TRIDENT ROWAN GROUP INC, 10-Q, 1999-08-20

TRIDENT ROWAN GROUP INC
10-Q, 1999-08-20
MOTORCYCLES, BICYCLES & PARTS

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<PAGE>

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarter period ended JUNE 30, 1999
-------------

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

For the transition period from to
-------------------- --------------------------
Commission File Number 0-2642
--------------------------------------------------------

TRIDENT ROWAN GROUP, INC.
----------------------------------------
(Exact name of registrant as specified in its charter)

MARYLAND 52-0466460
--------------------------------------------- -------------------
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)

TWO WORLDS FAIR DRIVE, SOMERSET, NJ 08873
---------------------------------------------------
(Address of principal executive offices - Zip Code)

(732) 868-9000
----------------------------------------------------
(Registrant's telephone number, including area code)

- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
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 check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by 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 $0.01
par value, 4,419,900 shares.

<PAGE>

INDEX
-----
<TABLE>
<CAPTION>

<S> <C>
PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Balance Sheets as of June 30, 1999 and December 31, 1998.......................................4
Statements of operations for the three months ended June 30, 1999 and 1998.....................6
Statements of operations for the six months ended June 30, 1999 and 1998.......................7
Statements of cash flows for the six months ended June 30, 1999 and 1998.......................8
Statements of stockholders' equity and comprehensive income/(loss) for the
six months ended June 30, 1999.................................................................9
Notes to Financial Statements.................................................................10

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...........................................................13

PART II OTHER INFORMATION

ITEM 6. EXHIBITION AND REPORTS ON FORM 8-K............................................................25
</TABLE>

<PAGE>

PART I

FINANCIAL INFORMATION

3
<PAGE>

TRIDENT ROWAN GROUP, INC
Consolidated Condensed Balance Sheets
June 30, 1999
<TABLE>
<CAPTION>

JUNE 30 JUNE 30 DEC. 31
1999 1999 1998
US$'000 LIRE M. LIRE M.
UNAUDITED UNAUDITED NOTE
<S> <C> <C> <C>

ASSETS
CASH AND CASH EQUIVALENTS............................................ $ 3,071 LIT. 5,774 LIT. 3,436
MARKETABLE SECURITIES, AT COST....................................... - - 955
RECEIVABLES.......................................................... 23,597 44,363 35,254
TRADE, LESS ALLOWANCE LIT. 2,165 (LIT.2,037)....................... 18,099 34,026 24,881
RECEIVABLES FROM RELATED PARTIES................................... 3,027 5,690 3,852
OTHER RECEIVABLES.................................................. 2,471 4,647 6,521

INVENTORIES.......................................................... 22,629 42,543 41,170
RAW MATERIALS, PARTS AND WORK-IN-PROCESS........................... 14,336 27,008 22,469
FINISHED PRODUCTS.................................................. 8,263 15,535 18,701

PREPAID EXPENSES..................................................... 511 961 982

-------------- ----------- ------------
TOTAL CURRENT ASSETS 49,808 93,641 81,797
-------------- ----------- ------------

PROPERTY, PLANT AND EQUIPMENT........................................ 9,760 18,347 18,168
AT COST............................................................ 24,770 46,566 44,625
LESS ALLOWANCES FOR DEPRECIATION................................... (15,010) (22,219) (26,007)

TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET OF
AMORTIZATION OF LIT. 1,400 (LIT. 1,350 - 1998)..................... 319 600 650
GOODWILL, NET OF AMORTIZATION OF LIT. 597 (1998 - LIT. 561).......... 106 200 236
REAL ESTATE FOR DEVELOPMENT, NET OF RESERVE OF LIT. 2,500 ........... 1,862 3,500 3,500
CONCESSION RIGHTS.................................................... 851 1,600 1,600
TAX RECEIVABLES...................................................... 1,629 3,062 9,185
OTHER ASSETS......................................................... 754 1,417 1,579

-------------- ----------- ------------
TOTAL ASSETS $ 65,089 LIT. 122,367 LIT. 117,165
-------------- ----------- ------------
-------------- ----------- ------------
</TABLE>

Note: The balance sheet as at December 31, 1998 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles.

SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

4
<PAGE>

TRIDENT ROWAN GROUP, INC.
Consolidated Condensed Balance Sheets
March 31, 1999
<TABLE>
<CAPTION>

JUNE 30 JUNE 30 DEC. 31
1999 1999 1998
US$'000 LIRE M. LIRE M.
UNAUDITED UNAUDITED NOTE

<S> <C> <C> <C>
LIABILITIES
ADVANCES FROM BANKS................................................... $ 20,744 LIT. 38,998 LIT. 32,619
CURRENT PORTION OF LONG-TERM DEBT.................................... 6,424 12,078 13,288
LOANS DUE TO RELATED PARTIES.......................................... 1,700 3,196 6,312
ACCOUNTS PAYABLE...................................................... 18,764 35,277 35,360
ACCRUED EXPENSES AND OTHER PAYABLES................................... 6,258 11,765 9,715

-------------- ----------- -----------
TOTAL CURRENT LIABILITIES 53,890 101,314 97,294
-------------- ----------- -----------

LONG-TERM DEBT, LESS CURRENT PORTION.................................. 1,860 3,497 4,257
TERMINATION INDEMNITIES............................................... 4,683 8,804 8,581
PROVISION FOR CLAIMS.................................................. 1,691 3,180 3,120

MINORITY INTERESTS.................................................... 6,589 12,385 10,907

PREFERRED STOCK OF SUBSIDIARY......................................... - - 13,132

SHAREHOLDERS' (DEFICIT)/EQUITY (3,624) (6,813) (20,126)
COMMON STOCK, PAR VALUE $0.01 PER SHARE:
AUTHORIZED 50,000,000 SHARES;
4,419,900 (1998 - 4,419,900) SHARES ISSUED AND OUTSTANDING 59 106 106
ADDITIONAL PAID IN CAPITAL.......................................... 55,506 104,352 104,032
TREASURY STOCK, AT COST............................................. (24,396) (45,865) (45,865)
CUMULATIVE TRANSLATION ADJUSTMENT.................................. (269) (505) 24
DEFICIT............................................................. (34,521) (64,901) (78,423)

-------------- ----------- ------------
$ 65,089 LIT. 122,367 LIT. 117,165
-------------- ----------- ------------
-------------- ----------- ------------
</TABLE>

SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

<PAGE>

TRIDENT ROWAN GROUP, INC.
Unaudited Consolidated Condensed Statements of Operations
3 Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>

JUNE 30 JUNE 30 JUNE 30
1999 1999 1998
US $'000 LIRE M. LIRE M.

<S> <C> <C> <C>
NET SALES........................................................... $ 16,205 LIT. 30,465 LIT. 29,213

COST OF SALES....................................................... (14,048) (26,411) (23,391)
---------- ----------- ----------

2,157 4,054 5,822

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........................ (3,990) (7,501) (7,076)
RESEARCH AND DEVELOPMENT............................................ (577) (1,085) (1,352)
---------- ----------- ----------

(2,410) (4,532) (2,606)

INTEREST EXPENSE.................................................... (624) (1,174) (1,357)
INTEREST INCOME..................................................... 93 174 459
OTHER (EXPENSE)/INCOME, NET......................................... (36) (68) 142
---------- ----------- ----------

LOSS BEFORE INCOME TAXES AND MINORITY INTERESTS.................... (2,977) (5,600) (2,606)

INCOME TAXES........................................................ (16) (30) (315)

MINORITY INTERESTS.................................................. 1,343 2,524 288

AMORTIZATION OF PREMIUM FOR REDEMPTION OF
PREFERRED STOCK OF SUBSIDIARY..................................... - - (285)

---------- ----------- ----------
NET LOSS ........................................................... $ (1,650) LIT. (3,106) LIT. (3,674)
---------- ----------- ----------
---------- ----------- ----------

PROFIT/(LOSS) PER SHARE US $ LIRE LIRE

BASIC............................................................... $ (0.39) LIT. (725) LIT. (737)
---------- ----------- ----------
---------- ----------- ----------
DILUTED............................................................. $ (0.39) LIT. (725) LIT. (737)
---------- ----------- ----------
---------- ----------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD

BASIC .............................................................. NO. 4,283,233 NO. 4,283,233 NO. 4,987,780
---------- ----------- ----------
---------- ----------- ----------
DILUTED............................................................. NO. 4,329,711 NO. 4,329,711 NO. 5,203,368
---------- ----------- ----------
---------- ----------- ----------
</TABLE>

SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

6
<PAGE>

TRIDENT ROWAN GROUP, INC.
Unaudited Consolidated Condensed Statements of Operations
6 Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
JUNE 30 JUNE 30 JUNE 30
1999 1999 1998
US $'000 LIRE M. LIRE M.
<S> <C> <C> <C>
NET SALES........................................................... $ 28,737 LIT. 54,026 LIT. 62,319

COST OF SALES....................................................... (25,980) (48,842) (50,577)
----------- --------- -------------

2,757 5,184 11,742

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........................ (7,090) (13,330) (12,511)
RESEARCH AND DEVELOPMENT............................................ (825) (1,551) (2,226)
----------- --------- -------------

(5,158) (9,697) (2,995)

INTEREST EXPENSE.................................................... (1,376) (2,586) (2,442)
INTEREST INCOME..................................................... 107 202 910
GAIN ON MERGER OF SUBSIDIARY........................................ 13,743 25,837 -
OTHER INCOME, NET................................................... 35 66 23
----------- --------- -------------

PROFIT/(LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS........... 7,351 13,822 (4,504)

INCOME TAXES........................................................ 11 21 (660)

MINORITY INTERESTS.................................................. (171) (321) 396

AMORTIZATION OF PREMIUM FOR REDEMPTION OF
PREFERRED STOCK OF SUBSIDIARY..................................... - - (1,258)

----------- --------- -------------
NET PROFIT/(LOSS) .................................................. $ 7,191 LIT. 13,522 LIT. (6,026)
----------- --------- -------------
----------- --------- -------------

PROFIT/(LOSS) PER SHARE US $ LIRE LIRE

BASIC............................................................... $ 1.68 LIT. 3,157 LIT. (1,208)
----------- --------- -------------
----------- --------- -------------
DILUTED............................................................. $ 1.65 LIT. 3,097 LIT. (1,208)
----------- --------- -------------
----------- --------- -------------

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD

BASIC .............................................................. NO. 4,283,233 NO. 4,283,233 NO. 4,987,780
----------- --------- -------------
----------- --------- -------------
DILUTED NO. 4,366,056 NO. 4,366,056 NO. 5,095,574
----------- --------- -------------
----------- --------- -------------

</TABLE>

7
<PAGE>

TRIDENT ROWAN GROUP, INC.
Unaudited Consolidated Condensed Statements of Cash Flows
6 Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
JUNE 30 JUNE 30 JUNE 30
1999 1999 1998
US$'000 LIRE M. LIRE M.

<S> <C> <C> <C>
NET PROFIT/(LOSS)................................................... $ 7,191 LIT. 13,522 LIT. (6,026)

ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED BY OPERATING ACTIVITIES:................................. (14,265) (26,820) (3,974)
------------ ---------- ----------

NET CASH USED IN OPERATING ACTIVITIES............................... (7,074) (13,298) (9,820)
------------ ---------- ----------

INVESTING ACTIVITIES:
NET INCREASE IN INVESTMENTS AND SECURITIES.......................... 508 955 15,840
PURCHASES OF PROPERTY, PLANT AND EQUIPMENT.......................... (961) (1,806) (5,074)

------------ ---------- -----------
NET CASH (USED)/ PROVIDED BY INVESTING ACTIVITIES................... (453) (851) 10,766
------------ ---------- -----------

FINANCING ACTIVITIES:
INCREASE IN ADVANCES FROM BANKS..................................... 3,205 6,026 6,809
CASH FROM MERGER OF SUBSIDIARY...................................... 8,514 16,006 -
REPURCHASES OF SHARES............................................... - - (15,944)
PROCEEDS FROM LONG-TERM DEBT........................................ - - 10,103
PRINCIPAL PAYMENTS OF LOANS FROM RELATED PARTIES.................... (1,880) (3,534) -
PRINCIPAL PAYMENTS OF LONG-TERM DEBT................................ (1,088) (2,046) (1,825)

------------ ---------- -----------
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES.................... 8,751 16,452 (857)
------------ ---------- -----------

INCREASE IN CASH AND CASH EQUIVALENTS............................... 1,224 2,303 89
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND
CASH EQUIVALENTS................................................... 19 35 7
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...................... 1,828 3,436 10,407

------------ ---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD............................ $ 3,071 LIT. 5,774 LIT. 10,503
------------ ---------- -----------
------------ ---------- -----------
</TABLE>

SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

8
<PAGE>

TRIDENT ROWAN GROUP, INC.
Unaudited Consolidated Condensed Statements of Shareholders' Equity
Comprehensive Income/(Loss)
6 Months Ended June 30, 1999 and 1998

ADDITIONAL ACCRETION

COMMON PAID-IN TREASURY TRANSLATION EXPENSE, ACCUMULATED

LIRE MILLION STOCK CAPITAL STOCK ADJUSTMENT NET DEFICIT
--------- -------- ---------- ----------- --------- ----------

<S> <C> <C> <C> <C> <C> <C> <C>
AT JANUARY 1, 1998 LIT.M 88 90,357 (29,921) (154) (2,474) (53,404)

Net loss - - - - - (25,019)

Translation adjustment - - - 178 - -

Accretion expense, net of exchange movements - - - - (253) -

Repurchase of shares 14 13,203 (15,944) - 2,727 -

Issuance of shares 4 1,680 - - - -

Less: Shares not vested as at Dec. 31, 1998 - (1,208) - - - -
--------- ---------- ---------- ---------- --------- ----------

AT DEC. 31, 1998 LIT.M 106 104,032 (45,865) 24 - (78,423)

Net profit - - - - - 13,522

Translation adjustment - - - (529) - -

Vesting of shares subject to forfeit - 320 - - - -
--------- ---------- ---------- ---------- --------- ----------

AT JUNE 30, 1999 LIT.M 106 104,352 (45,865) (505) - (64,901)

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

AT JUNE 30, 1999 $'000 56 55,506 (24,396) (269) - (34,521)
--------- ---------- ---------- ---------- --------- ----------
--------- ---------- ---------- ---------- --------- ----------

</TABLE>

<PAGE>

SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

TOTAL SHARES COMPREHENSIVE

SHAREHOLDERS' SUBJECT TO INCOME/

LIRE MILLION EQUITY REPURCHASE (LOSS)
----------- ----------- -------------

<S> <C> <C> <C>
AT JANUARY 1, 1998 4,492 15,691

Net loss (25,019) - (25,019)

Translation adjustment 178 - 178

Accretion expense, net of exchange movements (253) 253 (253)

Repurchase of shares - (15,944) -

Issuance of shares 1,684 - -

Less: Shares not vested as at Dec. 31, 1998 (1,208) - -
------------ ---------- -------------

AT DEC. 31, 1998 (20,126) - (25,094)

Net profit 13,522 - 13,522

Translation adjustment (529) - (529)

Vesting of shares subject to forfeit 320 - -
------------ ---------- -------------

AT JUNE 30, 1999 (6,813) - 12,993

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

AT JUNE 30, 1999 (3,624) - 7,255
------------ ---------- -------------
------------ ---------- -------------

</TABLE>

SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

9
<PAGE>

TRIDENT ROWAN GROUP, INC.
Notes to the Consolidated Condensed Financial Statements
June 30, 1999

NOTE 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. For a summary of the Registrant's accounting principles, and other
footnote information, reference is made to the Registrant's 1998 Annual Report
on Form 10-K. 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 and six months ended June 30, 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 1,880 to U.S. $1, the approximate exchange rate at June 30, 1999.
It should not be construed that the assets and liabilities, expressed in US
dollar equivalents, can actually be realized in or extinguished by U.S. dollars
at that or any other rate.

NOTE 2 - LOSS PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share" ("SFAS No. 128"). SFAS No. 128 replaced the calculation of
primary and diluted earnings per share with basic and diluted earnings per
share. Basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share gives effect to
all potentially dilutive common shares that were outstanding during the period.
All loss per share amounts for all periods have been presented to conform to
SFAS No. 128 requirements.

NOTE 3 - MERGER OF MOTO GUZZI SUBSIDIARY WITH NORTH ATLANTIC

On August 18, 1998, TRG's subsidiary, Moto Guzzi Corp., and for limited
purposes, TRG, entered into an agreement to merge with North Atlantic
Acquisition Corp. ("North Atlantic"). The merger consummated on March 5, 1999.
North Atlantic was organized in August 1995 as a specialized merger and
acquisition allocated risk company with the objective of acquiring an operating
business and had not engaged in any substantive commercial business. At the
effective time of the merger, North Atlantic had approximately $8.9 million
(Lit. 16.0 billion) in cash, from which merger expenses of $0.8 million (Lit.
1.4 billion) were subsequently paid, to finance the operations of Moto Guzzi. On
completion of the merger, North Atlantic changed its name to Moto Guzzi
Corporation and is listed on the over-the-counter market in New York under the
ticker "GUZI". TRG owns, through its 84.35% OAM S.p.A. subsidiary, approximately
60.1% of the equity securities of Moto Guzzi Corporation. As a result of the
merger, TRG recorded a gain of Lit. 25.8 billion (US$ 14.4 million) in the first
quarter of 1999, including the effects of the exchange of redeemable preferred
stock of Moto Guzzi Corp. into common stock of North Atlantic. Through December
31, 1998, TRG had accounted for the contingent redemption of such preferred
stock and included Lit. 13.1 billion in the balance sheet at December 31, 1998
to reflect such contingent obligation.

10
<PAGE>
TRIDENT ROWAN GROUP, INC.
Notes to the Consolidated Condensed Financial Statements
June 30, 1999

NOTE 4 - LIQUIDITY AND BRIDGE LOANS FROM AFFILIATES

Moto Guzzi has suffered recurring losses from operations and negative cash flows
during the last three years. The merger with North Atlantic 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. Moto Guzzi 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 Moto Guzzi. The foregoing
information is incorporated by reference at Item 3 of Part II of this Report.

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
low point which is expected in August and September. In early August 1999,
certain Moto Guzzi directors and their affiliates paid approximately $1.7
million (Lit. 3.0 billion) to Moto Guzzi in anticipation of their subscription
to an issue of preferred stock of up to US$ 5 million (Lit.9.4 billion),
approved by the Board of Moto Guzzi on July 30, 1999. Moto Guzzi is actively
discussing equity and debt financing options as well as potential business
combinations 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, or that any business
combination agreement will be reached or consummated. Any equity financing or
business combination would likely result in the Company owning less than 50% of
the equity securities of Moto Guzzi.

The Company is seeking to realize liquidity from certain non-strategic assets in
order to meet its commitments unrelated to Moto Guzzi. At the date of these
financial statements, the Company has sufficient liquidity to meet such other
commitments through available cash and expected further realizations, except for
full and timely repayment of a U.S. $2,000,000 bridge loan provided by Tamarix
Investors LDC in October 1998 which became due in accordance with its terms on
March 5, 1999. In May 1999, the Company repaid the Lit. 3,000 million bridge
loan provided by Dr. Giovanni Bulgari, a former affiliate of Tamarix, and
negotiated an extension of the US$ 2 million Tamarix bridge loan until June 30,
1999, making a partial repayment of principal of US$ 300,000. In July, 1999, a
further extension through November 30, 1999 was agreed and the Company made a
further partial repayment of principal of US$ 300,000.

Available cash and expected realization of TRG's non-strategic assets are not
expected to be sufficient to provide the financial support required by Moto
Guzzi Corporation. If revised terms of existing financing as well as additional
financing are not obtained in timely fashion, the Moto Guzzi creditors may look
to the Company to satisfy these obligations. As the Company does not have the
resources available to finance its consolidated obligations, there is
substantial doubt about its 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.

11
<PAGE>
TRIDENT ROWAN GROUP, INC.
Notes to the Consolidated Condensed Financial Statements
June 30, 1999

NOTE 5 - INDUSTRY SEGMENT ANALYSIS
<TABLE>
<CAPTION>

MANAGEMENT
THREE MONTHS ENDED JUNE 30, 1999 MOTOR- STEEL & CORPORATE
LIRE M. CYCLES TUBES SERVICES ELIMINATIONS TOTAL

<S> <C> <C> <C> <C> <C>
Net sales..................................... 23,805 6,288 372 - 30,465

Cost of sales................................. (20,997) (5,172) (242) - (26,411)
-------- -------- --------- ------------ ---------
2,808 1,116 130 - 4,054

Selling, general and administrative expenses.. (5,533) (737) (1,221) (10) (7,501)

Research and development...................... (1,085) - - - (1,085)
-------- -------- --------- ------------ ---------

Operating profit/(loss)....................... (3,810) 379 (1,091) (10) (4,532)
-------- -------- --------- ------------ ---------
-------- -------- --------- ------------ ---------

MANAGEMENT
THREE MONTHS ENDED JUNE 30, 1998 MOTOR- STEEL & CORPORATE
LIRE M. CYCLES TUBES SERVICES ELIMINATIONS TOTAL

Net sales..................................... 22,403 6,154 713 (57) 29,213

Cost of sales................................. (17,833) (5,087) (471) - (23,391)
-------- -------- --------- ------------ ---------

4,570 1,067 242 (57) 5,822

Selling, general and administrative expenses.. (4,548) (802) (1,778) 52 (7,076)

Research and development...................... (1,352) - - - (1,352)
-------- -------- --------- ------------ ---------

Operating profit/(loss)....................... (1,330) 265 (1,536) (5) (2,606)
-------- -------- --------- ------------ ---------
-------- -------- --------- ------------ ---------

MANAGEMENT
SIX MONTHS ENDED JUNE 30, 1999 MOTOR- STEEL & CORPORATE
LIRE M. CYCLES TUBES SERVICES ELIMINATIONS TOTAL

Net sales..................................... 41,378 11,853 795 - 54,026

Cost of sales................................. (38,446) (9,977) (419) - (48,842)
-------- -------- --------- ------------ ---------

2,932 1,876 376 - 5,184

Selling, general and administrative expenses.. (9,454) (1,411) (2,455) (10) (13,330)

Research and development...................... (1,551) - - - (1,551)
-------- -------- --------- ------------ ---------

Operating profit/(loss)....................... (8,073) 465 (2,079) (10) (9,697)
-------- -------- --------- ------------ ---------
-------- -------- --------- ------------ ---------

MANAGEMENT
SIX MONTHS ENDED JUNE 30, 1998 MOTOR- STEEL & CORPORATE
LIRE M. CYCLES TUBES SERVICES ELIMINATIONS TOTAL

Net sales..................................... 47,989 12,425 2,019 (114) 62,319

Cost of sales................................. (38,755) (10,696) (1,126) - (50,577)
-------- -------- --------- ------------ ---------

9,234 1,729 893 (114) 11,742

Selling, general and administrative expenses.. (7,861) (1,319) (3,440) 109 (12,511)

Research and development...................... (2,226) - (2,226)
-------- -------- --------- ------------ ---------
Operating profit/(loss)....................... (853) 410 (2,547) (5) (2,995)
-------- -------- --------- ------------ ---------
-------- -------- --------- ------------ ---------
</TABLE>

12
<PAGE>

TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations

GENERAL

Since the first quarter of 1998, the Company has focused its energies and
resources on its Moto Guzzi subsidiary.

As a result of the merger of Moto Guzzi Corp. into North Atlantic Acquisition
Corp., which was consummated on March 5, 1999, all of the common stock and
preferred stock of Moto Guzzi Corp. was exchanged for newly issued shares of
common stock of North Atlantic. The Company's subsidiary, OAM S.p.A., which
had owned all of Moto Guzzi Corp.'s common stock before the merger, also
contributed a Lit. 13,362 million intercompany loan it had made to Moto Guzzi
Corp. for additional North Atlantic common stock, and holders of Moto Guzzi
Corp. warrants received additional shares of North Atlantic common stock when
submitting their warrants for cancellation. The aggregate ownership by the
former Moto Guzzi Corp. security holders immediately following the merger was
approximately 75%, while the security holders of North Atlantic retained an
approximate 25% equity ownership interest in the merged entity, Moto Guzzi
Corporation. The Company owns approximately 60.1% of Moto Guzzi Corporation
through its 84.35% owned OAM S.p.A. subsidiary.

Approximately $8,150,000 (Lit. 14.6 billion) in cash owned by North Atlantic,
net of expenses of the merger, became available for Moto Guzzi capital needs,
of which approximately $7 million was used to pay supplier arrearages caused
by Moto Guzzi's liquidity shortage. The Company has accounted for the
transaction as a sale of shares in its Moto Guzzi Corp. subsidiary and
recorded a gain of Lit. 25.8 billion in the income statement in the first
quarter of 1999 based on such sale. Management believes that this transaction,
which results in Moto Guzzi being a separately traded public company, will
enhance Moto Guzzi's ability to raise further capital and that stock option
incentives to Moto Guzzi management and employees will provide further
motivation to enhance the value of the Moto Guzzi business.

The Company continues to seek to realize its non-strategic assets and to
contain corporate costs. In February 1999, the Company realized a Lit. 6.1
billion tax receivable and, in April 1999, the Company entered into agreement
to sell its concession rights over parking spaces in Genoa, Italy, for Lit.
1.6 billion, which sale was consummated early in July 1999. The Company's
steel tube business, L.I.T.A., has continued to expand export sales to offset
falling demand from the domestic (Italian) automobile sector and in the first
half of 1999 has recorded small increases in margins and operating profits,
despite the difficulties in its home market. The effects of containing
corporate overheads have resulted in a decrease in such expenses of 28.6% in
the first half of 1999 compared to the corresponding period in 1998.

13
<PAGE>

TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations

RESULTS OF OPERATIONS - 3 MONTHS ENDED
JUNE 30, 1999 COMPARED TO JUNE 30, 1998

OPERATING PROFIT/(LOSS)

Analysis of net sales, cost of sales and operating expenses by industry segment
is given in Note 5 to the condensed financial statements at June, 1999.

MOTORCYCLE SEGMENT - MOTO GUZZI
<TABLE>
<CAPTION>

THREE MONTHS ENDED JUNE 30,
1999 1998
LIRE M. LIRE M.

<S> <C> <C> <C> <C>
Net sales ................................................... 23,805 100.0% 22,403 100.0%

Cost of sales................................................ (20,997) (88.2%) (17,833) (79.6%)
-------- --------
2,808 11.8% 4,570 20.4%

Selling, general and administrative expenses ................ (5,533) (23.2%) (4,548) (20.3%)
Research & product development............................... (1,085) (4.6%) (1,352) (6.0%)
-------- --------

Operating loss............................................... (3,810) (16.0%) (1,330) (5.9%)
-------- --------
-------- --------
</TABLE>

Net sales increased by Lit.1.4 billion or 6.3% from Lit. 22.4 billion to
Lit. 23.8 billion while unit sales increased 19.8% from 1,522 in 1998 to
1,823 in 1999. The average unit sales price fell in 1999 compared to 1998 as
a result of a change in the sales mix. In 1999, sales were predominantly of
the Company's Jackal and Nevada models. The Jackal is a stripped down cruiser
motorcycle with a lower price point and the Nevada is Moto Guzzi's 750cc
"entry level" model. In 1998, the Company sold a larger number of its more
expensive Centauro and fully-equipped California models. The Centauro is no
longer being produced in 1999.

Gross margins decreased from Lit. 4.6 billion or 20.4% in the second quarter of
1998 to Lit. 2.8 billion or 11.8% in the second quarter of 1999. The decrease is
principally due to the sales mix; the Jackal and Nevada models generate lower
margins than the 1998 product mix.

Selling, general and administrative expenses increased by 21.7% to Lit. 5.5
billion in 1999 compared to Lit. 4.5 billion in 1998. Expenses at Moto America
increased by Lit. 402 million, or 78%, reflecting a new management team
installed in April 1999 and expenses related to building and motivating the
sales network. Expenses in Italy and corporate costs increased Lit 549 million,
or 14.7%, reflecting expenses in connection with the launch of the California
Jackal and costs connected with being a public company.

14
<PAGE>

TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations

STEEL TUBING SEGMENT - L.I.T.A.
<TABLE>
<CAPTION>

THREE MONTHS ENDED JUNE 30,
---------------------------
1999 1998
LIRE M. LIRE M.

<S> <C> <C> <C> <C>
Net sales ................................................... 6,288 100.0% 6,154 100.0%
-------- --------
Cost of sales................................................ (5,172) (82.3%) (5,087) (82.7%)
1,116 17.7% 1,067 17.3%

Selling, general and administrative expenses ................ (737) (11.7%) (802) (13.0%)
-------- --------
Operating profit............................................. 379 6.0% 265 4.3%
-------- --------
-------- --------
</TABLE>

Net sales increased by 2.2% reflecting increased export sales which more than
offset difficult market conditions in the domestic (Italian) automobile market.

MANAGEMENT AND CORPORATE SERVICES
<TABLE>

THREE MONTHS ENDED JUNE 30,
---------------------------
1999 1998
LIRE M. LIRE M.

<S> <C> <C> <C> <C>
Net sales ................................................... 372 100.0% 713 100.0%

Cost of sales................................................ (242) (65.1%) (571) (80.1%)
-------- --------

130 34.9% 142 19.9%

Selling, general and administrative expenses ................ (1,221) (328.2%) (1,778) (249.4%)
-------- --------
Operating profit/(loss)...................................... (1,091) (293.3%) (1,636 (229.5%)
-------- --------
-------- --------
</TABLE>

Corporate costs and overhead decreased by 31.3% in the 3 months ended June 30,
1999 compared to the same period in 1998 as a result of the Company's focus on
cost reduction in connection with its decision to dedicate its energies and
resources on enhancing the value of its Moto Guzzi business and not to pursue
other opportunities.

INTEREST EXPENSE, INTEREST INCOME AND OTHER INCOME STATEMENT ITEMS

Income statement items below operating profit level are compared below on a
consolidated basis and not by industry segment as their incurrence and
allocation between segments is, in large part, determined by structural
decisions independent of stand-alone operating needs and performance.

INTEREST INCOME AND EXPENSE

Interest expense decreased by Lit. 0.2 billion from Lit. 1.4 billion to Lit. 1.2
billion in the three months ended June, 1999 compared to the corresponding 1998
period principally due to lower interest rates in 1999 compared to 1998. The
decrease in interest income in the 1999 compared to 1998 principally results
from decreased liquidity. At the end of June 1998, the Company utilized fixed
interest securities it held to collateralize share repurchase commitments and
other cash, aggregating Lit. 15.9 billion, to satisfy its repurchase
obligations.

15
<PAGE>

TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations

OTHER INCOME/(EXPENSE), NET

Other income/(expense) in the three months ended June 30, 1999 and 1998 is
principally comprised of exchange gains/(losses).

AMORTIZATION OF PREMIUM FOR REDEMPTION OF PREFERRED STOCK OF SUBSIDIARY

In the three months ended June 30, 1998, a non-cash expense of Lit. 285 million
had been recorded as amortization of preferred stock redemption premium relating
to the Moto Guzzi Corp. preferred stock issued at the end of 1996 and in early
1997. A significant element of the charge resulted from exchange differences as
the contingent redemption obligation was denominated in U.S. dollars. The issued
and outstanding shares of Moto Guzzi Corp. preferred stock were converted into
shares of common stock of North Atlantic upon consummation of the merger with
North Atlantic (see Note 3 to Interim Financial Statements), and the contingent
obligation was accordingly eliminated.

RESULTS OF OPERATIONS - 6 MONTHS ENDED
JUNE 30, 1999 COMPARED TO JUNE 30, 1998

OPERATING PROFIT/(LOSS)

Analysis of net sales, cost of sales and operating expenses by industry segment
is given in Note 5 to the condensed financial statements at June, 1999.

MOTORCYCLE SEGMENT - MOTO GUZZI
<TABLE>

SIX MONTHS ENDED JUNE 30,
-------------------------
1999 1998
LIRE M. LIRE M.

<S> <C> <C> <C> <C>
Net sales ................................................... 41,378 100.0% 47,989 100.0%

Cost of sales................................................ (38,446) (92.9%) (38,755) (80.8%)
-------- --------
2,932 7.1% 9,234 19.2%
Selling, general and administrative expenses ................ (9,454) (22.8%) (7,861) (16.4%)
Research & product development............................... (1,551) (3.7%) (2,226) (4.6%)
-------- --------
Operating loss............................................... (8,073) (19.5%) (719) (1.5%)
-------- --------
-------- --------
</TABLE>

Net sales for the six month period ending June 30, 1999 decreased by Lit. 6.6
billion, or 13.8%, from Lit. 48.0 billion in the corresponding 1998 period to
Lit. 41.4 billion due to 1) changes in the sales mix, as described above; and 2)
the first half of 1998 included Lit. 3.8 billion of net sales relative to an
unusual public administration order. Sales and production through April 1999
were also significantly affected by a disruption in the supply of components due
to liquidity difficulties. Sales units decreased 8.1% from 3,309 units in 1998
to 3,041units in 1999. Excluding the exceptional 1998 public administration
order, sales units would have increased 1.5% in 1999 compared to 1998 and the
decrease in net sales would have been 6.3%.

16
<PAGE>

TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations

Gross margins decreased from Lit.9.2 billion, or 19.2%, in the second quarter of
1998 to Lit. 2.9 billion, or 7.1%, in the second quarter of 1999. The decrease
is principally due to the altered product mix, the exceptional public
administration order in the first quarter of 1998 and the significantly
decreased production levels in the first part of 1999 resulting from the
disruption in the supply of components. The consequence of lower production
levels through April 1999 is that fixed production costs were absorbed over
lower production volumes, reducing gross margin.

Selling, general and administrative expenses increased by 20.3% to Lit. 9.5
billion in 1999 compared to Lit. 7.9 billion in 1998. Expenses at Moto America
increased by Lit. 0.4 billion or 36.6% due to the installation of the new
management team in the second quarter and expenses related to a more aggressive
approach in advertising products and motivating sales. Italy and corporate costs
increased Lit 1.1 billion or 18.5% reflecting expenses in connection with the
launch of the California Jackal and costs connected with being a public company.

STEEL TUBING SEGMENT - L.I.T.A.
<TABLE>

SIX MONTHS ENDED JUNE 30,
--------------------------
1999 1998
LIRE M. LIRE M.

<S> <C> <C> <C> <C>
Net sales ................................................... 11,853 100.0% 12,425 100.0%
Cost of sales................................................ (9,977) (84.2%) (10,696) (86.1%)
------- ---------
1,876 15.8% 1,729 13.9%
Selling, general and administrative expenses ................ (1,411) (11.9%) (1,319) (10.6%)
------- ---------
Operating profit............................................. 465 3.9% 410 3.3%
------- ---------
------- ---------
</TABLE>

Net sales decreased by 4.6% reflecting difficult market conditions in the
domestic (Italian) automobile market, offset in part by increased export sales.

MANAGEMENT AND CORPORATE SERVICES
<TABLE>

SIX MONTHS ENDED JUNE 30,
--------------------------
1999 1998
LIRE M. LIRE M.

<S> <C> <C> <C> <C>
Net sales ................................................... 795 100.0% 2,019 100.0%

Cost of sales................................................ (419) (52.7%) (1,126) (55.8%)
-------- -------
376 47.3% 893 44.2%
Selling, general and administrative expenses ................ (2,445) (308.8%) (3,440) (170.4%)
-------- -------
Operating profit/(loss)...................................... (2,079) (261.5%) (2,547) (126.2%)
-------- -------
-------- -------
</TABLE>

Revenues had benefitted in the 1998 due to a management engagement in connection
with the acquisition of an Italian company by a Swiss acquiror. Corporate costs
and overheads decreased by 28.6% in the 6 months ended June 30, 1999 compared to
the same period in 1998 as a result of the Company's focus on cost reduction in
connection with its decision to dedicate its energies and resources on enhancing
the value of its Moto Guzzi business and not to pursue other opportunities.

17
<PAGE>

TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations

INTEREST EXPENSE, INTEREST INCOME AND OTHER INCOME STATEMENT ITEMS

INTEREST INCOME AND EXPENSE

Interest expense increased by Lit. 0.2 billion from Lit. 2.6 billion to Lit. 2.4
billion in the six months ended June, 1999 compared to the corresponding 1998
period. This was principally due to decreased indebtedness in the first quarter
of 1998 before the Company drew down a Lit. 10 billion long term credit line.
The effects of this more than offset the benefits of lower interest rates in
1999 compared to 1998. The decrease in interest income in the 1999 compared to
1998 principally results from decreased liquidity. At the end of June 1998, the
Company utilized fixed interest securities it held to collateralize share
repurchase commitments and other cash, aggregating Lit. 15.9 billion, to satisfy
its repurchase obligations.

GAIN ON MERGER OF SUBSIDIARY

As a result of the merger of Moto Guzzi into North Atlantic as described in Note
3 to the Interim Financial Statements, TRG recorded a gain of Lit. 25.8 billion
(US$ 14.4 million) in the first quarter of 1999, including the effects of the
exchange of redeemable preferred stock of Moto Guzzi Corp. into common stock of
North Atlantic. Through December 31, 1998, TRG had accounted for the contingent
redemption of such preferred stock and included Lit. 13.1 billion in the balance
sheet at December 31, 1998 to reflect such contingent obligation.

18
<PAGE>

TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations

OTHER INCOME, NET

Other income in the six months ended June 30, 1999 and 1998 is principally
comprised of exchange gains.

AMORTIZATION OF PREMIUM FOR REDEMPTION OF PREFERRED STOCK OF
SUBSIDIARY

In the six months ended June 30, 1998, a non-cash expense of Lit. 1,258 million
had been recorded as amortization of preferred stock redemption premium relating
to the Moto Guzzi Corp. preferred stock issued at the end of 1996 and in early
1997. A significant element of the charge resulted from exchange differences as
the contingent redemption obligation was denominated in U.S. dollars. The issued
and outstanding shares of Moto Guzzi Corp. preferred stock were converted into
shares of common stock of North Atlantic upon consummation of the merger, and
the contingent obligation was accordingly eliminated.

LIQUIDITY AND CAPITAL RESOURCES

OPERATIONS AND WORKING CAPITAL

The principal components which determine net cash used by operations of Lit.
13.3 billion compared to net profit of Lit. 13.5 billion are as follows:
<TABLE>
<CAPTION>

<S> <C> <C>
Net profit........................................................ 13.5
Gain on merger of subsidiary...................................... (25.8)
Minority interests................................................ 0.3
Depreciation...................................................... 2.3
Other............................................................. 0.7
------
(9.1)
Receipt of tax receivable......................................... 6.1
Trade and related party receivables (8.9)
Inventories....................................................... (0.7)
Accounts payable.................................................. 0.1
Other balances.................................................... (0.8)
------
Total working capital changes..................................... (4.2)
------
(13.3)
------
------
</TABLE>

The gain on merger of subsidiary relates to the merger of Moto Guzzi Corp. and
North Atlantic as described above and in Note 3 to the Interim Financial
Statements.

The Company received Lit. 6.1 billion in February 1999 in respect of a tax
receivable acquired in 1995 for Lit. 5.0 billion. The difference reflects
interest, accrued at legal rates, since the receivable was acquired.

The increase in trade and related party receivables (the 25% affiliate exclusive
importer of Moto Guzzi in Germany) principally reflects increased sales in the
second quarter and is a normal seasonal factor. Such increase is partly financed
by advances from banks against such receivables. Increases in inventory are

19
<PAGE>

TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations

principally at Moto Guzzi where increases in component inventories offset
reduced finished goods. The increase in component inventories is principally due
to higher production levels The increase in accounts payable principally
reflects payments to Moto Guzzi's suppliers made from the proceeds of the
merger, as well as payment of merger expenses, offset by higher seasonal levels
of payables, related to increased production in the second quarter.

INVESTING ACTIVITY

Expenditure on plant and equipment principally relates to Moto Guzzi.
Expenditure is primarily in respect of the California Jackal model, introduced
in April 1999, and the V-11 Sport model, to be introduced in September 1999.

FINANCING ACTIVITIES

The increase in advances from banks of approximately Lit. 6.0 billion is
principally due to financing of increased accounts receivable, as noted above,
at Moto Guzzi. The Lit. 16.0 billion of cash acquired in the merger reflects the
approximately $8.9 million of cash in North Atlantic at the date of merger, of
which approximately Lit. 1.4 billion was applied to pay North Atlantic's merger
expenses. Principal repayments of loans from related parties refer to Lit. 3.0
billion and Lit. 534 million (US$ 300,000) repayments of bridge loans that had
been made in anticipation of the closing of the North Atlantic merger. See Note
4 to the interim financial statements.

FUTURE LIQUIDITY REQUIREMENTS

Moto Guzzi has suffered recurring losses from operations and negative cash flows
during the last three years. The merger with North Atlantic 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. 10.0 billion credit facility
which facility has been classified as a current liability in the consolidated
balance sheet. Moto Guzzi 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 Moto Guzzi.

Excluding any requirement to repay this Lit. 10.0 billion 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. 10.0 billion to Lit 12.0
billion. 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
low point which is expected in August and September. In early August 1999,
certain Moto Guzzi directors and their affiliates paid approximately $1.7
million (Lit. 3.0 billion) to Moto Guzzi in anticipation of their subscription
to an issue of preferred stock of up to US$ 5 million (Lit.9.4 billion),
approved by the Board of Moto Guzzi on July 30, 1999. Moto Guzzi is actively
discussing equity and debt financing options as well as potential business
combinations 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, or that any business
combination agreement will be reached or consummated. Any equity financing or
business combination would likely result in the Company owning less than 50% of
the equity securities of Moto Guzzi.

To enable substantial further growth in production and sales, Moto Guzzi'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
<PAGE>

TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations

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
Moto Guzzi to increase production and sales rapidly enough to generate the
remaining needed capital. Moreover, in the four years ended December 31, 1998,
and in the quarter to March 31, 1999, Moto Guzzi has not generated cash from
operations.

The Company is seeking to realize liquidity from certain non-strategic assets in
order to meet its commitments unrelated to Moto Guzzi. At the date of these
financial statements, the Company has sufficient liquidity to meet such other
commitments through available cash and expected further realizations, except for
full and timely repayment of a U.S. $2 million bridge loan provided by Tamarix
Investors LDC in October 1998 which became due in accordance with its terms on
March 5, 1999. In May 1999, the Company repaid the Lit. 3.0 billion bridge loan
provided by Dr. Giovanni Bulgari, a former affiliate of Tamarix, and negotiated
an extension of the US$ 2 million Tamarix bridge loan until June 30, 1999.

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.

21
<PAGE>

TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations

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.

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 is engaged in analyzing those systems and is preparing
an action plan to enable it to complete any required upgrade or workaround by
year-end.

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.

Moto Guzzi has not yet completed polling its suppliers and customers to
determine their own state of Year 2000 compliance, a process which it expects to
complete during the third quarter of 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

22
<PAGE>

TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations

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.

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 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 the new
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 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.

23
<PAGE>

TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
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.

PORTIONS OF THIS REPORT CONTAIN CERTAIN "FORWARD LOOKING" STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD LOOKING STATEMENTS.
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO,
MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS AND SERVICES, CHANGES IN CURRENCY
EXCHANGE RATES, LACK OF ADEQUATE CAPITAL TO MAINTAIN OPERATIONS, OTHER FACTORS
DISCUSSED IN THE REPORT AS WELL AS FACTORS DISCUSSED IN OTHER FILINGS MADE WITH
THE SECURITIES AND EXCHANGE COMMISSION. ALTHOUGH THE COMPANY BELIEVES THAT THE
ASSUMPTIONS UNDERLYING THE FORWARD LOOKING STATEMENTS CONTAINED HEREIN ARE
REASONABLE, ANY OF THE ASSUMPTIONS COULD PROVE INACCURATE, AND THEREFORE, THERE
CAN BE NO ASSURANCE THAT THE FORWARD LOOKING STATEMENTS INCLUDED HEREIN WILL
PROVE TO BE ACCURATE.

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PART II - OTHER INFORMATION
---------------------------
---------------------------

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

EXHIBIT NO. DESCRIPTION

3.2 Amended and Restated By-Laws

27 Financial Data Schedule

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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.

TRIDENT ROWAN GROUP, INC.

Dated: August 19, 1999 By: /s/ Howard E. Chase
-----------------------------------------
Howard E. Chase,
Principal Financial Officer

Dated: August 19, 1999 By: /s/ Mark S. Hauser
-----------------------------------------
Mark S. Hauser
President and Chief Executive Officer

<PAGE>
Exhibit 3.2

BY-LAWS

TRIDENT ROWAN GROUP, INC.
a Maryland corporation
(the "Corporation")

ARTICLE I

OFFICES

Section 1.01. REGISTERED OFFICE. The registered office of the Corporation
in the State of Maryland shall be in the City of Baltimore, State of Maryland,
and the name of the resident agent in charge thereof is The Corporation Trust
Incorporated.

Section 1.02. OTHER OFFICES. The Corporation may also have offices at such
other places as the Board of Directors may from time to time determine or the
business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 2.01. GENERAL. All meetings of the stockholders shall be held at
such place either within or without the State of Maryland as the Board of
Directors shall determine prior to the mailing of the notice of such meeting.

Section 2.02. ANNUAL MEETING. The annual meeting of stockholders of the
Company, for the election of directors and for the transaction of any other
business which may properly be transacted at the annual meeting, shall be held
at such hour on such day and at such place within or without the State of
Maryland as may be fixed by the Board of Directors.

Section 2.03. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or the Secretary at the request in writing of a majority of the
Board of Directors or at the request in writing of stockholders owning a
majority of the Common Stock of the Corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.

<PAGE>

Section 2.04. NOTICE AND PURPOSE OF MEETINGS. Notice of the time and place
and the purpose or purposes of each meeting of stockholders shall be given by
the Secretary or an Assistant Secretary by mail not less than ten days (unless a
longer period shall be required by statute) nor more than sixty days before the
meeting to each stockholder of record entitled to vote at such meeting. Such
notice shall be directed to each stockholder at his address as it appears on the
stock register of the Corporation unless he shall have filed with the Secretary
of the Corporation a written request that notices intended for him be mailed to
some other address, in which case it shall be mailed or transmitted to the
address designated in such request. Such further notice shall be given as may be
required by law. Except as otherwise expressly provided by statute, no notice of
a meeting of stockholders shall be required to be given to any stockholder who
shall, in person or by attorney thereunto authorized, waive such notice in
writing or by facsimile, telegraph, cable or radio either before or after such
meeting or is present at the meeting in person or by proxy. Except where
otherwise required by law, notice of any adjourned meeting of stockholders shall
not be required to be given.

Section 2.05. QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of
stockholders for the transaction of business except as otherwise provided by
statute, by the Certificate of Incorporation or by these By-Laws. If, however,
such quorum shall not be present or represented at any meeting of stockholders,
the stockholders entitled to vote thereat present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified.

Section 2.06. VOTING. Except as otherwise required by statute, the
Certificate of Incorporation or these By-Laws, at every meeting of stockholders
each stockholder of the Corporation entitled to vote at such meeting shall have
one vote for each share of stock having voting rights held by him and registered
in his name on the books of the Corporation at the record date fixed or
otherwise determined for such meeting. Any vote may be given by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in writing
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the Secretary of the meeting; provided, however, that no proxy
shall be voted on after three years from its date unless said proxy provides for
a longer period. Except as otherwise required by statute, the Certificate of
Incorporation or these By-Laws, or in electing directors, all matters coming
before any meeting of stockholders shall be decided by a majority vote of the
stockholders entitled to vote thereat, a quorum being present.

Section 2.07. LIST OF STOCKHOLDERS. A complete list of the stockholders
entitled to vote at each meeting of stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder, shall be prepared by the Secretary
or other officer of the Corporation having charge of the stock ledger. Such list
shall

2
<PAGE>

be open to the examination of any stockholder for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where said meeting is to be held, and the list shall be
produced and kept at the time and place of said meeting during the whole time
thereof, and shall be subject to the inspection of any stockholder who may be
present.

Section 2.08. NOTICE OF STOCKHOLDER BUSINESS.

(a) At an annual meeting of the stockholders only such business shall be
conducted as shall have been brought before the meeting (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the Corporation who is a stockholder of
record at the time of giving of the notice provided for in these By-laws, who
shall be entitled to vote at such meeting and who complies with the notice
procedures set forth in these By-laws.

(b) For business to be properly brought before an annual meeting by a
stockholder pursuant to clause Section 2.08(a) of these By-laws, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive office of the Corporation not less than
60 days nor more than 90 days prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
meeting is changed by more than 30 days from such anniversary date, notice by
the stockholder to be timely must be received no later than the close of
business on the 10th day following the earlier of the day on which notice of the
date of the meeting was mailed or public disclosure was made. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, and the name
and address of the beneficial owner, if any, on whose behalf the proposal is
made, (iii) the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder of record and by the beneficial
owners, if any, on whose behalf the proposal is made and (iv) any material
interest of such stockholder of record and the beneficial owner, if any, on
whose behalf the proposal is made in such business.

(c) Notwithstanding anything in these By-laws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the procedures
set forth in these By-laws. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the procedures prescribed by
these By-laws, and if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted. Notwithstanding the foregoing provisions of these By-laws, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in these By-laws.

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<PAGE>

ARTICLE III

DIRECTORS

Section 3.01. POWERS. The property and business and affairs of the
Corporation shall be managed by or under the direction of its Board of Directors
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Certificate of Incorporation or
by these By-Laws directed or required to be exercised or done by the
stockholders.

Section 3.02. NUMBER; TERM; NOMINATIONS; QUALIFICATIONS.

(a) The number of directors which shall constitute the whole Board shall be
not less than one nor more than eleven, so long as Finprogetti S.p.A. shall not
have sold to Tamarix Investors LDC 1,635,000 Shares of Common Stock of the
Corporation pursuant to a certain stock purchase agreement dated 7 March 1997,
and shall be reduced to ten immediately after Finprogetti shall have sold to
Tamarix all of such Shares of Common Stock pursuant to the stock purchase
agreement. Any director may resign at any time by giving written notice to the
Corporation; such resignation shall take effect immediately upon receipt by the
Corporation if no time is specified therein, or at such later time as such
director may specify. The directors shall be elected at the annual meeting of
the stockholders, except as provided in Section 3.03.

(b) Each director shall be elected to serve for a three year term, and
until his successor shall be elected and qualified or until his earlier
resignation or removal. The terms of the directors shall be staggered, so that
the terms of approximately one-third of the directors (depending on the total
number of directors) shall end each year. The institution of these staggered
terms shall be implemented gradually commencing in 1997: four directors shall be
elected in 1997 and shall serve until the annual meeting of stockholders in 1998
(the "1998 class year"), four directors shall be elected in 1997 and shall serve
until the annual meeting of stockholders in 1999 (the "1999 class year"), and
three directors shall be elected in 1997 and shall serve until the annual
meeting of stockholders in 2000 (the "2000 class year.")

(c) So long as Tamarix Investors LDC shall own one million or more Shares
of Common Stock of the Corporation, it shall have the power to nominate a
director who, if elected, shall be the Chairman of the Board and who shall serve
in the 1998 class year, a director who shall serve in the 1999 class year, and a
director who shall serve in the 2000 class year. So long as Tamarix Investors
LDC shall own at least 500,000, but not more than 999,999, Shares of Common
Stock of the Corporation, it shall have the power to nominate a director who, if
elected, shall be the Chairman of the Board and who shall serve in the 1998
class year, and a director who, if elected, shall serve in the 1999 class year.
So long as Tamarix Investors LDC shall own at least 300,000, but not more than
499,999, Shares of Common Stock of the Corporation, it shall have the power to
nominate a director who, if elected, shall serve in the 1998 Class Year. Upon
any change in its shareholdings which reduces the number of directors which it
has the power to nominate, all of the

4
<PAGE>

directors whom it nominated shall resign, and Tamarix Investors LDC shall have
the power to nominate the number of directors to each of the class years as
provided above, in order to insure that the directors whom it has nominated are
in class years which it deems appropriate.

(d) The Board shall include no fewer than three independent directors, who
shall be persons of good character who are experienced in business matters and
who are reasonably acceptable to Tamarix Investors LDC. An "independent
director" shall be defined as a person who is not employed by the Company or
nominated by Tamarix Investors LDC to serve as a director.

(e) Only persons who are nominated in accordance with the procedures set
forth in these By-laws shall be eligible to serve as directors. Nominations of
persons for election to the Board of Directors of the Corporation may be made at
a meeting of stockholders (i) by or at the direction of the Board of Directors
or (ii) by any stockholder of the Corporation who is a stockholder of record at
the time of giving of notice provided for in these By-laws, who shall be
entitled to vote for the election of directors at the meeting and who complies
with the notice procedures set forth in these By-laws.

(f) Nominations by stockholders shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation (i) in the case of an annual meeting, not less than
60 days nor more than 90 days prior the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is changed by more than 30 days from such anniversary date,
notice by the stockholder to be timely must be so received not later than the
close of business on the 10th day following the earlier of the day on which
notice of the date of the meeting was mailed or public disclosure was made, and
(ii) in the case of a special meeting at which directors are to be elected, not
later than the close of business on the 10th day following the earlier of the
day on which notice of the date of the meeting was mailed or public disclosure
was made. Such stockholder's notice shall set forth (i) as to each person whom
the stockholder proposes to nominate for election or reelection as a director
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including such person's written consent to being named in the proxy
statement, as a nominee and to serving as a director if elected); (ii) as to the
stockholder giving the notice (a) the name and address, as they appear on the
Corporation's books, of such stockholder and (b) the class and number of shares
of the Corporation which are beneficially owned by such stockholder and also
which are owned of record by such stockholder; and (iii) as to the beneficial
owner, if any, on whose behalf the nomination is made, (a) the name and address
of such person and (b) the class and number of shares of the Corporation which
are beneficially owned by such person. At the request of the Board of Directors,
any person nominated by the Board of Directors for election as a director shall
furnish to the Secretary of the Corporation that information required to be set
forth in a stockholder's notice of nomination which pertains to the nominee.

5
<PAGE>

(g) No person shall be eligible to serve as a director of the Corporation
unless nominated in accordance with the procedures set forth in these By-laws.
The Chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the procedures
prescribed by these By-laws, and if he should so determine, he shall so declare
in the meeting and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of these By-laws, a stockholder shall
also comply with all applicable requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder with respect to the
matters set forth in these By-laws.

Section 3.03. VACANCIES. If any vacancies occur in the Board of Directors
caused by death, resignation, retirement, disqualification or removal from
office of any directors or otherwise, or any new directorship is created by any
increase in the authorized number of directors, a majority of the directors then
in each office, though less than a quorum, or the remaining sole director may
reduce the size of the Board as provided in Section 3.02 or choose a successor
or successors, or fill the newly created directorship, and director so chosen
shall hold office until the next annual election of directors and until his
successor shall be duly elected and qualified or until his earlier resignation
or removal.

Section 3.04. MEETINGS. Meetings of the Board of Directors shall be held at
such place within or without the State of Maryland as may from time to time be
fixed by resolution of the stockholders or Board of Directors, or as may be
specified in the notice of the meeting. Regular meetings of the Board of
Directors shall be held at such times and places as may from time to time be
fixed by resolution of the Board of Directors, and special meetings shall be
called by the Secretary pursuant to order of the President or any three
directors whenever in their judgment it may be necessary, by notice duly served
on or given by the Secretary to each director not less than three days before
such meeting. Such notice shall be given personally or by telephone or facsimile
transmission at least two days before the date of the meeting. Each newly
elected Board of Directors shall meet and organize at the place of the meeting
of the stockholders on the same date as the annual meeting of the stockholders
at which such Board of Directors was elected and as soon as reasonably
practicable after the adjournment of such annual meeting of the stockholders,
and no notice of such meeting shall be necessary to the newly elected directors
in order legally to constitute the meeting, provided a quorum shall be present.
In the event such meeting is not so held, the meeting may be held at such time
and place as shall be specified in a notice given as herein provided for special
meetings of the Board of Directors or as shall be specified in a written waiver
signed by all of the directors. Notice need not be given of regular meetings of
the Board of Directors held at the time and place fixed by resolution of the
Board of Directors. Meetings may be held at any time without notice if all the
directors are present, or if at any time before or after the meeting those not
present waive notice of the meeting in writing.

Section 3.05. QUORUM; VOTING. At all meetings of the Board the presence of
a majority of the directors then in office shall be necessary and sufficient to
constitute a quorum for the transaction of business. The act of a majority of
the directors shall be the act of the Board of Directors if such act was taken
at a meeting at which there is a quorum, except as may be otherwise specifically

6
<PAGE>

provided by statute or by the Certificate of Incorporation or these By-Laws. If
a quorum shall not be present at any meeting of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.

Section 3.06. COMMITTEES; EXECUTIVE COMMITTEE.

(a) The Board of Directors may, by resolution or resolutions passed by a
majority of the whole Board of Directors, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation, which,
to the extent provided in said resolution or resolutions and subject to any
restrictions imposed by applicable law, shall have and may exercise the powers
of the Board of Directors in the management of the business and affairs of the
Corporation. Such committee or committees shall have such name or names as may
be determined from time to time by resolution adopted by the Board of Directors.
Unless otherwise provided in the resolution of the Board of Directors
designating a committee, each committee shall have the power to adopt rules and
regulations for the calling and holding of meetings, and in the absence of the
adoption of such rules and regulations the provisions of these By-Laws relating
to the calling and holding of meetings of the Board of Directors shall apply.
Unless otherwise provided in the resolution of the Board of Directors
designating a committee, each committee may select a Chairman and a majority of
a committee shall constitute a quorum. A committee shall keep minutes of its
meetings. The Board of Directors shall have the power at any time to fill
vacancies in, to change the membership of, or to discharge any such committee.

(b) The Board of Directors shall designate a five-member Executive
Committee of the Board of Directors, which shall include the Chairman of the
Board of Directors or a director whom he designates, and who was nominated by
Tamarix Investors LDC to serve as a director, the Chief Executive Officer (if he
is a director), one director nominated by Tamarix Investors LDC, one independent
director, and one director other than the foregoing persons who lives and is
employed in Italy, and which shall have the power to take the following actions
among others: to direct the day-to-day business activities of the Corporation
which are within budget and operating guidelines prescribed by the Board of
Directors and which are not matters which require action by the stockholders of
the Corporation.

Section 3.07. REMOVAL OF DIRECTORS. At any special meeting of the
stockholders, duly called, as provided in these By-Laws, any director or
directors, by the affirmative vote of the holders of not less than a majority of
all shares of stock outstanding and entitled to vote for the election of
directors, may be removed from office with cause and his successor or their
successors may be elected at such meeting; or the remaining directors may, to
the extent vacancies are not filled by such election, fill any vacancy or
vacancies created by such removal. At any meetings of the Board of Directors any
director or directors, by the vote of a majority of the Board of Directors, may
be removed from office for cause and his successor or their successors elected
pursuant to the provisions of Sections 3.02 and 3.03 of these By-Laws. If a
director nominated by Tamarix Investors LDC shall be removed, Tamarix Investors
LDC shall have the power to nominate a successor director.

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<PAGE>

Section 3.08. INTERESTED DIRECTORS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if: (1) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved or ratified in good faith by vote of the stockholders, the
interested director or officer and the organization in which he is interested
abstaining or voting with the majority of the other shareholders who shall vote.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.

Section 3.09. INFORMAL ACTION. Any action required or permitted to be taken
at any meeting of the Board of Directors or any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of the committee, as the case may be, and such written consent is filed
with the minutes of proceedings of the Board of Directors or such committee.

Section 3.10. MEETINGS VIA CONFERENCE TELEPHONE. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or a committee by means of a
conference telephone or similar communications equipment in which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Section shall constitute presence in person at such meeting.

Section 3.11. COMPENSATION OF DIRECTORS. Directors who are not salaried
officers or salaried employees of the Corporation shall be entitled to receive
such compensation for their services as may from time to time be determined by
resolution of the Board of Directors, and all directors shall be entitled to
reimbursement of their reasonable expenses of attendance at each regular or
special meeting of the Board. Like compensation may be allowed by the Board of
Directors for attendance at committee meetings. Nothing herein contained shall
be construed to preclude any Director from serving the Corporation as a salaried
officer or salaried employee, or from rendering advice or services to the
Corporation in any other capacity, and receiving remuneration therefor.

ARTICLE IV

OFFICERS

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Section 4.01. NUMBER. The officers of the Corporation shall be chosen by
the directors and shall be a President, a Secretary and a Treasurer, and, in the
discretion of the Board of Directors, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. More than one office may be held by the
same person. The Board may also elect other officers with such titles, powers
and duties as the Board shall designate.

Section 4.02. TERM AND REMOVAL. Each officer of the Corporation shall hold
office until his successor is elected and qualified or until his earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time, with or without cause, by the affirmative
vote of a majority of the whole Board of Directors. Any officer may resign at
any time by giving written notice to the Corporation; such resignation shall
take effect immediately upon receipt by the Corporation if no time is specified
therein, or at such later time as such officer may specify. If the office of any
officer becomes vacant for any reason, the vacancy may be filled by the Board of
Directors.

Section 4.03. POWERS AND DUTIES. The officers of the Corporation shall each
have such powers and duties as may be prescribed by statute, the Corporation's
Certificate of Incorporation or these By-Laws or, if not so prescribed, as
generally pertain to their respective offices, as well as such powers and duties
as from time to time may be conferred by the Board of Directors.

Section 4.04. VOTING CORPORATION'S SECURITIES. Unless otherwise ordered by
the Board of Directors, the President or, in the event of his absence or
inability to act, any Vice President, shall each have full power and authority
on behalf of the Corporation to attend and to act and to vote, in person or by
proxy, at any meetings of security holders of corporations in which the
Corporation may hold securities, and at such meetings shall possess and may
exercise any and all rights and powers incident to the ownership of such
securities, and which as the owner thereof the Corporation might have possessed
and exercised if present. Such rights and powers shall include the right to
waive notice of meetings and to consent to action taken without a meeting. The
Board of Directors by resolution from time to time may confer like powers upon
any other person or persons.

Section 4.05. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board
of Directors shall be a director and shall preside at meetings of the Board of
Directors and of the Executive Committee.

Section 4.06. PRESIDENT. The President shall be the chief executive officer
of the Company. The President shall have such powers and perform such duties as
the Board of Directors, the Executive Committee, or relevant statutes may from
time to time prescribe. In the absence or inability to act of the Chairman of
the Board, unless the Board shall otherwise provide, the President shall perform
all the duties and may exercise any of the powers of the Chairman of the Board,
subject to the control of the Board of Directors.

Section 4.07. VICE PRESIDENTS. Each Vice President shall have such powers
and perform such duties as the Board of Directors or the Chairman of the Board
or the President may from time

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<PAGE>

to time prescribe. In the absence or inability to act of the President, unless
the Board of Directors shall otherwise provide, the Vice President who has
served in that capacity for the longest time and who shall be present and able
to act, shall perform all the duties and may exercise any of the powers of the
President. The performance of any duty by a Vice President shall, in respect of
any other person dealing with the Company, be conclusive evidence of such Vice
President's power to act.

Section 4.08. TREASURER. The Treasurer shall have charge of all funds and
securities of the Company, shall endorse the same for deposit or collection when
necessary and deposit the same to the credit of the Company in such banks or
depositories as the Board of Directors may authorize. The Treasurer may endorse
all commercial documents requiring endorsements for or on behalf of the Company
and may sign all receipts and vouchers for payments made to the Company. The
Treasurer shall have all such further powers and duties as generally are
incident to the position of Treasurer or as may be assigned to the Treasurer by
the Chairman of the Board, President, any Vice President or the Board of
Directors.

Section 4.09. SECRETARY. The Secretary shall record all proceedings of
meetings of the stockholders and directors in a book kept for that purpose and
shall file in such book all written consents of directors to any action taken
without a meeting. The Secretary shall attend to the giving and serving of all
notices of the Company. The Secretary shall have custody of the seal of the
Company and shall attest the same by signature whenever required. The Secretary
shall have charge of the stock ledger and such other books and papers as the
Board of Directors may direct, but may delegate responsibility for maintaining
the stock ledger to any transfer agent appointed by the Board. The Secretary
shall have all such further powers and duties as generally are incident to the
position of Secretary or as may be assigned to the Secretary by the Chairman of
the Board, the President, any Vice President or the Board of Directors.

Section 4.10. ASSISTANT TREASURERS. In the absence or inability to act of
the Treasurer, any Assistant Treasurer may perform all the duties and exercise
all the powers of the Treasurer. The performance of any such duty shall, in
respect of any other person dealing with the Company, be conclusive evidence of
such Assistant Treasurer's power to act. An Assistant Treasurer shall also
perform such other duties as the Treasurer or the Board of Directors may assign
to such person.

Section 4.11. ASSISTANT SECRETARIES. In the absence or inability to act of
the Secretary, any Assistant Secretary may perform all the duties and exercise
all the powers of the Secretary. The performance of any such duty shall, in
respect of any other person dealing with the Company, be conclusive evidence of
such Assistant Secretary's power to act. An Assistant Secretary shall also
perform such other duties as the Secretary or the Board of Directors may assign
to such person.

Section 4.12. DELEGATION OF DUTIES. In case of the absence of any officer
of the Company, or for any other reason that the Board may deem sufficient, the
Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any director.

10
<PAGE>

ARTICLE V

CERTIFICATES OF STOCK

Section 5.01. FORM. The interest of each stockholder shall be evidenced by
a certificate or certificates for shares of stock of the Corporation in such
form as the Board of Directors may from time to time prescribe. The certificates
of stock shall be signed by the President, or a Vice President and the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary and sealed
with the seal of the Corporation, which may be a facsimile, engraved, imprinted
or affixed. Any or all of the signatures on a certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon such certificate shall have ceased to be an
officer, the transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if such officer,
transfer agent or registrar had not ceased to be such at the time of its issue.

Section 5.02. LOST, STOLEN OR DESTROYED CERTIFICATES. No certificates for
shares of stock of the Corporation shall be issued in place of any certificates
alleged to have been lost, stolen or destroyed except upon production of such
evidence of the loss, theft or destruction and upon indemnification of the
Corporation and its agents to such extent and in such manner as the Board of
Directors from time to time may prescribe.

Section 5.03. TRANSFERS. Transfers of shares of the capital stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized, and on surrender of the
certificate or certificates for such shares properly endorsed. The Board of
Directors from time to time may make such additional rules and regulations as it
may deem expedient, not inconsistent with these By-Laws, concerning the issue,
transfer and registration of certificates for shares of the capital stock of the
Corporation.

Section 5.04. FIXING RECORD DATE.

(a) In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than 60 nor less than ten days before the date of such meeting, nor
more than 60 days prior to any other action. Only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to notice of, and
to vote at, such meeting and any adjournment thereof, or to express consent or
dissent to corporate action in writing without a meeting, or to receive payment
of such dividend or other distribution, or to exercise such rights in respect of
any such change, conversion or exchange of stock, or to participate in such
action, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any record date so fixed.

11
<PAGE>

(b) If no record date is fixed by the Board of Directors, (i) the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
date on which notice is given, (ii) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed, and (iii) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.

(c) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the
adjourned meeting.

Section 5.05. HOLDER OF RECORD. The Corporation shall be entitled to treat
the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.

Section 5.06. EXAMINATION OF BOOKS BY STOCKHOLDERS. The Board shall have
the power to determine, from time to time, whether and to what extent and at
what times and places and under what conditions and regulations the accounts and
books and documents of the Corporation, or any of them, shall be open to the
inspection of the stockholders; and, except as otherwise provided by law or
determined by the Board of Directors, no stockholder shall otherwise have any
right to inspect any account or book or document of the Corporation.

ARTICLE VI

GENERAL PROVISIONS

Section 6.01. DIVIDENDS. Dividends upon the stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation.

Section 6.02. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors from time to time may designate. Such signing
may be in facsimile if so authorized by the Board of Directors.

Section 6.03. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its incorporation and the words
"Corporate Seal, Maryland." Said seal

12
<PAGE>

may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.

ARTICLE VII

AMENDMENTS

Section 7.01. AMENDMENTS.

(a) Except as hereinafter provided, these By-Laws, or any of them or any
additional or amended By-Law, may be altered or repealed and new By-Laws may be
adopted at any regular meeting of the Board of Directors without notice, or at
any special meeting, the notice of which shall set forth the terms of the
proposed amendment, by the vote of a majority of the entire Board of Directors.

(b) This Section 7.01, relating to amendments, may, however, be amended
only at a regular meeting of stockholders without notice, or at a special
meeting of stockholders the notice of which shall set forth the terms of the
proposed amendment, in either case by the vote of a majority of the votes
entitled to be cast in the aggregate by all stockholders present in person or by
proxy at such meeting.

(c) The Board of Directors shall not exercise its power under Section
7.01(a) hereof to vote to amend these By-Laws in whole or in part, without the
written consent of Tamarix Investors LDC, subject to requirements of applicable
law so long as Tamarix Investors LDC shall own at least 7.5% of the issued and
outstanding shares of Common Stock of the Corporation.

ARTICLE VIII

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 8.01 INDEMNIFICATION OF DIRECTORS AND OFFICERS.

(a) The provisions of Section 2-418 of the Maryland General Corporation
Law, as in effect from time to time, and any successor thereto, are hereby
incorporated by reference in these By-laws and the Corporation shall provide
indemnification to its directors and officers to the maximum extent required or
permitted thereunder.

(b) The Corporation shall indemnify any person made or
threatened to be made a party to an action, suit or proceeding, whether, civil,
criminal, administrative or investigative, by

13
<PAGE>

reason of the fact that such person, at the request of the Corporation, is or
was a director or officer of another corporation, against the liabilities, costs
and expenses of every kind actually and reasonably incurred by him as a result
of such action, suit or proceeding, or any threat thereof or any appeal thereon,
to the full extent required or permitted under applicable common or statutory
law, state or federal. The foregoing indemnity shall not be exclusive of other
rights to which such person may be entitled.

<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements dated June 30, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,071,000
<SECURITIES> 0
<RECEIVABLES> 19,251,000
<ALLOWANCES> 1,152,0000
<INVENTORY> 22,629,000
<CURRENT-ASSETS> 49,809,000
<PP&E> 24,769,000
<DEPRECIATION> 15,010,000
<TOTAL-ASSETS> 65,088,000
<CURRENT-LIABILITIES> 53,889,000
<BONDS> 1,860,000
0
0
<COMMON> 56,000
<OTHER-SE> (3,680,000)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 28,737,000
<TOTAL-REVENUES> 25,737,000
<CGS> 25,980,000
<TOTAL-COSTS> 7,915,000
<OTHER-EXPENSES> (13,788,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,376,000
<INCOME-PRETAX> 7,353,000
<INCOME-TAX> (11,000)
<INCOME-CONTINUING> 7,191,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,191,000
<EPS-BASIC> 1.68
<EPS-DILUTED> 1.65

</TABLE>