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, 1997
[ ] 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: 2,849,865 common shares as of July 2, 1997
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
May 31, 1997 and August 31, 1996 3
Condensed Statements of Income
for the three months ended May 31,
1997 and May 31, 1996 4
Condensed Statements of Income
for the nine months ended May 31,
1997 and May 31, 1996 5
Condensed Statements of Cash Flows
for the nine months ended May 31,
1997 and May 31, 1996 6
Notes to Condensed Financial
Statements 7
Management's Discussion and
Analysis or Plan of Operation 7
PART II - Other Information:
Items 1 through 6 9
Signatures 9
CREATIVE COMPUTER APPLICATIONS, INC.
PART 1 - FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
____________________________________
<TABLE>
<CAPTION>
May 31, August 31,
1997 1996 *
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 358,187 $ 253,201
Receivables 2,160,500 1,678,564
Inventories 627,926 642,787
Prepaid expenses and other assets 123,912 86,881
Deferred tax asset 437,000 437,000
TOTAL CURRENT ASSETS 3,707,525 3,098,433
PROPERTY AND EQUIPMENT, net 538,366 480,108
INVENTORY OF COMPONENT PARTS 116,857 148,357
CAPITALIZED SOFTWARE COSTS, net of
accumulated amortization of
$339,006 and $446,632 844,513 693,696
INTANGIBLES, net 277,173 315,551
OTHER ASSETS 22,343 23,480
DEFERRED TAX ASSET 77,600 77,600
TOTAL ASSETS $5,584,377 $4,837,225
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank $ 317,296 $ 191,875
Accounts payable 402,846 306,321
Accrued liabilities:
Vacation Pay 173,655 157,106
Other 407,537 426,341
Deferred service contract income 643,673 464,076
Capital lease obligations,
current portion 20,449 27,489
TOTAL CURRENT LIABILITIES 1,965,456 1,573,208
CAPITAL LEASE OBLIGATIONS, net of
current portion 6,129 21,250
DEFERRED RENT 12,584 35,235
TOTAL LIABILITIES 1,984,169 1,629,693
SHAREHOLDERS' EQUITY:
Preferred shares, no par value; 500,000
shares authorized; no shares
outstanding - -
Common shares, no par value; 20,000,000
shares authorized; 2,849,865 and
2,820,915 shares outstanding 5,752,635 5,714,570
Accumulated deficit (2,152,427) (2,507,038)
TOTAL SHAREHOLDERS' EQUITY 3,600,208 3,207,532
$5,584,377 $4,837,225
</TABLE>
See Notes to Financial Statements.
* As presented in the audited financial statements
CREATIVE COMPUTER APPLICATIONS, INC.
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended May 31,
1997 1996
(unaudited)
<S> <C> <C>
NET SYSTEM SALES AND SERVICE REVENUE
System sales $1,223,380 $ 964,876
Service revenue 512,291 519,148
1,735,671 1,484,024
COST OF PRODUCTS AND SERVICES SOLD
System sales 556,206 399,204
Service revenue 362,154 346,653
918,360 745,857
Gross profit 817,311 738,167
OPERATING EXPENSES:
Selling, general and administrative 572,291 558,331
Research and development 146,115 139,907
718,406 698,238
Operating income 98,905 39,929
INTEREST AND OTHER INCOME 39,956 999
INTEREST EXPENSE (9,341) (6,213)
Income before taxes on income 129,520 34,715
TAXES ON INCOME (2,000) (2,800)
NET INCOME $ 127,520 $ 31,915
EARNINGS PER COMMON SHARE (Note 2): $ .04 $ .01
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON STOCK
EQUIVALENTS OUTSTANDING 3,038,984 3,321,924
</TABLE>
See Notes to Financial Statements.
CREATIVE COMPUTER APPLICATIONS, INC.
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Nine Months Ended May 31,
1997 1996
(unaudited)
<S> <C> <C>
NET SYSTEM SALES AND SERVICE REVENUE
System sales $3,726,836 $3,123,631
Service revenue 1,582,971 1,523,718
5,309,807 4,647,349
COST OF PRODUCTS AND SERVICES SOLD
System sales 1,786,511 1,455,392
Service revenue 1,012,847 946,830
2,799,358 2,402,222
Gross profit 2,510,449 2,245,127
OPERATING EXPENSES:
Selling, general and
administrative 1,746,591 1,510,506
Research and development 414,718 401,650
2,161,309 1,912,156
Operating income 349,140 332,971
INTEREST AND OTHER INCOME 42,500 2,344
INTEREST EXPENSE (25,829) (29,288)
Income before taxes on income 365,811 306,027
TAXES ON INCOME (11,200) (23,100)
NET INCOME $ 354,611 $ 282,927
EARNINGS PER COMMON SHARE (Note 2): $ .12 $ .10
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON STOCK
EQUIVALENTS OUTSTANDING 3,012,782 3,321,924
</TABLE>
See Notes to Financial Statements.
CREATIVE COMPUTER APPLICATIONS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Nine Months Ended May 31,
1997 1996
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 354,611 $ 282,927
Adjustments to reconcile
net income to net cash provided by
operating activities:
Depreciation and amortization 340,133 289,088
Provision for possible losses 2,777 3,142
Changes in operating assets and
liabilities:
Receivables (484,713) 81,473
Inventories 14,861 34,090
Prepaid expenses and other assets (59,682) (52,187)
Accounts payable 96,525 (189,551)
Accrued liabilities 177,342 11,385
Net cash provided by
operating activities 441,854 460,367
INVESTING ACTIVITIES
Additions to property and equipment (190,193) (292,888)
Capitalized software costs (288,000) (202,500)
Net cash used in investing
activities (478,193) (495,388)
FINANCING ACTIVITIES:
Additions to (payments on) notes
payable, net 125,421 (24,209)
Decrease in capital lease obligations,
net of payments (22,161) (21,795)
Exercise of Stock Options 38,065 38,340
Net cash provided by (used in)
financing activities 141,325 (7,664)
NET INCREASE (DECREASE) IN CASH 104,986 (42,685)
Cash, beginning of period 253,201 377,813
Cash, end of period $ 358,187 $ 335,128
</TABLE>
See notes to financial statements.
CREATIVE COMPUTER APPLICATIONS, INC.
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 May 31, 1997 and
August 31, 1996, the results of its operations for
the three months and nine months ended May 31, 1997
& May 31, 1996, and cash flows for the nine months
ended May 31, 1997 and May 31, 1996.
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.
Statement of Financial Standards No. 128, Earnings
Per Share (SFAS 128) is effective for financial
statements issued for periods ending after December
15, 1997, including interim periods. Earlier
application is not permitted. SFAS 128 requires
dual presentation of basic and diluted earnings per
share (EPS) on the face of the income statement.
It also requires a reconciliation of the numerator
and denominator of the basic EPS computation to the
numerator and denominator of the diluted EPS
computation. This statement also requires
restatement of all prior-period EPS data presented.
The Company has not determined the effect on its
EPS from the adoption of this statement.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
This following section of the report contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements involve risks and uncertainties so that the actual
results may vary materially.
Results of Operations
Sales for the third quarter of fiscal 1997 ended
May 31, 1997 increased by $251,647 or 17% compared to the same
quarter of fiscal 1996. For the nine month period ended May 31,
1997 sales increased $662,458 or 14% compared to the same period in
fiscal 1996. When analyzed by product category for the quarter and
nine month periods, sales of Clinical Information Systems increased
$246,568 or 34% and $519,863 or 22% respectively, sales of data
acquisition products increased $9,666 or 5% and $76,228 or 11%
respectively, and service and other revenues decreased by $4,587 or
1% and increased $66,367 or 4% respectively. The Company's new CIS
products have continued to receive acceptance from the healthcare
market which resulted in increased new orders for such products
during the quarter and a marked increase in new quotations for
potential sales. The increase in service revenues for the nine
month period is indicative of a greater number of accounts under
contract.
In the second half of fiscal 1996 management
restructured its sales and marketing activities, including the
recruitment of a Vice President of Sales and Business Development.
The Company also began strategic joint marketing partnerships with
other companies which improved the Company's market penetration.
Management views the near term outlook for the continued sale of CIS
products favorably during the remainder of the 1997 fiscal year.
However, the Company's future operating results will continue to be
subject to quarterly variations based upon a wide variety of
factors, including the volume mix and timing of orders received
during any quarter or annual periods.
Cost of sales for the third quarter and nine month
period ended May 31, 1997 increased by $172,503 or 23% and $397,136
or 17% respectively as compared to the same quarter and nine month
period of 1996. For the quarter and nine month period the increase
in costs of sales was primarily attributable to an increase in
material costs of $78,617 or 52% and $166,158 or 26% respectively,
and increases in other costs of $77,436 or 30% and $178,511 or 22%
respectively, and by increases in labor costs of $16,450 or 5% and
$52,467 or 6% respectively. The overall increases were attributable
to a higher volume of sales of Clinical Information Systems and data
acquisition products in the current quarter and nine month period
ending May 31, 1997. The quarter ending May 31, 1996, has been
restated in the accompanying financial statements to reflect the
reclassified amortization of capitalized software of $83,722 and is
included in cost of sales. For the current quarter and nine month
period ended May 31, 1997, cost of sales as a percentage of sales
increased to 53% from 50% and increased to 53% from 52%
respectively.
Selling and administration expenses increased
$13,960 or 3% and $236,085 or 16% in comparing the current quarter
and nine months ending May 31, 1997 with the same periods of fiscal
1996. The increase was primarily attributable to
CREATIVE COMPUTER APPLICATIONS, INC.
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 the remainder of
fiscal 1997 as the Company expands its sales and marketing
activities related to the sale of its CIS products across a broader
market spectrum.
Research and Development expense increased $6,208
or 4% and $13,068 or 3% for the current quarter and nine months
ending May 31, 1997 compared to the same periods of fiscal 1996.
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 $127,520 or $.04 per share
and $354,611 or $.12 per share for the current quarter and nine
month period ending May 31, 1997 compared to net income of $31,915
or $.01 per share and a net income of $282,927 or $.10 per share in
the comparable quarter and nine month period one year ago.
Capital Resources and Liquidity
As of May 31, 1997, the Company's working capital
amounted to $1,742,069 compared to $1,525,225 at August 31, 1996.
The ratio of the Company's current assets to current liabilities was
approximately 1.9 to 1 at May 31, 1997 compared to 2.0 to 1 at
August 31, 1996.
The Company's bank line of credit as of May 31,
1997 amounted to approximately $580,000, of that amount $317,000 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,
1997.
The Company believes that its cash flows from
operations together with its bank credit facilities should be
sufficient to fund its working capital requirements for its 1997
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 taking 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.
CREATIVE COMPUTER APPLICATIONS, INC.
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.
Exhibit 27 - Financial Data Schedule.
(b) There were no reports filed on Form 8-K during the quarter
ended May 31, 1997.
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: July 11, 1997 /S/ Steven M. Besbeck
Steven. M. Besbeck, President
Chief Executive Officer, Chief
Financial Officer
Date: July 11, 1997 /S/ Carol Bessel
Carol Bessel, Controller
and Chief Accounting Officer
CREATIVE COMPUTER APPLICATIONS, INC.
Exhibit 11
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
May 31, May 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
ENDING MARKET PRICE
PER SHARE $ 1.63 $ 2.13 $ 1.63 $ 2.13
AVERAGE MARKET PRICE
PER SHARE $ 1.85 $ 1.91 $ 1.94 $ 2.01
NET INCOME $ 354,611 $ 282,927 $ 127,520 $ 31,915
PRIMARY EARNINGS PER
SHARE:
Shares:
Weighted average
number of common
shares outstanding 2,830,698 2,752,015 2,835,698 2,752,015
Shares issuable
upon exercise of
options and
warrants 638,000 953,755 648,000 953,755
Shares assumed to be
repurchased under
the treasury stock
method (1) (2) ( 455,916) ( 383,846) ( 444,714) ( 383,846)
Adjusted weighed average
number of common shares
outstanding 3,012,782 3,321,924 3,038,984 3,321,924
Primary earnings per share: $ .12 $ .10 $ .04 $ .01
FULLY DILUTED EARNINGS
PER SHARE:
Shares:
Weighted average
number of common
shares outstanding 2,830,698 2,752,015 2,835,698 2,752,015
Shares issuable upon
exercise of options and
warrants 638,000 953,755 648,000 953,755
Shares assumed to be
repurchased under the
treasury stock method
(1)(2) ( 455,916) ( 383,846) ( 444,714) ( 383,846)
Adjusted weighted average
number of common shares
outstanding 3,012,782 3,321,924 3,038,984 3,321,924
Fully diluted earnings
per share: $ .12 $ .10 $ .04 $ .01
</TABLE>
(1) Shares assumed to be repurchased under the treasury stock
method:
Primary common stock equivalents are assumed to be
repurchased at average market price.
Fully diluted common stock equivalents are assumed to be
repurchased at the greater of average or ending market price.
Shares assumed to be repurchased under the treasury stock
method are limited to 20% of the number of shares
outstanding at the end of the period in accordance with
Accounting Principals Board Statement No. 15.
(2) Shares assumed to be repurchased under the treasury stock
method were based on proceeds of assumed options
of $843,445 & $862,745 for primary and fully diluted for
the nine months & three months ending May 31, 1997.
CREATIVE COMPUTER APPLICATIONS, INC.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 358187
<SECURITIES> 0
<RECEIVABLES> 2160500
<ALLOWANCES> 0
<INVENTORY> 627926
<CURRENT-ASSETS> 3707525
<PP&E> 1636385
<DEPRECIATION> 1098019
<TOTAL-ASSETS> 5584377
<CURRENT-LIABILITIES> 1965456
<BONDS> 0
<COMMON> 5752635
0
0
<OTHER-SE> (2152427)
<TOTAL-LIABILITY-AND-EQUITY> 5584377
<SALES> 5309807
<TOTAL-REVENUES> 5352307
<CGS> 2799358
<TOTAL-COSTS> 4960667
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25829
<INCOME-PRETAX> 365811
<INCOME-TAX> 11200
<INCOME-CONTINUING> 354611
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 354611
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
