SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended February 28, 2002 Commission File Number 0-7795 KNUSAGA CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 62-1004034 (I.R.S.) Employer Identification Number 3578 S. VAN DYKE ALMONT, MI 48803 (Address of principal executive office and zip code) Registrant's telephone number (include area code): (810) 798-8567 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (D) of the Securities Exchange Act of 1934 during the preceding twelve months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. X YES NO ---- ---- Shares of Common Stock Par Value $.01, outstanding: 7,000,000. -1- RESULTS OF OPERATIONS The Company's operations are classified into two principal reportable segments, tubing and seat tracks, that provide different products or services. Separate management of each segment is required because each business unit is subject to different marketing, production and technology strategies. Combined net sales increased 2.7% in the second quarter of the fiscal year ending August 2002 to $2,236,530 from $2,176,820 a year ago. This is a result of a strong recovery in the motor home market served by the registrant's seat track business. For the second quarter, sales for this segment increased 58.0% to $1,126,879 from $713,420 a year ago. The heavy truck market served by our tubing segment is in the second year of a sharp decline. According to "Automotive News" February 2002 is the 23rd consecutive month that heavy duty truck sales dropped from their year earlier levels. For the second quarter ending February 28, 2002, the registrant's tube sales to this segment declined 24.2% to $1,109,651 from $1,463,400 a year ago. For the six months ending February 28, 2002, combined sales declined 3.0% to $4,566,602 from $4,705,959 in the year ago period as a result of the weak first quarter of the current fiscal year. The registrant operated at a $49,246 profit in the second quarter of the 2002 fiscal year ending February 28, 2002 versus a loss of $74,213 in the year ago period as a result of the increased sales revenue. For the six months ending February 28, 2002, profit was $98,788 versus a loss of $172,353 in the year ago period. Below is summarized segmental data for the second quarters and six months ending February 28, 2002 and February 28, 2001. - ----------------------------------------------------------------------------------------------------------- 2ND QTR TUBING SEAT TRACK TOTAL - ----------------------------------------------------------------------------------------------------------- 2002 2001 2002 2001 2002 2001 - ----------------------------------------------------------------------------------------------------------- REVENUE 1,109,651 1,463,400 1,126,879 713,420 2,236,530 2,176,820 - ----------------------------------------------------------------------------------------------------------- PROFIT (138,601) (120,666) 187,847 46,458 49,246 (74,208) - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- 6 MONTHS TUBING SEAT TRACK TOTAL - ----------------------------------------------------------------------------------------------------------- 2002 2001 2002 2001 2002 2001 - ----------------------------------------------------------------------------------------------------------- REVENUE 2,615,503 3,248,458 1,951,099 1,457,501 4,566,602 4,705,959 - ----------------------------------------------------------------------------------------------------------- PROFIT (198,170) (314,312) 296,958 141,959 98,788 (172,353) - ----------------------------------------------------------------------------------------------------------- Selling, general and administrative expenses increased 14.4% in the second quarter ending February 28, 2002, to $290,323 from $253,783 in the year ago period as a result of the increased sales activity. For the six months ending February 28, 2002, these expenses increased 5.4% to $582,368 from $551,032 in the year ago period. -2- LIQUIDITY AND SOURCES OF CAPITAL The Registrant has a $1,250,000 line of credit with Standard Federal Bank, with interest payable monthly at the Bank's Prime Rate plus 1%. This line of credit is evidenced by a note which is secured by a security interest/mortgage in all of the Registrant's assets. This line of credit is due October 1, 2002. At February 28, 2002, the outstanding balance was $841,761.42 and the applicable interest rate was 4.75%. CONTINGENT MATTERS There are no contingencies or consequential uncertainties known that will materially affect the financial information as presented. -3- KNUSAGA CORPORATION BALANCE SHEET (UNAUDITED) FEBRUARY 28, 2002 ASSETS February 28, 2002 August 31, 2001 CASH $ 125,893 $ 62,753 ACCOUNTS RECEIVABLE $ 1,642,032 $ 1,538,348 ACCOUNTS RECEIVABLE -- OTHER $ 6,133 $ 3,598 INVENTORIES $ 1,097,514 $ 1,010,533 REFUNDABLE TAXES $ 0 $ 205,566 PREPAID EXPENSES $ 81,811 $ 44,600 ----------- ----------- TOTAL CURRENT ASSETS $ 2,953,376 $ 2,865,398 NET PROPERTY AND EQUIPMENT $ 1,911,129 $ 2,053,985 OTHER ASSETS DEPOSITS $ 7,050 $ 10,579 INVESTMENT IN JOINT VENTURES $ 110,987 $ 99,291 GOODWILL, NET OF AMORTIZATION $ 5,650 $ 6,652 ----------- ----------- TOTAL OTHER ASSETS $ 123,687 $ 116,522 ----------- ----------- TOTAL ASSETS $ 4,988,192 $ 5,035,905 =========== =========== LIABILITIES ACCOUNTS PAYABLE $ 552,477 $ 715,712 NOTES PAYABLE $ 1,405,500 $ 1,667,884 ACCRUED LIABILITIES $ 1,207,212 $ 863,172 ----------- ----------- TOTAL CURRENT LIABILITIES $ 3,165,189 $ 3,246,768 LONG TERM DEBT $ 633,898 $ 698,819 DEFERRED TAXES $ 36,500 $ 36,500 ----------- ----------- TOTAL LIABILITIES $ 3,835,587 $ 3,982,087 STOCKHOLDERS EQUITY STOCK $ 70,000 $ 70,000 PREFERRED STOCK $ 175,000 $ 175,000 ADDITIONAL PAID IN CAPITAL $ 366,365 $ 366,365 RETAINED EARNINGS $ 648,583 $ 549,796 NOTE RECEIVABLE SHAREHOLDER ($ 107,343) ($ 107,343) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY $ 1,152,605 $ 1,053,818 ----------- ----------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 4,988,192 $ 5,035,905 =========== =========== -4- KNUSAGA CORPORATION STATEMENT OF INCOME (UNAUDITED) FOR THREE AND SIX MONTH PERIOD ENDED FEBRUARY 28, 2002 AND FEBRUARY 28, 2001 (UNAUDITED) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, 2002 2001 2002 2001 NET SALES $ 2,236,530 $ 2,176,820 $ 4,566,602 $ 4,705,959 COST OF GOODS SOLD $ 1,809,613 $ 1,985,869 $ 3,724,727 $ 4,194,646 ----------- ----------- ----------- ----------- GROSS PROFIT $ 426,917 $ 190,951 $ 841,875 $ 511,313 SELLING, GENERAL AND ADMINISTRATIVE $ 290,323 $ 253,783 $ 582,368 $ 551,032 EXPENSES MISC. INCOME (EXPENSE) ($ 23,692) ($ 32,429) ($ 60,246) ($ 174,687) ----------- ----------- ----------- ----------- INCOME (LOSS) BEFORE TAXES $ 112,902 ($ 95,261) $ 199,261 ($ 215,012) PROVISION FOR FEDERAL INCOME TAXES $ 63,656 ($ 21,053) $ 100,473 ($ 42,659) ----------- ----------- ----------- ----------- NET INCOME BEFORE EXTRAORDINARY ITEMS $ 49,246 ($ 74,208) $ 98,788 ($ 172,353) EXTRAORDINARY ITEMS: $-0- $-0- $ 0 $ 0 ----------- ----------- ----------- ----------- NET INCOME $ 49,246 ($ 74,208) $ 98,788 ($ 172,353) PAR SHARE OF COMMON STOCK AND COMMON STOCK EQUIVALENTS: AVERAGE OUTSTANDING 7,000,000 7,000,000 7,000,000 7,000,000 SHARES .007 -0.011 0.013 -0.025 THE FINANCIAL STATEMENTS INCLUDED IN THIS REPORT REFLECT ALL ADJUSTMENTS, WHICH, IN THE OPINION OF REGISTRANT'S MANAGEMENT, ARE NECESSARY FOR FAIR PRESENTATION. THE FINANCIAL STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE FOOTNOTES WHICH ARE A PART OF REGISTRANT'S AUDITED FINANCIAL STATEMENTS CONTAINED IN REGISTRANT'S MOST RECENTLY FILED ANNUAL REPORT ON FORM 10KSB. -5- KNUSAGA CORPORATION STATEMENT OF CASH FLOW (UNAUDITED) THREE AND SIX MONTHS PERIOD ENDED FEBRUARY 28, 2002 AND FEBRUARY 28, 2001 (UNAUDITED) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED FEBRUARY FEBRUARY FEBRUARY FEBRUARY 28, 2002 28, 2001 28, 2002 28, 2001 NET INCOME $ 49,246 ($ 74,208) $ 98,788 ($172,353) DEPRECIATION & AMORTIZATION $ 87,487 $ 92,580 $ 145,566 $ 182,019 (INCREASE) DECREASE IN: ACCOUNTS RECEIVABLE ($230,716) $ 128,312 ($106,219) $ 107,920 INVENTORIES ($ 60,037) ($ 5,400) ($ 86,981) ($ 64,571) REFUNDABLE TAXES $ 205,566 PREPAID EXPENSES ($ 26,696) ($ 57,422) ($ 37,211) ($ 50,162) OTHER ASSETS $ 501 $ 501 $ 3,529 $ 1,002 INCREASE (DECREASE) IN: ACCOUNTS PAYABLE ($ 2,404) ($323,437) ($163,235) ($210,318) ACCRUED LIABILITIES $ 451,436 ($ 15,174) $ 344,040 ($ 65,398) --------- CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES $ 268,817 (254,248) $ 403,843 ($271,861) --------- INVESTMENT ACTIVITIES PURCHASES OF EQUIPMENT ($ 8,768) $ 20,203 ($ 1,708) ($ 23,083) INVESTMENT IN JOINT VENTURES ($ 5,459) $ 33,593 $ 11,696 $ 33,593 --------- CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES ($ 14,227) $ 53,796 ($ 13,404) $ 10,510 --------- FINANCING ACTIVITIES ($181,148) $ 96,691 ($327,299) $ 3,849 --------- PAYMENT OF NOTES CASH USED FOR FINANCING ACTIVITIES ($181,148) $ 96,691 ($327,299) $ 3,849 --------- NET INCREASE (DECREASE) $ 73,442 ($103,761) $ 63,140 ($256,596) BEGINNING CASH $ 52,451 $ 296,078 $ 62,753 $ 448,913 --------- ENDING CASH $ 125,893 $ 192,317 $ 125,893 $ 192,317 ========= -6- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KNUSAGA CORPORATION By: James Musser --------------------------------------- President, Duly Authorized Officer and Principal Accounting Officer Dated: April 12, 2002 --------------------------------------- -7-