-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CJe/W2xggJRTV2DysndypkIkCkgsqtuEx+cYfET1d5hBZw0U3T2716Bh30dIChig YaxSZ+lW+vjP4kwr04n2yg== 0001058809-98-000031.txt : 19981016 0001058809-98-000031.hdr.sgml : 19981016 ACCESSION NUMBER: 0001058809-98-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980831 FILED AS OF DATE: 19981015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANTERBURY INFORMATION TECHNOLOGY INC CENTRAL INDEX KEY: 0000794927 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 232170505 STATE OF INCORPORATION: PA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15588 FILM NUMBER: 98726261 BUSINESS ADDRESS: STREET 1: 1600 MEDFORD PLZ STREET 2: RTE 70 & HARTFORD RD CITY: MEDFORD STATE: NJ ZIP: 08055 BUSINESS PHONE: 6099530044 MAIL ADDRESS: STREET 1: 1600 MEDFORD PLZ CITY: MEDFORD STATE: NJ ZIP: 08055 FORMER COMPANY: FORMER CONFORMED NAME: CANTERBURY CORPORATE SERVICES INC DATE OF NAME CHANGE: 19940323 FORMER COMPANY: FORMER CONFORMED NAME: CANTERBURY EDUCATIONAL SERVICES INC /PA/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CANTERBURY PRESS INC DATE OF NAME CHANGE: 19870615 10-Q 1 FORM 10-Q FOR QUARTER ENDING 8/31/98 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------------- Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: Commission File Number: August 31, 1998 0-15588 CANTERBURY INFORMATION TECHNOLOGY, INC. --------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-2170505 (State of Incorporation) (I.R.S. Employer Identification No.) 1600 Medford Plaza Route 70 & Hartford Road Medford, New Jersey 08055 (Address of principal executive office) Telephone Number: (609) 953-0044 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No -------- -------- The number of shares outstanding of the registrant's common stock as of the date of the filing of this report: 6,068,163 shares. FORM 10-Q PART 1 - FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements - ----------------------------- CANTERBURY INFORMATION TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEET -------------------------- ASSETS - ------ August 31, 1998 November 30, (Unaudited) 1997 --------- ------------ Current Assets: Cash and cash equivalents $ 80,482 $ 295,936 Accounts receivable, net 1,571,413 1,332,518 Notes receivable 430,757 424,700 Prepaid expenses and other assets 1,092,735 770,173 Deferred income tax benefit 2,896,000 2,896,000 --------- ----------- Total Current Assets 6,071,387 5,719,327 Property and equipment at cost, net of accumulated depreciation and amortization of $3,834,000 and $3,396,000 2,457,320 2,503,277 Goodwill net of accumulated amortization of $1,901,000 and $1,492,000 8,603,997 8,916,221 Notes receivable 8,097,263 8,371,548 Other assets 266,769 276,728 --------- --------- Total Assets $25,496,736 $25,787,101 =========== =========== See Accompanying Notes FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEET LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ August 31, 1998 November 30, (Unaudited) 1997 ----------- ------------ Current Liabilities: Accounts payable - trade $ 403,633 $ 467,855 Accrued expenses 162,425 912,306 Unearned tuition income 924,799 828,469 Current portion, long-term debt 587,668 872,616 --------- --------- Total Current Liabilities 2,078,525 3,081,246 Long-term debt 3,819,000 3,856,956 Deferred income tax liability 3,361,425 3,244,500 Shareholders' Equity: Convertible preferred stock, Series D, no par value, 1,000,000 shares authorized; 0 and 1,000,000 issued and outstanding - 1,043,841 Common stock, $.001 par value, 50,000,000 shares authorized; 6,068,000 and 5,417,000 issued and outstanding 6,068 5,417 Additional paid in capital 17,085,540 15,980,044 Retained earnings (446,522) (1,017,603) Treasury stock (407,300) (407,300) ----------- ---------- Total Shareholders' Equity 16,237,786 15,604,399 ----------- ---------- Total Liabilities and Shareholders' Equity $ 25,496,736 $ 25,787,101 ============ ============ See Accompanying Notes FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF INCOME The following Consolidated Statements of Income for the three-month and nine-month periods ended August 31, 1998, and August 31, 1997, are unaudited, but the Company believes that all adjustments (which consist only of normal recurring accruals) necessary for a fair presentation of the results of operations for the respective periods have been included. Quarterly results of operations are not necessarily indicative of results for the full year. Three months ended Nine months ended August 31, August 31, (Unaudited) (Unaudited) --------------------------------------------- 1998 1997 1998 1997 Net revenues $3,215,032 $3,759,509 $9,436,482 $10,419,440 Costs and expenses 1,752,545 1,521,449 4,908,980 4,680,160 ---------- ---------- ---------- ----------- Gross profit 1,462,487 2,238,060 4,527,502 5,739,280 Selling 491,298 439,695 1,498,860 1,305,181 General and administrative 821,760 1,221,876 2,763,453 3,129,265 ---------- ---------- ---------- ----------- Total operating expenses 1,313,058 1,661,571 4,262,313 4,434,446 Other (income)/expenses Interest income (146,243) (183,999) (644,814) (492,095) Interest expense 71,788 60,679 268,715 309,200 Other (5,949) (51,105) (110,210) (40,532) ---------- ---------- --------- ---------- Income before provision for income taxes and discontinue operation 229,833 750,914 751,498 1,528,261 Provision for income taxes 50,000 285,000 180,416 581,000 ---------- ---------- --------- ---------- Income from continuing operations 179,833 465,914 571,082 947,261 Discontinued operation Income from discontinued operation net of income taxes of $16,000 and $49,000 - 25,010 - 81,820 ---------- ---------- --------- ---------- Net income $ 179,833 $ 490,924 $ 571,082 $1,029,081 ========== ========== ========= ========== Basic earnings per share: Basic Income from continuing operations $ .03 $ .08 $ .10 $ .18 Discontinued operation - .01 - .02 ---------- ---------- ---------- ---------- Net income per share $ .03 $ .09 $ .10 $ .20 ========== ========== ========== ========== Weighted average shares outstanding: Basic 6,043,000 5,465,400 5,945,200 5,226,000 See Accompanying Notes FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED AUGUST 31, 1998 AND AUGUST 31, 1997 August 31, August 31, 1998 1997 (Unaudited) (Unaudited) ----------- --------- Operating activities: Net income from continuing operations $571,081 $ 947,261 Adjustments to reconcile net income to net cash used in operating activities from continuing operations: Depreciation and amortization 750,001 818,650 Provision for losses on accounts receivable 13,000 45,000 Deferred income taxes 116,925 (400,000) Other noncash items 62,307 - Changes in operating assets, net of acquisitions Accounts receivable (251,895) (708,635) Prepaid expenses and other assets (312,603) (193,060) Income taxes - 112,705 Accounts payable (64,222) (19,331) Accrued expenses (749,881) (63,946) Unearned tuition income 96,330 53,892 -------- --------- Net cash provided by operating activities of continuing operations 231,043 592,536 -------- --------- Investing activities: Capital expenditures, net (391,821) (379,997) Collection on notes receivable 268,228 754,066 -------- --------- Net cash provided by/(used in) investing activities of continuing operations (123,593) 374,069 --------- --------- Financing activities: Principal payments on long term debt (141,886) (335,869) Proceeds from issuance of preferred stock - 766,000 Proceeds from issuance of common stock, net - 438,034 Proceeds from long term debt 143,982 219,533 Repayment on term loan (325,000) (1,635,000) --------- ---------- Net cash used in financing activities from continuing operations (322,904) (547,302) Cash provided by discontinued operations - 218,490 --------- ---------- Net increase (decrease) in cash (215,454) 637,793 Cash, beginning of year 295,936 440,178 ---------- ---------- Cash, end of year $ 80,482 $1,077,971 ========== ========= See Accompanying Notes FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Operations and Summary of Significant Accounting Policies Description of Business Canterbury Information Technology, Inc. ("the Company") is engaged in the business of providing information technology services which includes operating computer software training companies, a technical staffing company, a management training company and developing and selling software to individuals and corporations in the United States. Principles of Consolidation The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All material intercompany transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The ultimate outcome and actual results could differ from the estimates and assumptions used. Revenue Recognition The Company records revenue at the time services are performed or product is shipped. Statement of Cash Flows For purposes of the Statement of Cash Flows, cash refers solely to demand deposits with banks and cash on hand. In 1997, the Company changed the presentation of its statement of cash flows from the direct to the indirect method. Accordingly, amounts for 1997 were changed for comparative purposes. Depreciation and Amortization The Company depreciates and amortizes its property and equipment for financial statement purposes using the straight-line method over the estimated useful lives of the property and equipment (useful lives of leases or lives of leasehold improvements and leased property under capital leases, whichever is shorter). For income tax purposes, the Company uses accelerated methods of depreciation. Amortization of Intangible Assets Goodwill is being amortized over twenty-five years using the straight-line method. Deferred Income Taxes The Company utilizes the liability method to account for income taxes. This method gives consideration to the future tax consequences associated with the differences between financial accounting and tax bases of assets and liabilities. Earnings Per Share Effective December, 1997, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share", which required the Company to change the method used to compute earnings per share ("EPS") and to restate all prior periods presented. The presentation of primary and fully diluted EPS has been replaced with basic and diluted EPS, respectively. Basic earnings per share is computed using the weighted average number of common shares outstanding during the period. The computation of diluted earnings per share includes the diluted effect of securities that could be exercised or converted into common stock. As of August 31, 1998, there were no dilutive securities outstanding, and as of August 31, 1997, the difference between basic and diluted outstanding shares was deemed immaterial. Due to the April, 1998 1 for 3 reverse stock split, some changes to reported EPS in 1997 have occurred due to rounding. The change is not deemed material. Recent Accounting Pronouncements The Company has adopted the provisions of Statement of Financial Accounting Standards ("SFAS") 123, "Accounting for Stock-Based Compensation." SFAS 123 provides companies with a choice to follow the provisions of SFAS 123 in determining stock based compensation expense or to continue with the provisions of the Accounting Principles Board Opinion ("APB") 25, "Accounting for Stock Issued to Employees" and provide pro-forma disclosures of the effects on net income and earnings per share. The Company has elected to continue to utilize the provisions of APB 25 to account for stock-based compensation. The effect of applying SFAS 123's fair value method to the Company's stock-based awards results in net income and earnings per share that are not materially different from amounts reported. 2. Discontinued Operation In November, 1997 the Company decided to discontinue its vocational training segment and closed its last two vocational schools in New Jersey and Nevada. The results of operations has been reported as a discontinued operation and the financial statements for the quarter ended August 31, 1997 have been restated to reflect such. The net assets of discontinued operations are immaterial. The following is a summary of the results of operations of the Company's vocational school segment. Nine Months Ended August 31, 1997 --------------- Revenue $745,050 Income from discontinued operation (net of taxes of $49,000) 81,820 3. Property and Equipment Property and equipment consists of the following: August 31 November 30, 1998 1997 ---- ---- Land, buildings and improvements $ 725,910 $ 725,910 Equipment 3,172,387 2,961,376 Furniture and fixtures 1,276,163 1,107,993 Leased property under capital leases and leasehold improvements 1,116,929 1,104,289 ---------- ---------- 6,291,389 5,899,568 Less: accumulated depreciation and amortization (3,834,069) (3,396,291) ---------- ---------- Net property and equipment $ 2,457,320 $ 2,503,277 ========== =========== 4. Long-Term Debt August 31, November 30, 1998 1997 ---- ---- Long-term obligations consist of: Term loan 1,251,000 1,576,000 Revolving credit line 2,774,620 2,774,620 7% unsecured notes payable, other - 5,057 Capital lease obligations 381,048 373,895 ---------- ---------- 4,406,668 4,729,572 Less: Current maturities (587,668) (872,616) ---------- ---------- $ 3,819,000 $3,856,956 =========== ========== During 1996 the Company and its primary lender, Chase Manhattan Bank, instituted litigation, each claiming that the other party violated the terms of the credit agreement. As a result, the debt was declared in default. In February, 1997, the litigation was settled and all outstanding borrowings with Chase were restructured and became due on December 31, 1997. The Company and Chase agreed that all alleged defaults under the previous agreements were permanently waived and the Company would use its best efforts to replace Chase during 1997. A suitable replacement was not found during 1997, and the Company and Chase have agreed to extend their current banking relationship through December 31, 1998 subject to satisfactory documentation of the terms and conditions as agreed. The Company will continue to use its best efforts to replace Chase prior to December, 1998. The Company agreed to make principal payments against the term loan throughout 1998. The payments, which total $700,000, will be made monthly during the year. As of August 31, 1998, $325,000 had already been paid to Chase. The revolving credit facility remained at $2,774,600 at December 31, 1997, with no additional borrowings or repayments scheduled during fiscal 1998. Interest rates on all outstanding debt will remain at the same rate as before the restructuring. The term loan interest rate is LIBOR plus 3% or the Bank's prime rate plus 1/2%. The revolving credit facility carries an interest rate of LIBOR plus 2 1/2% or the Bank's prime rate of interest. The Company has the right to choose which rate is to be utilized on a periodic basis. The 30 day LIBOR rate at August 31, 1998 was 5.625%. As of August 31, 1998, the Company was in compliance with or has received a waiver on all of the debt covenants relating to both the term loan and the revolving credit facility. The long-term debt is secured by substantially all of the assets of the Company. The Company is restricted by its primary lender from paying dividends on its common stock. Aggregate maturities on long-term debt for the next five years, exclusive of obligations under capital leases, are approximately $4,026,000, $0, $0, $0 and $0 respectively. The carrying value of the long-term debt approximates its fair value. 5. Capital Leases Capital lease obligations are certain equipment leases which expire in October, 2000. Future payments under capitalized leases, together with the present value, calculated at the respective leases' implicit interest rate of approximately 10.5% to 11% at their inception, as of May 1, 1995 and May 1, 1997 are as follows: Year ending November 30, 1998 $ 58,096 Year ending November 30, 1999 213,309 Year ending November 30, 2000-2003 131,672 --------- Total minimum lease payments 403,077 Less amount representing interest (22,029) --------- Present value of long-term obligations under capital leases $381,048 ========= 6. Stockholders' Equity Faced with the possibility of losing its NASDAQ National Market listing because of NASDAQ's minimum stock price listing requirements, the Company's Board of Directors decided to reverse split its common stock on a one for three basis. This stock split took place on April 14, 1998. As a result of the reverse split, the Company's issued and outstanding common stock was reduced from 18,199,000 shares to 6,066,000 shares, and its public float was reduced from approximately 12,000,000 shares to approximately 4,000,000 shares. The balance sheets at November 30, 1997 and August 31, 1998, as well as the earnings per share calculations have been adjusted to reflect this reverse split. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Working capital at August 31, 1998 was $3,993,000. This was an increase of $1,355,000 over November 30, 1997. Reductions in the current portion of long-term debt and accrued expenses were the primary reason for the improvement. The Company and its primary lender, Chase Manhattan Bank, agreed to extend their banking relationship until December 31, 1998. The Company has agreed to make scheduled term debt payments totaling $700,000 in fiscal 1998. As of August 31, 1998, $325,000 has been paid to Chase per the agreement. The Company and Chase have agreed that all defaults under the previous lending agreements were permanently waived and the Company would use its best efforts to replace Chase during 1998. Although there is no assurance, the Company is continuing to negotiate with Chase and other lenders to refinance its debt. Cash flow from continuing operations for the nine months ended August 31, 1998 was $231,043, a decrease of $361,493 from the previous year. Management believes that based on the projected results of operations that cash flow from continuing operations should remain positive for the balance of the fiscal year. Results of Operations Revenues Revenues for the three months ended August 31, 1998 decreased by $544,000 (15%) over the comparable three-month period in fiscal 1997; and for the nine-month period ended August 31, 1998, revenues were lower by $983,000 (10%). This reduction was due to the subsidiaries' transition from offering primarily public classes to providing technical training and services. This revenue shortfall should be short-lived once the transition is fully completed during 1999. Costs and Expenses Costs and expenses for the three months ended August 31, 1998 increased by $231,000 (16%) due primarily to a increase in technical training and services labor as well as increased facilities costs. For the nine months ended August 31, 1998, costs increased by $229,000 (5%) for the same reasons. Also, the relocation of CALC/Canterbury's corporate office as well as its largest New Jersey training center contributed significantly to this increase. Selling expenses for the quarter ended August 31, 1998 increased by $52,000 (12%) over the same quarter in fiscal 1997. For the nine-month period ending August 31, 1998, selling expense increased $194,000 (15%) due to the planned increase in sales staff at CALC/Canterbury as well as the increase in commissions due to MSI/Canterbury's over-performing revenue numbers. General and administrative costs decreased by $400,000 (33%) over the previous year. For the nine months ended August 31, 1998, general and administrative expenses decreased $366,000 (12%). Reduced administrative labor expenses as well as reduced overall operating expenses were the reasons for the decrease. Interest income for the quarter decreased $38,000 (21%) over the same period in 1997; and for the nine-month period ended August 31, 1998, interest income was higher by $153,000 (32%). The increase is due to the accrual of the interest associated with the Landscape Maintenance Services (LMS) portion of the Chase revolver loan. This interest has yet to be collected from LMS. No interest income was accrued or paid on the revolver in fiscal 1997. It is anticipated that the monies will be collected in the first fiscal quarter of 1999. PART II - OTHER INFORMATION Item 1 Legal Proceedings No additional legal proceedings were either initiated or brought against the Company during the third fiscal quarter. Item 2 Changes in Securities None. Item 3 Defaults Upon Senior Securities None. Item 4 Submission of Matters to a Vote of Security Holders None. Item 5 Other Information None. Item 6 Exhibits and Reports on Form 8-K (a) Exhibits: None Reports on Form 8-K: (a) None. FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CANTERBURY INFORMATION TECHNOLOGY, INC. (Registrant) By/s/ Stanton M. Pikus ---------------------------------- Stanton M. Pikus President (Chief Executive Officer and duly authorized signer) By/s/ Kevin J. McAndrew ---------------------------------- Kevin J. McAndrew, C.P.A. Chief Operating Officer, Executive Vice President (Chief Financial Officer and duly authorized signer) October 15, 1998 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000794927 CANTERBURY INFORMATION TECHNOLOGY, INC. 1 US DOLLARS 1 NOV-30-1998 JUN-01-1998 AUG-31-1998 9-MOS 80,482 0 1,571,413 0 0 6,071,387 6,291,389 3,834,069 25,496,736 2,078,525 0 0 0 6,068 16,231,718 25,496,736 9,436,482 9,436,482 4,908,980 4,908,980 4,262,313 0 268,715 751,498 180,416 571,082 0 0 0 571,082 .10 .10
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