UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number - 000-22813
CENTERPOINT CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3853272
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
18 East 50th St. 10 Floor New York, New York 10022
--------------------------------------------------
(Address of principal executive offices - Zip code)
Registrant's telephone number, including area code: (212) 758-6622
Former name, former address and former fiscal year, if changed since last
report.
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes ___ No X
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by checkmark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ____ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date.
Common stock, par value $.01 per share, 6,005,339 shares outstanding as of
April 9, 2002.
TABLE OF CONTENTS
Page
Part I - Financial Information 2
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS 3
ASSETS 3
LIABILITIES 3
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE THREE MONTHS ENDED JUNE 30, 2001 and 2000 4
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2001 and 2000 5
COMPREHENSIVE INCOME/(LOSS) 6
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW 7
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 8-12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13-14
Part II - Other Information 15
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
1
CENTERPOINT CORPORATION
September 30, 2001
Part I - Financial Information
2
CENTERPOINT CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS
September 30, 2001
Sept. 30 Sept. 30 Dec. 31
2001 2001 2000
US$'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
3
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
========= ========= =========
4
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
5
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 $'000 51 19,038 (966) (4,977) 14,167 (1,021)
====== ========= ======= ======= ======== ==========
Accumulated Other Comprehensive Income relates to translation differences from the conversion of Balance Sheets
of non-Italian entities.
See Notes to Consolidated Financial Statement
6
CENTERPOINT CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
Nine Months Ended September 30, 2001
Sept. 30 Sept. 30 Sept. 30
2001 2001 2000
US$'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 (used in) 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 discounted 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
7
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. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. For a summary of the registrant's accounting principles
and other footnote information, reference is made to Form 10-K dated March 15,
2002. 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.
8
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.
9
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. 7,611 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.
10
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".
11
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 with the 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.
12
CENTERPOINT CORPORATION
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Three Months Ended September 30, 2001 2000
Lit. m Lit. m
Interest income 116 108
Selling, general and administrative expenses (219) (16)
Other income, net 1 (11)
Finance expense: Shares issued to TRG Inc. in
connection with Preferred Stock issuance - (3,347)
----- ------
Net profit from continuing operations
before income taxes (102) (3,266)
Discontinued operations:
Gain on disposal of discontinued operations - 57,018
Preferred Stock dividends - (458)
----- ------
Net profit attributable to common shareholders (102) 53,294
===== ======
Results of Operations
Six Months Ended September 30, 2001 2000
Lit. m Lit. m
Interest income 717 108
Selling, general and administrative expenses (568) (16)
Other income, net 471 (11)
Finance expense: Shares issued to TRG Inc. in
connection with Preferred Stock issuance - (3,347)
----- ------
Net profit from continuing operations
before income taxes 196 (3,266)
Discontinued operations:
Gain on disposal of discontinued operations - 57,018
Preferred Stock dividends - (458)
----- ------
Net profit attributable to common shareholders 196 53,294
===== ======
On September 7, 2000, the Company completed the sale of its operating
subsidiaries to Aprilia. This sale represents the discontinuance of
motorcycle operations which were the Company's only activities and have been
accounted for as discontinued operations. The effective accounting date for
the sale was July 1, 2000, reflecting the last date for which financial
information on the subsidiaries is available.
13
The Company has recorded interest income of Lit. 116 million principally from
the TRG loan and administrative expenses of Lit. 219 million principally in
respect of compliance costs on continuing operations for the three months
ending September 30, 2001. In the corresponding period in 2000, the Company
recorded interest income of Lit. 108 million on fixed interest securities and
selling, general and administrative expenses of Lit. 16 million principally in
respect of compliance costs on continuing operations. The Company also had
Other Income of $Lit 11 million on the positive exchange differences on
continuing operations due to the denomination of the functional currency of
Italian Lire for the three months ending September 30, 2000.
For the quarter ending September 30, 2001 the Company had no profit or loss
for the discontinued motorcycle operations. For the quarter ending September
30, 2000, the Company had a gain on the disposal of the discontinued
motorcycle operations of Lit. 57,018 million.
The Company has recorded interest income of Lit. 717 million principally from
the TRG loan and Euro denominated fixed interest securities, administrative
expenses of Lit. 568 million, principally in respect of compliance costs on
continuing operations for the nine months ending September 30, 2001. In the
corresponding period in 2000, the Company recorded interest income of Lit. 108
million on fixed interest securities and selling, general and administrative
expenses of Lit. 16 million principally in respect of compliance costs on
continuing operations. The Company also had Other Income of $Lit 11 million
on the positive exchange differences on continuing operations due to the
denomination of the functional currency of Italian Lire for the nine months
ending September 30, 2000.
For the nine months ending September 30, 2001 the Company had no profit or
loss for the discontinued motorcycle operations. For the nine months ending
September 30, 2000, the Company had a loss on discontinued operations of Lit.
8,324 million and gain on the disposal of the discontinued motorcycle
operations of Lit. 57,018 million.
Liquidity and Financial Resources
The Company has US $ 8.961 million in cash pending evaluation of the
alternatives available to the Company with respect to future investment
activities. In June 2001, the Company engaged the investment banking firm of
Investec Ernst & Co. to assist the Company in its evaluation of strategic
alternatives.
Future cash needs; application of liquidity after September 30, 2001
In January 2002, as described above in Note 5 - Subsequent Events, the Company
used $8.5 million - the major part of its remaining funds at that date - as
part of the consideration for the subscription of 19,000,000 shares of Bion.
14
Part II - Other Information
Item 1. Legal Proceedings
Pursuant to 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.
In December 21, 2000 and June 2001, legal counsel for Aprilia filed claims
against the Company under the Share Purchase Agreement alleging various
breaches of representations and warranties by Company.
On July 23, 2001, in spite of being aware of the Company contesting of each of
the alleged claims and its intention to seek arbitration, IMI advised the
Company 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.
Further details concerning the alleged claims and proceedings are set forth
under "Aprilia Claims Under the Stock Purchase Agreement" above, which is
incorporated herein by reference.
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.
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
15
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CENTERPOINT CORPORATION
April 18, 2002 By: /s/ David Mitchell
----------------------------
David Mitchell
President
April 18, 2002 By: /s/ David Fuller
----------------------------
David Fuller
Principal Accounting Officer
17