10QSB 1 knusaga10qsb022904.txt PERIOD ENDED 02-29-04 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 29, 2004 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.
RESULTS OF OPERATIONS The Company's operations are classified into two principal reportable segments, tubing and seat tracks. Combined net sales increased 12.1% in the second quarter ended February 29, 2004 of the fiscal year ending August 2004 to $1,302,280 from $1,161,437 a year ago. Sales for the tubing segment in the second quarter increased by 28.2% to $1,040,025 from $811,322 a year ago. This reflects the improvement in the heavy truck market from the depressed levels of the last two years. In the second quarter sales in the seat track segment, which serves the Class A motorhome market, declined 25.1% to $262,255 from $350,115 a year ago. This is a result of the registrant's major customer switching to a lower cost product from a competitor. The registrant has delivered prototypes of a new seat track design to two major potential customers. This new design could enter production in time for the 2005 model motorhome production which begins in the Fall of this year. For the six months ended February 29, 2004, combined sales increased 5.3% to $2,906,824 from $2,759,631 in the year ago period for the same reasons as stated above. The registrant operated at a loss of $90,982 in the second quarter of the 2004 fiscal year ended February 29, 2004 versus a loss of $81,346 in the year ago period. While there was some improvement in the tubing segment loss the reduced volume in the seat track segment resulted in a loss of $8,096 compared to income of $20,754 in the year ago period. For the six months ended February 29, 2004, there was little change with a loss of $51,275 versus a loss of $57,832 in the year ago period. Below is summarized segmental data for the second quarters and six months ended February 29, 2004 and February 28, 2003. --------------------------------------------------------------------------------------- 2ND QTR TUBING SEAT TRACK TOTAL --------------------------------------------------------------------------------------- 2004 2003 2004 2003 2004 2003 --------------------------------------------------------------------------------------- REVENUE 1,040,025 811,322 262,255 350,115 1,302,280 1,161,437 --------------------------------------------------------------------------------------- PROFIT (82,886) (102,100) (8,096) 20,754 (90,982) (81,346) --------------------------------------------------------------------------------------- -2-
----------------------------------------------------------------------------------------- 6 MONTHS TUBING SEAT TRACK TOTAL ----------------------------------------------------------------------------------------- 2004 2003 2004 2003 2004 2003 ----------------------------------------------------------------------------------------- REVENUE 2,092,973 1,942,314 813,851 817,317 2,906,824 2,759,631 ----------------------------------------------------------------------------------------- PROFIT (117,500) (115,669) 66,225 57,837 (51,275) (57,832) ----------------------------------------------------------------------------------------- Selling, general and administrative expenses were little changed with an increase of 0.9% in the second quarter ended February 29, 2004, to $190,710 from $189,028 in the year ago period. For the six months ended February 29, 2004, these expenses decreased 6.9% to $367,603 from $394,901 in the year ago period. 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 on all of the Registrant's assets. This line of credit is due August 31, 2004. As of February 29, 2004, the outstanding balance was $354,761 and the applicable interest rate was 5.0%. 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 29, 2004 AND FEBRUARY 28, 2003 February 29, February 28, ASSETS 2004 2003 CASH $ 21,850 $ 188,113 ACCOUNTS RECEIVABLE $ 694,358 $ 552,726 ACCOUNTS RECEIVABLE - OTHER $ 161,054 $ 177,056 ACCRUED INTEREST RECEIVABLE $ 2,446 INVENTORIES $ 682,423 $ 683,753 REFUNDABLE TAXES $ 30,632 -0- PREPAID EXPENSES $ 82,718 $ 83,195 DEFERRED TAX ASSET $ 47,600 -0- ---------- ---------- TOTAL CURRENT ASSETS $1,723,081 $1,684,843 NET PROPERTY AND EQUIPMENT $1,592,510 $1,737,539 OTHER ASSETS DEPOSITS $ 7,050 $ 7,050 INVESTMENT IN JOINT VENTURES $ 110,356 $ 126,066 INTANGIBLE ASSETS $ 60,961 $ 4,646 ---------- ---------- TOTAL OTHER ASSETS $ 178,367 $ 137,764 ---------- ---------- TOTAL ASSETS $3,493,958 $3,560,146 ========== ========== LIABILITIES ACCOUNTS PAYABLE $ 378,282 $ 231,481 NOTES PAYABLE $ 562,574 $ 849,200 ACCRUED LIABILITIES $ 376,996 $ 794,361 ---------- ---------- TOTAL CURRENT LIABILITIES $1,317,852 $1,875,042 LONG TERM DEBT $ 213,714 $ 394,273 DEFERRED TAXES $ 63,600 $ 57,300 ---------- ---------- TOTAL LIABILITIES $1,595,166 $2,326,615 STOCKHOLDERS EQUITY STOCK $ 10,863 $ 7,175 ADDITIONAL PAID IN CAPITAL $1,522,446 $ 604,190 RETAINED EARNINGS $ 365,483 $ 622,166 ---------- ---------- TOTAL SHAREHOLDERS' EQUITY $1,898,792 $1,233,531 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $3,493,958 $3,560,146 ========== ========== -4-
KNUSAGA CORPORATION STATEMENT OF INCOME (UNAUDITED) FOR THREE AND SIX MONTH PERIOD ENDED FEBRUARY 29, 2004 AND FEBRUARY 28, 2003 (UNAUDITED) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED FEBRUARY 29, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, 2004 2003 2004 2003 NET SALES $ 1,302,280 $ 1,161,447 $ 2,906,824 $ 2,759,631 COST OF GOODS SOLD $ 1,240,342 $ 1,083,609 $ 2,602,158 $ 2,472,200 ------------ ------------ ------------ ------------ GROSS PROFIT $ 61,938 $ 77,838 $ 304,666 $ 287,431 SELLING, GENERAL AND ADMINISTRATIVE $ 190,710 $ 189,028 $ 367,603 $ 394,901 EXPENSES MISC. INCOME (EXPENSE) ($ 9080) ($ 12,248) ($ 15,133) $ 19,644 ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE TAXES ($ 137,851) ($ 123,431) ($ 78,070) ($ 87,826) PROVISION FOR FEDERAL INCOME TAXES ($ 46,869) ($ 42,085) ($ 26,795) ($ 29,994) ------------ ------------ ------------ ------------ NET INCOME BEFORE EXTRAORDINARY ITEMS ($ 90,982) ($ 81,346) ($ 51,275) ($ 57,832) EXTRAORDINARY ITEMS: $ 0 $ 0 $ 0 $ 0 ------------ ------------ NET INCOME ($ 90,982) ($ 81,346) ($ 51,275) ($ 57,832) PAR SHARE OF COMMON STOCK AND COMMON STOCK EQUIVALENTS: AVERAGE OUTSTANDING SHARES 10,862,773 7,175,000 10,862,773 7,175,000 (0.008) (0.011) (0.005) (0.008) 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 29, 2004 AND FEBRUARY 28, 2003 (UNAUDITED) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED FEBRUARY FEBRUARY FEBRUARY FEBRUARY 29, 2004 28, 2003 29, 2004 28, 2003 NET INCOME ($90,982) ($81,346) ($51,275) ($57,832) DEPRECIATION & AMORTIZATION $62,459 $72,229 $124,484 145,411 (INCREASE) DECREASE IN: ACCOUNTS RECEIVABLE $8,048 ($40,119) $21,221 $582,992 INVENTORIES ($24,906) ($8,466) ($74,718) $16,569 REFUNDABLE TAXES $12,057 $32,131 PREPAID EXPENSES ($26,250) ($44,418) ($31,280) ($25,796) OTHER ASSETS INCREASE (DECREASE) IN: ACCOUNTS PAYABLE $33,798 ($27,024) $63,873 ($182,318) ACCRUED LIABILITIES $44,596 ($14,676) 34,277 ($123,022) CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES $18,820 ($143,820) $118,713 $356,004 INVESTMENT ACTIVITIES PURCHASES OF EQUIPMENT ($36,122) ($18,030) ($52,201) ($64,032) PROCEEDS FROM SALE OF EQUIPMENT $59,895 INVESTMENT IN JOINT VENTURES ($120) CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES ($36,122) ($18,030) ($52,201) ($4,257) FINANCING ACTIVITIES PAYMENT OF NOTES ($47,625) ($50,203) ($94,578) ($299,162) CASH USED FOR FINANCING ACTIVITIES ($47,625) ($50,203) ($94,578) ($299,162) NET INCREASE (DECREASE) ($64,927) ($212,053) ($28,066) $52,585 BEGINNING CASH $86,777 $400,166 $49,916 $135,528 ENDING CASH $21,850 $188,113 $21,850 $188,113 -6-
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. (b) Reports on Form 8-K None -7- EXHIBIT INDEX 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. -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 8, 2004 Dated: April 8, 2004 ---------------------------- ----------------------------- -9-