10-Q 1 ccg10q503.txt QUARTERLY REPORT FOR PERIOD ENDING MAY 31, 2003 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: May 31, 2003 0-15588 CANTERBURY CONSULTING GROUP, INC. --------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-2170505 ------------------------------- --------------------------------- (State of Incorporation) (IRS Employer Identification No.) 352 Stokes Road Suite 200 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 1,848,909 shares. FORM 10-Q PART 1 - FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements ----------------------------- CANTERBURY CONSULTING GROUP, INC. CONSOLIDATED BALANCE SHEET -------------------------- ASSETS ------ May 31, 2003 November 30, (Unaudited) 2002 ----------- ------------ Current Assets: Cash and cash equivalents $ 97,116 $ 395,477 Accounts receivable, net of allowance for doubtful accounts of $358,000 and $383,000 3,009,252 2,850,934 Notes receivable - current portion 511,635 492,377 Prepaid expenses and other assets 314,584 321,826 Inventory, principally finished goods, at cost 666,853 173,118 Deferred income tax benefit 272,660 272,660 ---------- ---------- Total Current Assets 4,872,100 4,506,392 Property and equipment at cost, net of accumulated depreciation of $1,546,000 and $1,349,000 714,516 885,302 Goodwill 3,608,381 3,608,381 Deferred income tax benefit 3,197,189 2,987,728 Notes receivable 5,713,540 6,474,266 Other assets 204,495 206,910 ---------- ---------- Total Assets $18,310,221 $18,668,979 =========== =========== See Accompanying Notes 2 FORM 10-Q CANTERBURY CONSULTING GROUP, INC. CONSOLIDATED BALANCE SHEET LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ May 31, 2003 November 30, (Unaudited) 2002 ---------------- ------------ Current Liabilities: Accounts payable - trade $ 1,610,874 $ 618,124 Accrued expenses 486,597 821,298 Unearned revenue 786,501 892,249 Current portion, long-term debt 854,230 882,880 ----------- ---------- Total Current Liabilities 3,738,202 3,214,551 Long-term debt 992,696 1,209,625 Deferred income tax 2,063,203 2,036,203 --------- ----------- Total Liabilities 6,794,101 6,460,379 Commitments Stockholders' Equity: Common stock, $.001 par value, 50,000,000 shares authorized; 1,848,909 and 1,732,959 issued and outstanding 1,849 1,733 Additional paid-in capital 24,006,151 23,782,498 Accumulated deficit (8,896,387) (7,934,823) Notes receivable for capital stock - related parties (3,595,493) (3,640,808) ----------- ----------- Total Stockholders' Equity 11,516,120 12,208,600 ----------- ----------- Total Liabilities and Stockholders' Equity $18,310,221 $18,668,979 =========== =========== See Accompanying Notes 3 FORM 10-Q CANTERBURY CONSULTING GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Three-Months Ended May 31, Six-Months Ended May 31, 2003 2002 2003 2002 ----- ---- ----- ---- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Service revenue $ 3,250,480 $ 4,820,943 $ 6,093,344 $ 8,840,638 Product revenue 2,180,635 4,818,714 4,006,150 7,548,013 ----------- ----------- ---------- ----------- Total net revenue 5,431,115 9,639,657 10,099,494 16,388,651 Service costs and expenses 2,057,177 2,830,852 4,483,925 5,628,294 Product costs and expenses 1,838,110 4,174,234 3,450,014 6,318,896 ----------- ----------- ----------- ----------- Total costs and expenses 3,895,287 7,005,086 7,933,939 11,947,190 Gross profit 1,535,828 2,634,571 2,165,555 4,441,461 Selling 434,183 665,379 894,619 1,262,888 General and administrative 1,133,234 1,505,011 2,646,378 2,828,402 ----------- ----------- ---------- ----------- Total operating expenses 1,567,417 2,170,390 3,540,997 4,091,290 Other income/(expense) Interest income 128,467 176,518 271,311 346,262 Interest expense (31,233) (57,022) (62,379) (104,703) Other 1,810 1,028 1,946 114,206 ----------- ------------ --------- ---------- Total other income/(expense) 99,044 120,524 210,878 355,765 Income (loss) before income taxes 67,455 584,705 (1,164,564) 705,936 Provision (benefit) for income tax 27,000 229,000 (203,000) 275,000 ----------- ----------- ---------- ----------- Net income (loss) $ 40,455 $ 355,705 $ (961,564) $ 430,936 ============= =========== =========== =========== Net income (loss) per share and common share equivalents Basic and diluted: Net income (loss) $ .02 $ .20 $(.54) $.25 ============= =========== ============ ========== Weighted average number of common shares - basic 1,849,000 1,752,300 1,791,600 1,759,000 ============= =========== ============ ========== Weighted average number of common shares - diluted 1,849,000 1,772,200 1,791,600 1,779,000 ============= =========== ============= ==========
See Accompanying Notes 4 FORM 10-Q CANTERBURY CONSULTING GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MAY 31, 2003 AND MAY 31, 2002 May 31, May 31, 2003 2002 ------------ -------------- (Unaudited) (Unaudited) Operating activities: Net (loss) income $ (961,564) $ 430,936 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 197,594 262,161 Provision for losses on accounts receivable (25,476) 5,755 Deferred income taxes (182,461) 267,070 401(k) contributions issued in stock 211,029 - Issuance of stock options to consultants for services 12,740 - Other assets 2,415 1,798 Changes in operating assets, net of acquisitions Accounts receivable (132,842) (1,122,629) Inventory (493,735) 498,195 Prepaid expenses and other assets 7,242 (155,996) Income taxes - (18,540) Accounts payable 992,750 1,003,400 Accrued expenses (334,701) (470,309) Unearned revenue (105,748) (921,937) -------- --------- Net cash used in operating activities (812,757) (220,096) -------- --------- Investing activities: Capital expenditures, net (26,808) (123,661) Proceeds from payments on notes receivable 741,468 221,495 Other - (29,500) -------- --------- Net cash provided by investing activities 714,660 68,334 -------- --------- Financing activities: Purchase of treasury shares - (250,323) Proceeds from issuance of common stock - 15,000 Proceeds from revolving line of credit - 250,000 Proceeds from payments on notes receivable for capital stock - related parties 45,315 - Principal payments on long term debt (245,579) (353,492) -------- -------- Net cash used in financing activities (200,264) (338,815) Net (decrease) increase in cash (298,361) (490,577) Cash, beginning of period 395,477 664,850 ---------- --------- Cash, end of period $ 97,116 $ 174,273 ========== ========= See Accompanying Notes 6 FORM 10-Q CANTERBURY CONSULTING GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ 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, 2002. 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 ------------------------ Canterbury Consulting Group, Inc. provides broad based information technology and management consulting services and training to both corporate and government clients. Canterbury's mandate is to become an integral part of its clients' management and technical infrastructure, designing and applying the best products and services to help them achieve a competitive advantage. For information about the Company's revenues, profit or loss, and assets by segment, see Note 2 of the Notes to Consolidated Financial Statements. 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 ---------------- Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (US GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts in the financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of assets and liabilities that are not readily apparent from other sources. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change and the best estimates and judgments routinely require adjustment. US GAAP requires us to make estimates and judgments in several areas, including those related to impairment of goodwill and equity investments, revenue recognition, recoverability of inventory and receivables, the useful lives of long lived assets such as property and equipment, the future realization of deferred income tax benefits and the recording of various accruals. The ultimate outcome and actual results could differ from the estimates and assumptions used. Change in Accounting ---------------------- As of December 1, 2001, the Company adopted SFAS 142, "Goodwill and Other Intangible Assets," which addresses the financial accounting and reporting standards for goodwill subsequent to its acquisition. This standard requires that goodwill no longer be amortized, and instead, be tested for impairment on an annual basis. Reverse Stock Split ------------------- On January 24, 2003, the Company's Board of Directors approved a one for seven reverse stock split of the Company's common shares. All share and per share information contained in these financial statements gives retroactive effect to the 1 for 7 reverse stock split. Concentration of Risk ---------------------- As previously discussed, the Company is in the business of providing management and 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 customers' 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 a creditworthy bank located in the United States. Accounts at the 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. For the quarter ended May 31, 2003, a significant number of local and state agencies in Maryland purchased equipment under a contract with the City of Baltimore from USC/Canterbury (Value Added Hardware Reseller Segment). Total purchases under this contract represented 52% of this segment's revenue and 20% of consolidated revenue. If this contract were not renegotiated or extended in September 2003, USC/Canterbury would not have access to sell into the City of Baltimore. A second group of customers, from a county in Virginia, accounted for 40% of revenues in the reseller segment and 15% of consolidated revenues for the quarter. This group of over 80 customers purchased equipment from USC/Canterbury under the City of Baltimore contract as well. Approximately 70% of this revenue could be purchased under the Virginia state contract if the Baltimore contract is not renewed in September 2003. Five of the six operating subsidiaries are headquartered in the Mid Atlantic and Northeast region of the country. As such, the majority of revenues for the first six months of Fiscal 2003 and Fiscal 2002 were generated in these two geographic regions. Reclassifications ------------------ Certain reclassifications have been made to prior years balances in order to conform to current presentations. 2. Segment Reporting ---------------------- The Company is organized into four operating segments and the corporate office. The operating segments are: training and consulting, value added hardware reseller, technical staffing and software development. Prior to the adoption of SFAS 142 for fiscal 2002, the Company accounted for goodwill and any related amortization expense or impairment charges at the corporate level. For Fiscal 2003, goodwill has been assigned to reporting units for purposes of impairment testing and segment reporting as required by SFAS 142. Summarized financial information for the three months and six months ended May 31, 2003 and May 31, 2002, for each segment, is as follows: For the six months ended May 31, Training Value Added and Hardware Technical Software 2003 Consulting Reseller Staffing Development Corporate Total ---- ---------- -------- --------- ----------- --------- ----- Revenues $ 5,808,020 $ 3,863,233 $285,324 $142,917 $ - $10,099,494 (Loss) income before taxes (662,600) 106,474 (20,153) 4,368 (592,653) (1,164,564) Assets 5,739,561 2,262,148 67,340 189,652 10,051,520 18,310,221 Interest income 214 - - - 271,097 271,311 Interest expense 32,420 527 - 1,428 28,004 62,379 Depreciation and amortization 170,232 9,582 1,954 3,886 11,940 197,594
Training Value Added and Hardware Technical Software 2002 Consulting Reseller Staffing Development Corporate Total ---- ---------- -------- --------- ----------- --------- ----- Revenues $ 8,262,024 $ 7,438,868 $ 578,614 $109,145 $ - $16,388,651 Income before taxes 359,071 660,424 72,416 (10,741) (375,234) 705,936 Assets 8,204,649 3,776,729 302,793 94,191 12,342,565 24,720,927 Interest income 460 - - 2,050 343,752 346,262 Interest expense 52,860 23 - 2,071 49,749 104,703 Depreciation and amortization 213,109 21,525 10,555 5,880 11,092 262,161
For the three months ended May 31, Training Value Added and Hardware Technical Software 2003 Consulting Reseller Staffing Development Corporate Total ---- ---------- -------- --------- ----------- --------- ----- Revenues $ 3,115,835 $ 2,067,611 $134,645 $113,024 $ - $ 5,431,115 Income (loss) before taxes 133,435 155,745 (2,013) 11,092 (230,804) 67,455 Assets 5,739,561 2,262,148 67,340 189,652 10,051,520 18,310,221 Interest income - - - - 128,467 128,467 Interest expense 15,739 257 - 616 14,621 31,233 Depreciation and amortization 81,357 5,270 967 1,723 5,968 95,285
Training Value Added and Hardware Technical Software 2002 Consulting Reseller Staffing Development Corporate Total ---- ---------- -------- --------- ----------- --------- ----- Revenues $ 4,566,211 $ 4,799,819 $ 254,732 $ 18,895 $ - $ 9,639,657 Income before taxes 442,130 385,829 13,645 (23,930) (232,969) 584,705 Assets 8,204,649 3,776,729 302,793 94,191 12,342,565 24,720,927 Interest income - - - 2,050 174,468 176,518 Interest expense 26,258 - - 1,012 29,752 57,022 Depreciation and amortization 94,515 16,444 5,281 1,987 5,564 123,791
3. Notes Receivable -------------------- The Company holds a note receivable with a remaining balance in the amount of $2,329,155 at May 31, 2003. This note was received in November 1995 as part of the consideration for the sale of a former subsidiary. The Company is scheduled to receive monthly payments of $33,975 inclusive of interest at 7.79% per year through November 2005 and a balloon payment of $1,707,000 in December 2005. In addition, the Company held notes receivable assets from a related party in the aggregate amount of $3,896,020 at May 31, 2003. These notes have interest terms that average 7.3% per year and are scheduled to mature at various dates through November 2006, with a balloon payment of $1,948,000 in December, 2006. The aggregate amount includes an $860,000 demand note. During April, 2003, in order to fortify the liquidity of the balance sheet, the Company negotiated a $500,000 paydown of the demand note (from $1,360,000 to $860,000). On April 3, 2003 the independent directors, who are a majority of the Board of Directors of Canterbury, voted to reduce the annual interest rate on the note from 10% to 5% per annum in exchange for the principal payment of $500,000 which was received by the Company during April, 2003. The demand note is included in the non-current portion of notes receivable at May 31, 2003 and November 30, 2002. The company has received all scheduled monthly installments for all of its notes receivable outstanding as of May 31, 2003. 4. Property and Equipment -------------------------- Property and equipment, which is recorded at cost, consists of the following: May 31, November 30, 2003 2002 ---- ---- Machinery and equipment $1,657,082 $1,630,274 Furniture and fixtures 454,407 454,407 Leased property under capital leases and leasehold improvements 149,345 149,345 ---------- ----------- 2,260,834 2,234,026 Less: Accumulated depreciation (1,546,318) (1,348,724) ---------- ----------- Net property and equipment $ 714,516 $ 885,302 ========== =========== Accumulated depreciation of leased property under capital leases at May 31, 2003 amounted to $142,000. 5. Long-Term Debt ------------------ May 31, November 30, 2003 2002 Long-term obligations consist of: ---- ---- Term loan $ 875,000 $1,025,000 Revolving credit line - - Note payable for acquisition 800,000 800,000 Capital lease obligations 6,909 23,841 Notes payable - equipment 165,017 243,664 ---------- ----------- 1,846,926 2,092,505 Less: Current maturities (854,230) (882,880) ---------- ----------- $ 992,696 $1,209,625 ========== ========== The Company's outstanding amount owed under the revolving credit line with Chase Bank was refinanced in May 2001 by establishing a commercial lending relationship with Commerce Bank, N.A. (the Bank). As of the date of the refinancing, approximately $883,000 was paid to Chase Bank in full satisfaction of the Company's outstanding obligations, from the proceeds of a $1,500,000 five-year term loan from Commerce. As of May 31, 2003, $625,000 of this loan has been repaid. As part of the refinancing, the Company also secured a two-year $2,500,000 working capital line of credit with Commerce Bank collateralized by trade accounts receivable and inventory. $1,500,000 was borrowed in conjunction with the acquisition of User Technology Services, Inc. ("Usertech") on September 28, 2001. This $1,500,000 has been repaid in full. Both loans carry an interest rate of the prime rate plus 1% with a floor of 5%. During June, 2003 the Bank extended the term on the revolving line of credit until May 1, 2005. The Bank's long term debt is secured by substantially all of the assets of the Company and requires compliance with covenants which include the maintenance of certain financial ratios and amounts. The Company is restricted by its bank from paying cash dividends on its common stock. As a result of recent losses, the Company was in breach of the minimum tangible net worth covenant in the loan agreement with the Bank. At May 31, 2003 the covenant called for a minimum tangible net worth of $8,000,000. The Company reported a tangible net worth of $7,908,000, a shortfall of $92,000. The Company had requested, and was granted, a waiver from the Bank for the quarter ended May 31, 2003 related to this covenant breach. The waiver was granted in conjunction with a previous amendment to the existing loan agreement related to total availability under the facility. Effective April, 2003, the maximum amount available under the credit facility has been reduced from $2,500,000 to $1,500,000 less the principal balance outstanding under the Commerce Bank term loan, subject to receivable and inventory levels. The total available line at May 31, 2003 was $625,000. The Company remains in compliance with all other financial covenants in the loan agreement as of May 31, 2003. As part of the purchase price paid for the acquisition of Usertech in September, 2001, the Company agreed to pay $1,200,000 to the seller over the next three years at an annual amount of $400,000 plus accrued interest at 7% per annum on the outstanding balance. In conjunction with the purchase of 100% of the stock of Usertech, the Company purchased computer equipment from the seller valued at $364,000 through issuance of a note payable over three years with interest at an annual rate of 3.75%. At May 31, 2003, the note payable had an outstanding balance of $133,467. Aggregate fiscal maturities on long-term debt, exclusive of obligations under capital leases, are approximately $630,000 in 2003; $773,000 in 2004; $307,000 in 2005; and $130,000 in 2006. The carrying value of the long-term debt approximates its fair value. 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 is as follows at May 31, 2003: Total minimum lease payments through November 30, 2003 $ 7,159 Less amount representing interest (250) --------- Present value of long-term obligations under capital leases $ 6,909 ========= 7. Related Party Transactions --------------------------------- During Fiscal 2001, certain officers and directors of the Company purchased a 33% ownership interest in a corporation from an outside group who purchased the business from the Company in 1996. The Company holds notes receivable from the corporation in the amount of $3,896,020 at May 31, 2003. The Company maintained the same level of security interest protection and the same debt amortization schedule. At May 31, 2003 and November 30, 2002, the total notes receivable plus accrued interest for issuances of Company common stock to corporate officers, corporate counsel and certain consultants totaled $3,595,000 and $3,641,000, respectively. These non-recourse notes are collateralized by common stock of the Company and are reported as a contra-equity account. Interest rates range from 4% to 6.6%. Prior to July 17, 2002, $1,739,000 of these notes were recourse notes. On July 17, 2002 the Compensation Committee recommended, and the Board of Directors approved a modification of the April 10, 2001 and the May 16, 2001 notes. The notes became non-recourse as to principal and interest as of September 1, 2002 with the issued shares continuing to collateralize the notes. All accrued interest on the notes as of September 1, 2002 has been paid to the Company. Principal and interest must be paid by each recipient before they are entitled to sell their respective shares. If principal and interest have not been paid by the maturity date of the recipient notes, then recipients' sole obligation shall be that any shares relating to this nonpayment will be forfeited and returned to the Company. If this event were to occur, both the underlying shares and the notes receivable would be cancelled with no effect on the net worth of the Company. In consideration for this modification the term of these notes was reduced and shortened from April and May, 2006 to December 31, 2004. The Board also prohibited the issuance of any stock options, stock or any other form of equity for all of Fiscal 2002 to the recipients. In the past, the Board has issued and/or granted significant amounts of equity (in the form of stock options or stock purchases) to these recipients on an annual basis. Also by reducing the term of these notes the Compensation Committee believed that management would have a further inducement to accelerate their efforts to increase shareholder value or risk the loss of their shares. As a subsequent event, on June 3, 2003 the Board of Directors of Canterbury approved a private placement for the Company in the form of 7 3/4% Senior Convertible Promissory Notes. The net proceeds of this private placement will be used for working capital in order to offset the cash drain in the fourth quarter of Fiscal 2002 and the first quarter of Fiscal 2003 and to partially replace the $1,000,000 reduction in the Company's credit facility by the Bank. This note converts into Canterbury restricted common stock at $.355 per share and the note, if not converted into restricted common stock before then, matures in 36 months. The proceeds totaled $355,000. Ten units at $35,500 each were sold. Four were purchased by affiliates of the Company and six were purchased by non- affiliates. The debt is subordinate to all current and future bank debt, but is senior to all other current and future Company indebtedness. The shareholders of the Company will be asked to ratify the issuance of the notes in the Proxy Statement for the Annual Meeting to be held in November, 2003. In the interim, the note holders have agreed not to exercise the conversion feature of the notes until after the Annual Meeting, pending shareholder approval. 8. Stock Listing ----------------- On February 15, 2002 the Company was notified by Nasdaq that it had until May 15, 2002 to come into compliance with the Nasdaq minimum $1.00 per share bid price requirement for continued inclusion of the Company's National Market listing. The Company was and is in full compliance with the remaining listing requirements of Nasdaq's Maintenance Standard #1. The Company complied with the minimum price requirements by closing at a $1.00 per share bid price for a period of 11 consecutive trading days before May 15, 2002. The minimum requirement was that the Company's common stock close at a $1.00 bid or better for 10 consecutive trading days. Even though the Company met the minimum price requirement, Nasdaq considered intra day trading activity below $1.00 during the 11-day period and did not approve the Company's continued listing on the National Market. The Company appealed Nasdaq's initial decision and appeared before an appeal panel on June 21, 2002. The appeal was denied and on July 31, 2002 the Company's common stock began trading on the Nasdaq SmallCap Market. In order to stay listed on the Nasdaq SmallCap Market, the Company's stock was required to close above a $1 bid price for at least 10 consecutive trading days by February 10, 2003. In order to remain in compliance with the Nasdaq minimum price requirement, the Board of Directors voted for a one for seven reverse split effective January 24, 2003. On February 13, 2003 the Company received a letter from Nasdaq stating that Canterbury had evidenced compliance with all requirements necessary for continued listing on the Nasdaq SmallCap Market. Accordingly, Nasdaq determined to continue the listing of the Company's securities on the Nasdaq SmallCap Market. On May 8, 2003 Canterbury received a written notification from the Nasdaq Listing Qualifications Section. The letter stated that because the closing bid price of Canterbury's common stock for the previous 30 consecutive trading days was less than the required $1.00 per share, the Company had until November 4, 2003 to trade at a closing bid price of $1.00 per share or more for a minimum of 10 consecutive trading days, or be delisted. In addition, even if the 10 consecutive trading days are achieved, there is no assurance that Canterbury would automatically remain on Nasdaq. As per the Nasdaq Notice Letter of Deficiency, "In determining whether to monitor the bid price beyond 10 business days, Nasdaq will consider the following four factors: (i) margin of compliance; (ii) trading volume; (iii) the market maker montage; and, (iv) the trend of the stock price." If, in the opinion of Nasdaq, the Company is not in compliance on November 4, 2003, additional criteria and an appeal process may be available. In the event that Canterbury's common stock is delisted from the Nasdaq SmallCap Market, the Company would apply for inclusion into the OTC Bulletin Board (OTCBB), which is an electronic exchange. The OTCBB is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (OTC) equity securities. The Company would request that its existing stock symbol be maintained in order to provide its shareholders with current and timely access to its market price. Item 2. Management's Discussion of Financial Condition and Results of Operations ------------------------------------------------------------------------ Cautionary Statement --------------------- When used in this Report on Form 10-Q and in other public statements, both oral and written, by the Company and Company officers, the word "estimates," "project," "intend," "believe," "anticipate," and similar expressions, are intended to identify forward-looking statements regarding events and financial trends that may affect the Company's future operating results and financial position. Such statements are subject to risks and uncertainties that could cause the Company's actual results and financial position to differ materially. Such factors include, among others: (1) the Company's success in attracting new business and success of its mergers and acquisitions program; (2) the competition in the industry in which the Company competes; (3) the sensitivity of the Company's business to general economic conditions; and (4) other economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices. The Company undertakes no obligations to publicly release the result of any revision of these forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events. Procedures and Controls ------------------------ Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. Liquidity and Capital Resources -------------------------------- Working capital at May 31, 2003, was $1,134,000. This was a decrease of $158,000 since November 30, 2002. Accounts receivable and inventory increased by $652,000 causing this decrease. This was due to higher overall sales volume and increased activity in the value added reseller segment. Working capital, however, increased by $673,000 from February 28, 2003 to May 31, 2003. This was caused by two factors. First, the Company returned to profitability in the second quarter. But the major factor was the $500,000 paydown on the long-term demand note from a related party. These funds were used to fortify the balance sheet by reducing short-term liabilities during the second quarter. The Company's outstanding amount owed under the revolving credit line with Chase Bank was refinanced in May 2001 by establishing a commercial lending relationship with Commerce Bank, N.A. (the Bank). As of the date of the refinancing, approximately $883,000 was paid to Chase in full satisfaction of the Company's outstanding obligations, from the proceeds of a $1,500,000 five-year term loan from Commerce. As of May 31, 2003, $625,000 of this loan has been repaid. As part of the refinancing, the Company also secured a two-year $2,500,000 working capital line of credit with the Bank collateralized by trade accounts receivable and inventory. $1,500,000 was borrowed in conjunction with the acquisition of User Technology Services, Inc. ("Usertech") on September 28, 2001. This $1,500,000 has been repaid in full. Both loans carry an interest rate of the prime rate plus 1% with a floor of 5%. During June, 2003 the Bank extended the term on the revolving line of credit until May 1, 2005. The Bank's long term debt is secured by substantially all of the assets of the Company and requires compliance with covenants which include the maintenance of certain financial ratios and amounts. The Company is restricted by its bank from paying cash dividends on its common stock. As a result of recent losses, the Company was in breach of the minimum tangible net worth covenant in the loan agreement with the Bank. At May 31, 2003 the covenant called for a minimum tangible net worth of $8,000,000. The Company reported a tangible net worth of $7,908,000, a shortfall of $92,000. The Company had requested, and was granted, a waiver from the Bank for the quarter ended May 31, 2003 related to this covenant breach. The waiver was granted in conjunction with a previous amendment to the existing loan agreement related to total availability under the facility. Effective April, 2003, the maximum amount available under the credit facility has been reduced from $2,500,000 to $1,500,000 less the principal balance outstanding under the Commerce Bank term loan, subject to receivable and inventory levels. The total available line at May 31, 2003 was $625,000. The Company remains in compliance with all other financial covenants in the loan agreement as of May 31, 2003. As part of the purchase price paid for the acquisition of Usertech in September, 2001, the Company agreed to pay $1,200,000 to the seller over the next three years at an annual amount of $400,000 plus accrued interest at 7% per annum on the outstanding balance. Management believes that anticipated positive cash flow contributions from the Company's operating subsidiaries, the availability to borrow from its revolving line of credit, utilizing the proceeds from the demand note paydown in April and the private placement in June, 2003 should be sufficient to cover cash flow requirements for Fiscal 2003. However, if economic conditions deteriorate or if the Company requires additional working capital to support an economic expansion, additional working capital may need to be raised. There was no material commitment for capital expenditures as of May 31, 2003. Inflation was not a significant factor in the Company's financial statements. Cash flow from operating activities for the six months ended May 31, 2003 was $(813,000), a decrease of $593,000 over the first six months of Fiscal 2002. The reduction in operating cash flow in 2003 was due in large part to the reduced levels of operating profitability from each of the subsidiaries as well as a temporary increase in inventory levels at May 31, 2003 due to delayed shipments of hardware to clients. The Company's May 31, 2003 current ratio was 1.30:1.00 versus 1.40:1.0 at November 30, 2002. While the May 31, 2003 current ratio is slightly below previous year end levels, it is an improvement from the end of the first quarter of Fiscal 2003 due again to the return to profitability and the collection of $500,000 from a demand note with a related party. During April, 2003, in order to fortify the liquidity of the balance sheet, the Company negotiated a $500,000 paydown of the $1,360,000 demand note, with a related party. On April 3, 2003 the independent directors, who are a majority of the Board of Directors of Canterbury, voted to reduce the annual interest rate on the note from 10% to 5% per annum in exchange for the principal payment of $500,000 which was received by the Company during April, 2003. The $860,000 and $1,360,000 demand note balance is included in the non-current portion of notes receivable at May 31, 2003 and November 30, 2002, respectively. As a subsequent event, on June 3, 2003 the Board of Directors of Canterbury approved a private placement for the Company in the form of 7 3/4% Senior Convertible Promissory Notes. The net proceeds of this private placement will be used for working capital, in order to offset the cash drain in the fourth quarter of Fiscal 2002 and the first quarter of Fiscal 2003 and to partially replace the $1,000,000 reduction in the Company's credit facility by the Bank. This note converts into Canterbury restricted common stock at $.355 per share and the note, if not converted into restricted common stock before then, matures in 36 months. The proceeds totaled $355,000. Ten units at $35,500 each were sold. Four were purchased by affiliates of the Company and six were purchased by non- affiliates. The debt is subordinate to all current and future bank debt, but is senior to all other current and future Company indebtedness. The shareholders of the Company will be asked to ratify the issuance of the notes in the Proxy Statement for the Annual Meeting to be held in November, 2003. In the interim, the note holders have agreed not to exercise the conversion feature of the notes until after the Annual Meeting, pending shareholder approval. RESULTS OF OPERATIONS ---------------------- Revenues -------- Total revenues for the three months ended May 31, 2003 decreased by $4,209,000 (44%) from the same three-month period in Fiscal 2002. Service revenue decreased by $1,571,000 (32%) and product revenue decreased by $2,638,000 (55%) during the second quarter of Fiscal 2003 as compared to the second quarter of Fiscal 2002. With the exception of the software segment, all operating segments experienced a revenue downturn during the quarter from the previous year. For the six months ended May 31, 2003, total revenue decreased by $6,290,000 (38%). Service revenue decreased by $2,748,000 (31%) and product revenue declined by $3,542,000 (47%). The declining revenue in all of the operating segments is the result of reduced client spending in all phases of information technology and training. Budgets have been reduced or eliminated. Projects have been delayed or reduced in scope. Many businesses are attempting to use internal resources instead of outsourcing in an attempt to save money during these difficult economic times. The Company is dealing with this business downturn in a number of ways. Facility consolidations, workforce reductions in areas other than sales, salary freezes and reductions, and the hiring of more sales personnel are all being utilized as a means to preserve cash and to increase revenues and cash flow. While revenues have declined across the board, the Company has taken aggressive steps to reduce fixed costs and lower the overall breakeven point for the business. CALC/Canterbury has reduced its fixed overhead by sharing its Parsippany, New Jersey facility with both DMI/Canterbury and Usertech/Canterbury. During February, 2003 CALC/Canterbury executed a licensing agreement with ExecuTrain, an international learning solutions provider, whereby it will become part of their global training network. As a result, CALC/Canterbury can now offer national and international training delivery to its existing clients with multiple locations. The alliance will also allow CALC/Canterbury to market itself to new clients who have not used them in the past due to its lack of national training capability. To date, CALC/Canterbury has not realized any significant incremental revenue from this relationship. CALC/Canterbury is currently in search of qualified sales personnel to help expand its presence in the metro New York City marketplace. During the second quarter of Fiscal 2003 the Company accepted the resignation of CALC/Canterbury's President for personal reasons. A successor has yet to be named and the existing management team has assumed additional responsibilities in the interim. Usertech/Canterbury experienced a significant downturn in revenues during Fiscal 2003. For the first half of Fiscal 2003 revenues have declined by almost $2,300,000 (45%) as compared to the first half of Fiscal 2002, representing the majority of the decrease in service revenue. Several large projects ended at the end of last year and were not replaced with new business. Many of Usertech/Canterbury's consultants were under utilized during the first quarter. As the softness in revenue has continued into the early part of Fiscal 2003, the Company has taken several significant steps to preserve cash flow. First, the Saddlebrook, New Jersey office was closed in December, 2002 and those employees were relocated to Parsippany, New Jersey to share office space with CALC/Canterbury. The Company saved approximately $175,000 annually by not renewing the Saddlebrook lease. There was also a significant workforce reduction during the first quarter of 2003. Twenty-seven (27) employees have been laid off resulting in annual salary and benefits savings of approximately $2,200,000. As a result of this staff reduction, Usertech/Canterbury's organization was restructured and streamlined resulting in additional savings. Usertech/Canterbury is also searching for additional account executives in order to reach more potential customers on a national basis. In addition, Usertech/Canterbury plans to offer its learning solutions through the ExecuTrain national franchise network as a result of the licensing agreement between CALC/Canterbury and ExecuTrain. ExecuTrain has been planning to expand its product offerings in the ERP market and Usertech/Canterbury can now provide quality delivery and service to the client base that ExecuTrain currently services through its network of training centers. To date, however, no revenues have been achieved through this source. During the second quarter of Fiscal 2003, revenues have increased by approximately 15% from the weak first quarter. This increase coupled with the significant reduction in expenses resulted in over a $700,000 improvement in pretax income for the subsidiary for the three months ended May 31, 2003 as compared to the first quarter of Fiscal 2003, although income for the first six months of Fiscal 2003 is well below that of Fiscal 2002. As previously reported, the Company is conducting an ongoing investigation into the circumstances relating to a certain previously undisclosed business relationship by the former President of Usertech/Canterbury to determine if other individuals or entities had any involvement in this matter. This business relationship was the reason the former President was terminated for cause earlier this year. USC/Canterbury has been dealing with a number of business issues as a result of the Hewlett-Packard/Compaq merger. Lower margins, more competition and delays in product availability have all taken their toll on revenues. USC/Canterbury is attempting to expand its reseller relationships to manufacturers other than Hewlett Packard and Compaq in order to provide customers with more purchasing options as well as to reduce its dependence on a sole source for product. The majority of USC/Canterbury's clients are municipalities in state and local government. With many state budgets running at a deficit, there is less money being allocated to information technology spending. USC/Canterbury continues to focus on expanding its business to commercial clients to reduce its overall dependence on government clients. The pending change with Hewlett Packard to an agent model from the current system of recording gross revenues and costs did not have a material impact on revenues for the first or second quarter of Fiscal 2003. Gross margins for USC/Canterbury have improved slightly during the second quarter of this year. At the end of the first quarter, gross profit was 10%. At May 31, 2003 it had improved to almost 13% on a year-to-date basis. There are no guarantees that these higher margins will be sustained for the balance of the year. One of the biggest reasons for the year-to-year decrease in product revenue was due to a delay in shipment of almost $3,000,000 in hardware to a school system in Virginia. In Fiscal 2002 this shipment occurred in May, 2002. This year the product did not ship until June, 2003 due to delays in receiving the orders from the client and further delays in shipping by the manufacturer. MSI/Canterbury's management and sales training tends to be a more discretionary expenditure by its clients during difficult economic times. Many clients have reduced or eliminated certain programs for the time being. Over the past thirty years of its existence MSI/Canterbury has experienced the ebb and flow caused by cyclical economic conditions. While dealing with the current downturn, this subsidiary has taken several steps to address the situation. First, MSI/Canterbury has expanded its reach by entering into several alliance programs with local chambers of commerce. There have been reductions in support staff and consultants, while at the same time an ongoing search for qualified sales personnel is being conducted. MSI/Canterbury also plans to offer its services through the ExecuTrain national network in conjunction with the agreement between CALC/Canterbury and ExecuTrain. MSI/Canterbury is also developing distance learning products to complement its live delivery platform. ATM/Canterbury has also experienced declining revenues caused in large part to the downturn in spending for information technology products as a result of poor economic conditions in the country. New products have been developed in an effort to penetrate markets that were previously not addressed. Lower priced versions of various software packages are being introduced to new clients who have less demanding performance requirements. ATM/Canterbury continues to search for strategic partners who will use its software as an integral component in a packaged solution for asset tracking or document tracking and retrieval. DMI/Canterbury's revenues have been adversely affected by the poor economic condition of many of the industries that it serves. A lack of information technology job openings coupled with a surplus of IT professionals has resulted in a reduction in revenue. It is anticipated that this decline in revenue will continue for the remainder of the year. Steps have been taken to reduce operating expenses in order to reduce the likelihood of future pretax losses for this segment. The Company continues to advocate and promote cross marketing between all of its operating subsidiaries. During the current economic downturn, the number of opportunities for Canterbury to provide an all-inclusive technology or training solution to its substantial customer list has been limited. All of the subsidiaries continue to present the full complement of Canterbury products and services to their clients. It is management's belief that when business conditions improve, the Company will inherit markets that have been abandoned by competitors who have gone out of business, or who do not have sufficient working capital to take advantage of future opportunities. Costs and Expenses ------------------ Total costs and expenses decreased by $3,110,000 (44%) during the second quarter of Fiscal 2003 as compared to the second quarter of Fiscal 2002. Service costs declined by $774,000 (27%), while product costs decreased by $2,336,000 (56%). The decreases are a direct result of the lower revenues recognized during the quarter and aggressive cost cutting by Company management. The service cost reduction is the result of lower personnel related costs of $683,000 and lower repair, maintenance and support costs of approximately $90,000. The consolidated gross profit margin increased from 27% for the second quarter of Fiscal 2003 to 28% in the second quarter of Fiscal 2003. The significant cost reductions outlined previously have had a positive impact on gross margins as the overall breakeven point for the business has been greatly reduced. The second quarter consolidated gross margin of 28% was better than twice the first quarter's margin of 13%. The major challenge facing management is to increase overall sales volume to capitalize on the improved cost structure of its businesses. Gross profit on services for the second quarter declined from 41% in Fiscal 2002 to 37% in Fiscal 2003 due primarily to declining revenue and relatively high fixed costs for training. Product margins increased to 16% from 13% in the previous year's second quarter. Even with lower sales volume and discontinued rebate programs, USC/Canterbury has been able to stabilize and even increase margins by utilizing strategic sales initiatives and maximizing manufacturer and distributor incentive programs. Selling expense declined by $231,000 (35%) during the second quarter of Fiscal 2003, as compared to Fiscal 2002, and $368,000 (29%) for the first six months of Fiscal 2003 compared to Fiscal 2002, due primarily to reductions in personnel related expenses including reduced commissions on lower reported revenues and gross profit. General and administrative expenses were reduced by $372,000 (25%) during the second quarter of Fiscal 2003 as compared to the same three- month period in Fiscal 2002. Reduction in personnel, salary freezes and pay reductions were the primary reason for the reduction ($325,000). Also the closing of the Saddlebrook facility in the beginning of the year accounted for approximately $50,000 of cost savings during the second quarter. On March 1, 2003 Canterbury's corporate management team, inclusive of the Chairman, President and Vice President, have voluntarily reduced their present salaries by 8%. This is in line with a recently instituted 8% salary reduction at one of the Company's largest subsidiaries. Interest income decreased by $49,000 (28%) during the second quarter of Fiscal 2003 as compared to the same period in the previous year. This is due in part to the reduction in notes receivable balance coupled with the reduced interest rate on the demand note with a related party which was negotiated as part of the paydown during April, 2003. This reduction also holds true for the six-month period ended May 31, 2003. Interest expense declined by $26,000 (46%) for the three months ended May 31, 2003 as compared to the same three months in Fiscal 2002. The ongoing reduction in term debt with the Bank coupled with declining interest rates are the two reasons for the reduction. The same can be said of the six-month reduction of $43,000 (41%). Critical Accounting Policies ---------------------------- Goodwill -------- As previously stated, the Company adopted SFAS 142, "Goodwill and Other Intangible Assets" as of December 1, 2001. This standard requires that goodwill no longer be amortized, but instead, be tested for impairment on an annual basis. The Company's earnings forecasts for purposes of these impairment tests are consistent with forecasts and budgets currently used in the management of these businesses. The estimated fair value of the goodwill amounts are based upon future expectations, and if actual results are significantly lower, the likelihood is that these estimates would change, resulting in future impairment charges. Revenue Recognition -------------------- The Company's revenue recognition policies are in accordance with Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements," which provides additional guidance in applying generally accepted accounting principles for revenue recognition. SAB 101 states that revenue is recognized when there is persuasive evidence of an arrangement, the product has been delivered, the sales price is fixed or determinable, and collectibility is reasonably assured. The vast majority of our revenue transactions contain standard business terms and conditions that result in a clear determination of when revenues should be recognized. Our revenue recognition policy requires an assessment as to whether collectibility is probable, which inherently requires us to evaluate the creditworthiness of our customers and their acceptance of our delivered products and services. Valuation Allowance-Deferred Tax Assets ---------------------------------------- The Company records valuation allowances to reduce deferred tax assets to amounts that are more likely than not to be realized. This process involves forecasting the future profitability of our businesses to determine whether the company is expecting to generate sufficient taxable income to fully utilize our existing tax loss carryforwards and other tax assets that become future tax deductions. The determination of the valuation allowance is based upon our earnings forecasts that we use in the management of our businesses. Therefore, we are required to make estimates and judgments based upon historical experience and the best information available to us. However, future events are subject to change and we may have to adjust the valuation allowance in future periods, accordingly. 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: 99.1 Statement of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 99.2 Statement of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 (b)Reports on Form 8-K: A Form 8-K was filed with the SEC on March 18, 2003 - The Employment of the President of its wholly owned subsidiary, Usertech/Canterbury Corp. has been terminated, and he has been removed as an officer and director of that subsidiary. A Form 8-K was filed with the SEC on May 15, 2003 - On May 8, 2003 Canterbury received a written notification from the Nasdaq Listing Qualifications Section. The letter stated that because the closing bid price of Canterbury's common stock for the previous 30 consecutive trading days was less than the required $1.00 per share, the Company had until November 4, 2003 to trade at a closing bid price of $1.00 per share or more for a minimum of 10 consecutive trading days, or be delisted. As a subsequent event, a Form 8-K was filed with the SEC on June 11, 2003 - The Board of Directors of Canterbury Consulting Group, Inc. authorized a debt private placement for the Company of a minimum of $250,000 up to a maximum of $500,000 in order to replace working capital which was depleted during the fourth quarter of Fiscal 2002 and the first quarter of Fiscal 2003. As a subsequent event, a Form 8-K was filed with the SEC on June 25, 2003 - Canterbury Consulting Group, Inc. received $355,000 from the aforementioned private placement for the Company in the form of a 7 3/4% Senior Convertible Promissory Note. CANTERBURY CONSULTING GROUP, 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 CONSULTING GROUP, INC. -------------------------------------- (Registrant) By/s/ Kevin J. McAndrew -------------------------------------- Kevin J. McAndrew President and Chief Executive Officer By/s/ Kevin J. McAndrew -------------------------------------- Kevin J. McAndrew Chief Financial Officer July 15, 2003 CERTIFICATION OF KEVIN J. MCANDREW AS PRESIDENT AND CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULE 13A-14 I, Kevin J. McAndrew, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Canterbury Consulting Group, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 15, 2003 /s/ Kevin J. McAndrew Kevin J. McAndrew President and Chief Executive Officer CERTIFICATION OF KEVIN J. MCANDREW AS CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULE 13A-14 I, Kevin J. McAndrew, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Canterbury Consulting Group, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 15, 2003 /s/ Kevin J. McAndrew ---------------------------- Kevin J. McAndrew Chief Financial Officer CANTERBURY CONSULTING GROUP, INC. ------------------------------------ EXHIBIT INDEX ------------- Exhibit No. Document ------------------ 99.1 Statement of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 99.2 Statement of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350