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 June 30, 2000
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number - 000-22813
MOTO GUZZI CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3853272
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
299 Park Avenue, New York, New York 10022
(Address of principal executive offices - Zip code)
Registrant's telephone number, including area code: (212) 644-4441
--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
445 Park Avenue, New York, NY 10022
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes____ 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 ____
<PAGE>
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date.
Common stock, par value $.01 per share, 5,999,092 shares outstanding as of
August 29, 2000.
<PAGE>
MOTO GUZZI CORPORATION AND SUBSIDIARIES
Part I - Financial Information
<PAGE>
MOTO GUZZI CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2000
<TABLE>
<CAPTION>
June 30 June 30 Dec. 31
2000 2000 1999
ASSETS US$'000 Lit. m Lit. m
<S> <C> <C> <C>
Cash and cash equivalents 1,198 Lit. 2,430 Lit. 2,391
Receivables 15,328 31,086 28,433
Trade, less allowance of Lit. 2,245 (1999 - Lit. 2,350) 10,402 21,096 19,189
Receivables from related parties 3,254 6,600 6,846
Other receivables 1,672 3,390 2,398
Inventories 17,187 34,856 34,451
Raw materials, components and work-in-process 9,117 18,489 20,073
Finished products 8,071 16,367 14,378
Prepaid expenses 201 408 266
------------ ----------- -----------
TOTAL CURRENT ASSETS 33,914 68,780 65,541
------------ ----------- -----------
Property, plant and equipment 6,308 12,792 14,638
At cost 22,136 44,892 44,713
Less allowances for depreciation (15,828) (32,100) (30,075)
Goodwill net of amortization of Lit. 236
(1999 - Lit. 208) 13 26 54
Investments in and advances to MGI Motorcycle GmbH 1,016 2,060 491
Other assets 210 424 344
------------ ----------- -----------
TOTAL ASSETS 41,461 Lit. 84,082 Lit. 81,068
============ =========== ===========
Note:....The balance sheet as at December 31, 1999 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
</TABLE>
<PAGE>
MOTO GUZZI CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2000
<TABLE>
<CAPTION>
June 30 June 30 Dec. 31
2000 2000 1999
LIABILITIES US$'000 Lit. m Lit. m
<S> <C> <C> <C>
Advances from banks $ 12,173 Lit. 24,686 Lit. 29,957
Current portion of long-term debt 5,210 10,565 11,496
Loans due to related parties - - 3,254
Accounts payable 13,724 27,832 32,212
Amounts due to related and affiliated parties 171 346 80
Accrued expenses and other payables 5,316 10,778 6,904
------------ ----------- -----------
TOTAL CURRENT LIABILITIES 36,594 74,207 83,903
------------ ----------- -----------
Long-term debt, less current portion 767 1,557 2,027
Termination indemnities 3,922 7,955 7,973
Advances for redeemable preferred stock subscription - - 2,405
Redeemable preferred stock 12,297 24,940 -
SHAREHOLDERS' DEFICIT (12,119) (24,577) (15,240)
Convertible preferred stock, par value $0.01 per share:
Authorized 4,750,000 shares;
123,500 out of 160,000 Series B shares outstanding 1 2 -
Common stock, par value $0.01 per share:
Authorised 20,250,000 shares;
5,599,092 (1999 - 5,589,092) shares outstanding 49 100 100
Additional paid-in capital 19,837 40,229 39,834
Accumulated other comprehensive income (329) (668) 133
Accumulated deficit (31,677) (64,240) (55,307)
------------ ----------- -----------
LIABILITIES & SHAREHOLDERS' DEFICIT $ 41,461 Lit. 84,082 Lit. 81,068
============ =========== ===========
</TABLE>
Note:....The balance sheet as at December 31, 1999 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
<PAGE>
MOTO GUZZI CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months to June 30, 2000 and 1999
<TABLE>
<CAPTION>
June 30 June 30 June 30
2000 2000 1999
US $'000 Lire m. Lire m.
<S> <C> <C> <C>
Net sales $ 15,246 Lit. 30,918 Lit. 23,805
Cost of sales (13,927) (28,244) (20,997)
------------ ----------- -----------
1,319 2,674 2,808
Selling, general and administrative expenses (2,709) (5,493) (5,533)
Research and development (220) (447) (1,085)
Share of losses of affiliated companies (156) (316) -
------------ ----------- -----------
Operating loss (1,766) (3,582) (3,810)
Interest expense (359) (728) (1,221)
Other income, net (48) (98) (37)
------------ ----------- -----------
Loss before income taxes (2,173) (4,830) (5,068)
Income taxes (208) (422) (34)
------------ ----------- -----------
Net loss (2,381) (3,494) (5,102)
Preferred stock dividends (217) (441) -
------------ ----------- -----------
Loss attributable to common shareholders $ (2,598) Lit. (5,271) Lit. (5,102)
============ =========== ===========
LOSS PER SHARE: US $ Lire Lire
Basic ... $ (0.46) Lit. (941) Lit. (928)
============ =========== ===========
Diluted . $ (0.46) Lit. (941) Lit. (928)
============ =========== ===========
Weighted average number of common shares
outstanding during the period
Basic ... 5,599,092 5,599,092 5,496,000
============ =========== ===========
Diluted . 5,698,858 5,698,858 5,603,791
============ =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
MOTO GUZZI CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months to June 30, 2000 and 1999
<TABLE>
<CAPTION>
June 30 June 30 June 30
2000 2000 1999
US $'000 Lire m. Lire m.
<S> <C> <C> <C>
Net sales $ 25,145 50,994 41,378
Cost of sales (22,925) (46,491) (38,446)
------------ ----------- -----------
2,220 4,503 2,932
Selling, general and administrative expenses (4,616) (9,362) (9,454)
Research and development (385) (780) (1,551)
Share of losses of affiliated companies (156) (316) -
------------ ----------- -----------
Operating loss (2,937) (5,955) (8,073)
Interest expense (957) (1,940) (2,285)
Other income, net 42 85 25
------------ ----------- -----------
Loss before income taxes (3,852) (7,810) (10,333)
Income taxes (253) (514) (66)
------------ ----------- -----------
Net loss (4,105) (8,324) (10,399)
Preferred stock dividends (300) (609) -
------------ ----------- -----------
Loss attributable to common shareholders $ (4,405) (8,933) (10,399)
============ =========== ===========
LOSS PER SHARE: US $ Lire Lire
Basic ... $ (0.79) Lit. (1,597) Lit. (2,193)
============ =========== ===========
Diluted . $ (0.79) Lit. (1,597) Lit. (2,193)
============ =========== ===========
Weighted average number of common shares
outstanding during the period
Basic ... 5,594,202 5,594,202 4,741,409
============ =========== ===========
Diluted . 5,693,968 5,693,968 4,901,065
============ =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
MOTO GUZZI CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
AND COMPREHENSIVE INCOME/(LOSS)
June 30, 2000
<TABLE>
<CAPTION>
Common Stock Class B Preferred
Stock Additional
Paid-In
Shares Amount Shares Amount Capital
---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
At January 1, 2000 Lit.m 5,589,092 100 - - 39,834
Net loss. - - - - -
Translation adjustment - - - - -
Issuance of Series B Preferred Stock - - 123,500 2 23,980
Reclassification for redemption of preferred stock - - - - (23,982)
Accretion expense for preferred stock
redemption and related exchange movements - - - - -
Issuance of shares for MGI purchase 10,000 - - - 91
Amortization of non-cash finance charges - - - - 306
---------- ---------- ---------- ----------- ------------
At June 30, 2000 Lit.m 5,599,092 100 123,500 2 40,229
========== ========== ========== =========== ============
At June 30, 2000 $'000 49 1 19,837
========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other SHARE-
Comprehensive Accumulated HOLDERS Comprehensive
Income Deficit EQUITY Income/(Loss)
---------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
At January 1, 2000 Lit.m 133 (55,307) (15,240) 0
Net loss. - (8,933) (8,933) (8,933)
Translation adjustment 157 - 157 157
Issuance of Series B Preferred Stock - - 23,982 -
Reclassification for redemption of preferred stock - - (23,982) -
Accretion expense for preferred stock
redemption and related exchange movements (958) - (958) (958)
Issuance of shares for MGI purchase - - 91 -
Amortization of non-cash finance charges - - (306) -
---------------- ------------- ------------
At June 30, 2000 Lit.m (668) (64,240) (24,577) (9,734)
================ ============= ============
At June 30, 2000 $'000 (329) (31,677) (12,119) (4,800)
================ ============= ============
See Notes to Consolidated Financial Statement
</TABLE>
<PAGE>
MOTO GUZZI CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
June 30, 2000 and 1999
<TABLE>
<CAPTION>
June 31 June 30 June 30
2000 2000 1999
US$'000 Lit. m Lit. m
<S> <C> <C> <C>
Net loss $ (4,405) Lit. (8,933) Lit. (10,399)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 1,089 2,208 1,907
Gain(loss) on sales of operating assets (6) (13) 2
Share of losses of affilliates 156 316 -
Termination indemnities, net (9) (18) 244
Amortization of warrant issued for finance expense 151 306 -
Other operating activities 147 298 (297)
Changes in operating assets and liabilities:
Trade and other receivables (1,314) (2,665) (6,524)
Related party receivables (394) (800) (1,819)
Inventories (18) (37) (1,540)
Prepaid expenses (67) (135) (191)
Accounts payable and accrued expenses (332) (673) (221)
Related party payables 11 23 (1,174)
------------ ----------- -----------
Net cash used by operating activities (4,991) (10,123) (20,012)
------------ ----------- -----------
Investing activities:
Investment in MGI Motorcycle GmbH (542) (1,099) -
Purchases of property, plant and equipment (226) (458) (1,591)
------------ ----------- -----------
Net cash used by investing activities (768) (1,557) (1,591)
------------ ----------- -----------
Financing activities
(Decrease)/Increase in advances from banks (2,632) (5,338) 7,018
Proceeds from merger with NAAC - - 16,006
Proceeds from issuance of preferred stock 9,038 18,329 -
Principal payments of long-term debt (658) (1,335) (859)
------------ ----------- -----------
Net cash provided by financing activities 5,748 11,656 22,165
------------ ----------- -----------
Increase/(decrease) in cash (11) (24) 562
Exchange movement on opening cash 31 63 28
Cash, beginning of period 1,178 2,391 217
------------ ----------- -----------
Cash, end of period $ 1,198 Lit. 2,430 Lit. 807
============ =========== ===========
</TABLE>
<PAGE>
Supplemental information on non-cash activities
Advances to the Company 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, respectively, were applied
to subscribe to the Series B preferred stock on February 25, 2000 - See Notes to
financial statements.
The Company also 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 and Lit. 794 million of receivables have been reclassified as
"Investments and advances to MGI Motorcycle GmbH".
<PAGE>
MOTO GUZZI CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2000
1........Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. For a summary of the Registrant's accounting principles, and other
footnote information, reference is made to the Form 10-K, dated April 26, 2000.
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 six months ended June 30, 2000 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 TRG 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, 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. As the Company had no
operating activities prior to the Merger, the Merger was not considered as a
business combination as defined by APB16 and no pro forma information is shown.
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.
The primary financial statements are shown in Italian lire because all of the
Company's material operating entities are based and operate in Italy.
Translation of lire amounts into U.S. Dollar amounts is included solely for the
convenience of the readers of the financial statements and has been made at the
rate of Lire 2,028 to U.S. $1, the approximate exchange rate at June 30, 2000.
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.
<PAGE>
2........Execution and Delivery of Share Purchase Agreement; Stockholder
Approval of the Sale of our operating subsidiaries and the change of our name
Preliminary Share Sale and Purchase Agreement and Special Meeting of
Stockholders
On April 14, 2000, we entered into a Preliminary Share Sale and Purchase
Agreement (the "Share Purchase Agreement") with Aprilia S.p.a. ("Aprilia")
providing for the sale to Aprilia of our four operating subsidiaries: (i) Moto
Guzzi, S.p.A., (ii) MGI Motorcycle GmbH, (iii) Moto Guzzi North America Inc.,
and (iv) Moto Guzzi France S.a.r.l. (the "Subsidiaries") for Lit. 71.5 billion
(approximately $35.2 million) plus or minus the amount by which the
subsidiaries' net worth at April 30, 2000 is more or less than its net worth at
December 31, 1999, subject to the approval of the holders of a majority of our
outstanding Class A common stock.
Under the Share Purchase Agreement we also agreed that beginning May 2, 2000,
Aprilia would oversee the management of the four subsidiaries. To facilitate
this, we put two Aprilia designees on the board of directors of each of the
subsidiaries beginning May 2, 2000. During the period Aprilia is overseeing the
operations of the subsidiaries, it must cause the subsidiaries to conduct their
operations in the ordinary course.
On August 3, 2000 we and Aprilia entered into a Side Letter dated August 2, 2000
which supplements and amends the Share Purchase Agreement and provides among
other things as follows:
o that the net worth of our subsidiaries at April 30, 2000 is minus Lit.
6,000,000, that the difference between the net worth of our
subsidiaries as shown in the Interim Financial Statements dated
December 31, 1999 and the Management Date Financial Statements dated
April 30, 2000 is plus Lit. 7,993,000,000, and that in accordance with
article 3.6 of the Share Purchase Agreement Aprilia shall pay into the
Escrow Account Lit. 7,993,000,000;
o that with respect to costs to be incurred in connection with the
recall of certain batches of motorcycles to replace certain of their
components if, at completion of the recall campaigns, the cost sustain
less any reimbursement received from insurance companies and Moto
Guzzi suppliers is lower than Lit. 1,824,000,000, then the difference
between the cost sustained and Lit. 1.824.000.000 will be paid by
Aprilia to us;
o that the amount of shareholders' loans at the Management Date was Lit.
2,074,000,000, which amounts shall be paid to us at the closing date
in accordance with article 3.4.2 (iv) of the Share Purchase Agreement;
o with respect to the Escrow Agreement, at the closing date the Escrow
Amount shall be reduced to Lit 9,375,000,000 and the amount of the
first tranche of the Escrow Fund indicated in article 5.1 (a) of the
Escrow Agreement is Lit. 7,000,000,000;
o as soon as practicable after the Closing Date and before December
31st, 2000 we and Aprilia will discuss in good faith the possibility
of an early release to us of the first tranche of the Escrow Amount,
net of the amount of any claims agreed to at that time;
o immediately after the Closing Date Aprilia will cause Moto Guzzi SpA
to fully co-operate in our efforts to obtain tax amnesties and tax
clearance certificates from the fiscal authorities, at our expense,
and should such certificates be obtained we and Aprilia will
immediately discuss in good faith an early release of a substantial
part of the second tranche of the Escrow Amount;
o that we and Aprilia would use all efforts to cause the closing of the
sale of the Subsidiaries to occur on or before August 31st, 2000, and
in any case the closing shall take place before September 15, 2000,
thereby modifying the original August 31st deadline for the closing.
On July 22, 2000 our Proxy Statement dated July 20, 2000 relating to the
proposed sale of our operating subsidiaries and the change of our name was
mailed to all of our Class A stockholders of record as of July 18, 2000, the
record date for the special meeting of stockholders to consider such proposals.
On August 11, 2000 at 10:00 a.m. New York time, at 200 Park Avenue, New York,
New York, the offices of Clifford Chance Rogers & Wells LLP, we called the
special meeting of stockholders to order. At the special meeting 4,399,784
shares of Class A common stock were represented in person or by proxy,
representing 73.34% of our issued and outstanding shares of Class A common stock
on the record date, thereby constituting a quorum. The following proposals were
presented to our stockholders at the special meeting: (i) a proposal to sell our
four operating subsidiaries pursuant to the Share Purchase Agreement, dated as
of April 14, 2000, with Aprilia S.p.A; and (ii) a proposal to amend our
Certificate of Incorporation to change our name to "Centerpoint Corporation".
At the special meeting, the holders of 4,399,774 shares of our Class A common
stock (representing 73.33% of shares of record) voted in favor of the proposal
to sell our four operating subsidiaries to Aprilia SpA, and the holders of
4,397,314 shares of our Class A common stock (representing 73.31 % of shares of
record) voted in favor of the proposal to change our name to "Centerpoint
Corporation", thereby approving the proposals.
No holders of shares of Class A common stock voted against the proposal to sell
our four operating subsidiaries to Aprilia SpA, and the holders of ten shares
abstained with respect to the proposal.
The holders of 2,400 shares of Class A common stock voted against the proposal
to change the Company's name to Centerpoint Corporation and no holders of shares
abstained from voting with respect to the proposal.
A closing with respect to the sale of the subsidiaries has been scheduled for
September 6, 2000.
Agreement with OAM and Trident Rowan to hold a Meeting of Stockholders within 90
days of the closing of the sale of our operating subsidiaries to consider a
proposal to liquidate our assets and dissolve the Company
In connection with the execution and delivery of the Share Purchase Agreement
described above we agreed with OAM and Trident Rowan by letter dated April 14,
2000 (as amended), that we will, 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 our assets and dissolve the Company. All holders of
Class A common stock will have an opportunity to vote on such a proposal.
However, because OAM owns 58% of the Class A common stock, it can approve the
liquidation even if no other stockholders vote in favor of it. Conversely, the
liquidation will not be approved unless OAM votes in favor of it. Although OAM
and Trident Rowan insisted that we agree to submit a liquidation proposal to our
stockholders, OAM is not committed to vote its shares of Class A common stock
for the liquidation proposal. It is also possible that OAM, Trident and we may
amend the April 14th letter to modify or remove the requirement that we hold a
stockholder meeting to consider and vote upon a liquidation proposal.
OAM has advised us that they have not, at this time, decided how they will vote
with respect to a liquidation proposal.
Following the closing of the sale we intend to seek to find one or more other
companies in which to invest proceeds from the sale. If we do so, we may propose
the acquisition of, or an investment in, another company or companies as an
alternative to liquidation at any stockholder meeting called to consider a
liquidation proposal.
<PAGE>
3. Issuance 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 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, for $100 per share (an
aggregate price of $12,350,000). Fineco and its affiliates purchased 60,000
shares and TRG purchased 35,000 shares, for cash. Wheatley Partners LP, Wheatley
Foreign Partners LP and Mr. 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 $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 is 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 is convertible into Class A Common Stock
at a conversion price of $5.00, based upon the liquidation preference of the
Series B Preferred Stock ($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.
There are several events which, among other things, will reduce the conversion
price of our Series B preferred stock from $5 per share of Class A common stock
(20 shares of Class A common stock for each share of Series B preferred stock)
to $2 per share (50 shares of Class A common stock for each share of Series B
preferred stock) and will require us immediately to redeem the Series B
preferred stock for $100 per share, plus accrued and unpaid dividends. One of
these events is stockholder approval of a sale of all or substantially all our
assets. Because the sale to Aprilia will be a sale of substantially all of our
assets, our stockholders' approval of the sale on August 11, 2000 would have
reduced the conversion price of the Series B preferred stock and require us to
redeem it. We have agreed with the Series B preferred stockholders that we will
redeem the Series B preferred stock on September 30, 2000 and they have agreed
not to convert their Series B stock if we redeem the stock by this date.
If, for any reason, we do not close the sale of our subsidiaries to Aprilia
S.p.A. before September 30, 2000, we may not be able to prevent conversion of
the Series B preferred stock at the reduced rate. If all the Series B preferred
stock were converted into Class A common stock at the reduced rate, that would
more than double the outstanding Class A common stock and would dilute the per
share interest of the existing Class A common stockholders in the proceeds of
the sale of our subsidiaries by approximately 50% (even though we would be
retaining the $12.35 million of those proceeds which we would otherwise have to
use to redeem the Series B preferred stock).
If, for any reason, we do not close the sale of our subsidiaries to Aprilia
S.p.A. before September 30, 2000, we may have to redeem our Series B preferred
stock shortly, and in any event we have to redeem it by December 31, 2001. Among
the events which would require us to redeem our Series B preferred stock before
December 31, 2001 (and would reduce the conversion price to $2 per share) is a
default by us or our subsidiaries in obligations totaling more than $250,000. It
is possible that our subsidiaries' current or future delinquencies in paying
their trade debt would be such a default. We are also in violation of
requirements in our Lit. 10 billion (approximately $5.0 million) credit
agreement with Centrobanca S.p.A. that we meet various financial ratio tests.
Indeed, it is possible that, because of delinquent trade debt and violations of
our credit agreement with Centrobanca, we were required to redeem our Series B
preferred stock when it was issued. However, we have obtained acknowledgement
from Fineco, S.A., the holder of approximately 48% of the Series B preferred
stock that delinquent trade debt and certain violations of our credit agreement
with Centrobanca S.p.A. existing when we issued the Series B shares is not an
event that required us to redeem the Series B preferred stock or reduced its
conversion price). Nonetheless, if Centrobanca were to declare our obligations
under that credit agreement to be due, we probably would be required to redeem
the Series B preferred stock. If we became required to redeem the Series B
preferred stock, but did not sell our subsidiaries, we would not have the funds
with which to meet that requirement. If the holders of the Series B preferred
stock were to convert their shares into Class A common stock at the reduced
conversion price, the existing holders of Class A common stock would suffer
substantial dilution of their interest in the Company.
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 Wheatley
advances and Lit. 3,174 million in respect of the OAM loan for a total of Lit.
23,982 million.
If the Sale is not consummated, the Company believes that lack of liquidity,
particularly following a seasonal liquidity low-point expected at the end of the
third quarter, would likely mean that it would be in default of the terms of the
preferred stock before the end of the year. A failure to consummate the Sale
would also likely cause the Company's lenders, including Centrobanca (See Note
5), to review the Company's credit lines which could result in Centrobanca
declaring us to be in default under our credit agreement with them and require
us to redeem the Series B preferred stock.
Upon issuance, the Company reclassified the Series B preferred stock outside of
shareholders equity and has booked accretion expense in the three months ended
June 30, 2000 of Lit. 958 million in respect of amortization of costs (estimated
based on redeeming the preferred stock at the then estimated earliest possible
date of July 31, 2000) and exchange differences which arise as the Company's
obligation is denominated in U.S. Dollars.
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
$.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.
Additionally, in connection with Fineco's purchase of the Series B shares the
Company paid a commission of $180,000 to Andrea delle Valle, a director of TRG,
and paid $80,000 to Investec Ernst, where Mark Segall, a director of TRG, is an
executive officer.
<PAGE>
4. Purchase of outstanding securities of MGI Motorcycle GmbH
In March 1999, the Company acquired for DM 100,000 in cash (Lit. 99 million)
plus 10,000 shares of its common stock with an estimated fair value of Lit. 91
million, the 75% of the outstanding securities of MGI Motorcycle GmbH ("MGI")
which it did not already own. The Company had previously acquired a 25%
shareholding in 1996 when MGI Motorcycle GmbH was formed as the exclusive
importer of Moto Guzzi motorcycles in Germany, replacing the former exclusive
importer for Germany. The Company also made a cash infusion of DM 900,000 (Lit.
891 million) into MGI in March 2000. Further trade and other balances due from
MGI of Lit. 794 million were also converted into long-term advances so as to
give MGI the capital base required to expand operations in Germany.
MGI Motorcycle GmbH has not been consolidated as at June 30, 2000 and is shown
in the balance sheet at cost less the Company's share of losses through June 30,
2000. The effects of the acquisition, net of elimination of sales and purchases
by the Company to MGI, were not material to the Company.
<PAGE>
5. Liquidity and going concern
The Company has suffered recurring losses from operations and negative cash
flows during the last three years. As described above, on February 25, 2000, the
Company raised $9.2 million net (Lit. 18.3 billion at such date) by way of issue
of Series B preferred stock.
Moto Guzzi is also not in compliance with certain covenants related to a Lit.
10,000 million credit facility which facility has been classified as a current
liability in the consolidated balance sheet. The Company disclosed this matter
to the lender at the end of 1998. The lender has not declared the loan in
default and negotiations with the lender to define revised terms of this loan
have not been concluded. There can be no assurance that such negotiations will
conclude on terms satisfactory to the Company.
Arrears of payment to suppliers, which reached approximately Lit. 15 billion in
January 2000, prior to the above financing, have also affected component supply
and production in the first quarter of 2000 and thus limited the Company's
ability to generate cash from operations. The financing raised in February
enabled the Company to significantly reduce arrears to suppliers and is expected
to enable the Company to operate at least through September 2000. Due to
seasonal factors and continuing losses, the Company may again have difficulties
in meeting current payables to suppliers after August 2000, if it does not
obtain further financing or if, for any reason, the sale of the Subsidiaries
described in Note 2 is not consummated. There can be no assurance that the sale
of the Subsidiaries will occur or that the Company will be able to raise
alternative finance on satisfactory terms, or at all. Accordingly, there is
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might be necessary
should the Company be unable to continue as a going concern.
<PAGE>
6. 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, translation difference from the
conversion of balance sheets of non-Italian entities and accretion expense and
related exchange differences related to the potential redemption of its 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 six
months to June 30, 2000 are as follows.
Accretion Accumulated
Cumulative expense and other
translation related exchange comprehensive
difference movements income
--------------- --------------- ---------------
Balance January 1, 2000 133 - 133
Movement for period 157 (958) (801)
--------------- --------------- ---------------
Balance June 30, 2000 290 (958) (668)
=============== =============== ===============
<PAGE>
MOTO GUZZI CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Significant material events with respect to the Company that impact the Company
and the discussion set forth below is subject to and qualified by the
information set forth below in the Notes to the Interim Financial Statements
under Note 2 - Execution and Delivery of Share Purchase Agreement and Note 3 -
Issuance of Series B Preferred Stock.
Results of Operations for the 3 Months Ended June 30, 2000 compared to 1999
<TABLE>
<CAPTION>
Jun. 30 Jun. 30
2000 1999
Lit.m Lit.m
<S> <C> <C> <C> <C>
Net sales 30,918 100.0% 23,805 100.0%
Cost of sales (28,444) (91.4%) (20,997) (88.2%)
------------ -----------
2,674 8.6% 2,808 11.8%
Selling, general and administrative expenses (5,493) (17.8%) (5,533) (23.2%)
Research & development (447) (1.4%) (1,085) (4.6%)
Share of losses of affiliate companies (316) (1.0%) -
------------ -----------
(3,582) (11.6%) (3,810) (16.0%)
Interest expense (728) (2.4%) (1,221) (5.1%)
Other expense, net (98) (0.3%) (37) (0.2%)
------------ -----------
Loss before income taxes (4,408) (14.3%) (5,068) (21.3%)
Income tax expense (422) (1.4%) (34) (0.1%)
------------ -----------
Net loss (4,830) (15.6%) (5,102) (21.4%)
Preferred Stock dividends (441) (1.4%) - -
------------ -----------
Net loss attributable to common stockholders (5,271) (17.0%) (5,102) (21.4%)
============ ===========
</TABLE>
Net sales for the three months ended June 30, 2000 increased by Lit. 7.1 billion
or 29.9% to Lit. 30.9 billion from Lit. 23.8 billion for the comparative period
in 1999, principally due to a more favorable sales mix and to an increase of
9.8% in unit sales to 2,001 in 2000 from 1,823 in 1999. The favorable effect of
sales mix was principally derived from sales of the Company's V-11 Sport model,
which was introduced in Europe in September 1999 and in the U.S. in February
2000.
Gross margins decreased to Lit. 2.7 billion or 8.6% in 2000 from Lit. 2.8
billion or 11.8% in 1999. The decrease is principally due to a lit. 1,800
million charge for product recall costs which more than offset the benefits from
price increases of 3-6% made from the beginning of 2000 and to the more
favorable product mix and to increased volumes.
Selling, general and administrative expenses were substantially unchanged in
2000 compared to 1999. Expenses at Moto Guzzi North America Inc. increased by
Lit. 0.4 billion or 49.9% due to expense related to a more aggressive approach
in advertising products and motivating sales. This offset decreases in Italy and
corporate costs of Lit 0.5 billion or 11.8% reflecting reduced administrative
personnel and a strict control of costs.
Research and development expenditure was limited to Lit. 0.4 billion. Aprilia
SpA, who assumed management of the operating subsidiaries from May 2, 2000 have
been evaluating product plans and expenditure on existing projects was limited
in the period.
Interest expense decreased from Lit. 1.2 billion in 1999 to Lit. 0.7 billion in
2000 principally due to the absence of a Lit. 0.3 billion non cash charge in
1999 for amortization of a warrant to purchase shares issued in 1999 in respect
of ongoing parent company financing and to lower cash interest from lower levels
of advances from banks in 2000 compared to 1999.
As a result of the above factors, net loss for the three months ended June 30,
2000 increased to Lit. 5.3 billion for compared to Lit. 5.1 billion for the
three months ended June 30, 1999.
Results of Operations for the 6 Months Ended June 30, 2000 compared to 1999
<TABLE>
<CAPTION>
Jun. 30 Jun. 30
2000 1999
Lit.m Lit.m
<S> <C> <C> <C> <C>
Net sales 50,994 100.0% 41,378 100.0%
Cost of sales (46,491) (91.2%) (38,446) (92.9%)
------------ -----------
4,503 8.8% 2,932 7.1%
Selling, general and administrative expenses (9,362) (18.4%) (9,454) (22.8%)
Research & development (780) (1.5%) (1,551) (3.7%)
Share of losses of affiliate companies (316) (0.6%) - -
------------ -----------
(5,955) (11.7%) (8,073) (19.5%)
Interest expense (1,940) (3.8%) (2,285) (5.5%)
Other income, net 85 0.2% 25 0.1%
------------ -----------
Loss before income taxes (7,810) (15.3%) (10,333) (25.0%)
Income tax expense (514) (1.0%) (66) (0.2%)
------------ -----------
Net loss (8,324) (16.3%) (10,399) (25.1%)
Preferred Stock dividends (609) (1.2%) - -
------------ -----------
Net loss attributable to common stockholders (8,933) (17.5%) (10,399) (25.1%)
============ ===========
</TABLE>
Net sales for the six months ended June 30, 2000 increased by Lit. 196 billion
or 23.2% to Lit. 51.0 billion from Lit. 41.4 billion for the comparative period
in 1999, principally due to a more favorable sales mix and to an increase of
8.3% in unit sales to 3,292 in 2000 from 3,041 in 1999. The favorable effect of
sales mix was principally derived from sales of the Company's V-11 Sport model,
which was introduced in Europe in September 1999 and in the U.S. in February
2000.
Gross margins increased to Lit. 4.5 billion or 8.8% in 2000 from Lit. 2.9
billion or 7.1% in 1999. The decrease is principally due to the benefits from
price increases of 3-6% made from the beginning of 2000 and to the more
favorable product mix and to increased volumes which more than offset a Lit.
1,800 million charge made in the second quarter for product recall. Without this
recall charge, margins in the six months to June 30, 2000 would have been 12.4%.
Selling, general and administrative expenses were slightly lower in 2000
compared to 1999. Expenses at Moto Guzzi North America Inc. increased by Lit.
0.9 billion or 61.1% due to expense related to a more aggressive approach in
advertising products and motivating sales. This offset decreases in Italy and
corporate costs of Lit 1.1 billion or 15.3% reflecting reduced administrative
personnel and a strict control of costs.
Research and development expenditure was limited to Lit. 0.8 billion. Aprilia
SpA, who assumed management of the operating subsidiaries from May 2, 2000 have
been evaluating product plans and expenditure on existing projects was limited
prior to this date due to financial constraints.
Interest expense decreased from Lit. 2.3 billion in 1999 to Lit. 1.9 billion in
2000 principally due to the absence of a Lit. 0.3 billion non cash charge in
1999 for amortization of a warrant to purchase shares issued in 1999 in respect
of ongoing parent company financing and to lower cash interest from lower levels
of advances from banks in 2000 compared to 1999.
As a result of the above factors, net loss for the six months ended June 30,
2000 decreased to Lit. 8.9 billion compared to Lit. 10.4 billion for the six
months ended June 30, 1999.
Liquidity and Financial Resources
Operations
Cash outflows from operations in the six months to June 30, 2000 were Lit. 10.1
billion compared to Lit. 20.0 billion in 1999 period. These cash outflows
related to losses from operations, adjusted for non-cash items, of Lit. 5.8
billion and working capital movements contributed a net negative Lit. 4.3
billion. The most significant working capital movement was Lit. 3.4 billion
increase in trade receivables due to increased sales in 2000. Trade and other
payables decreased Lit. 0.7 billion reflecting different trends in the first two
quarters: In the first quarter, payables decreased as the Company applied funds
received from the issuance of Series B preferred stock to pay supplier arrears
and restore component supply; and in the second quarter trade and other payables
increased due to improved supplier credit as well as accrual of Lit.. 1,800
million for product recall costs.
Investment activities
The investment in MGI Motorcycle GmbH "MGI" reflects the acquisition of the
outstanding 75% of this Company and a contemporaneous capital injection made
into MGI.
Capital expenditures principally related to maintenance and replacement capital
expenditures. Capital expenditure had been curtailed due to the Company's lack
of liquidity.
Financing Activities
The decrease in advances from banks principally reflects reduced recourse to
advances against trade receivables and reduction of some overdraft facilities
funded by the proceeds of the issuance of Series B preferred stock.
Cash from the Issuance of Series B Preferred Stock of Lit. 18.3 billion reflects
the approximately U.S. $ 9.2 million of cash raised, net of expenses, as
described in Note 3 to the Interim financial statements.
Future Liquidity Needs
The discussion set forth below is subject to and qualified by the information
set out in Note 2 to the Interim Financial Statements "Execution and Delivery of
Share Purchase Agreement".
If the Company were to implement its strategic plan to substantially increase
production and sales, it would be required to make total investments in research
and product development of some Lit. 50 billion (approximately $25 million) in
the five year period from 2000 through 2004. The plan also contemplates
investments of Lit. 20 billion (approximately $10 million) in production plant
and machinery and information systems. Much of the production machinery at Moto
Guzzi's facility is aged and in need of extensive modification, improvement or
replacement. Moto Guzzi believes that the existing plant at Mandello del Lario,
Italy has a potential production capacity that will be sufficient for its needs
for at least the next three/four years and is not actively seeking any other
alternatives at the present time. Moto Guzzi will have to make significant
investments in the existing plant in order that it can operate competitively.
Such required modernization may result in production interruptions.
The Company expects that, over the next four years, significant further capital
will be required to complete the planned overhaul. While anticipated increases
in sales during the period, if realized, would provide a significant portion of
the needed capital, anticipated internally generated cash and currently
available bank financing, in the aggregate, will not be sufficient to enable the
Company to increase production and sales rapidly enough to generate the
remaining needed capital. Moreover, in 2000 and in the five years ended December
31, 1999, Moto Guzzi has not generated cash from operations.
In February 1998 Moto Guzzi obtained a Lit. 10,000 million 10 year credit
facility, drawn down in April 1998, with principal repayments commencing from
the third year. The terms of the loan included covenants relating to the share
capital and equity (according to local Italian accounting principles) of Moto
Guzzi S.p.A as at December 31, 1998. Due to the losses in 1998 and delays in
closing the merger, Moto Guzzi is not in compliance with these covenants, the
consequence of which is that the lender can request immediate repayment of the
loan. The loan is classified as a current liability in the balance sheet as at
December 31, 1999 and 1998. The Company has advised the lender of the
non-compliance. No assurance can be given that negotiations with the lender will
successfully conclude on terms satisfactory to the Company.
In August, 1999, certain directors and their affiliates advanced $1.25 million
(approximately Lit. 2.3 billion) to meet working capital obligations at such
date. The Company has experienced cash flow shortages in September 1999 through
February 2000 and had accumulated arrearages to suppliers of approximately Lit.
15.0 billion by February 2000. This amount includes approximately Lit. 5.0
billion of supplier payments for which the company habitually has enjoyed
extended credit terms beyond due payment dates, but for which no formal
arrangements for such extended credit terms exist. As described in Note 3 to the
Interim Financial Statements, the Company raised $9.2 million (Lit. 18.3
billion) in February 2000 to enable it to maintain operations.
As described in Note 2 to the Interim Financial Statements, on April 14, 200 the
Company entered into a Share Purchase Agreement under which, if consummated, it
will sell all of its operating subsidiaries to Aprilia S.p.A. The Company has
satisfied the material conditions in the agreement including approval of
shareholders and closing is expected in early September, though there can be no
assurance that the sale will be consummated. If it fails to be consummated such
failure is likely to have a material adverse effect on the Company. Accordingly,
there is substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.
Potential Effects of the European Common Currency on the Company's Business
The Company's business is substantially located in and operates in Italy. On
January 1, 1999, Italy was admitted as one of 11 European countries in to
participate in the adoption of the new European common currency, the Euro.
The Euro is expected to have significant effects on the Company's business.
Among many potential economic factors, the proposed common currency is expected
to increase competition within the common currency zone. Because the adoption of
the Euro will require competitive businesses located in different participating
countries to price their products in a single currency, the historical ability
of such companies to increase or reduce prices without affecting operating
results in their home country's currency will be largely eliminated.
The uniform currency will also likely result in the establishment of new
Euro-based pricing points, e.g., Euro 9,999 or Euro 19,999. These new pricing
points may differ from the current prices charged for such products, which could
be advantageous or disadvantageous to a company, depending upon whether the
Euro-based price point is higher or lower than the prices charged before the
pricing policies and model specifications to most competitively deal with the
new pricing points. The Company will have to re-evaluate its pricing policies
and model specifications to most competitively deal with the new pricing points.
The Company also expects that the introduction of the Euro will increase
consolidation within industries and industry sectors, as currency translation
risks and competitive opportunities diminish within the common currency zone.
National regulatory barriers are also likely to fall as participating countries
harmonize their rules to promote intra-member commerce and cross-border
information exchange.
The combination of pricing transparency and consolidation is likely to increase
competition within the common currency zone generally. To the extent that
competitors of the Company participate in the expected consolidation, the
Company may in the future face competitors which are even larger and better
capitalized than the competitors it faces now.
Additionally, interest rates are likely to stabilize across the common currency
zone. Interest rates in Italy have fallen since 1997, partly in response to
anticipation of the introduction of the Euro.
The Company has not yet fully evaluated the ramifications of the Euro because
national European currencies continue to function as more dominant benchmarks
for pricing and commercial transactions with customers and suppliers in the
first months of the phasing in of the Euro. Adoption of the Euro is taking place
over a two-year transition phase in which both the Lire and the Euro are valid
currencies for business transaction in Italy.
The Company also makes significant export sales outside the common currency zone
and the prices of certain commodities used in its manufacturing processes may be
affected by the value of the Euro. The implementation of the Euro within the
common currency zone could have unanticipated consequences on the economies of
participant countries which could affect demand for the Company's products.
The European Common Currency could have a significant effect on the Company's
accounting systems which could require significant modification or replacement.
Management believes that the Company's businesses do not have unique or
custom-tailored requirements for accounting systems and that it could rapidly
and inexpensively change to "off-the-shelf" systems at an appropriate time if
existing systems prove not to be adequate. The Company is not able to evaluate
these matters or the effects on international financial and payment systems with
which it interacts at the present time. The Company will address these issues in
the current year and in 2001 as further guidelines and information become
available. Adoption of the Euro will also lead to the Company reporting its
results in that currency instead of the Italian Lire from the fiscal year ended
December 31, 2002, and thereafter.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
SUBSEQUENT EVENTS
Preliminary Share Sale and Purchase Agreement and Special Meeting of
Stockholders
On April 14, 2000, we entered into a Preliminary Share Sale and Purchase
Agreement (the "Share Purchase Agreement") with Aprilia S.p.a. ("Aprilia")
providing for the sale to Aprilia of our four operating subsidiaries: (i) Moto
Guzzi, S.p.A., (ii) MGI Motorcycle GmbH, (iii) Moto Guzzi North America Inc.,
and (iv) Moto Guzzi France S.a.r.l. (the "Subsidiaries") for Lit. 71.5 billion
(approximately $35.2 million) plus or minus the amount by which the
subsidiaries' net worth at April 30, 2000 is more or less than its net worth at
December 31, 1999, subject to the approval of the holders of a majority of our
outstanding Class A common stock.
On August 3, 2000 we and Aprilia entered into a Side Letter dated August 2, 2000
which supplements and amends the Share Purchase Agreement and provides among
other things as follows:
o that the net worth of our subsidiaries at April 30, 2000 is minus Lit.
6,000,000, that the difference between the net worth of our
subsidiaries as shown in the Interim Financial Statements dated
December 31, 1999 and the Management Date Financial Statements dated
April 30, 2000 is plus Lit. 7,993,000,000, and that in accordance with
article 3.6 of the Share Purchase Agreement Aprilia shall pay into the
Escrow Account Lit. 7,993,000,000;
o that with respect to costs to be incurred in connection with the
recall of certain batches of motorcycles to replace certain of their
components if, at completion of the recall campaigns, the cost sustain
less any reimbursement received from insurance companies and Moto
Guzzi suppliers is lower than Lit. 1,824,000,000, then the difference
between the cost sustained and Lit. 1.824.000.000 will be paid by
Aprilia to us;
o that the amount of shareholders' loans at the Management Date was Lit.
2,074,000,000, which amounts shall be paid to us at the closing date
in accordance with article 3.4.2 (iv) of the Share Purchase Agreement;
o with respect to the Escrow Agreement, at the closing date the Escrow
Amount shall be reduced to Lit 9,375,000,000 and the amount of the
first tranche of the Escrow Fund indicated in article 5.1 (a) of the
Escrow Agreement is Lit. 7,000,000,000;
o as soon as practicable after the Closing Date and before December
31st, 2000 we and Aprilia will discuss in good faith the possibility
of an early release to us of the first tranche of the Escrow Amount,
net of the amount of any claims agreed to at that time;
o immediately after the Closing Date Aprilia will cause Moto Guzzi SpA
to fully co-operate in our efforts to obtain tax amnesties and tax
clearance certificates from the fiscal authorities, at our expense,
and should such certificates be obtained we and Aprilia will
immediately discuss in good faith an early release of a substantial
part of the second tranche of the Escrow Amount;
o that we and Aprilia would use all efforts to cause the closing of the
sale of the Subsidiaries to occur on or before August 31st, 2000, and
in any case the closing shall take place before September 15, 2000,
thereby modifying the original August 31st deadline for the closing.
On July 22, 2000 our Proxy Statement dated July 20, 2000 relating to the
proposed sale of our operating subsidiaries and the change of our name was
mailed to all of our Class A stockholders of record as of July 18, 2000, the
record date for the special meeting of stockholders to consider such proposals.
On August 11, 2000 at 10:00 a.m. New York time, at 200 Park Avenue, New York,
New York, the offices of Clifford Chance Rogers & Wells LLP, we called the
special meeting of stockholders to order. At the special meeting 4,399,784
shares of Class A common stock were represented in person or by proxy,
representing 73.34% of our issued and outstanding shares of Class A common stock
on the record date, thereby constituting a quorum. The following proposals were
presented to our stockholders at the special meeting: (i) a proposal to sell our
four operating subsidiaries pursuant to the Share Purchase Agreement, dated as
of April 14, 2000, with Aprilia S.p.A; and (ii) a proposal to amend our
Certificate of Incorporation to change our name to "Centerpoint Corporation".
At the special meeting, the holders of 4,399,774 shares of our Class A common
stock (representing 73.33% of shares of record) voted in favor of the proposal
to sell our four operating subsidiaries to Aprilia SpA, and the holders of
4,397,314 shares of our Class A common stock (representing 73.31 % of shares of
record) voted in favor of the proposal to change our name to "Centerpoint
Corporation", thereby approving the proposals.
No holders of shares of Class A common stock voted against the proposal to sell
our four operating subsidiaries to Aprilia SpA, and the holders of ten shares
abstained with respect to the proposal.
The holders of 2,400 shares of Class A common stock voted against the proposal
to change the Company's name to Centerpoint Corporation and no holders of shares
abstained from voting with respect to the proposal.
A closing with respect to the sale of the subsidiaries has been scheduled for
September 6, 2000.
Agreement with OAM and Trident Rowan to hold a Meeting of Stockholders within 90
days of the closing of the sale of our operating subsidiaries to consider a
proposal to liquidate our assets and dissolve the Company
In connection with the execution and delivery of the Share Purchase Agreement
described above we agreed with OAM and Trident Rowan by letter dated April 14,
2000 (as amended), that we will, 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 our assets and dissolve the Company. All holders of
Class A common stock will have an opportunity to vote on such a proposal.
However, because OAM owns 58% of the Class A common stock, it can approve the
liquidation even if no other stockholders vote in favor of it. Conversely, the
liquidation will not be approved unless OAM votes in favor of it. Although OAM
and Trident Rowan insisted that we agree to submit a liquidation proposal to our
stockholders, OAM is not committed to vote its shares of Class A common stock
for the liquidation proposal. It is also possible that OAM, Trident and we may
amend the April 14th letter to modify or remove the requirement that we hold a
stockholder meeting to consider and vote upon a liquidation proposal.
OAM has advised us that they have not, at this time, decided how they will vote
with respect to a liquidation proposal.
Following the closing of the sale we intend to seek to find one or more other
companies in which to invest proceeds from the sale. If we do so, we may propose
the acquisition of, or an investment in, another company or companies as an
alternative to liquidation at any stockholder meeting called to consider a
liquidation proposal.
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
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.
OTO GUZZI CORPORATION
August 30, 2000 /s/ Mark S. Hauser
--------------------
Mark S. Hauser
Executive Chairman
August 30, 2000 /s/ Nick Speyer
--------------------
Nick Speyer
Chief Financial officer
<PAGE>
FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from the
unaudited financial statements dated June 30, 2000 and is qualified in its
entirety by reference to such financial statements.
PERIOD TYPE 6-MOS
FISCAL YEAR END DEC-31-1000
PERIOD END JUN-30-1999
CASH 1,198,000
SECURITIES 0
RECEIVABLES 16,487,000
ALLOWANCES 1,159,000
INVENTORY 17,187,000
CURRENT ASSETS 33,914,000
PP&E 22,136,000
DEPRECIATION 15,828,000
TOTAL ASSETS 41,461,000
CURRENT LIABILITIES 36,594,000
BONDS 767,000
PREFERRED MANDATORY 12,297,000
PREFERRED 0
COMMON 49,000
OTHER SHAREHOLDERS EQUITY (12,168,000)
TOTAL LIABILITY AND EQUITY 41,461,000
SALES 25,145,000
TOTAL REVENUES 25,145,000
CGS 22,925,000
TOTAL COSTS 5,001,000
OTHER EXPENSES (42,000)
LOSS PROVISION
INTEREST EXPENSE 957,000
INCOME (LOSS) PRETAX (3,852,000)
INCOME TAX 253,000
INCOME (LOSS) CONTINUING (4,105,000)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET INCOME (LOSS) (4,105,000)
EPS PRIMARY (0.79)
EPS DILUTED (0.79)
* Dollar amounts are based on conversion rate of 2,028 Lire to the Dollar which
prevailed on June 30, 2000
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information.................................................3
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS................................4
ASSETS 4
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS................................5
LIABILITIES....................................................................5
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS................................6
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS................................7
COMPREHENSIVE INCOME/(LOSS)....................................................8
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW.......................9
1. Basis of Presentation................................................11
2. Execution and Delivery of Share Purchase Agreement...................12
3. Issuance of Series B Preferred Stock.................................14
4. Purchase of outstanding securities of MGI Motorcycle GmbH............17
5. Liquidity and going concern..........................................18
6. Accumulated Other Comprehensive Income...............................19
Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................20
Liquidity and Financial Resources.............................................22
Operations....................................................................22
Investment activities.........................................................22
Financing Activities..........................................................22
Future Liquidity Needs........................................................22
Potential Effects of the European Common Currency on the Company's Business...23
Part II - Other Information...................................................25
Item 1. Legal Proceedings....................................................25
Item 2. Changes in Securities................................................25
Item 3. Defaults Upon Senior Securities......................................25
Item 4. Submission of Matters to a Vote of Security Holders..................25
Item 5. Other Information....................................................25
Item 6. Exhibits and Reports on Form 8-K.....................................25
SIGNATURES....................................................................26
