10QSB 1 k74021e10qsb.txt FORM 10QSB 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 November 30, 2002 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: 7,175,000. RESULTS OF OPERATIONS Net sales decreased 31.4% in the first quarter of the fiscal year ending August 2003 to $1,598,184 from $2,330,072 a year ago. This is a result of lost market share to competitors in both the truck tubing and seat track business segments. As a result of the 31.4% reduction in sales versus the year ago quarter, the registrant had an operating loss of $18,144 offset by a gain on the sale of equipment of $53,749 resulting in an after tax profit of $23,514 in the first quarter of the 2003 fiscal year versus a profit of $45,137 in the first quarter a year ago. For the same reason cost of sales increased to 86.9% in the first quarter of fiscal 2003 from 82.5% in the first quarter of fiscal 2002, and selling, general and administrative expenses decreased 29.0% to $205,880 in the first quarter of fiscal 2002 versus $289,810 in the year ago quarter. The Company'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 services the heavy truck market and the seat track business services the recreational vehicle market. Below is summarized segmental data for the three months ended November 30, 2002 and 2001.
TUBING SEAT TRACK TOTAL 2002 2001 2002 2001 2002 2001 --------- --------- --------- -------- --------- --------- External Revenue 1,130,982 1,505,852 467,202 824,220 1,598,184 2,330,072 Intersegment Revenue 0 0 0 0 0 0 Profit (loss) (13,569) (63,974) 37,083 109,111 23,514 45,137
LIQUIDITY AND SOURCES OF CAPITAL Operations during the quarter produced $499,824 of cash, equipment sales provided $59,895 and there was a reduction in bank debt of $248,959 resulting in a positive cash flow of $264,638 for the quarter. The Company's agreements with its bank lender currently mature January 31, 2003. 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, 2002
ASSETS November 30, 2002 CASH $ 400,166 ACCOUNTS RECEIVABLE $ 546,105 ACCOUNTS RECEIVABLE -- OTHER $ 143,558 INVENTORIES $ 675,287 PREPAID EXPENSE $ 38,776 TOTAL CURRENT ASSETS $1,803,893 NET PROPERTY, PLANT AND EQUIPMENT $1,792,239 OTHER ASSETS DEPOSITS 7,050 INVESTMENTS IN JOINT VENTURES 126,066 GOODWILL, NET OF AMORTIZATION 4,147 TOTAL ASSETS $3,733,395 LIABILITIES ACCOUNTS PAYABLE $ 258,505 NOTES PAYABLE $ 851,273 ACCRUED LIABILITIES $ 809,037 TOTAL CURRENT LIABILITIES $1,918,815 LONG TERM DEBT $ 442,403 DEFERRED TAXES 57,300 TOTAL LIABILITIES $2,418,518 STOCKHOLDERS EQUITY (DEFICIENCY) Common Stock, par value $.001 per share authorized 7,175,000 shares issued and outstanding $ 7,175 ADDITIONAL PAID-IN CAPITAL $ 604,190 RETAINED EARNINGS $ 703,512 TOTAL STOCKHOLDERS EQUITY $1,314,877 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $3,733,395
-3- KNUSAGA CORPORATION STATEMENT OF INCOME (UNAUDITED) THREE MONTHS ENDED NOVEMBER 30, 2002 AND NOVEMBER 30, 2001
(UNAUDITED) THREE MONTHS ENDED NOVEMBER 30, 2002 NOVEMBER 30, 2001 NET SALES $ 1,598,184 $ 2,330,072 COST OF GOODS SOLD $ 1,388,591 $ 1,921,752 ----------- GROSS PROFIT $ 209,593 $ 408,320 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $ 205,880 $ 289,810 MISC. INCOME (EXPENSE) $ 31,892 ($ 36,555) ----------- INCOME (LOSS) BEFORE TAXES $ 35,605 $ 81,955 PROVISION FOR FEDERAL INCOME TAXES $ 12,091 $ 36,818 ----------- NET INCOME BEFORE EXTRAORDINARY ITEMS $ 23,514 $ 45,137 EXTRAORDINARY ITEMS: $-0- $-0- TAX BENEFIT OF OPERATING LOSS CARRYFORWARD ----------- ----------- NET INCOME $ 23,514 $ 45,137 PAR SHARE OF COMMON STOCK AND COMMON STOCK EQUIVALENTS: AVERAGE OUTSTANDING SHARES 7,175,000 7,000,000 .003 .006
THE FINANCIAL STATEMENTS INCLUDED IN THIS REPORT REFLECT ALL ADJUSTMENTS, WHICH, IN THE OPINION OF MANAGEMENT, ARE NECESSARY FOR FAIR PRESENTATION. THESE FINANCIAL STATEMENTS SHOULD BE READ IN CONNECTION WITH THE FOOTNOTES THAT ARE A PART OF THE COMPANY'S AUDITED FINANCIAL STATEMENTS CONTAINED IN ITS MOST RECENTLY FILED ANNUAL REPORT ON FORM 10KSB. -4- KNUSAGA CORPORATION STATEMENT OF CASH FLOW (UNAUDITED) THREE MONTHS ENDED NOVEMBER 30, 2002 AND NOVEMBER 30, 2001
(UNAUDITED) THREE MONTHS ENDED NOVEMBER 30, 2002 NOVEMBER 30, 2001 CASH PROVIDED BY (USED FOR) OPERATIONS NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS, $ 23,514 $ 45,137 EXCHANGE LOSS NON-CASH EXPENSE INCLUDED IN NET INCOME $ 73,182 $ 67,154 DEPRECIATION (INCREASE) DECREASE IN: ACCOUNTS RECEIVABLE $ 623,111 $ 124,497 INVENTORIES $ 25,035 ($ 26,944) REFUNDABLE TAXES $ 40,718 PREPAID EXPENSES $ 18,622 ($ 2,984) OTHER ASSETS 3,529 INCREASE (DECREASE) IN: ACCOUNTS PAYABLE ($ 155,294) ($ 192,375) ACCRUED LIABILITIES ($ 108,346) $ 97,601 NET CASH PROVIDED BY (USED FOR) $ 499,824 $ 156,333 OPERATING ACTIVITIES INVESTING ACTIVITIES PURCHASES OF EQUIPMENT ($ 46,002) $ 7,061 PROCEEDS FROM SALE OF EQUIPMENT 59,895 INVESTMENT IN JOINT VENTURES (120) ($ 16,002) CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 13,773 ($ 8,941) FINANCING ACTIVITIES PAYMENT OF NOTES ($ 248,959) ($ 157,694) INCREASE (DECREASE) IN CASH $ 264,638 ($ 10,302) BALANCE AT BEGINNING OF PERIOD $ 135,528 $ 62,753 BALANCE AT END OF PERIOD $ 400,166 $ 52,451
-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. 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: James G. Musser By: Jerry Luptak ------------------------------ ---------------------------------- Director/President Vice President and Principal (Principal Executive Officer Financial Officer and Controller) Dated: January 17, 2003 Dated: January 17, 2003 ---------------------------- ------------------------------- -6- KNUSAGA CORPORATION CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION I, James G. Musser, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of KnuSaga Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: January 17, 2003 /s/ James G. Musser ----------------------------- James G. Musser Chief Executive Officer -7- KNUSAGA CORPORATION CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION I, Jerry Luptak, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of KnuSaga Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: January 17, 2003 /s/ Jerry Luptak ----------------------------- Jerry Luptak Chief Financial Officer -8- 10-Q EXHIBIT INDEX EXHIBIT NO. DESCRIPTION EX-99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 EX-99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002