<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number - 000-22813
MOTO GUZZI CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3853272
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
350 PARK AVENUE , NEW YORK, NEW YORK 10022
---------------------------------------------------
(Address of principal executive offices - Zip code)
Registrant's telephone number, including area code: (212) 644-4441
Former name, former address and former fiscal year, if changed since last
report.
North Atlantic Acquisition Corp., 5 East 59th Street, New York, NY 10022
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by checkmark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes |_| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date.
Common stock, par value $.01 per share, 5,496,000 shares outstanding as of May
17, 1999.
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information
Item 1. Financial statements:
<S> <C>
Balance sheets as of March 31, 1999 and December 31, 1998 ..........................................3
Statements of operations for the three months ended March 31, 1999 and 1998.........................5
Statements of stockholders' equity and comprehensive income/(loss) for the three months
ended March 31, 1999................................................................................6
Statements of cash flows for the three months ended March 31, 1999 and 1998.........................7
Notes to financial statements.......................................................................8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .....................................................11
Part II - Other Information
Item 1. Legal Proceedings.......................................................................................20
Item 2. Changes in Securities...................................................................................20
Item 3. Defaults Upon Senior Securities...........................................................................
Item 4. Submission of Matters to a Vote of Security Holders.....................................................20
Item 5. Other Information.........................................................................................
Item 6. Exhibits and Reports on Form 8-K..........................................................................
Signatures.........................................................................................................
</TABLE>
2
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Condensed Unaudited Consolidated Balance Sheets
<TABLE>
<CAPTION>
MAR. 31 Mar. 31 Dec. 31
1999 1999 1998
US$'000 Lire m. Lire m.
<S> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS................................................ $ 1,552 Lit. 2,779 Lit. 217
RECEIVABLES.............................................................. 18,087 32,394 24,427
TRADE, LESS ALLOWANCE OF LIT. 2,026 (1998 - LIT. 2,026)............... 12,704 22,753 16,288
Receivables from related parties ...................................... 3,545 6,349 4,167
Other receivables ..................................................... 1,838 3,292 3,972
Inventories.............................................................. 20,627 36,943 37,682
RAW MATERIALS, SPARE PARTS AND WORK-IN-PROCESS......................... 12,805 22,934 22,880
Finished products...................................................... 7,822 14,009 14,802
PREPAID EXPENSES......................................................... 297 532 341
----------- ----------- -----------
TOTAL CURRENT ASSETS..................................................... 40,563 72,648 62,667
----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT ........................................... 9,367 16,777 16,787
LAND................................................................... 422 755 755
Building............................................................... 1,505 2,696 2,696
Machinery and equipment................................................ 22,296 39,933 38,949
----------- ----------- -----------
At cost................................................................ 24,225 43,384 42,400
Less allowances for depreciation....................................... (14,856) (26,607) (25,613)
GOODWILL, NET OF AMORTIZATION OF LIT. 169 (1998 - LIT 156) .............. 52 93 106
Investments in affiliates................................................ 364 651 651
Other assets ............................................................ 260 465 466
----------- ----------- -----------
TOTAL ASSETS............................................................. $ 50,605 Lit. 90,634 Lit. 80,677
=========== =========== ===========
</TABLE>
See Notes to Condensed Financial Statements
3
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Condensed Unaudited Consolidated Balance Sheets
<TABLE>
<CAPTION>
MAR. 31 Mar. 31 Dec. 31
1999 1999 1998
US$'000 Lire m. Lire m.
<S> <C> <C> <C>
LIABILITIES
ADVANCES FROM BANKS...................................................... $ 17,618 Lit. 31,553 Lit. 27,063
Current portion of long-term debt........................................ 6,532 11,699 11,823
Loans due to parent company.............................................. 1,767 3,164 3,082
Accounts payable......................................................... 13,758 24,641 28,278
AMOUNTS DUE TO RELATED AND AFFILIATED PARTIES............................ 49 88 1,257
Accrued expenses and other payables...................................... 4,063 7,276 6,357
----------- ----------- -----------
TOTAL CURRENT LIABILITIES................................................ 43,787 78,421 77,860
----------- ----------- -----------
LONG-TERM DEBT, LESS CURRENT PORTION..................................... 1,673 2,998 2,986
Loans due to parent company.............................................. - - 13,362
Termination indemnities.................................................. 4,335 7,765 7,573
SHAREHOLDERS' EQUITY/(DEFICIT) 810 1,450 (21,104)
CONVERTIBLE PREFERRED STOCK, PAR VALUE $0.01 PER SHARE:
Authorized 1,000,000 shares;
94 (1998 - none) shares outstanding;
Liquidation preference $9,400.......................................... - - -
Common stock, par value $0.01 per share:
Authorized 50,000,000 shares;
5,496,000 (1998 - 3,328,047) SHARES OUTSTANDING........................ 55 98 59
Additional paid-in capital............................................... 21,731 38,920 11,011
Cumulative translation adjustment........................................ 38 68 157
Accumulated deficit...................................................... (21,014) (37,636) (32,331)
----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) $ 50,605 Lit. 90,634 Lit. 80,677
=========== =========== ===========
</TABLE>
See Notes to Condensed Financial Statements
4
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Condensed Unaudited Consolidated Statements of Operations
<TABLE>
<CAPTION>
MAR. 31 Mar. 31 Mar. 31
1999 1999 1998
US $'000 Lire m. Lire m.
<S> <C> <C> <C>
NET SALES................................................. $ 9,812 Lit. 17,573 Lit. 25,586
Cost of sales............................................. (9,742) (17,449) (20,922)
---------- ----------- ----------
70 124 4,664
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.............. (2,190) (3,921) (3,313)
Research and development.................................. (260) (466) (874)
---------- ----------- ----------
Operating (loss)/profit................................... (2,380) (4,263) 477
Interest expense.......................................... (594) (1,064) (986)
Other income, net......................................... 35 62 (109)
---------- ----------- ----------
Loss before income taxes.................................. (2,939) (5,265) (618)
Income taxes.............................................. (22) (40) (217)
---------- ----------- ----------
Net loss.................................................. $ (2,961) Lit. (5,305) Lit. (835)
========== =========== ==========
LOSS PER SHARE: US $ Lire Lire
BASIC..................................................... $ (0.74) Lit. (1,333) Lit. (251)
========== =========== ==========
DILUTED................................................... $ (0.74) Lit. (1,333) Lit. (251)
========== =========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD
BASIC..................................................... NO. 3,978,433 NO. 3,978,433 NO. 3,328,047
========== =========== ==========
DILUTED................................................... NO. 4,190,530 NO. 4,190,530 NO. 3,328,047
========== =========== ==========
</TABLE>
See Notes to Condensed Financial Statements
5
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Statements of Stockholders' Equity and Comprehensive Income/(Loss)
<TABLE>
<CAPTION>
CLASS A PREFERRED ADDITIONAL SHAREHOLDERS' COMPREHENSIVE
COMMON STOCK STOCK PAID-IN TRANSLATION ACCUMULATED (DEFICIT)/ INCOME/
LIRE MILLION SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT DEFICIT EQUITY (LOSS)
------ ------ ------ ------ ------- ---------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AT JANUARY 1, 1997............ 3,035,797 LIT.M 51 - - 8,086 23 (1,463) 6,697
Net loss...................... - - - - - (10,569) (10,569) (10,569)
Translation adjustment........ - - - - 202 - 202 202
Issuance of shares............ 292,250 8 - - 2,925 - - 2,933
--------- -------- ------- -------- --------- --------- ---------- ---------- --------
AT DECEMBER 31, 1997.......... 3,328,047 Lit.m 59 - - 11,011 225 (12,032) (737) (10,367)
Net loss...................... - - - - - (20,299) (20,299) (20,299)
Translation adjustment........ - - - - (68) - (68) (68)
--------- -------- ------- -------- --------- --------- ---------- ---------- --------
AT DECEMBER 31, 1998.......... 3,328,047 Lit.m 59 - - 11,011 157 (32,331) (21,104) (20,367)
Net loss...................... - - - - - (5,305) (5,305) (5,305)
Translation adjustment........ - - - - (89) - (89) (89)
Parent company debt exchange.. 871,953 16 - - 13,346 13,362
Issuance of shares in merger.. 1,296,000 23 94 - 14,563 - - 14,586
--------- -------- ------- -------- --------- --------- ---------- ---------- --------
AT MARCH 31, 1999............. 5,496,000 Lit.m 98 94 - 38,920 68 (37,636) 1,450 (5,394)
======== ======= ======== ========= ========= ========== ========== ========
AT MARCH 31, 1999............. $'000 55 - 21,731 38 (21,014) 810 (3,012)
======== ======== ========= ========= ========== ========== ========
</TABLE>
See Notes to Condensed Financial Statements
6
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Condensed Unaudited Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
MAR. 31 MAR. 31 MAR. 31
1999 1999 1998
US$'000 LIT.M. LIT.M.
<S> <C> <C> <C>
NET LOSS.......................................... $ (2,961) Lit. (5,305) Lit. (835)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED BY OPERATING ACTIVITIES:
Depreciation and amortization................... 551 987 779
Gain on sales of operating assets............... 1 2 5
Termination indemnities, net.................... 107 192 (308)
Other operating activities...................... (372) (667) 3
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Trade and other receivables..................... (3,062) (5,484) (11,174)
Related party receivables....................... (1,218) (2,182) 403
Inventories..................................... 631 1,131 (1,841)
Prepaid expenses................................ (106) (190) (1,008)
Accounts payable and accrued expenses........... (2,304) (4,126) 1,146
Related party payables.......................... (655) (1,174) 159
---------- ----------- ----------
NET CASH USED BY OPERATING ACTIVITIES............. (9,388) (16,816) (12,671)
---------- ----------- ----------
INVESTING ACTIVITIES:
Proceeds from disposal of operating assets...... - - 41
Purchases of property, plant and equipment...... (502) (900) (878)
---------- ----------- ----------
NET CASH USED IN INVESTING ACTIVITIES............. (502) (900) (837)
---------- ----------- ----------
FINANCING ACTIVITIES:
Increase in advances from banks................. 2,469 4,422 8,771
Cash from merger with North Atlantic (Note)..... 8,937 16,006 -
Principal payments of long-term debt............ (93) (167) (149)
---------- ----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES......... 11,313 20,261 8,622
---------- ----------- ----------
INCREASE/(DECREASE) IN CASH....................... 1,423 2,545 (4,886)
Exchange movement on opening cash................. 9 17 39
CASH, BEGINNING OF PERIOD......................... 120 217 6,352
---------- ----------- ----------
CASH, END OF PERIOD............................... $ 1,552 Lit. 2,779 LIT. 1,505
========== =========== ==========
</TABLE>
NOTE: The Company also acquired payables and other accruals for Lit. 1,420
million, principally relating to merger expenses, on merger with North Atlantic
Acquisition Corp. As part of the merger, Lit. 13,362 million of debt due to the
parent company was exchanged for 871,953 shares of the Company and the Company
also issued 30,000 shares with an estimated fair value of Lit. 591 million (US$
330,000) in settlement of certain merger expenses.
7
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Notes to Unaudited Condensed Financial Statements
1. Basis of Presentation.
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with the instructions to Form 10-Q.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The merger with
Moto Guzzi Corp., described below, on March 5, 1999 has been treated as
a reverse acquisition of the Company. The reported balance sheets,
results of operations, statements of shareholders' equity and cash
flows prior to the date of the merger are those of Moto Guzzi Corp.,
with the components of shareholders' equity restated retrospectively to
reflect the Company's shares issued in the merger. As the Company had
no operating activities prior to merger, the merger is not considered
as a business combination as defined by APB16 and no pro forma
information is shown. Following the merger, the Company has adopted the
December 31 financial reporting year of Guzzi Corp. and financial
statements are prepared using the accounting principles of Moto Guzzi
Corp.
For a summary of the Registrant's accounting principles, and other
footnote information, reference is made to the Proxy and Prospectus on
Form S-4, dated February 4, 1999. All adjustments necessary for the
fair presentation of the results of operations for the interim periods
covered by this report have been included. All of such adjustments are
of a normal and recurring nature. The results of operations for the
three months ended March 31, 1999 are not necessarily indicative of the
operating results for the full year.
The primary financial statements are shown in Italian lire because all
of the Company's material operating entities are based and operate in
Italy. Translation of lire amounts into U.S. Dollar amounts is included
solely for the convenience of the readers of the financial statements
and has been made at the rate of Lire 1,791 to U.S. $1, the approximate
exchange rate at March 31, 1999. It should not be construed that the
assets and liabilities, expressed in U.S. dollar equivalents, can
actually be realized in or extinguished by U.S. dollars at that or any
other rate.
2. MERGER WITH MOTO GUZZI CORP.
On August 18, 1998, the Company, Moto Guzzi Corp., a Delaware
corporation ("Guzzi Corp."), and for certain provisions, Trident Rowan
Group, Inc., a Maryland corporation ("TRG"), entered into a definitive
Agreement and Plan of Merger and Reorganization, as amended ("Merger
Agreement"), pursuant to which Guzzi Corp. would merge with and into
the Company, with the Company being the surviving corporation
("Merger"). TRG and its majority-owned subsidiary, O.A.M. S.p.A.,
together owned all the outstanding common stock of Guzzi Corp. prior to
the merger. Guzzi Corp., through its wholly-owned Moto Guzzi S.p.A.
subsidiary ("Moto Guzzi"), is a leading Italian manufacturer, marketer
and distributor of performance and luxury motorcycles and motorcycle
parts, marketed under the "Moto Guzzi(R)" brand name.
8
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Notes to Unaudited Condensed Financial Statements
2. MERGER WITH MOTO GUZZI CORP. (CONTINUED)
The Merger was approved on March 4, 1999 and consummated on March 5,
1999. On March 4, 1999 the Company's Class B shareholders also
eliminated authorization of the Company's Class B Common Stock and
approved conversion of each share of Class B Common Stock into 2 shares
of Common Stock and 2 Class A warrants. In accordance with the Merger
Agreement, the Company changed its name to Moto Guzzi Corporation and
changed its common stock ticker symbol to "GUZI".
The Merger has been treated as a reverse acquisition of the Company by
Guzzi Corp. The shareholders of Guzzi Corp. received an aggregate of
4,200,000 shares or approximately 76.4% of the post-Merger shares of
the Company, excluding any shares of the Company's formerly designated
Class A common stock issuable upon exercise of any options or warrants,
and Guzzi Corp., therefore, is the accounting acquiror. The cost of the
acquisition of the Company is based on the fair value of the Company's
assets and liabilities as of the date of the Merger of Lit. 14,586
million (approximately $8,153,000 at the then prevailing exchange
rate), represented by Lit. 16,006 million in cash ($8,947,000) less
Lit. 1,420 million ($794,000) of payables and accrued expenses,
principally in respect of merger expenses. Additionally, an aggregate
of 30,000 shares of common stock with a fair value of Lit. 591 million
($ 330,000) were issuable to Graubard, Mollen & Miller, counsel to the
Company, contingent upon consummation of the Merger in payment of fees
relating to the Merger and 350,000 warrants with an exercise price of
$10.00 were issued to the Company's investment bankers, Allen & Co.
3. LIQUIDITY
Moto Guzzi has suffered recurring losses from operations and negative
cash flows during the last three years. The Merger in March 1999 raised
approximately $8 million which, however, is not sufficient to fund its
operations and cash flow needs through 1999. Moto Guzzi is also not in
compliance with certain covenants related to a Lit. 10,000 million
credit facility which facility has been classified as a current
liability in the consolidated balance sheet. The Company is in
negotiations with the lender to define revised terms of this loan.
There can be no assurance that such negotiations will conclude on terms
satisfactory to the Company.
Excluding any requirement to repay this Lit. 10,000 million loan
facility on demand, management estimates that Moto Guzzi's financing
requirements through the end of the first quarter of 2000, if it is to
continue to make minimum necessary investments, will be approximately
Lit. 10,000 million to Lit 12,000 million. A substantial part of this
amount will be required before the end of the third quarter of 1999 to
finance working capital in the seasonal liquidity lowpoint which is
expected in August and September. Moto Guzzi is actively discussing
equity and debt financing options with a number of parties but there
can be no assurance that it will be able to raise finance on
satisfactory terms, or at all. Accordingly, there is substantial doubt
about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.
9
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Notes to Unaudited Condensed Financial Statements
4. STOCK OPTIONS
On July 23, 1998, the Company adopted the 1998 Stock Option Plan (the
"1998 Plan") and the 1998 Plan for Outside Directors. Both Option Plans
were subject to stockholder approval and consummation of the Merger
which duly occurred in March 1999.
The 1998 Plan provides for the grant of options to purchase up to an
aggregate of 1,250,000 shares of the Company's common stock to be made
to employees, officers, directors and consultants of the Company and
its subsidiaries after the Merger. The 1998 Plan provides both for
incentive stock options ("Incentive Options"), and for options not
qualifying as Incentive Options ("Non Qualified Options"). The
Company's Board or the Committee will determine the exercise price for
each share of the Company's common stock purchasable under an Incentive
or Non Qualified Option (collectively "Options"). The exercise price of
a Non Qualified Option may be less than 100% of the fair market value
on the last trading day before the date of the grant. The exercise
price of an Incentive Option may not be less than 100% of the fair
market value on the last trading day before the date of grant (or, in
the case of an Incentive Option granted to a person possessing at the
time of grant more than 10% of the total combined voting power of all
classes of stock of the Company, not less than 110% of such fair market
value). Options may only be granted within a ten-year period commencing
on July 23, 1998 and Incentive Options may only be exercised within ten
years of the date of the grant (or within five years in the case of an
Incentive Option granted to a person who, at the time of the grant,
owns stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or of its parent or any
subsidiary). Options to purchase an aggregate of 255,000 shares of
Common Stock at an exercise price of $10.625 were issued to certain
directors of the Company at the closing of the Merger and options to
purchase an aggregate of 625,000 shares at an exercise price of $9.50
were granted to operational management employees on March 8, 1999.
The 1998 Plan for Outside Directors provides for the grant of
non-incentive options to purchase up to an aggregate of 400,000 shares
of the Company's common stock, to the non-employee directors of the
Company, each grant to be on the effective date of the Merger and on
each January 2, beginning January 2, 2000, of options to purchase
12,500 shares of Company's common stock. The options will expire upon
the earlier of ten years following date of grant or three months
following the date on which the grantee ceases to serve as a director.
Options to purchase 100,000 shares of Common Stock at an exercise price
of $10.625 were granted on the closing of the Merger.
10
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
GENERAL
BACKGROUND
Until completion of its merger with Moto Guzzi Corp., Moto Guzzi Corporation,
formerly North Atlantic Acquisition Corp. ("North Atlantic") was a "blank check"
or "blind pool" company which was formed on August 9, 1995 to serve as a vehicle
to effect a merger, exchange of capital stock, asset acquisition or other
business combination (a "Business Combination") with an operating business (a
"Target Business"). The business objective of the Company was to effect a
Business Combination with a Target Business which the Company believed has
significant growth potential. As discussed in more detail in Note 2 to the
unaudited financial statements as at March 31, 1999, the Company merged with
Moto Guzzi Corp. on March 5, 1999.
Moto Guzzi Corp. was a Delaware corporation formed in 1996 to acquire Moto Guzzi
S.p.A., ("Moto Guzzi") its principal operating subsidiary and Moto America, Inc.
("Moto America"), the exclusive U.S. importer and distributor of "Moto Guzzi"
brand motorcycles and parts.
Moto Guzzi, over a period of more than 75 years, earned a reputation as one of
the world's elite designers and manufacturers of performance and luxury
motorcycles. While Moto Guzzi's models vary in engine displacement from 350cc to
1,100cc, in recent years, Moto Guzzi has focused its product design, development
and sales efforts on the heavyweight segment of the market.
Sales had declined from 46,487 units in 1971 to a low of 3,274 in 1993. From
1994, Moto Guzzi Corp. started making the investments to rebuild its business.
Partly as a result of the increased investment, unit sales volumes increased to
5,647 in 1998. Despite revenue growth, Moto Guzzi incurred losses and had cash
outflows from operations for each of the years 1994 through 1998 including a net
loss of Lit. 20,299 million in 1998. To fund its operations, Moto Guzzi borrowed
or obtained capital from Italian financial institutions and from affiliated
entities, Trident Rowan Group, Inc. and its affiliate OAM S.p.A. The two
companies collectively owned a 100% interest in Moto Guzzi Corp. until late 1996
and early 1997 when Moto Guzzi Corp. sold shares of preferred stock and common
stock purchase warrants in a private placement which raised approximately $5.2
million.
In 1998, Moto Guzzi Corp. explored various forms of financing, including an
initial public equity offering to provide working capital and make the necessary
investments to grow its business. In July 1998, it concluded that merger with
North Atlantic was an appropriate method of raising part of such finance and in
August 1998 it entered into agreement whereby it would merge with and into North
Atlantic.
11
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Strategy
The Company's strategy is to increase sales volumes and gross profits by (i)
focusing on the breadth, quality and design of its product offerings, (ii)
increasing its marketing activities, (iii) enhancing its distribution network,
and (iv) leveraging its brand name. Moto Guzzi believes that its reputation and
rich tradition as a technological innovator and quality manufacturer provides a
solid foundation. Moto Guzzi has built a loyal customer base over the past 77
years through the outstanding performance and reliability of its motorcycles, as
well as its strong distribution network.
The Company intends to build on its existing product family platforms and to
develop new platforms which will be the basis for the Company's next generation
of motorcycles. New power trains, which represent a significant part of planned
development activities, typically require at least three years' development
time. In the interim, new motorcycles based on the current product platforms
will be periodically introduced. The focus of these intermediate offerings will
be significant improvements in quality, performance and refinement.
In the future, the Company plans to introduce a range of branded accessories
such as hats, jackets, shirts and luggage. Moto Guzzi Corporation also plans to
exploit opportunities to license the "Moto Guzzi(R)" brand name to manufacturers
and suppliers of other products and services.
RECENT EVENTS
The closing of the merger with the Company on March 5, 1999 provided needed
liquidity to Moto Guzzi. A lack of liquidity had led to component supply
shortages in the last quarter of 1998 and the first two months of 1999.
Production and sales were stabilized by May 1999. Moto Guzzi is currently unable
to increase production levels sufficient to meet high seasonal demand because a
national labor contract renewal process restricts the availability of overtime
hours.
In late March 1999, Ing. Mario Scandellari joined the company as Managing
Director of Moto Guzzi. Ing. Scandellari has had a successful executive career
both in the motorcycle industry, initially with Harley Davidson and then
Cagiva/Ducati, as well as in turnaround situations. Ing. Scandellari was named
Chief Operating Officer of the Company in May 1999.
In April 1999, Moto Guzzi introduced its California Jackal model. This "stripped
down" model highlights the elegance of Moto Guzzi's unique engine and design.
Reduced weight further enhances handling.
Also in April, Moto Guzzi's California Special model was awarded second place in
the "cruiser" category by the premier Italian motorcycle magazine
"Motociclismo".
12
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
MARCH 31, 1999 COMPARED TO MARCH 31, 1998
<TABLE>
<CAPTION>
3 MONTHS 3 MONTHS
MARCH 31, MARCH 31
1999 1998
LIT.M LIT.M
<S> <C> <C>
NET SALES 17,573 100.0% 25,586 100.0%
Cost of sales (17,449) (99.3%) (20,922) (81.8%)
----------- -----------
124 0.7% 4,664 18.2%
Selling, general and administrative expenses (3,921) (22.3%) (3,313) (12.9%)
Research & development (466) (2.7%) (874) (3.4%)
----------- -----------
Operating (loss)/profit (4,263) (24.3%) 477 1.9%
Interest expense (1,064) (6.1%) (986) (3.9%)
Other income, net 62 0.4% (109) (0.4%)
----------- -----------
Loss before income taxes (5,265) (30.0%) (618) (2.4%)
Income tax expense (40) (0.2%) (217) (0.8%)
----------- -----------
Net loss (5,305) (30.2%) (835) (3.3%)
=========== ===========
</TABLE>
Net sales decreased by Lit. 8.0 billion or 31.3% from Lit. 25.6 billion to Lit.
17.6 billion and sales units decreased 29.1% from 1,717 in 1998 to 1,218 in
1999. The decreases resulted from two factors. First, the first quarter of 1998
included Lit. 3.8 billion of net sales relative to an exceptional public
administration order. Second, sales and production in the first quarter of 1999
were significantly affected by a disruption in supply of components because of
liquidity difficulties. Excluding the exceptional public administration order,
the decrease in unit sales would have been 13.3%. The average unit sales price
fell in 1999 compared to 1998 as a result of a change in the sales mix. In 1998,
the Company sold a larger number of its more expensive Centauro model which is
not being produced in 1999.
Gross margins decreased from Lit. 4.7 billion in the first quarter of 1998 to
Lit. 0.1 billion in the first quarter of 1999. The decrease results from a)
gross margin of approximately Lit. 1.0 billion on the exceptional 1998 public
administration order noted above; b) selective promotions of older models were
made in January and February 1999 (continued from the last quarter of 1998) in
an attempt to generate liquidity from sales; and c) significantly decreased
production levels, from 1,465 in 1998 to 1,135 in 1999, due to the disruption in
supply of components, with the consequence that fixed production costs were
absorbed over lower production volumes in 1999.
13
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Selling, general and administrative expenses increased from Lit. 3.3 billion in
1998 to Lit. 3.9 billion in 1999 reflecting increased selling costs and general
management costs, principally at the Company's plant in Italy. Research and
development expense decreased from Lit. 0.9 billion in 1998 to Lit. 0.5 billion
as the Company limited expenditures.
Interest expense was substantially unchanged at Lit. 1.0 billion, as the effects
of lower interest rates offset increased levels of indebtedness, principally in
respect of a Lit. 10 billion facility drawn down from April 1998.
As a result of the above factors, net loss in the quarter ended March 31, 1999
increased to Lit. 5.4 billion compared to Lit. 0.8 billion in the comparable
1998 quarter.
LIQUIDITY AND FINANCIAL RESOURCES
OPERATIONS
Cash outflows from operations in the 3 months ended March 31, 1999 were Lit.
16.8 billion compared to Lit. 12.7 billion in the corresponding 1998 period. In
addition to losses from operations, significant working capital movements
contributed to outflows. Receivables increased Lit. 7.7 billion (1998 - Lit.
10.4 billion) due to seasonal factors, principally the trade practice of
extending longer credit terms over the winter season. Inventories decreased Lit.
1.1 billion (1998 increase Lit. 1.8 billion) principally due to reduction of
finished goods inventory in the U.S. and France. The normal seasonal increase in
inventories at the end of the first quarter, in preparation for the main sales
season, did not manifest itself in 1999 as management focused purchase orders on
components to complete work in progress and partly assembled motorcycles. Trade
and other payables decreased Lit. 5.3 billion (compared to a 1998 increase of
Lit. 1.3 billion) principally reflecting payments of arrears made from the
proceeds of the March 1999 merger as well as payment of merger expenses.
INVESTMENT ACTIVITIES
Capital expenditures principally related to tooling for the California Jackal
model, introduced in April 1999 and routine capital maintenance expenditure.
FINANCING ACTIVITIES
Increases in advances from banks represent advances against increased levels of
trade receivables, as described above. Cash from the March 1999 merger of Lit.
16 billion reflects the approximately $ 8.9 million of cash in the Company at
closing. Approximately Lit. 1.4 billion of liabilities and accruals, principally
for merger expenses were also acquired, most of which were paid shortly after
closing, so that
14
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
net cash acquired was approximately Lit. 14.6 billion.
FUTURE LIQUIDITY NEEDS
To enable substantial further growth in production and sales, the Company's
strategic plan contemplates total investments in research and product
development of some Lit. 50 billion (approximately $28 million) in the five year
period from 1999 through 2003. The plan also contemplates investments of Lit. 20
billion (approximately $11 million) in production plant and machinery and
information systems. Much of the production machinery at Moto Guzzi's facility
is aged and in need of extensive modification, improvement or replacement. Moto
Guzzi believes that the existing plant at Mandello del Lario, Italy has a
potential production capacity that will be sufficient for its needs for at least
the next three/four years and is not actively seeking any other alternatives at
the present time. Moto Guzzi will have to make significant investments in the
existing plant in order that it can operate competitively. Such required
modernization may result in production interruptions.
The Company expects that, over the next four years, significant further capital
will be required to complete the planned overhaul. While anticipated increases
in sales during the period, if realized, would provide a significant portion of
the needed capital, anticipated internally generated cash and currently
available bank financing, in the aggregate, will not be sufficient to enable the
Company to increase production and sales rapidly enough to generate the
remaining needed capital. Moreover, in the four years ended December 31, 1998,
Moto Guzzi has not generated cash from operations.
In February 1998 Moto Guzzi obtained a Lit. 10,000 million 10 year credit
facility, drawn down in April 1998, with principal repayments commencing from
the third year. The terms of the loan included covenants relating to the share
capital and equity (according to local Italian accounting principles) of Moto
Guzzi S.p.A as at December 31, 1998. Due to the losses in 1998 and delays in
closing the merger, Moto Guzzi is not in compliance with these covenants, the
consequence of which is that the lender can request immediate repayment of the
loan. The loan is classified as a current liability in the balance sheet as at
March 31, 1999. The Company has advised the lender of the non-compliance and is
in discussions to renegotiate the terms of the loan. No assurance can be given
that these negotiations will successfully conclude on terms satisfactory to the
Company.
Additionally, management estimates that Moto Guzzi requires approximately Lit.
10,000 - 12,000 million of additional capital within the next 12 months to fund
operations and if it is to continue to make minimum necessary investments. The
seasonality of Moto Guzzi's business is such that the substantial part of such
capital will be required before the end of the third quarter of 1999. The
Company has outstanding warrants which could provide some of this further
capital. In particular, certain warrants can be redeemed for a nominal sum in
the event of the achievement of certain share price performance criteria and
which could potentially provide further cash of approximately $10.4 million.
15
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management is exploring a variety of debt and equity financing options, though
no arrangements have been made for any form of financing. No assurances can be
given that such financing will be obtained on acceptable terms, or at all.
POTENTIAL EFFECTS OF THE YEAR 2000 ON THE COMPANY'S BUSINESS
Many older computer systems and electronic devices are based on software systems
which, because of how dates are stored and manipulated, assume that all years
occur only in the 20th century. Consequently, after December 31, 1999, such
devices may not function correctly. The Company, like many other businesses and
individuals, is potentially subject to adverse consequences arising both from
the incorrect functioning of any systems used in its own business such as
accounting, production control, inventory and automated equipment and also from
the incorrect functioning of systems of suppliers, customers, utilities, banks
and financial institutions and others with whom it interacts in the normal
course of its business.
The following discussion of the effect of the Year 2000 on the Company's systems
is based on management's best estimates, which were derived using numerous
assumptions of future events, including the continuing availability of basic
utilities and other resources, the availability of trained personnel at
reasonable cost, and the ability of third parties to cure noncompliant software
and hardware. There can be no guarantee that these assumptions will prove
accurate, and accordingly the actual results may materially differ from those
anticipated.
In analyzing its exposure to operational interruption resulting from the advent
of January 1, 2000, management of the Company segmented its data processing
systems into three segments: Production Planning and Logistics; Accounting; and
Production Equipment.
PRODUCTION PLANNING AND LOGISTICS
Moto Guzzi has completed its assessment of all data processing devices involved
in production planning and logistics and has concluded that these systems are
Year 2000 compliant.
ACCOUNTING
The Company's operations do not have unique or custom-tailored requirements for
their accounting systems. Nonetheless, their accounting systems are not
currently Year 2000 compliant. In connection partly with routine system upgrade
and maintenance, and partly accelerated upgrade related to the Year 2000
problem, all of Moto Guzzi's accounting systems will be upgraded during the
summer of 1999 to Year 2000 compliant status. Appropriate vendors have already
been secured for this purpose.
16
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
PRODUCTION EQUIPMENT
Moto Guzzi believes it has identified all of the items of production machinery
and related equipment which are critical to uninterrupted operations, and, in
December, 1998 began to conduct a comprehensive inventory of all such items
which incorporate electronic devices, or which process dates in their ordinary
operation, to determine whether such operations will be affected by the Year
2000 problem. Moto Guzzi will contact the relevant vendors promptly upon
completion of the inventory assessment to upgrade all deficient items. Because
of the nature of the equipment, it is not expected that modifications other than
more current and readily available circuit boards of BIOS chips will be
required, although that assessment cannot be confirmed until completion of the
inventory in second quarter of 1999.
CUSTOMER OR SUPPLIER COMPLIANCE
The Company does not engage in material electronic data interchange with any of
its customers or component suppliers. An electronic interface is maintained with
one of Moto Guzzi's financial institutions. The Company's motorcycle dealers are
not believed to be heavily dependent upon computer systems other than in
connection with their accounting systems.
Nevertheless, promptly following completion of its internal production equipment
compliance assessment, Moto Guzzi will poll its suppliers and customers to
determine their own state of Year 2000 compliance, a process which it expects to
complete by July, 1999, and will at that time evaluate the level of exposure
Moto Guzzi faces should it be determined that Year 2000 compliance has not been
achieved, and does not seem to be timely capable of achievement.
CONTINGENCY PLANNING
Moto Guzzi has not established a contingency plan to deal with the advent of
January 1, 2000 without its own systems having been rendered Year 2000
compliant, because management does not believe that Moto Guzzi faces a material
risk that such an event is likely to occur, or, if it occurs, will result in
significant interruption in its operations. Moto Guzzi has not yet established a
contingency plan in the event a critical service or component supplier or
customer will not achieve Year 2000 compliance. Moto Guzzi will reassess the
need to establish such a contingency plan if, following its assessment of its
customer and suppliers, it appears that one or more critical customers or
suppliers will have to curtail business with Moto Guzzi because of that customer
or supplier's own Year 2000 exposure. Nevertheless, Moto Guzzi assumes that if a
supplier, whether of utility services, such as electricity, or of components,
cannot provide it with written assurance of compliance, that compliance will not
be achieved. If, in the reasonably possible, if unlikely, event that critical
services are affected, such as utilities, telecommunications or banking or if
components are unavailable and cannot be obtained from other sources which are
compliant, Moto Guzzi will have to curtail its operations.
17
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
TOTAL COST TO ACHIEVE YEAR 2000 COMPLIANCE
Moto Guzzi has, to date, spent an inconsequential amount directly attributable
to Year 2000 compliance, exclusive of routine personnel expenses. Moto Guzzi
does not expect that the aggregate cost for Moto Guzzi to achieve Year 2000
compliance will exceed approximately Lit. 500 million ($302,000), an amount
which is not considered material to Moto Guzzi's operations. Because so many
factors are beyond the control of Moto Guzzi, however, there can be no assurance
that these costs will not be exceeded. In the worst case scenario where
essential services are lost or critical components are no longer supplied, Moto
Guzzi will curtail its operations, in which event, the loss of revenues will
greatly exceed Year 2000 remediation expenses.
POTENTIAL EFFECTS OF THE PROPOSED EUROPEAN COMMON CURRENCY ON THE COMPANY'S
BUSINESS
The Company's businesses are substantially located and operate in Italy. On
January 1, 1999, Italy was admitted as one of 11 European countries in a
proposed European common currency, the Euro.
The European Common Currency is expected to have significant effects on the
Company's business. Among many potential economic factors, the proposed common
currency is expected to increase competition within the common currency zone.
Because the adoption of the Euro will require competitive businesses located in
different participating countries to price their products in a single currency,
the historical ability of such companies to increase or reduce prices without
affecting operating results in their home countries' currencies will be largely
eliminated.
The uniform currency will also likely result in the establishment of new
Euro-based pricing points, e.g., Euro 9,999 or Euro 19,999. These new pricing
points may differ from the current prices charged for such products, which could
be advantageous or disadvantageous to a company, depending upon whether the
Euro-based price point is higher or lower than the prices charged before the
adoption of the uniform currency. Moto Guzzi will have to re-evaluate its
pricing policies and model specifications to most competitively deal with the
new pricing points.
Moto Guzzi also expects that the introduction of the Euro will increase
consolidation within industries and industry sectors, as currency translation
risks and competitive opportunities diminish within the common currency zone.
National regulatory barriers are also likely to fall as participating countries
harmonize their rules to promote intra-member commerce and cross-border
information exchange.
The combination of pricing transparency and consolidation is likely to increase
competition within the common currency zone generally. To the extent that
competitors of Moto Guzzi participate in the expected consolidation, Moto Guzzi
may in the future face competitors which are even larger and better capitalized
than the competitors it faces now.
18
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Additionally, interest rates are likely to stabilize across the common currency
zone. Interest rates in Italy have fallen since 1997, partly in anticipation and
response to the Euro introduction.
Moto Guzzi has not yet fully evaluated the ramifications of the adoption of the
uniform currency because national European currencies continue to function as
more dominant benchmarks for pricing and commercial transactions with customers
and suppliers in the first months of the phasing in of the Euro. Adoption of the
Euro is expected to take place over a two year transition phase in which both
the Lira and the Euro are valid currencies for business transaction in Italy.
Moto Guzzi also makes significant export sales outside the proposed common
currency zone and the prices of certain commodities used in its manufacturing
processes may be affected by the value of the Euro. The implementation of the
Euro within the common currency zone could have unanticipated consequences on
the economics of participant countries which could affect demand for the
company's products.
Adoption of the Euro is expected to take place over a two year transition phase
in which initially both the Lira and the Euro would be valid currencies for
business transactions in Italy.
The European Common Currency could have a significant effect on Moto Guzzi's
accounting systems which could require significant modification or replacement.
Management believes that Moto Guzzi's businesses do not have unique or
custom-tailored requirements for accounting systems and that it could rapidly
and inexpensively change to "off-the-shelf" systems at an appropriate time if
existing systems prove not to be adequate. The Company is not able to evaluate
these matters or the effects on international financial and payment systems with
which it interacts at the present time. The Company will address these issues
during the current year and in 2000 as further guidelines and information become
available. Adoption of the Euro would also lead to the Company reporting its
results in that currency instead of the Italian Lira from some point in the
future, yet to be defined.
19
<PAGE>
MOTO GUZZI CORPORATION
(formerly North Atlantic Acquisition Corp.)
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
In connection with the March 1999 merger, the Company amended and
restated its Certificate of Incorporation to, among other things, eliminate
authorization for the issuance of class B Common Stock. Prior to the merger,
there were 150,000 shares of such securities issued and outstanding. As a result
of a proposal to recapitalize the Company, which was approved by the holders of
such securities, each share of Class B Common Stock was automatically converted
into two shares of Class A Common Stock and two warrants, each to purchase and
additional share of Class A Common Stock. The amendments to the Certificate of
Incorporation also eliminated the "Class A" title to the sole remaining class of
Common Stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 4, 1999, an annual meeting of the stockholders of the Company
was held to vote on a series of resolutions and the election of eight persons to
the Board of Directors. The resolutions, and the votes cast for or against each
resolution, or which abstained from voting, are as follows:
a) to approve the merger of Moto Guzzi Corp. with and into the Company;
859,060 votes were cast in favor, 9,800 votes were cast against, and zero shares
abstained;
b) to amend the Certificate of Incorporation to change the name of the
Company to Moto Guzzi corporation; 863,360 votes were cast in favor, 6,500 votes
were cast against, and zero shares abstained;
c) to amend the Certificate of Incorporation to increase the total
number of shares which the Company has authority to issue; 862,860 votes were
cast in favor, 6,000 votes were cast against, and zero shares abstained;
d) to amend the Certificate of Incorporation to provide for the
classification of the board of directors into three classes serving staggered
terms; 858,060 votes were cast in favor, 10,800 votes were cast against, and
zero shares abstained;
20
<PAGE>
PART II - OTHER INFORMATION
ITEM 4, CONTINUED
e) to amend the Certificate of Incorporation to require a vote of
two-thirds of the outstanding stock or the affirmative vote of a majority of the
board of directors to amend or repeal the by-laws, subject to certain
exceptions; 858,060 votes were cast in favor, 10,800 votes were cast against,
and zero shares abstained;
f) to amend the Certificate of Incorporation to provide that the
affirmative vote of two-thirds of the outstanding stock will be required to fill
a vacancy on the board of directors created by an increase in its size or by a
termination of a director, if not otherwise filled by the remaining members of
the board of directors; 857,060 votes were cast in favor, 11,800 votes were cast
against, and zero shares abstained;
g) to amend the Certificate of Incorporation to provide that the members
of the board of directors may be removed only for cause and only by action of
the board of directors or upon the affirmative vote of two-thirds of the
outstanding stock; 857,310 votes were cast in favor, 11,800 shares were cast
against, and 750 shares abstained;
h) to amend the Certificate of Incorporation to require the Company to
indemnify its officers and directors, subject to exceptions required by law;
859,060 votes were cast in favor, 9,300 votes were cast against, and 1,500
shares abstained;
i) to approve two stock option plans; 858,060 votes were cast in favor,
9,300 votes were cast against, and 1,500 shares abstained;
j) to amend the Certificate of Incorporation to eliminate authorization
for Class B Common Stock; votes of 721,970 shares of Class A stock and 141,790
shares of Class B stock were cast in favor, votes of 5,100 shares of Class A
stock and none of Class B stock were cast against, and zero shares abstained;
Additionally, eight persons were elected to the Board of Directors, to
take effect upon consummation of the merger. The persons elected, and the vote
in favor or against each such person, or which abstained from voting, is as
follows:
<TABLE>
<CAPTION>
For Against
<S> <C> <C>
Emmanuel Arbib 864,360 5,500
Gianni Bulgari 864,360 5,500
Howard E. Chase 864,360 5,500
Mark S. Hauser 864,360 5,500
Peter Hobbins 864,360 5,500
David J. Mitchell 864,360 5,500
Frank J. O'Connell 864,360 5,500
William Spier 864,360 5,500
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
21
<PAGE>
PART II - OTHER INFORMATION
SIGNATURES
Pursuant to the requirements 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.
Date: June 10, 1999 Moto Guzzi Corporation
By Mark S. Hauser
--------------------------------
Mark S. Hauser
Executive Chairman
By Nick Speyer
--------------------------------
Nick Speyer
Chief Financial Officer
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements dated March 31, 1999 and is qualified in its
entirety by reference to such financial statements. Amounts are based on
conversion rate of 1,791 lire to the dollar which prevailed at March 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,552,000
<SECURITIES> 0
<RECEIVABLES> 19,218,000
<ALLOWANCES> 1,131,000
<INVENTORY> 20,627,000
<CURRENT-ASSETS> 40,563,000
<PP&E> 24,223,000
<DEPRECIATION> 14,856,000
<TOTAL-ASSETS> 50,605,000
<CURRENT-LIABILITIES> 43,787,000
<BONDS> 1,673,000
0
0
<COMMON> 55,000
<OTHER-SE> 755,000
<TOTAL-LIABILITY-AND-EQUITY> 50,605,000
<SALES> 9,812,000
<TOTAL-REVENUES> 9,812,000
<CGS> 9,742,000
<TOTAL-COSTS> 12,192,000
<OTHER-EXPENSES> 2,450,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 594,000
<INCOME-PRETAX> (2,939,000)
<INCOME-TAX> 22,000
<INCOME-CONTINUING> (2,961,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,961,000)
<EPS-BASIC> (0.74)
<EPS-DILUTED> (0.74)
</TABLE>
