MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATION AND FINANCIAL CONDITION(1)

RESULTS OF OPERATIONS

Three Months Ended June 30, 1999 Compared To Three Months Ended June 30, 1998

Sales increased approximately $1.2 million or 6.4% over the same quarter in 1998 to $20,713,324. This increase is primarily due to gains in sales of brake parts, especially friction products and sales of the Company's premium "Ultimate" brake products. As to non brake businesses, sales of the Company's "commodities" business for the second quarter of 1999 was 28% greater than the same quarter of the prior year. However, this increase was wholly offset by a decrease in sales of the Company's Hungarian gray iron foundry for the quarter ended June 30, 1999 which were 32% less compared to the same 1998 quarter as the foundry worked to replace business lost in the last half of 1998 due to the Russian economic crisis.

Gross profits for the three months ended June 30, 1999 were $4,416,679 or 21.3% of net sales compared to $4,219,859 or 21.7% in the same period of 1998. Such increase in gross profit was principally due to increased sales offset by slightly lower gross profit percentages due to a more unfavorable sales mix between brake and non-brake business.

Selling, general and administrative expenses for the three months ended June 30, 1999 increased slightly by $24,200 from $3,171,941 (16.3% of net sales) for the second quarter of 1998 to $3,196,141 (15.4% of net sales). Selling, general and administrative expenses as a percentage of sales decreased principally because the fixed component of selling, general and administrative expenses has not increased as the Company's sales increased.

Other expense for the three months ended June 30, 1999 decreased to $497,362 from $514,679 for the same period of 1998. The decrease is attributable to (a) a slight decrease in interest expense due to lower average interest rates despite a higher level of borrowing at June 30, 1999 compared to June 30, 1998,
(b) absence of foreign exchange losses as occurred in the second quarter, 1998 due to unfavorable fluctuations in the Canadian dollar, and (c) absence of a favorable second quarter, 1998 adjustment of $151,000 to the previously recorded provision for lawsuit settlement .

Net income for the three months ended June 30, 1999 was $392,159 compared to net income of $349,539 for the same period in 1998. This increase in net income is attributed to higher sales and related gross profit, flat selling, general and administrative expenses and lower other expense as discussed above.

Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998

Net sales for the six months ended June 30, 1999 increased by $1,914,151 or 5.6% to $35,912,349. The sales increase is attributable to increased sales of brake products, primarily friction products and sales of the Company's premium "Ultimate" brake products. Sales of non brake warehouse "commodity" business was also higher than the same period in 1998 offset by lower sales in the Company's Hungarian gray iron foundry.

Gross profits for the six months ended June 30, 1999 decreased $378,248 or 5.2% to $6,873,578. The percent of gross profit for the six month period was 19.1% compared to 21.3% for the same 1998 period. The decrease in gross profits is due to (a) gaining two important new buying groups as customers in late 1998 by aggressive brake parts pricing especially in the first quarter of 1999 in anticipation of significant incremental volumes in the future and (b) reduced sales and related gross profit of UBP Csepel Iron Foundry as there has not been enough new business to compensate for the loss in 1998 of the Foundry's major customer due to the Russian economic crisis. The Company believes that the economic situation in Russia will continue in the short term; however, the Foundry's sales and marketing efforts are successfully being directed toward increasing sales in Central and Western Europe.

Selling, general and administrative expenses for the six months ended June 30, 1999 increased $292,241 or 5.2% to $5,923,075 from $5,630,834 for the same period in 1998. Such increase was due primarily to expenses incurred to in connection with the Company's effort to improve UBP Csepel's sales and marketing efforts.

Other Expense for the six months ended June 30, 1999 increased by $18,078 to $1,007,999 from $989,921 for the same period of 1998. The increase is attributable to an absence of a favorable adjustment in the second quarter, 1998 to a previously recorded provision for lawsuit settlement offset by the absence of foreign exchange losses due to unfavorable fluctuations in the Canadian dollar as was recorded in the same period of 1998.

Net loss for the six months ended June 30, 1999 was $192,995 compared to net income of $391,671 for the same period in 1998. This decrease in net income is attributable to the individual factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities for the six months ended June 30, 1999 was $3,350,632. This net use of cash is because cash generated from operations ($347 thousand) coupled with cash generated through an increase in accounts payable ($2.1 million) and a decrease in inventory ($2.1 million), did not offset cash required to finance growth in accounts receivable ($7.7 million).

Net cash used in investing activities was $857,253, which is attributable primarily to acquisition of various items of tooling, warehouse equipment and manufacturing equipment, particularly expansion of the Company's friction manufacturing. The Company's investment in warehouse equipment supports larger distribution facilities to enhance efficiency and to accommodate higher volumes. Net cash provided by financing activities was $3,960,115, consisting primarily of borrowings under the Company's revolving credit agreement and capital leases for the purchase of various manufacturing equipment.

The Company expects to continue to finance its operations through cash flow generated from operations, borrowings under the Company's bank lines of credit and credit from its suppliers.

"YEAR 2000" COMPLIANCE

The Company has reviewed the information technology ("IT") and non-IT systems and related software in use throughout its operations that could be affected by the Year 2000 issue. The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Thus, time sensitive software may recognize a date using the digits "00" as the year 1900 rather than the year 2000. This could result in system failure or miscalculation.

IT Systems
The Company has three major IT systems, the software for which has been licensed from various IT vendors: a system that processes and controls sales, inventory, and warehouse operations for its North American distribution business; an accounting system for its North American business; and an integrated business/accounting system for its Hungarian foundry.

The distribution business IT system requires a software upgrade from the vendor to be Year 2000 compliant. The Company chose to upgrade its computer hardware and operating system prior to installing the software upgrades to take advantage of more efficient computer operations and robust capabilities the new operating system offers. The new hardware and operating system have been installed and migration to

the fully Year 2000 compliant software upgrades are in place for the Company's United States facilities. Final implementation of the Year 200 software upgrade for the Canadian distribution business is scheduled for mid August, 1999. The cost of the new hardware and operating system software is approximately $75,000. The upgrade version of the software is provided by the vendor under a maintenance agreement.

The accounting system in use for the North American business has been certified as Year 2000 compliant by the software publisher for the version in use. No additional costs are anticipated for this system.

The Year 2000 upgrade needed for the integrated business/accounting system in use at the Hungarian foundry has been installed and has been provided by the software vendor under a maintenance agreement.

Non-IT Systems

The Company has considered the risk that the Year 2000 issue may adversely affect non-IT systems in use. In several instances, the provider of outside services has certified Year 2000 compliance (e.g. banking, payroll processing, etc.). The Company believes that its manufacturing processes are not subject to Year 2000 risk due to the nature of the processes and machines in use. The Company also believes that the impact of other non-IT systems not being Year 2000 compliant would be minimal.

Third Party Issues

The Company is currently addressing the Year 2000 readiness of third parties whose business interruption would have a material adverse affect on our business. Significant vendors and customers have been surveyed to ascertain their plans for Year 2000 readiness. The survey follow up and results are being completed. Any Year 2000 issues discovered through the survey process will be resolved by September 30, 1999.

In a highly unlikely worst case scenario in which a portion of the Company's computer system fails to produce accurate data due to Year 2000, a temporary manual/personal computer system would be used until the software is corrected or until replacement software is installed.

Despite diligent preparation, unanticipated third-party failures, more general public infrastructure failures or failure to successfully conclude our Year 2000 readiness efforts as planned could have a material adverse impact on the Company's results of operations, financial condition and cash flows in 2000 and beyond.