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 28, 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: 2,832,865 common shares as of March 24, 1997.
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 February
28, 1997 and August 31, 1996 3
Condensed Statements of Income for the
three months ended February 28, 1997
and February 29, 1996 4
Condensed Statements of Income for
the six months ended February 28, 1997
and February 29, 1996 5
Condensed Statements of Cash Flows for
the six months ended February 28, 1997
and February 29, 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
PART 1 - FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
____________________________________
<TABLE>
<CAPTION>
February 28, August 31,
1997 1996 *
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 205,577 $ 253,201
Receivables 2,069,171 1,678,564
Inventories 674,045 642,787
Prepaid expenses and other assets 104,838 86,881
Deferred tax asset 437,000 437,000
TOTAL CURRENT ASSETS 3,490,631 3,098,433
PROPERTY AND EQUIPMENT, net 559,274 480,108
INVENTORY OF COMPONENT PARTS 127,357 148,357
CAPITALIZED SOFTWARE COSTS, net of
accumulated amortization of
$291,319 and $446,632 796,199 693,696
INTANGIBLES, net 289,966 315,551
OTHER ASSETS 22,721 23,480
DEFERRED TAX ASSET 77,600 77,600
TOTAL ASSETS $5,363,748 $4,837,225
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank $ 320,000 $ 191,875
Accounts payable 472,050 306,321
Accrued liabilities:
Vacation Pay 175,549 157,106
Other 415,367 426,341
Deferred service contract income 446,179 464,076
Capital lease obligations,
current portion 24,189 27,489
TOTAL CURRENT LIABILITIES 1,853,334 1,573,208
NOTES PAYABLE TO BANK, NET OF
CURRENT PORTION 27,296 0
CAPITAL LEASE OBLIGATIONS, net of
current portion 10,797 21,250
DEFERRED RENT 20,134 35,235
TOTAL LIABILITIES 1,911,561 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;
2,832,865 and 2,820,915 shares
outstanding 5,732,135 5,714,570
Accumulated deficit (2,279,948) (2,507,038)
TOTAL SHAREHOLDERS' EQUITY 3,452,187 3,207,532
$5,363,748 $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
February 28 & 29,
1997 1996
(unaudited)
<S> <C> <C>
NET SYSTEM SALES AND SERVICE REVENUE
System sales $1,337,303 $ 937,260
Service revenue 502,262 510,531
1,839,565 1,447,791
COST OF PRODUCTS AND SERVICES SOLD
System sales 630,674 453,015
Service revenue 335,036 310,031
965,710 763,046
Gross profit 873,855 684,745
OPERATING EXPENSES:
Selling, general and
administrative 600,117 483,186
Research and development 134,216 124,218
734,333 607,404
Operating income 139,522 77,341
INTEREST AND OTHER INCOME 1,325 889
INTEREST EXPENSE (10,690) (15,510)
Income before taxes on income 130,157 62,720
TAXES ON INCOME (2,850) (3,700)
NET INCOME $ 127,307 $ 59,020
EARNINGS PER COMMON SHARE (Note 2): $ .04 $ .02
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON STOCK
EQUIVALENTS OUTSTANDING 2,995,355 3,295,998
</TABLE>
See Notes to Financial Statements.
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION> Six Months Ended
February 28 & 29,
1997 1996
(unaudited)
<S> <C> <C>
NET SYSTEM SALES AND SERVICE REVENUE
System sales $2,503,456 $2,158,755
Service revenue 1,070,680 1,004,570
3,574,136 3,163,325
COST OF PRODUCTS AND SERVICES SOLD
System sales 1,230,305 1,056,189
Service revenue 650,693 600,177
1,880,998 1,656,366
Gross profit 1,693,138 1,506,959
OPERATING EXPENSES:
Selling, general and
administrative 1,174,300 952,175
Research and development 268,603 261,742
1,442,903 1,213,917
Operating income 250,235 293,042
INTEREST AND OTHER INCOME 2,544 1,345
INTEREST EXPENSE (16,488) (23,075)
Income before taxes on income 236,291 271,312
TAXES ON INCOME (9,200) (20,300)
NET INCOME $ 227,091 $ 251,012
EARNINGS PER COMMON SHARE (Note 2): $ .08 $ .09
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON STOCK
EQUIVALENTS OUTSTANDING 3,008,355 3,282,090
</TABLE>
See Notes to Financial Statements.
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Six Months Ended
February 28 & 29,
1997 1996
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 227,091 $ 251,012
Adjustments to reconcile
net income to net cash provided
by operating activities:
Depreciation and amortization 222,189 166,461
Provision for possible losses 4,078 (4,068)
Changes in operating assets and
liabilities:
Receivables (394,685) (156,334)
Inventories (31,258) 76,923
Prepaid expenses and
other assets (33,058) (24,511)
Accounts payable 165,729 (136,515)
Accrued liabilities (10,428) 79,460
Net cash provided by
operating activities 149,658 252,428
INVESTING ACTIVITIES
Additions to property and
equipment (164,515) (192,341)
Capitalized software costs (192,000) (135,000)
Net cash used in investing
activities (356,515) (327,341)
FINANCING ACTIVITIES:
Additions to (payments on)
notes payable, net 155,421 35,069
Decrease in capital lease
obligations, net of payments (13,753) (18,033)
Exercise of Stock Options 17,565 1,890
Net cash provided by
financing activities 159,233 18,926
NET DECREASE IN CASH (47,624) (55,987)
Cash, beginning of period 253,201 377,813
Cash, end of period $ 205,577 $ 321,826
</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 February 28,
1997 and August 31, 1996, the results of its
operations for the three months and six months
ended February 28, 1997 & February 29, 1996, and
cash flows for the six months ended February 28,
1997 and February 29, 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.
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 second quarter of fiscal 1997 ended
February 28, 1997 increased by $391,774 or 27% compared to the same
quarter of fiscal 1996. For the six month period ended February 28,
1997 sales increased $410,811 or 13% compared to the same period in
fiscal 1996. When analyzed by product category for the quarter and
six month periods, sales of Clinical Information Systems increased
$415,945 or 67% and $273,295 or 16% respectively, sales of data
acquisition products decreased $18,321 or 6% and increased $66,562
or 14% respectively, and service and other revenues decreased by
$5,849 or 1% and increased $70,954 or 7% respectively. The
Company's new CIS products have continued to receive interest 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 six 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 second 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.
Cost of sales for the second quarter and six month
period ended February 28, 1997 increased by $202,664 or 27% and
$224,632 or 14% respectively as compared to the same quarter and six
month period of 1996. For the quarter and six month period the
increase in costs of sales was primarily attributable to an increase
in material costs of $118,836 or 65% and $87,540 or 18%
respectively, and increases in other costs of $63,809 or 25% and
$101,075 or 18% respectively, and by increases in labor costs of
$20,019 or 6% and $36,017 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 six month period ending February 28, 1997. For the
current quarter and six month period ended February 28, 1997, cost
of sales as a percentage of sales decreased to 52% from 53% and
increased to 53% from 52% respectively.
Selling and administration expenses increased
$116,931 or 24% and $222,125 or 23% in comparing the current quarter
and six months ending February 28, 1997 with the same periods of
fiscal 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 the second half 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 $9,998
or 8% and $6,861 or 3% for the current quarter and six months ending
February 28, 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 $127,307 or $.04 per share
and $227,091 or $.08 per share for the current quarter and six month
period ending February 28, 1997 compared to net income of $59,020 or
$.02 per share and a net income of $251,012 or $.09 per share in the
comparable quarter and six month period one year ago.
Capital Resources and Liquidity
As of February 28, 1997, the Company's working
capital amounted to $1,637,297 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 February 28, 1997 compared
to 2.0 to 1 at August 31, 1996.
The Company's bank line of credit as of February
28, 1997 amounted to approximately $580,000, of that amount $347,000
was outstanding as of that date. The Company was in compliance with
all covenants and financial ratios required by its bank as of
February 28, 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 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 February 28, 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: April 4, 1997 /S/ Steven M. Besbeck
Steven. M. Besbeck, President
Chief Executive Officer, Chief
Financial Officer
Date: April 4, 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>
Six Months Ended Three Months Ended
February 28 & 29, February 28 & 29,
<S> <C> <C> <C> <C>
1997 1996 1997 1996
ENDING MARKET PRICE
PER SHARE $ 1.50 $ 2.25 $ 1.50 $ 2.25
AVERAGE MARKET PRICE
PER SHARE $ 1.81 $ 1.86 $ 1.75 $ 1.93
NET INCOME $ 227,091 $ 251,012 $ 127,307 $ 59,020
PRIMARY EARNINGS PER
SHARE:
Shares:
Weighted average
number of common
shares outstanding 2,828,198 2,737,815 2,831,532 2,737,815
Shares issuable upon
exercise of options
and warrants 663,000 927,755 623,000 927,755
Shares assumed to be
repurchased under the
treasury stock method
(1) (2) (82,843) (383,480) (459,177) (369,572)
Adjusted weighted
average number of
common shares
outstanding 3,008,355 3,282,090 2,995,355 3,295,998
Primary earnings per share: $ .08 $ .09 $ .04 $ .02
FULLY DILUTED EARNINGS
PER SHARE:
Shares:
Weighted average number
of common shares outstanding 2,828,198 2,737,815 2,831,532 2,737,815
Shares issuable upon
exercise of options and
warrants 663,000 927,755 623,000 927,755
Shares assumed to be
repurchased under the
treasury stock method
(1) (2) (482,843) ( 317,010) (459,177) (317,010)
Adjusted weighted average
number of common shares
outstanding 3,008,355 3,348,560 2,995,355 3,348,560
Fully diluted earnings
per share: $ .08 $ .09 $ .04 $ .02
</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 $873,946 &
$803,560 for primary and fully diluted for the six months & three
months ending February 28, 1997.
CREATIVE COMPUTER APPLICATIONS, INC.
CREATIVE COMPUTER APPLICATIONS, INC.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 205577
<SECURITIES> 0
<RECEIVABLES> 2069171
<ALLOWANCES> 0
<INVENTORY> 674045
<CURRENT-ASSETS> 3490631
<PP&E> 1610706
<DEPRECIATION> 1051432
<TOTAL-ASSETS> 5363748
<CURRENT-LIABILITIES> 1853334
<BONDS> 0
<COMMON> 5732135
0
0
<OTHER-SE> (2279948)
<TOTAL-LIABILITY-AND-EQUITY> 5363748
<SALES> 3574136
<TOTAL-REVENUES> 3576680
<CGS> 1880998
<TOTAL-COSTS> 3323901
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16488
<INCOME-PRETAX> 236291
<INCOME-TAX> 9200
<INCOME-CONTINUING> 227091
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 227091
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
