<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON D.C. 20549

                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
         SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

                                       OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
         SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                     TO
                               -------------------     ------------------------
COMMISSION FILE NUMBER  1-12607

                            KRUG INTERNATIONAL CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                    Ohio                                       31-0621189
                  ---------                               -------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION              (I.R.S. EMPLOYER
                OR ORGANIZATION)                          IDENTIFICATION NO.)

            900 Circle 75 Parkway, Suite 1300, Atlanta, Georgia 30339
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                                   (ZIP CODE)

                                 (770) 933-7000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


         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 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filings requirements for the past 90 days.


Yes  [ X ]     No  [  ]



         The number of Common Shares, without par value, outstanding as of
November 2, 2000 was 4,976,340.

<PAGE>   2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                    KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30,       MARCH 31,
                                                                       2000               2000
                                                                   -------------       ---------
<S>                                                                <C>                 <C>
                                   ASSETS
Current Assets:
     Cash and cash equivalents                                        $  7,049         $ 7,651
     Receivables - net                                                   4,447           5,118
     Inventories                                                         2,625           3,611
     Prepaid expenses and other                                            786             506
                                                                      --------         -------
         Total Current Assets                                           14,907          16,886

Property, Plant and Equipment, At Cost                                   9,744          10,319
     Less accumulated depreciation                                       5,960           6,069
                                                                      --------         -------
         Property, Plant and Equipment - Net                             3,784           4,250

Pension Asset                                                            1,048           1,129
Net noncurrent assets of discontinued operations                           874             855
Other Assets                                                                37               8
                                                                      --------         -------

             Total Assets                                             $ 20,650         $23,128
                                                                      ========         =======

                    LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
     Bank borrowings                                                  $  2,630         $ 2,064
     Accounts payable                                                    4,053           5,562
     Accrued expenses                                                    2,164           2,378
     Income taxes                                                            6             348
     Net current liabilities of discontinued operations                    512             198
     Current maturities of long-term debt                                  393             589
                                                                      --------         -------
         Total Current Liabilities                                       9,758          11,139

Long-term debt                                                           1,606           1,438
Noncurrent reserve for Industrial Segment                                  997           1,038
                                                                      --------         -------
         Total Long-term Liabilities                                     2,603           2,476

Shareholders' Equity:
     Common shares, no par value:
         Issued and outstanding, 4,976 at September 30, 2000
             and March 31, 2000                                          2,488           2,488
     Additional paid-in capital                                          3,604           3,604
     Retained earnings                                                   2,369           3,172
     Accumulated other comprehensive income (loss)                        (172)            249
                                                                      --------         -------
                Total Shareholders' Equity                               8,289           9,513
                                                                      --------         -------

                    Total Liabilities and Shareholders' Equity        $ 20,650         $23,128
                                                                      ========         =======
</TABLE>

See notes to condensed consolidated financial statements


                                       2
<PAGE>   3
                    KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                    (in thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>

                                                     THREE MONTHS ENDED
                                                         SEPTEMBER 30,
                                                   -------------------------
                                                      2000           1999
                                                   -------------------------
<S>                                                 <C>             <C>
Revenues                                            $ 6,981         $ 7,993

Cost of Goods Sold                                    6,638           7,266
Selling and Administrative Expenses                     780             947
                                                    -------         -------

Operating Loss                                         (437)           (220)

Other Income (Expense):
     Interest expense                                   (61)            (45)
     Interest income                                    105              60
                                                    -------         -------
Loss From Continuing Operations
     Before Income Taxes                               (393)           (205)

Income Tax Benefit                                       63              --
                                                    -------         -------
Loss From Continuing Operations                        (330)           (205)

Earnings (Loss) From Discontinued Operations
     (net of tax expense of $66 and
         $74, respectively)                            (255)             40
                                                    -------         -------

Net Loss                                            $  (585)        $  (165)
                                                    =======         =======

Loss Per Share:
     Continuing Operations:
         Basic                                      $ (0.07)        $ (0.04)
                                                    =======         =======
         Diluted                                    $ (0.07)        $ (0.04)
                                                    =======         =======

     Net Loss:
         Basic                                      $ (0.12)        $ (0.03)
                                                    =======         =======
         Diluted                                    $ (0.12)        $ (0.03)
                                                    =======         =======

Weighted-Average Common Shares Outstanding:
         Basic                                        4,976           4,977
                                                    =======         =======
         Diluted                                      4,976           4,977
                                                    =======         =======

</TABLE>


See notes to condensed consolidated financial statements


                                       3
<PAGE>   4
                    KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                    (in thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                       SIX MONTHS ENDED
                                                          SEPTEMBER 30,
                                                   --------------------------
                                                     2000             1999
                                                   --------------------------
<S>                                                <C>              <C>
Revenues                                           $ 13,913         $ 15,674
Cost of Goods Sold                                   12,979           14,275
Selling and Administrative Expenses                   1,525            1,955
                                                   --------         --------

Operating Loss                                         (591)            (556)

Other Income (Expense):
     Interest expense                                  (112)            (123)
     Interest income                                    210              143
     Other income - net                                  --                1
                                                   --------         --------

Loss From Continuing Operations
     Before Income Taxes                               (493)            (535)

Income Tax Expense                                       --               --
                                                   --------         --------

Loss From Continuing Operations                        (493)            (535)

Loss From Discontinued Operations
     (net of tax expense of $48 and
         $122, respectively)                           (310)            (223)
                                                   --------         --------

Net Loss                                           $   (803)        $   (758)
                                                   ========         ========

Loss Per Share:
     Continuing Operations:
         Basic                                     $  (0.10)        $  (0.11)
                                                   ========         ========
         Diluted                                   $  (0.10)        $  (0.11)
                                                   ========         ========

     Net Loss:
         Basic                                     $  (0.16)        $  (0.15)
                                                   ========         ========
         Diluted                                   $  (0.16)        $  (0.15)
                                                   ========         ========

Weighted-Average Common Shares Outstanding:
         Basic                                        4,976            4,977
                                                   ========         ========
         Diluted                                      4,976            4,977
                                                   ========         ========
</TABLE>

See notes to condensed consolidated financial statements


                                       4
<PAGE>   5
                    KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                                        SIX MONTHS ENDED
                                                                          SEPTEMBER 30,
                                                                      -------------------------
                                                                         2000           1999
                                                                      --------         -------
<S>                                                                   <C>              <C>
Net Cash Used in Operating Activities                                 $ (1,273)        $(2,221)

Cash Flows From Investing Activities:
     Expenditures for property, plant and equipment                       (120)            (29)
                                                                      --------         -------

         Net Cash Used In Investing Activities                            (120)            (29)

Cash Flows From Financing Activities:
     Bank borrowings - net                                                 730              --
     Payments on long-term debt                                           (302)         (3,555)
     Additions to long-term debt                                           376             828
     Purchase of treasury stock                                             --              (2)
     Change in restricted cash                                              --           6,641
                                                                      --------         -------

         Net Cash Provided by Financing Activities                         804           3,912

     Effect of Exchange Rate Changes on Cash                               (13)             76
                                                                      --------         -------

Net Increase (Decrease) in Cash and Cash Equivalents                      (602)          1,738

Cash and Cash Equivalents at Beginning of Period                         7,651           2,712
                                                                      --------         -------

Cash and Cash Equivalents at End of Period                            $  7,049         $ 4,450
                                                                      ========         =======


Cash Paid For:
     Income Taxes                                                     $    500         $   170
                                                                      ========         =======
     Interest                                                         $    112         $   167
                                                                      ========         =======

Non-Cash Investing and Financing Activities:
     Capital leases                                                   $     48         $    40
                                                                      ========         =======
</TABLE>

See notes to condensed consolidated financial statements


                                       5
<PAGE>   6
                    KRUG INTERNATIONAL CORP. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                      THREE MONTHS ENDED SEPTEMBER 30, 2000
                             (DOLLARS IN THOUSANDS)

NOTE 1. -- BASIS OF PRESENTATION

     The unaudited Condensed Consolidated Financial Statements for the three
months ended September 30, 2000 have been prepared in accordance with Rule 10-01
of Regulation S-X of the Securities and Exchange Commission and, as such, do not
include all information required by generally accepted accounting principles.
These Condensed Consolidated Financial Statements should be read in conjunction
with the consolidated financial statements included in the Corporation's Annual
Report on Form 10-K filed on June 26, 2000. In the opinion of management, the
Condensed Consolidated Financial Statements, which are unaudited, include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position and results of operations for the periods
indicated. The results of operations for the three months and six months ended
September 30, 2000 are not necessarily indicative of the results that may be
expected for the entire fiscal year or any other interim period.

NOTE 2. -- BUSINESS OPERATIONS AND CORPORATE STRATEGY

     KRUG International Corp. manufactures and distributes housewares and child
safety products through its manufacturing and distribution operations in Europe.
The Corporation is currently redirecting its business strategy toward the
acquisition of interests in the healthcare industry in the United States
("U.S."). The Corporation has not confined its strategy to any one sector of the
healthcare industry, but its initial focus has been directed at evaluating
acquisition opportunities for community hospitals.

NOTE 3. -- DISCONTINUED OPERATIONS

     Child Safety Segment - During the quarter ended June 30, 2000, the
Corporation decided to dispose of the European Child Safety segment, Klippan
Limited ("Klippan"), and it is being marketed for sale. The Corporation
currently anticipates that the sale will occur in fiscal 2001, which ends March
31, 2001. Klippan is a leading United Kingdom ("U.K.") manufacturer of
children's automobile safety seats and accessories having manufacturing
facilities and sales offices in the U.K. and Europe.

     Life Sciences and Engineering Segment - On November 30, 1999, the
Corporation sold its Wyle Laboratories, Inc. ("Wyle") Series A Preferred Stock
and stock option for $4,125 in cash. The Series A Preferred Stock had voting
rights and was convertible into approximately 38% of Wyle's common shares. In
connection with the sale, which was a part of a leveraged management buy-out of
Wyle, the Corporation also exchanged its non-dividend paying and non-voting
Series B Preferred Stock in Wyle for Senior Preferred Stock of LTS Holdings,
Inc., Wyle's new parent company, and canceled its existing option to acquire
Wyle shares. The New Senior Preferred Stock is redeemable on March 31, 2003 for
$954 plus accrued and unpaid dividends at 8% per annum. No gain was reported on
the exchange of the Series B Preferred Stock of Wyle for Senior Preferred Stock
of LTS Holdings, Inc. due to the highly leveraged nature of Wyle's management
buy-out. The recorded investment in the Senior Preferred Stock of LTS Holdings,
Inc. is $0 at September 30, 2000.

     Industrial Segment - In fiscal year 1989, the Corporation discontinued the
operations of its Industrial segment and subsequently disposed of substantially
all related net assets. However, obligations remain relating to product
liability claims for products sold prior to the disposal.


                                       6

<PAGE>   7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4. - BANK BORROWINGS AND LONG-TERM DEBT


<TABLE>
<CAPTION>
                                     SEPTEMBER 30,    MARCH 31,
                                         2000           2000
                                     -------------   -----------
         <S>                         <C>             <C>
         U.K. Term Loan                 $ 1,475         $ 1,313
         Capital leases                     524             714
                                        -------         -------

              Total                       1,999           2,027
         Less current maturities           (393)           (589)
                                        -------         -------

              Long-term portion         $ 1,606         $ 1,438
                                        =======         =======
</TABLE>

     The Corporation renegotiated its U.K. Term Loan in September 2000. The U.K.
Term Loan was extended to a new 10 year term commencing in September 2000 with a
U.K. bank. The loan has monthly principal payments of $12, plus interest, at the
bank's base rate plus 1.25% (7.25% at September 30, 2000). There are no
financial covenants in the new Term Loan as were contained in the previous loan
agreement.

         The Corporation has established a working capital line with a U.K.
bank. The availability under the line is based upon the current levels of U.K.
accounts receivable and fluctuates with increases or decreases in eligible
accounts receivable. The line is secured by the U.K. accounts receivable.
Borrowings under this line were $2,630 at September 30, 2000.

NOTE 5. -- INVENTORIES

<TABLE>
<CAPTION>
                                     SEPTEMBER 30,    MARCH 31,
                                         2000           2000
                                     -------------   -----------
         <S>                         <C>             <C>
         Finished goods                 $   624         $ 1,245
         Work-in-process                    703             748
         Raw materials and supplies       1,298           1,618
                                        -------         -------
                                        $ 2,625         $ 3,611
                                        =======         =======
</TABLE>


NOTE 6. -- INCOME TAXES

        The income tax benefit of $63 for the three months ended September 30,
2000 represents a foreign tax benefit.


                                       7
<PAGE>   8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7. -- RESTRUCTURING CHARGES

     Accrued expenses at September 30 and March 31, 2000, included $45 for
estimated final expenses of a vacated leased office. The lease ended June 25,
1999, but certain costs related to the removal of furniture and fixtures have
not been settled.

NOTE 8. -- COMPREHENSIVE INCOME

     Comprehensive income (loss) for the Corporation includes foreign currency
translation and minimum pension liability adjustments. Total comprehensive
income (loss) for the following periods were as follows:

<TABLE>
<CAPTION>

                                                          THREE MONTHS ENDED
                                                    --------------------------------
                                                    SEPTEMBER 30,      SEPTEMBER 30,
                                                       2000                1999
                                                    -------------      -------------
         <S>                                        <C>                <C>
         Net loss:                                       $(585)           $(165)
         Other comprehensive income net of tax:
            Change in equity due to:
               Foreign currency
                  translation adjustment                  (208)             745
               Minimum pension liability
                  adjustment                                (7)
                                                         -----            -----
         Comprehensive income (loss)                     $(800)           $ 580
                                                         =====            =====

<CAPTION>


                                                           SIX MONTHS ENDED
                                                    --------------------------------
                                                    SEPTEMBER 30,      SEPTEMBER 30,
                                                       2000                1999
                                                    -------------      -------------
       <S>                                          <C>                <C>
       Net loss:                                       $  (803)          $ (758)
         Other comprehensive income net of tax:
            Change in equity due to:
              Foreign currency
                 translation adjustments                  (414)             320
              Minimum pension liability
                 adjustment                                 (7)
                                                       -------           ------
         Comprehensive loss                            $(1,224)          $ (438)
                                                       =======           ======
</TABLE>


                                       8
<PAGE>   9
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS
          (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


CERTAIN CAUTIONARY STATEMENTS

     In addition to historical information, Items 1 and 2 of this report
contains certain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 including, without limitation,
statements regarding the Corporation's business strategy and management's
outlook for each of its businesses and the sufficiency of the Corporation's
liquidity and sources of capital. These forward-looking statements are subject
to certain risks, uncertainties and other factors which could cause actual
results, performance and achievements to differ materially from those
anticipated, including, without limitation, general economic and business
conditions in the U.S. and abroad, restrictions imposed by debt agreements,
competition in the housewares and child safety businesses, governmental
budgetary constraints, the regulatory environment for the Corporation's
businesses, consolidation and acquisition trends in the Corporation's
businesses, economic conditions influencing the Corporation's ability to sell
its Child Safety business and influencing the price of the Child Safety
business, competition in the acquisition market including the acquisition of
hospitals and healthcare facilities, changes in exchange rates (including in
Europe the effects of the European currency, the Euro), changes in prices of raw
materials and services, the purchasing practices of significant customers, the
availability of qualified management and staff personnel in each subsidiary, the
functionality of the Corporation's computer systems and claims for product
liability from continuing and discontinued operations.

CORPORATE BUSINESS STRATEGY

     The Corporation is currently redirecting its strategy toward the
acquisition of interests in the healthcare industry in the U.S. The Corporation
intends to seek acquisitions in sectors which it believes have an opportunity
for future growth. The Corporation has not confined its strategy to any one
sector of the healthcare industry, but its initial focus has been directed at
evaluating acquisition opportunities for community hospitals. The Corporation is
evaluating acquisitions without regard to their current profitability if it
believes an acquisition provides an opportunity to achieve future cashflow and
profitability.

DISCONTINUED SEGMENT

     The Corporation has evaluated the disposition of its European Child Safety
subsidiary, Klippan Limited, in light of its performance and the Corporation's
objective of acquiring a U.S. healthcare business. As a result of such
evaluation and to better position itself to acquire a U.S. healthcare business,
the Corporation has decided to offer Klippan for sale. Klippan is reported as a
discontinued segment in the accompanying financial statements. However, no sales
agreement has yet been reached and there can be no assurance any sales agreement
will be reached or that the net proceeds of any agreement which is reached will
be sufficient (when added to the Corporation's other liquid assets) to allow the
Corporation to acquire any U.S. healthcare business. The Corporation anticipates
that the sale will occur in fiscal 2001, which ends March 31, 2001.



                                       9
<PAGE>   10

DISPOSAL OF BUSINESS SEGMENTS

     In November 1999, the Corporation sold its Wyle Laboratories, Inc. ("Wyle")
Series A Preferred Stock and stock option for $4,125 in cash. The Series A
Preferred Stock had voting rights and was convertible into approximately 38% of
Wyle's common shares. In connection with the sale, which was part of a leveraged
management buy-out of Wyle, the Corporation also exchanged its non-dividend
paying and non-voting Series B Preferred Stock in Wyle for Senior Preferred
Stock of LTS Holdings, Inc., Wyle's new parent company, and canceled its
existing option to acquire Wyle shares. The new Senior Preferred Stock is
redeemable on March 31, 2003 for $954 plus accrued and unpaid dividends at 8%
per annum.

FINANCIAL SUMMARY

<TABLE>
<CAPTION>

                                                 THREE MONTHS ENDED          SIX MONTHS ENDED
                                                    SEPTEMBER 30,               SEPTEMBER 30,
                                                --------------------      ----------------------
                                                  2000        1999          2000         1999
                                                --------------------      ----------------------
<S>                                             <C>          <C>          <C>           <C>
REVENUES:
Housewares segment                              $ 6,981      $ 7,993      $ 13,913      $ 15,674
                                                =======      =======      ========      ========

LOSS FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES:

Housewares segment                              $   (70)     $   186      $    138      $    259
Corporate expenses (U.S. and U.K.)                 (367)        (406)         (729)         (815)
                                                -------      -------      --------      --------
                                                   (437)        (220)         (591)         (556)
Interest expense                                    (61)         (45)         (112)         (123)
Interest income                                     105           60           210           143
Other income - net                                   --           --            --             1
                                                -------      -------      --------      --------
Loss from Continuing Operations
   Before Income Taxes                          $  (393)     $  (205)     $   (493)     $   (535)
                                                =======      =======      ========      ========

</TABLE>

RESULTS OF OPERATIONS

         Revenues for the second quarter of fiscal 2001 of $6,981 declined from
$7,993 for the second quarter of fiscal 2000. All of the Corporation's revenues
relate to the U.K. housewares segment. Decreased sales of child safety gates and
laundry care products and the unfavorable effect of foreign currency translation
of $617 were the principal causes of the revenue decline. Sales volume increased
in the current year second quarter in the ladder product group. Revenues for the
six months ended September 30, 2000 decreased by $1,761 to $13,913 from $15,674
for the same period last year. Decreased sales of child safety gates and laundry
care products and the unfavorable effect of foreign currency translation of $950
were the causes of the revenue decline. Ladder sales did increase in the current
year compared to both the three and six months periods last year.

     Gross profit margin (revenue less cost of goods sold) decreased to 4.9% for
the quarter ended September 30, 2000 from 9.1% for the same quarter of the
previous fiscal year. For the six months ended September 30, 2000, the gross
profit was 6.7% compared to 8.9% for the six months ended September 30, 1999.
The decrease in the current year was the result of lower manufacturing volume
due to the decreased sales volume and unchanged manufacturing overhead costs.
The increased sales of ladders in the current year also decreased the gross
profit margin due to the higher material cost of ladders compared to other
product lines.


                                       10
<PAGE>   11

     Selling and administrative expense decreased by $167 and $430,
respectively, in the quarter and six months ended September 30, 2000 from the
same periods of the previous fiscal year. The decreased expense resulted from
overhead reductions of the housewares segment, which were made to reduce cost
levels in response to lower than anticipated sales levels, and lower corporate
expenses. For the six months ended September 30, 2000, selling and
administrative expense includes $43 of hospital acquisition-related expenses and
$33 of legal expense defending a shareholder lawsuit. In August 2000, the United
States Court of Appeals for the Ninth Circuit reversed and vacated the
preliminary injunction obtained by a shareholder in November 1999 enjoining from
holding the Corporation's 1999 Annual Meeting of Shareholders. The Court of
Appeals concluded that the opposition slate of three directors was not properly
nominated and that the Corporation was not required to include information on
the opposition slate in its proxy statement for the 1999 Annual Meeting. The
2000 Annual Meeting of Shareholders is scheduled for December 1, 2000.

     Interest expense increased $16 in the quarter ended September 30, 2000 from
the same quarter of the previous fiscal year as a result of slightly increased
U.K. bank borrowing levels. For the six months ended September 30, 2000,
interest expense decreased by $11 from the same period last year. Interest
income increased $45 and $67, respectively in the quarter and six months ended
September 30, 2000 from the same periods of the prior year due to increased
levels of cash invested and higher interest rates earned in the U.S.

     An income tax benefit of $63 was recorded for the quarter ending September
30, 2000, compared to no tax expense for the same quarter of the previous year.
A tax benefit was recorded as a result of losses in the U.K. in the second
quarter of fiscal 2001 which caused the reversing of the tax expense in the
first quarter of fiscal 2001. For the six months ended September 30, 2000 and
1999, respectively, no tax expense from continuing operations was recorded due
to taxable losses in the U.S. and the U.K.

     The loss from continuing operations was $330 ($0.07 per share) in the
second quarter of fiscal 2001 compared to a loss of $205 ($0.04 per share) in
the second quarter of fiscal 2000. The loss increased in the current year
primarily due to an operating loss of the housewares segment in the current year
compared to an operating profit last year. For the six months ended September
30, 2000, the loss from continuing operations was $493 ($0.10 per share)
compared to a loss of $535 ($0.11 per share) for the same period last year. The
loss decreased in the current year due to increased interest income and slightly
lower interest expense.

LIQUIDITY AND CAPITAL RESOURCES

     The Corporation used $1,273 of cash in operating activities during the
first six months of fiscal 2001. Cash was used to pay U.S. income taxes of $500,
to pay for costs related to probable hospital acquisitions of $187 ($144 of
which has been capitalized in prepaid expenses), to provide working capital for
the European operations (primarily to reduce accounts payable balances) and to
fund corporate overhead expenses.

     The Corporation has established a working capital line of approximately
$4,500 with a U.K. bank. The availability under the line is based upon the
current levels of U.K. accounts receivable and will fluctuate with increases or
decreases in eligible accounts receivable. Borrowings under this line were
$2,630 at September 30, 2000. During September 2000, the Corporation
renegotiated its U.K. Term Loan relating to the Beldray Ltd. manufacturing
facility. The U.K. Term Loan was extended to a new 10 year term, maturing in
fiscal 2011. It has monthly principal payments and no financial covenants. At
September 30, 2000, the balance of the U.K. Term Loan was $1,475. At September
30, 2000, the Corporation had no outstanding U.S. debt. The


                                       11
<PAGE>   12

Corporation believes it has adequate financing and liquidity in both the U.S.
and U.K. to support its current level of operations.

     Obligations remain relating to product liability claims for products
manufactured and sold before the disposal of the Corporation's discontinued
industrial segment in fiscal 1989. The Corporation reviewed the provision for
losses from such discontinued operations during the quarter and no changes were
deemed necessary.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not applicable.



                                       12
<PAGE>   13
PART II.  OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (A)      Exhibit 10.1 - Advice of Borrowing Terms for KRUG
                  International (UK) Ltd. Group from National Westminster Bank
                  PLC dated September 18, 2000.

                  Exhibit 27 - Financial Data Schedule.

         (B)      Reports on Form 8-K - None.



                                       13
<PAGE>   14

                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
KRUG International Corp. has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

                                          KRUG International Corp.

                                          By:    /s/ Mark J. Stockslager
                                                 -------------------------
                                                  Mark J. Stockslager
                                                  Principal Accounting Officer





Dated:   November 9, 2000


                                       14