Creative Computer Overstated Its Sales by $1.5 Million

Creative Computer Applications disclosed Monday that it overstated its sales during its last fiscal year by nearly $1.5 million and apparently has gone into default on a $750,000 bank line of credit.

The Calabasas company, which makes equipment used to record laboratory test results, also announced that it lost $658,024, or 7 cents a share, on sales of $4.5 million in the fiscal year ended Aug. 31. A year earlier, it earned $147,310, or two cents a share, on sales of $4.2 million.

Creative Computer said in a news release that it had overstated sales because of accounting errors stemming primarily from incomplete shipment of components for its systems. Company officials declined to elaborate.

Creative Computer said it discovered the problems during a year-end audit and that directors were informed of the problems late last month. The improperly recorded sales, reported in documents filed with the Securities and Exchange Commission, included $764,000 for the second quarter and $102,000 for the third fiscal quarter.

Also improperly recorded were sales of about $600,000 for the fourth quarter that had not yet been reported to the SEC.

The company said it is revising its internal controls and will have quarterly reports reviewed by independent auditors until the problems are corrected.

Creative Computer said it may have gone into default because its bank credit agreement requires it to show pretax profits every quarter.