SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 8-K/A
AMENDMENT NO. 1
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: December 12, 2001
---------------------------------
(Date of earliest event reported)
Bion Environmental Technologies, Inc.
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(Exact Name of Registrant as Specified in its Charter
Colorado 0-19333 84-1176672
------------------------ --------------------- -------------------
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
18 East 50th Street 10th Floor New York, NY 10022
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(Address and Zip Code of Principal Executive Offices)
Registrant's telephone number including area code: (212) 758-6622
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS. The audited financial statements of
Centerpoint Corporation for the fiscal years ended December 31, 2000 and 1999
and the unaudited financial statements of Centerpoint Corporation for the
three and nine months ended September 30, 2001 are filed herewith as a part of
this report.
(b) PRO FORMA FINANCIAL INFORMATION. The unaudited pro forma
consolidated balance sheet of the Registrant as of December 31, 2001 is filed
herewith as a part of this report. No pro forma income statement is provided
because it would not be meaningful.
(c) EXHIBITS. Listed below are the exhibits filed as a part of this
report.
Exhibit
Number Description
------- -----------
10.1 Subscription Agreement with Centerpoint Corporation
(previously filed)
10.2 OAM Stock Purchase Agreement (previously filed)
10.3 Agreement with The Scotts Company (previously filed)
99.1 Capital Structure as of January 24, 2002
(previously filed)
99.2 Press release dated January 15, 2002 (previously filed)
99.3 Press release dated January 29, 2002 (previously filed)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
Centerpoint Corporation:
We have audited the accompanying consolidated balance sheets of Centerpoint
Corporation (a Delaware corporation, known as Moto Guzzi Corporation through
September 19, 2000) (See Note 1) as of December 31, 2000 and 1999, and the
related consolidated statements of income, shareholders' equity (deficit) and
cash flows for each of the three years in the period ended December 31, 2000,
expressed in Italian Lire. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Centerpoint Corporation and
subsidiaries as of December 31, 2000 and 1999 and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the Unites States.
In our auditors' report dated April 18, 2000, our opinion on the 1999
consolidated financial statements included an explanatory fourth paragraph to
call attention on the recurring losses from operations and negative cash flows
suffered by the Company. In addition, the Company had to meet certain debt
repayment obligations for which financing had yet to be arranged. All of these
matters raised substantial doubt about its ability to continue as a going
concern. The consolidated financial statements did not include any adjustment
that might result from the outcome of this uncertainty.
As explained in Note 1, on September 7, 2000, the Company closed the sale of
all its operating subsidiaries. Total proceeds from the sale were Lire 79,500
million (approximately US$ 35.6 million). As a result of this transaction, in
our present opinion on the 1999 consolidated financial statements, as
presented herein, this explanatory fourth paragraph has been removed.
/s/ Arthur Andersen SpA
Arthur Andersen SpA
Milan, Italy,
March 20, 2002
F-1
CENTERPOINT CORPORATION
(Moto Guzzi Corporation through September 19, 2000)
CONSOLIDATED BALANCE SHEETS
December 31, 2000
Dec. 31 Dec. 31 Dec. 31
2000 2000 1999
ASSETS US$'000 Lit. m Lit. m
--------- ------------ ------------
Cash and cash equivalents $ 1,170 Lit. 2,411 Lit. 3
Short-term marketable securities
held to maturity, at cost 13,754 28,351 -
Receivables - - 196
Receivables from related parties - - 196
Escrow receivable - - -
Prepaid expenses 75 154 128
--------- ------------ ------------
TOTAL CURRENT ASSETS 14,999 30,916 327
--------- ------------ ------------
Net non-current assets of discontinued
operations - - 5,527
--------- ------------ ------------
TOTAL ASSETS $ 14,999 Lit. 30,916 Lit. 5,854
========= ============ ============
LIABILITIES
Accounts payable 44 91 898
Amounts due to related and affiliated
parties 190 390 80
Accrued expenses and other payables 175 361 252
Net current liabilities of
discontinued operations - - 17,459
--------- ------------ ------------
TOTAL CURRENT LIABILITIES 409 842 18,689
--------- ------------ ------------
Advances for redeemable preferred
stock subscription - - 2,405
SHAREHOLDERS' EQUITY/(DEFICIT) 14,590 30,074 (15,240)
Common stock, par value $0.01 per
share:
Authorised 20,250,000 shares;
5,999,089 (1999 - 5,589,089)
shares outstanding 52 108 100
Additional paid-in capital 19,653 40,510 39,834
Accumulated other comprehensive
income 117 242 133
Accumulated deficit (5,232) (10,786) (55,307)
--------- ------------ ------------
LIABILITIES & SHAREHOLDERS'
EQUITY/(DEFICIT) $ 14,999 Lit. 30,916 Lit. 5,854
========= ============ ============
See Notes to Consolidated Financial Statements
F-2
CENTERPOINT CORPORATION
(Moto Guzzi Corporation through September 19, 2000)
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2000, 1999 and 1998
Dec. 31 Dec. 31 Dec. 31 Dec. 31
2000 2000 1999 1998
US $'000 Lire m. Lire m. Lire m.
---------- -------------- -------------- --------------
Interest income $ 241 Lit. 497 Lit. - Lit. -
Selling, general and administrative expenses (119) (245) - -
Finance expense: shares issued to TRG (1,624) (3,347) - -
Other income, net 5 11 - -
---------- -------------- -------------- --------------
Loss from continuing operations (1,497) (3,084) - -
Discontinued operations:
Loss from disposed motorcycle operations
(after tax of Lit. 514 (US$249), Lit. 88
and Lit. 519) (4,038) (8,324) (22,976) (20,299)
Gain on disposal of motorcycle operations 27,661 57,018 - -
---------- -------------- -------------- --------------
Net profit/(loss) 22,126 45,610 (22,976) (20,299)
Preferred stock dividends (528) (1,089) - -
---------- -------------- -------------- --------------
Profit/(loss) attributable to common
shareholders $ 21,598 Lit. 44,521 Lit. (22,976) Lit. (20,299)
========== ============== ============== ==============
BASIC EARNINGS/(LOSS) PER SHARE: US $ Lire Lire Lire
---------- -------------- -------------- --------------
Continuing operations $ (0.35) Lit. (720) Lit. - Lit. -
Discontinued operations $ 4.08 Lit. 8,401 Lit. (4,440) Lit. (6,101)
DILUTED EARNINGS/(LOSS) PER SHARE:
Continuing operations $ (0.35) Lit. (720) Lit. - Lit. -
Discontinued operations $ 4.08 Lit. 8,401 Lit. (4,440) Lit. (6,101)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD
Basic 5,796,106 5,796,106 5,174,481 3,327,139
========= ========= ========= =========
Diluted 5,796,106 5,796,106 5,226,852 3,327,139
--------- ========= ========= =========
See Notes to Consolidated Financial Statements
F-3
CENTERPOINT CORPORATION
(Moto Guzzi Corporation through September 19, 2000)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY/(DEFICIT) AND COMPREHENSIVE INCOME/(LOSS)
December 31, 2000
Accumu-
lated
Addi- Other Compre-
Class A Class B tional Compre- Accumu- Share- hensive
Common Stock Preferred Stock Preferred Stock Paid-In hensive lated holders' Income/
Shares Amount Shares Amount Shares Amount Capital Income Deficit Equity (Loss)
--------- ------ ------ ------ -------- ------ --------- ------- ------- ------- -------
At January 1,
1998 Lit.m 3,327,139 59 - - - - 11,011 225 (12,032) (737)
Net loss - - - - - - - - (20,299) (20,299) (20,299)
Translation adjustment - - - - - - - (68) - (68) (68)
--------- ------ ------ ------ -------- ------ --------- ------- ------- ------- -------
At January 1,
1999 Lit.m 3,327,139 59 - - - - 11,011 157 (32,331) (21,104) (20,367)
Net loss - - - - - - - - (22,976) (22,976) (22,976)
Translation adjustment - - - - - - - (24) - (24) (24)
Recapitalization -
parent company debt
exchange 871,950 16 - - - - 13,346 - - 13,346 -
Issuance of shares in
merger 1,296,000 23 94 - - - 14,563 - - 14,563
Conversion of preferred
stock 94,000 2 (94) - - - (2) - - -
Shares issuable for
renewal of parent
credit lines - - - - - - 1,222 - - 1,222
Less: relating to
future finance expenses - - - - - - (306) - - (306)
--------- ------ ------ ------ -------- ------ --------- ------- ------- ------- -------
At January 1,
2000 Lit.m 5,589,089 100 - - - - 39,834 133 (55,307) (15,240) (23,000)
Net profit - - - - - - - - 44,521 44,521 44,521
Translation adjustment - - - - - - - 109 - 109 109
Issuance of Series B
Preferred Stock - - - - 123,500 2 23,980 - - 23,982 -
Reclassification for
redemption of preferred
stock - - - - - - (23,982) - - (23,982) -
Accretion expense for
preferred stock redemp-
tion and related
exchange movements - - - - - - - (3,062) - (3,062) (3,062)
Redemption of Series
B Preferred Stock - - - - (123,500) (2) (3,060) 3,062 - - -
Issuance of shares for
MGI purchase 10,000 - - - - - 91 - - 91 -
Issuance of shares for
OAM warrant exercise 100,000 2 - - - - - - - 2 -
Issuance of shares
to TRG 300,000 6 - - - - 3,341 - - 3,347 -
Amortization of
non-cash finance
charges - - - - - - 306 - - 306 -
--------- ------ ------ ------ -------- ------ --------- ------- ------- ------- -------
At December 31,
2000 Lit.m 5,999,089 108 - - - - 40,510 242 (10,786) 30,074 41,568
========= ====== ====== ====== ======== ====== ========= ======= ======= ======= =======
At December 31,
2000 $'000 52 - - 19,653 117 (5,232) 14,590 20,166
====== ====== ====== ========= ======= ======= ======= =======
See Notes to Consolidated Financial Statement
F-4
CENTERPOINT CORPORATION
(Moto Guzzi Corporation through September 19, 2000)
CONSOLIDATED STATEMENTS OF CASH FLOW
December 31, 2000, 1999 and 1998
Dec. 31 Dec. 31 Dec. 31 Dec. 31
2000 2000 1999 1998
US $'000 Lire m. Lire m. Lire m.
---------- -------------- -------------- --------------
Net loss from continuing operations $ (1,497) Lit. (3,084) Lit. - Lit. -
Preferred stock dividends (528) (1,089) - -
Adjustments to reconcile net loss to net
cash used by operating activities:
Non cash finance expense:
Shares issued to TRG 1,624 3,347 - -
Other operating activities 3 6 6 (1)
Changes in operating assets and liabilities:
Related party receivables 104 214 (215) -
Prepaid expenses (8) (17) (95) (26)
Accounts payable and accrued expenses (1,448) (2,984) (451) 82
Related party payables 170 351 (1,348) 920
---------- -------------- -------------- --------------
Net cash (used in)/provided by operating
activities (1,579) (3,256) (2,103) 975
---------- -------------- -------------- --------------
Investing activities
Purchase of marketable securities (13,584) (27,998) - -
---------- -------------- -------------- --------------
Net cash used in investing activities (13,584) (27,998) - -
---------- -------------- -------------- --------------
Financing activities
Proceeds from merger with NAAC - - 16,006 -
Advance for subscription to preferred stock - - 2,274 -
Proceeds from issuance of preferred stock 8,893 18,329 - -
Redemption of preferred stock (13,122) (27,044) - -
---------- -------------- -------------- --------------
Net cash (used in)/provided by
financing activities (4,229) (8,715) 18,280 -
---------- -------------- -------------- --------------
(Decrease)/increase in cash from
continuing activities (19,393) (39,969) 16,177 975
Net cash (used in)/provided by
discontinued motorcycle operations 20,561 42,377 (16,174) (975)
Cash, beginning of year 2 3 - -
---------- -------------- -------------- --------------
Cash, end of year $ 1,170 Lit. 2,411 Lit. 3 Lit. -
========== ============== ============== ==============
Net cash (used in)/provided by
discontinued motorcycle operations
Net cash proceeds from sale 29,254 60,293 - -
Financing of disposed operations (7,735) (15,941) (13,863) -
Other expenditures allocated to
discontinued operations (958) (1,975) (2,311) (975)
---------- -------------- -------------- --------------
20,561 42,377 (16,174) (975)
---------- -------------- -------------- --------------
See Notes to Financial Statements
F-5
Supplemental information on non-cash activities
Advances to the Company, made in 1999, in an aggregate amount of US$1.25
million (Lit. 2,479 million at the then prevailing exchange rate) by Wheatley
Partners, LP and Wheatley Foreign Partners, LP (each of which is an affiliate
of Barry Fingerhut, a Director of the Company through January 2002) and
William Spier, a director of the Company through January 2002 and a US$ 1.6
million (Lit. 3,174 million) loan due to OAM, respectively, were applied to
subscribe to the Series B preferred stock on February 25, 2000 See Notes 1
and 4.
The Company issued 10,000 shares with a fair value of Lit. 91 million in
connection with its purchase of the 75% of MGI Motorcycle GmbH that the
Company did not already own. MGI Motorcycle GmbH was disposed as part of the
sale of motorcycle operations.
In 2000, the Company issued 100,000 shares to OAM S.p.A. upon exercise of a
warrant held by OAM issued in 1999. The exercise price of US$1,000 was
settled by reduction of balances due by the Company to OAM. The fair value of
this warrant at the date of issuance of Lit. 1,222 million was amortized from
April 1, 1999 through March 31, 2000 as finance expense.
The Company issued 300,000 shares to TRG in connection with successful efforts
by TRG Inc to assist in raising bridge financing through the issuance of
Series B Preferred Stock of the Company in February 2000. See Notes 1 and 4.
The fair value of the 300,000 shares at the date of issuance of the Series B
Preferred Stock, which was redeemed in 2000, was Lit. 3,347 million and this
amount has been expensed in 2000.
F-6
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
1. BACKGROUND AND ORGANIZATION
BACKGROUND OF THE COMPANY; MERGER WITH GUZZI CORP. IN 1999
Centerpoint Corporation ("the Company") (Moto Guzzi Corporation through
September 19, 2000) was originally incorporated in Delaware on August 9, 1995
under the name of North Atlantic Acquisition Corporation ("NAAC") to serve as
a vehicle to effect a merger, exchange of capital stock, asset acquisition or
other business combination with an operating business. On August 27, 1997 the
Company consummated an initial public offering consisting of 800,000 Units and
150,000 shares of Class B Common Stock, with each Unit consisting of one share
of Class A Common Stock and one warrant to purchase shares of Class A Common
Stock, which resulted in net proceeds to the Company of approximately
US$8,000,000.
Moto Guzzi S.p.A., the Italian manufacturer of Moto Guzzi motorcycles, had
been a subsidiary of Trident Rowan Group, Inc. ("TRG") since 1972. Effective
January 1, 1996, TRG acquired 100% of the outstanding capital of Moto Guzzi
North America Inc., the exclusive importer of Moto Guzzi motorcycles in the
United States. On October 9, 1996, TRG formed Moto Guzzi Corp. ("Guzzi
Corp.") as a holding company for its interests in the Moto Guzzi motorcycle
operations and transferred its 100% interests in Moto Guzzi S.p.A. and Moto
Guzzi North America Inc. to Guzzi Corp.
On August 18, 1998, NAAC and TRG, entered into a definitive agreement and plan
of merger and reorganization, as amended (the "Merger Agreement"), pursuant to
which Guzzi Corp. merged with and into NAAC, with NAAC, which later changed
its name to Moto Guzzi Corporation and later became Centerpoint Corporation,
as the surviving corporation (the "Merger"). Prior to the Merger, TRG and its
majority-owned subsidiary, OAM S.p.A ("OAM"), together owned all the
outstanding common stock of Guzzi Corp.
The Merger was approved on March 4, 1999 and consummated on March 5, 1999. As
part of the Merger Agreement, the Company's Class B shareholders also
eliminated authorization of NAAC's Class B Common Stock and approved
conversion of each share of Class B Common Stock into 2 shares of Class A
Common Stock and 2 Class A Warrants.
Upon the merger, shareholders of Guzzi Corp. received an aggregate of
4,199,089 shares or approximately 76.4% of the post-Merger shares of the
Company (excluding any shares of the Company's formerly designated Class A
Common Stock issuable upon exercise of any options or warrants) and Guzzi
Corp., was, therefore, the accounting acquirer. The cost of the acquisition
of NAAC was based on the fair value of the Company's assets and liabilities as
of the date of the Merger of Lit. 14,586 million (approximately US$8,153,000
at the then prevailing exchange rate), represented by Lit. 16,006 million in
cash (US$8,947,000) less Lit. 1,420 million (US$794,000) of payables and
F-7
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
1. BACKGROUND AND ORGANIZATION - Continued
accrued expenses, principally in respect of merger expenses. Additionally, an
aggregate of 30,000 shares of Class A Common Stock with a fair value of Lit.
591 million (US$330,000) were issued to Graubard, Mollen & Miller, counsel to
the Company, contingent upon consummation of the Merger in payment of fees
relating to the Merger and 350,000 Class A Warrants with an exercise price of
US$10.00 were issued to the Company's investment bankers.
Pursuant to the merger, NAAC changed its name to Moto Guzzi Corporation and
changed its common stock ticker symbol to "GUZI".
DISPOSAL OF OPERATING SUBSIDIARIES, DISPUTE OVER FINANCIAL ADVISORS FEES
In December 1999, the Company's parent, TRG, engaged IMI, a leading Italian
investment bank, to pursue strategic alternatives to enhance the Company's
shareholder value.
Pursuant to an April 14, 2000 Preliminary Sale and Purchase Agreement, on
August 11, 2000, at a special meeting of stockholders, the Company's
stockholders approved the sale of the operating subsidiaries and the change of
the corporate name from Moto Guzzi Corporation to Centerpoint Corporation,
with stockholders holding in excess of two-thirds of all outstanding shares of
Class A Common Stock voting for the sale and the name change. On September 7,
2000, the Company closed the sale of all its operating subsidiaries (see
below). To finance operations through the date of sale, the Company raised
bridge financing in February 2000 by way of issuance of Series B 7.0%
Preferred Stock, redeemable December 2001. This stock was subscribed for cash
by TRG for US$3,500,000 and by Fineco, a third party Italian institutional
investor group for US$6,000,000. Advances to the Company of US$1,600,000 by
OAM and US$1,250,000 by Messrs. Fingerhut and Spier, directors of the Company
until January 2002, were also applied to subscribe to the Series B Preferred
Stock. The Company agreed with holders of the Series B Preferred Stock to
redeem such stock on September 30, 2000, following the closing of the sale.
See Note 4, below for further details of the issuance and redemption of the
Series B Preferred Stock.
Total proceeds from the sale of the motorcycle operations to Aprilia were Lit.
79,500 million. In accordance with the Share Purchase Agreement, Aprilia also
reimbursed the Company Lit. 2,074 million, the amount owed to the Company by
the operating subsidiaries pursuant to intercompany loans. Lit. 9,375 million
of the total proceeds was placed in escrow to cover any claims Aprilia might
have in the future in respect of the representations and warranties given by
the Company in the Share Purchase Agreement. Full allowance was made for
escrow receivables from Aprilia in accounting for the sale of the Company's
Moto Guzzi subsidiaries, thus charging such amounts against the gain on sale
F-8
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
1. BACKGROUND AND ORGANIZATION - Continued
included in the income statement. Funds from the escrow account were to be
released to the Company in two tranches, subject to any claims Aprilia may
have in respect of the Company's representations and warranties: up to Lit.
7,000 million was to be released on September 8, 2001; and up to Lit. 2,375
million is to be released on September 8, 2007. Aprilia undertook to
evaluate, on a best efforts basis, an earlier resolution of the escrow
accounts, though this has not occurred. See also "Subsequent Events: Aprilia
Claims under the Share Purchase Agreement; Payment by IMI; Request for
Arbitration" in respect of claims made by Aprilia in 2001 and the status of
arbitration procedures concerning such claims.
SIREF S.p.A. and San Paolo Finanziaria S.p.A. (both affiliates of IMI) acted
as fiduciary agents for the closing. In accordance with invoices submitted to
them, they paid IMI Lit. 11,401 million, in respect of fees and expenses
claimed to be due to IMI, paid Lit. 505 million to Carnelutti, the Company's
Italian counsel, and then paid the remaining proceeds of Lit. 60,293 million
to the Company. The Company has since early July 2000 disputed IMI's
interpretation of the calculation of the fee due to them under their
engagement letter, following indication by IMI of their basis of calculation.
The Lit. 60,293 million received by the Company was applied first to pay
amounts due for transaction expenses and other payables and obligations
estimated in the aggregate to be approximately Lit. 2,700 million and to
redeem, prior to September 30, 2000, all outstanding shares of Series B
Preferred Stock for a price equal to US$100 per share plus any accrued and
unpaid dividends thereon, for a total of approximately US$ 12.6 million
(approximately Lit. 28,300 million at the then prevailing exchange rate). Cash
was invested in short-term fixed interest securities pending evaluation of the
alternatives available with respect to such funds.
AGREEMENT WITH TRG AND OAM TO HOLD SHAREHOLDER MEETING TO VOTE ON A PROPOSAL
TO LIQUIDATE
In connection with the execution and delivery of the Share Purchase Agreement
described above, the Company agreed with OAM and TRG by letter dated April 14,
2000 (as amended), that it would, as promptly as practicable after the closing
of the sale of the operating subsidiaries, but in no event later than 90 days
following the closing, hold a meeting of stockholders to consider and vote
upon a proposal to liquidate all the Company's assets and dissolve the
Company. The deadline for such shareholders' meeting was subsequently
extended by 60 days, to February 7, 2000 and then until July 15, 2001. In
connection with the Bion transaction, (see Note 12 - Subsequent Events), OAM
and TRG waived their rights to cause a shareholders' meeting to vote on a
proposal to liquidate.
F-9
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
1. BACKGROUND AND ORGANIZATION - Continued
REPORTING CURRENCY
The primary financial statements through the disposal of the Company's
operations were shown in Italian Lire because all of the Company's material
operating entities were based in and operated entirely in Italy. Following
the disposal of its operations, the Company invested the major part of the net
proceeds of disposal in Lire denominated short-term investments pending
evaluation of its alternatives and, accordingly, the primary financial
statements at December 31, 2000 continue to be shown in Italian lire.
The functional currency of the Company will change to U.S. Dollars following
the Bion transaction described in Note 12.
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
calculated at the rate of Lit. 2,061 to US$1.00, the approximate exchange rate
at December 31, 2000. It should not be construed that the assets and
liabilities, expressed in U.S. dollar equivalents, can actually be realized in
or extinguished in U.S. dollars at that or any other rate. All currency
amounts in these financial statements are in Lire unless specifically
designated in other currencies.
2. SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company have been translated from US$ to
Italian lire using the year-end exchange rate for balance sheet items and the
average exchange rate for the year for statement of operation items. The
translation differences resulting from the change in exchange rates from year
to year have been reported separately as a component of shareholders' equity.
F-10
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
2. SIGNIFICANT ACCOUNTING POLICIES - Continued
FOREIGN CURRENCY TRANSACTIONS
Transactions, receivables and payables denominated in currencies other than
the functional currency are recorded at the exchange rate in effect on the
transaction date. Such receivables and payables are adjusted to current
exchange rates as of the date paid or the balance sheet date, whichever is
earlier. Gains and losses are included in "other income, net" in the
statements of operations.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
MARKETABLE SECURITIES
Marketable securities consist of variable rate fixed income investments, which
can be readily sold using established markets. Marketable securities as of
December 31, 2000 are held-to-maturity and are represented by Banca del Lavoro
O/S FRN 2003 securities, which are carried at cost plus accrued interest.
INCOME TAXES
Income taxes are provided in accordance with local laws. Deferred income
taxes have been provided using the liability method in accordance with FASB
Statement No. 109, "Accounting for Income Taxes."
ACCUMULATED OTHER COMPREHENSIVE INCOME
In 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting comprehensive
income and its components in annual and interim financial statements. In the
Company's case comprehensive income includes net income and translation
difference from the conversion of balance sheets of non-Italian entities. The
Company has chosen to disclose comprehensive income in the Consolidated
Statements of Stockholders' Equity.
F-11
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
2. SIGNIFICANT ACCOUNTING POLICIES - Continued
NEW ACCOUNTING STANDARD
In 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities" SFAS No. 133 which establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be
recognized in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement.
SFAS No. 133 as amended by SFAS No. 137, is effective for fiscal years
beginning after June 15, 2000 but may be adopted earlier. The Company has not
and, not having any operations, does not intend to enter into derivative or
hedging operations and accordingly adoption of the standard will have no
effect.
RECLASSIFICATIONS
Comparative figures for 1999 and 1998 have been reclassified to conform with
the 2000 presentation.
3. DISCONTINUED MOTORCYCLE OPERATIONS
In September 2000, the Company closed its sale of all "Moto Guzzi" motorcycle
operations to Aprilia. From May 2, 2000 through the date of sale, Moto
Guzzi's operations were under the control of Aprilia management. The
measurement date of the disposal is July 1, 2000, reflecting the latest date
prior to sale for which the Company has complete financial information. Net
proceeds from the disposal exceeded the net assets of the operations sold and
the Company has recorded a gain on sale of Lit. 57,018 million. The Company
changed its name to Centerpoint Corporation on September 19, 2000 pursuant to
the sale, which is discussed in more detail in Note 1, above.
Results of the disposed motorcycle operations through the effective disposal
date of July 1, 2000 and for the years to December 31, 1999 and 1998 were as
follows:
F-12
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
3. DISCONTINUED MOTORCYCLE OPERATIONS - Continued
To effective disposal Dec. 31 Dec. 31
Date - July 1, 2000 1999 1998
US$'000 Lit. m Lit. m Lit. m
-------- ------------ ------------- ------------
Net sales 24,742 50,994 86,232 83,760
Loss before taxes (3,789) (7,810) (22,888) (19,780)
Provisions for taxes (249) (514) (88) (519)
-------- ------------ ------------- ------------
Net loss from discon-
tinued motorcycle
operations $ (4,038) Lit. (8,324) Lit. (22,976) Lit. (20,299)
======== ============ ============= ============
Net assets/(liabilities) of the discontinued motorcycle operations at the
effective date of disposal of July 1, 2000 and at December 31, 1999 were as
follows:
July 1 July 1 Dec. 31
2000 2000 1999
$'000 Lit. m Lit. m
------- ------------ --------------
Current assets 33,169 68,361 61,926
Current liabilities (35,344) (72,844) (79,385)
------- ------------ --------------
Net current liabilities (2,175) (4,483) (17,459)
------- ------------ --------------
Property, plant and equipment 6,207 12,792 14,638
Other long-term assets 1,218 2,510 889
Long-term liabilities (4,615) (9,512) (10,000)
Net non-current assets 2,810 5,790 5,527
------- ------------ --------------
Net assets/liabilities of
discontinued operations $ 635 Lit. 1,307 Lit. (11,932)
======= ============ ==============
In 2000 the Company provided the disposed motorcycle subsidiaries with cash,
in the form of capital and advances, of Lit. 15,941 million (1999 - Lit.
13,863 million) to finance operations through disposal.
F-13
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
4. ISSUANCE AND REDEMPTION OF SERIES B PREFERRED STOCK
On February 25, 2000, the Company issued 123,500 shares of a new Series B
Preferred Stock to Fineco, and affiliates of Fineco, TRG, OAM, the majority
stockholder of the Company, and Barry Fingerhut and William Spier, directors
of the Company until January 2002, for US$100 per share (an aggregate price of
US$12,350,000). Fineco and its affiliates purchased 60,000 shares and TRG
purchased 35,000 shares, for cash. Messrs. Fingerhut and Spier received a
total of 12,500 shares in satisfaction of advances they had made to the
Company in August 1999 and 16,000 shares were issued to OAM in partial
satisfaction of outstanding loans due to it.
The holders of the Series B Preferred Stock are entitled to receive dividends
at the rate of US$7 per share per year before any dividends may be paid with
regard to the Class A Common Stock, and to receive distribution of $100 per
share in liquidation of the Company before any liquidation distributions are
made with regard to the Class A Common Stock. The Company was required to
redeem the Series B Preferred Stock for $100 per share plus accrued dividends
on December 28, 2001. Holders of Series B Preferred Stock do not have voting
rights, except that they must approve issuance of securities which would
affect the Series B Preferred Stock and the incurrence of debt, other than
refinancing of existing debt or lines of credit used by the Company to finance
its day-to-day operations.
Each share of Series B Preferred Stock was convertible into Class A Common
Stock at a conversion price of US$5.00, based upon the liquidation preference
of the Series B Preferred Stock (US$100, plus accrued dividends, per share),
meaning each share of Series B Preferred Stock is convertible into
approximately 20 shares of Class A Common Stock.
The Company agreed with the Series B preferred stockholders that, following
the sale to Aprilia, it would redeem the Series B preferred stock on September
30, 2000 and they agreed not to convert their Series B stock if the Company
redeemed the stock by this date. Such redemption was effected, with
redemption payments made on the first business day of October 2000.
The Company received Lit. 18,329 million in cash, net of Lit. 516 million of
expenses in respect of the issue of the Series B Preferred Stock and also
recorded Lit. 2,479 million in respect of the William Spier and Barry
Fingerhut advances and Lit. 3,174 million in respect of the OAM loan for a
total of Lit. 23,982 million.
Upon issuance, the Company reclassified the Series B preferred stock outside
of shareholders equity and recorded accretion expense of Lit. 3,062 million in
respect of amortization of costs and exchange differences through redemption
which arose as the Company's obligation was denominated in U.S. Dollars.
F-14
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
4. ISSUANCE AND REDEMPTION OF SERIES B PREFERRED STOCK - Continued
In connection with issuance of the Series B preferred stock, the Company
agreed to issue 300,000 shares of Class A common stock to TRG for a purchase
price of US$.01 per share, in consideration of Trident Rowan's participation
in the Series B financing and their successful efforts to get Fineco, S.p.A.
to subscribe for Series B shares. These 300,000 shares were issued in July
2000 and the amount of Lit. 3,347 million, representing the fair value of the
shares has been charged to the income statement. Additionally, in connection
with Fineco's purchase of the Series B shares the Company paid a commission of
US$180,000 to Andrea delle Valle, a director of TRG, and paid US$80,000 to
Investec Ernst, an investment banking firm, where Mark Segall, a director of
TRG, is an executive officer.
5. AMOUNTS DUE FROM AND TO RELATED PARTIES
Dec. 31 Dec. 31 Dec. 31
2000 2000 1999
US$'000 Lit. m Lit. m
------- ------------ --------------
Amounts due from Related parties:
Trident Rowan Group, Inc. - - 196
------- ------------ --------------
$ - Lit. - Lit. 196
======= ============ ==============
Amounts due to Related parties:
Trident Rowan Group, Inc. 84 172 -
OAM S.p.A. 106 218 80
------- ------------ --------------
$ 190 Lit. 390 Lit. 80
======= ============= ==============
Balances due from and to TRG and OAM are in respect of various advances for
expenses.
6. RELATED PARTY TRANSACTIONS
BION TRANSACTION
In a related party transaction, the Company purchased 19,000,000 shares of
restricted stock of Bion for substantially all of its assets and immediately
thereafter this, Bion purchased from OAM 3,459,997 shares of the Company,
which represents a controlling interest in the Company. In addition, on March
14, 2002, the Company and Bion entered into an agreement effective January 15,
2002 for certain services and advances provided to the Company by Bion (See
Note 12 - Subsequent Events).
F-15
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
6. RELATED PARTY TRANSACTIONS - CONTINUED
FINANCIAL SUPPORT OF THE COMPANY BY OAM S.P.A. AND TRG INC.
On October 1, 1998, a bridge loan of Lit. 3,000 million was made by Mr. Gianni
Bulgari a director of the Company until January 2002, to OAM S.p.A. who lent
the proceeds to Guzzi Corp. to provide financing in anticipation of the
consummation of the merger with NAAC. The loan by OAM S.p.A. to Guzzi Corp.
was made on the same terms and conditions as the loan by Mr. Bulgari to OAM
S.p.A. and bore interest at 10% and a flat fee of 1%, through March 31, 1999.
The Lit. 3,000 million loan from Mr. Bulgari was repaid in May 1999 by OAM
S.p.A.
The loan was, however, not repaid to OAM S.p.A. by the Company on its
expiration of March 31, 1999 and in July 1999, the Company agreed to issue a
warrant to purchase 100,000 shares to OAM S.p.A. at a subscription price of
$0.01 each on condition that OAM S.p.A. reduced the interest rate on this loan
to 4% and maintained both this loan and collateral of Euro 2,050,000 deposited
as security for a bank credit line of Moto Guzzi S.p.A. through March 31,
2000. The Company accounted for the fair value of the 100,000 shares issuable
to OAM S.p.A. of Lit. 1,222 million as finance expense, which was amortized
over the period for which OAM S.p.A. agreed to maintain in place its loans and
funds deposited as collateral. OAM exercised this warrant in 2000 and
continued to provide the financial support from the expiration on March 31,
2000 until the sale of Moto Guzzi operations in September 2000, without any
additional expense.
ISSUANCE OF 5% DEBENTURES BY TRIDENT ROWAN AND LENDING OF PROCEEDS
On December 28, 1999, Trident Rowan issued US$ 6 million of 5% Convertible
Debentures Due December 28, 2001 to provide funds for the Company and for its
general corporate purposes. In connection with raising these funds, Trident
Rowan also issued a US$250,000 5% Convertible Debenture to Emanuel Arbib,
co-CEO of Trident Rowan and a Director of the Company, for his efforts in
connection with such placement, and agreed to issue Trident Rowan 300,000
shares of Common Stock of the Company in connection with its efforts to place
the Debentures. Such shares were issued in July 2000. In June 2001 Mr.
Arbib accepted US$218,750 as payment in full on the US$250,000 in Debentures
held by him. Trident Rowan also paid US$360,000 to an Italian intermediary
and US$60,000 plus US$26,106 for legal expenses to Investec Ernst & Company.
Mark Segall, a director of Trident Rowan is an officer of Investec Ernst &
Company.
F-16
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
6. RELATED PARTY TRANSACTIONS - CONTINUED
ISSUANCE AND REDEMPTION OF SERIES B PREFERRED STOCK
On February 25, 2000, the Company issued 123,500 shares of a new Series B
Preferred Stock to Fineco Sim S.p.A., an Italian institutional investor
("Fineco"), and affiliates of Fineco, TRG, OAM, S.p.A., and William Spier, a
director of the Company through January 2002, and Wheatley Partners LP and
Wheatley International Partners LP, each of which is an affiliate of Barry
Fingerhut, a director of the Company through January 2002, for US$100 per
share (an aggregate price of US$12,350,000). The Company closed on the sale
of its operating subsidiaries on September 6, 2000 and in the last week of
September 2000 it redeemed in full all outstanding shares of Series B
Preferred Stock for a price equal to US$100 per share plus accrued dividends
thereon, for a total of approximately US$ 12.6 million (approximately Lit.
28,300 million at the prevailing exchange rate). For further details on the
issuance and redemption of the Series B Preferred Stock, see Note 4 above.
APRIL 14TH SHARE PURCHASE AGREEMENT
The Share Purchase Agreement providing for the sale of the Company's operating
subsidiaries to Aprilia contained a condition that OAM (the holder of
approximately 58% of the issued and outstanding shares of the Company's Class
A common stock, and a subsidiary of TRG) agree to vote its capital stock for
the sale, and by letter to Aprilia dated April 14, 2000, OAM agreed, among
other things, to vote its shares for the sale.
In order to induce OAM to deliver its letter to Aprilia, the Company agreed
with OAM and Trident Rowan by letter dated April 14, 2000 that, among other
things, it would pay IMI's fees in connection with the sale. The April 14th
letter was amended on June 8, 2000 to provide, among other things, that the
Company would, as promptly as practicable after the closing of the sale, but
in no event later than 90 days following the closing, hold a meeting of
stockholders to consider and vote upon a proposal to liquidate all of the
Company's assets and dissolve itself. The date for proceeding to propose a
liquidation was subsequently extended by Trident Rowan and OAM to July 15,
2001. In connection with the Bion transactions described in Note 12 below,
OAM and Trident Rowan released the Company from its obligations to proceed to
propose a liquidation. In connection with the sale, Aprilia required the
terminations of certain of the Company's executives and further required that
the Company pay all costs of such terminations. Accordingly, the Company
agreed to pay severance to two of its directors, Mark S. Hauser and Howard E.
Chase, and to Emanuel Arbib, one of its former directors, of US$169,500,
US$51,400 and US$37,900, respectively, in exchange for termination of their
employment and consulting agreements with the Company. The Company also paid
Nick Speyer, the CFO of the Company, US$125,000 in connection with the
termination of his employment agreement with the Company.
F-17
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
6. RELATED PARTY TRANSACTIONS - CONTINUED
CENTERPOINT LOAN TO TRIDENT ROWAN
Trident Rowan's 5% Convertible Debentures in an aggregate amount of
US$6,250,000 were scheduled to come due in December 2001. In order to enable
Trident Rowan to pay off the Debentures on favorable terms, and in
consideration of Trident Rowan's and OAM's extension of the date for the
Company to proceed to propose a liquidation to July 15, 2001, on June 13, 2001
the Company, Trident Rowan and OAM entered into the Centerpoint Loan Agreement
wherein subject to the terms and certain conditions set forth therein the
Company agreed to lend Trident Rowan US$4,200,000. On June 13, 2001 the
Company made the Centerpoint Loan and on June 15, 2001 Trident Rowan paid the
holders of US$6,000,000 of the Debentures US$4,207,500 in cash, which the
Debenture holders accepted as payment in full on the Debentures (including
past due interest), representing a 31.5% discount from their face value. The
Centerpoint Loan bears interest at a rate of 5 % per annum, is repayable in
full on the earlier of June 13, 2002 and the date on which the Trident Rowan
causes or permits a liquidation of the Company, and is secured by the 300,000
shares of the Company's common stock currently owned by Trident Rowan. In
connection with the Centerpoint Loan, OAM also entered into the OAM Guaranty
wherein it guaranteed Trident Rowan's obligations under the Centerpoint Loan
Agreement. OAM's liability under the OAM Guaranty is limited to the value of
the 1,200,000 shares of the Company's common stock held by OAM.
Each of Mark S. Hauser and Nick Speyer is an officer or Director of OAM, which
holds approximately 61% of the Company's Common Stock.
Each of the following directors and former directors of the Company is also an
Officer or Director of Trident Rowan: Howard E. Chase, Mark S. Hauser, Gianni
Bulgari and Emmanuel Arbib (former Director). Additionally, each of Mark
Hauser, Gianni Bulgari and Emmanuel Arbib are principal stockholders of
Trident Rowan.
F-18
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
7. INCOME TAXES
TAX RECONCILIATION TO CREDIT AT STATUTORY U.S. FEDERAL RATE
The effective provision for income taxes varied from the income tax credit
calculated at the statutory U.S. federal income tax rate on losses from
continuing operations as follows:
Dec. 31 Dec. 31 Dec. 31 Dec. 31
1999 2000 1999 1998
US $'000 Lit. m Lit. m Lit. m
---------- -------------- -------------- --------------
Computed tax credit at U.S. Federal rate (524) (1,079) - -
Losses and timing differences for which
valuation allowance provided 524 1,079 - -
---------- -------------- -------------- --------------
$ - Lit. - Lit. - Lit. -
========= ============== ============== ==============
TAX LOSSES
At December 31, 2000 the Company had net operating loss carry-forwards for
U.S. federal income tax purposes which expire as follows:
Dec. 31 Dec. 31
2000 2000
US$'000 Lit. m
------- ------------
2020 1,497 3,084
2019 1,620 3,339
------ ------------
$3,117 Lit. 6,424
====== ============
In addition to the operating loss above, the Company has a capital loss
carry-forward of US $14,370,000 from the sale of the motorcycle operations.
This loss can be carried forward to 2005.
DEFERRED TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Valuation allowances
have been recorded for the deferred tax assets in respect of net operating
loss carry forwards, above, as management believes it more likely than not
that these assets will not be realized.
F-19
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
8. COMPREHENSIVE INCOME
Comprehensive income includes net income, translation difference from the
conversion of balance sheets of non-Italian entities and accretion expense and
related exchange differences related to its redeemable Series B preferred
stock. The Company has chosen to disclose comprehensive income in the
Consolidated Statements of Stockholders' Equity. Changes in components of
accumulated other comprehensive income in the 3 years to December 31, 2000 are
as follows.
Accretion Accumulated
Cumulative expense and other
translation related exchange comprehensive
difference movements income
----------- ---------------- -------------
Balance January 1, 1998 225 - 225
Movement for period (68) - (68)
----- ------ ------
Balance January 1, 1999 157 - 157
Movement for period (24) - (24)
----- ------ ------
Balance January 1, 2000 133 - 133
Movement for period 109 (3,062) (2,953)
Redemption of Series B
Preferred Stock - 3,062 3,062
----- ------ ------
Balance December 31, 2000 242 - 242
===== ====== ======
9. EARNINGS/LOSS PER SHARE
The numerator for the calculation of loss per common share have been
calculated as follows:
Dec .31 Dec. 31 Dec. 31 Dec. 31
2000 2000 1999 1998
$'000 Lit. m Lit. m Lit. m
------- ------- ------- -------
Loss from continuing
operations (1,497) (3,084) - -
Series B Preferred
Stock dividends (528) (1,089) - -
------- ------- ------- -------
Loss from continuing
operations attributable
to common shareholders (2,025) (4,173) - -
======= ======= ======= =======
Series B Convertible Preferred stock, issued and redeemed in 2000 - See Note 4
- was not dilutive.
F-20
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
10. STOCK OPTIONS
CLASS A WARRANTS TRADED ON THE OTC/BB MARKET UNDER THE TICKER "CPTXW"
On August 27, 1997, NAAC sold 800,000 units ("units") and 150,000 shares of
Class B exchangeable common stock in a public offering. Each unit consisted of
one share of the Company's Class A Common Stock and one Class A Warrant. Each
Class A Warrant entitles the holder to purchase from the Company one share of
Class A Common Stock at an exercise price of US$9.00; each share of Class B
Common Stock entitled the holder to receive two units in exchange for each
Class B share 90 days after the date of a business combination. The Class A
Warrants expire in August 2002 and are redeemable, as a class, in whole and
not in part, at a price of US$.05 per Warrant upon 30 days' notice at any time
provided that the Company's stockholders have approved a business combination
and the last sale price of the Class A Common Stock has been US$11.00 or
higher for 10 of the trading days prior to the day on which the Company gives
notice of redemption.
Also, as part of the Merger, certain directors of NAAC subscribed for 30,000
Class B options prior to the closing of the Merger. The 180,000 shares of
Class B Common Stock were eliminated on the consummation of the Merger and
each share of Class B Common Stock was converted to two shares of Class A
Common Stock and two Class A Warrants, resulting in the issue of 360,000 Class
A Warrants. The 1,160,000 Class A Warrants resulting from NAAC's public
offering and the conversion of Class B Common Stock are traded on the OTC/BB
market under the ticker "CPTXW."
UNDERWRITER WARRANTS AND OPTIONS AND OTHER NAAC OPTIONS AND WARRANTS PRIOR TO
MERGER
In October 1996, NAAC granted options to purchase 133,333.3 units (units
consisting of one share of Class A Common Stock and one Class A Warrant) to
the Company's two then new directors and to a founder. The options are
exercisable for a period of three (3) years from the date of a business
combination at an exercise price of US$12.50 per unit. 50,000 of such options
are held by David Mitchell, a director of the Company and the President and
CEO since January 24, 2002.
The underwriters engaged by NAAC in its public offering received a warrant to
purchase 80,000 shares of Class A Common Stock and 80,000 Class A Warrants, at
an exercise price of US$11.00 per share and a warrant and to purchase 15,000
shares of Class B Common Stock for US$11.00 per share (the "Class B Warrant").
Pursuant to the elimination of Class B Common Stock on March 4, 1999, the
Class B Warrant now entitles the holder to purchase 30,000 shares of Class A
Common Stock and 30,000 Class A Warrants for an exercise price of US$5.50 for
each unit consisting of one share of Class A Common Stock and one Class A
Warrant.
F-21
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
10. STOCK OPTIONS - CONTINUED
OTHER WARRANTS
In connection with the Merger, the Company issued 800,000 "Nominal Warrants"
to the Guzzi Corp. shareholders. Such warrants to subscribe to shares of
Class A Common Stock would be exercisable at US$0.01 each only if the Company
achieved certain operating income in 1999, or a revised target in 2000. In
July 1999, OAM cancelled 100,000 of such warrants that it held in connection
with agreements for providing ongoing financing to the Company and for which
it received a separate warrant. The Company did not reach the operating income
target in 1999 or 2000 and the nominal warrants have lapsed.
Upon closing of the Merger, the Company issued warrants to Allen & Company
Incorporated and EBI Securities Corporation ("EBI") to purchase 315,000 shares
of Class A Common Stock, and 35,000 shares of Class A Common Stock,
respectively, each at an exercise price of $10.00 per share. The warrants may
be exercised at any time prior to July 1, 2003.
In February 2000, the Board of Directors granted options to purchase 50,000
shares of the Company's Common Stock, at an exercise price of US$7.00 per
share, to Dr. Peter Hobbins, who was a Director of the Company from March 1999
to July 1999. The options were exercisable immediately and for ten years
following the date of grant. The options were issued in consideration of Mr.
Hobbins' prior service to the Company as a Director.
On March 25, 1999, the Company issued a warrant to Elliott Broidy to purchase
25,000 shares of Class A Common Stock at an exercise price of US$9.00 per
share. The warrant terminates on March 24, 2003. On March 31, 1999, pursuant
to an investment banking agreement between the Company and EBI, the Company
issued a warrant to EBI to purchase 225,000 shares of Class A Common Stock at
an exercise price of US$9.00 per share. In connection with this agreement,
EBI agreed to the cancellation of its 35,000 warrants referred to above.
As described in Note 6, in July 1999 the Company issued OAM a warrant to
purchase 100,000 shares of Class A Common Stock at an exercise price of
US$0.01 per share in consideration for financing provided by OAM. The warrant
was exercised in 2000.
STOCK OPTION PLAN
On July 23, 1998, the Company adopted the 1998 Stock Option Plan (the "1998
Plan") and the 1998 Plan for Outside Directors. Both Option Plans were
subject to stockholder approval and consummation of the Merger which duly
occurred in March 1999.
F-22
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
10. STOCK OPTIONS - CONTINUED
The 1998 Plan provides for the grant of options to purchase up to an aggregate
of 1,250,000 shares of the Company's Common Stock to be made to employees,
officers, directors and consultants of the Company and its subsidiaries after
the Merger. The 1998 Plan provides both for incentive stock options
("Incentive Options"), and for options not qualifying as Incentive Options
("Non Qualified Options"). The Company's Board or the Committee will determine
the exercise price for each share of the Company's Common Stock purchasable
under an Incentive or Non Qualified Option (collectively "Options"). The
exercise price of a Non Qualified Option may be less than 100% of the fair
market value on the last trading day before the date of the grant. The
exercise price of an Incentive Option may not be less than 100% of the fair
market value on the last trading day before the date of grant (or, in the case
of an Incentive Option granted to a person possessing at the time of grant
more than 10% of the total combined voting power of all classes of stock of
the Company, not less than 110% of such fair market value). Options may only
be granted within a ten-year period which commenced on July 23, 1998 and
Incentive Options may only be exercised within ten years of the date of the
grant (or within five years in the case of an Incentive Option granted to a
person who, at the time of the grant, owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of
its parent or any subsidiary). Options to purchase an aggregate of 255,000
shares of Class A Common Stock at an exercise price of US$10.8675 were issued
to certain officers (directors in their capacity as management) of the Company
at the closing of the Merger. Options to purchase an aggregate of 625,000
shares at an exercise price of US$9.50 were approved by the Board of Directors
on March 8, 1999 for grant to operational management employees, though none of
these options were ever granted.
The 1998 Plan for Outside Directors provides for the grant of non-incentive
options to purchase up to an aggregate of 400,000 shares of the Company's
Class A Common Stock, to the non-employee directors of the Company, each grant
to be on the effective date of the Merger and on each January 2, beginning
January 2, 2000, of options to purchase 12,500 shares of Company's Class A
Common Stock. The options will expire upon the earlier of ten years following
date of grant or three months following the date on which the grantee ceases
to serve as a director. Options to purchase an aggregate of 100,000 shares of
Class A Common Stock at an exercise price of US$10.8675 were granted to
directors on the closing of the Merger. On January 3, 2000, 12,500 options
with an exercise price of US$3.719 were issued to each of the four Outside
Directors under this Plan.
F-23
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
10. STOCK OPTIONS - CONTINUED
The following is a summary of options outstanding under the plans.
December 31, 2000 December 31, 1999
------------------- -------------------
Weighted Weighted
Average Average
Shares Exercise Shares Exercise
(000)'s Price (000)'s Price
------- -------- ------- --------
Outstanding, January 1 355 $10.87 - -
Granted 100 $ 5.36 355 $10.87
Exercised - - - -
Forfeited or exchanged (55) $10.87 - -
--- ------ --- ------
Outstanding, December 31 400 $ 9.49 355 $10.87
=== ====== === ======
Options Exercisable, December 31 400 $ 9.49 355 $10.87
=== ====== === ======
Stock Options Outstanding Stock Options Exercisable
------------------------------ -------------------------
Weighted
Weighted Average Weighted
Range of Average Remaining Average
Exercise Shares Exercise Contractual Shares Exercise
Price (000)'s Price Life (000)'s Price
-------- ------- -------- ----------- ------- ---------
$10.87 300 $10.87 8.18 years 300 $10.87
$ 7.00 50 $ 7.00 9.15 years 50 $ 7.00
$ 3.72 50 $ 3.72 9 years 50 $ 3.72
--- ------ --- ------
400 $ 9.49 400 $ 9.49
EARNINGS PER SHARE
As the Company has incurred losses from continuing operations in 2000 and had
no earnings from continuing operations in 1999 all warrants and options
described above are considered antidilutive. No options and warrants were
issued prior to 1999. The potentially dilutive effects of outstanding options
and warrants in 2000 and 1999 is summarized below:
F-24
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
10. STOCK OPTIONS - CONTINUED
2000 1999
--------- ---------
Weighted average number of common shares
outstanding during the year 5,796,106 5,174,481
OAM warrant - 41,860
NAAC underwriter warrants - 10,511
--------- ---------
5,796,106 5,226,852
========= =========
ACCOUNTING FOR STOCK OPTIONS
The Company has elected the disclosure-only provisions of FASB Statement No.
123, "Accounting for Stock Based Compensation" and applies APB Opinion No. 25
and related interpretations in accounting for their stock option plans.
If the Company had elected to recognize compensation cost based on the fair
value of awards of options and warrants at grant dates, the pro forma net loss
from operations and loss per share for 1999 would have been Lit. 24,970
million (US$12,978,000) and Lit. 4,826 (US$2.51) per share. The fair value of
options issued in 2000 would not have been significant. The fair value of
the Company's warrants and options for 1999 was estimated based on the trading
price of the Class A Warrants. The Company believes that due to the brief
trading history of the Company's shares that this basis of estimate
approximates that which would be obtained using Black-Scholes or other option
pricing models.
11. FINANCIAL INSTRUMENTS
The Company does not enter into foreign exchange contracts in the normal
course of its operating activities. The Company has not hedged against
foreign exchange risk on its marketable securities, which are denominated in
Euro.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosure for financial instruments.
CASH AND CASH EQUIVALENTS: the carrying amount of cash and cash equivalents
reported by the Company approximates their fair value.
FIXED INTEREST MARKETABLE SECURITIES: fair value for marketable quoted
securities is based on market price and for non-marketable securities, is
estimated using discounted cash flow analysis based on similar investments
available as at the balance sheet date. There are no significant differences
between fair value and carrying value.
F-25
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
12. SUBSEQUENT EVENTS
LOAN TO TRG INC
On June 13, 2001 the Company, TRG and OAM entered into the TRG Loan Agreement
wherein subject to the terms and certain conditions set forth therein the
Company agreed to lend TRG US$4,200,000. The loan bears interest at a rate of
5% per annum, was repayable in full on the earlier of June 13, 2002 and the
date on which TGR causes or permits a liquidation of the Company, and was
secured by the 300,000 shares of the Company's common stock currently owned
by TRG. In connection with the TRG loan, OAM also entered into the OAM
Guaranty wherein it guaranteed TRG's obligations under the TRG Loan Agreement.
OAM's liability to the Company under the OAM Guaranty is limited to the value
of 1,200,000 of the Centerpoint shares owned by OAM. The TRG Promissory Note
was used by the Company as partial consideration in its acquisition of the
Bion shares (see below), and in Bion's acquisition of the Company's shares
from OAM, each of which is described below.
APRILIA CLAIMS UNDER THE SHARE PURCHASE AGREEMENT; PAYMENT BY IMI; REQUEST FOR
ARBITRATION
On June 2001 Aprilia's legal counsel sent a letter to Centerpoint which
alleged that it had various claims under the Share Purchase Agreement
aggregating approximately Lit. 9,600 million. On July 13, 2001 Centerpoint's
Italian counsel sent a letter to Aprilia's counsel contesting all of the
Alleged Claims.
On July 13, 2001 Aprilia requested that IMI, the escrow agent under the Escrow
Agreement, pay them Lit. 7,611 million in respect of the Alleged Claims. On
July 26, 2001, in spite of being aware of Centerpoint contesting of each of
the Alleged Claims and its intention to seek arbitration, IMI advised
Centerpoint that it had paid Lit. 7,611 million from the escrow account to
Aprilia in respect of the Alleged Claims.
Pursuant to the Share Purchase Agreement and Escrow Agreement, which provides
that disputes among the parties be arbitrated, the Company filed with the
International Chamber of Commerce a Request for Arbitration in Accordance with
Article 4 of the ICC Rules of Arbitration relating to the Alleged Claims and
the payment by IMI and requesting restitution of the funds paid to Aprilia.
The Arbitration committee was constituted on November 16, 2001.
DISPUTE OVER IMI FEE
At the September 7, 2000 closing of the sale of the subsidiaries, in
accordance with an invoice previously submitted to them by IMI, but without
the prior approval, knowledge or consent of the Company, IMI was paid Lit.
11,401 million, in respect of fees and expenses claimed by IMI to be due it
under its engagement letter with TRG and OAM. Since early July 2000, the
Company and TRG have disputed IMI's interpretation of the calculation of the
fee due it under its engagement letter, following initial indication by IMI of
its basis of calculation.
F-26
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
12. SUBSEQUENT EVENTS - CONTINUED
On February 11, 2002 the Company brought a suit against IMI before the Civil
Section of the Court of Milano, seeking reimbursement of Lit. 8,766 million
(approximately US$4,253,000) of the Lit. 11,401 million (US$5,532,000) paid to
IMI at the closing. The first hearing in the case is scheduled for May 27,
2002 and as at March 11, 2002 IMI has not yet filed its defenses.
BION TRANSACTION - CHANGE OF CONTROL OF THE COMPANY
In December 2001, the Board of the Company met to evaluate the alternative
strategies and investments available to the Company. Investec Ernst & Co.,
who had been hired in June 2001 to assist in this process, presented to the
Board their conclusions on a number of potential investments. After review of
the possible investments, the Board resolved to approve the acquisition of
19,000,000 shares of Bion Environmental Technologies, Inc., a publicly held
Colorado corporation ("Bion"). Bion is an environmental service company
focused on the needs of confined animal feeding operations. Bion is engaged
in two main areas of activity: waste stream remediation and organic soil and
fertilizer production. Bion's waste remediation service business provides
confined animal feeding operations (primarily in the swine and dairy
industries) with treatment for the animal waste outputs. In this regard, Bion
treats their entire waste stream in a manner which cleans and reduces the
waste stream thereby mitigating pollution of the air, water (both ground and
surface) and soil, while creating value-added organic soil and fertilizer
products. Bion's soil and fertilizer products are being used for a variety of
applications including school athletic fields, golf courses and home and
garden applications.
On January 15, 2002, the Company closed the transaction with Bion by
purchasing 19,000,000 shares of restricted stock of Bion in exchange for
approximately US$8.5 million in cash (substantially all of the Company's
cash), the US$4.2 TRG Promissory Note (including accrued interest), and the
assignment of 65% of the Company's claims with respect to the escrow accounts
and claims against IMI. Unrestricted stock of Bion is traded on the OTC/BB
market under the ticker "BION".
Immediately upon consummation of this transaction, Bion purchased a 57.7%
majority interest in the Company from OAM. The total consideration paid by
Bion consisted of (i) US$3,700,000 in cash, (ii) the assignment of the US$4.2
million TRG Promissory Note (including accrued interest) and related loan
guarantees, (iii) the assignment of the 65% interest in the Company's claims
with respect to the escrow accounts and claims against IMI, (iv) the issuance
of 1,000,000 shares of Bion's common stock, and (v) the issuance of a warrant
to acquire 1,000,000 shares of Bion's common stock at a price of US$0.90, with
expiration date of January 10, 2007.
F-27
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
12. SUBSEQUENT EVENTS - CONTINUED
Under the Subscription Agreement and related Registration Rights Agreement,
Bion agreed among other things (i) file a with SEC a Registration Statement
with respect to the Bion Shares, as soon as practicable, and within 90 days of
the Company's filing with the SEC of its December 31, 2001 Form 10-K, and to
use its best efforts to cause such Registration Statement to be declared
effective as soon as practicable thereafter, (ii) to use its best efforts to
cause the Bion Shares to be distributed to the Company's common stockholders
in a tax efficient manner in accordance with applicable law, and (iii) to use
its best efforts to hold an Annual Meeting of Bion Shareholders during 2002,
in accordance with its by-laws and applicable law. It is expected that the
distribution will occur during the second half of calendar 2002. When that
distribution occurs, approximately 11,000,000 of Bion's shares will be
distributed back to Bion. Bion has advised the Company that it intends to
cancel such shares.
On March 14, 2002, the Company and Bion entered in an agreement effective
January 15, 2002 where the Company will pay $12,000 a month for management
services, support staff and office space. In addition, Bion will advance to
the Company sums needed to cure its delinquencies with the SEC, distribute
Bion shares to its shareholders, to locate and acquire new business
opportunities and for on-going expenses. Bion shall have no obligation to
make any advances in excess of $500,000. All sums due Bion shall be evidenced
by a convertible revolving promissory note. As additional consideration, Bion
shall receive a warrant to purchase 1,000,000 shares of the Company's common
stock at $3.00 per share until March 14, 2007.
David Mitchell, a director of the Company, is the Chairman, President, Board
member and a principal stock and warrant holder of Bion. Additionally a
portion of the proceeds of the Bion Investment were used to pay off US$718,485
of indebtedness of Bion owed to Mr. Mitchell.
On January 24, 2002, David Mitchell was elected as the Company's President and
CEO. David Mitchell is a founder, stockholder, option holder, former CEO of
the Company and currently is the only director of the Company.
Following the Bion Investment and Bion acquisition of Centerpoint Shares, all
of the Company's directors, other than David Mitchell, resigned from their
positions on the Company's Board of Directors. Bill Spier, one of the
Company's Directors until he resigned on January 24, 2002, sits on Bion's
advisory board. On January 21, 2002, Howard Chase, a director of the Company
until he resigned on January 15, 2002, joined the Board of Directors of Bion.
F-28
CENTERPOINT CORPORATION AND SUBSIDIARIES
(Moto Guzzi Corporation through September 19, 2000)
Schedule II - Valuation and Qualifying Accounts
Col. A Col. B Col. C Col. D Col. E
---------------------------------- ---------- --------------------- ---------- ---------
(2)
(1) Charged
Balance at Charged to to other Balance
beginning costs and accounts Deductions at end of
Description of period expenses describe describe period
---------------------------------- ---------- ---------- -------- ---------- ---------
In millions of Italian Lire
Year ended December 31, 2000
Deducted from asset accounts:
Allowance for escrow receivables - 9,375 (a) - - 9,375
----- ----- ---- ---- -----
- - - - 9,375
===== ===== ==== ==== =====
In thousands of U.S. Dollars
Year ended December 31, 2000
Deducted from asset accounts:
Allowance for escrow receivables - 4,549 (a) - - 4,549
----- ----- ---- ---- -----
- 4.549 - - 4,549
===== ===== ==== ==== =====
________________
(a) Full allowance was made for escrow receivables from Aprilia in accounting for the sale of the
Company's Moto Guzzi subsidiaries, thus charging such amounts against the gain on sale included
in the income statement.
F-29
CENTERPOINT CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS
September 30, 2001
Sept. 30 Sept. 30 Dec. 31
2001 2001 2000
US$'000 Lit. m Lit. m
-------- ------------ ------------
ASSETS
Cash and cash equivalents $ 8,961 Lit. 19,069 Lit. 2,411
Short-term marketable securities
held to maturity, at cost - - 28,351
Loan to TRG, plus accrued interest 4,263 9,072 -
Prepaid expenses 45 95 154
-------- ------------ ------------
TOTAL CURRENT ASSETS 13,269 28,236 30,916
-------- ------------ ------------
Escrow receivable in 2007 - - -
-------- ------------ ------------
TOTAL ASSETS $ 13,269 Lit. 28,236 Lit. 30,916
======== ============ ============
LIABILITIES
Accounts payable 20 43 91
Amounts due to related and
affiliated parties - - 390
Accrued expenses and other payables 103 220 361
-------- ------------ ------------
TOTAL CURRENT LIABILITIES 123 263 842
-------- ------------ ------------
SHAREHOLDERS' EQUITY 13,146 27,973 30,074
Common stock, par value $0.01 per
share:
Authorised 20,250,000 shares;
5,999,089 (2000 - 5,999,089)
shares outstanding 51 108 108
Additional paid-in capital 19,038 40,510 40,510
Accumulated other comprehensive
income (966) (2,055) 242
Accumulated deficit (4,977) (10,590) (10,786)
-------- ------------ ------------
LIABILITIES & SHAREHOLDERS' EQUITY $ 13,269 Lit. 28,236 Lit. 30,916
======== ============ ============
Note: The balance sheet as at December 31, 2000 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 Financial Statements
F-30
CENTERPOINT CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
3 Months ended September 30, 2001 and 2000
Sept. 30 Sept. 30 Sept. 30
2001 2001 2000
US$'000 Lit. m Lit. m
-------- ------------ ------------
Interest income $ 55 Lit. 116 Lit. 108
Selling, general and administrative
expenses (103) (219) (16)
Other income, net - 1 (11)
Finance expense: Shares issued to
TRG Inc. in connection with
Preferred Stock issuance (3,347)
-------- ------------ ------------
Loss from continuing operations (48) (102) (3,266)
Discontinued operations:
Gain on disposal of discontinued
operations 57,018
-------- ------------ ------------
Net profit/(loss) (48) (102) 53,752
Preferred stock dividends - - (458)
-------- ------------ ------------
Profit/(loss) attributable to
common shareholders $ (48) Lit. (102) Lit. 53,294
======== ============ ============
BASIC EARNINGS/(LOSS) PER SHARE: US $ Lire Lire
-------- ------------ ------------
Continuing operations $ (0.01) Lit. (17) Lit. (665)
Discontinued operations $ - Lit. - Lit. 10,183
DILUTED EARNINGS/(LOSS) PER SHARE:
Continuing operations $ (0.01) Lit. (17) Lit. (665)
Discontinued operations $ - Lit. - Lit. 10,183
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD
Basic 5,999,089 5,999,089 5,589,089
========= ========= =========
Diluted 5,999,089 5,999,089 5,688,858
========= ========= =========
F-31
CENTERPOINT CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
9 Months ended September 30, 2001 and 2000
Sept. 30 Sept. 30 Sept. 30
2001 2001 2000
US$'000 Lit. m Lit. m
-------- ------------ ------------
Interest income $ 337 Lit. 717 Lit. 108
Selling, general and administrative
expenses (267) (568) (16)
Other income, net 22 47 (11)
Finance expense: Shares issued to
TRG Inc. in connection with
Preferred Stock issuance (3,347)
-------- ------------ ------------
Profit/(Loss) from continuing
operations 92 196 (3,266)
Discontinued operations:
Loss from disposed motorcycle
operations (after tax of Lit. 514) - - (8,324)
Gain on disposal of motorcycle
business (after tax of Lit. 0) 57,018
-------- ------------ ------------
Net profit 92 196 45,428
Preferred stock dividends - - (1,067)
-------- ------------ ------------
Profit attributable to common
shareholders $ 92 Lit. 196 Lit. 44,361
======== ============ ============
BASIC EARNINGS/(LOSS) PER SHARE: US $ Lire Lire
-------- ------------ ------------
Continuing operations $ 0.02 Lit. 33 Lit. (762)
Discontinued operations $ - Lit. - Lit. (8,566)
DILUTED EARNINGS/(LOSS) PER SHARE:
Continuing operations $ 0.02 Lit. 33 Lit. (762)
Discontinued operations $ - Lit. - Lit. (8,566)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD
Basic 5,999,089 5,999,089 5,684,895
========= ========= =========
Diluted 5,999,089 5,999,089 5,684,895
========= ========= =========
See Notes to Consolidated Financial Statements
F-32
CENTERPOINT CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY/(DEFICIT); AND
COMPREHENSIVE INCOME/(LOSS)
September 30, 2001
Accumu-
lated
Other
Additional Compre- Accumu- Share- Comprehen-
Common Stock Paid-In hensive lated holders' sive
Shares Amount Capital Income Deficit Equity Income/Loss
--------- ------ ---------- ------- ------- -------- -----------
At January 1, 2001 Lit.m 5,999,089 108 40,510 242 (10,786) 30,074
Net profit - - - - 256 256 256
Translation adjustment - - - 12 - 12 12
--------- ------ ---------- ------- ------- -------- ----------
At March 31, 2001 Lit.m 5,999,089 108 40,510 254 (10,530) 30,342 268
Net profit - - - - 42 42 42
Translation adjustment - - - (239) - (239) (239)
--------- ------ ---------- ------- ------- -------- ----------
At June 30, 2001 5,999,089 108 40,510 15 (10,488) 30,145 (197)
Net profit - - - - (102) (102) (102)
Translation adjustment - - - (2,070) - (2,070) (2,070)
--------- ------ ---------- ------- ------- -------- ----------
At September 30, 2001 5,999,089 108 40,510 (2,055) (10,590) 27,973 (2,172)
--------- ------ ---------- ------- ------- -------- ----------
At June 30, 2001 $'000 51 19,038 (966) (4,977) 14,167 (1,021)
====== ========= ======= ======= ======== ==========
Accumulated Other Comprehensive Income relates to translation differences from the conversion of Balance Sheets
of non-Italian entities.
See Notes to Consolidated Financial Statement
F-33
CENTERPOINT CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
Nine Months Ended September 30, 2001
Sept. 30 Sept. 30 Sept. 31
2001 2001 2000
US$'000 Lit. m Lit. m
-------- ------------ ------------
Net profit from continuing
operations $ 92 Lit. 196 Lit. (3,266)
Dividends paid on preferred stock - - (1,067)
Adjustments to reconcile net loss to net
cash used by operating activities:
Stock issuance for finance expense - - 3,347
Other operating activities (765) (1,627) (122)
Changes in operating assets and liabilities:
Related party receivables: Interest
accrued on TRG loan (64) (137) 196
Prepaid expenses 31 66 (69)
Accounts payable and accrued expenses (97) (207) (646)
Related party payables (193) (410) 521
-------- ------------ ------------
Net cash used by operating activities (996) (2,119) (1,106)
-------- ------------ ------------
Investing activities
Decrease/(Increase) in marketable securities 13,323 28,351 (27,998)
Loan to TRG (4,510) (9,596) -
-------- ------------ ------------
Net cash provided by investing activities 8,813 18,755 (27,998)
-------- ------------ ------------
Financing activities
Proceeds from issuance of preferred stock - - 18,329
-------- ------------ ------------
Net cash provided by financing activities - - 18,329
-------- ------------ ------------
(Decrease)/increase in cash from continuing
activities 7,817 16,636 (10,775)
Net cash from/(used by) discontinued motorcycle
operations - - 42,995
Exchange movement on opening cash 11 22 -
Cash, beginning of period 1,133 2,411 3
-------- ------------ ------------
Cash, end of period $ 8,961 Lit. 19,069 Lit. 32,223
======== ============ ============
Supplemental information on non-cash activities
Advances to the Company, made in 1999, in an aggregate amount of $1.25 million (Lit. 2,479
million at the then prevailing exchange rate) by Wheatley Partners, LP and Wheatley
Foreign Partners, LP (each of which is an affiliate of Barry Fingerhut, a Director of the
Company) and William Spier, a director of the Company and a US$ 1.6 million (Lit. 3,174
million) loan due to OAM S.p.A., respectively, were applied to subscribe to the Company's
Series B preferred stock on February 25, 2000.
The Company issued 10,000 shares with a fair value of Lit. 91 million in connection with
its purchase of the 75% of MGI Motorcycle GmbH that it did not already own. MGI
Motorcycle GmbH was disposed as part of the sale of motorcycle operations.
See Notes to Financial Statements
F-34
CENTERPOINT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions to Form 10-Q, but have not
been reviewed by an independent public accountant. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted. 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 and nine months ended September 30, 2001
are not necessarily indicative of the operating results for the full year.
The Company was originally incorporated in Delaware on August 9, 1995 under
the name of North Atlantic Acquisition Corp. to serve as a vehicle to effect a
merger, exchange of capital stock, asset acquisition or other business
combination with an operating business. On August 27, 1997 the Company
consummated an initial public offering consisting of 800,000 Units and 150,000
shares of Class B Common Stock, with each Unit consisting of one share of
Class A Common Stock and one warrant to purchase shares of Class A Common
Stock, which resulted in net proceeds to the Company of approximately
$8,000,000.
On August 18, 1998, the Company and Trident Rowan Group, Inc. ("TRG" or
"Trident Rowan") entered into a definitive agreement and plan of merger and
reorganization, as amended (the "Merger Agreement"), pursuant to which Moto
Guzzi Corp. merged with and into the Company, with the Company as the
surviving corporation (the "Merger"). Prior to the Merger, TRG and its
majority-owned subsidiary, OAM S.p.A. ("OAM"), together owned all the
outstanding common stock of Moto Guzzi Corp. The Merger, which occurred on
March 5, 1999, was treated as a reverse acquisition of the Company. The
results of operations and cash flows prior to the date of the merger are those
of Moto Guzzi Corp. Following the Merger, the Company adopted the December 31
financial reporting year of Moto Guzzi Corp. and financial statements are
prepared using the accounting principles of Moto Guzzi Corp.
In September 2000, the Company sold all its operating subsidiaries to Aprilia
S.p.A. ("Aprilia") and changed its name to Centerpoint Corporation pursuant to
the sale of its motorcycle operations to Aprilia.
The primary financial statements are shown in Italian lire because all of the
Company's material operating entities were based and operated in Italy. The
Company will evaluate if its functional currency will continue to be the lire,
based on decisions to be taken as to its future activities. Translation of
lire amounts into U.S. Dollar amounts in the current financial statements is
included solely for the convenience of the readers of the financial statements
and has been made at the rate of Lire 2,128 to U.S. $1, the approximate
exchange rate at September 30, 2001. It should not be construed that the
assets and liabilities, expressed in U.S. dollar equivalents, can actually be
realized in or extinguished by U.S. dollars at that or any other rate.
F-35
2. EARNINGS/LOSS FROM CONTINUING OPERATIONS PER SHARE
The numerator for the calculation of earnings/(loss) per common share have
been calculated as follows:
Three months to September 30, 2001
Sept. 30 Sept. 30 Sept. 30
2001 2001 2000
$'000 Lit.m Lit.m
-------- --------- --------
Profit from continuing operations (48) (102) (3,266)
Preferred Stock dividends - - (458)
-------- --------- --------
Earnings from continuing operations
attributable to common shareholders (48) (102) (3,724)
======== ========= ========
Nine months to September 30, 2001
Sept. 30 Sept. 30 Sept. 30
2001 2001 2000
$'000 Lit.m Lit.m
-------- --------- --------
Profit from continuing operations 92 196 (3,266)
Preferred Stock dividends - - (1,067)
-------- --------- --------
Earnings from continuing operations
attributable to common shareholders 130 298 (4,333)
======== ========= ========
3. RELATED PARTY TRANSACTIONS
On June 13, 2001 the Company, TRG and OAM entered into the TRG Loan Agreement
("TRG Loan") wherein subject to the terms and certain conditions set forth
therein the Company agreed to lend TRG US$4,200,000. The loan bears interest
at a rate of 5 % per annum, is repayable in full on the earlier of June 13,
2002 and the date on which the Company causes or permits a liquidation of the
Company, and was secured by the 300,000 shares of the Company common stock
currently owned by the TRG and 1,200,000 of the shares of the Company common
stock owned by OAM. In connection with the TRG Loan, OAM also entered into
the OAM Guaranty wherein it guaranteed TRG's obligations under the TRG Loan
Agreement. OAM's liability to the Company under the OAM Guaranty is limited
to the value of the Company shares pledged by OAM, as that term is used in the
OAM pledge agreement. The TRG Loan formed part of the payment to OAM for
control of the Company in the Bion transaction (See Note 4 Subsequent
Events). For the three and nine months ending September 30, 2001 interest of
$52,932 and $63,288 was accrued on the TRG Loan.
4. OUTSTANDING CLAIMS
APRILIA CLAIMS UNDER THE SHARE PURCHASE AGREEMENT; REQUEST FOR ARBITRATION
Pursuant to the terms, and subject to the conditions, of the Share Purchase
Agreement and the Escrow Agreement relating to the sale of Moto Guzzi's
operating subsidiaries, Lit. 9,375 million of the proceeds of the sale were
placed into escrow.
F-36
By letter dated December 21, 2000, legal counsel for Aprilia filed a claim
against Centerpoint under the Share Purchase Agreement alleging (i) that it
had failed to receive a resignation and release from Mr. Roeth, an executive
and director of MGI Motorcycle GmbH, and (ii) that the campaign recall with
respect to certain Moto Guzzi motorcycles was more critical than that forecast
in the Management Date Financial Statements and August 3, 2000 letter. By
letter dated February 5, 2001 Centerpoint's Italian legal counsel responded to
the December 21, 2000 letter specifically denying the alleged claims and
requesting that the parties meet to negotiate a release of the escrow funds,
as provided for in the August 3, 2000 letter.
On June 4, 2001 Aprilia's legal counsel sent a letter to Centerpoint which
reiterated the claims in its December 21, 2000 letter and alleged the
following: (i) that the cost of the recall campaign was estimated by Aprilia
to be approximately Lit. 4,500 million, which exceeded the Management Date
Financial Statement amount with respect to the recall campaign by Lit. 2,676
million, (ii) that technical problems related to various motorcycles were
likely to cost Aprilia approximately Lit. 5,308 million, and that such
technical problems had not been disclosed to Aprilia in connection with the
sale of the Moto Guzzi operations to Aprilia, and that Aprilia was entitled to
reimbursement of such costs, (iii) that Aprilia was entitled to reimbursement
of Lit. 148.5 million incurred by Aprilia in connection with the termination
of Mr. Roeth, an executive of MGI Motorcycle GmbH, (iv) that Aprilia was
entitled to reimbursement of Lit. 378 million in respect of unjustified credit
notes issued by MGI Motorcycle GmbH in favor of dealers and distributors, and
(v) that breaches of accounting principles by Moto Guzzi North America
entitled it to claims against Centerpoint in the amount of Lit. 1,100 million
(collectively with (i), (ii), (iii) and(iv), the "Alleged Claims").
On July 13, 2001 Centerpoint's Italian counsel sent a letter to Aprilia's
counsel contesting all of the Alleged Claims.
By letter dated July 13, 2001 Aprilia requested that IMI, the escrow agent
under the Escrow Agreement, pay them Lit. 7,611 million in respect of the
Alleged Claims. On July 26, 2001, in spite of being aware of Centerpoint
contesting of each of the Alleged Claims and its intention to seek
arbitration, IMI advised Centerpoint that it had paid Lit. 7,611 million from
the escrow account to Aprilia in respect of the Alleged Claims.
Pursuant to the Share Purchase Agreement and Escrow Agreement, each of which
provides that disputes among the parties be arbitrated, the Company filed with
the International Arbitration Court of the International Chamber of Commerce a
Request for Arbitration in Accordance with Article 4 of the ICC Rules of
Arbitration relating to the Alleged Claims and the payment by IMI. Subsequent
to the Company's filing, a committee was formed in Milano, Italy to hear the
case. The company is requesting restitution of the Lit. 7,610 million
(approximately US$3,692,000) paid to Aprilia, plus interest and costs. The
Arbitration committee was constituted on November 16, 2001, and a decision is
expected to be rendered within twelve to eighteen months of the original
filing date.
F-37
DISPUTE WITH IMI REGARDING ITS FEE
IMI, the Company's investment adviser in connection with the sale, acted as
fiduciary for the closing. At the Closing, but without the prior approval,
knowledge or consent of the Company, IMI was paid Lit. 11,401 million, in
respect of fees and expenses claimed by IMI to be due it under its engagement
letter with TRG and OAM. Since early July 2000, the Company and TRG have
disputed IMI's interpretation of the calculation of the fee due it under its
engagement letter, following indication by IMI of its basis of calculation.
The dispute relates to the respective interpretations of the Company, TRG and
IMI of the term "Total Transaction Value" as that term is used in the
engagement letter. Since that time, the Company and TRG discussed and sought
to negotiate with IMI concerning its alleged amount of the fee. IMI refused
to engage in negotiations and did not present any calculation of the fee to
the Company or TRG prior to the closing. After the closing and actual payment
to IMI of the alleged fee, IMI then presented a calculation and an invoice to
the Company for fees and expenses alleged by IMI to be due it under the
engagement letter in the amount of Lit. 11,401 million. In addition to
disputing the amount of the fee paid to IMI, the Company believes that IMI had
no right to cause its fee to be deducted from the sale proceeds, as the
Company was not a party to the engagement letter, and did not consent to any
such deduction. On February 11, 2002 the Company brought a suit against IMI
before the Civil Section of the Court of Milano, seeking reimbursement of Lit.
8,766 million (approximately US$4,253,000) of the Lit. 11,401 million
(US$5,532,000) paid to IMI at the closing. The first hearing in the case is
scheduled for May 27, 2002 and as at March 11, 2002 IMI has not yet filed its
defenses.
5. SUBSEQUENT EVENTS
In December 2001, the Board of the Company met to evaluate the alternative
strategies and investments available to the Company. Investec Ernst & Co.,
who had been hired in June 2001 to assist in this process, presented to the
Board their conclusions on a number of potential investments. After review of
the possible investments, the Board resolved to approve the acquisition of
19,000,000 shares of Bion Environmental Technologies, Inc., a publicly-held
Colorado corporation ("Bion"). Bion is an environmental service company
focused on the needs of confined animal feeding operations. Bion is engaged
in two main areas of activity: waste stream remediation and organic soil and
fertilizer production. Bion's waste remediation service business provides
confined animal feeding operations (primarily in the swine and dairy
industries) with treatment for the animal waste outputs. In this regard, Bion
treats their entire waste stream in a manner which cleans and reduces the
waste stream thereby mitigating pollution of the air, water (both ground and
surface) and soil, while creating value-added organic soil and fertilizer
products. Bion's soil and fertilizer products are being used for a variety of
applications including school athletic fields, golf courses and home and
garden applications.
On January 15, 2002, the Company closed the transaction with Bion by
purchasing 19,000,000 shares of restricted stock of Bion in exchange for
approximately US$8.5 million in cash (substantially all of the Company's
cash), the US$4.2 TRG Promissory Note (including accrued interest), and the
assignment of 65% of the Company's claims with respect to the escrow accounts
and claims against IMI. Unrestricted stock of Bion is traded on the OTC/BB
market under the ticker "BION".
F-38
Immediately upon consummation of this transaction, Bion purchased a 57.7%
majority interest in the Company from OAM. The total consideration paid by
Bion consisted of (i) US$3,700,000 in cash, (ii) the assignment of the US$4.2
million TRG Promissory Note (including accrued interest) and related loan
guarantees, (iii) the assignment of the 65% interest in the Company's claims
with respect to the escrow accounts and claims against IMI, (iv) the issuance
of 1,000,000 shares of Bion's common stock, and (v) the issuance of a warrant
to acquire 1,000,000 shares of Bion's common stock at a price of US$0.90, with
expiration date of January 10, 2007.
Under the Subscription Agreement and related Registration Rights Agreement,
Bion agreed among other things (i) file a with SEC a Registration Statement
with respect to the Bion Shares, as soon as practicable, and within 90 days of
the Company's filing with the SEC of its December 31, 2001 Form 10-K, and to
use its best efforts to cause such Registration Statement to be declared
effective as soon as practicable thereafter, (ii) to use its best efforts to
cause the Bion Shares to be distributed to the Company's common stockholders
in a tax efficient manner in accordance with applicable law, and (iii) to use
its best efforts to hold an Annual Meeting of Bion Shareholders during 2002,
in accordance with its by-laws and applicable law. It is expected that the
distribution will occur during the second half of calendar 2002. When that
distribution occurs, approximately 11,000,000 of Bion's shares will be
distributed back to Bion. Bion has advised the Company that it intends to
cancel such shares.
On March 14, 2002, the Company and Bion entered in an agreement effective
January 15, 2002 where the Company will pay $12,000 a month for management
services, support staff and office space. In addition, Bion will advance to
the Company sums needed to cure its delinquencies with the SEC, distribute
Bion shares to its shareholders, to locate and acquire new business
opportunities and for on-going expenses. Bion shall have no obligation to
make any advances in excess of $500,000. All sums due Bion shall be evidenced
by a convertible revolving promissory note. As additional consideration, Bion
shall receive a warrant to purchase 1,000,000 shares of the Company's common
stock at $3.00 per share until March 14, 2007.
David Mitchell, a director of the Company, is the Chairman, President, Board
member and a principal stock and warrant holder of Bion. Additionally a
portion of the proceeds of the Bion Investment were used to pay off US$718,485
of indebtedness of Bion owed to Mr. Mitchell.
On January 24, 2002, David Mitchell was elected as the Company's President and
CEO. David Mitchell is a founder, stockholder, option holder, former CEO of
the Company and currently is the only director of the Company.
Following the Bion Investment and Bion acquisition of Centerpoint Shares, all
of the Company's directors, other than David Mitchell, resigned from their
positions on the Company's Board of Directors. Bill Spier, one of the
Company's Directors until he resigned on January 24, 2002, sits on Bion's
advisory board. On January 21, 2002, Howard Chase, a director of the Company
until he resigned on January 15, 2002, joined the Board of Directors of Bion.
F-39
PRO FORMA FINANCIAL INFORMATION
The following historical and unaudited pro forma consolidated financial
information gives effect to Bion Environmental Technologies, Inc. and
Subsidiaries ("Bion" or the "Company") sale of 19,000,000 shares of Bion
common stock to Centerpoint Corporation ("Centerpoint"), the purchase of
3,459,997 shares of Centerpoint common stock by Bion from OAM S.p.A., and the
conversion of approximately $13,000,000 of Bion's debt to equity on January
15, 2002.
In preparing this pro forma data, the Company has used what it believes are
reasonable methods to conform the basis of presentation of the Company's and
Centerpoint's historical financial statements. Bion reports its results on
June 30 year-end, whereas Centerpoint reports on a December 31 year-end.
The unaudited pro forma consolidated balance sheet as of December 31, 2001 was
prepared by combining Bion's balance sheet at December 31, 2001 with
Centerpoint's balance sheet at September 30, 2001, giving effect to the stock
sale, merger and conversion of debt to equity as though it had been completed
on December 31, 2001.
The Company has not presented pro forma income statements. With the exception
of $1,624,000 of interest expense for the 12 months ended June 30, 2001
recorded by Centerpoint relating to shares of common stock issued to a related
party for assistance in financing and taken as a one time charge,
Centerpoint's income from continuing operations has been minimal and would not
have a material effect on the pro forma financial statements.
These pro forma statements are presented for illustrative purposes only. The
pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. The pro forma
consolidated financial statements do not purport to represent what the results
of operations or financial position of Bion would actually have been if the
stock sale and related transactions had in fact occurred on such dates, nor do
they purport to project the results of operations or financial position of
Bion for any future period or as of any date respectively.
F-40
Unaudited Pro forma Consolidated
Balance Sheet as of December 31, 2001
Bion's Bion
Bion Sale of Proforma Purchase of Conversion
Balance 19,000,000 Adjusted 57.67% of and Repayment
Sheet Shares Centerpoint Centerpoint Pro forma of all
December 31, Pro forma Pro forma September 30, Pro forma Con- Outstanding Pro forma
2001 Adjustments(1) Financing 2001 (7) Adjustments solidated Bion Debt As Adjusted
------------ -------------- ---------- -------------- ----------- ---------- ----------- -----------
Assets
Current:
Cash and cash
equivalents 47,264 8,500,000 8,547,264 461,000 (3,700,000)(3) 5,308,264 (894,748)(5) 4,413,516
Accounts
receivable 11,388 11,388 11,388 11,388
Claim receivable 2,487,000 2,487,000 (2,487,000)(3) 0 0
Investment in
Centerpoint 0 (3)(4)
Investment in Bion 14,250,000 (14,250,000)(2) 0
Prepaid expenses 8,333 8,333 45,000 53,333 53,333
----------- ---------- ---------- ---------- ----------- ---------- ----------- ---------
Total current
assets 66,985 10,987,000 11,053,985 14,756,000 (20,437,000) 5,372,985 (894,748) 4,478,237
----------- ---------- ---------- ---------- ----------- ---------- ----------- ---------
Net property and
equipment 159,472 159,472 159,472 159,472
----------- ---------- ---------- ---------- ----------- ---------- ----------- ---------
Other assets:
Note Receivable 80,341 3,263,000 3,343,341 (3,263,000)(3) 80,341 80,341
Patents, net of
accumulated
amortization of
$23,193 31,753 31,753 31,753 31,753
Deposits and
other 135,859 135,859 135,859 135,859
----------- ---------- ---------- ---------- ----------- ---------- ----------- ---------
Total other assets 247,953 3,263,000 3,510,953 0 (3,263,000) 247,953 0 247,953
----------- ---------- ---------- ---------- ----------- ---------- ----------- ---------
Total Assets 474,410 14,250,000 14,724,410 14,756,000 (23,700,000) 5,780,410 (894,748) 4,885,662
=========== ========== ========== ========== =========== ========== =========== =========
Liabilities and
Stockholders'
Deficit
Current:
Accounts
payable 306,524 306,524 20,000 326,524 326,524
Convertible
bridge notes
payable 7,193,402 7,193,402 7,193,402 (7,193,402)(6) 0
Notes payable,
related
parties -
current 5,874,162 5,874,162 5,874,162 (5,874,162)(5) 0
Current portion
of capital
lease obli-
gations 5,156 5,156 5,156 5,156
Accrued expenses
and note payable 51,678 51,678 103,000 154,678 154,678
----------- ---------- ---------- ---------- ----------- ---------- ----------- ---------
Total current
liabilities 13,430,922 0 13,430,922 123,000 0 13,553,922 (13,067,564) 486,358
=========== ========== ========== ========== =========== ========== =========== =========
Long-term
liabilities:
Long-term portion
of capital lease
obligations 1,974 1,974 0 1,974 0 1,974
----------- ---------- ---------- ---------- ----------- ---------- ----------- ---------
Total long-term
liabilities 1,974 0 1,974 0 0 1,974 0 1,974
----------- ---------- ---------- ---------- ----------- ---------- ----------- ---------
Total
liabilities 13,432,896 0 13,432,896 123,000 0 13,555,896 (13,067,564) 488,332
----------- ---------- ---------- ---------- ----------- ---------- ----------- ---------
Minority
Interest 162,000(4) 162,000 162,000
----------- ---------- ---------- ---------- ----------- ---------- ----------- ---------
Commitments and
contingencies
Total stockholders' (2)(3) (5)
equity (deficit) (12,958,486) 14,250,000 1,291,514 14,633,000 (23,862,000)(4) (7,937,486) 12,172,816(6) 4,235,330
----------- ---------- ---------- ---------- ----------- ---------- ----------- ---------
Total Liabilities
and Stockholders'
Equity (Deficit) 474,410 14,250,000 14,724,410 14,756,000 (23,700,000) 5,780,410 (894,748) 4,885,662
=========== ========== ========== ========== =========== ========== =========== =========
F-41
FOOTNOTES TO PRO FORMA BALANCE SHEET
1) To record Bion's sale of 19,000,000 shares of stock in consideration for
cash, a note receivable, and 65% of a litigation claim receivable.
Cash $ 8,500,000
Note receivable $ 3,263,000
Claim receivable $ 2,487,000
Stockholders' equity $14,250,000
2) To eliminate Centerpoint's investment in Bion.
Stockholders' equity $14,250,000
Investment in Bion $14,250,000
3) To record Bion's purchase of 57.67% of Centerpoint from OAM S.p.A. in
consideration for cash, a note receivable, stock, warrants, and 65% of a
litigation claim receivable.
Investment in Centerpoint $10,580,000
Note receivable $ 3,263,000
Cash $ 3,700,000
Claim receivable $ 2,487,000
Stockholders' equity (i) $ 1,130,000
(i) 1,000,000 shares of the Company's stock issued to OAM S.p.a.
at $0.75 per share. Additionally, 1,000,000 warrants were
issued to OAM S.p.a and are included in Stockholders' equity
at $380,000. These warrants were valued using the Black
Scholes pricing model.
4) To record the elimination of Bion's investment in Centerpoint and record
the minority interest in Centerpoint's net assets.
Stockholders' equity $10,742,000
Investment in Centerpoint $10,580,000
Minority interest $ 162,000
5) To record the conversion and repayment of convertible notes payable,
related parties of $4,979,414 including accrued interest of $1,280,179
into 8,378,999 shares of the Company's common stock and the payment of
non-convertible debt of $894,748.
Notes payable, related parties, - current $ 5,874,162
Cash $ 894,748
Stockholders' equity $ 4,979,414
6) To record the conversion of convertible bridge notes of $7,953,321
including unamortized debt discount of $759,919 into 10,630,078 shares
of the Company's common stock.
Convertible bridge notes payable $ 7,193,402
Stockholders' equity $ 7,193,402
F-42
7) The following historical and unaudited proforma consolidated financial
information gives effect to Centerpoint's purchase of 19,000,000 shares
of Bion's common stock in consideration of cash, a note receivable,
and 65% of a litigation claim receivable.
Centerpoint
Purchase of Proforma
Centerpoint 19,000,000 Adjusted
Balance Sheet Bion Shares Centerpoint
September 30, Proforma September 30,
2001 Adjustments 2001
------------- ----------- ------------
Assets
Current:
Cash and cash equivalents 8,961,000 (8,500,000(B) 461,000
Note receivable 4,263,000 (4,263,000)(A)(B) -
Claim receivable - (A)(B)
Investment in Centerpoint
Investment in Bion 14,250,000(B) 14,250,000
Prepaid expenses 45,000 45,000
---------- ----------
Total assets 13,269,000 14,756,000
========== ==========
Liabilities and Stockholders'
Deficit
Current:
Accounts payable 20,000 20,000
Accrued expenses and note
payable 103,000 103,000
---------- ---------
Total liabilities 123,000 123,000
Commitments and contingencies
Total stockholders' equity
(deficit) 13,146,000 1,487,000(A) 14,633,000
---------- ----------
Total liabilities and
stockholders' equity
(deficit) 13,269,000 14,756,000
========== ==========
A) To record the realization of 65% of a litigation claim receivable
and a reserve for uncollectible amounts on a note receivable.
(ii) Claim receivable $2,487,000
Reserve for uncollectible note $1,000,000
Stockholders' Equity $1,487,000
F-43
B) To record Centerpoint's purchase of 19,000,000 shares of Bion's
stock.
Investment in Bion $14,250,00
Cash $8,500,000
Note receivable $3,263,000
(ii) Claim receivable $2,487,000
ii) As partial consideration for its sale of 19,000,000 shares of common
stock to Centerpoint, Bion received 65% of certain claims that
Centerpoint has against Aprilia, S.p.A., an Italian corporation, the
purchaser of Centerpoint's motorcycle operations ("Aprilia") and Banca di
Intermediazione Mobiliare IMI S.p.A., an Italian corporation ("IMI"), the
investment banker for Centerpoint in the transaction. The Aprilia claim
is for funds paid to Aprilia, though disputed by the Company, from an
escrow account set up for contingent liabilities for the sale of the
motorcycle operations. The claim against IMI is with regard to a dispute
in calculating the fee they received as investment banker in the sale of
the motorcycle operations to Aprilia. The total of these two claims is
approximately $7,945,000. The 65% that Bion received for the sale of its
shares of common stock to Centerpoint was valued in the Bion transaction
at $2,487,000. This represents a 52% discount from the full amount of
the claim for an aggregate discounted value of $3,826,000. The
$3,826,000 value ascribed to the claim was arrived at through an internal
allocation made by Bion management based on its own evaluation of the
relevant facts and circumstances and its review of a fairness opinion
that was provided by an investment banking firm with regard to the
transaction as a whole, and there is no assurance that this, or any,
amount will ever be recovered. Bion utilized the 65% claim with a deemed
value of $2,487,000 as part of the consideration paid to OAM for the
purchase of 57.7% of Centerpoint's common stock. Centerpoint retained
35% of these claims. While these claims are carried on Centerpoint's
books at $0 value at September 30, 2001, Centerpoint booked a gain of
$2,487,000 for the sale of 65% of the claim at January 15, 2002, and will
evaluate the value of the remaining 35% of the claim for the first
quarter ending March 31, 2002 financial statements.
It should be noted that court and arbitration hearings in respect of the
claims are scheduled for the first half of 2002 and such hearings may
provide better indications as to the likely value of the claims before
Bion's fiscal year end at June 30, 2002.
In addition, an escrow account that was set up for contingent liabilities
for the sale of the motorcycle operations and eventual rights to the
balance of these funds amounting to approximately $875,000 is valued on
Centerpoint's books as $0. No value was ascribed to any potential claims
for funds held in this escrow account as it was not considered at the
time negotiations took place.
F-44
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amended Report to be signed on its behalf by
the undersigned hereunto duly authorized.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
Date: April 1, 2002 By:/s/ David J. Mitchell
-------------------------------------
David J. Mitchell, President and
Chief Executive Officer