UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
| x | Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the year ended December 31, 2004.
| ¨ | TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-27805.
KNOX NURSERY, INC.
(Exact name of registrant as specified in its charter.)
| Florida | 59-1787808 | |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
| 4349 N. Hiawassee Road, Orlando, FL | 32818 | |
| (Address of principle executive offices) | (Zip Code) | |
(407) 293-3721
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common stock, par value $.001 per share, traded on the NASD OTC Bulletin Board.
Preferred stock, par value $.001 per share, none issued and outstanding
Based upon the $0.13 per share closing price of the registrant’s Common Stock as of March 25, 2005, the aggregate value of the shares of Common Stock held by nonaffiliates as of such date was $583,655.
Number of shares of common stock outstanding as of March 25, 2005 is 12,025,454.
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 ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained, herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. x
State issuer’s revenues for its most recent year - $7,834,377
DOCUMENTS INCORPORATED BY REFERENCE
None
INDEX
| PART I. | ||||||
| Item 1. | Description of Business | 3 | ||||
| Item 2. | Description of Property | 4 | ||||
| Item 3. | Legal Proceedings | 5 | ||||
| Item 4. | Submission of Matters to a Vote of Security Holders | 5 | ||||
| PART II. | ||||||
| Item 5. | Market for Common Equity and Related Stockholder Matters | 5 | ||||
| Item 6. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 6 | ||||
| Item 7. | Financial Statements | 15 | ||||
| Item 8. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure | 15 | ||||
| Item 8a. | Controls and Procedures | 16 | ||||
| PART III. | ||||||
| Item 9. | Directors, Executive Officers, Promoters, and Control Persons; Compliance with Section 16(a) of the Exchange Act | 16 | ||||
| Item 10. | Executive Compensation | 18 | ||||
| Item 11. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 19 | ||||
| Item 12. | Certain Relationships and Related Transactions | 20 | ||||
| Item 13. | Exhibits and Reports on Form 8-k | 20 | ||||
| Item 14. | Principal Accountant Fees and Services | 20 | ||||
| SIGNATURES | 22 | |||||
| EXHIBITS 31.1 | ||||||
| EXHIBITS 32.1 | ||||||
This Annual Report on Form 10-KSB contains forward-looking statements that are not statements of historical fact. Forward-looking statements by their nature involve substantial risks and uncertainties, and actual results may differ materially from such statements. These forward-looking statements are based on the Company’s expectations and are subject to a number of risks and uncertainties, including but not limited to, those risks associated with economic conditions generally and the economy in those areas where the Company has or expects to have assets and operations; risks relating to changes in interest rates and in the availability, cost and terms of financing; risks related to the performance of financial markets; risks related to changes in domestic and foreign laws, regulations and taxes; risks associated with future profitability; and other factors discussed elsewhere in this report.
ITEM I. DESCRIPTION OF BUSINESS
THE COMPANY
Knox Nursery, Inc. (the Company) is a Florida corporation established in 1962, having its offices in Orlando, Florida. The Company is a wholesale plant nursery specializing in sales of seedling annuals (plugs) to brokers and other nurseries located throughout the United States and Canada; and sales of potted annuals to wholesalers, landscapers and large final-use customers located primarily in Central Florida. Management believes its business activities constitute a single operating segment due to similar economic characteristics, products, production processes, class of customer and distribution methods. Additionally no discrete financial information is available for these operations.
Plug sales, which accounts for 70% of the Company’s sales, involves sowing millions of seeds annually, then precisely growing the seedlings for 4 to 10 weeks until the “pre-finished” plants are shipped to commercial growers throughout the country. These growers will transplant the plugs into larger pots and containers for resale to their customers.
Potted annuals are transplanted from pre-finished plugs into the appropriate containers, then carefully grown to a mature ready-to-sell condition. The target market for the finished plants includes mass merchandisers such as Lowe’s, Home Depot, and Wal-Mart, landscapers, and local final-use customers such as Walt Disney World and Universal Studios.
Knox Nursery’s plug facility (aka Avalon) is technologically advanced, costing the Company approximately $6,000,000 to construct. This gives Knox Nursery a competitive advantage in the marketplace. Now the total growing environment can be micro-managed. The temperature, moisture, humidity and light within the growing facility can be accurately controlled to provide optimum growing environments for maximum growth in the shortest periods. Additionally, this new facility lowers labor costs by approximately 40%, which constitutes the largest single cost to the Company. Therefore, even though the cost for the new facility was considerable, the advantages for the Company may provide greater future profits.
Principle raw materials used in the production of plug and finished products include plastic trays and pots supplied by Blackmore Company and Florikan, a soil-less growing media supplied by Prosource One, seed supplied by the Ball Seed Company, Syngenta, and Express Seed Company, and chemicals supplied by BWI. The Company believes should it be necessary, raw materials could be procured on competitive terms with alternative suppliers.
Knox Nursery Inc. employs an average of 109 people, 106 full-time and 3 part-time.
62% of plug tray sales in 2004 came from three customers – Grolink Sales 23%; Ball Seed Company 15%; and DPT Brokerage 24%. 24% of finished plants sales were made to these customers - Walt Disney World 8%; East Coast Greenery 6%; Gude Brothers 10%.
MARKET ENVIRONMENT
The Company targets medium to large wholesale growers for its pre-finished lines of plants, however, smaller growers are not ignored. The overall floriculture industry in the United States is a $3.7 billion industry. In Florida alone, the industry generates over $700 million in sales.
INDUSTRY ANALYSIS
The bedding plant industry consists of a small group of independent producers, many of whom are customers of Knox Nursery. The industry is currently being consolidated by large growers who are expanding and beginning to direct their sales effort to large, mass marketers. These large marketers are important to the Company, and it is the plan of Knox Nursery to take advantage of its Avalon facility, to further its share of the larger, mass marketer business.
MARKET SEGMENT
Knox Nursery does business with over 200 independent brokers selling its pre-finished products throughout the United States. The Company has certain advantages in the Southeastern United States because of its location, and the Company run distribution system of delivery trucks. Also, with its Florida location and its warm climate, the Company escapes the high-energy costs of northern areas. This competitive advantage allows the Company to offer better prices than many of its competitors. In one popular area, the supplying of Gerbera Daisies, Knox Nursery is the largest grower and supplier of this species in the United States.
ITEM 2. DESCRIPTION OF PROPERTY
The Company maintains the following facilities:
| Principle corporate offices |
4349 N. Hiawassee Rd. Orlando, Florida |
2,500 sq. ft. |
The Company does not anticipate that it will require any additional office facilities. However, if additional office space is required in the future, the available property will allow for expansion.
| Hiawassee Nursery |
4359 N. Hiawassee Rd. Orlando, Florida |
240,000 sq. ft. (9 structures) |
The 12 1 / 2 acres at this location have been fully developed.
| Avalon Nursery |
940 Avalon Road Winter Garden, Florida |
280,000 sq. ft. |
The entire Avalon Road property is a “Master Planned Project”, which will consist of four phases when fully developed.
The Company was involved in routine litigation that is incidental to the business at December 31, 2004, and on the date of this report. In the opinion of management, the outcome of this litigation will not have a materially adverse effect on the Company’s financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to security holders during the fourth quarter of 2004.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company’s Common Stock is traded on The NASD OTC Bulletin Board, under the symbol “KNUR.” The first active trading in the shares of the Company began in the fourth quarter of 1998. The high and low closing inter-dealer sales prices for each quarter of the last two fiscal years are as follows:
|
2004
|
2003
|
||||||||
|
high
|
low
|
high
|
low
|
||||||
|
1 st qtr |
$ | .13 | .13 | .13 | .09 | ||||
|
2 nd qtr |
.12 | .12 | .16 | .09 | |||||
|
3 rd qtr |
.11 | .11 | .18 | .11 | |||||
|
4 th qtr |
.12 | .11 | .20 | .14 | |||||
As of December 31, 2004 the number of shareholders of record was 75.
The Company has not paid any cash dividends on its Common Stock since inception and does not anticipate paying cash dividends in the foreseeable future. The future payment of dividends is directly dependent upon future earnings of the Company, its financial requirements and other factors to be determined by the Company’s Board of Directors, in its sole discretion. For the foreseeable future, it is anticipated that any earnings, which may be generated from the Company’s operations, will be used to finance the growth of the Company, and that cash dividends will not be paid to Common stockholders.
ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS
The following is a discussion of the financial condition and results of operation of the Company as of December 31, 2004. This discussion and analysis should be read in conjunction with the Company’s audited Financial Statements with accompanying Notes, which are included elsewhere in this Form 10-KSB.
GENERAL
Knox Nursery, Inc. founded in 1962, is located in Central Florida and has two product lines: 1) Plug trays, with sales of seedling annuals (plugs) to brokers and other nurseries throughout the United States; and 2) Finished Product, with sales of four inch annuals to wholesalers, landscapers and large final-use customers located primarily in Central Florida.
REVENUE
For the year ended December 31, 2004, revenue was $7,834,377, an decrease of $66,575, or <1% from the $7,900,952 posted for the year ended December 31, 2003. The overall decrease in 2004 sales is composed of a Plug tray revenue decrease of 14% or $921,702, and a Finished Product revenue increase of 58% or $855,127 from 2003, respectively. Plug sales declined due to a major customer shifting to in-house plug production and decreased demand from many customers over the prior year. Finished products demand is benefiting from the installation of vegetative product lines in 2003 and the new pot-less plant tray specialization provided by the acquisition and installation of the Ellegaard ellepot system in 2003.
COSTS AND EXPENSES
For the year ended December 31, 2004, cost of sales was $5,459,162, a decrease of $66,533, or 1.2% from the $5,525,695 posted for the year ended December 31, 2003. By product line, Cost of sales Plugs increased $16,636 (<1%). Cost of sales Finished Products decreased $204,021 (14%). Maintenace increased $120,852 (40%) from the prior year.
Cost factors analysis for all products shows plastic product purchases (trays, pots, flats) declined $35,635 (10%); soil and growing media up $11,504 (6%); seed down $444,746 (20%) cuttings and plants purchased up $64,152 (26%); fertilizer, chemicals, other supplies, and testing up $2,714 (2%); labels and boxes up $6,163 (3%); transport & racks down $50,072 (32%); and labor down $127,025 (7%). Costs decreased generally due to lower production levels for plugs and converting to ellepot production within finished products.
Cost factors analysis for maintenance include vehicle and equipment repairs, up $28,196(104%); finished product operations maintenance, up $60,858 (87%); and plug product operations maintenance, down $5,631 (8%). In house maintenance labor expenses were up significantly at $37,359 (28%) over the year 2003.
Operating expenses for 2004 amounted to $2,494,815, an increase of $207,300 or 9% from the $2,287,515 recorded in 2003. Within operating expenses depreciation expense is down $41,486 (7%) as older equipment continues to reach full depreciation. Insurance expense was up $100,204 (23%) as insurance premiums have risen in general due to higher gross wages under workman’s comp coverage, and health insurance premium increases. Office salaries and related taxes are up $110,065 (17%) due to added staff in outside sales and computer services. Propane and natural gas expense were down $19,374 (20%) due to fewer boiler running days in 2004. Electric utilities were up $14,069 (17%) due to rising energy prices in 2004.
“Other, net” on the Statement of Operations decreased $ 16,299 for the year ending 2004, and includes the following items:
|
2004
|
2003
|
change
|
||||||||
|
miscellaneous income |
4,485 | 33,443 | (28,958 | ) | ||||||
|
net vending income |
1,326 | 2,344 | (1,018 | ) | ||||||
|
net finance charges income |
38,097 | 24,420 | 13,677 | |||||||
|
|
|
|
|
|
|
|
||||
|
Other income |
$ | 43,908 | $ | 60,207 | $ | 16,299 | ||||
The Company recorded a net loss from operations in 2004 of $260,046 compared to a net loss of $15,533 in 2003, a 1,574% increase of $244,513. Non-cash charges for depreciation and amortization were $589,102 in 2004 and $627,823 in 2003.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2004, the Company had a working capital surplus of $617,161, compared to a working capital surplus of $287,238 at December 31, 2003. Working capital is up at the end of 2004 compared to 2003 due to one time outlays for fixed assets as noted in last year’s annual report. The company contracted for the construction of a new shade house and a roof repair for the retract area at the Avalon Plug facility in 2003 at a cost of $305,000. This construction project was 95% completed at December 31, 2003. The company also purchased $93,000 in trucks and trailers to meet growing order fulfillment. The company expended $143,000 on equipment, most notably for the acquisition of an Ellepot machine for the elimination of plastic pots in the finished goods product line.
RECENT ACCOUNTING PRONOUNCEMENTS
In November 2004, the FASB issued SFAS 151, Inventory Costs — an amendment of ARB No. 43, Chapter 4 (“FAS 151”). FAS 151 amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). FAS 151 requires that these costs be recognized as current period charges regardless of whether they are abnormal. In addition, FAS 151 requires that allocation of fixed production overheads
to the costs of manufacturing be based on the normal capacity of the production facilities. The provisions of FAS 151 are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company does not expect this new standard to have a material effect on its consolidated financial position or results of operations.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR
In addition to statements of historical fact, this annual report contains forward-looking statements which are inherently subject to change, based on known and unknown risks, including but not limited to changes in the market and industry. Please refer to documents filed with the Securities and Exchange Commission for additional information on factors that could materially affect the Company’s financial results.
Financial Statements
December 31, 2004 and 2003
Table of Contents
|
Report of Independent Registered Certified Public Accounting Firm |
1 | |
|
Financial Statements: |
||
| 2 | ||
| 3 | ||
| 4 | ||
| 5 | ||
| 7 | ||
Report of Independent Registered Certified Public Accounting Firm
To the Board of Directors of
Knox Nursery, Inc.:
We have audited the accompanying balance sheet of Knox Nursery, Inc. as of December 31, 2004, and the related statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2004 and 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Knox Nursery, Inc. as of December 31, 2004 and the results of its operations and its cash flows for the years ended December 31, 2004 and 2003 in conformity with accounting principles generally accepted in the United States of America.
|
/s/ Tedder, James, Worden & Associates, P.A. |
|
Orlando, Florida |
|
March 16, 2005, except for Note 5 as to which
|
Balance Sheet
December 31, 2004
| Assets | ||||
|
Current assets: |
||||
|
Cash and cash equivalents |
$ | 65,092 | ||
|
Accounts receivable, net of allowance for doubtful accounts of $150,000 |
1,087,177 | |||
|
Refundable income tax |
21,000 | |||
|
Inventories |
1,308,768 | |||
|
Prepaid expenses |
11,994 | |||
|
|
|
|
||
|
Total current assets |
2,494,031 | |||
|
Property, plant, and equipment, net |
4,174,520 | |||
|
Due from officer |
17,883 | |||
|
Deferred loan cost, net of accumulated amortization of $57,191 |
47,012 | |||
|
Investment in cooperative |
79,224 | |||
|
Deposits and other assets |
2,420 | |||
|
|
|
|
||
|
Total assets |
$ | 6,815,090 | ||
|
|
|
|
||
| Liabilities and Stockholders’ Equity | ||||
|
Current liabilities: |
||||
|
Accounts payable |
$ | 1,349,781 | ||
|
Accrued expenses |
138,995 | |||
|
Current installments of long-term debt |
369,247 | |||
|
Current installments of capital lease obligations |
18,847 | |||
|
|
|
|
||
|
Total current liabilities |
1,876,870 | |||
|
Long term liabilities: |
||||
|
Long-term debt, excluding current installments |
3,501,457 | |||
|
Capital lease obligations, excluding current installments |
22,698 | |||
|
|
|
|
||
|
Total liabilities |
5,401,025 | |||
|
Stockholders’ equity: |
||||
|
Preferred stock, $.001 par value, 10,000,000 shares authorized, none issued and outstanding |
— | |||
|
Common stock, $.001 par value, 40,000,000 shares authorized, 12,025,454 shares issued and outstanding |
12,025 | |||
|
Additional paid-in capital |
1,807,678 | |||
|
Accumulated deficit |
(405,638 | ) | ||
|
|
|
|
||
|
Total stockholders’ equity |
1,414,065 | |||
|
|
|
|
||
|
Total liabilities and stockholders’ equity |
$ | 6,815,090 | ||
|
|
|
|
||
See the accompanying notes to financial statements.
2
Statements of Operations
For the years ended December 31, 2004 and 2003
|
2004
|
2003
|
|||||||
|
Sales |
$ | 7,834,377 | $ | 7,900,952 | ||||
|
Cost of sales |
5,459,162 | 5,525,695 | ||||||
|
|
|
|
|
|
|
|||
|
Gross profit |
2,375,215 | 2,375,257 | ||||||
|
Operating expenses (income): |
||||||||
|
General and administrative |
2,573,606 | 2,287,515 | ||||||
|
Gain on involuntary conversion |
(78,791 | ) | — | |||||
|
|
|
|
|
|
|
|||
|
Total operating expenses |
2,494,815 | 2,287,515 | ||||||
|
|
|
|
|
|
|
|||
|
Income (loss) from operations |
(119,600 | ) | 87,742 | |||||
|
Other income (expense): |
||||||||
|
Interest expense |
(185,343 | ) | (165,351 | ) | ||||
|
Interest and dividend income |
989 | 1,869 | ||||||
|
Other |
43,908 | 60,207 | ||||||
|
|
|
|
|
|
|
|||
|
Other expense, net |
(140,446 | ) | (103,275 | ) | ||||
|
|
|
|
|
|
|
|||
|
Loss before income taxes |
(260,046 | ) | (15,533 | ) | ||||
|
Income tax expense |
— | — | ||||||
|
|
|
|
|
|
|
|||
|
Net loss |
$ | (260,046 | ) | $ | (15,533 | ) | ||
|
|
|
|
|
|
|
|||
|
Basic and diluted loss per common share |
$ | (0.022 | ) | $ | (0.001 | ) | ||
|
|
|
|
|
|
|
|||
|
Weighted average common shares outstanding |
12,025,454 | 12,025,454 | ||||||
|
|
|
|
|
|
|
|||
See the accompanying notes to financial statements.
3
Statements of Stockholders' Equity
For the years ended December 31, 2004 and 2003
|
Common
stock |
Additional
paid-in capital |
Accumulated
Deficit |
Total
|
||||||||
|
Balances, December 31, 2002 |
$ | 12,025 | 1,807,678 | (130,059 | ) | 1,689,644 | |||||
|
Net loss |
— | — | (15,533 | ) | (15,533 | ) | |||||
|
|
|
|
|
|
|
|
|||||
|
Balances, December 31, 2003 |
12,025 | 1,807,678 | (145,592 | ) | 1,674,111 | ||||||
|
Net loss |
— | — | (260,046 | ) | (260,046 | ) | |||||
|
|
|
|
|
|
|
|
|||||
|
Balances, December 31, 2004 |
$ | 12,025 | 1,807,678 | (405,638 | ) | 1,414,065 | |||||
|
|
|
|
|
|
|
|
|||||
See the accompanying notes to financial statements.
4
Statements of Cash Flows
For the years ended December 31, 2004 and 2003
|
2004
|
2003
|
|||||||
|
Cash flows from operating activities: |
||||||||
|
Net loss |
$ | (260,046 | ) | $ | (15,533 | ) | ||
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
|
Depreciation and amortization |
589,102 | 627,823 | ||||||
|
Gain on involuntary conversion |
(78,791 | ) | — | |||||
|
(Decrease) increase in the provision for bad debts |
94,722 | (87,422 | ) | |||||
|
Noncash patronage dividend receivable |
(32,743 | ) | (44,200 | ) | ||||
|
Cash provided by (used for) changes in: |
||||||||
|
Accounts receivable |
(205,908 | ) | 27,135 | |||||
|
Refundable income tax |
(21,000 | ) | — | |||||
|
Inventories |
313,121 | (71,890 | ) | |||||
|
Prepaid expenses |
1,488 | 12,920 | ||||||
|
Deposits and other assets |
(300 | ) | — | |||||
|
Accounts payable |
89,472 | 338,321 | ||||||
|
Accrued expenses |
14,653 | 11,505 | ||||||
|
|
|
|
|
|
|
|||
|
Net cash provided by operating activities |
503,770 | 798,659 | ||||||
|
Cash flows from investing activities: |
||||||||
|
Purchases of property, plant and equipment |
(191,283 | ) | (434,826 | ) | ||||
|
Proceeds received from disposal of property, plant, and equipment |
346,844 | — | ||||||
|
Collections on due from officer |
4,046 | 8,765 | ||||||
|
|
|
|
|
|
|
|||
|
Net cash provided by (used in) investing activities |
159,607 | (426,061 | ) | |||||
|
Cash flows from financing activities: |
||||||||
|
Payment of deferred loan costs |
(5,159 | ) | (3,000 | ) | ||||
|
Decrease in bank overdrafts |
— | (136,913 | ) | |||||
|
Net proceeds (repayments) on line of credit |
(303,615 | ) | 130,058 | |||||
|
Repayment of note payable to stockholder |
(350,000 | ) | (25,000 | ) | ||||
|
Repayment of long-term debt |
(328,334 | ) | (275,143 | ) | ||||
|
Proceeds from long-term debt |
350,000 | — | ||||||
|
Repayment of capital lease obligations |
(34,796 | ) | (19,268 | ) | ||||
|
|
|
|
|
|
|
|||
|
Net cash used in financing activities |
(671,904 | ) | (329,266 | ) | ||||
|
|
|
|
|
|
|
|||
|
Net increase (decrease) in cash and cash equivalents |
(8,527 | ) | 43,332 | |||||
|
Cash and cash equivalents at beginning of year |
73,619 | 30,287 | ||||||
|
|
|
|
|
|
|
|||
|
Cash and cash equivalents at end of year |
$ | 65,092 | $ | 73,619 | ||||
|
|
|
|
|
|
|
|||
See the accompanying notes to financial statements.
5
KNOX NURSERY, INC.
Statements of Cash Flows, Continued
For the years ended December 31, 2004 and 2003
|
2004
|
2003
|
|||||
|
Supplemental disclosure of cash flow information: |
||||||
|
Cash paid for: |
||||||
|
Interest, exclusive of amounts paid to stockholder |
$ | 175,080 | $ | 209,984 | ||
|
|
|
|
|
|||
|
Income taxes |
$ | 21,000 | $ | — | ||
|
|
|
|
|
|||
|
Supplemental disclosure of noncash investing and financing activities: |
||||||
|
Acquisition of equipment under capital lease |
$ | — | $ | 73,835 | ||
|
|
|
|
|
|||
|
Acquisition of equipment through seller financed debt |
$ | 19,228 | $ | 36,242 | ||
|
|
|
|
|
|||
See the accompanying notes to financial statements.
6
Notes to Financial Statements
December 31, 2004 and 2003
(1) Summary of Significant Accounting Policies
| (a) | Description of Business |
Knox Nursery, Inc. (the “Company”) is a Florida corporation established in 1962, having its offices in Orlando, Florida. The Company is a wholesale plant nursery specializing in sales of seedling annuals (plugs) to brokers and other nurseries located throughout the United States and Canada; and sales of potted annuals to wholesalers, landscapers, and large final-use customers located primarily in Central Florida.
| (b) | Revenue Recognition |
Revenue is recognized when the product is shipped and the risk of loss transfers to the customer.
| (c) | Cash Equivalents |
Cash equivalents represent short-term, highly liquid commercial paper readily convertible to cash.
| (d) | Accounts Receivable |
Accounts receivable are recorded at net realizable value. The allowance for doubtful accounts is estimated using the allowance method based upon historical experience. The allowance is reviewed periodically and adjusted for accounts deemed uncollectible by management.
| (e) | Inventories |
Inventories of plants, seeds, and supplies are stated at the lower of cost (first-in, first-out) or market.
| (f) | Property, Plant, and Equipment |
Property, plant, and equipment are stated at cost less accumulated depreciation. Assets are depreciated using the straight-line and accelerated methods over the estimated useful lives of the assets. The estimated useful lives of each class of depreciable asset are as follows:
|
Estimated useful lives
|
||
|
Building and improvements |
5 – 40 years | |
|
Machinery and equipment |
5 – 10 years | |
|
Automotive equipment |
5 – 10 years | |
|
Office furniture and equipment |
3 – 10 years |
7
(1) Summary of Significant Accounting Policies, Continued
| (g) | Deferred Loan Costs |
Deferred loan costs are amortized over the life of the related loan using a method which closely approximates the effective interest method.
| (h) | Income Taxes |
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
General business credits, which include investment tax credits and job credits, are accounted for as a reduction of income tax liability in the year realized.
| (i) | Use of Estimates |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
| (j) | Basic Income (Loss) per Common Share |
Basic per share amounts are based on the weighted average number of common stock issued and outstanding during each year. Diluted income per share would be computed in a manner consistent with that of basic per share amounts while giving effect to the potential dilution that could occur if the company had instruments, that if exercised, would dilute the issued and outstanding common stock. The Company has no such instruments.
| (k) | Impairment |
The Company periodically reviews long-lived assets to be held and used in operations for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss is recognized when the estimated undiscounted future cash flows from the assets are less than the carrying value of the assets. Assets to be disposed of are reported at the lower of their carrying amount or fair value less cost to sell.
8
(1) Summary of Significant Accounting Policies, Continued
| (l) | Advertising Costs |
Advertising costs are expensed as incurred and are included in operating expenses in the accompanying statements of operations.
| (m) | Fair Value of Financial Instruments |
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, accounts receivable, accounts payable, and accrued expenses. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature or they are receivable or payable on demand. The fair value of the Company’s debt, including amount due to stockholder, is estimated based upon the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. Fair value of these financial instruments also approximates their carrying values due to their proximity to current market rates.
| (n) | Concentrations of Risk |
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade receivables. The Company places its cash with high quality financial institutions. At various times throughout fiscal 2004 and 2003, cash balances held at financial institutions were in excess of federally insured limits.
The Company delivers products throughout the United States of America. The majority of the Company’s sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in their areas.
The Company’s three primary plug customers account for 62% of total plug sales. The Company’s three largest finished plant customers account for 24% of finished plant sales.
The nursery industry is subject to various factors over which growers have limited or no control, including weather conditions, disease, pestilence, water supply, and market price fluctuations.
9
(1) Summary of Significant Accounting Policies, Continued
| (o) | Reclassifications |
Certain amounts in the 2003 financial statements have been reclassified for comparitive purposes to conform to the presentation in the 2004 financial statements. These reclassifications had no impact on previously reported total assets, liabilities, stockholder’s equity, net income, or cash flows.
(2) Inventories
Inventories at December 31, 2004 consisted of the following:
|
Work in process |
$ | 1,188,888 | |
|
Materials and supplies |
119,880 | ||
|
|
|
||
|
Total inventories |
$ | 1,308,768 | |
|
|
|
(3) Property, Plant, and Equipment
Property, plant, and equipment at December 31, 2004 consisted of the following:
|
Land |
$ | 272,169 | ||
|
Buildings and improvements |
7,590,203 | |||
|
Machinery and equipment |
2,052,525 | |||
|
Automotive equipment |
408,566 | |||
|
Office furniture and equipment |
418,120 | |||
|
Construction in progress |
76,695 | |||
|
|
|
|
||
| 10,818,278 | ||||
|
Less accumulated depreciation |
(6,643,758 | ) | ||
|
|
|
|
||
|
Total property, plant and equipment, net |
$ | 4,174,520 | ||
|
|
|
|
Depreciation expense amounted to $567,127 and $608,614 for the years ended December 31, 2004 and 2003, respectively. Management has reviewed long-lived assets for impairment and determined the company’s assets are not impaired.
10
4) Line of Credit
Line of credit consisted of the following at December 31, 2004:
| Line of credit ($600,000 limit at December 31, 2004) with interest only payments equal to the three-month U.S. LIBOR rate plus margin points (5.75%) as of December 31, 2004. Margin points are determined in May of each year (3.5% at December 31, 2004) and are based on the Company’s debt leverage ratio on the reset date. The line of credit matures in July 2005, at which time all unpaid principal and accrued interest are due. The credit line is collateralized by a real estate security agreement, and is also personally guaranteed by the majority stockholders. | $ | — | |
|
|
|
(5) Long-Term Debt
Long-term debt consisted of the following at December 31, 2004:
| Commercial loan at a variable rate of interest equal to the three-month U.S. LIBOR rate plus margin points (5.75% as of December 31, 2004). Margin points are fixed at 3.5% on July 1, 2004. Due in 60 monthly principal installments of $23,844 plus interest with a final balloon payment of all unpaid principal and accrued interest on March 1, 2007. The loan is collateralized by a real estate security agreement and is personally guaranteed by the majority stockholders. The loan is subject to restrictive financial covenants including debt coverage, leverage, current and quick ratios, as well as the maintenance of working capital and net worth at specified levels. | $ | 3,505,134 | |
| Commercial loan with interest at a fixed rate of 0.0%, due in 60 equal monthly installments of $604 ending August 4, 2008. A vehicle collateralizes the loan. | 25,973 | ||
11
Loan costs of $104,203 were paid in conjunction with the above long-term debt and are being amortized over the life of the loan using a method that closely approximates the effective interest method. For the year ended December 31, 2004, amortization expense totaled $21,975.
Aggregate principal maturities for the years subsequent to December 31, 2004 are as follows:
|
2005 |
$ | 369,247 | |
|
2006 |
369,822 | ||
|
2007 |
3,016,573 | ||
|
2008 |
74,229 | ||
|
2009 |
40,833 | ||
|
|
|
||
| $ | 3,870,704 | ||
|
|
|
As of December 31, 2004, the Company was in non-compliance with the debt coverage ratio and the minimum net worth and working capital requirements of its long-term debt. The Company as requested and received waivers from the lender for the non-compliance.
12
(6) Lease Commitments
The Company leases various office equipment and nursery equipment under non-cancelable capital leases. The gross amount of assets and accumulated amortization recorded under capital leases are $97,241 and $14,932, respectively. Amortization expense related to assets recorded under capital leases is included as a component of depreciation expense and totaled $6,439 for the years ended December 31, 2004 and 2003.
The following is a schedule of future minimum lease payments under capital lease obligations, together with the present value of the net minimum lease payments:
|
Year ended December 31, |
|||
|
2005 |
$ | 20,804 | |
|
2006 |
20,804 | ||
|
2007 |
3,510 | ||
|
|
|
||
|
Total minimum lease payments |
45,118 | ||
|
Less amount-representing interest (5.0% - 9.1%) |
3,573 | ||
|
|
|
||
|
Present value of net minimum lease payments |
41,545 | ||
|
Less current installments |
18,847 | ||
|
|
|
||
|
Capital lease obligations, excluding current installments |
$ | 22,698 | |
|
|
|
||
(7) Income Taxes
For the years ended December 31, 2004 and 2003, the Company incurred no current or deferred income tax expense. Total income tax for the years ended December 31, 2004 and 2003 differed from amounts computed by applying the U.S. federal income tax rate of 34% to net income before income taxes as a result of the following:
|
2004
|
2003
|
||||||
|
Computed “expected” tax benefit |
$ | (88,415 | ) | (5,281 | ) | ||
|
Increase (reduction) in income taxes resulting from: |
|||||||
|
Non-deductible expenses |
2,225 | 2,544 | |||||
|
General business credits |
13,055 | 23,653 | |||||
|
Change in valuation allowance |
78,603 | (15,893 | ) | ||||
|
Other |
(5,468 | ) | (5,023 | ) | |||
|
|
|
|
|
|
|||
| $ | — | — | |||||
|
|
|
|
|
|
|||
13
The tax effects of temporary differences that give rise to a significant portion of the deferred tax assets and deferred tax liabilities as of December 31, 2004 were as follows:
|
Deferred tax assets: |
||||
|
General business credits |
$ | 37,285 | ||
|
Net operating loss carry forward |
1,619,301 | |||
|
Allowance for bad debts |
56,445 | |||
|
Related party accrued interest |
12,038 | |||
|
Other |
338 | |||
|
|
|
|
||
|
Total gross deferred tax assets |
1,725,407 | |||
|
Less valuation allowance |
(338,320 | ) | ||
|
|
|
|
||
|
Net deferred tax assets |
1,387,087 | |||
|
Deferred tax liabilities: |
||||
|
Inventory |
492,489 | |||
|
Property, plant, and equipment, principally due to differences in depreciation |
865,661 | |||
|
Deferred gain on involuntary conversion |
28,937 | |||
|
|
|
|
||
|
Total gross deferred tax liabilities |
1,387,087 | |||
|
|
|
|
||
|
Net deferred tax |
$ | — | ||
|
|
|
|
||
At December 31, 2004, the Company had net operating loss carry forwards of approximately $5,350,000 for the State of Florida and $4,125,000 for federal income tax purposes, which are available to offset future taxable income, if any, through 2024. The Company also had general business credit carry forwards for federal income tax purposes of $37,285 which are available to reduce future federal income taxes, if any, through 2010.
(8) Profit Sharing Plan
The Company has established a voluntary employee 401(k) savings plan available to all employees who meet certain eligibility requirements. The plan provides for a matching contribution by the Company of the employee’s contribution to the plan not to exceed certain specified limits. During the years ended December 31, 2004 and 2003, total Company contributions to the plan were $30,998 and $27,318, respectively.
(9) Advertising Costs
Advertising costs for the years ended December 31, 2004 and 2003 amounted to $13,598 and $10,253, respectively.
14
(10) Related Party Transactions
As of December 31, 2004, the Company had an amount due from an officer of $17,883. The Company also had a payable to a stockholder for accrued interest of $13,348.
(11) Contingencies
The Company is involved in routine litigation that is incidental to the business at December 31, 2004, and on the date of this report. In the opinion of management, the outcome of this litigation will not have a materially adverse effect on the Company’s financial position.
(12) Recent Accounting Pronouncements, Continued
In November 2004, the FASB issued SFAS 151, Inventory Costs — an amendment of ARB No. 43, Chapter 4 (“FAS 151”). FAS 151 amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). FAS 151 requires that these costs be recognized as current period charges regardless of whether they are abnormal. In addition, FAS 151 requires that allocation of fixed production overheads to the costs of manufacturing be based on the normal capacity of the production facilities. The provisions of FAS 151 are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company does not expect this new standard to have a material effect on its consolidated financial position or results of operations.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in, or disagreements with, the accountants for the Company.
ITEM 8A. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in the Company’s Security 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, as appropriate, to allow timely decisions regarding
15
required disclosure. In designating 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, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive 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.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
Our directors, executive officers, and key employees are as follows:
|
Name |
Age
|
Position with the Company |
Directors Since
|
|||
|
Bruce R. Knox |
39 | President and Director | 1986 | |||
|
James M. Knox, III |
43 | Vice President and Director | 1983 | |||
|
M. Nadine Knox |
70 | Director | 1978 |
BRUCE R. KNOX, PRESIDENT
Bruce R. Knox was born in Orlando, Florida on October 5, 1965. He graduated from Bishop Moore High School in May 1983 and soon entered the family business. Bruce began in production and has been a supervisor in all areas of the nursery, culminating with his appointment as President in March 1995.
16
Bruce has served the state floriculture industry as well. He has previously served on the State Board of Directors for the Florida Ornamental Growers Association, and the Board of Directors of the Action Chapter of the Florida Nurseryman and Growers Association. Bruce is a widely respected speaker on industry topics and has been a featured speaker at such forums as the Seeley Conference, the Professional Plant Growers Association, and the Southeast Greenhouse Conference.
Bruce has done extensive travel researching nursery automation systems in the United States and Europe. The benefits of this research resulted in the construction of one of the most technologically advanced greenhouse ranges in the world, Knox Nursery’s Avalon Plug Production Facility, which opened in February 1997.
JAMES M. (MONTY) KNOX, III, VICE PRESIDENT
Monty Knox was born on January 23, 1962 in Orlando, Florida. Monty graduated from Bishop Moore High School in May 1980 and attended the University of Central Florida. He joined Knox Nursery in October 1983. Monty started in production, planning and sales. Monty was appointed Vice President in January 1987.
Monty has served the nursery industry extensively in the State of Florida. Monty has served on the Florida Nurseryman and Growers Association State Board of Directors, Marketing Committee and FNATS Trade Show. He has served on the Action Chapter of FNGA’s Board of Directors, culminating as President in 1998. Monty serves on the Florida Farm Bureau’s State Water Advisory Committee, Tax Advisory Committee, the Orange County Farm Bureau’s Board of Directors and is Vice Chairman of the Orange County Farm Bureau PAC. Monty also serves on Orange County’s Planning and Zoning Commission and Local Planning Agency. Monty has been Chairman of Orange County’s Agricultural Board since 1995.
M. NADINE KNOX, DIRECTOR
M. Nadine Knox was born August 5, 1934 and is a founder of Knox Nursery beginning in 1962. She was the office manager until 1999 and remains a director of the Company today. She is the mother of Bruce R. Knox and James M. Knox, III.
17
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information relating to the compensation paid by the Company for the years 2003 and 2004, as well as proposed compensation for 2005.
|
Name and Principal Position |
Year |
Annual Compensation
|
||||||
|
Salary
|
Bonus
|
Other
|
||||||
|
Bruce R. Knox President, Director |
2005
2004 2003 |
100,000
90,862 78,000 |
-0-
-0- -0- |
-0- -0-
-0- |
||||
|
James M. Knox, III VP, Director |
2005
2004 2003 |
40,000
37,847 28,600 |
-0-
-0- -0- |
-0- -0-
10,000 |
||||
|
M. Nadine Knox Secretary/Treasurer Director |
2005
2004 2003 |
-0-
-0- -0- |
-0-
-0- -0- |
-0- -0-
-0- |
||||
Footnotes:
1. James M. Knox borrowed $38,500 in 2000, the Company purchased a car from Mr. Knox for $6,000, applying the payment to his outstanding loan balance. Mr. Knox received 1099s reflecting $10,000, and $5,000 of forgiven debt for 2003.
2. No other forms of compensation were received by the above principals.
Section 16(a) Beneficial Ownership Reporting Compliance:
The Company is not aware of any director, officer, or beneficial owner of more than ten percent of the Company’s Common Stock that, during fiscal year 2003, failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934.
18
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the beneficial ownership of the Company’s Common Stock as of December 31, 2004 by (1) each person (or group of affiliated persons) who to the knowledge
of the Company is the beneficial owner of five percent or more of the Company’s outstanding Common Stock, (2) each Director and each named Executive Officer of the Company. Except as otherwise noted, the Company believes that the persons listed
in this table have sole voting and investment power respecting all shares of Common Stock owned by them. The business address of each Director and Executive Officer listed below is the Company’s corporate address, 4349 N. Hiawassee Road,
Table 1. Security Ownership of Certain Beneficial Owners
19
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company had the following transactions with related parties:
M. Nadine Knox (director) loaned the Company $295,000 in 1999 and $352,000 in 2000 and was repaid $310,000 in 2000. M. Nadine Knox loaned the Company $85,000 on 1/31/01. M. Nadine Knox received a principle payment of $47,000 on 12/31/02, and $25,000 on 12/31/03. The balance payable to M. Nadine Knox was $350,000 at December 31, 2003 and was paid January 2004.
On 10/8/02 Bruce R. Knox borrowed $12, 500 from the Company and repaid the loan on 12/31/02. On 6/12/03 the company paid Bruce R. Knox $5,407 for the trade in value of 1993 Lexus LS400 used to acquire a 2003 Ford F150.
James M. Knox, III (officer) borrowed $38,500 in 2000. In 2000 the Company purchased a car from James M. Knox III, and applied the purchase price to interest and principle owed leaving an outstanding balance $33,943. On 9/30/02 $5,000 of the principal was repaid through a bonus and on 12/31/02 $2,000 was repaid. $10,000 of the principal was repaid through a bonus on 6/30/03. $5,000 of the principal was repaid on 6/30/04.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
No current reports on Form 8-K were filed by the Company during the fourth quarter ended December 31, 2004.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Independent Accountant Fees
The Company’s board of directors reviews and approves audit and permissible non-audit services performed by its independent accountants, as well as the fees charged for such services. In its review of non-audit service fees and its appointment of Tedder, James & Worden, P.A. as the Company’s independent accountants, the board of directors considered whether the provision of such services is compatible with maintaining independence. All of the services provided and fees charged by Tedder, James & Worden, P.A. in 2004 were approved by the board of directors. The following table presents fees for audit services rendered by Tedder, James, Worden & Associates, P.A. for the audit of the Company’s annual financial statements for the years ended December 31, 2004 and December 31, 2003 and fees billed for other services rendered by Tedder, James, Worden & Associates, P.A. during those periods.
20
|
Fiscal 2004
|
Fiscal 2003
|
|||||
|
Audit Fees (1) |
$ | 38,621 | $ | 34,658 | ||
|
Audit-Related Fees (2) |
— | — | ||||
|
Tax Fees (3) |
5,500 | 4,125 | ||||
|
|
|
|
|
|||
|
Subtotal |
44,121 | 38,783 | ||||
|
All other Fees |
150 | — | ||||
|
|
|
|
|
|||
|
Total |
$ | 44,271 | $ | 38,783 | ||
|
|
|
|
|
|||
| (1) | Audit Fees – Audit fees billed to the Company by Tedder, James, Worden & Associates, P.A. for auditing the Company’s annual financial statements and reviewing the financial statements included in the Company’s Quarterly Reports on Form 10-Q. |
| (2) | Audit-Related Fees – There were no other fees were billed by Tedder, James, Worden & Associates, P.A. during the last two fiscal years for assurance and related services that were reasonably related to the performance of the audit or review of the Company’s financial statements and not reported under “Audit Fees” above. |
| (3) | Tax Fees – Tax fees billed to the Company by Tedder, James, Worden & Associates, P.A. include the preparation of all state and federal returns for 2003. The Company anticipates billings by Tedder, James, Worden & Associates, P.A. for the preparation of all state and federal returns for 2004 to be approximately $6,000. |
21
KNOX NURSERY, INC.
Pursuant to the requirement of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| KNOX NURSERY, INC. | ||||
| Registrant | ||||
| Date: April 12, 2005 |
/s/ BRUCE R. KNOX |
|||
| Bruce R. Knox | ||||
| President | ||||
| (Principal Executive Officer) | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report Is signed below by the following persons on behalf of the registrant on the dates and in the capacities indicated.
|
Name |
Title |
Dates |
||
|
/s/ Bruce R. Knox |
President Director | April 12, 2005 | ||
| Bruce R. Knox | ||||
|
/s/ James M. Knox, III |
Vice President Director | April 12, 2005 | ||
| James M. Knox, III | ||||
|
/s/ M. Nadine Knox |
Director | April 12, 2005 | ||
| M. Nadine Knox | ||||
22
Exhibit 31.1
CERTIFICATIONS
I, Bruce R. Knox, Chief Executive Officer of Knox Nursery, Inc., certify that:
| 1. | I have reviewed this annual report on Form 10-KSB of Knox Nursery, Inc. |
| 2. | Based on my knowledge, this annual report does not include any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material aspects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: |
| a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, is made known to me by others within those entities, particularly during the period in which this annual report is being prepared; |
| b) | evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); |
| c) | presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
| 5. | I have disclosed, based on my most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditor any material weaknesses in internal controls; and |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
| 6. | I have indicated in this annual report whether or not there were significant changes in the internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: April 12, 2005
|
/s/ Bruce R. Knox |
|
President and Chief Executive Officer |
|
Secretary & Treasurer and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-KSB of Knox Nursery, Inc. (the “ Company ”), for the twelve months ended December 31 2004, as filed with the Securities and Exchange Commission on the date hereof (the “ Report ”), I, Bruce R. Knox, President and Chief Executive Officer, Secretary & Treasurer and Chief Financial Officer of the Company, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, do hereby certify, to my knowledge that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 15 U.S.C. 78m(a) or 780(d)); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: April 12, 2005
A signed original of this written statement required by Section 906 has been provided to Knox Nursery, Inc. and will be retained by Knox Nursery, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
|
/s/ Bruce R. Knox |
|
Bruce R. Knox |
|
President and Chief Executive Officer |
|
Secretary & Treasurer and Chief Financial Officer |