SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 2002
or
Commission File Number: 0-2642
TRIDENT ROWAN GROUP, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-0466460
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
C/O FdG Associates
299 Park Avenue
16th Floor
New York, New York 10171
(Address of principal executive offices) (Zip code)
(212) 644- 4441
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
------ -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. _____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes No X
----- -----
As of March 31, 2004, the aggregate market value of the voting stock held by non
affiliates of the registrant was $1.621 million (actual transaction currency).
As of March 31, 2004, there were 4,064,900 shares of the registrant's common
stock, par value US$ 0.01(actual transaction currency) per share, outstanding.
TRIDENT ROWAN GROUP, INC.
TABLE OF CONTENTS
Page
----
PART I ....................................................................1
ITEM 1. BUSINESS............................................................2
ITEM 2. PROPERTIES..........................................................5
ITEM 3. LEGAL PROCEEDINGS...................................................5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................7
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.............................................................7
ITEM 6. SELECTED FINANCIAL DATA.............................................9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..........................................10
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT
MARKET RISK........................................................15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................16
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE...........................................40
ITEM 9A. CONTROLS AND PROCEDURES............................................40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................41
ITEM 11. EXECUTIVE COMPENSATION.............................................43
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....49
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................51
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES .......................52
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K....54
PART I
Certain matters discussed herein are "forward-looking statements" intended to
qualify for the safe harbors from liability established by the Private
Securities Litigation Reform Act of 1995. These forward-looking statements can
generally be identified as such because they include words such as the Company
"believes," "anticipates," "expects" or "estimates" or words of similar meaning.
Similarly, statements that describe the Company's future plans, objectives,
targets or goals are also forward-looking statements. By their nature,
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those anticipated in this report.
Certain of such risks and uncertainties are described in close proximity to such
statements or elsewhere in this report. The forward-looking statements included
herein are made only as of the date of this report, and the Company undertakes
no obligation to update publicly such forward-looking statements to reflect
subsequent events or circumstances.
In October 2002 Arthur Andersen S.p.A. (Deloitte & Touche Italia S.p.A. until
July 31, 2003) entered into an agreement with the national Italian practice of
Deloitte Touche Tohmatsu ("DTT") that provides for the association of the ex
Arthur Andersen S.p.A. with those national practices (and therefore with DTT).
On August 1, 2003, the audit operations of Deloitte & Touche S.p.A. and Deloitte
& Touche Italia S.p.A. were combined and the resulting company took the name of
Deloitte & Touche S.p.A.. DTT has performed the quality control procedures
required for foreign associated firms that are embodied in the requirement of
the SEC Practice Section of the American Institute of Certified Public
Accountants with respect to the financial statements for the year ended December
31, 2000, included in this Annual Report on the Form 10-K as of December 31,
2002.
Reporting Currency
Beginning with the fiscal year ended December 31, 2002, Trident Rowan Group Inc.
(the "Company") has published its consolidated financial statements in euros
("(euro)"), the official common currency of twelve Member States of the European
Union (the "EU"), including Italy. In this Annual Report in Form 10-K,
references to "dollars," "U.S.$" or "$" are to United States dollars and
references to "lire" or "Lit." are to Italian lire. Amounts stated in dollars in
the Financial Statements and tables under Item 8, unless otherwise indicated,
have been translated from euros at an assumed rate solely for convenience and
should not be construed as representations that the euro amounts actually
represent such dollar amounts or could be converted into dollars at the rate
indicated. Unless otherwise indicated, such dollar amounts have been translated
from euros at the noon buying rate in The City of New York for cable transfers
in foreign currencies as announced by the Federal Reserve Bank of New York for
customs purposes (the "Noon Buying Rate") on December 31, 2002 (the last
business day of 2002) of $1.05 per (euro)1.00. Such rate may differ from the
actual rates used in the preparation of the consolidated financial statements
included in Item 8 and dollar amounts used in this Annual Report may differ from
the actual dollar amounts that were translated into euros in the preparation of
such consolidated financial statements. For information regarding recent rates
of exchange between euros and dollars and between Italian lire (the Company's
historical reporting currency) and dollars, see "Key Information--Selected
Financial Data -- Exchange Rates" in Item 3.
When the actual currency of the transaction is denominated in US Dollars, then
the US Dollar amount has been shown in the relevant note and/or table and
indicated as "US Dollar, actual transaction currency".
Prior to January 1, 2002, the reporting currency of the Company and its
consolidated subsidiaries (the "Group") was Italian lire. To facilitate a
comparison, all lire-denominated financial data for periods prior
1
to January 1, 2002 included in this Annual Report have been restated from
Italian lire to euros at the fixed rate as of December 31, 2001 of Lit. 1,936.27
= (euro)1.00. The comparative balances for prior years now reported in euros
depict the same trends as would have been presented had the Group continued to
report such amounts in Italian lire. The Group's financial data for periods
prior to January 1, 2002 may not be comparable to that of other companies
reporting in euros if those companies had restated from a reporting currency
other than Italian lire.
ITEM 1. BUSINESS
HISTORY OF THE COMPANY
Trident Rowan Group, Inc. ("the Company") was primarily in the business of
motorcycle manufacturing and distribution through Moto Guzzi Corporation ("Moto
Guzzi"). Moto Guzzi was a manufacturer of medium and high priced motorcycles
that the Company had acquired in 1972. Moto Guzzi was merged in 1999 with and
into North Atlantic Acquisition Corp. ("North Atlantic"), a specialized merger
and acquisition allocated risk company.
The Company, in 1995, acquired Temporary Integrated Management S.p.A. ("TIM"), a
temporary management company. The focus of TIM was to invest in troubled
companies and enhance its investment value through its temporary management
capability, and then realize such enhanced value through exit mechanisms.
The Company acquired L.I.T.A. S.p.A. ("LITA"), a producer of welded steel tubes
through its subsidiary in Luxembourg, Trident Rowan International S.A. ("TRI"),
in 1996.
Disposal of Operating Subsidiaries
Moto Guzzi experienced lack of liquidity in 1998 and 1999 that caused component
supply shortages, which were initially eased by the North Atlantic merger.
However, the proceeds of the North Atlantic merger were not sufficient to permit
Moto Guzzi to make all of the necessary investments to restore its operations to
profitability. Moto Guzzi was unable to subsequently raise the further funds
that it required; this resulted in severe financial difficulties and threatened
operations. Moto Guzzi sold all its four operating subsidiaries to Aprilia
S.p.A. ("Aprilia") in 2000 (see Note 3a to Consolidated Financial Statements in
Item 8). Moto Guzzi was renamed Centerpoint Corporation ("Centerpoint").
The Company, in 2000, also sold its steel tube operation that it carried out
through LITA (see Note 3b to Consolidated Financial Statements in Item 8) and
TIM.
RECENT AND SUBSEQUENT EVENTS
Overview
o In January, 2002, the judge in the Company's litigation against Travelers
Casualty and Surety Company ("Travelers") arising out of the Wilson
litigation determined that Travelers was liable to the Company for
US$1,000,000 (actual transaction currency), plus the Company's legal fees in
connection with the litigation, less a reasonable premium. After subsequent
challenges and appeals, in December 2003 the parties entered into a
settlement agreement, that provided, among other things, for the payment of
US$1,450,000 (actual transaction currency) to the Company by Travelers. This
amount was paid in December 2003 (see Item 3 and Note 16 to the Consolidated
Financial Statements in Item 8).
2
o In January 2002, the Company entered into a series of transactions and
agreements with Bion Environmental Technologies, Inc., ("Bion") (see Note 4
to the Consolidated Financial Statements in Item 8).
Following these transactions, the Company continued to hold directly 300,000
Centerpoint Class A Common Stock (approximately 5% of Centerpoint's
outstanding stock). The effect of the transactions with Bion was to dispose
of the Company's majority interest in Centerpoint, receiving assets
substantially similar in total value to those the Company would have received
in an eventual liquidation of Centerpoint.
o In February 2002, the Company settled litigation with the Rawlings Sporting
Goods Company (see Item 3 and Note 8 to the Consolidated Financial Statements
in Item 8).
o In October 2003, Centerpoint (which is no longer a related party to the
Company at this time because of the Bion transaction - see above), OAM and
Aprilia entered into an agreement to settle the dispute (relating to the sale
of the Moto Guzzi operations), with Aprilia paying (euro) 1.4 million (see
Note 16 to the Consolidated Financial Statements in Item 8).
o On March 31, 2004 the purchasers of LITA S.p.A. agreed to release the Company
from any other further obligations under its escrow pertaining to potential
tax liabilities, which had been due to expire on December 31, 2004. For this
release, the Company paid (euro) 30,000 in 2004 (see Note 16 to the
Consolidated Financial Statements in Item 8).
CURRENT STATUS OF THE COMPANY
As of March 31, 2004, the date of this report, the Company no longer has any
operating subsidiaries. The Company's principal assets are as follows:
o Approximately (euro) 4.1 million (US$5.0 million at March 31, 2004 exchange
rate) in cash. Approximately 86% of the cash held by the Company are
denominated in US Dollars and the balance in Euro;
o 140,000 Centerpoint Class A Common Stock (carrying value written down to zero
in 2002);
o 144,240 (after the 10 for 1 reverse stock split occurred in July 2002) Bion
common stock (carrying value written down to zero) and warrants to purchase
100,000 (after the 10 for 1 reverse stock split occurred in July 2002) shares
of Bion common stock at US$ 9.00 (actual transaction currency) per share (has
not been assigned a value in the consolidated financial statements);
o A sixty-five percent share in claims with respect to residual funds of
approximately (euro) 600 thousand held in an escrow account relating to the
September 2000 sale of the Company's Moto Guzzi operations to Aprilia (See
Note 16 to the Consolidated Financial Statements in Item 8). This claim (a
contingent asset) is not recorded as an asset in the consolidated financial
statements; and
o A sixty-five percent share of claims against Banca di Intermediazione
Mobiliare IMI S.p.A. ("IMI") to recover fees charged in connection with the
September 2000 sale of the Company's Moto Guzzi operations to Aprilia (see
Note 16 to the Consolidated Financial Statements in Item 8). This claim (a
contingent asset) is not recorded as an asset in the consolidated financial
statements.
The Company's only liabilities are principally payables for corporate costs,
taxes and litigation costs in respect of the claims above.
3
The majority of the assets described above are held by OAM S.p.A., a 98.6%
Italian subsidiary of the Company.
The Bion Transaction
In December 2001, Centerpoint's Board of Directors met to evaluate the
alternative strategies and investments available to it. Investec presented to
the Centerpoint Board of Directors their conclusions on a number of potential
investments. After review of the possible investments, the Centerpoint Board of
Directors resolved to approve the acquisition of 19,000,000 shares of Bion for
total consideration of US$ 14,250,000 (actual transaction currency) comprised of
the following: (i) approximately US$ 8,500,000 (actual transaction currency) in
cash, (ii) assignment of the Company's US$ 4.2 million (actual transaction
currency) promissory note, (iii) assignment of 65% of Centerpoint's claims
against IMI, (iv) assignment of 65% of Centerpoint's claims against Aprilia and
eventual rights to the balances in escrow, and (v) assignment of all of
Centerpoint's rights under the Centerpoint Loan Agreement.
In early January 2002, the Board of Directors of OAM, a subsidiary of the
Company and the majority stockholder of Centerpoint, met and approved the sale
of 3,459,997 shares of common stock of Centerpoint owned by OAM, or 100% of the
OAM investment in Centerpoint, to Bion pursuant to a Stock Purchase Agreement
dated as of January 15, 2002, for the following consideration ("Sale of the
Centerpoint Shares"): (i) 1,000,000 restricted Bion shares, (ii) a warrant to
purchase 1,000,000 shares of Bion common stock for a purchase price of US$ 0.90
(actual transaction currency) per share, (iii) US$ 3,700,000 (actual transaction
currency) in cash, (iv) the assignment to OAM of the Company's US$ 4.2 million
(actual transaction currency) promissory note, and the principal and interest
payable thereunder, (v) assignment of a 65% interest in Centerpoint's claims
against IMI, (vi) assignment of a 65% interest in Centerpoint's claims against
Aprilia and eventual rights to the balances in escrow, and (vii) assignment of
all of Centerpoint's rights under the Centerpoint Loan Agreement. David Mitchell
(a director of Centerpoint) was the Chairman, President, Board Member and a
principal stock and warrant holder of Bion at the time of the transaction.
On January 15, 2002, Centerpoint closed the Bion Investment, and immediately
upon the consummation of the Bion Investment, OAM and Bion closed the Sale of
the Centerpoint Shares.
FUTURE BUSINESS OF THE COMPANY
- ------------------------------
In May 2002 the Board of Directors of the Company approved the engagement of
Investec Inc. ("Investec") to explore investment options available to the
Company and to seek a suitable business to acquire or merge with. In June 2003,
following the closure of Investec's U.S. operations, in order to provide
continuity to the process of identifying potential candidates, the Company
engaged Kidron Corporate Advisors LLC, an M & A advisory boutique.
Following a non-binding term sheet dated December 30, 2003, between the Company
and Comtech Group, Inc., a Cayman Islands corporation, in May 2004, the Company
and Comtech reached an agreement in principle pursuant to which, Comtech may
transfer all of its equity to the Company and the Company, in turn, may issue to
Comtech's shareholders 42,000,000 shares of the Company's stock. Following the
transaction, Comtech's shareholders may control approximately 91.2% of the
Company's common stock (87.50% including options and warrants outstanding).
Comtech is in the business of distributing electronic components, providing
value added design services and developing and manufacturing electronic
components for the telecommunications and electronic market and has a majority
of its operating subsidiaries located in China.
4
ITEM 2. PROPERTIES
The Company does not own any real property. The only property leased by the
Company in 2001 and on the date of this report is an office space aggregating
100 square meters in Milan, Italy at a cost of approximately (euro) 10 thousand
annually. The lease contract expires on October 1, 2005.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are or were involved in the following
litigation:
Rawlings Litigation - settled in 2002
An action entitled "Rawlings Sporting Goods Co., Inc. v. Trident Rowan Group,
Inc. et al.," was filed in the United States District Court for the Northern
District of New York by Rawlings Sporting Goods Co ("Rawlings"), the owner of
property located in Salisbury, New York, in August 1998. The action seeks to
hold the Company liable for costs that Rawlings allegedly incurred in response
to the release or threatened release of allegedly hazardous substances on land
allegedly owned by the Company between 1948 and 1970, and used by a third party.
The compliant was amended in December 2000 to further allege that the Company
still owns a portion of the allegedly contaminated land.
The Company settled the matter with Rawlings on February 11, 2002. The Company,
in May 2002, transferred to Rawlings 160,000 Centerpoint Class A Common Stock
pursuant to a term of a settlement agreement with the Company and Rawlings
voluntarily dismissing the action and released each other from all claims
relating to the action.
Wilson and Travelers Litigation - settled in 2003
The Company is the subject of an action in the Court of Common Pleas, a
Pennsylvania State Court situated in Philadelphia, entitled "John Wilson et al.
v. Trident Rowan Group, Inc. et al" (the "Wilson Litigation"). The Wilson
Litigation was an action eventually consolidated with a related, companion
action against other parties. The plaintiff (John Wilson) was seeking damages
for serious burn injuries he allegedly sustained in 1996 from working with a
starter unit claimed to have been manufactured in the 1950's by a company once
owned by a predecessor of the Company. The case was settled in 2000 with the
Company and Gould Electronics, Inc. ("Gould"), a co-defendant, each paying 50%
of the US$ 2,050,000 (actual transaction currency) settlement amount, subject to
resolution of certain issues between them.
In March 1999, the Company separately brought suit against Travelers, the
Company's insurer, who disclaimed coverage and defense of the suit, to compel it
to resume coverage of the underlying claim and to assume the costs of defense of
the Wilson Litigation. In May 2001, the United States District Court granted
summary judgment in favor of the Company, holding that Travelers must indemnify
the Company for liability incurred and attorney's fees paid in connection with
the Wilson Litigation, plus interest.
Pursuant to the May 2001 judgment, on June 11, 2001, the Company submitted to
the Court a proposed form of judgment requiring Travelers to (i) pay the Company
US$ 2,050,000 (actual transaction currency) plus interest, attributable to the
sums the Company has and will have to spend in settlement of the Wilson
Litigation, (ii) US$ 764,045 (actual transaction currency) plus interest,
representing costs and attorneys fees incurred in defending the Wilson
Litigation, and (iii) US$ 78,975 (actual transaction currency) plus
5
interest, representing costs and attorneys fees incurred by the Company in
prosecuting its claims against Travelers.
On June 11, 2001, Travelers filed with the Court a motion for Reconsideration of
Order or in the Alternative For Resolution of Certain Undecided Issues, seeking
reconsideration of the judgment, or in the alternative asking the Court to
confirm that Travelers liability is limited to US$ 1,000,000 (actual transaction
currency) and that Travelers is entitled to charge the Company a reasonable
premium for the liability coverage
In January 2002, the judge in the Company's litigation against Travelers
determined that Travelers was liable to the Company for US$ 1,000,000 (actual
transaction currency), plus the Company's legal fees in connection with the
Wilson Litigation, less a reasonable premium. Travelers subsequently challenged
the reasonableness of the legal fees. In July 2002, the judge ruled that the
fees were reasonable provided certain duplications are eliminated. In September
2002, the Court rendered a judgment in favor of the Company in the amount of US$
1,822,979 (actual transaction currency). Travelers appealed the judgment and the
parties entered into a settlement agreement pursuant to which Travelers paid
US$1,450,000 (actual transaction currency) to the Company in December 2003.
Aprilia Claims under the Share Purchase Agreement; Payment by IMI; Request
for Arbitration; Settlement
Aprilia asserted in 2000 various claims against Centerpoint relating to
Centerpoint's representations and warranties under the Share Purchase Agreement
(the "Alleged Claims") for the sale of the Moto Guzzi operations. In 2001, IMI,
the escrow agent under the Escrow Agreement, paid (euro) 3,931,000 from the
escrow account (see Note 3a in Item 8) to Aprilia in respect of the Alleged
Claims. Centerpoint disputed the Alleged Claims and requested an arbitration.
Centerpoint and Aprilia, in October 2003, entered into agreement to settle the
matter with Aprilia paying (euro) 1,420,000 including (euro) 207,000 of legal
fees. The right to 35% of the net proceeds of this settlement is owned by
Centerpoint (which is no longer a related party of the Company at the time of
the settlement).
Pending
IMI Fees
In connection with the sale of Moto Guzzi to Aprilia, IMI was paid (euro)
5,888,000 in fees and expenses it claimed under its engagement letter with the
Company. The Company disputed the calculation of IMI's fees and has brought a
suit in Italy seeking reimbursement of (euro) 4,527,000 (approximately US$ 5.7
million at 2003 year-end exchange rates). The judge handling the lawsuit has
heard the case several times in 2002 and 2003. As of March 31, 200, the lawsuit
is still pending. However, the Company is in discussions with IMI for an
eventual out-of-court settlement.
CDS Srl
In 1999 CDS S.r.l. ("CDS") caused a leasing company to purchase from OAM real
estate in via Baronia, Rome and entered into a leasing arrangement with the
leasing company. Subsequently, on October 9, 1999, CDS brought a claim against
OAM in the Rome Civil Court alleging that the commercial designation of the
property in 1998 was not properly disclosed and consequently its lease payments
were excessive and sought reimbursement of the lease payments that it considered
excessive from OAM in an aggregate amount of approximately (euro)800,000
The proceedings have continued intermittently over the years. On March 25, 2004,
the Court requested that the parties present their conclusions in order for it
to render a final verdict, presumably within 80 days. It is management's opinion
that the risk of a negative judgement is low and the potential liability remote.
6
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
During the year ended December 31, 2002, the Company did not hold a stockholders
meeting or submit any matter to the vote of its stockholders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
From August 22, 1996 until June 5, 1997, the Company's common stock traded on
the NASDAQ Small Cap Market under the symbol TRGI. The reported prices represent
inter-dealer prices, which do not include retail mark-ups, markdowns, or any
commission to the broker-dealer, and may not necessarily represent actual
transactions. From June 5, 1997 until March 17, 1999, the Company's common stock
and warrants (issued in connection with the Company's public offering in June
1997) traded on the NASDAQ National Market. Since March 18, 1999, the common
stock and warrants have been quoted on the Over-The-Counter Market known as the
"pink sheets". All warrants issued in conjunction with the above public offering
(June 1997), expired in June 2002.
Common Stock
Bid Prices*
---------------------
High Bid Low Bid
-------- -------
2001 1st Quarter 1.02 0.75
2nd Quarter 1.00 0.85
3rd Quarter 1.10 0.98
4th Quarter 1.30 1.01
2002 1st Quarter 1.50 1.15
2nd Quarter 1.18 0.75
3rd Quarter 0.60 0.45
4th Quarter 0.47 0.20
2003 1st Quarter 0.42 0.22
2nd Quarter 0.42 0.28
3rd Quarter 0.80 0.29
4th Quarter 0.85 0.52
*actual transaction currency is US$
Warrants
The warrants ceased to be publicly traded in June 2002.
As of March 31, 2004, there were approximately 912 holders of record of the
Company's common stock.
7
Equity Compensation Plan Information
The following table sets forth certain equity compensation plan information
with respect to the Company's equity compensation plans approved by security
holders and equity compensation plans not approved by security holders as of
December 31, 2002:
Number of
securities
remaining available
Number of for future issuance
securities to be under equity
issued upon compensation plans
exercise of Weighted-average (excluding
outstanding exercise price of securities reflected
options, warrants outstanding options, in column (a))
and rights warrants and rights (c)
Plan category (a) (b)
- ------------- ----------------- -------------------- --------------------
Equity compensation plans approved by security
holders (1).................................. 465,834 1.47 1,684,166(2)
(1) The equity compensation plans approved by security holders consist of the
Company's 1995 Non-Qualified Plan and the Company's 1995 Directors' Plan.
The Company does not have any equity compensation plans that were not
approved by security holders.
(2) The number of securities remaining available for future issuance under
each of the Company's 1995 Non-Qualified Plan and the Company's 1995
Directors' Plan (excluding securities reflected in column (a) of the
chart) is 1,625,000 and is 59,166 shares of common stock, respectively
DIVIDEND POLICY
The Company has not paid any dividends since its inception and does not
anticipate paying any dividends on its common stock for the foreseeable future.
The Company is not under any contractual restriction as to its present or future
ability to pay dividends.
8
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below for the fiscal years
ended December 31, 2002, 2001, 2000, 1999 and 1998 have been derived from the
Company's audited consolidated financial statements. The information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Item 7 and the Consolidated Financial
Statements, including the notes thereto, included in Item 8 of this Form 10-K.
2002 2002 2001 2000 1999 1998
Income Statement Data `000(a) `000 `000 `000 `000 `000
--------- ------------- -------------- ------------- ------------- -------------
Net Sales ......................... $ (euro) - (euro) - (euro) - (euro) 1,026 (euro) 1,950
Loss from continuing operations..... $ (1,579) (euro) (1,504) (euro) (191) (euro) (3,692) (euro) (3,414) (euro) (3,157)
Net (loss)/profit................... $ (1,579) (euro) (1,504) (euro) (191) (euro) 13,800 (euro) 1,283 (euro) 12,921
Balance Sheet Data
Total assets........................ $ 3,798 (euro) 3,618 (euro) 10,994 (euro) 25,883 (euro) 12,243 (euro) 12,363
Long-term debt net of current
portion ........................... $ - - - (euro) 6,525 (euro) 656
Earnings (Loss) per share (b)
Continuing operations .............. $ (0.39) (euro) (0.37) (euro) (0.05) (euro) (0.91) (euro) (0.79) (euro) (0.68)
Discontinued operations............. - - (euro) 4.30(c) (euro) 1.10(d) (euro) 2.13
(a) Converted solely for the convenience of the reader at 1 (euro) = $1.05, the
approximate rate as at December 31, 2002.
(b) As the Company had losses from continuing operations in each of the years
1998 through 2002, all options, warrants and other instruments were anti
dilutive for each of the years above.
(c) Includes (euro) 29,148 thousand gain ((euro)7.16 on an EPS basis) on
disposal of the Moto Guzzi business, before minority interests of (euro)
9,707 thousand ((euro)2.38 on an EPS basis) and the loss of the
discontinued motorcycle operations of (euro)2,261 thousand ((euro)0.56 on
an EPS basis) .
(d) Includes (euro) 11,196 thousand gain ((euro)2.61 on an EPS basis), net of
minority interest of (euro) 2,147 thousand ((euro) 0.50 on an EPS basis),
relating to the merger of the discontinued Moto Guzzi business with North
Atlantic Acquisition Corp. and the loss of the discontinued motorcycle
operations of (euro)6,700 thousand ((euro)1.56 on an EPS basis).
Functional Currency
The consolidated financial statements through the date of the disposal of the
Company's operations were shown in Italian Lira because all of the Company's
material operating subsidiaries were based in and operated entirely in Italy,
where the functional currency from January 1, 2002, was changed to Euro. Pending
evaluation of its alternatives, following the disposals of its operations, the
Company invested the major part of the net proceeds from the disposals in Euro
denominated cash and cash equivalents and then moved these amounts to
US$-denominated bank accounts. The translation of Euro amounts into U.S. dollar
amounts in the Financial Statements and tables in Item 8, unless otherwise
indicated is included solely for the convenience of the readers of the financial
statements and has been calculated at the rate of 1 (euro) = $1.05, year-end
exchange rate.
When the actual currency of the transaction is denominated in US Dollars, then
the US Dollar amount has been shown in the relevant note and/or table and
indicated as "US Dollar, actual transaction currency".
9
The following table sets forth, for the period indicated, the high, low, average
and end of period exchange rates expressed in Lira per U.S. dollar (rounded to
the nearest Lira):
Calendar Year High Low Average End of Period
------------- ---- --- ------- -------------
2001 2,313 2,031 2,164 2.174
2000 2,340 1,874 2,103 2,061
1999 1,933 1,631 1,819 1,924
1998 1,823 1,590 1,733 1,656
1997 1,837 1,520 1,703 1,768
Italy, starting on January 1, 1999, participated with 11 other European
countries in a European common currency, the Euro. The following table sets
forth, for the period indicated, the high, low, average and end of period
exchange rates expressed in U.S. dollars to 1 Euro since the Lira to Euro
exchange rate was fixed at 1,936.27 from January 1, 2000.
Calendar Year High Low Average End of Period
------------- ---- --- ------- -------------
2003 1.26 1.04 1.13 1.26
2002 1.05 0.86 0.95 1.05
2001 0.95 0.84 0.90 0.89
2000 1.03 0.83 0.92 0.93
Fluctuations in the exchange rates between the Lira/Euro and the U.S. dollar
affect the U.S. dollar equivalents of the Company's reported revenues and
earnings. The Company, which no longer has any operations, does not currently
engage in hedging activities to reduce its exposure to exchange rate
fluctuations.
From January 1, 2002, the Euro became the only legal currency in the
participating countries and consequently the financial statements of the
Company, commencing January 1, 2002 are presented in Euro. Prior year statements
have been translated from Italian Lira to Euro at the 1,936,27 exchange rate for
comparative purposes.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Portions of the discussion and analysis below contain certain "forward looking"
statements, which involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, lack of adequate capital to continue operations, changes in currency
exchange rates, other factors discussed in this Annual Report on Form 10-K as
well as factors discussed in other filings made with the Securities and Exchange
Commission. Although the Company believes that the assumptions underlying the
forward looking statements contained herein are reasonable, any of the
assumptions could prove inaccurate, and therefore, there can be no assurance
that the forward looking statements included herein will prove to be accurate.
10
General
Year Ended December 31, 2002 as compared to Year Ended December 31, 2001
2002 2001
(euro) `000 (euro) `000
Selling, general and
administrative expenses (1,221) (2,173)
----------- -----------
Operating loss (1,221) (2,173)
Interest expense (26) (427)
Interest income 2 394
Other (expense)/income, net (153) 2,073
----------- -----------
Loss before income taxes and
minority interests (1,398) (133)
Income taxes (100) (117)
Minority interest (6) 59
----------- -----------
Net profit/(loss) (1,504) (191)
----------- -----------
Significant elements of selling, general and administrative costs are as
follows:
2002 2001
(euro) `000 (euro) `000
Corporate salaries 320 543
Legal and other litigation costs 154 774
Other costs 747 856
---------- ----------
1,221 2,173
---------- ==========
Other costs include rent and office expenses for the Company's offices in Milan,
Italy, tax, accounting and compliance costs in the U.S. and Italy, professional
fees in connection with legal claims and the disposal of operations in Italy.
Interest expense in 2001 principally reflects interest on the Company's US$ 6.25
million (actual transaction currency) 5% debentures issued in December 1999 and
repaid in June 2001 and residual debt in OAM repaid in April 2001.
Interest income in 2002 and 2001 principally reflects interest earned on cash.
11
Significant elements of other (expense)/income, net were:
2002 2001
(euro) `000 (euro) `000
Gain on Sale of Centerpoint 1,489 --
Exchange loss (475) --
Additional reserve for Rawlings Litigation -- (387)
Income from sale of marketable securities -- 122
Gain from the extinguishment of the
Convertible Debentures -- 2,208
Write down of all Bion shares (841) --
Write down of 140,000 Centerpoint shares (347) --
Other 21 130
---------------------
(153) 2,073
---------------------
In 2002, other expense includes the write down of 100,000 Bion shares for (euro)
841 thousand and the write down of 140,000 Centerpoint shares for (euro) 347
thousand. For a discussion on the Centerpoint gain, see Note 4 Section 8.
Year Ended December 31, 2001 as compared to Year Ended December 31, 2000
2001 2000
(euro) `000 (euro) `000
Selling, general and
administrative expenses (2,173) (2,339)
Impairment expense -- (47)
------- -------
Operating loss (2,173) (2,386)
Interest expense (427) (618)
Interest income 394 510
Amortization of premium for redemption of
subsidiary preferred stock -- (1,410)
Subsidiary preferred stock dividends -- (330)
Other (expense)/income, net 2,073 56
------- -------
Loss from continuing operations
before income taxes and minority interests (133) (4,178)
Income taxes (117) (20)
Minority interest 59 506
------- -------
Loss from continuing operations (191) (3,692)
Discontinued operations: -- 17,492
Gain on disposal of motorcycle operations -- 19,441
Losses of motorcycle segment after income
taxes of(euro)266 in 2000 -- (2,261)
Profit of steel tube segment after income
taxes of(euro)0 in 2000 -- 312
------- -------
Net profit/(loss) (191) 13,800
------- -------
12
The reduction of (euro) 166 thousand or 7.1% in selling general and
administrative expenses in 2001 compared to 2000 reflects the cost reductions
implemented by the Company.
The Company's cost saving program was hindered by the need to maintain
accounting and tax compliance systems for both Italian and U.S. purposes.
Significant elements of selling, general and administrative costs are as
follows:
2001 2000
(euro) `000 (euro) `000
Corporate salaries 543 692
Legal and other litigation costs 774 619
Other costs 856 1,028
----------- -----------
2,173 2,339
=========== ===========
Other costs include rent and office expenses for the Company's offices in Milan,
Italy, tax, accounting and compliance costs in the U.S. and Italy, professional
fees in connection with legal claims and the disposal of operations in Italy.
Interest expense in 2001 and 2000 principally reflect interest on the Company's
US$ 6.25 million (actual transaction currency) 5% debentures issued in December
1999 and repaid in June 2001 an residual debt in OAM, repaid in April 2001.
Interest income in 2001 and 2000 principally reflects interest earned on cash
and interest accrued on tax receivables.
In 2000, the Company recorded a charge of (euro) 1,410 thousand of amortization
for the premium on redemption of Centerpoint Series B Preferred Stock. Such
charges largely relate to exchange differences as the Centerpoint Series B
Preferred Stock was denominated in U.S. dollars. The Company also incurred
(euro) 330 thousand of financing costs in the form of preferred stock dividends
payable to external holders of the Centerpoint Series B Preferred Stock.
Significant elements of other (expense)/income, net were:
2001 2000
(euro) `000 (euro) `000
Additional reserve for Rawlings Litigation (387) -
Income from sale of marketable securities 122 -
Gain from the extinguishment of the
Convertible Debentures 2,208 -
Other 130 56
-------------------------
2,073 56
-------------------------
13
Liquidity and Capital Resources
Significant cash activities in 2002
In 2002, negative operating cash flows for the major part relate to selling,
general and administrative expenses in addition to the negative cash flows from
the Bion transaction, as described in Item 1 and Note 4, net of the sale of
Centerpoint, as described in Item 1 and Note 4 to the Consolidated Financial
Statements in Item 8.
In January, 2002, OAM entered into agreements with Bion as described in Note 4
to the Consolidated Financial Statements in Item 8 and in Item 1. The
substantial effect of the transactions with Bion was that the Company disposed
of its controlling interest in Centerpoint. The Company received substantially
the same value of proceeds it could have received had it liquidated Centerpoint.
Pursuant to these transactions, OAM received the Company's US$ 4.2 million
(actual transaction currency) Promissory Note and approximately US$ 3.7 million
(actual transaction currency) of the approximately US$ 8.7 million (actual
transaction currency) cash held by Centerpoint at the date of the transaction
with Bion.
The disposals of Moto Guzzi and LITA generated sufficient cash for the Company
to maintain operations which following the disposal related only to corporate
costs in winding down the companies activities and legal fees related to various
litigation described in Item 3 and in Note 3a to the Consolidated Financial
Statements in Item 8.
Future liquidity needs
As of March 31, 2004, the Company has approximately (euro) 4.1 million (US$ 5.0
million at exchange rates prevailing at March 31 2004) in cash. Management
believes such amounts to be sufficient to fund the Company's activities which
principally reflect litigation which the Company has commenced against IMI (see
Item 3) and to fund corporate costs related to the winding down of the Company's
corporate structure in Italy, which is redundant following the disposal of its
Italian operations. In addition, the Company continues to incur ongoing
corporate overhead costs that include executive salaries for Mark Hauser and
Emanuel Arbib, Directors & Officers ("D & O") Insurance, and professional fees
to lawyers, accountants and bankers, principally in connection with the
Company's public filings.
Following a non-binding term sheet dated December 30, 2003, between the Company
and Comtech Group, Inc., a Cayman Islands corporation, in May 2004, the Company
and Comtech reached an agreement in principle pursuant to which Comtech may
transfer all of its equity to the Company and the Company, in turn, may issue to
Comtech's shareholders 42,000,000 share of the Company's stock. (See "Future
Business of the Company" under Item 1). If the Company and Comtech enter into a
definitive agreement and the transactions contemplated thereby are consummated,
it is likely that the Company would use current resources to fund costs
associated with Comtech's business and the Company's liquidity would decrease.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
14
Contractual Obligations, Commercial Commitments and Purchase Obligations
As of December 31, 2002, the Company's contractual obligations, commercial
commitments and purchase obligations were as follows (in Euro):
Payment Due by Period
----------------------------------------------
Less More
Than 1 1 - 3 3 - 5 Than 5
Contractual Obligations Total Year Years Years Years
- ----------------------- ----- ---- ----- ----- -----
Long-Term Debt Obligations -- -- -- - --
Capital Lease Obligations -- -- -- - --
Operating Lease Obligations 32 11 21 - --
Purchase Obligations -- -- -- - --
Other Long-Term Liabilities Reflected
on the Registrant's -- -- -- - --
Balance Sheet under GAAP
Total 32 11 21 - --
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The fair value of cash approximates its carrying value.
Since, at March 31, 2004, 86% of the Company's cash is held in U.S. Dollars and
the functional currency is Euro, the Company is subject to exchange rate
fluctuations.
Fluctuations in the exchange rates between the Euro and the U.S. dollar affect
the Euro equivalent of the Company's reported earnings or losses. The Company,
which no longer has any operations, believes that its exposure to foreign
currency exchange rate risk is not material and does not currently engage in
hedging activities to reduce its exposure to exchange rate fluctuations.
The Company does not have any derivative financial instruments and believes its
exposure to interest rate risk and other relevant market risks is not material.
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TRIDENT ROWAN GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Public Accountants....................................17
Consolidated Balance Sheets - Assets........................................18
Consolidated Balance Sheets - Liabilities and Shareholders' Equity .........19
Consolidated Statements of Operations.......................................20
Consolidated Statements of Changes in Shareholders' Equity (Deficit)........23
Consolidated Statements of Cash Flows.......................................24
Notes to Consolidated Financial Statements..................................27
16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
Trident Rowan Group, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Trident Rowan
Group, Inc. (a Maryland corporation) and subsidiaries (the "Company") as of
December 31, 2002 and 2001, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 2002
and 2001, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE S.p.A.
Milan, Italy
May 7, 2004
17
TRIDENT ROWAN GROUP, INC. and SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2002 and 2001
In thousands of Euro or thousands of U.S. Dollars
2002 2002 2001
ASSETS $ `000 (euro)`000 (euro) `000
Cash..................................... 3,419 3,256 10,714
Receivables.............................. -- -- 27
Trade, less allowance.................. -- -- 13
Other receivables...................... 14
Prepaid Expenses......................... 62 59 62
------- ------- -------
TOTAL CURRENT ASSETS 3,481 3,315 10,803
------- ------- -------
Property, plant and equipment........... 15 14 19
At cost................................ 30 29 88
Less allowance for depreciation........ (15) (15) (69)
Other assets and receivables............. 303 289 172
------- ------- -------
TOTAL ASSETS 3,799 3,618 10,994
======= ------- =======
See Notes to Consolidated Financial Statements
18
TRIDENT ROWAN GROUP, INC. and SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2002 and 2001
In thousands of Euro or thousands of U.S. Dollars
2002 2002 2001
LIABILITIES $ `000 (euro) `000 (euro) `000
Accounts payable .............................................. 510 486 235
Accrued expenses and other payables ........................... 551 525 1,530
------- ------- -------
TOTAL CURRENT LIABILITIES ..................................... 1,061 1,011 1,765
------- ------- -------
Provision for claims .......................................... 462 440 440
Minority interests ............................................ 80 76 5,525
SHAREHOLDERS' EQUITY .......................................... 2,196 2,091 3,264
Common stock, par value $0.01 per share:
Authorized 50,000,000 shares,
4,064,900 shares outstanding, ............................... 58 55 55
Additional paid-in capital .................................... 57,870 55,114 55,114
Treasury stock, at cost .......................................(25,983) (24,746) (24,746)
Cumulative translation adjustment ............................. (1,280) (1,219) (1,550)
Accumulated deficit ...........................................(28,469) (27,113) (25,609)
------- ------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY .......................... 3,799 3,618 10,994
======= ======= =======
See Notes to Consolidated Financial Statements
19
TRIDENT ROWAN GROUP, INC. and SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 2002, 2001 and 2000
In thousands of Euro or thousands of U.S. Dollars
2002 2002 2001 2000
$ `000 (euro) `000 (euro) `000 (euro) `000
Selling, general and
administrative expenses ...................... (1,282) (1,221) (2,173) (2,339)
Impairment expense ............................. -- -- -- (47)
---------- ---------- ---------- ----------
Total operating loss ........................... (1,282) (1,221) (2,173) (2,386)
Interest expense ............................... (27) (26) (427) (618)
Interest income ................................ 2 2 394 510
Amortization of premium for
redemption of subsidiary
preferred stock .............................. -- -- -- (1,410)
Subsidiary preferred stock
dividends .................................... -- -- -- (330)
Other income/(expense), net .................... (161) (153) 2,073 56
---------- ---------- ---------- ----------
Loss from continuing
operations before income
taxes and minority interests ................. (1,468) (1,398) (133) (4,178)
Income taxes ................................... (105) (100) (117) (20)
Minority interests ............................. (6) (6) 59 506
---------- ---------- ---------- ----------
Loss from continuing operations ................ (1,579) (1,504) (191) (3,692)
Discontinued operations ........................ -- -- -- 17,492
Loss of motorcycle operations
segment after income taxes of (euro)266 ........ -- -- -- (2,261)
Gain on disposal of
discontinued motorcycle operations ............. -- -- -- 19,441
Profit of steel tube segment
after income taxes (euro) 0 .................... -- -- -- 312
---------- ---------- ---------- ----------
Net profit/(loss) .............................. (1,579) (1,504) (191) 13,800
========== ========== ========== ==========
20
2002 2002 2001 2000
$ `000 (euro) `000 (euro) `000 (euro) `000
PROFIT/(LOSS) PER SHARE
Basic
Continuing operations .......................... (0.39) (0.37) (0.05) (0.91)
Discontinued operations ........................ -- -- -- 4.30
---------- ---------- ---------- ----------
(0.39) (0.37) (0.05) 3.39
========== ========== ========== ==========
Weighted average number of
shares outstanding during
the period:
Basic .......................................... 4,064,900 4,064,900 4,064,900 4,069,571
---------- ---------- ---------- ----------
See Notes to Consolidated Financial Statements
21
TRIDENT ROWAN GROUP, INC. and SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
December 31, 2002, 2001 and 2000
In thousands of Euro or thousands of U.S. Dollars
TOTAL
Additional Other SHAREHOLDERS' Comprehensive
Common paid-in Treasury Comprehensive Accumulated EQUITY Income/
stock capital Stock Income deficit (DEFICIT) (loss)
------ ---------- -------- ------------- ----------- ------------ -------------
At January 1, 2000 (euro) `000 55 54,018 (24,544) (370) (39,218) (10,059)
Net profit (Loss) -- -- -- -- 13,800 13,800 13,800
Translation adjustment -- -- (208) -- (208) (208)
Capital increase resulting from
acquisition of minority interest -- 763 -- -- -- 763 --
Repurchase of shares -- -- (202) -- -- (202) --
Vesting of shares subject to
forfeit -- 250 -- -- -- 250 --
------- ------- ------- ------- ------- ------- -------
At December 31, 2000 (euro) `000 55 55,031 (24,746) (578) (25,418) 4,344 13,592
Net profit (Loss) -- -- -- -- (191) (191) (191)
Translation adjustment -- -- -- (972) -- (972) (972)
Vesting of shares subject to
forfeit -- 83 -- -- -- 83 --
------- ------- ------- ------- ------- ------- -------
At December 31, 2001 (euro) `000 55 55,114 (24,746) (1,550) (25,609) 3,264 (1,163)
Net profit (Loss) -- -- -- -- (1,504) (1,504) (1,504)
Translation adjustment -- -- -- 331 -- 331 331
Vesting of shares subject to
forfeit -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
At December 31, 2002 (euro) `000 55 55,114 (24,746) (1,219) (27,113) 2,091 (1,173)
At December 31, 2002 $ `000 58 57,870 (25,983) (1,280) (28,469) 2,196 (1,231)
======= ======= ======= ======= ======= ======= =======
See Notes to Consolidated Financial Statements
22
TRIDENT ROWAN GROUP, INC. and SUBSIDIARIES
Consolidated Statements of Cash Flows
December 31, 2002, 2001 and 2000
In thousands of Euro or thousands of U.S. Dollars
2002 2002 2001 2000
$ `000 (euro) `000 (euro) `000 (euro) `000
Loss from continuing operations .............................. (1,579) (1,504) (191) (3,692)
Adjustments to reconcile net loss to net
cash provided/(used) by continuing operations:
Depreciation and amortization ................................ 9 9 25 66
Amortization of deferred debt charges ........................ -- -- 104 242
Non-cash finance income from
discontinued operations ...................................... (158)
Minority interests .......................................... 6 6 (59) (506)
Amortization of premium for redemption of
Subsidiary preferred stock ................................. -- -- -- 1,038
(Gain)/Loss on disposals of subsidiaries ..................... (1,563) (1,489) -- (33)
Impairment reserves .......................................... -- -- -- 46
Write down of investment .................................... 1,247 1,188
Other operating activities ................................... (374) (356) (40) 542
Changes in operating assets and liabilities:
Trade and other receivables .................................. (95) (90) 471 703
Prepaid expenses ............................................. 3 3 36 5
Accounts payable and accrued expenses ........................ (687) (654) (2,167) (2,535)
Payment of settlement of litigations ......................... -- -- (1,145) --
Decrease in provision for claims ............................. -- -- (1,676) --
Related party payables ....................................... -- -- -- (105)
------- ------- ------- -------
Net cash (used)/provided by operating
activities ................................................. (3,033) (2,887) (4,642) (4,387)
------- ------- ------- -------
Investing activities:
Net (increase)/decrease in investments ....................... -- -- 16,621 (14,962)
Purchase of minorities in OAM ................................ (2,794)
Sale of subsidiaries, less cash disposed ..................... 6,808 6,484 (118)
Purchase of minority interest in Bion,
net of cash ................................................ (10,019) (9,543) -- --
Proceeds from disposal of other assets,
net ........................................................ (4) (4) -- --
------- ------- ------- -------
Net cash (used)/provided by investing
activities ................................................. (3,215) (3,063) 13,827 (15,080)
------- ------- ------- -------
Financing activities
Issuance of subsidiary preferred stock ....................... -- -- -- 5,880
Redemption of subsidiary preferred stock ..................... -- -- -- (8,199)
Repurchase of shares ......................................... -- -- -- (857)
Principal payments of long-term debt ......................... -- -- (5,261) (285)
------- ------- ------- -------
Net cash used in financing activities ........................ 0 0 (5,261) (3,461)
------- ------- ------- -------
23
TRIDENT ROWAN GROUP, INC. and SUBSIDIARIES
Consolidated Statements of Cash Flows
December 31, 2002, 2001 and 2000
In thousands of Euro or thousands of U.S. Dollars
2002 2002 2001 2000
$ `000 (euro) `000 (euro) `000 (euro) `000
Increase/(Decrease) in cash from
continuing operations ...................................... (6,248) (5,950) 3,924 (22,928)
Cash provided/(used) by discontinued
operations, Net of (euro) 516 (US$ 485)
restricted cash ............................................ -- -- -- 22,645
Exchange movement on opening cash ............................ (1,583) (1,508) 212 422
Cash, beginning of year ...................................... 11,250 10,714 6,578 6,439
------- ------- ------- -------
Cash, end of year ............................................ 3,419 3,256 10,714 6,578
======= ------- ======= =======
See Notes to Consolidated Financial Statements
24
TRIDENT ROWAN GROUP, INC. and SUBSIDIARIES
Consolidated Statements of Cash Flows
December 31, 2002, 2001 and 2000
Supplemental Schedule of Non-Cash Activities
2002 - In January 2002 in conclusion of the Bion transaction (see Note 4) the
Company received 1,000,000 Bion common stock and a warrant to acquire 1,000,000
Bion common stock at a price of US$0.90 (actual transaction currency). All the
Bion common shares were written down during the year.
In settlement of the Rawlings litigation, the Company transferred 160,000
Centerpoint common stock to Rawlings. The remaining 140,000 Centerpoint common
stock in the Company's possession was written down during the year.
2001 - As described in Note 4 to the Consolidated Financial Statements, as a
result of the allocation of the excess of the net fair value of assets acquired
and liabilities assumed over the acquisition costs of the minority interests in
OAM, tax receivables of (euro) 985 thousand and an investment of (euro) 516
thousand were written down to zero.
(euro)84 thousand has been charged as stock compensation expense.
2000 - In July 2000, Centerpoint Corporation ("Centerpoint") issued 300,000
shares of Centerpoint Class A Common Shares to the Company as a fee for
arranging and sponsoring the Centerpoint Series B Preferred Stock financing in
February 2000. Also in July 2000, OAM exercised 100,000 warrants for Centerpoint
stock at US$ 0.01 (actual transaction currency) per share. As a result of these
shares issued by Centerpoint, the Company recorded a non-cash increase in paid
in capital of (euro) 763 thousand.
In February 2000, US$ 1.25 million (actual transaction currency) of advances to
Centerpoint were converted to Centerpoint Series B Preferred Stock.
(euro)250 thousand has been charged as stock compensation expense.
Other Supplemental Information
Interest paid amounted to (euro) 26 thousand, (euro) 42 thousand and (euro) 68
thousand in 2002, 2001 and 2000, respectively.
25
1. Background and Organization
Trident Rowan Group, Inc. (the "Company") was a holding company incorporated in
the United States whose subsidiaries, prior to their disposals, operated
primarily in Italy. Its businesses were the manufacture and distribution of
"Moto Guzzi" brand motorcycles in Italy, Europe and elsewhere in the world, the
manufacture and distribution of steel tubes for the automotive and furniture
markets and the provision of temporary management services to third parties.
In 2000, the Company disposed of all of its operating subsidiaries (see Note 3).
It also disposed of its 57.70% controlling interest in Centerpoint Corporation
("Centerpoint") [formerly Moto Guzzi Corporation ("Moto Guzzi")] in 2002 (see
Note 4).
Reporting currency
The Company, on January 1, 2002, adopted Euro ((euro)) as its reporting currency
and therefore the accompanying consolidated balance sheet as of December 31,
2002, consolidated statements of operations, consolidated statement of changes
in shareholders' equity and consolidated statement of cash flows for the year
ended December 31, 2002 are presented in Euro. All consolidated financial
statements for each period prior to January 1, 2002 have been restated into Euro
using the official Italian Lira - Euro exchange rate fixed as of January 1, 1999
at ((euro)1 to Italian Lira 1,936.27). Since the exchange rate of Lira-Euro is
fixed, the Company's restated consolidated financial statements will depict the
same trends as would have been presented if it had continued to present its
consolidated financial statements in Italian Lira. The consolidated financial
statements of the Company, however, will not be comparable to the Euro
consolidated financial statements of other companies that previously reported
their financial statements in a currency other than Italian Lira because
currency fluctuations between Italian Lira and other currency.
When the actual currency of the transaction is denominated in US Dollars, then
the US Dollar amount has been shown in the relevant note and/or table and
indicated as "US Dollar, actual transaction currency".
All currency amounts in these financial statements are in Euro unless
specifically designated in other currencies.
2. Significant Accounting Policies
Principles of consolidation
The consolidated financial statements at December 31, 2002 included the accounts
of the Company and the following majority owned subsidiaries - Trident Rowan
Servizi S.p.A. ("Trident Servizi", a 99.9% owned subsidiary) and OAM S.p.A.
("OAM", a 99.6% owned subsidiary of Trident Servizi). Trident Rowan
International S.A. ("Trident International") was liquidated in 2002 and
Centerpoint was disposed of in 2002 (see Note 4).
The consolidated financial statements at December 31, 2001 include the accounts
of the Company and the following majority owned subsidiaries - Trident Servizi,
OAM, Trident International and Centerpoint (57.7% owned by OAM and 5% owned
directly by the Company).
The consolidated financial statements at December 31, 2000 include the accounts
of the Company and the following majority owned subsidiaries - Trident Servizi,
OAM, Trident International, Centerpoint. LITA S.p.A. and the subsidiaries of
Centerpoint were disposed of in 2000.
Significant inter-company accounts and transactions have been eliminated in
consolidation.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual results could
differ from these estimates.
26
Foreign currency transactions
Transactions denominated in currencies other than the functional currency of
individual entities included in consolidation are recorded at the exchange rate
in effect on the transaction date. Monetary assets and liabilities denominated
in currencies other than then functional currency are adjusted to current
exchange rates when paid or on the balance sheet date, whichever is earlier.
Gains and losses are included in "other income, net" in the consolidated
statements of operations.
Foreign currency translation
Assets and liabilities of subsidiaries whose functional currency is other than
the Euro ("(euro)") are translated into Euro using exchange rates prevailing at
the balance sheet dates. All expenses and other transactions are translated at
average exchange rates during the year. The adjustment resulting from
translating the financial statements of such subsidiaries is included as a
component of accumulated other comprehensive income or loss.
Property, plant and equipment
Property, plant and equipment are recorded at cost. Depreciation is provided on
the straight-line method over the estimated useful lives of the assets.
Income taxes
Income taxes are provided by each entity included in the consolidation in
accordance with local laws. Deferred income taxes are recognized for all
significant temporary differences and are classified as current or non-current
based upon the classification of the related asset or liability in the financial
statements. A valuation allowance is provided to reduce the amount of deferred
tax assets if it is considered more likely than not that some portion of, or all
of, the deferred tax asset will not be realized.
Stock-based compensation
The Company accounts for stock-based compensation using the intrinsic value
method. Under this method, compensation cost for stock options, warrants and
stock awards is measured as the excess, if any, of the quoted market price of
the Company's common stock at the date of the grant over the amount an employee
must pay to acquire the stock.
The additional compensation costs under the Company's stock option plans for
2002, 2001 and 2000, had they been accounted for using the fair value of awards
at the grant date, were not material. The effect of applying variable accounting
on fixed stock options or awards to employees which exercise prices have been
reduced subsequent to their original measurement dates as well as the effect of
the extension of the exercise periods of certain awards or options to employees,
were not material to the results of operations for all periods presented.
Stock options, warrants and stock awards to persons or entities other than
employees are recognized at the fair value of the Company's common stock at the
date of the grant.
Net profit/(loss) per common share
Basic earnings per share from continuing operations exclude any dilutive effects
of options, warrants and convertible securities. Diluted earnings per share from
continuing operations give effect to all potentially dilutive common shares that
were outstanding during the period. Since the Company had losses from continuing
operations from 2000 to 2002, potentially dilutive common shares are
antidilutive for each of these years.
Accumulated other comprehensive income
Comprehensive income includes net income and difference from the translation of
the balance sheets of non-Euro functional currency entities. The Company has
disclosed comprehensive income in the consolidated statements of changes in
shareholders equity.
Extinguishment of debt
Any gains or losses on extinguishment of debts are included in other income
(expense) in the consolidated statements of operations.
27
New accounting standard
There were several other accounting standards issued subsequent to December 31,
2002. The Company has reviewed those standards and has determined that they are
not applicable to the Company or that their impact is not material to the
financial position and results of operations.
3. Discontinued Operations
3a. Discontinued Motorcycle Operations
Sale of motorcycle operations
Moto Guzzi sold all its operating subsidiaries to Aprilia S.p.A. ("Aprilia") in
2000 for (euro) 42,284 thousand and changed its corporate name to Centerpoint. A
gain on the disposal of (euro) 29,148 thousand (before minority interests of
(euro) 9,707 thousand) was recognized after providing fully against eventual
amounts recoverable from the amounts placed in escrow (see below).
Centerpoint placed (euro) 4,842 thousand in escrow to satisfy potential claims
by Aprilia related to any breach of representations and warranties. The funds in
the escrow account were to be released to Centerpoint in two payments - (euro)
3,615 thousand on September 8, 2001 and up to (euro) 1,227 thousand on September
8, 2007.
Aprilia asserted in 2000 various claims against Centerpoint relating to
Centerpoint's representations and warranties under the Share Purchase Agreement
(the "Alleged Claims"). In 2001, Banca di Intermediazione Mobiliare IMI S.p.A.
("IMI"), the escrow agent under the Escrow Agreement, paid (euro) 3,931 thousand
from the escrow account to Aprilia in respect of the Alleged Claims. Centerpoint
disputed the Alleged Claims and requested an arbitration. (see Note 16).
IMI was paid (euro) 5,888 thousand in fees and expenses related to the foregoing
sale of the operating subsidiaries of Centerpoint, which amount is being
disputed by Centerpoint (see Note 16).
A portion of the proceeds from the sale of the operating subsidiaries of
Centerpoint was used to redeem all the then outstanding Centerpoint Series B
Preferred Stock for approximately US$ 12.6 million (actual transaction currency)
(approximately (euro) 14,616 thousand at the then prevailing exchange rate), of
which US$ 5.2 million (actual transaction currency) (approximately (euro) 5,888
thousand at the then prevailing exchange rate) was received by the Company.
3b. Discontinued Steel Tube Operations
The Company disposed of L.I.T.A. S.p.A. ("LITA") for a consideration of (euro)
1,276 thousand in July 2000. The Company also provided a bank guarantee for
(euro) 516 thousand to secure any claims the purchaser may have for breaches of
representations and warranties given by the Company through December 31, 2004.
The bank guarantee is secured by an investment of the Company held by the bank
that issued the guarantee. The Company settled (euro) 85 thousand of claims by
the purchaser in 2001 and recognized this expense in the consolidated statements
of operations.
4. Changes in Investment
Purchase of minority interests in OAM
The Company purchased, on March 1, 2001, the 15.65% minority interests in OAM
(that it did not already own) from DaimlerChrysler for US$2.5 million (actual
transaction currency)((euro) 2,661 thousand at the effective accounting date for
this transaction of January 1, 2001). The net fair value of the assets acquired
and liabilities assumed of (euro) 4,173 thousand exceeded the acquisition cost
by (euro) 1,512 thousand; this excess was applied to write down the fair value
initially allocated to the following non-current assets of OAM - tax receivables
of (euro) 985 thousand, an investment of (euro) 516 thousand and property and
equipment of (euro) 11 thousand.
28
Bion Transaction
Centerpoint, on January 15, 2002, acquired a 35% equity interest in Bion
Environmental Technologies, Inc. ("Bion") consisting of 19,000,000 common
shares. Bion is engaged in waste stream remediation and organic soil and
fertilizer production. Its unrestricted common share was then traded on the
OTC/BB market. The considerations for the foregoing acquisition are cash of
approximately US$8.5 million (actual transaction currency) (substantially all of
Centerpoint's cash), the US $4.2 million (actual transaction currency)
Centerpoint Loan to the Company (including accrued interest), and the assignment
of 65% of Centerpoint's claims with respect to the escrow accounts from the sale
of Centerpoint to Aprilia and its claims against IMI.
Simultaneously with the consummation of this transaction, Bion purchased the
57.7% majority interest in Centerpoint from OAM. The total consideration paid by
Bion consisted of (i) US$3.7 million (actual transaction currency) in cash, (ii)
the assignment of the US$4.2 million (actual transaction currency) Centerpoint
Loan to the Company (including accrued interest) and related loan guarantees,
(iii) the assignment of the 65% interest in Centerpoint's claims with respect to
the escrow accounts from the sale of Moto Guzzi to Aprilia and Centerpoint's
claims against IMI, (iv) the issuance of 1,000,000 Bion restricted common shares
to OAM, and (v) the issuance to OAM of a warrant to acquire 1,000,000 Bion
common shares at a price of US$0.90 (actual transaction currency), with
expiration date of January 10, 2007. David Mitchell (a director of Centerpoint)
was the Chairman, President, Board Member and a principal stock and warrant
holder of Bion at the time of the transaction. As a consequence of the sale, the
Company recorded a gain of (euro)1,489 thousand. The carrying value of the Bion
shares of (euro)841 thousand was fully written down in 2002.
In July 2002, Bion effected a 10 for 1 reverse stock split that reduced the
number of shares of Bion held by the Company to 100,000 and the number of
warrants held by the Company to 100,000.
5. Tax Receivables
Tax receivables represent amounts for which reimbursement has been requested.
The period for reimbursement in Italy has, in the recent past, invariably been
in excess of 12 months and, accordingly, amounts for which reimbursement has
been requested are classified as non-current assets. Interest accrues on these
receivables at rates set from time to time by the Italian Government.
6. Accrued Expenses and Other Payables
2002 2002 2001
$ `000 (euro) `000 (euro) `000
Salaries, wages and related items 215 205 207
Value added and other taxes 219 209 123
Other for legal costs, interest 117 111 814
and other accrued expenses
Provision for claims - - 386
-------- --------- ---------
551 525 1,530
======== ========= =========
The provision for claims as of December 31, 2001 (see Note 8) pertains to the
Rawlings Litigation that was settled in 2002.
7. Long-Term Debt
The Company issued a two-year US$ 6 million (actual transaction currency) 5%
convertible debentures ("US$6 Million (actual transaction currency) Convertible
Debenture") on December 28, 1999. The Company also issued US$ 250,000 (actual
transaction currency) convertible debenture ("US$250,000 (actual transaction
currency) Convertible Debenture") that had the same terms as the US$6 Million
(actual transaction currency) Convertible Debenture to Simtov LTD, an affiliate
of Emanuel Arbib (see Note 12), as payment for services in connection
29
with the issuance of the US$6 Million (actual transaction currency) Convertible
Debentures. The foregoing debentures are convertible at any time, in full or in
part, into common stock of the Company.
Centerpoint loaned US$4.2 million (actual transaction currency) to the Company
("Centerpoint Loan") on June 13, 2001 pursuant to a loan agreement ("Centerpoint
Loan Agreement") with the Company executing a promissory note ("Promissory
Note") for the amount of the Centerpoint Loan. The Centerpoint Loan bears
interest at a rate of 5 % per annum, is repayable in full on June 13, 2003 and
was secured by the 300,000 Centerpoint Class A Common Stock then owned by the
Company.
On June 15, 2001, from the proceeds of the Centerpoint Loan, the Company paid
the holders of the US$6 Million (actual transaction currency) Convertible
Debenture US$ 4,207,500 (actual transaction currency) as full payment (including
past due interest of US$135,000 (actual transaction currency)). Simtov LTD, also
accepted, in July 2001, US$ 218,750 (actual transaction currency) as payment in
full of the US$250,000 (actual transaction currency) Convertible Debentures. The
difference of (euro) 2,208 thousand between the carrying amounts of the US$6
Million (actual transaction currency) Convertible Debenture and the US$250,000
(actual transaction currency) Convertible Debenture and amounts paid in full
settlement thereof were recorded in "Other income/(expense) net," in the
consolidated statements of operations.
8. Other Income/(Expense)
2002 2002 2001 2000
$ `000 (euro) `000 (euro) `000 (euro) `000
Write down of Bion shares(See Note 4) (883) (841) - -
Gain on Sale of Centerpoint (See Note 4) 1,563 1,489 - -
Write down of 140,000 Centerpoint shares (364) (347) - -
Exchange loss (499) (475) -
Additional reserve for Rawlings Litigation - (387) -
Gain from the extinguishment of the
Convertible Debentures (see Note 7) - - 2,208 -
Income from sale of marketable securities - - 122 -
Other 22 21 130 56
------------- ------------- ------------ ------------
(161) (153) 2,073 56
============= ============= ============ ============
The Company, on February 11, 2002, entered into a settlement agreement with
Rawlings Sporting Goods Company with respect to the Rawlings Litigation pursuant
to which the Company transferred 160,000 Centerpoint Common Stock in May 2002;
in this connection, the Company recorded an additional reserve for (euro) 387
thousand in 2001.
The residual 140,000 shares of Centerpoint were written down in 2002.
9. Income Taxes
Loss from continuing operations before income taxes and minority interests
consisted of the following:
30
2002 2002 2001 2000
$ `000 (euro) `000 (euro) `000 (euro) `000
United States (1,152) (1,098) 103 (4,479)
Italy (316) (300) (100) 364
Elsewhere -- (136) (63)
------ ------ ------ ------
(1,468) (1,398) (133) (4,178)
====== ====== ====== ======
Income tax expense consisted of the following:
2002 2002 2001 2000
$ `000 (euro) `000 (euro) `000 (euro) `000
Current:
US 105 100 100 --
Italy -- -- 17 20
------ ------ ------ ------
105 100 117 20
------ ------ ------ ------
Deferred:
------ ------ ------ ------
Total 105 100 117 20
====== ====== ====== ======
Significant components of the Company's deferred tax assets are as follows:
2002 2002 2001 2000
$ `000 (euro) `000 (euro) `000 (euro) `000
Accrued expenses 210 200 123 604
------- ------- ------- -------
Net operating loss carry forwards 13,360 12,723 16,030 9,924
Valuation allowance (13,360) (12,723) (16,030) (9,924)
------- ------- ------- -------
Net deferred tax assets -- -- -- --
======= ======= ======= =======
It is management's opinion that it is more likely than not that loss
carry-forwards of the US company will not be realized; therefore deferred tax
assets were fully covered by valuation allowance.
The reconciliation of income taxes shown in the consolidated statements of
operations and the amount derived by multiplying loss from continuing operations
before income taxes and minority interest and the statutory U.S. federal income
tax rate is as follows
2002 2002 2001 2000
$ `000 (euro) `000 (euro) `000 (euro) `000
Computed tax credit at U.S.
federal rate on losses from
continuing operations (513) (489) (47) (1463)
Losses and reversals of short-term
reserves for which valuation allowance
was provided -- -- -- 1760
Valuation allowance on the deferred tax
asset related to tax losses
carried forward 513 489 47 --
Non-deductible expenses and local taxes,
Net 105 100 117 (278)
------ ------ ------ ------
105 100 117 19
====== ====== ====== ======
31
For U.S. federal income tax purposes, the Company has net operating loss
carry-forwards of approximately US$ 13.3 million (actual transaction currency)
at December 31, 2002. These losses expire from 2004 through 2022. United States
income taxes have not been provided on unremitted earnings of subsidiaries
located outside the United States as such earnings are considered to be
permanently reinvested.
At December 31, 2002 the Company had net operating loss carry-forwards for
Italian income tax purposes that expire as follows:
2002 2002
$ `000 (euro) `000
2005 3,265 3,110
2006 1,378 1,312
2007 25 24
--------- ---------
4,668 4,446
========= =========
The Directors are planning to place the Italian subsidiary into liquidation by
April 30, 2004. In that event, any remaining loss carry-forwards will not be
realized.
10. Shares issued in Connection with Employment Agreements
In 1998 the Company issued 205,000 common shares to Mark S. Hauser (see Note 12)
and Emanuel M. Arbib (see Note 12). The shares issued have contractual transfer
restrictions lapsing equally over a three-year period ended December 31, 2000.
The issuance of these shares has been accounted for using the quoted market
price of the Company's common stock as of the date of the agreements of US$ 4.06
(actual transaction currency) per share and charged to compensation expense over
the life of the service contracts. The compensation expense related to these
shares issuances were (euro) 250,000 and (euro) 83,000 in 2000 and
2001, respectively.
11. Stock Options and Warrants (all amounts in US$, the actual transaction
currency)
Tamarix warrant
In 1997, in connection with the purchase by Tamarix Investors LDC of a
controlling block of shares of the Company, the Company issued 1,250,000
warrants to the management of Tamarix Investors LDC. The warrants were
exercisable through May 2, 2000 at an exercise price of US$ 6.00, subsequently
revised to US$ 5.50 in October 1998. These warrants were distributed to Messrs.
Hauser, Bulgari and Arbib or their associates in 1999 as part of a
reorganization of Tamarix Investors LDC.
In February 2000, in connection with the then auction of the operating
subsidiaries of Centerpoint (see Note 3a), the Company reduced the exercise
price of the warrants previously issued to individuals identified below (or
their affiliates) to US$ 3.50 per share (the then current quoted market price of
the Company's common stock) and extended the expiration date of those warrants
to June 2007:
32
Original New
Warrants Exercise Exercise
Name Repriced Price* Price*
--------------------- -------- -------- --------
Mark S. Hauser 152,185 $ 5.50 $ 3.50
Azzurra (an affiliate of 250,000 $ 5.50 $ 3.50
Mark Hauser)
Simtov, LTD (an 99,212 $ 5.50 $ 3.50
affiliate of Emanuel
Arbib)
Gianni Bulgari 190,534 $ 5.50 $ 3.50
-----------
691,931
===========
* the actual transaction currency is US Dollars
The expiration date of the remaining 558,069 warrants was also extended to June
2007. Furthermore, in February 2000, additional 200,000 warrants were issued to
Mark Hauser and affiliates. This brought his total to 804,370. Of this total,
one half were exercisable at $3.50 (and repriced in June 2003 to $1.25) and the
other half exercisable at $5.50 (repriced in June 2003 to $1.50).
The above warrants and other warrants were further re-priced in June 2003 (see
Note 17).
Publicly traded warrants (OTC/BB: TRGIW)
The Company issued 1,437,500 warrants in June 1997; which all expired
unexercised in June 2002.
1995 Non Qualified Plan Options
The Company's "1995 Non-Qualified Plan" provides for the grant of non-qualified
stock options for officers and key employees. The Board of Directors has
authorized the issuance of a total of 2,000,000 options under this plan. The
total options granted under this plan prior to 2000 were 775,000 options (net of
forfeitures) at an exercise price of US$ 12.26 . On March 19, 1998, the Company
granted to certain officers options to purchase an aggregate of 280,000 common
stock at an exercise price of US$5.00 in exchange for the 710,000 outstanding
options. The remaining 65,000 options were forfeited in 2000.
Also on March 18, 1998, the Company granted options to Mr. Hauser, Mr. Arbib and
Tamarix to purchase an aggregate of 212,000 common stock at an exercise price of
US$ 5.00 and granted a further 105,000 options to persons not previously
included in its "1995 Non-Qualified Plan". 65,000 and 157,000 of these options
were forfeited prior to 2000 and in 2000, respectively, when the grantees left
the Company. In February 2000, in connection with the then upcoming auction of
the operating subsidiaries of Centerpoint, the Company reduced the exercise
price of 50,000 stock options previously granted to Mr. Hauser to US$ 3.50 per
share (the then current quoted market price of the Company's common stock). In
June 2003, the Company reduced the price of various options issued to Mr. Hauser
and other officers and directors of the Company (see Note 17).
As of December 31, 2002, the outstanding options under the "1995 Non-Qualified
Plan" which are all exercisable, are as follows - 245,000 options (exercise
price is $5.00 per share, reduced to $1.50 per share in 2003), 80,000 options
(exercise price is $5.50 per share, reduced to $1.50 per share in 2003) and
50,000 options (exercisable price is $3.50 per share, reduced to $1.25 per share
in 2003).
1995 Director's Plan
Every non-employee directors, who were never previously employed by the Company
or eligible to receive options, annually receive, on each January 2, options to
purchase 5,000 shares under the 1995 Directors' Plan. Newly appointed or elected
non-employee directors are granted options upon taking office. The authority to
33
grant options under the 1995 Directors' Plan will terminate on the earlier of
December 1, 2005 or upon the issuance of the entire 150,000 shares of stock
reserved for issuance under the plan.
The exercise price is fixed at the reported closing price of the stock on
January 2, or date of election of Directors for subsequent grants. All options
issued prior to 2000 were forfeited as a result of changes in the Board of
Directors except for 7,917 options with an exercise price of US$ 5.50 and 7,917
options with an exercise price of US$ 5.00. The Company issued 45,000 options on
January 3, 2000 with an exercise price of US$ 5.50 and a further 15,000 options
were issued on January 2, 2001 with an exercise price of $0.75 and another
15,000 options were issued on January 2, 2002, with an exercise price of $1.31.
As of December 31, 2002, the outstanding exercisable options under the "1995
Director's Plan" are as follows - 7,917 options (exercise price is $5.00 per
share, reduced to $1.50 per share in 2003), 52,917 options (exercisable price is
$5.50 per share, reduced to $1.50 per share in 2003), 15,000 options
(exercisable price is $0.75 per share, increased to $1.50 per share in 2003).
The remaining 15,000 options (exercisable price is $1.31 per share, increased to
$1.50 per share in 2003) are not exercisable at December 31, 2002.
As of March 31, 2004, 105,834 director options are issued and outstanding and
44,166 are available for issuance.
The following is a summary of transactions pertaining to the 1995 Non-qualified
Plan and the 1995 Director's Plans:
2002 2001 2000
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000's Price* (000's) Price* (000's) Price*
Outstanding, January 1 451 $ 4.84 436 $ 4.92 649 $ 5.76
Granted 15 $ 1.31 15 $ 0.75 45 $ 5.50
Exercised -- -- -- -- -- --
Forfeited or exchanged -- -- -- -- (258) $ 6.54
Outstanding, December 31 466 $ 4.73 451 $ 4.84 436 $ 4.92
-------------------------------------------------------------------------
Options Exercisable, December 31 451 $ 4.84 436 $ 4.98 421 $ 4.90
* the actual transaction currency is US Dollars
The following is a summary of the status of stock options outstanding and
exercisable under the 1995 Non-qualified Plan and the 1995 Director's Plans as
of December 31, 2002:
34
Stock Options Outstanding Stock Options Exercisable
Weighted
Weighted Average Weighted
Average Remaining Average
Range of Shares Exercise Contractual Shares Exercise
Exercise Price (000)'s Price* Life (000's) Price*
$5.50 133 $5.50 5.00 years 133 $5.50
$5.00 253 $5.00 5.00 years 253 $5.00
$3.50 50 $3.50 5.00 years 50 $3.50
$1.31 15 $1.31 5.00 years - -
$0.75 15 $0.75 4.00 years 15 $0.75
-------------------------------------------------------------------------------------
Totals 466 $4.73 451 $4.84
* the actual transaction currency is US Dollars
Other options
The Company sold to GKN Securities Corp. for US$ 100, 125,000 options
exercisable through June 10, 2002 at an exercise price of US$ 6.12 and issued
173,306 warrants exercisable through June 10, 2000 at an exercise price of US$
6.00 to certain shareholders as an inducement for them to enter into lock-up
agreements with the Company and GKN Securities Corp. in connection with its June
1997 public offering. These options and warrants expired unexercised. No
compensation expense related to these options and warrants were recognized in
2000, 2001 and 2002.
The Company incurred losses from continuing operations in 2000 and had no
operations in 2001 and 2002. All warrants and options described above are
considered anti-dilutive.
12. Related Party Transactions
Tamarix Capital Corporation / Mr. Mark Hauser
Tamarix Capital Corporation provides financial services to the Company. Mark
Hauser (a principal of Tamarix Capital Corporation) served in various capacities
with the Company - as Chief Executive Officer, Executive Chairman and Director.
He is currently joint Chief Executive Officer of the Company.
Mr. Emanuel Arbib
Mr. Arbib served the Company in various capacities - as a Director and also as
Chief Financial Officer. He also held the position of director of Centerpoint
until the sale of its operating subsidiaries, to Aprilia. He is currently joint
Chief Executive Officer of the Company.
TIM disposal
The Company sold its management services subsidiary in 2000 to the management of
the subsidiary. The Company, as consideration, received 55,000 of its own shares
held by the management of the subsidiary with a fair value of (euro) 201
thousand at the date of sale.
Andrea della Valle and Mark Segall
Andrea della Valle (a former director of the Company) and Investec Ernst &
Company (an investment banking firm where Mark Segall, a director of the
Company, was an executive officer at the time of the transaction) were paid by
Centerpoint commission of US$ 180,000 (actual transaction currency) and
US$80,000 (actual transaction currency), respectively, in connection with
Fineco's purchase of the Centerpoint Series B Preferred Stock in 2000.
35
13. Export Sales and Geographic Information
Identifiable assets by location were as follows: 2002 2002 2001
$ `000 (euro) `000 (euro) `000
Italy 663 631 566
United States 3,136 2,987 9,947
Elsewhere - - 481
----------------------------------
3,699 3,618 10,994
==================================
Assets held elsewhere are principally related to cash held by Trident Rowan
International (a Luxemburg company). The assets held in the US are US dollar
cash mainly owned by OAM and deposited in US banks.
14. Concentration of Credit Risks
The Company has cash with various financial institutions of national standing in
Italy and the United States.
15. Financial Instruments
The fair value of cash approximates its carrying value.
16. Claims and litigation
The provision for claims as of December 31, 2002 pertains to minor litigations.
Litigation pending:
Wilson/Travelers Litigation
The Company sued Travelers Casualty and Surety Company ("Travelers"), its
insurer, when Travelers disclaimed coverage and defense of a personal injury
litigation ("Wilson Litigation"). The dispute was settled in December 2003 with
Travelers paying the Company $1,450,000 (actual transaction currency)
((euro)1,285 thousand). This amount was recorded in "other income" in 2003.
Aprilia Claims under the Share Purchase Agreement; Payment by IMI; Request for
Arbitration; Settlement
Aprilia asserted in 2000 various claims against Centerpoint relating to
Centerpoint's representations and warranties under the Share Purchase Agreement
(the "Alleged Claims"). In 2001, Banca di Intermediazione Mobiliare IMI S.p.a.
("IMI"), the escrow agent under the Escrow Agreement, paid (euro) 3,931 thousand
from the escrow account (see Note 3a) to Aprilia in respect of the Alleged
Claims. Centerpoint disputed the Alleged Claims and requested an arbitration.
Centerpoint and OAM, in October 2003, entered into a settlement agreement with
Aprilia, with the latter paying (euro) 1,420,256 to Centerpoint, including
(euro) 206,583 of legal fees. OAM recorded in "other income" an equivalent of
65% of the net proceeds of this settlement. The right to the remaining 35% of
the proceeds is owned by Centerpoint (no longer a related party of the Company
as of December 31, 2003 (see Note 4).
The residual balance of approximately (euro) 600 thousand remaining in the
escrow account relates to eventual claims regarding taxes and social security
contributions and such balance, if any, after eventual successful claims by
Aprilia, will be released in September 2007. OAM is entitled to 65% of amounts
eventually released; this claim (a contingent asset) is not recorded in the
consolidated balance sheets.
IMI Fees
In relation to the sale of the subsidiaries of Centerpoint (a former subsidiary
of the Company) to Aprilia S.p.A, IMI was paid (euro) 5,888 thousand in fees and
expenses it claimed under its engagement letter with the Company
36
and OAM. The Company disputed the calculation of IMI's fees and has brought a
suit in Italy seeking reimbursement of (euro) 4,527 thousand (approximately US$
4.25 million). The judge handling the lawsuit has heard the case several times
in 2002 and 2003. As of March 31, 2004, the lawsuit is still pending; however,
the Company is in discussion with IMI for an eventual out-of-court settlement.
CDS Srl
In 1999 CDS S.r.l. ("CDS") caused a leasing company to purchase from OAM real
estate in via Baronia, Rome and entered into a leasing arrangement with the
leasing company. Subsequently, on October 9, 1999, CDS brought a claim against
OAM in the Rome Civil Court alleging that the commercial designation of the
property in 1998 was not properly disclosed and consequently its lease payments
were excessive and sought reimbursement of the lease payments that it considered
excessive from OAM in an aggregate amount of approximately (euro)800 thousand.
The proceedings have continued intermittently over the years. On March 25, 2004,
the Court requested that the parties present their conclusions in order for it
to render a final verdict, presumably within 80 days. It is management's opinion
that the risk of a negative judgment is low and the potential liability remote.
17. Subsequent events
Merger of OAM and Trident Servizi
On March 27, 2003, OAM was merged into Trident Servizi effective January 1,
2003. The terms of the merger provides for: (a) cancellation of the entire share
capital of OAM owned by Trident Servizi; (b) issuance of 73 new Trident Servizi
shares for every 1,000 OAM shares to the residual minority owner of OAM; (c)
increase in the share capital of Trident Servizi from 664,000 to 672,856 shares;
and (d) change in the name of Trident Servizi to OAM S.p.A.
Bion
In April 2003, Bion determined that the anti-dilution provisions in its
agreements with Centerpoint and OAM were preventing it from being able to raise
outside financing. In order to remedy this situation, and in anticipation of
receiving up to US$1,925,000 (actual transaction currency) in new financing, on
April 23, 2003, Bion entered into an agreement with Centerpoint providing, among
other things, that Centerpoint cancel all antidilution and penalty provisions in
existing agreements between Bion and Centerpoint. On May 23, 2003, OAM and Bion
entered into an agreement providing among other things: (i) that OAM waive the
anti-dilution provisions contained in its original agreement with Bion, (ii) for
clarification of certain reimbursements required to be made by Bion under the
original agreement relating to certain claims being handled by OAM also on
behalf of Centerpoint and (iii) the payment by Bion to OAM of US$80,000 (actual
transaction currency) plus US$10,000 (actual transaction currency) in legal
expenses.
The public filings of Bion disclosed that it is under financial difficulty and,
in January 2004, closed its New York office and all remaining employees and
consultants are working from their homes. Moreover, in January 2004, again as
disclosed in Bion public filings, the registration of its shares of stock was
terminated.
Centerpoint, in January 2004, distributed all Bion shares it owned pro-rata to
the holders of its common stock. The Company received 44,240 Bion shares which
are deemed to be of no value. The registration of Centerpoint shares was
terminated in February 2003.
37
Stock Option and Warrant Repricing
The following warrants and options were repriced and extended in July 2003 as
follows:
- ------------------------------- ----------- --------------------------- --------------------- -----------
Number of Securities
Underlying Exercise Price at New
Options/War-rants/SARs Time of Repricing Exercise
Name Date Repriced or Amended (#) or Amendment ($)* Price($)*
- ------------------------------- ----------- --------------------------- --------------------- -----------
Mark Hauser 6/20/03 50,000 (Options) US$3.50 US$1.25
87,917 (Options) US$5.50 US$1.50
152,185 (Warrants) US$3.50 US$1.25
152,185 (Warrants) US$5.50 US$1.50
- ------------------------------- ----------- --------------------------- --------------------- -----------
Emanuel Arbib 6/20/03 65,000 (Options) US$5.00 US$1.50
7,917 (Options) US$5.00 US$1.50
- ------------------------------- ----------- --------------------------- --------------------- -----------
Gianni Bulgari 6/20/03 15,000 (Options) US$5.50 US$1.50
5,000 (Options) US$0.75 US$1.50
5,000 (Options) US$1.31 US$1.50
5,000 (Options) US$0.25 US$1.50
190,534 (Warrants) US$3.50 US$1.25
190,533 (Warrants) US$5.50 US$1.50
- ------------------------------- ----------- --------------------------- --------------------- -----------
Howard Chase 6/20/03 140,000 (Options) US$5.00 US$1.50
15,000 (Options) US$5.50 US$1.50
5,000 (Options) US$0.75 US$1.50
5,000 (Options) US$1.31 US$1.50
5,000 (Options) US$0.25 US$1.50
- ------------------------------- ----------- --------------------------- --------------------- -----------
Nick Speyer 6/20/03 40,000 (Options) US$5.00 US$1.50
- ------------------------------- ----------- --------------------------- --------------------- -----------
Azzurra (an affiliate of 6/20/03 250,000 (Warrants) US$3.50 US$1.25
Mark Hauser) 250,000 (Warrants) US$5.50 US$1.50
- ------------------------------- ----------- --------------------------- --------------------- -----------
Simtov, LTD (an affiliate 6/20/03 99,212 (Warrants) US$3.50 US$1.25
of Emanuel Arbib) 165,351 (Warrants) US$5.50 US$1.50
- ------------------------------- ----------- --------------------------- --------------------- -----------
Mark Segall 6/20/03 15,000 (Options) US$5.50 US$1.50
5,000 (Options) US$0.75 US$1.50
5,000 (Options) US$1.31 US$1.50
5,000 (Options) US$0.25 US$1.50
- ------------------------------- ----------- --------------------------- --------------------- -----------
* the actual transaction currency is US Dollars
The expiration dates of all of the above warrants and options were extended to
July 1, 2009 in order to motivate the holders to continue to assist the Company
in maximizing shareholder value. In determining the repricing, the board
considered, among other issues, the following :
i) the requirement to expense all such options in the future;
ii) the history related to the options and the warrants;
iii) the complications and challenges the Company faced following the sale of
the operating subsidiaries of Centerpoint to Aprilia;
iv) the complications and challenges associated with completing an appropriate
transaction for the Company with the cash remaining from the Aprilia sale;
38
v) the current net asset and potential liquidation value of the Company;
vi) other relevant factors.
Release of LITA S.p.A. Guarantee
On March 31, 2004 the purchasers of LITA S.p.A. agreed to release the Company
from any other further obligations under its escrow pertaining to potential tax
liabilities, which had been due to expire on December 31, 2004. In connection
with this release, the Company paid (euro) 30,000 in 2004 and will record a gain
of (euro)486 thousand in 2004, primarily for face value of the investment of the
Company used to secure the guarantee that it has written-off in prior years.
Comtech Deal
Following the non-binding term sheet dated December 30, 2003, between the
Company and Comtech Group, Inc., a Cayman Islands corporation, in May 2004, the
Company and Comtech reached an agreement in principle pursuant to which, Comtech
may transfer all of its equity to the Company and the Company, in turn, may
issue to Comtech's shareholders 42,000,000 shares of the Company's stock.
Following the transaction, Comtech's shareholders may control approximately
91.2% of the Company's common stock (87.5% including options and warrants
outstanding). Comtech is in the business of distributing electronic components,
providing value added design services and developing and manufacturing
electronic components for the telecommunications and electronic market.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
In October 2002, Arthur Andersen S.p.A. (Deloitte & Touche Italia S.p.A. until
July 31, 2003) entered into an agreement with the national Italian practice of
Deloitte Touche Tohmatsu ("DTT") that provides for the association of the ex
Arthur Andersen S.p.A. with DTT. On August 1, 2003, the audit operations of
Deloitte & Touche S.p.A. and Deloitte & Touche Italia S.p.A. were combined and
the resulting company took the name of Deloitte & Touche S.p.A.
There are no disagreements with accountants on accounting and financial
disclosures.
ITEM 9A. CONTROLS AND PROCEDURES
We maintain a system of internal controls and procedures designed to provide
reasonable assurance as to the reliability of our published financial statements
and other disclosures included in this report. Based on their evaluation, as of
the end of the period covered by this Annual Report on Form 10-K, our Co-Chief
Executive Officers have concluded that our disclosure controls and procedures
(as defined in Rule 13a-14(c) and 15d-14(c) under the Securities Exchange Act of
1934, as amended) are effective. There have been no significant changes in
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.
39
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following information concerns the directors and executive officers of the
Company.
Directors and Executive Officers
As of December 31, 2002 and as of the date of the report, except as noted, the
Directors of the Company were as follows:
Name Age Position
- ---- --- --------
Mark S. Hauser ............... 46 President and Joint Chief Executive
Officer, Director
Emanuel Arbib ................ 36 Joint Chief Executive Officer, Director
Howard E. Chase .............. 68 Director
Gianni Bulgari ............... 67 Director
Mark B. Segall ............... 42 Director and Secretary
Mark S. Hauser, President and Chief Executive Officer of the Company from March
1998 through December 1999, and President and Joint Chief Executive Officer of
the Company since December 1999, became a Director of the Company on May 2, 1997
upon consummation of the Tamarix/Finprogetti Acquisition Agreement. Mr. Hauser
is a Managing Director of FdG Associates, a private equity fund. He is an
attorney and a founder and Managing Director of Tamarix Capital Corporation, a
New York-based merchant and investment-banking firm. In 1991, Mr. Hauser founded
Hauser, Richards & Company, also an international investment banking firm.
Emanuel Arbib, was the Company's Chief Financial Officer from March 1998 through
1999, and has been the Joint Chief Executive Officer since December 1999. He
became a Director of the Company on May 2, 1997 upon consummation of the
Tamarix/Finprogetti Acquisition Agreement. He is the co-founder and Managing
Director of GAIM Advisors Ltd., a London-based investment company. Since June
1998, he has served as a director of and chief executive officer of Integrated
Asset Management plc; an U.K. publicly traded company. In 1996, he served as
Managing Director of BioSafe Europe, an affiliate of BioSafe International Inc.,
a publicly traded company engaged in waste management and landfill reclamation.
From September 1996 to November 1997, he served as a director of International
Capital Growth Ltd., and its European subsidiary, Capital Growth (Europe) Ltd.,
investment-banking firms. From 1990 until 1991, Mr. Arbib headed the Italian
desk for Eurobond sales at Prudential Bache Securities (UK) Ltd.
Howard E. Chase has served as a Director of the Company since 1971, as Chairman
of the Board of Directors and Secretary of the Company until September 1999 and
as Company counsel from 1971 until September 1995 and as President and Chief
Executive Officer of the Company from October 1995 to March 1998. He is also
President of Carret Holdings, Inc., an asset management company. He has also
served as Vice-President of the Company from 1986 to October 1995; a partner of
Morrison Cohen Singer & Weinstein, LLP from April 1984 until September 1995; and
a director of Thoratec Corporation, a NASDAQ-traded company, since 1987 and
International Diamalt Co., Ltd., a U.K. based company. Mr. Chase became a
director of Bion Environmental Services, Inc. in January 2002. Bion, a Colorado
corporation, was publicly-held until January 2004.
Gianni Bulgari has served as a director of the Company since 1997, was Chairman
of the Board of Directors of FILA Holdings, S.p.A., a sportswear maker, from
1989 until 1998. From 1966 until 1987 he served as a Chairman of the Board of
Directors and Chief Executive Officer of "BULGARI," a family-owned jewelry
business. Mr. Bulgari was also a director of Centerpoint.
40
Mark B. Segall has been a director of the Company since December 1999 and the
Company's Secretary since December 1999. Mr. Segall was a partner at Kramer
Levin Naftalis & Frankel LLP ("Kramer Levin"), a New York law firm, until
October 1999. In October 1999, he became a Senior Vice President and the General
Counsel at Investec Ernst & Company, and in October 2001 President and CEO of
Investec Inc. The US investment banking operations of Investec were terminated
in June 2003 at which time Mr. Segall left Investec and became Chairman and CEO
of Kidron Corporate Advisors LLC, a M & A advisory boutique.
The Company does not currently have a code of ethics because the Company does
not now, nor did it in 2001, 2002 and 2003, have any operations; however the
Company intends to evaluate provisions for a code of ethics in the future.
The Board of Directors established an Audit Committee in 1995, which operated
until December 6, 1999. The members of the Committee were Howard E. Chase and
Deborah S. Novick. The audit and compensation oversight responsibility now sits
with Howard E. Chase, Mark Segall and Gianni Bulgari. The Board of Directors has
determined that neither of Messrs. Chase, Segall or Mr. Bulgari is an "audit
committee financial expert," within the meaning of the rules promulgated under
the Securities Exchange Act of 1934, as amended. The Board of Directors believes
that the background and financial sophistication of each of Messrs. Chase,
Segall and Bulgari are sufficient to fulfill the duties of such a financial
expert. Currently, issuers with securities quoted on the Over-The-Counter Market
known as the "pink sheets," such as the Company, are not required to have an
audit committee or an audit committee financial expert.
The Company does not currently have a code of ethics because the Company does
not now, nor did it in 2001, 2002 and 2003, have any operations; however the
Company intends to evaluate provisions for a code of ethics in the future.
Each of Messrs. Chase and Hauser were directors of Centerpoint an affiliate of
the Company and a company with a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), during the years ended December 31, 2000 and December 31, 2001. Each of
Messrs. Chase and Hauser resigned from Centerpoint in January 2002. None of the
other above-described persons is a director of such a company or of any company
registered as an Investment Company under the Investment Company Act of 1940. In
February 2003, Centerpoint filed a Certification and Notice of Termination of
Registration with the SEC, and as a result is no longer a publicly-held company.
Executive Officers
Position with Company and Business
Name Age Experience During Past Five Years
- ---- --- ---------------------------------
Mark S. Hauser ..... 46 President and Joint Chief Executive
Officer from December 1999
President and Chief Executive Officer
from March 1998
Director of the Company from May 1997
Emanuel Arbib ..... 36 Joint Chief Officer from December 1999
Chief Financial Officer from March 1998
Director of the Company from May 1997
Information relating to the past business experience of Messrs. Hauser and
Arbib, is set forth above under "Directors." All executive officers will serve
in their respective capacities in accordance with the forms of their employment
agreements and arrangements, until their successors shall have been elected and
qualified.
41
ITEM 11. EXECUTIVE COMPENSATION (all amounts stated in US$, the actual
transaction currency)
The following table shows, for the three fiscal years ended December 31, 2002,
2001 and 2000, the cash and certain other compensation paid or accrued for those
years to the President of the Company and Joint Chief Executive Officers of the
Company (collectively, "Named Executive Officers"). Other than as indicated in
the table below, no executive officer of the Company received salary plus bonus
in excess of US$100,000 during the fiscal year ended December 31, 2002.
SUMMARY COMPENSATION TABLE
Long -Term Compensation Awards
Annual Other
Compensation Annual Restricted Options/
Name and Principal Position Year Salary (Lira/$) Compensation (3) Stock SARs (#)
- --------------------------- ---- ---------------- ---------------- ----- --------
Mark S. Hauser(2) (3) 2002 $160,000 -0- -0- -0-
President and Joint Chief Executive
Officer since December 1999 2001 $160,000 -0- -0- -0-
President and Chief Executive
Officer since March 1998 2000 $235,000 $90,000 -0- -0-
Emanuel Arbib(4) 2002 $100,000 -0- -0- -0-
Joint Chief Executive Officer since
December 1999 2001 $100,000 -0- -0- -0-
Chief Financial Officer since March 2000 $100,000 -0- -0- -0-
1998
(1) The aggregate amount of all perquisites and other personal benefits
paid to each of the Named Executive Officers did not exceed the greater of
US$ 50,000 or 10% of such Named Executive Officer's salary.
(2) 2000 compensation includes cash compensation received from Centerpoint
(formerly Moto Guzzi), and the value of office space provided to Mr.
Hauser in 2000. Includes warrant and option repricing in 2000 described
below.
(3) Other Annual Compensation for Mr. Hauser in 2000 includes fees received as
chairman of Moto Guzzi Corporation, then an affiliate of the Company
(4) In July 2001, Mr. Arbib accepted US$ 218,750 as payment in full on the US$
250,000 5% Convertible Debenture issued to Simtov LTD an affiliate company
of Mr. Arbib in connection with Mr. Arbib's efforts in placing US$
6,000,000 of such Debentures in 1999. See "Ten-Year Stock Option and
Warrant Repricings" below
Employment Contracts
On March 18, 1998, the Board of Directors approved a three year employment
contract commencing May 1, 1998 with Mark S. Hauser as President and Chief
Executive Officer, a three year consulting contract commencing May 1, 1998 with
Emanuel M. Arbib as Chief Financial Officer and a one year, renewable agreement
commencing May 1, 1998 with Tamarix Capital Corporation, a company controlled by
Mr. Hauser which supercedes a prior existing contract, for provision of merchant
banking services to the Company. Upon expiration of the above three year
contracts, a one year renewable contract was signed. Mr. Hauser has agreed that
his compensation will terminate upon, and as of, any liquidation of the Company.
The terms of Mr. Hauser's employment contract with the Company provide for
compensation of US$ 160,000 per year and provided for the issuance of 130,000
shares of the Company's Common Stock with contractual transfer restrictions
lapsing as to one-third thereof on each of December 31, 1998, 1999 and 2000 and
130,000 options exercisable at US$ 5.00 per share. Pursuant to the Settlement
Agreement, Mr. Hauser has agreed that his compensation will terminate upon, and
as of, any liquidation of the Company.
42
From March 1999 through April 2000 Mr. Hauser was engaged as Executive Chairman
of Moto Guzzi, the Company's subsidiary, at a salary of US$ 90,000 per year plus
reimbursement of expenses and the grant of stock options.
In February 2000, in connection with the Company's auction of the Moto Guzzi
operations, the Company and Mr. Hauser renegotiated his employment agreement and
compensation arrangements and agreed that (i) Mr. Hauser's employment agreement
with Moto Guzzi would terminate effective immediately and that Mr. Hauser would
be paid not more than US$ 250,000 in severance in connection with such
termination out of the proceeds of the Moto Guzzi closing (US$ 169,500 was
eventually received by Mr. Hauser), (ii) Mr. Hauser would continue as Executive
Chairman of Moto Guzzi without compensation, (iii) all compensation under his
employment agreement with the Company would be deferred until such time as the
Company has adequate resources to pay such compensation, (iv) the executive
office space of the Company in New Jersey would be combined with that of Moto
Guzzi in New York, and that the Company and Moto Guzzi would pay Mr. Hauser only
for his actual out of pocket expenses in connection with maintaining such
offices, (v) Mr. Hauser would continue to serve as the Company's Co-CEO, (vi)
the exercise price of 402,185 of the 804,370 warrants issued to Mr. Hauser and
his affiliates would be reduced to US$ 3.50 per share and the expiration date of
such warrants would be extended to June 2007, the balance only extended to June
2007 and an additional 200,000 warrants issued, and (vii) the exercise price of
50,000 of the 137,917 options issued to Mr. Hauser would be reduced to US$ 3.50
per share repriced in 2003 to $1.25. All deferred amounts under Mr. Hauser's
employment agreement were paid in 2001. As of December 31, 2002, Mr. Hauser
holds 87,917 options exercisable at $1.50 (after the July 2003 repricing) and an
additional 50,000 at $1.25 (after the July 2003 repricing).
Mr. Hauser continued to serve as Executive Chairman of Centerpoint without
compensation until his resignation in January 2002 in connection with Bion's
acquisition of a controlling interest in Centerpoint.
Under the terms of the employment agreement entered into with Mr. Arbib in 1998,
Mr. Arbib is entitled to compensation of US$ 100,000 per year and the issuance
of 75,000 shares of the Company's Common Stock with contractual transfer
restrictions lapsing as to one-third thereof on each of December 31, 1998, 1999
and 2000 and 65,000 options exercisable at US$ 5.00 per share reduced to $1.50
in 2003. Cash compensation under the employment agreement was originally
deferred and accrued, and no cash compensation under the agreement was paid in
1998. Those restrictions were satisfied in 1999 and the Company commenced
payment of the accrued compensation in 1999. Mr. Arbib has agreed that his
compensation will terminate upon, and as of, any liquidation of the Company.
From March 1999 through April 2000 Mr. Arbib was also engaged as a financial
consultant to Moto Guzzi at compensation of US$ 30,000 per year plus
reimbursement of expenses and the grant of stock options.
In February 2000, in connection with the Company's auction of the Moto Guzzi
operations, the Company and Mr. Arbib renegotiated his consulting agreement and
compensation arrangements and agreed that (i) Mr. Arbib's consulting agreement
with Moto Guzzi would terminate effective immediately and that Mr. Arbib would
be paid US$ 37,900 in severance in connection with such termination out of the
proceeds of the closing, (ii) all compensation under his employment agreement
with the Company would be deferred until such time as the Company has adequate
resources to pay such compensation, (iii) Mr. Arbib would continue to serve as
the Company's Co-CEO, and (iv) the exercise price of 289,746 of the 645,630
warrants issued to Mr. Arbib and Gianni Bulgari and their affiliates would be
reduced to US$ 3.50 per share, now reduced to $1.50 in 2003. All deferred
amounts under Mr. Arbib's employment agreement were paid in 2001.
Report on Executive Compensation
The Company does not have a standing compensation committee. The compensation of
Mark Hauser, the President and Chief Executive Officer of the Company, and
Emanuel Arbib, the Joint Chief Executive Officer of the Company, during fiscal
year ended December 31, 2002, was the result of negotiated employment agreements
43
and arrangements approved by the outside directors with Messrs. Hauser and Arbib
and not the implementation of any compensation policy. The Company had no other
executive officers during fiscal year ended December 31, 2002.
Stock Option Plans
In order to attract and retain employees, the Board of Directors adopted, and
the shareholders approved, the 1995 Non-Qualified Stock Option Plan ("1995 NQ
Plan") and the 1995 Stock Option Plan for Outside Directors ("1995 Directors'
Plan"). The 1995 NQ Plan and the 1995 Directors' Plan are referred to
collectively as the "1995 Plans." Options to purchase an aggregate of 2,150,000
shares of Common Stock (subject to antidilution adjustments under certain
circumstances) may be awarded under the 1995 Plans.
1995 NQ Plan
The Compensation Committee administers the 1995 NQ Plan. Members of the
committee are not entitled to receive grants under the 1995 NQ Plan. The maximum
number of options that any optionee may receive is 350,000 per calendar year.
All officers and employees who, in the opinion of the committee have made or are
expected to make key contributions to the success of the Company are eligible to
receive options under the Plan. The committee may determine, subject to the
terms of the 1995 NQ Plan, the persons to whom options will be awarded, the
number of shares and the specific terms of each option granted. Officers and key
employees of companies acquired or operated by the Company or its subsidiaries
may also be option recipients. The committee has not yet established specific
performance or other criteria governing the granting of the remaining options.
Options may not be granted at an exercise price below the fair market value on
the date of grant.
If an option expires unexercised, is surrendered by the grantee for
cancellation, is canceled or otherwise becomes unexercisable, the shares
underlying the grant will again become available for the granting of new options
under the 1995 NQ Plan.
The plan is subject to amendment by a majority of those members of the Board of
Directors who are ineligible to receive options, but the Board of Directors may
not (i) change the total number of shares of stock available for options; (ii)
increase the maximum number of options; (iii) extend the duration of the plan;
(iv) decrease the minimum option price or otherwise materially increase the
benefits accruing to recipients; or (v) materially modify the eligibility
requirements.
1995 Directors' Plan
All non-employee directors, who were never previously employed by the Company or
eligible to receive options, annually receive, on each January 2, options to
purchase 5,000 shares under the 1995 Directors' Plan. Newly appointed or elected
non-employee directors receive a grant upon taking office.
Options relating to 15,000 shares were issued on January 2, 2001 and 2002 at an
exercise price of US$ 0.75 and $1.31, respectively per share and were all
repriced to $1.50 in 2003. Options are not exercisable until the later of
January 2 of the year succeeding the date of grant or six months following the
date of grant.
The authority to grant options under the 1995 Directors' Plan will terminate on
the earlier of December 1, 2005 or upon the issuance of the maximum number of
shares of stock reserved for issuance under the plan, which is 150,000. As of
March 31, 2004, the date of this report, 105,834 director options are issued and
outstanding and 44,166 are available for issuance.
The 1995 Directors' Plan may be amended by the Board of Directors' except that
provisions thereof concerning granting of options may not be amended more than
once every six months unless necessary to comply with the Internal Revenue Code
or the Employee Retirement Income Security Act.
44
Board of Directors Report on Stock Option And Warrant Repricings in 2003
On June 20, 2003, the Company's Board of Directors reviewed the terms and
conditions of certain options and warrants previously granted to directors and
executive officers of the Company, including the Named Executive Officers and
their affiliates. The Board of Directors determined that the market price of the
Company's Common Stock had declined significantly since such options and
warrants were originally granted and, as a result, such options and warrants had
exercise prices significantly higher than the current market price of the
Company's Common Stock. The Board of Directors also considered other issues
related to such options and warrants, including: (i) the requirement to expense
all such options and warrants in the future; (ii) the history related to the
options and the warrants; (iii) the complications and challenges the Company
faced following the sale of its Moto Guzzi assets to Aprilia; (iv) the
complications and challenges associated with completing an appropriate
transaction for the Company with the cash remaining from the Aprilia sale; and
(v) the current net asset and potential liquidation value of the Company.
The Board of Directors determined it to be in the best interest of the Company
to extend the expiration date of such options and warrants and to reduce the
exercise price of such options and warrants to reflect the current market price
of the Company's Common Stock in order to incentive the directors and executive
officers of the Company, including the Named Executive Officers, to remain with
the Company and to continue to assist the Company in maximizing shareholder
value.
As a consequence, the Board of Directors extended the expiration date of all
such options and warrants to July 1, 2009. In addition, the Board of Directors
reduced the exercise price of those options and warrants with an original
exercise price of $3.50 to $1.25 and the exercise price of those options and
warrants with an original exercise price of $5.50 to $1.50.
Respectfully submitted by the Board of Directors
Mark S. Hauser
Emanuel Arbib
Howard E. Chase
Gianni Bulgari
Mark Segall
Ten-Year Stock Option And Warrant Repricings
The table below sets forth information concerning all repricings of options,
warrants and SARS held by any executive officer of the Company during the last
ten completed fiscal years (all amounts in US$, the actual transaction
currency).
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Number of Length of
Securities Exercise Price Original
Underlying at Time of Option/Warrant
Options/Warrants/SARs Market Price of Repricing Term Remaining
Repriced or Stock at Time of or Amendment New at Date of
Amended (#) Repricing or ($) Exercise Repricing or
Name Date Amendment ($) Price($) Amendment
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Howard E. Chase 3/18/98 140,000(1)(2) US$5.00 US$12.26 US$5.00 2 years
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Albino Collini 3/18/98 50,000(1)(3) US$5.00 US$12.26 US$5.00 2 years
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Mario 3/18/98 50,000(1)(4) US$5.00 US$12.26 US$5.00 2 years
Tozzi-Condivi
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
45
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Number of Length of
Securities Exercise Price Original
Underlying at Time of Option/Warrant
Options/Warrants/SARs Market Price of Repricing Term Remaining
Repriced or Stock at Time of or Amendment New at Date of
Amended (#) Repricing or ($) Exercise Repricing or
Name Date Amendment ($) Price($) Amendment
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Domenico Costa 3/18/98 40,000(1)(5) US$5.00 US$12.26 US$5.00 2 years
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Mark Hauser 2/00 50,000(1) US$3.50 US$5.00 US$3.50 3 years
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Mark Hauser 2/00 152,185 (6) US$3.50 US$5.50 US$3.50 2 years (7)
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Azzurra (8) 2/00 250,000 (6) US$3.50 US$5.50 US$3.50 2 years (7)
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Simtov, LTD (9) 2/00 99,212 (6) US$3.50 US$5.50 US$3.50 2 years (7)
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Gianni Bulgari 2/00 190,534 (6) US$3.50 US$5.50 US$3.50 2 years (7)
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Mark Hauser 6/20/03 50,000 (1) US$0.29 US$3.50 US$1.25 4 years (10)
87,917 (1) US$0.29 US$5.50 US$1.50 4 years (10)
152,185 (6) US$0.29 US$3.50 US$1.25 4 years (10)
152,185 (6) US$0.29 US$5.50 US$1.50 4 years (10)
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Emanuel Arbib 6/20/03 65,000 (1) US$0.29 US$5.00 US$1.50 4 years (10)
7,917 (1) US$0.29 US$5.00 US$1.50 4 years (10)
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Gianni Bulgari 6/20/03 15,000 (1) US$0.29 US$5.50 US$1.50 4 years (10)
5,000 (1) US$0.29 US$0.75 US$1.50 3 years (10)
5,000 (1) US$0.29 US$1.31 US$1.50 4 years (10)
5,000 (1) US$0.29 US$0.25 US$1.50 5 years (10)
190,534 (6) US$0.29 US$3.50 US$1.25 4 years (10)
190,533 (6) US$0.29 US$5.50 US$1.50 4 years (10)
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Howard Chase 6/20/03 140,000 (1)(11) US$0.29 US$5.00 US$1.50 4 years (10)
15,000 (1) US$0.29 US$5.50 US$1.50 4 years (10)
5,000 (1) US$0.29 US$0.75 US$1.50 3 years (10)
5,000 (1) US$0.29 US$1.31 US$1.50 4 years (10)
5,000 (1) US$0.29 US$0.25 US$1.50 5 years (10)
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Nick Speyer 6/20/03 40,000 (1) US$0.29 US$5.00 US$1.50 4 years (10)
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Azzurra (8) 6/20/03 250,000 (6) US$0.29 US$3.50 US$1.25 4 years (10)
250,000 (6) US$0.29 US$5.50 US$1.50 4 years (10)
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Simtov, LTD (9) 6/20/03 99,212 (6) US$0.29 US$3.50 US$1.25 4 years (10)
165,351 (6) US$0.29 US$5.50 US$1.50 4 years (10)
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
Mark Segall 6/20/03 15,000 (1) US$0.29 US$5.50 US$1.50 4 years (10)
5,000 (1) US$0.29 US$0.75 US$1.50 3 years (10)
5,000 (1) US$0.29 US$1.31 US$1.50 4 years (10)
5,000 (1) US$0.29 US$0.25 US$1.50 5 years (10)
- ------------------- ---------- -------------------- -------------------- ------------------ ------------ -----------------
(1) Represents shares of Common Stock underlying options.
(2) Represents option to purchase 140,000 shares of TRG's common stock granted
on March 18, 1998 upon cancellation of option to purchase 300,000 shares
of TRG's common stock.
(3) Represents option to purchase 50,000 shares of TRG's common stock granted
on March 18, 1998 upon cancellation of option to purchase 150,000 shares
of TRG's common stock.
(4) Represents option to purchase 50,000 shares of TRG's common stock granted
on March 18, 1998 upon cancellation of option to purchase 200,000 shares
of TRG's common stock.
46
(5) Represents option to purchase 40,000 shares of TRG's common stock granted
on March 18, 1998 upon cancellation of option to purchase 60,000 shares of
TRG's common stock.
(6) Represents shares of Common Stock underlying warrants.
(7) The expiration date of the warrants repriced in February 2000 was extended
from June 2002 to June 2007.
(8) Affiliate of Mark Hauser.
(9) Affiliate of Emanuel Arbib.
(10) The expiration date of these options and warrants were extended to July 1,
2009.
(11) The expiration date of these options were extended in 2000 to 2007, but
were not repriced.
Options/SAR Grants in Last Fiscal Year
15,000 stock options were granted to the directors during the fiscal year ended
December 31, 2002.
Aggregate Options/SAR Exercises In Last Fiscal Year And Fiscal Year-End
Option/SAR Values
The following table summarizes the number of exercisable and unexercisable
options held by the Named Executive Officers at the end of 2002.
- --------------------------------------------------------------------------------------------------
Shares Number of Securities
Acquired Value Underlying Value of Unexercised
Name on Realized Unexercised In-the-Money
Exercise ($) Option/SARs at Fiscal Options/SARs at
(#) (1) Year-End Fiscal Year-End ($)
(Exercisable/Unexercisable) (Exercisable/Unexercisable) (2)
- ---------------------------------------------------------------------------------------------------
Mark Hauser - - 137,917 / 0 -
- ---------------------------------------------------------------------------------------------------
Emanuel Arbib - - 72,917 / 0 -
- ---------------------------------------------------------------------------------------------------
(1) None of the Named Executive Officers exercised any stock options in 2002.
(2) The fair market value of the securities underlying the options was less
than the exercises price of the options at December 31, 2002.
Compensation of Directors
Non-employee members of the Board of Directors of the Company receive automatic
annual grants of stock options for services rendered in their capacity as such,
at a rate of 5,000 per year. See "Stock Option Plans-1995 Directors' Plan."
Officers of the Company or its subsidiaries who are members of the Board of
Directors of the Company and employees receive compensation for services
rendered in their capacities as officers only, and may be entitled to
discretionary grants of stock options.
Compensation Committee Interlocks and Insider Participation
The Company does not currently have a standing compensation committee of the
Board of Directors. During the fiscal year ended December 31, 2002, no officer
or employee of TRG or any of its subsidiaries, nor any former
47
officer of the Company or any of its subsidiaries, participated in deliberations
of the Company's Board of Directors concerning executive officer compensation.
Messrs. Hauser and Arbib, who are both directors and executive officers of the
Company, have not participated in any deliberations of the Company's Board of
Directors concerning their employment agreements and arrangements with the
Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Security Holders
The following table sets forth certain information concerning the beneficial
ownership of Common Stock as of March 31, 2004, the date of this report, by (i)
each person who is known by the Company to own beneficially 5% or more of the
Company's common stock, (ii) each of the Company's directors and Named Executive
Officers, and (iii) all directors and executive officers as a group. Unless
otherwise indicated, each person in the table has sole voting and investment
power with respect to the shares shown. Unless otherwise indicated, address is
address of the Company.
Number of Shares Percentage
Name and Address of Beneficial Owner* Beneficially Owned Beneficially Owned
- ------------------------------------- ------------------ ------------------
Mark S. Hauser ................................. 1,754,866(1)(2) 27.1%
Gianni Bulgari ................................. 1,498,827(2)(3) 23.2%
c/o Gruppo G.B. Bulgari
via M. Mercati, 17A
00187 Rome, Italy
Emanuel Arbib .................................. 475,972(2)(4) 7.4%
Howard E. Chase ................................ 180,000(5) 2.8%
Nick Speyer .................................... 40,000(6) **
Mark Segall .................................... 30,000(7) **
William Spier .................................. 15,000 **
Finprogetti Spa ................................ 635,238 9.8%
Via Fieno 8
20123 Milan, Italy
Jan H. Loeb .................................... 311,700 4.8%
All directors and officers as a group .......... 3,939,665 60.9%
* Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of Common Stock, which would be issued
upon the exercise of options or warrants that are currently exercisable, or
exercisable or convertible within 60 days, are deemed outstanding for computing
the percentage ownership of the person holding such options or warrants but are
not deemed outstanding for computing the percentage ownership of any other
person.
** Less than one percent.
(1) Includes warrants to purchase 500,000 shares owned of record by Azzurra,
Inc., a Delaware corporation controlled by Mr. Hauser, 682,579 shares owned of
record by Tamarix Investors LDC, a Cayman Islands Limited duration company
controlled by Mr. Hauser and presently exercisable options to purchase 137,917
shares.
(2) As part of a reporting group, Mark Hauser, Tamarix Investors LDC, Azzurra,
Gianni Bulgari and Emanuel Arbib report beneficial ownership of 3,729,665
shares, consisting of 2,038,831 shares and warrants and options to purchase an
additional 1,690,834 shares. Such group constitutes beneficial ownership of
approximately 56.4% of all shares outstanding on a diluted basis pursuant to
Regulation 13D-G under the Securities Exchange Act of 1934, as amended.
48
(3) Includes warrants to purchase 381,067 shares from the Company.
(4) Includes warrants to purchase 264,563 shares owned of record by entities
controlled by Mr. Arbib and options held by Mr. Arbib to purchase 72,917 shares.
(5) Includes 140,000 presently exercisable options.
(6) Includes 40,000 presently exercisable options.
(7) Includes 30,000 presently exercisable options
49
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Bion Investment by Centerpoint; Sale of Centerpoint Shares by OAM to Bion
In June 2001, with the consent of the Company, Centerpoint engaged the
investment-banking firm of Investec Ernst & Co. to assist Centerpoint in its
evaluation of strategic alternatives. From September 2000 through December 2001,
with the knowledge and consent of the Company, the Company's principal
subsidiary, Centerpoint, examined opportunities to acquire or merge with another
operating business or businesses, as an alternative to liquidation.
In December 2001, Centerpoint's Board of Directors met to evaluate the
alternative strategies and investments available to it. Investec presented to
the Centerpoint Board of Directors their conclusions on a number of potential
investments. After review of the possible investments, the Centerpoint Board of
Directors resolved to approve the acquisition of 19,000,000 shares of Bion for
total consideration of US$ 14,250,000 (actual transaction currency) comprised of
the following: (i) approximately US$ 8,500,000 (actual transaction currency) in
cash, (ii) assignment of the Company's US$ 4.2 million (actual transaction
currency) promissory note, (iii) assignment of 65% of Centerpoint's claims
against IMI, (iv) assignment of 65% of Centerpoint's claims against Aprilia and
eventual rights to the balances in escrow, and (v) assignment of all of
Centerpoint's rights under the Centerpoint Loan Agreement.
In early January 2002, the Board of Directors of OAM, a subsidiary of the
Company and the majority stockholder of Centerpoint, met and approved the sale
of 3,459,997 shares of common stock of Centerpoint owned by OAM, or 100% of
OAM's investment in Centerpoint, to Bion pursuant to a Stock Purchase Agreement
dated as of January 15, 2002, for the following consideration ("Sale of the
Centerpoint Shares"): (i) 1,000,000 restricted shares of Bion common stock, (ii)
a warrant to purchase 1,000,000 shares of Bion common stock for a purchase price
of US$ 0.90 per share (actual transaction currency), (iii) US$ 3,700,000 (actual
transaction currency) in cash, (iv) the assignment to OAM of the Company's US$
4.2 million (actual transaction currency) promissory note, and the principal and
interest payable there under, (v) assignment of a 65% interest in Centerpoint's
claims against IMI, (vi) assignment of a 65% interest in Centerpoint's claims
against Aprilia and eventual rights to the balances in escrow, and (vii)
assignment of all of Centerpoint's rights under the Centerpoint Loan Agreement.
On January 15, 2002, Centerpoint closed the Bion Investment, and immediately
upon the consummation of the Bion Investment, OAM and Bion closed the Sale of
the Centerpoint Shares.
In connection with the Bion Investment, Centerpoint also approved the Sale of
the Centerpoint Shares and the Company and OAM waived their rights to cause
Centerpoint to proceed with liquidation and released Centerpoint from such
obligations.
In connection with the assignment of the claims against IMI, Aprilia and the
residual claims against amounts in escrow following the sale of Centerpoint
subsidiaries to Aprilia, OAM agreed that it will continue to administer any
litigation related to, settlement of, or other resolution of such claims, to the
best of its ability, on behalf of both OAM and Centerpoint.
For further details concerning the Bion Investment and Sale of the Centerpoint
Shares, and various agreements among Bion, Centerpoint and the Company, please
see Item 1 and Note 4 to the Consolidated Financial Statements.
50
Warrant and Option Repricing
In February 2000, and in June 2003, the Company repriced and extended various
options and warrants owned by executive officers and affiliates of the Company.
Please see "Stock Option and Warrant Repricing" above for further details.
Centerpoint Loan and early payoff of Debentures
Centerpoint loaned US$4,200,000 (actual transaction currency) to the Company
(Centerpoint Loan); which the Company used to retire the Convertible Debentures
(see Note 7 to the Consolidated Financial Statements for further information).
The Centerpoint Loan documents and the related Promissory Note were assigned to
OAM, the Company's wholly owned subsidiary, in January 2002, in connection with
the Bion Transactions (see Item 1 for further information).
Company's Engagement of Investec Inc. to explore Strategic Alternatives;
Engagement of Kidron and Kramer Levin Investec provided the Company with
advisory services during 2001 and 2002, and Kidron has provided the Company with
advisory services since 2003. Kramer Levin represented the Company in its
December 1999 Convertible Debenture offering, and since that time, has rendered
legal services to the Company on request. Until the end of September 1999,
Kramer Levin provided legal services to Gianni Bulgari in connection with the
Settlement Agreement by and among the Company, Mark Hauser, Gianni Bulgari,
Howard Chase, Emanuel Arbib and William Spier. Prior to that, Kramer Levin
provided advice to Ixion LTD (which was controlled by Gianni Bulgari and Emanuel
Arbib), an affiliate of Tamarix Investors LDC, an affiliate of Mark Hauser,
Gianni Bulgari, Emanuel Arbib and William Spier.
Section 16(a) Beneficial Ownership Reporting Compliance
Based on a review of the Forms 3, 4 and 5, which have been filed with the
Securities and Exchange Commission with respect to transactions that occurred in
2002, it appears that all officers and/or directors of the Company complied with
their Section 16 reporting requirements.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
Deloitte & Touche S.p.A. billed the Company (euro)35,000 and (euro)35,000, in
the aggregate, for professional services rendered by it for each of the fiscal
years ended December 31, 2002 and December 31, 2001, respectively, for the audit
of the Company's annual financial statements for each of such fiscal years and
review of the interim financial statements included in the Company's Form
10-QSB's for each of the quarters of such fiscal years.
Audit-Related Fees
Deloitte & Touche S.p.A. did not render professional services for assurance and
related services related to the performance of the audit or review of the
Company's financial statements for either of the fiscal years ended December 31,
2002 or December 31, 2001 (other than those covered above under "Audit Fees").
Tax Fees
Deloitte & Touche LLP (US) rendered professional services for tax compliance,
tax advice or tax planning during the fiscal years ended December 31, 2002 and
December 31, 2001 for fees of US$52,000 (actual transaction currency)
((euro)55,000) and US$32,000 (actual transaction currency) ((euro)35,000)
respectively, principally for tax compliance.
51
All Other Fees
Deloitte & Touche S.p.A. did not provide any products or render any professional
services (other than those covered above under "Audit Fees," and "Tax Fees")
during either of the fiscal years ended December 31, 2002 or December 31, 2001.
Audit of Financial Statements.
Deloitte and Touche S.p.A. were the principal auditors and no work was
performed by persons outside of the firm.
52
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Contained in Item 8 of this Report.
(2) Contained in Item 8 of this Report.
(3) Contained in paragraph (c) below.
The Company did not file any Current Reports on Form 8-K during the three-month
period ending December 31, 2002.
(c) Exhibits.
Exhibit No. Description Page
- ----------- ----------- ----
3.1 Amendment to Restated Articles of Incorporation of
the Company, as amended. Filed as Exhibit 3.1 to the
Company's Form 10-K for the year ended December 31,
1998.
3.2 Amended and Restated Bylaws of the Company (filed as
Exhibit 3.3 to Registration Statement on Forms S-1,
Amendment No. 1, file No. 333-21595).
4.3 Warrant Agreement with Warrant Certificate, each
dated May 2, 1997, with respect to 1,250,000 shares
of Common Stock issued to Centaurus Management LTD
(Filed as Exhibits 4.1 and 4.2 to Current report on
Form 8-K for Event Dated May 2, 1997).
4.4 Loan Agreement between the Company and Tamarix
Investors LDC dated October 1, 1998 (filed as
Exhibit 4.1 to November 17, 1998 Current Report on
Form 8-K).
4.5 Warrant Agreement dated October 1, 1998 between the
Company and Centaurus Management LTD (filed as
Exhibit 4.2 to November 17, 1998 Current Report on
Form 8-K).
4.6 Warrant Agreement dated October 1, 1998 between the
Company and Azzurra, Inc. (filed as Exhibit 4.3 to
November 17, 1998 Current Report on Form 8-K).
4.7 Warrant Agreement dated October 1, 1998 between the
Company and Ixion, LDC (filed as Exhibit 4.4 to
November 17, 1998 Current Report on Form 8-K).
10.1 1995 Non-Qualified Stock Option Plan (filed as
Exhibit A to the Company's Preliminary Proxy
Statement filed May 24, 1996).
10.2 1995 Director's Plan (filed as Exhibit B to the
Company's Preliminary Proxy Statement filed May 24,
1996).
53
Exhibit No. Description Page
- ----------- ----------- ----
10.3 Description of 8% 2-year promissory notes issued in
connection with the Company's Stock Repurchase Plan
included in the Company's Schedule 13E-4 dated
September 20, 1996 (filed as Exhibit 10.23 to 1996
Annual Report on Form 10-K).
10.4 Retainer Agreement dated March 7, 1997 between the
Registrant and Tamarix Capital Corporation (filed as
Exhibit 10.24 to Registration Statement on Form S-1,
Amendment No. 1, file No. 333-21595).
10.5 Inducement Agreement dated April 8, 1997 between the
Registrant and Tamarix Investors LDC (filed as
Exhibit 10.25 to Registration Statement on Form S-1,
Amendment No. 1, File No. 333-21558).
10.6 Employment Agreement dated March 25, 1998 with Mark
S. Hauser (filed as Exhibit 10.1 to the March 31,
1998 Quarterly Report on Form 10-Q).
10.7 Novation of March 7, 1997 agreement with Tamarix
Capital Corp. (filed as Exhibit 10.2 to March 31,
1998 Quarterly Report on Form 10-Q).
10.8 Agreement and Plan of Merger dated August 18, 1998
between Moto Guzzi and North Atlantic Acquisition
Corp. and the Company (filed as Exhibit 10.1 to
December 11, 1998 Current Report on Form 8-K).
10.9 First Amendment dated December 3, 1998 to Agreement
and Plan of Merger dated August 18, 1998 (filed as
Exhibit 10.2 to December 11, 1998 Current Report on
Form 8-K).
10.10 Consulting Agreement dated March 25, 1998 with
Emanuel Arbib.
10.11 Stock Purchase Agreement by and between OAM and Bion
dated as of January 10, 2002 (incorporated by
reference to Exhibit 3 to Amendment No. 2 to the
Centerpoint Schedule 13D dated January 24, 2002).
21. Subsidiaries: The Company's significant
subsidiaries, the jurisdiction of their
incorporation and nature of their respective
activities is contained in this Report.
31.1 Certification of Mark S. Hauser, Co-CEO of the
Company.
31.2 Certification of Emanuel Arbib, Co-CEO of the
Company.
54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TRIDENT ROWAN GROUP, INC.
May 25, 2004 /s/ Mark S. Hauser
--------------------
Mark S. Hauser
President and Joint Chief Executive
Officer
May 25, 2004
/s/ Emanuel Arbib
-----------------------------
Emanuel Arbib
Joint Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacity and on the dates indicated.
May 25, 2004 /s/ Emanuel Arbib
-----------------------
Emanuel Arbib, Director
May 25, 2004 /s/ Howard E. Chase
--------------------------
Howard E. Chase, Director
May 25, 2004 /s/ Mark S. Hauser
-------------------------
Mark S. Hauser, Director
May 25, 2004 /s/ Gianni Bulgari
------------------------
Gianni Bulgari, Director
May 25, 2004 /s/ Mark B. Segall
-------------------------
Mark B. Segall, Director
55
Appendix A to Item 601(c) of Regulation S-K (Article 5 of Regulation S-X)
Commercial and Industrial Companies
This schedule contains summary financial information extracted from the
unaudited financial statements dated December 31, 2002 and is qualified in its
entirety by reference to such financial statements.
Period 12 months
Fiscal Year End December 31, 2002
Period End December 31, 2002
Item No. Item Description Amount*
- -------- ---------------- ------
5-01(1) Cash and cash items 3,419,000
5-02(2) Marketable securities 0
5-02(3)(a)(1) Notes and accounts receivable - trade 0
5-02(3)(a)(4) Notes and accounts receivable - other 0
5-02(4) Allowances for doubtful accounts 0
5-02(6) Inventory 0
5-02(9) Total current assets 3,481,000
5-02(13) Property, plant and equipment 30,000
5-02(14) Accumulated depreciation 15,000
5-02(18) Total assets 3,798,000
5-02(21) Total current liabilities 1,061,000
5-02(22) Bonds, mortgages and similar debt 0
5-02(28) Preferred stock - mandatory redemption 0
5-02(30) Preferred stock - non-mandatory redemption 0
5-02(31) Common stock 57,000
5-02(32) Other stockholders' equity 2,138,000
5-03(b)(1)(a) Net sales of tangible products 0
5-03(b)(1) Total revenues 0
5-03(b)(2)(a) Cost of tangible goods sold 0
5-03(b)(2) Total costs and expenses applicable to sales
and revenue 1,282,000
5-03(b)(3) Other (income)/costs and expenses 161,000
5-03(b)(5) Provision for doubtful accounts and notes 0
5-03(b)(8) Interest income/(expense) and amortization
of debt discount 25,000
5-03(b)(10) Income/(loss) before taxes and other items (1,468,000)
5-03(b)(11) Income tax expense 105,000
5-03(b)(14) Income/(loss) continuing operations (1,579,000)
5-03(b)(15) Discontinued operations 0
5-03(b)(17) Extraordinary items 0
5-03(b)(18) Cumulative effect - changes in accounting
principles 0
5-03(b)(19) Net income or (loss) (1,579,000)
5-03(b)(20) Earnings per share - primary (0.39)
5-03(b)(20) Earnings per share - fully diluted (0.39)
* U.S. dollar amounts are based on conversion rate of 1 (euro) = $1.05, which
prevailed on December 31, 2002
56
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
1. FINANCIAL STATEMENTS - The financial statements listed in the accompanying
Index to Consolidated Financial Statements and Financial Statement
Schedules are filed as part of this annual report and such Index to
Consolidated Financial Statements and Financial Statement Schedules is
incorporated herein by reference.
2. FINANCIAL STATEMENT SCHEDULES - The financial statement schedule listed in
the accompanying Index to Consolidated Financial Statements and Financial
Statement Schedules is filed as part of this annual report and such Index
to Consolidated Financial Statements and Financial Statement Schedules is
incorporated herein by reference.
3. EXHIBITS - The exhibits listed on the accompanying List of Exhibits are
filed as part of this annual report and such List of Exhibits is
incorporated herein by reference.
57
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a) 1 and 2)
Page
----
Report of Independent Public Accountants 16
Consolidated Balance Sheets - Assets 18
Consolidated Balance Sheets - Liabilities and 19
Shareholders' Equity (Deficit)
Consolidated Statements of Operation 20
Consolidated Statements of Changes in the Shareholders' 23
Equity (Deficit)
Consolidated Statements of Cash Flows 24
Notes to Consolidated Financial Statements 25
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedules.
58