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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
Commission File Number: 000-24779
V-TWIN ACQUISITIONS, INC.
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(Exact name of Registrant as specified in its charter)
District of Columbia 52-2110338
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1707 H St. NW #200, Washington, DC 20006
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 471-6990
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act: Common Stock
Check whether the Issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 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
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State Issuer's revenues for its most recent fiscal year. The Issuer had combined
revenues of $1,539,236 for fiscal year ended June 30, 1999.
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as a specified
date within the past 60 days: $9,000,000.
The number of shares outstanding as of June 30, 1999 was 3,600,000.
DOCUMENTS INCORPORATED BY REFERENCE
None
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Part I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL BUSINESS DEVELOPMENT
The Holding Company, which was formerly known as American Solid Fuel, Inc. was
incorporated in Delaware on August 16, 1988. In July, 1998, American Solid Fuel
(later renamed "CIU") entered into a merger by statute under Title 29 of the
District of Columbia Code with V-Twin Acquisitions, Inc., (the "Company",
"Holding Company" or "V-Twin") a District of Columbia corporation incorporated
on July 10, 1998. V-Twin was incorporated in the District of Columbia on July
10, 1998 and was the surviving entity in the above described merger. Further
information regarding the merger can be found in the Company's Form 10-SB as
amended, filed on February 19, 1999 at page 2.
In March, 1999, a separate corporation and an affiliate for Securities &
Exchange Commission purposes, V-Twin Acquisitions Inc. of Virginia (the
"Virginia entity"), was formed to effectuate the purchase of the assets of Cycle
Sport Unlimited, Inc., a two store motorcycle dealership in the metropolitan
District of Columbia area. This Virginia entity is a completely separate legal
entity. This structure would allow the Company and the Virginia entity to avoid
double taxation regarding a "foreign corporation" (in this case, the Registrant)
doing business in another state, in this case, the Commonwealth of Virginia.
This business trust was created by the four V-Twin investors and the two Board
members, and can be found attached as Exhibit 99.9.
The Virginia entity is owned 90% by Ted Schwartzbeck and 10% by Jay Pignatello
(both officers and directors) and is a Virginia close corporation. The Virginia
entity has 100 common shares authorized and outstanding, (par value $.001), 90
shares owned by Mr. Schwartzbeck and 10 shares owned by Mr. Pignatello. The
Virginia entity is a licensed and Virginia Department of Motor Vehicle approved
motorcycle dealership doing business as Cycle Sport Unlimited. The Holding
Company and the Virginia entity are combined for reporting purposes for this and
other filings pursuant to certain FASB, GAAP and other relevant accounting
principles, for accounting purposes alone and for no other reason or purpose.
The Virginia entity's bulk purchase of the assets of Cycle Sport Unlimited, Inc.
was closed in escrow on May 1, 1999 pending the finalization of the floor plan
financing arrangements and the issuance of dealer agreements from the
manufacturers. This purchase and the closing conditions were reported and
discussed in the Company's Form 10-SB as amended, filed on February 19, 1999 at
page 6.
The Virginia entity has actively managed Cycle Sport's operations since May 1,
1999 through June 30, 1999. The financial statements in this Form 10 (herein)
reflect two months of Cycle Sport's operations.
BUSINESS OF V-TWIN ACQUISITIONS, INC.
The Holding Company proposes to acquire independent motorcycle dealerships and
create a nationwide marketing, distribution and retail organization that
leverages multiple sources of sales and sales leads, including Internet
commerce, direct marketing, retail sales and service. Prior to the effectiveness
of the Form 10-SB/A-3 filing, the Holding Company was dormant. The Company is
engaged in operation only as a holding company, and therefore does
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not produce or distribute products, has no sources of raw materials nor
principal suppliers.
The Virginia entity has completed the acquisition of Cycle Sport Unlimited,
Inc., and is currently a licensed and franchised motorcycle dealership with two
locations in the Washington, DC metropolitan area that sells motorcycles,
personal watercraft, ATV's and related parts and accessories and provide
service. The Virginia entity faces significant competition from similar
motorcycle dealerships, and will continue to advertise in its local markets to
continue to compete effectively. The Virginia entity receives its products for
resale from new motorcycle, parts and accessories manufacturers and
distributors. As a retail business, the Virginia entity does not depend on any
one or few major customers.
The Company and the Virginia entity do not hold any patents, trademarks,
licenses, franchises, concessions, royalty agreements or labor contracts. The
Holding Company and the Virginia entity have never been subject to any
requirement of government approval for its operations, other than the
application and eventual issuance of the relevant Commonwealth of Virginia
Department of Motor Vehicle license for the Virginia entity to be a franchised
motorcycle dealership. Neither the Company nor the Virginia entity anticipate
any material business change due to probable governmental regulations.
The Company and the Virginia entity anticipate complying with all applicable
environmental laws (federal, state and local) to the extent required. These
costs are carried as normal business operating expenses and are not considered
material.
From its inception to the present the Company has experienced minimal research
and development costs in developing it business plan and in negotiating
acquisitions. These costs were borne by management.
From its inception to the date of the merger the Company has been dormant, and
has had no active function or employees. The Virginia entity has approximately
thirty employees, twenty six of which are full time.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's operations are conducted in leased facilities located in
Washington, DC and the Virginia entity operates in Virginia. The following table
describes the general character of the existing facilities as of June 30, 1999:
<TABLE>
<CAPTION>
SQUARE LEASE APPROX
LOCATION PRIMARY FUNCTION FEET EXPIRES MONTLY RENT
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<S> <C> <C> <C>
Washington, DC Registered Office N/A $100
Herndon, VA Retail Store 12,000 $8,842
(Affiliate)
Springfield, VA Retail Store 6500 $4,833
(Affiliate)
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</TABLE>
ITEM 3. LEGAL PROCEEDINGS
There are, at present, no legal proceedings in which the Company is involved,
either as plaintiff or defendant.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
V-Twin's Common Stock has been traded since June 7, 1999, on the NASDAQ Bulletin
Board under the symbol VTWN. The following table reflects the high and low bid
prices of the Company's Common Stock, as reported by the OTC Bulletin Board.
This High/Low Bid information reflect inter-dealer prices, without retail
mark-up, markdown, or commission and may not represent actual transactions.
HIGH $2.50 LOW $2.00
To date the Company has not paid any cash dividends on its Common Stock and does
not expect to pay any in the foreseeable future. As of June 30, 1999, there were
316 shareholders of record of the Company's Common Stock.
Within the past three years, the only sales of unregistered securities the
Company has undertaken have been the securities issued to V-Twin's management
and its 5% persons. Additionally, shares were distributed, on a one for one
basis, to the former CIU shareholders in the recent merger conducted under the
laws of the District of Columbia.
Information regarding recent sales of unregistered securities as required by
Section 228.701 (Item 701) can be found in V-Twin's third amended Form 10-SB
filed on February 19, 1999 at pages 22 and 23, and that filing's related
exhibits.
V-Twin believes that the subsequent transactions described below in which
securities were sold were exempt from registration under the Securities Act of
1933 by virtue of Section 4(2), Regulation D Section 504, and Rule 145 (a)(2)
thereof as transactions not involving any public offerings. In each transaction,
the number of investors was limited, the investors were provided with
information about the Company and/or given access to such information, and
restrictions were placed on resales of the securities.
<TABLE>
<CAPTION>
DATE TITLE AMOUNT CONSIDERATION PUCHASER
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<S> <C> <C> <C> <C>
6/99 Common Stock and 600,000 $400,000 (1) Private investors
warrants to purchase
Common Stock
Common Stock issued 100,000 $166,667 (1) Private investors
Upon exercise of
warrants
</TABLE>
(1) Effective June 30, 1999, the Company issued 600,000 restricted common
shares and warrants to purchase an additional 600,000 restricted common
shares for five years at a price of $1.67 per share.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following information should be read in conjunction with the audited
beginning financial statements and notes appearing elsewhere in this Form
10-KSB. The Company had no revenue from operations in each of the last two
fiscal years. The Company had expenses with regards to its business development
and additional costs related to its requirements as a public company.
The Company is primarily engaged in the research required in connection with the
acquisition of independent motorcycle dealerships and related businesses. The
Company itself has no sales revenues and has had no income from any operations.
The Company's only actions have been to complete the Company's initial
capitalization and to conduct the necessary SEC filings to achieve public
status. The Virginia entity sells motorcycles and related service, parts and
accessories. The Virginia entity initiated operations on May 1, 1999. In this
document, the financial information about the Virginia entity represents the two
months from May 1, 1999 to June 30, 1999.
In combination with the Virginia entity, the total assets of the Company at June
30, 1999 were $1,531,740, net of an allowance for doubtful accounts of $53,159,
which represents a shortfall in the purchase of the assets of a motorcycle
dealership undertaken by the Virginia entity during May, 1999. Total capital in
consolidation is $358,487.
Total revenues for the period of inception, July 10, 1998, through June 30,
1999, were $1,539,236, and gross profit was $393,309. In combination, the
Company has a net loss of ($213,113), or ($.05) per share.
At inception, July 10, 1998, the Company had no revenues.
The Company and the Virginia entity note that their financial statements are
combined pursuant to a Trust Agreement, appended hereto as Exhibit 99.9, and
certain accounting rules regarding combination, while both entities remain, and
shall always remain, separate legal entities.
Plan of Operation
The Company has sufficient funds to satisfy its cash requirements for the next
12 months, and would raise funds only to acquire additional independent
dealerships. The Virginia entity expects to have sufficient funds resulting from
continuing operations to satisfy its operating cash requirements for the next 12
months.
To the extent necessary, both Mr. Schwartzbeck, President of V-Twin
Acquisitions, Inc. and the Virginia entity, and Mr. Pignatello, Secretary of
V-Twin Acquisitions, Inc. and the Virginia entity, are willing to provide any
and all working capital necessary for V-Twin Acquisitions, Inc. and the Virginia
entity for the next twelve months, should there be any shortfall of working
capital in V-Twin Acquisitions, Inc. and the Virginia entity.
Effective May 1, 1999, the Virginia entity purchased the assets of a two store
motorcycle dealership in the DC metropolitan area named Cycle Sport Unlimited,
Inc. It should be noted that the technique to effectuate that transaction was a
"bulk sale" agreement under the Uniform Commercial Code ("UCC") and the Virginia
Code. A Bulk Sale is the purchase of assets and the assumption of liabilities of
a division of a going concern, with the intent of the parties being that the
purchaser will continue in the same business that the seller operated, but as a
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new business. The Virginia entity did not purchase any income or earnings. As a
result of the bulk purchase, no material undisclosed liabilities surfaced, and
no tax liabilities were carried forward.
While the Company's previous SEC filings indicate that the Company would,
itself, purchase the assets of Cycle Sport Unlimited, Inc., certain business
conditions arose through examination by management which necessitated a change
in the bulk sale purchase. These business conditions included double taxation
issues, as well as other foreign jurisdiction and state approval issues, and the
Trust Agreement listed as Exhibit 99.9 was created. Therefore, upon management
resolution of these issues, the Virginia entity was created in March, 1999.
The Virginia entity's goal is to recapitalize and advertise the dealership's
products in order to improve the profitability of it's two retail locations. The
Virginia entity also desires to bring new motorcycle lines into its locations to
increase its customer base. Additionally, the Virginia entity's goal is to
expand both of its locations to allow it to carry more products and to update
its showroom. Finally, the Company's goal is to purchase the assets and
liabilities of independent motorcycle dealerships across the country and develop
an integrated, national marketing effort that leverages retail sales, direct
marketing and the Internet.
The Virginia entity's total asset purchase cost for Cycle Sport was $300,000. To
finance future asset purchases of independent motorcycle dealerships, the
Company itself intends to raise funds from the sale of its restricted common
stock to accredited individuals. These sales may rely upon an exemption from
registration available under Section 4(2), Regulation D Section 504 and Rule 145
(a)(2).
Growth in the Motorcycle Industry
The Company found from research that the entire motorcycle industry is growing
considerably. Several sources cite information from the Motorcycle Industry
Council in supporting the statement that motorcycles are "a rising industry
growing by 20% annually". These authoritative sources include information from
the Motorcycle Industry Council, Cycle News, Harley Davidson's Securities and
Exchange Commission filings on Form 10-K, various press releases disseminated by
Reuters, Polaris Industries, Excelsior Henderson Motorcycle Co., Harley
Davidson, and the regional sales statistics from the Yamaha Motorcycle Division
of Yamaha Industries.
For more information regarding industry growth, please see the Form 10-SB/A-3
filed on February 19, 1999 at pages 7 through 9, and exhibits 99.2, 99.3, and
99.5 appended.
V-Twin Acquisitions, Inc. should not be considered an investment company under
the Investment Company Act of 1940 by virtue of the provisions found at 15 USC
80a-3, exempting a company which has a business purpose other than the making of
investments. Further information regarding this issue can be found in the
previously filed Form 10-SB/A-3 filed February 19, 1999 at page 9.
Liquidity and Capital Resources
The Company anticipates meeting its working capital needs during the 2000 fiscal
year from capital raised through the common stock already sold to its control
shareholders. It is also investigating the possibility of other financing to
provide additional acquisition capital and to further its acquisition program.
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Although it has not made any arrangements or definitive agreements, it is
contemplating both the private placements of securities and/or a public
offering.
In the opinion of management, inflation has not had a material effect on the
operations of the Company.
PRODUCTS AND MARKETS
The Virginia entity is primarily engaged in retail sales of several well-known
brands of motorcycles, as well as ATV's and personal watercraft, related parts
and accessories, and the service of these products.
As recreational products, motorcycles, ATV's and personal watercraft and related
parts and accessories are products enjoying a rising consumer market. According
to U.S. Government reports, from 1992 through 1995 spending on recreational
products grew at over five percent per year and from 1994 through 1997 grew at
three times the rate of overall consumer spending.
The motorcycle industry is large and very fragmented. This is supported by
industry data, primarily the 1998 Motorcycle Statistical Annual Report issued by
the Motorcycle Industry Council. This report states that $6.4 billion in retail
sales were generated by over 12,581 franchised and non-franchised motorcycle
retail outlets. Please see Exhibit 99.10.
There are several factors and changes in the motorcycle retailing industry which
the Company believes provide attractive consolidation opportunities for groups
with significant equity capital and managers experienced in identifying,
acquiring and professionally managing dealerships. The primary factor that the
Company believes provides a consolidation opportunity is that the motorcycle
retailing industry is very fragmented, with over 12,581 retail outlets in 1998.
The majority of these dealerships are privately owned and operated. Dealership
costs are growing as capital costs of opening new dealerships are increasing and
franchising costs require a dealer to carry substantial inventories. For many
dealers there are few alternative exit strategies other than selling to a
growing dealership group, especially for larger dealerships and dealership
owners nearing retirement. The Company believes that these factors may provide
attractive consolidation opportunities.
More information regarding the control of motorcycle manufacturers over
acquisitions and dealers under the headings "Manufacturers' Consent to
Acquisitions and Market Expansion" and "Motorcycle Manufacturers' Control Over
Dealers".
MANUFACTURERS' CONSENT TO ACQUISITIONS AND MARKET EXPANSION
Motorcycle manufacturers yield considerable control over the dealerships that
carry their brands through franchise agreements. If there is a change of control
in the dealership, the New Dealer must obtain consent from each manufacturer to
continue to carry that manufacturer's brand of motorcycle. In determining
whether to approve changes of control, manufacturers may consider any number of
subjective factors. These may include the financial condition and ownership
structure of the New Dealer. The manufacturers may impose conditions to the
change of control, including limiting the number of such manufacturers'
franchised dealers that may be acquired by the New Dealer. The manufacturers are
under no obligation to approve changes in control or acquisitions, to disclose
their reasons for accepting or rejecting an acquisition or by abiding
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by objective and publicly disclosed measurements by which they approve changes
in control.
The ability of a future subsidiary and/or affiliate corporation to meet
manufacturers' requirements for approving future acquisitions will have a direct
bearing on the Company's ability to complete acquisitions and effect its growth
strategy. The Company can make no assurance that a manufacturer will not
terminate its dealer agreement, refuse to renew its dealer agreement, refuse to
approve future acquisitions, or take other action that could have a material
adverse effect on the Company's acquisition program.
The Company's growth strategy includes acquiring non-franchised and/or
independent motorcycle dealerships that are not restrained by manufacturers'
dealer agreements.
MOTORCYCLE MANUFACTURERS' CONTROL OVER DEALERS
The major motorcycle manufacturers exercise significant control over the
operations of their franchised dealerships. In addition to yielding control over
changes in dealer ownership, many manufacturers control the dealer's geographic
selling area. In these cases, the dealer has an exclusive right to sell the
franchised manufacturers' products within a given protected geographical area.
The dealer may not promote or sell its products to customers residing outside of
its geographical area. The manufacturers also impose customer satisfaction and
market share goals. If a dealer fails the requirements of its dealer agreement,
then the manufacturer may (i) impose additional conditions in subsequent dealer
agreements; (ii) terminate its dealer agreement (iii) limit allocations of
inventory; (iv) reduce reimbursement rates for warranty work performed by the
dealer; and/or (v) deny approval of future acquisitions.
COMPETITION
V-Twin, as a proposed consolidator of independent motorcycle dealerships, has no
direct competition. V-Twin is a public company, which proposes to purchase
motorcycle dealerships that are traditionally held by private owners. The
Company's knows of no other publicly traded company that conducts business in
acquiring and/or consolidating the retail motorcycle market. While the vast
majority of motorcycle dealers are single store operations that are family owned
style dealership, there are several privately-owned dealerships that own
multiple retail locations and seek to acquire additional locations. Increased
competition for acquisition candidates may increase purchase prices for
acquisitions to levels beyond the Company's financial capability or to levels
that would not result in the desired returns.
V-Twin's competitive position within the industry will be largely determined by
its ability to offer competitive motorcycle brands and models, and its ability
to offer value and service to its customers, both in the factory replacement
parts retail sector and in the service sector.
DISTRIBUTION
The majority of Cycle Sport's motorcycles were purchased and shipped directly to
its stores from their franchise manufacturers. In addition to motorcycles, the
Virginia entity purchases for resale after market parts and accessories, such as
side cars, wearing apparel, helmets, saddlebags, custom exhausts, seats, handle
bars, light bars, sissy bars, and touring luggage.
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The Virginia entity operates pursuant to franchise agreements between each
motorcycle manufacturer or their authorized distributor. The Virginia entity is
significantly dependent on its relationship with such manufacturers for
distribution (and subsequent sales) of motorcycles and related products. The
manufacturers control many aspects of a dealer's business, as described in the
above section entitled "MOTORCYCLE MANUFACTURERS' CONTROL OVER DEALERS".
OPERATIONS
Many phases of the Virginia entity's operations are subject to influences
outside its control. Any singular factor, or combination of factors, could
materially affect its results. These factors include: the cost of goods,
competitive pressures, inflation, consumer debt levels, currency exchange
fluctuations, trade restrictions, changes in tariff and freight rates, interest
rate fluctuations and other capital market conditions.
Forward-looking statements that are made, or others make on its behalf, are
based on knowledge of the Company's business and the environment in which it
operates. However, because of the factors listed herein, actual results may
differ from those in the forward-looking statements. Consequently, all of the
forward-looking statements made are qualified by these and other cautionary
statements. The Company can make no assurance that the actual results or
developments it anticipates will be realized or, even if substantially realized,
that they will have the expected consequences to or effects on the Company or
its business or operations.
SEASONALITY
The Virginia entity will experience significant seasonal fluctuations in
motorcycle sales. Summer sales are generally twice as great as winter sales.
Weather conditions, specifically a harsh and long winter season, is likely to
adversely affect sales.
GOVERNMENT REGULATION
Motorcycle sales are subject to certain government regulations. Motorcycles are
subject to the emissions and noise standards of the U.S. Environmental
Protection Agency and the more stringent emissions standards of various State
agencies. Motorcycles are also subject to the National Traffic and Motor Vehicle
Safety Act and the rules promulgated thereunder by the National Highway Traffic
Safety Administration. Federal, state and local authorities have adopted various
standards relating to air, water, helmet rules and noise pollution.
Additionally, the Federal Trade Commission applies regulations over franchised
businesses and dealerships. Any of these regulations may affect the Company's
operations as well as those of the motorcycle manufacturers. The Virginia
entity's facilities comply with all such regulations and standards, and that
current production levels of motorcycles will continue in line with the
increasing interest in motorcycles, ATVs and personal watercraft. Finally, the
Virginia entity is subject to the laws of Department of Motor Vehicle for the
Commonwealth of Virginia regarding motorcycle dealerships.
EMPLOYEES
As of June 30, 1999, the Holding Company had no full-time employees. The Holding
Company anticipates adding home office supervisory, marketing and administrative
staff as the Company furthers its business. The Virginia entity had
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approximately 30 employees in sales, service and administration, and the
Virginia entity provides those employees with health insurance. The Virginia
entity is not subject to any collective bargaining agreements.
CUSTOMER BASE
The Virginia entity is not dependent on any one major or any few select
customers. The Virginia entity's sales are the result of comprehensive
advertising campaigns, referrals and re-sales to old customers. Cycle Sport
enjoys the benefit of its customers who have purchased various items from the
previous owner for the past 27 years.
RESEARCH AND DEVELOPMENT
The Company has conducted specific research required in connection with the
acquisition of independent motorcycle dealerships. Research and development is
limited to a study of the retail motorcycle industry, and finding, evaluating
and negotiating the purchase of independent motorcycle dealerships to be
acquired. Research and development is a critical factor to the Company's
success. Sound business decisions in finding and closing the purchase of
acquisitions in the unconsolidated motorcycle dealership market will lead to
success for V-Twin and its shareholders.
GROWTH STRATEGY
The Company intends to acquire independent motorcycle dealerships throughout the
United States. The Company intends to initially acquire several dealerships that
will serve as regional bases of operations. The Company seeks to acquire
dealerships that have superior operating and financial managers and benefit from
their market knowledge, customer base and local reputation. By acquiring
additional dealerships the Company will increase its total consolidated sales
and profits. These acquisitions should produce opportunities for additional
operating efficiencies, promote increased name recognition and provide the
Company's affiliates and itself with better opportunities for repeat and
referral business.
Once an acquisition has been completed, the Company intends to review and
potentially reorganize business operations, corporate infrastructure and
systems, and financial controls. Unforeseen expenses, difficulties, and delays
frequently encountered in connection with rapid expansion through acquisitions
could inhibit the Company's growth and negatively impact profitability.
While V-Twin feels that certain segments of the motorcycle industry may be
available for consolidation, there are several factors which are inherently
problematic in acquiring independent motorcycle dealerships. Some of these
inherent problems are the fact that, typically, motorcycle dealerships have
substandard accounting practices and controls, and are typically not audited.
V-Twin, as a proposed consolidator of independent dealerships, will sustain such
problems and expenses as it conducts its assets purchases and/or acquisitions to
make such new affiliates and/or subsidiaries able to comply with SEC standard
accounting practices.
The Company can make no assurance that suitable acquisition candidates will be
identified, that acquisitions of such candidates will be consummated, or that
the operations of any acquired businesses will be successfully integrated into
the Company's operations and managed profitably without substantial costs,
delays, or other operational or financial difficulties.
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ANTI-TAKEOVER EFFECT OF ARTICLES AND BYLAW PROVISIONS
The Company's Articles of Incorporation provide that up to 50,000,000 shares of
common stock and 2,000,000 shares of preferred stock may be issued by the
Company from time to time in one or more series. On November 27, 1998, the
Board, authorized by the shareholders, merged these classes into one unitary
class with one vote per share.
V-Twin's Articles of Incorporation authorize The Board of Directors with various
rights, including the rights to (i) determine the rights, preferences,
privileges and restrictions granted to and imposed upon any unissued series of
preferred stock; (ii) fix the number of shares of any series of preferred stock
and the designation of any such series, without any vote or action by the
Company's stockholders; (iii) authorize and issue preferred stock with voting or
conversion rights that could adversely affect the voting power or other rights
of the holders of Common Stock; (iv) issue preferred stock that could have the
effect of delaying, deferring or preventing a change in control of the Company;
and (v) fix the number of directors in the Bylaws with no minimum or maximum
number of directors required. The effect of these provisions may be to delay or
prevent a tender offer or takeover attempt that a stockholder might consider to
be in his best interest, including attempts that might result in a premium over
the market price for the shares held by the stockholders.
CHANGES IN CONSUMER SPENDING, ECONOMIC CONDITIONS OR TAX LAWS
The Virginia entity's operations depend upon a number of factors relating to or
affecting consumer spending for discretionary goods such as motorcycles. The
Virginia entity's operations may be adversely affected by economic developments
that reduce consumer spending in its markets. In an economic downturn, consumer
discretionary spending levels generally decline. Rising interest rates could
have a negative impact on consumers' ability or willingness to finance
motorcycle purchases. Local influences, such as corporate downsizing and
military base closings, could adversely affect the Company's operations in
certain markets. Changes in federal and state tax laws, such as an imposition of
luxury taxes on leisure time products, also could influence consumers' decisions
to purchase products offered by The Virginia entity. These factors could
adversely affect the ability of Cycle Sport or future affiliates and/or
subsidiaries to sell its products. There can be no assurance that the Company
could maintain its profitability during any such period of adverse economic
conditions or low consumer confidence could have a negative effect on the
Company's sales.
DILUTION THROUGH ISSUANCE OF STOCK
The Company's operating results may fluctuate substantially from quarter to
quarter due to the size, timing, and integration of any future acquisitions.
Consequently, operating results for any quarter may not be indicative of the
results that may be achieved for any subsequent quarter or for a full fiscal
year. These fluctuations could adversely affect the market price of the Common
Stock.
The Company's ability to grow by acquiring additional dealers will depend upon
several factors. These include (i) the availability of suitable acquisition
candidates at attractive purchase prices; (ii) its ability to compete
effectively for available acquisition opportunities; (iii) the availability of
funds or the market price of the Company's common stock; (iv) its ability to
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obtain the requisite government licensing approvals; and (v) its ability to
obtain the necessary franchising agreements with manufacturers. Additionally,
one or more manufacturers may attempt to impose further restrictions on us in
connection with their approval of acquisitions.
FUTURE CAPITAL NEEDS; DEBT SERVICE REQUIREMENTS; POSSIBLE DILUTION THROUGH
ISSUANCE OF STOCK
The Company's future capital requirements will depend upon the size, timing, and
structure of future acquisitions and its working capital and general corporate
needs. To the extent that future acquisitions are wholly are partially financed
through common stock or securities convertible into or exercisable into common
stock, the voting power of existing stockholders will be diluted and earnings
per share could be reduced. The extent to which the Company will be able or
willing to use common stock for acquisitions will depend on the market value of
V-Twin's common stock from time to time. It will also depend on the willingness
of potential sellers of dealerships to accept common stock as full or partial
consideration. The Company's growth could be materially limited if the Company
is unable to use V-Twin's common stock as consideration in acquisitions, to
generate cash from operations, or to obtain additional debt or equity financing.
Any borrowings made to finance future acquisitions or for operations could make
the Company more vulnerable to a downturn in its operating results, a downturn
in economic conditions, or increases in interest rates on borrowings that are
subject to interest rate fluctuations. If The Virginia entity's cash flow from
operations is insufficient to meet its debt service requirements, the Company
could be required to sell additional equity securities, refinance its
obligations, or dispose of assets in order to meet its debt service
requirements.
Additionally, it is likely that the Virginia entity and future affiliates must
comply with financial and operational covenants of their current or future
credit arrangements. These covenants are likely to include limitations on both
capital expenditures and increases in indebtedness.
There can be no assurance that such financing will be available if and when
needed or will be available on terms acceptable to V-Twin, Cycle Sport or future
affiliates and/or subsidiaries. The failure to obtain sufficient financing on
favorable terms and conditions could have a material adverse effect on the
Company's growth prospects and its business, financial condition, and results of
operations.
YEAR 2000 COMPLIANCE
V-Twin has determined that, while its assessment of the Year 2000 ("Y2K") issue
is continuing, Year 2000 issues would not have a material effect on its
business. V-Twin's computer system comprises one stand-alone computer operating
Windows NT as an operating system. Embedded technology and microcontrollers are
not a part of the Holding Company's operations. The Company, by itself, is
currently Year 2000 compliant.
Given the worldwide effect of Year 2000 problems, it is likely that some
disruption in relationship with vendors, suppliers and customers will occur,
even if such entities are Year 2000 compliant. At present, given the ongoing
nature of its assessment, V-Twin does not feel that the Year 2000 problem will
be material to business, results of operations and financial condition.
12
<PAGE> 13
Cycle Sport is highly dependent upon its point-of-sale ("POS") software. As a
retail business, the resolution and prevention of any problems related to Y2K is
essential. Recognizing this, Cycle Sport began the remediation process for Y2K
in June, 1999 by contacting the companies that created its POS software and the
accounting software to which it interfaces, namely Comptron and RealWorld,
respectively. The Virginia entity anticipates installing the new software and
hardware upgrades provided by these vendors by early December, 1999. Cycle Sport
believes that its ongoing readiness efforts will allow it to avoid third party
liability.
The Virginia entity has several third parties whose failure to be Y2K compliant
would be materially disruptive. These third parties include motorcycle
manufacturers, shipping companies, retail finance companies and wholesale
finance companies. Although failure of these third parties to be compliant would
be disruptive, it would not have a material adverse financial impact on Cycle
Sport. At worst, such a failure would temporarily lower service levels until
compliance was achieved. Cycle Sport has notified V-Twin Acquisitions, Inc. that
should all of its systems fail in the Year 2000 for any reason, that it would be
able to conduct "business as usual" manually, without any hindrance whatsoever.
The "worst case" scenario for Year 2000 problems are that V-Twin and Cycle Sport
would have to function manually and could do so without significant loss of
business. Neither V-Twin nor Cycle Sport feel that the Year 2000 efforts have
substantially or materially deferred its ability to conduct other IT projects.
13
<PAGE> 14
ITEM 7. FINANCIAL STATEMENTS
V-TWIN ACQUISITIONS, INC. AND AFFILIATE
Combined Financial Statements
Period from inception (July 10, 1998) to June 30 1999
CONTENTS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Report of Independent Auditors..........................................................1
Financial Statements:
Combined Balance Sheet...............................................................2
Combined Statement of Operations.....................................................3
Combined Statement of Stockholders' Equity...........................................4
Combined Statement of Cash Flows.....................................................5
Notes to Combined Financial Statements..........................................6 - 12
</TABLE>
<PAGE> 15
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
V-Twin Acquisitions, Inc. and Affiliate
Washington, DC
We have audited the accompanying combined balance sheet of V-Twin Acquisitions,
Inc. and Affiliate (the "Company") as of June 30, 1999 and the related combined
statements of operations, stockholders' equity, and cash flows for the period
from inception (July 10, 1998) to June 30, 1999. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
Except as discussed in the following paragraph, we conducted our audit in
accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the combined financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the combined 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 audit provides a reasonable basis for our opinion.
We did not observe the taking of physical inventories at June 30, 1999 (stated
at $1,080,733), since that date was prior to the time we were initially engaged
as auditors for the Company. Accordingly, we were unable to satisfy ourselves
about inventory quantities by means of other auditing procedures.
In our opinion, except for the effects of such adjustments, if any, as might
have been determined necessary had we been able to observe the Company's
physical inventories as of June 30, 1999, the combined financial statements
referred to above present fairly, in all material respects, the financial
position of the V-Twin Acquisitions, Inc. and Affiliate as of June 30, 1999, and
the results of their operations and their cash flows for the period from
inception (July 10, 1998) to June 30, 1999 in conformity with generally accepted
accounting principles.
KAUFMAN DAVIS, PC
Certified Public Accountants Bethesda, MD
October 21, 1999
<PAGE> 16
V-TWIN ACQUISITIONS, INC. AND AFFILIATE
Combined Balance Sheet
June 30, 1999
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents ........................ $ 220,460
Investments ...................................... 125,000
Accounts receivable, net of allowance for
doubtful accounts of $53,158 ................. 61,068
Inventory, net ................................... 1,080,733
Prepaid expenses ................................. 33,513
-----------
Total current assets ......................... 1,520,774
Property and equipment, net ................................ 10,966
-----------
Total assets ................................. $ 1,531,740
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt .................................. $ 927,100
Accounts payable ................................. 127,549
Accrued expenses ................................. 67,823
Customer deposits ................................ 50,781
-----------
Total current liabilities .................... 1,173,253
Commitments and contingencies .............................. -
Stockholders' equity:
Common stock ..................................... 3,600
Additional paid-in capital ....................... 568,000
Accumulated deficit .............................. (213,113)
-----------
Total stockholders' equity ................... 358,487
-----------
Total liabilities and stockholders' equity . $ 1,531,740
===========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 17
V-TWIN ACQUISITIONS, INC. AND AFFILIATE
Combined Statement of Operations
Activity from inception (July 10, 1998) to June 30, 1999
<TABLE>
<S> <C>
Revenues:
Sales income ......................... $ 1,441,876
Service income ....................... 97,360
---------------
Total revenues .................. 1,539,236
Cost of goods sold ....................... 1,145,927
---------------
Gross margin ................... 393,309
Operating expenses ....................... 591,756
---------------
Operating loss .................. (198,447)
Other expenses:
Interest expense ..................... 14,666
---------------
Net loss ................................. $ (213,113)
===============
Net loss per common share:
Basic and diluted .................... $ (.07)
---------------
Weighted average number
of outstanding common shares........... $ 3,000,033
===============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 18
V-TWIN ACQUISITIONS, INC. AND AFFILIATE
Combined Statement of Stockholders' Equity
Activity from inception (July 10, 1998) to June 30, 1999
<TABLE>
<CAPTION>
Common Class A Common Stock Class B Common Stock
Stock ------------------------ -------------------------
CIU Shares Amount Shares Amount
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at July 10, 1998 .......................... $ 1,000 - $ - - $ -
CIU stock and treasury stock retired in
connection with merger of the Company ......... (1,000) - - - -
Exchange of 1,000,000 shares outstanding
of CIU common stock for:
808,727 shares outstanding of V-Twin
Class A common stock (par value $.001) ........ - 808,727 809 - -
191,273 shares outstanding of V-Twin
Class B common stock (par value $.001) ........ - - - 191,273 191
Exchange Class B for Class A (to create one
unitary class) and ............................ - (808,727) (809) (191,273) (191)
a one for three (1:3) forward split ........... - 3,000,000 3,000 - -
Reduction in additional paid-in-capital
in connection with forward split .............. - - - - -
Cash of $170,500 from three shareholders .......... - - - - -
Issuance of 600,000 shares and 600,000
warrants for cash ............................ - 600,000 600 - -
Issuance of V-Twin Acquisitions of Virginia, Inc.
common stock at .001 per share ................ - 100 - - -
Net loss from inception
(July 10, 1998) to June 30, 1999 .............. - - - - -
---------- ---------- ---------- -------- ---------
Balance at June 30, 1999 .......................... $ - 3,600,100 $ 3,600 - $ -
========== ========== ========== ======== =========
</TABLE>
<TABLE>
<CAPTION>
Additional Treasury Total
paid in Accumulated Stock stockholders'
capital deficit CIU equity
---------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at July 10, 1998 .......................... $ - $ - $ (667) $ 333
CIU stock and treasury stock retired in
connection with merger of the Company ......... - - 667 (333)
Exchange of 1,000,000 shares outstanding
of CIU common stock for:
808,727 shares outstanding of V-Twin
Class A common stock (par value $.001) ........ - - - 809
191,273 shares outstanding of V-Twin
Class B common stock (par value $.001) ........ - - - 191
Exchange Class B for Class A (to create one
unitary class) and ............................ - - - (1,000)
a one for three (1:3) forward split ........... - - - 3,000
Reduction in additional paid-in-capital
in connection with forward split .............. (2,000) - - (2,000)
Cash of $170,500 from three shareholders .......... 170,500 - - 170,500
Issuance of 600,000 shares and 600,000
warrants for cash ............................ 399,400 - - 400,000
Issuance of V-Twin Acquisitions of Virginia, Inc.
common stock at .001 per share ................ 100 - - 100
Net loss from inception
(July 10, 1998) to June 30, 1999 .............. - (213,113) - (213,113)
---------- ---------- ---------- -----------
Balance at June 30, 1999 .......................... $ 568,000 $ (213,113) $ - $ 358,487
========== ========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 19
V-TWIN ACQUISITIONS, INC. AND AFFILIATE
Combined Statement of Cash Flows
Activity from inception (July 10, 1998) to June 30, 1999
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss .................................................................. $(213,113)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation .............................................................. 353
Changes in operating assets and liabilities:
(Increase) in:
Accounts receivable ....................................................... (61,068)
Inventory ................................................................. (153,633)
Prepaid expenses .......................................................... (33,513)
Increase in:
Accounts payable .......................................................... 127,549
Accrued expenses .......................................................... 67,823
Customer deposits ......................................................... 50,781
---------
Net cash used in operating activities ................................. (214,821)
---------
Cash flows from investing activities:
Additions to property and equipment ....................................... (11,319)
Investments purchased ..................................................... (125,000)
---------
Net cash used in investing activities ................................. (136,319)
---------
Cash flows from financing activities:
Proceeds from sale of common stock and warrants ........................... 401,100
Proceeds from additional paid in capital .................................. 170,500
---------
Net cash provided by financing activities ............................. 571,600
---------
Net increase in cash ........................................................... 220,460
Cash at beginning of period .................................................... -
---------
Cash at end of period .......................................................... $ 220,460
=========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 20
V-TWIN ACQUISITIONS, INC. AND AFFILIATE
Notes to Combined Financial Statements
June 30, 1999
1. ORGANIZATION
V-Twin Acquisitions, Inc. (the "Company"), was organized under the laws of the
District of Columbia on July 10, 1998. On July 10, 1998, the Company completed a
merger with Commercial Indemnity Underwriters, Inc. ("CIU") with the Company as
the surviving entity.
CIU formerly know as American Solid Fuel, Inc. ("ASFI"), was an inactive company
until its merger with the Company. ASFI was formed in August, 1988, and
successfully completed a public offering through an S-18 registration. CIU had
no assets, liabilities, income or expenditures from operations and accordingly,
there was no historical carry-over basis.
V-Twin Acquisitions, Inc. of Virginia (the "Affiliate") is a privately-held
corporation organized under the laws of Virginia on March 30, 1999 to own and
operate motorcycle dealerships in Virginia.
The Company intends to acquire independent motorcycle dealerships and create a
nationwide marketing, distribution and retail organization that leverages
multiple sources of sales and sales leads, including internet commerce, direct
marketing, retail sales and service.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The combined financial statements of the Company include
the accounts of its affiliate, V-Twin Acquisitions, Inc. of Virginia. All
significant intercompany balances and transactions have been eliminated.
Accounting Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the associated amounts
of revenues and expenses during the period reported. Actual results could differ
from the estimates.
Allowance for Doubtful Accounts - The Company uses the allowance method of
recognizing bad debts. Specifically identified uncollectible accounts are
charged against the allowance.
Inventory Valuation - Inventory is valued at the lower of cost or market using
the average cost method. Obsolete or damaged goods are reduced to estimated net
realizable values.
Cash Equivalents - For purposes of the combined statements of cash flows, the
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
Concentrations of Credit Risk - Financial instruments that potentially subject
the Company to a concentration of credit risk consist principally of temporary
cash investments and accounts receivable. The Company has cash investment
policies that restrict placement of these investments to financial institutions
that are evaluated as highly creditworthy. The carrying amount of accounts
receivable approximate their net realizable value.
6
<PAGE> 21
V-TWIN ACQUISITIONS, INC. AND AFFILIATE
Notes to Combined Financial Statements
June 30, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment - Property and equipment are recorded at cost.
Depreciation expense of property and equipment is determined using the
straight-line method over the estimated useful lives of the assets, as follows:
Computer equipment......................... 5 years
Machinery and equipment.................... 7 years
Maintenance and repairs are charged to expense as incurred; major renewals and
improvements are capitalized. When items of property or equipment are sold or
retired, the related cost and accumulated depreciation are removed from the
accounts and any gain or loss is included in the results of operations.
Income Taxes - Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted taxes expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Dividend Policy - The Company has not paid any dividends since its inception.
Management does not anticipate declaring dividends in the foreseeable future.
Earnings Per Share - Basic earnings per share is computed by dividing net income
by the weighted average number of shares outstanding for the period. Diluted
earnings per share include the dilutive effect of stock options, warrants and
contingent shares.
New Accounting Standards - In April 1998, the Accounting Standards Executive
Committee (AcSEC) issued Statement of Position (SOP) 98-5, "Reporting on the
Costs of Start-Up Activities." This SOP is effective for fiscal year 2000 and
requires that start-up costs and organizational costs be expensed as incurred
and that such costs capitalized previously be expensed as a cumulative effect of
change in accounting principle. The Company does not believe that SOP 98-5 will
have a material impact on its financial position or results of operations when
such statement is adopted.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" for fiscal years
beginning after June 15, 1999. SFAS No. 133 requires the recognition of all
derivatives in the consolidated and combined balance sheet as either assets or
liabilities measured at fair value. The Company will adopt SFAS No. 133
effectivie for the 2000 calendar year end. Additionally, the Company does not
expect the adoption of SFAS No. 133 to have a material impact on its financial
position or results of operations since it does not engage in hedging activities
or hold derivatives.
7
<PAGE> 22
V-TWIN ACQUISITIONS, INC. AND AFFILIATE
Notes to Combined Financial Statements
June 30, 1999
3. ACQUISITIONS
In April 1999, the Affiliate began its strategic acquisition program by
purchasing the ongoing operations plus certain assets and liabilities of a
retail motorcycle dealership located in Herndon, Va. The acquisition was
accounted for as a purchase, and accordingly, the operating results of the
acquired company have been included in the accompanying combined financial
statements since the date of acquisition. The aggregate purchase price was
approximately $300,000 and has been allocated to the assets and liabilities
acquired based upon their respective fair market values. No good will was
recognized in connection with this transaction.
4. INVESTMENTS
Investments consist of three certificates of deposit which serve as security for
three letters of credit required to obtain inventory floorplan financing. These
investments bear interest at 4.05% with one year terms and are expected to be
held to maturity. The carrying amounts reported in the combined balance sheet
for these financial instruments are at cost, which approximates fair market
value.
5. INVENTORY
Inventory consists of the following:
<TABLE>
<S> <C>
Motorcycles and other vehicles .............. $ 858,630
Parts and accessories ...................... 222,103
-----------
$ 1,080,733
===========
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<S> <C>
Computer equipment .......................... $ 6,662
Machinery and equipment ..................... 4,657
----------
11,319
Less: accumulated depreciation .............. 353
----------
$ 10,966
==========
</TABLE>
Depreciation expense for property and equipment was $ 353 for the period from
inception (July 10, 1998) to June 30, 1999.
8
<PAGE> 23
V-TWIN ACQUISITIONS, INC. AND AFFILIATE
Notes to Combined Financial Statements
June 30, 1999
7. SHORT-TERM DEBT
The Affiliate finances its motorcycle inventory through floorplan financing
arrangements that are secured by the underlying motorcycle inventory and the
assets of the Affiliate. Investments held by the Affiliate have been pledged as
additional security to the finance companies along with personal guarantee's of
two officers and directors of the Affiliate. Finance terms range from prime to
prime plus five depending upon the number of days outstanding from the inception
date of the financing. Typically, the finance companies provide a 60 or 90 day
grace period before interest is charged or accrued.
8. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Affiliate entered into a ten year lease agreement beginning May 1, 1999, for
office and retail space in Herndon, VA at an initial monthly rate of $8,850.
The Affiliate also assumed a lease for retail space in Springfield, VA, which
expired on June 30, 1999. Subsequent to the expiration of this lease agreement,
the Affiliate entered into a month to month lease agreement at $4,800 per month.
Future minimum lease payments as of June 30, 1999 under all operating leases
greater than one year are as follows:
<TABLE>
<CAPTION>
Year ended June 30,
-----------------------------
<S> <C>
2000 .................................. $ 108,210
2001 .................................. 120,462
2002 .................................. 130,148
2003 .................................. 136,602
2004 .................................. 142,805
Thereafter ................................ 752,657
-------------
$ 1,390,884
=============
</TABLE>
Rent expense for the period from inception (July 10, 1998) to June 30, 1999 was
$28,729.
9
<PAGE> 24
V-TWIN ACQUISITIONS, INC. AND AFFILIATE
Notes to Combined Financial Statements
June 30, 1999
9. STOCKHOLDERS' EQUITY
At June 30, 1999, stockholders' equity is comprised of the following:
<TABLE>
<S> <C>
Common stock
Company - .001 par; 25,000,000 shares authorized; 3,600,000
shares issued and outstanding ......................................... $ 3,600
Affiliate - .001 par - 100 shares, authorized, issued and
outstanding ........................................................... -
------------
Total common stock ........................................... $ 3,600
============
Additional paid in capital
Company .................................................................. 567,900
Affiliate ................................................................ 100
------------
Total additional paid in capital ............................. $ 568,000
============
Accumulated deficit
Company .................................................................. (29,980)
Affiliate ................................................................ (183,133)
------------
Total accumulated deficit .................................... $ (213,113)
============
</TABLE>
Common Stock - In July, 1998, the Company merged with Commercial
IndemnityUnderwriters, Inc. (CIU). In connection with this merger, all
outstanding shares of CIU were exchanged for 808,727 Class A shares and 191,273
Class B shares.
In August 1998, the Company's shareholders approved a one for three (1:3)
forward stock split and the abolishment of the existing two classes of common
stock resulting in a singular unitary class of common stock. At June 30, 1999,
the Company had 25,000,000 shares authorized and 3,600,000 shares issued and
outstanding at a par value of .001 per share.
In April, 1999, the Affiliate was incorporated in the state of Virginia. 100
shares of common stock were authorized and issued at par value of .001 per
share.
Warrants - In March 1999, the Company issued 600,000 shares of restricted common
stock and warrants to purchase 600,000 additional shares of restricted common
stock. The warrants are exercisable at $1.67 per share for a period of 54 months
in consideration for $400,000 in cash received.
Additional Paid in Capital - During the period ended June 30, 1999, the Company
received cash consideration of $170,500 as additional paid-in-capital from
certain officers and directors of the Company.
10
<PAGE> 25
V-TWIN ACQUISITIONS, INC. AND AFFILIATE
Notes to Combined Financial Statements
June 30, 1999
10. INCOME TAXES
A reconciliation between the federal income tax benefit, applying U.S. federal
statutory rates and the Company's effective income tax benefit, as reported in
the accompanying combined financial statements is as follows:
<TABLE>
<CAPTION>
Amount Percent
----------------------- -----------------
<S> <C> <C>
Tax at statutory rate ......................................... $ (31,967) (15.0) %
State taxes (net of federal benefit) .......................... (14,918) (7.0) %
Accruals and other expenses not deductible for federal
income tax purposes, net .................................... 10,869 5.1 %
------------- ---------
(36,016)
Valuation allowance on net deferred tax benefit ............... 36,016 (16.9) %
------------- ---------
$ - -
============= =========
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets at June 30, 1999 are as follows:
<TABLE>
<CAPTION>
Deferred tax assets:
<S> <C>
Expenses not currently deductible for tax purposes ...... $ 8,984
Net operating loss carryforward ......................... 27,032
--------------------
Total gross deferred tax assets ............... 36,016
Less: valuation allowance ............................... $ (36,016)
====================
Net deferred tax assets ................................. $ -
====================
</TABLE>
At June 30, 1999 the Company had a net operating loss carryforward of
approximately $160,000 which expires in the year 2019. A 100% valuation reserve
has been provided due to uncertainty regarding the realization of the net
deferred tax assets.
11
<PAGE> 26
V-TWIN ACQUISITIONS, INC. AND AFFILIATE
Notes to Combined Financial Statements
June 30, 1999
11. EARNINGS PER SHARE
The following data shows the amounts used in computing basic and diluted
earnings per share for the period from inception (July 10, 1998) to June 30,
1999.
<TABLE>
<S> <C>
Net loss to common shareholders ................................... $ (213,113)
Weighted average number of outstanding
common shares ................................................... 3,000,033
------------------------
Net loss - basic and diluted ...................................... $ (0.07)
========================
</TABLE>
12. RELATED PARTY TRANSACTIONS
Two officers and directors of the Affiliate also serve as officers and directors
of the Company. The two officers and directors of the Affiliate, owning
collectively 100% of the outstanding common stock of the Affiliate, have agreed
to pledge their shares pursuant to a trust agreement dated April 15, 1999, in
consideration for the purchase of key man life insurance.
In April, 1999 the Company loaned the Affiliate $400,000 for purchase of certain
assets and liabilities of a motorcycle dealership and to provide working
capital. The loan evidenced via a promissory note is unsecured and is due and
payable in five years. Interest accrues at an annual rate of 10%.
13. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Interest paid during the period from inception (July 10, 1998) to June 30, 1999
was $14,641. No federal or state income taxes have been paid.
The Affiliate acquired motorcycle inventory with a cost basis of $927,100 and
assumed a corresponding financing liability of the same amount.
In connection with the one for three (1:3) forward stock split and abolishment
of the existing two classes of common stock, $2,000 was reclassified from
additional paid-in-capital to common stock.
14. SUBSEQUENT EVENTS
During July and August 1999, 100,000 of the 600,000 outstanding warrants were
exercised at $1.67 per share.
12
<PAGE> 27
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There are not now, nor have there been, disagreements with the Company's
presently engaged accountants, Kaufman Davis, PC. There were not, nor were there
ever, any disagreements with the Company's previously engaged accountants,
Klipfel & Associates, LLC. This change in auditor was the subject of a Form
8-KSB filing completed by the Registrant on September 8, 1999.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers consist of the following persons:
<TABLE>
<CAPTION>
Name Office
- ---------------- -------------
<S> <C>
Ted Schwartzbeck Chairman, President and Chief Executive Officer
Richard J. Paone Chief Financial Officer; Director
Jay Pignatello Executive Vice President and Secretary; Director
David L. Settle Executive Vice President; Director
</TABLE>
Mr. Schwartzbeck, age 37, has been the Chairman, President and CEO of the
Company since its inception. For the past 15 years he has been vice president of
Century Steel Products, Inc., a specialty steel manufacturer in Sterling,
Virginia, and has also been President and CEO of Century Industries, Inc. He
studied at the University of Miami prior to beginning his business career.
Mr. Paone, age 39, has served as the Company's CFO and has been a Director since
April, 1999. Mr. Paone was the Managing Director of Investment Banking and
Syndication at LT Lawrence & Co. from 1995 to 1998; Vice President of Investment
Banking with Coleman & Company and RAS Securities during 1994 and 1995; Vice
President of Investment Banking/Leveraged Buyouts with Weatherly Financial Group
from 1992 to 1994; and Vice President of Investment Banking/Mergers &
Acquisitions with Henry Ansbacher from 1989 to 1991. From 1984 to 1989 Mr. Paone
founded and operated a direct marketing business which he later sold. Mr. Paone
received a Masters of Business Administration in Banking and Financial Markets
from Adelphi University and a Bachelor of Arts in Economics from the State
University of New York at Stony Brook.
Mr. Settle, age 37, raced motocross motorcycles in Maryland and won several
prestigious races from 1974 through 1994, from age 13 through age 33. He
completed his racing days with the #5 plate in the Seniors class in the State of
Maryland. He subsequently served with the U.S. State Department for several
years as Supervisor of Foreign Embassy Elevator Maintenance, coordinating and
supervising a substantial field service force. Mr. Settle has served on the
Company's Board of Directors since its inception and acts as it Vice President
of Operations. Mr. Settle and Mr. Schwartzbeck are first cousins.
Mr. Pignatello, age 29, has been an Executive Vice President, Secretary and
Director since the Company's inception. Since 1998, he has been a Director and
Vice President of Century Industries, Inc. In 1996 he worked as an assistant to
the president of US Insurance Brokers, Inc. He was employed at the law firms of
Arent, Fox, Kintner, Plotkin & Kahn and Reed, Smith, Shaw & McClay as a legal
assistant from 1992 to 1996. He graduated from the University of Pennsylvania in
1992.
15
<PAGE> 28
The above Directors are all elected annually, and all the Directors except Mr.
Paone have served since the Company's inception. Mr. Paone joined the Board in
April, 1999, upon the resignation of Ms. Mongold. All of the Directors were
appointed to serve for the fiscal year of 2000 at the annual meeting.
ITEM 10. EXECUTIVE COMPENSATION
No Officer or Director receives any compensation from the Holding Company. The
Officers contemplate receiving a moderate compensation package for their efforts
upon when the business is of the size to justify such compensation.
ANNUAL COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION Year Salary Bonus Stock Awards
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ted Schwartzbeck, Chm,Pres,CEO 1999 0 0 0
Richard Paone, CFO 1999 0 0 0
Jay Pignatello, EVP 1999 60,000 0 0
David L. Settle, EVP 1999 70,000 0 0
</TABLE>
(1) Messrs. Settle and Pignatello are being compensated by The
Virginia entity for their work at the retail locations.
The Company has no stock option, retirement, pension, or profit-sharing programs
for the benefit of directors, officers, or other employees at this time, but the
Board of Directors may recommend adoption of one or more such programs in the
future, as the creation of a stock option plan was previously approved by the
shareholders of the Company at the first annual meeting on August 31, 1998.
COMPENSATION OF DIRECTORS
No compensation was paid to the directors of the Company for their services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables are intended as a visual description:
Beneficial Owners
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
NAME AND ADDRESS TITLE OF CLASS BENEFICIALLY OWNED CLASS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ted Schwartzbeck Common Voting 582,090 16%
c/o Cycle Sport
632 Grant Street
Herndon VA 20170
Jay Pignatello Common Voting 295,545 8%
c/o Cycle Sport
632 Grant Street
Herndon VA 20170
Villa Beau Holdings Common Voting 309,045 9%
43 Elizabeth Street,
Nassau, NP, Bahamas(1)
</TABLE>
16
<PAGE> 29
The principals of Villa Beau Holdings are: Clara Cespedes: Director, President;
Jose Tamarez, Esq.: Director, Secretary, control shareholder.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's officers and directors, and persons who own more
than 10% of a registered class of the Company's equity securities (the "10%
Shareholders"), to file reports of ownership and changes of ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors and 10%
Shareholders of the Company are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms so filed.
The Company believes that, during the last fiscal year, the following forms
required to be filed under Section 16(a) were not filed: (i) Mr. Schwartzbeck
failed to file one Form 3 upon the effectiveness of the registration of the
Company's equity securities under the Exchange Act on Form 10-SB and
subsequently failed to file a Form 5 to reflect the failure to file such Form 3.
To the best of the Company's knowledge, none of these above described Forms have
been filed as of June 30, 1999.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Cash consideration was paid to V-Twin Acquisitions by Jay Pignatello, Ted
Schwartzbeck and Villa Beau Holdings during July, 1998. Mr. Pignatello paid
$22,148; Mr. Schwartzbeck paid $8,000; and Villa Beau paid $20,000. Mr.
Pignatello's transaction occurred in several deposits during July, 1998; Mr.
Schwartzbeck's transaction occurred during July, 1998; and Villa Beau's
transaction occurred during July, 1998. Originally, these transactions were
accounted for as loans. However, Mr. Pignatello, Mr. Schwartzbeck and Villa Beau
Holdings requested that these transactions be accounted for as additional paid
in capital.
At September 27, 1998, the control and one 5% shareholder (Villa Beau Holdings,
Ltd., Ted L. Schwartzbeck, and A. Jay Pignatello), have written letters to the
Registrant declaring that the consideration paid by the control and 5%
shareholder (Villa Beau Holdings, Ltd., Ted L. Schwartzbeck, and A. Jay
Pignatello) should be classified as additional paid in capital. These letters
from the control shareholders are attached as Exhibit 99.7.
In July, 1998, Villa Beau exchanged 350,000 Class A common shares of Century
Industries for additional paid in capital of V-Twin Acquisitions, Inc. The
Company returned these shares to Villa Beau Holdings, Ltd., effective June 30,
1999, and for accounting purposes treated this transaction as if it had not
occurred.
There exists no affiliation between Villa Beau Holdings and the executive
officers and directors of V-Twin. There exists no affiliation between Villa Beau
Holdings and the executive officers and directors of Century Industries.
In April, 1999, Messrs. Schwartzbeck and Pignatello entered into a Trust
Agreement, attached herewith at Exhibit "99.9". This Trust Agreement has been
further described, infra, at page 2.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-KSB
(A) LIST OF EXHIBITS
17
<PAGE> 30
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession. Incorporated by reference through previously filed Form
10-SB registration statement and amendments.
(3) Articles of Incorporation and by-laws. Incorporated by reference through
previously filed Form 10-SB registration statement and amendments.
(10) Material contracts. Incorporated by reference through previously filed
Form 10-SB registration statement and amendments.
(13) Annual or quarterly reports, Form 10-Q or quarterly report to security
holders. Incorporated by reference.
(27) Financial data schedule. Incorporated by reference through previously
filed Form 10-SB registration statement and amendments.
(99) Additional Exhibits. Incorporated by reference through previously filed
Form 10-SB registration statement and amendments.
(99.1) American Solid Fuel, Inc. S-18 effective notice dated August 2,
1989 and Prospectus. Incorporated by reference through
previously filed Form 10-SB registration statement and
amendments.
(99.2) "The Motorcycle Industry" by Mike Paschke. Incorporated by
reference through previously filed Form 10-SB registration
statement and amendments.
(99.3) Reuters News Release - "Harley Rides Out US Motorcycle Boom".
Incorporated by reference through previously filed Form 10-SB
registration statement and amendments.
(99.4) Antitrust Law and Economic Review by Charles E. Mueller.
Incorporated by reference through previously filed Form 10-SB
registration statement and amendments.
(99.5) Cycle News - "In the Wind". Incorporated by reference through
previously filed Form 10-SB registration statement and
amendments.
(99.6) 1998 Yamaha Industry Comparison Data. Incorporated by reference
through previously filed Form 10-SB registration statement and
amendments.
(99.7) V-Twin control shareholders letters re: additional paid in
capital. Incorporated by reference through previously filed Form
10-SB registration statement and amendments.
(99.8) Form D - Notice of Sale of Securities Pursuant to Regulation D,
Section 4(6), and/or Uniform Limited Offering Exemption.
Incorporated by reference through previously filed Form 10-SB
registration statement and amendments.
(99.9) Trust Agreement.
(99.10) Motorcycle Industry Council 1998 Annual Report (selected pages).
18
<PAGE> 31
(99.11) Information Statement
(B) Reports on Form 8-K
During the last quarter of the period covered by this report, the
following reports on Form 8-K were filed by Registrant:
On March 25, 1999, a Form 8-K was filed regarding preliminary financing
arrangements.
On April 6, 1999, an amended Form 8-K was filed regarding preliminary financing
arrangements.
On April 6, 1999, a Form 8-K was filed regarding common control issues
concerning Messrs. Schwartzbeck and Pignatello.
On April 21, 1999, an amended Form 8-K was filed regarding preliminary financing
arrangements.
On September 8, 1999, a Form 8-K was filed regarding change in accountant.
SIGNATURE
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
December 1, 1999
V-Twin Acquisitions, Inc.
/s/ Richard Paone
- ----------------------------------------
Richard Paone, CFO
19
<PAGE> 1
EXHIBIT 99.9
TRUST AGREEMENT
This Trust Agreement entered into and made this 15 day of April,
1999, by and between Ted Schwartzbeck and Jay Pignatello, Trustees, and V-Twin
Acquisitions, Inc., a District of Columbia corporation (hereinafter "V-Twin of
DC") and V-Twin Acquisitions, Inc. of Virginia (hereinafter "V-Twin of VA") is
made by the parties hereto for the consideration and purposes reflected below:
I
Consideration
WHEREAS, V-Twin of DC is a publicly traded District of Columbia
corporation desiring to benefit from the available accounting consolidation and
management of selected motorcycle dealerships, and
WHEREAS, V-Twin of VA is owned and controlled, as a close Virginia
corporation, by A. Jay Pignatello and Ted L. Schwartzbeck as its sole
shareholders, and desires to maintain this close corporation status as an
independent entity, while still remaining able to benefit from the downstreaming
and accounting consolidation from V-Twin of DC, and
WHEREAS, Messrs. Pignatello and Schwartzbeck are also shareholders
of V-Twin of DC, as well as officers and directors of V-Twin of DC, and
WHEREAS, Messrs. Pignatello and Schwartzbeck are willing to act as
Trustees of V-Twin of VA for the use and benefit of V-Twin of DC to accomplish
these purposes, it is
NOW THEREFORE AGREED by all parties hereto as follows:
1. TITLE. Messrs. Pignatello and Schwartzbeck, while maintaining full legal
title to all shares of V-Twin of VA which they own (such shares constituting
100% of the outstanding shares of V-Twin of VA), agree to hold these shares in
Trust for the use and benefit of V-Twin of DC.
2. SEPARATION. V-Twin of VA agrees that it shall maintain its sole separate and
independent legal status as a Virginia close corporation, with the totality, one
hundred percent, of its shares to, always and forever, be owned by Messrs.
Pignatello and
<PAGE> 2
Schwartzbeck and no other person, but for modification of this Trust Agreement.
3. RELATIONSHIP. V-Twin of DC hereby agrees to consider any and all loan, direct
payment or downstreaming of revenue requests from V-Twin of VA on a priority
basis.
4. ACCOUNTING CONSOLIDATION. By the Trust Agreement it is covenanted, agreed and
established by all parties hereto that for the purposes of FASB rules, GAAP
rules, and other relevant accounting principles, for accounting purposes alone
and for no other reason or purpose, V-Twin of DC may consolidate its financial
statements, including, but not limited to, earnings, assets and balance sheet
items, with that of V-Twin of VA, this accounting consolidation being one of the
fundamental reasons for the creation of the Trust.
5. NO CONFLICT. This Trust Agreement creates no conflict between V-Twin of VA,
V-Twin of DC, and Messrs. Schwartzbeck and Pignatello.
6. CONSIDERATION. As consideration for Messrs. Pignatello and Schwartzbeck
entering into this Trust Agreement, V-Twin of DC, and/or V-Twin of VA, agree to
purchase Key Man life insurance policies or another like kind of personal
insurance coverage for Messrs. Pignatello and Schwartzbeck at a propitious time.
7. FIDUCIARY DUTY. Messrs. Pignatello and Schwartzbeck recognize that they, as
individuals, have a fiduciary duty to both V-Twin of VA and V-Twin of DC.
8. SHARE ISSUANCE. As a result of V-Twin of DC returning the Century shares to
Villa Beau Holdings, and Villa Beau Holdings returning its V-Twin of DC shares
to V-Twin of DC, this Trust Agreement will cause V-Twin of DC to issue V-Twin of
DC shares in the same amount as were issued to Villa Beau Holdings to Ted
Schwartzbeck for his efforts and assumption of personal liability associated
with obtaining the floor plan lines of credit for V-Twin of VA.
9. CLOSE CORPORATION. In all other respects, this Trust Agreement
notwithstanding, V-Twin of VA shall be treated as a sole and separate close
corporation and is not a direct, indirect, or any other type of subsidiary of
V-Twin of DC.
10. NOTICES. Any notices hereunder with respect to V-Twin of VA shall be sent to
Messrs. Schwartzbeck and Pignatello at their respective addresses: 43783
Michener Drive, Ashburn, VA 20147 and
2
<PAGE> 3
4334 Gingham Court, Alexandria, VA 22310. Any notices hereunder with respect to
V-Twin of DC shall be sent to: Corporate Secretary, V-Twin Acquisitions, Inc.,
1707 H Street, NW, Suite 200, Washington, DC 20006. Any notices hereunder with
respect to V-Twin of VA shall be sent to: Corporate Secretary, V-Twin
Acquisitions, Inc. of Virginia, 632 Grant Street, Herndon, VA 20170. Any notice
shall be given by registered or certified mail, postage prepaid, and shall be
deemed to have been given when deposited in the United States mail. Either party
may designate any other address to which notice shall be given, by giving
written notice to the other of such change in address in the manner herein
provided.
11. GOVERNING LAW. This Trust Agreement has been made in the Commonwealth of
Virginia and shall be construed and governed in accordance with the laws thereof
without regard to conflicts of laws, and each of the parties hereto irrevocably
consents to the jurisdiction of venue of the federal and state courts located in
the Commonwealth of Virginia.
12. ENTIRE AGREEMENT. This Trust Agreement contains the entire Agreement between
the parties, may not be altered or modified, except in writing and signed by the
parties hereto.
13. BINDING EFFECT. This Trust Agreement shall be binding upon the parties
hereto and their respective heirs, administrators, successors, and assigns. This
Trust Agreement shall survive Messrs. Pignatello and Schwartzbeck, jointly and
severally, as Trustees herein, and shall be binding in all respects upon the
executors, administrators or any other fiduciary party charged with
responsibility over the management of the respective estates of either Messrs.
Pignatello or Schwartzbeck. It is the express intent of Messrs. Pignatello and
Schwartzbeck, jointly and severally, that this Trust Agreement shall be the
obligation of their respective estates and should be given full force and effect
by their respective estate administrators.
14. PRIVILEGES AND IMMUNITIES. It is further reflected herein, as the intent of
all parties hereto, that Messrs. Pignatello and Schwartzbeck enter into this
Trust Agreement through the exercise of all privileges and immunities to which
they are entitled by virtue of the Constitutions of both the United States of
America and the Commonwealth of Virginia. Their entrance into this Agreement is
agreed by all parties hereto as an exercise of their free right to contract and
exercise of property rights allowed by the aforesaid Constitutions.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year above first written.
/s/ TED SCHWARTZBECK
- -------------------------------
Ted Schwartzbeck, Individually
/s/ A. JAY PIGNATELLO
- -------------------------------
A. Jay Pignatello, Individually
/s/ TED SCHWARTZBECK PRESIDENT
- -------------------------------
Ted Schwartzbeck, President
V-Twin Acquisitions, Inc. of VA
/s/ A. JAY PIGNATELLO SECRETARY
- -------------------------------
A. Jay Pignatello, Secretary
V-Twin Acquisitions, Inc. (DC)
4
<PAGE> 1
99.10
1998 MOTORCYCLE
STATISTICAL ANNUAL
[MOTORCYCLE INDUSTRY COUNCIL LOGO]
<PAGE> 2
MOTORCYCLE RETAIL OUTLETS
Retail Outlets by State: 1998
In 1998, 12,581 retail outlets sold motorcycles and related products in the U.S.
These retail outlets employed an estimated 93,800 employees at an annual payroll
of $1.9 billion.
In 1998, 41% of the retail outlets were franchised to sell new motorcycles,
scooters or all-terrain vehicles (ATVs).
About three-fifths (59%) of the 1998 retail outlets specialized in motorcycle
related parts, accessories, riding apparel, used vehicles or service, but were
not franchised to sell new motorcycles, scooters or ATVs.
NOTE:
A FRANCHISED motorcycle outlet is defined as a motorcycle retail outlet
franchised to sell new motorcycles, scooters or all terrain vehicles (ATVs). A
NON-FRANCHISED motorcycle outlet is defined as a motorcycle retail outlet
specializing in the sale of either motorcycle related parts, accessories, riding
apparel, used vehicles or service, but not franchised to sell new motorcycles,
scooters or ATVs. Because of differences in list sources, direct comparisons
should not be made between the number of outlets each year.
SOURCE:
1998 Motorcycle Retail Outlet Audit, Motorcycle Industry Council, Inc., Irvine,
California, August 1998.
1996 Motorcycle Retail Outlet Profile Survey, Motorcycle Industry Council, Inc.,
Irvine, California, September 1997.
<TABLE>
<CAPTION>
1998 Franchised 1998 Non-Franchised 1998 Total
Motorcycle Retail Outlets Motorcycle Retail Outlets Motorcycle Retail Outlets
No. of No. of Employee No. of No. of Employee No. of No. of Employee
Outlets Employees Payroll Outlets Employees Payroll Outlets Employees Payroll
State ($OOO's) ($OOO's) ($OOO's)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alabama 86 1,144 $ 25,941 95 342 $ 4,783 181 1,486 $ 30,724
Alaska 62 849 19,129 17 71 1,532 79 920 20,661
Arizona 62 849 19,129 134 563 12,073 196 1,412 31,202
Arkansas 105 1,397 31,673 87 313 4,380 192 1,710 36,053
California 329 4,507 101,508 795 3,339 71,628 1,124 7,846 173,136
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado 97 1,329 29,928 126 529 11,352 223 1,858 41,280
Connecticut 39 445 11,626 104 364 5,758 143 809 17,384
Delaware 6 68 1,789 24 84 1,329 30 152 3,118
Dist. of Columbia 0 0 0 3 11 166 3 11 166
Florida 172 2,288 51,883 440 1,584 22,153 612 3,872 74,036
- -----------------------------------------------------------------------------------------------------------------------------------
Georgia 115 1,530 34,689 163 587 8,207 278 2,117 42,896
Hawaii 9 123 2,777 37 155 3,334 46 278 6,111
Idaho 83 1,137 25,608 52 218 4,685 135 1,355 30,293
Illinois 201 2,352 55,012 323 1,389 12,988 524 3,741 68,000
Indiana 119 1,392 32,569 228 980 9,168 347 2,372 41,737
- -----------------------------------------------------------------------------------------------------------------------------------
Iowa 106 1,240 29,011 128 550 5,147 234 1,790 34,158
Kansas 75 878 20,527 93 400 3,740 168 1,278 24,267
Kentucky 86 1,144 25,941 127 457 6,394 213 1,601 32,335
Louisiana 85 1,131 25,640 76 274 3,826 161 1,405 29,466
Maine 79 901 23,550 63 221 3,488 142 1,122 27,038
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland 40 456 11,924 108 378 5,980 148 834 17,904
Massachusetts 65 741 19,377 158 553 8,748 223 1,294 28,125
Michigan 234 2,738 64,044 244 1,049 9,811 478 3,787 73,855
Minnesota 244 2,855 66,781 160 688 6,434 404 3,543 73,215
Mississippi 72 958 21,718 68 245 3,424 140 1,203 25,142
- -----------------------------------------------------------------------------------------------------------------------------------
Missouri 113 1,322 30,927 155 667 6,233 268 1,989 37,160
Montana 72 986 22,214 33 139 2,973 105 1,125 25,187
Nebraska 63 737 17,243 47 202 1,890 110 939 19,133
Nevada 32 438 9,873 51 214 4,595 83 652 14,468
New Hampshire 50 570 14,905 79 277 4,374 129 847 19,279
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey 70 798 20,867 188 658 10,409 258 1,456 31,276
New Mexico 39 534 12,033 60 252 5,406 99 786 17,439
New York 269 3,067 80,189 359 1,257 19,877 628 4,324 100,066
North Carolina 147 1,955 44,342 198 713 9,969 345 2,668 54,311
North Dakota 64 749 17,516 28 120 1,126 92 869 18,642
- -----------------------------------------------------------------------------------------------------------------------------------
Ohio 176 2,059 48,170 463 1,991 18,617 639 4,050 66,787
Oklahoma 71 944 21,417 76 274 3,826 147 1,218 25,243
Oregon 78 1,069 24,066 94 395 8,469 172 1,464 32,585
Pennsylvania 233 2,656 69,458 395 1,383 21,871 628 4,039 91,329
Rhode Island 9 103 2,683 20 70 1,107 29 173 3,790
- -----------------------------------------------------------------------------------------------------------------------------------
South Carolina 61 811 18,400 102 367 5,135 163 1,178 23,535
South Dakota 40 468 10,948 28 120 1,126 68 588 12,074
Tennessee 103 1,370 31,069 143 515 7,200 246 1,885 38,269
Texas 277 3,684 83,555 342 1,231 17,219 619 4,915 100,774
Utah 70 959 21,597 40 168 3,604 110 1,127 25,201
- -----------------------------------------------------------------------------------------------------------------------------------
Vermont 43 490 12,818 27 95 1,495 70 585 14,313
Virginia 89 1,184 26,846 136 490 6,847 225 1,674 33,693
Washington 100 1,370 30,853 137 575 12,343 237 1,945 43,196
West Virginia 52 593 15,501 76 266 4,208 128 859 19,709
Wisconsin 228 2,668 62,402 245 1,054 9,852 473 3,722 72,254
- -----------------------------------------------------------------------------------------------------------------------------------
Wyoming 56 767 17,278 30 126 2,703 86 893 19,981
U.S. TOTAL 5,176 64,803 $1,518,944 7,405 28,963 $423,002 12,581 93,766 $1,941,946
</TABLE>
<PAGE> 3
Motorcycle Retail Outlet Profile
1997 Retail Sales Volume by U.S. Motorcycle Outlets
<TABLE>
<CAPTION>
FRANCHISED NON-FRANCHISED ALL MOTORCYCLE
M/C OUTLETS % OF M/C OUTLETS % OF OUTLETS % OF
($000's) TOTAL ($OOO'S) TOTAL ($000'S) TOTAL
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New Motorcycles $2,892,000 57.0% $ 0 0.0% $2,892,000 45.5%
Used Motorcycles 745,800 14.7% 191,700 14.9% 937,500 14.7%
Parts, Accessories
& Riding Apparel 1,116,200 22.0% 882,500 68.6% 1,998,700 31.4%
Service Labor 289,200 5.7% 211,000 16.4% 500,200 7.9%
Other Motorcycle
Related Sales 30,400 0.6% 1,300 0.1% 31,700 0.5%
------ ---- ----- ---- ------ ----
Total Motorcycle
Related Sales $5,073,600 100.0% $1,286,500 100.0% $6,360,100 100.0%
</TABLE>
Note: Comparisons cannot be made with prior or subsequent years due to
revisions in new vehicle sales estimates and differences in dealer
sources. ATV related sales are not included.
1996 Motorcycle Retail Outlet Profile Survey
<TABLE>
<CAPTION>
AVERAGE AVERAGE
FRANCHISED NON-FRANCHISED
MOTORCYCLE OUTLET MOTORCYCLE OUTLET
<S> <C> <C>
TOTAL MOTORCYCLE RELATED SALES AND SERVICES $ 1,606,100 $159,850
--------- -------
New Vehicle Sales 915,700 N/A
Used Vehicle Sales 235,600 23,800
Parts, Accessories & Riding Apparel 353,500 109,600
Service Labor 91,000 26,400
Other Related Sales 10,300 50
NUMBER OF EMPLOYEES 12.6 3.9
---- ---
Full-Time 10.7 2.7
Part-Time 1.9 1.2
PAYROLL AND OTHER COMPENSATION $ 295,500 $ 58,200
(Including owner and manager)
YEARS AT SAME LOCATION 19 11
(Under current & previous ownership)
YEARS UNDER CURRENT OWNERSHIP 18 12
(Whether or not at this location)
ADVERTISING & PROMOTIONAL EXPENDITURES $ 23,250 $ 1,000
NUMBER OF NEW BRANDS CARRIED 2.2 N/A
</TABLE>
NOTE: Represents average distribution of sales by all non-franchised
outlets combined and may not be typical of individual motorcycle
parts, accessory or service outlets. ATV related sales are not
included. See page 7 for outlet definitions.
SOURCE: 1997 Motorcycle Retail Outlet Audit, Motorcycle Industry Council,
Inc., Irvine, California, August 1997.
1996 Motorcycle Retail Outlet Profile Survey, Motorcycle Industry
Council, Inc., Irvine, California, September 1997.
In 1997 there were $6.4 billion in retail sales generated by all franchised and
non-franchised motorcycle retail outlets.
Sales by franchised outlets accounted for $5.1 billion of the total retail
sales volume, compared to $1.3 billion for non-franchised outlets.
At $2.9 billion, sales of new motorcycles represented nearly half (45%) of
total retail sales in 1997.
From the 1996 Retail Outlet Profile Survey, the estimated average motorcycle
related sales and services for a franchised motorcycle outlet was $1,606,100
compared to $159,850 for a non-franchised outlet.
Franchised motorcycle outlets had been in business at the same location in 1996
for an average of 19 years. Non-franchised outlets had been at the same
location an average of 11 years.
8
<PAGE> 4
TABLE OF CONTENTS
About the Motorcycle Industry Council
The Motorcycle Industry Council (MIC) is a nonprofit, national trade
association created to represent the motorcycle industry. While the MIC name
originated in 1970, the association has existed under other names since 1914.
In addition to the Executive Office in Irvine, California, the MIC maintains a
Government Relations Office in the Washington, D.C. area.
The purpose of the MIC is to preserve and promote motorcycling by serving
the interests of individual members, the industry and the general public. This
is accomplished through activities in government relations, statistics,
communications, technical and aftermarket programs.
Discover Today's Motorcycling, a program of the Motorcycle Industry
Council, provides a better understanding of the world of motorcycling among the
general public and media.
More than 265 members represent manufacturers and distributors of
motorcycles, scooters, all-terrain vehicles (ATVs), parts and accessories, and
members of allied trades, such as publishing companies, advertising agencies,
insurance companies and consultants. While dealers, clubs and individuals are
not eligible for membership, the MIC works with these groups on issues of
mutual interest.
For more information, please contact the Motorcycle Industry Council:
EXECUTIVE OFFICE
2 Jenner Street, Suite 150
Irvine, California 92618-3806
(949) 727-4211
FAX (949) 727-4217
GOVERNMENT RELATIONS OFFICE
1235 Jefferson Davis Highway
Suite 600
Arlington, Virginia 22202-3261
(703) 416-0444
FAX (703) 416-2269
MEDIA NEWS BUREAU
2 Jenner Street, Suite 150
Irvine, California 92618-3806
(949) 727-4211 Extension 3027
FAX (949) 727-4217
MOTORCYCLE POPULATION
By Model Type and Engine Displacement............................... 1
MOTORCYCLE POPULATION
By State and Region................................................. 2
TOTAL U.S. MOTORCYCLE REGISTRATIONS................................. 3
MARKET SHARE - NEW MOTORCYCLE SALES................................. 4
NEW MOTORCYCLE RETAIL SALES
By Units and Dollars ............................................... 5
RETAIL SALES/ECONOMIC VALUE
By State ........................................................... 6
MOTORCYCLE RETAIL OUTLETS
By State ........................................................... 7
MOTORCYCLE RETAIL OUTLET PROFILE
Retail Sales Volume ................................................ 8
MOTORCYCLE OWNER PROFILE ........................................... 9
RIDER EDUCATION AND SAFETY ........................................ 10
STATE MOTORCYCLE EQUIPMENT
REQUIREMENTS ...................................................... 11
STATE OFF-HIGHWAY MOTORCYCLE
REQUIREMENTS ...................................................... 12
MOTORCYCLE USAGE
By Model Type and State ........................................... 13
MOTORCYCLE MANUFACTURERS
AND DISTRIBUTORS IN THE U.S ....................................... 14
STATE MOTORCYCLE DEALERS
ASSOCIATIONS ................................................... 15-16
Copyright (C) 1998 Motorcycle Industry Council, Inc.
<PAGE> 1
EXHIBIT 99.11
V-TWIN ACQUISITIONS, INC.
1707 H Street, NW
Suite 200
Washington DC 20006
Information Statement Pursuant to
Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 Thereunder
INTRODUCTION
This Information Statement is being mailed on or before July 31, 1999, to
holders of record on July 15, 1999, of shares of Common Stock, $.001 par value
("Common Stock"), of V-Twin Acquisitions, Inc., a District of Columbia
corporation (the "Company"). This Information Statement is being delivered to
provide information regarding the voting for by the shareholders for the
membership of the board of directors of the Company.
INDIVIDUALS SLATED FOR ELECTION
TO THE COMPANY'S BOARD OF DIRECTORS
The following table sets forth certain information with respect to the proposed
members of the Board of Directors of the Company:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES AGE
BENEFICIALLY OWNED
<S> <C> <C>
Ted Schwartzbeck 850,135 37
c/o Cycle Sport
632 Grant Street
Herndon VA 20170
Jay Pignatello 328,545 29
c/o Cycle Sport
632 Grant Street
Herndon VA 20170
David Settle - 0 - 38
c/o Cycle Sport
632 Grant Street
Herndon VA 20170
Richard Paone - 0 - 39
c/o Cycle Sport
632 Grant Street
Herndon VA 20170
</TABLE>
Ted L. Schwartzbeck - Mr. Schwartzbeck studied at the University of Miami prior
to beginning his business career. He is the President and CEO of the Company.
For the past 15 years he has been vice president of Century Steel Products,
Inc., a specialty steel manufacturer in Sterling, Virginia, and has also been
President and CEO of Century Industries, Inc. He has served on the Company's
Board of Directors since its inception.
Richard J. Paone - Mr. Paone serves as the Company's Chief Financial Officer and
Director. Mr. Paone was the Managing Director of Investment Banking and
Syndication at LT Lawrence & Co. from 1995 to 1998; Vice President of Investment
Banking with Coleman & Company and RAS Securities during 1994 and 1995; Vice
President of Investment Banking/Leveraged Buyouts with Weatherly Financial Group
from 1992 to 1994; and Vice President of Investment
<PAGE> 2
Banking/Mergers & Acquisitions with Henry Ansbacher from 1988 to 1991. From 1984
to 1988 Mr. Paone founded and operated a direct marketing business which he
later sold.
Mr. Paone received a Masters of Business Administration in Banking and Financial
Markets from Adelphi University and a Bachelor of Arts in Economics from the
State University of New York at Stony Brook.
David L. Settle - Mr. Settle raced motocross motorcycles in Maryland and won
several prestigious races from 1974 through 1994, from age 13 through age 33. He
completed his racing days with the #5 plate in the Seniors class in the State of
Maryland. He subsequently served with the U.S. State Department for several
years as Supervisor of Foreign Embassy Elevator Maintenance, coordinating and
supervising a substantial field service force. Mr. Settle has served on the
Company's Board of Directors since its inception and acts as it Vice President
of Operations.
A. Jay Pignatello - Mr. Pignatello graduated from the University of Pennsylvania
in 1992. He is the Vice President of Corporate Development and Secretary of the
Company. He worked as a legal assistant for the law firms of Arent, Fox and
Reed, Smith in Washington DC from 1992 to 1996. From 1996 to 1998 Mr. Pignatello
worked with US Insurance Brokers, Inc. as a Vice President and served on the
Board of Century Industries, Inc. He has served on the Company's Board of
Directors since its inception.
SECURITY OWNERSHIP OF 5% BENEFICIAL OWNERS AND MANAGEMENT
As of July 31, 1999, there were 3,600,000 shares of Common Stock (par
value $.001) of the Company issued and outstanding of V-Twin. The following
table sets forth as of July 15, 1999, the name and address of each person who,
to the knowledge of the Company, owned beneficially more than 5% of the shares
of Common Stock deemed outstanding at such date, the number of shares owned by
each such persons and by each of the current directors and by the current
directors and executive officers of the Company as a group, and the nature of
such ownership, and the percentage of the outstanding shares of Common Stock
represented thereby.
<TABLE>
<CAPTION>
NAME AND ADDRESS TITLE OF CLASS NUMBER OF SHARES
BENEFICIALLY OWNED PERCENTAGE OF CLASS
<S> <C> <C> <C>
Ted Schwartzbeck Common Voting 850,135 24%
c/o Cycle Sport
632 Grant Street
Herndon VA 20170
Jay Pignatello Common Voting 328,545 9%
c/o Cycle Sport
632 Grant Street
Herndon VA 20170
</TABLE>
There are no additional persons or entities which are known to be the beneficial
owner of more than 5% of the Company's single class of shares.
MANAGEMENT
The following sets forth certain information as to the current directors,
executive officers and significant employees of the Company.
2
<PAGE> 3
TED L. SCHWARTZBECK
Please see above information for Mr. Schwartzbeck under the section entitled
"INDIVIDUALS SLATED FOR ELECTION TO THE COMPANY'S BOARD OF DIRECTORS".
RICHARD J. PAONE
Please see above information for Mr. Paone under the section entitled
"INDIVIDUALS SLATED FOR ELECTION TO THE COMPANY'S BOARD OF DIRECTORS".
DAVID L. SETTLE
Please see above information for Mr. Settle under the section entitled
"INDIVIDUALS SLATED FOR ELECTION TO THE COMPANY'S BOARD OF DIRECTORS".
A. JAY PIGNATELLO
Please see above information for Mr. Pignatello under the section entitled
"INDIVIDUALS SLATED FOR ELECTION TO THE COMPANY'S BOARD OF DIRECTORS".
There does exist a family relationship between two of the directors and officers
of the Company. Mr. Schwartzbeck and Mr. Settle are cousins. This is their first
business interest together.
The Company has no standing audit, nominating or compensation committees of the
Board of directors, or committees performing such similar functions. The Company
anticipates creating an audit committee once a five member board of the Company
is established.
The Company's Board of Directors held 3 formal meetings during the fiscal year
ended June 30, 1999. No director of V-Twin attended less than 75% of the
aggregate number of meetings of the Board of Directors during such fiscal year.
COMPENSATION AND OTHER INFORMATION CONCERNING EXECUTIVE OFFICERS
Compensation of Executive Officers and Directors
No Officer or Director receives any compensation from the Company. The Officers
contemplate receiving a moderate compensation package for their efforts upon the
completion of the purchase of a sufficient number of dealerships to justify such
compensation.
In the following table names have been abbreviated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
V-Twin Acquisitions, Inc.
Name and Restricted All
Position Year Salary ($) Bonus Other($) stock awards Other
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jay Pignatello 1999 -0- -0- -0- -0- -0-
Ted Beck 1999 -0- -0- -0- -0- -0-
David L. Settle 1999 -0- -0- -0- -0- -0-
Richard Paone 1999 -0- -0- -0- -0- -0-
- --------------------------------------------------------------------------------
</TABLE>
No officer or director has received any other remuneration. Until the Company
acquires additional capital, it is not intended that any officer or
3
<PAGE> 4
director will receive compensation from the other than reimbursement for
out-of-pocket expenses incurred on behalf of the Company.
The Company has no stock option, retirement, pension, or profit-sharing programs
for the benefit of directors, officers, or other employees at this time, but the
Board of Directors may recommend adoption of one or more such programs in the
future, as the creation of a stock option plan was previously approved by the
shareholders of the Company at the first annual meeting on August 31, 1998. The
Company was a private company at August 31, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Transactions
There are not any related party transactions to be reported other than those
previously described in the Form 10-SB, as filed.
Legal Proceedings
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
No director, officer, or affiliate of the Company, and no owner of record or
beneficial owner of more than five percent (5%) of the securities of the
Company, or any associate of any such director, officer, or security holder is a
party adverse to the Company or has a material interest adverse to the Company
in reference to pending litigation.
This Information Statement is provided to you for information purposes only. No
action on your part is sought or required.
SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than 10% of a registered class of the Company's equity securities (the
"10% Shareholders"), to file reports of ownership and changes of ownership with
the Securities and Exchange Commission ("SEC"). Officers, directors and 10%
Shareholders of the Company are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms so filed.
The Company believes that, during the last fiscal year, the following
forms required to be filed under Section 16(a) were not filed: (i) Mr.
Schwartzbeck failed to file one Form 3 upon the effectiveness of the
registration of the Company's equity securities under the Exchange Act on Form
10-SB and subsequently failed to file a Form 5 to reflect the failure to file
such Form 3.
July 31, 1999
4
