<PAGE> 1
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, 1998
Commission File Number 0-7795
KNUSAGA CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
62-1004034
(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 $.01, outstanding: 7,000,000.
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<PAGE> 2
RESULTS OF OPERATIONS
Net Sales decreased 17.6% in the first quarter of the fiscal year ending August
1999 to $2,462,657. Tubing sales decreased 48% to $1,541,310 from $2,988,804 in
the year ago quarter. This is a result of a substantial decline of Ford Medium
Truck production in their Mexican plant and Freightliner's production not yet
reaching planned volumes. The seat track business provided new sales of $921,347
during the quarter. There were no seat track sales in the year ago quarter.
The 48% decline in tubing sales resulted in a loss of $50,662 for the tubing
business during the quarter compared to a profit of $327,462 in the year ago
quarter. This was offset by a profit of $89,108 for the seat track business.
Selling and Administrative expenses of $216,059 decreased 9.3% from the year ago
quarter expense of $238,204 due to expense reduction in the tube business offset
by a modest increase for the seat track business.
LIQUIDITY AND SOURCES OF CAPITAL
The company experienced a negative cash flow of $27,196 from operations during
the quarter. There was an additional cash requirement of $107,470 for equipment
purchases. This requirement was funded by cash available at the beginning of the
quarter and a small increase in short term borrowings of $9,863. Long term debt
was reduced by $94,043 during the quarter.
CONTINGENT MATTERS
There are no contingencies or consequential uncertainties known that will
materially affect the financial information as presented.
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<PAGE> 3
KNUSAGA CORPORATION
BALANCE SHEET (UNAUDITED)
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
ASSETS November 30, 1998
<S> <C>
CASH $ 147,579
ACCOUNTS RECEIVABLE $1,505,394
ACCOUNTS RECEIVABLE - OTHER $ 94,143
INVENTORIES $ 516,926
PREPAID EXPENSE $ 251,582
----------
TOTAL CURRENT ASSETS $2,515,624
NET PROPERTY, PLANT AND EQUIPMENT $2,437,516
OTHER ASSETS $ 20,713
----------
TOTAL ASSETS $4,973,853
LIABILITIES
ACCOUNTS PAYABLE $1,060,260
NOTES PAYABLE $1,036,505
ACCRUED LIABILITIES $ 175,649
----------
TOTAL CURRENT LIABILITIES $2,272,414
LONG TERM DEBT $1,401,861
----------
TOTAL LIABILITIES $3,674,275
STOCKHOLDERS EQUITY (DEFICIENCY)
Common Stock, par value $.01 per share authorized $ 70,000
7,000,000 shares issued and outstanding.
Preferred stock, par value $.01 per share $ 175,000
authorized 500,000 shares, issued and outstanding
175,000 of Class A $1.00 stated value, 4%
non-cumulative, non-voting.
ADDITIONAL PAID-IN CAPITAL $ 366,365
RETAINED EARNINGS $ 688,213
----------
TOTAL STOCKHOLDERS EQUITY $1,299,578
----------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $4,973,853
</TABLE>
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<PAGE> 4
KNUSAGA CORPORATION
STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, 1998 AND NOVEMBER 30, 1997
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, 1998 NOVEMBER 30, 1997
<S> <C> <C>
NET SALES $ 2,462,657 $2,988,804
COST OF GOODS SOLD $ 2,136,670 $2,208,638
----------- ----------
GROSS PROFIT $ 325,987 $ 780,166
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $ 216,059 $ 238,204
MISC. INCOME (EXPENSE) ($ 44,485) $ 44,306
----------- ----------
INCOME (LOSS) BEFORE TAXES $ 65,443 $ 497,657
PROVISION FOR FEDERAL INCOME TAXES $ 26,997 $ 170,195
----------- ----------
NET INCOME BEFORE EXTRAORDINARY ITEMS $ 38,446 $ 327,462
EXTRAORDINARY ITEMS: $ -0- $ -0-
TAX BENEFIT OF OPERATING
LOSS CARRYFORWARD
----------- -----------
NET INCOME $ 38,446 $ 327,462
PAR SHARE OF COMMON STOCK AND COMMON STOCK
EQUIVALENTS:
AVERAGE OUTSTANDING SHARES 7,000,000 7,000,000
.00 .04
</TABLE>
THE FINANCIAL STATEMENTS INCLUDED IN THIS REPORT REFLECT ALL ADJUSTMENTS, WHICH,
IN THE OPINION OF MANAGEMENT, ARE NECESSARY FOR FAIR PRESENTATION.
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<PAGE> 5
KNUSAGA CORPORATION
STATEMENT OF CASH FLOW (UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, 1998 AND NOVEMBER 30, 1997
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
NOVEMBER 30, 1998 NOVEMBER 30, 1997
<S> <C> <C>
CASH PROVIDED BY (USED FOR) OPERATIONS
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS, NON-CASH $ 38,446 $ 327,462
EXPENSE INCLUDED IN NET INCOME
DEPRECIATION $ 82,686 $ 71,250
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLE ($475,725) $ 70,915
INVENTORIES $ 51,785 $ 100,109
PREPAID EXPENSES ($ 4,472) $ 8,759
OTHER ASSETS --- ($62,100)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE $ 267,179 ($84,588)
ACCRUED LIABILITIES $ 12,905 $ 21,197
--------- ---------
NET CASH PROVIDED BY (USED FOR) ($27,196) $ 453,004
OPERATING ACTIVITIES
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES
PURCHASES OF EQUIPMENT $ 107,470 ($69,706)
---------
CASH PROVIDED BY (USED FOR) BEFORE ($134,666) $ 383,298
FINANCING ACTIVITIES
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
DEBT INCREASE (DECREASE)
SHORT-TERM $ 9,863 ($580,000)
LONG-TERM ($94,043) ($63,358)
--------- ---------
NET CASH PROVIDED BY (USED FOR) ($84,180) ($643,358)
FINANCING ACTIVITIES
INCREASE (DECREASE) IN CASH ($218,840) ($260,060)
BALANCE AT BEGINNING OF PERIOD $ 364,781 $ 276,294
BALANCE AT END OF PERIOD $ 145,935 $ 16,234
</TABLE>
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<PAGE> 6
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/ Jim Musser
---------------------------
Jim Musser
Dated: 2/22/99
------------------------
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<PAGE> 7
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ------- --- -----------
27 Financial Data Schedule
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 147,579
<SECURITIES> 0
<RECEIVABLES> 1,599,537
<ALLOWANCES> 0
<INVENTORY> 516,926
<CURRENT-ASSETS> 2,515,624
<PP&E> 3,783,979
<DEPRECIATION> 1,346,463
<TOTAL-ASSETS> 4,973,853
<CURRENT-LIABILITIES> 2,272,414
<BONDS> 830,060
0
175,000
<COMMON> 70,000
<OTHER-SE> 1,054,578
<TOTAL-LIABILITY-AND-EQUITY> 4,973,853
<SALES> 2,462,657
<TOTAL-REVENUES> 2,462,657
<CGS> 2,136,670
<TOTAL-COSTS> 2,352,729
<OTHER-EXPENSES> (532)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,016
<INCOME-PRETAX> 65,443
<INCOME-TAX> 26,997
<INCOME-CONTINUING> 38,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,446
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
