UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES AND EXCHANGE ACT OF 1934 for the fiscal year 
ended August 31, 1998.

OR
[ ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE 
SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ____________ to _______________

Commission file number 0-12551

CREATIVE COMPUTER APPLICATIONS, INC.
(Name of Small Business Issuer 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)    (Zip Code)

Issuer's telephone number: (818) 880-6700

Securities registered under Section 12(b) of the Exchange Act:  None
Securities registered under Section 12(g) of the Exchange Act:

Common Stock, no par value
(Title of class)

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 Issuer was required to file 
such reports), and (2) has been subject to such filing requirements 
for the past 90 days.
		Yes  X 		No  __

Check if there is no disclosure of delinquent filers in response to 
Item 405 of Regulation S-B is not contained in this form, and no 
disclosure will be contained, to the best of Issuer's knowledge, in 
definitive proxy or information statements incorporated by reference 
in Part III of this Form 10-KSB or any amendment to this Form 10-
KSB.						[  ]

Issuer's revenues for its most recent fiscal year ended August 31, 
1998 were $6,448,370

As of November 16, 1998, the aggregate market value of the voting 
stock held by non-affiliates of the Company was approximately 
$2,000,000.

As of November 16, 1998, the Company had 2,920,740 shares of its 
common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Transitional Small Business Disclosure (check one):
		Yes  __		No  X	

Items 10, 11 and 12 of Part III of this report are hereby 
incorporated by reference from the Company's Definitive Proxy 
Statement which will be filed within 120 days of the Company's 
fiscal year.

PART I

Item 1.  Business.

	The following 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.


Business Description

Creative Computer Applications, Inc. (CCA or the Company) 
develops, assembles, markets, installs, and services computer based 
Clinical Information Systems for use in hospitals, clinics, 
reference laboratories, and other healthcare institutions.  Clinical 
information is data that is gathered concerning each individual 
patient's health condition, diagnosis, and treatment that is used by 
doctors, nurses and other healthcare providers.  CCA's products are 
used to provide automation of information that facilitates the 
operation of clinical departments and allows the rapid recording and 
processing of information that can be communicated, documented, and 
delivered to healthcare providers.  Currently, CCA markets a 
Laboratory Information System under the name CyberLAB II(Registered 
Trademark), a Pharmacy Information System under the name of 
CyberMED(Trademark), a Radiology Information System under the name 
CyberRAD(Registered Trademark), a Financial Management System for 
outpatient billing and accounts receivable and other related 
application modules. Additional application software products are in 
development or are planned to be developed in the future. The 
Company is also actively seeking to license or acquire other 
synergistic software products and operating businesses to add to its 
expanding product and service activities.  The Company operates in a 
single industry segment.  The general offices and operational 
headquarters are located at 26115-A Mureau Road, Calabasas, CA 
91302.  The telephone number is 818/880-6700.

The Company's business consists of three operational areas:  
(1) Clinical Information Systems products, (2) service of its 
client's installations, and (3) data acquisition products.  Product 
lines consist of Laboratory Information Systems, Pharmacy 
Information Systems, Radiology Information Systems, Financial 
Management Systems, Mammography Reporting and Tracking Systems, and 
Data Acquisition products.  The Company sells its products and 
systems directly through its own sales force and through joint 
marketing relations with other companies.  In addition, the Company 
sells its data acquisition products to original equipment 
manufacturers (OEM) and provides out source services.


History and Business Development

Since its inception as a California corporation in 1978, the 
Company has been primarily engaged in the development, manufacture, 
and service of Clinical Information Systems that automate the 
collection and management of patient clinical data for the 
healthcare industry.

Upon its formation, the Company initially designed and 
assembled custom data interfaces for various customers to use with 
specific automated and semi-automated testing devices.  By January 
1982, the Company had expanded its initial prototype data interface 
and data entry console products into a line of off-the-shelf 
interfaces for a wide variety of clinical instrumentation.  
Subsequently, the Company transformed this technology into turnkey 
information processing and Clinical Information Systems (CIS).  As 
of August 31, 1998, the Company supported approximately 650 active 
application installations, that are used in over 500 client sites.

The percentage of the Company's net sales attributable to 
the sale and licensure of Clinical Information Systems, including 
data acquisition product sales, accounted for approximately 64% of 
the total revenues in fiscal 1998, 70% in fiscal 1997,and 67% in 
fiscal 1996. Management believes that the percentage of the 
Company's net sales attributable to its sales of Clinical 
Information Systems activities will continue at a similar rate in 
fiscal 1999 as in the current fiscal year.

By automating the collection and organization of patient 
clinical data, the Company's Clinical Information Systems reduce 
operating costs, improve patient care, and increase the efficiency 
of healthcare providers.  In recent years, the healthcare industry 
has come under increasing pressure to control costs from government 
regulatory agencies and third party payers of medical expenses, as 
well as from increased competition in the healthcare industry.  The 
need to contain healthcare costs has led to pressure to decrease or 
control the costs of the various components of healthcare.  
Management believes the pressure to contain healthcare costs can be 
expected to increase in the foreseeable future.  The Company is 
continuing its research and development activities to develop 
products, which will reduce operating costs, improve patient care, 
and provide efficiencies in the healthcare industry.

The Company has pursued a diversification program since 1992 
through acquisition and new product development to expand the 
Company's business to encompass other products that could service 
other clinical departments in hospitals and multi-specialty clinics.  
The Company has successfully pursued this program and during fiscal 
1998 acquired MQA, a mammography reporting and tracking system, and 
completed enhancements and new modules to its Clinical Information 
System products.  In addition, the Company has developed a Web-
server based clinical system that provides access to its existing 
products so that physicians and nurses can easily utilize them from 
virtually anywhere in the world.  Management believes that there are 
significant opportunities to market a multiple range of clinical 
applications to existing as well as new customers.  Furthermore, the 
Company's software and hardware support organization and its sales 
and marketing personnel have been employed to service and market 
additional products.  Management also believes there is synergy 
between the various clinical departments in hospitals and multi-
specialty clinics.  The Company is working to provide integration of 
its various departmental clinical applications to aid in patient 
treatment and management.

Although the Company has been profitable in each of its last six 
previous fiscal years, its 1998 fiscal year resulted in a loss 
primarily attributable to the adoption of a new accounting method, 
SOP 97-2.  In October 1997 the American Institute of Certified 
Public Accountants issued Statement of Position (SOP 97-2), Software 
Revenue Recognition, which became effective for fiscal years 
beginning after December 15, 1997 although earlier adoption was 
recommended.  The provisions of the new SOP necessitated significant 
modifications in the way companies structure software transactions 
and report revenues from those activities. Under the SOP 97-2 
guidelines revenues from the sale of the Company's CIS products are 
recognized as hardware and standard software are delivered to a 
client, custom software such as interfaces to other vendors systems 
will be recognized when delivered and operational, and revenues 
associated with the installation and implementation of systems will 
be recognized as the services are performed.  Because of the 
substantial nature of the accounting changes, the Company decided to 
adopt SOP 97-2 in mid year rather than wait until the beginning of 
its 1999 fiscal year.  Accordingly, the Company's Results of 
Operations, resulted in a reduction of revenues and operating losses 
in its second and third fiscal quarters.  Its fourth quarter 
resulted in an operating profit.


Clinical Information Systems

For laboratories, the Company has integrated its software 
applications and data acquisition technology into Laboratory 
Information Systems, which are sold under its tradename CyberLAB 
II(Registered Trademark).  The Company offers systems on Compaq(Registered
Trademark),IBM(Registered Trademark) and Hewlett Packard(Registered Trademark)
computers.  Extensive applications for a wide variety of laboratory testing,
compliance, and quality control procedures, including hematology, immunology,
chemistry, microbiology, drug testing, toxicology, urinalysis, blood bank,
and cytology testing, are available with the Company's systems.  File 
management, data base management, bedside specimen collections, 
remote communications, and financial management, including billing 
and accounts receivable options, are also available.

The Company's systems are highly scaleable, enabling a wide 
range of users to employ them.  The Company's systems are designed 
around flexible parameterized software which enables the customer to 
tailor the software for its individual needs.  The Company's 
Laboratory Information Systems are used by laboratories testing up 
to 15,000 patient samples a day, which includes approximately 95% of 
the clinical laboratory market.

CyberLAB II(Registered Trademark) as well as 
CyberMED(Trademark) and CyberRAD(Registered Trademark) operate under 
UNIX and are sold independently or as an integrated turnkey system 
and may be networked together or become part of an enterprise-wide 
network.  In fiscal 1998, the Company developed a number of new 
features, and enhancements to CyberLAB II(Registered Trademark) 
including medical necessity validation decision support capabilities 
and an expanded microbiology module.  The Company also completed the 
development of a new anatomical pathology system that can be used as 
a stand-alone or integrated with CyberLAB II(Registered Trademark), 
and a Web-server that provides access to its applications via 
Internet or Intranet.  CyberLAB II(Registered Trademark) is Year 
2000 compliant.

The Company's Pharmacy Information Systems, which are sold 
under the trademark CyberMED(Trademark), integrate inpatient, 
outpatient and long term care applications into a highly integrated 
software product.  CyberMED(Trademark) integrates unit dose, 
IVPB/TPN, controlled substances, floor stock, inventory control, and 
kinetics functions.  It performs labor intensive operations such as 
patient profiling, medication administration reporting, drug 
inventory control, drug interactions, and patient billing.  An 
optional purchasing module can electronically place orders with 
suppliers and determine the fastest moving drugs, as well as track 
drug usage and costs.  CyberMED(Trademark) supports several third 
party data base services for integrated drug interactions, pricing, 
and patient informational disclosures that are required by 
regulation.  CyberMED(Trademark) is currently undergoing 
modifications to be Year 2000 compliant.

CyberRAD(Registered Trademark), the Company's Radiology 
Information System, is also hybrid in its design that allows its 
employment in inpatient and outpatient settings.  Applications 
include extensive scheduling, reporting, film tracking, 
transcription and clinical functionality.  MQA, a mammography 
reporting and tracking system acquired by the Company during fiscal 
1998 has been integrated into CyberRAD(Registered Trademark).  MQA 
can also be sold as a stand-alone system, and meets FDA 
requirements.  CyberRAD(Registered Trademark) and MQA are Year 2000 
compliant.

The Company's Clinical Information Systems support extensive 
communication capabilities to both Hospital Information Systems and 
Clinical Information Systems for which the Company has developed 
over one-hundred system to system communication interfaces for a 
variety of settings.  The Company's Clinical Information Systems 
support networking capabilities and are employed in certain settings 
that consist of multiple sites.  In addition, different types of 
enterprises such as hospital and affiliated outpatient clinics can 
use the Company's systems to integrate their activities together.  
The communication interfaces often support bi-directional data 
communication whereby demographic and test order requests are 
transmitted to the Clinical Information Systems and, in turn, 
billing information and test results are re-transmitted to the host 
system.  The Company's Clinical Information Systems support their 
own order communications and test results subsystems that have been 
employed in other accounts that have relied on the Clinical 
Information System's communications capabilities.  Management 
believes that communications to other systems allowing connectivity 
between clinical systems such as CyberLAB II(Registered Trademark), 
CyberMED(Trademark), and CyberRAD(Registered Trademark), and 
administrative information systems are very important functional 
requirements in the marketability of its products.  The Company has 
focused considerable attention on the communication, networking, and 
connectivity capabilities of its products and plans to further 
develop these capabilities as opportunities present themselves.

	The Company has developed standard seamless integration and 
network connectivity for all its products through user selected 
network topologies (Ethernet, Token Ring), network protocols 
(TCP/IP, IPX/SPX), and network operating systems (Novell(Registered
Trademark), LAN Manager(Registered Trademark), Microsoft NT(Registered
Trademark).  Although each application has been
carefully configured to operate as a stand-alone product, all can be 
operated as an integrated package, residing on a shared platform or 
network, thereby eliminating the need for multiple interfaces, 
duplicate information handling, and their associated costs.  During 
fiscal 1998 the Company completed the development of enhancements to 
CyberLINK(Registered Trademark) a software integration and 
communications module that integrates all of its own clinical 
applications and provides a single communications gateway to or from 
other vendors' software products.

The Company has designed its products to incorporate open 
systems architecture and to conform to computer industry standards, 
which enable them to be more easily integrated with other vendor's 
products.  Healthcare industry standards including health level 
seven (HL7) and ASTM are employed throughout the Company's software 
products.  All of the Company's application products except 
CyberMED(Trademark), are either Year 2000 compliant or are in the 
final stages of conversion to Year 2000 compliance.  In addition, 
the Company designed the Year 2000 changes so they are backward 
compatible, thereby providing a simple upgrade path for its 
installed base of clients.  The work associated with the conversion 
to Year 2000 compliance has not posed a significant investment for 
the company other than the allocation of staff resources.  Although 
the conversion may delay or postpone other projects, it has not had, 
nor is it expected to have, a material adverse effect on the 
Company's business.

The Company's Clinical Information Systems operate under 
various versions of UNIX, which has been a defacto standard in 
healthcare where most competitive companies also have standardized 
on UNIX.  As a result of popular trends throughout the information 
technology marketplace Microsoft NT(Registered Trademark) is becoming
more popular.  The Company has the ability to operate its Clinical
Information Systems under NT and is in the process of porting its
applications to that environment.  In addition, the Company is also
migrating its systems to a client-server format that it has termed
Incremental Client Server Architecture(Trademark)(ICSA).  ICSA allows a
mixture of both character and graphical user workstations on the same
platform. Because many clinical departments do not lend themselves to
a true graphical user applications, a mix and match approach under ICSA 
provides this capability.  In addition, healthcare users are under 
tight budgetary controls and consequently by employing ICSA they can 
"incrementally" apply client-server technology where applicable 
without replacing all their existing equipment.


Data Acquisition Products

The Company's data acquisition products, which consist of 
data interfaces, data entry consoles and intelligent disk systems, 
are designed to increase the efficiency and accuracy of on-line data 
acquisition in biomedical laboratories by automating the collection 
and organization of test data.  Each of the Company's data 
acquisition products uses a microcomputer performing a specific 
discrete task.  All of the Company's data acquisition products are 
"plug-in" compatible with each other, enabling an end user to easily 
expand its system.  The Company's data acquisition products conserve 
central computer resources, lower hardware costs and significantly 
reduce costs of installation and system expansion, meeting the cost-
containment needs of healthcare organizations.

The Company's data acquisition products are designed to be 
compatible with virtually all currently available computer systems 
and are designed for installation by persons without technical 
skills or training. Management believes that the Company currently 
markets the widest line of data acquisition products designed for 
use by biomedical laboratories.  As of August 31, 1998, the Company 
had sold more than 11,500 of its data acquisition products in the 
United States and abroad.  All of the Company's data acquisition 
products are Year 2000 compliant.

Most laboratory tests, such as blood cell counts and blood 
serum chemistry analyses, are performed by freestanding automated 
testing instruments.  These instruments produce hard data, such as 
computer printouts.  The Company has developed intelligent links, or 
"data interfaces", which enable these freestanding automated testing 
devices to "talk to" and automatically enter data into the 
laboratory's central computer.  By eliminating the production of 
hard data and the resulting need to transcribe the data, interfaces 
save time and labor and reduce human error. The Company currently 
sells over 500 different interface configurations for use with a 
wide variety of automated biomedical testing devices.  The Company 
also develops new data interfaces, upon request, for products 
introduced into the market.

The Company also sells a product to collect data at the 
patients bedside known as CyberMATE(Registered Trademark), a hand-
held computer which permits phlebotomists to download specimen 
collection orders from CyberLAB II(Registered Trademark) into a 
battery operated hand-held computer, make their rounds based upon 
information displayed on CyberMATE's(Registered Trademark) screen, 
and update collection status information as they collect specimens.  
The updated status information is uploaded into CyberLAB 
II(Registered Trademark) via a system communication/battery charging 
device.


Service

The Company provides comprehensive services to its installed 
base of system clients through its own service organization, and 
provides extensive training and implementation of its systems.  The 
Company offers both software support service through a twenty-four 
(24) hour "hotline" and field service for hardware repair.  In some 
instances the Company relies on third parties to service hardware 
components that it sells, especially in the case of computers 
supplied by IBM (Registered Trademark)and Hewlett Packard(Registered
Trademark). The Company services its own data acquisition products
and related software, including peripherals used as part of its CIS
products, under service contracts offered to end users.  The Company's
long-term inventory requirements for its service and repair business
are significant.

The Company's service revenues for fiscal 1998 increased by 
approximately 9% from the previous fiscal year and they are expected 
to continue to grow as the installed base of system clients grows.  
More than 90% of the Company's clients are under service contracts.  
The Company believes that the ability to offer comprehensive 
services to its clients is a competitive advantage and solidifies a 
long-term relationship with its client accounts.  The recurring 
revenue stream associated with this activity is a significant part 
of the Company's business.  The ability to offer long term service 
often leads to add-on sales opportunities for peripheral components, 
data acquisition products and upgrades to newer computers and 
software applications.  In addition, the quality of service is an 
important aspect of the end users buying decision when making a 
system selection, therefore the Company is constantly fine tuning 
the services it provides and its service organization as part of its 
marketing plan.

	During fiscal 1996 the Company began an extensive project to 
install a new help desk/service support system to automate the 
Company's service activities. During fiscal 1997 and fiscal 1998 the 
system was integrated throughout the Company on a wide area network 
and linked its California and Colorado facilities and its field 
personnel.  To date, approximately $450,000 have been expended for 
the project.  The Company has begun to employ a "virtual company" 
concept by linking outside personnel via the Internet directly into 
its own internal network.  A number of Company employees who are 
engaged in technical and service related activities tele-commute 
through this venue.

	The Company believes that the service of its clients is of 
utmost importance to its long-term success and business strategy.  
Accordingly a great deal of emphasis is being placed on upgrading 
its service organization and expanding the services that the company 
offers.  During fiscal 1998 the Company recruited an implementation 
manager, and other personnel to augment its service and 
implementation staff.  Additional personnel may be added in fiscal 
1999 to further augment the Company's service and implementation 
operations.  The Company has expanded its professional service 
activities, which include networking, communications, and systems 
integration.


Significant Contracts and Programs

The Company entered into a contract in November 1989 with 
Laboratory Corporation of America (LCA) formerly, Roche Biomedical 
Laboratories, Inc., a subsidiary of Hoffman La Roche, Inc., to 
provide LCA with custom software applications and the Company's data 
acquisition products for use in LCA's laboratory facilities 
throughout the United States.  As of August 31, 1998 the Company had 
approximately 150 departmental results processing systems and over 
500 of its data acquisition products in twenty-seven LCA 
laboratories.  Development of further software applications 
continues and management anticipates that LCA will acquire several 
more data acquisition products in fiscal 1999.  In addition, the 
Company is currently assisting LCA in upgrading their departmental 
results processing systems for Year 2000 compliance.

In June 1998 the Company entered into a 3 year preferred 
vendor agreement with PhyCor, Inc. to provide that company with 
CyberLAB II(Registered Trademark) laboratory information systems.  
PhyCor based in Nashville, TN. is a physician practice management 
company that operates 61 large multi-specialty clinics and manages 
independent practice associations.  The Company currently has seven 
CyberLAB II(Registered Trademark) installations within PhyCor 
clinics and is in the process of working with several PhyCor 
affiliates who have selected the Company's products.  The Company's 
knowledge of multi-specialty clinics' specialized needs has enabled 
it to develop state of the art applications that address PhyCor's 
unique requirements.  In addition, the Company offers an array of 
operational, reporting and Internet connectivity solutions that 
facilitate the clinics clinical and compliance related activities.

As part of its overall marketing strategy the Company is 
pursuing a number of other strategic relationships with 
organizations that operate multiple entity enterprises where the 
Company may have the opportunity to offer its array of products and 
services to the group.

During the 1998 fiscal year, there were no contracts or 
programs that generated over 10% of the Company's net sales.


Product Development

The market for the Company's products is characterized by 
rapid and significant technological change.  The Company's ability 
to compete in the market and to operate successfully depends in part 
on its ability to react to such change.  During the Company's 1998, 
1997 and 1996 fiscal years, amounts (inclusive of capitalized 
software) equal to approximately 16%, 14% and 13%, respectively, of 
the Company's net sales were expended for research and development.  
The Company continues to expend a significant amount of resources 
for the development of new products, and for the development of 
additional enhancements to existing products.

The Company has planned product development projects over 
the next three years that include enhancements to the anatomical 
pathology system, a data warehouse for all its systems, and a 
clinical work station that will include system-wide order 
communications, inquiry and decision support.  The Company has also 
developed a Web-server that allows orders and inquiry via standard 
Internet browsers into the Company's clinical applications.  In 
addition, the Company has designed an Incremental Client Server 
Architecture that allows for the migration of the Company's existing 
application products to a client server environment.  At the same 
time, graphical user interfaces are being incorporated into the 
Company's clinical applications.  The Company has developed 
relationships with several major vendors of analytical testing 
instruments which provide the Company with specifications of new 
products when developed in order for the Company to develop data 
acquisition products for use with these products.  The Company also 
develops, in certain instances at the customer's expense, 
application software to meet the customer's special needs.

Research and development expenditures amounted to 
approximately $671,000 in fiscal 1998, $570,000 in fiscal 1997, and 
$461,000 in fiscal 1996.  Such expenditures were attributable to 
systems development, including the development of new Laboratory, 
Radiology, and Pharmacy Information Systems applications, and 
enhancements to those products. The Company's applications are 
compiled under Microfocus COBOL that provides a standard code 
structure for the system applications while other imbedded process 
code is written in C.  By employing Microfocus' run-time modules for 
UNIX, the Company has been able to port to a variety of hardware 
platforms with ease.  The Company has successfully ported its 
software applications from Compaq(Registered Trademark) to IBM(Registered
Trademark) RISC 6000 Systems, Data General Aviion(Registered Trademark)
Systems, and to Hewlett Packard(Registered Trademark)HP
9000 RISC Systems.  This portability capability has allowed the Company to 
become "platform independent" in vending its software products where 
some customers may be predisposed to certain hardware brands.  The 
Company at present is porting its applications to Microsoft NT(Registered
Trademark) and intends to offer its products on both UNIX and NT platforms in
the near future.  All of the Company's products are open data base 
compliant (ODBC) and the data structures support the use of standard 
query language (SQL) report generators for a wide range of reporting 
capabilities.


Distribution and Marketing

From its inception, the Company has sold its products and 
systems directly to the healthcare industry through its own sales 
and marketing personnel, as well as indirectly through original 
equipment manufacturers ("OEM's") and through joint marketing 
relations with other companies.  The Company markets all its 
products throughout the United States, Canada and the Caribbean.  At 
present, the Company's direct field sales force consists of five 
salespersons.  In addition, the Company's management and seven 
technical specialists assist in sales activities.  Management 
anticipates that at least one marketing support person will be added 
to the Company's sales and marketing department in fiscal 1999.

During fiscal 1999 the Company commenced new promotional 
activities targeting larger potential clients with some success.  
The Company promotes its products by attending industry trade 
meetings at national and regional levels.  Because of the 
opportunity the Company has in meeting larger audiences at such 
meetings it intends to increase the number of meetings it will 
attend in fiscal 1999.  The Company also markets an upgrade program 
in order to help customers upgrade their existing systems.  In 
addition, the Company has formed informal joint marketing 
arrangements with other companies that have compatible products and 
services, which have increased sales penetration in the marketplace.

Historically, the Company established user groups in order 
to encourage users of its Clinical Information Systems to 
participate in helping the Company to better serve its clients.  The 
focus of the user groups is to encourage open group communications 
with the Company about a range of subjects, including service and 
support and new product enhancements.  During fiscal 1997 the user 
groups were reorganized and consolidated into a single national 
symposium.  Since the Company has experienced success in vending 
multiple products to its clients the national symposium proved to be 
a good forum to discuss general topics, such as the Company's 
strategy and product direction, and provided an opportunity to focus 
on specific application issues in breakout sessions.  The Company 
also scheduled free advanced training courses prior to the symposium 
that had considerable attendance by its clients.  The Company 
intends to continue the symposium format and has scheduled a 
symposium for March 1999.

The Company also publishes newsletters and articles, which 
are intended to expand communication with existing and potential 
clients.  During fiscal 1998, the Company invested in new collateral 
materials, including new product marketing literature, and 
enhancements to its Web page.

The Company has OEM contracts to sell its products to a 
number of vendors of hospital Laboratory Information Systems and 
analytical instrumentation, including HBOC and Columbia Health Care.

During the fiscal year ended August 31, 1998, prices 
received by the Company for its Clinical Information Systems with 
application and operating system software ranged from approximately 
$90,000 to over $450,000. The sales price varies depending on the 
type of system purchased and the configuration of hardware and 
related software ordered by the customer.


Competition

The Company has significant competition in the Clinical 
Information Systems business from several competitors, many of whom 
are larger concerns that may offer a wider array of products in 
addition to competitive clinical applications.  Management believes, 
however, that few competing Laboratory Information Systems offer the 
Company's hybrid multi-site capabilities, variety of data 
interfaces, add-on capability and flexibility that allows the 
systems to be user definable so that they can be employed in 
different types of settings.  The multi-site and multi-disciplinary 
or hybrid nature of the Company's products are a strong selling 
point.  The Company has also received very good references about its 
service organization and the ability to respond to clients needs on 
a timely and cost effective basis.  Most of the Company's 
competitors have designed their products for the hospital 
environment; therefore, they are not as flexible and are less 
suitable for other types of operations.  With respect to its 
Pharmacy Information Systems, the Company believes it has a 
competitive advantage because of CyberMED's(Trademark) robust 
features, flexibility, and integrated outpatient, inpatient, and 
long term care functionality.

The Company has made a concerted effort to emphasize the 
sale of software and de-emphasize the sale of hardware, which is 
less profitable.  Accordingly the Company often times installs its 
software applications in customers sites on existing hardware or in 
conjunction with other vendor's applications.  This has led to 
better margins and more market opportunities.

The principal competitive factors in the Company's business 
are technological competence, diversity of product line, price and 
performance characteristics, product quality, capability and 
reliability, marketing and distribution networks, service and 
support, ability to attract and retain trained technical employees 
and business reputation.  The Company believes that it has 
competitive advantages in many of these areas.  During fiscal 1998 
the Company sold 44 system applications to 32 clients.


Manufacturing and Suppliers

The Company has utilized computers manufactured by several 
suppliers for its Clinical Information Systems in the past and 
currently uses computers manufactured by Compaq (Registered Trademark),
IBM (Registered Trademark), and Hewlett Packard (Registered Trademark).
Management believes that other computers, which can be
used in the Company's systems, are readily available from several 
suppliers.  The Company has entered into an agreement with Compaq(Registered 
Trademark)as a sub-dealer and with IBM (Registered Trademark) and Hewlett 
Packard(Registered Trademark) as industry re-sellers.  These arrangements
providefor volume purchase discounts, cooperative marketing programs, the
sublicensure of certain software and technical assistance.

The Company's data acquisition products are assembled by its 
employees and subcontractors from prefabricated subassemblies, which 
are built by independent electronics assembly companies.  Management 
believes there are many competent subassembly companies within the 
immediate vicinity of the Company's business location.  The Company 
obtains the components of its data acquisition products from a 
variety of suppliers and is not dependent on any one supplier for 
products.


Warranties and Product Liability

The Company warrants that its products conform to their 
respective functional specifications.  The Company's products and 
components are warranted against faulty materials and workmanship 
for 90 days, in the case of its data acquisition products, and six 
months, in the case of software and hardware incorporated in its 
Laboratory, Radiology, and Pharmacy Information Systems.  Direct 
costs associated with the initial warranties have been 
insignificant.  The computers that the Company currently sells as 
part of its Clinical Information Systems are subject to the 
warranties of their manufacturers.  The manufacturers generally 
warrant their products against faulty material and workmanship for 
one to three years.

The Company currently carries an aggregate of $4,000,000 in 
product liability insurance.  Management believes that this amount 
of insurance is adequate to cover its risks.


Copyrights, Patents and Trade Secrets

The Company does not hold any patents protecting its 
proprietary technology.  The Company has relied on design copyrights 
for its hardware and has copyrighted the designs of its proprietary 
components and software.  Patent or copyright protection may not be 
available for many of the Company's products.  A portion of the 
Company's proprietary technology is in the form of software.  The 
Company has relied primarily on copyright and trade secret 
protection of its software.  Management believes that its business 
is more dependent upon marketing, service, and know-how than patent 
or copyright protection.  The Company has trademarks for 
CyberLAB(Registered Trademark), CyberMED(Trademark), 
CyberRAD(Registered Trademark), CyberTERM(Registered Trademark), 
CyberLINK(Registered Trademark) and CyberMATE(Registered Trademark), 
and has applied to register its trademark's on several of its other 
trade names.  The Company has retained special intellectual property 
counsel to advise management on the appropriate course to pursue 
with respect to these issues.


Governmental Regulation

The Federal Food, Drug and Cosmetic Act, more commonly known 
for its regulation of interstate commerce in drugs, was amended by 
the "Medical Device Amendments of 1976" (the "Amendments") to cover 
devices used in medical practice.  These include instruments and 
reagents used in biomedical laboratory testing.  In 1987 the FDA 
first classified a number of clinical software products as medical 
devices, but exempted most of them from routine regulations.  
Subsequently the FDA amended the policy and made the exemptions 
inapplicable to manufacturers of devices intended for use in blood 
banks.  As a result of more recent pronouncements by the FDA and the 
decision by the Company to develop a blood bank module to its 
CyberLAB II(Registered Trademark) LIS, the Company undertook the 
filing of a pre-market notification (510K), which was submitted in 
March 1996.  The Company received a review letter from the FDA 
regarding its 510K submission and because of timing issues withdrew 
its submission.  The Company is currently planning a resubmission of 
its 510K pending the completion of certain data relative to 
outstanding issues highlighted by the FDA in their review.

In addition the Company is informed that the FDA also 
intends to require all Class I devices, which includes the Company's 
other Clinical Information System products, to comply with its 
Quality System Requirements (QSRs).  The Company is in the process 
of modifying its internal policies to comply with this directive.  
Management anticipates that the QSRs procedure will have an impact 
on its business to the extent that there will be lengthened 
development cycles of new software and additional costs incurred.  
However, all of its competitors are faced with the same 
requirements.

The FDA is currently in the process of reevaluating its 
rules relevant to computer products used in connection with medical 
devices and software used in clinical applications.  No assurance 
can be given that the Company's current or new products developed by 
the Company will not be subject to the provisions of the Amendments 
and implementing rules.  The Company has retained special counsel to 
advise it in such matters.  The likelihood of such changes and their 
effect on the business of the Company cannot be ascertained.  If the 
FDA were to determine that additional provisions should apply to all 
or some of the Company's products, it is uncertain whether 
compliance with such interpretation would have a material adverse 
effect on the Company.

The Company and its products are subject to direct 
governmental regulations applicable to manufacturers in general, 
including those regulations promulgated under the Occupational 
Safety and Health Act and by the Environmental Protection Agency.  
The Company's customers, however, are subject to significant 
regulation by the Food and Drug Administration, the Healthcare 
Financing Administration, the Health and Human Services 
Administration and by state and local governmental authorities.  
Such regulations require the Company to comply with certain 
requirements in order to sell its systems and are a major focus of 
its development efforts in order to maintain the regulatory 
compliance of its products.


Backlog

	The Companies order backlog at August 31, 1998 was 
approximately $900,000 for systems and interface products and 
$750,000 for deferred services, compared to approximately $200,000 
for system and interface products and $570,000 for deferred services 
at August 31, 1997.


Employees

At November 10, 1998, the Company employed 61 full-time and 
3 part-time employees of whom 12 are involved in product 
development, 12 in sales and marketing, 4 in production, 29 in 
technical services and support and 7 in administration.  The Company 
is not subject to any collective bargaining agreements.  The Company 
considers its employee relations to be good.


Item 2.  Properties.

The Company's headquarters are located in a leased facility 
in Calabasas, California.  The facility was constructed in 1991 and 
comprises approximately 16,850 square feet with an effective base 
rental of approximately $17,700 per month plus common area 
maintenance costs and property taxes. The lease comprises a five-
year term with no cost of living adjustments.  There is a five-year 
renewal option at the end of the initial term.

The Company also leases a 2,100 square foot office in 
Boulder, Colorado that costs approximately $1,990 per month 
including common area maintenance costs, property taxes and is 
subject to cost of living increases annually. 

The Calabasas, California facility is used as general 
offices and operations headquarters that cover warehousing, support, 
training, development, and assembly.  The Boulder, Colorado facility 
is a branch development office.  The Company considers the two 
facilities to be adequate for their intended purpose.  The Company 
carries adequate general liability insurance as required by the 
respective leases to cover any risks concerning the two facilities. 


Item 3.  Legal Proceedings.

	There are no material pending or threatened legal 
proceedings to which the Company is a party at August 31, 1998.


Item 4.  Submission of Matters to a Vote of Security Holders.

The Company did not submit any matter to a vote of its 
security holders during the fourth quarter of its fiscal year ended 
August 31, 1998.


PART II


Item 5.  Market for Company's Common Equity and Related Stockholder 
Matters.

The Company's common shares trade on the American Stock Exchange 
under the symbol CAP.

The following table sets forth the high and low bid quotations for 
the Common Shares for the periods indicated.

<TABLE>
<CAPTION>

                                                   High        Low
<S>                                               <C>          <C>
Fiscal Year Ended August 31, 1997
        1st Quarter, Ended November 30, 1996      2 13/16    1 7/16
        2nd Quarter, Ended February 28, 1997      2 3/16     1 3/8
        3rd Quarter, Ended May 31, 1997           2 7/16     1 3/8
        4th Quarter, Ended August 31, 1997        2 1/8      1 1/2


Fiscal Year Ended August 31, 1998
        1st Quarter, Ended November 30, 1997      1 15/16    1 9/16
        2nd Quarter, Ended February 28, 1998         2       1 3/8
        3rd Quarter, Ended May 31, 1998           1 3/4      1 7/16
        4th Quarter, Ended August 31, 1998        1 1/2         1
</TABLE>

	The number of shareholders of record of Common Shares of the 
Company as of November 1, 1998 was approximately 431.

Holders of Common Shares are entitled to receive such 
dividends as may be declared by the Company's Board of Directors.  
The Company has never paid a cash dividend on its Common Shares and 
the Board of Directors currently intends to retain any earnings for 
use in the Company's business.


Item 6.  Management's Discussion and Analysis of Results of 
Operations and Financial Condition.


Results of Operations

	In October 1997 the American Institute of Certified Public 
Accountants issued Statement of Position (SOP) 97-2, Software 
Revenue Recognition, which became effective for fiscal years 
beginning after December 15, 1997 although earlier adoption was 
recommended.  The new SOP affects all companies that sell software 
and provide related services.  Its provisions necessitated 
significant modifications in the way the Company structured software 
transactions and reported revenues from those activities.  Because 
SOP 97-2 significantly changes the way in which the Company accounts 
for the sale of its Clinical Information Systems, management decided 
to adopt the change in accounting method immediately on January 
1,1998 instead of waiting until the beginning of its next fiscal 
year.  The Company expected that the change in accounting method 
would significantly impact the recording of revenues and its results 
of operations for one to two quarters beyond the second quarter 
ended February 28, 1998.

	SOP 97-2 requires that the Company modify its revenue 
recognition policies on a going forward basis and no restatement of 
prior periods is required.  Accordingly the following discussion 
takes into consideration the effect of SOP 97-2 for the current 
fiscal year only and therefore the comparisons are not fully 
representative  The change in accounting method brought about by SOP 
97-2 primarily affects reporting of revenues from the sale of the 
Company's CIS products and related data acquisition products bundled 
into CIS transactions.  All other components of the Company's 
business from which it derives revenues were already compliant with 
the provisions of SOP 97-2.  Under the SOP 97-2 guidelines revenues 
from the sale of the Company's CIS products are recognized as 
hardware and standard software are delivered to a client, custom 
software such as interfaces to other vendors systems will be 
recognized when delivered and operational, and revenues associated 
with the installation and implementation of systems will be 
recognized as the services are performed.  Other provisions of the 
SOP that require, among other things, a defined contract and 
definitive sales price by component have been met by the Company's 
internal sales policies that were already in place for many years.

	Sales for the year ended August 31, 1998 were $6,448,370 as 
compared to $7,119,381 for the fiscal year ended August 31, 1997, an 
overall decrease of approximately $671,010 or 9%.  When analyzed by 
product category, sales of Clinical Information Systems (CIS) 
decreased by $666,892 or 16% and sales of data acquisition products 
decreased $196,078 or 21%.  Service revenues increased $191,961 or 
9% over the previous fiscal year.  The decrease in the sale of CIS 
products was primarily attributable to the effects of SOP 97-2 as 
described above, whereby a portion of the revenues from the sale of 
CIS products was deferred to subsequent periods when the deferred 
revenues will be recognized.  Had the Company not implemented SOP 
97-2 the sales of CIS products would have been at similar levels to 
fiscal 1997.  During the 1998 fiscal year the Company experienced a 
slow down in the close rate of new CIS orders as a result of 
potential clients delaying purchasing decisions.  These delays are 
attributable to clients deliberating over Year 2000 issues that have 
effected the entire industry.  However, the Company has the largest 
"pipeline" of working CIS transactions in its history, and believes 
that the decision delays are only temporary.  The decrease in sales 
of data acquisition products was primarily attributable to a lower 
volume of units sold to CyberLAB II(Registered Trademark) customers, 
and reduced sales of such products to OEM customers.  The increase 
in service revenues is attributable to a greater number of client 
accounts under contract.  Service revenues are expected to continue 
to increase as the Company's installed base of CIS installations 
increases.

	The Company continues to expand its sales and marketing 
activities and has also initiated strategic joint marketing 
partnerships with other companies, which have improved the Company's 
market penetration.  With these changes the Company successfully 
increased its market presence which resulted in the 19% increase in 
sales of CIS products during the 1997 fiscal year, and has increased 
its "pipeline" of working CIS transactions to date.  Management 
views the near term outlook for the continued sale of CIS products 
favorably during the first half of the 1999 fiscal year.  However, 
the Company's future operating results could 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, and the temporary delays in the closing 
of new CIS sales described above.

	Cost of sales increased by $382,425 or 10% for the 1998 
fiscal year.  There was a decrease in materials of $115,750 or 10%, 
an increase in other costs of sales of $121,859 or 9%, and an 
increase in labor of $376,316 or 27%.  The decrease in material 
costs was attributable to the decrease in the sale of CIS products 
discussed above.  However, management expects the trend, which began 
in fiscal 1996, of increasing application software sales and 
decreasing hardware sales to continue due to the Company's emphasis 
on selling multiple products to the same accounts.  The increase in 
labor costs was attributable to more personnel hired to staff the 
Company's system support departments.  The increase in other costs 
of sales was attributable to increased expenses in travel, personnel 
recruitment, training, and depreciation all related to implementing 
CIS transactions during the current fiscal year.  The Company has 
implemented cost savings measures directed at reducing travel 
expenses by centralizing its travel through one agency, and has 
begun billing its clients for out of pocket travel related expenses 
associated with its CIS implementations.  Cost of sales as a 
percentage of sales increased to 65% for the 1998 fiscal year as 
compared to 54% for the 1997 fiscal year.  The overall percentage 
increase in cost of sales was attributable to both a decrease in 
sales and the increase in expenses previously discussed.  The 
effects of SOP 97-2 also temporarily skewed cost of sales during the 
period, due to the deferral of revenues related to the 
implementation of systems which has a higher gross margin.

	Selling, general and administrative expenses increased by 
$195,980 or 8.6% for the current 1998 fiscal year as compared to the 
1997 fiscal year.  The increases in S G & A expenses were 
attributable to an increase in the write off of approximately 
$85,000 in bad debts expense, as well as increased costs in travel, 
trade show, consultant and personnel recruitment expenses.

	Research and development expenses increased by $101,367 or 
17.8% for fiscal 1998.  The increase is attributable to the addition 
of new personnel and their related salaries. For its 1998 and 1997 
fiscal years, the Company capitalized software costs of $385,164 and 
$395,856 respectively which are generally amortized over a five year 
period.  Such costs were attributable to enhancements and new 
modules for the Company's CIS products, new applications under 
development, and modifications associated with Year 2000 compliance.  
Management anticipates its overall research and development 
activities will increase in fiscal 1999.

	Interest and other income was $3,630 for fiscal 1998 as 
compared to $6,589 for fiscal 1997.

	Interest and other expense increased by $46,687 or 204% for 
fiscal 1998 as compared to fiscal 1997 due to increased borrowings 
on the Company's line of credit with its bank.

	The Company incurred a loss before Income Tax Expense 
(Benefit) of $(971,703)for fiscal 1998 as compared to income of 
$428,725 for fiscal 1997.  As a result of the application of the 
Statement of Financial Accounting Standards (SFAS) No. 109, 
"Accounting for Income taxes" (see notes to the financial statements) 
the Company recognized an income tax benefit net of applicable 
income taxes of $322,800 in fiscal 1998 and  $462,275 in its 1997 
fiscal year.  As a result of these factors the Company's net loss 
was $(648,903) or $.22 per share in fiscal 1998 as compared to net 
income of $891,000 or $.30 per share in fiscal 1997.

	The Company is currently in a loss carryforward position 
primarily due to the operating losses incurred prior to August 31, 
1993.  The net operating loss carryforwards balance as of the August 
31, 1998 was approximately $3,416,000 compared to $2,365,000 in the 
prior year.  The net operating loss carryforward is available to 
offset future taxable income through 2013.  The Company also has 
investment and research and experimentation tax credit carryforwards 
to offset future income tax payable of approximately $285,000 that 
expire at various dates through 2013.

	The major temporary tax differences that are expected to 
reverse next year are deferred revenue, allowance for doubtful 
accounts, accrued vacation, Section 263A Unicap inventory, and 
component inventory reserve.  However, the Company expects new 
temporary differences to be established in these years, which will 
either reduce or exceed the reversing temporary differences.

	For the year ended August 31, 1995, the Company established 
a valuation allowance equal to the net deferred tax asset as the 
Company could not conclude that it was more likely than not that the 
deferred tax asset could be realized.  During the years ended August 
31, 1997 and 1996, the Company re-evaluated the valuation allowance 
taking into consideration prior earnings history, projected 
operating results and the reversal of temporary tax differences.  As 
a result, the Company reduced the valuation allowance to zero, as 
the Company believes it is more likely than not that the net 
deferred tax asset will be realized.  During the year ended August 
31, 1998, the Company re-evaluated the realization of the deferred 
tax asset taking into consideration projected operating results and 
prior earnings history, in light of the current year loss.  As a 
result, the Company continues to believe that it is more likely than 
not that the net deferred tax asset will be realized.


Capital Resources and Liquidity

        The Company's primary need for capital has been to invest in 
software development, and in the new company wide network and 
facility expansion. The Company invested $385,164 and $395,856 
during fiscal 1998 and 1997 in software development.  These 
expenditures related to the new version of the Company's LIS product 
(CyberLAB II(Registered Trademark)), and the release of its revised 
PIS product (CyberMED(Trademark)), its new RIS product 
(CyberRAD(Registered Trademark)), and other product enhancements.  
The Company anticipates expending additional sums during fiscal 1999 
on the further development of the Company's Radiology Information 
System, and other new products and product enhancements.  During 
fiscal 1998, the Company expended an additional $200,526 to 
implement the Company's wide area network, help desk systems, and 
the expansion of its California facilities.

        As of August 31, 1998, the Company's working capital 
amounted to $526,566 compared to $1,703,057 as of August 31, 1997.  
The decrease in working capital was primarily attributable to the 
loss incurred as a result of the change in accounting method 
necessitated by the adoption of SOP 97-2.  In addition, the 
Company's Balance Sheet has been affected by the inclusion of 
deferred revenues as a current liability which further reduced 
working capital.  The Company's bank line as of August 31, 1998 
amounted to $800,000 of which $611,609 was being utilized.  The bank 
credit agreement contains certain financial ratio requirements.  The 
Company was not in compliance with some of the covenants as of 
August 31, 1998, but had obtained a waiver from the bank.

	Cash flows from operating activities were $96,357 for the 
1998 fiscal year compared to $784,317 for the 1997 fiscal year.  The 
decrease resulted primarily from lower sales recognized because of 
the adoption of SOP 97-2.

	Net cash used in investing activities changed during the 
1998 fiscal year to $617,944 used in investing activities as 
compared to $609,085 used in investing activities during the 1997 
fiscal year.  The change resulted from decreased expenditures for 
the company wide network and help desk system, and the acquisition 
of assets of $33,780.  As discussed under Item 1 Business, the 
Company is undertaking the conversion of its products to make them 
Year 2000 compliant.  Although it is not expected that such 
activities will have a material adverse impact on the Company's 
business a reallocation of personnel resources will be required 
during fiscal 1999 to complete the projects.

	Cash flows from financing activities changed to $363,033 
provided by financing activities during the 1998 fiscal year from 
$105,997 provided by financing activities in fiscal 1997.  The 
change resulted from proceeds from the exercise of stock options and 
warrants and increased bank borrowings, but was partially offset by 
repayments of notes payable and capital lease obligations as 
compared to the prior year.

	The Company believes that its projected cash flow from 
operations together with its bank credit facilities should be 
sufficient to fund its working capital requirements for its 1999 
fiscal year.


Seasonality, Inflation and Industry Trends

The Company's sales are generally lower in the summer and 
higher in the fall and winter.  Inflation has had no material effect 
on the Company's 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 industry will 
continue to be competitive and that potential healthcare reforms may 
have a long-term positive impact on its business.  In addition, 
management believes that the industry will be marked with 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, improving and 
expanding its services, and by constantly enhancing its software 
applications.


New Accounting Pronouncements

	Statement of Financial Accounting Standard No. 129 (SFAS No. 
129), "Disclosure of Information about Capital Structure," issued by 
the Financial Accounting Standards Board is effective for financial 
statements issued ending after December 15, 1997.  The new standard 
reinstates various securities disclosure requirements previously in 
effect under Accounting Principles Board Opinion No. 15, which has 
been superseded by SFAS No. 129.  The Company adopted SFAS No. 129 on 
December 15, 1997 and it had no effect on its financial position or 
results of operations.

	Statement of Financial Accounting Standard No. 130 (SFAS No. 
130), "Reporting Comprehensive Income," issued by the Financial 
Accounting Standards Board is effective for financial statements with 
fiscal years beginning after December 15, 1997.  Earlier application 
is permitted.  SFAS No. 130 establishes standards for reporting and 
display of comprehensive income and its components in a full set of 
general-purpose financial statements.  This standard deals with 
financial statement disclosure and will not effect the Company's 
financial position or its results of operations.

	Statement of Financial Accounting Standard No. 131 (SFAS No. 
131), "Disclosure about Segments of an Enterprise and Related 
Information," issued by the Financial Accounting Standards Board is 
effective for financial statements with fiscal years beginning after 
December 15, 1997.  The new standard requires that public business 
enterprises report certain information about operating segments in 
complete sets of financial statements of the enterprises and in 
condensed financial statements of interim periods issued to 
shareholders.  It also requires that public business enterprises 
report certain information about their products and services, the 
geographic areas in which they operate and their major customers. This 
standard deals with financial statement disclosure and will not effect 
the Company's financial position or its results of operations.

        Statement of Position 97-2, "Software Revenue Recognition", 
("SOP 97-2") issued by the AICPA is effective for transactions 
entered into in fiscal years beginning after December 15, 1997.  SOP 
97-2 supersedes SOP 91-1 regarding software revenue recognition.  
SOP 97-2 establishes standards which require a company to recognize 
revenue when (i) persuasive evidence of an arrangement exists, (ii) 
delivery has occurred, (iii) the vendor's fee is fixed or 
determinable, and (iv) collectability is probable.  The SOP also 
discusses the revenue recognition criteria for multiple element 
contracts and allocation of the fee to various elements based on 
vendor-specific objective evidence of fair value.  Statement of 
Position 98-4 "Deferral of the Effective Date of a Provision of SOP 
97-2" defers for one year the application which limits what is 
considered vendor-specific objective evidence of the fair value of 
the various elements in a multiple-element arrangement.  The Company 
adopted this SOP during 1998.


Year 2000 Compliance

Many currently installed computer systems and software 
products are coded to accept only two digit entries in the date code 
field.  As the year 2000 approaches, these code fields will need to 
accept four digit entries to distinguish years beginning with "19" 
from those beginning with "20".  As a result some computer systems 
and software used by the Company and its clients may have to be 
upgraded to comply with such Year 2000 requirements.  The Company is 
currently expending resources to review its products, systems and 
services and the computer systems and software products it sells in 
order to identify and modify those products, systems and services.  
The Company believes that the cost of the modifications associated 
with this effort will not have a material adverse effect on the 
Company's operating results.  However, achieving Year 2000 
compliance is dependent on many factors, some of which are not 
completely within the Company's control, including without 
limitation, the availability and cost of trained personnel and 
effectiveness of software upgrades used by the Company and its 
vendors and suppliers.  Should either the Company's internal systems 
or the internal systems of one or more significant vendors or 
suppliers fail to achieve Year 2000 compliance, the Company's 
business and its results of operations could be adversely affected.

Clinical Information Systems

	The Company has been engaged in evaluating and modifying its 
CIS products for sometime and has completed core modifications and 
testing for Year 2000 changes to CyberLAB II(Registered Trademark).  
The Company is currently distributing the Year 2000 compliant 
software upgrades to its clients.  CyberRAD(Registered Trademark)  
and MQA were designed to be Year 2000 compliant.  
CyberMED(Trademark) is currently being modified and it is expected 
that the modifications and testing will be completed by mid 1999.  
Subsequently the modified CyberMED(Trademark) upgrade will be 
distributed to clients.  Modifications are also currently being made 
to the financial management system that will be completed by March 
1999 and released thereafter.  The Company will also evaluate 
communication interfaces it has installed in order to determine in 
each individual case, whether the software is Year 2000 compliant, 
and will undertake such modifications as are deemed to be necessary 
to be compliant.  The Company believes it is timely and on schedule 
in its efforts to effectuate the modifications, testing and upgrade 
of its developed software applications to its clients.  Management 
is cognizant of the fact that the timeliness of the completion and 
distribution of Year 2000 modifications are critical to the success 
of the Company.

        Some of the Company's clients may require upgrades to their 
computers and/or operating systems, in order to operate the upgraded 
application software and otherwise be Year 2000 compliant.  The 
Company has been conducting a review of its client installations in 
order to determine their status and to advise clients as to what 
modifications should be undertaken.  The Company's extended service 
agreements require that the client be responsible for the cost of 
any upgrades to their computers that may be required to operate 
upgraded or modified application software.  Therefore the Company 
does not expect to bear the costs associated with this effort and 
instead will derive revenues from the upgrades.  The Company had 
identified the modifications and/or upgrades required by the vendors 
and is assisting its clients in securing the necessary modifications 
and/or upgrades.

In House Systems and Computers

	The Company has been conducting a review of the computers, 
systems and software that it utilizes internally to operate its 
business.  It has determined that some systems such as its 
accounting and voice mail systems will have to be replaced since 
they are not modifiable.  However, such systems were already due to 
be replaced because they are no longer adequate and are not being 
supported by their manufacturers.  Other systems supported by their 
manufacturers will be upgraded in the normal course with Year 2000 
modifications on a timely basis.  Although the Company will have to 
bear the cost of replacing non-compliant systems, it is not 
anticipated that the aggregate expenditures will be of a material 
nature.  At present, the cost of such replacements has not been 
fully determined.


Item 7.  Financial Statements.

For a list of financial statements filed as part of this 
report, see index to Financial Statements and Financial Statement 
Schedules on page F-1.

Item 8.  Changes in and Disagreements with Accountants on Accounting 
and Financial Disclosures.

Not applicable.


PART III

Item 9.  Directors, Executive Officers, Promoters and Control 
Persons; Compliance with Section 16(a) of the Exchange Act.

Background information concerning each present Director, 
executive officer and each nominee for the office of Director of 
Company is as follows:

<TABLE>
<CAPTION>                                        
<S>                                  <S>                            <C>
                             Office with Company;               Year First
Name, Age                    Background Information          Elected Director


Bruce M. Miller, 52          Chairman of the Board and              1978
                             Chief Technology Officer      
                             since its inception in 1978.


Steven M. Besbeck, 50        President, Chief Executive             1980
                             Officer of the Company since
                             August 1983 and a Director of
                             the Company since November
                             1980 and Chief Financial Officer.
                             Director of International Remote
                             Imaging Systems.

James R. Helms, 54           Vice President/Operations since        1987
                             1982 and Secretary.


Lawrence S. Schmid, 57       President and Chief Executive          1991
                             Officer, Strategic Directions
                             International, Inc., a management
                             consulting firm specializing
                             in technology companies.
                     
Robert S. Fogerson, Jr., 45  Chief Operating Officer, of            1992
                             ViroMED Laboratories, Inc.,
                             a leading independent laboratory
                             providing clinical testing services
                             since 1998.  Mr. Fogerson
                             had previously served in various
                             capacities at PharmChem Laboratories
                             since 1975.


John R. Murray, 56           Vice President, Sales and Business
                             Development since February 1996.
                             Mr. Murray served as an Independent
                             Marketing Consultant since 1993 and
                             a Manager of International Business
                             Development, Healthvision Corporation
                             since 1991.
</TABLE>

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 
requires the Company's directors and executive officers, and persons 
who own more than 10% of a registered class of the Company's equity 
security, to file with the Securities and Exchange Commission and 
the American Stock Exchange (AMEX) reports of ownership and changes 
in ownership of common stock and other equity securities of the 
Company.  Officers, directors and greater than 10% shareholders are 
required by SEC regulation to furnish the Company with copies of all 
Section 16(a) forms they file.


Item 10. Executive Compensation.

        Incorporated by reference from "Executive Compensation" in 
the Definitive Proxy Statement to be filed with the Securities and 
Exchange Commission for the 1999 Annual Meeting of the Company's 
Shareholders.


Item 11. Security Ownership of Certain Beneficial Owners and 
Management.

        Incorporated by reference from "Security Ownership of 
Certain Beneficial Owners and Management" in the Definitive Proxy 
Statement to be filed with the Securities and Exchange Commission 
for the 1999 Annual Meeting of the Company's Shareholders.


Item 12. Certain Relationships and Related Transactions.

        Incorporated by reference from "Certain Relationships and 
Related Transactions" in the Definitive Proxy Statement to be filed 
with the Securities and Exchange Commission for the 1999 Annual 
Meeting of the Company's Shareholders.


Item 13.  Exhibits and Reports on Form 8-K.

	(a)	Exhibits

	2.1(6)	Asset Purchase Agreement.

	3.1(1)	Restated Articles of 
                Incorporation, as Amended.

	3.2(1)	By-Laws, as amended.

	4.1(1)	Specimen Share 
                Certificate.

	4.2(2)	Specimen Warrant 
                Certificate.

	4.3(2)	Form of Underwriter's 
                Warrant.

	4.8(6)	Warrant Agreement and 
                Warrant Certificate 
                between CCA and Western 
                States Pharmacy 
                Consultants, Ltd.

	4.9(6)	Warrant Agreement and 
                Warrant Certificate 
                between CCA and James 
                L.D. Roser.

	4.10(6)	Warrant Agreement and 
                Warrant Certificate 
                between CCA and The Roser 
                Partnership.

	4.11(6)	Warrant Agreement and 
                Warrant Certificate 
                between CCA and Epigen,Inc.

	4.12(8)	Registration Rights 
                Agreement.

	10.1(2)	Warrant Agreement.

	10.2(2)	The Company's product 
                warranties.

	10.5(1)	14% Subordinated 
                Convertible Debenture due 
                December 21, 1987.
 
	10.6(1)	Form of 1983 Warrants.

	10.7(1)	Form of 1982 Warrant.

	10.8(2)	Original Equipment 
                Manufacturer Contracts.

	10.9(2)	Michael Miller Consulting 
                Agreement.

        10.10(2) Boehringer Mannheim 
                (Canada) Joint Marketing 
                 Agreement.

        10.12(3) Lease for Premises at 
                 26664 Agoura Road, 
                 Calabasas,  California.

        10.13(3) SAC Shareholders' 
                 Agreement.

        10.14(8) Lease for Premises at 
                 26115-A Mureau Road, 
                 Calabasas, California

        10.15(8) Mission Park Agreement

	11.	Statement re:  
                computation of per share 
                earnings

	16.(4)	Letter re:  change in 
                certifying accountants

	16.1(5)	Letter re:  change in 
                certifying accountants

Executive compensation plans and arrangements.

	4.4(1)	1982 Non-Qualified Stock 
                Option Plan.

	4.5(2)	1982 Incentive Stock 
                Option Plan, as amended.

	4.6(6)	1992 Incentive Stock 
                Option Plan.

	4.7(7)	1992 Non-Qualified Stock 
                Option Plan.

	10.3(2)	Bruce Miller Employment 
                Agreement.

	10.4(2)	Steven Besbeck Employment 
                Agreement.

(1)     Previously filed as an exhibit to the Company's Registration 
        Statement on Form S-18 dated September 22, 1983, SEC File 
        No. 2- 85265.

(2)     Previously filed as an exhibit to the Company's Registration 
        Statement on Form S-1 dated October 1, 1985 SEC File No. 2-
        99878.

(3)	Previously filed as an exhibit to the Company's Form 10-K 
        for the  year ended August 31, 1986.

(4)	Previously filed as an exhibit to the Company's Form 8-K 
        dated  August 18, 1989.

(5)	Previously filed as an exhibit to the Company's Form 8 
        Amendment No. 1 to Form 8-K, dated July 20, 1990, 
        incorporated by reference herein.

(6)	Previously filed as an exhibit to the Company's Form 8-K 
        dated October 21, 1992.

(7)	Previously filed as an addendum to the Company's Proxy 
        Statement and Notice of Annual Meeting of Shareholders dated 
        April 10, 1992.

(8)	Previously filed as an exhibit to the Company's Form 10-K 
        for the year ended August 31, 1992.

        (b)     Reports on Form 8-K

The Company did not file any reports on Form 8-K during its 
last fiscal quarter ended August 31, 1998.


SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, 
the Company has duly caused this report to be signed on its behalf 
by the undersigned, thereunto duly authorized.

CREATIVE COMPUTER APPLICATIONS, INC.

Dated:  November 20, 1998           By:  /S/ Steven M. Besbeck
                                         Steven M. Besbeck, President, 
                                         Chief Executive Officer, and
                                         Chief Financial Officer.

In accordance with Section 13 or 15(d) of the Exchange Act, 
this report has been signed below by the following persons on behalf 
of the Company and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>

<S>                             <S>                                 <C>
Signatures                      Title                               Date


/S/ Bruce M. Miller          Chairman of the Board and Chief     Nov. 20, 1998
Bruce M. Miller              Technology Officer


/S/ Steven M. Besbeck        President, Chief Executive          Nov. 20, 1998
Steven M. Besbeck            Officer, Chief Financial Officer
                             and Director


/S/ James R. Helms           Vice President, Operations,         Nov. 20, 1998
James R. Helms               Secretary and Director


/S/ Lawrence S. Schmid       Director                            Nov. 20, 1998
Lawrence S. Schmid


/S/ Robert S. Fogerson, Jr.  Director                            Nov. 20, 1998
Robert S. Fogerson, Jr.


/S/ Carol Bessel             Controller                          Nov. 20, 1998
Carol Bessel                 Chief Accounting Officer


/S/ John R. Murray           Vice President, Sales               Nov. 20, 1998
John R. Murray               and Business Development
</TABLE>

CREATIVE COMPUTER APPLICATIONS, INC.



_______________________




Financial Statements


For the Years Ended August 31, 1998 and 1997



_______________________


CREATIVE COMPUTER APPLICATIONS, INC.

INDEX


                                                              Page


FINANCIAL STATEMENTS:

Report of Independent Certified Public Accountants             F-2

Balance Sheets
  August 31, 1998 and 1997                                     F-3

Statements of Operations
  Years ended August 31, 1998, 1997 and 1996                   F-4

Statements of Shareholders' Equity
  Years ended August 31, 1998, 1997 and 1996                   F-5

Statements of Cash Flows
  Years ended August 31, 1998, 1997 and 1996                   F-6

Notes to Financial Statements                           F-7 - F-19



Report of Independent Certified Public Accountants



Board of Directors and Shareholders 
Creative Computer Applications, Inc.


	We have audited the accompanying balance sheets of Creative 
Computer Applications, Inc. as of August 31, 1998 and 1997 and the 
related statements of operations, shareholders' equity and cash flows 
for each of the three years in the period ended August 31, 1998.  
These financial statements are the responsibility of the Company's 
management.  Our responsibility is to express an opinion on these 
financial statements based on our audits.

	We conducted our audits in accordance with generally accepted 
auditing standards.  Those standards require that we plan and perform 
the audit to obtain reasonable assurance about whether the financial 
statements are free of material misstatement.  An audit includes 
examining, on a test basis, evidence supporting the amounts and 
disclosures in the financial statements.  An audit also includes 
assessing the accounting principles used and significant estimates 
made by management, as well as evaluating the overall financial 
statement presentation.  We believe that our audits provide a 
reasonable basis for our opinion.

	In our opinion, the financial statements referred to above 
present fairly, in all material respects, the financial position of 
Creative Computer Applications, Inc. at August 31, 1998 and 1997 and 
the results of its operations and its cash flows for the three years 
ended August 31, 1998 in conformity with generally accepted accounting 
principles.

In accordance with Statement of Position 97-2, "Software 
Revenue Recognition", which the Company adopted as of December 1998 
and as discussed Note 8 to the financial statements, the Company 
changed its method of accounting for software revenue recognition in 
fiscal 1998.



BDO SEIDMAN, LLP

/S/ BDO Seidman, LLP



Los Angeles, California
October 23, 1998

<TABLE>
<CAPTION>


<S>                                           <C>            <C>
August 31,                                   1998            1997 
ASSETS (Note 4)	
CURRENT ASSETS:	
Cash                                      $  375,876     $  534,430 
Receivables, net (Note 2)                  1,973,601      1,933,685 
Inventory                                    670,243        675,795 
Prepaid expenses                              79,907         78,951 
Deferred tax asset (Note 9)                  466,300        427,000 
	
TOTAL CURRENT ASSETS                       3,565,927      3,649,861 

PROPERTY AND EQUIPMENT, net (Note 3)         575,804        551,413 
INVENTORY OF COMPONENT PARTS                 156,527        136,357 
CAPITALIZED SOFTWARE COSTS, 
net of accumulated amortization of
     $384,509 and $286,907 (Note 1)        1,128,498        917,937
INTANGIBLES, net (Note 1)                    302,120        264,381 
DEFERRED TAX ASSET (Note 9)                  844,200        551,200 
OTHER ASSETS (Note 7)                         32,371         21,965 
                                          $6,605,447     $6,093,114 

LIABILITIES AND SHAREHOLDERS' EQUITY							
							
CURRENT LIABILITIES:							
Notes payable to bank (Note 4)            $  611,609     $  287,296 
Accounts payable                             507,005        522,808 
Accrued liabilities:	
Vacation pay                                 184,305        187,367 
Other                                        339,402        363,027 
Deferred service contract income             754,343        569,734 
Deferred revenue on system sales(Note 8)     638,018              - 
Capital lease obligations - current
     portion (Note 5)                          4,679         16,572
							
TOTAL CURRENT LIABILITIES                  3,039,361      1,946,804 
		
DEFERRED RENT (Note 5)                             -          5,034 
CAPITAL LEASE OBLIGATIONS, net of
   current portion (Note 5)                        -          4,679
							
TOTAL LIABILITIES                          3,039,361      1,956,517 

COMMITMENTS (Note 5)

SHAREHOLDERS' EQUITY(Notes 6 and 10):
Preferred shares, no par value;
   500,000 shares authorized; no
   shares outstanding                              -              -
Common shares, no par value;
   20,000,000 shares authorized;
   2,920,740, and 2,849,865
   shares outstanding                      5,831,027      5,752,635
Accumulated deficit                       (2,264,941)    (1,616,038)

TOTAL SHAREHOLDERS' EQUITY                 3,566,086      4,136,597 
                                          $6,605,447     $6,093,114 
</TABLE>


See notes to financial statements.
<TABLE>
<CAPTION>


<S>                                  <C>            <C>            <C>
Year ended August 31,                1998           1997           1996 

NET SYSTEM SALES AND SERVICE 
REVENUE (Notes 7 and 8):	
System sales                      $4,113,848     $4,976,820    $4,190,825 
Service revenue                    2,334,522      2,142,561     2,046,137 

                                   6,448,370      7,119,381     6,236,962
COST OF PRODUCTS AND
    SERVICES SOLD:
System sales                       2,645,949      2,467,743     1,922,100 
Service revenue                    1,550,487      1,346,269     1,259,486 

                                   4,196,436      3,814,012     3,181,586

GROSS PROFIT                       2,251,934      3,305,369     3,055,376 
							
RESEARCH AND DEVELOPMENT
  EXPENSE                            671,035        569,668       461,330

SELLING AND ADMINISTRATIVE
  EXPENSES                         2,486,716      2,290,736     2,095,493

OPERATING INCOME (LOSS)             (905,817)       444,965       498,553 

OTHER INCOME (EXPENSE):
Interest income                        3,630          6,589         3,243 
Interest and other expense           (69,516)       (22,829)      (36,409)

                                     (65,886)       (16,240)       (33,166)

INCOME (LOSS) BEFORE INCOME
   TAX BENEFIT                      (971,703)       428,725        465,387

INCOME TAX BENEFIT (Note 9)         (322,800)      (462,275)      (502,410)

NET INCOME (LOSS)                 $ (648,903)    $  891,000     $  967,797 

EARNINGS (LOSS) PER SHARE
   (Notes 1 and 10):
Basic                             $     (.22)    $      .31     $      .35 
Diluted                           $     (.22)    $      .30     $      .32 
                                                
WEIGHTED AVERAGE NUMBER
 OF SHARES OUTSTANDING(Note 10):                                                
Basic                              2,901,003      2,836,532      2,772,615 
Diluted                            2,901,003      3,011,101      3,006,926 
</TABLE>


See notes to financial statements.

<TABLE>
<CAPTION>
                                         Common       Accumu-                     
                             Common      Shares       lated              
                             Shares      Amount       Deficit      Totals 
									
BALANCE, September 1, 1995   2,735,715   $5,676,230   $(3,474,835) $2,201,395 

<S>                           <C>          <C>          <C>           <C>
Exercise of warrants and
 stock options (Note 6)         85,200       38,340            -      38,340 

Net income                           -            -      967,797     967,797 
									
BALANCE, August 31, 1996     2,820,915    5,714,570   (2,507,038)  3,207,532 

Exercise of warrants and
 stock options (Note 6)         25,000       32,140            -      32,140 
Issuance of common shares        3,950        5,925            -       5,925 

Net income                           -            -      891,000     891,000 

BALANCE, August 31, 1997     2,849,865    5,752,635   (1,616,038)  4,136,597 
									
Exercise of stock options
  (Note 6)                      61,000       66,550            -      66,550
									
Issuance of common shares        9,875       11,842            -      11,842 
									
Net loss                             -            -     (648,903)   (648,903)

BALANCE, August 31, 1998    $2,920,740   $5,831,027  $(2,264,941) $3,566,086 
</TABLE>


See notes to financial statements.
<TABLE>
<CAPTION>

Increase (Decrease) in Cash (Note 11)	
	
Year ended August 31,               1998           1997         1996 

<S>                                 <C>            <C>          <C>
OPERATING ACTIVITIES	
Net income (loss)                $  (648,903)  $  891,000   $  967,797 
Adjustments to reconcile
   net income (loss) to net
   cash provided by operating
   activities:
Depreciation and amortization        235,005      194,606      180,093 
Amortization of capitalized
   software costs                    174,602      171,616      175,491
Provision for possible losses        106,118       16,793       55,422 
Gain on disposal of property
and equipment                           (246)           -            -
Deferred rent expense                 (5,034)     (30,201)     (30,200)
Deferred taxes                      (332,300)    (463,600)    (514,602)
Increase (decrease) from
   changes in:
Receivables                         (146,034)    (271,911)    (173,900)
Inventories                          (14,618)     (21,008)     (57,032)
Prepaid expenses                        (956)       7,930       (5,749)
Accounts payable                     (15,803)     216,487     (186,952) 
Accrued liabilities                  (89,127)     (33,053)     138,002
Deferred service income              184,609      105,658      (29,183)
Deferred revenue on
   system sales                      638,018            -            -
Other assets                          11,026            -            - 
							
Net cash provided by
   operating activities               96,357      784,317      519,187
							
INVESTING ACTIVITIES							
Additions to property
   and equipment                    (200,526)    (213,229)    (357,510)
Capitalized software costs          (385,164)    (395,856)    (365,420)
Payments for acquisition
   of assets                         (33,780)           -            -
Proceeds from insurance
   settlement of property
   and equipment                       1,526            -            - 

Net cash used in
   investing activities             (617,944)    (609,085)    (722,930)

FINANCING ACTIVITIES
Borrowings on notes payable          644,313      315,421      351,875 
Payments on notes payable           (320,000)    (220,000)    (306,084)
Payments on capital
   lease obligations                 (16,572)     (27,489)      (5,000)
Proceeds from issuance
   of stock                           11,842            -            -
Exercise of stock options
   and warrants                       43,450       38,065       38,340

Net cash provided by
   financing activities              363,033      105,997       79,131

NET INCREASE (DECREASE)
   IN CASH                          (158,554)     281,229     (124,612)

CASH, beginning of year              534,430      253,201      377,813 

CASH, end of year                 $  375,876   $  534,430   $  253,201 

</TABLE>
See notesto financial statements.



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

	Business Activities

Creative Computer Applications, Inc. (the "Company") 
develops, assembles, markets, installs and services computer based 
Clinical Information Systems and products which automate the 
acquisition and management of clinical data for the healthcare 
industry.  The Company sells its products and systems, including the 
implementation of such products and systems, primarily to hospitals, 
clinics, reference laboratories and other healthcare institutions, 
as well as original equipment manufacturers.  The Company also 
generates revenue through service contracts with customers to 
provide technical support and repair services for specified periods 
of time.

Cash and Cash Equivalents

	The Company considers all liquid assets with an initial 
maturity of three months or less to be cash and cash equivalents.  

	Accounts Receivable and Concentration of Credit Risk

	Accounts receivable potentially exposes the Company to 
concentrations of credit risk, as defined by Statement of Financial 
Accounting Standards No. 105 "Disclosure of Information about 
Financial Instruments with Off-Balance-Sheet Risk and Financial 
Instruments with Concentrations of Credit Risk."  The Company 
provides credit to a large number of hospitals, clinics, reference 
laboratories and other healthcare institutions in various 
geographical areas.  The Company performs ongoing credit evaluations 
and maintains a general security interest in the item sold until 
full payment is received.

	Inventories

	Inventories consist primarily of computer hardware held for 
resale and are stated at the lower of cost or market (net realizable 
value).  Cost is determined using the first-in, first-out method. 
Supplies are charged to expense as incurred.

	The Company also maintains an inventory pool of component 
parts to service systems previously sold, which is classified as 
non-current in the accompanying balance sheets.  Such inventory is 
carried at the lower of cost or market and is charged to cost of 
sales based on usage.  Allowances are made for quantities on hand in 
excess of estimated future usage.

	Property and Equipment

	Property, equipment, and leasehold improvements are stated 
at cost less accumulated depreciation.  Depreciation of machinery 
and equipment, furniture and fixtures, and data processing equipment 
is computed for financial reporting purposes using the straight-line 
method over the estimated useful life of the related asset 
(generally five years).  Amortization of leasehold improvements is 
computed using the straight-line method over the lease term.  
Accelerated depreciation methods are used for income tax reporting 
purposes.

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	Capitalized Software Costs

	Software costs incurred internally in creating computer 
software products are expensed until technological feasibility has 
been established upon completion of a detailed program design.  
Thereafter, all software development costs are capitalized until the 
point that the product is ready for sale and subsequently reported 
at the lower of unamortized cost or net realizable value.  The 
Company considers annual amortization of capitalized software costs 
based on the ratio of current year revenues by product to the 
product's total estimated revenues method, subject to an annual 
minimum based on straight-line amortization over the product's 
estimated economic useful life, not to exceed five years.

	During the years ended August 31, 1998, 1997 and 1996, the 
Company capitalized $385,164, $395,856 and $365,420 of software 
development costs.  Amortization expense of capitalized software 
development costs, included in cost of sales, for the years ended 
August 31, 1998, 1997 and 1996 amounted to $174,602, $171,616 and 
$175,491.

	Intangible Assets

	Intangible assets amounting to $607,924 consist of 
proprietary rights to application software, trademarks, customer 
lists and copyrights and are being amortized using the straight-line 
method over the estimated useful life, not to exceed ten years.  
Accumulated amortization was $305,804 and $247,323 at August 31, 
1998 and 1997.

	Revenue Recognition

		System Sales

        The Company adopted Statement of Position 97-2, "Software 
Revenue Recognition", ("SOP 97-2") during 1998.  In accordance with 
SOP 97-2, the Company recognizes revenue on sales of Clinical 
Information Systems and data acquisition products when the following 
criteria are met; (I) persuasive evidence of an arrangement exists, 
(ii) delivery has occurred and the system is functionable, (iii) the 
vendor's fee is fixed or determinable and (iv) collectability is 
probable.  Also in accordance with SOP 97-2, the Company also 
allocates the fee of a multiple element contract to the various 
elements based on vendor-specific objective evidence of fair value.  
Revenue allocated to a specific element is recognized when the basic 
revenue recognition criteria above is met for that element.  If 
sufficient vendor-specific objective evidence for all elements does 
not exist to allocate revenue to the elements, all revenue from the 
arrangement generally would be deferred until such evidence does 
exist or until all elements have been delivered.  Revenues related 
to installation of systems requiring substantial future performance 
by the Company are recognized using the percentage-of-completion 
method based on meeting key milestone events over the terms of the 
contract.  Implementation revenue, consisting primarily of 
installation and training, is recognized as revenue as the services 
are performed.

		Service Revenue

	Service revenues (which are included in net sales) are 
recognized ratably over the contractual period (usually one year) or 
as the services are provided.  These services are not essential to 
the functionality of any other elements and are separately stated.  


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	Revenue Recognition (Continued)

		Deferred Revenue and Income

Deferred revenue on system sales and deferred service contract 
income represent cash received in advance or accounts receivable 
from system and service sales of which the above criteria have not 
been met for the current reporting of income. 

	Stock Based Compensation

	Statement of Financial Accounting Standards No. 123, 
"Accounting for Stock-based Compensation" SFAS 123, establishes a 
fair value method of accounting for stock-based compensation plans 
and for transactions in which a company acquires goods or services 
from non-employees in exchange for equity instruments.  The Company 
adopted this accounting standard on September 1, 1996.  SFAS 123 
also gives the option to account for stock-based employee 
compensation in accordance with Accounting Principles Board Opinion 
No. 25 (APB 25), "Accounting for Stock issued to Employees," or SFAS 
123.  The Company elected to follow APB 25 which measures 
compensation cost for employee stock options as the excess, if any, 
of the fair market price of the Company's stock at the measurement 
date over the amount an employee must pay to acquire stock.

	If SFAS 123 is not adopted related to stock-based employee 
compensation, SFAS 123 for footnote purposes requires that companies 
measure the cost of stock-based employee compensation at the grant 
date based on the value of the award and recognize this cost over 
the service period.  The value of the stock-based award is 
determined using a pricing model whereby compensation cost is the 
excess of the fair value of the stock as determined by the model at 
grant date or other measurement date over the amount an employee 
must pay to acquire the stock.  The Company has adopted this method 
of reporting.

	Earnings Per Share

	The Company adopted Statement of Financial Accounting 
Standards No. 128, "Earnings per Share" (SFAS No. 128) during 1998.  
SFAS No. 128 provides for the calculation of Basic and Diluted 
earnings per share.  Basic earnings per share includes no dilution 
and is computed by dividing income (loss) available to common 
shareholders by the weighted average number of common shares 
outstanding for the period.  Diluted earnings per share reflects the 
potential dilution of securities that could share in the earnings of 
an entity, such as stock options, warrants or convertible 
debentures.  All prior period weighted average and per share 
information has been adjusted in accordance with SFAS No. 128.

	Income Taxes

	The Company accounts for income taxes in accordance with the 
Statement of Financial Accounting Standards (SFAS) No. 109, 
"Accounting for Income Taxes.  SFAS No. 109 requires a Company to 
use the asset and liability method of accounting for income taxes.  
Under the asset and liability method, deferred income taxes are 
recognized for the tax consequences of "temporary differences" by 
applying enacted statutory tax rates applicable to future years to 
differences between the financial statement carrying amounts and the 
tax bases of existing assets and liabilities.  Under SFAS No. 109, 
the effect on deferred income taxes of a change in tax rates is 
recognized in income in the period that includes the enactment date.


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	Accounting Estimates

	The preparation of financial statements in conformity with 
generally accepted accounting principles requires management to make 
estimates and assumptions that affect the reported amounts of assets 
and liabilities and disclosure of contingent assets and liabilities 
at the date of the financial statements and the reported amounts of 
revenues and expenses during the reporting period.  Actual results 
could differ from those estimates.

	Fair Value of Financial Instruments

	Quoted market prices generally are not available for all of 
the Company's financial instruments.  Accordingly, fair values are 
based on judgments regarding current economic conditions, risk 
characteristics of various financial instruments and other factors.  
These estimates involve uncertainties and matters of judgment, and 
therefore, cannot be determined with precision.  Changes in 
assumptions could significantly affect the estimates.

	A description of the methods and assumptions used to 
estimate the fair value of each class of the Company's financial 
instruments is as follows:

	Cash, receivables, accounts payable, deferred service 
contract income and deferred revenue on system sales are recorded at 
carrying amounts which approximate fair value due to the short 
maturity of these instruments.

	The fair value of the Company's notes payable and capital 
lease obligations are based on quoted market prices for similar 
issues of debt and capital leases with similar remaining maturities 
and terms, and therefore the carrying amounts approximate fair 
value.

	New Accounting Pronouncements

	Disclosure about Capital Structure

	Statement of Financial Accounting Standard No. 129 (SFAS No. 
129), "Disclosure of Information about Capital Structure," issued by 
the Financial Accounting Standards Board is effective for financial 
statements issued ending after December 15, 1997.  The new standard 
reinstates various securities disclosure requirements previously in 
effect under Accounting Principles Board Opinion No. 15, which has 
been superseded by SFAS No. 129.  The Company adopted SFAS No. 129 
on December 15, 1997 and it had no effect on its financial position 
or results of operations.

	Comprehensive Income

	Statement of Financial Accounting Standard No. 130 (SFAS No. 
130), "Reporting Comprehensive Income," issued by the Financial 
Accounting Standards Board is effective for financial statements 
with fiscal years beginning after December 15, 1997.  Earlier 
application is permitted.  SFAS No. 130 establishes standards for 
reporting and display of comprehensive income and its components in 
a full set of general-purpose financial statements.  This standard 
deals with financial statement disclosure and will not effect the 
Company's financial position or its results of operations.  


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	New Accounting Pronouncements (Continued)

	Segment Information

	Statement of Financial Accounting Standard No. 131 (SFAS No. 
131), "Disclosure about Segments of an Enterprise and Related 
Information," issued by the Financial Accounting Standards Board is 
effective for financial statements with fiscal years beginning after 
December 15, 1997.  The new standard requires that public business 
enterprises report certain information about operating segments in 
complete sets of financial statements of the enterprises and in 
condensed financial statements of interim periods issued to 
shareholders.  It also requires that public business enterprises 
report certain information about their products and services, the 
geographic areas in which they operate and their major customers.  
This standard deals with financial statement disclosure and will not 
effect the Company's financial position or its results of 
operations.  

	Software Revenue Recognition

        Statement of Position 97-2, "Software Revenue Recognition", 
("SOP 97-2") issued by the AICPA is effective for transactions 
entered into in fiscal years beginning after December 15, 1997.  SOP 
97-2 supersedes SOP 91-1 regarding software revenue recognition.  
SOP 97-2 establishes standards which require a company to recognize 
revenue when (i) persuasive evidence of an arrangement exists, (ii) 
delivery has occurred, (iii) the vendor's fee is fixed or 
determinable, and (iv) collectability is probable.  The SOP also 
discusses the revenue recognition criteria for multiple element 
contracts and allocation of the fee to various elements based on 
vendor-specific objective evidence of fair value.  Statement of 
Position 98-4 "Deferral of the Effective Date of a Provision of SOP 
97-2" defers for one year the application which limits what is 
considered vendor-specific objective evidence of the fair value of 
the various elements in a multiple-element arrangement.  The Company 
adopted this SOP during 1998 and the effect on the Company resulted 
in deferred revenue of $638,018 at August 31, 1998.


NOTE 2 - RECEIVABLES

<TABLE>
<CAPTION>

Receivables are summarized as follows:

August 31,                                    1998           1997

<S>                                            <C>            <C>
Trade accounts                             $2,037,101     $1,966,985 
Allowance for uncollectible accounts          (63,500)       (33,300)

                                           $1,973,601     $1,933,685 
</TABLE>


NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

<TABLE>
<CAPTION>

August 31,                                     1998           1997 
<S>                                             <C>           <C>
Machinery and equipment                    $  244,447     $  231,438 
Furniture and fixtures                        327,865        214,593 
Leasehold improvements                         84,705         65,078 
Data processing equipment                   1,179,764      1,148,310 

                                            1,836,781      1,659,419 
Accumulated depreciation                   (1,260,977)    (1,108,006)

                                           $  575,804      $ 551,413 
</TABLE>

Included in property and equipment at August 31, 1998 and 
1997 are machinery and equipment and furniture and fixtures under 
capital lease agreements in the amount of $23,275 and $96,261 with 
related accumulated amortization thereon of $19,784 and $66,807.

	Depreciation and amortization expense for the years ended 
August 31, 1998, 1997 and 1996 was $174,855, $158,901 and $127,400.

NOTE 4 - NOTES PAYABLE TO BANK

The notes payable to bank are classified as current and are summarized 
as follows:

<TABLE>
<CAPTION>

August 31,                                      1998            1997 
<S>                                              <C>             <C>
Line of credit of $500,000 with a
bank with interest at the bank's prime
rate plus 1.75% (10.25% at August 31,
1998) and maturing on February 1, 1999,
and collateralized by substantially all
of the Company's assets                       $500,000        $200,000 

Note payable to a bank with interest at
the bank's prime rate plus 2.5%
(11% at August 31, 1998) maturing on
January 1, 2000, and collateralized by
substantially all of the Company's assets.
The note is subject to minimum principal
repayment terms of $10,000 a month
plus interest                                  111,609         87,296 

                                              $611,609       $287,296
 </TABLE>

	The notes payable to bank are covered by two note agreements 
that require the Company to meet certain covenants, including 
various financial ratios.  At August 31, 1998, the Company was not 
in compliance with certain financial covenants of which the Company 
received a waiver from the bank.


NOTE 5 - COMMITMENTS

	Operating Leases

        The Company leases office and warehouse space in Calabasas,
California under a non-cancelable operating lease expiring in fiscal
2003.  Under the original terms of the lease, the Company received nine
months of free rent.  In accordance with Statement of Financial
Accounting Standards No. 13 the Company is recognizing rental expense
with respect to the facility lease on a straight-line basis which
has resulted in the recognition of a liability for deferred rent as of
August 31, 1997.  The Company also leases office space in Boulder,
Colorado expiring in fiscal 1999.

	Future minimum lease payments under the facility leases are
as follows:

<TABLE>
<CAPTION>

Fiscal year ending             Facilities 
<C>                               <C>
1999                            $219,712 
2000                             211,752 
2001                             211,752 
2002                             211,752 
2003                              17,646 

Total minimum lease payments    $872,614 
</TABLE>


	Rent expense for the years ended August 31, 1998, 1997 and 
1996 was approximately $229,000, $172,000 and $205,000.

	Capital Leases

	The Company leases certain machinery and equipment and 
furniture and fixtures under leases classified as capital leases due 
to the existence of bargain purchase options.  The following is a 
schedule by years of future minimum lease payments under capital 
leases together with the present value of the net minimum lease 
payments as of August 31, 1998:

<TABLE>
<CAPTION>

<S>                                                          <C>
                                                           Capital
Fiscal year ending                                         Leases 

1999                                                       $4,679 
Total minimum lease payments                                4,679 

Amount representing interest                                    -

Present value of minimum lease payments                     4,679 
Current portion                                            (4,679)
 Capital lease obligations, net of current portion         $    -
</TABLE>


NOTE 6 - STOCK OPTION PLANS AND WARRANTS

	During 1997, the Company adopted the 1997 Non-Qualified and 
Incentive Stock Option Plans upon termination of the 1992 Plans.  At 
August 31, 1998, the 1992 plans have 284,000 options outstanding and 
203,911 options exercisable.  Under the 1997 Non-Qualified Stock 
Option Plan, the Company may grant a maximum of 300,000 common 
shares (officers and directors may acquire no more than 150,000 
common shares) and no options may be granted at a price less than 85 
percent of the fair market value of the common shares on the date of 
grant.  Under the 1997 Incentive Stock Option Plan, the Company may 
grant a maximum of 500,000 common shares (officers and directors may 
acquire no more than 250,000 common shares).  In addition, under the 
1997 Incentive Stock Option Plan, options can not be granted at a 
price less than 100 percent of the fair market value of the common 
shares on the date of grant for officers, directors and employees 
who owned less than 10 percent of the Company's common shares and 
not less than 110 percent of fair market value for those officers, 
directors, and employees who owned 10 percent or more of the 
Company's common shares.  Under the 1997 Plans, options granted to 
optionees owning less than 10 percent of the Company's outstanding 
voting securities may exercise their options within ten years from 
the date of grant.  Options granted to optionees owning 10 percent 
or more of the Company's outstanding voting securities have an 
exercise term of no more than five years from the date of grant.  No 
options under either plan can be exercised if the optionee had been 
previously granted an option that had not been exercised or had not 
expired.  No options can be exercised during the first year of the 
option term.  At August 31, 1998, the 1997 plans have 172,000 
options outstanding and 19,250 options exercisable.  These plans 
expire in 2007.


	Activity under the 1982, 1992 and 1997 plans through August 
31, 1998 is summarized below:

<TABLE>
<CAPTION>

                               Non-Qualified Plans           Incentive Plans 
                                         Weighted                  Weighted 
                               Number    Average        Number      Average 
                                 of      Exercise        of         Exercise 
                               Shares     Price         Shares       Price 

<S>                            <C>         <C>            <C>         <C> 
September 1, 1995              724,755    $1.27         212,409      $1.33 
Options granted range from
   $1.75 to $2.25 per share     25,000    $1.79         115,000      $2.19
Options expired range from
   $.45 to $2.25 per share           -         -        (48,209)     $1.36
Options exercised at $0.45     (34,000)   $0.45         (51,200)     $0.45 
									
August 31, 1996                715,755    $1.33         228,000      $1.96 
Options granted range from
   $1.63 to $2.13               75,000    $1.87          42,000      $1.85
Options expired range from
   $1.00 to $1.25             (108,000)   $1.02         (15,000)     $2.25
Options exercised range from
   $1.25 to $1.58              (20,000)   $1.33          (5,000)     $1.10

August 31, 1997                662,755    $1.44         250,000      $1.94 
Options granted range from
   $1.63 to $1.78               35,000    $1.69          60,000      $1.72
Options expired range from
   $1.10 to $1.50              (30,000)   $1.30         (11,000)     $2.25
Options exercised range from
   $1.03 to $1.13              (36,000)   $1.10         (25,000)     $1.08

August 31, 1998                631,755    $1.48         274,000      $1.95 
                                                                
Options exercisable at
   August 31, 1998             515,566    $1.40         144,911      $2.04
									
Options available for
   grant at August 31,1998     215,000                  413,000

 </TABLE>


	During fiscal 1996 and 1995, the Company also granted 
special options approved by the Board of Directors to officers and 
directors and financial consultants.  The options have been granted 
at the fair market value at the date of grant and are exercisable 
over periods ranging from two to five years after which they expire.  
449,755 shares of the special grants are included in the non-
qualified plan shares outstanding at August 31, 1998.

NOTE 6 - STOCK OPTION PLANS AND WARRANTS (Continued)


	Information relating to stock options, at August 31,1998 
summarized by exercise price are as follows:

<TABLE>
<CAPTION>

                         Outstanding                  Exerciseable 
                                Weighted Average     Weighted Average 
Exercise Price               Life     Exercise                Exercise 
Per Share       Shares     (Month)      Price       Shares     Price 
											
Incentive Stock Option Plan:									
		

<C>              <C>        <C>         <C>          <C>       <C>
$1.25           10,000       13.0     $  1.25       7,500    $  1.25
$1.38            5,000       13.0        1.38       3,750       1.38
$1.44           10,000        1.0        1.44      10,000       1.44 
$1.58            5,000        1.0        1.58       5,000       1.58 
$1.63           20,000      114.0        1.63           -       1.63 
$1.63           10,000       37.0        1.63       2,500       1.63 
$1.66            5,000      114.0        1.66           -       1.66 
$1.75           10,000       25.0        1.75       5,000       1.75 
$1.78           25,000      111.0        1.78           -       1.78 
$1.79           10,000       56.0        1.79           -       1.79 
$1.79            5,000       37.0        1.79       1,250       1.79 
$1.93            5,000       25.0        1.93       2,500       1.93 
$1.94           27,000       44.0        1.94       6,750       1.94 
$2.25          127,000       26.0        2.25     100,661       2.25 

               274,000       44.1     $  1.95     144,911    $  2.04 
</TABLE>

<TABLE>
<CAPTION>
Non-Qualified Stock Option Plan:								
			
<C>             <C>           <C>       <C>         <C>        <C> 
$1.00         100,000         8.0     $  1.00    100,000     $  1.00 
$1.25          20,000        13.0        1.25     20,000        1.25 
$1.38           5,000        13.0        1.38      5,000        1.38 
$1.38         300,000        27.0        1.38    300,000        1.38 
$1.44          20,000         1.0        1.44     20,000        1.44 
$1.58           2,000         1.0        1.58      2,000        1.58 
$1.63          20,000        37.0        1.63      5,000        1.63 
$1.63          20,000        37.0        1.63          -        1.63 
$1.75          20,000        25.0        1.75     10,000        1.75 
$1.78          15,000       111.0        1.78          -        1.78 
$1.79           5,000        37.0        1.79      1,250        1.79 
$1.93           5,000        25.0        1.93      2,500        1.93 
$1.94          40,000        44.0        1.94     10,000        1.94 
$2.13          10,000        44.0        2.13      2,500        2.13 
$2.25          49,755        17.5        2.25     37,316        2.25 

              631,755        25.8     $  1.48    515,566     $  1.40
</TABLE>

NOTE 6 - STOCK OPTION PLANS AND WARRANTS (Continued)

	All stock options issued to employees have an exercise price 
not less than the fair market value of the Company's common stock on 
the date of grant, and in accordance with accounting for such 
options utilizing the intrinsic value method stock-based 
compensation been determined based on the fair value of the grant 
dates consistent with the method of SFAS 123, the Company's net 
income (loss) and earnings (loss) per share for the years ended 
August 31, 1998, 1997, and 1996 would have been decreased to the pro 
forma amounts presented below.

<TABLE>
<CAPTION>

August 31,                             1998          1997          1996 

<S>                                    <C>          <C>            <C>
Net income (loss), as reported     $(648, 903)  $  891,000    $  967,797 
Net income (loss), pro forma         (709,144)     859,205       952,869 
							
Basic net earnings (loss)
  per share, as reported                (0.22)        0.31          0.35
Basic net earnings (loss)
  per share, pro forma                  (0.25)        0.30          0.32
							
Diluted net earnings (loss)
  per share, as reported                (0.22)        0.30          0.32
Diluted net earnings (loss)
  per share, as reported                (0.25)        0.29          0.32

</TABLE>


	The fair value of option grants is estimated on the date of 
grants utilizing the Black-Scholes option pricing with the following 
weighted average assumptions for grants in 1998, 1997 and 1996; 
expected life of options for all three years was 5 years, expected 
volatility of 14%, 16% and 19%, respectively, and risk-free interest 
rate of 6.0%, 5.5% and 6.0%, respectively.  The weighted average 
fair value on the date of grants for options granted during 1998, 
1997 and 1996 was $.46, $.49 and $.57 per option.  

        Due to the fact that the Company's stock option programs 
vest over many years and additional awards are made each year, the 
above pro forma numbers are not indicative of the financial impact 
had the disclosure provisions of SFAS 123 been applicable to all 
years of previous option grants.  The above numbers do not include 
the effect of options granted prior to 1995 that vested in 1996, 
1997 and 1998.  

NOTE 7 - RELATED PARTIES

The Company has a note receivable from a major shareholder 
for $23,100, which accrues interest at 10% per annum and is payable 
monthly beginning January 2, 1998.  The note receivable of $23,100 
is payable in full on December 18, 2000.  


NOTE 8 - REVENUE

	In accordance with SOP 97-2, a Company is required to change 
its method of accounting for software revenue for fiscal years 
beginning after December 15, 1997.  During 1998, the Company elected 
early adoption of this SOP.  

NOTE 8 - REVENUE (Continued)

The Company recognizes revenue when the criteria discussed in the 
Revenue Recognition accounting policy in Note 1 are met.  Whereas 
under SOP 91-1 revenue was recognized once delivery occurred, 
collectability was probable and remaining vendor obligations were 
insignificant and accrued for.  As a result of implementing SOP 97-
2, the Company has deferred revenue on system sales of $638,018 
(primarily related to implementation revenue), as the revenue 
recognition criteria under SOP 97-2 were not met.  Deferred revenue 
will be recognized as the Company meets the specific criteria.  In 
accordance with SOP 97-2, all prior periods have not been 
retroactively adjusted.  


NOTE 9 - INCOME TAX BENEFIT

	The provision for income taxes consist of the following:

<TABLE>
<CAPTION>

August 31,                    1998            1997            1996 
<S>                            <C>             <C>             <C>
Current taxes:
  Federal                  $       -       $       -     $       - 
  State                        9,500           1,325        12,190 

Deferred
  State                        7,800               -             - 
  Federal                   (340,100)         51,000             - 

                            (322,800)         52,325        12,190 

Change in valuation
  allowance                        -        (514,600)     (514,600)
							
Income tax benefit          $(322,800)     $(462,275)    $(502,410)
</TABLE>


	Income tax benefit differs from the amount obtained by 
applying the statutory federal income tax rate to income before 
income tax expense as follows:

<TABLE>
<CAPTION>
                                    1998        1997         1996 

<S>                                 <C>         <C>          <C>
Computed provision (benefit)
   for taxes based on income
   at statutory rate               (34.0)%      34.0%        34.0%

State taxes, net of benefit
   of state net operating loss
   carryforward                      1.0          0.3         6.0

Tax benefit of federal net
   operating loss carryforward         -        (34.0)      (34.0)

Permanent differences and other     (0.2)        11.9           - 

Reduction in valuation allowance       -       (120.0)     (114.0)

                                   (33.2)%     (107.8)%    (108.0)%
</TABLE>

NOTE 9 - INCOME TAXES (Continued)

	Deferred income taxes reflect the net tax effects of 
temporary differences between the carrying amounts of assets and 
liabilities for financial reporting purposes and the amounts used 
for income tax purposes.  Significant components of the Company's 
deferred tax assets and liabilities as of August 31, 1998 and 1997 
are as follows:

<TABLE>
<CAPTION>

August 31,                                   1998            1997 

<S>                                          <C>             <C>
Deferred tax assets:					
  Allowance for doubtful accounts        $   25,400      $    13,700 
  Inventory uniform capitalization           24,000           23,900 
  Accrued vacation                           64,600           66,900 
  Deferred revenue                          214,900          163,500 
  Depreciation and amortization               4,600            7,600 
  Net operating loss carryforwards        1,161,600          804,000 
  Tax credits                               285,200          275,000 
					
Gross deferred tax assets                 1,780,300        1,354,600 

Deferred tax liability:
  Capitalized software costs               (468,600)        (376,400)
  Other                                      (1,200)               - 

                                           (469,800)        (376,400)


Net deferred tax assets                  $1,310,500       $ 0 978,200 
</TABLE>

	At August 31, 1998, the Company had federal net operating 
loss carryforwards available to offset future taxable income of 
approximately $3,416,000 that expire at various dates through 2013 
and general business tax credit carryforwards available to offset 
future income tax payable of approximately $285,200 that expire at 
various dates through 2013.  The Tax Reform Act of 1986 contains 
provisions which limit the amount of tax credits that can be 
utilized in any one year in subsequent years.

	For the year ended August 31, 1995, the Company established 
a valuation allowance equal to the net deferred tax asset as the 
Company could not conclude that it was more likely than not that the 
deferred tax asset could be realized.  During the years ended August 
31, 1997 and 1996, the Company re-evaluated the valuation allowance 
taking into consideration prior earnings history, projected 
operating results and the reversal of temporary tax differences.  As 
a result, the Company reduced the valuation allowance to zero, as 
the Company believes it is more likely than not that the net 
deferred tax asset will be realized.  During the year ended August 
31, 1998, the Company re-evaluated the realization of the deferred 
tax asset taking into consideration projected operating results and 
prior earnings history, in light of the current year loss.  As a 
result, the Company continues to believe that it is more likely than 
not that the net deferred tax asset will be realized. 

NOTE 10 - EARNINGS (LOSS) PER SHARE


<TABLE>
<CAPTION>

                                              August 31
                                1998            1997            1996
<S>                             <C>             <C>             <C>
Basic weighted average
  shares outstanding          2,901,003      2,836,532       2,772,615

Diluted effect of stock
  options and warrants                -        174,569         234,311

Diluted weighted average
  shares outstanding          2,901,003      3,011,101       3,006,926
</TABLE>


	At August 31, 1998, options to purchase 905,755 shares were 
outstanding and could effect future periods, but were not included 
in the computation of diluted loss per common share because the 
effect would be antidilutive.  

NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information is as follows:

	(a)	Cash paid:

<TABLE>
<CAPTION>
<S>                   <C>             <C>          <C>
                      1998            1997         1996 
							
Interest           $  55,365      $  34,969     $  35,800 
Income taxes       $   1,570      $       -     $       - 
</TABLE>

(b)	Non-cash investing and financing activities:

During fiscal 1998, the Company generated a note receivable for 
$23,100 from a related party (See Note 7).  

During fiscal 1996, the Company acquired a computer with a cost 
of $23,286 under a capital lease agreement.


EXHIBIT 11

<TABLE>
<CAPTION>

<S>                              <C>           <C>             <C>
Year ended August 31,            1998          1997            1996 

AVERAGE MARKET PRICE
   PER SHARE                 $      1.50    $     1.82     $     1.85
							
NET INCOME (LOSS)            $  (648,903)   $  891,000     $  967,797 
							
Basic weighted average
   number of common
   shares outstanding           2,901,003    2,836,532      2,772,615 

Diluted effect of
   stock options                        -      174,569        234,311

Diluted weighted average
   number of common
   shares outstanding            2,901,003    3,011,101     3,006,926 

Basic earnings (loss)
   per share                 $        (.22) $       .31   $       .35

Diluted earnings (loss)
   per share                 $        (.22) $       .30   $       .32
</TABLE>

 
 <TABLE>
<CAPTION>

<S>                                   <C>

[ARTICLE]	5
[RESTATED]

</TABLE>
<TABLE>
<S>                                   <C>
[PERIOD-TYPE]		12-MOS
[FISCAL-YEAR-END]                     AUG-31-1997
[PERIOD-END]                          AUG-31-1997
[CASH]                                     534430
[SECURITIES]                                    0
[RECEIVABLES]                             1933685
[ALLOWANCES]                                    0
[INVENTORY]                                675795
[CURRENT-ASSETS]                          3649861
[PP&E]                                    1659419
[DEPRECIATION]                            1108006
[TOTAL-ASSETS]                            6093114
[CURRENT-LIABILITIES]                     1946804
[BONDS]                                         0
[PREFERRED-MANDATORY]                           0
[PREFERRED]                                     0
[COMMON]                                  5752635
[OTHER-SE]                               (1616038)
[TOTAL-LIABILITY-AND-EQUITY]              6093114
[SALES]                                   7119381
<TOTAL REVENUES>                          7125970
[CGS]                                     3814012
[TOTAL-COSTS]                             6674416
[OTHER-EXPENSES]                                0
[LOSS-PROVISION]                                0
[INTEREST-EXPENSE]                          22829
[INCOME-PRETAX]                            428725
[INCOME-TAX]                              (462275)
[INCOME-CONTINUING]                        891000
[DISCONTINUED]                                  0
[EXTRAORDINARY]                                 0
[CHANGES]                                       0
[NET-INCOME]                               891000
[EPS-PRIMARY]                                 .31
[EPS-DILUTED]                                 .30
</TABLE>


CREATIVE COMPUTER APPLICATIONS, INC.