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 May 31, 2005
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.
YES X NO
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Shares of Common Stock Par Value $.001, outstanding: 10,862,773.
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RESULTS OF OPERATIONS
Prior to December 23, 2004 the Registrant's operations were classified into two
principal reportable segments that provide different products or services.
Separate management of each segment was required because each business unit was
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, 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 the 2004 periods have been restated reflecting the
discontinued operations.
There was no revenue for the discontinued tubing segment in the quarter ending
May 31, 2005 compared to revenue of $1,253,762 in the year ago period. Operating
losses increase to $109,673 compared to the year ago period of $89,739. For the
nine month period ending May 31, 2005 sales dropped to $1,734,081 compared to
$3,346,735 in the year ago period and operating losses increase to $465,352
compared to $321,235 in the year ago period.
Seat track sales were little changed in the quarter ending May 31, 2005 at
$272,266 compared to $276,779 in the year ago period. New product development
costs caused a loss of $6,847 compared to a profit of $8,704 in the year ago
period. For the nine months ending May 31, 2005 sales dropped 31% to $752,468,
compared to $1,090,630 in the year ago period. This was the result of a customer
that was present in the early part of the 2004 nine month period which was lost
to competition in the 2005 period.
There was no significant change in Selling,General and Administrative expenses
for either the quarter or nine month period compared to a year ago.
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.
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KNUSAGA CORPORATION
BALANCE SHEET (UNAUDITED)
MAY 31, 2005 AND MAY 31, 2004
31-May-05 31-May-04
ASSETS
CASH 14,372 7,743
NOTES RECEIVABLE 14,424 92,031
ACCOUNTS RECEIVABLE 169,889 131,742
ACCRUED INTEREST RECEIVABLE 8,642 2,446
INVENTORIES 141,613 112,971
PREPAID EXPENSES 4,729 11,347
DEFERRED TAX ASSET 10,400 0
CURRENT ASSETS FROM DISCONTINUED OPERATIONS 549,754 1,378,432
TOTAL CURRENT ASSETS 913,823 1,736,712
NET PROPERTY AND EQUIPMENT CONTINUING OPERATIONS 89,905 155,749
NET PROPERTY AND EQUIPMENT 1,066,515 1,502,149
DICONTINUED OPERATIONS
NET PROPERTY AND EQUIPMENT 1,156,420 1,657,898
DEPOSITS 7,050 7,150
INVESTMENTS IN JOINT VENTURES 137,530 110,356
INTANGIBLES 4,648 4,648
TOTAL OTHER ASSETS 149,228 122,154
TOTAL ASSETS 2,219,471 3,516,764
LIABILITIES
ACCOUNTS PAYABLE 124,125 87,952
NOTES PAYABLE 28,060 33,787
ACCRUED LIABILITIES 107,707 642,293
LIABILITIES FROM DISCONTINUED OPERATIONS 447,746 669,943
TOTAL CURRENT LIABILITIES 707,638 1,443,975
LONG TERM DEBT 78,266 251,991
DEFERRED TAXES CONTINUING OPER 10,400 6,900
DEFERRED TAXES DISCONTINUED OPER 13,500 9,100
TOTAL LIABILITIES 809,804 1,701,966
STOCKHOLDER EQUITY
COMMON STOCK 10,863 10,863
PAID IN CAPITAL 1,522,446 1,522,446
RETAINED EARNINGS (92,369) 281,489
OTHER COMPREHENSIVE LOSS (31,273) 0
TOTAL SHAREHOLDER EQUITY 1,409,667 1,814,798
TOTAL LIABILITIES & SHAREHOLDER EQUITY 2,219,471 3,516,764
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KNUSAGA CORPORATION
STATEMENT OF INCOME (UNAUDITED)
FOR MONTHS ENDED
MAY 31, 2005 AND MAY 31, 2004
3 MONTHS ENDED 9 MONTHS ENDED
5/31/05 5/31/04 5/31/05 5/31/04
NET SALES 272,266 276,779 752,468 1,090,630
COST OF GOODS SOLD 243,792 229,377 646,570 862,517
GROSS PROFIT 28,474 47,402 105,898 228,113
SELLING, GENERAL & 38,849 38,697 116,095 119,068
ADMINISTRATIVE EXPENSES
INCOME FROM OPERATIONS (10,375) 8,705 (10,197) 109,045
INCOME (LOSS) BEFORE TAXES (10,375) 8,705 (10,197) 109,045
FED INCOME TAXES 1,000 2,961 3,300 37,077
INCOME FROM CONTINUING OPERATIONS (11,375) 5,744 (13,497) 71,968
DISCONTINUED OPERATIONS
INCOME FROM (110,573) (142,826) (465,352) (321,235)
DISCONTINUED OPERATIONS
GAIN ON DISPOSAL OF DISCONTINUED 0 7,385 281,866 7,385
OPERATIONS
INCOME TAX ON (1,000) (45,702) (3,300) (106,613)
DISCONTINUED OPERATIONS
NET INCOME DISCONTINUED
OPERATIONS (109,573) (89,739) (180,186) (207,237)
NET INCOME (120,948) (83,993) (193,683) (135,269)
AVERAGE SHARES 10,862,773 10,862,773 10,862,773 10,862,773
OUTSTANDING
EARNINGS PER SHARE (.011) (.008) (.018) (.012)
The Financial Statements included in this report reflect all the
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)
FOR MONTHS ENDED
MAY 31, 2005 AND MAY 31, 2004
3 MONTHS ENDED 9 MONTHS ENDED
5/31/05 5/31/04 5/31/05 5/31/04
NET INCOME (11,375 5,744 (13,497) 71,968
ADJUSTMENTS TO RECONCILE NET INCOME
FROM CONTINUING OPERATIONS TO CASH
PROVIDED BY OPERATING ACTIVITIES
DEPRECIATION 12,546 12,721 37,225 37,941
(INCREASE)DECEASE IN:
ACOUNTS RECEIVABLE (24,462) 4,245 (35,590) 88,875
INVENTORIES (5,338) 8,290 (40,702) (8,687)
PREPAID EXPENSES 2,443 (1,476) (69) (5,710)
OTHER ASSETS 0 0 0 0
DECREASE(INCREASE) IN:
ACCOUNTS PAYABLE 25,191 1,333 (18,412) (48,939)
ACCRUED EXPENSES 12,162 5,703 15,665 38,322
NET CASH PROVIDED BY (USED 11,167 36,560 (55,380) 173,770
IN)CONTINUING OPERATIONS
NET CASH PROVIDED BY (USED IN) (113,999) (160,948) 158,469 (220,476)
DISCONTINUED OPERATIONS
NET CASH USED IN OPERATING ACTIVITIES (102,832) (124,388) 103,089 (46,706)
INVESTING ACTIVITIES
PROCEEDS FROM SALE OF ASSETS 0 36,500 640,710 36,500
PURCHASE OF PROPERTY AND EQUIPMENT 0 (45,646) (22,372) (97,847)
INVESTMENT IN JOINT VENTURES 0 0 (2,250) 0
PAYMENTS FOR NOTES RECEIVABLE 0 0 0 0
PROCEEDS FROM NOTES RECEIVABLE 30,080 69,022 73,640 112,909
NET CASH PROVIDED BY INVESTMENT 30,080 59,876 689,728 51,562
ACTIVITIES
FINANCING ACTIVITIES
PAYMENT OF NOTES PAYABLE 54,563 50,404 (862,219) (44,174)
NET CASH USED IN FINANCING ACTIVITES 54,563 50,404 (862,219) (44,174)
NET INCREASE(DECREASE) IN CASH (18,189) (14,108) (69,402) (39.318)
BEGINNING CASH 32,561 21,851 83,774 47,061
ENDING CASH 14,372 7,743 14,372 7,743
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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.
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8K
a) Exhibits. Description
31.1 Certification of the CEO pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of the CFO pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of the CEO pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of the CFO pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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: July 12, 2005 Dated: July 12, 2005
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