<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

        For fiscal year ended August 31, 2002 Commission File No. 0-7795

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

<TABLE>
<S><C>
               NEVADA                                                       62-1004034
------------------------------------------                       ----------------------------------
(State or other jurisdiction of incorporation or               (I.R.S. Employer Identification Number)
organization)
</TABLE>

                    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, 2002:  7,175,000

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes  X      No
                                     ---         ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-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, 2002:  $9,722,765.

Registrant timely filed a Form 12B-25.


                                      -1-

<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, 2002,
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, 2002 and 2001, five customers accounted
for 97% and 96%, respectively, of the Registrant's tubing segment sales. One
customer accounted for 62% and 66%, respectively, of net sales. In the coming
fiscal year starting September 1, 2002 this customer will significantly reduce
its purchases from the Registrant. The Registrant expects that new customers
will partially offset this decrease.

       During the years ended August 31, 2002 and 2001, three customers
accounted for 92% and 98%, respectively, of the Registrant's seat track sales.
In the coming fiscal year starting September 2002, 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 and increased sales to its other existing customers.

                                      -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 and
Nova Bus and deals with each on a just-in-time inventory basis from a rolling
ten to fifteen working day firm shipping schedule.

       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 competitor for Freightliner's
truck tube business, Imperial Group being Registrant's 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.

       R&D expenditures for the last two fiscal years were $88,850 in 2002 and
$60,000 in 2001.

       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.

       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.

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.

                                      -3-


<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, 2002, there were approximately 1,592
shareholders of Registrant's common stock.

         5 (c) Registrant has not paid any dividends in the past two (2) years.
This failure to pay dividends is due solely to financial considerations. The
Registrant is not under any legal restrictions imposed by its Articles of
Incorporation, Bylaws, express covenants in loan agreements or other obligations
to third parties with regard to dividend payments, although payment of dividends
could not be made if after giving effect to such payment an event of default
under the loan agreements between Registrant and its lender would arise by
virtue of such payment. 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, 2002, increased by
$434,506 or 4.7% from the year ended August 31, 2001. The increase in sales for
fiscal year 2002 was the result of a significant increase in seat track sales
resulting from the growth of the Class A motor home industry offset by a
continuing decrease in the tubing business as a result of the depressed heavy
truck market.

         Truck tubing sales were $5,400,528 in fiscal 2002 versus $6,446,981 in
2001, a decline of $1,046,453 or 16.2%. This reduction is a result of the
decrease in heavy truck industry sales in Fiscal 2002 versus fiscal 2001.

         The seat track line of business provided $4,322,237 of sales in fiscal
2002 up $1,480,959 or 52.1% from fiscal 2001 sales of $2,841,278 as a result
of the increase in the Class A motor home market.

         Cost of goods sold as a percentage of sales decreased to 81.8% in
fiscal 2002 versus 93.4% in fiscal 2001. This was due to the change in the mix
of sales to the more profitable seat track segment. Selling, general, and
administrative expenses in fiscal year 2002 increased $409,325 or 39.2% compared
to fiscal 2001 as a result of increased marketing expense associated with direct
sales of seat track products versus sales through the former distributor.

         Net income improved from a loss of $454,067 in the fiscal year ending
August 31, 2001 to a profit of $130,202 for the current fiscal year ending
August 31, 2002. Seat track income improved 88.9% to $912,779 in fiscal 2002
versus $483,151 in fiscal 2001 as a result of improved volume. While truck
tubing sales decreased in fiscal 2002 versus 2001 losses is this sector declined
37.7% from a loss of $1,114,868 in fiscal 2001 to a loss of $694,847 in fiscal
2002 as a result of improved manufacturing operations. Continuing improvements
in manufacturing operations are being made.

                                      -4-

<PAGE>




       Inventories reduced $310,211 or 30.7% compared to fiscal 2001 as a result
of a move to lean manufacturing.


         6(b) Liquidity and Capital Resources. The reduction in receivables,
inventories, payables and current maturities of long-term debt in fiscal 2002
compared to fiscal 2001 resulted in a reduction of the working capital deficit
from $381,370 to $178,501.

       The Registrant has a term note with Standard Federal Bank payable in
monthly installments of $17,838, including interest at 3.25% above Libor,
through May 2006. The note is secured by all assets of the Registrant. At August
31, 2002 the principal amount was $657,200 and the interest rate was 6.07%.

       The Registrant has a line of credit with Standard Federal Bank with
interest payable in monthly installments at said bank's prime rate. The note is
secured by all assets of the Registrant and the principle is due in January
2003. At August 31, 2002 the outstanding balance was $444,761 and the applicable
interest rate was 5.75%. The Registrant expects to invest $250,000 in Fiscal
2003 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. Such
statements can be identified by the use of terminology such as "will,"
"anticipate," "estimate," "expect," "intend," or similar words. These views
involve risks and uncertainties that are difficult to predict and, accordingly,
the Registrant's actual results may differ materially from the results discussed
in such forward-looking statements. Readers should consider that various factors
in the United States and abroad, including changes in general economic
conditions, competitive market conditions and pricing pressures, relationships
with key customers, industry consolidation of vehicle and truck suppliers,
shifts in distribution, currency exchange rates and other factors discussed in
the Registrant's other filings with the Securities and Exchange Commission, may
affect the Registrant's performance. The Registrant undertakes no obligations 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.

                                      -5-

<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, 2002 and 2001 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

<TABLE>
<CAPTION>
                NAME                        AGE                        POSITION
                ----                        ---                        --------
<S>                                         <C>           <C>
         James G. Musser, Jr.                67                   Director/President
         Jerry D. Luptak                     80           Director/Vice President Finance and
                                                                    General Counsel
         Harold Beznos                       64              Director/Secretary-Treasurer
</TABLE>


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

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

               MR. MUSSER is, and has been, a Director and President of the
         Registrant since September 1, 1977. 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.

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

         In the fiscal years ending August 31, 2000, 2001, and 2002 Mr. Musser
was paid salaries of $100,000, $63,460, and $75,000 respectively. None of the
other directors or officers received any direct or indirect remuneration during
the fiscal years ended August 31, 2001 and 2002, and none is anticipated in the
fiscal year ending August 31, 2003.
                                      -6-


<PAGE>




         Messrs. Beznos, Luptak, Musser, and the Knudsen Trust have collectively
made working capital loans to the Corporation. These loans are payable on demand
and are represented by notes bearing an annual interest rate of 12%, with
principal and interest originally payable June, 1990. The outstanding principal
balance on these loans at August 31, 2002, was $155,836. As a result of the
merger of Hydraulic Tubes and Fittings, Inc., into Registrant, the Registrant
assumed the obligation for repayment of additional demand loans, which had an
aggregate unpaid principal balance at August 31, 2002 of $151,417. No interest
was paid during fiscal year 2002 with respect to these loans. The information
set forth under Note 18 in the Financial Statements is incorporated by
reference.

         In March and April of 1990, Jay A. Fishman, as Trustee of the Paola M.
Luptak Irrevocable Trust U/A/D August 20, 1970, and Frieda Applebaum, as Trustee
of the Beznos Family Irrevocable Trust U/A/D February 2, 1976, each loaned
$50,000 to the Registrant as working capital in return for which they each
received a note bearing an annual interest rate of 12%, with principal and
interest payable on demand. The principal balance of these notes at August 31,
2002, was $50,000 each. The beneficiaries of the Beznos Family Irrevocable Trust
are beneficial shareholders of the Registrant and are related to Harold Beznos,
an officer and director of the Registrant. The note originally issued to the
Paola M. Luptak Irrevocable Trust has been assigned and is presently held by
Mayfair Associates Limited Partnership. No interest was paid during fiscal 2002
with respect to these loans.

         On November 13, 2000, the Registrant's board of directors approved a
resolution to authorize additional shares of stock and issue stock to these
Directors, Officers, Shareholders, and their affiliates in exchange for the
payment of all amounts due under the existing obligations. Certain of the
Directors, Officers, Shareholders, and their affiliates have verbally agreed to
the transaction, but no documents have been executed by the Directors, Officers,
Shareholders, and their affiliates. As of November 30, 2002, the number of
shares to be issued had not been determined.

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

       11(a)

<TABLE>
<CAPTION>
             Title
              Of                    Name and Address of               Amount and Nature of
             Class                   Beneficial Owner                   Beneficial Owner                % of Class
             -----                   ----------------                   ----------------                ----------
<S>                              <C>                                  <C>                               <C>

            Common               James G. Musser, Jr. (1)               726,520 shares                     10.4%
             Stock               7475 Pinehurst Circle
                                 Birmingham, MI  48010


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

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


                                      -7-

<PAGE>
<TABLE>
<S>                              <C>                                    <C>                                <C>
            Common               Mayfair Associates Limited             2,268,314 shares                   32.4%
             Stock               Partnership (3)
                                 c/o 31731 Northwestern Hwy.
                                 Ste. 250W
                                 Farmington Hills, MI  48334

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


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

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

       (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 directly and indirectly own 1,449,137
shares of Registrant's common stock, representing 20.7% of all outstanding
common stock.

Item 13    EXHIBITS AND REPORTS ON FORM 8-K

       13a.  Financial Statement Schedules

             For Fiscal Years Ended August 31, 2002 and 2001

             1)  Accountant's opinion for years ended August 31, 2002 and 2001.

             2)  Balance Sheet for the years ended August 31, 2002 and 2001.

             3)  Statement of Income for years ended August 31, 2002 and 2001.

             4)  Statement of Stockholder's Equity for years ended August 31,
                 2002 and 2001.

             5)  Statement of Cash Flows for years ended August 31, 2002 and
                 2001.

             6)  Notes to Financial Statements for years ended 2002 and 2001.

       13b.  Reports on Form 8-K

             None

       13c.  Exhibits

             None


                                      -8-


<PAGE>





         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        KNUSAGA CORPORATION



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


                                        Dated:            December 13, 2002
                                                --------------------------------

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


By:    James G. Musser                               Date:    December 13, 2002
       -----------------------------------------              -----------------
       Director/President
       (Principal Executive Officer and
       Controller)


By:    Jerry D. Luptak                               Date:    December 13, 2002
       -----------------------------------------              -----------------
       Director
       Vice President, Finance and
       General Counsel
       (Principal Financial Officer)

By:    Harold Beznos                                 Date:    December 13, 2002
       -----------------------------------------              -----------------
       Director Secretary-Treasurer



                                      -9-


<PAGE>





                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual Report of KnuSaga Corporation ("KnuSaga") on Form
10-KSB for the period ending August 31, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, James G. Musser,
President, Chief Executive Officer of KnuSaga and a member of the Board of
Directors, certify, pursuant to s.906 of the Sarbanes-Oxley Act of 2002, that:

         (1)      The Report fully complies with the requirements of section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2)      The information contained in the Report fairly represents the
                  financial condition and result of operations of the Company.




/s/ James G. Musser
---------------------------
James G. Musser
Chief Executive Officer
December 13, 2002



                                      -10-


<PAGE>





                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of KnuSaga Corporation ("KnuSaga") on Form
10-KSB for the period ending August 31, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Jerry Luptak, Vice
President, Finance, General Counsel, and Chief Financial Officer of KnuSaga,
certify, pursuant to s.906 of the Sarbanes-Oxley Act of 2002, that:

         (1)      The Report fully complies with the requirements of section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         (2)      The information contained in the Report fairly represents the
                  financial condition and result of operations of the Company.



/s/ Jerry Luptak
---------------------------
Jerry Luptak
Chief Financial Officer
December 13, 2002


                                      -11-

<PAGE>





                               KNUSAGA CORPORATION
                           CERTIFICATIONS PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

                                  CERTIFICATION

I, James G. Musser, certify that:

         1. I have reviewed this annual report on Form 10-KSB of KnuSaga
Corporation;

         2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

                  a)       designed such disclosure controls and procedures to
                           ensure that material information relating to the
                           registrant is made known to us, particularly during
                           the period in which this annual report is being
                           prepared;

                  b)       evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           annual report (the "Evaluation Date"); and

                  c)       presented in this annual report our conclusions about
                           the effectiveness of the disclosure controls and
                           procedures based on our evaluation as of the
                           Evaluation Date.

         5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls.

                  b)       any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal controls.


                                      -12-

<PAGE>




         6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: December 13, 2002


/s/ James G. Musser
-----------------------------
James G. Musser
Chief Executive Officer



                                      -13-


<PAGE>





                               KNUSAGA CORPORATION
                           CERTIFICATIONS PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

                                  CERTIFICATION

I, Jerry Luptak, certify that:

         1. I have reviewed this annual report on Form 10-KSB of KnuSaga
Corporation;

         2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

                  a)       designed such disclosure controls and procedures to
                           ensure that material information relating to the
                           registrant is made known to us, particularly during
                           the period in which this annual report is being
                           prepared;

                  b)       evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           annual report (the "Evaluation Date"); and

                  c)       presented in this annual report our conclusions about
                           the effectiveness of the disclosure controls and
                           procedures based on our evaluation as of the
                           Evaluation Date.

         5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls.

                  b)       any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal controls.


                                      -14-


<PAGE>




         6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: December 13, 2002


/s/ Jerry Luptak
---------------------
Jerry Luptak
Chief Financial Officer


                                      -15-


<PAGE>












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

                        CONSOLIDATED FINANCIAL STATEMENTS

                               FOR THE YEARS ENDED
                            AUGUST 31, 2002 AND 2001









                                      -16-



<PAGE>

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


                                TABLE OF CONTENTS

                                                                           PAGE


Independent Auditors' Report................................................18

Consolidated Balance Sheets..............................................19-20

Consolidated Statements of Income...........................................21

Consolidated Statements of Stockholders' Equity.............................22

Consolidated Statements of Cash Flows.......................................23

Notes to Consolidated Financial Statements...............................24-34


                                      -17-


<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,
2002 and 2001 and the related consolidated statements of income, stockholders'
equity, and cash flows for the years ended August 31, 2002 and 2001. 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, 2002 and 2001 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 31, 2002



                                      -18-

<PAGE>



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

                                                  AS OF AUGUST 31, 2002 AND 2001






<TABLE>
<CAPTION>
                                     ASSETS

                                                                                             2002                  2001
                                                                                ----------------------------------------------------
<S>                                                                                       <C>                    <C>
Current Assets
      Cash                                                                                $ 135,528              $ 62,753
      Accounts Receivable - Trade, net of Allowance
         for Doubtful Accounts of $-0-                                                    1,247,178             1,538,348
      Notes Receivable                                                                       65,596                 3,598
      Inventories                                                                           700,322             1,010,533
      Refundable Income Taxes                                                                   -0-               205,566
      Prepaid Expenses                                                                       57,399                44,600
------------------------------------------------------------------------------------------------------------------------------------
          Total Current Assets                                                            2,206,023             2,865,398
------------------------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment, Net                                                        1,878,813             2,053,985
------------------------------------------------------------------------------------------------------------------------------------
Other Assets
     Deposits                                                                                 7,050                10,579
     Investments in Other Entities                                                          125,946                99,291
     Intangible Assets, Net                                                                   4,648                 6,652
------------------------------------------------------------------------------------------------------------------------------------
     Total Other Assets                                                                     137,644               116,522
------------------------------------------------------------------------------------------------------------------------------------
         Total Assets                                                                    $4,222,480            $5,035,905
====================================================================================================================================
</TABLE>















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

                                                                         PAGE 19




<PAGE>


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

                                                  AS OF AUGUST 31, 2002 AND 2001




<TABLE>
<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                                                      2002           2001
                                                                                    ------------------------------------------------
<S>                                                                                              <C>            <C>
Current Liabilities
     Accounts Payable - Trade                                                                    $   413,799    $   715,712
     Current Maturities of Long-Term Debt                                                          1,053,342      1,667,884
     Accrued Expenses                                                                                917,383        863,172
------------------------------------------------------------------------------------------------------------------------------------
     Total Current Liabilities                                                                     2,384,524      3,246,768
------------------------------------------------------------------------------------------------------------------------------------
Other Liabilities
     Long-Term Debt - Less Current Maturities                                                        489,293        698,819
------------------------------------------------------------------------------------------------------------------------------------
     Total Other Liabilities                                                                         489,293        698,819
------------------------------------------------------------------------------------------------------------------------------------
Deferred Taxes                                                                                        57,300         36,500
------------------------------------------------------------------------------------------------------------------------------------
         Total Liabilities                                                                         2,931,117      3,982,087
------------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
     Common Stock, $.001 Par Value, 24,000,000 Shares
        Authorized, 7,175,000 and -0- issued and outstanding, respectively                             7,175            -0-
     Common Stock, $.01 Par Value, 7,000,000 Shares Authorized, -0- and
        7,000,000, Shares Issued and Outstanding, respectively                                           -0-         70,000
     Preferred Stock, Class A, 4% Non-Cumulative Non-Voting, Each Share
        Convertible into One Share of Common Stock, Par Value $.01, Stated
        Value $1.00, 1,000,000 Shares Authorized, -0- and 175,000 Shares Issued
        and Outstanding, respectively                                                                    -0-        175,000
     Preferred Stock, $.001 par value, 1,000,000 shares authorized, No shares
        outstanding                                                                                      -0-            -0-
     Additional Paid-In Capital                                                                      604,190        366,365
     Retained Earnings                                                                               679,998        549,796
     Note Receivable - Officers                                                                          -0-       (107,343)
------------------------------------------------------------------------------------------------------------------------------------
     Total Stockholders' Equity                                                                    1,291,363      1,053,818
------------------------------------------------------------------------------------------------------------------------------------
         Total Liabilities and Stockholders' Equity                                              $ 4,222,480    $ 5,035,905
====================================================================================================================================
</TABLE>


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

                                                                         PAGE 20

<PAGE>

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

                                    FOR THE YEARS ENDED AUGUST 31, 2002 AND 2001



<TABLE>
<CAPTION>
                                                                                     2002                     2001
                                                                                --------------------------------------------

<S>                                                                              <C>                     <C>
Sales, Net                                                                       $ 9,722,765             $ 9,288,259
Cost of Sales                                                                      7,951,373               8,678,664
----------------------------------------------------------------------------------------------------------------------------
Gross Profit                                                                       1,771,392                 609,595
Selling, General and Administrative Expenses                                       1,452,217               1,042,892
----------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss)                                                              319,175                (433,297)
----------------------------------------------------------------------------------------------------------------------------
Other Income (Expense)
    Interest Expense                                                                (130,339)               (208,323)
    Miscellaneous Income                                                              11,971                   2,953
    Gain (Loss) on Sale of Asset                                                       3,305                   7,248
(Loss) from Joint Venture                                                             13,820                    (298)
----------------------------------------------------------------------------------------------------------------------------
     Total Other Income (Expense)                                                   (101,243)               (198,420)
----------------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes                                                    217,932                (631,717)
Income Taxes Expense (Benefit)                                                        87,730                (177,650)
----------------------------------------------------------------------------------------------------------------------------
Net Income (Loss)                                                                $   130,202             $  (454,067)
============================================================================================================================

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




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


                                                                         PAGE 21





<PAGE>


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

                                    FOR THE YEARS ENDED AUGUST 31, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                   Additional                             Note
                                                  Common        Preferred           Paid-In          Retained          Receivable
                                                   Stock          Stock             Capital          Earnings            Officer
                                          ------------------------------------------------------------------------------------------
<S>                                          <C>                <C>             <C>                <C>                 <C>
Balance, August 31, 2000                     $    70,000        $175,000        $   366,365        $ 1,003,863         $(107,343)
Repayment of Loans                                   -0-             -0-                -0-                -0-               -0-
Net Loss for the Year Ended
  August 31, 2000                                    -0-             -0-                -0-           (454,067)              -0-
------------------------------------------------------------------------------------------------------------------------------------
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-
====================================================================================================================================
</TABLE>





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


                                                                         PAGE 22


<PAGE>



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

                                    FOR THE YEARS ENDED AUGUST 31, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                              2002                     2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                      <C>
 Cash Flows From Operations
     Net Income (Loss)                                                                  $   130,202              $  (454,067)
     Adjustments to Reconcile Net Income to Net Cash
       Provided By Operating Activities
        Bad Debts                                                                           195,214                   88,832
      Depreciation and Amortization                                                         310,097                  370,430
      (Gain) Loss on Sale of Asset                                                           (3,305)                  (7,248)
        Loss From Joint Venture                                                             (13,820)                     298
      (Increase) Decrease In:
        Accounts Receivable                                                                 203,299                  (10,862)
        Inventories                                                                         310,211                  241,217
          Refundable Income Taxes                                                           205,566                 (205,566)
        Prepaid Expenses                                                                    (12,799)                   8,206
        Deposits                                                                              3,529                    7,890
      Increase (Decrease) In:
        Accounts Payable                                                                   (301,913)                (379,126)
        Accrued Expenses                                                                     54,211                 (148,820)
        Deferred Taxes                                                                       20,800                   14,000
------------------------------------------------------------------------------------------------------------------------------------
      Net Cash Provided By Operating Activities                                           1,101,292                 (474,816)
------------------------------------------------------------------------------------------------------------------------------------
 Cash Flows From Investing Activities
     Equipment Purchases                                                                   (139,948)                 (43,141)
     Proceeds From Sale of Assets                                                            10,332                   37,739
     Payments For Notes Receivable                                                          (61,998)                  (3,598)
     Investment in Joint Ventures                                                           (12,835)                 (68,630)
------------------------------------------------------------------------------------------------------------------------------------
          Net Cash Used For Investing Activities                                           (204,449)                 (77,630)
------------------------------------------------------------------------------------------------------------------------------------
 Cash Flows From Financing Activities
     Proceeds From Debt                                                                         -0-                  448,330
     Principal Payments on Debt                                                            (824,068)                (281,986)
------------------------------------------------------------------------------------------------------------------------------------
      Net Cash Provided By (Used For) Financing
          Activities                                                                       (824,068)                 166,344
------------------------------------------------------------------------------------------------------------------------------------

 Increase (Decrease) in Cash                                                                 72,775                 (386,102)
 Balance, September 1                                                                        62,753                  448,855
------------------------------------------------------------------------------------------------------------------------------------
 Balance, August 31                                                                     $   135,528              $    62,753
====================================================================================================================================
</TABLE>


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


                                                                         PAGE 23



<PAGE>

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

                                                        AUGUST 31, 2002 AND 2001


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 three major customers, which potentially subjects
         the Company to concentration of credit risk. All receivables are due
         within thirty days and are unsecured. It is the Company's policy not to
         require collateral.

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

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

         F. Property, Equipment and Related Depreciation - Property and
         equipment are recorded at cost. Depreciation is computed by the
         straight-line method for financial reporting purposes and accelerated
         methods for tax reporting purposes. Estimated lives range from three to
         forty years. Depreciation charged to operations was $308,093 and
         $368,426 for the years ended August 31, 2002 and 2001, 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, 2002 and 2001 consisted of the
         following:

<TABLE>
<CAPTION>
                                                   2002                  2001
                                         ---------------------------------------
<S>                                           <C>                   <C>
                   Raw Material               $  372,371            $  429,714
                   Work in Process               197,351               225,432
                   Finished Goods                130,600               355,387
                                         ---------------------------------------
                                              $  700,322            $1,010,533
                                         =======================================
</TABLE>



                                                                         PAGE 24

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

                                                        AUGUST 31, 2002 AND 2001






         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, 2002 and 2001.

         I. Major Suppliers - At August 31, 2002 and 2001 54% and 37%,
         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, 2002 and 2001, 67% and 49%, respectively of the accounts
         payable - trade was to four major suppliers of seat track components.

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

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

         L. Intangible Assets - Finders fee associated with the acquisition of
         the seat track business amortized over seven years on a straight-line
         basis. At August 31, 2002 and 2001, accumulated amortization is $9,352
         and $7,348, respectively.

NOTE 2.  PREPAID EXPENSES

     The following is a detail of the prepaid expenses as of August 31, 2002 and
2001:

<TABLE>
<CAPTION>
                                                                2002                   2001
                                                        ---------------------------------------
<S>                                                         <C>                    <C>
                   Prepaid Insurance                        $ 44,523               $ 40,541
                   Prepaid Taxes                              12,876                  4,059
                                                        ---------------------------------------
                       Total Prepaid Expenses               $ 57,399               $ 44,600
                                                        =======================================
</TABLE>


                                                                         PAGE 25


<PAGE>


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

                                                        AUGUST 31, 2002 AND 2001





NOTE 3.  PROPERTY AND EQUIPMENT

     The major components of property and equipment are as follows:

<TABLE>
<CAPTION>
                                                                                                2002                       2001
                                                                                    ------------------------------------------------
<S>                                                                                       <C>                        <C>
     Land                                                                                 $   24,847                 $   24,847
     Land Improvements                                                                        19,158                     17,195
     Buildings and Improvements                                                            1,496,910                  1,498,524
     Machinery and Equipment                                                               2,327,985                  2,195,100
     Furniture and Fixtures                                                                  164,061                    167,894
     Transportation Equipment                                                                145,037                    164,547
     Obligations Under Capital Leases                                                        134,898                    134,898
                                                                                    ------------------------------------------------
                                                                                           4,312,896                  4,203,005
     Less:  Accumulated Depreciation                                                       2,434,083                  2,149,020
                                                                                    ------------------------------------------------
     Net Property and Equipment                                                           $1,878,813                 $2,053,985
                                                                                    ================================================
</TABLE>


NOTE 4.  ACCRUED EXPENSES

     The following is a detail of the current accrued expenses as of August 31,
2002 and 2001.

<TABLE>
<CAPTION>
                                                                                                  2002                     2001
                                                                                    ------------------------------------------------
<S>                                                                                           <C>                      <C>
     Accrued Commissions                                                                      $    -0-                 $ 21,888
     Accrued Insurance                                                                          20,698                   15,546
     Accrued Interest - Other                                                                    5,781                   11,346
     Accrued Interest -- Related Parties                                                       601,242                  566,697
     Accrued Payroll                                                                            86,766                   86,307
     Accrued Payroll -- Officers                                                                17,829                   87,045
     Accrued and Withheld Payroll Taxes                                                          9,090                   11,338
     Accrued Pension                                                                            52,904                   22,736
     Accrued Professional Fees                                                                  29,350                   28,845
     Accrued Income Taxes                                                                       59,100                      -0-
     Accrued Taxes -- Other                                                                     34,623                   11,424
                                                                                    ------------------------------------------------
     Total Current Accrued Expenses                                                           $917,383                 $863,172
                                                                                    ================================================
</TABLE>

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

NOTE 5.  NOTES RECEIVABLE

<TABLE>
<CAPTION>
                                                                                                   2002                  2001
                                                                                    ------------------------------------------------
<S>                                                                                           <C>                      <C>
Non-interest bearing note receivable from an officer/stockholder.  The note
is unsecured and due on demand.  See Note 10
                                                                                              $    -0-                 $107,143
====================================================================================================================================
</TABLE>





                                                                         PAGE 26




<PAGE>

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

                                                        AUGUST 31, 2002 AND 2001



NOTE 5.  NOTES RECEIVABLE (CONTINUED)

<TABLE>
<CAPTION>
                                                                                          2002                2001
<S>                                                                                      <C>                 <C>
   Notes receivable from related companies, through common ownership at 6% per
   annum. The notes are unsecured and due on demand.
                                                                                        $ 59,274            $    -0-
   Non-interest bearing note receivable from a joint venture partner. The Note is
   unsecured and due on demand.

                                                                                           6,322               3,598
                                                                                ----------------------------------------
                                                                                        $ 65,596            $  3,598
                                                                                ========================================

NOTE 6.  NOTES PAYABLE AND OBLIGATIONS UNDER CAPITAL LEASES

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


                                                                                           2002               2001
                                                                                ----------------------------------------
   A. Notes payable - directors, officers, shareholders and their affiliates,
   bearing interest at 12% per annum. The notes are payable on demand and are
   unsecured. Loans totaling $265,000 have been subordinated to the bank. (See
   Note 18)
                                                                                        $407,253            $407,253

   B. $1,500,000 Line of Credit - Bank, interest payable in monthly installments
   at the lender's prime rate. Principal is due January 1, 2002. Note is secured
   by all the assets of the Company. The interest rate at August 31, 2002 was
   5.75%.
                                                                                         444,761           1,071,761

   C. Loan Payable -- Chrysler Financial Company, payable in monthly
   installments of $863 including interest at 7.75% through May, 2002. The loan
   is secured by transportation equipment.
                                                                                             -0-               6,709

   D. Loan Payable -- Chrysler Financial Company, payable in monthly
   installments of $695, through August, 2003, including interest at .9%.
   Secured by transportation equipment.
                                                                                           8,302              16,530

   E. Obligation Under Capital Lease -- machinery, payable in monthly
   installments of $1,282 through May, 2004 including interest at 7.88%.                  25,119              37,996
   Secured by the machinery.
</TABLE>





                                                                         PAGE 27




<PAGE>



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

                                                        AUGUST 31, 2002 AND 2001
<TABLE>
<CAPTION>
<S>                                                                                    <C>                 <C>
   F. Loan Payable - Bank, payable in monthly installments of $17,838 including,
   interest at 3.25% above Libor, through May 2006. The note is secured by all
   the assets of the Company. The interest rate at August 31, 2002 was 6.07%.            657,200             826,454

                                                                                ------------------------------------------
     Total                                                                             1,542,635           2,366,703
        Amounts due within one year                                                    1,053,342           1,667,884
                                                                                ------------------------------------------
                                                                                       $ 489,293           $ 698,819
                                                                                ==========================================
</TABLE>


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

<TABLE>
<CAPTION>
<S>                                                                 <C>
                      August 31, 2003                               $1,053,342
                      August 31, 2004                                  201,464
                      August 31, 2005                                  202,151
                      August 31, 2006                                   85,678
                      August 31, 2007                                      -0-
                                                               -----------------
                                                                    $1,542,635
                                                               =================
</TABLE>

NOTE 6.  CONTINUED

   Interest expense for the years ended August 31, 2002 and 2001 totaled
   $130,339 and $208,323, respectively.

   Interest expense on obligations under capital leases for the years ended
   August 31, 2002 and 2001 was $2,512 and $3,485, respectively. Depreciation
   expense of equipment held under capital leases for the years ended August 31,
   2002 and 2001 was $14,400 and $16,540, respectively.

NOTE 7.  LOAN COVENANTS

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


   1. The Company's seat track operations must maintain a minimum net revenue of
   not less than $3,300,000.

   As of August 31, 2002, the Company was in compliance with its loan covenants.

NOTE 8.  PER SHARE COMPUTATION

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


NOTE 9.  INCOME TAXES

   The provision for income taxes consists of the following components:

<TABLE>
<CAPTION>
                                                                                          2002                2001
                                                                                ------------------------------------------
<S>                                                                                      <C>              <C>
   Current:

         Current Due (Refundable)                                                        $66,930          $ (191,650)
         Deferred                                                                         20,800              14,000
                                                                                ------------------------------------------
                  Net Tax Expense (Benefit)                                              $87,730          $ (177,650)
                                                                                ==========================================
</TABLE>

                                                                         PAGE 28

<PAGE>

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

                                                        AUGUST 31, 2002 AND 2001


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

<TABLE>
<CAPTION>
                                                                                                2002                     2001
                                                                                    ------------------------------------------------
<S>                                                                                          <C>                      <C>
    Income (Loss) Before Income Taxes                                                        $ 217,932                $(651,717)
====================================================================================================================================
    Statutory Federal Income Tax                                                             $  74,097                $(214,784)
    State Income Tax, Net of Federal Benefit                                                     5,271                    2,221
    Foreign Losses Not Benefited                                                                18,789                   35,712
    Non-deductible Expenses                                                                      1,335                    3,006
    Other, Net                                                                                 (11,762)                  (3,805)
------------------------------------------------------------------------------------------------------------------------------------
      Total                                                                                  $  87,730                $(177,650)
====================================================================================================================================


    Deferred taxes are detailed as follows:

<CAPTION>
                                                                                                  2002                     2001
                                                                                    ------------------------------------------------
<S>                                                                                          <C>                      <C>
    Deferred Income Tax Liability - Depreciation                                             $  79,250                $  82,119
------------------------------------------------------------------------------------------------------------------------------------
    Deferred Income Tax Assets
         Accrued Expenses                                                                       21,950                   45,619
    Valuation Allowance                                                                            -0-                      -0-
------------------------------------------------------------------------------------------------------------------------------------
    Net Deferred Income Tax Asset                                                               21,950                   45,619
------------------------------------------------------------------------------------------------------------------------------------
    Net Deferred Income Taxes                                                                $  57,300                $  36,500
====================================================================================================================================
</TABLE>

NOTE 10.  RELATED PARTY TRANSACTION

As disclosed in Note 6 to the financial statements, certain directors, officers,
shareholders and their affiliates are major creditors of the Company. Amounts
due as of August 31, 2002 and 2001 totaled $407,253. Interest accrued on these
notes at August 31, 2002 and 2001 totaled $601242 and $566,697, respectively.
Interest expense accrued for the years ended August 31, 2002 and 2001 was
$34,545 and $48,770, respectively.


NOTE 10.  RELATED PARTY TRANSACTION (CONTINUED)

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.

                                                                         PAGE 29



<PAGE>


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

                                                        AUGUST 31, 2002 AND 2001


NOTE 11. CASH FLOW DISCLOSURES

   Interest and income taxes paid during the years ended August 31, 2002 and
   2001 were as follows:

<TABLE>
<CAPTION>
                                                                       2002                    2001
                                                          ------------------------------------------------
<S>                                                                <C>                     <C>
                  Interest                                         $101,359                $161,879
                                                          ================================================
                  Income Taxes                                        3,136                $ 66,066
                                                          ================================================
</TABLE>

   Interest income and income taxes received during the years ended August 31,
   2002 and 2001 was as follows:

<TABLE>
<CAPTION>
                                                                        2002                  2001
                                                          ------------------------------------------------
<S>                                                                  <C>                     <C>
                  Interest                                             $ -0-                 $ -0-
                                                          ================================================
                  Income Taxes                                       202,472                 $ -0-
                                                          ================================================
</TABLE>

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

NOTE 12. DEFINED BENEFIT PENSION PLAN

   The Company sponsors a defined benefit pension plan that covers substantially
   all employees of the Company. The inception of the plan was January 1, 1992,
   with a fiscal year end of August 31. The plan calls for benefits to be paid
   to eligible employees at retirement based upon years of service with the
   Company. Contributions to the plan reflect benefits attributed to employees'
   services to date, as well as services expected to be earned in the future.
   Pension expense for the years ended August 31, 2002 and 2001 was $30,168 and
   $27,089, respectively. Pension contributions due to the plan at August 31,
   2002 and 2001 were $52,904 and $22,736, respectively. As of August 31, 2002
   the defined benefit pension plan is funded in accordance with ERISA.








                                                                         PAGE 30


<PAGE>


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

                                                        AUGUST 31, 2002 AND 2001




NOTE 12. DEFINED BENEFIT PENSION PLAN (CONTINUED)

   The following table sets forth the plan's funded and amounts recognized in
   the Company's statement of financial position at August 31, 2002 and 2001.

<TABLE>
<CAPTION>

                                                                                                 2002               2001
                                                                              ------------------------------------------------
<S>                                                                                         <C>                <C>
Actuarial present value of benefit obligations:                                             $ 241,904          $ 261,567
------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation for service rendered to date
                                                                                              241,904            261,567
Plan assets at fair value                                                                     177,558            225,345
------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation below (in excess of) plan assets
                                                                                               64,346             36,222
Unrecognized net gain from past experience different from that assumed and
     effect of changes in assumptions
                                                                                               62,853             64,526
Prior service cost not yet recognized in net periodic pension cost
                                                                                              (46,438)           (48,761)
Unrecognized net obligation at date of initial application of FAS-87
                                                                                              (27,857)           (29,251)
------------------------------------------------------------------------------------------------------------------------------
(Prepaid) accrued cost                                                                      $  52,904          $  22,736
==============================================================================================================================

Net pension cost for 2002 and 2001 includes the following components:
     Service cost - benefits earned during the period                                       $  30,649          $  32,621
     Interest cost on projected benefit obligation                                             13,896             14,714
     Actual return on plan assets                                                             (14,934)           (50,498)
     Amortization of Actuarial Gains and Net Transition Asset
                                                                                                  557             30,252
------------------------------------------------------------------------------------------------------------------------------
Net periodic pension costs                                                                  $  30,168          $  27,089
==============================================================================================================================
</TABLE>


NOTE 13.  401K PROFIT SHARING PLAN

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


                                                                         PAGE 31

<PAGE>

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

                                                        AUGUST 31, 2002 AND 2001



NOTE 14.  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.

NOTE 15.  LEASE OBLIGATION

The Company leases a facility in Imlay City, Michigan for its seat track
operations. The lease requires minimum monthly payments of $3,721 in addition to
property taxes, insurance and maintenance. The lease expires January, 2003.

Total rents paid during the years ended August 31, 2002 and 2001 were $71,539
and $117,992, respectively.

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

<TABLE>
<CAPTION>
<S>                                                                     <C>
                        August 31, 2003                                 $ 18,605
                        August 31, 2004                                      -0-
                        August 31, 2005                                      -0-
                        August 31, 2006                                      -0-
                        August 31, 2007                                      -0-
                                                                ---------------------
                                                                        $ 18,605
                                                                =====================
</TABLE>

NOTE 16.  SEGMENTAL DATA

The Company's operations are classified into two principal reportable segments
that provide different products or services. Separate management of each segment
is required because each business unit is subject to different marketing,
production and technology strategies. Below is summarized segmental data for the
years ended August 31, 2002 and 2001.

<TABLE>
<CAPTION>
                                                              TUBING                     SEAT TRACK                    TOTAL
                                                       2002           2001           2002          2001          2002          2001
                                              --------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>           <C>           <C>           <C>
External Revenue                                  5,400,528      6,446,981      4,322,237     2,841,278     9,722,765     9,288,259
Intersegment Revenue                                    -0-            -0-         38,258           -0-        38,258           -0-
Interest Revenue                                        -0-            -0-            -0-           -0-           -0-           -0-
Interest Expense                                    130,295        207,402             44           921       130,339       208,323
Depreciation and Amortization                       248,379        309,708         61,718        60,722       310,097       370,430
Profit (Loss)                                      (694,847)    (1,114,868)       912,779       483,151       217,932      (631,717)
Total Assets                                      3,393,361      3,928,223        829,119     1,107,682     4,222,480     5,035,905
Expenditures for Long-Lived Assets                  136,098         41,534          3,850         1,607       139,948        43,141
</TABLE>


                                                                         PAGE 32


<PAGE>

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

                                                        AUGUST 31, 2002 AND 2001



NOTE 16.  CONTINUED

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

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

     During the years ended August 31, 2002 and 2001, five customers accounted
     for 97% and 96%, respectively, of the Company's tubing segment net sales.
     One customer accounted for 62% and 66%, respectively, of net sales.

     During the years ended August 31, 2002 and 2001, three customers accounted
     for 92% and 98%, respectively, of the Company's seat track segment net
     sales. One customer accounted for 63% and 88%, respectively, of net sales.
     In September 2002, this customer discontinued buying from the Company
     causing a substantial decrease in sales. The Company expects to replace
     these sales with the addition of a new customer and increased sales to its
     existing customers.

NOTE 17.  INVESTMENT IN OTHER ENTITIES

A. In October 2000, the Company entered into a joint venture (Modular Tubes
Systems S.A. de C.V., a Mexico Corporation) (MTS) with an unrelated entity in
Mexico City, Mexico. The joint venture will manufacture automotive tubing
primarily for Ford Motor Company. The Company owns 50% of the joint venture.
During the years ended August 31, 2002 and 2001, the Company invested $12,835
and $84,990, respectively, including the assignment of its note receivable of
$30,959 from its joint venture partner. The Company accounts for its investment
in MTS using the equity method of accounting. A summary of financial information
for MTS is as follows:

<TABLE>
<CAPTION>
                                                                             2002              2001
                                                                     -------------------------------------
<S>                                                                      <C>                <C>
     Current Assets                                                      $ 42,058              $  0
     Noncurrent Assets                                                     99,982           169,980
                                                                     -------------------------------------
         Total Assets                                                     142,040           169,980
                                                                     -------------------------------------
     Current Liabilities                                                    5,069               -0-
     Noncurrent Liabilities                                                   -0-               -0-
                                                                     -------------------------------------
         Total Liabilities                                                  5,069               -0-
                                                                     -------------------------------------
     Shareholders' Equity                                                $136,971          $169,980
                                                                     =====================================
     Company's Equity Investment                                         $113,810          $ 84,990
                                                                     =====================================
</TABLE>


Revenues or expenses during the years ended August 31, 2002 was $37,317 and
5,069, respectively. MTS had no revenues and expenses during the year ended
August 31, 2001. Net income for year ended August 31, 2002 was $31,970.





                                                                         PAGE 33


<PAGE>


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

                                                        AUGUST 31, 2002 AND 2001




NOTE 17.  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, 2002 and 2001, the company
contributed $-0- and $14,599, respectively 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:

<TABLE>
<CAPTION>
                                                                                              2002                       2001
                                                                                  --------------------------------------------------
<S>                                                                                        <C>                        <C>
     Current Assets                                                                        $ 37,808                   $ 45,338
     Noncurrent Assets                                                                          -0-                        -0-
                                                                                  --------------------------------------------------
         Total Assets                                                                        37,808                     45,338
                                                                                  --------------------------------------------------
     Current Liabilities                                                                      7,422                     14,841
     Noncurrent Liabilities                                                                     -0-                        -0-
                                                                                  --------------------------------------------------
         Total Liabilities                                                                    7,422                     14,841
                                                                                  --------------------------------------------------
     Partners' Capital                                                                     $ 30,386                   $ 30,497
                                                                                  ==================================================
     Company's Equity Investment                                                           $ 12,136                   $ 14,301
                                                                                  ==================================================
<CAPTION>

                                                                                              2002                       2001
                                                                                  --------------------------------------------------
<S>                                                                                        <C>                        <C>
     Revenues                                                                              $ 31,072                   $ 15,902
     Cost of Goods Sold                                                                      30,319                     13,921
                                                                                  --------------------------------------------------
         Gross Profit                                                                      $    753                   $  1,981
                                                                                  ==================================================
     Operating Loss                                                                        $ (6,560)                  $   (894)
                                                                                  ==================================================
     Operating Cash Flow                                                                   $(19,186)                  $ (6,480)
                                                                                  ==================================================
     Net Loss Available
        to members                                                                         $ (6,560)                  $   (894)
                                                                                  ==================================================
     Company's Equity Loss                                                                 $ (2,165)                  $   (298)
                                                                                  ==================================================
</TABLE>



NOTE 18.  CONVERSION OF SHAREHOLDER DEBT TO STOCK

As discussed in Notes 4,6 and 10, the company had outstanding as of August 31,
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. As of August 31, 2002, not all signed
documents have been received and no stock has been issued. Once all signed
documents have been received, the exchange will be done with an effective date
of May 15, 2002. Therefore, the Company has stopped accruing interest as of May
15, 2002.

NOTE 19.  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.




                                                                         PAGE 34