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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