** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

 

**Washington, DC 20549**

 

**FORM 10-QSB**

 

**(Mark One)**

 
| **ý**                                                                                                                                                                                                                                                                                                                                                                                                        | **QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|
| **For the quarterly period ended November 30,  2003.**                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                              |
| **o**                                                                                                                                                                                                                                                                                                                                                                                                             | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT**                   |
| **For the transition period from                                  to                               ** |

 

| **Commission file number 0-12551**                                 |
|--------------------------------------------------------------------|
|                                                               |   |   |
| **CREATIVE COMPUTER APPLICATIONS, INC.**                           |
| (Exact name of small business issuer as  specified in its charter) |
|                                                               |   |   |
| **California**                                                     |   | **95-3353465** |
| (State or other jurisdiction of  incorporation or organization)    |   | (I.R.S. Employer  Identification No.) |
|                                                               |   |   |
| **26115-A Mureau Road, Calabasas, California  91302**              |
| (Address of principal executive offices)                           |
|                                                               |   |   |
| **(818) 880-6700**                                                 |
| Issuer’s telephone number:                                    |

 

State thenumber of shares outstanding of each of the issuer’s classes of common equity,as of the latest practicable date: 3,318,900 common shares as of December 31, 2003.

 
| Transitional Small Business Disclosure Format (check one): |
|------------------------------------------------------------|
|                                                       | Yes  o        No  ý |

 

 

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**CREATIVECOMPUTER APPLICATIONS, INC.**

 

**FORM 10-QSB**

 

### **INDEX**

 
| **PART I - Financial Information:**                                                                                 |   |
|---------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                |   |
| Condensed  Consolidated Balance Sheets, as at November 30, 2003 and August 31, 2003                                 |   |
|                                                                                                                |   |
| Condensed Consolidated Statements of  Operations for the three months ended November 30, 2003 and November 30, 2002 |   |
|                                                                                                                |   |
| Condensed Consolidated Statements of Cash  Flows for the three months ended November 30, 2003 and November 30, 2002 |   |
|                                                                                                                |   |
| Notes to Condensed Consolidated Financial  Statements                                                               |   |
|                                                                                                                |   |
| Management’s  Discussion and Analysis of Results of Operations and Financial Condition                         |   |
|                                                                                                                |   |
| Controls and Procedures                                                                                             |   |
|                                                                                                                |   |
| **PART II - Other Information:**                                                                                    |   |
|                                                                                                                |   |
| Items 1 through 6                                                                                                   |   |
|                                                                                                                |   |
| Signatures                                                                                                          |   |
|                                                                                                                |   |
| Exhibits and Certifications                                                                                         |   |

 

2

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**CREATIVECOMPUTER APPLICATIONS, INC.**

 

**PART 1 - FINANCIAL INFORMATION**

 

#### **Item 1.  Financial Statements**

#### ** **

#### **CONDENSED CONSOLIDATED BALANCE SHEETS**

 
|                                                                                                    |   | **November  30,  2003** |      | **August 31,*********2003** |   |
|---------------------------------------------------------------------------------------------------------|--------|-------------------------|-----------|-----------------------------|--------|
|                                                                                                    |   | **(Unaudited)**         |      |                        |   |
| **ASSETS**                                                                                              |   |                    |      |                        |   |
|                                                                                                    |   |                    |      |                        |   |
| CURRENT ASSETS:                                                                                         |   |                    |      |                        |   |
| Cash                                                                                                    |   | $                       | 871,216   |                        | $      | 1,075,323 |   |
| Receivables, net                                                                                        |   | 1,903,453               |      | 2,063,311                   |   |
| Inventories                                                                                             |   | 149,774                 |      | 164,581                     |   |
| Prepaid  expenses and other assets                                                                      |   | 198,737                 |      | 231,117                     |   |
| Deferred tax asset                                                                                      |   | 362,850                 |      | 362,850                     |   |
|                                                                                                    |   |                    |      |                        |   |
| TOTAL CURRENT ASSETS                                                                                    |   | 3,486,030               |      | 3,897,182                   |   |
|                                                                                                    |   |                    |      |                        |   |
| PROPERTY AND EQUIPMENT, net                                                                             |   | 206,300                 |      | 219,627                     |   |
| INVENTORY OF COMPONENT PARTS                                                                            |   | 252,275                 |      | 267,275                     |   |
| CAPITALIZED SOFTWARE COSTS, net of  accumulated  amortization of $1,216,337 and $1,114,645              |   | 1,387,682               |      | 1,360,374                   |   |
| DEFERRED TAX ASSET                                                                                      |   | 536,885                 |      | 536,885                     |   |
|                                                                                                    |   |                    |      |                        |   |
|                                                                                                    |   | $                       | 5,869,172 |                        | $      | 6,281,343 |   |
|                                                                                                    |   |                    |      |                        |   |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                           |   |                    |      |                        |   |
|                                                                                                    |   |                    |      |                        |   |
| CURRENT LIABILITIES:                                                                                    |   |                    |      |                        |   |
| Notes payable to bank (Note 4)                                                                          |   | $                       | —    |                        | $      | — |   |
| Accounts payable                                                                                        |   | 258,238                 |      | 207,624                     |   |
| Accrued liabilities:                                                                                    |   |                    |      |                        |   |
| Vacation Pay                                                                                            |   | 203,922                 |      | 185,508                     |   |
| Accrued Payroll                                                                                         |   | 31,434                  |      | 105,768                     |   |
| Other                                                                                                   |   | 164,815                 |      | 159,241                     |   |
| Deferred service contract income                                                                        |   | 1,143,950               |      | 1,115,366                   |   |
| Deferred revenue on system sales                                                                        |   | 314,503                 |      | 501,507                     |   |
| Capital lease obligation, current portion                                                               |   | —                  |      | 361                         |   |
|                                                                                                    |   |                    |      |                        |   |
| TOTAL  CURRENT LIABILITIES                                                                              |   | 2,116,862               |      | 2,275,375                   |   |
|                                                                                                    |   |                    |      |                        |   |
| SHAREHOLDERS’ EQUITY:                                                                              |   |                    |      |                        |   |
| Common shares, no par value; 20,000,000  shares  authorized; 3,318,900 and 3,318,900 shares outstanding |   | 6,192,692               |      | 6,192,692                   |   |
| Accumulated deficit                                                                                     |   | (2,440,382              | )         | (2,186,724                  | )      |
|                                                                                                    |   |                    |      |                        |   |
| TOTAL SHAREHOLDERS’ EQUITY                                                                         |   | 3,752,310               |      | 4,005,968                   |   |
|                                                                                                    |   |                    |      |                        |   |
|                                                                                                    |   | $                       | 5,869,172 |                        | $      | 6,281,343 |   |

 

----

*** As presented in the audited consolidatedfinancial statements**

 

**See Notes to Condensed Consolidated FinancialStatements.**

 

3

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**CREATIVECOMPUTER APPLICATIONS, INC.**

 

**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

 
|                                             |   | **Three  Months Ended November 30,** |     |
|--------------------------------------------------|--------|--------------------------------------|----------|
|                                             |   | **2003**                             |     | **2002** |   |
|                                             |   | **(unaudited)**                      |     |
|                                             |   |                                 |     |   |   |
| NET SYSTEM SALES AND  SERVICE REVENUE (Note 3)   |   |                                 |     |   |   |
| System sales                                     |   | $                                    | 471,355  |   | $ | 802,469 |   |
| Service revenue                                  |   | 1,124,206                            |     | 1,079,692 |   |
|                                             |   | 1,595,561                            |     | 1,882,161 |   |
|                                             |   |                                 |     |   |   |
| COST OF PRODUCTS AND SERVICES SOLD               |   |                                 |     |   |   |
| System sales                                     |   | 447,375                              |     | 579,177 |   |
| Service revenue                                  |   | 405,054                              |     | 356,683 |   |
|                                             |   | 852,429                              |     | 935,860 |   |
|                                             |   |                                 |     |   |   |
| Gross profit                                     |   | 743,132                              |     | 946,301 |   |
|                                             |   |                                 |     |   |   |
| OPERATING EXPENSES:                              |   |                                 |     |   |   |
| Selling, general and administrative              |   | 740,484                              |     | 651,440 |   |
|                                             |   |                                 |     |   |   |
| Research and development                         |   | 256,236                              |     | 213,510 |   |
|                                             |   |                                 |     |   |   |
| Total Operating Expenses                         |   | 996,720                              |     | 864,950 |   |
|                                             |   |                                 |     |   |   |
| Operating income (loss)                          |   | (253,588                             | )        | 81,351 |   |
|                                             |   |                                 |     |   |   |
| INTEREST AND OTHER INCOME                        |   | 1,357                                |     | 3,725 |   |
|                                             |   |                                 |     |   |   |
| INTEREST EXPENSE                                 |   | (1,427                               | )        | (2,347 | ) |
|                                             |   |                                 |     |   |   |
| Income (loss) before provision for income  taxes |   | (253,658                             | )        | 82,729 |   |
|                                             |   |                                 |     |   |   |
| PROVISION FOR INCOME TAXES                       |   | —                               |     | 34,746 |   |
|                                             |   |                                 |     |   |   |
| NET INCOME (LOSS)                                |   | $                                    | (253,658 | ) | $ | 47,983 |   |
|                                             |   |                                 |     |   |   |
| EARNINGS (LOSS) PER SHARE (Note 2):              |   |                                 |     |   |   |
| Basic                                            |   | $                                    | (.08     | ) | $ | .02 |   |
| Diluted                                          |   | $                                    | (.08     | ) | $ | .01 |   |
|                                             |   |                                 |     |   |   |
| WEIGHTED  AVERAGE NUMBER OF SHARES OUTSTANDING   |   |                                 |     |   |   |
| Basic                                            |   | 3,318,900                            |     | 3,266,400 |   |
| Diluted                                          |   | 3,318,900                            |     | 3,382,486 |   |

 

**See Notes to Condensed Consolidated FinancialStatements.**

 

4

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**CREATIVECOMPUTER APPLICATIONS, INC.**

 

**CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS**

 

**Increase (Decrease) in Cash**

 
|                                                                                                |   | **Three  Months Ended November 30,** |     |
|-----------------------------------------------------------------------------------------------------|--------|--------------------------------------|----------|
|                                                                                                |   | **2003**                             |     | **2002** |   |
|                                                                                                |   | **(unaudited  )**                    |     |
|                                                                                                |   |                                 |     |   |   |
| OPERATING ACTIVITIES:                                                                               |   |                                 |     |   |   |
| Net income (loss)                                                                                   |   | $                                    | (253,658 | ) | $ | 47,983 |   |
| Adjustments to reconcile net income (loss)  to net cash provided by (used in) operating activities: |   |                                 |     |   |   |
| Depreciation and amortization                                                                       |   | 33,639                               |     | 41,901 |   |
| Provision for doubtful accounts                                                                     |   | 10,000                               |     | — |   |
| Amortization  of capitalized software costs                                                         |   | 101,692                              |     | 105,009 |   |
| Deferred tax provision                                                                              |   | —                               |     | 34,746 |   |
| Increase (decrease) from changes in:                                                                |   |                                 |     |   |   |
| Receivables                                                                                         |   | 149,858                              |     | 254,602 |   |
| Inventories                                                                                         |   | 29,807                               |     | 13,221 |   |
| Prepaid expenses and other assets                                                                   |   | 32,380                               |     | 751 |   |
| Accounts payable                                                                                    |   | 50,614                               |     | 72,737 |   |
| Accrued liabilities                                                                                 |   | (50,346                              | )        | (199,957 | ) |
| Deferred revenues                                                                                   |   | (158,420                             | )        | (144,632 | ) |
|                                                                                                |   |                                 |     |   |   |
| Net cash provided by (used in) operating  activities                                                |   | (54,434                              | )        | 226,361 |   |
|                                                                                                |   |                                 |     |   |   |
| INVESTING  ACTIVITIES                                                                               |   |                                 |     |   |   |
| Additions to property and equipment                                                                 |   | (20,312                              | )        | (20,980 | ) |
| Additions to capitalized software costs                                                             |   | (129,000                             | )        | (114,000 | ) |
|                                                                                                |   |                                 |     |   |   |
| Net cash used in investing activities                                                               |   | (149,312                             | )        | (134,980 | ) |
|                                                                                                |   |                                 |     |   |   |
| FINANCING ACTIVITIES:                                                                               |   |                                 |     |   |   |
| Payments on capital lease obligations                                                               |   | (361                                 | )        | (5,688 | ) |
| Proceeds from issuance of stock and  exercises of stock options                                     |   | —                               |     | 2,250 |   |
|                                                                                                |   |                                 |     |   |   |
| Net cash used in financing activities                                                               |   | (361                                 | )        | (3,438 | ) |
|                                                                                                |   |                                 |     |   |   |
| NET INCREASE (DECREASE) IN CASH                                                                     |   | (204,107                             | )        | 87,943 |   |
|                                                                                                |   |                                 |     |   |   |
| Cash, beginning of period                                                                           |   | 1,075,323                            |     | 1,027,810 |   |
|                                                                                                |   |                                 |     |   |   |
| Cash, end of period                                                                                 |   | $                                    | 871,216  |   | $ | 1,115,753 |   |

 

**See notes to Condensed Consolidated FinancialStatements.**

 

5

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**CREATIVECOMPUTER APPLICATIONS, INC.**

 

**NOTES TOCONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

**Note1.**                                                          In the opinion of management, theaccompanying unaudited condensed consolidated financial statements reflect alladjustments (which include only normal recurring accruals) necessary to presentfairly the Company’s financial position as of November 30, 2003, the results ofits operations for the three months ended November 30, 2003 and 2002, and cashflows for the three months ended November 30, 2003 and 2002.  These results have been determined on thebasis of accounting principles generally accepted in the United States ofAmerica and practices applied consistently with those used in preparation ofthe Company’s Annual Report on Form 10-KSB for the fiscal year ended August 31,2003.

 

Theresults of operations for the three months ended November 30, 2003 are notnecessarily indicative of the results expected for any other period or for theentire year.

 

**Note 2.**                                                          The Company accounts for its earnings pershare in accordance with SFAS No.128, which requires presentation of basic anddiluted earnings per share.  Basicearnings per share is computed by dividing income or loss available to commonshareholders by the weighted average number of common shares outstanding forthe reporting period.  Diluted earningsper share reflect the potential dilution that could occur if securities orother contracts, such as stock options, to issue common stock were exercised orconverted into common stock.

 

Earnings per share has been computed as follows:

 
|                                                          |   | **Three  Months Ended  November 30, 2003** |     | **Three  Months Ended  November 30, 2002** |   |
|---------------------------------------------------------------|--------|--------------------------------------------|----------|--------------------------------------------|--------|
|                                                          |   |                                       |     |                                       |   |
| NET INCOME (LOSS)                                             |   | $                                          | (253,658 | )                                          | $      | 47,983 |   |
| Basic weighted average number of common  shares outstanding   |   | 3,318,900                                  |     | 3,266,400                                  |   |
|                                                          |   |                                       |     |                                       |   |
| Dilutive effect of stock options                              |   | —                                     |     | 116,086                                    |   |
|                                                          |   |                                       |     |                                       |   |
| Diluted weighted average number of common  shares outstanding |   | 3,318,900                                  |     | 3,382,486                                  |   |
| Basic earnings (loss) per share                               |   | $                                          | (.08     | )                                          | $      | .02 |   |
| Diluted earnings (loss) per share                             |   | $                                          | (.08     | )                                          | $      | .01 |   |

 

At November 30, 2003,options to purchase 645,000 shares of common stock at a per share price rangingfrom $.72 to $1.76 were not included in the computation of diluted loss pershare because inclusion would have been anti-dilutive.  At November 30, 2002, warrants to purchase125,000 shares of common stock at $1.50 per share were not included in thecomputation of diluted earnings per share because the exercise price exceededaverage market price and would have been anti-dilutive.

 

**Note 3.**                                                          The Company accounts for its softwarerevenue recognition in accordance with Statement of Position 97-2, “SoftwareRevenue Recognition”, (“SOP 97-2”).  SOP 97-2 requires companies to recognize revenue when (i) persuasiveevidence of an arrangement exists, (ii) delivery has occurred, (iii) thevendor’s fee is fixed and determinable, and (iv) collectability isprobable.  The SOP also requirescompanies to allocate the fee on a multiple element contract between thevarious elements based on vendor-specific objective evidence of fair value.  The Company’s policies are in accordancewith Staff Accounting Bulletin 101, “Revenue Recognition”, (“SAB 101”). SAB 101provides interpretive guidance on the recognition, presentation and disclosureof revenue in financial statements.  SAB101 expands on the issues not explicitly covered in the SOP.

 

6

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**Note 4.**                                                          The Company’s line of credit with its bankprovides for $500,000 on a revolving basis through February 1, 2004, andcontains certain loan covenants and financial ratio requirements.  On November 30, 2003, there were no amountsoutstanding under the line of credit. The Company was in compliance with all of the covenants and financialratios required by its bank as of November 30, 2003.

 

**Note 5.**                                                          As allowed by SFAS 123, the Companyhas adopted the intrinsic value method of accounting for employee stock optionsunder the principles of APB Opinion No. 25, Accounting for Stock Issued toEmployees (APB 25) and discloses the pro forma effect on net income and incomeper share as if the fair value based method had been applied.  For equity instruments, including stockoptions, issued to non-employees, the fair value of the equity instruments orthe fair value of the consideration received, whichever is more readilydeterminable, is used to determine the value of services or goods received andthe corresponding charge to operations.

 

The following table illustrates the effect onnet income and income per share as if the Company had applied the fair valuerecognition provision of SFAS No. 123 to stock-based employee compensation.

 
|                                                                                                     |   | **Three  Months EndedNovember 30, 2003** |     | **Three  Months EndedNovember 30, 2002** |   |
|----------------------------------------------------------------------------------------------------------|--------|------------------------------------------|----------|------------------------------------------|--------|
| Net Income (Loss), as reported                                                                           |   | $                                        | (253,658 | )                                        | $      | 47,983 |   |
|                                                                                                     |   |                                     |     |                                     |   |
| Less: total stock based employee  compensation expense determined under fair value method for all awards |   | (16,835                                  | )        | (7,865                                   | )      |
|                                                                                                     |   |                                     |     |                                     |   |
| Pro forma net income (loss)                                                                              |   | $                                        | (270,493 | )                                        | $      | 40,118 |   |
|                                                                                                     |   |                                     |     |                                     |   |
| Basic net earnings (loss) per share, as  reported                                                        |   | $                                        | (.08     | )                                        | $      | .02 |   |
| Basic net earnings (loss) per share, pro  forma                                                          |   | $                                        | (.08     | )                                        | $      | .01 |   |
| Diluted net earnings (loss) per share, as  reported                                                      |   | $                                        | (.08     | )                                        | $      | .01 |   |
| Diluted net earnings (loss) per share, pro  forma                                                        |   | $                                        | (.08     | )                                        | $      | .01 |   |

 

As required by SFAS 123, the Company providesthe following disclosure of estimated values for these awards.

 

The fair value of each option was estimatedon the date of grant using a Black-Scholes option-pricing model with thefollowing weighted average assumptions for 2003 and 2002: risk free interestrates ranging from 3.8% to 6.1%, expected lives of 5 years; volatility rangingfrom 67% to 126% and no assumed dividends. The weighted-average grant-date fair value of options granted during2003 was estimated to be $1.25.  Therewere no options granted in the three months ended November 30, 2003.

 

**Note6.**                                                          Inaccordance with the bylaws of the Company, officers and directors areindemnified for certain events or occurrences arising as a result of theofficer or director’s serving in such capacity.  The term of the indemnification period is for the lifetime of theofficer or director.  The maximumpotential amount of future payments the Company could be required to make underthe indemnification provisions of its bylaws is unlimited.  However, the Company has a director andofficer liability insurance policy that reduces its exposure and enables it torecover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes theestimated exposure for the indemnification provisions of its bylaws is minimaland therefore, the Company has not recorded any related liabilities.

 

7

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The Company enters into indemnificationprovisions under agreements with various parties in the normal course ofbusiness, typically with customers and landlords.  Under these provisions, the Company generally indemnifies andholds harmless the indemnified party for losses suffered or incurred by theindemnified party as a result of the Company’s activities or, in some cases, asa result of the indemnified party’s activities under the agreement.  These indemnification provisions ofteninclude indemnifications relating to representations made by the Company withregard to intellectual property rights. These indemnification provisions generally survive termination of theunderlying agreement.  The maximumpotential amount of future payments the Company could be required to make underthese indemnification provisions cannot be estimated.  The Company maintains general liability, errors and omissions,and professional liability insurance in order to mitigate such risks.  The Company has not incurred material coststo defend lawsuits or settle claims related to these indemnificationagreements.  As a result, the Companybelieves the estimated exposure under these agreements is minimal.  Accordingly, the Company has not recordedany related liabilities.

 

**Note 7.**                                                          NewAccounting Pronouncements - OnDecember 17, 2003, the SEC’s Office of the Chief Accountant and Division ofCorporation Finance issued Staff Accounting Bulletin (SAB) 104, RevenueRecognition. The SAB updates portions of the interpretive guidance included inTopic 13 of the codification of staff accounting bulletins (SAB 103codification) in order to make the guidance consistent with currentauthoritative accounting literature. The principal revisions relate to the incorporation of certain sectionsof the staff’s FAQ document on revenue recognition into Topic 13.  The Company does not expect the adoption ofSAB 104 to have a material effect on the Company’s financial statements.

 

**Item 2.          Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

This Quarterly Report on Form 10-QSB includesforward-looking statements within the meaning of Section 21E of the SecuritiesExchange Act of 1934 that involve risk and uncertainty, such as forward-lookingstatements relating to sales and earnings per share expectations, expectationsregarding the Company’s liquidity and the impact of seasonality on theCompany’s operations and is subject to the Risk Factors set forth below.  We disclaim any obligation to update ourforward-looking statements

 

**Overview**

 

CCA generates revenues primarily from thesale of its Clinical Information Systems (CIS), which includes the licensure ofproprietary application software, the licensure of third party software, andthe sale of servers upon which the application software operates.  In connection with its sales of CISproducts, the Company provides implementation services for the installation,integration, and training of end users’ personnel.  The Company generates sales of ancillary software and hardware,including its data acquisition products, to its CIS clients and to thirdparties.  The Company also generatesrecurring revenues from the provision of comprehensive post implementationservices to its CIS clients, pursuant to extended service agreements.

 

Because of the nature of its business, CCA makes significantinvestments in research and development for new products and enhancements toexisting products.  Historically, CCA hasfunded its research and development programs through cash flow primarilygenerated from operations.  Managementanticipates that future expenditures in research and development will eithercontinue at current levels or may increase for the foreseeable future, and willbe funded primarily out of the Company’s cash flow.

 

CCA’s results of operations for the first fiscal quarter ended November30, 2003 were marked by a decrease in sales over the comparable quarter in 2003and a decrease in earnings.  The Company’s decrease inrevenues for the first fiscal quarter was due to a number of factors.  The primary factor was a transition to a newversion of our core product, CyberLABâ 7.0 that impacted sales of the previousversion of this product.  Other factors contributingto the decline in sales were associated with the sluggish economy and thehealthcare industry’s preoccupation with the Health Insurance Portability andAccountability Act (HIPAA) compliance issues. In addition, the Company experienced delays in closing new transactionsthat further impacted the first fiscal quarter of 2004.  Typically, sales cycles for CIS products arelengthy

 

8

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andon average exceed one year from inception to closure.  Because of the complexity of the sales process, a number offactors can delay the closing of transactions that are beyond the control ofthe Company.

 

The Companyexperienced a delay in the release of its new CyberLAB 7.0 laboratoryinformation system due to timing issues and the need to complete HIPAA relatedupgrades to its existing products and deliver them to its clients.  During the fourth fiscal quarter of 2003,CCA had substantially completed CyberLAB 7.0 and began to install the newsoftware in its initial beta site for testing and evaluation.  As of December 31, 2003, CyberLAB 7.0 waslive in two beta sites and one additional new site was being implemented.  The Company is planning to generally releaseCyberLAB 7.0 to its client base beginning in the first calendar quarter of2004.  In addition, new sales andmarketing activities were initiated resulting in CCA’s pipeline of potentialnew CyberLAB 7.0 related transactions increasing back to historical levels.  CyberLAB 7.0 has generated significantinterest among new buyers as well as CCA’s installed client base.  Management believes the industry and themarket for healthcare information technology products continues to improvedespite economic conditions.  The marketis experiencing a renewed interest in clinical applications that is beingfueled by the demand for new technology that addresses compliance issues aswell as patient care and safety issues.

 

In order to address compliance issues broughtabout by the HIPAA regulations, the Company completed the development ofenhancements to its products and upgraded hundreds of client sites with theHIPAA related enhancements during the 2003 fiscal year.  This posed considerable challenges to CCA’sorganization.  Provisions of HIPAA areintended to ensure patient confidentiality and security for all health carerelated information.  The requirementsof HIPAA apply to any entity storing and/or transmitting patient identifiableinformation on electronic media.  Thisaffects virtually all health care organizations, from physicians and insurancecompanies to health care support organizations.  Certain safeguards are required to accurately insure the securityof patient data including more robust audit trails and tiered/structuredpassword security when accessing patient data. Management believes that the HIPAA enhancements willrequire that many CCA clients will need to upgrade their systems in order toeffectively manage greater amounts of data, which will afford the Companyopportunities to sell upgrades and provide professional services.  It is also anticipated that the migration toCyberLAB 7.0 will require clients to acquire additional hardware andprofessional services from the Company in order to deploy the new software.

 

**Results of Operations**

 

The following table sets forth certain lineitems in our condensed consolidated statement of operations as a percentage oftotal revenues for the periods indicated:

 
|                                             |   | **Three  Months Ended  November 30, 2003** |   | **Three  Months Ended  November 30, 2002** |   |
|--------------------------------------------------|--------|--------------------------------------------|--------|--------------------------------------------|--------|
| Revenues:                                        |   |                                       |   |                                       |   |
| System sales                                     |   | 29.5                                       | %      | 42.6                                       | %      |
| Service revenues                                 |   | 70.5                                       |   | 57.4                                       |   |
|                                             |   |                                       |   |                                       |   |
| Total revenues                                   |   | 100.0                                      |   | 100.0                                      |   |
|                                             |   |                                       |   |                                       |   |
| Cost of products and services sold:              |   |                                       |   |                                       |   |
| System sales                                     |   | 28.0                                       |   | 30.8                                       |   |
| Service revenues                                 |   | 25.4                                       |   | 19.0                                       |   |
|                                             |   |                                       |   |                                       |   |
| Total cost of products and services              |   | 53.4                                       |   | 49.8                                       |   |
|                                             |   |                                       |   |                                       |   |
| Gross profit                                     |   | 46.6                                       |   | 50.2                                       |   |
| Operating expenses:                              |   |                                       |   |                                       |   |
| Selling, general and administrative              |   | 46.4                                       |   | 34.6                                       |   |
| Research and development                         |   | 16.1                                       |   | 11.3                                       |   |
|                                             |   |                                       |   |                                       |   |
| Total operating expenses                         |   | 62.5                                       |   | 45.9                                       |   |
| Operating income (loss)                          |   | (15.9                                      | )      | 4.3                                        |   |
|                                             |   |                                       |   |                                       |   |
| Income (loss) before provision for income  taxes |   | (15.9                                      | )      | 4.4                                        |   |
| Provision for income taxes                       |   | —                                     |   | 1.9                                        |   |
|                                             |   |                                       |   |                                       |   |
| Net income (loss)                                |   | (15.9                                      | )      | 2.5                                        |   |

 

9

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Sales for the first fiscal quarter ending November 30, 2003 decreasedto $1,595,561, as compared to $1,882,161 for the comparable quarter endedNovember 30, 2002, an overall decrease of approximately $286,600 or 15%.  When analyzed by product category, sales ofCIS products decreased by $321,338 or 43.5%, sales of data acquisition productsdecreased by $9,067 or 15.8%, and other revenues decreased slightly by $709 or11.3% when compared to the same quarter of fiscal 2003.  Such decreases were partially offset by anincrease in service revenues of $44,514 or 4.1%.  The decrease in sales of CIS products was primarily attributableto a transition to a new version of CyberLAB 7.0 that impacted sales of theprevious product version, delays associated with closing new transactions,market conditions, and the industry’s preoccupation with issues related toHIPAA as discussed more fully above. The increase in service revenues is attributable to a greater number ofclient accounts under contract and an increase in the average fees charged forsuch contracts.  Service revenues areexpected to continue to increase as and when the Company’s installed base ofCIS installations increases.

 

The Company has continued to experience a decrease in sales of dataacquisition products over the past few years, which has been primarilyattributable to a decrease in the volume of units sold to OEM customers and atechnological shift to software based clinical instrument interfaces.  The decrease in OEM business is expected tocontinue, as fewer OEM customers remain active in the marketplace or no longeruse CCA’s data acquisition products. Management does not believe the OEM business is a material part of CCA’sbusiness today and will not be in the future as the Company’s emphasis is beingplaced on its CIS products and related services.

 

The Company continues to expand its direct sales and marketingactivities, directing its focus towards larger clients and multi-product salesas well as selling new products into its installed client base.  In addition, the Company has strategic jointmarketing partnerships with other companies, which has improved the Company’smarket penetration and has initiated more marketing activitiesinternationally.  Although its“pipeline” of working CIS transactions continues to improve, management viewsthe near term outlook for the continued sale of CIS products cautiously duringthe first half of the 2004 fiscal year. The Company’s future operating results could continue to be subject toquarterly variations based upon a wide variety of factors, including the volumemix and timing of orders received during any quarter, and the temporary delaysin the closing of new CIS sales.  Inaddition, the Company’s revenues associated with CIS sales may be delayed dueto client related issues such as client staff availability for training, ITinfrastructure readiness, and the performance of third party contractors, allof which are issues outside of the control of CCA.

 

Cost of sales for the first quarter of fiscal 2004 decreased by $83,431or 8.9% as compared to the same quarter of fiscal 2003.  The overall decrease in cost of sales wasprimarily attributable to a decrease in material costs of $101,497 or 53.3% anda decrease in other costs of $17,583 or 5.2%. Such decreases were partially offset by an increase in labor costs of$35,649 or 8.8%.  The decrease inmaterial costs was attributable to the decrease in sales of CIS productsdiscussed above.  The increase in laborcosts was attributable to additions of personnel to the Company’s support andimplementation departments.  Thedecrease in other costs of sales was attributable to decreased expenses intravel and training.  Cost of sales as apercentage of sales was 53% as compared to 50% for the comparable 2003 fiscalquarter.  The overall percentageincrease in cost of sales, as a percentage of sales, was attributable to theoverall decrease in sales of CIS products. The Company could potentially experience quarterly variations in grossmargin as a result of the factors discussed above.

 

Selling, general, and administrative expenses increased by $89,044 or13.7% for the first fiscal quarter 2004 as compared to the same quarter offiscal 2003.  The increases in selling,general, and administrative expenses were attributable to the addition of a newCyberLAB product manager in October and additional expenses for salesactivities.  The Company plans tocontinue investment in sales and marketing activities; however, the Companyplans to monitor and keep a tight reign on its expenditures in fiscal2004.  Management also anticipatesincreases in insurance costs in the current fiscal year.

 

Research and development expenses increased by $42,726 or 20% duringthe first fiscal quarter of 2004 as compared to the same quarter of fiscal2003.  The increase is attributable toincreases in salaries, other personnel related expenses, and the addition ofnew personnel in product engineering. For the comparable first quarters of 2004 and 2003, the Companycapitalized software costs of $129,000 and $114,000, respectively, which aregenerally amortized over the estimated useful life not to exceed fiveyears.  Such costs were attributable toenhancements and new modules for the Company’s CIS products, new applicationsunder development, and modifications associated with HIPAA compliance to

 

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all of CCA’s products.  Management anticipates its overall researchand development activities will increase in fiscal 2004 due to plannedpersonnel additions in product engineering.

 

For the first fiscal quarter ended November 30, 2003, the Company didnot record a tax provision compared to $34,746 recorded for the same quarter offiscal 2003 due to the level of taxable income.  The Company believes that it is more likely than not that the netdeferred tax asset of $899,735 will be realized in future periods.

 

As a result of the factors discussed above, the Company incurred a netloss of $253,658 for the first fiscal quarter of 2004, compared to net incomeof $47,983 for the same quarter in fiscal 2003.  The Company’s basic and diluted loss per share was $.08 for thefirst fiscal quarter of 2004 as compared to basic and diluted net income pershare of $.02 and $.01, respectively, for the comparable quarter in 2003.

 

### **Capital Resources andLiquidity**

 

The Company’s primary need for capital has been to invest in softwaredevelopment, and in computers and related equipment for its internal use.  The Company invested $ 129,000 and $114,000during the first fiscal quarters of 2004 and 2003 in software development.  These expenditures related to HIPAA relatedenhancements to all its products, and the new browser version of the Company’sLIS product, CyberLAB 7.0, and other product enhancements.  The Company anticipates expending additionalsums during fiscal 2004 on product enhancements to all its products and thefurther development of the new browser version of the Company’s CyberLAB7.0product.  During the first fiscalquarter of 2004, the Company invested an aggregate of $20,312 in additions tofixed assets, primarily consisting of computers and software, as compared to aninvestment of $20,980 in the comparable quarter of 2003.

 

As of November 30, 2003, the Company’s working capital amounted to$1,369,168 compared to $1,621,807 as of August 31, 2003.  The Company’s current ratio was 1.6 atNovember 30, 2003 compared to 1.7 at August 31, 2003.  At November 30, 2003 the Company’s credit facilities with itsbank consisted of a revolving line of credit of $500,000, of which there wereno amounts outstanding.  The bank creditagreement expires on February 1, 2004 and contains certain loan covenants andfinancial ratio requirements.  As ofNovember 30, 2003, the Company was in compliance with all of the covenants andfinancial ratio requirements required by its bank.  Management believes the bank will renew the line of credit,however if such renewal is not forthcoming, the Company may have to seekalternative financing.

 

Cash used in operating activities was $54,434 for the first fiscalquarter of 2004 compared to cash flows of $226,361 for the comparable quarterof fiscal 2003.  The decrease in cashflow from operating activities was primarily attributable to the net loss fromoperations in the first fiscal quarter ended November 30, 2003compared to netincome in the comparable quarter of fiscal 2003.

 

Net cash used in investing activities totaled $149,312 for the firstquarter of fiscal 2004, compared to $134,980 used in investing activitiesduring the comparable quarter of 2003. The increase in cash used in investing activities was due to increasedinvestment in software development and the portion that was associated withsoftware capitalization.

 

Cash used in financing activities amounted to $361 during the firstfiscal quarter of 2004 compared to $3,438 in the same quarter of fiscal2003.  The change from fiscal 2003 tofiscal 2004 resulted primarily from the Company having paid off its capitallease obligations.

 

The Company’s primary source of working capital has been generated fromearnings, and borrowings on its line of credit.  The Company used cash amounting to $54,434 to fund its operationsin the first fiscal quarter ended November 30, 2003.  Management believes that its sales pipeline is adequate toproduce sufficient operating cash flow in the 2004 fiscal year, and that itsprojected cash flow from operations, together with its bank credit facilities,should be sufficient to fund its working capital requirements for its 2004fiscal year.  However, an unanticipateddecline in sales or continued delays in closing new transactions as experiencedin our first fiscal quarter of 2004, delays in implementations where paymentsare tied to delivery and/or performance of services, or cancellations ofcontracts could have a negative effect on cash flow from operations and couldin turn create short-term liquidity problems. If such events were to occur the Company may have to seek alternativefinancing.

 

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### **Seasonality, Inflationand Industry Trends**

 

The Company’s sales are generally higher in the winter and spring.  Inflation has not had a material effect onthe Company’s business since the Company has been able to adjust the prices ofits products and services in response to inflationary pressures.  Management believes that most phases of thehealthcare segment of the computer industry will continue to be highlycompetitive, and that potential healthcare reforms including those promulgatedby HIPAA may have a long-term positive impact on its business.  With respect to the compliance issuesbrought about by HIPAA, the Company has invested heavily in new applicationmodules to assist its clients in meeting their regulatory goals.  Management believes that the new moduleswill be key selling points and will provide a competitive advantage.  In addition, management believes that thehealthcare information technology industry will be marked with more significanttechnological advances, which will improve the quality of service and reducecosts.  The Company is poised to meetthese challenges by continuing to employ new technologies when they becomeavailable, diversifying its product offerings, improving and expanding itsservices, and by constantly enhancing its software applications.

 

### **Critical Accounting Policies and Estimates**

 

Managements discussion and analysis of CCA’s financial condition andresults of operations are based upon the condensed consolidated financialstatements, which have been prepared in accordance with accounting principlesgenerally accepted in the United States. The preparation of these financial statements requires management tomake estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosures of contingentassets and liabilities.  On an on-goingbasis, management evaluates estimates, including those related to the valuationof inventory and the allowance for uncollectible accounts receivable. We baseour estimates on historical experience and on various other assumptions thatare believed to be reasonable under the circumstances, the results of whichform the basis for making judgments about the carrying values of assets andliabilities that are not readily apparent from other sources.  Actual results may differ from theseestimates under different assumptions or conditions. We believe the followingcritical accounting policies affect our more significant judgments andestimates used in the preparation of our consolidated financial statements:

 

Inventory

 

The Company’s inventory is comprised of a current inventory accountthat consists of items that are held for resale and a long-term inventoryaccount that consists of items that are held for repairs and replacement ofhardware components that are serviced by the Company under long-term ExtendedService Agreements with its clients. Current inventory is valued at the lower of cost to purchase or thecurrent estimated market value of the inventory items.  Inventory is evaluated on a continual basisand adjustments to recorded costs are made based on management’s estimate offuture sales value, or in the case of the long-term component inventory, onmanagements estimation of the usage of specific inventory items and netrealizable value.  Management reviewsinventory quantities on hand and makes determination of the excess or obsoleteitems in the inventory, which, are specifically reserved.  In addition, adjustments are made for thedifference between the cost of the inventory and the estimated market value andcharged to operations in the period in which the facts that give rise to theadjustments become known.  At November30, 2003 and 2002, the inventory reserve was $91,273 and $85,568 respectively.

 

Accounts Receivable

 

Accounts receivable balances are evaluated on a continual basis andallowances are provided for potentially uncollectible accounts based onmanagement’s estimate of the collectability of customer accounts. If thefinancial condition of a customer were to deteriorate, resulting in animpairment of their ability to make payments, an additional allowance may berequired. Allowance adjustments are charged to operations in the period inwhich the facts that give rise to the adjustments become known.  The accounts receivable balance at November30, 2003 was $1,903,453, net of an allowance for doubtful accounts of $27,362.

 

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Revenue Recognition

 

Revenues are derived primarily from the sale of CIS products and theprovision of services.  The componentsof the system sales revenues are the licensing of computer software,installation, and the sale of computer hardware and sublicensed software. Thecomponents of service revenues are software support and hardware maintenance,training, and implementation services. The Company recognizes revenue in accordance with the provisions ofStatement of Position (SOP) No. 97-2, “Software Revenue Recognition,” asamended by SOP No. 98-4, SOP 98-9 and clarified by Staff Accounting Bulletin(SAB) 101 “Revenue Recognition in Financial Statements.” SOP No 97-2, asamended, generally requires revenue earned on software arrangements involvingmultiple-elements to be allocated to each element based on the relative fairvalues of those elements.  The Companyallocates revenue to each element in a multiple-element arrangement based onthe element’s respective fair value, with the fair value determined by theprice charged when that element is sold and specifically defined in a quotationor contract.  The Company determines thefair value of the maintenance portion of the arrangement based on the renewalprice of the maintenance charged to clients, professional services portion ofthe arrangement, other than installation services, based on hourly rates whichthe Company charges for these services when sold apart from a software license,and the hardware and sublicense of software based on the prices for theseelements when they are sold separately from the software.  At November 30, 2003 and 2002, deferredrevenue was $314,503 and $433,446, respectively.

 

Post Implementation software and hardware maintenance services aremarketed under monthly and annual arrangements and are recognized as revenueratably over the contracted maintenance term as services are provided.  Deferred revenue related to CIS sales, comprisesdeferrals for license fees, hardware, and other services for which theimplementation has not yet been completed and revenues have not beenrecognized.  At November 30, 2003 and2002, deferred service contract income was $1,143,950 and $957,238, respectively.

 

Software Development Costs

 

Costs incurred internally in creating computer software products areexpensed until technological feasibility has been established upon completionof a program design. Thereafter, applicable software development costs arecapitalized and subsequently reported at the lower of amortized cost or netrealizable value.  Capitalized costs areamortized based on current and expected future revenue for each product withminimum annual amortization equal to the straight-line amortization over theestimated economic life of the product, not to exceed five years.  For the first fiscal quarters of 2004 and2003, the Company capitalized $129,000 and $114,000, respectively.  At November 30, 2003, the balance ofcapitalized software costs were $1,387,682, net of accumulated amortization of$1,216,337.

 

**Risk Factors**

 

In evaluating the Company, various risk factors and other informationshould be carefully considered. The risks and uncertainties described below arenot the only ones that impact the Company. Additional risks and uncertaintiesnot presently known to us or that we currently deem immaterial may also have anadverse impact on us. Among other things, this discussion containsforward-looking statements that are based on certain assumptions about futurerisks and uncertainties. We believe that our assumptions are reasonable.Nonetheless, it is likely that at least some of these assumptions will not cometrue.

 

***CCA faces intensecompetition from both established entities and new entries in the market thatmay adversely affect our revenues and profitability***

 

There are many companies with active research and development programsboth in and outside of the healthcare information technology industry.  Many of these companies have considerableexperience in areas of competing interest to us.  Additionally, we cannot determine if other firms are conductingpotentially competitive research, which could result in the development andintroduction of products that are either comparable or superior to the productswe sell.  Further, new productintroductions, product enhancements and the use of other technologies by ourcompetitors could lead to a loss of market acceptance and cause a decline insales or gross margins.

 

***CCA’ssuccess depends on its ability to attract, retain and motivate management andother skilled employees***

 

CCA’s success depends upon the continued services of key management andskilled personnel.  Competition forqualified personnel is intense and there are a limited number of people withknowledge of, and experience in, our industry.

 

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We do not have employmentagreements with most of our key employees. However, we generally enter into agreements with our employees regardingpatents, confidentiality and related matters. We do not maintain life insurance polices on our employees.  Our loss of key personnel, especiallywithout advance notice, or our inability to hire or retain qualified personnel,could have a material adverse effect on sales and our ability to maintain ourtechnological edge.  We cannot guaranteethat we will continue to retain our key management and skilled personnel, orthat we will be able to attract, assimilate and retain other highly qualifiedpersonnel in the future.

 

***Any failure tosuccessfully introduce future products into the market could adversely affectour business***

 

The commercial success of future products depends upon their acceptanceby the medical community.  Our futureproduct plans include capital-intensive clinical information systems.  We believe that these products cansignificantly reduce labor costs, improve patient care and offer otherdistinctive benefits to the medical community. However, there is often market resistance to products that requiresignificant capital expenditures or which eliminate jobs throughautomation.  We can make no assurancethat the market will accept our future products and systems, or that sales ofour future products and systems will grow at the rates expected by ourmanagement.

 

***If CCA fails to meetchanging demands of technology, we may not continue to be able to competesuccessfully with competitors***

 

The market for CCA’s products and systems is characterized by rapidtechnological advances, changes in customer requirements and frequent newproduct introductions and enhancements. Our future success depends upon our ability to introduce new productsthat keep pace with technological developments, enhance current product linesand respond to evolving client requirements. Our failure to meet these demands could result in a loss of our marketshare and competitiveness and could harm our revenues and results ofoperations.

 

***Anyfailure or inability to protect our technology and confidential informationcould adversely affect our business***

 

*Trade Secrets.*  We have tradesecrets, unpatented technology and proprietary knowledge related to the sale,promotion, design, operation, and development of our products.  We generally enter into confidentialityagreements with our employees and consultants. However, we cannot guarantee that our trade secrets, unpatentedtechnology or proprietary knowledge will not become known or be independentlydeveloped by competitors.  If any ofthis proprietary information becomes know to third parties, we may have nopractical recourse against these parties.

 

*Copyrights.*  We claim copyrightsin our software and also claim trademark rights in the United States and otherforeign countries where we sell our products. However, we can make no assurance that we will be able to obtainenforceable copyright and trademark protection, nor that this protection willprovide us a significant commercial advantage.

 

***CCA operates in aconsolidating industry which creates barriers to market penetration***

 

The healthcare information technology industry in recent years has beencharacterized by consolidation by both healthcare providers who are our clientsand by those companies that we compete against.  Large hospital chains and groups of affiliated hospitals preferto negotiate comprehensive contracts for all of their system needs with largervendors who offer broader product lines and services.  The convenience offered by these large vendors are administrativeand financial incentives that we cannot offer our clients.

 

***CCA’s products maybe subject to government regulation in the future that could impair ouroperations***

 

CCA’s products could be subject to stringent government regulation inthe United States and other countries in the future.  These regulatory processes can be lengthy, expensive anduncertain.  Additionally, securingnecessary clearances or approvals may require the submission of extensive dataand other supporting information. Failure to comply with applicable requirements could result in fines,recall, total or partial suspension of distribution, or withdrawal of existingproduct.  If any of these things occur,it could have a material adverse impact on our business.

 

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***Changes ingovernment regulation of the healthcare industry could adversely affect CCA’sbusiness.***

 

Federal and state legislative proposals are periodically introduced orproposed that would affect major changes in the healthcare system, nationally,at the state level or both.  Futurelegislation, regulation or payment policies of Medicare, Medicaid, privatehealth insurance plans, health maintenance organizations and other third-partypayors could adversely affect the demand for our current or future products andour ability to sell our products on a profitable basis.  Moreover, healthcare legislation is an areaof extensive and dynamic change, and we cannot predict future legislativechanges in the healthcare field or their impact on our industry or ourbusiness.

 

***Defective productsmay subject CCA to liability***

 

CCA’s products are used to gather information for professionals to makemedical decisions, diagnosis, and treatment. Accordingly, the manufacture and sale of our products entails aninherent risk of product liability arising from an inaccurate, or allegedlyinaccurate, test or procedure result. We currently maintain product liability insurance coverage for up to$2.0 million per incident and up to an aggregate of $4.0 million peryear.  Although management believes thisliability coverage is sufficient protection against future claims, there can beno assurance of the sufficiency of these policies.  We have not received any indication that our insurance carrierwill not renew our product liability insurance at or near current premiums;however, we cannot guarantee that this will continue to be the case.

 

*****HealthInsurance Portability and Accountability Act (HIPAA)*****

 

****Our business is substantiallyimpacted by the requirements of HIPAA and our products must maintain theconfidentiality of a patents medical records and information.  Theserequirements also apply to most of our clients.  We believe our productsmeet the standards of HIPAA and may require our clients to upgrade theirsystems, but our clients’ preoccupation with HIPAA may adversely impact salesof our products, and the costs of compliance with HIPAA could have an impact onour product margins and selling, general and administrative expenses incurredby us and could negatively impact our net income.****

### ** **

### **New Accounting Pronouncements**

 

On December 17, 2003, the SEC’s Office of the Chief Accountant andDivision of Corporation Finance issued Staff Accounting Bulletin (SAB) 104,Revenue Recognition. The SAB updates portions of the interpretive guidanceincluded in Topic 13 of the codification of staff accounting bulletins (SAB 103codification) in order to make the guidance consistent with currentauthoritative accounting literature. The principal revisions relate to the incorporation of certain sectionsof the staff’s FAQ document on revenue recognition into Topic 13.  The Company does not expect the adoption ofSAB 104 to have a material effect on the Company’s financial statements.

 

**Item 3     Controls and Procedures**

 

(a)  Evaluation of DisclosureControls and Procedures.  The Company’sChief Executive Officer and its Chief Accounting Officer, with theparticipation of the Company’s management, carried out an evaluation of theeffectiveness of the Company’s disclosure controls and procedures pursuant toExchange Act Rules 13a-15(e).  Basedupon that evaluation, the Chief Executive Officer and the Chief AccountingOfficer believes that as of the end of the period covered by this report, theCompany’s disclosure controls and procedures are adequate and effective inmaking known to them material information relating to the Company (includingits consolidated subsidiary) required to be included in the report.

 

(b)  Changes in InternalControls. There were no significant changes in the Company’s internalcontrols or in other factors that could significantly affect the Company’sdisclosure controls and procedures subsequent to the Evaluation Date, nor anysignificant deficiencies or material weaknesses in such disclosure controls andprocedures requiring corrective actions.

 

The Company maintains a system of internal controls designed to providereasonable assurance that transactions are executed in accordance withmanagement’s general or specific authorization; transactions are recorded asnecessary (1) to permit preparation of financial statements in conformity withgenerally accepted accounting principles, (2) to maintain accountability forassets, and (3) to ensure that access to assets is permitted only in accordancewith management’s general or specific authorization; and the recorded accountabilityfor access is compared with the existing assets at reasonable intervals andappropriate action is taken with respect to any differences.

 

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**PART II - OTHER INFORMATION**

 

Items 1 through 5.  NOTAPPLICABLE

 

**Item 6.    Exhibits and Reportson Form 8-K**

 
| (a)    | Exhibit 11 - Statement re:  computation of per share earnings.                                                                                                                        |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |
| (b)    | Exhibit 31.1 Certification of Chief Executive Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                     |
|   | Exhibit 31.2 Certification of Chief Accounting Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                    |
|   | Exhibit 32.1 Certification of Chief Executive Officer pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.                                                                     |
|   | Exhibit 32.2 Certification of Chief Accounting Officer pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.                                                                    |
|   |
| (c)    | There was one report dated  November 25, 2003 filed on Form 8-K during the quarter ended November 30,  2003 disclosing other information; the Company’s annual earnings release. |

 

### **SIGNATURES**

 

In accordance with the requirements of theExchange Act, the Company caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 

 
| CREATIVE COMPUTER  APPLICATIONS, INC. |             |
|---------------------------------------|------------------|
| (Company)                             |
|                                  |
|                                  |
| Date                                  | January 12, 2004 |   | /S/ Steven M. Besbeck |   |
|                                  |             | Steven. M. Besbeck, President |
|                                  |             | Chief Executive Officer, Chief  Financial Officer |
|                                  |
|                                  |
|                                  |
| Date                                  | January 12, 2004 |   |   | /S/ Anahita Villafane |   |
|                                  |             | Anahita Villafane, |
|                                  |             | Controller and Chief  Accounting  Officer |

 

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