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 November 30, 2003
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: 10,862,773.
RESULTS OF OPERATIONS
Net sales had a small 0.4% increase in the first quarter of the fical year
ending August 2004 to $1,604,543 from $1,598,184 a year ago. The Registrant'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 stratigies. The tubing business segment services the heavy truck
market and the seat track business segment services the recreational vehicle
market. Below is summarized segmental data for the three months ended November
30, 2003 and 2002.
- ------------------------ --------------------------------- ----------------------------------- -----------------------------------
Tubing Seat Track Total
- ------------------------ --------------------------------- ----------------------------------- -----------------------------------
2003 2002 2003 2002 2003 2002
- ------------------------ --------------- ----------------- ----------------- ----------------- ----------------- -----------------
External Revenue 1,052,947 1,130,982 551,596 467,202 1,604543 1,598,184
- ------------------------ --------------- ----------------- ----------------- ----------------- ----------------- -----------------
Intersegment Revenue 0 0 0 0 0 0
- ------------------------ --------------- ----------------- ----------------- ----------------- ----------------- -----------------
Profit (loss) (34,613) (13,569) 74,320 37,083 39,707 23,514
- ------------------------ --------------- ----------------- ----------------- ----------------- ----------------- -----------------
The tubing segment had a 6.9% decrease in net sales in the first quarter to
$1,052,947 from $1,130,982 a year ago. This was a result of continuing increased
competition at the Registrant's major customer. As a result of the drop in
sales, net loss from the tubing segment in the first quarter dropped to $34,613
from $13,569 a year ago.
The seat track segment had an increase of 18.1% in net sales in the first
quarter to $551,569 from $467,202 a year ago reflecting the improving
recreational vehicle market, however this increase is not expected to continue
because business has been lost to a competitor at the Registrant's major
customer. The increase sales improved net income 100.4% in the first quarter to
$74.320 from $37,083 a year ago.
Overall the Registrant's net income improved 66.2% in the first quarter to
$39,707 from $23,514 a year ago. Contributing to the improvement in net income
was a reduction of 14.1% in selling, general, and administrative costs in the
first quarter to $165,888 from $205,880 a year ago.
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 of all
of the Registrant's assets. This line of credit is due January 15, 2004. As of
November 30, 2003, the outstanding balance was $354,761.42 and the applicable
interest was 5.0%.
CONTINGENT MATTERS
There are no contingencies or consequential uncertainties known that will
materially affect the financial information as presented.
-2-
KNUSAGA CORPORATION
BALANCE SHEET (UNAUDITED)
NOVEMBER 30, 2003
ASSETS November 30, 2003
CASH $ 86,777
ACCOUNTS RECEIVABLE $ 632,579
ACCOUNTS RECEIVABLE - OTHER $ 230,881
ACCRUED INTEREST RECEIVABLE $ 2,446
INVENTORIES $ 657,517
REFUNDABLE TAXES $ 42,689
PREPAID EXPENSE $ 56,468
DEFERRED TAX ASSET $ 47,600
TOTAL CURRENT ASSETS
$1,756,957
NET PROPERTY, PLANT AND EQUIPMENT $1,618,847
OTHER ASSETS
DEPOSITS $ 7,050
INVESTMENT IN JOINT VENTURES $ 110,356
INTANGIBLES $ 60,961
TOTAL ASSETS $3,554,171
LIABILITIES
ACCOUNTS PAYABLE $ 344,484
NOTES PAYABLE $ 566,350
ACCRUED LIABILITIES $ 332,400
TOTAL CURRENT LIABILITIES $1,243,234
LONG TERM DEBT $ 257,563
DEFERRED TAXES $ 63,600
TOTAL LIABILITIES $1,564,397
STOCKHOLDERS EQUITY (DEFICIENCY)
Common Stock, par value $.001 per share authorized
$10,863 10,862,773 shares issued and outstanding
ADDITIONAL PAID-IN CAPITAL $1,522,446
RETAINED EARNINGS $ 456,465
TOTAL STOCKHOLDERS EQUITY $1,989,774
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $3,554,171
-3-
KNUSAGA CORPORATION
STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, 2003 AND NOVEMBER 30, 2002
(UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
2003 2002
NET SALES $ 1,604,543 $ 1,598,184
COST OF GOODS SOLD $ 1,361,816 $ 1,388,591
GROSS PROFIT $ 242,727 $ 209,593
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $ 165,888 $ 205,880
OPERATING INCOME
$ 76,839 $ 3,713
OTHER INCOME (EXPENSE)
INTEREST EXPENSE ($ 11,005) ($ 17,152)
MISC. INCOME ($ 6,053) $ 120
GAIN ON SALE OF ASSET -0- $ 48,924
TOTAL OTHER INCOME (EXPENSE) ($ 17,058) $ 31,892
INCOME (LOSS) BEFORE TAXES $ 59,781 $ 35,605
PROVISION FOR FEDERAL INCOME TAXES $ 20,074 $ 12,091
------------ ------------
NET INCOME BEFORE EXTRAORDINARY ITEMS $ 39,707 $ 23,514
EXTRAORDINARY ITEMS: $-0- $-0-
TAX BENEFIT OF OPERATING
LOSS CARRYFORWARD -- --
NET INCOME $ 39,707 $ 23,514
PAR SHARE OF COMMON STOCK AND COMMON STOCK
EQUIVALENTS:
AVERAGE OUTSTANDING SHARES 10,862,773 7,175,000
.004 .003
THE FINANCIAL STATEMENTS INCLUDED IN THIS REPORT
REFLECT ALL ADJUSTMENTS, WHICH, IN THE OPINION OF
MANAGEMENT, ARE NECESSARY FOR FAIR PRESENTATION.
-4-
KNUSAGA CORPORATION
STATEMENT OF CASH FLOW (UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, 2003 AND NOVEMBER 30, 2002
(UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
2003 2002
CASH PROVIDED BY (USED FOR) OPERATIONS
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS, $ 39,707 $ 23,514
EXCHANGE LOSS
NON-CASH EXPENSE INCLUDED IN NET INCOME $ 62,025 $ 73,182
DEPRECIATION
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLE $ 13,173 $ 623,111
INVENTORIES ($ 49,812) $ 25,035
REFUNDABLE TAXES $ 20,074 $ 18,622
PREPAID EXPENSES ($ 5,030) - 0 -
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE $ 30,075
ACCRUED LIABILITIES ($ 10,319) ($155,294)
($108,346
NET CASH PROVIDED BY (USED FOR) $ 99,893 $ 499,824
OPERATING ACTIVITIES
INVESTING ACTIVITIES
PURCHASES OF EQUIPMENT ($ 16,079) ($ 46,002)
PROCEEDS FROM SALE OF EQUIPMENT - 0 - $ 59,895
INVESTMENT IN JOINT VENTURES - 0 - ($ 120)
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES ($ 16,079) $ 13,773
FINANCING ACTIVITIES
PAYMENT OF NOTES ($ 46,953) ($248,959)
INCREASE (DECREASE) IN CASH $ 36,861 $ 264,638
BALANCE AT BEGINNING OF PERIOD $ 49,916 $ 135,528
BALANCE AT END OF PERIOD $ 86,777 $ 400,166
-5-
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.
Part II - OTHER INFORMATIONS
- ----------------------------
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits: Description
31.01 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.02 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.01 Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.02 Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
-6-
SIGNATURES
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: /s/ James G. Musser By: /s/ Jerry Luptak
------------------------------- --------------------------------
James G. Musser Jerry Luptak
Director/President Vice President and
(Principal Executive Officer Principal Financial
and Controller) Officer
Dated: January 12, 2004 Dated: January 12, 2004
-------------------------- ---------------------------
-7-