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 February 29, 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:
2,739,915 common shares.
Transitional Small Business Disclosure Format (check one):
Yes No X
CREATIVE COMPUTER APPLICATIONS, INC.
FORM 10-QSB
I N D E X
PART I - Financial Information:
PAGE
Condensed Balance Sheets, as at
February 29, 1996 and August 31, 1995 2
Condensed Statements of Income for
the three months ended February 29, 1996
and February 28, 1995 3
Condensed Statements of Income for
the six months ended February 29, 1996
and February 28, 1995 4
Condensed Statements of Cash Flows
for the six months ended February 29,
1996 and February 28, 1995 5
Notes to Condensed Financial Statements 6
Management's Discussion and Analysis
of Financial Condition & Results of
Operation 6
PART II - Other Information:
Items 1 through 6 8
Signatures 9
1
PART 1 - FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
____________________________________
<TABLE>
<CAPTION>
February 29, August 31,
1996 1995 *
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 321,826 $ 377,813
Receivables 1,720,489 1,560,087
Inventories 590,532 646,456
Prepaid expenses and other
assets 105,643 81,132
TOTAL CURRENT ASSETS 2,738,490 2,665,488
PROPERTY AND EQUIPMENT, net 385,948 250,005
INVENTORY OF COMPONENT PARTS 66,656 87,655
CAPITALIZED SOFTWARE COSTS, net
of accumulated amortization of
$354,863 and $271,142 555,046 503,768
INTANGIBLES, net 341,136 366,721
OTHER ASSETS 24,234 24,990
TOTAL ASSETS $4,111,510 $3,898,627
LIABILITIES AND SHAREHOLDERS'EQUITY
CURRENT LIABILITIES:
Notes payable to bank,
current portion $ 181,153 $ 146,084
Accounts payable 356,758 493,273
Accrued liabilities: 518,483 445,442
Deferred service contract income,
current portion 514,777 493,259
Capital lease obligations,
current portion 19,313 23,643
TOTAL CURRENT LIABILITIES 1,590,484 1,601,701
CAPITAL LEASE OBLIGATIONS,
net of current portion 16,393 30,096
OTHER LIABILITIES 50,336 65,435
TOTAL LIABILITIES 1,657,213 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;
2,739,915 and 2,735,715 shares
outstanding 5,678,120 5,676,230
Accumulated deficit (3,223,823) (3,474,835)
TOTAL SHAREHOLDERS' EQUITY 2,454,297 2,201,395
$4,111,510 $3,898,627
</TABLE>
See Notes to Condensed Financial Statements.
* As presented in the audited financial statements
2
CREATIVE COMPUTER APPLICATIONS, INC.
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended February 29, & 28,
1996 1995
(unaudited)
<S> <C> <C>
NET SALES $1,447,791 $1,691,469
COST OF SALES 763,046 910,587
Gross profit 684,745 780,882
OPERATING EXPENSES:
Selling, general and
administrative 483,186 491,110
Research and development 124,218 122,956
607,404 614,066
Operating income 77,341 166,816
INTEREST AND OTHER INCOME 889 641
INTEREST EXPENSE (15,510) (15,543)
INCOME BEFORE TAXES ON INCOME 62,720 151,914
TAXES ON INCOME (3,700) (12,000)
NET INCOME $ 59,020 $ 139,914
EARNINGS PER COMMON
SHARE (Note 2):
Net Income per share $ .02 $ .05
WEIGHTED AVERAGE COMMON
SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING 3,295,998 3,362,855
</TABLE>
See Notes to Condensed Financial Statements.
3
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Six Months Ended February 29, & 28,
1996 1995
(unaudited)
<S> <C> <C>
NET SALES $3,163,325 $3,463,729
COST OF SALES 1,656,366 1,899,619
Gross profit 1,506,959 1,564,110
OPERATING EXPENSES:
Selling, general and administrative 952,175 930,728
Research and development 261,742 252,113
1,213,917 1,182,841
Operating income 293,042 381,269
INTEREST AND OTHER INCOME 1,345 1,349
INTEREST EXPENSE (23,075) (27,568)
INCOME BEFORE TAXES ON INCOME 271,312 355,050
TAXES ON INCOME (20,300) (28,000)
NET INCOME $ 251,012 $ 327,050
EARNINGS PER COMMON SHARE (Note 2):
Net Income per share $ .09 $ .11
WEIGHTED AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS
OUTSTANDING 3,282,090 3,317,298
</TABLE>
See Notes to Condensed Financial Statements.
4
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Six Months Ended February 29, & 28,
1996 1995
(unaudited)
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $251,012 $327,050
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 166,461 150,166
Provision for possible
losses (4,068) 12,134
Changes in operating assets and
liabilities:
Receivables (156,334) (633,067)
Inventories 76,923 30,584
Prepaid expenses and other assets (24,511) (32,333)
Accounts payable (136,515) (26,171)
Accrued liabilities 79,460 104,804
Net cash used in operating
activities 252,428 (66,833)
INVESTING ACTIVITIES
Additions to property and equipment (192,341) (8,943)
Capitalized software costs (135,000) (110,000)
Net cash used in investing
activities (327,341) (118,943)
FINANCING ACTIVITIES:
Increase in notes payable, net 35,069 (66,000)
Decrease in capital lease obligations,
net of payments (18,033) (13,526)
Exercise of stock options 1,890 18,810
Net cash used in financing activities 18,926 (60,716)
NET DECREASE IN CASH (55,987) (246,492)
Cash, beginning of period 377,813 431,532
Cash, end of period $ 321,826 $ 185,040
</TABLE>
See Notes to Condensed Financial Statements.
5
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 six months ended February
29, 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 second quarter of fiscal 1996 ended February 29,
1996 decreased by $243,678 or 14% compared to the same quarter of fiscal
1995. For the six month period ended February 29, 1996 sales decreased
$300,404 or 9% compared to the same period in fiscal 1995. When analyzed
by product category for the quarter and six month periods, sales of
Clinical Information Systems decreased $224,970 or 27% and $256,532 or 13%
respectively, sales of data acquisition products decreased $36,247 or 11%
and $76,235 or 14% respectively, and service and other revenues increased
by $17,539 or 3% and $32,363 or 3% respectively. Management believes that
the decreased level of sales is indicative of delays encountered in the
closing of new system contracts and delays experienced in the completion of
new system installations in progress, partially caused by severe winter
weather in the Northeast. 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.
Cost of sales for the second quarter and six month period ended
February 29, 1996 decreased by $147,541 or 16% and $243,253 or 13%
respectively as compared to the same quarter and six month period of 1995.
For the quarter and six month period the decrease in costs of sales was
primarily attributable to decrease in material costs of $130,928 or 42% and
$222,251 or 31% respectively, and decreases in other costs of $33,728 or
12% and $46,550 or 8% respectively. These decreases were partially offset
by increases in labor costs of $17,115 or 6% and $25,548 or 4%
respectively. The overall decreases were attributable to a lower volume of
sales of Clinical Information Systems and data acquisition products in the
current quarter and six month period ending February 29, 1996. The Company
is closing more sales of Clinical Information Systems that represent
software only transactions therefore less hardware materials are included
in such sales. For the current quarter and six month period ended February
29, 1996, cost of sales as a percentage of sales decreased to 53% from 54%
and 52% from 55% respectively.
Selling and administrative expenses decreased $7,924 or 2% and
increased $21,447 or 2% in comparing the current quarter and six months
ending February 28, 1996 with the same periods of fiscal 1995.
Research and development expense increased $1,262 or 1% and
$9,629 or 4% for the current quarter and six months ending February 29,
1996 compared to the same periods of fiscal 1995. The increases were
primarily attributable to a greater amount of labor costs incurred in the
current periods due to a number of new software products in development.
As a result of the aggregate factors discussed above the company
earned net income of $59,020 or $.02 per share and $251,012 or $.08 per
share for the current quarter and six month period ending February 29, 1996
compared to net income of $139,914 or $.05 per share and a net income of
$327,050 or $.11 per share in the comparable quarter and six month period
one year ago.
6
Capital Resources and Liquidity
As of February 29, 1996, the Company's working capital amounted
to $1,148,006 compared to $1,063,787 at August 31, 1995. The ratio of the
Company's current assets to current liabilities was approximately 1.7 to 1
at February 29, 1996 and at August 31, 1995.
The Company's bank line of credit as of February 29, 1996
amounted to approximately $700,000, of that amount $181,000 was outstanding
as of that date. The Company was in compliance with all covenants and
financial ratios required by its bank as of February 29, 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.
7
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 4. Submission of Matters to a Vote of Security Holders
(a) The Company held an Annual Meeting of Shareholders on February 16,
1996.
(b) The following Directors, all of whom were incumbents, were reelected
to the five member Board at the February 16, 1996 meeting:
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD NON-VOTE
<S> <C> <C> <C> <C>
Bruce M. Miller/Chairman 2,136,122 20,519 0 0
Steven M. Besbeck 2,136,122 20,519 0 0
James R. Helms 2,137,942 18,699 0 0
Lawrence S. Schmid 2,138,122 18,519 0 0
Robert S. Fogerson, Jr. 2,137,962 18,679 0 0
</TABLE>
(c) 1. The only other matter voted upon at the February 16, 1996 Annual
Meeting was the ratification of BDO Seidman as the Company's auditors by a
vote of 2,146,121 for, 6,740 against, 3,780 abstaining, and 0 non-votes.
(d) Not applicable.
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 February 29, 1996.
8
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)
/S/ Steven M. Besbeck
Date April 9, 1996 Steven. M. Besbeck,
President,ChiefExecutive Officer,
Chief Financial Officer
9
Exhibit 11
CREATIVE COMPUTER APPLICATIONS, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
February 29, & 28, February 29, & 28,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
ENDING MARKET PRICE
PER SHARE $ 2.25 $ 2.56 $ 2.25 $ 2.56
AVERAGE MARKET
PRICE PER SHARE $ 1.86 $ 2.17 $ 1.93 $ 2.68
PRIMARY EARNINGS
PER SHARE
Net income $ 251,012 $ 327,050 $ 59,020 $ 139,914
ADD
Interest on debt
assumed to be
repaid (net of
income taxes) 20,287 25,362 6,489 14,300
Interest assumed
to be earned on
excess funds
invested (net of
income taxes) 11,779 19,249 5,889 9,624
Net income for
primary earnings
pershare $ 283,078 $ 371,661 $ 71,398 $ 163,838
Weighted average
number of shares
outstanding 2,737,815 2,334,704 2,737,815 2,334,704
Shares issuable
upon exercise of
options and
warrants 927,755 1,221,990 927,755 1,221,990
Shares assumed to
be repurchased
under the treasury
stock method * (383,480) (239,396) (369,572) (193,839)
3,282,090 3,317,298 3,295,998 3,362,855
Primary earnings
per share .09 .11 .02 .05
FULLY DILUTED
EARNINGS PER SHARE
Net income $ 251,012 $ 327,050 $ 59,020 $ 139,914
ADD
Interest on debt
assumed to be
repaid (net of
income taxes) 20,287 25,362 6,489 14,300
Interest assumed to
be earned on excess
funds invested (net
of income taxes) 11,779 19,249 5,889 9,624
Net income for fully
diluted earnings
per share $ 283,078 $ 371,661 $ 71,398 $ 163,838
Weighted average
number of shares
outstanding 2,737,815 2,334,704 2,737,815 2,334,704
Shares issuable upon
exercise of options
and warrants 927,755 1,221,990 927,755 1,221,990
Shares assumed to be
repurchased under
the treasury stock
method * (317,010) (202,925) (317,010) (193,839)
3,348,560 3,353,769 3,348,560 3,362,855
Fully diluted
earnings per share $ .09 $ .11 $ .02 $ .05
</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> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> FEB-29-1996
<CASH> 321826
<SECURITIES> 0
<RECEIVABLES> 1720489
<ALLOWANCES> 0
<INVENTORY> 590532
<CURRENT-ASSETS> 2738490
<PP&E> 1281020
<DEPRECIATION> 895072
<TOTAL-ASSETS> 4111510
<CURRENT-LIABILITIES> 1590484
<BONDS> 0
<COMMON> 5678120
0
0
<OTHER-SE> (3223823)
<TOTAL-LIABILITY-AND-EQUITY> 4111510
<SALES> 3163325
<TOTAL-REVENUES> 3164670
<CGS> 1656366
<TOTAL-COSTS> 2870283
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23075
<INCOME-PRETAX> 271312
<INCOME-TAX> 20300
<INCOME-CONTINUING> 251012
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 251012
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
