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, 2003 Commission File No. 0-7795

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

            NEVADA                                              38-3601122
 ------------------------------                            --------------------
(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 $.001 Per Share
                                 --------------
                                (Title of Class)

Number of shares of common stock outstanding as of August 31, 2003:  10,862,773

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-K 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-K or any amendment to this
Form 10-K. [ X ]

Registrant's revenue for fiscal year ended August 31, 2003:  $5,301,842.

<PAGE>


                                     PART I

Item 1.   DESCRIPTION OF BUSINESS.
          -----------------------

     Knusaga Corporation ("Registrant") was originally incorporated in the State
of Delaware on May 28, 1971. As of its fiscal year ended August 31, 2003,
Registrant was engaged in the fabrication and sale of steel, aluminum and copper
tubes for use in the truck industry and power seat tracks for the automotive
aftermarket.

     During said fiscal year, Registrant shipped various air intake, exhaust and
radiator tubes for medium and large over-the-road trucks. Registrant acquired
this line of business on September 1, 1994, from a group of Registrant's
shareholders through an issuance of 2,601,753 shares of its common stock for all
of the issued and outstanding stock of Hydraulic Tubes and Fittings, Inc., a
closely held Michigan corporation, followed by a merger of Hydraulic Tubes and
Fittings, Inc., into Registrant. At the time of said acquisition, the
shareholders of Hydraulic Tubes and Fittings, Inc., collectively owned 91.26% of
the issued and outstanding common stock of Registrant. Following said
acquisition, said shareholders' ownership of Registrant's common stock increased
to 94.51%.

     In January of 1998, Registrant acquired a power seat track business from
ITT Electric Systems, Inc.. Equipment and tooling was moved from the ITT
facility in Rochester, NY to a facility leased by the Registrant in Imlay City,
MI during January of 1998 and production of the seat track began in February of
1998.

     In October 2000, the Registrant entered into a joint venture (Modular Tubes
Systems S.A. de C.V.) with an unrelated entity in Mexico City, Mexico. The joint
venture manufactures truck tubing for Ford and Mercedes plants in Mexico. The
Registrant and its partner have made equal contributions to equity and each own
50% of the joint venture.

     Effective May 19, 2002, the Registrant merged into its wholly-owned Nevada
subsidiary. As a part of this merger, outstanding shares of the Registrant's
common stock and preferred stock were converted into an equal number of shares
of the subsidiary's common stock and the subsidiary's name was changed to
"Knusaga Corporation". Registrant is now a Nevada Corporation and the rights of
its shareholders are governed by Nevada law.

     During the years ended August 31, 2003 and 2002, five customers accounted
for 88% and 97%, respectively, of the Registrant's tubing segment sales. One
customer accounted for 59% and 62%, respectively, of tubing sales. In the fiscal
year started September 1, 2003 it is expected that this customer will increase
its purchases from the Registrant.

     During the years ended August 31, 2003 and 2002, two customers accounted
for 83% and 82%, respectively, of the Registrant's seat track sales. In the
fiscal year started September 2003, one of these customers will discontinue
buying from the Registrant causing a substantial decrease in sales. The
Registrant expects to replace these sales with the addition of a new customer.

                                      -2-

<PAGE>


     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 the Registrant and its suppliers.

     The Registrant is a tier one supplier to Freightliner, Ford, Volvo, Orion
Bus, Blue Bird, and Thomas Bus and deals with each on a just-in-time inventory
basis from a rolling ten to fifteen working day firm shipping schedule.

     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 formal agreement between the
Registrant and each company with respect to Registrant's products.

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

     There are several competitors in the truck metal tube fabricating business,
with Tube Specialties being Registrant's major competitor for Freightliner's
truck tube business, Imperial Group being Registrant's major competitor for
Volvo's truck tube business, and Northern Tube being Registrant's major
competitor for Ford's medium truck 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. During fiscal 2002 the Registrant began direct marketing
of its seat track products replacing the previous distributor. The Registrant
has continued direct marketing of these products.

     R&D expenditures for the last two fiscal years were $70,811 in 2003 and
$88,850 in 2002.

     The Registrant has 75 employees.

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

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. The registrant's Almont facility is encumbered by
a mortgage which secures repayment of Registrant's bank indebtedness. See
"Management's Discussion and Analysis - Liquidity and Capital Resources" for a
description of this indebtedness.

     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.

                                      -3-

<PAGE>


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
         ---------------------------------------------------

     Not applicable.

                                      -4-

<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, 2003, there were approximately 1,592 shareholders of
record of Registrant's common stock.

     5 (c) Registrant has not paid any dividends in the past two (2) years. 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
is indirectly limited by the Registrant's obligations in its loan agreements to
maintain a minimum tangible net worth and a maximum leverage ratio of
liabilities to tangible net worth. The Registrant does not anticipate the
payment of any cash dividends in the foreseeable future.

Item 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS
          ------------------------------------

     6(a) Net sales for the fiscal year ended August 31, 2003, declined by
$4,420,423 or 45% from the year ended August 31, 2002 as a result of declines in
both the Truck Tubing and Seat Track business segments.

     Truck tubing sales were $3,766,487 in fiscal 2003 versus $5,400,528 in
2002, a decline of $1,634,041 or 30%. This reduction is a result of the loss of
a major portion of business with its primary customer to a competitor. Sales to
this customer will improve in fiscal 2004 due to successful bids on new
business. Additional business with new customers is also expected in 2004

     The seat track line of business saw a sharp $2,786,882 decline in sales in
2003 to $1,535,355 from $4,322,237 in 2002 or 64%. This was a result of losing
its major customer to a competitor. A new joint program with a major supplier to
the Recreation Industry will begin in fiscal 2004.

     With the large reduction in sales, cost of goods sold as a percentage of
sales increased due to fixed expenses to 92% in fiscal 2003 versus 82% in fiscal
2002. Selling, general, and administrative expenses in fiscal year 2003
decreased $697,302 to $754,915, or 48%, compared to $1,452,217 in fiscal 2002.

     With the drastic sales reduction in fiscal 2003 the Registrant posted a
loss of $250,094 compared to a net income of $130,202 in fiscal 2002. The Truck
Tubing segment had a pre tax loss of $514,931 in 2003 compared to a loss of
$694,847 in 2002. Pre tax income of the Seat Track segment dropped $742,100 to
$170,679 in fiscal 2003 compared to $912,779 in fiscal 2002, or 81%.

     Inventories in 2003 were reduced by $92,617, or 13%, compared to fiscal
2002 as a result of the lower level of sales.

                                      -5-

<PAGE>


     6(b) Liquidity and Capital Resources. The reduction in inventories and
payables in fiscal 2003 compared to fiscal 2002, offset by a reduction in
receivables, and the conversion of $380,403 in shareholder debt and $541,541 in
accrued interest to equity in fiscal 2003, improved working capital from a
$178,501 deficit in 2002 to a positive $609,257 in 2003.

     The Registrant has a term loan with Standard Federal Bank payable in
monthly installments of $16,546, including interest at 3.25% above Libor,
through May 2006. The term loan is secured by all assets of the Registrant. At
August 31, 2003 the principal amount of the term loan was $478,066 and the
interest rate was 5.35%.

     The Registrant has a $1,250,000 line of credit with Standard Federal Bank
with interest payable monthly at said bank's prime rate plus 1%. The line of
credit is payable on demand and is secured by all assets of the Registrant and
the principal is due January 1, 2004. At August 31, 2003 the outstanding balance
was $354,761 and the applicable interest rate was 5.0%. The Registrant expects
to invest $175,000 in Fiscal 2004 for tooling on a new seat track product. The
Registrant expects to fund this investment through increased borrowings on its
line of credit.

     FORWARD LOOKING STATEMENTS
     --------------------------

     Certain sections of this Annual Report contain statements reflecting the
Registrant's views about its future performance and constitute "forward-looking"
statements" under the Private Securities Litigation Reform Act of 1995. These
views involve risks and uncertainties that are difficult to predict and,
accordingly, the Registrant's actual results may differ materially from the
results discussed in such forward-looking statements. Readers should consider
that various factors in the United States and abroad, including changes in
general economic conditions, competitive market conditions and pricing
pressures, relationships with key customers, industry consolidation of vehicle
and truck suppliers, shifts in distribution, currency exchange rates and other
factors discussed in the Registrant's other filings with the Securities and
Exchange Commission, may affect the Registrant's performance. The Registrant
undertakes no obligation to update publicly any forward-looking statements as a
result of new information, future events or otherwise.

Supplemental Item.     Controls and Procedures
                       -----------------------

Based on their most recent evaluation, which was completed within 90 days of the
filing of this Form 10-KSB, the Registrant's Chief Executive Officer and Chief
Financial Officer believe the Registrant's disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) are effective to ensure
that information required to be disclosed by the Registrant in this report is
accumulated and communicated to the Registrant's management,, including its
principal executive officer and principal financial officer, as appropriate, to
allow timely decisions regarding required disclosure. There were no significant
changes in these controls subsequent to the date of their evaluation and there
were no corrective actions with regard to significant deficiencies and material
weaknesses.

                                      -6-

<PAGE>


Item 7.   FINANCIAL STATEMENTS
          --------------------

     The report of independent auditors and consolidated financial statements
included on pages 10 through 29 of the annual financial report for the year
ended August 31, 2003 and 2002 are incorporated herein by reference.

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

     No response required.


                                    PART III.


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

              NAME                   AGE                   POSITION
              ----                   ---                   --------

          James G. Musser, Jr.       68               Director/President
          Jerry D. Luptak            81      Director/Vice President Finance and
                                                       General Counsel
          Harold Beznos              65          Director/Secretary-Treasurer


     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. Since January 1, 2002, he has devoted
     100% of his time per month to the business affairs of 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 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.

                                      -7-

<PAGE>
<TABLE>
<CAPTION>

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

     In the fiscal years ending August 31, 2001, 2002, and 2003 Mr. Musser was
paid salaries of $63,460, $75,000, and $100,000 respectively. During the fiscal
years 2001 and 2002, Mr. Musser was not working full-time for the Registrant.
His salary for these years was adjusted appropriately. None of the other
directors or officers received any direct or indirect remuneration during the
fiscal years ended August 31, 2002 and 2003, and none is anticipated in the
fiscal year ending August 31, 2004.

     On May 15, 2002, the Registrant reached an agreement in principal with
Messrs. Luptak, Musser, Beznos and Knudsen and Trusts for these individuals or
their family members' benefit, to exchange indebtedness of the Registrant held
by them for shares of the Registrant's common stock at a rate of $0.25 of
indebtedness for each share of common stock. No interest was paid by the
Registrant during fiscal year 2002 or 2003 on any of this indebtedness.

     Pursuant to this May 15, 2002 agreement, on August 28, 2003 the Registrant
issued 3,687,733 shares of its common stock in exchange for principal of
$380,403.10 and accrued interest of $541,540.67. Relatives of Mr. Knudsen still
hold an aggregate of $26,850.00 of the Registrant's indebtedness and $62,373 of
accrued interest, and Mr. Knudsen still holds $20,791 of accrued interest.

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

       11(a)

             Title
              Of                  Name and Address of                   Amount and Nature
             Class                 Beneficial Owner                    of Beneficial Owner              % of Class
             -----                 ----------------                    -------------------              ----------

           <S>                   <C>                                      <C>                               <C>
            Common               James G. Musser, Jr. (1)                  729,864 shares                   6.6%
             Stock               7475 Pinehurst Circle
                                 Birmingham, MI  48010


            Common               Lorraine A. Musser  (1)                   722,617 shares                   6.5%
             Stock               7475 Pinehurst Circle
                                 Birmingham, MI  48010

            Common               Frieda Applebaum, as trustee of the     2,488,626 shares                  22.3%
             Stock               Beznos Family Irrevocable Trust
                                 U/A/D February 2, 1976(2)
                                 31731 Northwestern Hwy.
                                 Farmington Hills, MI  48334

            Common               Mayfair Associates Limited              2,775,382 shares                  24.9%
             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                   5.0%
             Stock               611 Woodward
                                 Detroit, MI  48226

            Common               Jerry Luptak                              793,227 shares                   7.1%
             Stock               c/o The Beztak Companies
                                 31731 Northwestern Highway,
                                 Suite 250W
                                 Farmington Hills, MI 48334

            Common               Harold Beznos                             684,541 shares                   6.1%
             Stock               c/o The Beztak Companies
                                 31731 Northwestern Highway,
                                 Suite 250W
                                 Farmington Hills, MI 48334

            Common               Paola M. Luptak Revocable Trust           552,704 shares                   5.0%
             Stock               c/o 4700 N.W. Boca Raton Blvd.,
                                 4th Floor
                                 Boca Raton, FL 33431

            Common               Copperfield Associates                    980,205 shares                   8.8%
             Stock               c/o The Beztak Companies
                                 31731 Northwestern Highway,
                                 Suite 250W
                                 Farmington Hills, MI 48334

                                                       -8-
</TABLE>

<PAGE>

     (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.

     (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 BankOne of
          Detroit, Michigan, as Trustee with voting and investment power 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 own 2,207,632 shares of Registrant's
common stock, representing 19.8% of all outstanding common stock. These shares
do not include shares owned by Mr. Musser's wife as to which he disclaims
beneficial ownership.

Item 13   EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------

     13a. Financial Statement Schedules

          For Fiscal Years Ended August 31, 2003 and 2002
          -----------------------------------------------

          1) Accountant's opinion for years ended August 31, 2003 and 2002.

          2) Balance Sheet for the years ended August 31, 2003 and 2002.

          3) Statement of Income for years ended August 31, 2003 and 2002.

          4) Statement of Stockholder's Equity for years ended August 31, 2003
          and 2002.

          5) Statement of Cash Flows for years ended August 31, 2003 and
             2002.

          6) Notes to Financial Statements for years ended 2003 and 2002.

     13b. Reports on Form 8-K
          -------------------

          None

     13c. Exhibits
          --------

          31.1      Certification of Chief Executive Officer pursuant to 18
                    U.S.C.ss.1350, as adopted pursuant to Section 302 of the
                    Sarbanes-Oxley act of 2002

          31.2      Certification of Chief Financial Officer pursuant to 18
                    U.S.C.ss.1350, as adopted pursuant to Section 302 of the
                    Sarbanes-Oxley act of 2002

          32.1      Certification of Chief Executive Officer pursuant to 18
                    U.S.C.ss.1350, as adopted pursuant to Section 906 of the
                    Sarbanes-Oxley act of 2002

          32.2      Certification of Chief Financial Officer pursuant to 18
                    U.S.C.ss.1350, as adopted pursuant to Section 906 of the
                    Sarbanes-Oxley act of 2002

                                      -9-

<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:  /s/  Jerry Luptak
                                               --------------------------------
                                                      Jerry Luptak
                                                      Vice President


                                            Dated: November 21, 2003
                                                  -----------------------------

     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:  /s/  James G. Musser                          Date:    November 24, 2003
   ------------------------------------
          James G. Musser
          Director/President
          (Principal Executive Officer
          and Controller)


By:  /s/  Jerry D. Luptak                          Date:    November 24, 2003
   ------------------------------------
          Jerry Luptak
          Director
          Vice President, Finance and
          General Counsel
          (Principal Financial Officer)

By:  /s/  Harold Beznos                            Date:    November 24, 2003
   ------------------------------------
          Harold Beznos
          Director Secretary-Treasurer

                                      -10-

<PAGE>


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

                        CONSOLIDATED FINANCIAL STATEMENTS
                               FOR THE YEARS ENDED
                            AUGUST 31, 2003 AND 2002

                                      -11-

<PAGE>

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





                                TABLE OF CONTENTS
                                -----------------


Independent Auditors' Report..................................................13

Consolidated Balance Sheets................................................14-15

Consolidated Statements of Income.............................................16

Consolidated Statements of Stockholders' Equity...............................17

Consolidated Statements of Cash Flows.........................................18


Notes to Consolidated Financial Statements.................................19-34

                                                                         Page 12

<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,
2003 and 2002 and the related consolidated statements of income, stockholders'
equity, and cash flows for the years ended August 31, 2003 and 2002. 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, 2003 and 2002 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,

FREEDMAN & GOLDBERG, CPA'S, P.C.





-----------------------------------
Farmington Hills, Michigan
October 27, 2003

                                                                         Page 13

<PAGE>


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



                                     ASSETS

                                                                         2002-
                                                             2003    As Restated
                                                         ----------   ----------
Current Assets
      Cash                                               $   49,916   $  135,528
      Accounts Receivable - Trade, net of Allowance
         for Doubtful Accounts of $-0-                      671,693    1,247,178
      Notes Receivable                                      204,940       65,596
      Accrued Interest Receivable                             2,446          -0-
      Inventories                                           607,705      700,322
      Refundable Income Taxes                                62,763          -0-
      Prepaid Expenses                                       51,438       57,399
      Deferred Tax Asset                                     47,600          -0-
                                                         ----------   ----------
          Total Current Assets                            1,698,501    2,206,023
                                                         ----------   ----------
Property, Plant and Equipment, Net                        1,664,793    1,878,813
                                                         ----------   ----------
Other Assets
     Deposits                                                 7,050        7,050
     Investments in Other Entities                          110,356      125,946
     Intangible Assets, Net                                  60,961       16,090
                                                         ----------   ----------
     Total Other Assets                                     178,367      149,086
                                                         ----------   ----------
         Total Assets                                    $3,541,661   $4,233,922
                                                         ==========   ==========


The accompanying notes are an integral part of the financial statements.
================================================================================

                                                                         Page 14

<PAGE>
<TABLE>
<CAPTION>


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

                                                               As of August 31, 2003 and 2002





                      LIABILITIES AND STOCKHOLDERS' EQUITY


                                                                                    2002-As
                                                                         2003       Restated
                                                                      ----------   ----------
<S>                                                                   <C>          <C>
Current Liabilities
     Accounts Payable - Trade                                         $  314,409   $  413,799
     Current Maturities of Long-Term Debt                                570,007    1,053,342
     Accrued Expenses                                                    342,719      928,825
                                                                      ----------   ----------
     Total Current Liabilities                                         1,227,135    2,395,966
                                                                      ----------   ----------
Other Liabilities
     Long-Term Debt - Less Current Maturities                            300,859      489,293
                                                                      ----------   ----------
     Total Other Liabilities                                             300,859      489,293
                                                                      ----------   ----------
Deferred Taxes                                                            63,600       57,300
                                                                      ----------   ----------
         Total Liabilities                                             1,591,594    2,942,559
                                                                      ----------   ----------
Stockholders' Equity
     Common Stock,$.001 Par Value, 24,000,000 Shares
       Authorized, 11,137,000 and 7,175,000 issued and outstanding,
        respectively                                                      10,863        7,175
     Additional Paid-In Capital                                        1,522,446      604,190
     Retained Earnings                                                   416,758      679,998
                                                                      ----------   ----------

    Total Stockholders' Equity                                         1,950,067    1,291,363
                                                                      ----------   ----------
     Total Liabilities and Stockholders' Equity                       $3,541,661   $4,233,922
                                                                      ==========   ==========


The accompanying notes are an integral part of the financial statements.
=============================================================================================

                                                                                      Page 15
</TABLE>

<PAGE>


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

                                   For the Years Ended August 31, 2003 and 2002



                                                                       2002-As
                                                       2003           Restated
                                                    -----------     -----------
Sales, Net                                          $ 5,301,842     $ 9,687,751
Cost of Sales                                         4,900,427       7,869,008
                                                    -----------     -----------
Gross Profit                                            401,415       1,818,743
Selling, General and Administrative Expenses            754,305       1,445,050
                                                    -----------     -----------
Operating Income (Loss)                                (352,890)        373,693
                                                    -----------     -----------
Other Income (Expense)
    Interest Income                                       9,431             -0-
   Interest Expense                                     (73,214)       (130,339)
    Miscellaneous Income                                 13,964           9,147
    Gain (Loss) on Sale of Asset                         83,926           6,874
   Income (Loss) from Joint Venture                     (44,805)         13,820
                                                    -----------     -----------
     Total Other Income (Expense)                       (10,698)       (100,498)
                                                    -----------     -----------
Income (Loss) Before Income Taxes                      (363,588)        273,195
Income Taxes Expense (Benefit)                         (100,958)         87,730
                                                    -----------     -----------

Income (Loss) From Continuing Operations               (262,630)        185,465
Loss From Discontinued Operations,
  Net of Income Taxes                                      (610)        (55,263)
                                                    ===========     ===========
Net Income                                          $  (263,240)    $   130,202
                                                    ===========     ===========

Earnings Per Share
  Income From Continuing Operations                 $      (.03)    $       .03
  Income From Discontinued Operations                       .00            (.01)
                                                    -----------     -----------
Net Income Per Share                                $      (.03)    $       .02
                                                    ===========     ===========


The accompanying notes are an integral part of the financial statements.
================================================================================

                                                                         Page 16

<PAGE>
<TABLE>
<CAPTION>


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

                                                      For the Years Ended August 31, 2003 and 2002




                                                             Additional                   Note
                                    Common      Preferred     Paid-In      Retained     Receivable
                                    Stock         Stock       Capital      Earnings      Officer
                                  ----------    ----------   ----------   ----------    ----------
<S>                               <C>           <C>          <C>          <C>           <C>
Balance, August 31, 2001          $   70,000    $  175,000   $  366,365   $  549,796    $(107,343)
Repayment of Loans                       -0-           -0-          -0-          -0-      107,343
Re-capitalization of common and
 preferred stock                     (62,825)     (175,000)     237,825          -0-           -0-
Net Income for the Year Ended
  August 31, 2002                        -0-           -0-          -0-      130,202           -0-
                                  ----------    ----------   ----------   ----------    ----------
Balance, August 31, 2002               7,175           -0-      604,190      679,998           -0-
Exchange of Shareholder Debt
  for common stock                     3,962           -0-      986,414          -0-           -0-
Net Loss For the Year
 Ended August 31, 2003                   -0-           -0-          -0-     (263,240)          -0-
                                  ----------    ----------   ----------   ----------    ----------
Balance, August 31, 2003          $   11,137    $      -0-   $1,590,604   $  416,758    $      -0-
                                  ==========    ==========   ==========   ==========    ==========


                          The accompanying notes are an integral part of the financial statements.
==================================================================================================

                                                                                           Page 17
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


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

                                     For the Years Ended August 31, 2003 and 2002



                                                         2003           2002
                                                      -----------    -----------
<S>                                                   <C>            <C>
Cash Flows From Operations
    Net Income (Loss) From Continuing Operations      $  (262,630)   $   185,465
    Adjustments to Reconcile Net Income to Net Cash
      Provided By Operating Activities
     Bad Debts                                                206        195,214
     Depreciation and Amortization                        275,516        308,778
      (Gain) Loss on Sale of Asset                        (83,926)        (6,874)
      (Income) Loss From Joint Venture                     44,805        (13,820)
       (Increase) Decrease In:
       Accounts Receivable                                575,279        197,823
       Accrued Interest Receivable                         (2,446)           -0-
       Inventories                                         92,617        310,211
       Refundable Income Taxes                            (62,763)       205,566
       Prepaid Expenses                                     5,961        (12,799)
       Deferred Tax Asset                                 (47,600)           -0-
       Intangible Assets                                  (44,871)       (11,442)
     Increase (Decrease) In:
       Accounts Payable                                   (99,390)      (295,772)
       Accrued Expenses                                   (44,565)        68,900
       Deferred Taxes                                       6,300         20,800
                                                      -----------    -----------
       Net Cash Provided By Continuing Operations         352,493      1,152,050
                                                      -----------    -----------
       Net Cash Provided By Discontinued Operations          (610)       (50,758)
                                                      -----------    -----------
     Net Cash Provided By Operating Activities            351,883      1,101,292
                                                      -----------    -----------
Cash Flows From Investing Activities
    Equipment Purchases                                   (72,679)      (139,948)
    Proceeds From Sale of Assets                           95,109         10,332
    Proceeds From Notes Receivable                         96,113            -0-
    Payments For Notes Receivable                        (264,315)       (61,998)
    Investment in Joint Ventures                             (357)       (12,835)
                                                      -----------    -----------
         Net Cash Used For Investing Activities          (146,129)      (204,449)
                                                      -----------    -----------
Cash Flows From Financing Activities
    Proceeds From Debt                                    110,000            -0-
    Principal Payments on Debt                           (401,366)      (824,068)
                                                      -----------    -----------
     Net Cash Provided By (Used For) Financing
         Activities                                      (291,366)      (824,068)
                                                      -----------    -----------

Increase (Decrease) in Cash                               (85,612)        72,775
Balance, September 1                                      135,528         62,753
                                                      -----------    -----------
Balance, August 31                                    $    49,916    $   135,528
                                                      ===========    ===========


         The accompanying notes are an integral part of the financial statements.
=================================================================================

                                                                          Page 18
</TABLE>

<PAGE>


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

                                                        August 31, 2003 and 2002



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
          Ontario, Canada. All significant intercompany accounts and
          transactions have been eliminated in consolidation.

     C.   Concentration of Credit Risk - Substantially all of the accounts
          receivable are from four 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 $275,516 and $308,093
          for the years ended August 31, 2003 and 2002, 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, 2003 and 2002 consisted of the
          following:

                                                 2003         2002
                                             --------     --------
                   Raw Material              $320,464     $372,371
                   Work in Process            136,435      197,351
                   Finished Goods             150,806      130,600
                                             --------     --------
                                             $607,705     $700,322
                                             ========     ========

--------------------------------------------------------------------------------
                                                                         Page 19

<PAGE>


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

                                                        August 31, 2003 and 2002


Note 1.  Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------

     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, 2003 and 2002.

     I.   Major Suppliers - At August 31, 2003 and 2002 50% and 54%,
          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, 2003 and 2002, 69% and 67%, respectively of the accounts
          payable - trade was to five 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.


Note 2.  Prepaid Expenses

     The following is a detail of the prepaid expenses as of August 31, 2003 and
2002:

                                                          2003             2002
                                                        -------          -------
Prepaid Insurance                                       $43,524          $44,523
Prepaid Taxes                                             7,914           12,876
                                                        -------          -------
     Total Prepaid Expenses                             $51,438          $57,399
                                                        -------          -------


--------------------------------------------------------------------------------

                                                                         Page 20

<PAGE>
<TABLE>
<CAPTION>


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

                                                                                August 31, 2003 and 2002


Note 3.  Property and Equipment

     The major components of property and equipment are as follows:

                                                                                    2003         2002
                                                                                 ----------   ----------
     <S>                                                                         <C>          <C>
     Land                                                                        $   24,847   $   24,847
     Land Improvements                                                               19,158       19,158
     Buildings and Improvements                                                   1,496,910    1,496,910
     Machinery and Equipment                                                      2,258,788    2,327,985
     Furniture and Fixtures                                                         164,061      164,061
     Transportation Equipment                                                       117,391      145,037
     Obligations Under Capital Leases                                               134,898      134,898
                                                                                 ----------   ----------
                                                                                  4,216,053    4,312,896
     Less:  Accumulated Depreciation                                              2,551,260    2,434,083
                                                                                 ----------   ----------
     Net Property and Equipment                                                  $1,664,793   $1,878,813
                                                                                 ==========   ==========


Note 4. Intangible Assets

Intangible assets at August 31, 2003 and 2002 consisted of the following:

                                                        Amortization Period
     Amortized Intangibles                                                          2003         2002
                                                        -------------------      ----------   ----------
     Goodwill                                                      7 Years       $   14,000   $   14,000

     Accumulated Amortization                                                         9,352        9,352
                                                                                 ----------   ----------
     Balance, net                                                                     4,648        4,648

     Unamortized Pension Benefit
       Obligation From Transition And Prior Service
     Cost(See Note 13)                                                               56,313       11,442
                                                                                 ----------   ----------
                                                                                 $   60,961   $   16,090
                                                                                 ==========   ==========

Amortization expenses on goodwill for the years end August 31, 2003 and 2002 was
$-0- and $2,004, respectively.

Effective September 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142).
Under SFAS 142, the Company's goodwill is deemed to have an indefinite useful
life; therefore, the Company ceased amortization effective September 1, 2002.
The Company determined that the carrying amount of its goodwill did not exceed
its fair market and that no impairment loss on its goodwill has been realized
during the year ended August 31, 2003. A reconciliation of reported net income
for the years ended August 31, 2003 and 2002 to the net income that would have
been reported had the provisions of SFAS 142 been applied to all periods
presented is as follows:

                                       21
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


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

                                                                                August 31, 2003 and 2002


Note 4. Intangible Assets (Continued)

                                                                                    2003         2002
                                                                                  ---------    ---------
<S>                                                                               <C>          <C>
Reported Net Income (Loss)                                                        $(250,094)   $ 130,202
Goodwill Amortization                                                                   -0-        2,004
                                                                                  ---------    ---------

Adjusted Net Income (Loss)                                                        $(250,094)   $ 132,206
                                                                                  =========    =========


Note 5.  Accrued Expenses

     The following is a detail of the current accrued expenses as of August 31,
2003 and 2002
                                                                                       2003         2002
                                                                                  ---------    ---------
Accrued Insurance                                                                 $  21,381    $  20,698
Accrued Interest - Other                                                              3,622        5,781
Accrued Interest - Related Parties                                                   83,164      601,242
Accrued Payroll                                                                      59,959       86,766
Accrued Payroll - Officers                                                              -0-       17,829
Accrued and Withheld Payroll Taxes                                                   15,902        9,090
Accrued Pension Benefit Cost                                                         53,165       52,904
Accrued Minimum Pension Liability                                                    56,313       11,442
Accrued Professional Fees                                                            27,300       29,350
Accrued Income Taxes                                                                    -0-       59,100
Accrued Taxes - Other                                                                21,913       34,623
                                                                                  ---------    ---------
Total Current Accrued Expenses                                                    $ 342,719    $ 928,825
                                                                                  =========    =========


   Note 6.  Notes Receivable
                                                                                       2003         2002
                                                                                  ---------    ---------

Notes receivable from related companies, through common ownership at 6% per
annum. The notes are unsecured and due on demand
                                                                                  $ 164,692    $  59,274
Non-interest bearing note receivable from a joint venture partner. The Note is
unsecured and due on demand

Non-interest bearing note receivable from                                             3,224        6,322
A joint venture partner, net of $28,858 of loss joint venture allocated
against loan - See Note 18.  The Note is unsecured and due
on demand


                                                                                     37,024          -0-
                                                                                  ---------    ---------

                                                                                  $ 204,940    $  65,596
                                                                                  =========    =========

                                                   22
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


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

                                                                                     August 31, 2003 and 2002


Note 7.  Notes Payable and Obligations Under Capital Leases

     Notes payable and obligations under capital leases consist of the
following:

                                                                                         2003         2002
                                                                                      ----------   ----------
<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)
                                                                                      $   26,850   $  407,253

B. $1,500,000 Line of Credit - Bank, interest payable in monthly installments at
the lender's prime rate plus 1%. Principal is due January 1, 2004. Note is
secured by all the assets of the Company. The interest rate at August 31, 2003
was 5.0%

                                                                                         354,761      444,761

C. Loan Payable - Chrysler Financial Company, payable in monthly installments of
$695, through August, 2003, including interest at .9%. Secured by transportation
equipment
                                                                                             -0-        8,302

D. Obligation Under Capital Lease - machinery, payable in monthly installments
of $1,282 through May, 2004 including interest at 7.88%. Secured by the
machinery
                                                                                          11,189       25,119

E. Loan Payable - Bank, payable in monthly installments of $16,546 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, 2003 was 5.35%
                                                                                         478,066      657,200
                                                                                      ----------   ----------
     Total                                                                               870,866    1,542,635
     Amounts due within one year                                                         570,007    1,053,342
                                                                                      ----------   ----------
                                                                                      $  300,859   $  489,293
                                                                                      ==========   ==========


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

                   August 31, 2004                                 $570,007
                   August 31, 2005                                  186,999
                   August 31, 2006                                  113,860
                   August 31, 2007                                      -0-
                   August 31, 2008                                      -0-
                                                                   --------
                                                                   $870,866
                                                                   ========


                                       23
</TABLE>

<PAGE>


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

                                                        August 31, 2003 and 2002


Note 7.  Continued

     Interest expense for the years ended August 31, 2003 and 2002 totaled
     $73,214 and $130,339, respectively.

     Interest expense on obligations under capital leases for the years ended
     August 31, 2003 and 2002 was $1,460 and $2,512, respectively. Depreciation
     expense of equipment held under capital leases for the years ended August
     31, 2003 and 2002 was $4,311 and $14,400, respectively.

Note 8.  Loan Covenants

     Under the terms of the loan agreement with the bank the Company must
     maintain certain restrictive financial covenants, including: 1) maintaining
     certain minimum levels of tangible net worth; and 2) maintaining a debt
     leverage ratio. The Company was in compliance with its covenants.

Note 9.  Per Share Computation

     Earnings per share have been calculated based on the weighted average
     number of shares outstanding. The weighted average number of shares used in
     computing net income per share was 7,205,310 and 7,175,000 for the years
     ended August 31, 2003 and 2002, respectively.

Note 10.  Income Taxes

     The provision for income taxes consists of the following components:

                                       24

<PAGE>


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

                                                        August 31, 2003 and 2002


                                                         2003           2002
                                                       ---------      ---------
Current:
         Current Due (Refundable)                      $ (59,658)     $  66,930
         Deferred                                        (41,300)        20,800
                                                       ---------      ---------
                  Net Tax Expense (Benefit)            $(100,958)     $  87,730
                                                       =========      =========

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

                                                            2003           2002
                                                       ---------      ---------
Income (Loss) Before Income Taxes                      $(364,197)     $ 217,932
                                                       =========      =========
Statutory Federal Income Tax                           $(123,827)     $  74,097
State Income Tax, Net of Federal Benefit                    (517)         5,271
Foreign Losses Not Benefited                                 610         18,789
Losses From Joint Ventures Not Benefited                   8,830            736
Non-deductible Expenses                                    1,484          1,335
Other, Net                                                12,462        (12,498)
                                                       ---------      ---------

  Total                                                $(100,958)     $  87,730
                                                       =========      =========


Note 10.  Income Taxes (Continued)

     During the year ended August 31, 2003, the Company incurred a net operating
     loss for federal income tax purposes of $289,979, which it has elected to
     carry-back to prior years resulting in a tax refund of $58,900. The Company
     has an unutilized net operating loss carryforward of $95,937 which will
     expire August 31, 2023

     Deferred taxes are detailed as follows:
                                                          2003           2002
                                                       ---------      ---------
Deferred Income Tax Liability - Depreciation           $  63,600      $  79,250
                                                       ---------      ---------
Deferred Income Tax Assets
     Accrued Expenses                                     15,000         21,950
   Net Operating Loss Carry-forward                       32,600            -0-
Valuation Allowance                                          -0-            -0-
                                                       ---------      ---------
Net Deferred Income Tax Asset                             47,600         21,950
                                                       ---------      ---------
Net Deferred Income Taxes                              $  16,000      $  57,300
                                                       =========      =========


                                       25

<PAGE>


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

                                                        August 31, 2003 and 2002


Note 11.  Related Party Transaction

As disclosed in Note 7 to the financial statements, certain directors, officers,
shareholders and their affiliates are major creditors of the Company. Amounts
due as of August 31, 2003 and 2002 totaled $26,850 and $407,253, respectively.
Interest accrued on these notes at August 31, 2003 and 2002 totaled $83,164 and
$601,242, respectively. Interest expense accrued for the years ended August 31,
2003 and 2002 was $23,462 and $34,545, respectively. On August 28, 2003, the
Company issued common stock in lieu of payment of accrued interest due and
related debt. See Note 19.

During the year ended August 31, 2002, the loan due from a shareholder in the
amount of $107,143 was repaid via the assignment of a note receivable due to the
shareholder from a related company, through common ownership. As of August 31,
2002, this note receivable was deemed uncollectible and was written off.



Note 12. Cash Flow Disclosures

     Interest and income taxes paid during the years ended August 31, 2003 and
     2002 were as follows:

                                                  2003               2002
                                                --------           --------
              Interest                          $ 51,911           $101,359
                                                ========           ========
              Income Taxes                      $ 64,352           $  3,136
                                                ========           ========

Note 12. Cash Flow Disclosures (Continued)

     Interest income and income taxes received during the years ended August 31,
     2003 and 2002 was as follows:

                                                  2003               2002
                                                --------           --------
Interest                                        $  6,985           $    -0-
                                                ========           ========
Income Taxes                                    $    -0-           $202,472
                                                ========           ========


     During the year ended August 31, 2003, the Company issued 3,687,773 shares
     of its common stock in lieu of repayment of outstanding notes and accrued
     interest to certain directors, officers and shareholders amounting to
     $380,403 and $541,541, respectively.


Note 13. 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,
     2003 and 2002 was $36,479 and $30,168, respectively. Pension contributions
     accrued to the plan at August 31, 2003 and 2002 were $53,165 and $52,904,
     respectively. As of August 31, 2003 the defined benefit pension plan is
     funded in accordance with ERISA.

                                       26

<PAGE>
<TABLE>
<CAPTION>


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

                                                                           August 31, 2003 and 2002


     The following table sets forth the plan's funded and amounts recognized in
     the Company's statement of financial position at August 31, 2003 and 2002.

                                                                               2003         2002
                                                                             ---------    ---------
<S>                                                                          <C>          <C>
Actuarial present value of benefit obligations:                              $ 244,089    $ 241,904
                                                                             ---------    ---------
Projected benefit obligation for service rendered to date                      244,089      241,904
Plan assets at fair value                                                      134,611      177,558
                                                                             ---------    ---------
Projected benefit obligation below (in excess of) plan assets                  109,478       64,346

Unrecognized net gain from past experience different from that assumed and
     effect of changes in assumptions                                           14,265       62,853

Prior service cost not yet recognized in net periodic pension cost             (44,115)     (46,438)

Unrecognized net obligation at date of initial application of FAS-87           (26,463)     (27,857)
                                                                             ---------    ---------
(Prepaid) accrued cost                                                       $  53,165    $  52,904
                                                                             =========    =========
Note 13. Defined Benefit Pension Plan (Continued)
                                                                                  2003         2002
                                                                             ---------    ---------
Minimum Pension Liability:

Projected benefit obligation below (in excess of) plan assets                $ 109,478    $  64,346
Accrued Benefit Cost                                                           (53,165)     (52,904)
                                                                             ---------    ---------
    Additional Minimum Pension Liability                                     $  56,313    $  11,442
                                                                             ---------    ---------

Intangible Assets:
Unrecognized obligation from transition                                      $  26,463    $  27,857
Unrecognized prior service cost                                                 44,115       46,438
                                                                             ---------    ---------
Maximum Intangible Asset                                                     $  70,578    $  74,295
                                                                             =========    =========
Actual Intangible Asset (Lesser of Maximum
  Intangible Assets or Minimum Pension Liability)                            $  56,313    $  11,442
                                                                             =========    =========

Net pension cost for 2003 and 2002 includes the following components:
     Service cost - benefits earned during the period                        $  27,727    $  30,649
     Interest cost on projected benefit obligation                              15,564       13,896
     Expected return on plan assets                                            (10,529)     (14,934)
     Amortization of Actuarial Gains and Net Transition Asset
                                                                                 3,717          557
                                                                             ---------    ---------
Net periodic pension costs                                                   $  36,479    $  30,168
                                                                             =========    =========


                                                 27
</TABLE>

<PAGE>


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

                                                        August 31, 2003 and 2002



Note 14.  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 15.  Foreign Subsidiary

     In March 1999, the Company established HTF, Ltd., a new subsidiary, located
     in St. Thomas, Ontario, Canada. HTF, Ltd. services a 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. During the year ended August 31, 2002,
     HTF, Ltd. closed its plant in St. Thomas and ceased operations (See Note
     21).


Note 16.  Lease Obligation

     The Company leases a facility in Imlay City, Michigan for its seat track
     operations. The lease requires minimum monthly payments of $4,125,
     increasing to $4,200 in February 2004, in addition to property taxes,
     insurance and maintenance. The lease expires January, 2006.

     Total rents paid during the years ended August 31, 2003 and 2002 were
     $47,478 and $44,650, respectively.

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

                   August 31, 2004              $ 50,024
                   August 31, 2005                50,400
                   August 31, 2006                21,000
                   August 31, 2007                   -0-
                   August 31, 2008                   -0-
                                                --------
                                                $121,424
                                                ========


                                       28

<PAGE>
<TABLE>
<CAPTION>


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

                                                        August 31, 2003 and 2002


Note 17.  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, 2003 and 2002.

                                                    Tubing                        Seat Track                         Total
                                             2003            2002            2003              2002          2003             2002
                                       ---------------------------------------------------------------------------------------------
<S>                                     <C>             <C>             <C>               <C>           <C>              <C>
External Revenue                        3,766,487       5,365,514       1,535,355         4,322,237     5,301,842        9,687,751
Intersegment Revenue                          -0-             -0-          14,655            38,258        14,655           38,258
Interest Revenue                            9,431             -0-             -0-               -0-         9,431              -0-
Interest Expense                           73,214         130,295             -0-                44        73,214          130,339
Depreciation and Amortization             219,857         248,379          55,659            61,718       275,516          310,097
Profit (Loss)                            (534,267)       (639,584)        170,679           912,779      (363,588)         273,195
Total Assets                            3,043,148       3,404,803         498,513           829,119     3,541,661        4,233,922
Expenditures for Long-Lived Assets
                                           12,029         136,098          60,650             3,850        72,679          139,948
Loss from Discontinued
  Operations                                 (610)        (55,263)           -0-               -0-           (610)         (55,263)


     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.



Note 17.  Segmental Data (Continued)
------------------------------------

     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.

     During the years ended August 31, 2003 and 2002, two and five customers
     accounted for 74% and 97%, respectively, of the Company's tubing segment
     net sales. One customer accounted for 64% and 62%, respectively, of net
     sales.

     During the years ended August 31, 2003 and 2002, two and three customers
     accounted for 83% and 92%, respectively, of the Company's seat track
     segment net sales. In September 2002, one customer who accounted for 63% of
     its net sales for the year ended August 31, 2002, discontinued buying from
     the Company causing a substantial decrease in sales.


                                       29
</TABLE>

<PAGE>


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

                                                        August 31, 2003 and 2002


Note 18.  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 years ended August 31, 2003 and 2002, the Company invested $-0- and
$12,835, respectively. The Company accounts for its investment in MTS using the
equity method of accounting. A summary of financial information for MTS is as
follows:


                                                       2003              2002
                                                    ---------         ---------
 Current Assets                                     $  90,420         $  42,058
 Noncurrent Assets                                     99,320            99,982
                                                    ---------         ---------
     Total Assets                                     189,740           142,040
                                                    ---------         ---------
 Current Liabilities                                      -0-             5,069
 Noncurrent Liabilities                                   -0-               -0-
                                                    ---------         ---------
     Total Liabilities                                    -0-             5,069
                                                    ---------         ---------
 Shareholders' Equity                                 189,740         $ 136,971
                                                    =========         =========
 Company's Equity Investment                        $ 103,592         $ 113,810
                                                    =========         =========

                                                         2003              2002
                                                    ---------         ---------
Revenues                                            $  71,802         $  37,317
Cost of Goods Sold                                     18,353             5,069
                                                    ---------         ---------
    Gross Profit                                    $  53,449         $  32,248
                                                    =========         =========
Operating Income                                    $  20,170         $  31,970
                                                    =========         =========
Operating Cash Flow                                 $       1         $    (278)
                                                    =========         =========
Net Income Available
   to members                                       $  20,170         $  31,970
                                                    =========         =========
Company's Equity Income                             $  10,085         $  15,985
                                                    =========         =========


                                       30

<PAGE>


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

                                                        August 31, 2003 and 2002


Note 18.  Investment in Other Entities (Continued)
--------------------------------------------------

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 years ended August 31, 2003 and 2002, the company
contributed $-0- in cash and materials. The Company has a 33% 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:

                                                       2003              2002
                                                     --------          --------
Current Assets                                       $ 18,755          $ 37,808
Noncurrent Assets                                         -0-               -0-
                                                     --------          --------
    Total Assets                                       18,755            37,808
                                                     --------          --------
Current Liabilities                                     3,646             7,422
Noncurrent Liabilities                                    -0-               -0-
                                                     --------          --------
    Total Liabilities                                   3,646             7,422
                                                     --------          --------
Partners' Capital                                    $ 15,109          $ 30,386
                                                     ========          ========
Company's Equity Investment                          $  6,764          $ 12,136
                                                     ========          ========

                                                         2003              2002
                                                     --------          --------
Revenues                                             $ 21,340          $ 31,072
Cost of Goods Sold                                     31,325            30,319
                                                     --------          --------
    Gross Profit                                       (9,985)         $    753
                                                     ========          ========
Operating Loss                                       $(16,277)         $ (6,560)
                                                     ========          ========
Operating Cash Flow                                  $  1,151          $(19,186)
                                                     ========          ========
Net Loss Available
   to members                                        $(16,277)         $ (6,560)
                                                     ========          ========
Company's Equity Loss                                $ (5,372)         $ (2,165)
                                                     ========          ========


                                       31

<PAGE>


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

                                                        August 31, 2003 and 2002


C. During the year ended August 31, 2003, the Company entered into a joint
venture (Invisiguard, LLC, a Michigan limited liability company) (IVG) with an
unrelated entity. IVG is testing and marketing a laminated glass product to be
used in automobiles. The glass is a high intrusion projection glass which is
harder to shatter compared to traditional tempered glass windows. The company
has an exclusive distributor agreement with its supplier for a major automotive
manufacturer. However, as of August 31, 2003, IVG has not secured any orders
from any customers. During the years ended August 31, 2003 and 2002, the company
contributed $490 and $-0- in cash. In addition, the Company also loaned $65,881
to IVG. The Company has a 49% ownership. The Company accounts for its investment
in IVG using the equity method of accounting. A summary of financial information
for SV is as follows:

                                                          2003           2002
                                                       ----------     ----------
Current Assets                                         $    6,922     $      -0-
Noncurrent Assets                                             -0-            -0-
                                                       ----------     ----------
    Total Assets                                            6,922            -0-
                                                       ----------     ----------
Current Liabilities                                        66,325            -0-
Noncurrent Liabilities                                        -0-            -0-
                                                       ----------     ----------
    Total Liabilities                                      66,325            -0-
                                                       ----------     ----------
Partners' Capital (Deficit)                            $  (59,403)    $      -0-
                                                       ==========     ==========
Company's Equity Investment                            $      -0-     $      -0-
                                                       ==========     ==========


                                                          2003           2002
                                                       ==========     ==========
Revenues                                               $      -0-     $      -0-
Cost of Goods Sold                                            -0-            -0-
                                                       ==========     ==========
    Gross Profit                                              -0-     $      -0-
                                                       ==========     ==========
Operating Loss                                         $  (59,893)    $      -0-
                                                       ==========     ==========
Operating Cash Flow                                    $  (65,881)    $      -0-
                                                       ==========     ==========
Net Loss Available
   to members                                          $  (59,893)    $      -0-
                                                       ==========     ==========
Company's Equity Loss                                  $  (29,348)    $      -0-
                                                       ==========     ==========

During the year ended August 31, 2003, the Company recognized $28,858 of its
equity loss from IVG against its note receivable. See Note 6.


                                       32

<PAGE>


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

                                                        August 31, 2003 and 2002


Note 19.  Conversion of Shareholder Debt to Stock
-------------------------------------------------

As discussed in Notes 5,7 and 11, the company had outstanding as of August 31,
2002 principal and accrued interest on notes payable to various directors,
officers, shareholders and their affiliates in the amounts of $407,253 and
$601,242 respectively. On November 13, 2000, the company's board of directors
approved in principle authorization of additional shares of common stock and
issuance of shares to these directors, officers, shareholders and their
affiliates in satisfaction of this debtedness. On May 15, 2002, the Company
issued an exchange agreement to convert the principal and accrued interest to
additional shares of common stock. On August 28, 2003, the Company issued
3,687,773 shares of its $.001 par value common stock in lieu of payment of
principal and accrued interest of $380,403 and $541,541, respectively, with an
effective date of May 15, 2002.

In finalizing the exchange of stock, not all shareholders agreed to convert all
their debt and accrued interest to stock. As of August 31, 2003, the Company
still owed $26,850 and $83,164 of debt and accrued interest, respectively.

Note 20.  Re-Capitalization of Company
--------------------------------------

In May 2002, the company authorized 24,000,000 shares of new $.001 par value
common stock and converted all its outstanding shares of existing $.01 par value
common stock and $1.00 stated value preferred stock in exchange for 7,175,000
shares of its newly authorized common stock.

Note 21.  Discontinued Operations
---------------------------------

     During the year ended August 31, 2002, the Company's foreign subsidiary
     (HTF, Ltd.) discontinued its operations. This disposal has been accounted
     for as a discontinued operation and, accordingly, its net assets
     (liabilities) have been segregated from continuing operations in the
     accompanying consolidated balance sheets, and its operating results are
     segregated and reported as discontinued operations in the accompanying
     consolidated statement of income and cash flows.

     Information relating to the discontinued operations of HTF, Ltd. for the
     years ended August 31, 2003 and 2002 is as follows:
                                                          2003           2002
                                                        --------      --------
Sales, net                                              $    -0-      $ 35,014
Cost of Sales                                                -0-        82,365
                                                        --------      --------
Gross Profit                                                 -0-       (47,351)
Selling, General and Administrative Expenses                 610         7,167
Operating Loss                                              (610)      (54,518)
                                                        --------       --------
Other Income (Expense)
  Miscellaneous Income                                       -0-          2,824
  Loss on Sale of Assets                                     -0-         (3,569)
                                                        --------       --------
     Total Other Income (Expense)                            -0-           (745)
                                                        --------       --------
Operating Income (Loss)                                 $   (610)      $(55,263)
                                                        ========       ========


     There were no assets and liabilities of the discontinued operations of HTF,
     Ltd. included in the accompanying consolidated balance sheets as of August
     31, 2003 and 2002


                                       33

<PAGE>


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

                                                        August 31, 2003 and 2002


Note 22.  Restatement of Financial Statements
---------------------------------------------

     The financial statements for August 31, 2003 have been restated to reflect
     the effect of discontinued operations discussed in Note 21 and intangible
     assets and additional minimum pension liability and discussed in Note 13.

Note 23.  Contingent Liability
------------------------------

     The Company is currently disputing a grievance filed by a former union
     employee regarding wrongful termination. The case is scheduled for
     arbitration. Should the Company lose its case, the former employee could be
     entitled to back pay of approximately $13,500. Management believes that the
     Company had reasonable cause and the termination will be upheld. Therefore,
     no accrual has been reflected in the financial statements.

                                       34