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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) July 14, 2000
Titan Motorcycle Co. of America
(Exact Name of Registrant as Specified in Charter)
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Nevada 000-24477 86-0776876
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
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2222 West Peoria Avenue, Phoenix, Arizona 85029
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (602) 861-6977
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
FINANCIAL CONDITION
Titan Motorcycle Co. of America (the "Company") announced today that it
has signed a modification and extension through September 11, 2000 to its loan
agreement with Wells Fargo Business Credit, Inc. A copy of the modification and
extension is included as Exhibit 10.1 to this filing. The extension was granted
in light of Titan's inability to date to secure a new credit facility to replace
the existing line of credit. In this regard, discussions with two potential new
lenders that had expressed a preliminary interest in replacing and expanding the
existing facility have terminated, and the Company is in the process of seeking
additional capital and a new lender. Among other things, the modification and
extension with Wells Fargo (1) further limits the Company's borrowing capacity,
and (2) requires that the Company develop and implement profit improvement and
asset reduction plans and engage an investment banker to explore the Company's
strategic alternatives. If the Company is unable to replace the Wells Fargo line
with a new credit facility, it will be forced to sell or wind down its business.
In addition, the loan agreement contains various continuing obligations,
including financial covenants. If the Company fails to satisfy these covenants,
it would go into default which could accelerate any decision to liquidate or
file for reorganization.
The Company also announced that: (i) it is receiving increasing
pressure for additional payments from trade creditors, and is encountering
difficulties in obtaining necessary parts from these suppliers to manufacture
its motorcycles; (ii) Deutsch Financial Service and Transamerica Commercial
Finance Corporation, which provide "floor financing" to the Company's dealers,
have notified the Company that they intend to terminate (in Transamerica's case)
or may terminate (in Deutsch's case) these arrangements unless dealer payments
are guaranteed or other accommodations are made; (iii) the Company is in the
process of reducing its workforce by approximately 25% in an effort to lower
expenses, and (iv) distributorships owned by the Keery family, which controls
Titan Motorcycles, are in the process of being sold or shut down. These stores
have historically accounted for a significant portion of the Company's sales and
currently owe the Company approximately $600,000, the collection of which is
uncertain. The inventory held by these dealerships will be returned to the
Company through Transamerica, with a corresponding payment due Transamerica in
the amount of $1.3 million. The Company does not have the cash to make this
payment, and has reached a verbal agreement with Transamerica that would allow
it to resell the returned inventory to dealers and repay Transamerica over a
three month period.
In light of the foregoing, the Company is actively reviewing a number
of possible strategic alternatives, including: (A) seeking alternative sources
of capital or debt financing; (B) negotiating to maintain the Transamerica and
Deutsch facilities in place; (C) implementing a further reduction in its
workforce and an overall reduction in its operations; and (D) selling or merging
the Company. There can be no assurance that the Company will be able to
implement any of these strategies. If the Company is not successful in achieving
one or more of these strategic alternatives, it may be forced to liquidate or
file for reorganization under the federal bankruptcy laws.
NASDAQ LISTING
The Company also announced that it was notified by Nasdaq that it was
not in compliance with Nasdaq's continuing SmallCap Market criteria.
Specifically, Nasdaq noted that the Company did not have either $2 million in
net tangible assets, $35 million of market capitalization or $5 million in net
income. Subsequent to Nasdaq's notification, the Company's preferred
stockholders agreed to modify the terms of their preferred stock so that it
would be characterized under generally accepted accounting principles as
capital, rather than as mezzanine instruments.
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Upon filing of appropriate amendments to the terms and conditions of the Series
A and Series B Convertible Preferred Stock, the Company believes that its net
tangible assets (assuming it is a going concern) will exceed the minimum Nasdaq
requirement of $2 million and has so notified Nasdaq. Nasdaq also inquired into
the reasons for the Company's auditors rendering a going concern opinion in
connection with the Company's 1999 financial statements, which (together with
the opinion) were filed in its Form 10-K for the year-ended December 31, 1999.
The Company advised Nasdaq that the going concern opinion issued by its auditors
arose principally out of the fact that its primary financing source, its line of
credit with Wells Fargo Business Credit, was to come due on April 10, 2000, and
at year-end the Company did not have another facility available to refinance
this debt. Coupled with Company's losses from operations, the auditors
determined that a going concern opinion was appropriate. The Company has
received extensions on the Wells Fargo facility, the most recent one of which is
described above and included herein. In light of the Company's current
situation, it is unsure whether the Nasdaq will take action to delist the
Company's securities and, if so, what the timing of such an action would be.
If the Company fails to maintain Nasdaq SmallCap Market listing for its
securities, trading in its stock is likely to be materially adversely effected.
Among other things, the Company's common stock would then constitute "penny
stock," which would place increased regulatory burden upon brokers, making them
less likely to make a market in the stock.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
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EXHIBIT
NUMBER DESCRIPTION
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10.1 First Amendment to Amended and Restated Loan and Security Agreement
dated as of July 10, 2000 with Wells Fargo Business Credit, Inc.
(executed July 14, 2000)
10.2 Proposed Amended and Restated Certificate of Designation for Series A
Preferred Stock
10.3 Proposed Amended and Restated Certificate of Designation for Series B
Preferred Stock
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Titan Motorcycle Co. of America
/s:/Francis S. Keery/
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Francis S. Keery
Chief Executive Officer
Dated: July 17, 2000
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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10.1 First Amendment to Amended and Restated Loan and Security Agreement
dated as of July 10, 2000 with Wells Fargo Business Credit, Inc.
(executed July 14, 2000)
10.2 Proposed Amended and Restated Certificate of Designation for
Series A Preferred Stock
10.3 Proposed Amended and Restated Certificate of Designation for
Series B Preferred Stock
