-----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, Jzqb6kOsgRQGMa7JSz0Mco6UDOPWrcpV6DDZlm0RdLsed7nPs9KDCtV6TN/UCIfS d0ddD/4LDKOCe4jKRiFwdw== /in/edgar/work/0001058809-00-000024/0001058809-00-000024.txt : 20001016 0001058809-00-000024.hdr.sgml : 20001016 ACCESSION NUMBER: 0001058809-00-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000831 FILED AS OF DATE: 20001013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANTERBURY INFORMATION TECHNOLOGY INC CENTRAL INDEX KEY: 0000794927 STANDARD INDUSTRIAL CLASSIFICATION: [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: 740048 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 0001.txt 10-Q FOR QUARTER ENDED 8/31/2000 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, 2000 0-15583 CANTERBURY INFORMATION TECHNOLOGY, INC. _______________________________________ (Exact name of registrant as specified in its charter) Pennsylvania 23-217505 (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 10,735,707 shares. FORM 10-Q PART 1 - FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements - ----------------------------- CANTERBURY INFORMATION TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEET -------------------------- ASSETS - ------ August 31, 2000 November 30, (Unaudited) 1999 ----------- ------------ Current Assets: Cash and cash equivalents $ 767,296 $ 1,060,434 Accounts receivable, net 5,160,749 2,676,889 Notes receivable-current portion 387,149 363,805 Prepaid expenses and other assets 766,375 849,107 Inventory, principally finished goods, at cost 534,002 101,533 Deferred income tax benefit 99,448 99,448 --------- --------- Total Current Assets 7,715,019 5,151,216 Property and equipment at cost, net of accumulated depreciation and amortization of $4,997,000 and $4,593,000 2,093,516 2,383,829 Goodwill net of accumulated Amortization of $2,688,000 and $2,348,000 9,142,101 8,885,170 Deferred income tax benefit 2,024,997 2,706,888 Notes receivable 7,337,340 7,630,836 Other assets 1,186,877 1,054,033 ---------- ---------- Total Assets $29,499,850 $27,811,972 =========== =========== See Accompanying Notes FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEET LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ August 31, 2000 November 30, (Unaudited) 1999 ----------- ------------ Current Liabilities: Accounts payable - trade $ 3,064,306 $ 1,144,922 Accrued expenses 511,916 387,660 Unearned revenue 913,917 1,111,330 Current portion, long-term debt 1,372,334 1,246,997 --------- --------- Total Current Liabilities 5,862,473 3,890,909 Long-term debt 959,620 1,989,031 Deferred income tax liability 2,993,846 3,059,219 Stockholder's Equity: Common stock, $.001 par value, 50,000,000 shares authorized; 10,735,000 and 9,508,000 issued 10,735 9,508 Additional paid in capital 22,102,193 19,946,848 Accumulated other comprehensive income (1,188,261) (472,215) Retained earnings 1,135,761 184,668 Notes receivable for capital stock (1,972,072) (388,696) Less treasury shares, at cost (407,300) (407,300) --------- ---------- Total Shareholders' Equity 19,681,056 18,872,813 ---------- ---------- Total Liabilities and Shareholders' Equity $29,496,995 $27,811,972 =========== =========== See Accompanying Notes FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF INCOME Three months ended Nine months ended August 31, August 31, (Unaudited) (Unaudited) ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- Service revenue $ 3,375,756 $3,067,023 $ 9,069,430 $8,927,322 Product revenue 6,136,621 160,007 12,405,672 620,644 ---------- --------- ---------- --------- Total net revenue 9,512,377 3,227,030 21,475,102 9,547,966 Service cost and expenses $ 1,876,288 $1,709,146 $ 5,233,960 $4,935,194 Product cost and expenses 5,228,184 50,560 10,540,526 242,694 ---------- --------- ---------- --------- Total cost and expenses 7,104,472 1,759,706 15,774,486 5,177,888 Gross profit 2,407,905 1,467,324 5,700,616 4,370,078 Selling 641,890 430,376 1,673,705 1,306,790 General and administrative 1,202,810 841,522 3,255,416 2,753,525 ---------- --------- ---------- --------- Total operating expenses 1,844,700 1,271,898 4,929,121 4,060,315 Other income/(expenses) Interest income 194,941 169,348 526,209 509,770 Interest expense (69,363) (91,832) (231,637) (275,330) Other 9,317 6,229 497,881 35,096 --------- --------- --------- --------- Income before income taxes 698,100 279,171 1,563,948 579,299 Provision for income taxes 272,000 30,000 610,000 60,720 ---------- --------- --------- --------- Net income $ 426,100 $ 249,171 $ 953,948 $ 518,579 =========== ========== =========== ========== Net income per share and common share equivalents: Basic net income per share $ .04 $ .03 $ .10 $ .07 =========== ========== =========== ========== Diluted net income per share $ .04 $ .03 $ .09 $ .07 =========== ========== =========== ========== Weighted average number of common shares - basic 10,345,400 8,819,700 9,840,000 7,773,500 =========== ========== =========== ========== Weighted average number of common shares - diluted 11,320,800 8,942,200 10,800,700 7,893,500 =========== ========== =========== ========== See Accompanying Notes FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE-MONTHS ENDED AUGUST 31, 2000 AND AUGUST 31, 1999 August 31, August 31, 2000 1999 --------- --------- (Unaudited) (Unaudited) Operating activities: Net income $ 953,948 $ 518,579 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 766,867 771,566 Provision for losses on accounts receivable 47,674 13,256 Deferred income taxes 616,517 (151,432) 401(k) contributions 59,498 48,192 Other assets (785,160) (247,940) Changes in operating assets, net of acquisitions Accounts receivable (2,322,529) (204,841) Inventory (432,469) -- Prepaid expenses and other assets 86,140 (323,317) Income taxes -- (36,298) Accounts payable 1,801,881 (140,136) Accrued expenses (107,716) (17,075) Unearned revenue (197,413) (16,620) ---------- --------- Net cash provided by operating activities 487,238 213,934 ---------- --------- Investing activities: Capital expenditures, net (96,453) (121,481) ---------- --------- Net cash used in investing activities (96,453) (121,481) ---------- --------- Financing activities: Proceeds from issuance of common stock, net -- 1,112,091 Principal payments on long term debt (942,374) (1,007,123) Other (50,001) -- Proceeds from long term debt 38,300 -- Proceeds from payments on notes receivable 270,152 249,704 ---------- ---------- Net cash provided by/(used in) financing activities (683,923) 354,672 ---------- ---------- Net increase/(decrease) in cash (293,138) 447,125 Cash, beginning of period 1,060,434 287,274 ---------- ---------- Cash, end of period $ 767,296 $ 734,399 ========== ========== See Accompanying Notes FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) 1. Operations and Summary of Significant Accounting Policies --------------------------------------------------------- Basis of Presentation --------------------- The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to those rules and regulations. It is suggested that these unaudited consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's 10-K for the year ended November 30. 1999. In the opinion of management, all adjustments (which consist only of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows of all periods presented have been made. Quarterly results are not necessarily indicative of results for the full year. Description of Business ----------------------- The Canterbury Companies, wholly-owned subsidiaries of Canterbury Information Technology, Inc., provide a wide variety of computer and management training programs and technology consulting services to Fortune 1000 companies. CALC/Canterbury is a Microsoft Solutions Provider and a Microsoft Certified Technical Education Center (CTEC), as well as a Lotus Authorized Education Center (LAEC). CALC/Canterbury provides application and technical computer training, technical services and staffing and both instructor led and on-line course development. CALC Web University, an online training portal, developed and hosted by CALC/Canterbury, focuses on design and delivery of online training in both Internet and Intranet environments. USC/Canterbury, a CTEC in the Mid-Atlantic area, provides technical training and network development and design. USC/Canterbury is also a value added reseller of hardware and software. MSI/Canterbury offers sales and management training and consulting to corporations. ATM/Canterbury is a software consulting and development company that specializes in document imaging, tracking and retrieval. DataMosaic/Canterbury Corp. and Canterbury Consulting Group are management and system consulting companies that provide staffing augmentation solutions and consulting services to the information technology industry. FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) 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. Stock Based Compensation ------------------------ The Company accounts for stock options under Accounting Principles Board (APB) Opinion No. 25- Accounting for Stock Issued to Employees. The Company discloses the pro forma net income and earnings per share effect as if the Company had used the fair value method prescribed under SFAS No.123-Accounting for Stock Based Compensation. Use of Estimates ---------------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 training and consulting revenue at the time the class is completed or the consulting services are performed. Hardware revenue is recorded when the goods are shipped to the customer. Revenue for software is recognized when the software is shipped to the customer. Statement of Cash Flows ----------------------- For purposes of the Statement of Cash Flows, cash refers solely to demand deposits with banks and cash on hand. FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) 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. The following estimated useful lives are used: Building and improvements 7 years Equipment 5 years Furniture and fixture 5 to 7 years Intangible Assets ----------------- Goodwill is being amortized over periods ranging from twenty to twenty-five years using the straight-line method. The Company periodically evaluates whether the remaining estimated useful life of intangibles may warrant revision or the remaining balance of intangibles may require adjustment generally based upon expectations of nondiscounted cash flows and operating income. Inventories ----------- Inventories are stated at the lower of cost or market utilizing a first-in, first-out method of determining cost. Earnings Per Share ------------------ Basic earnings per share is computed using the weighted average common shares outstanding during the year. Diluted earnings per share considers the dilutive effect, if any, of common stock equivalents (options). FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) Recent Accounting Pronouncements -------------------------------- The Company plans to adopt Statement of Financial Accounting Standards "(SFAS)" No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, effective at the beginning of fiscal 2001. This statement will require derivative positions to be recognized in the balance sheet at fair value. The Company believes that there will be no impact upon adoption on results of operations or financial position. Concentration of Risk --------------------- As previously discussed, the Company is in the business of providing information technology services. These services are provided to a large number of customers in various industries in the United States. The Company's trade accounts receivable are exposed to credit risk, but the risk is limited due to the diversity of the customer base and the customers wide geographic dispersion. The Company performs ongoing credit evaluations of its customer's financial condition. The Company maintains reserves for potential bad debt losses and such bad debt losses have been within the Company's expectations. The Company maintains cash balances at several large creditworthy banks located in the United States. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. The Company does not believe that it has significant credit risk related to its cash balance. Comprehensive Income -------------------- During the three months ended August 31, 2000 and August 31, 1999, total comprehensive income/(loss) amounted to ($98,000) and $0 respectively. For the nine months ended August 31, 2000 and August 31, 1999, total comprehensive income/(loss) amounted to ($716,000) and ($200,000) respectively. Comprehensive income consists of net income and unrealized gains and losses on securities available for sale, and is adjusted quarterly to reflect current market value of these securities. FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) 2. Acquisitions ------------ On August 1, 2000 the Company purchased all of the outstanding common stock of DataMosaic International, Inc. ("DataMosaic") for 221,420 restricted shares of Canterbury common stock valued at $558,000. DataMosaic, an Atlanta, Georgia company, is a management and systems consulting business which provides staffing augmentation solutions and consulting services to the information technology industry. The acquisition was recorded under the purchase method of accounting. The consolidated results of operations include DataMosaic since the date of acquisition. Proforma results of operations for 2000 and 1999 are deemed immaterial, and are not presented. After the acquisition DataMosaic changed its name to DataMosaic/Canterbury Corp. The purchase price was preliminarily allocated as follows: Cash - $114,000; receivables - $209,000; other assets - $23,000; liabilities - $349,000. The excess cost over the fair value of net assets acquired was approximately $561,000. On October 20, 1999, the Company acquired certain assets and assumed certain liabilities of U.S. Communications, Inc. (USC) from Condor Technology Solutions, Inc. for 292,000 shares of Canterbury restricted common stock valued at $850,000. USC, based in Maryland, is a reseller of desktop and server computer systems to state and local governments, as well as commercial private sector companies in the Mid-Atlantic market. USC provides a wide range of information technology services as well. They include training, software, consulting and network design. After the acquisition, the Company changed the name of U.S. Communications to USC/Canterbury Corp. The acquisition was accounted for using the purchase method of accounting. The purchase price was allocated as follows: receivables - $308,000; inventory - $209,000; other current assets - $21,000; non-current assets - $49,000; and current liabilities - $66,000. The excess cost over the fair value of net assets acquired was approximately $362,000. Goodwill is being amortized over 20 years on a straight line basis. The consolidated results of operations for 1999 include USC since the date of the acquisition. FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) 3. Segment Reporting ----------------- The Company is organized into three operating segments and the corporate office. The operating segments are: training and consulting, hardware sales and software sales. Summarized financial information for the three months ended August 31, 2000 and August 31, 1999, for each segment, is as follows: For the nine months ended August 31, Training and 2000 Consulting Hardware Software Corporate Total - ---- ------------ -------- -------- --------- ----- Revenues $9,061,087 $12,110,847 $303,168 $ -- $21,475,102 Income before taxes 999,746 984,071 9,165 (429,034) 1,563,948 Interest income -- -- -- 526,209 526,209 Interest expense -- 37 -- 231,600 231,637 Depreciation and amortization 376,049 29,252 14,920 346,646 766,867 Training and 1999 Consulting Hardware Software Corporate Total - ---- ------------ -------- -------- --------- ----- Revenues $8,927,320 $ 377,267 $243,379 $ -- $9,547,966 Income before taxes 1,124,947 55,674 36,766 (638,088) 579,299 Interest income -- -- -- 509,770 509,770 Interest expense -- -- -- 275,330 275,330 Depreciation and amortization 420,999 15,483 10,225 324,859 771,566 For the three months ended August 31, Training and 2000 Consulting Hardware Software Corporate Total - ---- ------------ -------- -------- --------- ----- Revenues $3,367,413 $5,956,361 $188,603 $ -- $9,512,377 Income before Taxes 453,288 556,386 6,811 (318,385) 698,100 Interest income -- -- -- 194,941 194,941 Interest expense -- -- -- 69,363 69,363 Depreciation and amortization 103,418 8,520 4,187 121,997 238,122 FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) Training and 1999 Consulting Hardware Software Corporate Total - ---- ------------ -------- -------- --------- ----- Revenues $3,067,021 $ 78,373 $ 81,636 $ -- $3,227,030 Income before Taxes 428,664 3,577 8,921 (161,991) 279,171 Interest income -- -- -- 169,348 169,348 Interest expense -- -- -- 91,832 91,832 Depreciation and amortization 134,609 4,149 4,167 106,753 249,678 4. Property and Equipment ---------------------- Property and equipment consists of the following: August 31, November 30, 2000 1999 --------- ----------- Land, buildings and improvements $ 725,910 $ 725,910 Machinery and equipment 4,219,542 4,116,383 Furniture and fixtures 1,413,287 1,401,696 Leased property under capital leases and leasehold improvements 732,197 732,197 ----------- ----------- 7,090,936 6,976,186 Less: accumulated depreciation (4,997,420) (4,592,357) ----------- ----------- Net property and equipment $ 2,093,516 $ 2,383,829 =========== =========== Depreciation expense for 2000 and 1999 was $426,000 and $302,000, respectively. FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) 5. Long-Term Debt -------------- August 31, November 30, 2000 1999 --------- ----------- Long-term obligations consist of: Term loan $ -- $ 200,436 Revolving credit line 2,159,620 2,774,620 Capital lease obligations 172,334 260,972 ----------- ----------- 2,331,954 3,236,028 Less: Current maturities (1,372,334) (1,246,997) ----------- ----------- $ 959,620 $ 1,989,031 =========== =========== The Company's outstanding amounts owed under the term loan and credit line with Chase Bank were refinanced in December, 1999. Under the new agreement, the Company paid off the remaining term debt of $200,436 and agreed to term out the $2,774,620 credit line. Monthly payments began in March of 2000, and continue until December of 2001 when the final balloon payment of $640,000 is due and payable. At August 31, 2000, the Company was in technical violation of a debt to equity ratio covenant contained in its bank agreement by 0.06, due to a change in accounting policies. The Company is in the process of resolving this issue. The long term debt is secured by substantially all of the assets of the Company and requires compliance with covenants which include: limits on capital expenditures, certain prepayments from excess cash flow as defined and the maintenance of certain financial ratios and amounts. The Company is restricted by its primary lender from paying cash dividends on its common stock. Aggregate maturities on long-term debt, exclusive of obligations under capital leases, are approximately $300,000 in 2000, $1,220,000 in 2001, and $639,620 thereafter. The carrying value of the long-term debt approximates its fair value. FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) 6. Capital Leases -------------- Capital lease obligations are for certain equipment leases which expire through fiscal year 2003. Future required payments under capitalized leases together with the present value, calculated at the respective leases' implicit interest rate of approximately 10.5% to 14.3% at their inception. Year ending November 30, 2000 $ 54,597 Year ending November 30, 2001 80,764 Year ending November 30, 2002 44,560 Year ending November 30, 2003 8,934 -------- Total minimum lease payments 188,855 Less amount representing interest (16,521) -------- Present value of long-term obligations under capital leases $172,334 ======== 7. Securities Available for Sale ----------------------------- At August 31, 2000 and November 30, 1999, the Company held investment securities in public companies. For one of the public companies certain officers and directors of the Company have an ownership interest in the aggregate of approximately 15%. Management has estimated the fair value of this investment at August 31, 2000 and November 30, 1999 at $822,840 and $26,437, respectively, based on discounted market values due to the stock being thinly traded and volatile. Other equity securities have a fair value of $81,081 and $202,355 at August 31, 2000 and November 30, 1999, respectively. Management has classified these investments as "available for sale" and are included in non-current other assets in the accompanying balance sheet. The Company did not sell any available for sale securities during 2000 or 1999. FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) 8. Related Party Transactions -------------------------- During 1999, the Company performed consulting and web development services for a start-up, non-public company, e*machinery, inc. in which certain officers are members of the Board of Directors and shareholders. The services billed during the year totaled $521,500. The receivable for these services is included in other assets on the accompanying balance sheet at May 31, 2000 and November 30, 1999. In March 2000 the Company received approximately 278,000 shares of restricted common stock in e*machinery.net, inc., the publicly traded parent company, in satisfaction of the receivable. During 2000, the Company also assisted in raising capital for e*machinery, inc., which is now e*machinery.net, inc., a public company. For these services, the Company earned 250,000 shares of restricted common stock. The discounted value of these shares was $461,250. This amount has been recorded in Other Income on the income statement during the quarter ended May 31, 2000. In the third quarter of Fiscal 2000 the Company billed $275,000 for services and will receive restricted common stock as payment, as a subsequent event. 9. Stockholders' Equity -------------------- In June, 2000 the Board of Directors voted to allow officers, directors, certain advisors and individuals valuable to Canterbury the opportunity to increase their equity positions in the Company, as an incentive to continue and increase their efforts on behalf of the Company. A total of 800,000 shares of restricted common stock were purchased at market with interest bearing, non-recourse notes to the Company. The notes carry an interest rate of 6.5% and are due and payable on or before June, 2004. The notes and accrued interest are collateralized by the shares being issued. Each recipient also has granted the Company or its designees a 15- day right of first refusal, in any sale of these shares. FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) Item 2. Management's Discussion of Financial Condition and Results ---------------------------------------------------------- of Operations ------------- Liquidity and Capital Resources - ------------------------------- Working capital at August 31, 2000 was $1,853,000. This was an increase of $592,000 over November 30, 1999. The increase was caused by an increase in receivables and inventory, offset by an increase in accounts payable of USC/Canterbury. The Company's outstanding amounts owed under the term loan and credit line with Chase Bank were refinanced in December, 1999. Under the new agreement, the Company paid off the remaining term debt of $200,436 and agreed to term out the $2,774,620 credit line. Monthly payments began in March of 2000, and continue until December of 2001 when the final balloon payment of $640,000 is due and payable. As of September 1, 2000 the Company has made $715,000 in principal payments to Chase Bank. At August 31, 2000, the Company was in technical violation of a debt to equity ratio covenant contained in its bank agreement by 0.06, due to a change in accounting policies. The Company is in the process of resolving this issue. The long term debt is secured by substantially all of the assets of the Company and requires compliance with covenants which include: limits on capital expenditures, certain prepayments from excess cash flow as defined and the maintenance of certain financial ratios and amounts. The Company is restricted by its primary lender from paying cash dividends on its common stock. Management believes that positive cash flow contributions from the Company's operating subsidiaries will be sufficient to cover cash flow requirements for fiscal 2000. There was no material commitment for capital expenditures as of August 31, 2000. Inflation was not a significant factor in the Company's financial statements. Cash flow from continuing operations for the nine months ended August 31, 2000 was $487,000. This represents an increase of $273,000 over the prior year. The increase is mainly attributable to the additional cash flow provided by the USC/Canterbury acquisition, as well as an overall improvement from existing subsidiaries. FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) Results of Operations - --------------------- Revenues -------- Revenues for the three months ended August 31, 2000 increased by $6,285,000 (195%) over the comparable three-month period in fiscal 1999, due primarily to the revenue contribution of USC/ Canterbury in fiscal 2000. For the nine months ended August 31, 2000, revenues increased by $11,927,000 (125%) due again to the USC/Canterbury acquisition. Costs and Expenses ------------------ Costs and expenses for the three months ended August 31, 2000 increased by $5,344,000 in conjunction with the $6,285,000 revenue increase due again to the costs associated with the USC/Canterbury operations. The $10,596,000 increase for the nine months ended August 31, 2000 was also due to the USC/Canterbury operations. Gross margins percentages for both the quarter and nine months ended August 31, 2000 decreased from 45% to 26% due to the increase in sales contribution from USC/Canterbury. As a VAR, USC's margins are typically lower than in the pre-existing services businesses within Canterbury. However, it is management's belief that the additional dollar contribution to gross and pretax profit, as well as the additional goods and services made available to the client base will enhance the overall revenue contribution from all subsidiaries. Selling expenses for the quarter and nine months ended August 31, 2000 increased by $212,000 (49%) and $366,000 (28%) respectively, over the same period in fiscal 1999. The increase was due primarily to the selling costs associated with USC/Canterbury for the three months ended August 31, 2000. Other Income ------------ Other income for the nine months ended August 31, 2000 increased by $463,000 due to the receipt of stock for assisting in raising capital for a related party during the second quarter. FORM 10-Q CANTERBURY INFORMATION TECHNOLOGY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ (continued) PART II - OTHER INFORMATION - --------------------------- Item 1 Legal Proceedings - ------ None Item 2 Changes in Securities - ------ None Item 3 Defaults Upon Senior Securities - ------ None Item 4 Submission of Matters to a Vote of Stock Holders - ------ None Item 5 Other Information - ------ None Item 6 Exhibits and Reports on Form 8-K - ------ (a) Exhibits: None (b) Reports on Form 8-K: 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 13, 2000 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 0000794927 CANTERBURY INFORMATION TECHNOLOGY, INC. 1 NOV-30-2000 JUN-01-2000 AUG-31-2000 9-MOS 767,296 0 5,160,749 0 534,002 7,715,019 7,090,936 (4,997,420) 29,499,850 5,862,473 0 0 0 10,735 19,673,176 29,499,850 21,475,102 21,475,102 15,774,486 4,929,122 1,024,090 0 (231,637) 1,563,948 610,000 953,948 0 0 0 953,948 .10 .09
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