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, 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
(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.
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RESULTS OF OPERATIONS
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 strategies. The tubing business segment
services the heavy truck market and the seat track business segment services the
recreational vehicle market. The Registrant ceased operation of the tubing
segment on November 23, 2004. The equipment associated with this segment has
been sold. The building associated with this segment has been listed for sale.
The seat track segment is unaffected and continues to operate out of the
Registrant's other leased facility. The Statements of Income and Cash Flow for
November 30, 2003 have been restated reflecting the discontinued operations.
Sales for the discontinued tubing segment increased 35.7% in the first quarter
of the fiscal year ending August 31, 2005 to $1,429,095 from $1,052,947 in the
year ago period. This was due to increased production of the Heavy Truck
Industry. Income for the discontinued truck segment for the period ending
November 30, 2004 was $47,168 compared to a loss of $34,613 in the year ago
period. This was a result of a gain of $281,866 on the sale of equipment used by
the tube segment offset by a loss of $232,998 for the discontinued operations.
The seat track segment sales decreased 56.7% in the quarter ending November 30,
2004 to $238,840 from $551,596 in the year ago period. This was a result of the
loss of a major customer compared to the year ago period. As a result of the
sales decline the seat track segment experienced a loss of $5,385 in the quarter
from a profit of $74,321 in the year ago period.
Below is summarized segmental data for the three months ended November 30, 2004
and 2003.
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Tubing Seat Track Total
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2004 2003 2004 2003 2004 2003
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External
Revenue
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Intersegment 1,429,095 $1,052,947 $238,840 $551,596 $1,667,935 $1,604,543
Revenue
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Profit (loss) $ 47,168 ($ 34,613) ($ 5,385) $ 74,321 $ 41,783 $ 39,708
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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 of all
of the Registrant's assets. This line of credit is due January 31, 2005. As of
November 30, 2003, the outstanding balance was $102,393.30 and the applicable
interest was 6.0%.
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)
NOVEMBER 30, 2004
ASSETS November 30, 2004
CASH $ 26,941
NOTES RECEIVABLE $ 69,504
ACCOUNTS RECEIVABLE $ 110,654
ACCOUNTS RECEIVABLE - OTHER $ 8,642
INVENTORIES $ 104,693
PREPAID EXPENSE $ 1,867
DEFERRED TAX ASSET $ 14,100
CURRENT ASSETS FROM DISCONTINUED OPER $ 1,171,825
TOTAL CURRENT ASSETS $ 1,508,226
NET PROPERTY, PLANT AND EQUIPMENT
CONTINUING OPERATIONS $ 118,128
DISCONTINUED OPERATIONS $ 1,095,492
NET PROPERTY AND EQUIPMENT $ 1,213,620
OTHER ASSETS
DEPOSITS $ 15,050
INVESTMENT IN JOINT VENTURES $ 137,530
INTANGIBLES $ 4,648
TOTAL OTHER ASSETS $ 157,228
TOTAL ASSETS $ 2,879,074
LIABILITIES
ACCOUNTS PAYABLE $ 96,583
NOTES PAYABLE $ 32,107
ACCRUED LIABILITIES $ 90,706
LIABILITIES DISCONTINUED OPERATIONS $ 963,955
TOTAL CURRENT LIABILITIES $ 1,183,351
LONG TERM DEBT, NET OF CURRENT PORTION $ 21,390
DEFERRED TAXES-CONTINUING OPERATIONS $ 14,100
DEFERRED TAXES-DISCONTINUED OPERATIONS $ 15,100
TOTAL LIABILITIES $ 1,233,941
STOCKHOLDERS EQUITY (DEFICIENCY)
Common Stock, par value $.001 per share authorized $ 10,863
10,862,773 shares issued and outstanding
ADDITIONAL PAID-IN CAPITAL $ 1,552,446
RETAINED EARNINGS $ 143,097
OTHER COMPREHENSIVE LOSS ($ 31,273)
TOTAL STOCKHOLDERS EQUITY $ 1,845,133
TOTAL LIABILITIES AND $ 2,879,074
STOCKHOLDERS EQUITY
KNUSAGA CORPORATION
STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, 2004 AND NOVEMBER 30, 2003
(UNAUDITED)
THREE MONTHS ENDED
RESTATED
NOVEMBER 30, NOVEMBER 30,
2004 2003
NET SALES $ 238,840 $ 551,596
COST OF GOODS SOLD $ 207,939 $ 396,600
GROSS PROFIT $ 30,901 $ 154,996
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $ 37,986 $ 42,389
OTHER INCOME EXPENSE 0 0
INCOME (LOSS) BEFORE TAXES ($ 7,085) $ 112,607
PROVISION FOR FEDERAL INCOME TAXES ($ 1,700) $ 38,286
NET INCOME FROM CONTINUING OPERATIONS ($ 5,385) $ 74,321
DISONTINUED OPERATIONS
INCOME FROM DISCONTINED OPER ($ 232,998) ($ 52,825)
GAIN ON DISPOSAL OF DICONTINUED OPERATIONS $ 281,866 0
INCOME TAX ON DISCONTINUED OPER $ 1,700 ($ 18,212)
NET INCOME FROM DISCONTINUED OPERATIONS
NET INCOME $ 47,168 ($ 34,613)
$ 41,783 $ 39,708
PAR SHARE OF COMMON STOCK AND COMMON STOCK
EQUIVALENTS:
AVERAGE OUTSTANDING SHARES 10,682,773 10,682,773
EARNINGS PER SHARE .004 .004
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KNUSAGA CORPORATION
STATEMENT OF CASH FLOW (UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, 2004 AND NOVEMBER 30, 2003
(UNAUDITED)
THREE MONTHS ENDED
RESTATED
NOVEMBER 30, NOVEMBER 30,
2004 2003
CASH PROVIDED BY (USED FOR) OPERATIONS
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS, ($ 5,385) $ 74,321
EXCHANGE LOSS
NON-CASH EXPENSE INCLUDED IN NET INCOME $ 12,531 $ 12,515
DEPRECIATION
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLE $ 23,645 $ 15,887
INVENTORIES ($ 3,782) ($ 6,028)
PREPAID EXPENSES $ 2,793 $($3,704)
OTHER ASSETS ($ 8,000) 0
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE ($ 45,954) $ 5,668
ACCRUED LIABILITIES ($ 1,336) $ 37,502
NET CASH PROVIDED BY (USED FOR)
CONTINUING OPERATIONS ($ 25,488) $ 136,161
DISCONTINUED OPERATIONS $ 142,257 ($ 10,459)
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NET CASH USED IN OPERATING ACTIVITIES $ 116,769 $ 125,702
INVESTING ACTIVITIES
PROCEEDS FROM SALE OF ASSETS $ 640,710 0
PURCHASE OF PORPERTY AND EQUIPMENT ($ 23,372) ($ 16,079)
INVESTMENTS IN JOINT VENTURES ($ 2,250) 0
PAYMENT S FOR NOTES RECEIVABLE 0 ($ 22,955)
PROCEEDS FROM NOTES RECEIVABLE $ 18,560 0
FINANCING ACTIVITIES
PAYMENT OF NOTES ($808,250) ($ 46,953)
INCREASE (DECREASE) IN CASH ($ 56,833) $ 39,715
BALANCE AT BEGINNING OF PERIOD $ 83,774 $ 47,061
BALANCE AT END OF PERIOD $ 26,941 $ 86,776
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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.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K during the quarter ended November 30, 2004:
None
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: January 14, 2005 Dated: January 14, 2005
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