**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

**FORM 10-K**

 

**ANNUAL REPORT UNDER SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGEACT OF 1934**

 

**For thefiscal year ended September 30, 2004**

**CommissionFile Number 33-98404**

 

**T.J.T., INC.**

(Exact name of registrant asspecified in its charter)

 
| **WASHINGTON**                                                  | ** ** | **82-0333246**                     |
|-----------------------------------------------------------------|------------|------------------------------------|
| (State or  other jurisdiction of incorporation or organization) |       | (IRS  Employer Identification No.) |

 

**843 NorthWashington, P.O. Box 278, Emmett, Idaho 83617**

(Address of principal executiveoffices)

 

**(208)365-5321**

(Registrant’s telephone number)

 
| Securities registered under Sections 12 (b)  and 12 (g) of the Exchange Act: |
|------------------------------------------------------------------------------|
|                                                                         | Title of each class | Name of each exchange on which registered |
|                                                                         | Common Stock, $.001 par value | OTC Bulletin Board |

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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 ý No o

 

Indicate by check mark if disclosure ofdelinquent filers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in PartIII of this Form 10-K or any amendment to this Form 10-K. o

 

Indicateby check mark whether the registrant is an accelerated filer (as defined in theExchange Act Rule 12d-2).  Yes oNo ý

 

Registrant’s revenues for the fiscal year ended September 30, 2004were $19,701,243.

 

As of December 17, 2003, there were 4,504,939 shares of theregistrant’s $.001 par value common stock outstanding.  Based on the stock’s closing price of $.76 onDecember 17, 2004, non-affiliated market value was approximately $1,789,600.

#### ** **

#### **DOCUMENTS INCORPORATED BY REFERENCE**

#### ** **

Portions of the registrant’s definitive proxystatement to be dated on or after January 17, 2005, for use in connectionwith the annual meeting of stockholders to be held on February 22, 2005,are hereby  incorporated by referenceinto Part III of the Form 10-K.

 

 

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**PART I**

 

### **Forward Looking Statements and Risk Factors**

### ** **

*This Form 10-K contains certainforward-looking statements which are based on management’s currentexpectations.  These forward-lookingstatements are subject to certain risks and uncertainties. The words “believe,”“expect,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could,” andother expressions that indicate future events and trends identifyforward-looking statements.  The Companyhas identified risk factors which could cause actual results to differsubstantially from the forward-looking statements.  These risk factors include, but are notlimited to, general economic conditions, changes in interest rates,availability of financing for both manufactured home buyers and suppliers, realestate values, adverse weather conditions, the economic viability of ourcustomers and vendors, and availability of qualified employees.  In addition, industry conditions that mayhave an adverse impact on future results include, but are not limited to, lowbarriers of entry, changes and/or enforcement in legislation or regulations, andcompetitive pressure on both the purchasing of used axles and tires frommanufactured housing dealers and the selling of refurbished axles and tires tomanufactured housing factories.*

 

*All tabular dollar amounts are in thousandsand all period references are to the Company’s fiscal period unless otherwiseindicated.*

 

**ITEM 1. BUSINESS**

 

### **The Company**

### ** **

T.J.T., Inc., an Idahocorporation, was established in 1977. T.J.T., Inc. merged with and into T.J.T.,Inc., a Washington corporation on December 13, 1994.  The Company’s corporate office is located at843 N. Washington Street, Emmett, Idaho 83617. Information about the Company is available on the internet atwww.tjt-inc.com.  Information containedor referenced on our website is not incorporated by reference and does not forma part of this Annual Report on Form 10-K. Copies of our Annual Report on Form 10-K, Quarterly Reports on Form10-Q, and the Executive Officers’ Code of Ethics are available free of chargeby calling 1-800-458-3555.

 

The Company has recycling and distribution locations in Emmett, Idaho;Woodland, California; Chehalis, Washington; and Platteville, Colorado.  The Company also manufactures hanger parts inEugene, Oregon which are used by the manufactured housing producers to attachaxles to homes.  The Company maintained asales office in Salem, Oregon and a recycling and distribution plant inPhoenix, Arizona until June of 2003 when both locations were closed.  The Company operates in Arizona, New Mexico, Kansas,and southern California through NewCo Tire and Axle, L.L.C. (NewCo), a jointventure established in June 2003.

 

The Company has two business lines: repairingand reconditioning axles and tires for the manufactured housing industry, anddistribution of after-market accessory products to manufactured housing dealersand set-up contractors, as well as siding to on-site house builders.

 

**Recent Events**

 

The manufactured housing industry recovery that began in 2004 was precededby several years of decreases in manufactured housing production due to extensiverepossessions and decreased consumer demand resulting from tightened creditstandards.  In 2004, production in the Company’sthirteen state market area increased by two percent from fiscal 2003 accordingto statistics from the *Institute for BuildingTechnology and Safety, Inc.,* a non-profit governmental organizationproviding

 

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independent evaluations, research, and technical assistance to federalgovernment agencies and formally known as *National Conference ofStates on Building Codes and Standards.*

 

In January 2004, the property lease for the Centralia, Washingtonfacility expired.  Therefore, in December 2003,the Washington facility was moved to a new location in Chehalis, Washington.  The Company entered into a lease with optionto purchase agreement in August 2003. The Company may execute the purchase option at any time prior to theexpiration of the lease.    Leasehold improvements of approximately$99,000 were made to the property.

 

In June 2003, the Company entered into a joint venture, NewCo,with West States Recycling, Inc.  NewCo engagesin themanufactured housing axle and tire recycling business in the Arizona andNew Mexico, Kansas, and southern California market areas with plans to expandinto other market areas.  The Company hasa 50 percent ownership interest, and under the terms of the joint venture, theCompany will receive 40 percent of  netprofits or losses.  In addition, theCompany leases trucks and equipment to the joint venture.

 

**Axle and Tire Reconditioning**

 

The Company buys used axles and tires from manufactured housing dealersthroughout the western United States. The axles and tires are detached from the manufactured homes when they areplaced on a pad or foundation upon sale and delivery of the manufactured homeby the dealer or third party.  TheCompany also buys used axles and tires from independent brokers.

 

In accordance with criteria set forth in The *FederalManufactured Housing Construction and Safety Standards, Section 3280.904(b)*,more commonly known as “The HUD Code,” after each use the axles are dismantled,cleaned, inspected, and rebuilt as necessary. This is done in compliance with recycling guidelines and qualityassurance programs established and administered by independent third partylisting companies.  Approximately 30axles are rebuilt for each eight man-hour shift.  Tires are graded and repaired.  Axles and tires are then sold to manufacturedhousing factories.  Each axle and tireassembly is used and recycled approximately three times a year.  The tires and axles are sold principally tomanufactured housing factories and are delivered to their sites.

 

Sales of reconditioned axles and tires represented 74 percent, 77percent, and 76 percent of total revenues for the years ended September 30,2004, 2003, and 2002, respectively.

 

### **Accessories and Siding Distribution**

### ** **

The Company sells manufactured housing accessories such as vinylskirting, piers, and other ancillary products to manufactured housing dealersand set-up contractors.  The Companysells vinyl siding to the site-built housing market.  In 2004, the Company began selling metalbuildings under the accessories and siding distribution segment.

 

Sales of accessories and siding represented 26 percent, 23 percent, and24 percent of total revenues for the years ended September 30, 2004, 2003,and 2002, respectively.

 

**Regulatory Matters**

 

Department of Transportation (DOT) regulations govern the maximum pertire load limit for tires used in the transportation of manufactured homes,which in turn dictates the number of axles required for the transport of thesehomes.  Approximately seven axles arerequired for transport of the average manufactured home.  Department of Housing and Urban Development (HUD)regulations require each axle to be reconditioned prior to every use by acertified recycler, and further require periodic inspections of the recyclingfacilities by an approved third party inspector.  Future changes in DOT or

 

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HUD rules and regulations may impact the demand for the Company’s axleand tire reconditioning services.

 

**Target Market and Supply**

 

The Company’s target market is themanufactured housing industry and the site-built construction industry.  The Company sells to manufactured housingfactories, manufactured housing dealers, set-up contractors, and site-builtcontractors and remodelers.  The Company’smajor customers are manufactured housing factories.  Three manufacturers collectively representedmore than 40 percent of total sales during 2004:

 
| Oakwood/Clayton Homes  Corporation | 15 percent |
|------------------------------------|------------|
| Fleetwood Enterprises,  Inc.       | 15 percent |
| Champion Homes                     | 10 percent |

 

The Company has no one vendor or broker thatsupplies more than 10 percent of axle and tire purchases.  It has one supplier of accessory products,D-Mac, that supplies 11 percent of total accessory products purchased by theCompany.

 

**Competition**

 

The Company operates in Idaho, Oregon, Washington, California,Colorado, Utah, Nevada, Montana, Wyoming, Minnesota, Nebraska, North Dakota,and South Dakota.  The Company alsooperates in Arizona, New Mexico, Kansas, and southern California through itsjoint venture, NewCo Tire and Axle, L.L.C.

 

***Axles and Tires***

 

In the Company’s thirteen-state market area,price competition is intense for both the purchase and sale of axles and tires.The Company has two major competitors within its market area.  Barriers to entry are low for the axle andtire business, which could result in additional major competitors.

 

An injunction was granted in January of2002 prohibiting certain former employees and directors of the Company (theBradley Group) from competing against the Company’s axle and tire business aswell as the housing accessories business. The injunction expired on January 1, 2004.  Therefore, the Bradley Group is now competingwith the Company in the Oregon and Washington market areas.

 

The Company believes it hasgreater financial resources, a larger geographical presence, and a betterreputation for quality, honesty, reliability, and service than itscompetitors.  The Company believes itscompetitors have a lower cost structure that enables them to acquire marketshare where price is the customers’ primary concern.

 

All competitors are believed to be privately held companies havingbetween one and twenty-five employees. The Company estimates that it has a 64 percent market share, and isroughly two times larger than its largest competitor.  Since the Company is the only company withreadily discernable revenues and industry totals are unknown, estimating marketshare involves extrapolating numerous estimates and results in a market sharenumber subject to questionable accuracy.

 

The Company also competes in the Arizona, New Mexico, Kansas, andsouthern California markets through a joint venture, NewCo Tire & Axle,L.L.C. (NewCo) which was formed in July of 2003.  The Company believes there are two majorcompetitors in the joint venture’s market area.

 

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***Accessories and Siding***

 

The Company competes for accessory, siding,and metal building sales with building materials distributors and manufacturedhousing wholesale suppliers which are numerous in all of the Company’s marketareas.

 

The Company competes with numerouscompetitors for accessories and siding sales with availability and price beingthe principal methods of competition. The Company believes it has lower prices than local stores providingimmediate access to accessories, and higher prices than regional distributorsthat provide two to fourteen day access.   The Company also offersengineered custom metal buildings while providing local customer service andinstallation assistance.

 

### **Industry Overview**

### ** **

Production of manufactured housing in theCompany’s market area increased two percent from 2003 to 2004 after severalyears of decline.  Shipments ofmanufactured homes increased three percent as well.  The manufactured housing production andshipment indicators were obtained from the *Institute for BuildingTechnology and Safety, Inc.,*formally known as the *National Conference of States on Building Codes and Standards.*  The Company expects to see marketconditions remain static in 2005 or to see slight increases similar to thoseexperienced in fiscal 2004.

 

## **Personnel**

## ** **

The Company had a total of 101 employees as of September 30, 2004.  None of the Company’s employees are membersof a union.

 

##### **ITEM 2.  PROPERTIES**

 

The two properties owned by the Company are a warehouse in Emmett,Idaho, and a processing facility in Platteville, Colorado.  The Magna, Utah property, previously ownedand used as a small sales office by the Company, was sold in 2003.

 

The Company leases four properties located in Idaho, California,Washington, and Oregon.  Property locatedin Emmett, Idaho is leased from two related parties, T.J.T. Enterprises and Sheldon-HomedaleFamily, L.P.  The property located inCentralia, Washington was leased through January 1, 2004.  The recycling and distribution center locatedin Centralia is now operated at a facility leased in Chehalis, Washington.  The property previously leased for the Phoenix,Arizona facility was subleased until the lease expired in January of 2004.  The property leased and located in Eugene, Oregonis only utilized for manufacturing hanger parts and sales of accessories.  All properties are adequate and suitable forthe needs of the location and are being fully utilized.

 

### **ITEM 3. LEGAL PROCEEDINGS**

### ** **

The Company has no materiallegal proceedings to report.

 

##### **ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

Shareholders were not asked to vote on any matters during the quarterended September 30, 2004.

 

**EXECUTIVE OFFICERS OF THEREGISTRANT**

 

The schedule below shows the names andcertain information regarding all of the executive officers of TJT as of September 30,2004.  Each executive officer has aone-year term of office.

 

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| **Name**            | ** ** | **Age** | ** ** | **Position**                                                                                                                                                                                                                          |
|---------------------|------------|---------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Terrence J. Sheldon |       | 62      |       | President, Chief Executive Officer,  Chairman of the Board of Directors, Trustee of the Company’s 401(k) Profit  Sharing Plan, Chairman of the Directors Compensation Committee and Member of  the Directors Executive Committee |
|                |       |    |       |                                                                                                                                                                                                                                  |
| Larry B. Prescott   |       | 56      |       | Senior Vice President, Chief Financial  Officer and Treasurer, Member of the Board of Directors, Trustee of the Company’s 401(k) Profit Sharing Plan, Secretary  of the Directors Executive Committee                       |
|                |       |    |       |                                                                                                                                                                                                                                  |
| Cindy M. Truchot    |       | 33      |       | Vice President and Controller                                                                                                                                                                                                         |
|                |       |    |       |                                                                                                                                                                                                                                  |
| John W. Eames II    |       | 63      |       | Vice President and Corporate Secretary and  non-voting Secretary of the Directors Audit Committee                                                                                                                                     |

 

**Terrence J. Sheldon**- Mr. Sheldon is the founder and principal stockholder of the Company and hasserved as President since October 1986 and Chief Executive Officer since1994.

 

**Larry B. Prescott** – Mr. Prescotthas served as Senior Vice President, Chief Financial Officer and Treasurersince January 1999.  Previously, heserved as Vice President and Portfolio Manager at U.S. Bancorp inPortland.  Mr. Prescott received a B.A.in Business from Boise State University.

 

**Cindy M. Truchot** – Ms. Truchot is a CPA and has served asVice President and Controller since February 2002.  Previously, she served as Controller of aprivately owned technology based company as well as serving several years in thepublic accounting sector.  Ms. Truchotreceived a B.S. in Business Administration, accounting emphasis, from IdahoState University.

 

**John W. Eames III** - Mr. Eameshas served the Company in various positions since 1991.  He was appointed Corporate Secretary in August 2001,an Executive Officer in August 2002, and a Vice President in February of2004.   Previously, Mr. Eames served asNational Sales Manager for a log home manufacturer in Idaho and held severalmanagement positions with Boise Cascade Corporation’s Housing Division.

 

**PART II**

 

**ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

 

The Company’s Common Stockis registered on the OTC Bulletin Board under the symbol “AXLE”. The tablebelow shows the high and low sales prices of the Common Stock for each of thelast eight fiscal quarters:

 
| ** **     | ** ** | **Quarter****Ended  9/30/04** | ** ** | **Quarter****Ended  6/30/04** | ** ** | **Quarter****Ended  3/31/04** | ** ** | **Quarter  Ended  12/31/03** | ** ** |
|----------------|------------|-------------------------------|------------|-------------------------------|------------|-------------------------------|------------|------------------------------|------------|
|           |       |                          |       |                          |       |                          |       |                         |       |
| Common  Stock: |       |                          |       |                          |       |                          |       |                         |       |
| High           |       | $                             | .80        |                          | $          | .80                           |       | $                            | .90        |   | $ | .95 |   |
| Low            |       | .63                           |       | .64                           |       | .60                           |       | .46                          |       |
| Quarter-end    |       | .70                           |       | .72                           |       | .71                           |       | .90                          |       |
|                |            |                               |            |                               |            |                               |            |                              |            |  |  |  |  |

 

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| ** **     | ** ** | **Quarter  Ended  9/30/03** | ** ** | **Quarter****Ended  6/30/03** | ** ** | **Quarter****Ended  3/31/03** | ** ** | **Quarter****Ended  12/31/02** | ** ** |
|----------------|------------|-----------------------------|------------|-------------------------------|------------|-------------------------------|------------|--------------------------------|------------|
|           |       |                        |       |                          |       |                          |       |                           |       |
| Common  Stock: |       |                        |       |                          |       |                          |       |                           |       |
| High           |       | $                           | .51        |                          | $          | .62                           |       | $                              | .58        |   | $ | .45 |   |
| Low            |       | .33                         |       | .32                           |       | .27                           |       | .22                            |       |
| Quarter-end    |       | .51                         |       | .35                           |       | .51                           |       | .27                            |       |
|                |            |                             |            |                               |            |                               |            |                                |            |  |  |  |  |

 

The over-the-counter market quotationsreflect inter-dealer prices, without retail mark-up, mark-down, or commissionand may not necessarily represent actual transactions.

 

The table below shows the approximate numberof holders of record of the Company’s Common Stock at December 17, 2004:

 

| **Title of Class**             | ** ** | **Number of registered owners** | ** ** |
|--------------------------------|------------|---------------------------------|------------|
| Common  Stock, $.001 par value |       | 573                             |       |

 

The Company has never paid dividends to shareholders and does notexpect to pay dividends in the foreseeable future.  The Company intends to use future earningsfor reinvestment in its business.  TheCompany is prohibited from paying cash dividends by the revolving line ofcredit agreement with its principal lender.

 

Information relating to compensation plans underwhich equity securities of the Company are authorized for issuance are setforth under “Equity Compensation Plan Information” in the Company’s definitiveProxy Statement which is incorporated herein by reference.

 

**ITEM 6. SELECTED FINANCIAL DATA**

 
| ** **                                          | ** ** | **Fiscal Year Ended September 30** | ** ** |
|-----------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                          | ** ** | **2004**                                | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** | **2000** | ** ** |
|                                                |       |                                    |       |   |   |   |   |   |   |   |   |
| Operating  data:                                    |       |                                    |       |   |   |   |   |   |   |   |   |
| Sales                                               |       | $                                       | 19,701     |   | $ | 19,728 |   | $ | 20,386 |   | $ | 21,219 |   | $ | 26,881 |   |
| Cost of  goods sold                                 |       | 14,881                                  |       | 15,481 |   | 16,072 |   | 16,939 |   | 22,502 |   |
| Selling,  general and administrative expenses       |       | 4,669                                   |       | 4,259 |   | 4,709 |   | 4,840 |   | 5,957 |   |
| Impairment  loss                                    |       | —                                  |       | — |   | — |   | — |   | 847 |   |
| Cumulative  effect of accounting change, net of tax |       | —                                  |       | — |   | (748 | ) | — |   | — |   |
|                                                |       |                                    |       |   |   |   |   |   |   |   |   |
| Net  income(loss)                                   |       | 397                                     |       | 132 |   | (887 | ) | (242 | ) | (1,720 | ) |
|                                                |       |                                    |       |   |   |   |   |   |   |   |   |
| Share data                                          |       |                                    |       |   |   |   |   |   |   |   |   |
| Net income  (loss)                                  |       | .09                                     |       | .03 |   | (.20 | ) | (.05 | ) | (.38 | ) |
| Weighted  average shares outstanding                |       | 4,504,939                               |       | 4,504,939 |   | 4,504,939 |   | 4,504,939 |   | 4,516,605 |   |
|                                                |       |                                    |       |   |   |   |   |   |   |   |   |
| Balance  sheet data:                                |       |                                    |       |   |   |   |   |   |   |   |   |
| Cash and  cash equivalents                          |       | 843                                     |       | 1,072 |   | 767 |   | 329 |   | 54 |   |
| Current  assets                                     |       | 5,346                                   |       | 5,119 |   | 4,706 |   | 4,589 |   | 6,102 |   |
| Property,  plant & equipment, net               |       | 728                                     |       | 594 |   | 699 |   | 952 |   | 1,320 |   |
| Total assets                                        |       | 7,703                                   |       | 7,542 |   | 6,990 |   | 8,005 |   | 10,117 |   |
| Current  liabilities                                |       | 1,196                                   |       | 1,413 |   | 989 |   | 1,070 |   | 2,921 |   |
| Long-term  liabilities                              |       | 57                                      |       | 79 |   | 83 |   | 130 |   | 149 |   |
| Shareholders’  equity                          |       | 6,450                                   |       | 6,050 |   | 5,918 |   | 6,805 |   | 7,047 |   |
|                                                     |            |                                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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**ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

*This Form 10-K contains certainforward-looking statements which are based on management’s currentexpectations.  The words “believe,” “expect,”“anticipate,” “intend,” “estimate,” “will,” “should,” “could,” and otherexpressions that indicate future events and trends identify forward-lookingstatements. The forward-looking statements such as those made in “Company Strategy”regarding growth for the housing accessories segment and new productdevelopment, as well as comments made in “Overview” regarding expansion ofNewCo market areas are subject to certain risks and uncertainties.  Additional risk factors identified by theCompany that could cause actual results to differ substantially from theforward-looking statements include, but are not limited to, general economicconditions, availability of financing for both manufactured home buyers andsuppliers, real estate values, adverse weather conditions, the economicviability of our customers and vendors, and availability of qualifiedemployees.  In addition, industryconditions that may have an adverse impact on future results include, but arenot limited to, low barriers of entry, changes and/or enforcement inlegislation or regulations, and competitive pressure on both the purchasing ofused axles and tires from manufactured housing dealers and the selling ofrefurbished axles and tires to manufactured housing factories. The Management’sDiscussion and Analysis should be read in conjunction with the FinancialStatements and accompanying notes for the year ended September 30,2004.  All period references are to theCompany’s fiscal periods unless otherwise indicated.*

 

**Overview**

 

T.J.T., Inc. has two business lines: axle and tire reconditioning, andaccessories and siding distribution.

 

Axle and tire reconditioning sales represent approximately 74 percentof consolidated sales.  Axles and tiresare purchased from manufactured homes dealers and reconditioned in fourlocations in the western United States. After axles are reconditioned and certified and tires are inspected andgraded, they are sold primarily to manufactured housing factories.

 

Axle and tire reconditioning is performed at the Company’s locations inEmmett, Idaho;  Chehalis, Washington;Woodland, California; and Platteville, Colorado.  The Company maintains a manufacturingfacility in Eugene, Oregon which manufactures metal hanger parts for attachingaxles to manufactured homes and frame components used on manufactured homechassis, and sells dealer accessories items.

 

The Company sells accessories to manufacturedhome dealers and set-up contractors from all its locations.  The major product lines are vinyl skirting,piers, and related products through the Company’s distribution channels whichcomprise approximately 650 dealers.  TheCompany also sells vinyl siding to the site-built construction industry out ofits Emmett location.  In 2004 the Companybegan selling metal buildings primarily to agricultural markets and registered thetrade name Anchor Metal Buildings.

 

The Company is a 50 percent owner in a jointventure limited liability corporation, NewCo Tire & Axle, L.L.C. (NewCo),which operates an axle and tire reconditioning facility in Arizona and servicesthe Arizona, New Mexico, Kansas and parts of southern California marketareas.  Plans for expansion into othermarket areas are currently underway.   The Company accounts for the joint ventureusing

 

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the equity method and does not consolidatethe income as the investment does not meet the criteria for consolidationoutlined in the Financial Accounting Standards Board Interpretation No. 46, *Consolidation of Variable Interest Entities – an Interpretation of ARBNo. 51.* The Company recognized $224,000 of undistributed earningsrelated to its investment in the joint venture, which contributed more than 20percent to net income for the Company as a whole.  Separate financial statements of NewCo willbe filed as an Exhibit in Item 15 of an amended Form 10-K within 90 daysfollowing the joint venture’s year end, which is October 31, 2004.

 

**Results of Operations**

 

During 2004, the manufactured housing industry experienced an increase inshipments of approximately three percent in the Company’s market area accordingto the *Institute for Building Technology and Safety, Inc.,*formally known as*National Conference ofStates on Building Codes and Standards.*   The Company’s sales for the same periodreflect a decrease of only .1 percent.  TheCompany’s ongoing operations increased its market share from 2003 to 2004 by 11percent after excluding $1.9 million of sales generated in the first half of2003 by the Company’s Arizona facility.

 

The 2004 fiscal period reflects operating profit for each locationcompared to losses in 2003 in Colorado and Arizona.  The following table summarizes the Company’srevenues and expenses by major categories as a percent of sales for 2004, 2003and 2002:

 
| ** **                                   | ** ** | **Fiscal years ended September 30** | ** ** |
|----------------------------------------------|------------|------------------------------------------|------------|
| ** **                                   | ** ** | **2004**                                 | ** ** | **2003** | ** ** | **2002** | ** ** |
|                                         |       |                                     |       |   |   |   |   |
| Axle and  tire reconditioning                |       | 73.6                                     | %          | 77.1 | % | 76.5 | % |
| Manufactured  housing accessories and siding |       | 26.4                                     |       | 22.9 |   | 23.5 |   |
| Gross margin                                 |       | 24.5                                     |       | 21.5 |   | 21.2 |   |
| Selling  expense                             |       | 14.9                                     |       | 14.8 |   | 15.9 |   |
| Administrative  expense                      |       | 8.8                                      |       | 6.8 |   | 7.2 |   |
| Interest  income, net of expense             |       | .3                                       |       | .3 |   | .2 |   |
| Other  expense                               |       | .1                                       |       | .1 |   | .1 |   |

 
| ** **                               | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Axles and  Tires:                        |       |     |       |     |       |     |       |
| Net sales                                |       | $        | 14,502     |     | $          | 15,215   |       | $ | 15,594 |   |
| Cost of  goods                           |       | 11,312   |       | 12,332   |       | 12,690   |       |
| Gross profit                             |       | 3,190    |       | 2,883    |       | 2,904    |       |
| Selling,  general administrative expense |       | 2,870    |       | 2,812    |       | 2,908    |       |
| Operating  income (loss)                 |       | 320      |       | 71       |       | (4       | )          |
|                                     |       |     |       |     |       |     |       |
| Accessories  and Siding:                 |       |     |       |     |       |     |       |
| Net sales                                |       | 5,199    |       | 4,513    |       | 4,792    |       |
| Cost of  goods                           |       | 3,569    |       | 3,149    |       | 3,382    |       |
| Gross profit                             |       | 1,630    |       | 1,364    |       | 1,410    |       |
| Selling,  general administrative expense |       | 1,799    |       | 1,447    |       | 1,801    |       |
| Operating  income (loss)                 |       | (169     | )          | (83      | )          | (391     | )          |
|                                          |            |          |            |          |            |          |            |  |  |  |

 

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***Net Sales***

 

Net sales were virtually the same in 2004 as compared to 2003.  In 2004, sales generated from the dealeraccessories and siding segment increased 15 percent from 2003 while sales fromthe axles and tires segment declined five percent during the same period.  However, the Company’s Arizona facility,which was closed mid-year in 2003, generated $1.9 million of sales to the axleand tire segment in fiscal 2003.  Axleand tire sales generated by locations operating in both 2004 and 2003 increasedby eight percent.  Therefore, salesvolumes of the Company’s five remaining locations in 2004 largely offset the lossof the 2003 Arizona sales.

 

Net sales during 2003 declined by three percent compared to the sameperiod in 2002 primarily due to the closure of the Arizona location during the2003 fiscal year.  Increases in sales ofaxles and tires at the Platteville, Colorado facility partially offset thedecrease in Arizona sales.

 

***Gross Margin***

 

The Company’s gross profit margin increased three percent in 2004compared to 2003.  Gross margin was positivelyimpacted by higher sales prices for axles and tires, lower purchase costs ofused tires, and the elimination of lower margin sales generated by the Phoenix,Arizona facility which was closed in July 2003.  In addition, higher margin sales of the accessoriesand siding segment increased 15 percent in 2004 compared to 2003.

 

The Company’s gross margin increased .4 percent in 2003 compared to2002 as a result of higher selling prices of axles and tires in the finalquarter of 2003, which were offset by the lower margin sales at the Arizonafacility.  The Arizona location operatedfor the first nine months of 2003 but was in operation for the entire year of2002.

 

***Selling, General, and Administrative***

 

In 2004, selling, general and administrative expenses for the Companyincreased by 10 percent compared to 2003. The increase is primarily due to higher selling expenses associated withexpansion of the dealer accessories product line and performance basedincentive pay offset by elimination of overhead expense associated with theArizona location incurred during the first three quarters of 2003.

 

Selling, general and administrative expenses decreased by almost 10percent in 2003 compared to 2002 primarily due to a significant reduction oflegal fees associated with prior year legal proceedings and a reduction ofoverhead expenses as a result of closing the Arizona location in July of2003.

 

***Net Income***

 

Net income tripled in 2004 increasing to $397,000 compared to $132,000in 2003.  Higher margins generated froman increase in higher margin accessories sales along with higher selling pricesand lower purchase costs in the axle and tire segment increased gross profit by$573,000 in 2004 compared to 2003.  Alllocations open in 2004 operated at a profit. The 2003 gross profit reflects losses of $98,000 related to the Phoenix,Arizona facility.  The increased marginswere offset by higher selling, general and administrative expenses resultingfrom increased sales personnel related to expanding the dealer accessory andafter market business and incentive compensation for performance based bonusplans.

 

The Company also recognized $224,000 ofundistributed income in 2004 and $63,000 in 2003 from its interest in NewCo.   Rental income received for equipment leasedto the joint venture in 2004 was $26,000 compared to $16,000 received in thefour months during operation in 2003.

 

Net income for fiscal period 2003 was $132,000 compared to a loss of$139,000 before the cumulative effect of implementing *SFAS**142, Goodwill and Other Intangible Assets*in the first

 

10

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quarter of 2002.  The improvementwas primarily due to a decrease of selling, general and administrative expensesof $450,000 and improved operating results at the Company’s Colorado andCalifornia locations.   Losses generatedby the Arizona facility during the 2003 and 2002 fiscal periods were $98,000and $339,000, respectively.

 

Income recognized on investment property sales was $170,000, $68,000,and $116,000 in 2004, 2003, and 2002, respectively.  The Company plans to liquidate the remaininginvestment properties, which have a book value of $224,000 as of September 30,2004, as permitted by market conditions.

 

## ***Seasonality***

## ** **

The manufactured housingindustry and the site-built construction industry are seasonal within themajority of the Company’s market area. Typically, sales for the months from November through March arelower than for other months due to weather and ground conditions.  Assuming normal weather conditions, theCompany expects the quarters ended September 30 and June 30 to behigher volume quarters and the quarter ended March 31 to be the lowestvolume quarter.   The following tablesummarizes operating results by quarter and demonstrates the seasonal nature ofTJT’s operations:

 
| ** **               | ** ** | **December 31** | ** ** | **March 31** | ** ** | **June 30** | ** ** | **September 30** | ** ** |
|--------------------------|------------|----------------------|------------|-------------------|------------|------------------|------------|-----------------------|------------|
| ** **               | ** ** | **(Unaudited)**      | ** ** | **(Unaudited)**   | ** ** | **(Unaudited)**  | ** ** | ** **            | ** ** |
|                     |       |                 |       |              |       |             |       |                  |       |
| Fiscal year  ended 2004  | ** ** | ** **           | ** ** | ** **        | ** ** | ** **       | ** ** | ** **            | ** ** |
| Net sales                |       | $                    | 4,377      |              | $          | 4,337            |       | $                     | 5,230      |   | $ | 5,757 |   |
| Gross profit             |       | 1,064                |       | 1,083             |       | 1,261            |       | 1,412                 |       |
| Operating  income (loss) |       | 36                   |       | (11               | )          | 57               |       | 69                    |       |
| Net income  (loss)       |       | 55                   |       | 64                |       | 110              |       | 168                   |       |
| ** **               | ** ** | ** **           | ** ** | ** **        | ** ** | ** **       | ** ** | ** **            | ** ** |
| Fiscal year  ended 2003  |       |                 |       |              |       |             |       |                  |       |
| Net sales                |       | $                    | 4,918      |              | $          | 4,571            |       | $                     | 5,127      |   | $ | 5,112 |   |
| Gross profit             |       | 1,036                |       | 849               |       | 1,100            |       | 1,262                 |       |
| Operating  income (loss) |       | (2                   | )          | (292              | )          | 81               |       | 201                   |       |
| Net income  (loss)       |       | 6                    |       | (155              | )          | 72               |       | 209                   |       |

 

## **Liquidity and Capital Resources**

## ** **

*Operatingactivities* for 2004 used cash of $218,000 compared tooperating activities in 2003 which provided cash of $306,000.  In 2004, the Company increased housing accessoriesinventory levels as a result of adding new product lines and changing suppliersof certain tie down accessories.  Inaddition, a contractual agreement with a major customer who also supplies tiresand axles to the Company, significantly reduced the payment terms on purchasesmade by the Company.   Prepaid expenses and other current assetsincreased by $95,000 in 2004, of which $87,000 is a result of direct depositamounts related to the October 1st payroll clearing the bank inSeptember, as well as increases in advances to tire and axle buyers.

 

*Investing activities* used $11,000of cash during 2004 compared to $1,000 in 2003. Amounts received on notes receivable and investment property sales during2004 were more than offset by $122,000 of leasehold improvements made to theChehalis, Washington and Eugene, Oregon facilities along with $105,000 investedin trucks, trailers, and equipment.  TheCompany invested approximately $40,000 in necessary upgrades to the informationsystems and accounting software during 2004.   Also, $17,000 was used to furtherdevelop property parcels owned by the Company to increase market appeal.   Investment property sales contributed $158,000and $153,000 to cash flow from investing activities for the periods ending September 30,2004 and 2003, respectively.  The Companywill continue to focus on liquidating its current investment property holdingsand expects to see similar

 

11

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results in fiscal 2005.   The Company made an advance in exchange fora note receivable from a related party which is discussed further in Note K ofthe financial statements.

 

On March 31, 2004, the Company renewed a$350,000 revolving credit facility that matures on March 31, 2005 and issecured by receivables and inventory. The interest rate on the credit line is the prime rate plus onepercent.  As of September 30, 2004,the Company has not borrowed on the line and is in compliance with allcovenants.   The Company expects thatcash flow from operations combined with the line of credit will be a sufficientsource of liquidity to fund operations.

 

**Critical Accounting Policies**

 

The Company’s financial statements have beenprepared in conformity with generally accepted accounting principles.  In preparing the financial statements,management makes many estimates and assumptions that affect the amounts anddisclosures reported in the financial statements and related accompanyingnotes.  Changes in most of the estimatesand assumptions would not likely materially affect the Company’s financialposition and results of operations. However, calculations related to inventory, shipping expenses anddeferred tax assets involve subjective judgments, estimates, and assumptionsthat could produce materially different results if different judgments,estimates, or assumptions were used.

 

***Inventory***

 

Inventory is stated at lower of cost ormarket. Cost of the Company’s tire and axle inventory includes unprocessed orraw tires and axles as well as processed or finished tires and axles.  A portion of the costs incurred in acquiringand processing the tires and axles is allocated to finished inventory based onthe number of tires and axles processed at the end of the period.  The Company estimates per unit processing andgathering costs based upon labor and manufacturing overhead costs.

 

The Company reviews inventory for slow movingor obsolete items on a regular basis. Inventory is written-down based on specific identification, taking intoconsideration demand in certain markets and other industry conditions.  If actual demand or market conditions areless favorable than those estimated, additional write-downs may be necessary.

 

***Shipping Allocation***

 

The Company allocates to cost of goods sold aportion of the costs associated with gathering and distributing products(shipping costs).  These expenses includelabor for drivers, fuel, equipment operating leases as well as maintenance anddepreciation, along with other expenses related to travel and per diem.   These shipping costs are allocated basedupon an estimate of the level of gathering and distribution utilized bydepartment and segment of business for each facility operated by the Company.  The estimates associated with gathering anddelivering tires and axles to manufactured housing factories are allocated tocost of goods sold for each location. Although the estimates used to allocate shipping costs are subjective,they do not change the net income results. However, the allocation to cost of goods sold could impact the grossmargin analysis for both business segments from period to period if theestimated levels of shipping costs change significantly.

 

***Income Taxes***

 

The Company’s accompanying Balance Sheetsinclude deferred tax assets resulting from temporary differences, which areexpected to reduce future taxable income. Management estimates the realizability of these assets based uponforecasted taxable income.  Therealizability of these assets is reassessed at the end of each reporting periodor as significant events occur which may impact management’s assessment.  Failure to achieve forecasted taxable incomecould affect the realization of certain deferred tax assets, and could resultin the recording of a valuation reserve.

 

12

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**Off Balance SheetArrangements**

 

***Joint Venture***

 

The Company entered into a joint venture,NewCo, to engage in the manufactured housing axle and tire recycling businessin Arizona, New Mexico, Kansas and southern California.  The Company has 50 percent ownership interestin the joint venture and will receive 40 percent of the net profits or losses.  The Company also receives rental income fromNewCo for equipment leased to the joint venture.   The Company recognized $224,000 and $63,000of income in 2004 and 2003, respectively, related to the investment as isfurther described in Footnote N of the financial statements.

 

The Company contributed $130,000 in cash and$259,000 of inventory during 2003.  No capitalcontributions were made during 2004. Further capital contributions to NewCo are limited to an additional $20,000in aggregate unless both parties agree to the additional contributions and arewilling to contribute 50 percent of the required capital.  The Company’s exposure is limited to amountscontributed as of the end of 2003 as well as amounts included in tradereceivables, which approximate $2,000 in 2004 and $16,000 in 2003.  The Company accounts for its interest in thejoint venture using the equity method.

 

***Contractual Obligations***

 

The following tablesummarizes the Company’s significant contractual obligations at September 30,2004, and the effect the obligations are expected to have on the Company’s cashflow in future periods.

 
| ** **        | ** ** | **Total** | ** ** | **Less than  1 year** | ** ** | **1-3 years** | ** ** | **3-5 years** | ** ** | **More than  5 years** | ** ** |
|-------------------|------------|-----------|------------|-----------------------|------------|---------------|------------|---------------|------------|------------------------|------------|
|              |       |      |       |                  |       |          |       |          |       |                   |       |
| Operating  leases |       | $         | 624,400    |                  | $          | 236,126       |       | $             | 287,654    |                   | $          | 86,375 |   | $ | 14,245 |   |
|                   |            |           |            |                       |            |               |            |               |            |                        |            |  |  |  |  |  |

 

The timing of paymentamounts of the obligations listed above are estimated based upon currentinformation.   The timing of payments andactual amounts paid may be different depending on potential changes to leaseagreements.  The amounts above includeleases that are non-cancelable.

 

The Company does not haveany long-term debt obligations or any other agreements that require fixed orminimum quantities to be purchased that are enforceable or legally bindingpurchase agreements.

 

**Company Strategy**

 

The Company will endeavor to maintain its market share and profitmargins in the axle and tire segment of the business.  The Company expects demand to increase overthe next year and as a result could encounter supply shortages in used tiresand axles.  The Company plans to protectprofit margins through careful planning, good purchasing practices, andjudicious price increases for reconditioned axles and used tires.  Prior experience indicates that should thedemand for used tires and axles exceed availability, it would be possible tosupplement supply with new product at comparable profit margins.

 

The Company’s growth strategies for fiscal 2005 include research anddevelopment of carefully selected new product lines for addition into theaccessories and siding distribution segment, and a significantly expandedmarketing effort for Anchor Metal Buildings®. The marketing plan for Anchor Metal Buildings® includes strategicplacement of model building sales centers, providing one-stop shopping serviceto customers throughout the northwest and northern California, as well asexpanded product offerings through improved design and engineering.

 

13

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These strategies are consistent with our continuing quest to develop amore diversified and equal business base for the Company.

 

**ITEM 7A. QUANTITATIVE AND QUALITATIVEDISCLOSURE ABOUT MARKET RISK**

 

The Company is not required to provide this information pursuant toItem 305(e) of Regulation S-K.

 

##### **ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

 

T.J.T., INC. – FORM 10-K

**INDEX TOFINANCIAL STATEMENTS AND SCHEDULES**

 
| Balance Sheets                                      |   |
|-----------------------------------------------------|--------|
|                                                |   |
| Statements of Operation                             |   |
|                                                |   |
| Statements of Cash Flows                            |   |
|                                                |   |
| Statements of Changes in Shareholders’  Equity |   |
|                                                |   |
| Notes to Financial Statements                       |   |
|                                                |   |
| Independent Auditor’s Reports                  |   |

 

14

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**T.J.T.,INC.**

**BALANCE SHEETS**

(Dollarsin thousands)

 
| **At September 30,**                                                                              | ** ** | **2004** | ** ** | **2003** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                                                                   |       |     |       |     |       |
| Current  assets:                                                                                       |       |     |       |     |       |
| Cash and  cash equivalents                                                                             |       | $        | 843        |     | $          | 1,072 |   |
| Accounts  receivable (net of allowance for doubtful accounts of $23 and $68)                           |       | 1,349    |       | 1,336    |       |
| Current  portion of notes receivable                                                                   |       | 105      |       | 38       |       |
| Inventories                                                                                            |       | 2,847    |       | 2,566    |       |
| Prepaid  expenses and other current assets                                                             |       | 202      |       | 107      |       |
| Total  current assets                                                                                  |       | 5,346    |       | 5,119    |       |
|                                                                                                   |       |     |       |     |       |
| Property,  plant and equipment, net of accumulated depreciation                                        |       | 728      |       | 594      |       |
|                                                                                                   |       |     |       |     |       |
| Notes  receivable, net of current portion                                                              |       | 338      |       | 323      |       |
| Notes  receivable from related parties                                                                 |       | —   |       | 89       |       |
| Real estate  held for investment                                                                       |       | 224      |       | 341      |       |
| Investment  in joint venture                                                                           |       | 676      |       | 452      |       |
| Other assets                                                                                           |       | 212      |       | 174      |       |
| Deferred tax  asset                                                                                    |       | 179      |       | 450      |       |
| Total assets                                                                                           |       | $        | 7,703      |     | $          | 7,542 |   |
|                                                                                                   |       |     |       |     |       |
| Current  liabilities:                                                                                  |       |     |       |     |       |
| Accounts  payable                                                                                      |       | $        | 556        |     | $          | 864 |   |
| Accrued  liabilities                                                                                   |       | 640      |       | 549      |       |
| Total  current liabilities                                                                             |       | 1,196    |       | 1,413    |       |
|                                                                                                   |       |     |       |     |       |
| Deferred  income and other noncurrent obligations                                                      |       | 57       |       | 79       |       |
| Total  liabilities                                                                                     |       | 1,253    |       | 1,492    |       |
|                                                                                                   |       |     |       |     |       |
| Shareholders’  equity:                                                                            |       |     |       |     |       |
| Preferred  stock, $.001 par value; 5,000,000 shares authorized; 0 shares issued and  outstanding       |       | —   |       | —   |       |
| Common  stock, $.001 par value; 10,000,000 shares authorized; 4,504,939 shares issued  and outstanding |       | 5        |       | 5        |       |
| Capital  surplus                                                                                       |       | 5,791    |       | 5,788    |       |
| Retained  earnings                                                                                     |       | 654      |       | 257      |       |
| Total  shareholders’ equity                                                                       |       | 6,450    |       | 6,050    |       |
| Total  liabilities and shareholders’ equity                                                       |       | $        | 7,703      |     | $          | 7,542 |   |

 

See accompanying notes tofinancial statements.

 

15

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**T.J.T., INC.**

**STATEMENTSOF OPERATION**

(Dollarsin thousands except per share amounts)

 
| **For the year ended September 30,**                    | ** ** | **2004**  | ** ** | **2003**  | ** ** | **2002**  | ** ** |
|--------------------------------------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|
|                                                         |       |      |       |      |       |      |       |
| Sales (net  of returns and allowances):                      |       |      |       |      |       |      |       |
| Axles and  tires                                             |       | $         | 14,502     |      | $          | 15,215    |       | $ | 15,594 |   |
| Accessories  and siding                                      |       | 5,199     |       | 4,513     |       | 4,792     |       |
| Total sales                                                  |       | 19,701    |       | 19,728    |       | 20,386    |       |
|                                                         |       |      |       |      |       |      |       |
| Cost of  goods sold                                          |       |      |       |      |       |      |       |
| Axles and  tires                                             |       | 11,312    |       | 12,332    |       | 12,690    |       |
| Accessories  and siding                                      |       | 3,569     |       | 3,149     |       | 3,382     |       |
| Cost of  goods sold                                          |       | 14,881    |       | 15,481    |       | 16,072    |       |
|                                                         |       |      |       |      |       |      |       |
| Gross profit                                                 |       | 4,820     |       | 4,247     |       | 4,314     |       |
|                                                         |       |      |       |      |       |      |       |
| Selling,  general and administrative expenses                |       | 4,669     |       | 4,259     |       | 4,709     |       |
|                                                         |       |      |       |      |       |      |       |
| Operating  income (loss)                                     |       | 151       |       | (12       | )          | (395      | )          |
|                                                         |       |      |       |      |       |      |       |
| Interest  income                                             |       | 58        |       | 51        |       | 43        |       |
| Investment  property income                                  |       | 170       |       | 68        |       | 116       |       |
| Undistributed  equity interest in joint venture income       |       | 224       |       | 63        |       | —    |       |
| Rental  income                                               |       | 49        |       | 34        |       | 12        |       |
| Other income                                                 |       | 21        |       | 24        |       | 18        |       |
|                                                         |       |      |       |      |       |      |       |
| Income  (loss) before taxes                                  |       | 673       |       | 228       |       | (206      | )          |
|                                                         |       |      |       |      |       |      |       |
| Income taxes  (benefit)                                      |       | 276       |       | 96        |       | (67       | )          |
|                                                         |       |      |       |      |       |      |       |
| Income  (loss) before cumulative effect of accounting change |       | 397       |       | 132       |       | (139      | )          |
|                                                         |       |      |       |      |       |      |       |
| Cumulative  effect of accounting change, net of income taxes |       | —    |       | —    |       | (748      | )          |
|                                                         |       |      |       |      |       |      |       |
| Net income  (loss)                                           |       | $         | 397        |      | $          | 132       |       | $ | (887 | ) |
|                                                         |       |      |       |      |       |      |       |
| Net income  (loss) per common share basic and diluted:       |       |      |       |      |       |      |       |
| Continuing  operations                                       |       | $         | 0.09       |      | $          | 0.03      |       | $ | (0.03 | ) |
| Cumulative  effect of accounting change                      |       | —    |       | —    |       | (0.17     | )          |
|                                                         |       |      |       |      |       |      |       |
| Net income  (loss) per common share                          |       | $         | 0.09       |      | $          | 0.03      |       | $ | (0.20 | ) |
|                                                         |       |      |       |      |       |      |       |
| Weighted  average shares outstanding                         |       | 4,504,939 |       | 4,504,939 |       | 4,504,939 |       |

 

See accompanying notes tofinancial statements.

 

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**T.J.T., INC.**

**STATEMENTS OF CASH FLOWS**

(Dollars in thousands)

 
| **For the year ended September 30,**                                                 | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                                      |       |     |       |     |       |     |       |
| Cash flows  from operating activities:                                                    |       |     |       |     |       |     |       |
| Net income  (loss)                                                                        |       | $        | 397        |     | $          | 132      |       | $ | (887 | ) |
| Adjustments  to reconcile net income (loss) to net cash provided by operating activities: |       |     |       |     |       |     |       |
| Depreciation  and amortization                                                            |       | 170      |       | 226      |       | 362      |       |
| Cumulative  effect of accounting change                                                   |       | —   |       | —   |       | 748      |       |
| Gain on sale  of assets                                                                   |       | (21      | )          | (32      | )          | (15      | )          |
| Gain loss on  sale of property held for investment                                        |       | (170     | )          | (62      | )          | (92      | )          |
| Undistributed  equity earnings in joint venture                                           |       | (224     | )          | (63      | )          | —   |       |
| Stock-based  compensation                                                                 |       | 3        |       | —   |       | —   |       |
| Change in  accounts receivables                                                           |       | (18      | )          | (116     | )          | 246      |       |
| Change in  inventories                                                                    |       | (281     | )          | (232     | )          | 86       |       |
| Change in  prepaid expenses and other current assets                                      |       | (95      | )          | (8       | )          | (19      | )          |
| Change in  accounts payable                                                               |       | (308     | )          | 209      |       | (104     | )          |
| Change in  taxes                                                                          |       | 271      |       | 146      |       | 19       |       |
| Change in  other assets and liabilities                                                   |       | 58       |       | 106      |       | (60      | )          |
| Net cash  provided (used) by operating activities                                         |       | (218     | )          | 306      |       | 284      |       |
|                                                                                      |       |     |       |     |       |     |       |
| Cash flows  from investing activities:                                                    |       |     |       |     |       |     |       |
| Purchases of  property, plant and equipment                                               |       | (304     | )          | (124     | )          | (73      | )          |
| Repayments  received on notes receivable                                                  |       | 188      |       | 89       |       | 110      |       |
| Advances  under notes receivable to related parties                                       |       | (59      | )          | —   |       | —   |       |
| Proceeds  from sale of assets                                                             |       | 23       |       | 28       |       | 25       |       |
| Investment  in joint venture                                                              |       | —   |       | (130     | )          | —   |       |
| Land  purchased for investment                                                            |       | (17      | )          | (17      | )          | (28      | )          |
| Proceeds  from sale of land held for investment                                           |       | 158      |       | 153      |       | 120      |       |
| Net cash  provided (used) by investing activities                                         |       | (11      | )          | (1       | )          | 154      |       |
|                                                                                      |       |     |       |     |       |     |       |
| Net change  in cash and cash equivalents                                                  |       | (229     | )          | 305      |       | 438      |       |
| Cash and  cash equivalents at October 1                                              |       | 1,072    |       | 767      |       | 329      |       |
|                                                                                      |       |     |       |     |       |     |       |
| Cash and  cash equivalents at September 30                                           |       | $        | 843        |     | $          | 1,072    |       | $ | 767 |   |
|                                                                                      |       |     |       |     |       |     |       |
| Supplemental  information:                                                                |       |     |       |     |       |     |       |
| Cash paid  for interest                                                                   |       | $        | 1          |     | $          | 1        |       | $ | 2 |   |
| Income tax  refunds received                                                              |       | —   |       | 50       |       | 34       |       |
|                                                                                      |       |     |       |     |       |     |       |
| Noncash  transactions:                                                                    |       |     |       |     |       |     |       |
| Sale of land  by issuance of note receivable                                              |       | $        | 35         |     | $          | 120      |       | $ | 74 |   |
| Cumulative  effect of accounting change                                                   |       | —   |       | —   |       | 748      |       |
| Prepaid  operating lease                                                                  |       | —   |       | —   |       | 4        |       |
| Reacquisition  of investment property by cancellation of note receivable                  |       | —   |       | —   |       | 40       |       |
| Inventory  contributed to joint venture                                                   |       | —   |       | 259      |       | —   |       |
| Deferred  gain offset against outstanding note receivable upon payoff                     |       | 18       |       | —   |       | —   |       |

 

See accompanying notes tofinancial statements.

 

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**T.J.T., INC.**

**STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**

(Dollars in thousands)

 
| ** **                          | ** ** | **Preferred Stock**  | ** ** | **Common Stock**        | ** ** | ** **        | ** ** | ** **              | ** ** | ** **           | ** ** |
|-------------------------------------|------------|----------------------|------------|-------------------------|------------|-------------------|------------|-------------------------|------------|----------------------|------------|
| ** **                          | ** ** | **Preferred  Stock** | ** ** | **Outstanding  Shares** | ** ** | **Common  Stock** | ** ** | **Outstanding  Shares** | ** ** | **Capital  Surplus** | ** ** | **Retained  Earnings** | ** ** | **Treasury  Stock** | ** ** |
|                                |       |                 |       |                    |       |              |       |                    |       |                 |       |   |   |   |   |
| Balance at September 30,  2001 |       | $                    | —     |                    | —     |              | $          | 5                       |       | 4,504,939            |       | $ | 6,181 |   | $ | 1,012 |   | $ | (393 | ) |
|                                |       |                 |       |                    |       |              |       |                    |       |                 |       |   |   |   |   |
| Net loss                            |       | —               |       | —                  |       | —            |       | —                  |       | —               |       | (887 | ) | — |   |
|                                |       |                 |       |                    |       |              |       |                    |       |                 |       |   |   |   |   |
| Balance at September 30,  2002 |       | $                    | —     |                    | —     |              | $          | 5                       |       | 4,504,939            |       | $ | 6,181 |   | $ | 125 |   | $ | (393 | ) |
|                                |       |                 |       |                    |       |              |       |                    |       |                 |       |   |   |   |   |
| Retired  treasury stock             |       |                 |       |                    |       |              |       |                    |       | (393                 | )          |   |   | 393 |   |
| Net income                          |       | —               |       | —                  |       | —            |       | —                  |       | —               |       | 132 |   | — |   |
|                                |       |                 |       |                    |       |              |       |                    |       |                 |       |   |   |   |   |
| Balance at September 30,  2003 |       | $                    | —     |                    | —     |              | $          | 5                       |       | 4,504,939            |       | $ | 5,788 |   | $ | 257 |   | — |   |
|                                |       |                 |       |                    |       |              |       |                    |       |                 |       |   |   |   |   |
| Stock Based  Compensation           |       |                 |       |                    |       |              |       |                    |       | 3                    |       |   |   |   |   |
| Net Income                          |       | —               |       | —                  |       | —            |       | —                  |       | —               |       | 397 |   | — |   |
|                                |       |                 |       |                    |       |              |       |                    |       |                 |       |   |   |   |   |
| Balance at September 30,  2004 |       | $                    | —     |                    | —     |              | $          | 5                       |       | 4,504,939            |       | $ | 5,791 |   | $ | 654 |   | $ | — |   |

 

See accompanying notes tofinancial statements.

 

18

----

 

**T.J.T.,INC.**

#### **NOTES TO FINANCIALSTATEMENTS**

September 30, 2004, 2003and 2002

 
| **NOTE A - SIGNIFICANT ACCOUNTING POLICIES**
  |
|-----------------------------------------------------|
| ** **                                          |

### ** **

### **Business Activity**

### ** **

The Company is engaged in the business ofrepairing and reconditioning axles and tires for the manufactured housing industry.  The Company also sells skirting and otheraftermarket accessories to manufactured housing dealers, and vinyl sidingprimarily to the site-built housing market. The Company grants trade credit to customers in Idaho, Oregon,California, Utah, Washington, Montana, Colorado, Wyoming, Arizona, Minnesota, Nebraska,Nevada, North Dakota, and South Dakota, substantially all of whom aremanufactured housing factories, manufactured housing dealers, site-built homecontractors or siding contractors.

 

The Company operates in two businesssegments:  Axle and Tire Reconditioningand Accessories and Siding Distribution. These segments have been determined by evaluating the Company’s internalreporting structure and nature of products offered.

 

### **Major Suppliers and Customers**

### ** **

The Company had no single supplier of axlesand tires that represented 10 percent or more of total purchases.  The Company had one supplier of accessoryproducts, D-Mac, that supplied 11 percent of total accessories purchases. TheCompany has certain major customers for reconditioned axles and tires, all ofwhich are manufactured housing producers. Three companies have purchases representing 10 percent or more of sales:

 
| ** ** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|------------|------------|----------|------------|----------|------------|----------|------------|
| Company A  |       | 15       |       | 17       |       | 15       |       |
| Company B  |       | 10       |       | —   |       | 10       |       |
| Company C  |       | 15       |       | 14       |       | 12       |       |

 

### **Cash and Cash Equivalents**

### ** **

The Company considers allhighly liquid investments purchased with a maturity of three months or less tobe cash equivalents.  Cash balances areinvested in highly rated financial institutions and may at times exceed FDICinsured limits.

 

**Receivables**

 

The Company performs credit history checks and limited financialanalysis before credit terms are offered to customers.  Accounts receivable are generallyunsecured.  Bad debts are accounted forusing the allowance method.  Expense isrecognized based on an estimate of uncollectible accounts.  Trade receivables are reported in the balancesheet net of any chargeoffs and the allowance for doubtful accounts.

 

Notes receivable consistprimarily of amounts owed by individuals as a result of the sale of real estateand are generally secured by the real estate sold.

 

### **Property, Plant and Equipment**

### ** **

Property, plant andequipment is stated at cost. Depreciation is calculated using the straight-line method over the estimateduseful lives for financial reporting purposes.

 

19

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Useful lives for property,plant and equipment are as follows:

 
| Land and  building       |   | 5-30 years |   |
|--------------------------|--------|------------|--------|
| Leasehold  improvements  |   | 3-19 years |   |
| Furniture  and equipment |   | 3-7 years  |   |
| Vehicles and  trailers   |   | 3-7 years  |   |

 

Repairs and maintenance costs which do not extend the estimated usefullives of property, plant and equipment are charged to expense in the periodincurred.

 

### **Deferred Charges and Other Assets**

 

Deferred charges and otherassets consist primarily of contractual rights under a split-dollar lifeinsurance agreement on the life of Terrence Sheldon.  The Company owns the policy and pays thepremium, and will recover all premiums paid by the Company in 2018, or upon thedeath of Mr. Sheldon, if earlier.

 

### **Goodwill**

### ** **

Goodwill previously consisted of the excess of purchase price paid overnet assets acquired. Effective October 1, 2001, the Company implementedSFAS 142, and performed the initial goodwill test.  The impairment test involved estimating fairmarket values for tangible assets and liabilities and comparing the nettangible values to quoted market prices for the Company’s stock.  As of October 1, 2001 the Company’s nettangible value was substantially in excess of quoted market prices for theCompany’s stock and a cumulative effect of accounting change of $748,000 wasrecorded.  The cumulative effect ofaccounting change consists of a $790,000 writedown of goodwill assigned to theCompany’s axle and tire reconditioning segment, offset by a $42,000 taxbenefit.

 
| ** **                             | ** ** | **2002** | ** ** |
|----------------------------------------|------------|----------|------------|
| Goodwill at October 1             |       | $        | 790        |   |
| Amortization                           |       | —   |       |
| Impairment  loss                       |       | —   |       |
| Effect of  accounting change (pre-tax) |       | (790     | )          |
|                                   |       |     |       |
| Goodwill at September 30          |       | $        | —     |   |

 

**Stock Based Compensation**

 

TheCompany has a stock option plan which allows officers, directors and keyemployees to receive non-qualified and incentive stock options.   The Company awarded 20,000 stock options todirectors during the quarter ended March 31, 2004 with exercise pricesranging between $.70 and $.80.  Duringthe quarter ended June 30, 2004, the Company granted 5,000 stock optionswith an exercise price of $.70 to a director. There were no options granted during the first and final quarters offiscal 2004.  All options granted willbecome vested at a rate of 20 percent each year for a period of five years fromthe grant date.  As of September 30,2004, 380,000 shares of stock were available for future option grants.

 

Asof October 1, 2003, the Company adopted the fair value method ofaccounting for stock options contained in Statement of Financial Standards (“SFAS”)No. 123, *Accounting for Stock-Based Compensation.*  During the transition period, the Companywill be utilizing the prospective method under SFAS No. 148 *Accounting for Stock-Based Compensation – Transition andDisclosures. *Stock optionsgranted subsequent to October 1, 2003 will be expensed over the stockoption vesting period based on fair value which will be determined using theBlack-Scholes option-pricing method at the

 

20

----

 

datethe options are granted.  Stock-basedcompensation for the period ended September 30, 2004 was $3,000.  The net of tax impact on the financialstatements during fiscal 2004 approximated $2,000.

 

Thefollowing table illustrates the effect on net income (loss) and net income(loss) per common share as if the fair value method had been applied to alloutstanding and unvested awards in each period:

 
| **(In  thousands, except per share amounts)**                                                           | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net income  (loss), as reported                                                                         |       | $        | 397        |     | $          | 132      |       | $ | (887 | ) |
|                                                                                                    |       |     |       |     |       |     |       |
| Add: stock-based employee compensation  expense included in net income, net of tax                      |       | 2        |       | —   |       | —   |       |
| Deduct: stock-based compensation expense  determined under fair value method for all awards, net of tax |       | 8        |       | 9        |       | 12       |       |
|                                                                                                    |       |     |       |     |       |     |       |
| Pro forma  net income (loss)                                                                            |       | $        | 391        |     | $          | 123      |       | $ | (899 | ) |
|                                                                                                    |       |     |       |     |       |     |       |
| Earnings per  share:                                                                                    |       |     |       |     |       |     |       |
| Basic – as  reported                                                                               |       | $        | .09        |     | $          | .03      |       | $ | (.20 | ) |
| Basic – pro  forma                                                                                 |       | $        | .09        |     | $          | .03      |       | $ | (.20 | ) |

 

### **Deferred Gains**

### ** **

Deferred gains include gainson the sale of land held for investment where the Company provided virtually100 percent financing to the buyer under an installment sale.  The Company recognizes interest income andthen a reduction of the principal balance to the extent of payments received onthe related notes receivable until it has received 25 percent or more of theoriginal principal balance, at which point the remaining deferred gain isrecognized if the balance is deemed collectible.

 

### **Income Taxes**

### ** **

Income taxes are accountedfor using the asset and liability method under which deferred income taxes aredetermined based on differences between the financial reporting and tax basisof assets and liabilities.  Deferredincome taxes are measured by applying enacted tax rates and laws to taxableyears in which such differences are expected to reverse**.  **Management has determined thatexpected future earnings will be sufficient for all deferred tax assets to berealizable before their expiration. Accordingly, no valuation allowance has been offset against deferred taxassets.

 

### **Earnings Per Share**

### ** **

Basic earnings per share (EPS) is computed based on net income and theweighted average number of common shares outstanding.  Diluted EPS is similar to basic EPS exceptthat the weighted average of common shares outstanding is increased to includethe number of potential additional common shares that would have beenoutstanding if the dilutive options had been exercised.   Although basic EPS was not impacted by thedilutive options for each year presented, 130,000, 123,000, and 88,000 of thetotal options outstanding at September 30, 2004, 2003, and 2002,respectively, were not included in the diluted earnings per share calculationbecause the exercise price of the options were greater than the average marketprice of the common shares.

 

21

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**Revenue Recognition**

 

The Company recognizes revenue at the time delivery is made to thecustomer, or when used by the customer in the case of consigned inventory.  No agreements exist requiring any performanceby the Company subsequent to the sale.

 

**Concentration of Credit Risk**

 

All trade receivables are due from entitiesinvolved in the housing industry and are unsecured.  The accounting loss incurred if all partiesfailed entirely to perform on their obligation is equal to the balanceoutstanding for trade accounts receivable.

 

Notes receivable related tosales of real estate held for investment are secured by real estate located inIdaho and Utah.  Other portions of thenotes receivable are secured by receivables. The accounting loss incurred ifall parties failed entirely to perform on their obligation is equal to thebalance outstanding on the notes receivable less amounts realizable from theforeclosure and resale of the assets securing the notes receivable.

 

### **Fair Value of Financial Instruments**

### ** **

The Company has a number of nonderivativefinancial instruments, none of which are held for trading purposes.  The recorded amounts of cash and cashequivalents, accounts receivable, short-term borrowings, accounts payable andaccrued liabilities as presented in the financial statements approximate fairvalue because of the short-term nature of these instruments.  The recorded amount of short and long-term borrowingsapproximates fair value as the interest rates approximate current competitiverates.  The estimated fair values havebeen determined by the Company using available market information andappropriate valuation methodologies. Judgment is required in interpreting market data to develop theestimates of fair value and the estimates are not necessarily indicative ofamounts the Company could realize in a current market exchange.

 

### **Significant Estimates**

### ** **

The presentation offinancial statements in conformity with the accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities andthe disclosure of contingent assets and liabilities at the date of thefinancial statements, as well as the reported amounts of revenue and expensesduring the reporting period.  Listedbelow are the estimates and assumptions that management considers to besignificant in the preparation of its financial statements.  Significant estimates used in preparing thesefinancial statements are as follows:

 

Allowancefor Doubtful Accounts — The Company estimates losses foruncollectible accounts based on the aging of the accounts receivable and anevaluation of the likelihood of success in collecting the receivable.

 

InventoryLower-of-Cost-or-Market – The Company assesses the estimated netrealizable value of inventory on hand for the purposes of costing at the lowerof cost or market.

 

InventoryObsolescence Allowance – The Company evaluates the expectedsalability and usefulness of inventory on hand for purposes of determining thepresence of obsolescence for old, defective, or outdated inventory.

 

It is reasonably possiblethat the significant estimates may change within the next year.

 

22

----

 

**Reclassifications**

 

Certain 2003 and 2002amounts have been reclassified to conform with 2004 presentation.

 

**Recently Issued AccountingStandards**

 

InSeptember 2004, the Emerging Issues Task Force (EITF) reached a consensuson EITF Issue No. 04-10, *ApplyingParagraph 19 of FAS 131 in Determining Whether to Aggregate OperatingSegments That Do Not Meet the Quantitative Thresholds.* The consensusstates that operating segments that do not meet the quantitative thresholds canbe aggregated only if aggregation is consistent with the objective and basicprinciples of SFAS No. 131, *Disclosuresabout Segments of an Enterprise and Related Information*, thesegments have similar economic characteristics, and the segments share a majorityof the aggregation criteria (a)-(e) listed in paragraph 17 ofSFAS 131. The effective date of the consensus in this Issue is for fiscalyears ending after October 13, 2004. If the Financial Accounting Standards Board (FASB) ratifies EITF IssueNo. 04-10, the Company does not anticipate a material impact on the financialstatements.

 

In March 2004, the EITF reached a consensus onthe remaining portions of EITF 03-01, *TheMeaning of Other-Than-Temporary Impairment and Its Application to CertainInvestments* with an effective date of June 15, 2004. EITF 03-01provides new disclosure requirements for other-than-temporary impairments ondebt and equity investments. Investors are required to disclose quantitativeinformation about: (i) the aggregate amount of unrealized losses, and(ii) the aggregate related fair values of investments with unrealizedlosses, segregated into time periods during which the investment has been in anunrealized loss position of less than 12 months and greater than 12 months.In addition, investors are required to disclose the qualitative informationthat supports their conclusion that the impairments noted in the qualitativedisclosure are not other-than temporary. The Company does not expect EITF 03-01to have a material impact on the financial statements.

 

In March 2004, the EITF reached a consensus onEITF Issue No. 03-6, *ParticipatingSecurities and the Two-Class Method under FASB Statement No. 128, Earningsper Share*. EITF Issue No. 03-6 clarifies what constitutes aparticipating security and provides further guidance in applying the two-classmethod of calculating earnings per share. The consensuses reached by the TaskForce on EITF Issue No. 03-6 were ratified by the FASB on March 31,2004, and are effective for reporting periods beginning after March 31,2004.  The Company currently has only oneclass of stock issued and does not expect EITF Issue No. 03-6 to materiallyimpact the financial statements.

 

The FASB issued Statement of Financial Accounting Standards (SFAS) No.148 in December 2002.  ThisStatement amends FASB Statement No. 123, *Accounting for Stock-BasedCompensation,* to provide alternative methods of transition for avoluntary change to the fair value based method of accounting for stock-basedemployee compensation.  In addition, this Statement amends the disclosurerequirements of Statement 123 to require prominent disclosures in both annualand interim financial statements about the method of accounting for stock-basedemployee compensation and the effect of the method used on reportedresults.  Prior to fiscal 2004, theCompany accounted for its employee stock-based compensation using the intrinsicvalue method while meeting the disclosure requirements of Statement No. 148.    Effective October 1, 2003, the Companyadopted the fair value method of accounting for stock options in accordancewith Statement No. 148.  During thetransition period, the Company will utilize the prospective method.  Stock options granted subsequent to October 1,2003 will be expensed over the stock options vesting period based on fair valuewhich will be determined using the Black-Scholes option-pricing method at thedate the options are granted.

 

On March 31, 2004, the FASB issued *Revised Statement of Financial Accounting Standards-Share-Based Payment*,effective for fiscal periods beginning after December 15, 2004. ThisStatement was published by the FASB on December 16, 2004 and supercedesSFAS 123, which allowed for footnote

 

23

----

 

disclosure of this expense.  TheCompany adopted Statement No. 148 in 2004 and, therefore, does not expect thisStatement to have a material impact on the financial statements.

 

InJanuary 2003, the FASB issued Interpretation No. 46, *Consolidationof Variable Interest Entities – an interpretation of ARB No. 51*,which provides guidance on the identification of and reporting for variableinterest entities.  Interpretation No. 46expands the criteria for consideration in determining whether a variableinterest entity should be consolidated. Interpretation No. 46 is effective immediately for variable interestentities created after January 31, 2003, and to variable interest entitiesin which an enterprise obtains an interest after that date.  Interpretation No. 46 is effective for theCompany in 2003 because the Company entered into a joint venture with WestStates Recycling, Inc. on June 9, 2003. The Company has a 50 percent interest in ownership and a 40 percentinterest in future net profits or losses. The Interpretation requires unconsolidated variable interest entities tobe consolidated by their primary beneficiaries. The primary beneficiary is the party that assumes the majority of therisk which includes, but is not limited to, the entity’s expected losses.  Therefore, in accordance with InterpretationNo. 46, the Company will not consolidate the joint venture financialinformation since the primary beneficiary is West States Recycling, Inc.

 
| **NOTE B - INVENTORIES**
  |
|---------------------------------|
| ** **                      |

### ** **

Inventories are stated atthe lower of cost (first-in, first-out and average cost methods) or market.

 
| ** **      | ** ** | **2004** | ** ** | **2003** | ** ** |
|-----------------|------------|----------|------------|----------|------------|
|            |       |     |       |     |       |
| Raw  materials  |       | $        | 1,373      |     | $          | 1,284 |   |
| Finished  goods |       | 1,474    |       | 1,282    |       |
| Total           |       | $        | 2,847      |     | $          | 2,566 |   |

 
| **NOTE C -  PROPERTY, PLANT AND EQUIPMENT**
  |
|----------------------------------------------------|
| ** **                                         |

 
| ** **                         | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------------------------------|------------|----------|------------|----------|------------|
| Land and  building                 |       | $        | 395        |     | $          | 386 |   |
| Leasehold  improvements            |       | 291      |       | 399      |       |
| Furniture  and equipment           |       | 1,238    |       | 1,153    |       |
| Vehicles and  trailers             |       | 1,058    |       | 1,060    |       |
|                               |       | 2,982    |       | 2,998    |       |
| Less  accumulated depreciation     |       | 2,254    |       | 2,404    |       |
| Net  property, plant and equipment |       | $        | 728        |     | $          | 594 |   |

 

Depreciation expense was $170,000, $226,000, and $316,000 for 2004,2003, and 2002, respectively.

 
| **NOTE D – NOTES RECEIVABLE**
  |
|-------------------------------------------|
| ** **                                |

### ** **

Notes that management hasthe intent and ability to hold for the foreseeable future or until maturity orpayoff are reported in the balance sheet at outstanding principal adjusted forany related deferred income.  Notesreceivable consist primarily of amounts owed by individuals resulting from thesale of real estate and are generally secured by the real estate sold.

 

The Company made an advanceto a related party in exchange for a note receivable which is secured by realestate.  Current and long-term portion ofnotes receivable reported in the accompanying

 

24

----

 

financial statementsincludes amounts due from related parties totaling $94,000 and $120,000 as of September 30,2004 and 2003, respectively (See Note K). Notes generally require minimum principal and interest repaymentsmonthly, quarterly or annually, with any remaining amounts due upon maturity orresale of the underlying property. Interest accrues at rates ranging between eight and twelve percent perannum.  Minimum principal repayments tobe received in future years ending September 30 are as follows:

 
| 2005       |   | $      | 105    |   |
|------------|--------|--------|--------|--------|
| 2006       |   | 38     |   |
| 2007       |   | 3      |   |
| 2008       |   | 118    |   |
| 2009       |   | 78     |   |
| Thereafter |   | 101    |   |
|       |   |   |   |
| Total      |   | $      | 443    |   |

 
| **NOTE E - LEASES**
  |
|----------------------------|
| ** **                 |

### ** **

The Company leases vehicles,administrative office space, manufacturing facilities, building and warehousespace, and storage yard space.  The leases,which expire between December 2004 and July 2012, are classified asoperating leases.  The leases have beenentered into with related parties and unaffiliated entities.

 

The Company entered into afive year lease agreement for the Chehalis, Washington facility in 2003.  The Company has the option to buy theproperty at any time during the lease period or upon expiration of thelease.  There are no other significantrenewals or escalation clauses.

 

The future minimum paymentsby fiscal year under non-cancelable operating lease agreements at September 30,2004 were:

 
| 2005       |   | $   | 257    |   |
|------------|--------|-----|--------|--------|
| 2006       |   | 165 |   |
| 2007       |   | 102 |   |
| 2008       |   | 78  |   |
| 2009       |   | 8   |   |
| Thereafter |   | 14  |   |
| Total      |   | $   | 624    |   |

 

  Rental expense and rent paid torelated parties were:

 
| ** **                    | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Rental expense                |       | $        | 219        |     | $          | 283      |       | $ | 320 |   |
| Rent paid to related parties: |       |     |       |     |       |     |       |
| Ulysses Mori                  |       | —   |       | —   |       | 38       |       |
| T.J.T. Enterprises            |       | 34       |       | 31       |       | 33       |       |
| Sheldon-Homedale Family, L.P. |       | 30       |       | 25       |       | 25       |       |
|                               |            |          |            |          |            |          |            |  |  |  |

 

25

----

 

Mr. Mori, a Director of theCompany, owned property leased by the Company until May of 2002.  The Company now leases the property from anon-related party.  T.J.T. Enterprises isa partnership consisting of Terrence Sheldon, President and Chief ExecutiveOfficer of the Company, and Jerry L. Radandt, a former officer of theCompany.  Mr. Sheldon and Mr. Radandt areequal partners in T.J.T. Enterprises. Sheldon-Homedale Family, L.P. (Homedale) is a partnership owned by theSheldon family.  Terrence Sheldon ownsfive percent and is a general partner of Homedale.

 
| **NOTE F - CREDIT FACILITY**
  |
|-------------------------------------|
| ** **                          |

### ** **

On March 31, 2004, the Company renewed a$350,000 revolving credit facility that matures on March 31, 2005 and issecured by receivables and inventory. The interest rate on the credit line is the prime rate plus onepercent.  As of September 30, 2004,the Company has not borrowed on the line and is in compliance with allcovenants.

 
| **NOTE G –  CUMULATIVE EFFECT OF ACCOUNTING CHANGE**
  |
|------------------------------------------------------------------|
| ** **                                                       |

### ** **

The Company implemented SFAS 142, *Goodwill and Other Intangible Assets*, and performed theinitial goodwill impairment test in 2002. The impairment test involved estimating fair market values for tangibleassets and liabilities and comparing the net tangible values to quoted marketprices for the Company’s stock.  As of October 1,2001 the Company’s net tangible value was substantially in excess of quotedmarket prices for the Company’s stock and a cumulative effect of accountingchange of $748,000 was recorded.  Thecumulative effect of accounting change consists of a $790,000 writedown ofgoodwill assigned to the Company’s axle and tire reconditioning segment, offsetby a $42,000 tax benefit.

 

Net income adjusted to exclude amortizationexpense and related tax benefit is as follows:

 
| **For the twelve months ended September 30,** | ** ** | **2002** | ** ** |
|----------------------------------------------------|------------|----------|------------|
|                                               |       |     |       |
| Reported net  income                               |       | $        | (887       | ) |
| Goodwill  amortization                             |       | —   |       |
| Tax benefit  of goodwill amortization              |       | —   |       |
| Adjusted net  income                               |       | $        | (887       | ) |

 

There would be no change in earnings pershare had goodwill not been amortized during 2002.

 
| **NOTE H - SHAREHOLDERS’ EQUITY**
  |
|-----------------------------------------------|
| ** **                                    |

### ** **

Authorized stock of theCompany consists of 10,000,000 shares of $.001 par value common stock and5,000,000 shares of $.001 par value preferred stock.  No shares of preferred stock have beenissued.

 

26

----

 
| **NOTE I – STOCK OPTIONS**
  |
|----------------------------------------|
| ** **                             |

### ** **

The Company has two stock option plans whichallow key employees and directors of the Company to receive incentive andnon-qualified stock options.  Theexercise price, term and other conditions applicable to each option grantedunder the Company’s plans are generally determined by the CompensationCommittee of the Board of Directors at the time of the grant of each option andmay vary with each option granted.  No optionsmay have a term longer than ten years. The plans allow up to 400,000 incentive, or nonqualified options to beissued to key employees and up to 200,000 nonqualified options to be issued todirectors.

 

Option activity under the Company’s stockoption plans is summarized as follows:

 
| ** **                        | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Number of  option shares          |       |     |       |     |       |     |       |
| Beginning of  year                |       | 230,000  |       | 160,000  |       | 165,000  |       |
| Granted                           |       | 25,000   |       | 70,000   |       | 5,000    |       |
| Expired                           |       | —   |       | —   |       | 10,000   |       |
| Cancelled                         |       | 35,000   |       | —   |       | —   |       |
| Outstanding  at end of year       |       | 220,000  |       | 230,000  |       | 160,000  |       |
| Exercisable  at end of year       |       | 158,000  |       | 139,000  |       | 88,000   |       |
|                              |       |     |       |     |       |     |       |
| Weighted-average  exercise prices |       |     |       |     |       |     |       |
| Beginning of  year                |       | $        | .68        |     | $          | .83      |       | $ | .86 |   |
| Granted at  fair value            |       | .74      |       | .34      |       | .40      |       |
| Expired                           |       | —   |       | —   |       | 1.05     |       |
| Cancelled                         |       | .92      |       | —   |       | —   |       |
| Outstanding  at end of year       |       | .65      |       | .68      |       | .83      |       |
| Exercisable  at end of year       |       | .72      |       | .80      |       | .88      |       |
|                                   |            |          |            |          |            |          |            |  |  |  |

 

The following table summarizes information about options outstanding asof September 30, 2004:

 
| ** **                    | ** ** | ** **            | ** ** | **Outstanding Options**                                        | ** ** | ** **                            | ** ** | **Exercisable Options** | ** ** |
|-------------------------------|------------|-----------------------|------------|----------------------------------------------------------------|------------|---------------------------------------|------------|-------------------------|------------|
| **Range of  exercise prices** | ** ** | **Number  of shares** | ** ** | **Weighted  average  remaining  contractual life  (in years)** | ** ** | **Weighted  average  exercise price** | ** ** | **Number  of shares**   | ** ** | **Weighted  average  exercise  price** | ** ** |
|                          |       |                  |       |                                                           |       |                                  |       |                    |       |   |   |
| $ .28 - $ .44       |       | 50,000                |       | 8.14                                                           |       | $                                     | .28        |                    | 20,000     |   | $ | .28 |   |
| $ .45 - $ .70       |       | 30,000                |       | 8.81                                                           |       | .56                                   |       | 10,000                  |       | .54 |   |
| $ .75 - $1.05            |       | 140,000               |       | 5.63                                                           |       | .80                                   |       | 128,000                 |       | .81 |   |
|                          |       | 220,000               |       | 6.63                                                           |       | $                                     | .65        |                    | 158,000    |   | $ | .72 |   |

 

The Company elected to adopt the provisionsof Statement of Financial Accounting Standards No. 123, *Accountingfor Stock-Based Compensation* (FAS 123) effective October 1,2003.  Assumptions used to calculate theincome statement impact of stock options granted are as follows:

 
| ** **               | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|--------------------------|------------|----------|------------|----------|------------|----------|------------|
| Weighted  average:       |       |     |       |     |       |     |       |
| Risk-free  interest rate |       | 5.00     | %          | 5.00     | %          | 5.00     | %          |
| Expected  life           |       | 10 years |       | 10 years |       | 10 years |       |
| Expected  volatility     |       | 78.80    | %          | 70.69    | %          | 79.55    | %          |
| Expected  dividends      |       | none     |       | none     |       | none     |       |

 

27

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| **NOTE  J - INCOME TAXES**
  |
|----------------------------------------|
| ** **                             |

### ** **

The Company accounts forincome taxes as prescribed by Statement of Financial Accounting Standards No.109, *Accounting for Income Taxes,* whichrequires deferred income taxes to be accounted for using the liability methodand allows recognition of operating loss and tax credit carryforwards as deferredtax assets.

 

The components of income tax benefit (expense) from continuingoperations for the years ended September 30 are as follows:

 
| **(Dollars in thousands)** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|----------|------------|
| Current:                   |       |     |       |     |       |     |       |
| Federal                    |       | $        | —     |     | $          | —   |       | $ | (86 | ) |
| State                      |       | 4        |       | 4        |       | 1        |       |
| Deferred:                  |       |     |       |     |       |     |       |
| Federal                    |       | 217      |       | 88       |       | 22       |       |
| State                      |       | 55       |       | 4        |       | (4       | )          |
| Total                      |       | $        | 276        |     | $          | 96       |       | $ | (67 | ) |
|                            |            |          |            |          |            |          |            |  |  |  |  |

 

Deferred taxes for the years ended September 30 are as follows:

 
| Book to tax  depreciation differences          |   | $   | (19    | )      | $      | 83     |   | $ | (70  | ) |
|------------------------------------------------|--------|-----|--------|--------|--------|--------|--------|---|------|---|
| Book to tax  goodwill amortization differences |   | 149 |   | 166    |   | (182   | )      |
| Vacation  liability                            |   | 35  |   | 34     |   | (28    | )      |
| Installment  sales of land                     |   | 15  |   | 29     |   | (31    | )      |
| Investment  in limited liability company       |   | (82 | )      | — |   | — |   |
| Net  operating loss carryforward               |   | 81  |   | 138    |   | (228   | )      |
| Total                                          |   | $   | 179    |   | $      | 450    |   | $ | (539 | ) |
|                                                |        |     |        |        |        |        |        |   |      |   |  |

 

The provision for income taxes varied from amounts computed at thefederal statutory rate for the years ended September 30 as follows:

 
| Provision at  statutory rate |   | $  | 229    |   | $      | 78 |   | $ | (70 | ) |
|------------------------------|--------|----|--------|--------|--------|----|--------|---|-----|---|
| State income  taxes          |   | 39 |   | 5      |   | (3 | )      |
| Non-deductible  expense      |   | 9  |   | 9      |   | 10 |   |
| Other                        |   | (1 | )      | 4      |   | (4 | )      |
| Total                        |   | $  | 276    |   | $      | 96 |   | $ | (67 | ) |
|                              |        |    |        |        |        |    |        |   |     |   |  |

 

The net operating loss carry forward at September 30, 2004 forfederal tax purpose of approximately $38,000 and state tax purposes ofapproximately $907,000begins to expire in the years 2020 and 2006, respectively.

 

28

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| **NOTE K - RELATED PARTY TRANSACTIONS**
  |
|------------------------------------------------|
| ** **                                     |

### ** **

The Company has extendedloans to various related parties.  Totalprincipal and accrued interest receivables from related parties were asfollows:

 
| ** **                  | ** ** | **2004** | ** ** | **2003** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|
|                        |       |     |       |     |       |
| Current  notes receivable   |       | $        | 94         |     | $          | 31 |   |
| Long-term  notes receivable |       | —   |       | 89       |       |
| Total                       |       | $        | 94         |     | $          | 120 |   |

 

In October 1996,the Company made a personal loan to Jerry L. Radandt for $46,594 at an interestrate of 12.22 percent.   During fiscal2001 the loan was amended to an interest rate of prime plus two percent andsecured by property, which was subsequently sold resulting in $30,000 of theloan being paid off.  The outstandingprincipal loan balance, which is included in the totals specified above, is$3,187 and $9,992 for September 30, 2004 and 2003, respectively.  Terrence Sheldon, President and ChiefExecutive Officer of the Company, and Jerry L. Radandt are equal partners inT.J.T. Enterprises.

 

In March 2004, the Company made a loanto Leo Radandt for $35,000 at an interest rate of 10 percent.  A second loan was made in March 2004 for$10,000 at an interest rate of 10 percent for the first month and five percentfor every month thereafter.  In August 2004,a third loan was made to Leo Radandt for $41,850 at an interest rate of 10percent.  These three notes are securedby property with a fair market value of approximately $110,000 and will maturein March 2005.  A fourth note wasmade in August 2004 for $6,990 at an interest rate of eight percent and issecured by personal property and will mature in August 2005. Theoutstanding principal loan balance for all four notes on September 30,2004 was $86,042.  Leo Radandt is the sonof Jerry L. Radandt, who is an equal partner with Terrence Sheldon, thePresident and Chief Executive Office of the Company, in T.J.T.Enterprises.  In addition, Leo Radandt isan outside supplier of tires and axles to the Company.  The Company purchased approximately $866,000of materials from Wholesale Tire and Axle, which is owned by Leo Radandt,during fiscal 2004.

 

As more fully described in Note N, theCompany is a 50 percent partner in a joint venture, NewCo Tire & Axle,L.L.C., with West States Recycling, Inc. The Companyhas a 40 percent interest in net profits and losses.  In addition, the Company leases trucks andequipment to the joint venture.  Rentalincome recognized from NewCo during 2004 and 2003 was $26,000 and $16,000,respectively.

 

The Company purchases piersand other materials used to set-up manufactured homes from D-Mac, LLC, which isowned by two individuals with each individual owning 50 percent. Robert B.Siegel, elected Director of the Company in February 2002, is one of theindividuals.  The Company purchasedapproximately $606,000 and $448,500 of materials from D-Mac in 2004 and 2003,respectively.

 

In 2003, Arthur J. Berry, aDirector of the Company became principal shareholder, owning 80 percent, of KitHomebuilders West, L.L.C., a producer of HUD Code manufactured homes.  Kit Homebuilders West, L.L.C. purchasedapproximately $452,000 and $216,000 of products from the Company at competitivemarket prices during 2004 and 2003, respectively.  Subsequently, in October 2004, Arthur J.Berry sold the majority of his interest in Kit Homebuilders West, L.L.C. to anon-related third party.

 
| **NOTE L -  EMPLOYEE BENEFITS**
  |
|----------------------------------------|
| ** **                             |

### ** **

The Company has a 401(k)plan through which the employer matches 50 percent of employees’ contributionsup to six percent of wages.  Employeesare eligible for participation in the 401(k) plan after completing one year ofservice.  Employer contributions to theplan were $30,743, $33,371, and $40,022 in 2004, 2003, and 2002, respectively.

 

29

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The Company had accruedapproximately $30,000 for incurred but not reported items in 2003 and 2002associated with self-insured employee medical benefits.  As of October 1, 2003, the Company wasno longer self-insured for employee medical benefits. The Company’s employeesare now  insured through a traditionalmedical care plan.  The Company willcontinue to self-insure for employee dental benefits with no plans to accruefor incurred but not reported items as these amounts are insignificant.

 
| **NOTE M – BUSINESS SEGMENTS**
  |
|--------------------------------------------|
| ** **                                 |

### ** **

The Company operates in two business segments:  Axles and Tire Reconditioning and Accessoriesand Siding Distribution.  These segmentshave been determined by evaluating the Company’s internal reporting structureand nature of products offered.

 

Axles and Tire Reconditioning: The Company provides reconditioned axles and tires to manufacturedhousing factories.

 

Accessories and Siding Distribution: The Company provides skirting, siding, and other aftermarket accessoriesto manufactured housing dealers and contractors.

 
| ** **                       | ** ** | **Axle & Tire  Reconditioning** | ** ** | **Accessories  and Siding** | ** ** | **Total** | ** ** |
|----------------------------------|------------|-------------------------------------|------------|-----------------------------|------------|-----------|------------|
| 2004                             |       |                                |       |                        |       |      |       |
| Operating  revenue               |       | $                                   | 14,502     |                        | $          | 5,199     |       | $ | 19,701 |   |
| Operating  income (loss)         |       | 320                                 |       | (169                        | )          | 151       |       |
| Depreciation  & Amortization |       | 126                                 |       | 44                          |       | 170       |       |
| Capital  expenditures            |       | 256                                 |       | 48                          |       | 304       |       |
|                             |       |                                |       |                        |       |      |       |
| 2003                             |       |                                |       |                        |       |      |       |
| Operating  revenue               |       | $                                   | 15,215     |                        | $          | 4,513     |       | $ | 19,728 |   |
| Operating  income (loss)         |       | 71                                  |       | (83                         | )          | (12       | )          |
| Depreciation  & Amortization |       | 161                                 |       | 65                          |       | 226       |       |
| Capital  expenditures            |       | 106                                 |       | 18                          |       | 124       |       |
|                             |       |                                |       |                        |       |      |       |
| 2002                             |       |                                |       |                        |       |      |       |
| Operating  revenue               |       | $                                   | 15,594     |                        | $          | 4,792     |       | $ | 20,386 |   |
| Operating  income (loss)         |       | (4                                  | )          | (391                        | )          | (395      | )          |
| Depreciation  & Amortization |       | 277                                 |       | 85                          |       | 362       |       |
| Capital  expenditures            |       | 61                                  |       | 12                          |       | 73        |       |

 

The Company does not assign interest income,interest expense, other expenses or income taxes to operating segments.  Identifiable assets and related capitalexpenditures are assigned to operating locations rather than operatingsegments, with depreciation allocated to the segments based upon usage.

 

30

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| **NOTE N – JOINT VENTURE**
  |
|----------------------------------------|
| ** **                             |

### ** **

The Company has a 50 percent ownershipinterest in a joint venture, NewCo Tire & Axle, L.L.C. (NewCo), which wasformed to engage inthe manufactured housing axle and tire recycling business in Arizona, NewMexico, Kansas and parts of southern California.  Under the joint venture agreement, theCompany contributed cash and inventory amounting to $389,000 for its initialinvestment in 2003.  Further capitalcontributions to NewCo are limited to an additional $20,000 in aggregate unlessboth parties agree to the additional contributions and are willing tocontribute 50 percent of the required capital. The Company has a 40 percentinterest in net profits or losses.   Theinvestment in the joint venture is accounted for using the equity method ofaccounting, under which the Company’s initial investment is adjusted for itsproportionate share of net profits and losses and distributed earnings, ifany.  NewCo has not made anydistributions of profits during 2003 or 2004 to the joint venture members.

 

Concurrent with the formation of the joint venture,the Company leases trucks and equipment to NewCo. Gross rental incomerecognized from the NewCo leases was approximately $26,000 and $16,000 in 2004and 2003, respectively.  The followinginformation summarizes the activity of the joint venture:

 
| **(In  thousands)**            | ** ** | **2004** | ** ** | **2003** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|
| ** **                     |       |     |       |     |       |
| Total and  current assets      |       | $        | 1,637      |     | $          | 1,239 |   |
| Total and  current liabilities |       | 186      |       | 310      |       |
| Net assets                     |       | 1,451    |       | 929      |       |
| Revenues                       |       | 9,176    |       | 2,749    |       |
| Cost of  sales                 |       | 7,074    |       | 2,536    |       |
| Net income                     |       | 560      |       | 159      |       |
| Company’s  interest       |       | 224      |       | 63       |       |
| Equity in  net assets          |       | $        | 676        |     | $          | 452 |   |

 

31

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**REPORT OFINDEPENDENT****REGISTERED PUBLICACCOUNTING FIRM**

 

To the Shareholders and Board of Directors

T.J.T., Inc.

Emmett, Idaho

 

We have audited the accompanying balance sheet ofT.J.T., Inc. as of September 30, 2004, and the related statements ofoperations, shareholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’smanagement.  Our responsibility is to express an opinion on thesefinancial statements based on our audit.

 

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (UnitedStates).  Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatements.  An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred toabove present fairly, in all material respects, the financial position ofT.J.T., Inc. at September 30, 2004, and the results of its operations andits cash flows for the year then ended, in conformity with accountingprinciples generally accepted in the United States.

 

Moss Adams LLP

Seattle, Washington

October 22, 2004

 

32

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**REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM**

 

To the Shareholders and Board of Directors

T.J.T., Inc.

Emmett, Idaho

 

We have audited the accompanying balancesheet as of September 30, 2003 and the related statements of operation,changes in shareholders’ equity and cash flows of T.J.T., Inc. for the yearended September 30, 2003 and 2002. These consolidated financial statements are the responsibility of theCompany’s management.  Our responsibilityis to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with U.S. generally acceptedauditing standards.  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the consolidated financial statements are free of materialmisstatement.  An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe consolidated financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation.  Webelieve that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above presentfairly, in all material respects, the financial position of T.J.T. Inc. as ofSeptember 30, 2003 and the results of its operations and cash flows for theyears ended September 30, 2003 and 2002, in conformity with U.S. generallyaccepted accounting principles.

 

Eide Bailly LLP (formerly Balukoff, Lindstrom & Co., P.A.- joinedEide Bailly November 1, 2004)

Boise, Idaho

November 18, 2003

 

33

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**ITEM  9.****         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON ACCOUNTING AND FINANCIAL DISCLOSURE**

 

OnMay 11, 2004, TJT, Inc.’s Audit Committee engaged Moss Adams LLP as independentauditor, replacing Balukoff Lindstrom & Co.

 

BalukoffLindstrom & Co.’s reports on TJT, Inc.’s financial statements for the pasttwo years did not contain an adverse opinion or disclaimer of opinion.  The reports were not qualified or modified asto uncertainty, audit scope, or accounting principles.

 

DuringTJT, Inc.’s two most recent fiscal years and through the date of BalukoffLindstrom & Co.’s dismissal, there were no disagreements with BalukoffLindstrom & Co. on any other matter of accounting principles or practices,financial statement disclosure, or auditing scope or procedure which, if notresolved to Balukoff Lindstrom & Co’s satisfaction, would have causedBalukoff Lindstrom & Co. to make reference to the subject matter inconnection with its report of the financial statements for such year; and therewere no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

 

**ITEM 9A. CONTROLS AND PROCEDURES**

 

(a)           **Evaluation of Disclosure Controls and Procedures**

 

Based on their evaluation as of a date within90 days of the filing date of this Annual Report on Form 10-K, the Company’sprincipal executive officer and principal financial officer have concluded thatthe Company’s disclosure controls and procedures (as defined in Rules 13a-14(c)and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)are effective to ensure that information required to be disclosed by theCompany in reports that it files or submits under the Exchange Act is recorded,processed, summarized and reported within the time periods specified inSecurities and Exchange Commission rules and forms.

 

(b)           **Changes in Internal Controls**

 

There were no significant changes in theCompany’s internal controls or in other factors that could significantly affectthe controls subsequent to the date of their evaluation.  There were no significant deficiencies ormaterial weaknesses, and therefore there were no corrective actions taken.

 

**PART III**

 

##### **ITEM 10.  DIRECTORS AND EXECUTIVEOFFICERS OF THE REGISTRANT**

 

Information about directors and executiveofficers of the Company will be included in the Company’s definitive ProxyStatement which is incorporated herein by reference.  In addition, information on Section 16(a)reporting requirements may be found under “Compliance with Section 16(a)of the Exchange Act” which is incorporated herein by reference in the Company’sdefinitive Proxy Statement.

 

##### **ITEM 11.  EXECUTIVE COMPENSATION**

 

Compensation of Directorswill be included in the Company’s definitive Proxy Statement under “DirectorCompensation” which is incorporated herein by reference.

 

34

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**ITEM 12.  SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

 

Item 12 will be included inthe Company’s definitive proxy statement under the caption “Security Ownershipof Certain Beneficial Owners and Management” which is incorporated herein byreference.

 

For purposes of calculating theaggregate market value of the voting stock held by non-affiliates as set forthon the cover page of this Form 10-K, the Company has assumed that affiliatesare those persons identified in the portion of the definitive Proxy Statementidentified above and treasury stock held by the Company.

 

##### **ITEM 13.  CERTAIN RELATIONSHIPSAND RELATED TRANSACTIONS**

 

Item 13 is included in Note K and N to thefinancial statements.

 

##### **ITEM 14.  PRINCIPAL ACCOUNTANTFEES AND SERVICES**

 

Item14 will be included in the Company’s definitive proxy statement, which isincorporated by reference.

 

**PART IV**

 

**ITEM 15. EXHIBITS, STATEMENT SCHEDULES AND REPORTS ON FORM 8-K**

 

(a)           **FinancialStatements, Schedules and Exhibits**

 

1.             Financialstatements and report of Moss Adams L.L.P. and Eide Bailly LLP (f.k.a.Balukoff, Lindstrom & Co. P.A.—joined Eide Bailly LLP November 1,2004)

 
| (a)    | Report of Independent Registered Public Accounting Firm –                                     |
|--------|----------------------------------------------------------------------------------------------------|
|   | Moss Adams L.L.P. for T. J.T., Inc.                                                                |
|   | Independent Auditors’ Report – Balukoff,  Lindstrom & Co., P.A.                      |
|   | Balance Sheets – September 30, 2004  and 2003                                            |
|   | Statements of Operation – September 30, 2004, 2003 and 2002                              |
|   | Statements of Cash Flows – September 30, 2004, 2003 and 2002                             |
|   | Statements of Changes in Shareholders’  Equity – September 30, 2002, 2003, and 2004 |
|   |                                                                                               |
| (b)    | NewCo Tire and Axle, L.L.C.                                                                        |
|   | Balance Sheets – October 31, 2004 and  2003                                              |
|   | Statements of Operation – October 31,  2004 and 2003                                     |
|   | Statement of Cash Flows – October 31,  2004 and 2003                                     |
|   | Notes to the Financial Statements –  October 31, 2004 and 2003                           |
|   | (To be filed by Amendment to 10-K no later  than January 31, 2005)                            |

 

2.             Financialstatement schedules

 

Other schedules are omitted because they arenot required or because the information is included in the financial statementsor notes thereto

 

35

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3.             Exhibits

 

3.1           Articlesof Incorporation of T.J.T., Inc., a Washington corporation;  asamended November 9, 1995, incorporated by reference to Exhibit 3.1 to theRegistrant’s Form SB-2 Registration Statement dated October 20, 1995, asamended December 6, 1995 (Commission File No. 33-98404).

 

3.2           Bylawsof T.J.T., Inc., a Washington corporation; as amended November 11, 2003and attached hereto as Exhibit 3.2, as amended May 12, 1998, incorporated byreference to Exhibit 3.2 to the Registrant’s Form SB-2 Registration Statementdated October 20, 1995, as amended December 6, 1995 (Commission FileNo. 33-98404).

 

4.1           Specimen Common StockCertificate; incorporated by reference to Exhibit 4.1 to the Registrant’s FormSB-2 Registration Statement dated October 20, 1995, as amended December 6,1995 (Commission File No. 33-98404).

 

4.2           SpecimenRedeemable Common Stock Purchase Warrant; incorporated by reference to Exhibit4.2 to the Registrant’s Form SB-2 Registration Statement dated October 20,1995, as amended December 6, 1995 (Commission File No. 33-98404).

 

4.3           Formof Underwriter’s Warrant Agreement; incorporated by reference to Exhibit 4.3 tothe Registrant’s Form SB-2 Registration Statement dated October 20, 1995,as amended December 6, 1995 (Commission File No. 33-98404).

 

4.4           Formof Warrant Agreement issued to 1995 Private Placement Investors in October 1995;incorporated by reference to Exhibit 4.4 to the Registrant’s Form SB-2Registration Statement dated October 20, 1995, as amended December 6,1995 (Commission File No. 33-98404).

 

4.5           Formof Registration Rights Agreement issued in connection with 1995 Privateplacement; incorporated by reference to Exhibit 4.5 to the Registrant’s FormSB-2 Registration Statement dated October 20, 1995, as amended December 6,1995 (Commission File No. 33-98404).

 

23.1*       Consentof Independent Public Auditors - 2004

 

23.2*       Consent of Independent Public Auditors -2003 & 2002

 

31.1*       CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302of the Sarbanes-Oxley Act of 2002.

 

31.2*       CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302of the Sarbanes-Oxley Act of 2002.

 

32.1*       CertificationPursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906of the Sarbanes-Oxley Act of 2002.

 

32.2*       CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906of the Sarbanes-Oxley Act of 2002.

 

----

*              Filedherewith

 

36

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(b)           **Reports on Form 8-K. **TheCompany issued a Form 8-K on December 3, 2004.  The purpose for the filing was to furnish thepress release dated December 3, 2004 announcing our financial results forthe three and twelve months ended September 30, 2004.

 

**SIGNATURES**

 

In accordance with Section 13 or 15(d)of the Exchange Act, the Registrant caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 
|   |                   |   | T.J.T., INC.                                                                      |
|--------|------------------------|--------|-----------------------------------------------------------------------------------|
|   |                   |   | **Registrant**                                                                    |
|   |                   |   | ** **                                                                        |
| Date:  | December 29, 2004 | By:    | /s/ Terrence J. Sheldon                                                           |   |
|   |                   |   | Terrence J. Sheldon, President and  Chief Executive Officer                       |
|   |                   |   |                                                                              |
| Date:  | December 29, 2004 | By:    | /s/ Larry B. Prescott                                                             |   |
|   |                   |   | Larry B. Prescott, Senior Vice President,  Treasurer  and Chief Financial Officer |
|   |                   |   |                                                                              |
| Date:  | December 29, 2004 | By:    | /s/ Cindy M. Truchot                                                              |   |
|   |                   |   | Cindy M.  Truchot, Vice President and Controller                                  |
|        |                        |        |                                                                                   |  |  |

 

In accordance with the Exchange Act, this report has been signed belowby the following persons on behalf of the Registrant and in the capacities andon the dates indicated.

 
| Date:  | December 29, 2004 | By:    | /s/ Terrence J. Sheldon                                                                           |   |
|--------|------------------------|--------|---------------------------------------------------------------------------------------------------|--------|
|   |                   |   | Terrence J. Sheldon, President, Chief  Executive  Officer, and Chairman of the Board of Directors |
|   |                   |   |                                                                                              |
| Date:  | December 29, 2004 | By:    | /s/Ulysses B. Mori                                                                                |   |
|   |                   |   | Ulysses B. Mori, Senior Vice President and  Corporate Sales Manager and Director                  |
|   |                   |   |                                                                                              |
| Date:  | December 29, 2004 | By:    | /s/Larry B. Prescott                                                                              |   |
|   |                   |   | Larry B. Prescott, Senior Vice President,  Treasurer, Chief Financial Officer and Director        |
|   |                   |   |                                                                                              |
| Date:  | December 29, 2004 | By:    | /s/Arthur J. Berry                                                                                |
|   |                   |   | Arthur J.  Berry, Director                                                                        |
|   |                   |   |                                                                                              |
| Date:  | December 29, 2004 | By:    | /s/Jerome B. Light                                                                                |
|   |                   |   | Jerome B.  Light, Director                                                                        |
|   |                   |   |                                                                                              |
| Date:  | December 29, 2004 | By:    | /s/Larry E. Kling                                                                                 |
|   |                   |   | Larry E.  Kling, Director                                                                         |
|   |                   |   |                                                                                              |
| Date:  | December 29, 2004 | By:    | /s/Susan M. Allison                                                                               |
|   |                   |   | Susan M.  Allison, Director                                                                       |

 

37

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|   |                   |   |                        |
|--------|------------------------|--------|-----------------------------|
| Date:  | December 29, 2004 | By:    | /s/Robert B. Siegel         |
|   |                   |   | Robert B.  Siegel, Director |

 

38

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**INVESTOR INFORMATION**

 

**Corporate Headquarters**

 

T.J.T., Inc.

843 North Washington

P.O. Box 278

Emmett, Idaho 83617

 

**Stock Exchange Listing**

** **

T.J.T., Inc.’s common stock is traded on the OTC Bulletin Board underthe symbol AXLE.

 

**Public Information**

** **

Financial analysts, stockbrokers, interested investors and others canobtain additional information by contacting:

 

Larry B. Prescott

Chief Financial Officer

(208) 365-5321

 

**Transfer Agent**

** **

Corporate Stock Transfer

3200 Cherry Creek Drive South

Suite 430

Denver, Colorado 80209

(303) 282-4800

 

**Annual Meeting**

** **

The annual shareholders meeting of T.J.T., Inc. will be held:

Tuesday, February 22, 2005

10:00 a.m., Mountain Standard Time

Owyhee Plaza

Boise, Idaho

 

Proxy material will be mailed to shareholders of record prior to themeeting.

 

**Independent PublicAccountants**

** **

Moss Adams LLP

Seattle, WA  98154-1199

 

**Legal Counsel**

 

Moffatt, Thomas, Barrett, Rock& Fields, Chtd.

Boise, Idaho

 

39

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T.J.T., INC. — FORM 10-K

**INDEX TOATTACHED EXHIBITS**

 
| Consent of Independent Auditors 2004 -  Exhibit 23.1                                      |   |
|-------------------------------------------------------------------------------------------|--------|
|                                                                                      |   |
| Consent of Independent Auditors 2003 &  2002 – Exhibit 23.2                      |   |
|                                                                                      |   |
| Certification Pursuant to Section 302  of the Sarbanes-Oxley Act – Exhibit 31.1 |   |
|                                                                                      |   |
| Certification Pursuant to Section 302  of the Sarbanes-Oxley Act – Exhibit 31.2 |   |
|                                                                                      |   |
| Certification Pursuant to Section 906  of the Sarbanes-Oxley Act - Exhibit 32.1      |   |
|                                                                                      |   |
| Certification Pursuant to Section 906  of the Sarbanes-Oxley Act - Exhibit 32.2      |   |

 

40

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