<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
_____________________
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1995.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ______________.
Commission File No. 0-15501
BIKERS DREAM, INC.
(Exact name of Registrant as specified in its charter)
California 33-0140149
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1420 Village Way, Santa Ana, California 92705
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(714) 835-8464
----------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of September 30, 1995, there were 5,535,920 shares of common stock
outstanding.
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<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BIKERS DREAM, INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 195,323 $ 18,136
Accounts receivable 245,944 98,014
Inventories 1,761,355 701,301
Note receivable from stockholder --- 24,616
Employee advances 610 1,870
Prepaid expenses 121,182 58,426
Current portion of note receivable 7,560 ---
---------- ----------
Total current assets 2,331,974 902,363
PROPERTY AND EQUIPMENT, at cost, less
accumulated depreciation and
amortization of $86,946 and $28,082 565,144 114,282
DEFERRED TAX ASSET --- 64,785
NOTE RECEIVABLE, less current portion 8,554 ---
GOODWILL 238,266
DEPOSITS 49,930 37,219
---------- ----------
$3,193,868 $1,118,649
========== ==========
</TABLE>
See the accompanying notes to these financial statements
2
<PAGE> 3
BIKERS DREAM, INC.
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------ ------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 359,283 $ 5,116
Other accrued expenses 361,377 125,748
Current portion of long-term debt 11,739 1,230
Notes payable 250,000 521,000
Notes payable to stockholder 104,000 ---
----------- ----------
Total current liabilities 1,086,399 653,094
DEFERRED RENT 76,412 73,504
DEFERRED TAX LIABILITY 3,425 5,859
LONG-TERM DEBT, less current portion 70,191 72,324
----------- ----------
1,236,427 804,781
----------- ----------
STOCKHOLDERS' EQUITY
Common stock, no par value;
25,000,000 and 1,000,000 shares
authorized at September 30, 1995 and
December 31, 1994, respectively;
5,535,920 and 658,013 shares issued
and outstanding at September 30, 1995
and December 31, 1994, respectively 3,260,179 448,990
Accumulated deficit (1,302,738) (135,122)
----------- ----------
Total stockholders' equity 1,957,441 313,868
----------- ----------
$ 3,193,868 $1,118,649
=========== ==========
</TABLE>
See the accompanying notes to these financial statements
3
<PAGE> 4
BIKERS DREAM, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------------- --------------------------
1995 1994 1995 1994
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
NET SALES $2,121,538 $1,271,860 $ 5,367,804 $3,150,150
COST OF GOODS SOLD 1,463,028 1,002,647 3,967,897 2,359,400
---------- ---------- ----------- ----------
GROSS PROFIT 658,510 269,213 1,399,907 790,750
---------- ---------- ----------- ----------
OTHER (INCOME) AND EXPENSES
Selling, general and administrative
expenses 942,029 376,348 2,495,658 795,553
Depreciation and amortization 25,225 7,757 58,864 20,233
Interest (income) expense 19,030 (6,279) 18,877 (152)
Franchise income (63,774) (38,500) (72,274) (53,500)
Other expense (income) 6,840 --- 3,250 ---
---------- ---------- ----------- ----------
929,350 339,326 2,504,375 762,134
---------- ---------- ----------- ----------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (270,840) (70,113) (1,104,468) 28,616
PROVISION (BENEFIT) FOR INCOME TAXES 0 (24,450) 63,151 6,600
---------- ---------- ----------- ----------
NET INCOME (LOSS) $ (270,840) $ (45,663) $(1,167,619) $ 22,016
========== ========== =========== ==========
NET INCOME (LOSS), per common share $ (0.05) $ (0.07) $ (0.24) $ 0.03
========== ========== =========== ==========
</TABLE>
See the accompanying notes to these financial statements
4
<PAGE> 5
BIKERS DREAM, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
----------------------------
1995 1994
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(1,167,619) $ 22,016
----------- ---------
Adjustments to reconcile net income (loss) to net
cash used in operating activities
Deferred income taxes 62,351 3,000
Depreciation and amortization 58,864 20,233
Change in assets and liabilities
Increase in accounts receivable (147,930) (112,697)
Increase in inventories (1,060,054) (548,923)
Increase in deposits (12,711) (3,760)
Increase in prepaid expenses (62,756) (879)
Decrease (increase) in employee advances 1,260 (2,164)
Increase (decrease) in accounts payable 354,167 (78,850)
Increase in deferred rent 2,908 77,068
Increase in other accrued expenses 235,632 11,779
Increase in income taxes payable --- 3,800
----------- ---------
Total adjustments (568,269) (632,393)
----------- ---------
Net cash used in operating activities (1,735,888) (610,377)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchase of fixed assets (509,726) 8,939
Acquisition of businesses (238,266) ---
----------- ---------
Net cash provided by (used in) investing activities (747,992) 8,939
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances received on employee note receivable (16,114) ---
Principal payments made on long-term debt (76,972) (74,535)
Proceeds from issuance of common stock 2,311,189 741,990
Payments received on note receivable from stockholder 24,616 20,978
Proceeds from issuance of long-term debt 85,348 ---
Advances received on note payable to stockholder 104,000 ---
Proceeds received from the issuance of notes payable 250,000 ---
Payments made against notes payable (21,000) ---
----------- ---------
Net cash provided by financing activities 2,661,067 688,433
----------- ---------
</TABLE>
See the accompanying notes to these financial statements
5
<PAGE> 6
BIKERS DREAM, INC.
STATEMENT OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-----------------------------
1995 1994
---------- ----------
<S> <C> <C>
NET INCREASE IN CASH AND CASH EQUIVALENTS 177,187 86,995
CASH AND CASH EQUIVALENTS (DEFICIT),
beginning of period 18,136 (41,922)
---------- ----------
CASH AND CASH EQUIVALENTS,
end of period $ 195,323 $ 45,073
========== ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITY:
A note payable in the amount of $500,000 was converted to stock at March 31, 1995.
</TABLE>
See the accompanying notes to these financial statements
6
<PAGE> 7
BIKERS DREAM, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - GENERAL
The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes, however, that
the disclosures are adequate to make the information presented not misleading.
The interim financial statements reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results for the
interim periods presented. It is suggested that these unaudited financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's December 31, 1994 audited financial
statements. The results of operations for the three months and nine months
ended September 30, 1995 and 1994 are not necessarily indicative of the
operating results for the full year.
NOTE 2 - THE COMPANY
The Company, which was formerly known as HDL Communications, was
engaged in the publishing business until September, 1989 when it discontinued
operations. The Company remained inactive until March 13, 1995, when it
acquired all of the outstanding stock of Bikers Dream, Inc., a California
corporation engaged in sales and service of used Harley-Davidson motorcycles
and in retail sales of aftermarket accessories and parts for Harley-Davidson
motorcycles. Prior to its acquisition of Bikers Dream, Inc., the Company
effected a 1 for 1,363.341473 reverse split of its outstanding common stock.
After the acquisition, Bikers Dream, Inc. was merged into HDL Communications
and HDL Communications changed its name to Bikers Dream, Inc. The substance of
the transaction was a recapitalization by Bikers Dream, Inc. in exchange of
Bikers Dream's shares for HDL shares.
7
<PAGE> 8
NOTE 3 - INVENTORIES
Inventories are valued using a cost method which approximates the
first-in, first-out (FIFO) method at the lower of cost or market.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
Finished goods $ 1,761,355 $ 701,301
=========== ===========
</TABLE>
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
Furniture and fixtures $ 104,462 $ 31,012
Equipment 54,763 29,756
Computers 201,584 29,493
Leasehold improvements 253,592 22,255
Phone system 14,395 6,554
Displays 23,294 23,294
----------- ----------
652,090 142,364
Less: accumulated depreciation and
amortization (86,946) (28,082)
----------- ----------
$ 565,144 $ 114,282
=========== ==========
</TABLE>
NOTE 5 - NOTE RECEIVABLE FROM STOCKHOLDER
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
The Company had a note receivable from its
majority stockholder that was non-interest
bearing and was payable on demand. $ --- $ 24,616
========== ===========
</TABLE>
8
<PAGE> 9
NOTE 6 - NOTE RECEIVABLE
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
The Company has a note receivable from an
employee that is non-interest bearing and
is payable in semi-monthly installments
of $315. $ 16,114 $ ---
Less: current portion (7,560) ---
----------- -----------
$ 8,554 $ ---
=========== ===========
</TABLE>
NOTE 7 - GOODWILL
Goodwill represents the excess of acquisition
cost over the fair value of net assets plus the
direct out of pocket costs to acquire purchased
businesses. Goodwill is amortized on a straight-
line basis over 15 years. The Company
periodically evaluates the recoverability of
goodwill based upon future cash flows. There
was no amortization expense in 1995 as the
transaction which established this asset
occurred at the end of the third quarter.
NOTE 8 - NOTES PAYABLE TO STOCKHOLDER
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
The Company has notes payable to its
majority stockholder which bear interest
at rates from 8% to 16%, and are payable
on demand. $104,000 $ ---
======== ==========
</TABLE>
9
<PAGE> 10
NOTE 9 - LONG-TERM DEBT
Long-term debt consists of the following at September 30, 1995 and
December 31, 1994:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
Note payable to lender in monthly installments
of $492 including principal and interest at
7.5%, matures January 2023. Monthly
installments are subject to change every
six months. At September 30, 1995, this note
has been reclassified as a current liability as it is
expected to be paid in full in the next 12 months. $ --- $ 73,554
Capitalized lease obligation payable to a
finance company, collateralized by certain
computer equipment, requiring principal and
interest payments of $2,272 per month, with
interest accruing at 20% per annum through
May 2000. 81,930 ---
------------ ----------
81,930 73,554
Less: current portion (11,739) (1,230)
------------ ----------
$ 70,191 $ 72,324
============ ==========
</TABLE>
10
<PAGE> 11
NOTE 10 - NOTES PAYABLE
The notes payable consist of the following at September 30, 1995 and
December 31, 1994:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
Note payable to related party, HDL
Communications, Inc. accruing interest
at 1% plus the prime rate on $200,000
of the unpaid principal balance, principal
plus any accrued interest due March 1995,
collateralized by all assets of the Company.
This note was converted to 333,333 shares
of common stock in March 1995. $ --- $ 500,000
Note payable to lender, accruing no interest,
due on demand. This note was paid off in
February 1995. --- 21,000
Note payable to unrelated party is in
conjunction with acquisition of former
franchise operation. $100,000 due in
October, 1995, and balance accruing
interest at 9% and payable in equal
monthly installments to September 1996
collateralized by all the assets of the Company. $ 250,000 $ ---
----------- -----------
$ 250,000 $ 521,000
=========== ===========
</TABLE>
NOTE 11 - FRANCHISE INCOME
Revenue from the sales of individual franchises is recognized at the
time the franchise commences retail operations and the Company has performed
substantially all of the services which it is required to perform under the
Company's franchise agreement.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Bikers Dream, Inc. incorporated in California in December of
1991, sells used Harley-Davidson motorcycles ("Harleys") and aftermarket parts,
accessories and related apparel to Harley enthusiasts. Until late 1993, the
business operated in a facility of approximately 2,400 square feet in
Huntington Beach, California. In December, 1993, the Company opened its first
Superstore, a 12,000 square foot facility located in an up-scale commercial
center in Santa Ana, California. The Company's second Superstore, a 10,000
square foot facility, was opened on April 8, 1995 in Dallas, Texas. The third
Company-owned Superstore, a 10,500 square foot facility, was opened on July 28,
1995, in Tampa Bay, Florida. The fourth Company-owned Superstore, a 4,200
square foot facility, was acquired from a former franchisee on September 22,
1995 and is located in Thousand Oaks, California.
In addition to retail sales at its Superstores, aftermarket
parts, accessories and related apparel are sold through the Company's 100 page
full color mail order catalogue. The Company plans to publish its second
catalogue in 1996 which is expected to be three times the size of its first
such endeavor.
The Company is in the process of establishing a network of
franchised Bikers Dream stores. As of September 30, 1995, the Company had sold
ten Bikers Dream franchises (three in California and seven in other states) at
a price of $15,000 per franchise, seven of which are currently open and
operating. In addition, the Company has conducted negotiations with several
other potential franchisees for the sale of a Bikers Dream franchise. The
Company was advised by its special franchise counsel that certain previous
franchise sales and offers to sell franchises were not made in compliance with
applicable federal and state franchise laws and regulations. Special franchise
counsel also advised the Company that applicable federal and state franchise
laws have broad enforcement provisions, and that under certain state laws the
potential and existing franchisees may have a private cause of action for
franchise violations. Consequently, the Company suspended its franchise sales
activities in March 1995 while it was in the process of preparing the required
disclosure documents and complying with federal and state franchising laws for
future offers and sales of franchises. The Company, through its wholly owned
subsidiary, Bikers Dream International, Inc. ("BDII") has filed its franchise
registrations as required by law, and as of September 30, 1995, is authorized
to sell franchises in all states and possessions of the United States except
for the following states: Hawaii, Illinois and New York. The Company
restructured its franchise program and resumed its franchise sales activities
in August, 1995.
Bikers Dream has provided written notice to its three
California franchisees and one person who was negotiating to acquire a Bikers
Dream franchise of their remedies and rights under California franchise laws.
Franchisees who do not elect to pursue the remedies available to them under
California law will remain as franchisees of the Company. The Company has
acquired one operating franchise from a California franchisee for approximately
$304,000, is negotiating to acquire another outstanding franchise from a
California franchisee for an amount not expected to exceed
12
<PAGE> 13
$140,000 and has agreed to refund the $15,000 franchise fee plus out-of-pocket
expenses of approximately $6,000 to a non-operating California franchisee. The
Company is also negotiating to settle a dispute with a former California
franchise applicant as to the terms of a proposed franchise, and based upon
recent discussions, management believes that the dispute can be resolved
without any material adverse effect on the Company.
In addition, the Company is currently evaluating the status of
its relationship with its seven existing non-California franchisees to
determine if any notification requirements exist regarding possible franchise
violations. Management believes, based upon recent discussions with these
franchisees regarding the Company's restructured franchise program, that all or
substantially all of them will accept the Company's offer and remain as
franchisees of the Company.
13
<PAGE> 14
RESULTS OF OPERATIONS
The following table sets forth for the period indicated the income and
expense items.
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
----------------------------- ----------------------------
1995 1994 1995 1994
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net Sales $2,121,538 $1,271,860 $ 5,367,804 $3,150,150
Cost of goods sold 1,463,028 1,002,647 3,967,897 2,359,400
---------- ---------- ----------- ----------
Gross Profit 658,510 269,213 1,399,907 790,750
---------- ---------- ----------- ----------
Other expenses (income)
Selling, general & administrative 942,029 376,348 2,495,658 795,553
Depreciation and amortization 25,225 7,757 58,864 20,233
Interest (income) expense 19,030 (6,279) 18,877 (152)
Franchise income (63,774) (38,500) (72,274) (53,500)
Other expense (income) 6,840 --- 3,250 ---
---------- ---------- ----------- ----------
929,350 339,326 2,504,375 762,134
---------- ---------- ----------- ----------
Income (Loss) before provision
for income taxes (270,840) (70,113) (1,104,468) 28,616
Provision (Benefit) for income taxes --- (24,450) 63,151 6,600
----------- ---------- ----------- -----------
Net Income (Loss) $ (270,840) $ (45,663) $(1,167,619) $ 22,016
=========== ========== =========== ===========
</TABLE>
COMPARISON OF THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994:
14
<PAGE> 15
Net sales for the third quarter ended September 30, 1995 were
$2,121,538, an increase of $849,678 or 66.8% from the third quarter ended
September 30, 1994. The increase in net sales is entirely due to the opening
of the Company's second and third Superstores in Dallas, Texas and Tampa Bay,
Florida during the quarter.
Comparable store sales for the third quarter decreased 21.4%
compared to the same period of the prior year. This decrease in sales was due
to non-recurrance of the Company's grand opening event which occurred during
the third quarter of 1994 for the Company's then one and only Superstore
located in Santa Ana, California.
Net sales for the nine months ended September 30, 1995 were
$5,367,804, an increase of $2,217,654 or 70.4% over the same period ended
September 30, 1994. The increase in net sales is due to the same reasons
outlined above for the third quarter results.
Comparable store sales for the nine months ended September 30,
1995 increased 15.9% over the same period of the prior year.
Total gross profit for the third quarter ended September 30,
1995 was $658,510, an increase of $389,297, or 144.6% from the third quarter of
1994. The increase in gross profit was due to: 1) an increase in the level of
sales volumes from two newly opened stores in Dallas, Texas and Tampa Bay,
Florida, 2) the correction of an inventory valuation of used motorcycles in
Dallas, Texas which occurred at the end of the second quarter of this year, and
3) a change in accounting practice to recognize income related to the sale of
financing contracts on motorcycles at the time of sale rather than when payment
is actually received ($92,000). The gross profit rate for the third quarter
1995 was 31.0% compared with 21.2% for the same period in 1994. The change in
gross profit rate was caused entirely by the inventory valuation adjustment for
the Dallas, Texas location mentioned previously, and the recognition of
financing income at the time of sale, partly offset by the reclassification of
service department labor from selling and administrative expenses to cost of
goods sold.
As discussed in the previous quarter's Management Discussion
and Analysis, the Company is continuing its efforts to replace the current
point of sale and perpetual inventory systems with the integrated financial
systems package purchased earlier this year. Company management continues to
believe that the current financial statements conservatively reflect the
results of operations and inventory balances as of September 30, 1995.
Gross profit for the first nine months of 1995 was $1,399,907,
an increase of $609,157 or 77.0% over the same period in 1994. The gross
profit rate for the first nine months of 1995 was 26.1% as compared to 25.1%
for the same period last year. The change in gross profit rate was caused
mainly by mix changes, the establishment of inventory reserves in the second
quarter 1995, and the reclassification of service department labor mentioned
previously, offset by the change in accounting policy for finance contract
sales.
15
<PAGE> 16
Selling, general and administrative expenses were $942,029 for
the third quarter ended September 30, 1995 which represents an increase of
$565,681 or 150.3% from the comparable period for the prior year. The increase
is due to higher costs associated with: 1) the opening of the second and third
Company owned Superstores located in Texas and Florida; 2) legal fees relating
to the re-registration and approval for the Company to continue selling
franchises throughout the United States, and 3) the establishment of an
in-house accounting function which was previously performed by an outside
service bureau.
Selling, general and administrative expenses were $2,495,658
for the first nine months of 1995, an increase of $1,700,105 or 213.7% over the
same period in 1994. The increase was due to the same reasons as outlined
above for the third quarter 1995, plus additional costs associated with a
publicly traded company which commenced in March, 1995 following the reverse
acquisition of HDL Communications.
Depreciation and amortization expense was $25,225 and $7,757
for the third quarter ended September 30, 1995 and 1994, respectively. The
increase of $17,468 or 225.2% is due entirely to the acquisition of new
equipment and leasehold improvements to support the two new Company-owned
Dallas and Tampa Bay Superstores, and the newly acquired computer and software
required to operate the in-house accounting system.
Depreciation and amortization expense was $58,864 for the
first nine months ended September 30, 1995. This increase of $38,631 or 190.9%
from the same period last year was due to the same items previously discussed
in the results for the third quarter ended September 30, 1995.
There was no provision for income taxes for the quarter ended
September 30, 1995 as compared to a benefit of $24,450 for the same period last
year. The Company decided to fully reserve for the Deferred Tax Asset related
to its net operating loss carry forwards beginning in the second quarter 1995.
The Company's management has concluded that, based upon its assessment of all
available evidence, the future benefit of this asset cannot be projected
accurately at this time. The major underlying reason which led to this
conclusion is the uncertainty of the Company's ability to raise the sufficient
debt and equity capital necessary to expand the number of Company-owned
Superstores. The Company planned to use this additional capital to expand its
retail operations into new locations which would generate more operating
income. This additional operating income from additional retail trade-related
activities would defray existing centralized corporate overhead costs and
generate additional operating profits to begin utilizing the tax loss carry
forwards. As a result of the current timing delays in the Company's ability to
raise the amount of additional capital required, the Company's management
believes that it is not more likely than not that the timing of the income turn
around can be predicted with accuracy.
The income tax provision for the first nine months of 1995 was
$63,151, an increase of $56,551 or 856.8% over the same period in 1994. This
increase results from the Company's decision to fully reserve for the Deferred
Tax Asset as previously discussed.
16
<PAGE> 17
The net loss for the quarter ended September 30, 1995 was
$270,840 as compared to a net loss of $45,663 for the quarter ended September
30, 1994. The loss for the third quarter 1995 was due to the continued
investment by the Company to grow the business through the opening of new
Superstores in various parts of the U.S., the costs related to re-establishing
the ability to sell franchises, as well as the costs associated with the
reverse acquisition of HDL Communications in March, 1995 and becoming a
publicly traded company.
The net loss for the first nine months ended September 30,
1995 was $1,167,619 versus a profit of $22,016 for the same period in 1994.
The loss for the first three quarters of 1995 is due to continued investment by
the Company to grow the number of Superstores and franchises as identified in
previous commentary on the third quarter ended September 30, 1995, and the
Company's decision to fully reserve for the Deferred Tax Asset.
While the Company does not expect inflation to have a material
impact upon its operating results, there can be no assurance that inflation
will not affect the Company's business in the future. The Company expects to
mitigate inflationary increases through securing additional purchase volume
discounts as net sales increase through the opening of future Superstores and
franchises.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has relied upon equity capital to sustain
its present growth. In connection with the Company's reverse acquisition of
HDL Communications on March 13, 1995, the Company received $1.4 million from
the private placement of common stock.
The Company intends to finance future expansion through a
combination of equity and debt financing. The Company is aggressively pursuing
various alternatives to obtain either a debt or equity capital to continue its
growth. Although the Company received $1,240,000 from the private placement of
its convertible promissory notes in June and July 1995, such amount fell short
of the additional $8 million deemed necessary to fund all future planned
expansion of additional retail Superstores and a centralized distribution
warehouse to supply the needs of the Company-owned and franchised operations.
If the Company is unable to raise the required additional capital, existing
operations will have to be modified and/or downsized in order to achieve a
profitability position.
17
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 6(a). REPORTS ON FORM 8-K.
(b) EXHIBITS
Exhibit 27 - Financial Data Schedule
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BIKERS DREAM, INC.
Date: November 9, 1995 By: /s/ Dennis Campbell
-----------------------------
Dennis Campbell, President
By: /s/ William R. Gresher
-----------------------------
William R. Gresher,
Vice President and
Chief Financial Officer
19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 195,323
<SECURITIES> 0
<RECEIVABLES> 260,855
<ALLOWANCES> (14,911)
<INVENTORY> 1,761,355
<CURRENT-ASSETS> 2,331,974
<PP&E> 652,090
<DEPRECIATION> (86,946)
<TOTAL-ASSETS> 3,193,868
<CURRENT-LIABILITIES> 1,086,399
<BONDS> 0
<COMMON> 3,260,179
0
0
<OTHER-SE> (1,302,738)
<TOTAL-LIABILITY-AND-EQUITY> 3,193,868
<SALES> 5,367,897
<TOTAL-REVENUES> 5,400,078
<CGS> 3,967,897
<TOTAL-COSTS> 2,554,522
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 14,911
<INTEREST-EXPENSE> 18,877
<INCOME-PRETAX> (1,104,468)
<INCOME-TAX> (63,151)
<INCOME-CONTINUING> (1,167,619)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,167,619)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
