<PAGE> 1
FORM 10-Q/A
Securities and Exchange Commission
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2000
-----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission file number 000-24477
---------------
TITAN MOTORCYCLE COMPANY OF AMERICA
(Exact name of registrant as specified in its charter)
Nevada 86-0776876
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2222 West Peoria Avenue, Phoenix, Arizona 85029
----------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 861-6977
-------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 X No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of shares of common stock, par value $.001,
outstanding as of May 8, 2000: 17,704,458
REASON FOR THE AMENDMENT
The Company has restated its earnings per share calculation to account for the
beneficial conversion feature associated with the Series B Redeemable Preferred
Stock.
<PAGE> 2
TITAN MOTORCYCLE CO. OF AMERICA
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of April 1, 2000 and
January 1, 2000 (Unaudited)
Condensed Consolidated Statements of Operations for the thirteen-weeks
ended April 1, 2000 (Restated) and April 3, 1999 (Unaudited)
Condensed Consolidated Statements of Shareholders' Equity for the years
ended January 1, 2000 and January 3, 1999 and the thirteen-weeks ended
April 1, 2000 (Unaudited)
Condensed Consolidated Statements of Cash Flow for the thirteen-weeks
ended April 1, 2000 and April 3, 1999 (Unaudited)
Notes to Condensed Consolidated Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PART II. OTHER INFORMATION
---------------------------
ITEM 5. Other Matters
ITEM 6. Exhibits and Reports on Form 8-K
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TITAN MOTORCYCLE CO. OF AMERICA
Consolidated Balance Sheets
<TABLE>
<CAPTION>
APRIL 1, JANUARY 1,
2000 2000
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,072,015 $ 33,700
Accounts receivable, net 3,058,666 1,228,311
Accounts receivable - related party 611,250 999,252
Inventories, net 15,280,820 17,451,996
Prepaid expenses 277,121 351,483
------------ ------------
TOTAL CURRENT ASSETS 20,299,872 20,064,742
Property and equipment, net 1,920,983 2,013,905
Other assets 17,317 17,317
Trademarks 85,018 85,481
------------ ------------
TOTAL ASSETS $ 22,323,190 $ 22,181,445
============ ============
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Bank Overdraft $ 647,761 $ 305,538
Accounts payable 3,745,683 3,891,287
Accrued expenses 2,241,699 2,158,985
Note Payable - line of credit 8,644,350 9,779,731
Current portion of notes payable 1,541,381 627,825
------------ ------------
TOTAL CURRENT LIABILITIES 16,820,874 16,763,366
Note payable - related party 1,303,399 2,199,980
Mortgage note payable 353,432 370,407
Other long - term liabilities 66,282 76,782
------------ ------------
TOTAL LIABILITIES 18,543,987 19,410,535
REDEEMABLE PREFERRED STOCK
Cumulative preferred stock, 6000 shares outstanding
$.001 par value, including accrued dividends 5,068,111 3,536,739
STOCKHOLDERS' DEFICIT
Common stock, par value $.001; 100,000,000 shares authorized 17,705 17,162
Additional paid in capital 10,060,029 9,098,252
Unearned compensation (29,659) (31,475)
Accumulated deficit (11,336,983) (9,849,768)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (1,288,908) (765,829)
------------ ------------
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT $ 22,323,190 $ 22,181,445
============ ============
</TABLE>
The accompanying footnotes are an integral part of these financial statements
3
<PAGE> 4
TITAN MOTORCYCLE CO. OF AMERICA
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED
APRIL 1, 2000 APRIL 3, 1999
------------- -------------
(Restated)
<S> <C> <C>
Sales, net $ 8,021,820 $ 7,645,565
Cost of goods sold 7,509,267 6,485,346
------------ ------------
Gross profit 512,553 1,160,219
------------ ------------
Operating expenses:
Selling, general and administrative 1,702,128 1,044,936
Research and development 22,347 84,108
------------ ------------
Total operating expenses 1,724,475 1,129,044
Income (loss) from operations (1,211,922) 31,175
Other income (expense):
Other income (expense) 1,200 8,257
Interest expense (276,493) (199,724)
------------ ------------
Total other income (expense) (275,293) (191,467)
------------ ------------
Income (loss) before income taxes (1,487,215) (160,292)
Income taxes - -
------------ ------------
Net loss $ (1,487,215) $ (160,292)
Amortization of beneficial conversion feature (restated) $ 500,000 -
------------ ------------
Net loss available to common shareholders (restated) $ (1,987,215) $ (160,292)
============ ============
Income (loss) per common share - basic and diluted (restated) $ (.11) $ (0.01)
============ ============
Weighted average number of common shares and equivalents
Basic 17,342,040 16,467,372
Diluted 17,342,040 16,467,372
</TABLE>
The accompanying footnotes are an integral part of these financial statements
4
<PAGE> 5
TITAN MOTORCYCLE COMPANY OF AMERICA
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL PAID-
---------------------------------- IN
SHARES AMOUNT CAPITAL
----------- ------------ -------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 16,210,666 $ 16,211 $ 6,480,769
Issuance of common stock for cash
at $3.00 per share 166,667 167 499,833
Issuance of common stock for
advertising services at $4.17 per share 60,000 60 249,940
Issuance of stock options 41,875
Amortization of unearned compensation
Net income
----------- ----------- -----------
BALANCE, JANUARY 2, 1999 16,437,333 $ 16,438 $ 7,272,417
Issuance of common stock for cash 700,000 700 1,349,250
at $2.25 per share
Issuance of common stock
for services 23,647 24 82,976
Issuance of warrants 463,307
Preferred stock dividends (69,698)
Amortization of unearned compensation
Net loss
----------- ----------- -----------
BALANCE, JANUARY 1, 2000 17,160,980 $ 17,162 $ 9,098,252
Issuance of common stock 543,478 543 749,457
Issuance of warrants 280,000
Preferred dividends (67,680)
Amortization of unearned compensation
Net loss
BALANCE, APRIL 1, 2000 (UNAUDITED) 17,704,458 $ 17,705 $10,060,029
=========== =========== ===========
<CAPTION>
UNEARNED ACCUMULATED
COMPENSATION DEFICIT TOTAL
------------ ------- -----
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 $ (2,026,965) $ 4,470,015
Issuance of common stock for cash
at $3.00 per share 500,000
Issuance of common stock for
advertising services at $4.17 per share 250,000
Issuance of stock options (41,875) -
Amortization of unearned compensation 3,134 3,134
Net income 237,479 237,479
------------ ------------ ------------
BALANCE, JANUARY 2, 1999 $ (38,741) $ (1,789,486) $ 5,460,628
Issuance of common stock for cash 1,349,950
at $2.25 per share
Issuance of common stock
for services 83,000
Issuance of warrants 463,307
Preferred stock dividends (69,698)
Amortization of unearned compensation 7,266 7,266
Net loss (8,060,282) (8,060,282)
------------ ------------ ------------
BALANCE, JANUARY 1, 2000 $ (31,475) $ (9,849,768) $ (765,829)
Issuance of common stock 750,000
Issuance of warrants 280,000
Preferred dividends (67,680)
Amortization of unearned compensation 1,816 1,816
Net loss (1,487,215) (1,487,215)
BALANCE, APRIL 1, 2000 (UNAUDITED) $ (29,659) $(11,336,983) $ (1,288,908)
============ ============ ============
</TABLE>
The accompanying footnotes are in integral part of these financial statements
-5-
<PAGE> 6
TITAN MOTORCYCLE CO. OF AMERICA
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED
APRIL 1, 2000 APRIL 3, 1999
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,487,215) $ (160,292)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation and amortization 93,395 61,073
Net change in balance sheet accounts
Accounts receivable (1,442,357) (1,762,285)
Inventories 2,171,176 67,011
Other assets 74,361 (133,517)
Accounts payable (154,288) 300,404
Accrued expenses 97,872 403,180
----------- -----------
Net cash used in operating expenses (647,056) (1,224,426)
----------- -----------
Cash Flows from Investing Activities:
Purchase of property and equipment - (174,731)
----------- -----------
Net cash used in investing activities - (174,731)
----------- -----------
Cash Flows from Financing Activities
Bank overdraft 342,223 (52,680)
Issuance of stock and warrants 2,478,529 649,980
Net (decrease) increase in line of credit (1,135,381) 950,876
----------- -----------
Net cash provided by financing activities 1,685,371 1,548,176
----------- -----------
Net increase in cash 1,038,315 149,019
Cash and cash equivalents at beginning of year 33,700 8,398
----------- -----------
Cash and cash equivalents at end of period $ 1,072,015 $ 157,417
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
TITAN MOTORCYCLE CO. OF AMERICA
Notes to the Consolidated Financial Statements
April 1, 2000 and April 3, 1999
NOTE 1 - Condensed Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at April 1, 2000 and
for all periods presented have been made.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's January 1, 2000 audited
consolidated financial statements. The results of operations for the period
ended April 1, 2000 are not necessarily indicative of the operating results for
the full year.
NOTE 2-Inventory
The composition of inventory as of April 1, 2000 and January 1, 2000 was as
follows:
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Raw materials and supplies $ 10,906,947 $ 10,607,330
Work-in-process 1,350,309 2,461,800
Finished Goods 3,173,564 4,382,866
------------ ------------
Total inventories 15,430,820 17,451,996
Reserve for obsolescence (150,000) -
------------ ------------
$ 15,280,820 $ 17,451,996
============ ============
</TABLE>
7
<PAGE> 8
NOTE 3 - Earnings Per Share (Restated)
In accordance with the disclosure requirements of Statement of Financial
Accounting Standards No. 128, Earnings Per Share, a reconciliation of the
numerator and denominator of basic and diluted EPS is provided as follows:
<TABLE>
<CAPTION>
Thirteen - Weeks Ended Thirteen - Weeks Ended
April 1, 2000 April 3, 1999
-------------------------------------------- ----------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
-------------------------------------------- ----------------------------------------------
Restated Restated
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net income (loss) $ 1,487,215 - - $ 160,292 - -
Amortization of beneficial
conversion feature 500,000 - - - - -
------------ ----------
Net income (loss) available to
common shareholders $ (1,987,215) 17,342,040 $ (0.11) $ (160,292) 16,467,372 $ (0.01)
EFFECTS OF DILUTIVE SECURITIES
Common stock options $ - - $ - $ - - $ -
DILUTED EPS
Net income (loss) available to
common shareholders $ (1,987,215) 17,342,040 $ (0.11) $ (160,292) 16,467,372 $ (0.01)
</TABLE>
Earnings per share as previously reported in the first quarter has been restated
to include the amortization of the preferred stock beneficial conversion feature
which had previously been omitted. The effect was to change earnings per share
from ($.09) to ($.11).
NOTE 4 - Going Concern
The accompanying financial statements have been prepared on a going concern
basis of accounting which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
For the first quarter of fiscal 2000, the Company has incurred net losses of
$1,487,215 million. For the two years ending January 1, 2000, the Company has
incurred a net loss and net income of $8,060,282 and $237,479, respectively. As
of April 1, 2000 and January 1, 2000, the Company had cash balances of
approximately $1,072,015 and $34,000, respectively and an accumulated deficit of
$11,336,983 million as of April 1, 2000. Additionally, as of April 1, 2000, the
Company has an outstanding balance on its credit line of $8,644,350 that matures
on July 10, 2000. These factors, among other things, may indicate that the
Company will be unable to continue as a going concern for a reasonable period of
time.
The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability of assets and classification of
liabilities that may be necessary should the Company be unable to continue as a
going concern.
8
<PAGE> 9
Management is pursuing various options in order to provide necessary financing.
Management's plans to resolve near term cash flow issues include the following
transactions:
- Negotiating a new $15 million line of credit with additional cash
availability;
- A private placement equity financing to provide approximately $3 to $5
million in cash flow, less offering costs; and
- Projected improvement of operating results.
Management believes if it can finalize the financing alternatives that it is
pursuing together with its projected improvement in operating results for the
remainder of fiscal 2000, the Company will generate sufficient resources to
ensure uninterrupted performance of its operating obligations as currently
structured and anticipated. The Company's continuance as a going concern is
dependent upon its ability to generate sufficient cash flow to meet its
obligations in a timely manner, to obtain additional financing as required, and
ultimately to attain profitability. There can be no assurance, however, that
these sources will be available to the Company on acceptable terms or when
necessary.
NOTE 5 - Issuance's of Preferred and Common Stock
In February 2000, the Company sold 543,478 shares of common stock under three
separate private placements to three non-U.S. investors. The Company received
$750,000 in proceeds related to these transactions.
In March 2000, the Company sold two thousand shares of Series B Convertible
Preferred Stock ("Preferred Shares"). Gross proceeds totaled $2 million with net
proceeds of approximately $1.8 million.
The Preferred Shares are convertible into a maximum of 3,436,000 shares of the
Company's common stock. For the first year after issuance, the Preferred Shares
are convertible at a fixed conversion price of $1.75 which was less than the
stock price at the date of close resulting in a beneficial conversion feature at
the issue date. Thereafter, the conversion price is adjusted every six months to
the lesser of:
- The prior conversion price, or
- The average market price for the ten days prior to the adjustment date.
As of the issue date, the Company allocated $500,000 to the beneficial
conversion feature, which was fully amortized at the date of issuance.
The preferred stock contains conditions for redemption which are not solely
within the control of the issuer. As a result, these shares have been classified
as mandatorily redeemable in the accompanying condensed consolidated financial
statements.
9
<PAGE> 10
Additionally, with the Preferred Shares, the Company issued warrants for the
purchase of 250,000 shares of the Company's common stock. The Company also
issued warrants for the purchase of 12,500 shares of common stock to a third
party as partial compensation for their assistance in placing the Preferred
Shares. The exercise price of these warrants is $2.00 per share, with an
expiration date of March 9, 2005. The fair value of the warrants at the date of
issuance totaled $280,000 and is reflected as an increase to additional paid in
capital in the accompanying consolidated financial statements.
NOTE 6 Amended and Restated Loan and Security Agreement
In April 2000, the Company signed an agreement which extended the line of credit
due on April 10, 2000 for an additional three-months. The extension agreement
contains certain additional restrictive covenants and fees. In addition, the
maximum borrowing amount has been reduced to $9 million with further reductions
of $250,000 every two weeks beginning in May, 2000. The borrowing base has also
been reduced as defined in the agreement.
Although management anticipates it will be able to obtain a new line of credit
with another financial institution, there can be no assurance that it will be
able to obtain financing on acceptable terms and conditions or when necessary.
NOTE 7 Newly Issued Accounting Standards
In December 1999 the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 (SAB 101). SAB 101 summarizes application of generally accepted
accounting principles related to revenue recognition and establishes certain
criteria. SAB 101 is effective for the Company's second quarter in fiscal 2000.
Management is currently evaluating the impact of this pronouncement.
10
<PAGE> 11
TITAN MOTORCYCLE COMPANY OF AMERICA
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
13 WEEK PERIOD ENDED APRIL 1, 2000, COMPARED WITH 13 WEEK PERIOD ENDED APRIL 3,
1999
OVERALL
Net Sales for the thirteen-week period ended April 1, 2000 of $8.0 million were
up 5% over the comparable period in 1998. The Company recorded a net loss of
$1.5 million, or ($0.11) per share, in 2000 compared with a net loss of $160,292
or ($0.01) per share, for 1999.
RESULTS OF OPERATIONS
MOTORCYCLE UNIT SHIPMENTS AND NET SALES
<TABLE>
<CAPTION>
2000 1999 INCREASE % CHANGE
---- ---- -------- --------
<S> <C> <C> <C> <C>
Motorcycle Units 359 251 108 43%
Net Sales (in $ 000's):
Motorcycles $ 7,644 $ 7,472 $ 172 2.3%
Motorcycle Parts and Accessories $ 378 $ 174 $ 204 117%
Total Motorcycles and Parts $ 8,022 $ 7,646 $ 376 4.9%
</TABLE>
As indicated in the above chart, the Company's business consisted primarily of
motorcycle sales. The Company's Clothing and Accessories product line,
introduced in late 1997, continues to be well received.
The increase in motorcycle shipments is due to several reasons. Chief among them
is the successful introduction of the Company's new "Phoenix by Titan" bike.
Additionally, the growth in the dealership network continues to be a factor in
the growth of shipments.
11
<PAGE> 12
GROSS PROFIT
<TABLE>
<CAPTION>
2000 1999 DECREASE % CHANGE
---- ---- -------- --------
<S> <C> <C> <C> <C>
Gross Profit (In 000's) $513 $1,160 $547 47%
Gross Margin % 6.3% 15.1% 8.8%
</TABLE>
In the thirteen-weeks ended April 1, 2000, gross profit decreased $513,000 or
47%, as compared to the comparable period in 1999. This decrease in gross profit
is due primarily to negative labor and overhead variances as a result of lower
production level due to a planned reduction of finished goods inventory.
Additionally, margin was reduced due to increased sales of the Company's new,
lower priced "Phoenix" line of motorcycles that generate a lower gross margin
than the Company's hi-line bikes and the establishment of a $150,000 inventory
reserve for obsolescence. The gross profit margin was 6.3% as compared with
15.1% in 1999.
Management has plans in place to improve gross margin with volume purchases of
components, motorcycle and component design, improved utilization of labor and
overhead and the ramp-up of higher margin product for the remainder of fiscal
2000.
OPERATING EXPENSES
<TABLE>
<CAPTION>
2000 1999 INCREASE % CHANGE
---- ---- -------- --------
<S> <C> <C> <C> <C>
Operating Expenses (In 000's) $1,724 $1,129 $595 52.7%
Operating Expense as % of Sales 21.5% 14.8% 6.7%
</TABLE>
Total operating expense for the thirteen-week period ended April 1, 2000
increased $595,000, or 52.7%, over the comparable period in 1999. This increase
was due to a number of causes, including, but not limited to the following
principal factors:
- an increase in rental expense to support the expanded manufacturing
facility
- an increase in salaries and wages attributed to enhancing both the
management and support staff necessary to support anticipated growth.
- an increase in legal and accounting expense;
- an increase in advertising, trade show and promotional activities in order
to "roll-out" the Phoenix line of bikes.
CONSOLIDATED INCOME TAXES
The Company's effective tax rate was 0.0% in both the thirteen-week period ended
April 1, 2000 and the comparable period ended April 3, 1999. The Company
currently has a federal and state net operating loss carry forward of
approximately $8.8 million and $5.9 million, respectively.
12
<PAGE> 13
WORKING CAPITAL MANAGEMENT
The Company supplies motorcycles to its dealers in one of two ways. First, the
dealer can specify the motorcycle completely with customized paint and selected
options with a lead-time of 6-8 weeks, sometimes slightly longer during peak
season. Alternatively, the dealer can select a completed bike from the Company's
available Finished Goods inventory list for immediate shipment or one from the
current production schedule that will be available inside the normal lead time
window. The Company builds some inventory of finished motorcycles during the
winter months that are consumed during the spring/summer peak season. During the
rest of the year the Company normally maintains a lower level of finished goods
inventory.
Motorcycles are typically either floored with major financial institutions by
the dealer or are paid for in full prior to shipment by the Company. The Company
receives payment for floored bikes within 2 weeks of shipment. During winter
months the Company may provide free flooring for qualifying dealers depending on
model and stock situation to help smooth shipments and keep higher levels of
product available for customers.
Parts used to build the bikes are usually available with short lead times, but
some parts do require up to ten weeks lead-time. Due to high quality standards
and reliability of delivery, the Company sets slightly higher stocking levels to
assure the availability of parts to production. The Company has an ongoing
program to continue to upgrade its supplier base and to selectively bring
additional parts in house for production, reducing required inventory levels as
well as part costs.
The Company has built a strong network of dealers both domestically and
internationally. Collectively, there are approximately 88 dealers currently in
place with more being added every month. There are 5 types of dealers in the
Company's network; independent dealers, Easyrider stores and franchises, Bikers'
Dream franchises, existing Harley Davidson(TM) dealers, and Titan dealerships.
To date in 2000, 4 dealers with common ownership (Titan of Los Angeles, Titan of
Las Vegas, Titan of Houston and Paragon Custom dba Titan of Phoenix) represented
approximately 14% of the Company's sales. Principals in the Company hold
majority ownership of these dealerships.
As of May 8, 2000, backlog orders stood at approximately $9 million, compared
with approximately $1.4 million at the same time in 1999.
13
<PAGE> 14
NEWLY ISSUED ACCOUNTING STANDARDS
In December 1999 the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 (SAB 101). SAB 101 summarizes application of generally accepted
accounting principles related to revenue recognition and establishes certain
criteria. SAB 101 is effective for the Company's second quarter in fiscal 2000.
Management is currently evaluating the impact of this pronouncement.
IMPACT OF YEAR 2000
The Company has not experienced any adverse effects related to the Year 2000
issue. Costs associated with the Company's Year 2000 compliance efforts were
immaterial with no additional costs anticipated.
LIQUIDITY AND CAPITAL RESOURCES
The Company used $647,052 million of cash in operating activities in the
thirteen week period ended April 1, 2000 compared with $1,224,426 million in the
comparable period in 1999. The decrease in cash used for operating expenses is
due primarily to reduction in inventory of approximately $2,200,000 for the
thirteen weeks ended April 1, 2000. Capital expenditures totaled $ 0 in the
thirteen-week period ending April 1, 2000 compared with $174,731 in the
comparable period in 1999. Cash provided through the issuance and sale of common
and preferred stock totaled approximately $2,500,000 for the first quarter in
fiscal 2000 as compared to approximately $650,000 million for the first quarter
1999. Additionally, the Company had a net reduction in borrowings under its line
of credit of $1,135,381 million in the first quarter of fiscal 2000 as compared
with a net increase of $950,876 for the same quarter in 1999. A more detailed
description of cash flows can be found in the attached financial statements.
For the first quarter of fiscal 2000 and fiscal 1999, the Company has incurred
net losses of $1,487,215 and $160,292, respectively. For the two years ending
January 1, 2000, the Company has incurred a net loss and net income of
approximately $8,100,000 and $240,000, respectively. Additionally, as of April
1, 2000, the Company has an outstanding balance on its credit line of $8,644,350
that matures on July 10, 2000. As of April 1, 2000 and January 1, 2000, the
Company had cash balances of approximately $1,487,000 and $34,000, respectively
and an accumulated deficit of approximately $11,200,000 as of April 1, 2000.
These factors, among other things, may indicate that the Company will be unable
to continue as a going concern for a reasonable period of time.
14
<PAGE> 15
Management is pursuing various options in order to provide necessary financing.
As discussed in Note 4 to the consolidated financial statements, management's
plans to resolve near term cash flow issues include the following transactions:
- Negotiating a new $15 million line of credit with additional cash
availability;
- A private placement equity financing to provide approximately $3 to $5
million in cash flow, less offering costs; and
- Projected improvement of operating results.
Management believes if it can finalize the financing alternatives that it is
pursuing together with its projected improvement in operating results for the
remainder of fiscal 2000, the Company will generate sufficient resources to
ensure uninterrupted performance of its operating obligations as currently
structured and anticipated. The Company's continuance as a growing concern is
dependent upon its ability to generate sufficient cash flow to meet its
obligations in a timely manner, to obtain additional financing as required, and
ultimately to attain profitability. There can be no assurance, however, that
these sources will be available to the Company on acceptable terms or when
necessary.
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
In April 2000, the Company signed an agreement which extended the line of credit
due on April 10, 2000 for an additional three-months. The extension agreement
contains certain additional restrictive covenants and fees. In addition, the
maximum borrowing amount has been reduced to $9 million with further reductions
of $250,000 every two weeks beginning in May, 2000. The borrowing base has also
been reduced as defined in the agreement.
Although management anticipates it will be able to obtain a new line of credit
with another financial institution, there can be no assurance that it will be
able to obtain financing on acceptable terms and conditions or when necessary.
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 5. Other Matters
The Company obtained an extension from its Series B Preferred Stock shareholders
extending the Company's annual shareholders' meeting from June 15, 2000 to
August 15, 2000.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
On March 24, 2000, the Company filed a Form 8-K regarding a Series B Preferred
Stock transaction.
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<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TITAN MOTORCYCLE COMPANY OF AMERICA
(Registrant)
[Francis Keery] May 15, 2000
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FRANCIS KEERY DATE
CHAIRMAN AND CEO
[Robert Lobban] May 15, 2000
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ROBERT LOBBAN DATE
CHIEF FINANCIAL OFFICER
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
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27.1 Financial Data Schedule
