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, 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: 2,910,865 common shares as of December
29, 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 November 30,
1997 and August 31, 1997 3
Condensed Statements of Income for the three
months ended November 30, 1997 and
November 30, 1996 4
Condensed Statements of Cash Flows for the
three months ended November 30, 1997 and
November 30, 1996 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,
1997 1997 *
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 292,768 $ 534,430
Receivables 2,123,796 1,933,685
Inventories 724,297 675,795
Prepaid expenses and other assets 117,306 78,951
Deferred tax asset 427,000 427,000
TOTAL CURRENT ASSETS 3,685,167 3,649,861
PROPERTY AND EQUIPMENT, net 550,059 551,413
INVENTORY OF COMPONENT PARTS 125,857 136,357
CAPITALIZED SOFTWARE COSTS, net
of accumulated
amortization of $334,269
and $286,907 976,575 917,937
INTANGIBLES, net 251,588 264,381
OTHER ASSETS 21,587 21,965
DEFERRED TAX ASSET 551,200 551,200
TOTAL ASSETS $ 6,162,033 $6,093,114
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank $ 157,296 $ 287,296
Accounts payable 575,296 522,808
Accrued liabilities:
Vacation Pay 196,024 187,367
Other 418,787 363,027
Deferred service contract income 606,294 569,734
Capital lease obligations, current portion 12,130 16,572
TOTAL CURRENT LIABILITIES 1,965,827 1,946,804
CAPITAL LEASE OBLIGATIONS, net
of current portion 3,173 4,679
DEFERRED RENT 0 5,034
TOTAL LIABILITIES 1,969,000 1,956,517
SHAREHOLDERS' EQUITY:
Preferred shares, no par value;
500,000 shares authorized; no
shares outstanding - -
Common shares, no par value;
20,000,000 shares authorized;
2,864,865 and 2,849,865 shares
outstanding 5,768,585 5,752,635
Accumulated deficit (1,575,552) (1,616,038)
TOTAL SHAREHOLDERS' EQUITY 4,193,033 4,136,597
$ 6,162,033 $ 6,093,114
</TABLE>
See Notes to Financial Statements.
* As presented in the audited financial statements
CONDENSED STATEMENTS OF OPERATION
<TABLE>
<CAPTION>
Three Months Ended November 30,
1997 1996
(unaudited)
<S> <C> <C>
NET SYSTEM SALES AND SERVICE REVENUE
System sales $ 1,244,737 $ 1,166,153
Service revenue 562,704 568,418
1,807,441 1,734,571
COST OF PRODUCTS AND SERVICES SOLD
System sales 624,861 599,631
Service revenue 393,406 315,657
1,018,267 915,288
Gross profit 789,174 819,283
OPERATING EXPENSES:
Selling, general and administrative 589,371 574,183
Research and development 155,543 134,387
744,914 708,570
Operating income 44,260 110,713
INTEREST AND OTHER INCOME 574 1,219
INTEREST EXPENSE (3,998) (5,798)
Income before taxes on income 40,836 106,134
TAXES ON INCOME (350) (6,350)
NET INCOME $ 40,486 $ 99,784
EARNINGS PER COMMON SHARE (Note 2): $ .01 $ .03
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON STOCK
EQUIVALENTS OUTSTANDING 3,006,993 3,019,099
</TABLE>
See Notes to Financial Statements.
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Three Months Ended November 30,
1997 1996
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 40,486 $ 99,784
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 111,176 104,916
Provision for possible losses 1,650 (2,136)
Changes in operating assets and
liabilities:
Receivables (191,761) 70,081
Inventories (48,502) (25,271)
Prepaid expenses and other assets (43,388) (34,506)
Accounts payable 52,488 230,356
Accrued liabilities 100,975 (29,771)
Net cash provided by
operating activities 23,124 413,453
INVESTING ACTIVITIES
Additions to property and equipment (38,788) (146,634)
Capitalized software costs (106,000) (96,000)
Net cash used in investing
activities (144,788) (242,634)
FINANCING ACTIVITIES:
Additions to (payments on) notes
payable, net (130,000) (14,579)
Decrease in capital lease obligations,
net of payments (5,948) (6,745)
Exercise of Stock Option 15,950 5,925
Net cash used in financing activities (119,998) (15,399)
NET INCREASE (DECREASE) IN CASH (241,662) 155,420
Cash, beginning of period 534,430 253,201
Cash, end of period $ 292,768 $ 408,621
</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,
1997 and August 31, 1997, the results of its
operations for the three months ended November 30,
1997 and 1996, and cash flows for the three months
ended November 30, 1997 and November 30, 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. If 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 first quarter of fiscal 1998 ended
November 30, 1997 increased by $72,870 or 4% compared to the same
quarter of fiscal 1997. When analyzed by product category, sales of
Clinical Information Systems (CIS) increased $106,606 or 12%, sales
of data acquisition products decreased $29,164 or 11% and service
and other revenues decreased $4,572 or 1%. The overall increase in
sales is primarily attributable to an increase in the sales of
Clinical Information Systems, offset by a decrease in sales of data
acquisition products. 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 an increase in new
quotations for potential sales.
Cost of sales for the first quarter of 1998
increased by $102,979 or 11% as compared to the same quarter of
1997. The increase in cost of sales was primarily attributable to
an increase in labor costs of $121,082 or 40% due to the conversion
of temporary personnel to full-time employee status and hiring
additional trainers and managers to handle an anticipated increase
in sales. There was an increase in other costs of $41,172 or 12%
primarily attributable to travel expenses for training and
installation. These increases were partially offset by a decrease
in material costs of $59,275 or 22% which were attributable to a
lesser volume of hardware components sold during the quarter and to
a greater volume of software only sales. Cost of sales as a
percentage of sales increased to 56% in the current fiscal quarter
as compared to 53% in the same quarter of fiscal 1997.
Selling and administration expenses increased
$15,188 or about 3% for the current quarter compared to the same
quarter of 1997. 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.
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 1998 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 increased $21,156
or about 16% for the current quarter as compared to the same quarter
of 1997. 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 $40,486 or $.01 per share for
the first fiscal quarter ended November 30, 1997 compared to $99,784
or $.03 per share for the same quarter a year ago.
Capital Resources and Liquidity
As of November 30, 1997, the Company's working
capital amounted to $1,719,340 compared to $1,703,057 at August 31,
1997. The ratio of the Company's current assets to current
liabilities was approximately 1.9 to 1 at November 30, 1997 compared
to 1.9 to 1 at August 31, 1997.
The Company's bank line of credit as of November
30, 1997 amounted to approximately $460,000, of that amount $157,000
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, 1997.
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 1998
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, 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 January 12, 1998 /S/ Steven M. Besbeck
Steven. M. Besbeck, President
Chief Executive Officer, Chief
Financial Officer
Date January 12, 1998 /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,
1997 1996
<S> <C> <C>
ENDING MARKET PRICE PER SHARE $ 1.75 $ 2.13
AVERAGE MARKET PRICE PER SHARE $ 1.74 $ 1.86
NET INCOME $ 40,486 $ 99,784
PRIMARY EARNINGS PER SHARE:
Shares:
Weighted average number of common
shares outstanding 2,859,865 2,824,207
Shares issuable upon exercise of
options and warrants 583,000 671,000
Shares assumed to be repurchased
under the treasury stock
method (1) (2) (435,872) (476,108)
Adjusted weighted average number
of common shares outstanding 3,006,993 3,019,099
Primary earnings per share $ .01 $ .03
FULLY DILUTED EARNINGS PER SHARE:
Shares:
Weighted average number of
common shares outstanding 2,859,865 2,824,207
Shares issuable upon exercise of
options and warrants 583,000 681,000
Shares assumed to be repurchased
under the treasury stock
method (1) (2) (432,634) (424,817)
Adjusted weighted average number
of common shares outstanding 3,010,231 3,080,390
Fully diluted earnings per share $ .01 $ .03
</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.
(2) Shares assumed to be repurchased under the treasury stock method were
based on proceeds of assumed options of $757,110 for primary and
fully diluted for the three month period ended November 30, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> NOV-30-1997
<CASH> 292768
<SECURITIES> 0
<RECEIVABLES> 2123796
<ALLOWANCES> 0
<INVENTORY> 724297
<CURRENT-ASSETS> 3685167
<PP&E> 1698207
<DEPRECIATION> 1148148
<TOTAL-ASSETS> 6162033
<CURRENT-LIABILITIES> 1965827
<BONDS> 0
0
0
<COMMON> 5768585
<OTHER-SE> (1575552)
<TOTAL-LIABILITY-AND-EQUITY> 6162033
<SALES> 1807441
<TOTAL-REVENUES> 1808015
<CGS> 1018267
<TOTAL-COSTS> 1763181
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3998
<INCOME-PRETAX> 40836
<INCOME-TAX> 350
<INCOME-CONTINUING> 40486
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40486
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
