MESSAGE FROM MANAGEMENT
Dear Fellow Shareholders:
Canterbury is very pleased to report that in fiscal 1999, revenues increased
from $12,122,879 in 1998 to $14,209,526 in 1999. Net income increased
from $581,503 to $620,768 despite the fact that we invested
heavily in both the infrastructure of our subsidiaries and the
final preparation of CALC Web University. Basic and fully diluted
earnings per share in 1999 were $.08 versus $.10 as a result of
the increase in our common shares outstanding of 3,087,000 in
fiscal 1999. In addition, net worth increased from $16,229,268 to
$18,872,813; and total assets increased from $25,329,897 to
$27,811,972.
We believe that Canterbury is extremely well positioned for fiscal
2000.
* We have fully launched CALC Web University, our learning
portal on the internet. It now offers a vast array of
options for corporate and governmental employees as well as
individual consumers, including a catalog of over 300 online
courses ranging from Desktop Computing to Microsoft MCSE
Training to Management and Business Skills. CALC Web
University can also create, produce and deliver training
programs from scratch on any topic, specifically for online
presentation over our portal or via any corporate intranet.
* Canterbury has and continues to assist e*machinery.net, inc.
(OTCBB: EMAC) in the development of an industry specific portal
for the construction and mining industry worldwide. EMAC's web site
intends to provide a "state of the art" electronic exchange for the
purchase and sale of new and used construction and mining machinery.
It plans to also provide access to financing, underwriting, shipping,
inspections, appraisals, training and other associated services.
Canterbury will also provide EMAC with various business overlays so
that EMAC's management can focus on the marketing, sale and daily
support necessary to provide a full service, worldwide, vertically
integrated portal to its customer base. Canterbury is currently a
significant minority shareholder in EMAC and we expect our equity to
grow as we offer on-going technical and business related services.
* The Canterbury acquisition of U.S. Communications (renamed
USC/Canterbury Corp.) in the fourth fiscal quarter of 1999
not only added additional information technology capabilities
to the Canterbury family of companies, but also increased our
pro forma revenues by over $10,000,000. Assuming even
moderate internal growth for our subsidiaries in the Year
2000, we believe that it is reasonably safe to assume
revenues will grow from $14,200,000 in fiscal 1999 to more
than $25,000,000 in fiscal 2000. We also believe that our
net income and earnings per share will grow accordingly.
We are continuing the aggressive acquisition search that we began
in the second half of fiscal 1999. The first dividend from this
search culminated in the acquisition of the business and assets of
U.S. Communications, Inc. We are now entering the second phase of
our acquisition search. We will still consider only profitable,
well-managed companies that will add to the products and services
we can offer to our existing corporate customers in order to
provide one-stop shopping to mid-size and large corporations and
state and local governments that wish to outsource their
information technology requirements. However, now we will be
focusing more on larger acquisitions so that Canterbury can have
revenues significantly higher than $25,000,000. We know that we
have the internal management and administrative systems to support
a $100,000,000 company. We also know that information technology
is the right place to be for the foreseeable future, and we
believe that we are very good at what we do. Therefore our
objective, as your management, is to reach our goal, not only by
aggressive internal growth but by the strategic acquisition of
substantially larger companies.
<PAGE>
MESSAGE FROM MANAGEMENT (Continued)
In order to familiarize our shareholders with Canterbury's
capabilities, we have blocked out below those capabilities by
subsidiary.
Technical Management Computer and Technical Staffing
Training Training Software And Recruiting
CALC/Canterbury Companies Consulting CALC/Canterbury
MSI/Canterbury ATM/Canterbury
CALC/Canterbury
USC/Canterbury
Network and Systems Integrators Internet and Intranet
Systems --------- Consultants, Developers
Developers and Hardware/Software And Providers
Installers Sales CALC/Canterbury
CALC/Canterbury USC/Canterbury
USC/Canterbury
Business to Business Portal
Global Online Training
CALC Web University
We look forward to a successful Year 2000 filled with exciting
developments. We will keep you informed of our progress.
Respectfully submitted,
Stanton M. Pikus Kevin J. McAndrew
President Executive Vice President
Subsequent Events:
-----------------
On April 7, 2000 Canterbury announced a partnership with Saba to
bring CALC Web University, its online learning portal site, to the
2,000,000 corporate and government learners who are on SABA
(Nasdaq NM: SABA). Saba is widely regarded as the leading
provider of internet based business-to-business learning networks.
On April 13, 2000 Canterbury announced that for the first fiscal
quarter ended February 29, 2000, revenues increased from
$2,802,000 in 1999 to $5,954,000 in 2000. Net income increased
from $43,000 to $157,000 and earnings per share increased from
$.01 to $.02.
On July 17, 2000 Canterbury announced that for the three months
ended May 31, 2000 revenues were $6,009,000 versus $3,519,000 in
1999. Net income was $371,000 in 2000 versus $227,000 for the
same period in 1999. Earnings per share was $.04 in 2000 versus
$.03 in 1999. For the six months ended May 31, 2000, revenues
were $11,963,000 versus $6,321,000 in 1999. Net income was
$528,000 versus $269,000 for 1999. Earnings per share was $.06 in
2000 versus $.04 in 1999.
<PAGE>
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, 1999
and 1998, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years
in the period ended November 30, 1999. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. 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, 1999 and 1998, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended
November 30, 1999, in conformity with accounting principles
generally accepted in the United States.
Ernst & Young LLP
Philadelphia, Pennsylvania
February 25, 2000
<PAGE>
SUMMARY FINANCIAL INFORMATION AS OF 11/30/99
Cash and cash equivalents $ 1,060,434
Accounts receivable, net 2,676,889
Prepaid and other current assets 1,413,893
--------------
Total current assets 5,151,216
Property and equipment net 2,383,829
Goodwill, net 8,885,170
Deferred income tax benefit 2,706,888
Other non-current assets 8,684,869
--------------
Total assets $ 27,811,972
==============
Accounts payable and accrued expenses $ 1,532,582
Unearned revenue 1,111,330
Current portion, long-term debt 1,246,997
--------------
Total current liabilities 3,890,909
Long-term debt and deferred tax liability 5,048,250
Stockholders' equity
Total stockholders' equity $ 18,872,813
--------------
Total liabilities and
stockholders' equity $ 27,811,972
==============
<PAGE>
Years ended November 30, 1999, 1998, and 1997
1999 1998 1997
---- ---- ----
Service revenue $11,665,394 $11,400,199 $12,109,611
Product revenue 2,544,132 722,680 313,841
----------- ----------- -----------
Total net revenue 14,209,526 12,122,879 12,423,452
Service costs and expenses 6,657,385 6,403,033 7,020,737
Product costs and expenses 1,810,926 292,243 84,066
----------- ----------- -----------
Total costs and
expenses 8,468,311 6,695,276 7,104,803
Gross profit 5,741,215 5,427,603 5,318,649
Selling 1,808,601 1,984,836 2,032,510
General and administrative 3,645,673 3,798,612 4,318,455
----------- ----------- -----------
Total operating expenses 5,454,274 5,783,448 6,350,965
Other income (expenses)
Interest income 705,959 861,424 607,178
Interest expense (390,453) (394,925) (490,552)
Other 18,321 470,849 (517,956)
----------- ----------- -----------
Total other income
(expenses) 333,827 937,348 (401,330)
Income (loss) before income taxes
and discontinued
operations 620,768 581,503 (1,433,646)
Benefit for income taxes - - (501,776)
----------- ----------- -----------
Income (loss) from
continuing operations 620,768 581,503 (931,870)
Discontinued operations
Loss from discontinued operations
(less applicable income tax benefit
of $298,224) - - (1,536,047)
----------- ----------- -----------
Net income (loss) $ 620,768 $ 581,503 $(2,467,917)
=========== =========== ===========
Please refer to Canterbury Information Technology, Inc. financial
statements in the November 30, 1998 Form 10-K Report, audited by
Ernst & Young, LLP, for footnotes, schedules and further
information.
SUMMARY FINANCIAL INFORMATION AS OF 11/30/99
CAUTIONARY STATEMENT
When used in this Report on Form 10-K 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
Company's ability to obtain financing on satisfactory terms; (4)
the sensitivity of the Company's business to general economic
conditions; and (5) 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.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at November 30, 1999, was $1,260,000. This
was an increase of $1,878,000 over the previous year. This
increase is explained by the following reasons: Accounts
receivable increased by $1,536,000, while accounts payable
increased only by $788,000. Most of these increases were caused
by the acquisition of USC/Canterbury in October, 1999. Secondly,
cash increased $773,000 during the year, due to positive cash flow
from operating activities.
The Company's outstanding amounts owed under the term loan
and credit line with Chase Bank were refinanced in December, 1999.
Under the new agreement, the Company paid off the remaining term
debt of $200,436 and agreed to term out the $2,774,620 credit
line. Monthly payments began in March of 2000, and continue until
December of 2001 when the final balloon payment of $640,000 is due
and payable. Scheduled payments for fiscal 2000 total $915,000.
The long term debt is secured by substantially all of the
assets of the Company and requires compliance with covenants which
include: limits on capital expenditures, certain prepayments from
excess cash flow as defined and the maintenance of certain
financial ratios and amounts. The Company is restricted by its
primary lender from paying cash dividends on its common stock.
Subsequent to November 30, 1999 the Company has paid a total
of $285,000 to reduce the total bank debt from $2,975,000 to
$2,690,000. The outstanding debt will accrue interest at prime
plus 2.0% per annum.
During 1999, the Company successfully completed a series of
private placements with non-affiliates. From March, 1999 to
October, 1999 a total of four private placements occurred. A
total of 2,320,589 restricted common shares of stock were issued.
The net proceeds totaled $1,471,220. The Company also issued a
total of 397,059 shares of restricted common stock as finder fees
associated with these placements. All private placements had
registration rights. The Company used the proceeds to repay
amounts under the term loan, for general corporate purposes and
for working capital.
Management believes that positive cash flow contributions
from the Company's operating subsidiaries will be sufficient to
cover cash flow requirements for fiscal 2000. There was no
material commitment for capital expenditures as of November 30,
1999. Inflation was not a significant factor in the Company's
financial statements.
Cash flow from continuing operations for the year ended
November 30, 1999 was $659,000. This represents an increase of
$253,000 over the prior year. 1999 was the fifth consecutive year
of positive cash from continuing operations. During the year, the
Company reduced its long term bank debt by $1,257,000. For the
past four years, the reduction in long term debt totals
$6,652,000.
IMPACT OF THE YEAR 2000
In prior years, the Company discussed the nature and progress
of its plans to become Year 2000 ready. In late 1999, the Company
completed its remediation and testing of systems. As a result of
those planning and implementation efforts, the Company experienced
no significant disruptions in mission critical information
technology and non-information technology systems and believes
those systems successfully responded to the Year 2000 date change.
The Company expensed approximately $50,000 during 1999 in
connection with remediating its systems. The Company is not aware
of any material problems resulting from Year 2000 issues, either
with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor
its mission critical computer applications and those of its
suppliers and vendors throughout the year 2000 to ensure that any
latent year 2000 matters that may arise are addressed promptly.
RESULTS OF OPERATIONS
Fiscal 1999 Compared to Fiscal 1998
Revenues
--------
Revenues increased by $2,086,000 (17%) in fiscal 1999 over
fiscal 1998. The majority ($1,990,000) of this increase is
attributable to the revenues generated by USC/Canterbury, which
was acquired in October, 1999. The revenues for the other
existing subsidiaries remained fairly constant. The Company
continues to develop alternative revenue streams such as on-line
learning, technical staffing, technical services and web
development. It is believed that these additional revenue streams
will become more significant in Fiscal 2000 and beyond.
Costs and Expenses
------------------
Costs and expenses increased by $1,773,000 (26%) in fiscal
1999 over the previous year. Again, the most significant portion
of this increase ($1,592,000) is attributable to costs associated
with USC/Canterbury for the fourth quarter of the year. The
remaining increase of $181,000 is due to increased labor and
personnel costs in the training segment.
Selling expense decreased by $176,000 (9%). There was a
planned reduction in marketing expense for CALC/Canterbury of
$106,000. During the year the Company continued to downsize the
catalog and the mailing list. More and more of the public
registrations are coming through the CALC/Canterbury web site,
which has allowed for the reduction in printing and postage
expenses. The balance of the reduction is primarily due to
reduced costs associated with sales personnel.
General and administrative expense decreased by $153,000 (4%)
in fiscal 1999 over fiscal 1998. This reduction is due to reduced
personnel costs throughout the organization. As technology
continues to improve, the Company has been able to downsize
several support functions, relying more on information generated
and processed by in-house computer applications.
Interest income for fiscal 1999 decreased by $155,000 (18%)
over fiscal 1998. This was due to the fact that in 1998 the
Company recognized interest income on the portion of the Company's
revolving credit facility with Chase Bank that was assumed by the
owners of Landscape Maintenance Services for both 1998 and 1997.
CORPORATE INFORMATION
WEB SITES
Corporate canterburyciti.com
CALC/Canterbury Corp. calc.com
ATM/Canterbury Corp. atmcan.com
MSI/Canterbury Corp. msitrain.com
USC/Canterbury Corp. gettrained.com
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 Street, 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
and are available on the internet directly from the Securities and
Exchange Commission's Web site: edgar.com.
