ITEM 1	BUSINESS
Canisco Resources, Inc. (stock symbol "CANR"), a Delaware corporation, was founded in 1996 as the successor by merger of Nuclear Support Services, Inc. (NSSI or the Company), which was founded in 1973, and NSS of Delaware, Inc. Shareholder approval for the merger of NSSI and NSS of Delaware into Canisco Resources, Inc. was granted at a special meeting of shareholders held March 29, 1996. This merger was also effected pursuant to the Company's Amended Joint Plan of Reorganization which was confirmed by the United States Bankruptcy Court for the Middle District of Pennsylvania, Harrisburg on April 24, 1996.
In June 1993, the Company created a new subsidiary, IceSolv, Inc. (IceSolv) to provide dry ice blasting services for decontamination, cleaning and preparation of surfaces for the nuclear power, electrical and other general industries.
Effective October 1, 1993, the Company acquired two companies, Oliver B. Cannon & Son, Inc. and Sline Industrial Painters, Inc., marketed together as Cannon Sline. Cannon Sline provides surface preparation, specialty coatings and related services to the power generation, pulp and paper, and other general industries across the United States.
On January 31, 1996, the Company filed a Joint Plan of Reorganization. An Amended Joint Plan of Reorganization (the "Amended Plan") was filed and confirmed by the Court on April 24, 1996. On June 28, 1996 the Company met all the requirements of the Amended Plan by executing the necessary banking documents for securing exit financing. The Company's exited from bankruptcy on July 1, 1996.
In May 1996, Oliver B. Cannon & Son, Inc. and Sline Industrial Painters Inc. were merged pursuant to the Amended Plan. The surviving entity is Cannon Sline, Inc., a Pennsylvania corporation. Cannon Sline remains an operating subsidiary under the reorganization and restructuring plans.
On March 24, 1998, the Court administratively closed the bankruptcy proceedings pending the resolution of two contested matters. These matters have subsequently been resolved.
Effective April 22, 1998, the Company acquired all the outstanding stock of Mansfield Industrial Coatings, Inc. (Mansfield). Mansfield provides specialty coating, asbestos, and lead abatement services to power generation, pulp and paper, petro-chemical and other general industries located throughout the southeastern and gulf coast regions of the country.
In January 2000, certain of the assets of IceSolv, Inc. were sold to Radiological Services, Inc.
The current structure of Canisco Resources, Inc. reflects these changes.
MARKETS AND SERVICES FOR CANISCO RESOURCES
Canisco Resources, Inc. provides a range of maintenance services on an as- needed basis primarily to the power generation, petro-chemical and pulp and paper industries through the Company's operating subsidiaries. The Company's services consist of specialty cleaning, decontamination, janitorial services, technical support, surface preparation and painting and specialty coatings and linings application. The Company also provides turnkey identification system services along with miscellaneous metal, siding and roof replacements, insulation and abatement services to its clients.
POWER GENERATION MARKET
Thirty one percent (31%) of consolidated revenues in the power generation market was the largest for the Company's services in fiscal year 2000 was attributable to nuclear, fossil fuel, hydro-electric and other customers whose operations involve the production of electricity. This is an increase from twenty one percent (21%) in fiscal year 1999 and a decrease from thirty three percent (33%) in fiscal year 1998.
PETRO-CHEMICAL MARKET
Twenty three percent (23%) of the Company's revenues was generated from clients in the petro-chemical and refining industry which includes chemical, crude oil and natural gas processing. This is a decrease from thirty nine percent (39%) compared to twenty four (24%) in fiscal years 1999 and 1998 respectively.
PULP AND PAPER MARKET
Pulp and paper facilities serviced by the Company include mills and production plants whose primary operations involve the production of paper, paperboard and pulp. Of the Company's consolidated revenues in fiscal year 2000, twenty eight percent (28%) was generated from customers in this industry compared to fourteen percent (14%) in fiscal year 1999 and twenty percent (20%) in fiscal year 1998.
OTHER MARKETS SERVED
The Company provides services to government facilities and state and municipal infrastructure as well as automotive, metals and mining, textiles, marine and printing industries. No one of these industries is a significant part of the Company's business. Eighteen percent (18%) of the Company's consolidated revenues during fiscal year 2000 were generated from services provided to this group of industries compared to twenty six percent (26%) for fiscal year 1999 and twenty three percent (23%) for fiscal year 1998.
The Company's business is impacted by seasonal sensitivity. Historically, demand for the Company's services is highest in the spring through fall and lowest during the winter months. The Company's assets are not assigned to a particular market.
COMPETITION
The Company's subsidiaries compete with approximately one hundred (100) national and/or regional competitors. Price, quality and customer service are the governing factors.
CLIENTS
The Company's clients consist primarily of electric utilities, major oil companies, paper companies and other general industry. Because of the nature of the services offered by the Company and the size of the projects in which the Company is engaged, a small number of clients, at times, account for a significant percentage of the Company's revenues in a given fiscal year.
For fiscal years 2000 and 1999, no client represented more than ten percent (10%) of revenues. For fiscal year 1998, Northeast Utilities accounted for twelve percent (12%) of consolidated revenues.
The Company operates primarily within the United States. The Company has or is performing contracts in Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
The Company's contracts with its clients provide for charges for services on a time and material, fixed-price and/or modified fixed-price basis. The time and materials contracts generally permit the client to control the amount, type and timing of services to be performed by the Company, and most of the contracts permit the client to terminate the contract with appropriate notice. The Company's clients often modify the nature and timing of services to be performed. The fixed-price and modified fixed-price contracts are recognized on the percentage of completion method and are measured by the cost-to-cost method. Revenues from time and material contracts are recognized as work progresses. Provisions for estimated losses on uncompleted contracts are made in the period in which losses are determined.
The Company's uncompleted contracts include both undetermined and specific dollar contracts for services. The Company has found that the undetermined dollar contracts are longer term and give it more flexibility in being responsive to customers' needs. Due to the number and nature of undetermined dollar contracts and customer scheduling changes which may effect the timing of contract initiation and completion, it is difficult for management to place an exact dollar value on its present uncompleted contracts.
INSURANCE
In addition to insurance required by statute, the Company maintains insurance coverage for general liability. Based on scope of their operations, the Company's subsidiaries maintain environmental and pollution liability insurance as may be applicable.
PERSONNEL
The seasonality of the business causes the employment of the Company to vary widely throughout the year. During the fiscal year ended March 31, 2000, the number of personnel employed at one time by the Company fluctuated between approximately 523 and 989.
Managerial and clerical employees of the Company and its subsidiaries are not affiliated with a union nor are the project related employees of IceSolv and Mansfield. Cannon Sline, Inc. utilizes union labor for field projects on an as- needed basis. Pertinent collective bargaining agreements to which Cannon Sline is signatory are: Collective bargaining agreements between District Council No. 21 International Brotherhood of Painters and Allied Trades, and the Associated Master Painters and Decorators of Philadelphia and Vicinity and Cannon Sline (expires 04/30/01); National Power Generating Facilities Agreement between IBPAT, AFL-CIO-CFL and Cannon Sline; Corrosion Control Agreement in Industrial Plants between IBPAT, AFL-CIO-CFL and Cannon Sline; Fire-Retardant Coatings Agreement between IBPAT, AFL-CIO-CFL and Cannon Sline; National Tank Agreement between IBPAT, AFL-CIO-CFL and Cannon Sline; National Rubberlining Agreement between the International Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmiths, Forgers and Helpers, AFL-CIO and Cannon Sline; National Bridge & Tunnel Agreement between IBPAT, AFL-CIO-CFL and Bridge Painting Contractors; National Erectors Association National Maintenance Agreement between IBPAT, AFL- CIO-CFL and Cannon Sline, and, Installation of Corrosion Proof Materials Agreement between the Operative Plasterers and Cement Masons International and Cannon Sline. Unless otherwise noted, the foregoing agreements provide for annual renewal absent written notice. Cannon Sline does not expect any significant difficulty in renewing any of its agreements.
The following table sets forth the demographics of the Company's employees for the period indicated.
Description						 At Fiscal Year End 2000 1999 1998
Union Project Personnel 359 309 405
Non-Union Project Personnel 374 362 81
Clerical, Administrative, Sales and Management Personnel 66 130 92
Total Personnel 799 801 578
ITEM 2
ITEM 2	PROPERTIES
The Company and its subsidiaries maintain office and shop/storage facilities suitable to support operations. These facilities are geographically located to provide effective customer service:
The following properties are owned: Lakeland, FL; Sulphur, LA; Houston, TX; Chesterfield County, VA; and Mobile, AL.
The following properties are leased: Pottstown, PA; Kennewick, WA; Palmyra, PA; Sacramento, CA; Brunswick, OH; Atlanta, GA; Pensacola, FL; Baton Rouge, LA; West Monroe, LA; and Wilmington, DE. There are no major encumbrances on the real properties with the exception of liens granted to the Company's lenders on the owned properties.
ITEM 3
ITEM 3	LEGAL PROCEEDINGS
The Company or its subsidiaries are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position. For information related to the Company's bankruptcy filing in 1995, please refer to prior reports and Item 1.
ITEM 4
ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on January 25, 2000. The following actions were taken:
1. The following directors were elected to serve on the Board of Directors of the Company:
Dale Ferguson	 (For 1,988,414/Withheld 150,166/Exception 122,210) Tom McShane		 (For 1,996,543/Withheld 142,037/Exception 114,081) Larry Petcovic	(For 1,996,279/Withheld 142,301/Exception 114,345) Ted Mansfield	 (For 2,110,624/Withheld 27,956/Exception 0) Marvin Davis	 (For 2,105,159/Withheld 33,421/Exception 5,465)
2. Ratification of appointment of KPMG LLP as Independent Auditors.
(For 2,016,278/Against 118,977/Abstain 3,325)
PART II
ITEM 5
ITEM 5	MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Canisco Resources, Inc. had 2,536,565 shares of common stock outstanding and approximately 349 shareholders of record as of June 1, 2000. The Company's common stock traded on the NASDAQ Stock Market under the symbol "NSSI" until May 20, 1996 at which time the Company commenced trading on the NASDAQ Small Cap Market under the symbol "CANR". The above was the result of the merger of Nuclear Support Services, Inc. into Canisco Resources, Inc. in accordance with the Company's plan of reorganization. On November 30, 1998, the Company's symbol was changed to "CANRC" in conformance with a waiver of continued listing requirements issued by NASDAQ. The Company's common stock was traded on the NASDAQ SmallCap Market until July 14, 1999, at which time it was delisted from the NASDAQ SmallCap Market, and it now trades over the counter.
Stock Highlights Fiscal Year Fiscal Year Quarter 2000 1999 	Ended High Low High Low
	June 30 3 1/2 3 1/2 3 3/4 2 1/2 	 Sept 30 3 1/2 1 3 1/4 1 3/4 	 Dec 31 1 7/16 11/16 3 1/2 1 1/2 	March 31 1 65/128 2 1/4 1 1/2
ITEM 6
ITEM 6	SELECTED FINANCIAL DATA Financial Highlights for the Fiscal Year End (in thousands except per share amounts)
2000(1) 1999(2) 1998 1997(3) 1996(4) Revenues $71,516 $69,443 $52,227 $50,191 $32,931 Income from operations 1,579 2,077 1,586 1,709 407 Interest expense 1,768 1,777 1,004 963 670 Net earnings (loss) (177) 80 490 452 (1,508) Basic earnings (loss) per share (0.07) 0.03 0.22 0.21 (0.69) Total assets 29,739 31,727 20,633 21,301 26,101 Total long-term debt 16,409 19,719 10,256 11,274 5,587 Liabilities subject to compromise - - - - 5,262 Equity per share 1.54 1.61 1.43 1.20 0.99 Return on average equity (4%) 2% 17% 19% - Weighted average common and common equivalent shares (basic) 2,531 2,452 2,193 2,170 2,169
(1)	Reflects expenses of approximately $274 related to Company's equity 	raising efforts, $522 related to management changes and $348 of goodwill 	amortization.
(2)	Reflects expenses of approximately $229 related to the Company's growth 	 strategy, and approximately $302 of goodwill amortization associated with 	 acquisition of Mansfield Industrial Coatings.
(3)	Reflects net reorganization expenses of approximately $600 and settlement 	of the Westinghouse litigation.
(4)	Fiscal year end change from September 30th to March 31st (a 6 month 	period) and reflects the discontinuance of Henze operations and includes 	 approximately $1.1 million in reorganization costs.
ITEM 7
ITEM 7	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 		RESULTS OF OPERATIONS
RECENTLY ISSUED ACCOUNTING STANDARD
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). This statement establishes accounting and reporting standards for derivative instruments, including hedging activities. In June of 1999, the FASB issued SFAS No. 137 "Accounting for Derivative Instruments and Hedging Activities Deferral of the Effective Date of SFAS No. 133." SFAS 137 delays the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. The Company expects that adoption of SFAS 133 will not have a material impact on the Company's financial condition or results of operations.
RESULTS OF OPERATIONS 2000 COMPARED TO 1999
Fiscal year 2000 revenues were $71,516,000 compared to $69,443,000 for fiscal year 1999. The increase was due primarily to the award of a multi-year maintenance agreement in the power generation market. The power generation market accounted for thirty one percent (31%) of the 2000 total revenues compared to twenty one percent (21%) for fiscal year 1999 revenues. The petro- chemical business contribution decreased to twenty three percent (23%) from thirty nine percent (39%) for fiscal year 1999. The pulp and paper market business represented twenty eight percent (28%) of revenue in 2000 versus fourteen percent (14%) in fiscal year 1999. This decline was driven by the completion of several large capital projects performed in the prior year. The revenue contribution of all markets decreased to eighteen percent (18%) in 2000 versus twenty six percent (26%) in fiscal year 1999. The contribution on the various markets reflects the diversification strategy of the Company.
The gross margin of the Company was $13,533,000 compared to $12,857,000 for fiscal year 1999 and as a percent of revenue, gross margin remained constant at nineteen percent (19%).
General and administrative expenses were $11,954,000 compared to $10,780,000 for the prior year. As a percent of revenue, general and administrative expenses increased to seventeen percent (17%) from sixteen percent (16%) from fiscal year 1999 to 2000. During the fiscal year, the Company incurred expenses of $796,000 including $274,000 associated with its equity raising efforts and $522,000 associated with management changes.
Income from operations decreased to $1,579,000 in fiscal year 2000 compared to $2,077,000 for fiscal year 1999. This decrease was primarily attributable to an increase in general and administrative expenses.
Interest expense for fiscal year 2000 was $1,768,000 compared to $1,777,000 in fiscal year 1999.
The Company had other income, net of expenses of $101,000 in fiscal year 2000 compared to $199,000 for fiscal year 1999.
Income tax expense for fiscal year 2000 was $89,000 compared to $420,000 for the fiscal year ended 1999. The decrease in income taxes was the result of decreased income from operations and the effect of goodwill amortization.
As a result of the above, the loss was ($177,000) or $0.07 cents per share (basic) compared to net earnings of $80,000 or $0.03 cents per share (basic) a year ago.
RESULTS OF OPERATIONS 1999 COMPARED TO 1998
On April 22, 1998, the Company acquired the business of Mansfield Industrial Coatings, Inc. The addition of Mansfield's client base to the Company somewhat shifted the Company's market sector balance. Unless otherwise noted, shifts in the Company's revenues and gross margin contribution and improved operating income are attributable to the addition of the Mansfield business. Fiscal year 1999 revenues were $69,443,000 compared to $52,227,000 for fiscal year 1998. The power generation market accounted for twenty one percent (21%) of the 1999 total revenues compared to thirty-three percent (33%) for fiscal year 1998 revenues. The petro-chemical business contribution increased to thirty nine percent (39%) from twenty four percent (24%) for fiscal year 1998. The pulp and paper market business represented fourteen percent (14%) of revenue in 1999 versus twenty percent (20%) in fiscal year 1998. This decline was driven by general softness in the pulp and paper market especially the availability of capital projects. The revenue contribution of all other markets collectively was twenty six percent (26%) which is consistent with the prior year. The contribution of the various markets reflect the diversification strategy of the Company.
The gross margin of the Company was $12,857,000 for fiscal year 1999 compared to $9,376,000 for fiscal year 1998 and as a percent of revenue, gross margin was nineteen percent (19%) for fiscal year 1999 compared to eighteen percent (18%) for fiscal year 1998. This increase in gross margin percentage is attributable to shifts in revenues between market sectors, the impact of weather, and the impact of the addition of Mansfield to the Company's business.
General and administrative expenses were $10,780,000 compared to $7,790,000 for the prior year. As a percent of revenue, general and administrative expenses increased to 16% from 15% from fiscal year 1998 to 1999. In addition to the general and administrative expenses associated within the Mansfield operation, the Company amortized goodwill in the amount of $302,000 associated with the business, $152,000 of which was expensed in the fourth quarter relating to the impact of fourth quarter revisions to the original purchase price allocation. Considering its growth strategy and the track record of its businesses, the Company has re-evaluated the useful life of the Mansfield business and will change its estimate for purposes of amortizing the remaining goodwill effective April 1, 1999. During the fourth quarter, the Company also had non-recurring expenses of $229,000 related to its investment in its growth strategy of which $108,000 was associated with potential acquisitions and $121,000 associated with its equity raising efforts.
Income from operations increased to $2,077,000 compared to $1,586,000 for fiscal year 1998. This increase was attributable to increase in revenue and improvement in gross margins offset somewhat by an increase in general and administrative expenses.
Interest expense for the year was $1,777,000 compared to $1,004,000 in fiscal year 1998. The increase was due primarily to the increase of the debt associated with the Mansfield acquisition and increase of the revolving credit facility, the proceeds of which were used to pay off the Company's prepetition obligations.
The Company had other income, net of expenses of $199,000 in fiscal year 1999 compared to $77,000 for fiscal year 1998.
Income tax expense for fiscal year 1999 was $420,000 compared to $168,500 for the fiscal year ended 1998. The increase in income taxes was the result of increased income from operations and the effect of goodwill amortization and a revision of an estimate of its deferred tax asset.
Net income from operations was $80,000 or $0.03 cents per share (basic) compared to $490,000 or $0.22 cents per share (basic) a year ago. The decrease in net earnings is primarily attributable to increase interest expense, non-recurring general and administrative expenses and taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's ability to generate cash adequate to meet its needs depends primarily upon payments for its services and periodic bank borrowings. These sources of liquidity are reduced by the payment of direct costs, taxes, purchase of property and equipment and periodic repayment of the Company's revolving line of credit and term debt.
Effective April 17, 1998, the Company amended its credit facility with its current lender, GMAC Commercial Credit Corporation. The amended credit facility consists of a three year commitment with automatic extensions for two additional years for a $25,000,000 credit facility. The amended facility included a $5,000,000 acquisition credit loan, which was utilized for the Mansfield acquisition. Capital expenditures for equipment and expansion of facilities are expected to be funded from cash flow from operations and supplemented as necessary by borrowings under the credit facility.
At March 31, 2000, the Company had borrowed approximately $9,243,000 on its revolving credit line and had an outstanding principal balance of $4,974,000 on its long term secured loan obligation. The Company is in compliance with the debt covenants of its Credit Agreement, as amended from time to time.
At March 31, 2000, the Company had working capital of approximately $6,867,000 compared to working capital of $8,496,000 for fiscal year end 1999. The decrease in working capital was due primarily to the increase in accounts payable and billings in excess of costs and estimated earnings on uncompleted contracts offset somewhat by the decrease in inventory.
LOOKING FORWARD
The Company continues to evaluate the growth strategy that has been described in its prior periodic reports to shareholders. The Company also continues to assess its ability to obtain equity financing from various sources. To date, several attempts to obtain equity financing initiatives have not been consummated due to various factors, including management conflicts and the complexity of some such financing proposals. Since the above discussed acquisition strategy was first disclosed to shareholders approximately three years ago, most of the companies targeted by the Company for acquisition at that time have been acquired by other companies. At this time, the Company has no further plans to pursue acquisitions.
Instead, the Company intends to focus on increasing its earnings from operations. Several events have occurred which have negatively impacted the Company's cash flows, including the following: interest rate increases over the past year, the failure of the Company to consummate several attempts at obtaining equity financing and settlement arrangements with several departing executives. Due to the above, the Company has lost much of its flexibility in managing cash flow. In addition, the Company has the need for new capital equipment to replace old equipment. The Company also faces increasing marketing pressure to upgrade its computer systems in order to totally integrate on-line contract services. The Company believes its computer systems will need to be upgraded in the future to address the changing technology requirements of its market.
Looking forward, the Company intends to focus on running a low-risk operation to maximize earnings. The Company believes that revenue will increase slowly, if at all, as the result of the need to offset lost contracts against gains. Careful management of cash to upgrade computers and allocation of capital for new equipment will be a challenge for the next few years. The ability of the Company to grow in the future will depend on the ability of management to increase earnings while faced with a very difficult cash position.
CAUTIONARY STATEMENT
Statements in this Report on Form 10K which express the "belief", "anticipation" or "expectation," as well as other statements which are not historical fact, are forward looking statements within the meaning of the Private Securities Litigation Reform Action of 1995 and involve risks and uncertainties that could cause actual results to differ materially from those projected. Certain factors such as competitive market pressures, material changes in demand from larger customers, changes in weather, availability of labor, changes in government policies and changes in economic conditions could cause actual results to differ materially from those in the forward-looking statements.
ITEM 7A
ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have any material exposure to market risk associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments.
ITEM 8
ITEM 8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Consolidated Financial Statements
Years Ended March 31, 2000, 1999 and 1998
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
The Board of Directors and Shareholders Canisco Resources, Inc.:
We have audited the accompanying consolidated balance sheets of Canisco Resources, Inc. and subsidiaries as of March 31, 2000 and 1999, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the years in the three-year period ended March 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Canisco Resources, Inc. and subsidiaries as of March 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2000, in conformity with accounting principles generally accepted in the United States of America.
KPMG LLP
Philadelphia, Pennsylvania June 30, 2000
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets March 31, 2000 and 1999
Assets 2000 1999
Current assets:
Cash and cash equivalents (including restricted cash) $1,927,230 $ 1,944,053 Accounts receivable Billed, less allowances of $799,266 and $566,641 at March 31, 2000 and 1999, respectively 11,795,742 12,181,791 Unbilled 751,334 398,944 Other 208,703 268,420
Total accounts receivable 12,755,779 12,849,155
Inventory 326,326 424,020 Deferred income taxes 477,000 366,000 Costs and estimated earnings in excess of billings on uncompleted contracts 1,488,656 1,427,806 Prepaid expenses and other current assets 344,492 404,660 Total current assets 17,319,483 17,415,694
Property and equipment: Land 804,000 804,000 Buildings and improvements 853,661 785,663 Machinery and equipment 5,880,943 6,025,828 Furniture and fixtures 491,942 494,022 Vehicles 1,010,966 1,091,481
9,041,512 9,200,994 Less accumulated depreciation 3,065,345 2,624,997
5,976,167 6,575,997
Deferred income taxes 604,000 804,000 Intangible pension asset 698,866 802,402 Other assets 338,983 1,228,685 Goodwill, net 4,801,752 4,899,753 Total assets $ 29,739,251 $ 31,726,531
See accompanying notes to consolidated financial statements.
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets March 31, 2000 and 1999
Liabilities and Shareholders' Equity 2000 1999
Current liabilities: Current portion of long-term debt (including related party) $ 1,809,828 $ 1,824,711 Accounts payable and bank overdrafts	 4,905,061 3,291,920 Accrued payroll and employee benefits 1,592,149 1,562,989 Billings in excess of costs and estimated earnings on uncompleted contracts 934,495 732,058 Other accrued expenses 1,236,092 1,507,988
Total current liabilities 10,477,625 8,919,666
Note payable to bank 9,243,452 10,754,785 Other long-term debt (including related party), less current portion 5,356,081 7,139,282 Accrued pension cost 757,683 846,582
Total liabilities 25,834,841 27,660,315
Commitments and contingencies Shareholders' equity: Common stock, $.0025 par value, authorized 20,000,000 shares; issued 2,788,617 shares; outstanding 2,536,565 and 2,526,565 shares at March 31, 2000 and 1999, respectively 6,972 6,972 Additional paid-in capital 3,552,964 3,688,764 Retained earnings 4,145,211 4,322,017 Treasury stock, at cost (3,800,737) (3,951,537) Total shareholders' equity 3,904,410 4,066,216
Total liabilities and shareholders' equity $29,739,251 $31,726,531
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations Years ended March 31, 2000, 1999, and 1998
Year ended March 31, 2000 1999 1998
Revenues from services $71,516,158 69,443,141 52,227,363 Cost of services 57,983,296 56,585,831 42,851,839
Gross margin 13,532,862 12,857,310 9,375,524
General and administrative expenses 11,953,794 10,780,435 7,789,533 Income from operations 1,579,068 2,076,875 1,585,991 Interest expense (1,768,059) (1,776,529) (1,003,979) Other income, net 100,979 199,297 76,909
(Loss) income before income taxes (88,012) 499,643 658,921
Income tax expense 88,794 419,772 168,530 Net earnings (loss) (176,806) 79,871 490,391
Net earnings (loss) per share, (basic) $ (.07) .03 .22 Weighted average common and common equivalent shares (basic) 2,530,565 2,452,155 2,193,040
Net earnings (loss) per share (diluted) $ (.07) .03 .20
Weighted average common shares (diluted) 2,623,521 2,573,080 2,405,436
See accompanying notes to consolidated financial statements.
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity Years ended March 31, 2000, 1999, and 1998
Common Stock Treasury Stock Number Additional Number of	 paid in Retained of Shares Amount capital earnings shares Amount	 Total
Balance at 3/31/97 2,477,592 $6,194 3,478,576 3,751,755 307,052$(4,630,137) 2,606,388
Reissuance of treasury stock		 - - (605,475) - (45,000) 678,600 73,125
Net earnings - - - 490,391 - - 490,391
Balance at 3/31/98 2,477,592 $6,194 2,873,101 4,242,146 262,052$(3,951,537) 3,169,904
Issuance of stock 311,025 778 815,663 - - - 816,441
Net earnings - - - 79,871 - - 79,871
Balance at 3/31/99 2,788,617 $6,972 3,688,764 4,322,017 262,052$(3,951,537) 4,066,216
Reissuance of treasury stock - - (135,800) - (10,000) 150,800 15,000
Net loss - - - (176,806) - - (176,806)
Balance at 3/31/00 2,788,617 $6,972 3,552,964 4,145,211 252,052$(3,800,737) 3,904,410
See accompanying notes to consolidated financial statements.
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows Years ended March 31, 2000, 1999, and 1998
2000 1999 1998
Cash flows from operating activities: Net earnings (loss) $ (176,806) 79,871 490,391 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization 1,554,753 1,425,688 629,329 Deferred income taxes 89,000 250,342 283,000 Provision for doubtful accounts receivable 232,625 396,708 - Net gain on sale of property (121,920) (21,390) - Changes in assets and liabilities net of effects from purchases and sales of subsidiaries: (Increase) decrease in accounts receivable (139,249) (1,584,170) 794,014 Decrease (increase) in inventory 97,694 28,717 (12,531) Decrease in prepaid expenses and other current assets 60,168 235,141 958,556 (Increase) decrease in costs and estimated earnings in excess of billings on uncompleted contracts (60,850) 948,460 (453,358) Decrease (increase) in other assets 740,602 371,408(1,451,391) Increase (decrease) in accounts payable 1,613,141 (314,932) 383,541 Increase (decrease) in accrued payroll and employee benefits 29,160 (147,179) (305,181) (Decrease) in other accrued expenses (271,896) (855,565) (133,956) Increase (decrease) in billings in excess of costs and estimated earnings on uncompleted contracts 202,437 (110,184) (137,155) Decrease in accrued pension cost (88,899) (116,287) (89,328) Net cash provided by operating activities 3,759,960 586,628 955,931
(continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows Continued
2000 1999 1998
Cash flows from investing activities: Purchase of property and equipment (485,566) (736,592) (199,809) Proceeds from sale of property 253,200 572,144 - Purchase of Mansfield (net of cash acquired) (250,000) (6,052,514) - Net cash (used in) provided by investing activities (482,366) (6,216,962) (199,809) Cash flows from financing activities: Net (payments) borrowings on notes payable (1,511,333) 4,228,364 1,182,556 Proceeds from long-term debt - 5,175,105 - Principal payments on long-term debt (1,798,084) (3,017,475)(2,131,635) Treasury stock issuance 15,000 - 73,125
Net cash (used in) provided by financing activities (3,294,417) 6,385,994 (875,954) Net (decrease) increase in cash and cash equivalents (16,823) 755,660 (119,832) Cash and cash equivalents (including restricted cash) at beginning of year 1,944,053 1,188,393 1,308,225 Cash and cash equivalents (including restricted cash) at end of year $1,927,230 1,944,053 1,188,393 Cash paid during the year for: Interest $1,768,250 1,676,716 958,776 Income taxes 114,542 68,767 23,990 Supplemental disclosure of noncash investing and financing activities - Stock issued in acquisition of Mansfield (note 1) - 656,250 - Stock paid incentive compensation - 160,191 -
See accompanying notes to consolidated financial statements.
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements Years ended March 31, 2000, 1999, and 1998
(1)	DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Canisco Resources, Inc. provides painting and surface preparation, specialty coatings and linings, specialty cleaning, decontamination, janitorial, and technical support services. On September 5, 1995 (the "Petition Date"), Canisco Resources, Inc. - (the "Debtor") filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code ("Chapter 11") in the United States Bankruptcy Court for the Middle District of Pennsylvania in Harrisburg. Under Chapter 11, certain claims against the Debtor in existence prior to the filing of the petition for relief under the federal bankruptcy laws were stayed while the Debtor continued business operations as Debtor-in-Possession. The debtor exited its bankruptcy reorganization on July 1, 1996.
On April 22, 1998, the Company purchased the stock of Mansfield Industrial Coatings Inc. ("Mansfield") of Pensacola, Florida. Mansfield's lines of business are similar to that of the parent company.
On January 31, 2000, the Company sold substantially all the assets of IceSolv, Inc. to Radiological Services, Inc. (See Note 12).
(2)	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Canisco Resources, Inc. and its wholly owned subsidiaries (together referred to as the "Company"). All significant intercompany transactions and balances have been eliminated in consolidation.
ACCOUNTING ESTIMATES
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated balance sheets and income and expenses for the periods. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Included in cash and cash equivalents at March 31, 2000 and 1999 is cash of approximately $1,261,000 and $1,197,000, respectively, restricted as to use in connection with the Company's workers' compensation insurance program.
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2)	Continued
REVENUE AND COST RECOGNITION
Revenues from fixed-price and modified fixed-price construction contracts are recognized on the percentage-of-completion method, measured by the cost-to-cost method. Revenues from cost-plus-fee contracts are recognized on the basis of costs incurred during the period plus the fee earned, measured by the cost-to- cost method.
Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Profit incentives are included in revenues when their realization is reasonably assured. An amount equal to contract costs attributable to claims is included in revenues when realization is probable and the amount can be reliably estimated.
The asset, "Cost and estimated earnings in excess of billings on uncompleted contracts," represents revenues recognized in excess of amounts billed. The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts," represents billings in excess of revenues recognized. Contract retentions are included in accounts receivable.
INVENTORY
Inventory consists primarily of consumable supplies and is stated at the lower of average cost or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is provided using the straight-line method over the estimated useful lives of the assets ranging from three to 10 years for property and equipment other than buildings. The estimated useful life of buildings is 40 years. Capital leases are included at the capitalized amount less accumulated amortization. Amortization of capital leases is included in depreciation expense. Leasehold improvements are amortized over the shorter of their estimated useful lives or the terms of the respective leases.
Maintenance and repairs are expensed when incurred, and expenditures for improvements are capitalized. Any gains or losses from the disposal of assets are recorded in the year of disposal.
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2)	Continued
GOODWILL
Goodwill is amortized using the straight-line method. The Company assesses the recoverability of this intangible asset by determining whether the amortization of the goodwill balance over the remaining life can be recovered through projected undiscounted future cash flows. The amount of the impairment, if any, is measured based on projected discounted future operating cash flows using a discount rate reflecting the Company's average cost of funds or fair value of the asset, where appropriate. The assessment of the recoverability of intangible assets will be impacted if estimated future operating cash flows are not achieved.
ACCOUNTS PAYABLE AND BANK OVERDRAFTS
Included in accounts payable and bank overdrafts is $1,209,853 and $768,950 of bank overdrafts at March 31, 2000 and 1999, respectively.
STOCK BASED COMPENSATION
The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation". The Company measures compensation under its stock option plans using the intrinsic value approach prescribed under Accounting Principles Board Opinion No. 25.
INCOME TAXES
Deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss carryforwards. Additionally, the effect on deferred taxes of a change in tax rates is recognized in earnings in the period that includes the enactment date.
CONCENTRATION OF CREDIT RISK
The Company provides its services primarily to the power generation, petro- chemical and pulp and paper industries.
The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for potential credit losses and such losses have been within management's expectations.
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2)	Continued
NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share reflects the potential dilution of securities that could share in the earnings.
SEGMENT DISCLOSURES
In fiscal year 1999, the Company adopted SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information." SFAS 131 establishes standards for reporting information about operating segments and related disclosures about products and services, geographic areas and major customers. SFAS No. 131 requires that companies disclose segment data based on how management makes decisions about allocating resources to segments and measuring their performance. The Company has one operating segment, which is engaged in industrial coatings and linings and related services.
(3)	OTHER ASSETS
Included in other assets is approximately $525,000 at March 31, 1999, related to workers' compensation refunds due from the Company's insurance carrier.
(4)	COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS AND RETAINAGE
Costs and estimated earnings on uncompleted contracts are summarized as follows: March 31, 2000 1999
Costs incurred on uncompleted contracts $38,899,672 41,946,575 Estimated earnings 8,726,915 8,833,645
47,626,587 50,780,220 Less billings to date 47,072,426 50,084,472
$ 554,161 695,748 Included in the accompanying consolidated balance sheets under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts 1,488,656 1,427,806 Billings in excess of costs and estimated earnings on uncompleted contracts (934,495) (732,058) $ 554,161 695,748
Accounts receivable billed includes amounts retained by customers, in accordance with contract provisions, of approximately $751,000 and $399,000 at March 31, 2000 and 1999, respectively. These amounts are expected to be collected within one year.
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5)	NOTES PAYABLE TO BANK AND OTHER LONG TERM DEBT
Other long-term debt is summarized as follows: March 31, 2000 1999 Acquisition loan payable to bank, the proceeds of which are used for the purpose of financing acquisitions collateralized by the Company's accounts receivable, inventory, machinery and equipment, real estate, and general intangibles. The note bears interest at prime plus 3% (at March 31, 2000 the effective rate was 12%) and is payable in equal monthly installments through June 2003. $2,309,714 3,058,810
Term loan payable to bank, collateralized by the Company's accounts receivable, inventory, machinery and equipment, real estate, and general intangibles. The note bears interest at prime plus a variable margin of 3% (at March 31, 2000 the effective rate was 12%) and is payable in equal monthly installments through June 2003. 2,664,028 3,254,981
Note to bank payable in monthly installments of $2,235 plus interest at prime (9.0% at March 31, 2000), due July 2000; collateralized by four vehicles. 8,942 35,767
Note to bank payable in monthly installments of $1,472 plus interest at prime, (9.0% at March 31, 2000) due October 2000; collateralized by machinery and equipment. 10,306 27,972
Note to Associates Commercial Corp. payable in monthly installments of $5,137 including interest at 7.14%, due September 2000; collateralized by equipment. 30,182 87,433
Related party note to Teddy L. Mansfield payable in monthly installments of $21,292 including interest at 7%, due April 2005. 1,090,202 1,262,774
Related party note to R. Dean Mansfield payable in monthly installments of $14,194 including interest at 7%, due April 2005. 726,801 841,850
Related party note to Teddy L. Mansfield payable in monthly installments of $6,092 including interest at 7%, due December 2002. 182,392 240,503
(continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5)	Continued March 31, 2000 1999
Related party note to R. Dean Mansfield payable in monthly installments of $3,898 including interest at 7%, due December 2002. $ 116,716 153,903
Note to Safeco Credit Company, Inc. due 8/15/02; payable in monthly installments of $363.00 including interest at 9.7% collateralized by equipment 9,261 -
Note to Safeco Credit Company, Inc. due 11/15/02; payable in monthly installments of $552.00 including interest at 9.477% collateralized by equipment 15,499 -
Note to Orix Credit Alliance due 5/18/02; payable in monthly installments of $87.00 including APR of 18.75% interest collateralized by equipment 1,866 -
7,165,909 8,963,993 Less current maturities 1,809,828 1,824,711 $5,356,081 7,139,282
On June 28, 1996, the Company entered into an $11,000,000 revolving credit agreement (the "Credit Agreement") with a bank which expires on June 1, 2001. The Credit Agreement was amended April 17, 1998 increasing the facility to $25,000,000 and incorporating automatic renewals through April 16, 2003. The amended facility includes a $5.0 million acquisition credit loan. At March 31, 2000, the acquisition and term loans as per the preceding table were outstanding under the amended Credit Agreement. The amount outstanding under the Revolving Credit portion of the Credit Agreement was $9,243,452 at March 31, 2000 and $10,754,785 at March 31, 1999. Borrowings bear interest at prime plus 3% (at March 31, 2000 the effective rate was 10.831%, at March 31, 1999 the margin rate was the average monthly libor rate plus 3.0% and the effective rate was 7.937%), and are secured by the Company's accounts receivable, inventory, machinery and equipment, real estate, and general intangibles. The Credit Agreement, among other things, requires the Company to meet various covenants including minimum levels of tangible net worth and earnings before interest, taxes, depreciation, and amortization. The Company was in compliance with these covenants, as amended, as of March 31, 2000, and management believes that such compliance will continue through the fiscal year ending March 31, 2001. Commitment fees are 1/4 of 1% of the average daily unused amount of the Credit Agreement. The Company is also required to pay a monthly collateral monitoring fee which was $2,500 in 2000 and 1999.
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5)	Continued
At March 31, 2000, future long-term debt payments, excluding payments under the revolving credit agreement, are as follows:
Year Amount
2001 $1,809,828 2002 1,791,138 2003 2,741,674 2004 380,250 2005 407,738 Thereafter 35,281
Total $7,165,909
Based on the borrowing rates currently available to the Company for debt with similar terms and average maturities, the fair value of long-term debt approximates its carrying value.
(6)	ACQUISITION
On April 22, 1998, the Company purchased the stock of Mansfield Industrial Coatings Inc. ("Mansfield") of Pensacola, Florida for a purchase price of $7,306,000, consisting of cash and common stock. In addition, an earnout agreement was entered into, whereby the Company may pay additional consideration of $750,000 over a three year period depending on the results of operations of Mansfield. In addition, the former stockholders of Mansfield are entitled to purchase 100,000 shares of common stock at $2.625 per share depending on the results of operations of Mansfield over a five year period. The acquisition was accounted for as a purchase.
During the fourth quarter of fiscal 1999, the Company completed the purchase price allocation for the Mansfield acquisition. As a result, adjustments were made to the preliminary purchase price allocation recorded, including corrections to certain net asset balances and recording of deferred taxes thereon. The restated purchase price allocation follows:
Net assets $2,354,700 Goodwill 4,951,752 Purchase price $7,306,452
The goodwill above is being amortized on the straight line basis over a 15 year period, resulting in goodwill amortization expense of $348,000 and $302,000 for the fiscal years ended March 31, 2000 and 1999.
Effective March 31, 2000 and 1999, the Company accrued $250,000 of the contingent earnout noted above, which was recorded as additional goodwill.
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6)	Continued
The results of operations of Mansfield are included in the Company's statements of operations from the date of acquisition. For fiscal year 1999, the unaudited pro forma results of operations do not differ materially from the reported results. The following unaudited fiscal 1998 pro forma consolidated results of operations assume the acquisition occurred at the beginning of the fiscal year 1998.
Year Ended March 31, (in thousands)
Revenues $ 76,239 Income from continuing operations 2,092 Net income per common share from continuing operations $ 0.47
The pro forma consolidated results do not purport to be indicative of results that would have occurred had the acquisition been in effect for the period presented, nor do they purport to be indicative of results that will be obtained in the future.
(7)	INCOME TAXES
Income tax expense (benefit) consists of the following:
Years ended March 31, 2000 1999 1998 Current: Federal $ - 109,430 (114,470) State - 60,000 -
Total current - 169,430 (114,470)
Deferred - Federal and state 88,794 250,342 283,000
Total income tax expense $ 88,794 419,772 168,530
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7)	Continued
The reconciliation between the tax expense (benefit) computed by multiplying pretax income (loss) the U.S. Federal statutory tax rate and the reported amounts of income tax expense is as follows:
Years ended March 31, 2000 1999 1998
Computed at U.S. statutory tax rate $ (30,000) 170,000 224,000 State income taxes, net of Federal income tax effect 11,000 32,000 24,000 Federal income tax adjustments - 170,000 (95,000) Nondeductible goodwill 118,000 103,000 - Decrease in beginning-of-year balance of valuation allowance - (71,000) - Nondeductible expenses and other, net (10,206) 15,772 15,530
Total income tax expense $ 88,794 419,772 168,530
(continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7)	Continued
SFAS 109 requires the recognition of deferred tax assets and liabilities for both the expected future tax impact of differences between the financial statement and tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. SFAS 109 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets and liabilities are as follows:
March 31, 2000 1999 Deferred tax assets: Allowance for doubtful accounts $ 260,000 154,000 Operating loss carryforwards 1,819,000 2,027,000 Accruals not deducted for tax purposes 208,000 204,000 AMT credit carryforwards 167,000 167,000 Other 85,000 85,000
Total gross deferred tax assets 2,539,000 2,637,000
Less valuation allowance - -
Net deferred tax assets 2,539,000 2,637,000
Deferred tax liabilities: Fixed asset depreciation 1,458,000 1,467,000
Total deferred tax liabilities 1,458,000 1,467,000
Net deferred tax asset $1,081,000 1,170,000
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7)	Continued
The Company's net operating loss carryforwards, which approximate $5,300,000 at March 31, 2000, expire beginning in 2010. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management believes it is more likely than not the Company will realize the benefits of these deductible differences. Accordingly, the valuation allowance for deferred tax assets decreased by $71,000 during the fiscal year ended March 31, 1999.
In 1995, the Internal Revenue Service (IRS), completed an audit of the Company's income tax returns for the years ended September 30, 1993, 1992, 1991, and 1990. As a result of the audit, the IRS challenged the write-off for tax purposes of certain intangible assets made during the year ended September 30, 1993. The Company had previously accrued $750,000 relating to this audit. The Company settled this matter for approximately $450,000 in April 1997. Included in other accrued expenses on the Company's consolidated balance sheets is $300,000 and $385,000 at March 31, 2000 and 1999, respectively, related to this matter.
(8)	EMPLOYEE BENEFIT PLANS
Effective October 1, 1996, the Company established a defined benefit pension plan for the benefit of a certain select group of former (retired) senior management. The benefits to be paid are based on specified amounts for a specified period of time. The Company has decided to fund the plan by contributing amounts when necessary for benefit disbursements.
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8)	Continued
The following table sets forth the plan's funded status at March 31, 2000 and 1999:
March 31, March 31, 2000 1999 Actuarial present value of accumulated plan benefits, including vested benefits of $757,683 and $846,582 at March 31, 2000 and 1999, respectively $ 757,683 846,582 Plan assets at fair value - -
Accumulated plan benefits in excess of plan assets 757,683 846,582 Unrecognized prior service cost (698,866) (802,402) Minimum liability adjustment 698,866 802,402
Accrued pension cost $ 757,683 846,582
Net pension cost for the year ended March 31, 2000 and March 31, 1999 included the following components:
March 31, March 31, 2000 1999
Interest cost on projected benefit obligation $ 60,822 68,533 Amortization of prior service cost 103,536 103,536
$ 164,358 172,069
The weighted-average discount rate used to measure the projected benefit obligation was 8.0%.
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8)	Continued
The Company established an Employee Stock Purchase Plan in 1988 for substantially all of its employees. The Plan offers employees the opportunity to purchase Company common stock through regular payroll deductions. Participation in this Plan is voluntary, and the Company pays transaction fees for purchases made under this Plan.
The Company is obligated under the terms of a thrift plan for substantially all employees of its subsidiary, Cannon Sline, Inc., not covered by union- sponsored plans. The Plan allows participants to contribute after-tax earnings up to a maximum of 10% of annual compensation. The Plan provides for Company matching and additional discretionary contributions as defined in the Plan document. The Company expensed approximately $132,000, $157,000, and $163,000, in combined matching and discretionary contributions to the Plan during the years ended March 31, 2000, 1999 and 1998, respectively.
The Company is required to contribute to pension plans (defined contribution) administered by collective bargaining organizations. Contributions are based on hours worked, as specified in the various contracts. Information regarding these plans is not currently made available by the union administrators or trustees.
(9)	MAJOR CUSTOMER
In the years ended March 31, 2000 and 1999, no single customer accounted for more than 10% of consolidated revenues. One customer accounted for 12% of consolidated revenue in the year ended March 31, 1998.
(10)	STOCK BASED INCENTIVE PLANS
(a)	Stock Appreciation Rights Plan
On January 1, 1995, the Board of Directors adopted the Nuclear Support Services, Inc. Non-Qualified Executive Stock Appreciation Plan (the "SAR Plan") to provide incentive to key officers and executives of the Company. A total of 250,000 appreciation rights (Rights) can be granted under the SAR Plan through January 1, 2002.
Rights granted under the SAR Plan are immediately exercisable and expire five years from the date of grant. Each Right entitles the grantee to receive in cash, upon exercise thereof, the excess of the market value of one share of the Company's common stock on the date of exercise over a price specified at the date of grant. At March 31, 2000, a total of 235,000 Rights have been granted under the SAR Plan at grant prices ranging from $2.50-$3.00 per Right. As of March 31, 2000, no Rights have been exercised. The total appreciation value of all Rights granted as of March 31, 2000 was $ 0.
(Continued) CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10)	Continued
(b)	Stock Option Plans
On February 6, 1990, the Board of Directors adopted the Nuclear Support Services, Inc. 1990 Stock Option Plan (the "1990 Plan") to provide incentive to key full-time employees and consultants of the Company. Under the 1990 Plan, stock options could be granted for up to 416,897 shares of common stock. Options granted under the 1990 Plan are immediately exercisable and expire five years from the date of grant. All stock options were granted at not less than the fair market value of the stock on the date granted. The 1990 Plan was effective January 1, 1990 and expired December 31, 1994. Options outstanding under the 1990 Plan remained exercisable by their terms after expiration of the Plan, and therefore expired on December 31, 1999.
On February 8, 1991, the Board of Directors adopted the Directors Stock Option Program wherein Directors, at their election made in advance, could accept non qualified stock options in lieu of cash for all or a portion of Director compensation. Such options could be acquired at the rate of 17% of the market value of the stock as of the date such compensation was payable. Options granted under this program were included in the 1990 Plan and are exercisable at the fair market value of the stock on the date that each Directors compensation became payable.
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10)	Continued
Following is a summary of activity in the 1990 Plan for the years ended March 31, 2000, 1999, and 1998:
Option Price Per Share Weighted Shares Range Average
Options outstanding and exercisable at March 31, 1997 248,747 $ 3.38-9.00 4.68 Canceled or expired (72,703) 4.63-9.00 5.71
Options outstanding and exercisable at March 31, 1998 176,044 $ 3.38-5.50 4.25 Exercised Canceled or expired (156,632) 3.38-5.50 4.24
Options outstanding and exercisable at March 31, 1999 19,412 $ 4.13-5.50 4.37 Exercised Canceled or expired (19,412) $ 4.13-5.50 4.37
Options outstanding and exercisable at March 31, 2000 0 0 0
On August 11, 1998, the Board of Directors adopted the 1998 stock option/incentive plan to provide incentive to directors and employees of the Company. The plan authorizes options up to 750,000 shares of common stock, increased each March 31st by an additional number equal to 2% of the number of shares outstanding on that date, commencing March 31, 1999. Provided, however, the aggregate number of shares issuable shall not exceed 1,000,000. Options granted under the 1998 plan are immediately exercisable and expire five years from the date of grant and may be granted at less than, equal to, or greater than fair market value of the stock on the grant date. All stock options will be granted at not less than fair market value of the stock on the date granted. The 1998 plan is effective March 31, 1999 and expires March 31, 2008. As of March 31, 2000, 140,000 Stock Appreciation Rights have been granted at grant prices ranging from $1.00-$1.50 per Right.
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Following is a summary of activity in the 1998 Plan for the years ended March 31, 2000, and 1999:
Option Price Per Share Weighted Shares Range Average
Options outstanding at March 31, 1999 105,000 $ 3.00 3.00 Granted 20,000 .625 .625 Exercised Canceled or expired (21,125) 3.00 3.00 Options outstanding and exercisable at March 31, 2000 103,875 $.625-3.00 2.54
The following table summarizes information about stock options outstanding at March 31, 2000:
Weighted Average Weighted Range of remaining average exercise Number contractual exercise prices outstanding life price
$ 3.00 83,875 4 years $ 3.00 .625 20,000 5 years .625
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11)	COMMITMENTS AND CONTINGENCIES
(a)	Legal Matters
The Company or its subsidiaries are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position.
(b)	Rental and Employment Agreements
The Company leases office space and various equipment under operating leases which provide for minimum rentals as follows:
Year Amount
2001 566,813 2002 383,099 2003 236,639 2004 131,673 2005 78,254
Total minimum lease payments $1,396,478
Rental expense under all agreements for the years ended March 31, 2000, 1999, and 1998 was approximately $357,000, $546,000 and $506,000, respectively.
The Company has employment agreements with certain executives which expire at various times. Certain of these agreements include change of control provisions.
(12)	SALE OF ASSETS
On January 31, 2000, the Company sold certain assets of its IceSolv wholly owned subsidiary, (primarily equipment and contracts in progress) with net book value of approximately $50,000 for $130,000 in cash and a note receivable (including interest) for $120,000 payable over the next 12 months. The gain on the sale of these assets of approximately $180,000 is included in the 2000 statements of operations in other income, net.
(13)	RELATED PARTY TRANSACTIONS
In September, 1999, the Company entered into a letter agreement with a consulting firm, of which a Company director is a principal, for strategic advisory services. The terms of the agreement include monthly fess of $30,000 to be paid. In December, 1999, the agreement was modified in connection with management changes within the Company, reducing the amount to be paid beginning January 2000.
(Continued)
CANISCO RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13)	Continued
The letter agreement includes a provision for the granting of stock appreciation rights. Each Right permits the holder to receive cash on exercise equal to the amount by which the fair market value of the Company's common stock on the date of exercise exceeds the exercise price. As of December 31, 1999, 125,000 Rights had been awarded to the consulting firm at an exercise price of $1.50 per share. The Board of Directors awarded Mr. Thomas McShane 15,000 Rights at an exercise price of $1.00 per share. The Rights expire one year from the date of grant.
During the year ended March 31, 2000, the consulting firm was paid approximately $175,000 in fees and expenses. As of March 31, 2000, the consulting firm is being paid on an as needed basis.
(14)	SUBSEQUENT EVENT
On June 28, 2000, the Company announced that they have entered into a definitive merger agreement under which Kenny Industrial Services, L.L.C. ("Kenny") will acquire all of the outstanding shares of Canisco Resources, Inc.
Under the terms of the agreement, a wholly owned subsidiary of Kenny will commence a tender offer to purchase all outstanding shares of Canisco common stock for $1.00 per share in cash. Canisco's Board of Directors has recommended that Canisco stockholders tender their shares. Following completion of the tender offer, Kenny intends to consummate a cash merger to acquire any shares not previously tendered. Canisco has approximately 2,536,565 shares outstanding.
The tender offer is conditioned, among other things, upon a minimum tender of a majority of the outstanding Canisco shares on a fully diluted basis and receipt of regulatory approvals, including approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
ITEM 9
ITEM 9 CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
PART III
Item 10
Item 10	Directors and Executive Officers of the Registrant
Item 11
Item 11	Executive Compensation
Item 12
Item 12	Security Ownership of Certain Beneficial Owners and Management
Item 13
Item 13	Certain Relationships and Related Transactions
Information required in Items 10 through 13 are incorporated by reference to Proxy statement for next meeting of stockholders.
PART IV
ITEM 14
ITEM 14	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A.	Reports on Form 8-K (none)
B.	Exhibits
Exhibit Number	Description of Document
2.1		Plan and Agreement of Merger by and among Nuclear Support Services, Inc., NSS of Delaware, Inc. and Canisco Resources, Inc. (filed as exhibit 2.1 to the Company's form 8-B filed May 24, 1996 and incorporated herein by reference).
3.1	 Articles of Incorporation of the Company, as amended (filed as Exhibit 3.1 to Form 8-B filed May 24, 1996 and incorporated herein by reference).
3.2	 By-laws of the Company (filed as Exhibit 3.2 to Form 8-B filed May 24, 1996 and incorporated herein by reference).
10.1	1990 Stock Option Plan (filed as Exhibit 28.2 to Registration Statement on Form S-8 (No. 33-33180) and incorporated herein by reference).
10.10	1998 Stock Option/Incentive Plan (Incorporated herein by reference to the Company's Definitive Proxy Statement on Form 14A filed July 28, 1998).
10.11	Stock Purchase Agreement dated April 22, 1998 (Incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K filed May 7, 1998).
10.12	Form of Stock Purchase Warrant issued to Teddy Mansfield (Incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K filed May 7, 1998).
10.13	Form of Stock Purchase Warrant issued to R. Dean Mansfield (Incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K filed May 7, 1998).
10.14	Amended and Restated Credit and Security Agreement with The BNY Financial Corporation dated as of April 17, 1998 (Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K filed May 7, 1998).
10.2	 Securities Purchase Agreement, dated as of October 16, 1998, by and among Mellon Ventures, L.P. and Morse Partners, Ltd, and Canisco Resources, Inc. (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed October 30, 1998).
10.20	Securities Purchase Agreement, dated as of April 16, 1999, by and among SCC Investment I, L.P., Sterling City Capital LLC and Canisco Resources, Inc. (Incorporated by reference to Exhibit 10.2 to the Company's Amended Current Report on Form 8-K filed May 11, 1999).
10.21 Agreement and Plan of Merger dated as of June 28, 2000, by and among Kenny Industrial Services, L.L.C., Canisco Acquisition, Inc., and Canisco Resources, Inc.
21 Subsidiaries of the Registrant.
23 	Accountants' Consent
27 	Financial Data Schedule (EDGAR)
99.1	Index to Financial Statement Schedule.
99.2	Independent Auditors' Report-Schedule.
99.3	Schedule II - Valuation and Qualifying Accounts.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATE: July 11, 2000			CANISCO RESOURCES, INC.
			Ted L. Mansfield 						President and 			Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons, on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE				 CAPACITY				 DATE
/s/Wm. Lawrence Petcovic	 Chairman of the Board		 July 11, 2000
/s/Dale L. Ferguson	 	Director				 July 11, 2000
/s/Thomas P. McShane	 	Director	 			 July 11, 2000
/s/Marv Davis			 Director 			 	July 11, 2000
/s/Ted L. Mansfield		 President, CEO	 		 July 11, 2000
/s/Michael J. Olson		 Chief Financial Officer		July 11, 2000