Computer Services : Quarterly Report

COMPUTER SERVICES, INC.

A Kentucky Corporation

3901 Technology Drive

Paducah, Kentucky 42001-5201

________________________________

Telephone: [phone]

Corporate Website: www.csiweb.com

________________________________

SIC Code: 7374

Quarterly Report

For the period ended May 31, 2022

(the "Reporting Period")

The number of shares outstanding of our Common Stock is 27,493,241 as of July 12,

2022.

The number of shares outstanding of our Common Stock was 27,460,955 as of February 28, 2022.

Indicate by check mark whether the company is a shell company (as defined in Rule 405 of the Securities Act of 1933 and Rule 12b-2 of the Exchange Act of 1934):

Yes: [ ]

No: [✓]

Indicate by check mark whether the company's shell status has changed since the previous reporting period:

Yes: [ ]

No: [✓]

Indicate by check mark whether a change in control of the company has occurred over this reporting period:

Yes: [ ]

No: [✓]

COMPUTER SERVICES, INC.

QUARTERLY REPORT

FOR THE FISCAL QUARTER ENDED MAY 31, 2022

All information contained in this Quarterly Report has been compiled to fulfill the disclosure requirements of OTC Markets Group, Inc. and Rule 15c2-11 under the Securities Exchange Act of 1934. The captions contained herein correspond to the sequential format as set forth in the applicable disclosure guidelines of OTC Markets Group, Inc. All dollar amounts are presented in thousands, except dividend and other per share data. Quantitative share data, among other non-dollar figures, are not presented in thousands. Computer Services, Inc. and its subsidiaries are referred to as "CSI", the "Company", "We", "Us", or "Our".

Forward-Looking Statements

This Quarterly Report contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. All statements, except historical statements, contained herein constitute "forward-looking statements". Forward-looking statements are inherently uncertain and are based only on current expectations and assumptions that are subject to future developments that may cause results to differ materially.

Readers should carefully consider: (i) economic, competitive, technological and governmental factors affecting CSI's operations, customers, markets, services, products and prices; (ii) risk factors affecting the financial services information technology industry generally including, but not limited to, cybersecurity risks that may result in increased costs to CSI to protect against the risks, as well as liability or reputational damage to CSI in the event of a breach or suspected breach of our security; (iii) risk factors affecting the United States economy generally including without limitation acts of terrorism, military actions including war, and viral epidemics and pandemics that alter human behaviors, including the COVID-19 pandemic and its effect on our business operations and financial results; (iv) increasing domestic and international regulations imposing burdensome requirements regarding the privacy of consumer data especially consumer financial transaction data of which CSI possesses substantial quantities; and (v) other factors discussed in CSI's Annual Reports, Quarterly Reports, Information and Disclosure Statements, News Releases, and other documents posted from time to time on the OTCQX website (www.otcmarkets.com), including without limitation, the description of the nature of CSI's business and its management discussion and analysis of financial condition and results of operations for reported periods.

Except as required by law or OTC Markets Group, Inc., CSI undertakes no obligation to update, and is not responsible for updating, the information contained or incorporated by reference in this document beyond the publication date, whether as a result of new information or future events, or to conform this document to actual results or changes in CSI's expectations, or for changes made to this document by wire services or Internet services or otherwise.

Pandemic

The effects of the Covid-19 pandemic on the Company and its operations are discussed in the 2022 Annual Report to Shareholders incorporated herein by reference and filed separately through the OTC Disclosure and News Service, available at www.otcmarkets.com.

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COMPUTER SERVICES, INC.

QUARTERLY REPORT

FOR THE FISCAL QUARTER ENDED MAY 31, 2022

Item 1: Exact name of issuer and address of its principal executive offices.

Name of Issuer:	Computer Services, Inc.
Principal Executive Offices:	3901 Technology Drive
	Paducah, Kentucky 42001-5201
	Telephone:	800.545.4274
	Facsimile:	270.442.9905
	Website:	www.csiweb.com
Investor Relations Officer:	Brian K. Brown, Treasurer & CFO
	3901 Technology Drive
	Paducah, Kentucky 42001-5201
	Telephone:	270.442.7361 x10689
	Facsimile:	270.575.6716
	Email:	[e-mail]

Item 2: Shares outstanding.

The following table sets forth information concerning each authorized class of equity securities of Computer Services, Inc. as of May 31, 2022:

SECURITIES AUTHORIZED AND OUTSTANDING

		Number of	Number of	Freely Tradable	Total Number	Total Number
Class	As of	of Beneficial	of
Shares	Shares	Shares (public	Shareholders	Shareholders
		Authorized	Outstanding	float)
		(1)	of Record
Common	5/31/2022	60,000,000	27,512,873	26,882,614	6,987	265
Preferred	5/31/2022	5,000,000	-	-	-	-

1. Estimate of individual participants represented by security position listings. Based on such estimate, more than 100 beneficial shareholders each own at least 100 shares of common stock.

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COMPUTER SERVICES, INC.

QUARTERLY REPORT

FOR THE FISCAL QUARTER ENDED MAY 31, 2022

Item 3: Interim Financial Statements.

COMPUTER SERVICES, INC.

Condensed Consolidated Statements of Income

(Unaudited)

(in thousands, except share and per share data)

		Three Months Ended May 31,
		2022		2021
Revenues	$	81,047	$	76,656
Operating expenses		61,559		57,856
Operating income		19,488		18,800
Non-operating (loss) income		(9)		-
Interest income, net		48		40
Income before income taxes		19,527		18,841
Provision for income taxes		4,784		4,427
Net income	$	14,743	$	14,414
Earnings per common share	$	0.54	$	0.52
Shares used in computing earnings per
common share		27,476,022		27,512,055

See accompanying notes to consolidated financial statements.

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COMPUTER SERVICES, INC.

QUARTERLY REPORT

FOR THE FISCAL QUARTER ENDED MAY 31, 2022

COMPUTER SERVICES, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

		5/31/2022		2/28/2022		5/31/2021
		(Unaudited)		(Audited)		(Unaudited)
ASSETS
Current assets
Cash	$	76,003	$	60,996	$	53,779
Funds held on behalf of clients		13,131		12,263		10,692
Accounts receivable, net		46,460		52,991		36,319
Income tax receivable		-		1,694		-
Deferred contract costs		24,085		22,763		19,873
Prepaid expenses and other current assets		11,562		12,498		10,584
Total current assets		171,241		163,205		131,246
Property and equipment, net		40,556		41,412		42,522
Software and software licenses, net		27,354		26,438		29,244
Deferred contract costs		136,788		129,390		114,296
Goodwill		60,115		60,115		60,115
Intangible assets, net		2,536		2,682		3,245
Right of use assets		4,311		4,931		6,095
Other assets		6,626		6,730		6,822
Total assets	$	449,527	$	434,903	$	393,585
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses	$	25,507	$	24,757	$	24,644
Deferred contract liabilities		69,089		62,695		54,308
Deferred revenue		12,929		12,690		11,324
Client funding obligation - settlement liabilities		13,131		12,263		10,692
Current portion of operating lease liabilities		1,884		2,138		2,510
Income tax payable		3,089		-		3,527
Total current liabilities		125,629		114,543		107,005
Long-term liabilities
Deferred income taxes, net		31,546		31,546		29,313
Deferred contract liabilities		13,938		13,389		11,406
Operating lease liabilities		2,587		2,964		3,767
Other liabilities		1,692		1,704		1,691
Total long-term liabilities		49,763		49,603		46,176
Total liabilities		175,392		164,146		153,182
Shareholders' equity
Preferred stock; shares authorized, 5,000,000; none issued		-		-		-
Common stock, no par; 60,000,000 shares authorized;
27,512,873 shares issued at May 31, 2022;
27,460,955 shares issued at February 28, 2022;
27,502,375 shares issued at May 31, 2021		37,700		35,303		34,562
Additional Paid in Capital		1,230		-		-
Retained earnings		235,205		235,454		205,963
Accumulated other comprehensive income, net		-		-		(122)
Total shareholders' equity		274,135		270,757		240,403
Total liabilities and shareholders' equity	$	449,527	$	434,903	$	393,585

See accompanying notes to consolidated financial statements.

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