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, 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: 2,824,865 common shares as of December 27, 1996
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,
1996 and August 31, 1996 3
Condensed Statements of Income for the
three months ended November 30,
1996 and November 30, 1995 4
Condensed Statements of Cash Flows
for the three months ended November 30,
1996 and November 30, 1995 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
<TABLE>
<CAPTION>
November 30, August 31,
1996 1996 *
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 408,621 $ 253,201
Receivables 1,610,620 1,678,564
Inventories 668,058 642,787
Prepaid expenses and
other assets 113,837 86,881
Deferred tax asset 437,000 437,000
TOTAL CURRENT ASSETS 3,238,136 3,098,433
PROPERTY AND EQUIPMENT, net 587,184 480,108
INVENTORY OF COMPONENT PARTS 137,857 148,357
CAPITALIZED SOFTWARE COSTS, net
of accumulated amortization
of $243,509 and $446,632 748,009 693,696
INTANGIBLES, net 302,758 315,551
OTHER ASSETS 23,099 23,480
DEFERRED TAX ASSET 77,600 77,600
TOTAL ASSETS $ 5,114,643 $ 4,837,225
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank $ 120,000 $ 191,875
Accounts payable 536,677 306,321
Accrued liabilities:
Vacation Pay 172,120 157,106
Other 446,834 426,341
Deferred service contract income 398,798 464,076
Capital lease obligations,
current portion 26,691 27,489
TOTAL CURRENT LIABILITIES 1,701,120 1,573,208
NOTES PAYABLE TO BANK, NET OF
CURRENT PORTION 57,296 0
CAPITAL LEASE OBLIGATIONS, net
of current portion 15,303 21,250
DEFERRED RENT 27,685 35,235
TOTAL LIABILITIES 1,801,404 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; 2,824,865 and
2,820,915 shares outstanding 5,720,495 5,714,570
Accumulated deficit (2,407,256) (2,507,038)
TOTAL SHAREHOLDERS' EQUITY 3,313,239 3,207,532
$ 5,114,643 $ 4,837,225
</TABLE>
See Notes to Financial Statements.
* As presented in the audited financial statements
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended November 30,
1996 1995
(unaudited)
<S> <C> <C>
NET SYSTEM SALES AND SERVICE REVENUE
System sales $ 1,166,153 $ 1,221,494
Service revenue 568,418 494,040
1,734,571 1,715,534
COST OF PRODUCTS AND SERVICES SOLD
System sales 599,631 603,174
Service revenue 315,657 290,146
915,288 893,320
Gross profit 819,283 822,214
OPERATING EXPENSES:
Selling, general and
administrative 574,183 468,989
Research and development 134,387 137,524
708,570 606,513
Operating income 110,713 215,701
INTEREST AND OTHER INCOME 1,219 456
INTEREST EXPENSE (5,798) (7,565)
Income before taxes on income 106,134 208,592
TAXES ON INCOME (6,350) (16,600)
NET INCOME 99,784 191,992
EARNINGS PER COMMON SHARE (Note 2): $ .03 $ .06
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON STOCK
EQUIVALENTS OUTSTANDING 3,019,099 3,023,905
</TABLE>
See Notes to Financial Statements.
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Three Months Ended November 30,
1996 1995
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 99,784 $ 191,992
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 104,916 92,788
Provision for possible losses (2,136) 10,056
Changes in operating assets and
liabilities:
Receivables 70,081 (253,717)
Inventories (25,271) 59,696
Prepaid expenses and other assets (34,506) (29,376)
Accounts payable 230,356 (76,357)
Accrued liabilities (29,771) (39,196)
Net cash provided by (used in)
operating activities 413,453 (44,114)
INVESTING ACTIVITIES
Additions to property and equipment (146,634) (20,792)
Capitalized software costs (96,000) (67,500)
Net cash used in investing
activities (242,634) (88,292)
FINANCING ACTIVITIES:
Additions to (payments on)
notes payable, net (14,579) 67,000
Decrease in capital lease obligations,
net of payments (6,745) (13,899)
Exercise of Stock Option 5,925 1,890
Net cash provided by (used in)
financing activities (15,399) 54,991
NET INCREASE (DECREASE) IN CASH 155,420 (77,415)
Cash, beginning of period 253,201 377,813
Cash, end of period $ 408,621 $ 300,398
</TABLE>
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,
1996 and August 31, 1996, the results of its
operations for the three months ended November 30,
1996 and 1995, and cash flows for the three months
ended November 30, 1996 and November 30, 1995.
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
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 first quarter of fiscal 1997 ended
November 30, 1996 increased by $19,037 or 1% compared to the same
quarter of fiscal 1996. When analyzed by product category, sales of
Clinical Information Systems (CIS) decreased $142,649 or 14%, sales
of data acquisition products increased $84,883 or 50% and service
and other revenues increased $76,803 or 15%. The increase in sales
is primarily attributable to an increase in the sales of data
acquisition products and service revenues, offset by a fewer number
of Clinical Information Systems 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. The increase in service revenues is indicative of
a greater number of accounts under contract.
Cost of sales for the first quarter of 1997
increased by $21,968 or 2% as compared to the same quarter of 1996.
The increase in cost of sales was primarily attributable to an
increase in labor costs of $15,998 or 6% and an increase in other
costs of $37,266 or 13%. The increases were partially offset by a
decrease in material costs of $31,296 or 10%. The decrease in
material costs is attributable to a greater volume of software only
revenues that improve gross margins and a lower volume of sales of
Clinical Information Systems. Cost of sales as a percentage of
sales increased to 53% in the current fiscal quarter as compared to
52% in the same quarter of fiscal 1996.
Selling and administration expenses increased
$105,194 or about 22% for the current quarter compared to the same
quarter of 1996. 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 related to the
sale of its CIS products across a broader market spectrum.
In 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 first half 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.
Research and Development expense decreased $3,137
or about 3% for the current quarter as compared to the same quarter
of 1996. The Company continues to expend considerable resources on
new product development and product enhancements which should
continue for the foreseeable future. In addition, the Company has
also initiated the design phase of new CIS products that will
require increased development expenditures in future periods.
As a result of the aggregate factors discussed
above the Company earned net income of $99,784 or $.03 per share for
the first fiscal quarter ended November 30, 1996 compared to
$191,992 or $.06 per share for the same quarter a year ago.
Capital Resources and Liquidity
As of November 30, 1996, the Company's working
capital amounted to $1,537,016 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 November 30, 1996 compared
to 2.0 to 1 at August 31, 1996.
The Company's bank line of credit as of November
30, 1996 amounted to approximately $700,000, of that amount $178,000
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, 1996.
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 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 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.
Exhibit 27 - Financial Data Schedule.
(b) There were no reports filed on Form 8-K
during the quarter ended November 30, 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 January 10, 1997 /S/ Steven M. Besbeck
Steven. M. Besbeck, President
Chief Executive Officer, Chief
Financial Officer
Date January 10, 1997 /S/ Carol Bessel
Carol Bessel,
Controller and Chief Accounting
Officer
Exhibit 11
CREATIVE COMPUTER APPLICATIONS, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months ended
November 30,
1996 1995
<S> <C> <C>
ENDING MARKET PRICE PER SHARE $ 2.13 $ 1.75
AVERAGE MARKET PRICE PER SHARE $ 1.86 $ 1.79
NET INCOME $ 99,784 $ 191,992
PRIMARY EARNINGS PER SHARE:
Shares:
Weighted average number of
common shares outstanding 2,824,207 2,735,715
shares issuable upon exercise
of options and warrants 671,000 816,000
Shares assumed to be repurchased
under the treasury stock
method (1) (2) (476,108) (527,810)
Adjusted weighted average number
of common shares outstanding 3,019,099 3,023,905
Primary earnings per share $ .03 $ .06
FULLY DILUTED EARNINGS PER SHARE:
Shares:
Weighted average number of
common shares outstanding 2,824,207 2,735,715
Shares issuable upon exercise
of options and warrants 681,000 816,000
Shares assumed to be repurchased
under the treasury
stock method (1) (2) (424,817) (139,000)
Adjusted weighted average
number of common shares outstanding 3,080,390 3,412,715
Fully diluted earnings per share $ .03 $ .06
</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 $885,560 for primary and $904,860 for fully diluted
for the period ended November 30, 1996.
CREATIVE COMPUTER APPLICATIONS, INC.
CREATIVE COMPUTER APPLICATIONS, INC.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 408621
<SECURITIES> 0
<RECEIVABLES> 1610620
<ALLOWANCES> 0
<INVENTORY> 668058
<CURRENT-ASSETS> 3238136
<PP&E> 1592824
<DEPRECIATION> 1005640
<TOTAL-ASSETS> 5114643
<CURRENT-LIABILITIES> 1701120
<BONDS> 0
<COMMON> 5720495
0
0
<OTHER-SE> (2407256)
<TOTAL-LIABILITY-AND-EQUITY> 5114643
<SALES> 1734571
<TOTAL-REVENUES> 1735790
<CGS> 915288
<TOTAL-COSTS> 1623858
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5798
<INCOME-PRETAX> 106134
<INCOME-TAX> 6350
<INCOME-CONTINUING> 99784
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 99784
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
