SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended November 30, 2002
Commission File Number 0-7795
KNUSAGA CORPORATION
(Exact name of Registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
38-3601122
(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 $.001, outstanding: 7,175,000.
RESULTS OF OPERATIONS
Net sales decreased 31.4% in the first quarter of the fiscal year ending August
2003 to $1,598,184 from $2,330,072 a year ago. This is a result of lost market
share to competitors in both the truck tubing and seat track business segments.
As a result of the 31.4% reduction in sales versus the year ago quarter, the
registrant had an operating loss of $18,144 offset by a gain on the sale of
equipment of $53,749 resulting in an after tax profit of $23,514 in the first
quarter of the 2003 fiscal year versus a profit of $45,137 in the first quarter
a year ago. For the same reason cost of sales increased to 86.9% in the first
quarter of fiscal 2003 from 82.5% in the first quarter of fiscal 2002, and
selling, general and administrative expenses decreased 29.0% to $205,880 in the
first quarter of fiscal 2002 versus $289,810 in the year ago quarter.
The Company's operations are classified into two principal reportable segments
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. The tubing business services the heavy
truck market and the seat track business services the recreational vehicle
market. Below is summarized segmental data for the three months ended November
30, 2002 and 2001.
TUBING SEAT TRACK TOTAL
2002 2001 2002 2001 2002 2001
--------- --------- --------- -------- --------- ---------
External Revenue 1,130,982 1,505,852 467,202 824,220 1,598,184 2,330,072
Intersegment Revenue 0 0 0 0 0 0
Profit (loss) (13,569) (63,974) 37,083 109,111 23,514 45,137
LIQUIDITY AND SOURCES OF CAPITAL
Operations during the quarter produced $499,824 of cash, equipment sales
provided $59,895 and there was a reduction in bank debt of $248,959 resulting in
a positive cash flow of $264,638 for the quarter. The Company's agreements with
its bank lender currently mature January 31, 2003.
CONTINGENT MATTERS
There are no contingencies or consequential uncertainties known that will
materially affect the financial information as presented.
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KNUSAGA CORPORATION
BALANCE SHEET (UNAUDITED)
NOVEMBER 30, 2002
ASSETS November 30, 2002
CASH $ 400,166
ACCOUNTS RECEIVABLE $ 546,105
ACCOUNTS RECEIVABLE -- OTHER $ 143,558
INVENTORIES $ 675,287
PREPAID EXPENSE $ 38,776
TOTAL CURRENT ASSETS $1,803,893
NET PROPERTY, PLANT AND EQUIPMENT $1,792,239
OTHER ASSETS
DEPOSITS 7,050
INVESTMENTS IN JOINT VENTURES 126,066
GOODWILL, NET OF AMORTIZATION 4,147
TOTAL ASSETS $3,733,395
LIABILITIES
ACCOUNTS PAYABLE $ 258,505
NOTES PAYABLE $ 851,273
ACCRUED LIABILITIES $ 809,037
TOTAL CURRENT LIABILITIES $1,918,815
LONG TERM DEBT $ 442,403
DEFERRED TAXES 57,300
TOTAL LIABILITIES $2,418,518
STOCKHOLDERS EQUITY (DEFICIENCY)
Common Stock, par value $.001 per share authorized
7,175,000 shares issued and outstanding $ 7,175
ADDITIONAL PAID-IN CAPITAL $ 604,190
RETAINED EARNINGS $ 703,512
TOTAL STOCKHOLDERS EQUITY $1,314,877
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $3,733,395
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KNUSAGA CORPORATION
STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, 2002 AND NOVEMBER 30, 2001
(UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, 2002 NOVEMBER 30, 2001
NET SALES $ 1,598,184 $ 2,330,072
COST OF GOODS SOLD $ 1,388,591 $ 1,921,752
-----------
GROSS PROFIT $ 209,593 $ 408,320
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $ 205,880 $ 289,810
MISC. INCOME (EXPENSE) $ 31,892 ($ 36,555)
-----------
INCOME (LOSS) BEFORE TAXES $ 35,605 $ 81,955
PROVISION FOR FEDERAL INCOME TAXES $ 12,091 $ 36,818
-----------
NET INCOME BEFORE EXTRAORDINARY ITEMS $ 23,514 $ 45,137
EXTRAORDINARY ITEMS: $-0- $-0-
TAX BENEFIT OF OPERATING LOSS CARRYFORWARD
----------- -----------
NET INCOME $ 23,514 $ 45,137
PAR SHARE OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:
AVERAGE OUTSTANDING SHARES 7,175,000 7,000,000
.003 .006
THE FINANCIAL STATEMENTS INCLUDED IN THIS REPORT REFLECT ALL ADJUSTMENTS, WHICH,
IN THE OPINION OF MANAGEMENT, ARE NECESSARY FOR FAIR PRESENTATION. THESE
FINANCIAL STATEMENTS SHOULD BE READ IN CONNECTION WITH THE FOOTNOTES THAT ARE A
PART OF THE COMPANY'S AUDITED FINANCIAL STATEMENTS CONTAINED IN ITS MOST
RECENTLY FILED ANNUAL REPORT ON FORM 10KSB.
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KNUSAGA CORPORATION
STATEMENT OF CASH FLOW (UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, 2002 AND NOVEMBER 30, 2001
(UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, 2002 NOVEMBER 30, 2001
CASH PROVIDED BY (USED FOR) OPERATIONS
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS, $ 23,514 $ 45,137
EXCHANGE LOSS
NON-CASH EXPENSE INCLUDED IN NET INCOME $ 73,182 $ 67,154
DEPRECIATION
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLE $ 623,111 $ 124,497
INVENTORIES $ 25,035 ($ 26,944)
REFUNDABLE TAXES $ 40,718
PREPAID EXPENSES $ 18,622 ($ 2,984)
OTHER ASSETS 3,529
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE ($ 155,294) ($ 192,375)
ACCRUED LIABILITIES ($ 108,346) $ 97,601
NET CASH PROVIDED BY (USED FOR) $ 499,824 $ 156,333
OPERATING ACTIVITIES
INVESTING ACTIVITIES
PURCHASES OF EQUIPMENT ($ 46,002) $ 7,061
PROCEEDS FROM SALE OF EQUIPMENT 59,895
INVESTMENT IN JOINT VENTURES (120) ($ 16,002)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 13,773 ($ 8,941)
FINANCING ACTIVITIES
PAYMENT OF NOTES ($ 248,959) ($ 157,694)
INCREASE (DECREASE) IN CASH $ 264,638 ($ 10,302)
BALANCE AT BEGINNING OF PERIOD $ 135,528 $ 62,753
BALANCE AT END OF PERIOD $ 400,166 $ 52,451
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FORWARD LOOKING STATEMENTS
Certain sections of this quarterly report contain statements reflecting
the Registrant's views about its future performance and constitute
"forward-looking" statements" under the Private Securities Litigation Reform Act
of 1995. Such statements can be identified by the use of terminology such as
"will," "anticipate," "estimate," "expect," "intends," or similar words. These
views involve risks and uncertainties that are difficult to predict and,
accordingly, the Registrant's actual results may differ materially from the
results discussed in such forward-looking statements. Readers should consider
that various factors in the United States and abroad, including changes in
general economic conditions, competitive market conditions and pricing
pressures, relationships with key customers, industry consolidation of vehicle
and truck suppliers, shifts in distribution, currency exchange rates and other
factors discussed in the Registrant's other filings with the Securities and
Exchange Commission, may affect the Registrant's performance. The Registrant
undertakes no obligation to update publicly any forward-looking statements as a
result of new information, future events or otherwise.
Supplemental Item. Controls and Procedures
Based on their most recent evaluation, which was completed within 90
days of the filing of this Form 10-QSB, the registrant's Chief Executive Officer
and Chief Financial Officer believe the registrant's disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are effective to
ensure that information required to be disclosed by the registrant in this
report is accumulated and communicated to the registrant's management,,
including its principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure. There were
no significant changes in these controls subsequent to the date of their
evaluation and there were no corrective actions with regard to significant
deficiencies and material weaknesses.
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 KNUSAGA CORPORATION
By: James G. Musser By: Jerry Luptak
------------------------------ ----------------------------------
Director/President Vice President and Principal
(Principal Executive Officer Financial Officer
and Controller)
Dated: January 17, 2003 Dated: January 17, 2003
---------------------------- -------------------------------
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KNUSAGA CORPORATION
CERTIFICATIONS PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, James G. Musser, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of KnuSaga
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant is made known to us, particularly during
the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: January 17, 2003
/s/ James G. Musser
- -----------------------------
James G. Musser
Chief Executive Officer
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KNUSAGA CORPORATION
CERTIFICATIONS PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Jerry Luptak, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of KnuSaga
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant is made known to us, particularly during
the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: January 17, 2003
/s/ Jerry Luptak
- -----------------------------
Jerry Luptak
Chief Financial Officer
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10-Q EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
EX-99.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
EX-99.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002