U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 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. 0-31235
CONX CAPITAL CORPORATION
----------------------
(Exact name of registrant as specified in its charter)
NEVADA 62-1736894
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
502 N. DIVISION STREET, CARSON CITY, NV 89703
--------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(702) 886-0713
-------------
(Registrant's telephone number, including area code)
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. YES X NO
--- ---
As of September 30, 2001, the Registrant had 6,650,000 shares of
Common Stock, $.01 par value per share, outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
This quarterly report on Form 10-Q contains forward-looking
statements as defined by the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements should be read in
conjunction with the cautionary statements and other important
factors included in this Form 10-Q as well as in other filings
made by the Company with the Securities and Exchange Commission
("SEC") . These forward-looking statements are subject to a
number of risks and uncertainties, which could cause the
Company's actual results to differ materially from those
anticipated in such statements and include statements concerning
plans, objectives, goals, strategies, future events or
performance and underlying assumptions and other statements which
are other than statements of historical facts. Factors which
could cause such results to differ include the Company's limited
operating history, the Company's dependence on the operations of
an affiliated party, reliance upon third party financing, the
need for additional financing and other factors discussed in the
Company's filings with the SEC, including the Risk Factors set
forth in the Company's Form 10 dated January 16, 2001. Such
forward-looking statements may be identified, without limitation,
by the use of the words "anticipates," "believes," "estimates,"
"expects," "intends," "plans," "predicts," "projects," and
similar expressions.
The Company's expectations, beliefs and projections are
expressed in good faith and are believed by the Company to have a
reasonable basis, including without limitation, management's
examination of the historical operating trends, data contained in
the Company's records and other data available from third
parties. There can be no assurance, however, that the Company's
expectations, beliefs or projections will be achieved or
accomplished.
-1-
CONX CAPITAL CORPORATION
Accountants' Report and Condensed Financial Statements
September 30, 2001 and December 31, 2000
CONX CAPITAL CORPORATION
September 30, 2001 AND DECEMBER 31, 2000
TABLE OF CONTENTS
-----------------
Page
INDEPENDENT ACCOUNTANTS' REPORT. . . . . . . . . . . . . . . 4
CONDENSED FINANCIAL STATEMENTS
Balance Sheets. . . . . . . . . . . . . . . . . . . . . . 5
Statements of Income. . . . . . . . . . . . . . . . . . . 6
Statements of Changes in Stockholders' Equity . . . . . . 7
Statements of Cash Flows. . . . . . . . . . . . . . . . . 8
Notes to Condensed Financial Statements . . . . . . . . . 9
Independent Accountants' Report
Board of Directors
CONX Capital Corporation
Little Rock, Arkansas
We have reviewed the condensed balance sheet of CONX CAPITAL
CORPORATION as of September 30, 2001 and the related
condensed statements of income for the three-month and
nine-month periods ended September 30, 2001 and 2000, and
the condensed statements of changes in stockholders' equity
and cash flows for the nine-month periods ended September
30, 2001 and 2000. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with
auditing standards generally accepted in the United States
of America, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the condensed financial
statements referred to above for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with auditing
standards generally accepted in the United States of
America, the balance sheet as of December 31, 2000 and the
related statements of income, changes in stockholders'
equity, and cash flows for the year then ended (not
presented herein) and in our report dated February 22, 2001,
we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in
the accompanying condensed balance sheet as of December 31,
2000 is fairly stated, in all material respects, in relation
to the balance sheet from which it has been derived.
BKD, LLP
Little Rock, Arkansas
October 29, 2001
-4-
CONX CAPITAL CORPORATION
CONDENSED BALANCE SHEETS
September 30, 2001 AND DECEMBER 31, 2000
ASSETS
------
2001 2000
(Unaudited)
--------- --------
Cash
Cash $ 262,176 $ 227,948
Accounts receivable - affiliated company 96,912 97,478
Note receivable - affiliated company 724,512 125,000
Equipment, at cost, net of accumulated
depreciation 7,456,843 10,152,605
--------- ----------
TOTAL ASSETS $ 8,540,443 $ 10,603,031
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------
LIABILITIES
Accounts Payable $ 23,075 $ --
Accrued expenses 27,882 27,968
Long-term debt 5,876,972 9,031,653
Deferred income taxes 992,633 575,982
--------- ---------
TOTAL LIABILITIES 6,920,562 9,635,603
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized
and issued 7,000,000 shares 70,000 70,000
Retained earnings 1,567,881 915,428
--------- ---------
1,637,881 985,428
Treasury stock, at cost, 350,000 shares (18,000) (18,000)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,619,881 967,428
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 8,540,443 $ 10,603,031
========= ==========
See Accountant's Review Report and
Notes to Condensed Financial Statements
-5-
CONX CAPITAL CORPORATION
CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000
Three Months Ended September 30, Nine Months Ended September 30,
2001 2000 2001 2000
---- ---- ---- -----
(Unaudited) (Unaudited)
--------- ---------
LEASE INCOME $ 1,129,525 $ 1,152,600 $ 3,434,725 $ 3,173,687
--------- --------- ---------- ---------
OPERATING EXPENSES
Management fees 15,000 15,000 45,000 45,000
Depreciation 636,649 684,198 1,994,219 1,901,512
Interest expense 125,119 196,712 432,191 544,828
Professional fees 7,200 16,876 28,644 29,421
Directors' fees 5,000 5,000 15,000 15,000
Rent 1,500 1,500 4,500 4,500
Taxes and licenses 1,840 1,440 10,406 10,375
Other 80 280 206 1,634
Gain on sale of
equipment (133,390) -- (137,128) --
------ ------- --------- ---------
658,998 921,015 2,393,038 2,552,270
------- ------- --------- ---------
INCOME FROM
OPERATIONS 470,527 231,585 1,041,687 621,417
OTHER INCOME 12,276 2,324 27,417 5,710
------- ------- ------- -------
INCOME BEFORE
INCOME TAXES 482,803 233,909 1,069,104 627,127
PROVISION FOR
INCOME TAXES 188,223 89,563 416,651 240,126
NET INCOME $ 294,580 $ 144,346 $ 652,453 $ 387,001
======= ======= ======= =======
EARNINGS PER SHARE
Net Income $ 294,580 $ 144,346 $ 652,453 $ 387,001
Weighted Average
Shares of
Common Stock 6,650,000 6,650,000 6,650,000 6,650,000
--------- --------- --------- ---------
Basic earnings
per share $ .0443 $ .0217 $ .0981 $ .0582
===== ===== ===== =====
See Accountant's Review Report and
Notes to Condensed Financial Statements
-6-
CONX CAPITAL CORPORATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
Common Retained Treasury
Stock Earnings Stock Total
----- -------- ----- -----
BALANCE, DECEMBER 31, 1999 $ 70,000 $ 374,135 $ (18,000) $ 426,135
Net income (unaudited) 387,001 387,001
------- ------- -------- -------
BALANCE, SEPTEMBER 30, 2000
(UNAUDITED) 70,000 761,136 (18,000) 813,136
Net income (unauditied) 154,292 154,292
------- ------- -------- -------
BALANCE, DECEMBER 31, 2000 70,000 915,428 (18,000) 967,428
Net income (unaudited) 652,453 652,453
------- ------- -------- -------
BALANCE, SEPTEMBER 30, 2001
(UNAUDITED) $ 70,000 $ 1,567,811 $ (18,000) $ 1,619,881
======= ========= ========= =========
See Accountant's Review Report and
Notes to Condensed Financial Statements
-7-
CONX CAPTIAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
September 30, September 30,
2001 2000
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 652,453 $ 387,001
Items not requiring cash:
Depreciation 2,695,762 1,901,512
Gain on sale of equipment -- --
Deferred income taxes 416,651 240,126
Changes in:
Accounts receivable 566 (64,656)
Prepaid expenses -- (5,000)
Accounts payable and accrued expenses 22,989 (78,603)
--------- ---------
Net cash provided by operating activities 3,788,421 2,380,380
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment -- (4,846,336)
Proceeds from sale of equipment -- 175,565
Advances to affiliate (599,512) --
--------- ---------
Net cash used in investing activities (599,512) (4,670,771)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt -- 4,846,336
Payments on long-term debt (3,154,681) (2,336,093)
--------- ---------
Net cash provided by (used in)
financing activities (3,154,681) 2,510,243
--------- ---------
INCREASE (DECREASE) IN CASH 34,228 219,852
CASH, BEGINNING OF PERIOD 227,948 97,203
--------- ---------
CASH, END OF PERIOD $ 262,176 $ 317,055
========= =========
See Accountant's Review Report and
Notes to Condensed Financial Statements
-8-
CONX CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Operations
--------------------
CONX Capital Corporation, a Delaware Corporation, is a
specialty commercial finance company engaged in the business of
originating and securing loans and equipment leases to smaller
businesses, with a primary initial focus on regional trucking
companies. The Company was organized in April 1998 with its
headquarters located in Carson City, Nevada. The Company
originates loans and leases through marketing offices located in
Carson City, Nevada, and Little Rock, Arkansas. For the periods
ended September 30, 2001 and 2000, all lease income was derived
from one affiliated company.
Basis of Presentation
---------------------
All adjustments made to the unaudited financial statements
were of a normal recurring nature. In the opinion of
management, all adjustments necessary for a fair presentation of
the results of interim period have been made. The results of
operations for the period are not necessarily indicative of the
results to be expected for the full year.
Certain information and note disclosures normally included
in the Company's annual financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted. These condensed financial statements
should be read in conjunction with the financial statements and
notes thereto included in the Company's Form 10 filed with the
Securities and Exchange Commission.
Revenue Recognition
-------------------
The Company recognizes operating lease income on the
straight-line basis over the life of the operating leases.
These operating leases contain provisions for service charges on
late payments equal to two percent of the lease payment or, if
less, the highest rate allowed by Nevada law. The leases also
contain excess mileage charges in the amount of five cents per
mile for miles in excess of 150,000 miles determined on an
annual basis. Initial direct costs are expensed over the life
of the corresponding lease in proportion to the recognition of
lease income.
See Accountant's Review Report
-9-
CONX CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
At September 30, 2001, the approximate future minimum lease
income under these operating leases are as follows:
(Unaudited)
---------
2001 $ 436,845
2002 455,000
---------
$ 891,845
=========
Operating Leases
----------------
The Company leases equipment under noncancellable
operating leases. These leases expire in various years
through 2002 and convert to a month-to-month basis if the
Company does not receive notice of termination. These
leases require the lessee to pay all executory costs
(property taxes, maintenance and insurance). Rental income
under these operating leases was $3,434,725 and $3,173,687
for the nine months ended September 30, 2001 and 2000,
respectively.
Equipment under operating leases consists of the
following at September 30, 2001 and December 31, 2000:
2001
(Unaudited) 2000
--------- ----
Tractor $ 10,467,330 $ 12,342,754
Trailers 2,465,894 2,465,894
---------- ----------
12,933,224 14,808,648
Less accumulated depreciation 5,476,381 4,656,043
---------- ----------
$ 7,456,843 $ 10,152,605
========== ==========
See Accountant's Review Report
-10-
CONX CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Use of Estimates
----------------
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Equipment
---------
Equipment is depreciated over the estimated useful life
of each asset. Annual depreciation is computed using the
straight-line method. Estimated useful lives are as follows:
Tractors 5 years
Trailers 10 years
Income Taxes
------------
Deferred tax liabilities and assets are recognized for
the tax effects of differences between the financial
statement and tax bases of assets and liabilities. A
valuation allowance is established to reduce deferred tax
assets if it is more likely than not that a deferred tax
asset will not be realized.
NOTE 2: LONG-TERM DEBT
(Unaudited)
---------
Note payable - Navistar Financial Corp. (A) $ 3,916,303
Note payable - Banc One Leasing Corp. (B) 693,515
Note payable - Fleet Capital Leasing (C) 342,491
Note payable - GE Capital Corp. (D) 924,663
---------
$ 5,876,972
=========
See Accountant's Review Report
-11-
CONX CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
NOTE 2: LONG-TERM DEBT (CONTINUED)
Aggregate annual maturities of long-term debt at September
30, 2001:
2001 $ 576,117
2002 3,407,783
2003 1,558,569
2004 334,503
---------
$ 5,876,972
=========
(A) Due in monthly installments through 2003 ranging
from $2,253 to $53,693; including interest from
6.50 percent to 7.40 percent; secured by trucks and
trailers. Notes are guaranteed by Continental
Express SD, Inc. (See Note 3)
(B) Due October 30, 2003; payable $14,892 monthly,
including interest at 7.83 percent; secured by
trailers. Note is guaranteed by Continental
Express SD, Inc. (see Note 3)
(C) Due January 28, 2003; payable $45,367 monthly,
including interest at 6.50 percent; secured by
tractors and trailers. Note is guaranteed by
Continental Express SD, Inc. (see Note 3)
(D) Due January 13, 2004; payable $36,421 monthly,
including interest at 8.26 percent; secured by
trucks. Note is guaranteed by Continental
Express SD, Inc. (see Note 3)
NOTE 3: RELATED PARTY TRANSACTIONS
The Company leases all of its equipment to
Continental Express SD, Inc., an affiliated company, which
has common ownership with the Company. The lessor is
required to pay all executory costs (maintenance and
insurance). The Company uses the management and office
supplies of Harvey, Inc., an affiliated Company, which is
owned by the Company's principal stockholder. The Company
paid Harvey, Inc. $45,000 during the nine months ended
September 30, 2001 and 2000, for management fees.
The Company had a note receivable from Harvey
Manufacturing, LLC, an affiliated Company, in the amount
of $724,512 at September 30, 2001. This note bears interest
at 8.25 percent.
See Accountant's Review Report
-12-
CONX CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
NOTE 3: RELATED PARTY TRANSACTIONS (CONTINUED)
At September 30, 2001, the approximate future minimum
lease income under these operating leases are as follows:
(Unaudited)
---------
2001 $ 436,845
2002 455,000
---------
$ 891,845
=========
NOTE 4: INCOME TAXES
The provision for income taxes includes these
components at September 30:
2001 2000
(Unaudited) (Unaudited)
--------- ---------
Taxes currently payable $ -- $ --
Deferred income taxes 416,651 240,126
------- -------
$ 416,651 $ 240,126
======= =======
A reconciliation of income tax expense at the statutory
rate to the Company's actual income tax expense is shown below at
September 30:
2001 2000
(Unaudited) (Unaudited)
--------- ---------
Computed at the statutory rate
(34 percent) $ 363,495 $ 213,223
Increase resulting from:
State income taxes - net of federal
tax benefit 53,156 26,903
------- -------
Actual tax provision $ 416,651 $ 240,126
======= =======
See Accountant's Review Report
-13-
CONX CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
NOTE 4: INCOME TAXES (CONTINUED)
The tax effects of temporary differences related to
deferred taxes shown on the balance sheets at September 30, 2001
and December 31, 2000 were:
2001 2000
(Unaudited)
--------- ---------
Deferred tax assets:
Net operating loss carryforwards
(expiring 2019) $ 236,635 $ 438,189
Deferred tax liabilities:
Accumulated depreciation (1,229,268) (1,014,171)
--------- ---------
Net deferred tax liability $ (992,633) $ (575,982)
========= =========
NOTE 5: EQUIPMENT
Equipment consists of the following at September 30, 2001
and December 31, 2000:
2001
(Unaudited) 2000
--------- ----
Tractors $ 10,467,330 $ 12,342,754
Trailers 2,465,894 2,465,894
---------- ----------
12,933,224 14,808,648
Less accumulated depreciation 5,476,381 4,656,043
---------- ----------
$ 7,456,843 $ 10,152,605
========== ==========
NOTE 6: ADDITIONAL CASH FLOW INFORMATION
September 30,
-----------------------------
2001 2000
(Unaudited) (Unaudited)
--------- ---------
Interest paid $ 432,191 $ 544,828
======== ========
See Accountant's Review Report
-14-
CONX CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
NOTE 7: SUBSEQUENT EVENTS
No events, other than normal operations, of a
material nature have occurred subsequent to September 30, 2001
that require disclosure.
See Accountant's Review Report
-15-
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
The following discussion and analysis below should be read
in conjunction with the financial statements, including the notes
thereto, appearing elsewhere in this Quarterly Report on Form 10-
Q. To date, the Company's only activities and sources of
operating revenue have been leases of tractor and trailer truck
equipment to one affiliated company, Continental Express SD, Inc.
Results of Operations
Three Month Period ended September 30, 2001:
Lease income was $1,129,525 for the quarter ended September
30, 2001, as compared to $1,152,600 for the same period in
2000, a decrease of $23,075 or 2.0%. As of September 30, 2001,
the Company had 173 tractors and 142 semi-trailers leased to
its customer. As of the same date in 2000, the Company had 146
tractors and 142 semi-trailers leased to its customer.
Operating expenses (consisting primarily of interest and
depreciation) for the three month period ended September 30,
2001 were $658,998, and operating expenses as a percentage of
lease income were 58.3%. For the same period in 2000, operating
expenses were $921,015, a decrease of $262,017 or 28.5%.
Operating expenses as a percentage of lease income were 79.9%
for the third quarter of 2000. Income from operations for the
quarter ended September 30, 2001 was $470,527, as compared to
$231,585 for the third quarter of 2000, resulting in an
increase of $238,942 or 50.8% in 2001 over 2000. Other income
for the three month period ended September 30, 2001 was $12,276,
as compared to $2,324 for the third quarter of 2000. Income
before income taxes for the quarter ended September 30, 2001
was $482,803, with a provision for income taxes of $188,223,
resulting in net income for the three month period ended
September 30, 2001 of $294,580. For the quarter ending September
30, 2000, income before income taxes was $233,909, with a
provision for taxes of $89,563 resulting in net income for the
period of $144,346. As a result, income before income taxes
increased $248,894 or 51.6% and net income increased $150,234 or
50.9% for the third quarter of 2001 over the same period in 2000.
Nine Month Period ended September 30, 2001:
Lease income was $3,434,725 for the nine months ended
September 30, 2001, as compared to $3,173,687 for the same
period in 2000, an increase of $261,038 or 7.6%. Operating
expenses (consisting primarily of interest and deprecitation)
for the nine month period ended September 30, 2001 were
$2,393,038, and operating expenses as a percentage of lease
income were 69.7%. For the same period in 2000, operating
expenses were $2,552,270, a decrease of $159,232 or 6.2%.
Operating expenses as a percentage of lease income were 80.4%
for the first nine months of 2000. Income from operations for
the nine month period ended September 30, 2001 was $1,041,687,
as compared to $621,417 for the first nine months of 2000,
resulting in an increase of $420,270 or 40.4% in 2001 over 2000.
Other income for the nine months ended September 30, 2001 was
$27,417, as compared to $5,710 for the first nine months of 2000.
Income before income taxes for the nine month period ended
September 30, 2001 was $1,069,104, with a provision for income
taxes of $416,651, resulting in net income for the nine months
ended September 30, 2001 of $652,453. For the same nine month
period in 2000, income before income taxes was $627,127,
with a provision for income taxes of $240,126, resulting in net
income of $387,001. As a result, income before income taxes
increased $441,977 or 41.3% and net income increased $265,452 or
40.7% for the first nine months of 2001 over the same period in
2000.
The Company anticipates additional leasing activity with
Continental Express SD, Inc., through the remainder of 2001. The
Company is increasing its efforts to provide equipment leasing
and loan products to other customers in an effort to diversify
its revenue stream and the products being offered. However,
during the next twelve months, the Company does not anticipate
any material change in the sources of its revenue stream.
Liquidity and Capital Resources
The Company's current assets and working capital are
sufficient to meet its needs for the next twelve months of
operation as the Company is currently operating. However, the
Company has an ongoing need to finance its lending activities.
This need is expected to increase as the volume of the Company's
loan and lease originations increase. The Company's primary cash
requirements include the funding of (i) loans and leases pending
their sale, (ii) fees and expenses incurred in connection with
its securitization program, (iii) overcollateralization or
reserve account requirements in connection with loans pooled and
sold, (iv) interest, fees, and expenses associated with the
Company's warehouse credit and repurchase facilities with certain
financial institutions, (v) federal and state income tax
payments, and (vi) ongoing administrative and other operating
-16-
expenses. To date, the Company currently has funded these cash
requirements by credit facilities granted by Navistar Financial
Corporation, Banc One Leasing Corporation, GE Capital Corporation
and Fleet Capital Leasing and guaranteed by the Company's
affiliate, Continental Express SD, Inc. The Company anticipates
that it will rely more heavily on securitizations, whole loan and
lease sales, and borrowings as its cash requirements increase.
Inflation
The impact of inflation is reflected in the increased cost
of the Company's operating expenses, excluding depreciation and
interest expense. Changes in interest rates have a greater
impact on the Company's performance than do the effects of
general levels of inflation. Inflation affects the Company
primarily through its effect on interest rates, since interest
rates normally increase during periods of high inflation and
decrease during periods of low inflation. The Company intends to
manage its exposure to inflationary interest rate risks by
closely monitoring the difference or spread between the
effective rate of interest received by the Company and the rates
payable by the Company.
ITEM 3. Quantitative and Qualitative Disclosures About Market
Risk
Market risk represents the potential loss resulting from
adverse changes in the value of financial instruments, either
derivative or non-derivative, caused by fluctuations in interest
rates, foreign exchange rates, commodity prices, and equity
security prices. The Company handles market risks in accordance
with its established policies; however, the Company does not
enter into derivatives or other financial instruments for trading
or speculative purposes. The Company does not have financial
instruments to manage and reduce the impact of changes in
interest rates at September 30, 2001 and December 31, 2000.
The Company held various financial instruments at September 30,
2001 and 2000, consisting of financial assets and liabilities
reported in the Company's Balance Sheets. (For additional
information regarding these financial instruments, refer to
Note 2 to the Company's financial statements.)
Interest Rate Risk - The Company is subject to interest rate
risk by financing operations through the issuance of certain
long-term Notes issued to various lenders. The fair market value
of long-term, fixed-interest rate debt is subject to interest
rate risk. Generally, the fair value of fixed-interest rate debt
will increase as interest rates fall and will decrease as
interest rates rise.
Foreign-Exchange Rate Risk - The Company currently has no
exposure to foreign-exchange rate risk because all of its
financial instruments are denominated in U.S. dollars.
Commodity Price Risk - The Company has no financial
instruments subject to commodity price risk.
Equity Security Price Risk - The Company has no financial
instruments subject to equity security price risk.
-17-
PART II -- OTHER INFORMATION
ITEM 1. Legal Proceedings
There are no legal proceedings involving the Company as a party
or involving any of the Company's assets or leased properties.
ITEM 2. Changes in Securities
None of the rights of the holders of any of the Company's
securities were materially modified during the period covered by
this report. In addition, no class of securities of the Company
was issued or modified which materially limited or qualified any
class of its registered securities.
ITEM 3. Defaults Upon Senior Securities
During the period covered by this report there was no material
default in the payment of any principal, interest, sinking or
purchase fund installment, or any other material default not
cured within 30 days with respect to any indebtedness of the
Company.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders.
ITEM 5. Other Information
None
ITEM 6. (a) Exhibits and Reports on Form 10-Q
No exhibits or reports are being filed with this Form 10-Q.
(b) Reports on Form 8-K
No reports were filed for the period covered by this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CONX Capital Corporation
By: /s/ Edward M. Harvey
------------------------------------
Edward M. Harvey, Chairman, Director
and President (Principal Executive
Officer)
Dated: November 14, 2001
By: /s/ Todd W. Tiefel
------------------------------------
Todd W. Tiefel, Secretary, Treasurer
and Director (Principal Financial and
Accounting Officer)
Dated: November 14, 2001
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