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 28, 2005
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 48003
--------------------------------------------------
(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.
-1-
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
serviced the heavy truck market and the seat track business segment services the
recreational vehicle market. The Registrant ceased operation of the tubing
segment on December 23, 2005. 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
the 2004 periods have been restated reflecting the discontinued operations.
Sales for the discontinued tubing segment decreased 68.8% in the second quarter
ending February 28, 2005 to $324,526 from $1,040,025 in the year ago period.
This was due to cessation of production on December 23, 2004. Loss for the
discontinued truck segment for the period ending February 28, 2005 was $117,781
compared to a loss of $82,885 in the year ago period as a result of the
discontinued operations.
The seat track segment sales decreased 8.0% in the quarter ending February 28,
2005 to $241,362 from $262,255 in the year ago period. This was a result of a
decline in the Industry's motorhome market during the quarter. There was however
an improvement in income for the quarter ending February 28, 2005 to $3,263 from
a loss of $8,097 in the year ago period as a result of reduced research and
development expenses..
Below is summarized segmental data for the second quarter and six months ended
February 28, 2005 and February 29, 2004.
- --------------------------------------------------------------------------------
2ND QTR TUBING SEAT TRACK TOTAL
- --------------------------------------------------------------------------------
2005 2004 2005 2004 2005 2004
- --------------------------------------------------------------------------------
REVENUE 324,526 1,040,025 241,362 262,255 565,888 1,302,280
- --------------------------------------------------------------------------------
PROFIT (117,781) (82,885) 3,263 (8,097) (114,518) (90,982)
- --------------------------------------------------------------------------------
-2-
- --------------------------------------------------------------------------------
6 MONTHS TUBING SEAT TRACK TOTAL
- --------------------------------------------------------------------------------
2005 2004 2005 2004 2005 2004
- --------------------------------------------------------------------------------
REVENUE 1,753,621 2,092,973 480,202 813,851 2,233,823 2,906,824
- --------------------------------------------------------------------------------
PROFIT (70,613) (117,499) (2,122) 66,224 (72,735) (51,275)
- --------------------------------------------------------------------------------
Selling, general and administrative expenses were little changed with an
increase of 0.9% in the second quarter ended February 28, 2005, to $39,260 from
$37,982 in the year ago period. For the six months ended February 28, 2005,
these expenses decreased 3.7% to $77,246 from $80,371 in the year ago period.
LIQUIDITY AND SOURCES OF CAPITAL
The line of credit and the term note with Standard Federal Bank was paid off
with the proceeds of the tubing segment's equipment sale.
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, 2005 AND FEBRUARY 29, 2004
RESTATED
FEBRUARY 28, FEBRUARY 28,
ASSETS 2005 2005
CASH 32,561 21,851
NOTES RECEIVABLE 44,504 161,053
ACCOUNTS RECEIVABLE 145,427 135,987
ACCRUED INTEREST RECEIVABLE 8,642 2,446
INVENTORIES 136,275 121,261
PREPAID EXPENSES 7,172 9,871
DEFERRED TAX ASSET 13,500 0
CURRENT ASSETS FROM DISCONTINUED OPERATIONS 609,293 1,192,280
---------- ----------
TOTAL CURRENT ASSETS 997,374 1,644,749
---------- ----------
NET PROPERTY AND EQUIPMENT -
CONTINUING OPERATIONS 103,986 164,803
NET PROPERTY AND EQUIPMENT - 1,080,801 1,427,708
---------- ----------
DISCONTINUED OPERATIONS
NET PROPERTY AND EQUIPMENT 1,184,787 1,592,511
---------- ----------
DEPOSITS 7,050 7,150
INVESTMENT IN JOINT VENTURES 137,530 110,356
INTANGIBLES 4,648 4,648
---------- ----------
TOTAL OTHER ASSETS 149,228 122,154
---------- ----------
TOTAL ASSETS 2,331,389 3,359,414
---------- ----------
LIABILITIES
ACCOUNTS PAYABLE 98,934 86,619
NOTES PAYABLE 30,373 26,850
ACCRUED LIABILITIES 95,545 636,590
---------- ----------
LIABILITIES FROM DISCONTINUED OPERATIONS 526,732 480,895
---------- ----------
TOTAL CURRENT LIABILITIES 751,584 1,230,954
LONG-TERM DEBT, NET OF CURRENT PORTION 21,390 213,667
DEFERRED TAXES-CONTINUING OPERATIONS 13,500 6,900
DEFERRED TAXES-DISCONTINUED OPERATIONS 14,300 9,100
---------- ----------
TOTAL LIABILITIES 800,774 1,460,621
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK 10,863 10,863
PAID IN CAPITAL 1,522,446 1,522,446
RETAINED EARNINGS 28,579 365,484
OTHER COMPREHENSIVE LOSS (31,273) 0
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,530,615 1,898,793
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 2,331,389 3,359.414
========== ==========
-4-
KNUSAGA CORPORATION
STATEMENT OF INCOME (UNAUDITED)
FOR THREE AND SIX MONTH PERIOD ENDED
FEBRUARY 28, 2005 AND FEBRUARY 29, 2004
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
RESTATED RESTATED
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 29,
2005 2004 2005 2004
SALES $ 241,362 $ 262,255 $ 480,202 $ 813,851
COST OF SALES $ 194,839 $ 236,540 $ 402,778 $ 633,140
--------- --------- --------- ---------
GROSS PROFIT $ 46,523 $ 25,715 $ 77,424 $ 180,711
SGA $ 39,260 $ 37,982 $ 77,246 $ 80,371
--------- ---------
INCOME FROM OPERATIONS $ 7,263 ($ 12,267) $ 178 $ 100,340
OTHER INCOME (EXPENSE) $ 0 $ 0 $ 0 $ 0
--------- --------- --------- ---------
INCOME BEFORE TAXES $ 7,263 ($ 12,267) $ 178 $ 100,340
PROVISION FOR INCOME TAXES $ 4,000 ($ 4,170) $ 2,300 $ 34,116
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS $ 3,263 ($ 8,097) ($ 2,122) $ 66,224
--------- --------- --------- ---------
DISCONTINUED OPERATIONS ($121,781) ($125,584) ($354,779) ($178,409)
INCOME FROM
DISCONTINUED OPERATIONS
GAIN ON DISPOSAL OF
DISCONTINUED OPERATIONS $ 0 $ 0 $ 281,866 $ 0
--------- --------- --------- ---------
($121,781) ($125,584) ($ 72,913) ($178,409)
INCOME TAX ON ($ 4,000) ($ 42,699) ($ 2,300) ($ 60,911)
DISCONTINUED OPERATIONS --------- --------- --------- ---------
NET INCOME FROM
DISCONTINUED OPERATIONS ($117,781) ($ 82,885) ($ 70,613) ($117,498)
--------- --------- --------- ---------
NET INCOME ($114,518) ($ 90,982) ($ 72,735) ($ 51,724)
========= ========= ========= =========
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, 2005 AND FEBRUARY 29, 2004
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
RESTATED RESTATED
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
28, 2005 29, 2004 28, 2005 29, 2004
NET INCOME $ 3,263 ($ 8,097) ($ 2,122) $ 66,224
ADJUSTMENTS TO RECONCILE NET INCOME FROM
CONTINUING OPERATIONS TO CASH PROVIDED BY
OPERATING ACTIVITIES
DEPRECIATION $ 12,148 $ 12,705 $ 24,679 $ 25,220
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLE ($ 34,773) $ 68,743 ($ 11,128) $ 84,630
INVENTORIES ($ 31,582) ($ 10,949) ($ 35,364) ($ 16,977)
PREPAID EXPENSES ($ 5,305) ($ 530) ($ 2,512) ($ 4,234)
OTHER ASSETS $ 8,000 $ 0 $ 0 $ 0
DECREASE (INCREASE) IN:
ACCOUNTS PAYABLE $ 2,351 ($ 55,940) ($ 43,603) ($ 50,272)
ACCRUED EXPENSES $ 4,839 ($ 4,883) $ 3,503 $ 32,619
--------- --------- --------- ---------
NET CASH PROVIDED BY (USED IN) CONTINUING
OPERATIONS ($ 41,059) $ 1,049 ($ 66,547) $ 137,210
NET CASH PROVIDED BY (USED IN) DISCONTINUED
OPERATIONS
NET CASH USED IN OPERATING ACTIVIITES $ 130,211 ($ 49,069) $ 272,468 ($ 59,528)
--------- --------- --------- ---------
$ 89,152 ($ 48,020) $ 205,921 $ 77,682
--------- --------- ---------
INVESTING ACTIVITIES
PROCEEDS FROM SALES OF ASSETS $ 0 $ 0 $ 640,710 $ 0
PURCHASE OF PROPERTY AND EQUIPMENT $ 0 ($ 36,122) ($ 22,372) ($ 52,201)
INVESTMENT IN JOINT VENTURES $ 0 $ 0 ($ 2,250) $ 0
PAYMENTS FOR NOTES RECEIVABLE $ 0 $ 22,955 $ 0 $ 0
PROCEEDS FROM NOTES RECEIVABLE $ 25,000 $ 43,887 $ 43,560 $ 43,887
--------- --------- --------- ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES $ 25,000 $ 30,720 $ 659,648 ($ 8,314)
--------- --------- --------- ---------
FINANCING ACTIVITIES
PAYMENT OF NOTES PAYABLE ($108,532) ($ 47,625) ($916,782) ($ 94,578)
--------- --------- --------- ---------
NET CASH USED IN FINANCING ACTIVITIES ($108,532) ($ 47,625) ($916,782) ($ 94,578)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH $ 5,620 ($ 64,925) ($ 51,213) ($ 25,210)
BEGINNING CASH $ 26,941 $ 86,776 $ 83,774 $ 47.061
--------- --------- --------- ---------
ENDING CASH $ 32,561 $ 21,851 $ 32,561 $ 21,851
========= ========= ========= =========
PER B/S $ 32,561 $ 21,851 $ 32,561 $ 21,851
========= ========= ========= =========
-6-
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
ITEM 3. Defaults Upon Senior Notes
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8K
a) Exhibits. Description
31.1 Certification of CEO pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of CFO pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of CEO pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of CFO pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
-7-
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: /s/ James Musser
--------------------------------
James Musser
President, Duly Authorized
Officer and
Principal Accounting
Officer
Dated: April 13, 2005
-----------------------------
-8-
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: /s/ James G. Musser By: /s/ Jerry Luptak
----------------------------- --------------------------------
James G. Musser Jerry Luptak
Director/President Vice President and
(Principal Executive Officer Principal Financial Officer
and Controller)
Dated: April 13, 2005 Dated: April 13, 2005
---------------------------- -----------------------------
-9-