UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number: 333-68570
Cycle Country Accessories Corp.
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(Exact name of small business issuer as specified in its charter)
Nevada 42-1523809
-------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2188 Highway 86, Milford, Iowa 51351
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(Address of principal executive offices)
(712) 338-2701
---------------------------
(Issuer's telephone number)
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(Former name, former address and formal fiscal year, if changed
since last report)
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 [ ]
The number of shares of the registrant's common stock, par value $0.0001 per
share, outstanding as of July 21, 2004 was 4,914,422 and there were 805
stockholders of record.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Cycle Country Accessories Corp.
Index to Form 10-QSB
Part I Financial Information Page
----
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet - June 30, 2004.................2
Condensed Consolidated Statements of Income - Three Months and Nine
Months Ended June 30, 2004 and 2003..................................3
Condensed Consolidated Statements of Cash Flows - Nine Months
Ended June 30, 2004 and 2003 ........................................5
Notes to Condensed Consolidated Financial Statements.................7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................11
Item 3. Controls and Procedures.............................................17
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K....................................18
Signatures...................................................................19
Part I Financial Information
Item 1. Financial Statements
Cycle Country Accessories Corp. and Subsidiaries
Condensed Consolidated Balance Sheet
June 30, 2004
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 376,957
Accounts receivable, net 1,414,659
Inventories 3,627,687
Deferred income taxes 72,095
Prepaid expenses and other 156,661
----------
Total current assets 5,648,059
----------
Property, plant, and equipment, net 2,858,798
Intangible assets, net 204,457
Goodwill 41,700
Other assets 38,620
----------
Total assets $8,791,634
==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 999,641
Accrued expenses 299,960
Income taxes payable 516,146
----------
Total current liabilities 1,815,747
----------
Long-Term Liabilities:
Deferred income taxes 96,405
----------
Total liabilities 1,912,152
----------
Stockholders' Equity:
Preferred stock, $.0001 par value; 20,000,000 shares
authorized; no shares issued or outstanding --
Preferred stock, $.0001 par value; 2,000,000 shares
authorized; no shares issued or outstanding --
Common stock, $.0001 par value; 100,000,000 shares
authorized; 4,889,422 shares issued and outstanding 489
Additional paid-in capital 5,494,341
Retained earnings 1,384,652
----------
Total stockholders' equity 6,879,482
----------
Total liabilities and stockholders' equity $8,791,634
==========
See accompanying notes to the condensed consolidated financial statements.
Page 2
Cycle Country Accessories Corp. and Subsidiaries
Condensed Consolidated Statements of Income
Three Months Ended June 30,
----------------------------
2004 2003
------------ ------------
(Unaudited) (Unaudited)
Revenues:
Net sales $ 4,035,775 $ 3,043,621
Freight income 31,724 42,334
------------ ------------
Total revenues 4,067,499 3,085,955
------------ ------------
Cost of goods sold (3,006,499) (2,255,984)
------------ ------------
Gross profit 1,061,000 829,971
------------ ------------
Selling, general, and administrative
expenses (706,345) (679,077)
------------ ------------
Income from operations 354,655 150,894
------------ ------------
Other Income (Expense):
Interest expense (48,655) (60,722)
Interest income 4,629 876
Miscellaneous 4,257 413
------------ ------------
Total other expense (39,769) (59,433)
------------ ------------
Income before provision
for income taxes 314,886 91,461
------------ ------------
Provision for income taxes (119,479) (32,645)
------------ ------------
Net income $ 195,407 $ 58,816
Dividends on preferred stock 7,644 --
------------ ------------
Net income available to common
Stockholders $ 187,763 $ 58,816
============ ============
Weighted average shares outstanding:
Basic 4,305,784 3,953,000
============ ============
Diluted 4,708,624 3,953,000
============ ============
Earnings per share:
Basic $ 0.04 $ 0.02
============ ============
Diluted $ 0.04 $ 0.02
============ ============
See accompanying notes to the condensed consolidated financial statements.
Page 3
Cycle Country Accessories Corp. and Subsidiaries
Condensed Consolidated Statements of Income
Nine Months Ended June 30,
------------------------------
2004 2003
------------ ------------
(Unaudited) (Unaudited)
Revenues:
Net sales $ 14,973,212 $ 10,122,003
Freight income 119,563 110,567
------------ ------------
Total revenues 15,092,775 10,232,570
------------ ------------
Cost of goods sold (11,162,822) (7,587,590)
------------ ------------
Gross profit 3,929,953 2,644,980
------------ ------------
Selling, general, and administrative
expenses (2,182,758) (2,063,622)
------------ ------------
Income from operations 1,747,195 581,358
------------ ------------
Other Income (Expense):
Interest expense (131,135) (169,689)
Interest income 15,921 2,088
Miscellaneous 40,910 5,940
------------ ------------
Total other income (expense) (74,304) (161,661)
------------ ------------
Income before provision for
income taxes 1,672,891 419,697
------------ ------------
Provision for income taxes (608,361) (150,810)
------------ ------------
Net income $ 1,064,530 $ 268,887
Dividends on preferred stock 52,395 --
------------ ------------
Net income available to common
Stockholders $ 1,012,135 $ 268,887
============ ============
Weighted average shares outstanding:
Basic 4,083,621 3,953,000
============ ============
Diluted 4,361,435 3,953,000
============ ============
Earnings per share:
Basic $ 0.25 $ 0.07
============ ============
Diluted $ 0.24 $ 0.07
============ ============
See accompanying notes to the condensed consolidated financial statements.
Page 4
Cycle Country Accessories Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Nine Months Ended June 30,
----------------------------
2004 2003
------------ ------------
(Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net income $ 1,064,530 $ 268,887
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 259,306 226,549
Amortization 15,609 15,610
Inventory reserve (21,340) --
Gain on sale of equipment (6,514) (4,205)
(Increase) decrease in assets:
Accounts receivable, net (333,805) 312,188
Inventories (581,614) 3,471
Prepaid expenses and other 102,608 48,877
Increase (decrease) in liabilities:
Accounts payable (42,405) (436,477)
Accrued expenses (84,653) (177,082)
Income taxes payable 605,653 --
Accrued interest payable (2,200) (500)
------------ ------------
Net cash provided by operating activities 975,175 406,228
------------ ------------
Cash Flows from Investing Activities:
Purchase of equipment (199,819) (574,378)
Withdrawals from restricted cash 1,911,054 --
Deposits into restricted cash (9,156) (1,898,780)
Proceeds from sale of equipment 19,107 5,515
------------ ------------
Net cash provided by (used in)
investing activities 1,721,186 (2,467,643)
------------ ------------
Cash Flows from Financing Activities:
Payments on bank notes payable (3,631,954) (588,720)
Net borrowings from (payments on)
bank line of credit (420,000) 773,984
Proceeds from exercise of stock warrants 1,500,000 --
Proceeds from preferred stock conversion 16,999 --
Proceeds from issuance of preferred stock -- 1,898,000
Payment of loan costs -- (25,000)
------------ ------------
Net cash provided by (used in)
financing activities (2,534,955) 2,058,264
------------ ------------
Net increase (decrease) in cash and
cash equivalents 161,406 (3,151)
Cash and cash equivalents, beginning of
period 215,551 207,162
------------ ------------
Cash and Cash Equivalents, end of
period $ 376,957 $ 204,011
============ ============
See accompanying notes to the condensed consolidated financial statements.
Page 5
Cycle Country Accessories Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Nine Months Ended June 30,
---------------------------
2004 2003
------------ ------------
(Unaudited) (Unaudited)
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 133,335 $ 170,189
============ ============
Income taxes $ 2,708 $ 1,899
============ ============
Supplemental schedule of non-cash investing
and financing activities:
Issuance of common stock for
payment of employee compensation $ 9,902 $ --
============ ============
Issuance of common stock for
payment of dividends on preferred
stock $ 52,395 $ --
============ ============
Issuance of common stock for
payment of professional services
fee included in prepaid expenses $ 171,750 $ --
============ ============
Issuance of common stock for
payment of a contract fee $ 13,150 $ --
============ ============
Issuance of common stock for
conversion of preferred stock $ 2,000,000 $ --
============ ============
Conversion of bank line of credit
to bank note payable $ -- $ 735,439
============ ============
See accompanying notes to the condensed consolidated financial statements.
Page 6
Cycle Country Accessories Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Nine Months Ended June 30, 2004 and 2003
(Unaudited)
1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements for the
three and nine months ended June 30, 2004 and 2003 have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission for Form 10-QSB.
Accordingly, they do not include all the information and footnotes required by
accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements contain all adjustments,
consisting only of normal recurring accruals, considered necessary for a fair
presentation of the Company's financial position, results of operations, and
cash flows for the periods presented.
The results of operations for the interim periods ended June 30, 2004 and 2003
are not necessarily indicative of the results to be expected for the full year.
These interim consolidated financial statements should be read in conjunction
with the September 30, 2003 consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-KSB for the year ended
September 30, 2003.
2. Inventories:
Inventories are valued at the lower of cost or market. Cost is determined using
the first-in, first-out method. The major components of inventories at June 30,
2004 are summarized as follows:
Raw materials $ 1,843,203
Work in progress 83,188
Finished goods 1,701,296
-------------
Total inventories $ 3,627,687
=============
3. Accrued Expenses:
The major components of accrued expenses at June 30, 2004 are summarized as
follows:
Accrued salaries and related benefits $ 162,136
Accrued warranty expense 39,000
Distributor rebate payable 39,716
Accrued real estate tax 27,573
Accrued investment management fee 20,000
Royalties payable 11,535
-------------
Total accrued expenses $ 299,960
=============
4. Earnings Per Share:
Basic earnings per share ("EPS") is calculated by dividing net income by the
weighted-average number of common shares outstanding during the period. Diluted
EPS is computed in a manner consistent with that of basic EPS while giving
effect to the potential dilution that could occur if warrants to issue common
stock were exercised and the preferred stock was converted. Preferred stock
dividends are added back to income since these would not be paid if the
preferred stock were converted to common stock.
Page 7
Cycle Country Accessories Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Nine Months Ended June 30, 2004 and 2003
(Unaudited)
4. Earnings Per Share, Continued:
The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations for the three months and nine months ended
June 30, 2004 and 2003:
For the three months ended For the nine months ended
June 30, 2004 June 30, 2004
-------------------------------------------- ---------------------------------------------
Income Shares Per-share Income Shares Per-share
(numerator) (denominator) amount (numerator) (denominator) amount
------------- ------------- ------------- ------------- ------------- -------------
Basic EPS
Income available to common
stockholders $ 187,763 4,305,784 $ 0.04 $ 1,012,135 4,083,621 $ 0.25
=============
Effect of Dilutive Securities
Convertible preferred stock 7,644 -- 52,395 --
Warrants -- 402,840 -- 277,814
------------- ------------- ------------- -------------
Diluted EPS
Income available to common
stockholders and assumed
conversions $ 195,407 4,708,624 $ 0.04 $ 1,064,530 4,361,435 $ 0.24
============= ============= ============= ============= ============= =============
For the three months ended For the nine months ended
June 30, 2003 June 30, 2003
-------------------------------------------- ---------------------------------------------
Income Shares Per-share Income Shares Per-share
(numerator) (denominator) amount (numerator) (denominator) amount
------------- ------------- ------------- ------------- ------------- -------------
Basic EPS
Income available to common
stockholders $ 58,816 3,953,000 $ 0.02 $ 268,887 3,953,000 $ 0.07
=============
Effect of Dilutive Securities
Warrants -- -- -- --
------------- ------------- ------------- -------------
Diluted EPS
Income available to common
stockholders $ 58,816 3,953,000 $ 0.02 $ 268,887 3,953,000 $ 0.07
============= ============= ============= ============= ============= =============
Page 8
Cycle Country Accessories Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Nine Months Ended June 30, 2004 and 2003
(Unaudited)
5. Segment Information:
Segment information has been presented on a basis consistent with how business
activities are reported internally to management. Management solely evaluates
operating profit by segment by direct costs of manufacturing its products
without an allocation of indirect costs. In determining the total revenues by
segment, freight income and sales discounts are not allocated to each of the
segments for internal reporting purposes. The Company has three operating
segments that assemble, manufacture, and sell a variety of products: ATV
Accessories, Plastic Wheel Covers, and Lawn and Garden. ATV Accessories is
engaged in the design, assembly, and sale of ATV accessories such as snowplow
blades, lawnmowers, spreaders, sprayers, tillage equipment, winch mounts,
utility boxes, and oil filters. Plastic Wheel Covers manufactures and sells
injection-molded plastic wheel covers for vehicles such as golf carts and
light-duty trailers. Lawn and Garden is engaged in the design, assembly, and
sale of lawn and garden accessories through our Weekend Warrior subsidiary.
These lawn and garden accessories include lawnmowers, spreaders, sprayers, and
tillage equipment. The significant accounting policies of the operating segments
are the same as those described in Note 1 to the Consolidated Financial
Statements of the Company's Annual Report on Form 10-KSB for the year ended
September 30, 2003. Sales of snowplow blades comprised approximately 34% and 38%
of ATV Accessories revenues during the three months ended June 30, 2004 and
2003, respectively, and approximately 60% and 58% of ATV Accessories revenues
during the nine months ended June 30, 2004 and 2003, respectively. In addition,
sales of snowplow blades comprised approximately 30% and 31% of the Company's
consolidated total revenues during the three months ended June 30, 2004 and
2003, respectively, and approximately 55% and 50% of the Company's consolidated
total revenues during the nine months ended June 30, 2004 and 2003,
respectively. Sales of mowers comprised approximately 21% and 15% of ATV
accessories revenues during the three months ended June 30, 2004 and 2003,
respectively, and approximately 6% and 6% of ATV accessories revenues during the
nine months ended June 30, 2004 and 2003, respectively. In addition, sales of
mowers comprised approximately 18% and 13% of consolidated total revenues during
the three months ended June 30, 2004 and 2003, respectively. Sales of Original
Equipment Manufacturer (OEM) products, including John Deere and Land Pride,
comprised approximately 21% and 12% of ATV accessories revenues during the three
months ended June 30, 2004 and 2003, respectively, and approximately 17% and 12%
of ATV accessories revenues during the nine months ended June 30, 2004 and 2003,
respectively. In addition, sales of Original Equipment Manufacturer (OEM)
products, including John Deere and Land Pride, comprised approximately 18% and
10% of consolidated total revenues during the three months ended June 30, 2004
and 2003, respectively, and approximately 16% and 10% of consolidated total
revenues during the nine months ended June 30, 2004 and 2003, respectively.
Sales of wheel covers comprised approximately 12% and 17% of the Company's
consolidated total revenues during the three months ended June 30, 2004 and
2003, respectively, and approximately 9% and 15% of the Company's consolidated
total revenues during the nine months ended June 30, 2004 and 2003,
respectively.
The following is a summary of certain financial information related to the three
segments during the three months and nine months ended June 30, 2004 and 2003:
Three months ended June 30, Nine months ended June 30,
---------------------------- ----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Total revenues by segment
ATV Accessories $ 3,551,846 $ 2,503,139 $ 13,699,608 $ 8,791,629
Plastic Wheel Covers 484,176 515,132 1,393,047 1,503,046
Lawn and Garden 82,346 105,701 273,488 120,983
------------ ------------ ------------ ------------
Total revenues by segment 4,118,368 3,123,972 15,366,143 10,415,658
Freight income 31,724 42,334 119,563 110,567
Sales allowances (82,593) (80,351) (392,931) (293,655)
------------ ------------ ------------ ------------
Total revenues $ 4,067,499 $ 3,085,955 $ 15,092,775 $ 10,232,570
============ ============ ============ ============
Page 9
Cycle Country Accessories Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Nine Months Ended June 30, 2004 and 2003
(Unaudited)
5. Segment Information, Continued:
Operating profit by segment
ATV Accessories $ 1,085,886 $ 753,079 $ 4,154,538 $ 2,633,496
Plastic Wheel Covers 262,802 315,568 741,675 883,896
Lawn and Garden 34,126 46,853 106,770 55,995
Freight income 31,724 42,334 119,563 110,567
Sales allowances (82,593) (80,351) (392,932) (293,655)
Factory overhead (270,946) (247,512) (799,661) (745,319)
Selling, general, and
administrative (706,345) (679,077) (2,182,758) (2,063,622)
Interest income (expense), net (44,026) (59,846) (115,214) (167,601)
Other income (expense), net 4,257 413 40,910 5,940
Provision for income taxes (119,479) (32,645) (608,361) (150,810)
----------- ----------- ----------- -----------
Net income $ 195,406 $ 58,816 $ 1,064,530 $ 268,887
=========== =========== =========== ===========
The following is a summary of the Company's revenue in different geographic
areas during the three months and nine months ended June 30, 2004 and 2003:
Three months ended June 30, Nine months ended June 30,
--------------------------- ---------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
United States of America $ 3,614,119 $ 2,771,836 $ 13,860,448 $ 9,368,038
Other countries 453,380 314,119 1,232,327 864,532
------------ ------------ ------------ ------------
Total revenue $ 4,067,499 $ 3,085,955 $ 15,092,775 $ 10,232,570
============ ============ ============ ============
As of June 30, 2004, all of the Company's long-lived assets are located in the
United States of America.
ATV Accessories sales to major customers, which exceeded 10% of net revenues,
accounted for approximately 18.6% and 15.8% each of net revenues during the
three months ended June 30, 2004, and approximately 16.2% and 15% each of net
revenues during the three months ended June 30, 2003. Plastic Wheel Covers and
Lawn and Garden did not have sales to any individual customer greater than 10%
of net revenues during the three months ended June 30, 2004 or 2003.
ATV Accessories sales to major customers, which exceeded 10% of net revenues,
accounted for approximately 16.9%, 15.8%, and 12.8% each of net revenues during
the nine months ended June 30, 2004, and approximately 15.8% and 15.6% each of
net revenues during the nine months ended June 30, 2003. Plastic Wheel Covers
and Lawn and Garden did not have sales to any individual customer greater than
10% of net revenues during the nine months ended June 30, 2004 or 2003.
Page 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is a discussion and analysis of our results of operations and our
liquidity and capital resources and should be read in conjunction with the
Condensed Consolidated Financial Statements and the related Notes thereto
included elsewhere in this filing. To the extent that our analysis contains
statements that are not of a historical nature, these statements are
forward-looking statements, which involve risks and uncertainties. See "Special
Note Regarding Forward-Looking Statements" included elsewhere in this filing.
Additional risk factors are also identified in our annual report to the
Securities and Exchange Commission filed on Form 10-KSB and in other SEC
filings.
Critical Accounting Policies and Estimates
------------------------------------------
The Company's discussion and analysis of its financial condition and results of
operations are based upon its Consolidated Financial Statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
the Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, the Company evaluates the
estimates including those related to bad debts and inventories. The Company
bases its estimates on historical experiences and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates.
The Company believes the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of the Consolidated
Financial Statements:
Allowance for Doubtful Accounts - the Company maintains an allowance for
doubtful accounts for estimated losses resulting from the inability of its
customers to make required payments. If the financial condition of the Company's
customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional allowance may be required.
Reserve for Inventory - the Company records valuation reserves on its inventory
for estimated excess and obsolete inventory equal to the difference between the
cost of inventory and the estimated market value based upon assumptions about
future product demand and market conditions. If future product demand or market
conditions are less favorable than those projected by management, additional
inventory reserves may be required.
Depreciation of Long-Lived Assets - the Company assigns useful lives for
long-lived assets based on periodic studies of actual asset lives and the
intended use for those assets. Any change in those assets lives would be
reported in the statement of operations as soon as any change in estimate is
determined.
Accrued Warranty Costs - the Company records a liability for the expected cost
of warranty-related claims as its products are sold. The Company provides a
one-year warranty on all of its products except the snowplow blade, which has a
limited lifetime warranty. The amount of the warranty liability accrued reflects
the Company's estimate of the expected future costs of honoring its obligations
under the warranty plan. The estimate is based on historical experiences and
known current events. If future estimates of expected costs were to be less
favorable, an increase in the amount of the warranty liability accrued may be
required.
Distributor Rebate Payable - the Company records a liability for the expected
cost of offering an annual rebate program to certain eligible distributors. The
rebate liability is calculated and recognized as eligible ATV accessory products
are sold based upon factors surrounding the activity and prior experience of the
eligible distributors. The Program provides for a 7% rebate on purchases of
certain eligible products during the Program period if certain pre-determined
cumulative purchase levels are obtained. The Program rebate is provided to the
applicable distributors as a credit against future purchases of the Company's
products.
Accounting for Income Taxes - the Company is required to estimate income taxes
in each of the jurisdictions in which it operates. This process involves
estimating actual current tax exposure for the Company together with assessing
temporary differences resulting from differing treatment of items, such as
property, plant and equipment depreciation, for tax and accounting purposes.
Actual income taxes could vary from these estimates due to future changes in
income tax law or results from final tax exam reviews. At June 30, 2004, the
Company assessed the need for a valuation allowance on its deferred tax assets.
A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. Based upon the
historical operating profits and the near certainty regarding sufficient near
term taxable income, management believes that there is no need to establish a
valuation allowance. Should the Company determine that it would not be able to
realize all or part of its net deferred tax assets in the future, a valuation
allowance may be required.
Page 11
OVERALL RESULTS OF OPERATIONS - Three Months Ended June 30, 2004 and 2003
-------------------------------------------------------------------------
Revenues for the three months ended June 30, 2004 increased $981,544, or 31.8%,
to $4,067,499 from $3,085,955 for the three months ended June 30, 2003. Cost of
goods sold increased $750,515, or 33.3%, to $3,006,499 for the three months
ended June 30, 2004 from $2,255,984 for the three months ended June 30, 2003.
Additionally, gross profit as a percentage of revenue was 26.1% for the third
quarter ended June 30, 2004 compared to 26.9% for the third quarter ended June
30, 2003. The increase in revenues during the third quarter ended June 30, 2004
is attributable to an increase in sales of our mainstay product, Snowplow
Blades, of approximately $267,000, an increase in sales of mowers of
approximately $352,400, and an increase in sales of our OEM products of
approximately $439,700, which consists of sales to John Deere, Land Pride and
our other OEM customers. These increases in sales were offset by a decrease in
sales of our three-point hitch of approximately $60,700. The increase in
revenues can be attributed to increased sales among all United States, Canada,
and European distributors. Sales to our distributors and OEM customers during
the third quarter of fiscal 2004 were very strong, providing us with one of the
best third quarters in recent company history. Truckload deliveries to our
distributors continued strong in the third quarter with the increased number of
mowers ordered and continued shipping of snowplow blades throughout the quarter.
The Company's fourth quarter is shaping up to continue producing strong sales
results as orders for snowplow blades and OEM products are very strong. In fact,
the Company has already returned to full capacity production levels to meet the
demand and management expects to run at full capacity production levels through
the next two quarters. Gross profit remained steady for the three months ended
June 30, 2004 as compared to the three months ended June 30,2003.
Selling, general, and administrative expenses increased $27,268, or 4.0%, to
$706,345 for the three months ended June 30, 2004 from $679,077 for the three
months ended June 30, 2003. Increases in operating expenses of approximately
$85,600 in other professional fees, approximately $16,400 in licenses and fees,
and approximately $16,800 in shipping wage expense were offset by decreases in
shipping and handling costs of approximately $40,000, legal and accounting
expenses of approximately $37,300, and in insurance expense of approximately
$16,200. The increase in other professional fees is due to the costs associated
with services being provided by an investor relations firm to promote and market
the Company to potential brokers and investors during fiscal 2004. The decrease
in shipping and handling costs is primarily the result of reduced freight rates
being realized through utilization of a nationwide freight logistics and
brokerage company.
Interest and miscellaneous income increased approximately $19,700 from the third
quarter of fiscal 2003 to the third quarter of fiscal 2004. The increase is
mainly due to interest expense decreasing 19.9% to $48,655 for the three months
ended June 30, 2004 from $60,722 for the three months ended June 30, 2003 due to
the principal balance on the bank notes payable continually being reduced. The
bank notes were paid in full at the end of the third quarter of fiscal 2004,
thus the remainder of fiscal 2004 should not incur any interest expense.
OVERALL RESULTS OF OPERATIONS - Nine months Ended June 30, 2004 and 2003
------------------------------------------------------------------------
Revenues for the nine months ended June 30, 2004 increased $4,860,205, or 47.5%,
to $15,092,775 from $10,232,570 for the nine months ended June 30, 2003. Cost of
goods sold increased $3,575,232, or 47.1%, to $11,162,822 for the nine months
ended June 30, 2004 from $7,587,590 for the nine months ended June 30, 2003.
Additionally, gross profit as a percentage of revenue was 26% for the nine
months ended June 30, 2004 compared to 25.8% for the nine months ended June 30,
2003. The increase in revenues during the nine months ended June 30, 2004 is
mainly attributable to an increase in sales of our mainstay product, Snowplow
Blades, of approximately $3,176,700. Also contributing to the increased revenues
were increases in our OEM product sales of approximately $1,354,000, which
consists of sales to John Deere, Land Pride and our other OEM customers,
increased sales of mowers of approximately $253,600, increased sales of our
electric blade lift systems of approximately $140,900, and increased sales of
our Weekend Warrior lawn and garden products of approximately $152,500. These
increases in sales were offset by decreased sales of our plastic wheel covers of
approximately $110,000 and an increase in the distributor rebate program
expense, which is netted against sales, of approximately $206,200. The increase
in revenues can be attributed to increased sales among all United States,
Canada, and European distributors. Sales to our distributors and OEM customers
during the first nine months of fiscal 2004 were very strong, putting the
Company on track to realize one of the best fiscal years in recent company
history. Truckload deliveries of mowers, sprayers, spreaders, snowplow blades
and related products to our distributors were strong and solid throughout the
first nine months of fiscal 2004 as were our shipments of products to our OEM
customers. The Company's fourth quarter is shaping up to continue producing
strong sales results as orders for snowplow blades and OEM products are very
strong. In fact, the Company has already returned to full capacity production
levels to meet the demand and management expects to run at full capacity
production levels through the next two quarters. The volatility in the steel
markets has not dampened demand for our products. Gross profit remained steady
at 26% for the nine months ended June 30, 2004 compared to 25.8% for the nine
months ended June 30, 2003.
Page 12
Selling, general, and administrative expenses increased $119,136, or 5.8%, to
$2,182,758 for the nine months ended June 30, 2004 from $2,063,622 for the nine
months ended June 30, 2003. Increases in operating expenses of approximately
$135,000 in other professional fees, approximately $33,200 in licenses and fees,
approximately $26,200 in fuel and fuel tax expense, approximately $40,600 in
officer bonus expense, approximately $26,300 in repairs and maintenance
expenses, and approximately $31,000 in shipping wage expense were offset by
decreases in shipping and handling costs of approximately $43,300, approximately
$41,900 in legal and accounting expense, approximately $38,900 in advertising
expense, approximately $21,400 in rent expense, and in research and development
wage expense of approximately $26,900. The increase in other professional fees
is due to the costs associated with services being provided by an investor
relations firm to promote and market the Company to potential brokers and
investors during fiscal 2004. The decrease in advertising expense is due to
reduced catalog costs and print media advertising costs in fiscal 2004 as
compared to fiscal 2003.
Interest and miscellaneous income increased approximately $87,400 from the third
quarter of fiscal 2003 to the third quarter of fiscal 2004. The increase is
mainly due to interest expense decreasing approximately $38,900, or 22.7%, for
the nine months ended June 30, 2004 from the nine months ended June 30, 2003 due
to the principal balance on the bank notes payable continually being reduced.
The increase is also attributable to a refund received from amending a prior
year corporate income tax return of approximately $32,000. The bank notes were
paid in full at the end of the third quarter of fiscal 2004, thus the remainder
of fiscal 2004 should not incur any interest expense.
We anticipate that our revenues for the fourth quarter of fiscal 2004 will
exceed the actual results of fiscal 2003. We also anticipate that the fourth
quarter's net income will improve over the fourth quarter of fiscal 2003, as
management's continuous efforts to address seasonality issues, expand into new
markets, increase products produced for OEM's, expand the OEM customer base, and
strengthen the market-leading positions of our current products continue to
provide financial results. Our introduction of new OEM products and projected
strong sales of our mainstay winter products in the fourth quarter will add to
the outstanding results of the first nine months putting fiscal 2004 on track to
be one of the best complete fiscal years in the Company's history. Our Weekend
Warrior lawn and garden products and Perf-Form premium oil filter and oil cooler
products will also continue to provide the company opportunities for strong
sales and profits in quarters that traditionally have been weak due to the
seasonality of the ATV accessories market. We are continually addressing the
seasonality of the ATV accessories market with our increased sales and marketing
efforts to our existing distributors, our focus on new distributors in untapped
geographic locations, and continuing to expand our presence in new markets, such
as lawn and garden. We foresee selling, general and administrative expenses
remaining relatively consistent as a percentage of revenues during the last
quarter of fiscal 2004 as we maintain our increased usage of existing
manufacturing capacity of our operating facility from sustained increased
production of new and existing products while maintaining a consistent level of
administrative support.
BUSINESS SEGMENTS
-----------------
As more fully described in Note 5 to the Condensed Consolidated Financial
Statements included elsewhere in this filing, the Company operates three
reportable business segments: ATV Accessories, Plastic Wheel Covers, and Lawn
and Garden. The gross margins are vastly different in our three reportable
business segments due to the fact that we assemble our ATV accessories (i.e. we
outsource the ironworks to our main product supplier), we are vertically
integrated in our Plastic Wheel Cover segment, and we utilize a single-step
distribution method for our Lawn and Garden segment.
ATV ACCESSORIES - Three Months Ended June 30, 2004 and 2003
-----------------------------------------------------------
Revenues for the three months ended June 30, 2004 increased $1,048,707, or
41.9%, to $3,551,846 from $2,503,139 for the three months ended June 30, 2003.
The increase is mainly attributable to an increase in sales of our Snowplow
Blades, mowers, and OEM products, as discussed above (See OVERALL RESULTS OF
OPERATIONS).
Cost of goods sold for the three months ended June 30, 2004 increased $715,900,
or 40.9%, to $2,465,960 from $1,750,060 for the three months ended June 30,
2003. Gross profit as a percent of revenues was 30.6% for the three months ended
June 30, 2004 compared to 30.1% for the corresponding period in fiscal 2003. The
increase in gross profit was due to our more profitable products, such as the
snowplow blades, dominating the third quarter sales for the three months ended
June 30, 2004 as compared to the three months ended June 30,2003.
Page 13
PLASTIC WHEEL COVERS - Three Months Ended June 30, 2004 and 2003
----------------------------------------------------------------
Revenues for the three months ended June 30, 2004 decreased $30,956, or 6%, to
$484,176 from $515,132 for the three months ended June 30, 2003. The decrease is
attributable to changes in current market conditions as golf cart OEM customers
and distributors reduced their purchases of wheel covers during the third fiscal
quarter of 2004 as compared to the third fiscal quarter of 2003. We believe
sales will approximate fourth quarter fiscal 2003 levels for the fourth quarter
of fiscal 2004. Management is working to expand the application and use of its
wheel covers beyond the golf markets by working with various OEM's in varying
markets to fill a specialized need and to re-establish the company as a source
for quality plastic injection molded products. The initial results of these
efforts should be realized in late fiscal 2004 or fiscal 2005.
Cost of goods sold for the three months ended June 30, 2004 increased by
$21,810, or 10.9%, to $221,374 from $199,564 for the three months ended June 30,
2003. Gross profit as a percent of revenue was 54.3% for the three months ended
June 30, 2004 compared to 61.3% for the corresponding period in fiscal 2003. The
decrease in gross profit during the three months ended June 30, 2004 as compared
to the three months ended June 30, 2003 was attributable to increased material
costs as raw plastic costs increased 6% from last year to this year and the
amount of clear coat compound applied to each wheel was increased to meet higher
durability standards set by management. Direct labor costs also increased during
the third quarter of fiscal 2004 as compared to the third quarter of fiscal 2003
as the Company brought in an experienced plastics manager late in fiscal 2003 to
increase production efficiency, improve product quality, and assist with the
expansion of this business segment into new markets.
LAWN AND GARDEN - Three Months Ended June 30, 2004 and 2003
-----------------------------------------------------------
This business segment was created by management to monitor and manage the
expansion of our products into the lawn and garden industry during the second
quarter of fiscal 2003. This segment contains our Weekend Warrior products which
feature pull-behind and 3-point implements designed and built for garden
tractors and ATVs. As growth in the lawn and garden industry continues this will
allow the company to address the seasonality of our ATV accessory products by
providing sales in quarters traditionally slow in our main ATV Accessories
business segment. Revenues for the three months ended June 30, 2004 decreased
$23,355, or 22%, to $82,346 from $105,701 for the three months ended June 30,
2003. Cost of goods sold for the three months ended June 30, 2004 decreased
$10,628, or 18%, to $48,220 from $58,848 for the three months ended June 30,
2003. Gross profit as a percent of revenue was 41.4% for the three months ended
June 30, 2004 compared to 44.3% for the three months ended June 30, 2003. The
decrease in sales in this quarter is simply due to timing of when the orders
were placed this fiscal year against last fiscal year as year to date sales are
significantly higher for fiscal 2004 compared to fiscal 2003 (see below).
GEOGRAPHIC REVENUE - Three Months Ended June 30, 2004 and 2003
--------------------------------------------------------------
During the three months ended June 30, 2004, revenue in the United States of
America increased $842,283, or 30.4%, to $3,614,119 from $2,771,836 for the
three months ended June 30, 2003. Revenue from other countries increased
$139,261, or 44.3%, to $453,380 from $314,119 for the three months ended June
30, 2003. The increase during the three months ended June 30, 2004 in U.S.
revenue is due to a general increase across all regions previously serviced in
the United States of America. The increase during the three months ended June
30, 2004 in revenue from other countries is due to an increase of sales in
Europe and Canada.
ATV ACCESSORIES - Nine months Ended June 30, 2004 and 2003
----------------------------------------------------------
Revenues for the nine months ended June 30, 2004 increased $4,907,979, or 55.8%,
to $13,699,608 from $8,791,629 for the nine months ended June 30, 2003. The
increase is mainly attributable to increased sales of our core products and OEM
sales as discussed above (See OVERALL RESULTS OF OPERATIONS).
Cost of goods sold for the nine months ended June 30, 2004 increased $3,386,938,
or 55%, to $9,545,070 from $6,158,132 for the nine months ended June 30, 2003.
Gross profit as a percent of revenues was 30.3% for the nine months ended June
30, 2004 compared to 30% for the corresponding period in fiscal 2003. The
Company's fourth quarter is shaping up to continue producing strong sales
results in this segment as orders for snowplow blades and OEM products are very
strong. In fact, the Company has already returned to full capacity production
levels to meet the demand and expects to run at full capacity production levels
through the next two quarters.
Page 14
PLASTIC WHEEL COVERS - Nine months Ended June 30, 2004 and 2003
---------------------------------------------------------------
Revenues for the nine months ended June 30, 2003 decreased $109,998, or 7.3%, to
$1,393,048 from $1,503,046 for the nine months ended June 30, 2003. The decrease
is attributable to changes in current market conditions as golf cart OEM
customers and distributors reduced their purchases of wheel covers during the
first nine months of fiscal 2004 as compared to the first nine months of fiscal
2003. We believe sales will approximate fourth quarter 2003 levels in the fourth
quarter of fiscal 2004. Management is working to expand the application and use
of its wheel covers beyond the golf markets by working with various OEM's in
varying markets to fill a specialized need and to re-establish the company as a
source for quality plastic injection molded products. The initial results of
these efforts should be realized in late fiscal 2004 or fiscal 2005.
Cost of goods sold for the nine months ended June 30, 2004 increased $32,223, or
5.2%, to $651,373 from $619,150 for the nine months ended June 30, 2003. Gross
profit as a percent of revenue was 53.2% for the nine months ended June 30, 2004
compared to 58.8% for the corresponding period in fiscal 2003. The decrease in
gross profit during the nine months ended June 30, 2004 as compared to the three
months ended June 30, 2003 was attributable to increased material costs as raw
plastic costs increased 6% from last year to this year and the amount of clear
coat compound applied to each wheel was increased to meet higher durability
standards set by management. Direct labor costs also increased during fiscal
2004 as compared to the fiscal 2003 as the Company expanded personnel on second
and third shifts and brought in an experienced plastics manager late in fiscal
2003 to increase production efficiency, improve product quality, and assist with
the expansion of this business segment into new markets.
LAWN AND GARDEN - Nine Months Ended June 30, 2004 and 2003
----------------------------------------------------------
This business segment was created by management to monitor and manage the
expansion of our products into the lawn and garden industry during the second
quarter of fiscal 2003. This segment contains our Weekend Warrior products which
feature pull-behind and 3-point implements designed and built for garden
tractors and ATVs. As growth in the lawn and garden industry continues this will
allow the company to address the seasonality of our ATV accessory products by
providing sales in quarters traditionally slow in our main ATV Accessories
business segment. Revenues for the nine months ended June 30, 2004 increased
$152,504, or 126%, to $273,488 from $120,983 for the nine months ended June 30,
2003. Cost of goods sold for the nine months ended June 30, 2004 increased
$101,730, or 156.5%, to $166,718 from $64,988 for the nine months ended June 30,
2003. Gross profit as a percent of revenue was 39% for the nine months ended
June 30, 2004 compared to 46.3% for the nine months ended June 30, 2003. The
gross profit for fiscal 2004 is on target with management's budget. The decrease
in gross profit percentage from fiscal 2003 to fiscal 2004 is due to product
improvements for quality and durability.
GEOGRAPHIC REVENUE - Nine months Ended June 30, 2004 and 2003
-------------------------------------------------------------
During the nine months ended June 30, 2004, revenue in the United States of
America increased $4,492,410, or 47.9%, to $13,860,448 from $9,368,038 for the
nine months ended June 30, 2003. Revenue from other countries increased
$367,795, or 42.5%, to $1,232,327 from $864,532 for the nine months ended June
30, 2003. The increase during the nine months ended June 30, 2004 in U.S.
revenue is due to a general increase across all regions previously serviced in
the United States of America, as discussed previously (See OVERALL RESULTS OF
OPERATIONS). The increase during the nine months ended June 30, 2004 in revenue
from other countries is due to an increase of sales in Europe and Canada.
Liquidity and Capital Resources
Our primary source of liquidity has been cash generated by our operations and
borrowings under our bank line of credit.
At June 30, 2004, we had $376,957 in cash and cash equivalents, compared to
$215,551 at September 30, 2003. Until required for operations, our policy is to
invest any excess cash reserves in bank deposits, money market funds, and
certificates of deposit. Net working capital was $3,832,312 at June 30, 2004
compared to $2,192,089 at September 30, 2003. The change in working capital is
primarily due to the following:
Balance Balance Increase/ Percent
June 30, 2004 September 30, 2003 (Decrease) Change
----------------- ------------------ ----------------- -----------------
Accounts receivable $ 1,414,659 $ 1,080,854 $ 333,805 30.9%
Inventories 3,627,687 3,024,733 602,954 19.9%
Prepaid expenses 156,661 66,105 90,556 137%
Accounts payable 999,641 1,042,046 (42,405) (4.1%)
Accrued expenses 299,960 409,865 (109,905) 26.8%
Bank line of credit -- 420,000 (420,000) (100.0%)
Income taxes payable 516,146 -- 516,146 100.0%
Page 15
On June 25, 2003, the Company and its commercial lender amended the original
secured credit agreement dated August 21, 2001. Under the terms of the amended
secured credit agreement, the Company entered into a note payable for $1,500,000
("Note One") and a second note payable for $2,250,000 ("Note Two") with the
commercial lender, replacing the single, original note entered into under the
original secured credit agreement. The Notes were collateralized by all of the
Company's assets, were payable in monthly installments from July 2003 until June
2018 for Note One and until June 2008 for Note Two, which include principal and
interest at prime + 0.25% (4.5% at June 30, 2004) for Note One and principal and
interest at prime + 0.625% (4.625% at June 30, 2004) for Note Two, with a final
payment upon maturity on June 25, 2018 for Note One and June 25, 2008 for Note
Two. The variable interest rate could never exceed 9.5% or be lower than 4.5%
for Note One and could never exceed 8.5% or be lower than 4.5% for Note Two. The
monthly payment was $11,473 and $42,324 for Note One and Note Two, respectively,
and was applied to interest first based on the interest rate in effect, with the
balance applied to principal. The interest rate was adjusted daily.
Additionally, any proceeds from the sale of stock received from the exercise of
warrants was applied to any outstanding balance on the Notes or the Line of
Credit described below. At June 30, 2004, there were no balances owed for Note
One and Note Two, respectively, as the debts were retired in full from the
applying of the proceeds from exercised stock warrants and applying the
previously restricted cash balance which was released upon the conversion of the
convertible preferred stock into common stock of the Company. At June 30, 2003,
$1,500,000 and $2,250,000 for Note One and Note Two, respectively, were
outstanding on the Notes.
Under the terms of the amended secured credit agreement noted above, the Company
has a Line of Credit for the lesser of $1,000,000 or 80% of eligible accounts
receivable and 35% of eligible inventory. The original secured credit agreement
noted above had a line of credit for the lesser of $500,000 or 80% of eligible
accounts receivable and 35% of eligible inventory. In the fourth quarter of
fiscal 2002, the Line of Credit under the original secured credit agreement was
increased to the lesser of $1,000,000 or 80% of eligible accounts receivable and
35% of eligible inventory. The Line of Credit bears interest at prime plus 0.75%
(4.75% at June 30, 2004) and is collateralized by all of the Company's assets.
The variable interest rate can never exceed 7% or be lower than 4.75%. The Line
of Credit matures on December 31, 2004. At June 30, 2004 and 2003, $-0- and
$438,545, respectively, was outstanding on the Line of Credit.
The secured credit agreement contains conditions and covenants that prevent or
restrict the Company from engaging in certain transactions without the consent
of the commercial lender and require the Company to maintain certain financial
ratios, including term debt coverage and maximum leverage. In addition, the
Company is required to maintain a minimum working capital and shall not declare
or pay any dividends or any other distributions except as may be required by the
preferred shares issued in June of 2003 and discussed below. At June 30, 2004,
the Company was not required to meet any of the required financial ratios as all
Notes were paid in full.
On June 11, 2003, the Company entered into and closed upon a financing agreement
whereby the Company's newly authorized preferred shares were issued in exchange
for restricted cash. The restricted cash would be made available to the Company
for use as general corporate purposes upon the conversion of the Preferred
Stock. The preferred shares were convertible into the Company's common shares
based on an annually set conversion price computed as the average of the five
lowest closing prices of the common stock for the twenty-two trading days prior
to each anniversary date. Upon an event of default, the investment may have been
reclassified as a debt obligation of the Company. This new series of preferred
shares was cumulative and convertible with dividends computed on a simple
interest per annum basis using the current prime interest rate plus 0.5% (4.5%
at June 30, 2004) and was to be paid prior to any dividends being paid or
declared on the Company's common stock. The Company has 2,000,000 shares of
$0.0001 par value preferred stock authorized and no shares issued and
outstanding at June 30, 2004. As of June 30, 2004, all of the convertible
preferred shares were converted into common shares of the Company. The
conversion also released the restricted cash to the Company for use as general
corporate purposes of which almost all of the balance was applied to the Notes
with the commercial lender to retire the Company's Notes payable debts in full.
The Company previously issued 2,000,000 of warrants to purchase the Company's
common stock at $4.00 per share, one share per warrant. The warrants will expire
August 21, 2004, unless extended by the board of directors. As of June 30, 2004,
the Company received $1,500,000 from the exercise of 375,000 warrants. The
proceeds were applied to the outstanding balance on the Notes as stipulated in
the secured credit agreement with the commercial lender prior to the Notes being
paid in full by the conversion of the preferred stock and release of restricted
cash discussed above. After June 30, 2004 the proceeds from any exercise of
warrants will be available to the Company for general corporate purposes.
Consistent with normal practice, management believes that the Company's
operations are not expected to require significant capital expenditures during
the remainder of fiscal 2004. Management believes that existing cash balances,
cash flow to be generated from operating activities and available borrowing
capacity under its line of credit will be sufficient to fund operations, and
capital expenditure requirements for at least the next twelve months. At this
time management is not aware of any factors that would have a materially adverse
impact on cash flow during this period.
Page 16
Item 3. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Securities
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
During the 90 day period prior to the date of this report, an evaluation was
performed under the supervision and with the participation of our Company's
management, including the Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based upon that evaluation, the Chief
Executive Officer and the Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective. Subsequent to the date of
this evaluation, there have been no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls, and no corrective actions taken with regard to significant
deficiencies or material weaknesses in such controls.
Special Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the "Reform Act") provides
a safe harbor for forward-looking statements made by or on behalf of the
Company. The Company and its representatives may, from time to time, make
written or verbal forward-looking statements, including statements contained in
the Company's filings with the Securities and Exchange Commission and in its
reports to stockholders. Generally, the inclusion of the words "believe",
"expect", "intend", "estimate", "anticipate", "will", and similar expressions
identify statements that constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 and that are intended to come within the safe
harbor protection provided by those sections.
All statements addressing operating performance, events, or developments that
the Company expects or anticipates will occur in the future, including
statements relating to sales growth, earnings or earnings per share growth, and
market share, as well as statements expressing optimism or pessimism about
future operating results (in particular, statements under Part I, Item 2,
Management's Discussion and Analysis of Financial Condition and Results of
Operations), contain forward-looking statements within the meaning of the Reform
Act. The forward-looking statements are and will be based upon management's
then-current views and assumptions regarding future events and operating
performance, and are applicable only as of the dates of such statements but
there can be no assurance that the statement of expectation or belief will
result or be achieved or accomplished. In addition, the Company undertakes no
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
By their nature, all forward-looking statements involve risk and uncertainties.
Actual results may differ materially from those contemplated by the
forward-looking statements for a number of reasons, including but not limited:
competitive prices pressures at both the wholesale and retail levels, changes in
market demand, changing interest rates, adverse weather conditions that reduce
sales at distributors, the risk of assembly and manufacturing plant shutdowns
due to storms or other factors, the impact of marketing and cost-management
programs, and general economic, financial and business conditions.
Page 17
Part II - Other Information
THERE ARE NO REPORTABLE EVENTS FOR ITEM 1 THROUGH ITEM 5.
Item 6. Exhibits and Reports on Form 8-K
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(31.1) Certification of Chief Executive Officer pursuant to Rule 13a-14
or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to section
302 of the Sarbanes-Oxley act of 2002.
(31.2) Certification of Chief Financial Officer pursuant to Rule 13a-14
or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to section
302 of the Sarbanes-Oxley act of 2002.
(32.1) Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(32.2) Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K
During the third quarter of 2004, the Company filed one report on Form 8-K dated
June 29, 2004. The Form 8-K is attached and made a part of this 10-QSB for the
quarterly period ended June 30, 2004.
Page 18
Signatures
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on August 9, 2004.
CYCLE COUNTRY ACCESSORIES CORP.
By: /s/ RON HICKMAN
---------------------------------------------------
Ron Hickman
Principal Executive Officer, President and Director
In accordance with the requirements of the Exchange Act, this report
has been signed by the following persons on behalf of the registrant and in the
capacities indicated on August 9, 2004.
By: /s/ RON HICKMAN Principal Executive Officer, President and
------------------------------ Director
Ron Hickman
By: /s/ DAVID DAVIS Principal Financial Officer and
------------------------------ Principal Accounting Officer
David Davis
By: /s/ F.L. MILLER Director
------------------------------
F.L. Miller
By: /s/ JIM DANBOM Director
------------------------------
Jim Danbom
By: /s/ L.G. HANCHER JR. Director
------------------------------
L.G. Hancher Jr.
By: /s/ ROD SIMONSON Director
------------------------------
Rod Simonson
Page 19