CANTERBURY INFORMATION TECHNOLOGY, INC.
ANNUAL REPORT 1997
Dear Fellow Stockholders
In fiscal 1997, Canterbury recorded the final charges and reserves
associated with the reengineering of its business. Although, these
charges and reserves caused us to report a book loss for the year,
they were necessary. They also permitted us to enter fiscal 1998
with no "overhang" of potential "write-offs" resulting from our
previous business segment.
In fiscal 1997, Canterbury's net cash provided by continuing
operations was positive for the third consecutive year. For the
fiscal years ending November 30, 1995, 1996 and 1997, Canterbury
reported cash flow from continuing operations in excess of
$4,400,000.
In fiscal 1997, Canterbury reduced its term debt with Chase Bank
from $2,800,000 to less than $1,500,000. This term debt was
$8,300,000 in June of 1994 as a result of the purchase of
CALC/Canterbury Corp., our largest subsidiary.
To review Canterbury's progress from the end of our fiscal year to
the present date, please read the Subsequent Events section which
follows.
The Canterbury Management Team and Canterbury Board of Directors
will continue to explore every opportunity to attempt to increase
shareholder value.
Respectfully submitted,
/s/Stanton M. Pikus /s/Kevin J. McAndrew
Stanton M. Pikus Kevin J. McAndrew
President Executive Vice President
June 10, 1998
Medford, NJ 08055
Subsequent Events
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December 1, 1997
Kevin J. McAndrew, Chief Operating Officer of Canterbury
Information Technology, Inc. (NASDAQ National Market: CITI)
announced today that CALC/Canterbury Corp., a wholly owned
subsidiary of Canterbury, has commenced a major expansion into the
technical training market. Mr. McAndrew was quoted as saying, "For
some time CALC/Canterbury has been a Microsoft Certified Technical
Education Center (CTEC) and a Lotus Authorized Education Center
(LAEC), but until this time has focused primarily on end user or
application training. From this time forward, CALC/Canterbury will
commit a substantial amount of its capital resources to the technical
training segment of the software training market."
February 27, 1998
Canterbury Information Technology, Inc. (NASDAQ - CITI) - announced
today that Chase Bank and Canterbury have agreed to extend the
current banking relationship through December 31, 1998.
April 8, 1998
Stanton M. Pikus, President, was quoted as saying, "Our Board of
Directors, faced with the possibility of losing our NASDAQ National
Market listing because of NASDAQ's minimum stock price listing
requirements, has voted to reverse split our common stock on a one
for three basis. Accordingly, the stock symbol will be changed to
CITI. The split and the stock symbol change will take effect on
April 14, 1998.
This unanimous action by our Board of Directors will reduce our
issued and outstanding shares from 18,199,000 to 6,066,000. It
will also reduce the number of shares in our 'float' -- those
shares that are freely tradeable in the stock market -- from
approximately 12,000,000 shares to approximately 4,000,000 shares."
April 15, 1998
Canterbury Reports Profitable First Quarter - - Expects Trend To
Continue: Canterbury Information Technology, Inc. (NASDAQ - CITI) -
announced today that for the three months ended February 28, 1998
revenues were $2,783,904 versus $2,822,275 in 1997. Income from
continuing operations was $150,016 in 1998 versus $90,719 in 1997.
Earnings per share was $.03 in 1998 versus $.02 in 1997, reflecting
the one for three reverse split on April 14, 1998.
June 30, 1998
Medford, New Jersey, since the end of fiscal 1997, Canterbury has
reduced its bank term debt by an additional $200,000. The
$8,300,000 of bank-term debt incurred in June of 1994 at the
acquisition of CALC/Canterbury Corp. has been reduced to $1,300,000
as of this date.
Report of Independent Auditors
The Board of Directors and Stockholders
Canterbury Information Technology, Inc.
We have audited the accompanying consolidated balance sheets of
Canterbury Information Technology, Inc. as of November 30, 1997 and
1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in
the period ended November 30, 1997. These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit 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
provided a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Canterbury Information Technology, Inc. at November 30,
1997 and 1996, and the consolidated results of its operations and
cash flows for each of the three years in the period ended November
30, 1997, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
February 27, 1998
Financial Information as of November 30, 1997
Cash and cash equivalents $ 295,936
Accounts receivable, net 1,332,518
Prepaid and other current assets 1,194,873
Deferred income tax benefit and
refundable taxes 2,896,000
-------------
Total current assets 5,719,327
Property and equipment net 2,503,277
Goodwill, net 8,916,221
Other non-current assets 8,648,276
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Total assets $ 25,787,101
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Accounts payable and accrued expenses $ 1,380,161
Unearned tuition income 828,469
Current portion, long-term debt 872,616
-------------
Total current liabilities 3,081,246
Long-term debt and deferred tax liability 7,101,456
Stockholders' equity
Total stockholders' equity $ 15,604,399
-------------
Total liabilities and
stockholders' equity $ 25,787,101
=============
Years ended November 30, 1997 and 1996
1997 1996
---- ----
Net revenues $12,423,452 $12,717,692
Costs and expenses 7,104,803 5,854,993
----------- -----------
Gross profit 5,318,649 6,862,699
Selling 2,032,510 2,149,563
General and administrative 4,318,455 3,996,020
Total operating expenses 6,350,965 6,145,583
Other (income) expenses
Interest income 607,178 326,485
Interest expense (490,552) (682,251)
Other (517,956) 374,575
--------- ---------
Total other income (expenses) (401,330) 18,809
Income (loss) before income taxes
and discontinued operations (1,433,646) 735,925
Provision/(benefit) for income taxes (501,776) 312,768
--------- ---------
Income from continuing operations (931,870) 423,157
Discontinued operations
Loss from discontinued operations
less applicable income
taxes benefits of ($298,224)
and ($762,417) (1,536,047) (1,031,761)
Gain on sale of discontinued
operations (less applicable
income taxes provision of $1,681,649) - 2,275,172
----------- -------------
Net income (loss) $(2,467,917) $ 1,666,568
=========== =============
Please refer to Canterbury Information Technology, Inc. financial
statements in the November 30, 1997 Form 10-K Report, audited by
Ernst & Young, LLP, for footnotes, schedules and further
information.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Working capital at November 30, 1997 was $2,638,000, an increase of
$667,000 over the previous year. During 1997 the Company and its
primary lender, Chase Manhattan Bank, agreed to formally end the
banking relationship between them by December 31, 1997. Throughout
the year, the Company attempted to replace the bank with a suitable
lender. No acceptable alternative was found. In February, 1998
the Company and Chase agreed to extend their banking relationship
until December 31, 1998. The Company has agreed to make scheduled
term debt payments totaling $700,000 in fiscal 1998. The Company
and Chase agreed that all defaults under the previous agreements
were permanently waived and the Company would again use its best
efforts to replace Chase during 1998.
Management believes that positive cash flow contributions from the
Company's operating subsidiaries will be sufficient to cover cash
flow requirements for fiscal 1998. There was no material
commitment for capital expenditures as of November 30, 1997.
Inflation was not a significant factor in the Company's financial
statements.
Cash flow from continuing operations for the year ended November
30, 1997 was $544,000. This was the third consecutive year of
positive cash from continuing operations. During the year, the
Company reduced its long term bank debt by $2,439,000. For the
past three years, the reduction in long term debt totals
$7,663,000.
As with most organizations, the Company relies heavily on
technology to deliver its goods and services. As the turn of the
century approaches, the Company is preparing all of its computer
systems to be Year 2000 compliant. A company-wide taskforce has
been identified to review all software applications, operating
systems and proprietary programs to ensure that they do not
malfunction as a result of the Year 2000. In this process, the
Company plans to replace and/or upgrade all systems that do not
currently meet the required standards. The current cost of this
effort is still being evaluated. As part of this upgrade process,
the Company expects to benefit from many of the technology advances
found in the newest Year 2000 software releases.
RESULTS OF OPERATIONS
Fiscal 1997 Compared to Fiscal 1996
Revenues
- --------
Revenues decreased by $295,000 (2%) in fiscal 1997 over fiscal
1996. This slight reduction was due to the re-engineering of the
sales department in the software training area of the Company. As
previously discussed, new information technology goods and services
are being introduced to our customers. This strategy of becoming a
more complete provider of information technology services required
the restructuring of the existing sales force. This has caused, in
the short term, some revenue degradation due to the recruiting,
hiring and training process of the sales staff. The Company
believes that this current investment will provide long-term
benefits to the customers and hence, revenues.
Costs and Expenses
- ------------------
Costs and expenses increased by $1,250,000 (21%) in fiscal 1997
over the previous year. This increase was caused by various
factors. Rent expense increased by $423,000 due to the Company
establishing lease termination reserves, increasing the number of
classrooms for computer training, as well as reserving for the
relocation of CALC/Canterbury and MSI/Canterbury into customized
office and classroom space in Parsippany, New Jersey. Subcontract
labor for CALC/Canterbury increased by $212,000 for two reasons.
First, there was a significant increase in technical training
classes offered in 1997, which resulted in the need for more
consultants to train these high-end courses. Secondly, there was
approximately $75,000 spent for programming a new operational
accounting system which will allow for both Year 2000 compliance
and increased reporting and processing capabilities. Over $300,000
of the increase in 1997 was attributed to the acquisition of
ATM/Canterbury in May, 1997, as well as ProSoft/Canterbury
operating for a full year in 1997 versus 1996.
Selling expense decreased by $117,000 (5%) in fiscal 1997 over
fiscal 1996 due to lower commission expense and a reduction in
sales personnel through the first nine months of fiscal 1997.
General and administrative expense increased by $322,000 (8%) in
fiscal 1997 over fiscal 1996. Increased legal fees associated with
the settlement and restructuring of the Chase banking relationship
as well as higher consulting fees for the corporate office caused
this increase. The Company believes that both these expenses are
non-recurring. During 1997, the Company allocated $235,000 of
corporate expenses to discontinued operations.
Interest income for fiscal 1997 increased by $281,000 (86%) over
fiscal 1996 due to the payments from the note receivable generated
by the sale of Landscape Maintenance Services, Inc. in November,
1996.
Interest expense decreased by $192,000 (28%) in fiscal 1997 versus
fiscal 1996. The reduction in outstanding borrowings on the term
loan is the major cause for this reduction.
Other expenses of $518,000 in fiscal 1997 were due primarily to a
$450,000 charge representing the difference between the unpaid
balance of a note receivable and the estimated current value of the
collateral supporting the note.
Corporate Information
---------------------
BOARD OF DIRECTORS
- ------------------
Stanton M. Pikus
Kevin J. McAndrew
Jean Zwerlein Pikus
Alan Manin
Stephen M. Vineberg
Paul L. Shapiro
Frank A. Cappiello
EXECUTIVE OFFICERS
- ------------------
Stanton M. Pikus: President, Chief Executive Officer
Kevin J. McAndrew, CPA: Executive Vice President, Chief Operating Officer,
Chief Financial Officer, Treasurer
Jean Zwerlein Pikus: Vice President, Operations; Secretary
CORPORATE HEADQUARTERS
- ----------------------
1600 Medford Plaza, Medford, New Jersey 08055; (609) 953-0044;
(Fax) 609-953-0062
TRANSFER AGENT
- --------------
American Stock Transfer Trust & Company
6201 Fifteenth Avenue, Brooklyn, New York 11219
AUDITORS
- --------
Ernst & Young, LLP
2 Commerce Square, 2001 Market St., Suite 4000, Philadelphia, PA 19103
SEC FORM 10-K
- -------------
The Company's annual report to the Securities and Exchange
Commission on Form 10-K and other financial information such as
interim and annual reports to stockholders are available, without
charge to stockholders, upon written request to:
Canterbury Information Technology, Inc.
1600 Medford Plaza, Medford, New Jersey 08055
(609) 953-0044 Fax (609) 953-0062
Web site: canterburyciti.com
CANTERBURY WEB SITES
Corporate....................canterburyciti.com
CALC/Canterbury Corp.........calctrain.com
ATM/Canterbury Corp..........atmcan.com
ProSoft/Canterbury Corp......prosoftweb.com
MSI/Canterbury Corp..........msitrain.com
CANTERBURY INFORMATION TECHNOLOGY, INC.
1600 Medford Plaza, Medford, New Jersey 08055
(609) 953-0044 Fax (609) 953-0062
www.canterburyciti.com
(Nasdaq: CITI)