8-K/A 1 ccg8kut.txt FINANCIAL STATEMENTS FOR OCT. 12, 2001 8-K FILING SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A Current Report Pursuant to Section 13 or 15(d) of The Securities Act of 1934 Date of Report (Date of earliest event reported): September 28, 2001 CANTERBURY CONSULTING GROUP, INC. --------------------------------- FORMERLY CANTERBURY INFORMATION TECHNOLOGY, INC. (Exact name of registrant as specified in its charter) Pennsylvania 23-2170505 - ------------------------------- ----------------------- (State of Incorporation) (IRS Employer Identification Number) 1600 Medford Plaza Rt. 70 & Hartford Road Medford, New Jersey 08055 (Address of principal executive offices) Telephone Number: (609) 953-0044 Table of Contents USER TECHNOLOGY SERVICES, INC. - ------------------------------ Independent Auditors' Report..............................................F-1 Balance Sheets at December 31, 2000 and 1999..............................F-2 Statements of Operations for the Fiscal Years ended December 31, 2000 and 1999.................................F-4 Statements of Stockholder's Equity/(Deficit) for the Fiscal Years ended December 31, 2000 and 1999.................................F-5 Statements of Cash Flows for the Fiscal Years ended December 31, 2000 and 1999.................................F-6 Notes to Financial Statements for the Fiscal Years ended December 31, 2000 and 1999................................F-7 Balance Sheet August 31, 2001 (unaudited)................................F-14 Statements of Operations for the Eight Months ended August 31, 2001 and 2000 (unaudited)......................F-16 Statements of Cash Flows for the Eight Months ended August 31, 2001 and 2000 (unaudited)......................F-17 Notes to Financial Statements for the Eight Months ended August 31, 2001 and 2000 (unaudited)......................F-18 CANTERBURY CONSULTING GROUP, INC. - --------------------------------- Introduction to Pro Forma Statements (unaudited).........................F-21 Pro Forma Balance Sheet - August 31, 2001 (unaudited)....................F-22 Pro Forma Statement of Operations - Fiscal Year 2000 (unaudited)....................................F-24 Pro Forma Statement of Operations for the Nine Months ended in Fiscal 2001 (unaudited)................................F-25 Notes to Pro Forma Financial Statements (unaudited)......................F-26 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Usertech/Canterbury Corp. 1600 Medford Plaza 128 Route 70 Medford, New Jersey 08055 We have audited the accompanying balance sheets of User Technology Services, Inc. as of December 31, 2000 and 1999 and the related statements of operations, stockholder's equity/(deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of User Technology Services, Inc. at December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/BARATZ & ASSOCIATES, P.A. December 12, 2001 F-1 USER TECHNOLOGY SERVICES, INC. BALANCE SHEETS DECEMBER 31, 2000 AND 1999 ASSETS - ------ 2000 1999 ---- ---- Current Assets: Cash $ 450,291 $ 552,674 Trade receivables, net of allowance for doubtful accounts of $344,973 and $170,675 at December 31, 2000 and 1999, respectively 3,359,952 2,863,032 Current portion of note receivable 50,000 75,000 Prepaid expenses 80,943 84,497 Deferred tax asset 94,928 - ----------- ---------- Total Current Assets 4,036,114 3,575,203 Property and equipment, net 278,215 681,532 Goodwill, net 2,065,815 2,604,711 Software costs, net 32,614 39,546 Note receivable, long term - 50,000 Deferred tax asset 83,270 78,456 ----------- ---------- Total Assets $6,496,028 $7,029,448 =========== ========== See Accompanying Notes F-2 USER TECHNOLOGY SERVICES, INC. BALANCE SHEETS DECEMBER 31, 2000 AND 1999 LIABILITIES AND STOCKHOLDER'S EQUITY/(DEFICIT) - ------------------------------------------------- 2000 1999 ---- ---- Current Liabilities: Accounts payable $ 96,989 $ 148,114 Accrued expenses 625,005 896,655 Unearned revenue 102,365 178,291 Deferred income taxes - 10,666 Due to parent company 5,855,926 3,567,800 ---------- ---------- Total Current Liabilities 6,680,285 4,801,526 ---------- ---------- Stockholder's Equity/(Deficit): Common stock, $.01 par value, 2,150,000 shares authorized; 100 shares issued and outstanding 1 1 Additional paid in capital 5,499,999 5,661,289 Accumulated deficit (5,684,257) (3,433,368) ---------- ---------- Total Stockholder's Equity/(Deficit) (184,257) 2,227,922 ---------- ---------- Total Liabilities and Stockholder's Equity/(Deficit) $6,496,028 $7,029,448 ========== ========== See Accompanying Notes F-3 USER TECHNOLOGY SERVICES, INC. STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2000 AND 1999 2000 1999 ---- ---- Service income $14,497,898 $20,554,826 Cost of services 10,815,996 17,726,736 ----------- ----------- Gross profit 3,681,902 2,828,090 ----------- ----------- Operating expenses: Selling 2,109,130 2,425,728 General and administrative 3,696,663 2,452,328 Corporate administrative 530,524 731,873 ----------- ----------- Total operating expenses 6,336,317 5,609,929 ----------- ----------- Other expense: Interest expense 465,039 490,943 ----------- ----------- Loss before income tax benefit (3,119,454) (3,272,782) Income tax benefit (868,565) (893,537) ----------- ----------- Net loss $(2,250,889) $(2,379,245) =========== =========== See Accompanying Notes F-4 USER TECHNOLOGY SERVICES, INC. STATEMENTS OF STOCKHOLDER'S EQUITY/(DEFICIT) YEARS ENDED DECEMBER 31, 2000 AND 1999 Common Common Additional Total Stock Stock Paid-in- Accumulated Stockholder's Shares Amount Capital Deficit Equity/(Deficit) ------ ------ ------- ------- ---------------- Balance, January 1, 1999 100 $1 $5,499,999 $(1,054,123) $ 4,445,877 Additional capital contributed by parent 161,290 - 161,290 Net loss for the 1999 Year - (2,379,245) (2,379,245) ----- ----- ---------- ----------- ----------- Balance, December 31, 1999 100 $1 5,661,289 $(3,433,368) $2,227,922 Return of capital to parent - - (161,290) - (161,290) Net loss for the 2000 Year - - - (2,250,889) (2,250,889) ----- ----- ---------- ----------- ----------- Balance, December 31, 2000 100 $1 $5,499,999 $(5,684,257) $ (184,257) ===== ===== ========== =========== ===========
See Accompanying Notes F-5 USER TECHNOLOGY SERVICES, INC. STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2000 AND 1999 2000 1999 ---- ---- Cash flows from operating activities: Net loss $(2,250,889) $(2,379,245) Adjustments to reconcile net loss to net cash (used in)/provided by operating activities: Depreciation and amortization 950,893 1,105,366 Loss on sale of equipment 9,449 6,275 Changes in operating assets and liabilities (Increase)/decrease in receivables (496,920) 6,902,088 Decrease/(increase) in prepaid expenses 3,554 (31,054) (Increase)/decrease in deferred tax assets (110,409) 59,979 (Decrease)/increase in accounts payable (51,126) 71,395 Decrease in accrued liabilities (271,649) (711,624) Decrease in deferred income (75,926) (689,020) ----------- ---------- Net cash (used in) provided by operating activities (2,293,023) 4,334,160 ----------- ---------- Cash flows from investing activities: Purchases of software (16,451) (33,608) Proceeds from note receivable 75,000 75,000 Purchases of equipment (26,509) (235,511) Proceeds from sale of equipment 31,764 49,051 ----------- ---------- Net cash provided by (used in) investing activities 63,804 (145,068) ----------- ---------- Cash flows from financing activities: Increase/(decrease) in due to parent company 2,288,126 (4,080,059) Capital contributions by parent company (161,290) 161,290 ----------- ---------- Net cash provided by (used in) financing activities 2,126,836 (3,918,769) ----------- ---------- Net (decrease)/increase in cash (102,383) 270,323 Cash, beginning of the period 552,674 282,351 ----------- ---------- Cash, end of the period $ 450,291 $ 552,674 =========== ========== See Accompanying Notes F-6 USER TECHNOLOGY SERVICES, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000 AND 1999 1. Operations and Summary of Significant Accounting Policies --------------------------------------------------------- Description of Business ----------------------- Usertech/Canterbury, Inc. ("the Company" formerly known as User Technology Services, Inc.), is a twenty-three year old technology consulting organization specializing in custom learning solutions for Fortune 1000 corporations, higher education institutions, public sector organizations and mid-sized companies. Usertech/Canterbury trains its clients' employees in the use of Enterprise Resource Planning (ERP) systems, such as PeopleSoft, SAP and Oracle, as well as many other proprietary and client relationship management (CRM) applications. Usertech/Canterbury designs training and performance support programs that ensure users' early acceptance of new information technology, and facilitate a smooth conversion to new systems and business processes. To deliver these services, the Company promotes a blended media approach, employing effective mixtures of process, people and technology. Instructor-led training, coupled with e-Learning, help desk and service center support allow for maximum results with the best return on customer investment. Revenue Recognition ------------------- Staff Accounting Bulletin #101 (SAB 101) was recently issued by the SEC. SAB 101 states that revenue recognition cannot occur until the earnings process is complete, evidenced by an agreement between the Company and the customer, there has been delivery and acceptance, collectibility is probable, and pricing is fixed and determinable. If significant obligations remain after delivery, revenue is deferred until such obligations are fulfilled. The Company had followed these principles of revenue recognition prior to the implementation of SAB 101. Therefore, SAB 101 shall have no impact on revenue reporting. Revenues from consulting and service contracts are recognized as services are rendered over the contract or service period. Trade Receivables ----------------- The Company provides an allowance for losses on trade receivables based on a review of the current status of existing receivables and management's evaluation of periodic aging of the accounts. Concentration of Credit Risk ---------------------------- The Company provides its services to a wide variety of commercial, governmental and institutional customers. Financial instruments which potentially subject the Company to concentrations of credit risk are cash and trade receivables. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, does not require collateral from its customers. The Company has not experienced significant credit losses. The Company maintains deposit accounts with high quality financial institutions; at times, such deposits may exceed FDIC insurance limits. F-7 USER TECHNOLOGY SERVICES, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000 AND 1999 Property and Equipment ---------------------- Property and equipment are stated at original cost. Depreciation and amortization for financial accounting purposes is computed using the straight line method over the estimated lives of the respective assets. The total original cost for each class of property and equipment along with the estimated life for each class is as follows as of December 31: Estimated Life 2000 1999 (Years) ---- ---- ------- Computer equipment $ 1,534,887 $ 1,706,422 3 Furniture and equipment 312,626 329,819 6 Leasehold improvements 5,950 5,950 5 ----------- ----------- Total Cost 1,853,463 2,042,191 Less accumulated depreciation (1,575,248) (1,360,659) ----------- ----------- Net Property and Equipment $ 278,215 $ 681,532 =========== =========== For income tax purposes, accelerated methods of depreciation are used. Maintenance and repair costs are charged to expense as incurred. The cost and accumulated depreciation relating to property and equipment retired or otherwise disposed of are eliminated from the accounts and any resulting gains or losses are credited or charged to income. Goodwill -------- Goodwill is being amortized over 10 years. The original cost and accumulated amortization of goodwill is as follows as of December 31: 2000 1999 ---- ---- Original Cost $ 5,390,789 $ 5,390,789 Accumulated amortization (3,324,974) (2,786,078) ----------- ----------- Goodwill, net of amortization $ 2,065,815 $ 2,604,711 =========== =========== Software -------- Purchased software is being amortized over 3 years. The original cost and accumulated amortization of software is as follows as of December 31: 2000 1999 ---- ---- Original Cost $ 83,647 $ 67,196 Accumulated amortization (51,033) (27,650) -------- -------- Software, net of amortization $ 32,614 $ 39,546 ======== ======== F-8 USER TECHNOLOGY SERVICES, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000 AND 1999 Valuation of Long Lived Assets ------------------------------ The Company evaluates its long lived assets by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with them. If such evaluations indicate that the future undiscounted cash flows of certain long lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. Income Taxes ------------ Income taxes are accounted for under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than the enactment of changes in tax laws or rates. A valuation allowance is recognized if, on weight of available evidence, it is more likely than not that some portion or all the deferred tax assets will not be realized. Advertising Cost ---------------- Advertising costs are charged to expense as incurred. Advertising expense for the years ended December 31, 2000 and 1999 was $182,077 and $290,124 respectively. Stock-Based Compensation ------------------------ Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," (SFAS No. 123) encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for employer stock-based compensation utilizing the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". Accordingly, compensation cost for stock options issued to employees is measured as the excess, if any, of the fair market price of the Company stock at the date of grant over the amount an employee must pay to acquire the stock. SFAS No. 123 requires companies that continue to follow APB No. 25 to provide a pro forma disclosure of the impact of applying the fair value method of SFAS No. 123. 2. Related Party Transactions -------------------------- The Company was a 100% owned subsidiary of Ceridian Corporation during the years ended December 31, 2000 and 1999. During 2000, the Company earned revenues of $814,778 from services rendered to Ceridian Corporation and affiliates. No revenues were earned from related parties in 1999. F-9 USER TECHNOLOGY SERVICES, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000 AND 1999 The Company was charged general and administrative costs by Ceridian Corporation related to various corporate services provided by the parent company. In addition, Ceridian charged interest expense to the Company for amounts advanced to or otherwise due from the Company. As reported in Note 3, the Company received federal income tax benefits from Ceridian through utlilization of current federal net operating losses. Related party expenses and income tax benefits for the years ended December 31, 2000 and 1999 were as follows: 2000 1999 ---- ---- Corporate administrative $ 530,524 $ 731,873 Interest expense $ 465,039 $ 490,943 Income tax benefits $(746,820) $(954,134) 3. Income Tax (Benefit) Expense ---------------------------- Deferred income taxes reflect the net tax effects of (a) temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) net operating loss carryforwards (when available). Income tax (benefit) expense consisted of the following for the years ended December 31: 2000 1999 ---- ---- Current taxes: Federal $(746,820) $(954,134) State and local 27,798 600 --------- --------- (719,022) (953,534) Deferred taxes: Federal (149,543) 59,997 --------- --------- Net income tax (benefit) $(868,565) $(893,537) ========= ========= The federal income tax benefits were the result of the utilization of the Company's current net operating losses by the parent company, Ceridian Corporation in the annual filing of consolidated federal income tax returns. The tax benefits receivable from the parent company were offset against amounts due to the parent company. Significant items comprising the Company's deferred tax assets and liabilities are as follows at December 31: F-10 USER TECHNOLOGY SERVICES, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000 AND 1999 2000 1999 ---- ---- Deferred Tax Asset/(Liability) - Current - ---------------------------------------- Differences between book and tax basis: Trade receivables $29,400 $(60,143) Accrued liabilities 65,528 27,948 Others - 21,529 ------- -------- 94,928 (10,666) ------- -------- Deferred Tax Asset - Long Term - ------------------------------ Differences between book and tax basis: Property and equipment $63,526 $19,578 State net operating loss carryforwards 19,744 58,878 ------- -------- $83,270 $78,456 ------- -------- 4. Supplemental Cash Flow Information ---------------------------------- Cash paid for interest and income taxes for the years ended December 31, 2000 and 1999 were as follows: 2000 1999 ---- ---- Interest $465,039 $490,943 Income Taxes $ 22,347 $ 600 5. Stock Compensation Plans ------------------------ The employees of the Company participated in two stock compensation plans of Ceridian Corporation, the parent company. Stock options were awarded to eligible employees under Ceridian's 1999 Stock Incentive Plan. These stock option awards generally vested annually over a three year period with 10-year terms and have an exercise price that may not be less than the fair market value of the underlying stock at the date of grant. Ceridian's Employee Stock Purchase Plan provided the opportunity for participants to purchase Ceridian stock at a price of 85% of the lesser of the fair market value on either the first day or the last day of the applicable three-month offering period. As reported in Note 1, the Company has adopted the disclosure-only provisions of SFAS No. 123. Therefore, no expense is recorded with respect F-11 USER TECHNOLOGY SERVICES, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000 AND 1999 to the stock option or employee stock purchase plans. A pro forma disclosure of SFAS 123 compensation expense and other stock compensation plan information is presented below. 2000 1999 ---- ---- Pro Forma Effect of Fair Value Accounting: Net loss as reported $(2,250,889) $(2,379,245) Pro forma compensation expense 103,362 211,367 ----------- ----------- Pro forma net loss $(2,354,251) $(2,590,612) Weighted -Average Assumptions: Expected lives in years (stock options) 4-8 4-8 Expected volatility 40.4% 37.4% Expected dividend rate - - Risk-free interest rate 5.0% 6.3% Stock Options: Shares 25,500 28,250 Fair value per share $7.52 $9.69 Employee Stock Purchase Plan Shares 3,312 3,494 Fair value per share $4.90 $6.89 6. Commitments ----------- The Company leases office facilities and office equipment under noncancelable operating leases. Future minimum lease payments under such leases were as follows at December 31, 2000: Fiscal Years ------------ 2001 $ 617,117 2002 591,808 2003 590,398 2004 290,521 Thereafter - ---------- Total $2,089,844 ========== Aggregate rent expense for the years ended December 31, 2000 and 1999 approximated $608,000 and $629,000 respectively. 7. Subsequent Events ----------------- At September 28, 2001, Canterbury Consulting Group, Inc. ("Canterbury") F-12 USER TECHNOLOGY SERVICES, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000 AND 1999 purchased 100% of the outstanding shares of the Company from Ceridian Corporation with an effective date of September 1, 2001. Canterbury paid $2,350,000 in cash and issued a $1,200,000 note payable over three years to Ceridian. At August 31, 2001, Ceridian recapitalized the balance of the amount due to the parent company of $6,256,834 to contribute additional capital to the company. In addition, pursuant to the Canterbury transaction, Ceridian Corporation assumed a Company office facility lease effective September 1, 2001. This lease had a monthly rent cost of approximately $ 7,500 with a lease term through June 2004. Moreover, pursuant to the Canterbury transaction, the Company purchased computer equipment from Ceridian Corporation by issuing a $364,703 note payable over 31 monthly installments of $ 12,362 inclusive of interest at 3.75% per year. During the first half of 2001, Company management completed and implemented a business restructuring plan. The plan included cost-cutting measures such as workforce reduction and an early termination of a facility lease. The lease had a monthly rent cost of approximately $4,800 with a scheduled lease term through December 2003. Total restructuring charges of $3,149,500 were recorded in the first half of 2001 inclusive of a noncash goodwill impairment charge of $1,931,000. F-13 USER TECHNOLOGY SERVICES, INC. BALANCE SHEET AUGUST 31, 2001 (Unaudited) ASSETS - ------ Current Assets: Cash $ - Trade receivables 2,592,120 Prepaid expenses 39,806 Deferred income tax asset 46,808 ---------- Total Current Assets 2,678,734 Property and equipment 494,228 Deferred income tax asset 27,694 ---------- Total Assets $3,200,656 ========== See Accompanying Notes F-14 USER TECHNOLOGY SERVICES, INC. BALANCE SHEET AUGUST 31, 2001 (Unaudited) LIABILITIES AND STOCKHOLDER'S EQUITY - ------------------------------------ Current Liabilities: Accounts payable $ 120,375 Current portion of long term debt 137,006 Accrued expenses 311,865 Unearned revenue 53,380 ---------- Total Current Liabilities 622,626 Long term debt 227,696 ---------- Total Liabilities 850,322 ---------- Stockholder's Equity: Common stock, $.01 par value 2,150,000 shares authorized; 200 shares issued and outstanding 2 Additional paid-in capital 11,756,832 Accumulated deficit (9,406,500) ---------- Total Stockholder's Equity 2,350,334 ---------- Total Liabilities and Stockholder's Equity $3,200,656 ========== See Accompanying Notes F-15 USER TECHNOLOGY SERVICES, INC. STATEMENTS OF OPERATIONS The following Statements of Operations for the eight-month periods ended August 31, 2001 and August 31, 2000, 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 period have been included. Eight-months ended August 31, ------------------ (Unaudited) 2001 2000 ---- ---- Service income $ 7,075,411 $ 9,766,961 Cost of services 6,469,666 7,925,938 ----------- ----------- Gross profit 605,745 1,841,023 Operating Expenses: Selling 614,775 1,187,244 General and administrative 4,174,268 2,248,256 Corporate administrative 290,166 352,444 ----------- ----------- Total operating expenses 5,079,209 3,787,944 Other Expense: Interest expense 72,500 268,755 ----------- ----------- Loss before income taxes (4,545,964) (2,215,676) Income tax benefit (823,721) (753,330) ----------- ----------- Net loss $(3,722,243) $(1,462,346) =========== =========== See Accompanying Notes F-16 USER TECHNOLOGY SERVICES, INC. STATEMENTS OF CASH FLOWS EIGHT MONTHS ENDED AUGUST 31, 2001 AND 2000 (Unaudited) 2001 2000 ---- ---- Cash flows from operating activities: Net loss $(3,722,243) $(1,462,346) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 271,912 653,640 Loss on sale of equipment 1,603 4,638 Impairment of goodwill 1,931,000 - Changes in operating assets and liabilities Decrease/(increase) in receivables 767,832 (1,742,149) Decrease in prepaid expenses 41,137 3,554 Decrease)/(increase) in deferred tax assets 103,696 (19,838) Increase/(decrease) in accounts payable 23,386 (17,168) (Decrease)/increase in accrued liabilities (313,140) 238,897 (Decrease)/increase in deferred income (48,985) 273,448 ----------- ----------- Net cash used in operating activities (943,802) (2,067,324) ----------- ----------- Cash flows from investing activities: Purchases of software - (9,160) Proceeds from note receivable 50,000 75,000 Purchases of equipment (7,469) (28,315) Proceeds from sale of equipment 31,831 34,566 Proceeds from sale of software 18,241 - ----------- ----------- Net cash provided by investing activities 92,603 72,091 ----------- ----------- Cash flows from financing activities: Capital contributions by parent company 6,256,834 - (Decrease)/increase in due to parent company (5,855,926) 1,619,919 ----------- ----------- Net cash provided by financing activities 400,908 1,619,919 ----------- ----------- Net decrease in cash (450,291) (375,314) Cash, beginning of the period 450,291 552,674 ----------- ----------- Cash, end of the period $ - $ 177,360 =========== =========== See Accompanying Notes F-17 USER TECHNOLOGY SERVICES, INC. NOTES TO FINANCIAL STATEMENTS EIGHT MONTHS ENDED AUGUST 31, 2001 AND 2000 (Unaudited) 1. Basis of Presentation --------------------- The financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the other financial statements and footnotes thereto included in this Form 8-K/A. 2. Business Restructuring ---------------------- During the eight months ended August 31, 2001, management performed an evaluation of the Company and implemented a business restructuring plan. The plan included cost-cutting measures such as workforce reduction and an early termination of a facility lease. Total restructuring charges of $3,149,500 were recorded in the first half of 2001 inclusive of a noncash goodwill impairment charge of $1,931,000. 3. Related Party Transactions -------------------------- During the eight months ended August 31, 2001 and 2000 the Company earned revenues of $180,395 and $347,791, respectively from services rendered to Ceridian Corporation and affiliates. The Company was charged general and administrative costs by Ceridian Corporation related to various corporate services provided by the parent company. In addition, Ceridian charged interest expense to the Company for amounts advanced to or otherwise due from the Company. Related party expenses and income tax benefits for the eight months ended August 31, 2001 and 2000 were as follows: 2001 2000 ---- ---- Corporate administrative $ 290,166 $ 352,444 Interest expense $ 72,500 $ 268,755 Income tax benefits $(939,760) $(753,330) 4. Income Tax (Benefit) Expense ---------------------------- Deferred income taxes reflect the net tax effects of (a) temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) net operating loss carryforwards (when available). Income tax (benefit) expense consisted of the following for the eight months ended August 31, 2001 and 2000: F-18 USER TECHNOLOGY SERVICES, INC. NOTES TO FINANCIAL STATEMENTS EIGHT MONTHS ENDED AUGUST 31, 2001 AND 2000 (Unaudited) 2001 2000 ---- ---- Current taxes: Federal $(939,760) $(753,330) State and local 32,087 - --------- --------- (907,673) (753,330) Deferred taxes: Federal 83,952 - --------- --------- Net income tax (benefit) $(823,721) $(753,330) ========= ========= 5. Supplemental Cash Flow Information ---------------------------------- At August 31, 2001, the Company purchased computer equipment costing $364,703 from Ceridian Corporation through issuance of a $364,703 note payable. 6. Commitments ----------- As reported in Note 2, the Company implemented a business restructuring plan during the eight months ended August 31, 2001. The restructuring included an early termination of a facility lease. The terminated lease had a monthly rent cost of approximately $4,800 with a scheduled lease term through December 2003. Pursuant to the Canterbury transaction reported in Note 8, Ceridian Corporation assumed a Company office facility lease effective September 1, 2001. This lease had a monthly rent cost of approximately $7,500 with a lease term through June 2004. 7. Long Term Debt -------------- Pursuant to the Canterbury transaction, the Company purchased computer equipment from Ceridian Corporation by issuing a $364,703 note payable over 31 monthly installments of $12,362 inclusive of interest at 3.75% per year. 8. Subsequent Event ---------------- At September 28, 2001, Canterbury Consulting Group, Inc. ("Canterbury") purchased 100% of the outstanding shares of the Company from Ceridian Corporation with an effective date of September 1, 2001. Canterbury paid $2,350,000 in cash and issued a $1,200,000 note payable over three years to Ceridian. F-19 USER TECHNOLOGY SERVICES, INC. NOTES TO FINANCIAL STATEMENTS EIGHT MONTHS ENDED AUGUST 31, 2001 AND 2000 (Unaudited) 9. Major Customer -------------- One customer accounted for approximately 11% of Company revenues for the eight months ended August 31, 2001. F-20 CANTERBURY CONSULTING GROUP, INC. PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) The pro forma financial statements give effect to the September 28, 2001 acquisition by Canterbury Consulting Group, Inc. ("the Company"), of 100% of the outstanding shares of User Technology Services, Inc. from Ceridian Corporation with an effective date of September 1, 2001, as if such transaction had occurred at the close of business at August 31, 2001 for pro forma balance sheet purposes and as if such transaction had occurred at the beginning of the periods presented for the purposes of the pro forma statements of operations. A pro forma statement of operations is presented to combine the year ended November 30, 2000 for Canterbury Consulting Group, Inc. with the year ended December 31, 2000 for User Technology Services, Inc. In addition, a pro forma statement of operations is presented to combine the nine months ended August 31, 2001 for Canterbury Consulting Group, Inc. with the nine months ended September 30, 2001 for User Technology Services, Inc. Balance sheet pro forma adjustment references are reported in Note 1. Statements of operations pro forma adjustment references for the fiscal 2000 year and for the nine month periods ended in fiscal 2001 are reported in Notes 2 and 3 respectively. The pro forma financial statements and accompanying notes should be read in conjunction with a reading of the financial statements of Canterbury Consulting Group, Inc. and User Technology Services, Inc. F-21 CANTERBURY CONSULTING GROUP, INC. PRO FORMA BALANCE SHEET AUGUST 31, 2001 (Unaudited) Historical ---------- Pro Forma Total Canterbury Usertech Adjustments Pro Forma ---------- -------- ----------- --------- Assets Cash $ 2,042,025 $ - $ (850,334)(a) $ 1,191,691 Accounts receivable, net 3,591,446 2,592,120 - 6,183,566 Other receivables - - - - Notes receivable, current portion 419,789 - - 419,789 Inventory 372,121 - - 372,121 Prepaid expenses 188,963 39,806 - 228,769 Deferred tax benefit 91,412 46,808 - 138,220 ----------- ---------- ---------- ----------- Total Current Assets 6,705,756 2,678,734 (850,334) 8,534,156 ----------- ---------- ---------- ----------- Total Property and Equipment 962,870 494,228 - 1,457,098 ----------- ---------- ---------- ----------- Net goodwill 8,458,279 - 1,200,000(b) 9,658,279 Notes receivable 7,113,905 - - 7,113,905 Other assets 257,499 - - 257,499 Investments 2,727,072 - - 2,727,072 Deferred tax benefit, long term 2,109,785 27,694 - 2,137,479 ----------- ---------- ---------- ----------- Total Other Assets 20,666,540 27,694 1,200,000 21,894,234 ----------- ---------- ---------- ----------- Total Assets $28,335,166 $3,200,656 $ 349,666 $31,885,488 =========== ========== ========== =========== See Accompanying Notes F-22 CANTERBURY CONSULTING GROUP, INC. PRO FORMA BALANCE SHEET AUGUST 31, 2001 (Unaudited) Historical ---------- Pro Forma Total Canterbury Usertech Adjustments Pro Forma ---------- -------- ----------- --------- Current Liabilities: Accounts payable $ 1,716,073 $ 120,375 $ - $1,836,448 Notes payable 297,934 137,006 125,393(c) 560,333 Unearned revenue 843,973 53,380 - 897,353 Accrued expenses 631,399 311,865 - 943,264 ----------- ---------- ---------- ---------- Total Current Liabilities 3,489,379 622,626 125,393(c) 4,237,398 ----------- ---------- ---------- ---------- Notes payable 1,228,411 227,696 2,574,607(d) 4,030,714 Deferred income taxes 3,024,961 - - 3,024,961 ----------- ---------- ---------- ---------- Total Long Term Liabilities 4,253,372 227,696 2,574,607 7,055,675 ----------- ---------- ---------- ---------- Total Liabilities 7,742,751 850,322 2,700,000 11,293,073 ----------- ---------- ---------- ---------- Stockholder's Equity: Common stock 12,431 2 (2)(e) 12,431 Additional paid in capital 24,607,548 11,756,832 (11,756,832)(e) 24,607,548 Accumulated other comprehensive income 111,325 - - 111,325 Retained earnings/ (accumulated deficit) 474,921 (9,406,500) 9,406,500(e) 474,921 Notes receivable for capital stock (4,206,533) - - (4,206,533) Treasury stock (407,277) - - (407,277) ----------- ---------- ---------- ---------- Total Stockholder's Equity 20,592,415 2,350,334 (2,350,334) 20,592,415 ----------- ---------- ---------- ---------- Total Liabilities & Stockholder's Equity $28,335,166 $ 3,200,656 $ 349,666 $31,885,488 =========== =========== =========== =========== See Accompanying Notes F-23 CANTERBURY CONSULTING GROUP, INC. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Year Ended: November 30, December 31, 2000 2000 Historical ---------- Pro Forma Consolidated Canterbury Usertech Adjustments Pro Forma ---------- -------- ----------- --------- Revenues $29,734,589 $14,497,898 $ - $44,232,487 Cost of revenues 21,828,520 10,815,996 (85,668)(a) 32,558,848 ----------- ----------- ----------- ----------- Gross profit 7,906,069 3,681,902 85,668 11,673,639 ----------- ----------- ----------- ----------- Selling 2,377,340 2,109,130 - 4,486,470 General and administrative 4,486,552 4,227,187 (1,422,900)(b) 7,290,839 ----------- ----------- ----------- ----------- Total operating expenses 6,863,892 6,336,317 (1,422,900) 11,777,309 ----------- ----------- ----------- ----------- Other income/(expense) Interest income 715,829 - - 715,829 Interest expense (346,457) (465,039) 286,252(c) (525,244) Other 345,014 - - 345,014 ----------- ----------- ----------- ----------- Total other income/(expense) 714,386 (465,039) 286,252 535,599 ----------- ----------- ----------- ----------- Income/(loss) before income taxes 1,756,563 (3,119,454) 1,794,820 431,929 Provision (benefit) for income taxes 698,348 (868,565) 351,910(d) 181,693 ----------- ----------- ----------- ----------- Net income/(loss) $ 1,058,215 $(2,250,889) $ 1,442,910 $ 250,236 =========== =========== =========== =========== Weighted Average Net Income Number of Shares Per Share Historical net income per share: Basic 10,027,700 $0.11 Diluted 11,028,500 $0.10 Pro forma net income per share: Basic 10,027,700 $0.02 Diluted 11,028,500 $0.02 See Accompanying Notes F-24 CANTERBURY CONSULTING GROUP, INC. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Nine Months Ended: August 31, September 30, 2001 2001 Historical ---------- (Unaudited) Pro Forma Consolidated Canterbury Usertech Adjustments Pro Forma ---------- -------- ----------- --------- Revenues $20,416,641 $ 7,902,830 $ - $28,319,471 Cost of revenues 14,680,439 7,016,133 (599,383)(a)(b)(c) 21,097,189 ----------- ----------- ---------- ----------- Gross profit 5,736,202 886,697 599,383 7,222,282 ----------- ----------- ---------- ----------- Selling 2,004,741 684,221 - 2,688,962 General and administrative 4,686,535 4,528,333 (3,333,566)(a)(b)(c) 5,881,302 ----------- ----------- ---------- ----------- Total operating expenses 6,691,276 5,212,554 (3,333,566) 8,570,264 ----------- ----------- ---------- ----------- Other income/(expense) Interest income 618,118 - - 618,118 Interest expense (128,184) (72,500) (69,250)(g) (269,934) Other (333,822) - - (333,822) ----------- ----------- ---------- ----------- Total other income/ (expense) 156,112 (72,500) (69,250) 14,362 ----------- ----------- ---------- ----------- Income/(loss) before income taxes (798,962) (4,398,357) 3,863,699 (1,333,620) Provision/(benefit) for income taxes (31,000) (773,534) (657,118)(h) (147,416) ----------- ----------- ---------- ----------- Net income/(loss) $ (767,962) $(3,624,823) $3,206,581 $(1,186,204) =========== =========== ========== =========== Weighted Average Net Loss Number of Shares Per Share Historical net loss per share: Basic 11,529,700 $(0.07) Diluted 11,796,900 $(0.07) Pro forma net loss per share: Basic 11,529,700 $(0.10) Diluted 11,796,900 $(0.10) See Accompanying Notes F-25 CANTERBURY CONSULTING GROUP, INC. NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) 1. Pro forma Adjustments - Balance Sheet ------------------------------------- (a) represents the difference between the cash payment of $2,350,334 and the $1,500,000 borrowed for the transaction. (b) excess paid over net worth of $2,350,334. Equal to the three-year note balance. (c) represents the current portion of the assumed note payable for computers. (d) the net effect of: $1,500,000 borrowed from Commerce Bank; $1,200,000 acquisition note less $125,393 reclass of current portion of note payable. (e) eliminating entry (acquired net worth). 2. Pro forma Adjustments - Statement of Operations Year(s) Ended in Fiscal ----------------------------------------------------------------------- 2000 ---- (a) allocated building occupancy with parent company. (b) allocated corporate expenses which would not be incurred with Canterbury (goodwill amortization, general expenses and intercompany transfers). (c) represents net adjustment - elimination of intercompany interest allocation of $475,252; additional $84,000 interest expense on the acquisition note and $105,000 additional interest expense on the $1,500,000 borrowings for the cash paid to Ceridian at closing. (d) effective tax rate for Usertech is 28% exclusive of $538,000 of nondeductible goodwill amortization adjustment. 3. Pro forma Adjustments - Statement of Operations Nine Month Period(s) Ended -------------------------------------------------------------------------- in Fiscal 2001 -------------- (a) allocated building occupancy with parent company of $106,382. (b) allocated retirement benefits from Ceridian of $350,000. (c) accrued vacation benefits of $143,000 were calculated as part of the sale to Canterbury. (d) restructuring charge of $3,149,516 was taken by Ceridian in early 2001 in contemplation of the divestiture (e) Ceridian corporate allocations totaling $184,050. (f) goodwill amortization of $134,724 is eliminated (no goodwill was purchased by Canterbury). (g) represents net adjustment - elimination of intercompany interest allocation of $72,500; additional $63,000 interest expense on the acquisition note and $78,750 additional interest expense on the $1,500,000 borrowings for the cash paid to Ceridian at closing. An interest rate of 7% was to calculate the imputed interest expense. (h) effective tax rate for Usertech is 34% exclusive of $1,931,000 nondeductible goodwill impairment charge. F-26