<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                       -----------------------------------

        For fiscal year ended August 31, 2001 Commission File No. 0-7795

                               KNUSAGA CORPORATION
--------------------------------------------------------------------------------
             (Exact name of Registrant as Specified in its Charter)

       DELAWARE                                         62-1004034
---------------------------------             ----------------------------------
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                    Identification Number)

                    3578 S. Van Dyke, Almont, Michigan 48003
--------------------------------------------------------------------------------
              (Address of Principal Executive Office and Zip Code)

Registrant's telephone number, including area code: (810) 798-2402
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, Par Value $.01 Per Share
--------------------------------------------------------------------------------
                                (Title of Class)

Number of shares of common stock outstanding as of August 31, 2001:  7,000,000

Market value of shares held by non-affiliates not available due to lack of
market for stock.

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.

                                 Yes  X    No
                                    -----     ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]


Registrant's revenue for fiscal year ended August 31, 2001:  $9,288,259.

Registrant timely filed a Form 12B-25.


                                                                    Page 1 of 30
<PAGE>


                                     PART I

Item 1. DESCRIPTION OF BUSINESS.

       Knusaga Corporation ("Registrant") was incorporated in the State of
Delaware on May 28, 1971. As of its fiscal year ended August 31, 2001,
Registrant was engaged in the fabrication and sale of steel, aluminum and copper
tubes for use in the medium and large commercial truck industry and power seat
tracks for the automotive aftermarket.

       The Registrant intends to sell tubes to truck manufacturers in Mexico
through a 50% owned joint venture (Modular Tubes Systems, S.A., de C.V.) in
Mexico City, Mexico, after construction and certification of a Mexican plant.

       The principal customer for Registrant's air intake, exhaust and radiator
tubes is Freightliner Corporation (Freightliner), which accounted for 64% of the
Registrant's sales for said products during its fiscal year ended August 31,
2001. Registrant's second and third biggest customers are Volvo Trucks North
American, Inc. (Volvo), which accounted for 11%, and Ford Motor Company
("Ford"), which accounted for 7% of Registrant's sales for said products during
said fiscal year.

       Alpha Tube and United Industries are Registrant's largest suppliers.
Registrant issues periodic purchase orders to its suppliers for specific
quantities on an as needed basis, which are generally for four weeks of
projected requirements. Such purchase orders represent the only enforceable
formal agreement between Registrant and its suppliers.

       Registrant is a tier one supplier to Freightliner, Ford, Volvo and Nova
Bus and deals with each on a just-in-time inventory basis from a rolling ten to
fifteen working day firm shipping schedule. Registrant uses its employees to
sell directly to its tube customers.

       The Registrant's customers issue purchase orders to the Registrant for
specific parts. As with Registrant's purchase orders to its vendors, customer
purchase orders represent the only enforceable agreement between the Registrant
and each company with respect to the Registrant's products.

       Registrant's firm order backlog is just ten to fifteen working days.

       There are several competitors in the truck metal tube fabrication
business, with Northern Tube being Registrant's major competitor for Ford's
medium truck business and Tube Specialties being Registrant's competitor for
Freightliner's large over-the-road tube business. Truck suppliers compete on the
basis of price, quality, technology and on-time delivery.

       The principal customers for the Registrant's seat tracks are recreational
vehicle manufacturers. The Registrant uses distributors to market this product.

       During fiscal 2001, the Registrant commenced manufacture and sale of kits
to modify motorcycles into three-wheel vehicles through a 33 1/3% owned entity,
Sport Vehicles, LLC. See Note 17 to the Registrant's financial statements
included with Report.

       In addition to internal Research and Development, Research and
Development ("R&D") expenditures are also made to Travel Products. Currently,
Registrant pays Travel Products a monthly fee for R&D work with adjustments for
additional work. R&D expenditures for the last two fiscal years, including fees
paid to Travel Products, were $60,000 in 2001 and $101,388 in 2000.

       The Registrant has 90 full-time employees.

       The Registrant does not do any promotional advertising. The Registrant
does not own any patents or trademarks which are material to its business.

Forward Looking Statements

       This Annual Report contains statements reflecting our views about the
Registrant's future performance. These statements are "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995. These
views may involve risks and uncertainties that are difficult to predict and may
cause the Registrant's actual results to differ materially from the results
discussed in such forward-looking statements. Readers should consider that
various factors, including changes in general economic conditions, nature of
competition, relationships with customers, industry consolidation, government
regulation and other factors may affect the Registrant's future performance.
The Registrant undertakes no obligation to update any forward-looking
statements.

                                                                    Page 2 of 30
<PAGE>

Item 2. DESCRIPTION OF PROPERTY

       The Registrant owns a manufacturing building with attached office space
and an attached warehouse located on 10 acres of land at 3578 South Van Dyke
Road, Almont, Michigan. Registrant had previously been leasing office space in
said facility from Hydraulic Tubes and Fittings, Inc., and acquired ownership of
the entire facility when Hydraulic Tubes and Fittings, Inc., was merged into the
Registrant. The Registrant leases a facility in Imlay City, MI which it uses for
the production of seat tracks. It also leases a building in St. Thomas, Ontario
which it uses to sequence exhaust systems into Freightliner's Sterling truck
plant.

       Registrant owns certain fabricating equipment, which is used for the
fabrication of steel, aluminum, and copper tubes and certain assembly equipment
and tooling which is used for the production of power seat tracks.

       The Registrant's property, plant and equipment is in good operating
condition, subject to normal wear and tear and the need for periodic
replacement.

       A security interest is substantially all of Registrant's-owned property
has been granted to secure repayment of indebtedness to Registrant's bank
lender.

Item 3. LEGAL PROCEEDINGS

       Registrant is not currently involved in any pending material litigation.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       In March, 2001 the Registrant obtained the consent from holders of in
excess of 90% of its issued and outstanding shares of common stock and from
holders of 100% of its issued and outstanding shares of preferred stock to a
merger of the Registrant into and with a wholly-owned Nevada subsidiary. The
Registrant notified all non-consenting stockholders, as required by Delaware
law. This merger will enable the Registrant to increase the number of its
authorized shares of common stock and save corporate franchise taxes, and will
be completed upon securing its bank lender's consent.



                                                                    Page 3 of 30
<PAGE>


                                    PART II.

Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
             RELATED SECURITY HOLDING MATTERS

       5 (a) The principal market for the Registrant's common stock is the
over-the-counter market. Due to the infrequent trading of Registrant's stock, no
quotations are available.

       5 (b) As of August 31, 2001, there were approximately 1,592 shareholders
of Registrant's common stock.

       5 (c) Registrant has not paid any dividends in the past two (2) years.
This failure to pay dividends is due solely to financial considerations. The
Registrant is not under any legal restrictions imposed by its Articles of
Incorporation, Bylaws, express covenants in loan agreements or other obligations
to third parties with regard to dividend payments, although payment of dividends
could not be made if after giving effect to such payment an event of default
would arise by virtue of such payment or if an event of default already existed.
The Registrant does not anticipate the payment of any cash dividends in the
foreseeable future. By virtue of Registrant's current non-compliance with its
financial covenants, it is precluded from paying dividends.

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

       6(a) Net sales for the fiscal year ended August 31, 2001, decreased by
$4,016,361 or 30% from the year ended August 31, 2000. The decrease in sales for
fiscal year 2001 was the result of a severely depressed heavy truck market for
the tubing business and a decline in the Class A motor home industry, the
primary user of the Registrant's seat tracks.

       As a result of the decline in the Class A motor home market, seat track
sales were $2,841,278 in fiscal 2001, down $1,085,712 or 27.6% from fiscal 2000
seat track sales of $3,926,990.

       Cost of goods sold as a percentage of sales increased to 93.4% in fiscal
2001 versus 86.2% in fiscal 2000. This was primarily caused by fixed cost
absorption at the lower volumes in fiscal 2001, and price reductions demanded by
our principle customer, Freightliner. Selling, general, and administrative
expenses in fiscal year 2001 decreased $250,736 or 19.4% compared to fiscal
2000, as a result of lower sales.

       The Registrant's sales to Freightliner decreased from 77% in fiscal 2000
to 64% in fiscal 2001, while Ford dropped from 10% to 7%, but Volvo increased
from 6% to 11%. Seat track sales remained at 30% of total sales.

       As a result of the decrease in sales in fiscal 2001 and a write-down,
inventories were reduced $241,217 or 19.2% from the inventory amount at the end
of fiscal 2000.

       6(b) Liquidity and Capital Resources As a result of the contraction in
the Registrant's business in fiscal 2001, there was a corresponding reduction in
the amount of its receivables, inventories, payables and current portion of
long-term debt at fiscal 2001 year-end compared to fiscal year-end 2000, which
resulted in a reduction of its working capital deficit from $674,082 to
$393,570. The amount of this deficit reduction would have been greater without a
write-down of inventory at fiscal year-end 2001 of approximately $300,000.

       During fiscal 2001, the Registrant repaid nine term notes evidencing
aggregate principal indebtedness of $484,613 bearing interest at rates of 10 to
10.5%, as well as a portion of its resolving indebtedness, by issuing a new term
note for $826,454 payable in monthly installments of $17,838, including interest
at 3.25% above LIBOR, through May 2006.

                                                                    Page 4 of 30


<PAGE>

       The Registrant has a line of credit with Standard Federal Bank with
interest payable in monthly installments at the bank's prime rate. The note is
secured by all assets of the Registrant and the principal is due in January of
2002, although the Bank could demand repayment based on Registrant's
non-compliance with its financial covenants. At August 31, 2001, the outstanding
balance was $1,071,761 and the applicable interest rate was 6.75%.

       The Registrant does not have any material commitment for capital
expenditures in the current fiscal year.

Item 7. FINANCIAL STATEMENTS

       The report of independent auditors and consolidated financial statements
included on pages 13 through 30 of the annual financial report for the year
ended August 31, 2001 and 2000 are incorporated herein by reference.

Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

       No response required.

                                                                    Page 5 of 30
<PAGE>



                                    PART III.

Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT

<TABLE>
<CAPTION>
                     NAME                   AGE                        POSITION
                     ----                   ---                        --------
<S>                                        <C>            <C>
         James G. Musser, Jr.                66                   Director/President
         Jerry D. Luptak                     79           Director/Vice President Finance and
                                                                    General Counsel
         Harold Beznos                       63              Director/Secretary-Treasurer
</TABLE>


       The directors were elected in March, 1978 at the annual stockholders
meeting to serve until their successors are duly elected and qualified. Because
Registrant has not had another stockholders meeting, the directors have
continued to act in their present capacities as directors of Registrant. The
officers were appointed by the Board of Directors by Unanimous Written Consent
effective March 3, 1997.

       The following outlines the past and present occupations and business
experience of the executive officers of the Registrant.

              MR. MUSSER is, and has been, a Director and President of the
       Registrant since September 1, 1977. Prior to February 2001, he devoted
       100% of his time per month to the business affairs of the Registrant and
       since that date he has devoted approximately 25% of his time to the
       Registrant.

              MR. LUPTAK has served in his present capacities with the
       Registrant since September 1, 1977. Currently, and for more than five
       years, he has been Chairman of the Board and Chief Executive Officer
       (formerly President) of Armada Corporation, a manufacturer of metal
       alloys, and has been actively engaged in real estate development
       including multifamily residential, single family residential, retail and
       office buildings. He devotes approximately 2% of his time per month to
       the business affairs of the Registrant.

              MR. BEZNOS has served in his present capacities with the
       Registrant since September 1, 1977. Currently, and for more than five
       years, he has been actively engaged in real estate development including
       multifamily, residential, single family residential, retail and office
       buildings. He devotes approximately 1% of his time per month to the
       business affairs of the Registrant.

       Contemporaneously with Mr. Beebe's retirement, the Registrant understands
Mr. Beebe sold his shares in the Registrant. The Registrant does not believe a
Form 4 was filed reporting this sale.

Items 10
and 12. EXECUTIVE COMPENSATION AND CERTAIN RELATIONSHIPS
                     AND RELATED TRANSACTIONS.

       In the fiscal year ended August 31, 2001, Mr. Musser was paid $63,460 in
salary. Mr. Musser's salary was reduced effective February 1, 2001, to reflect
the reduced time devoted by Mr. Musser to the Registrant. None of the other
directors or officers received any direct or indirect remuneration during the
fiscal year ended August 31, 2001, and none is anticipated in the fiscal year
ending August 31, 2002.

       Messrs. Beznos, Luptak, Musser, and the Knudsen Trust have collectively
made working capital loans to the Corporation. These loans are payable on demand
and are represented by a single note bearing an annual interest rate of 12%,
with principal and interest originally payable June, 1990. The outstanding
principal balance on this note at August 31, 2001, was $165,836. As a result of
the merger of Hydraulic Tubes and Fittings, Inc., into Registrant, the
Registrant assumed the obligation for repayment of demand loans payable to
Messrs. Beznos, Luptak, and the Knudsen Trust bearing an annual interest rate of
12% and having an aggregate unpaid principal balance at August 31, 2001, of
$141,417. The information set forth under Note 10 in the Financial Statements is
incorporated by reference.


                                                                    Page 6 of 30
<PAGE>

       In March and April of 1990, Jay A. Fishman, as Trustee of the Paola M.
Luptak Irrevocable Trust U/A/D August 20, 1970, and Frieda Applebaum, as Trustee
of the Beznos Family Irrevocable Trust U/A/D February 2, 1976, each loaned
$50,000 to the Registrant as working capital in return for which they each
received a note bearing an annual interest rate of 12%, with principal and
interest payable on demand. The principal balance of these notes at August 31,
2001, was $50,000 each. The beneficiaries of the Beznos Family Irrevocable Trust
are beneficial shareholders of the Registrant and are related to Harold Beznos,
an officer and director of the Registrant. The note originally issued to the
Paola M. Luptak Irrevocable Trust has been assigned and is presently held by
Mayfair Associates Limited Partnership. No interest was accrued during fiscal
2001 with respect to these loans.

       On November 13, 2000, the Registrant's board of directors approved a
resolution to authorize additional shares of stock and issue stock to these
Directors, Officers, Shareholders, and their affiliates in exchange for the
payment of all amounts due under the existing obligations. The Directors,
Officers, Shareholders, and their affiliates have verbally agreed to the
transaction, but no documents have been executed by the Directors, Officers,
Shareholders, and their affiliates. As of December 14, 2001, the date of this
report, the number of shares to be issued has not yet been determined. In order
to increase its authorized capital to permit this exchange of debt, the
Registrant's Board and Stockholders have approved the merger of Registrant into
a wholly-owned Nevada subsidiary (which will be completed upon receipt of its
second lender's consent). Please see Note 17 to the Registrant's financial
statements for a description of a transaction with Registrant's President.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

       11(a)
<TABLE>
<CAPTION>
             Title
              Of                      Name and Address of               Amount and Nature of
             Class                     Beneficial Owner                   Beneficial Owner              % of Class
             -----                     ----------------                   ----------------              ----------
<S>                              <C>                                    <C>                             <C>
            Common               James G. Musser, Jr. (1)               726,520 shares                     10.4%
             Stock               7475 Pinehurst Circle
                                 Birmingham, MI  48010


            Common               Lorraine A. Musser  (1)                722,617 shares                     10.3%
             Stock               7475 Pinehurst Circle
                                 Birmingham, MI  48010

            Common               Frieda Applebaum, as trustee of the    1,449,137 shares                   20.7
             Stock               Beznos Family Irrevocable Trust
                                 U/A/D February 2, 1976(2)
                                 31731 Northwestern Hwy.
                                 Farmington Hills, MI  48334

            Common               Mayfair Associates Limited             1,463,109 shares                   20.9%
             Stock               Partnership (3)
                                 c/o 31731 Northwestern Hwy.
                                 Ste. 250W
                                 Farmington Hills, MI  48334

            Common               Bank One Trust Company, N.A. (4)       562,402 shares                     8.0%
             Stock               611 Woodward
                                 Detroit, MI  48226
</TABLE>

       (1)    Lorraine A. Musser is the wife of James G. Musser, Jr.

       (2)    These shares are held in an irrevocable trust with Frieda
              Applebaum as Trustee with voting and investment power for the
              benefit of Leslie Beznos, Samual Beznos and Lauren Beznos, who are
              the daughter, son and niece, respectively, of Harold Beznos, a
              director and officer of the Registrant.


                                                                    Page 7 of 30
<PAGE>

       (3)    These shares are owned by a Nevada Limited Partnership of which
              Mayfair General Corporation, a Nevada Corporation, is the sole
              general partner. As the sole director of said corporation,
              Virginia Buell has the power to vote the stock.

       (4)    These shares are held in a revocable trust with the Bank One Trust
              Company, N.A., as Trustee for the benefit of K. Peter Knudsen.

       11(b)  No shares of common stock of the Registrant are beneficially owned
              by any officers and directors of the Registrant, except Mr. James
              G. Musser, Jr. as listed in Item 11(a) above.

  As a group, the officers and directors beneficially own 726,520 shares of
  Registrant's common stock, representing 10.4% of all outstanding common stock.

  Item 13    EXHIBITS AND REPORTS ON FORM 8-K

       13a.  Financial Statement Schedules
             For Fiscal Years Ended August 31, 2001 and 2000

              1)     Accountant's opinion for years ended August 31, 2001 and
                     2000.

              2)     Balance Sheet for the years ended August 31, 2001 and 2000.

              3)     Statement of Income for years ended August 31, 2001 and
                     2000.

              4)     Statement of Stockholder's Equity for years ended August
                     31, 2001 and 2000.

              5)     Statement of Cash Flows for years ended August 31, 2001 and
                     2000.

              6)     Notes to Financial Statements for years ended 2001 and
                     2000.

       13b.  Reports on Form 8-K
             None

       13c.  Exhibits
             None

                                                                    Page 8 of 30
<PAGE>



       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:             Jerry Luptak
                                                    ----------------------------
                                                            Vice President


                                            Dated:         December 14, 2001
                                                    ----------------------------

       Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the date indicated:


By:    James G. Musser                               Date:    December 14, 2001
       -------------------------------------                  -----------------
       Director/President
       (Principal Executive Officer and
       Controller)


By:    Jerry D. Luptak                               Date:    December 14, 2001
       -------------------------------------                  -----------------
       Director
       Vice President, Finance and
       General Counsel
       (Principal Financial Officer)

By:    Harold Beznos                                 Date:    December 14, 2001
       -------------------------------------                  -----------------
       Director Secretary-Treasurer



                                                                    Page 9 of 30
<PAGE>


                       KNUSAGA CORPORATION AND SUBSIDIARY
                       D.B.A. HYDRAULIC TUBES AND FITTINGS

                        CONSOLIDATED FINANCIAL STATEMENTS

                               FOR THE YEARS ENDED
                            AUGUST 31, 2001 AND 2000




                                                                   Page 10 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                                  PAGE
                                                                                                                  ----
<S>                                                                                                              <C>
 ..................................................................................................................Page


Consolidated Balance Sheets......................................................................................13-14

Consolidated Statements of Income...................................................................................15

Consolidated Statements of Stockholders' Equity.....................................................................16

Consolidated Statements of Cash Flows...............................................................................17

Notes to Consolidated Financial Statements.......................................................................18-30
</TABLE>



                                                                   Page 11 of 30

<PAGE>






                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Knusaga Corporation
D.B.A. Hydraulic Tubes and Fittings
Almont, MI  48003

We have audited the accompanying consolidated balance sheets of Knusaga
Corporation and Subsidiary, D.B.A. Hydraulic Tubes and Fittings as of August 31,
2001 and 2000 and the related consolidated statement of income, stockholders'
equity, and cash flows for the years ended August 31, 2001 and 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessment of the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion the financial statements referred to above present fairly, in all
material respects, the financial position of Knusaga Corporation and Subsidiary,
D.B.A. Hydraulic Tubes and Fittings as of August 31, 2001 and 2000 and the
results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.

Respectfully,


/s/ Freedman & Goldberg
------------------------------
Freedman & Goldberg
Certified Public Accountants

Farmington Hills, Michigan
December 1, 2001


                                                                   Page 12 of 30
<PAGE>


                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                                     CONSOLIDATED BALANCE SHEETS


                                                  AS OF AUGUST 31, 2001 AND 2000





                                     ASSETS
<TABLE>
<CAPTION>
                                                                                                2001                2000
                                                                                             --------------------------------
<S>                                                                                          <C>                 <C>
Current Assets
      Cash                                                                                   $   62,753          $  448,855
      Accounts Receivable - Trade, net of Allowance
         for Doubtful Accounts of $-0-                                                        1,538,348           1,616,318
      Note Receivable                                                                             3,598              30,959
      Inventories                                                                             1,010,533           1,251,750
      Refundable Income Taxes                                                                   205,566                 -0-
      Prepaid Expenses                                                                           44,600              52,806
-----------------------------------------------------------------------------------------------------------------------------
          Total Current Assets                                                                2,865,398           3,400,688
-----------------------------------------------------------------------------------------------------------------------------
Property and Equipment, Net                                                                   2,053,985           2,486,035
-----------------------------------------------------------------------------------------------------------------------------
Other Assets
     Deposits                                                                                    10,579              18,469
     Investments in Other Entities                                                               99,291                 -0-
     Intangible Assets, Net                                                                       6,652               8,656
-----------------------------------------------------------------------------------------------------------------------------
     Total Other Assets                                                                         116,522              27,125
-----------------------------------------------------------------------------------------------------------------------------
         Total Assets                                                                        $5,035,905          $5,913,848
=============================================================================================================================
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.


                                                                   Page 13 of 30

<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                                     CONSOLIDATED BALANCE SHEETS


                                                  AS OF AUGUST 31, 2001 AND 2000



                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                                            2001                2000
                                                                                       ----------------------------------
<S>                                                                                    <C>                <C>
Current Liabilities
     Accounts Payable - Trade                                                           $   715,712        $ 1,171,112
     Current Maturities of Long-Term Debt                                                 1,667,884          1,891,666
     Accrued Expenses                                                                       863,172          1,011,992
-------------------------------------------------------------------------------------------------------------------------
     Total Current Liabilities                                                            3,246,768          4,074,770
-------------------------------------------------------------------------------------------------------------------------
Other Liabilities
     Long-Term Debt - Less Current Maturities                                               698,819            308,693
-------------------------------------------------------------------------------------------------------------------------
     Total Other Liabilities                                                                698,819            308,693
-------------------------------------------------------------------------------------------------------------------------
Deferred Taxes                                                                               36,500             22,500
-------------------------------------------------------------------------------------------------------------------------
         Total Liabilities                                                                3,982,087          4,405,963

Stockholders' Equity
     Common Stock, $.01 Par Value, 7,000,000 Shares Authorized, 7,000,000,
        Shares Issued and Outstanding
     Preferred Stock, Class A, 4% Non-Cumulative Non-Voting, Each Share                      70,000             70,000
        Convertible into One Share of Common Stock, Par Value $.01, Stated
        Value $1.00, 500,000 Shares Authorized, 175,000 Shares Issued and
        Outstanding
     Additional Paid-In Capital
     Retained Earnings                                                                      175,000            175,000
     Note Receivable - Officers                                                             366,365            366,365
                                                                                            549,796          1,003,863
                                                                                           (107,343)          (107,343)
-------------------------------------------------------------------------------------------------------------------------
    Total Stockholders' Equity                                                            1,053,818          1,507,885
-------------------------------------------------------------------------------------------------------------------------
     Total Liabilities and Stockholders' Equity                                         $ 5,035,905        $ 5,913,848
=========================================================================================================================
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.


                                                                   Page 14 of 30

<PAGE>


                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                               CONSOLIDATED STATEMENTS OF INCOME

                                    FOR THE YEARS ENDED AUGUST 31, 2001 AND 2000






<TABLE>
<CAPTION>

                                                                                         2001                    2000
                                                                                ----------------------------------------------
<S>                                                                             <C>                    <C>
Sales, Net                                                                              $ 9,288,259          $   13,304,620
Cost of Sales                                                                             8,678,664              11,467,287
------------------------------------------------------------------------------------------------------------------------------
Gross Profit                                                                                609,595               1,837,333
Selling, General and Administrative Expenses                                              1,042,892               1,293,628
------------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss)                                                                    (433,297)                543,705
------------------------------------------------------------------------------------------------------------------------------
Other Income (Expense)
    Interest Income                                                                              -0-                    116
    Interest Expense                                                                       (208,323)               (213,134)
    Miscellaneous Income                                                                      2,953                   2,496
    Gain (Loss) on Sale of Asset                                                              7,248                   7,905
  (Loss) from Joint Venture                                                                    (298)                    -0-
------------------------------------------------------------------------------------------------------------------------------
     Total Other Income (Expense)                                                          (198,420)               (202,617)
------------------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes                                                          (631,717)                341,088
Income Taxes Expense (Benefit)                                                             (177,650)                184,442
------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss)                                                                        $ (454,067)         $      156,646
==============================================================================================================================



Net Income Per Share                                                                     $       -0-         $           .02
==============================================================================================================================
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.


                                                                   Page 15 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                    FOR THE YEARS ENDED AUGUST 31, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                                                   Retained
                                                                                Additional         Earnings               Note
                                              Common         Preferred           Paid-In         (Accumulated          Receivable
                                              Stock            Stock             Capital            Deficit)             Officer
                                         ---------------- ------------------ ------------------ ------------------ -----------------
<S>                                      <C>              <C>                <C>                <C>                <C>
Balance, August 31, 1999                       $70,000          $175,000          $366,365          $ 847,217           $(124,143)
Advances to Officer                                -0-               -0-               -0-                -0-            ( 13,200)
Repayment of Loans                                 -0-               -0-               -0-                -0-              30,000
Net Income for the Year Ended
  August 31, 2000                                  -0-               -0-               -0-            156,646                 -0-
------------------------------------------------------------------------------------------------------------------------------------
Balance, August 31, 2000                        70,000           175,000           366,365          1,003,863            (107,343)
Repayment of Loans                                 -0-               -0-               -0-                -0-                 -0-
Net Loss For the Year
 Ended August 31, 2001                             -0-               -0-               -0-           (454,067)                -0-
------------------------------------------------------------------------------------------------------------------------------------
Balance, August 31, 2001                       $70,000          $175,000          $366,365          $ 549,796           $(107,343)
====================================================================================================================================
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

                                                                   Page 16 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                    FOR THE YEARS ENDED AUGUST 31, 2001 AND 2000
<TABLE>
<CAPTION>
                                                                                                2001               2000
 -------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>              <C>
 Cash Flows From Operations
     Net Income (Loss)                                                                     $ (454,067)         $156,646
     Adjustments to Reconcile Net Income to Net Cash
       Provided By Operating Activities
        Bad Debts                                                                              88,832               -0-
      Depreciation and Amortization                                                           370,430           352,545
      (Gain) Loss on Sale of Asset                                                             (7,248)           (7,905)
      (Increase) Decrease In:
        Accounts Receivable                                                                   (10,862)          475,996
        Inventories                                                                           241,217          (534,684)
          Refundable Income Taxes                                                            (205,566)              -0-
        Prepaid Expenses                                                                        8,206           (14,905)
        Deposits                                                                                7,890                54
      Increase (Decrease) In:
        Accounts Payable                                                                     (379,126)         (206,405)
        Accrued Expenses                                                                     (148,820)          (38,373)
        Deferred Taxes                                                                         14,000            10,700
 -------------------------------------------------------------------------------------------------------------------------
      Net Cash Provided By Operating Activities                                              (475,114)          193,669
 -------------------------------------------------------------------------------------------------------------------------
 Cash Flows From Investing Activities
     Equipment Purchases                                                                      (43,141)         (295,746)
     Proceeds From Sale of Assets                                                              37,739            67,618
     Proceeds From Notes Receivable                                                               -0-            30,000
     Payments For Notes Receivable                                                             (3,598)          (44,159)
     Investment in Joint Ventures                                                             (68,332)              -0-
 -------------------------------------------------------------------------------------------------------------------------
          Net Cash Used For Investing Activities                                              (77,332)         (242,287)
 -------------------------------------------------------------------------------------------------------------------------
 Cash Flows From Financing Activities
     Proceeds From Debt                                                                       448,330           272,982
     Principal Payments on Debt                                                              (281,986)         (276,384)
 -------------------------------------------------------------------------------------------------------------------------
      Net Cash Provided By (Used For) Financing
          Activities                                                                          166,344            (3,402)
 -------------------------------------------------------------------------------------------------------------------------

 Increase (Decrease) in Cash                                                                 (386,102)          (52,020)
 Balance, September 1                                                                         448,855           500,875
 -------------------------------------------------------------------------------------------------------------------------
 Balance, August 31                                                                          $ 62,753          $448,855
 =========================================================================================================================
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

                                                                   Page 17 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000




Note 1. Summary of Significant Accounting Policies

     This summary of significant accounting policies of Knusaga Corporation and
     Subsidiary, D.B.A. Hydraulic Tubes and Fittings (the Company) is presented
     to assist in understanding the Company's financial statements. The
     financial statements and notes are representations of the Company's
     management who is responsible for their integrity and objectivity. These
     accounting policies conform to generally accepted accounting principles and
     have been consistently applied in the preparation of the financial
     statements.

         A. Nature of Operations - Knusaga Corporation operates in two separate
         industries: 1) fabrication of tubing for the auto industry and 2)
         manufacturing of seat tracks for the auto industry.

         B. Basis of Consolidation - The consolidated financial statements
         include the accounts of HTF, Ltd., a wholly owned subsidiary located in
         St. Thomas, and Ontario. All significant intercompany accounts and
         transactions have been eliminated in consolidation.

         C. Concentration of Credit Risk - Substantially all of the accounts
         receivable are from three major customers, which potentially subjects
         the Company to concentration of credit risk. All receivables are due
         within thirty days and are unsecured. It is the Company's policy not to
         require collateral.

         D. Revenues - The Company recognizes revenue from automotive tubes and
         seat tracks upon shipment.

         E. For purposes of the statement of cash flows, the Company considers
         all short-term debt securities purchased with a maturity of three
         months or less to be cash equivalents.

         F. Property, Equipment and Related Depreciation - Property and
         equipment are recorded at cost. Depreciation is computed by the
         straight-line method for financial reporting purposes and accelerated
         methods for tax reporting purposes. Estimated lives range from three to
         forty years. Depreciation charged to operations was $368,426 and
         $350,541 for the years ended August 31, 2001 and 2000, respectively.
         When properties are disposed of, the related costs and accumulated
         depreciation are removed from the respective accounts and any gain or
         loss on disposition is recognized currently. Maintenance and repairs
         which do not improve or extend the lives of assets are expensed as
         incurred.

         G. Inventories - Inventories are stated at lower of cost or market.
         Cost is determined on the first-in, first-out (FIFO) basis. Inventory
         classifications as of August 31, 2000 and 1999 consisted of the
         following:

<TABLE>
<CAPTION>
                                        2001                 2000
                               -------------------------------------------
<S>                            <C>                  <C>
Raw Material                            $ 429,714              $521,085
Work in Process                           225,432               317,411
Finished Goods                            355,387               413,254
                               -------------------------------------------
                                       $1,010,533            $1,251,750
                               ===========================================
</TABLE>

                                                                   Page 18 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000



         H. In accordance with SFAS No. 121, the Company reviews its long-lived
         assets, including property and equipment, goodwill and other
         identifiable intangibles for impairment whenever events or changes in
         circumstances indicate that the carrying amount of the assets may not
         be fully recoverable. To determine recoverability of its long-lived
         assets, the Company evaluates the probability that future undiscounted
         net cash flows, without interest charges, will be less than the
         carrying amount of the assets. Impairment is measured at fair value.
         The adoption of SFAS No. 121 had no effect on the Company's
         consolidated financial statements. The Company had no impairment of
         assets during the years ended August 31, 2001 and 2000.

         I. Major Suppliers - At August 31, 2001 and 2000 37% and 33%,
         respectively of the accounts payable - trade was to five major
         suppliers of aluminum and steel tubing. The Company believes there
         is no potential risk pertaining to the major suppliers.

At August 31, 2001 and 2000, 49% and 41%, respectively of the accounts payable -
trade was to four major suppliers of seat track components.

         J. Use of Estimates - The preparation of financial statements in
         conformity with generally accepted accounting principles requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosure of contingent assets
         and liabilities at the date of the financial statements and the
         reported amounts of revenues and expenses during the reporting period.
         Actual results could differ from those estimates.

         K. Income Taxes - The Company accounts for income taxes under the
         provisions of SFAS No. 109, "Accounting for Income Taxes," which
         requires recognition of deferred tax assets and liabilities for the
         expected future tax consequences of events that have been included in
         the Company's consolidated financial statements or tax returns. Under
         this method, deferred tax assets and liabilities are determined based
         on the differences between the financial accounting and tax basis of
         assets and liabilities using enacted tax rates in effect for the year
         in which the differences are expected to reverse.

         L. Intangible Assets - Finders fee associated with the acquisition of
         the seat track business amortized over seven years on a straight-line
         basis. At August 31, 2001 and 2000, accumulated amortization is $7,348
         and $5,344, respectively.

NOTE 2. PREPAID EXPENSES

     The following is a detail of the prepaid expenses as of August 31, 2001 and
2000:

<TABLE>
<CAPTION>
                                                       2001                  2000
                                              --------------------------------------------
<S>                                           <C>                   <C>
Prepaid Insurance                                        $ 40,541              $ 48,567
Prepaid Taxes                                               4,059                 4,239
                                              --------------------------------------------
     Total Prepaid Expenses                              $ 44,600              $ 52,806
                                              ============================================
</TABLE>

                                                                   Page 19 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000



NOTE 3. PROPERTY AND EQUIPMENT

     The major components of property and equipment are as follows:
<TABLE>
<CAPTION>
                                                                                       2001              2000
                                                                               --------------------------------------
<S>                                                                            <C>                 <C>
Land                                                                                   $ 24,847           $ 24,847
Land Improvements                                                                        17,195             17,195
Buildings and Improvements                                                            1,498,524          1,482,417
Machinery and Equipment                                                               2,195,100          2,171,726
Furniture and Fixtures                                                                  167,894            167,894
Transportation Equipment                                                                164,547            209,944
Obligations Under Capital Leases                                                        134,898            134,898
Equipment Under Construction                                                                -0-             91,636
                                                                               ---------------------------------------
                                                                                      4,203,005          4,300,557
Less:  Accumulated Depreciation                                                       2,149,020          1,814,522
                                                                               ---------------------------------------
Net Property and Equipment                                                           $2,053,985         $2,486,035
                                                                               =======================================
</TABLE>

NOTE 4. ACCRUED EXPENSES

The following is a detail of the current accrued expenses as of August 31, 2001
and 2000.
<TABLE>
<CAPTION>
                                                                                       2001                2000
                                                                                --------------------------------------
<S>                                                                             <C>                 <C>
Accrued Commissions                                                                     $ 21,888              $  -0-
Accrued Insurance                                                                         15,546              21,922
Accrued Interest - Other                                                                  11,346              13,672
Accrued Interest - Related Parties                                                       566,697             517,927
Accrued Payroll                                                                           86,307             157,603
Accrued Payroll - Officers                                                                87,045             143,283
Accrued and Withheld Payroll Taxes                                                        11,338              17,280
Accrued Pension                                                                           22,736              21,450
Accrued Professional Fees                                                                 28,845              35,168
Accrued Income Taxes                                                                         -0-              29,837
Accrued Taxes - Other                                                                     11,424              53,850
                                                                                --------------------------------------
Total Current Accrued Expenses                                                          $863,172          $1,011,992
                                                                                ======================================
</TABLE>

Per the loan covenants with the bank, the Company cannot pay the accrued payroll
- officers shown without the bank's permission.

NOTE 5. NOTES RECEIVABLE
<TABLE>
<CAPTION>
                                                                                            2001                2000
                                                                                --------------------------------------
<S>                                                                             <C>                 <C>
Non-interest bearing note receivable from an officer/stockholder. The note is
unsecured and due on demand.
                                                                                       $ 107,143           $ 107,143
                                                                                ======================================

Note receivable from one of the company's joint venture partner (See note 17) at
10% per annum. All outstanding principal and accrued interest was due August 28,
2001.
                                                                                           $ -0-             $30,958
Non-interest bearing note receivable from a joint venture partner. The Note is
unsecured and due on demand.
                                                                                --------------------------------------
</TABLE>


                                                                   Page 20 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000


<TABLE>
<S>                                                                             <C>                <C>
                                                                                ======================================
                                                                                           3,598                -0-
                                                                                --------------------------------------
                                                                                         $ 3,598            $30,959
                                                                                ======================================
</TABLE>


                                                                   Page 21 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000



NOTE 6. NOTES PAYABLE AND OBLIGATIONS UNDER CAPITAL LEASES

     Notes payable and obligations under capital leases consist of the
following:
<TABLE>
<CAPTION>
                                                                                         2001                2000
                                                                                 -------------------- -------------------
<S>                                                                              <C>                  <C>
A. Notes payable - directors, officers, shareholders and their affiliates,
bearing interest at 12% per annum. The notes are payable on demand and are
unsecured. Loans totaling $265,000 have been subordinated to the bank. (See Note
18)                                                                                       $407,253            $407,253

B. Loan Payable - Bank, payable in monthly installments of $6,214 plus interest
at 1% over the lender's prime rate through October, 2001. The note is secured by
all the assets of the Company. The interest rate at August 31, 2000 was 10.5%.
                                                                                               -0-              93,166

C. Loan Payable - Bank, payable in monthly installments of $3,333 plus interest
at 1% over lender's prime rate through December, 2000. The loan is secured by
all the assets of the Company. The interest rate at August 31, 2001 was 10.5%.
                                                                                               -0-              13,334

D. $1,500,000 Line of Credit - Bank, interest payable in monthly installments at
the lender's prime rate. Principal is due January 1, 2002. Note is secured by
all the assets of the Company. The interest rate at August 31, 2001 was 6.75%.
                                                                                         1,071,761           1,217,762

E. Loan Payable - Bank, payable in monthly installments of $6,383 plus interest
at .5% over lender's prime rate, through January, 2002. The note is secured by
all the assets of the Company. The interest rate at August 31, 2000 was 10.0%.
                                                                                               -0-             108,491

F. Loan Payable - Bank, payable in monthly installments of $2,249 plus interest
at .5% over the lender's prime rate through April, 2003. Note is secured by all
the assets of the Company. The interest rate at August 31, 2000 was 10.0%.
                                                                                               -0-              71,973


G. Loan Payable - Bank, payable in monthly installments of $244 plus interest at
 .5% over lender's prime rate through August 2003. The loan is secured by all the
assets of the Company. The interest rate at August 31, 2000 was 10.0%.                         -0-               8,800


H. Loan Payable - Bank, payable in monthly installments of $801 plus interest at
 .5% over lender's prime rate through February 2005. Note is secured by all the
assets of the company. The interest rate at August 31, 2000 was 10.0%                          -0-              44,074
</TABLE>

                                                                   Page 22 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000



<TABLE>
<S>                                                                                       <C>             <C>
I. Loan Payable - Bank, payable in monthly installments of $1,076 including
interest at .5% over lender's prime rate, through October 2004. Note is secured
by all the assets of the company. The interest rate at August 31, 2000 was 10.0%               -0-              43,889

J. Loan Payable - Bank, payable in monthly installments of $1,438, including
interest at .5% over lender's prime rate, through December, 2003. The note is
secured by all the assets of the Company. The interest rate at August 31, 2000
was 10.0%.
                                                                                               -0-              48,567

K. Loan Payable - Bank, payable in monthly installments of $1,355 including
interest at .5% over the lender's prime rate, through April, 2004. The note is
secured by all the assets of the Company. The interest rate at August 31, 2000
was 10.0%.
                                                                                               -0-              52,319

L. Loan Payable - Chrysler Financial Company, payable in monthly installments of
$863 including interest at 7.75% through May, 2002. The loan is secured by
transportation equipment.
                                                                                             6,709              16,146

M. Loan Payable - Chrysler Financial Company, payable in monthly installments of
$695, through August, 2003, including interest at .9%. Secured by transportation
equipment.
                                                                                            16,530              24,684

N. Obligation Under Capital Lease - machinery, payable in monthly installments
of $1,282 through May, 2004 including interest at 7.88%. Secured by the
machinery.
                                                                                            37,996              49,901

O. Loan Payable - Bank, payable in monthly installments of $17,838 including,
interest at 3.25% above Libor, through May 2006. The note is secured by all the
assets of the Company. The interest rate at August 31, 2001 was 7.034%.
                                                                                           826,454                -0-
                                                                                  --------------------------------------
     Total                                                                               2,366,703          2,200,359
     Amounts due within one year                                                         1,667,884          1,891,666
                                                                                  --------------------------------------
                                                                                         $ 698,819          $ 308,693
                                                                                  ======================================
</TABLE>

     The debt and lease maturities for the next five years are as follows:

<TABLE>
<S>                                           <C>
        August 31, 2002                               $1,667,884
        August 31, 2003                                  194,987
        August 31, 2004                                  196,496
        August 31, 2005                                  198,769
        August 31, 2006                                  108,567
                                              ---------------------
                                                      $2,366,703
                                              =====================
</TABLE>


                                                                   Page 23 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000


NOTE 6. CONTINUED

     Interest expense for the years ended August 31, 2001 and 2000 totaled
     $208,323 and $213,134, respectively.

     Interest expense on obligations under capital leases for the years ended
     August 31, 2001 and 2000 was $3,485 and $4,384, respectively. Depreciation
     expense of equipment held under capital leases for the years ended August
     31, 2001 and 2000 was $16,540 and $19,660, respectively.

NOTE 7. LOAN COVENANTS

     Under the terms of the loan agreement with the bank the Company must
maintain the following covenants:

     1.  Maintain a current ratio of not less than 1.00 to 1.00
     2.  Maintain a net worth plus subordinated debt of not less than
         $1,500,000.
     3.  Maintain a ratio of total liabilities to net worth plus subordinated
         debt of not more than 3.0 to 1.
     4.  Maintain a debt service coverage ratio of not less than 1.25 to 1.

     As of August 31, 2001, the Company was not in compliance with its loan
     covenants.

NOTE 8. PER SHARE COMPUTATION

     Earnings per share have been calculated based on the weighted average
     number of shares outstanding. The 4% preferred stock is considered a common
     equivalent. The number of shares used in computing net income per share was
     7,175,000.

NOTE 9. INCOME TAXES

     The provision for income taxes consists of the following components:
<TABLE>
<CAPTION>
                                                                                          2001                2000
                                                                                  -----------------------------------------
<S>                                                                               <C>                 <C>
Current:
         Current Due (Refundable)                                                         $ (191,650)           $173,742
         Deferred                                                                             14,000              10,700
                                                                                  -----------------------------------------
                  Net Tax Expense (Benefit)                                               $ (177,650)           $184,442
                                                                                  =========================================
</TABLE>


                                                                   Page 24 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000


NOTE 9. CONTINUED

     Differences between income taxes calculated using federal statutory income
     tax rate of 34% and the provision for income taxes were as follows:

<TABLE>
<CAPTION>
                                                                                         2001                  2000
                                                                                  ------------------------------------------
<S>                                                                               <C>                  <C>
Income (Loss) Before Income Taxes                                                         $ (651,717)            $341,088

============================================================================================================================

Statutory Federal Income Tax                                                              $ (214,784)           $ 115,970
State Income Tax, Net of Federal Benefit                                                       2,221                8,381
Foreign Losses Not Benefited                                                                  35,712               53,785
Non-deductible Expenses                                                                        3,006                4,522
Other, Net                                                                                (    3,805)               1,784
----------------------------------------------------------------------------------------------------------------------------
  Total                                                                                   $ (177,650)            $184,442
============================================================================================================================
</TABLE>

     Deferred taxes are detailed as follows:
<TABLE>
<CAPTION>
                                                                                          2001                 2000
                                                                                  ------------------------------------------
<S>                                                                               <C>                  <C>
Deferred Income Tax Liability - Depreciation                                               $ 82,119              $ 89,922
----------------------------------------------------------------------------------------------------------------------------
Deferred Income Tax Assets
     Accrued Expenses                                                                        45,619                67,422
Valuation Allowance                                                                             -0-                   -0-
----------------------------------------------------------------------------------------------------------------------------
Net Deferred Income Tax Asset                                                                45,619                67,422
----------------------------------------------------------------------------------------------------------------------------
Net Deferred Income Taxes                                                                  $ 36,500              $ 22,500
============================================================================================================================
</TABLE>

NOTE 10. RELATED PARTY TRANSACTION

     As disclosed in Note 6 to the financial statements, certain directors,
     officers, shareholders and their affiliates are major creditors of the
     Company. Amounts due as of August 31, 2001 and 2000 totaled $407,253.
     Interest accrued on these notes at August 31, 2001 and 2000 totaled
     $566,697 and $517,927, respectively. Interest expense accrued for the years
     ended August 31, 2001 and 2000 was $48,770 for each year.

NOTE 11. CASH FLOW DISCLOSURES

     Interest and income taxes paid for the years ended August 31, 2001 and 2000
     were as follows:

<TABLE>
<CAPTION>
                                                                 2001                 2000
                                                         -------------------- --------------------
<S>                                                      <C>                  <C>
Interest                                                         $ 161,879            $ 211,291
                                                         =========================================
Income Taxes                                                       $66,066            $ 242,392
                                                         =========================================
</TABLE>

     Interest received during the years ended August 31, 2001 and 2000 was $-0-
     and $116, respectively.

     During the year ended August 31, 2001 and 2000, the Company acquired
     equipment through non-cash financing transactions of $-0- and $24,684,
     respectively.

                                                                   Page 25 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000


     During the year ended August 31, 2001, the Company paid $596,670 of
     existing debt through a non-cash financing transaction.


                                                                   Page 26 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000


NOTE 12. DEFINED BENEFIT PENSION PLAN

     The Company sponsors a defined benefit pension plan that covers
     substantially all employees of the Company. The inception of the plan was
     January 1, 1992, with a fiscal year end of August 31. The plan calls for
     benefits to be paid to eligible employees at retirement based upon years of
     service with the Company. Contributions to the plan reflect benefits
     attributed to employees' services to date, as well as services expected to
     be earned in the future. Pension expense for the years ended August 31,
     2001 and 2000 was $27,089 and $25,694, respectively. Pension contributions
     due to the plan at August 31, 2001 and 2000 were $22,736 and $21,450,
     respectively. As of August 31, 2001 the defined benefit pension plan is
     funded in accordance with ERISA.

     The following table sets forth the plan's funded and amounts recognized in
     the Company's statement of financial position at August 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                                                                        2001                 2000
                                                                               -------------------------------------------
<S>                                                                            <C>                   <C>
     Actuarial present value of benefit obligations:                                     $ 261,567            $ 210,533
--------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation for service rendered to date
                                                                                           261,567              210,533
Plan assets at fair value                                                                  225,345              274,324
--------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation below (in excess of) plan assets
                                                                                            36,222              (63,791)
Unrecognized net gain from past experience different from that assumed and
     effect of changes in assumptions
                                                                                            64,526              136,612
Prior service cost not yet recognized in net periodic pension cost
                                                                                           (48,761)             (20,726)
Unrecognized net obligation at date of initial application of FAS-87
                                                                                           (29,251)             (30,645)
--------------------------------------------------------------------------------------------------------------------------
(Prepaid) accrued cost                                                                     $22,736             $ 21,450
==========================================================================================================================

Net pension cost for 2001 and 2000 includes the following components:
     Service cost - benefits earned during the period                                     $ 32,621             $ 31,720
     Interest cost on projected benefit obligation                                          14,714               11,615
     Actual return on plan assets                                                          (50,498)             (41,083)
     Amortization of Actuarial Gains and Net Transition Asset
                                                                                            30,252               23,712
--------------------------------------------------------------------------------------------------------------------------
Net periodic pension costs                                                                $ 27,089             $ 25,964
==========================================================================================================================
</TABLE>

                        NOTE 13. 401K PROFIT SHARING PLAN

     The Company sponsors a 401K profit sharing plan that covers all employees
     of the Company. The plan allows eligible employees to withhold amounts from
     their pay on a pre-tax basis and invest in self directed investment
     accounts. The company has no obligation to make any contributions to the
     plan


NOTE 14. FOREIGN SUBSIDIARY

     In March 1999, the Company established HTF, Ltd., a new subsidiary, located
     in St. Thomas, Ontario, Canada. HTF, Ltd. services its major customer by
     arranging various automotive tubing parts in a specific order as requested
     by its customers. The parts used are manufactured and sold by Knusaga
     Corporation, its parent corporation.



                                                                   Page 27 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000


NOTE 15. LEASE OBLIGATION

     THE COMPANY LEASES A FACILITY IN IMLAY CITY, MICHIGAN FOR ITS SEAT TRACK
     OPERATIONS. THE LEASE REQUIRES MINIMUM MONTHLY PAYMENTS OF $3,721 IN
     ADDITION TO PROPERTY TAXES, INSURANCE AND MAINTENANCE. THE LEASE EXPIRES
     JANUARY, 2003.

     The Company's subsidiary leases a facility in St. Thomas, Ontario for its
     sequencing operations. The lease requires monthly payments of $3,225 on a
     month-to-month basis.

     The Company's subsidiary has lease agreements to rent forklifts. The leases
     call for monthly payments of $343 through June 2004.

     Total rents paid during the years ended August 31, 2001 and 2000 were
     $117,992 and $146,406, respectively.

Future minimum lease obligations under all operating leases are as follows:

<TABLE>
<S>                                           <C>
        August 31, 2002                                 $ 48,554
        August 31, 2003                                   22,509
        August 31, 2004                                    3,253
        August 31, 2005                                      -0-
        August 31, 2006                                      -0-
                                              ---------------------
                                                         $74,316
                                              =====================
</TABLE>

NOTE 16. SEGMENTAL DATA

     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. BELOW IS
     SUMMARIZED SEGMENTAL DATA FOR THE YEARS ENDED AUGUST 31, 2001 AND 2000.

<TABLE>
<CAPTION>
                                                    TUBING                       SEAT TRACK                         TOTAL
                                              2001           2000           2001              2000          2001             2000
                                     -----------------------------------------------------------------------------------------------
<S>                                  <C>               <C>            <C>              <C>            <C>             <C>
External Revenue                         6,446,981      9,377,630      2,841,278         3,926,990     9,288,259       13,304,620
Intersegment Revenue                           -0-            -0-            -0-               -0-           -0-              -0-
Interest Revenue                               -0-            -0-            -0-               -0-           -0-              -0-
Interest Expense                           207,402        211,868            921             1,266       208,323          213,134
Depreciation and Amortization              309,708        292,804         60,722            59,741       370,430          352,545
Profit (Loss)                          ( 1,114,868)     ( 521,269)       483,151           862,357      (631,717)         341,088
Total Assets                             3,928,223      4,797,594      1,107,682         1,227,547     5,035,905        6,025,141
Expenditures for Long-Lived Assets
                                            41,534        303,969          1,607            16,464        43,141          320,433
</TABLE>


                                                                   Page 28 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000


NOTE 16. CONTINUED

     The tubing segment derives its revenues from the sale of automotive tubing
     in the production process of the automobile industry. The seat track
     segment derives its revenues from the sale of adjustable seat tracks to
     recreation vehicle manufacturers and van converters.

     The Company maintains separate records for each segment. The accounting
     policies applied by each of the segments are the same as those used by the
     Company in general.

     Net sales to one customer of its tubing segment totaled $4,261,176 and
     $7,286,951 of the Company's net sales for the years ended August 31, 2001
     and 2000, respectively. Net sales to another customer of its tubing segment
     totaled $436,070 and $1,241,679 of the Company's net sales for the years
     ended August 31, 2001 and 2000, respectively. Net sales to one customer of
     its seat track segment totaled $2,512,940 and $3,926,990 of the Company's
     net sales for the years ended August 31, 2001 and 2000, respectively.

NOTE 17. INVESTMENT IN OTHER ENTITIES

A. In October 2000, the Company entered into a joint venture (Modular Tubes
Systems S.A. de C.V., a Mexico corporation) (MTS) with an unrelated entity in
Mexico City, Mexico. The joint venture will manufacture automotive tubing
primarily for Ford Motor Company. The Company owns 50% of the joint venture.
During the year ended August 31, 2001, the Company invested $84,990, including
the assignment of its note receivable of $30,959 from its joint venture partner.
As of August 31, 2001, the joint venture has not yet commenced operations. The
Company accounts for its investment in MTS using the equity method of
accounting. A summary of financial information for MTS is as follows:


<TABLE>
<CAPTION>
                                                                            2001           2000
                                                                     ---------------------------------
<S>                                                                  <C>                <C>
     Current Assets                                                              $  0           $ 0
     Noncurrent Assets                                                        169,980             0
                                                                     ---------------------------------
         Total Assets                                                         169,980             0
                                                                     ---------------------------------
     Current Liabilities                                                            0             0
     Noncurrent Liabilities                                                         0             0
                                                                     ---------------------------------
         Total Liabilities                                                          0             0
                                                                     ---------------------------------
     Partners' Capital                                                       $169,980           $ 0
                                                                     =================================
     Company's Equity Investment                                             $ 84,990           $ 0
                                                                     =================================
</TABLE>

MTS had no revenues or expenses during the year ended August 31, 2001.

B. In May 2001, the Company formed a limited liability company (Sport Vehicles,
LLC, a Michigan limited liability company) (SV), with the Company's president.
SV manufactures kits used to modify motorcycles into Indy-style three-wheel
vehicles. During the year ended August 31, 2001, the company contributed $14,599
in cash and materials. The Company has a 33 1/3% ownership. The Company accounts
for its investment in SV using the equity method of accounting. A summary of
financial information for SV is as follows:




                                                                   Page 29 of 30
<PAGE>

                                              KNUSAGA CORPORATION AND SUBSIDIARY
                                             D.B.A. HYDRAULIC TUBES AND FITTINGS
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        AUGUST 31, 2001 AND 2000



NOTE 17. INVESTMENT IN OTHER ENTITIES - CONTINUED
<TABLE>
<CAPTION>
                                                                                     2001             2000
                                                                             ----------------------------------
<S>                                                                          <C>              <C>
    Current Assets                                                                 $ 45,338              $ 0
    Noncurrent Assets                                                                     0                0
                                                                             ----------------------------------
        Total Assets                                                                 45,338                0
                                                                             ----------------------------------
    Current Liabilities                                                              14,841                0
    Noncurrent Liabilities                                                                0                0
                                                                             ----------------------------------
        Total Liabilities                                                            14,841                0
                                                                             ----------------------------------
    Partners' Capital                                                              $ 30,497              $ 0
                                                                             ==================================
    Company's Equity Investment                                                    $ 14,301              $ 0
                                                                             ==================================
<CAPTION>

                                                                                    2001            2000
                                                                             ----------------------------------
<S>                                                                          <C>              <C>
    Revenues                                                                       $ 15,902               $  0
    Cost of Goods Sold                                                               13,921                  0
                                                                             ----------------------------------
        Gross Profit                                                                 $1,981               $  0
                                                                             ==================================
    Operating Loss                                                                    $ (894)             $  0
                                                                             ==================================
    Operating Cash Flow                                                             $(13,948)             $  0
                                                                             ==================================
    Net Loss Available
       to members                                                                     $ (894)             $  0
                                                                             ==================================
    Company's Equity Loss                                                             $ (298)             $  0
                                                                             ==================================
</TABLE>



NOTE 18. CONVERSION OF SHAREHOLDER DEBT TO STOCK

     As discussed in Notes 4,6 and 10, the company had outstanding as of August
31, 2001 principal and accrued interest on notes payable to various directors,
officers, shareholders and their affiliates in the amounts of $407,253 and
$566,667 respectively. On November 13, 2000, the company's board of directors
approved in principles authorization of additional shares of common stock and
issuance of shares to these directors, officers, shareholders and their
affiliates in satisfaction of this debtedness. The directors, officers,
shareholders and their affiliates have agreed in principle to the exchange, but
agreements providing for the exchange have not been executed pending shareholder
approval of the increased shares and the Board's determination of a fair rate of
exchange (and the directors, officers, shareholders and their affiliates
acceptance of this rate).