed based upon the number of
         weighted average common shares outstanding during each of the years
         and common share equivalents arising from the assumed exercise of
         stock options outstanding at the end of each year. Weighted average
         common shares and common share equivalents outstanding for the years
         ended August 31, 1996 and 1995 were 3,970,208 and 3,974,123,
         respectively.

                                       18

<PAGE>   19

                            Computer Research, Inc.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                            August 31, 1996 and 1995

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

         FAIR VALUE OF FINANCIAL INSTRUMENTS

         Statement of Financial Accounting Standards No. 107, Disclosures About
         Fair Value of Financial Instruments (SFAS 107), requires disclosure of
         the following information about the fair value of certain financial
         instruments for which it is practicable to estimate that value. These
         amounts represent management's best estimates of fair value. In
         accordance with SFAS 107, the Company has excluded certain financial
         instruments and all other assets and liabilities from this disclosure.

         The carrying value of the Company's cash and notes payable to bank
         approximates fair value due to the relatively short period to maturity
         of these instruments. The short-term investments, which are classified
         as available-for-sale, are carried at fair value. The carrying value
         of the Company's long-term debt approximates fair value based on
         borrowing rates currently available to the Company for debt with
         comparable maturities.

         RECLASSIFICATIONS

         Certain reclassifications have been made to the 1995 financial
         statements in order to conform to the 1996 financial statements
         presentation.

         CASH EQUIVALENTS

         For purposes of the Statement of Cash Flows, the Company considers all
         highly liquid investments having original maturities of three months
         or less, money market and other interest-bearing deposit accounts to
         be cash equivalents.

         SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

         The Company entered into capital lease obligations for the purchase of
         new equipment totalling $57,692 and $85,923 during the years ended
         1996 and 1995, respectively. The Company paid the following amounts
         for interest and income taxes during each year.

<TABLE>
<CAPTION>
                                              =========================
                                                1996              1995
                                              -------------------------
                      <S>                     <C>               <C>
                      Interest                $12,540           $12,747
                      Income taxes            $22,500           $ 1,153
</TABLE>

                                       19

<PAGE>   20

                            Computer Research, Inc.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                            August 31, 1996 and 1995

NOTE B - INVENTORIES

         Inventories at August 31, 1996 and 1995 consist of:

<TABLE>
<CAPTION>
                                             ===========================
                                               1996                1995
                                             ---------------------------
               <S>                           <C>                 <C>
               Equipment held for resale     $16,466             $16,156
               Work in-process                 9,070              41,216
               Computer supplies              16,422              23,146
                                             ---------------------------
                                             $41,958             $80,518
                                             ===========================
</TABLE>


         Work in-process consists of unbilled revenues for services performed.
         Computer supplies are primarily computer paper and ribbons which are
         sold to customers.

NOTE C - NOTE PAYABLE TO BANK

         Note payable to bank represents borrowings from a line of credit of up
         to the lesser of $750,000 or a specified percentage of eligible
         accounts receivable and inventory as defined in the note agreement.
         The line of credit, which expires January 27, 1997, bears interest at
         the prime interest rate plus 1 percent (8.25% at August 31, 1996). The
         line of credit is primarily collateralized by accounts receivable,
         equipment and inventory. Restrictive covenants in the note agreement,
         among other things, require the Company to maintain certain financial
         ratios.

NOTE D - LONG-TERM OBLIGATIONS

         Long-term obligations at August 31, 1996 and 1995 consist of
         obligations under capital leases for various data processing
         equipment.  The leases, which expire on various dates through 1998,
         provide for monthly rental payments ranging from $1,055 to $2,900.
         Equipment under the capital leases had a cost of $143,615 and $104,339
         and accumulated amortization of $66,455 and $27,304 as of August 31,
         1996 and 1995, respectively.

                                       20

<PAGE>   21

                            Computer Research, Inc.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                            August 31, 1996 and 1995

NOTE D - LONG-TERM OBLIGATIONS (CONTINUED)

         Commitments for future minimum payments under these obligations are as
         follows:

<TABLE>
               <S>                                         <C>
                                          1997             $67,440
                                          1998              12,500
                                                           -------
               Net minimum lease payments                   79,940
                  Less amount representing interest          3,190
                                                           -------
               Present value of minimum lease payments      76,750
                  Less current portion                      64,731
                                                           -------
                                                           $12,019
                                                           =======
</TABLE>

NOTE E - LEASE COMMITMENTS

         The Company has several operating lease agreements for automobiles,
         equipment, and office space. Certain of the leases contain escalation
         clauses and require the Company to pay for taxes, utilities and other
         operating expenses of the lessor. The Company entered into a
         noncancelable sublease agreement for certain office space in fiscal
         1995.

         Rental expense charged to operations was $679,954 and $574,230 for the
         years ended August 31, 1996 and 1995, respectively. As of August 31,
         1996, the Company is obligated to pay, and entitled to receive, the
         following minimum annual rentals on operating leases.

<TABLE>
<CAPTION>
                                          ==================================
                                                       SUBLEASE
                                                        RENTAL
               YEAR ENDING AUGUST 31,      AMOUNT       INCOME        NET
               -------------------------------------------------------------
                      <S>                 <C>          <C>          <C>
                      1997                $406,730     $108,412     $298,318
                      1998                 129,210       36,832       92,378
                                          ----------------------------------
                                          $535,940     $145,244     $390,696
                                          ==================================
</TABLE>

                                       21

<PAGE>   22

                            Computer Research, Inc.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                            August 31, 1996 and 1995

NOTE F - EQUIPMENT UNDER OPERATING LEASES TO CUSTOMERS

         The Company leases minicomputers and data processing equipment, as
         lessor, under operating leases that have one-year or two-year initial
         lease terms. Customers may terminate these leases during the initial
         term only by purchasing or leasing equipment of equal or greater value
         from the Company. Property leased and property held for lease had a
         cost of $1,555,957 at August 31, 1996 and 1995. These properties were
         substantially depreciated in each year.

NOTE G - STOCK OPTIONS

         The Company had reserved 250,000 shares of common stock under a stock
         option plan for key employees. Options under the plan could be granted
         at prices not less than 100% of the fair market value on the date
         granted. Stock options, which were exercisable at option prices
         ranging from $.19 to $.21 per share, expired on February 22, 1996.

         Stock option activity for the years ended August 31, 1996 and 1995 was
         as follows:

<TABLE>
<CAPTION>
                                                         ===================
                                                           1996        1995
                                                         -------------------
             <S>                                         <C>         <C>
             Outstanding, beginning of year              161,000     184,000
             Less exercised at $.19 - $.21 per share     150,000      23,000
             Less expired                                 11,000          --
                                                         -------------------
             Outstanding, end of year                         --     161,000
                                                         ===================
</TABLE>


         In fiscal year 1996, the Board of Directors approved a resolution to
         reserve 400,000 shares of common stock for issuance to key employees,
         directors and other advisors of the Company under a new stock
         incentive plan. As of August 31, 1996, the new plan had not yet been
         finalized and no options had been granted.

                                       22

<PAGE>   23

                            Computer Research, Inc.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                            August 31, 1996 and 1995

NOTE H - INCOME TAXES

         The Company has recorded reduced provisions for income taxes for the
         years ended August 31, 1996 and 1995 due to the utilization of federal
         and state net operating loss carryforwards. Reconciliations of the
         expected federal statutory rates and effective tax rates are
         summarized as follows:

<TABLE>
<CAPTION>
                                                             ================
                                                             1996       1995
                                                             ----------------
<S>                                                          <C>        <C>
Expected statutory rate                                       34.0%      34.0%
Permanent nondeductible expenditures                           1.3        4.0
State income taxes - net of federal benefit                    2.3        3.2
Utilization of federal income tax loss carryforwards         (17.2)     (34.4)
Other                                                           .1        (.5)
                                                             ----------------
                                                              20.5%       6.3%
                                                             ================
</TABLE>

         At August 31, 1996, the Company has state net operating loss
         carryforwards of approximately $1,030,000, of which approximately
         $650,000 expires in fiscal year 1998 and the remainder expires in
         fiscal year 2001. The utilization of the state net operating loss
         carryforwards could be subject to limitations in the future. All
         federal net operating loss carryforwards have been utilized as of
         August 31, 1996.

         Deferred tax assets and liabilities at August 31, 1996 and 1995
         consist of the following:

<TABLE>
<CAPTION>
                                                      ========================
                                                         1996           1995
                                                      ------------------------
<S>                                                   <C>            <C>
Temporary differences related to:
   Accrued expenses and allowances                    $ 143,000      $ 152,000
   Depreciation                                          (3,000)        (3,000)
Net operating loss carryforwards                         83,000        313,000
Valuation allowance                                    (223,000)      (462,000)
                                                      ------------------------
        NET DEFERRED TAXES                            $      --      $      --
                                                      ========================
</TABLE>

                                       23

<PAGE>   24

                            Computer Research, Inc.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                            August 31, 1996 and 1995

NOTE H - INCOME TAXES (CONTINUED)

         The Company has established a valuation allowance at August 31, 1996
         and 1995 as the result of the uncertainty as to the ultimate
         recoverability of the deferred tax assets which are dependent on
         future taxable income. The valuation allowance decreased $239,000 and
         $209,000 for the years ended August 31, 1996 and 1995, respectively.

NOTE I - EMPLOYEE BENEFIT PLAN

         The Company has a qualified profit-sharing plan, which includes a
         salary reduction, deferred compensation feature under Section 401(k)
         of the Internal Revenue Code. Substantially all employees are eligible
         to participate in this plan. Employer contributions to the plan are
         determined annually by the Board of Directors. Employer contribution
         expense for the years ended August 31, 1996 and 1995 was $210,828 and
         $57,607, respectively.

NOTE J - MAJOR CUSTOMERS

         The continuing operations of the Company primarily consist of
         providing services and products to banks and security brokerage/dealer
         sectors.  Sales to one customer amounted to 19.9% and 19.2% of total
         revenues during the fiscal years ended August 31, 1996 and 1995,
         respectively.

         On February 9, 1995, the Company and an affiliate of the major client
         noted above, entered into an agreement in principle to negotiate the
         terms and conditions of a definitive agreement regarding a joint
         project to convert the Company's computer production software from its
         existing hardware platform to an IBM AS/400 platform. The project is
         scheduled for completion during the 1997 fiscal year. Upon successful
         completion of the project, the Company intends to license the software
         to third parties, including the major client, which may result in a
         reduction in service revenues from the major client. The agreement
         also may provide the Company with the ability to out source data
         center operations on terms favorable to the Company, resulting in a
         reduction in its cost of operations.

                                       24