Effective October 24, 2011, Cereplast Italia S.p.A (Cereplast Italia), our wholly owned subsidiary,
completed its acquisition of an industrial plant and the real estate on which the industrial plant is located in
Cannara, Italy. The Deed of Sale between Cereplast Italia and Societa Regionale Per Lo Sviluppo Economico
DellUmbria Sviluppumbria S.p.A, provided for an aggregate purchase price of approximately $6.5
million. The acquisition had previously been secured by a mortgage loan with Banca Monte Dei Paschi Di
Sienna S.p.A for the principal of $4.5 million.
Effective October 25, 2012, Cereplast Italia renegotiated the terms of the acquisition of the industrial plant
located in Cannara, Italy with Societa Regionale Per Lo Sviluppo Economico DellUmbria Sviluppumbria
S.p.A In connection with our renegotiation, the sale of the land was rescinded and Cereplast Italia retained the
existing building, reducing the value of the purchase price to approximately $4.2 million. In exchange,
Cereplast Italia rescinded the Mortgage loan with Banca Monte Dei Paschi Di Sienna S.p.A for the principal
of $4.5 million in paying a limited rescission fee and cancelled all credit facility. Sviluppumbria S.p.A
accepted to carry over a Note secured by the building, in amount of $3.2 million with an annual interest rate of
5.5%, until a new lender is secured. During that period of time Cereplast Italia agreed to negotiate the
refurbishment of the building by a third party at no cost. Svilluppumprbia requested Cereplast Italia to
represent a plan of development to occur within a longer period of time.
In July 2013, Cereplast Italia was unable to secure a new lender to repay the Note owed to Sviluppumbria
S.p.A and is in default. However, during the refurbishment due diligence process, Cereplast Italia identified
significant undisclosed environmental issues and requested additional time to clarify the situation. We are
continuing an ongoing discussion to explore mutually acceptable alternatives with Sviluppumbria
S.p.A. Potential resolutions include, but are not limited to, a revised payment plan with significant financial
concessions. If we are unable to reach an agreement with Sviluppumbria S.p.A,,Cereplast Italia may abandon
the property and pursue recovery of its full i