UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X ] QUARTERLY REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1996
[ ] TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from ____________ to _______________
Commission file number 0-12551
CREATIVE COMPUTER APPLICATIONS, INC.
(Exact name of small business issuer as specified in its charter)
California 95-3353465
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
26115-A Mureau Road, Calabasas, California 91302
(Address of principal executive offices)
(818) 880-6700
Issuer's telephone number:
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
State the number of shares
outstanding of each of the issuer's
classes of common equity, as of the
latest practicable date: 2,820,915
common shares.
Transitional Small Business Disclosure Format (check one):
Yes No X
FORM 10-QSB
I N D E X
PART I - Financial Information: PAGE
Condensed Balance Sheets, as at May 31,
1996 and August 31, 1995 3
Condensed Statements of Operations for
the three months ended May 31, 1996
and 1995 4
Condensed Statements of Operations for
the nine months ended May 31, 1996
and 1995 5
Condensed Statements of Cash Flows
for the nine months ended May 31, 1996
and 1995 6
Notes to Condensed Financial Statements 7
Management's Discussion and Analysis
of Financial Condition & Results of
Operation 7
PART II - Other Information:
Items 1 through 6 8
Signatures 9
PART 1 - FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
____________________________________
<TABLE>
<CAPTION>
May 31, August 31,
1996 1995 *
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 335,128 $ 377,813
Receivables 1,475,472 1,560,087
Inventories 612,366 646,456
Prepaid expenses and other assets 133,319 81,132
TOTAL CURRENT ASSETS 2,556,285 2,665,488
PROPERTY AND EQUIPMENT, net 450,399 250,005
INVENTORY OF COMPONENT PARTS 56,156 87,655
CAPITALIZED SOFTWARE COSTS, net of
accumulated amortization of
$396,724 and $271,142 580,685 503,768
INTANGIBLES, net 328,343 366,721
OTHER ASSETS 23,856 24,990
TOTAL ASSETS $3,995,724 $3,898,627
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank, current portion $ 120,000 $ 146,084
Accounts payable 303,722 493,273
Accrued liabilities 520,289 445,442
Deferred service contract income,
current portion 452,446 493,259
Capital lease obligations, current portion 17,804 23,643
TOTAL CURRENT LIABILITIES 1,414,261 1,601,701
NOTES PAYABLE TO BANK, net of current portion 1,875 -
CAPITAL LEASE OBLIGATIONS, net of
current portion 14,140 30,096
OTHER LIABILITIES 42,786 65,435
TOTAL LIABILITIES 1,473,062 1,697,232
SHAREHOLDERS' EQUITY:
Preferred shares, no par value;
500,000 shares authorized; no shares
outstanding - -
Common shares, no par value;
20,000,000 shares authorized;
2,820,915 and 2,735,715 shares
outstanding 5,714,570 5,676,230
Accumulated deficit (3,191,908) (3,474,835)
TOTAL SHAREHOLDERS' EQUITY 2,522,662 2,201,395
$3,995,724 $3,898,627
</TABLE>
See Notes to Condensed Financial Statements.
* As presented in the audited financial statements
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
May 31,
1996 1995
(unaudited)
<S> <C> <C>
NET SALES $1,484,024 $ 837,896
COST OF SALES 662,135 710,796
Gross profit 821,889 127,100
OPERATING EXPENSES:
Selling, general and administrative 558,331 340,764
Research and development 223,629 119,500
781,960 460,264
Operating income (loss) 39,929 (333,164)
SETTLEMENT OF LITIGATION - (132,475)
INTEREST AND OTHER INCOME 999 983
INTEREST EXPENSE (6,213) (8,384)
INCOME BEFORE TAXES ON INCOME 34,715 (473,040)
TAXES ON INCOME (2,800) -
NET INCOME (LOSS) $ 31,915 $ (473,040)
EARNINGS PER COMMON SHARE (Note 2):
Net Income (loss) per share $ .01 $ (.14)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,321,924 2,602,777
</TABLE>
See Notes to Condensed Financial Statements.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
May 31,
1996 1995
(unaudited)
<S> <C> <C>
NET SALES $4,647,349 $4,301,625
COST OF SALES 2,402,222 2,610,415
Gross profit 2,245,127 1,691,210
OPERATING EXPENSES:
Selling, general and administrative 1,510,506 1,299,492
Research and development 401,650 371,612
1,912,156 1,671,104
Operating income 332,971 20,106
SETTLEMENT OF LITIGATION - (132,475)
INTEREST AND OTHER INCOME 2,344 2,331
INTEREST EXPENSE (29,288) (35,952)
INCOME BEFORE TAXES ON INCOME 306,027 (145,990)
TAXES ON INCOME (23,100) -
NET INCOME (LOSS) $ 282,927 $ (145,990)
EARNINGS PER COMMON SHARE (Note 2):
Net Income (loss) per share $ .10 $ (.06)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,321,924 2,424,062
</TABLE>
See Notes to Condensed Financial Statements.
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Nine Months Ended May 31,
1996 1995
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss) $ 282,927 $(145,990)
Adjustments to reconcile net
income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 289,088 225,478
Provision for possible losses 3,142 2,041
Changes in operating assets and liabilities:
Receivables 81,473 150,865
Inventories 34,090 (44,047)
Prepaid expenses and other assets (52,187) (53,896)
Accounts payable (189,551) (193,930)
Accrued liabilities 11,385 12,935
Net cash provided by (used in)
operating activities 460,367 (46,544)
INVESTING ACTIVITIES
Additions to property and equipment (292,888) (32,193)
Capitalized software costs (202,500) (205,000)
Net cash used in investing activities (495,388) (237,193)
FINANCING ACTIVITIES:
Payments on notes payable, net (24,209) (269,000)
Decrease in capital lease obligations,
net of payments (21,795) (20,687)
Exercise of warrants and stock options 38,340 393,851
Net cash used in financing activities (7,664) 104,164
NET DECREASE IN CASH (42,685) (179,573)
Cash, beginning of period 377,813 431,532
Cash, end of period $ 335,128 $ 251,959
</TABLE>
See Notes to Condensed Financial Statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1. In the opinion of management,
the accompanying unaudited
condensed financial statements
reflect all adjustments (which
include only normal recurring
accruals) necessary to present
fairly the Company's results
of the interim periods. The
results of operations for the
three months and nine months
ended May 31, 1996 are not
necessarily indicative of the
results for the entire year.
Note 2. Earnings per common share are
computed by dividing the
earnings for each period by
the weighted average number of
common shares plus the
weighted average of dilutive
common share equivalents
outstanding during the period
using the treasury stock
method. Common share
equivalents consist of stock
options and warrants. Common
stock equivalents are
considered dilutive for
earnings per share if the
average stock price exceeds
the exercise price during the
period. The common stock
equivalents are weighted from
the beginning of the earliest
quarter in which they become
dilutive.
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations
Results of Operations
Sales for the third fiscal quarter
ended May 31, 1996 increased by $646,128
or 77% compared to the same quarter of
fiscal 1995. For the nine month period
ended May 31, 1996 sales increased
$345,724 or 8% compared to the same
period of 1995. When analyzed by
product category for the quarter and
nine month periods, sales of Clinical
Information Systems increased $540,135
or 282% and $283,603 or 13%
respectively, sales of data acquisition
products increased $64,474 or 44% for
the current quarter and decreased
$11,761 or 2% for the nine month period.
Service and other revenues increased
$41,519 or 8% and $73,882 or 5%
respectively. Although the Company
experienced increases in sales during
the reporting periods, continued delays
are being experienced in the
consummation of new system contracts. A
greater number of the Company's new
system sales comprise multiple products
offered by the Company, and have become
more complicated, thus lengthening the
sales process.
During the third fiscal quarter the
Company restructured its sales
territories, added new sales personnel
and implemented new marketing programs.
Management intends to make further
changes in its sales and marketing
activities to be more strategically
responsive to the change in the nature
of its sales activities, and to develop
additional marketing/distribution
channels through the establishment of
joint marketing strategic partnerships
with other companies who sell compatible
products and services, with an objective
of increasing its sales penetration of
the marketplace.
Cost of Sales for the third fiscal
quarter decreased $48,661 or 7% as
compared to the same quarter last year.
For the quarter the decrease in cost of
sales was primarily attributable to a
reduction in other costs of sales
aggregating $147,486 which were
partially offset by an increase in
material costs of $87,906 and labor
costs of $10,919. For the nine month
period ending May 31, 1996, cost of
sales decreased by $208,193 or 8% as
compared to the same period last fiscal
year. The decrease in cost of sales
for the nine month period was primarily
attributable to reductions in material
costs of $134,345, and other costs of
sales of $110,315 which were partially
offset by an increase in labor costs of
$36,467. In general the Company is
experiencing increases in labor costs
as a result of the addition of
personnel. Material costs are
declining as a percentage of sales
because the Company is entering into
more transactions for the sale of
software only. Management
expects that material costs as a
percentage of sales will continue to
decline in future periods. For the
current quarter and nine month period
ended May 31, 1996, cost of sales as a
percentage of sales decreased to 45%
and 52% compared to 85% and 61%
respectively.
Selling, general and administrative
expenses increased $217,567 or 64% and
$211,014 or 16% in comparing the current
quarter and nine months ending May 31,
1996 with the same periods in 1995. The
increases were primarily attributable to
the addition of new sales and marketing
personnel and increases in travel, trade
shows, advertising and expenses
associated with the new product launch
of CyberRAD, the Company's new radiology
information system.
Research and development expenses
increased $104,129 or 88% and $30,038 or
8% respectively for the current quarter
and nine months ending May 31, 1996
compared to the same periods of fiscal
1995. The increases were primarily
attributable to the planned addition of
three programmer/analysts and their
associated costs. The Company has
increased its research and development
activities associated with the
development of enhancements to existing
products, as well as new product
development. Management anticipates
that the Company will continue to
increase its research and development
activities over the next few years as
the Company adds new products to its
portfolio.
As a result of the aggregate
factors discussed above the Company
earned net income of $31,915 or $.01 per
share and $282,927 or $.10 per share for
the current quarter and nine month
period ending May 31, 1996, compared to
a net loss of $473,040 or $.14 per share
and a net loss of $145,990 or $.06 per
share for the comparable periods in
1995.
Capital Resources and Liquidity
As of May 31, 1996, the Company's
working capital amounted to $1,142,024
compared to $1,063,787 at August 31,
1995. The ratio of the Company's
current assets to current liabilities
was approximately 1.8 to 1 at May 31,
1996 and at August 31, 1995.
The Company's bank line of credit
as of May 31, 1996 amounted to
approximately $700,000 of that amount
$122,000 was outstanding as of that
date. The Company was in compliance
with all covenants and financial ratios
required by its bank as of May 31, 1996.
In December 1995 the Company reached an
agreement with its bank to renew its
revolving line of credit in the amount
of $400,000 until February 1, 1997, and
established a new long term loan in the
amount of $300,000. Proceeds from the
new term loan will be used to purchase
and implement a new company wide
computer system to automate the service,
production and administrative activities
of the Company.
The Company believes that its cash
flow from operations together with its
bank credit facilities should be
sufficient to fund its working capital
requirements for its 1996 fiscal year.
Seasonality, Inflation and Industry Trends
The Company sales are generally
lower in the summer and higher in the
fall and winter. Inflation has had no
material effect on the Company business
since the Company has been able to
adjust the prices of its products and
services. Management believes that most
phases of the healthcare segment of the
computer systems industry will continue
to be competitive and that the proposed
healthcare reforms will have a long term
positive impact on its business. In
addition, management believes that the
industry will experience more
significant technological advances which
will improve the quality of service and
reduce costs. The Company is poised to
meet these challenges by continuing to
employ new technologies when they become
available, diversifying its product
offerings, and by constantly enhancing
its software applications.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no reportable
events or material developments
occurring in the latest quarter from
those referenced in the Company's Report
on Form 10-KSB for the fiscal year ended
August 31, 1995.
Item 6. Exhibits and Reports on Forms 8-K
(a) Exhibit 11 - Statement re:
computation of per share earnings.
(b) There were no
reports filed on
Form 8-K during the
quarter ended May
31, 1996.
SIGNATURES
In accordance with the requirements of
the Exchange Act, the Company caused
this report to be signed on its behalf
by the undersigned, thereunto duly
authorized.
CREATIVE COMPUTER APPLICATIONS, INC.
(Company)
Date
Steven. M. Besbeck,President
Chief Executive Officer,
Chief Financial Officer
Exhibit 11
<TABLE>
<CAPTION>
CREATIVE COMPUTER APPLICATIONS, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
Nine Months Ended Three Months Ended
May 31, May 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
ENDING MARKET PRICE
PER SHARE $ 2.13 $ 1.88 $ 2.13 $ 1.88
AVERAGE MARKET PRICE
PER SHARE $ 1.91 $ 2.20 $ 2.01 $ 2.22
PRIMARY EARNINGS PER SHARE
Net income $ 282,927 $ (145,990) $ 31,915 $ (473,040)
ADD
Interest on debt assumed
to be repaid (net of
income taxes) 26,945 10,641 5,716 3,547
Interest assumed to be
earned on excess funds
invested (net of
income taxes) 23,569 17,397 8,209 5,799
Net income for primary
earnings per share $ 333,441 $ (117,952) $ 45,840 $ (463,694)
Weighted average number
of shares outstanding 2,752,015 2,727,682 2,752,015 2,727,682
Shares issuable upon
exercise of options
and warrants 953,755 825,409 953,755 825,409
Shares assumed to be
repurchased under the
treasury stock method * (383,846) (245,872) (383,846) (243,657)
3,321,924 3,307,219 3,321,924 3,309,434
Primary earnings per share .10 (.04) .01 (.14)
FULLY DILUTED EARNINGS
PER SHARE
Net income $ 282,927 $ (145,990) $ 31,915 $ (473,040)
ADD
Interest on debt assumed
to be repaid (net of
income taxes) 26,945 10,641 5,716 3,547
Interest assumed to be
earned on excess funds
invested (net of
income taxes) 23,569 17,397 8,209 5,799
Net income for fully
diluted earnings per share $ 333,441 $ (117,952) $ 45,840 $ (463,694)
Weighted average number of
shares outstanding 2,752,015 2,727,682 2,752,015 2,727,682
Shares issuable upon
exercise of options
and warrants 953,755 825,409 953,755 825,409
Shares assumed to be
repurchased under the
treasury stock method * (383,846) (245,872) (383,846) (243,657)
3,321,924 3,307,219 3,321,924 3,309,434
Fully diluted earnings
per share .10 (.04) .01 (.14)
</TABLE>
* Shares assumed to be issuable under
the treasury method is limited to 20% of
the shares outstanding at the end of the
period in accordance with Accounting
Principals Board Statement No. 15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 335128
<SECURITIES> 0
<RECEIVABLES> 1475472
<ALLOWANCES> 0
<INVENTORY> 612366
<CURRENT-ASSETS> 2556285
<PP&E> 1381566
<DEPRECIATION> 931167
<TOTAL-ASSETS> 3995724
<CURRENT-LIABILITIES> 1414261
<BONDS> 0
<COMMON> 5714570
0
0
<OTHER-SE> (3191908)
<TOTAL-LIABILITY-AND-EQUITY> 3995724
<SALES> 4647349
<TOTAL-REVENUES> 4649693
<CGS> 2402222
<TOTAL-COSTS> 4314378
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29288
<INCOME-PRETAX> 306027
<INCOME-TAX> 23100
<INCOME-CONTINUING> 282927
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 282927
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
