10QSB 1 knusaga10qsb113003.txt PERIOD ENDED 11-30-03 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, 2003 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: 10,862,773.
RESULTS OF OPERATIONS Net sales had a small 0.4% increase in the first quarter of the fical year ending August 2004 to $1,604,543 from $1,598,184 a year ago. 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 stratigies. The tubing business segment services the heavy truck market and the seat track business segment services the recreational vehicle market. Below is summarized segmental data for the three months ended November 30, 2003 and 2002. ------------------------ --------------------------------- ----------------------------------- ----------------------------------- Tubing Seat Track Total ------------------------ --------------------------------- ----------------------------------- ----------------------------------- 2003 2002 2003 2002 2003 2002 ------------------------ --------------- ----------------- ----------------- ----------------- ----------------- ----------------- External Revenue 1,052,947 1,130,982 551,596 467,202 1,604543 1,598,184 ------------------------ --------------- ----------------- ----------------- ----------------- ----------------- ----------------- Intersegment Revenue 0 0 0 0 0 0 ------------------------ --------------- ----------------- ----------------- ----------------- ----------------- ----------------- Profit (loss) (34,613) (13,569) 74,320 37,083 39,707 23,514 ------------------------ --------------- ----------------- ----------------- ----------------- ----------------- ----------------- The tubing segment had a 6.9% decrease in net sales in the first quarter to $1,052,947 from $1,130,982 a year ago. This was a result of continuing increased competition at the Registrant's major customer. As a result of the drop in sales, net loss from the tubing segment in the first quarter dropped to $34,613 from $13,569 a year ago. The seat track segment had an increase of 18.1% in net sales in the first quarter to $551,569 from $467,202 a year ago reflecting the improving recreational vehicle market, however this increase is not expected to continue because business has been lost to a competitor at the Registrant's major customer. The increase sales improved net income 100.4% in the first quarter to $74.320 from $37,083 a year ago. Overall the Registrant's net income improved 66.2% in the first quarter to $39,707 from $23,514 a year ago. Contributing to the improvement in net income was a reduction of 14.1% in selling, general, and administrative costs in the first quarter to $165,888 from $205,880 a year ago. LIQUIDITY AND SOURCES OF CAPITAL The registrant has a $1,250,000 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 15, 2004. As of November 30, 2003, the outstanding balance was $354,761.42 and the applicable interest was 5.0%. 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, 2003 ASSETS November 30, 2003 CASH $ 86,777 ACCOUNTS RECEIVABLE $ 632,579 ACCOUNTS RECEIVABLE - OTHER $ 230,881 ACCRUED INTEREST RECEIVABLE $ 2,446 INVENTORIES $ 657,517 REFUNDABLE TAXES $ 42,689 PREPAID EXPENSE $ 56,468 DEFERRED TAX ASSET $ 47,600 TOTAL CURRENT ASSETS $1,756,957 NET PROPERTY, PLANT AND EQUIPMENT $1,618,847 OTHER ASSETS DEPOSITS $ 7,050 INVESTMENT IN JOINT VENTURES $ 110,356 INTANGIBLES $ 60,961 TOTAL ASSETS $3,554,171 LIABILITIES ACCOUNTS PAYABLE $ 344,484 NOTES PAYABLE $ 566,350 ACCRUED LIABILITIES $ 332,400 TOTAL CURRENT LIABILITIES $1,243,234 LONG TERM DEBT $ 257,563 DEFERRED TAXES $ 63,600 TOTAL LIABILITIES $1,564,397 STOCKHOLDERS EQUITY (DEFICIENCY) Common Stock, par value $.001 per share authorized $10,863 10,862,773 shares issued and outstanding ADDITIONAL PAID-IN CAPITAL $1,522,446 RETAINED EARNINGS $ 456,465 TOTAL STOCKHOLDERS EQUITY $1,989,774 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $3,554,171 -3- KNUSAGA CORPORATION STATEMENT OF INCOME (UNAUDITED) THREE MONTHS ENDED NOVEMBER 30, 2003 AND NOVEMBER 30, 2002 (UNAUDITED) THREE MONTHS ENDED NOVEMBER 30, NOVEMBER 30, 2003 2002 NET SALES $ 1,604,543 $ 1,598,184 COST OF GOODS SOLD $ 1,361,816 $ 1,388,591 GROSS PROFIT $ 242,727 $ 209,593 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $ 165,888 $ 205,880 OPERATING INCOME $ 76,839 $ 3,713 OTHER INCOME (EXPENSE) INTEREST EXPENSE ($ 11,005) ($ 17,152) MISC. INCOME ($ 6,053) $ 120 GAIN ON SALE OF ASSET -0- $ 48,924 TOTAL OTHER INCOME (EXPENSE) ($ 17,058) $ 31,892 INCOME (LOSS) BEFORE TAXES $ 59,781 $ 35,605 PROVISION FOR FEDERAL INCOME TAXES $ 20,074 $ 12,091 ------------ ------------ NET INCOME BEFORE EXTRAORDINARY ITEMS $ 39,707 $ 23,514 EXTRAORDINARY ITEMS: $-0- $-0- TAX BENEFIT OF OPERATING LOSS CARRYFORWARD -- -- NET INCOME $ 39,707 $ 23,514 PAR SHARE OF COMMON STOCK AND COMMON STOCK EQUIVALENTS: AVERAGE OUTSTANDING SHARES 10,862,773 7,175,000 .004 .003 THE FINANCIAL STATEMENTS INCLUDED IN THIS REPORT REFLECT ALL ADJUSTMENTS, WHICH, IN THE OPINION OF MANAGEMENT, ARE NECESSARY FOR FAIR PRESENTATION. -4- KNUSAGA CORPORATION STATEMENT OF CASH FLOW (UNAUDITED) THREE MONTHS ENDED NOVEMBER 30, 2003 AND NOVEMBER 30, 2002 (UNAUDITED) THREE MONTHS ENDED NOVEMBER 30, NOVEMBER 30, 2003 2002 CASH PROVIDED BY (USED FOR) OPERATIONS NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS, $ 39,707 $ 23,514 EXCHANGE LOSS NON-CASH EXPENSE INCLUDED IN NET INCOME $ 62,025 $ 73,182 DEPRECIATION (INCREASE) DECREASE IN: ACCOUNTS RECEIVABLE $ 13,173 $ 623,111 INVENTORIES ($ 49,812) $ 25,035 REFUNDABLE TAXES $ 20,074 $ 18,622 PREPAID EXPENSES ($ 5,030) - 0 - INCREASE (DECREASE) IN: ACCOUNTS PAYABLE $ 30,075 ACCRUED LIABILITIES ($ 10,319) ($155,294) ($108,346 NET CASH PROVIDED BY (USED FOR) $ 99,893 $ 499,824 OPERATING ACTIVITIES INVESTING ACTIVITIES PURCHASES OF EQUIPMENT ($ 16,079) ($ 46,002) PROCEEDS FROM SALE OF EQUIPMENT - 0 - $ 59,895 INVESTMENT IN JOINT VENTURES - 0 - ($ 120) CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES ($ 16,079) $ 13,773 FINANCING ACTIVITIES PAYMENT OF NOTES ($ 46,953) ($248,959) INCREASE (DECREASE) IN CASH $ 36,861 $ 264,638 BALANCE AT BEGINNING OF PERIOD $ 49,916 $ 135,528 BALANCE AT END OF PERIOD $ 86,777 $ 400,166 -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. Part II - OTHER INFORMATIONS ---------------------------- Item 6. Exhibits and Reports on Form 8-K ----------------------------------------- (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. -6- SIGNATURES 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 and Controller) Officer Dated: January 12, 2004 Dated: January 12, 2004 -------------------------- --------------------------- -7-