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 November 30, 1995
[ ] 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: 2,737,605 common shares as of December 29, 1995
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 November 30,
1995 and August 31, 1995 3
Condensed Statements of Income for the three
months ended November 30, 1995 and
November 30, 1994 4
Condensed Statements of Cash Flows for the
three months ended November 30,1995
and November 30, 1994 5
Notes to Condensed Financial Statements 6
Management's Discussion and Analysis or Plan of Operation 6
PART II - Other Information:
Items 1 through 6 8
Signatures 8
PART 1 - FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
____________________________________
November 30, August 31,
1995 1995 *
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 300,398 $ 377,813
Receivables 1,803,748 1,560,087
Inventories 586,760 646,456
Prepaid expenses and other assets 110,508 81,132
TOTAL CURRENT ASSETS 2,801,414 2,665,488
PROPERTY AND EQUIPMENT, net 243,540 250,005
INVENTORY OF COMPONENT PARTS 77,156 87,655
CAPITALIZED SOFTWARE COSTS, net of accumulated
amortization of $313,003 and $271,142 529,407 503,768
INTANGIBLES, net 353,928 366,721
OTHER ASSETS 24,612 24,990
TOTAL ASSETS $4,030,057 $3,898,627
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank $ 213,083 $ 146,084
Accounts payable 416,916 493,273
Accrued liabilities:
Vacation Pay 156,032 150,652
Other 305,584 294,790
Deferred service contract income, current
portion 445,438 493,259
Capital lease obligations, current portion 15,370 23,643
TOTAL CURRENT LIABILITIES 1,552,423 1,601,701
CAPITAL LEASE OBLIGATIONS, net of current
portion 24,470 30,096
OTHER LIABILITIES 57,887 65,435
TOTAL LIABILITIES 1,634,780 1,697,232
SHAREHOLDERS' EQUITY:
Preferred shares, no par value; 500,000
shares authorized; no shares outstanding - -
Common shares, no par value; 100,000,000
shares authorized; 2,737,605 and
2,735,715 shares outstanding 5,678,120 5,676,230
Accumulated deficit (3,282,843) (3,474,83
5)
TOTAL SHAREHOLDERS' EQUITY 2,395,277 2,201,395
$4,030,057 $3,898,627
See Notes to Financial Statements.
* As presented in the audited financial statements
CONDENSED STATEMENTS OF INCOME
Three Months Ended November 30,
1995 1994
(unaudited)
NET SALES $1,715,534 $1,772,260
COST OF SALES 893,320 989,032
Gross profit 822,214 783,228
OPERATING EXPENSES:
Selling, general and administrative 468,989 439,618
Research and development 137,524 129,157
606,513 568,775
Operating income 215,701 214,453
INTEREST AND OTHER INCOME 456 708
INTEREST EXPENSE (7,565) (12,025)
Income before taxes on income 208,592 203,136
TAXES ON INCOME (16,600) (16,000)
NET INCOME 191,992 187,136
EARNINGS PER COMMON SHARE (Note 2): $ .06 $ .07
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON STOCK
EQUIVALENTS OUTSTANDING 3,023,905 2,641,100
See Notes to Financial Statements.
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
Three Months Ended
November 30,
1995 1994
(unaudited)
OPERATING ACTIVITIES:
Net income 191,992 $ 187,136
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 92,788 75,055
Provision for possible losses 10,056 5,322
Changes in operating assets and
liabilities:
Receivables (253,717) (483,643)
Inventories 59,696 (40,622)
Prepaid expenses and other assets (29,376) 2,184
Accounts payable (76,357) (111,685)
Accrued liabilities (39,196) 198,294
Net cash used in operating
activities (44,114) (167,959)
INVESTING ACTIVITIES
Additions to property and equipment (20,792) (2,110)
Capitalized software costs (67,500) (45,000)
Net cash used in investing
activities (88,292) (47,110)
FINANCING ACTIVITIES:
Additions to (payments on) notes payable, net 67,000 (33,000)
Decrease in capital lease obligations,
net of payments (13,899) (6,612)
Exercise of Stock Option 1,890 -
Net cash used in financing activities 54,991 (39,612)
NET DECREASE IN CASH (77,415) (254,681)
Cash, beginning of period 377,813 431,532
Cash, end of period $ 300,398 $ 176,851
See notes to 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 financial position as of November 30, 1995
and August 31, 1995, the results of its operations for the three
months ended November 30, 1995 and 1994, and cash flows for the
three months ended November 30, 1995 and November 30, 1994.
Note 2. Earnings per common share are computed by dividing the net income
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 Results of Operations and
Financial Condition
Results of Operations
Sales for the first quarter of fiscal 1996 ended November 30,
1995 decreased by $56,726 or 3% compared to the same quarter of fiscal
1995. When analyzed by product category, sales of Clinical Information
Systems (CIS) decreased $31,562 or 3%, sales of data acquisition products
decreased $39,988 or 19% and service and other revenues increased $14,824
or 3%. The decrease in sales is primarily attributable to a decrease in
the sale of peripheral products, and a fewer number of data acquisition
products shipped during the quarter. The Company's new CIS products have
continued to receive interest from the healthcare market which resulted in
new orders for such products during the quarter and a marked increase in
new quotations for potential sales.
Cost of sales for the first quarter of 1996 decreased by $95,712
or 10% as compared to the same quarter of 1994. The decrease in cost of
sales was primarily attributable to a decrease in material costs of $91,323
or 23% and, a decrease in other costs of $12,822 or 4%. The decreases were
partially offset by an increase in labor costs of $8,433 or 3%. The
decrease in material costs is attributable to a greater volume of software
only revenues that improve gross margins. Cost of sales as a percentage of
sales decreased to 52% in the current fiscal quarter as compared to 56% in
the same quarter of fiscal 1995.
Selling and administration expenses increased $29,371 or about 7%
for the current quarter compared to the same quarter of 1995. The increase
was primarily attributable to planned expenditures in sales and marketing
associated with the Company's CIS products. Management anticipates the
increased level of sales and marketing expenditures to continue in future
quarters as the Company expands its sales and marketing activities.
Research and Development expense increased $8,367 or about 6% for
the current quarter as compared to the same quarter of 1995. The increase
was primarily attributable to increases in personnel salaries. The Company
continues to expend considerable resources on new product development and
product enhancements which should continue at current levels for the
foreseeable future.
As a result of the aggregate factors discussed above the Company
earned net income of $191,992 or $.06 per share for the first fiscal
quarter ended November 30, 1995 compared to $187,136 or $.07 per share for
the same quarter a year ago.
Capital Resources and Liquidity
As of November 30, 1995, the Company's working capital amounted
to $1,248,991 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 November 30, 1995 compared to 1.7 to 1 at August 31, 1995.
The Company's bank line of credit as of November 30, 1995
amounted to approximately $413,000, of that amount $213,000 was outstanding
as of that date. The Company was in compliance with all covenants and
financial ratios required by its bank as of November 30, 1995. 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 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 changes making place in healthcare 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
Items 1 through 5. 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 November 30, 1995.
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 January 11, 1996
Steven. M. Besbeck,
President
Chief Executive Officer,
Chief
Financial Officer
Exhibit 11
CREATIVE COMPUTER APPLICATIONS, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
Three Months ended
November 30,
1995 1994
ENDING MARKET PRICE PER SHARE $ 1.75 $ 3.38
AVERAGE MARKET PRICE PER SHARE $ 1.79 $ 1.65
Net Income $ 191,992 $ 187,136
PRIMARY EARNINGS PER SHARE:
Shares:
Weighted average number
of common shares outstanding 2,735,715 2,334,704
Incremental shares assuming all dilutive
options and warrants exercised and
proceeds used to purchase shares in
the market at the average stock price
during the period 288,190 306,396
3,023,905 2,641,100
Primary earnings per share;
$ .06 $ .07
FULLY DILUTED EARNINGS PER SHARE:
Shares:
Weighted average number of common
shares outstanding 2,735,715 2,334,704
Incremental shares assuming
all dilutive options and warrants
exercised and proceeds used to
purchase shares in the market at
the average stock price during the
period or the stock price at the
end of the period, whichever is higher 677,000 583,344
3,412,715 2,918,048
Fully diluted earnings per share: $ .06 $ .06
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