**UNITED STATES SECURITIES 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 February 28, 2003**                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                           |   |                                                                                   |
| **o**                                                                                                                                                                                                                                                                                                                          |   | **TRANSITION REPORT UNDER SECTION  13 OR 15(d) OF THE EXCHANGE ACT**                   |
|                                                                                                                                                                                                                                                                                                                           |   |                                                                                   |
| **For the transition period from                           to                         ** |

 

**Commissionfile 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 the number ofshares outstanding of each of the issuer’s classes of common equity, as of thelatest practicable date:  3,318,900common shares as of March 31, 2003.

 

Transitional SmallBusiness Disclosure Format (check one):

Yes o      Noý

 

 

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**CREATIVE COMPUTER APPLICATIONS, INC.**

 

**FORM 10-QSB**

 

**I N D E X**

 
| **PART I -  Financial Information:**                                                                       |
|------------------------------------------------------------------------------------------------------------|
|                                                                                                       |
| Item 1.   Financial Statements                                                                        |
|                                                                                                       |   |
|                                                                                                       | Condensed Consolidated Balance Sheets at  February 28, 2003 and August 31, 2002 |
|                                                                                                       |   |
|                                                                                                       | Condensed Consolidated Statements of Operations  for the three months ended February 28, 2003 and February 28, 2002 |
|                                                                                                       |   |
|                                                                                                       | Condensed Consolidated Statements of Operations  for the six months ended February 28, 2003 and February 28, 2002 |
|                                                                                                       |   |
|                                                                                                       | Condensed Consolidated Statements of Cash Flows  for the six months ended February 28, 2003 and February 28, 2002 |
|                                                                                                       |   |
|                                                                                                       | Notes to Condensed Consolidated Financial  Statements |
|                                                                                                       |   |
| Item 2.   Management’s Discussion and Analysis of Results of Operations and  Financial Condition |
|                                                                                                       |
| Item 3.   Controls and Procedures                                                                     |
|                                                                                                       |
| **PART II -  Other Information:**                                                                          |
|                                                                                                       |
| Items 1 through 6                                                                                          |
|                                                                                                       |
| **Signatures**                                                                                             |
|                                                                                                       |
| **Certifications**                                                                                         |

 

2

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**CREATIVE COMPUTER APPLICATIONS, INC.**

 

**PART1****- FINANCIAL INFORMATION**

 

#### **Item1**.  FinancialStatements

#### ** **

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

 
|                                                                                                    |   | **February  28,  2003** |      | **August 31,  2002*** |   |
|---------------------------------------------------------------------------------------------------------|--------|-------------------------|-----------|-----------------------|--------|
|                                                                                                    |   | **(Unaudited)**         |      |                  |   |
| **ASSETS**                                                                                              |   |                    |      |                  |   |
|                                                                                                    |   |                    |      |                  |   |
| CURRENT  ASSETS:                                                                                        |   |                    |      |                  |   |
| Cash                                                                                                    |   | $                       | 1,230,827 |                  | $      | 1,027,810 |   |
| Receivables, net                                                                                        |   | 2,367,377               |      | 2,089,274             |   |
| Inventories                                                                                             |   | 205,614                 |      | 183,640               |   |
| Prepaid  expenses and other assets                                                                      |   | 175,575                 |      | 183,251               |   |
| Deferred  tax asset                                                                                     |   | 464,078                 |      | 488,600               |   |
|                                                                                                    |   |                    |      |                  |   |
| TOTAL  CURRENT ASSETS                                                                                   |   | 4,443,471               |      | 3,972,575             |   |
|                                                                                                    |   |                    |      |                  |   |
| PROPERTY  AND EQUIPMENT, net                                                                            |   | 206,263                 |      | 251,458               |   |
| INVENTORY  OF COMPONENT PARTS                                                                           |   | 215,889                 |      | 245,889               |   |
| CAPITALIZED  SOFTWARE COSTS, net of accumulated amortization of $1,411,384 and $1,200,993               |   | 1,383,372               |      | 1,365,763             |   |
| DEFERRED  TAX ASSET                                                                                     |   | 434,056                 |      | 456,691               |   |
|                                                                                                    |   |                    |      |                  |   |
|                                                                                                    |   | $                       | 6,683,051 |                  | $      | 6,292,376 |   |
|                                                                                                    |   |                    |      |                  |   |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                          |   |                    |      |                  |   |
|                                                                                                    |   |                    |      |                  |   |
| CURRENT  LIABILITIES:                                                                                   |   |                    |      |                  |   |
| Accounts  payable                                                                                       |   | $                       | 324,391   |                  | $      | 224,418 |   |
| Accrued  liabilities:                                                                                   |   |                    |      |                  |   |
| Vacation pay                                                                                            |   | 159,478                 |      | 151,930               |   |
| Accrued  payroll                                                                                        |   | 98,991                  |      | 97,672                |   |
| Other                                                                                                   |   | 163,162                 |      | 396,712               |   |
| Deferred service contract income                                                                        |   | 1,118,171               |      | 973,931               |   |
| Deferred  revenue                                                                                       |   | 830,410                 |      | 561,385               |   |
| Capital lease obligation, current portion                                                               |   | 11,736                  |      | 23,111                |   |
|                                                                                                    |   |                    |      |                  |   |
| TOTAL  CURRENT LIABILITIES                                                                              |   | 2,706,339               |      | 2,429,159             |   |
|                                                                                                    |   |                    |      |                  |   |
| SHAREHOLDERS’  EQUITY:                                                                             |   |                    |      |                  |   |
| Common  shares, no par value; 20,000,000 shares authorized; 3,318,900 and 3,266,400  shares outstanding |   | 6,192,691               |      | 6,144,042             |   |
| Accumulated  deficit                                                                                    |   | (2,215,979              | )         | (2,280,825            | )      |
|                                                                                                    |   |                    |      |                  |   |
| TOTAL  SHAREHOLDERS’ EQUITY                                                                        |   | 3,976,712               |      | 3,863,217             |   |
|                                                                                                    |   |                    |      |                  |   |
|                                                                                                    |   | $                       | 6,683,051 |                  | $      | 6,292,376 |   |

 

**See Notes to Condensed ConsolidatedFinancial Statements.**

 

----

*** As presented in the audited consolidated financialstatements**

 

3

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**CREATIVE COMPUTER APPLICATIONS, INC.**

 

##### **CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS**

 
|                                           |   | **Three  Months Ended February 28** |    |
|------------------------------------------------|--------|-------------------------------------|---------|
|                                           |   | **2003**                            |    | **2002** |   |
|                                           |   | **(unaudited)**                     |    |
|                                           |   |                                |    |   |   |
| NET  SYSTEM SALES AND SERVICE REVENUE (Note 3) |   |                                |    |   |   |
| System  sales                                  |   | $                                   | 817,856 |   | $ | 824,072 |   |
| Service  revenue                               |   | 1,036,929                           |    | 990,351 |   |
|                                           |   | 1,854,785                           |    | 1,814,423 |   |
|                                           |   |                                |    |   |   |
| COST  OF PRODUCTS AND SERVICES SOLD            |   |                                |    |   |   |
| System  sales                                  |   | 526,044                             |    | 528,161 |   |
| Service  revenue                               |   | 360,823                             |    | 357,053 |   |
|                                           |   | 886,867                             |    | 885,214 |   |
|                                           |   |                                |    |   |   |
| Gross  profit                                  |   | 967,918                             |    | 929,209 |   |
|                                           |   |                                |    |   |   |
| OPERATING  EXPENSES:                           |   |                                |    |   |   |
| Selling,  general and administrative           |   | 715,457                             |    | 615,178 |   |
|                                           |   |                                |    |   |   |
| Research  and development                      |   | 225,768                             |    | 211,514 |   |
|                                           |   |                                |    |   |   |
| Total  Operating Expenses                      |   | 941,225                             |    | 826,692 |   |
|                                           |   |                                |    |   |   |
| Operating  income                              |   | 26,693                              |    | 102,517 |   |
|                                           |   |                                |    |   |   |
| INTEREST  AND OTHER INCOME                     |   | 4,785                               |    | 4,388 |   |
|                                           |   |                                |    |   |   |
| INTEREST  EXPENSE                              |   | (2,204                              | )       | (5,433 | ) |
|                                           |   |                                |    |   |   |
| Income  before taxes on income                 |   | 29,274                              |    | 101,472 |   |
|                                           |   |                                |    |   |   |
| INCOME  TAX PROVISION                          |   | 12,411                              |    | 42,798 |   |
|                                           |   |                                |    |   |   |
| NET  INCOME                                    |   | $                                   | 16,863  |   | $ | 58,674 |   |
|                                           |   |                                |    |   |   |
| EARNINGS  PER COMMON SHARE (Note 2):           |   |                                |    |   |   |
|                                           |   |                                |    |   |   |
| Basic                                          |   | $                                   | .01     |   | $ | .02 |   |
| Diluted                                        |   | .01                                 |    | .02 |   |
|                                           |   |                                |    |   |   |
| WEIGHTED  AVERAGE NUMBER OF SHARES OUTSTANDING |   |                                |    |   |   |
|                                           |   |                                |    |   |   |
| Basic                                          |   | 3,272,233                           |    | 3,231,025 |   |
| Diluted                                        |   | 3,540,303                           |    | 3,231,025 |   |

 

**SeeNotes to Condensed Consolidated Financial Statements.**

 

4

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**CREATIVE COMPUTER APPLICATIONS, INC.**

 

**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

 
|                                           |   | **Six Months  Ended February 28** |      |
|------------------------------------------------|--------|-----------------------------------|-----------|
|                                           |   | **2003**                          |      | **2002** |   |
|                                           |   | **(unaudited)**                   |      |
|                                           |   |                              |      |   |   |
| NET  SYSTEM SALES AND SERVICE REVENUE (Note 3) |   |                              |      |   |   |
| System  sales                                  |   | $                                 | 1,620,325 |   | $ | 1,596,618 |   |
| Service  revenue                               |   | 2,116,621                         |      | 1,945,120 |   |
|                                           |   | 3,736,946                         |      | 3,541,738 |   |
|                                           |   |                              |      |   |   |
| COST  OF PRODUCTS AND SERVICES SOLD            |   |                              |      |   |   |
| System  sales                                  |   | 1,105,221                         |      | 998,166 |   |
| Service  revenue                               |   | 717,506                           |      | 723,610 |   |
|                                           |   | 1,822,727                         |      | 1,721,776 |   |
|                                           |   |                              |      |   |   |
| Gross  profit                                  |   | 1,914,219                         |      | 1,819,962 |   |
|                                           |   |                              |      |   |   |
| OPERATING  EXPENSES:                           |   |                              |      |   |   |
| Selling,  general and administrative           |   | 1,366,897                         |      | 1,269,030 |   |
|                                           |   |                              |      |   |   |
| Research  and development                      |   | 439,278                           |      | 396,361 |   |
|                                           |   |                              |      |   |   |
| Total  Operating Expenses                      |   | 1,806,175                         |      | 1,665,391 |   |
|                                           |   |                              |      |   |   |
| Operating  income                              |   | 108,044                           |      | 154,571 |   |
|                                           |   |                              |      |   |   |
| INTEREST  AND OTHER INCOME                     |   | 8,510                             |      | 8,528 |   |
|                                           |   |                              |      |   |   |
| INTEREST  EXPENSE                              |   | (4,551                            | )         | (9,943 | ) |
|                                           |   |                              |      |   |   |
| Income  before taxes on income                 |   | 112,003                           |      | 153,156 |   |
|                                           |   |                              |      |   |   |
| INCOME  TAX PROVISION                          |   | 47,157                            |      | 64,505 |   |
|                                           |   |                              |      |   |   |
| NET  INCOME                                    |   | $                                 | 64,846    |   | $ | 88,651 |   |
|                                           |   |                              |      |   |   |
| EARNINGS  PER COMMON SHARE (Note 2):           |   |                              |      |   |   |
| Basic                                          |   | $                                 | .02       |   | $ | .03 |   |
| Diluted                                        |   | .02                               |      | .03 |   |
|                                           |   |                              |      |   |   |
| WEIGHTED  AVERAGE NUMBER OF SHARES OUTSTANDING |   |                              |      |   |   |
|                                           |   |                              |      |   |   |
| Basic                                          |   | 3,269,317                         |      | 3,227,692 |   |
| Diluted                                        |   | 3,461,395                         |      | 3,227,692 |   |

 

**SeeNotes to Condensed Consolidated Financial Statements.**

 

5

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**CREATIVE COMPUTER APPLICATIONS, INC.**

 

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

 

**Increase(Decrease) in Cash**

 
|                                                                               |   | **Six Months  Ended February 28** |      |
|------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|
|                                                                               |   | **2003**                          |      | **2002** |   |
|                                                                               |   | **(unaudited)**                   |      |
|                                                                               |   |                              |      |   |   |
| OPERATING  ACTIVITIES:                                                             |   |                              |      |   |   |
| Net  income                                                                        |   | $                                 | 64,846    |   | $ | 88,651 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |   |                              |      |   |   |
| Depreciation  and amortization                                                     |   | 293,704                           |      | 358,154 |   |
| Deferred  taxes                                                                    |   | 47,157                            |      | 64,505 |   |
| Changes  in operating assets and liabilities:                                      |   |                              |      |   |   |
| Receivables                                                                        |   | (278,103                          | )         | (750,706 | ) |
| Inventories                                                                        |   | 8,026                             |      | (28,105 | ) |
| Prepaid  expenses and other assets                                                 |   | 7,676                             |      | 39,057 |   |
| Accounts  payable                                                                  |   | 99,973                            |      | 109,368 |   |
| Accrued  liabilities and deferred revenues                                         |   | 188,581                           |      | 243,121 |   |
|                                                                               |   |                              |      |   |   |
| Net  cash provided by operating activities                                         |   | 431,860                           |      | 124,045 |   |
|                                                                               |   |                              |      |   |   |
| INVESTING  ACTIVITIES                                                              |   |                              |      |   |   |
| Purchases  of property and equipment                                               |   | (38,118                           | )         | (35,064 | ) |
| Capitalized  software costs                                                        |   | (228,000                          | )         | (224,280 | ) |
|                                                                               |   |                              |      |   |   |
| Net  cash used in investing activities                                             |   | (266,118                          | )         | (259,344 | ) |
|                                                                               |   |                              |      |   |   |
| FINANCING  ACTIVITIES:                                                             |   |                              |      |   |   |
| Borrowings  on notes payable                                                       |   | —                            |      | 200,000 |   |
| Payments  on notes payable                                                         |   | —                            |      | (260,000 | ) |
| Payments  on capital lease obligations                                             |   | (11,375                           | )         | (11,375 | ) |
| Proceeds  from issuance of stock and exercises of stock options                    |   | 48,650                            |      | 3,500 |   |
|                                                                               |   |                              |      |   |   |
| Net  cash provided by (used in) financing activities                               |   | 37,275                            |      | (67,875 | ) |
|                                                                               |   |                              |      |   |   |
| NET  INCREASE (DECREASE) IN CASH                                                   |   | 203,017                           |      | (203,174 | ) |
|                                                                               |   |                              |      |   |   |
| Cash,  beginning of period                                                         |   | 1,027,810                         |      | 661,008 |   |
|                                                                               |   |                              |      |   |   |
| Cash,  end of period                                                               |   | $                                 | 1,230,827 |   | $ | 457,834 |   |

 

**SeeNotes to Condensed Consolidated Financial Statements.**

 

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**CREATIVE COMPUTER APPLICATIONS, INC.**

 

**NOTES****TOCONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

**Note 1.**                                                          Inthe opinion of management, the accompanying unaudited condensed consolidatedfinancial statements reflect all adjustments (which include only normalrecurring accruals) necessary to present fairly the Company’s financialposition as of February 28, 2003 the results of its operations for the threeand six months ended February 28, 2003 and 2002, and cash flows for the sixmonths ended February 28, 2003 and 2002. These results have been determined on the basis of accounting principlesgenerally accepted in the United States of America and practices appliedconsistently with those used in preparation of the Company’s Annual Report onForm 10-KSB for the fiscal year ended August 31, 2002.

 

The results of operations for the three andsix months ended February 28, 2003 are not necessarily indicative of theresults expected for any other period or for the entire year.

 

**Note 2.**                                                          TheCompany accounts for its earnings per share in accordance with SFAS No.128,which requires presentation of basic and diluted earnings per share.  Basic earnings per share is computed bydividing income or loss available to common shareholders by the weightedaverage number of common shares outstanding for the reporting period.  Diluted earnings per share reflect thepotential dilution that could occur if securities or other contracts, such asstock options, to issue common stock were exercised or converted into commonstock.

 

Earnings per share has been computed as follows:

 
|                                                          |   | **Three  Months Ended  February 28, 2003** |   | **Six Months  Ended  February 28, 2003** |   |
|---------------------------------------------------------------|--------|--------------------------------------------|--------|------------------------------------------|--------|
|                                                          |   |                                       |   |                                     |   |
| NET  INCOME                                                   |   | 16,863                                     |   | 64,846                                   |   |
| Basic  weighted average number of common shares outstanding   |   | 3,272,233                                  |   | 3,269,317                                |   |
|                                                          |   |                                       |   |                                     |   |
| Diluted  effect of stock options                              |   | 268,070                                    |   | 192,078                                  |   |
| Diluted  weighted average number of common shares outstanding |   | 3,540,303                                  |   | 3,461,395                                |   |
| Basic  earnings per share                                     |   | $                                          | .01    |                                     | $      | .02 |   |
| Diluted  earnings per share                                   |   | $                                          | .01    |                                     | $      | .02 |   |

 

**Note 3.**                                                          TheCompany accounts for its software revenue recognition in accordance withStatement of Position 97-2, “Software Revenue Recognition”, (“SOP 97-2”).   SOP 97-2 requires companies to recognizerevenue when (i) persuasive evidence of an arrangement exists, (ii) deliveryhas occurred, (iii) the vendor’s fee is fixed and determinable, and (iv)collectability is probable.  The SOPalso requires companies to allocate the fee on a multiple element contractbetween the various elements based on vendor-specific objective evidence offair value.  The Company’s policies arein accordance with Staff Accounting Bulletin 101, “Revenue Recognition”, (“SAB101”). SAB 101 provides interpretive guidance on the recognition, presentationand disclosure of revenue in financial statements.  SAB 101 expands on the issues not explicitly covered in the SOP.

 

**Note 4.**                                                          TheCompany’s line of credit with its bank provides for $500,000 on a revolvingbasis through February 1, 2004, and contains certain loan covenants andfinancial ratio requirements.  OnFebruary 28, 2003, there were no amounts outstanding under the line of credit.The Company was in compliance with all of the covenants and financial ratiosrequired by its bank as of February 28, 2003.

 

**Note 5.**                                                          New Accounting Pronouncements- SFAS 144, Accounting for the Impairmentor Disposal of Long-Lived Assets, was issued in August 2001 and is effectivefor fiscal years beginning after December 15, 2001.  SFAS 144 provides a single, comprehensive accounting model forimpairment and disposal of long-lived

 

7

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assets and discontinued operations.  The Company has adopted this standard and itdid not have a material effect on the Company’s financial statements.

 

In April 2002, the FASB issued SFAS No. 145,“Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB StatementNo. 13, and Technical Corrections”. This statement eliminates the currentrequirement that gains and losses on debt extinguishments must be classified asextraordinary items in the income statement. Instead, such gains and losseswill be classified as extraordinary items only if they are deemed to be unusualand infrequent, in accordance with the current GAAP criteria for extraordinaryclassification. In addition, SFAS No. 145 eliminates an inconsistency in leaseaccounting by requiring that modifications of capital leases that result inreclassification as operating leases be accounted for consistent withsale-leaseback accounting rules. The statement also contains othernonsubstantive corrections to authoritative accounting literature. The changesrelated to debt extinguishment will be effective for fiscal years beginningafter May 15, 2002, and the changes related to lease accounting would beeffective for transactions occurring after May 15, 2002. The Company hasadopted this standard and it did not have an effect on the Company’sconsolidated financial statements.

 

In September 2002, theFASB issued SFAS No. 146, “Accounting for Costs Associated with Exit orDisposal Activities”, which addresses accounting for restructuring and similarcosts. SFAS No. 146 supersedes previous accounting guidance, principallyEmerging Issues Task Force (“EITF”) Issue No. 94-3. The Company will adopt theprovisions of SFAS No. 146 for restructuring activities initiated afterDecember 31, 2001.  SFAS No. 146requires that the liability for costs associated with an exit or disposalactivity be recognized when the liability is incurred. Under EITF No. 94-3, aliability for an exit cost was recognized at the date of a company’s commitmentto an exit plan.  SFAS No.146 alsoestablishes that the liability be measured and recorded at fair value.  Accordingly, SFAS No. 146 may affect thetiming of recognizing future restructuring costs as well as the amountrecognized.  The Company has adoptedthis standard and it did not have an effect on the Company’s consolidatedfinancial statements.

 

In December 2002,the FASB issued SFAS No. 148, “Accounting for Stock-BasedCompensation—Transition and Disclosure—an amendment of FASB StatementNo. 123.” This statement provides alternative methods of transition for avoluntary change to the fair value method of accounting for stock-basedcompensation. The statement amends the disclosure requirements of FASBStatement No. 123 to require prominent disclosure in both annual andinterim financial statements about the method of accounting for stock-basedcompensation and the effect of the method used on reported results. The Companyaccounts for stock-based compensation arrangements in accordance with theprovisions of Accounting Principles Board Opinion No. 25, “Accounting forStock Issued to Employees,” and complies with the disclosure provisions of FASBStatement No. 123. The transition provisions are effective for fiscalyears ending after December 15, 2002. The disclosure provisions areeffective for interim periods beginning after December 15, 2002, withearly application encouraged. The adoption of this statement is not expected tohave a material impact on the Company’s consolidated financial position,results of operations or cash flows. The Company will implement the disclosureprovisions in the quarter ending May 31, 2003.

 

In November 2002, theFASB issued Financial Interpretation No. 45, “Guarantor’s Accounting andDisclosure Requirements for Guarantees, Including Indirect Guarantees ofIndebtedness of Others” (FIN 45).  Theprovisions of FIN 45 are effective for year-end 2003.  Recognition and measurement provisions of FIN 45 become effectivefor guarantees issued or modified on or after January 1, 2003.  We do not expect the adoption of FIN 45 tohave a material impact on our results of operations, financial position, orliquidity.

 

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

 

The following section ofthis report contains forward-looking statements within the meaning of thePrivate Securities Litigation Reform Act of 1995.  Such forward-looking statements involve risks and uncertaintiesso that the actual results may vary materially.

 

8

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###### **Introduction**

 

CCA generates revenuesprimarily from the sale of its Clinical Information Systems, which includes thelicensure of proprietary application software, and the sale of servers uponwhich the application software operates, and from the performance ofservices.  In connection with its salesof CIS products, the Company provides implementation services for theinstallation, integration, and training of end users’ personnel.  The Company generates sales of ancillarysoftware and hardware, including its data acquisition products, to its CISclients and to third parties.  TheCompany also generates recurring revenues from the provision of comprehensivepost implementation services to its CIS clients, pursuant to extended serviceagreements.

 

Because of the nature ofits business, CCA makes significant ongoing investments in research anddevelopment for new products and enhancements to existing products.  In the past, CCA has funded its research anddevelopment programs through cash flow primarily generated fromoperations.  Management anticipates thatfuture expenditures in research and development will either continue at currentlevels or may increase for the foreseeable future, and will be funded primarilyout of the Company’s cash flow.

 

As a result of increasedsales and marketing activities, the Company’s pipeline of new CIS transactionshas increased over the last two fiscal years. Management believes the industry and the market for healthcare informationtechnology products continues to improve despite current economicconditions.  The market is nowexperiencing a new interest in clinical applications that is being fueled bythe demand for new technology that addresses compliance issues as well as patientcare and safety issues.

 

In order to addresscompliance issues necessitated by the Health Insurance Portability andAccountability Act (HIPAA) regulations, the Company is completing thedevelopment of enhancements to its products. Provisions of HIPAA are intendedto ensure patient confidentiality and security for all health care relatedinformation.  The requirements of HIPAAapply 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 will be required to accurately insure thesecurity of patient data including more robust audit trails andtiered/structured password security when accessing patient data.  CCA is on schedule with its plans to provideits client base with application enhancements that will assist them in adheringto HIPAA regulations before the regulations go into effect.  Management also believes that theapplication enhancements will require that many of its clients will need toupgrade their systems in order to effectively manage greater amounts of data,which will afford the Company opportunities to sell upgrades and provideprofessional services.

 

# **Resultsof Operations**

 

Sales for the secondfiscal quarter ending February 28, 2003 increased by $40,362 or 2%, as comparedto the same quarter of fiscal 2002.  Forthe six-month period ended February 28, 2003, sales increased $195,208 or 6%compared to the same period in fiscal 2002. When analyzed by product category for the quarter and six-month period,sales of Clinical Information Systems (CIS) increased $23,164 or 3.3% and$111,029 or 8.2% respectively, and service revenues increased $46,578 or 4.7%and $171,501 or 8.9% respectively, and other revenues increased $3,031 or 73.6%and $1,033 or 8.3% respectively.  Suchincreases were partially offset by a decrease in sales of data acquisitionproducts for the quarter and six-month period, of $32,411 or 27.9% and $88,355or 38.5% respectively.  The increase insales of CIS products was primarily attributable to a greater number of CISrelated transactions due in part to upgrades to insure clients’ readiness forHIPAA compliance.  The increase inservice revenues is attributable to a greater number of client accounts undercontract and an increase in the average fees charged for such contracts.  Service revenues are expected to continue toincrease as and when the Company’s installed base of CIS installationsincreases.  The Company experienced anoverall decrease in sales of data acquisition products, which was 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 are nolonger reliant on CCA’s data acquisition products.  Management does not believe the OEM business is a material partof CCA’s business today and will not be in the future as the Company’s emphasisis being placed on its CIS products and related services.

 

9

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The Company continues toexpand its sales and marketing activities, directing its focus towards largerclients and multi-product sales as well as selling new products into itsinstalled client base.  The Company hasalso initiated strategic joint marketing partnerships with other companies,which has improved the Company’s market penetration and has initiated moremarketing activities internationally. Although its “pipeline” of working CIS transactions continues toimprove, management views the near term outlook for the continued sale of CISproducts cautiously during the second half of the 2003 fiscal year.  The Company’s future operating results couldcontinue to be subject to quarterly variations based upon a wide variety offactors, including the volume mix and timing of orders received during anyquarter, and the temporary delays in the closing of new CIS sales.  In addition, the Company’s revenuesassociated with CIS transactions may be delayed due to client related issuessuch as staff availability, IT infrastructure readiness, and the performance ofthird party contractors, all of which are issues outside of the control ofCCA.  Such issues were relevant to thecurrent quarter, which delayed implementations and required the deferral ofrevenue recognition to later periods.

 

Cost of sales for thesecond quarter and six-month period ended February 28, 2003 increased by $1,653or .2% and $100,951 or 5.9% respectively, as compared to the same quarter andsix-month period of fiscal 2002.  Forthe quarter and six-month period the increase in cost of sales was attributableto increases in labor costs of $17,718 or 4.6% and $45,110 or 5.9%respectively, and in material costs of $3,455 or 2.1% and $88,915 or33.4%.  Such increases were partiallyoffset by a decrease in other costs of $19,520 or 5.8% and $33,074 or 4.8%respectively.  The increase in materialcosts was attributable to sales that were more weighted to upgrades having ahigher proportion of hardware components and lower gross margins.  The increase in labor costs was attributableto additions in personnel expenses due to new hires for the Company’s supportoperations.  Cost of sales as apercentage of sales for the current quarter was 48% as compared to 49% for thecomparable 2002 fiscal quarter.  For thesix-month period ended February 28, 2003, cost of sales and a percentage ofsales remained unchanged at 49% as compared to the same period of fiscal 2002.

 

Selling, general, andadministrative expenses increased by $100,279 or 16.3% and $97,867 or 7.7% forthe current quarter and six months ended February 28, 2003 as compared to thesame periods of fiscal 2002.  Theincrease in selling, general, and administrative expenses was primarily due toadditional expenditures in legal, accounting, advertising, tradeshows, andother related marketing expenses.

 

Research and developmentexpenses increased by $14,254 or 6.7% and $42,917 or 10.8% for the currentquarter and six months ended February 28, 2003 as compared to the same periodsof fiscal 2002.  The increase isattributable to increases in salaries and other personnel relatedexpenses.  For the comparable secondquarters of 2003 and 2002, the Company capitalized software costs of $114,000and $111,000, respectively, which are generally amortized over the estimateduseful life not to exceed five years. Such costs were attributable to enhancements and new modules for theCompany’s CIS products, new applications under development, and modificationsassociated with HIPAA compliance to all of CCA’s products.  Management anticipates its overall researchand development activities will increase in fiscal 2003 due to plannedpersonnel additions in product engineering, quality assurance and systemcommunications support.

 

Interest and other incomewas $4,785 and $8,510 respectively, for the current quarter and six-monthperiod ended February 28, 2003, which is consistent with $4,388 and $8,528respectively for comparable periods of fiscal 2002.

 

Interest and otherexpense was $2,204 and $4,551 respectively for the current quarter andsix-month period ended February 28, 2003 as compared to $5,433 and $9,943 forthe comparable periods of fiscal 2002 due to the level of borrowings.

 

For the current quarterand six-month period ended February 28, 2003, the Company recorded a taxprovision of $12,411 and $47,157 respectively, as compared to $42,798 and$64,505 for the same periods of fiscal 2002 due to the level of taxableincome.  The Company believes it is morelikely than not that the net deferred tax asset of $898,134 will be realized.

 

As a result of theaggregate factors discussed above, the Company earned net income of $16,863 orbasic and diluted earnings per share of $0.01 and $64,846 or basic and dilutedearnings per share of $0.02 for the current quarter and six-month period endedFebruary 28, 2003 compared to a net income of $58,674 or basic and dilutedearnings per share of $0.02 and $88,651 or basic and diluted earnings per shareof $0.03 for the same quarter and six-month period in fiscal 2002.

 

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### **Capital Resources and Liquidity**

 

The Company’s primaryneed for capital has been to invest in software development, and in computersand related equipment for its internal use. The Company invested $ 228,000 and $224,280 during the first half of fiscal2003 and 2002 in software development. These expenditures related to HIPAA related enhancements to all itsproducts, and the new browser version of the Company’s LIS product, CyberLAB®,the release of its revised PIS, CyberMED®, its new RIS, CyberRAD®, and otherproduct enhancements.  The Companyanticipates expending additional sums during fiscal 2003 on the remainder ofthe HIPAA related enhancements to all its products and the further developmentof the new browser based versions of its CIS products.  During the six-month period ended February28, 2003, the Company invested an aggregate of $ 38,118 in additions to fixedassets primarily consisting of computers and software, as compared to aninvestment of $35,064 in the comparable period of fiscal 2002.

 

As of February 28,2003,the Company’s working capital amounted to $1,737,132 compared to $1,543,416 asof August 31, 2002.  The Company’scurrent ratio was 1.6 at February 28, 2003 and August 31, 2002.  At February 28, 2003 the Company’s creditfacilities with its bank consisted of a revolving line of credit of $500,000,of which there were no amounts outstanding. The bank credit agreement is through February 1, 2004 and containscertain loan covenants and financial ratio requirements.  As of February 28, 2003, the Company was incompliance with all of the covenants and financial ratio requirements requiredby its bank.

 

Cash flows from operatingactivities were $431,860 for the six months ended February 28, 2003, comparedto cash flow of $124,045 for the comparable period of fiscal 2002.  The increase in cash flow from operatingactivities was primarily attributable to the net change in receivables duringthe six months ended February 28, 2003.

 

Net cash used ininvesting activities totaled $266,118 for the six months ended February 28,2003, compared to $259,344 used in investing activities during the comparableperiod of 2002.

 

Cash flows from financingactivities amounted to $37,275 for the six months ended February 28, 2003compared to cash used of $67,875 in the same period of fiscal 2002.  The change from fiscal 2002 to fiscal 2003resulted primarily from the Company having paid off its line of credit andexercises of stock options.

 

The Company’s primary source of working capital hasbeen generated from earnings, and borrowings on its line of credit.  The Company’s results of operations for thesix months ended February 28, 2003 produced operating cash flow of $431,860,which was sufficient to fund its product development activities, and to investin new marketing programs.  Management believesthat its sales pipeline is adequate to produce sufficient operating cash flowin the 2003 fiscal year, and that it’s projected cash flow from operations,together with its bank credit facilities, should be sufficient to fund itsworking capital requirements for its 2003 fiscal year.  However, an unanticipated decline in sales,delays in implementations where payments are tied to delivery and/orperformance of services, or cancellations of contracts could have a negativeeffect on cash flow from operations and could in turn create short-termliquidity problems.  If such events wereto occur the Company may have to seek alternative financing.

 

### **Seasonality, Inflation and Industry Trends**

 

The Company’s sales aregenerally higher in the winter and spring. Inflation has not had a material effect on the Company’s business sincethe Company has been able to adjust the prices of its products and services inresponse to inflationary pressures. Management believes that most phases of the healthcare segment of thecomputer industry will continue to be highly competitive, and that potentialhealthcare reforms including those promulgated by HIPAA may have a long-termpositive impact on its business.  Withrespect to the compliance issues brought about by HIPAA, the Company hasinvested heavily in new application modules to assist its clients in meetingtheir regulatory goals.  Managementbelieves that the new modules will be key selling points and will provide acompetitive advantage.  In addition,management believes that the healthcare information technology industry will bemarked with more significant technological advances, which will improve thequality of service and reduce costs. The Company is poised to meet these challenges by continuing to employnew technologies when they become available, diversifying its productofferings, improving and expanding its services, and by constantly enhancingits software applications.

 

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

 

Managements discussionand analysis of CCA’s financial condition and results of operations are basedupon the condensed consolidated financial statements, which have been preparedin accordance with accounting principles generally accepted in the UnitedStates.  The preparation of thesefinancial statements requires management to make estimates and judgments thataffect the reported amounts of assets, liabilities, revenues and expenses, andrelated disclosures of contingent assets and liabilities.  On an on-going basis, management evaluatesestimates, including those related to the valuation of inventory and theallowance for uncollectible accounts receivable. We base our estimates onhistorical experience and on various other assumptions that are believed to bereasonable under the circumstances, the results of which form the basis formaking judgments about the carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from these estimates under differentassumptions or conditions. We believe the following critical accountingpolicies affect our more significant judgments and estimates used in thepreparation of our consolidated financial statements:

 

Inventory

 

Inventory is evaluated ona continual basis and reserve adjustments are made based on management’sestimate of future sales value, if any, of specific inventory items. Reserveadjustments are made for the difference between the cost of the inventory andthe estimated market value and charged to operations in the period in which thefacts that give rise to the adjustments become known.  At February 28, 2003 and 2002, the inventory reserve was $100,569and $86,174 respectively.

 

Accounts Receivable

 

Accounts receivablebalances are evaluated on a continual basis and allowances are provided forpotentially uncollectible accounts based on management’s estimate of thecollectability of customer accounts. If the financial condition of a customerwere to deteriorate, resulting in an impairment of their ability to makepayments, an additional allowance may be required. Allowance adjustments arecharged to operations in the period in which the facts that give rise to theadjustments become known.  The accountsreceivable balance at February 28, 2003 was $2,367,377 net of an allowance fordoubtful accounts of $30,133.

 

RevenueRecognition

 

Revenues are derivedprimarily from the sale of clinical information systems and the provision ofservices.  The components of the systemsales revenues are the licensing of computer software, installation, and thesale of computer hardware and sublicensed software. The components of servicerevenues are software support and hardware maintenance, training, andimplementation services.  The Companyrecognizes revenue in accordance with the provisions of Statement of Position(SOP) No. 97-2, “Software Revenue Recognition,” as amended by SOP No. 98-4, SOP98-9 and clarified by Staff Accounting Bulletin (SAB) 101 “Revenue Recognitionin Financial Statements.” SOP No 97-2, as amended, generally requires revenueearned on software arrangements involving multiple-elements to be allocated toeach element based on the relative fair values of those elements.  The Company allocates revenue to eachelement in a multiple-element arrangement based on the element’s respectivefair value, with the fair value determined by the price charged when thatelement is sold and specifically defined in a quotation or contract.  The Company determines the fair value of themaintenance portion of the arrangement based on the renewal price of themaintenance charged to clients, professional services portion of thearrangement, other than installation services, based on hourly rates which theCompany charges for these services when sold apart from a software license, andthe hardware and sublicense of software based on the prices for these elementswhen they are sold separately from the software.

 

Post Implementationsoftware and hardware maintenance services are marketed under monthly andannual arrangements and are recognized as revenue ratably over the contractedmaintenance term as services are provided. Deferred revenue related to CIS sales, comprises deferrals for licensefees, hardware, and other services for which the implementation has not yetbeen completed and revenues have not been recognized.

 

Software DevelopmentCosts

 

Costs incurred internallyin creating computer software products are expensed until technologicalfeasibility has been established upon completion of a program design.Thereafter, applicable software development costs are capitalized andsubsequently reported at the lower of amortized cost or net realizablevalue.  Capitalized costs are amortizedbased

 

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on current and expected future revenue for each product with minimumannual amortization equal to the straight-line amortization over the estimatedeconomic life of the product not to exceed five years.

 

### **NewAccounting Pronouncements**

 

SFAS 144, Accounting forthe Impairment or Disposal of Long-Lived Assets, was issued in August 2001 andis effective for fiscal years beginning after December 15, 2001.  SFAS 144 provides a single, comprehensiveaccounting model for impairment and disposal of long-lived assets and discontinuedoperations.  The Company has adoptedthis standard and it did not have a material effect on the Company’s financialstatements.

 

In April 2002, the FASBissued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64,Amendment of FASB Statement No. 13, and Technical Corrections”. This statementeliminates the current requirement that gains and losses on debtextinguishments must be classified as extraordinary items in the incomestatement. Instead, such gains and losses will be classified as extraordinaryitems only if they are deemed to be unusual and infrequent, in accordance withthe current GAAP criteria for extraordinary classification. In addition, SFASNo. 145 eliminates an inconsistency in lease accounting by requiring thatmodifications of capital leases that result in reclassification as operatingleases be accounted for consistent with sale-leaseback accounting rules. Thestatement also contains other nonsubstantive corrections to authoritativeaccounting literature. The changes related to debt extinguishment will beeffective for fiscal years beginning after May 15, 2002, and the changesrelated to lease accounting would be effective for transactions occurring afterMay 15, 2002. The Company has adopted this standard and it did not have aneffect on the Company’s consolidated financial statements.

 

In September 2002, theFASB issued SFAS No. 146, “Accounting for Costs Associated with Exit orDisposal Activities”, which addresses accounting for restructuring and similarcosts. SFAS No. 146 supersedes previous accounting guidance, principallyEmerging Issues Task Force (“EITF”) Issue No. 94-3. The Company will adopt theprovisions of SFAS No. 146 for restructuring activities initiated afterDecember 31, 2001.  SFAS No. 146requires that the liability for costs associated with an exit or disposalactivity be recognized when the liability is incurred. Under EITF No. 94-3, aliability for an exit cost was recognized at the date of a company’s commitmentto an exit plan.  SFAS No.146 alsoestablishes that the liability be measured and recorded at fair value.  Accordingly, SFAS No. 146 may affect thetiming of recognizing future restructuring costs as well as the amountrecognized.  The Company has adoptedthis standard and it did not have an effect on the Company’s consolidatedfinancial statements.

 

In December 2002,the FASB issued SFAS No. 148, “Accounting for Stock-BasedCompensation—Transition and Disclosure—an amendment of FASB StatementNo. 123.” This statement provides alternative methods of transition for avoluntary change to the fair value method of accounting for stock-basedcompensation. The statement amends the disclosure requirements of FASBStatement No. 123 to require prominent disclosure in both annual andinterim financial statements about the method of accounting for stock-basedcompensation and the effect of the method used on reported results. The Companyaccounts for stock-based compensation arrangements in accordance with theprovisions of Accounting Principles Board Opinion No. 25, “Accounting forStock Issued to Employees,” and complies with the disclosure provisions of FASBStatement No. 123. The transition provisions are effective for fiscalyears ending after December 15, 2002. The disclosure provisions areeffective for interim periods beginning after December 15, 2002, withearly application encouraged. The adoption of this statement is not expected tohave a material impact on the Company’s consolidated financial position,results of operations or cash flows. The Company will implement the disclosureprovisions in the quarter ending May 31, 2003.

 

In November 2002, theFASB issued Financial Interpretation No. 45, “Guarantor’s Accounting andDisclosure Requirements for Guarantees, Including Indirect Guarantees ofIndebtedness of Others” (FIN 45).  Theprovisions of FIN 45 are effective for year-end 2003.  Recognition and measurement provisions of FIN 45 become effectivefor guarantees issued or modified on or after January 1, 2003.  We do not expect the adoption of FIN 45 tohave a material impact on our results of operations, financial position, orliquidity.

 

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**Item 3****.****                                                           Controlsand Procedures**

 

(a)  Evaluation of Disclosure Controls andProcedures.  The Company’s Chief ExecutiveOfficer and its Chief Accounting Officer, after evaluating the effectiveness ofthe Company’s disclosure controls and procedures (as defined in the SecuritiesExchange Act of 1934 Rules 13a-14(c) and 15d-14(c) as of a date within 90 daysof the filing date of this quarterly report on Form 10-QSB (the “EvaluationDate”), have concluded that as of the Evaluation Date, the Company’s disclosurecontrols and procedures were adequate and effective to ensure that materialinformation relating to the Company would be made known to them by otherswithin the Company.

 

(b)  Changes in Internal Controls. Therewere no significant changes in the Company’s internal controls or in otherfactors that could significantly affect the Company’s disclosure controls andprocedures subsequent to the Evaluation Date, nor any significant deficienciesor material weaknesses in such disclosure controls and procedures requiringcorrective actions.

 

 

**PART II****- OTHER INFORMATION**

 

Items1 through 3.  NOTAPPLICABLE

 

Item4.             Submission of Matters to a Vote of SecurityHolders

 

(a)                                  TheCompany held an Annual Meeting of Shareholders on February 28, 2003.

 

(b)                                 Thefollowing Directors, all of whom were incumbents, were reelected to the fivemember Board at the February 28, 2003 meeting:

 
|                     |   | **FOR**   |   | **WITHHELD** |   |
|--------------------------|--------|-----------|--------|--------------|--------|
|                     |   |      |   |         |   |
| Bruce  M. Miller         |   | 2,948,948 |   | 3,580        |   |
| Steven  M. Besbeck       |   | 2,948,748 |   | 3,780        |   |
| James  R. Helms          |   | 2,948,748 |   | 3,780        |   |
| Lawrence  S. Schmid      |   | 2,948,948 |   | 3,580        |   |
| Robert  S. Fogerson, Jr. |   | 2,948,748 |   | 3,780        |   |

 

(c)                                  Theonly matter voted upon at the February 28, 2003 Annual Meeting was theratification of BDO Seidman, LLP as the Company’s auditors for the fiscal yearending August 31, 2003 by a vote of 2,950,528 for, 1,940 against, 60abstaining, and 0 non-votes.

 

(d)                                 Notapplicable.

 

Item 5.             NOT APPLICABLE

 

Item 6.             Exhibits andReports on Forms 8-K

 

(a)                                  Exhibit11 - Statement re: computation of per share earnings.

 

(b)                                 Exhibit99.1 Statement Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 99.2Statement Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

(c)                                  Therewere no reports filed on Form 8-K during the quarter ended February 28, 2003.

 

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**SIGNATURES**

 

In accordance with therequirements of the Exchange Act, the Company caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.

 
| **CREATIVE COMPUTER APPLICATIONS, INC.** |           |   |   |                                                                              |
|------------------------------------------|----------------|--------|--------|-----------------------------------------------------------------------------------|
| (Company)                                |           |   |   |                                                                              |
|                                     |           |   |   |                                                                              |   |
| **Date:**                                | April 11, 2003 |   |   | /s/  Steven M. Besbeck                                                       |   |
|                                     |           |   |   | Steven. M. Besbeck,  President  Chief Executive Officer, Chief  Financial Officer |   |
|                                     |           |   |   |                                                                              |   |
| **Date:**                                | April 11, 2003 |   |   | /s/  Anahita Villafane                                                       |   |
|                                     |           |   |   | Anahita Villafane                                                                 |   |
|                                     |           |   |   | Controller and Chief  Accounting Officer                                          |   |
|                                          |                |        |        |                                                                                   |  |  |

 

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**StatementPursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

**By**

#### **Principal ExecutiveOfficer**

#### **RegardingFacts and Circumstances Relating to Exchange Act Filings**

 

I, Steven M. Besbeck, certify that:

 

1. I have reviewed this quarterly report on Form 10-QSB of CreativeComputer Applications, Inc.;

 

2. Based on my knowledge, this quarterly report does not contain any untruestatement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this quarterlyreport;

 

3. Based on my knowledge, the financial statements, and other financialinformation included in this quarterly report, fairly present in all materialrespects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this quarterly report;

 

4. The registrant’s other certifying officers and I are responsible forestablishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-14 and 15d-14) for the registrant and have:

 

a)  designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)  evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)  presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5. The registrant’s other certifying officers and I have disclosed, basedon our most recent evaluation, to the registrant’s auditors and the auditcommittee of registrant’s board of directors (or persons performing theequivalent function):

 

a)  all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)  any fraud, whetheror not material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6. The registrant’s other certifyingofficers and I have indicated in this quarterly report whether or not therewere significant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significant deficienciesand material weaknesses.

 

Date: April 11, 2003

 

 
|   | /s/ Steven M. Besbeck                                            |   |
|--------|------------------------------------------------------------------|--------|
|   | Steven M. Besbeck                                                |
|   | President, Chief Executive  Officer, and Chief Financial Officer |

 

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**Statement Pursuant to Section 302 ofthe Sarbanes-Oxley Act of 2002**

**By**

**Principal Financial Officer**

**Regarding Facts and CircumstancesRelating to Exchange Act Filings**

 

I, Anahita Villafane, certify that:

 

1. I have reviewed this quarterly report on Form 10-QSB of CreativeComputer Applications, Inc.;

 

2. Based on my knowledge, this quarterly report does not contain any untruestatement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this quarterlyreport;

 

3. Based on my knowledge, the financial statements, and other financialinformation included in this quarterly report, fairly present in all materialrespects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this quarterly report;

 

4. The registrant’s other certifying officers and I are responsible forestablishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-14 and 15d-14) for the registrant and have:

 

a) designed such disclosure controls and procedures to ensurethat material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this quarterly report is beingprepared;

 

b) evaluated the effectiveness of the registrant’s disclosurecontrols and procedures as of a date within 90 days prior to the filing date ofthis quarterly report (the “Evaluation Date”); and

 

c) presented in this quarterly report our conclusions aboutthe effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

 

5. The registrant’s other certifying officers and I have disclosed, basedon our most recent evaluation, to the registrant’s auditors and the auditcommittee of registrant’s board of directors (or persons performing theequivalent function):

 

a) all significant deficiencies in the design or operation ofinternal controls which could adversely affect the registrant’s ability torecord, process, summarize and report financial data and have identified forthe registrant’s auditors any material weaknesses in internal controls; and

 

b) any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in the registrant’sinternal controls; and

 

6. The registrant’s other certifyingofficers and I have indicated in this quarterly report whether or not therewere significant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

Date: April 11, 2003

 
|   | /s/ Anahita Villafane    |   |
|--------|--------------------------|--------|
|   | Anahita Villafane        |
|   | Controller               |
|   | Chief Accounting Officer |

 

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