SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
( X )QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission File No. 0-16386
CANNON EXPRESS, INC.
(Exact name of registrant as specified in its charter)
Delaware 71-0650141
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1457 Robinson
P.O. Box 364
Springdale, Arkansas 72765
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (501) 751-9209
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 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. Yes X No
Number of shares of $.01 par value common stock outstanding at April 30,
2001: 3,205,276
INDEX
CANNON EXPRESS, INC. and SUBSIDIARIES
PART 1 -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements (Unaudited)
Consolidated Balance Sheets
as of March 31, 2001 and June 30, 2000....................................1
Consolidated Statements of Operations
for the Three Months and Nine Months Ended March 31, 2001 and 2000........3
Consolidated Statements of Cash Flows
for the Nine Months Ended March 31, 2001 and 2000.........................4
Notes to Consolidated Financial Statements..................................5
ITEM 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................6
ITEM 3 -- Quantitative and Qualitative Disclosure about Market Risk........10
PART II -- OTHER INFORMATION
ITEM 1 -- Legal Proceedings ...............................................10
ITEM 2 -- Changes in Securities.............................................*
ITEM 3 -- Defaults Upon Senior Securities...................................*
ITEM 4 -- Submission of Matters to a Vote of Security-Holders...............*
ITEM 5 -- Other Information.................................................*
ITEM 6 -- Exhibits and Reports on Form 8-K.................................10
*No information submitted under this caption.
PART 1.
ITEM 1. Financial Statements (Unaudited)
Cannon Express, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31 June 30
2001 2000
(Unaudited) (Note)
Assets
Current assets:
Cash and cash equivalents $5,453,904 $8,351,582
Receivables, net of allowance for doubtful accounts
(March 31, 2001-$313,046; June 30, 2000-$267,405):
Trade 10,574,748 11,987,372
Other 131,264 1,837,256
Current portion of net investment in direct
financing leases 3,558,100 6,575,400
Prepaid expenses and supplies 1,571,361 1,623,267
Deferred income taxes 136,000 4,919,000
Total current assets 21,425,377 35,293,877
Property and equipment:
Land, buildings and improvements 1,368,273 1,257,335
Revenue equipment 78,225,286 75,340,802
Service, office and other equipment 2,940,760 2,932,135
82,534,319 79,530,272
Less allowances for depreciation 28,642,096 24,460,235
53,892,223 55,070,037
Other assets:
Receivable from stockholders 23,406 23,406
Restricted cash 2,417,686 2,406,916
Marketable securities 342,550 346,970
Net investment in direct financing leases,
less current portion 4,159,621 10,636,780
Deferred income taxes 206,597 -
Other 111,182 111,182
Total other assets 7,261,042 13,525,254
$82,578,642 $103,889,168
Note: The balance sheet at June 30, 2000 has been derived from the audited
consolidated balance sheet at that date but it does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to consolidated financial statements.
Cannon Express, Inc. and Subsidiaries
Consolidated Balance Sheets (Continued)
March 31 June 30
2001 2000
(Unaudited) (Note)
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 1,444,653 $ 1,529,639
Accrued expenses:
Insurance reserves 3,760,227 3,666,103
Other 2,332,716 1,865,089
Federal and state income taxes payable - 1,414,652
Current portion of long-term debt 14,892,288 13,098,351
Total current liabilities 22,429,884 21,573,834
Long-term debt, less current portion 44,455,720 56,648,009
Deferred income taxes - 6,849,000
Other liabilities 1,253 12,531
Stockholders' equity:
Common stock: $.01 par value; authorized
10,000,000 shares; issued 3,265,401 shares 32,654 32,654
Additional paid-in capital 3,747,575 3,747,575
Retained earnings 12,112,773 15,230,131
Unrealized depreciation on marketable
securities, net of income taxes (953) (4,302)
15,892,049 19,006,058
Less treasury stock, at cost (60,125 shares) 200,264 200,264
15,691,785 18,805,794
$82,578,642 $103,889,168
Note: The balance sheet at June 30, 2000 has been derived from the audited
consolidated balance sheet at that date but it does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to consolidated financial statements.
Cannon Express, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended Nine Months Ended
March 31 March 31
2001 2000 2001 2000
(Unaudited) (Unaudited)
Operating revenue $20,850,239 $22,522,951 $63,926,044 $66,729,176
Operating expenses and costs:
Salaries, wages
and fringe benefits 6,320,789 6,083,764 18,115,110 19,626,750
Rents and purchased
transportation 5,685,623 7,269,852 20,010,522 18,848,589
Operating supplies
and expense 5,589,218 4,658,643 15,265,598 15,571,967
Taxes and licenses 970,915 1,137,993 2,710,447 3,278,400
Insurance & claims 571,489 1,158,372 2,633,742 3,918,233
Depreciation and amort. 2,047,313 511,475 6,753,202 2,033,461
Other 556,541 630,758 1,912,229 2,131,889
21,741,888 21,450,857 67,400,850 65,409,289
Operating income (loss) (891,649) 1,072,094 (3,474,806) 1,319,887
Other income (expense)
Interest expense (1,106,128) (1,158,421) (3,611,873) (2,653,793)
Other income 80,500 208,909 303,821 391,590
(1,025,628) (949,512) (3,308,052) (2,262,203)
Income (loss)
before income taxes (1,917,277) 122,582 (6,782,858) (942,316)
Federal and state income taxes
Current (383,500) 116,000 (1,150,500) 279,000
Deferred (738,000) (484,000) (2,515,000) (1,887,000)
(1,121,500) (368,000) (3,665,500) (1,608,000)
Net income (loss) (795,777) 490,582 (3,117,358) 665,684
Basic and diluted
earnings (loss) per share ($0.25) $0.15 ($0.97) $0.21
Basic and diluted
shares outstanding 3,205,276 3,205,276 3,205,276 3,205,276
See notes to consolidated financial statements.
Cannon Express, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Nine Months Ended
March 31
2001 2000
(Unaudited)
Operating activities
Net income (loss) $ (3,117,358) $ 665,684
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,321,912 6,700,419
Provision for losses on accounts receivable 45,000 45,000
Benefit for deferred income taxes (2,272,596) (1,828,000)
Gain on disposal of equipment (568,709) (4,664,757)
(Gain) loss on sale of marketable securities 5,104 (62,985)
Changes in operating assets and liabilities:
Accounts receivable 3,073,616 (1,190,182)
Prepaid expenses and supplies 51,906 (332,599)
Accounts payable, accrued expenses,
taxes payable, and other liabilities (939,985) (696,729)
Net investment in direct financing leases 2,622,715 3,128,808
Other assets - (50,020)
Net cash provided by operating activities 6,221,605 1,714,639
Investing activities
Purchases of property and equipment (391,097) (26,676,453)
Investment in outside driver training facility - (37,550)
Net increase in restricted cash (10,770) -
Proceeds from sales of marketable securities 4,762 234,791
Proceeds from equipment sales 1,676,173 19,853,230
Net cash provided by (used in) investing activities 1,279,068 (6,625,982)
Financing activities
Proceeds from long-term borrowing 246,437 26,593,937
Principal payments on long-term debt and
capital lease obligations (10,644,788) (21,825,551)
Net cash provided by (used in) financing activities (10,398,351) 4,768,386
Decrease in cash and cash equivalents (2,897,678) (142,957)
Cash and cash equivalents at beginning of period 8,351,582 9,683,794
Cash and cash equivalents at end of period $ 5,453,904 $ 9,540,837
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10 - Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three month and nine month periods ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the year
ended June 30, 2001. For further information, refer to the Company's
consolidated financial statements and notes thereto included in its Form 10
- - K for the fiscal year ended June 30, 2000.
Note B - Supplemental Disclosures of Cash Flow Information
Nine Months Ended
March 31
2001 2000
Interest paid $ 3,531,622 $ 2,545,278
Non-cash investing and financing activities:
Decrease in direct financing leases $ 6,608,715 -
Debt incurred due to net investment in
direct financing leases - $15,939,016
Note C - Legal Proceedings
The Company is a party to routine litigation incidental to its business,
primarily involving claims for personal injuries and property damage incurred
in the transportation of freight. Management believes that adverse results in
one or more of these cases would not have a material adverse effect on
profitability or financial position. Additionally, a decision has been
rendered against the Company by the Equal Employment Opportunity Commission
("EEOC") for unlawful hiring practices regarding pre-employment questions
about medical issues. The Company believed it was required by Department of
Transportation regulations to ask these questions. The Company is unable to
predict the range of any penalties which may be imposed, but accrued $250,000
in the quarter ended September 30, 2000 for potential penalties and associated
legal fees. The Company believes that settlement of this charge will not have
a material adverse effect on profitability or financial position of the
Company.
Note D - Reclassification
Certain reclassifications have been made to the March 31, 2000 financial
statements to conform to the March 31, 2001 financial statement presentation.
These reclassifications had no effect on net income.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations -- Third Quarter
Operating revenue for the third quarter of fiscal 2001 (ended March 31, 2001)
was $20,850,239 compared to $22,522,951 for the third quarter of fiscal 2000,
a decrease of $1,672,712 or 7.4% for the period. At March 31, 2001, the
Company's fleet consisted of 779 trucks and 2,023 trailers, while on March
31, 2000, the Company's fleet consisted of 712 trucks and 2,212 trailers.
Logistics and intermodal revenue for the third quarter of fiscal 2001
decreased by $583,379 from $1,607,316 for the third quarter of fiscal 2000 to
$1,023,937 for the same period of fiscal 2001. The Company's revenue
continued to be negatively impacted by a shortage of qualified drivers to
operate its trucks during the third quarter of fiscal 2001. Additionally,
the Company was affected by an industry-wide shortage of freight during the
quarter ended March 31, 2001.
The Company experienced significant turnover in its lease program in the
third quarter of fiscal 2001. Economic conditions were not favorable to small
companies who did not have financial resources to survive. Consequently, 123
trucks which were lease trucks on June 30, 2000 were converted to Company
trucks. Salaries, wages, and fringe benefits, made up primarily of drivers'
wages, increased as a percentage of revenue to 30.3% in the third quarter of
fiscal 2001 from 27.0% in the third quarter of fiscal 2000 due to the
increase in Company drivers. Rents and purchased transportation decreased to
27.3% of revenue in fiscal 2001 from 32.3% in fiscal 2000 primarily due to
the decrease in the Company's owner operators and to decreased logistics
activities.
Operating supplies and expenses, as a percentage of revenue, increased to
26.8% in the third quarter of fiscal 2001 from 20.7% in the comparable period
of fiscal 2000. This increase was due to the increase in company drivers and
decrease in lease operators. Operating taxes and licenses decreased to 4.7%
of revenue in fiscal 2001 from 5.1% in fiscal 2000. Insurance and claims
were 2.7% of revenue in fiscal 2001, decreasing from 5.1% in fiscal 2000.
Depreciation and amortization increased to 9.8% of revenue in fiscal 2001
from 2.3% in fiscal 2000. This increase was largely due to a smaller gain on
sale of equipment of $439,566 which was realized in the third quarter of
fiscal 2001 as compared to a gain of $2,214,744 in the third quarter of
fiscal 2000 as gains are netted against depreciation and amortization. Other
expenses were 2.7% of revenue in the third quarter of fiscal 2001 and 2.8% in
the comparable period of 2000.
Operating revenue for the third quarter of 2001 decreased by 7.4% over the
comparable period of 2000, while operating expenses increased by $291,031 or
1.4%. Accordingly, the Company's operating ratio increased to 104.3% in the
third fiscal quarter of 2001 from 95.2% in the same period of fiscal 2000.
Interest expense increased to 5.3% of revenue in the third quarter of
fiscal 2001 from 5.1% recorded in the third quarter of fiscal 2000.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Cont'd
Beginning in 1999 and continuing through 2000, the Company recognized a
previously unrealized tax benefit resulting from a sale/leaseback transaction
entered into during fiscal year 1995. The Company took a position on its
1995 and later tax returns, which the Company believed might be challenged by
the Internal Revenue Service (the Service). The Company initially did not
recognize any tax benefit for financial reporting purposes. The Company is
currently undergoing an audit by the Service for its fiscal 1997 tax period.
Although the service has not made a final determination with regard to the
lease transaction and its tax consequences, the Company believes that the
Service will ultimately determine that its previous tax deductions were
appropriate and the Company will then recognize all benefits accrued through
the most current reporting period. Consequently, the Company recognized a
current income tax credit of $383,500 during the quarter ended March 31,
2001.
Net loss for the third quarter of fiscal 2001 ended March 31, 2001 was
($795,777) ($.25 loss per diluted share) compared to net income of $490,582
($.15 earnings per diluted share) during the comparable period of fiscal
2000, a decrease of $1,286,359 or 262.2% for the period.
Results of Operations - Nine Month Period
Operating revenue for the first nine months of fiscal 2001 ended March 31,
2001 was $63,926,044 compared to $66,729,176 for the comparable period of
fiscal 2000, representing a decrease of $2,803,132 or 4.2%. Logistics and
intermodal revenue decreased by $1,350,589 for the nine-month period of
fiscal 2001 over the comparable period of fiscal 2000. As in the three-month
period, a continued shortage of qualified drivers impaired the Company's
ability to produce revenue.
Salaries, wages, and fringe benefits decreased to 28.3% of revenues in the
nine-month period of fiscal 2001 from the 29.4% reported in the nine-month
period of fiscal 2000. This decrease is primarily due to the Company's
implementation of its lease program for owner operators. Rents and purchased
transportation increased to 31.3% of revenue in the first nine months of
fiscal 2001 from 28.2% during the comparable period of fiscal 2000. This
increase was caused primarily by payments made to the Company's owner
operators. Operating supplies and expenses increased to 23.9% of revenue in
fiscal 2001 from 23.3% in fiscal 2000. Taxes and licenses decreased to 4.2%
of revenue during fiscal 2001 from 4.9% in fiscal 2000. Insurance and claims
were 4.1% of revenue in fiscal 2001, decreasing from 5.9% in fiscal 2000.
Depreciation and amortization, as a percentage of revenue, increased to
10.6% of revenue in fiscal 2001 from 3.0% in the same period of fiscal 2000.
This decrease was largely due to smaller gain on sale of equipment of
$568,709 which was realized in the nine-month period of fiscal 2001 as
compared to a gain of $4,664,757 in the same period of fiscal 2000 as gains
are netted against depreciation and amortization. The remaining increase is
due to depreciation on new equipment. Other expenses decreased to 3.0% in the
nine-month period of fiscal 2001 from 3.2% in the nine-month period of fiscal
2000.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Cont'd
Operating revenue for the nine-month period of 2001 decreased by 4.2% over
the comparable period of 2000, while operating expenses increased by
$1,991,561 or 3.0%. Accordingly, the Company's operating ratio increased to
105.4% for the nine-month period in 2001 from 98.0% during the same period in
2000.
Interest expense increased to 5.7% of revenue in the first nine months of
fiscal 2001 from 4.0% recorded in the first nine months of fiscal 2000.
Beginning in 1999 and continuing through 2000, the Company recognized a
previously unrealized tax benefit resulting from a sale/leaseback transaction
entered into during fiscal year 1995. The Company took a position on its 1995
and later tax returns which the Company believed might be challenged by the
Internal Revenue Service (the Service). The Company initially did not
recognize any tax benefit for financial reporting purposes. The Company is
currently undergoing an audit by the Service for its fiscal 1997 tax period.
Although the service has not made a final determination with regard to the
lease transaction and its tax consequences, the Company believes that the
Service will ultimately determine that its previous tax deductions were
appropriate and the Company will then recognize all benefits accrued through
the most current reporting period. Consequently, the Company recognized a
deferred income tax credit of $1,150,500 during the nine-month period ended
March 31, 2001.
Net loss for the first nine months of fiscal 2001 ended March 31, 2001 was
($3,117,358) ($.97 loss per diluted share) compared to net income of $665,684
($.21 earnings per diluted share) during the comparable period of fiscal
2000, a decrease of $3,783,042 or 568.3% for the nine-month period.
In July of 1999, the Company implemented a new program in which owner-
operators may qualify to lease/purchase a truck and be paid a percentage of
the Company's revenue to operate it under a contract with the Company to haul
freight for its customers. This program for owner/operators is intended to
provide benefits to the Company during the term of the lease approximately
equal to the current employee driver program. The program is an option for
drivers which the Company believes may improve driver retention. Since the
owner/operator is responsible for certain of the costs born by the company
for employee drivers, the Company's income statement will reflect a shift
between individual cost categories.
The Company's cost for owner/operators is reflected in the income statement
as part of "Rents and purchased transportation." The Company has incurred
a significant reduction in its costs for Salaries, wages and fringe benefits,
Operating supplies and expense, Operating taxes and licenses, and
Depreciation and amortization. The increase in costs for "Rents and
purchased transportation" approximately equals the decreases in the other
categories, therefore having no significant impact on profit margin.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Cont'd
The Company's lease program is structured in such a way that the
owner/operator may elect to purchase the equipment for its fair market value
at the end of the lease. Alternatively, the owner/operator may elect not to
purchase the equipment. In the event that an operator does not purchase the
equipment, the Company anticipates that it may realize a benefit at the end
of the lease term when trucks are sold as a result of a higher trade-in or
re-sale value due to better care and maintenance by the owner/operator.
The Company experienced significant turnover in its lease program for the
first nine months of fiscal 2001. Economic conditions were not favorable to
small companies who did not have financial resources to survive.
Consequently, 123 trucks which were lease trucks on June 30, 2000 were
converted to Company trucks.
Fuel Cost and Availability
The Company, and the motor carrier industry as a whole, is dependent upon the
availability and cost of diesel fuel. For the third quarter of fiscal 2001,
the average cost per gallon of fuel was approximately the same as in the same
quarter of fiscal 2000. For the nine-month period ended March 31, 2001, the
average cost per gallon was 23 cents higher than in the same period of fiscal
2000. Historically, increases in fuel costs have been passed through to the
Company's customers, either in the form of fuel surcharges, or if deemed
permanent in nature, through increased rates. Although the Company has
currently implemented fuel surcharges for its customers, there is no
assurance that any future increases in fuel costs can be passed through to
the Company's customers. The current or further cost increases or shortages
of fuel could affect the Company's future profitability.
Liquidity and Capital Resources
The Company's primary sources of liquidity have been cash flows generated
from operations and proceeds from borrowings. The Company typically extends
credit to its customers, billing freight charges after delivery.
Accordingly, the ability of the Company to generate cash to satisfactorily
meet its ongoing cash needs is substantially dependent upon timely payment by
its customers. The Company has not experienced significant uncollectible
accounts receivable.
Operating activities provided cash flows of $6.2 million for the first nine
months of fiscal 2001 compared to $1.7 million for the same period of fiscal
2000. Cash flows from operations in the first three quarters of fiscal 2001
were the result of $3.1 million net loss, $7.3 million in depreciation offset
by $.6 million from gain on disposal of assets and $2.6 million provided by
other working capital assets and liabilities. Investing activities provided
net cash of $1.3 million during the first nine months of fiscal 2001 compared
to $6.6 million net cash used in the same period of fiscal 2000. Financing
activities used net cash of $10.4 million during the first three quarters of
fiscal 2001 compared to $4.8 million net cash provided in fiscal 2000.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Cont'd
The Company's working capital decreased by $14.7 million to a deficit of $1.0
million at March 31, 2001 from $13.7 million at June 30, 2000. Historically,
working capital needs have been met from cash generated from operations.
Management believes that the Company's working capital will be sufficient for
its short-term needs.
Like other truckload carriers, the Company experiences significant driver
turnover. Management anticipates that competition for qualified drivers will
intensify. The Company seeks to attract drivers by advertising job openings,
encouraging referrals from existing employees and providing a training
program for applicants whose experience does not meet the Company's minimum
requirements, however, no assurance can be made that the Company will not
continue to experience a shortage of drivers in the future.
During the first nine months of fiscal 2001, the Company has taken delivery
of 4 new trucks, increasing its fleet to 779 at March 31, 2001. Additionally,
the Company has sold 257 of its 48 foot trailers resulting in a gain of
approximately $569,000. The Company plans to convert the majority of its
trailer fleet to 53 foot trailers in the future in order to allow it to
compete for freight from the increasing number of customers who require 53
foot trailers for some or all of their shipments. The Company currently owns
and operates 1,092 of the 53 foot trailers and 931 of the 48 foot trailers.
Forward-Looking Statements
This report contains forward-looking statements that are based on assumptions
made by management from information currently available to management. These
statements address future plans, expectations and events or conditions
concerning various matters such as the results of the Company's sales efforts
as set forth in the discussion of results of operations, capital
expenditures, litigation and capital resources and accounting matters.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, actual results could differ
materially from those currently reported.
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk
The Company is exposed to cash flow and interest rate risk due to changes in
interest rates with respect to its long-term debt. See Note 2 to the
Consolidated Financial Statements in the Company's Annual Report for fiscal
year ended June 30, 2000 for details on the Company's long-term debt.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is a party to routine litigation incidental to its business,
primarily involving claims for personal injuries and property damage incurred
in the transportation of freight. Management believes that adverse results in
one or more of these cases would not have a material adverse effect on
profitability or financial position. Additionally, a decision has been
rendered against the Company by the Equal Employment Opportunity Commission
("EEOC") for unlawful hiring practices regarding pre-employment questions
about medical issues. The Company believed it was required by Department of
Transportation regulations to ask these questions. The Company is unable to
predict the range of any penalties which may be imposed, but accrued $250,000
in the quarter ended September 30, 2000 for potential penalties and
associated legal fees. The Company believes that settlement of this charge
will not have a material adverse effect on profitability or financial
position of the Company.
ITEM 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended March 31,
2001.
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.
CANNON EXPRESS, INC.
(Registrant)
Date: May 15, 2001 /s/ Dean G. Cannon
President, Chairman of the Board,
Chief Executive Officer and Chief
Accounting Officer
Date: May 15, 2001 /s/ Rose Marie Cannon
Secretary, Treasurer and Director