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 February 29, 2004
Commission File Number 0-7795
KNUSAGA CORPORATION
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(Exact name of Registrant as specified in its charter)
NEVADA
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(State or other jurisdiction of incorporation or organization)
38-3601122
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(I.R.S. Employer Identification Number)
3578 S. VAN DYKE
ALMONT, MI 48003
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(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
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Shares of Common Stock Par Value $.001, outstanding: 10,862,773.
RESULTS OF OPERATIONS
The Company's operations are classified into two principal reportable segments,
tubing and seat tracks.
Combined net sales increased 12.1% in the second quarter ended February 29, 2004
of the fiscal year ending August 2004 to $1,302,280 from $1,161,437 a year ago.
Sales for the tubing segment in the second quarter increased by 28.2% to
$1,040,025 from $811,322 a year ago. This reflects the improvement in the heavy
truck market from the depressed levels of the last two years.
In the second quarter sales in the seat track segment, which serves the Class A
motorhome market, declined 25.1% to $262,255 from $350,115 a year ago. This is a
result of the registrant's major customer switching to a lower cost product from
a competitor. The registrant has delivered prototypes of a new seat track design
to two major potential customers. This new design could enter production in time
for the 2005 model motorhome production which begins in the Fall of this year.
For the six months ended February 29, 2004, combined sales increased 5.3% to
$2,906,824 from $2,759,631 in the year ago period for the same reasons as stated
above.
The registrant operated at a loss of $90,982 in the second quarter of the 2004
fiscal year ended February 29, 2004 versus a loss of $81,346 in the year ago
period. While there was some improvement in the tubing segment loss the reduced
volume in the seat track segment resulted in a loss of $8,096 compared to income
of $20,754 in the year ago period. For the six months ended February 29, 2004,
there was little change with a loss of $51,275 versus a loss of $57,832 in the
year ago period.
Below is summarized segmental data for the second quarters and six months ended
February 29, 2004 and February 28, 2003.
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2ND QTR TUBING SEAT TRACK TOTAL
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2004 2003 2004 2003 2004 2003
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REVENUE 1,040,025 811,322 262,255 350,115 1,302,280 1,161,437
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PROFIT (82,886) (102,100) (8,096) 20,754 (90,982) (81,346)
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6 MONTHS TUBING SEAT TRACK TOTAL
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2004 2003 2004 2003 2004 2003
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REVENUE 2,092,973 1,942,314 813,851 817,317 2,906,824 2,759,631
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PROFIT (117,500) (115,669) 66,225 57,837 (51,275) (57,832)
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Selling, general and administrative expenses were little changed with an
increase of 0.9% in the second quarter ended February 29, 2004, to $190,710 from
$189,028 in the year ago period. For the six months ended February 29, 2004,
these expenses decreased 6.9% to $367,603 from $394,901 in the year ago period.
LIQUIDITY AND SOURCES OF CAPITAL
The Registrant has a $600,000 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 on all
of the Registrant's assets. This line of credit is due August 31, 2004. As of
February 29, 2004, the outstanding balance was $354,761 and the applicable
interest rate was 5.0%.
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)
FEBRUARY 29, 2004 AND FEBRUARY 28, 2003
February 29, February 28,
ASSETS 2004 2003
CASH $ 21,850 $ 188,113
ACCOUNTS RECEIVABLE $ 694,358 $ 552,726
ACCOUNTS RECEIVABLE - OTHER $ 161,054 $ 177,056
ACCRUED INTEREST RECEIVABLE $ 2,446
INVENTORIES $ 682,423 $ 683,753
REFUNDABLE TAXES $ 30,632 -0-
PREPAID EXPENSES $ 82,718 $ 83,195
DEFERRED TAX ASSET $ 47,600 -0-
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TOTAL CURRENT ASSETS $1,723,081 $1,684,843
NET PROPERTY AND EQUIPMENT $1,592,510 $1,737,539
OTHER ASSETS
DEPOSITS $ 7,050 $ 7,050
INVESTMENT IN JOINT VENTURES $ 110,356 $ 126,066
INTANGIBLE ASSETS $ 60,961 $ 4,646
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TOTAL OTHER ASSETS $ 178,367 $ 137,764
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TOTAL ASSETS $3,493,958 $3,560,146
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LIABILITIES
ACCOUNTS PAYABLE $ 378,282 $ 231,481
NOTES PAYABLE $ 562,574 $ 849,200
ACCRUED LIABILITIES $ 376,996 $ 794,361
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TOTAL CURRENT LIABILITIES $1,317,852 $1,875,042
LONG TERM DEBT $ 213,714 $ 394,273
DEFERRED TAXES $ 63,600 $ 57,300
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TOTAL LIABILITIES $1,595,166 $2,326,615
STOCKHOLDERS EQUITY
STOCK $ 10,863 $ 7,175
ADDITIONAL PAID IN CAPITAL $1,522,446 $ 604,190
RETAINED EARNINGS $ 365,483 $ 622,166
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TOTAL SHAREHOLDERS' EQUITY $1,898,792 $1,233,531
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $3,493,958 $3,560,146
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KNUSAGA CORPORATION
STATEMENT OF INCOME (UNAUDITED)
FOR THREE AND SIX MONTH PERIOD ENDED
FEBRUARY 29, 2004 AND FEBRUARY 28, 2003
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
FEBRUARY 29, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
2004 2003 2004 2003
NET SALES $ 1,302,280 $ 1,161,447 $ 2,906,824 $ 2,759,631
COST OF GOODS SOLD $ 1,240,342 $ 1,083,609 $ 2,602,158 $ 2,472,200
------------ ------------ ------------ ------------
GROSS PROFIT $ 61,938 $ 77,838 $ 304,666 $ 287,431
SELLING, GENERAL AND ADMINISTRATIVE $ 190,710 $ 189,028 $ 367,603 $ 394,901
EXPENSES
MISC. INCOME (EXPENSE) ($ 9080) ($ 12,248) ($ 15,133) $ 19,644
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INCOME (LOSS) BEFORE TAXES ($ 137,851) ($ 123,431) ($ 78,070) ($ 87,826)
PROVISION FOR FEDERAL INCOME TAXES ($ 46,869) ($ 42,085) ($ 26,795) ($ 29,994)
------------ ------------ ------------ ------------
NET INCOME BEFORE EXTRAORDINARY ITEMS ($ 90,982) ($ 81,346) ($ 51,275) ($ 57,832)
EXTRAORDINARY ITEMS: $ 0 $ 0 $ 0 $ 0
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NET INCOME ($ 90,982) ($ 81,346) ($ 51,275) ($ 57,832)
PAR SHARE OF COMMON STOCK AND COMMON
STOCK EQUIVALENTS:
AVERAGE OUTSTANDING SHARES 10,862,773 7,175,000 10,862,773 7,175,000
(0.008) (0.011) (0.005) (0.008)
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.
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KNUSAGA CORPORATION
STATEMENT OF CASH FLOW (UNAUDITED)
THREE AND SIX MONTHS PERIOD ENDED
FEBRUARY 29, 2004 AND FEBRUARY 28, 2003
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
29, 2004 28, 2003 29, 2004 28, 2003
NET INCOME ($90,982) ($81,346) ($51,275) ($57,832)
DEPRECIATION & AMORTIZATION $62,459 $72,229 $124,484 145,411
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLE $8,048 ($40,119) $21,221 $582,992
INVENTORIES ($24,906) ($8,466) ($74,718) $16,569
REFUNDABLE TAXES $12,057 $32,131
PREPAID EXPENSES ($26,250) ($44,418) ($31,280) ($25,796)
OTHER ASSETS
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE $33,798 ($27,024) $63,873 ($182,318)
ACCRUED LIABILITIES $44,596 ($14,676) 34,277 ($123,022)
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES $18,820 ($143,820) $118,713 $356,004
INVESTMENT ACTIVITIES
PURCHASES OF EQUIPMENT ($36,122) ($18,030) ($52,201) ($64,032)
PROCEEDS FROM SALE OF EQUIPMENT $59,895
INVESTMENT IN JOINT VENTURES ($120)
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES ($36,122) ($18,030) ($52,201) ($4,257)
FINANCING ACTIVITIES
PAYMENT OF NOTES ($47,625) ($50,203) ($94,578) ($299,162)
CASH USED FOR FINANCING ACTIVITIES ($47,625) ($50,203) ($94,578) ($299,162)
NET INCREASE (DECREASE) ($64,927) ($212,053) ($28,066) $52,585
BEGINNING CASH $86,777 $400,166 $49,916 $135,528
ENDING CASH $21,850 $188,113 $21,850 $188,113
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Item 6. Exhibits and Reports on Form 8-K
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(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.
(b) Reports on Form 8-K
None
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EXHIBIT INDEX
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.
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FORWARD LOOKING STATEMENTS
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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
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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: /s/ James G. Musser By: /s/ Jerry Luptak
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James G. Musser Jerry Luptak
Director/President Vice President and
(Principal Executive Officer Principal Financial Officer
and Controller)
Dated: April 8, 2004 Dated: April 8, 2004
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