<PAGE> 1
As filed with the Securities and Exchange Commission on December 13, 1996
Registration No. _________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BIKERS DREAM, INC.
(Exact name of Registrant as Specified in its Charter)
California
(State or other jurisdiction of
incorporation or organization)
33-0140149
(IRS Employer Identification Number)
1420 Village Way
Santa Ana, California 92705
(714) 835-8464
(Address, Including Zip Code, and Telephone Number,
including area code, of Registrant's Principal Executive Offices)
Donald J. Duffy, Co-Chief Executive Officer
Bikers Dream, Inc.
1420 Village Way
Santa Ana, California 92705
(Name, Address, Including Zip Code,
and Telephone Number, Including
Area Code, of Agent for Service)
Copy to:
Leonard J. McGill, Esq.
Day Campbell & McGill
3070 Bristol, Suite 650
Costa Mesa, California 92626
(714) 429-2900
Approximate date of commencement of proposed sale to public: From time
to time after this Registration Statement comes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [X]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed Maximum
Maximum Aggregate Offering
Title of Securities To Amount To Be Offering Price Price(1) Amount of
Be Registered Registered Per Share(1) Registration Fee
- ------------- ---------- ------------ ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock , 1,166,669 $3.50(2) $1,225,000(2) $371.22
no par value(2)
Common Stock, 350,000 $5.00 $1,750,000 $530.31
no par value(3)
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457.
(2) Shares issuable upon conversion of preferred stock. One share of such
preferred stock is convertible at a maximum conversion price of $3.50
per share into 50,000 shares of common stock, and is convertible at a
minimum conversion price of $1.50 per share into 166,667 shares of
common stock. The registrant is issuing shares of common stock issuable
upon conversion of seven (7) shares of such preferred stock, which at
the minimum conversion price of $1.50 would convert into a maximum
aggregate of 1,116,669 shares of common stock, but which in all events
will result in a maximum aggregate offering price of $1,225,000.
(3) Shares issuable upon the exercise of the warrants at an exercise price
of $5.00 per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 3
SUBJECT TO COMPLETION
Dated December ___, 1996
1,516,669 Shares of Common Stock
(no par value)
BIKERS DREAM
This Prospectus relates to 1,516,669 shares of Common Stock, no par
value ("Common Stock") of Bikers Dream, Inc., a California corporation (the
"Company" or "Bikers Dream"), heretofore issued, or issuable upon the conversion
of convertible preferred stock or exercise of warrants, to the persons listed as
the Selling Shareholders. Such shares of Common Stock are being offered for the
respective accounts of the Selling Shareholders, and will be sold from time to
time by the Selling Shareholders on the over-the-counter market at their
prevailing prices, or in negotiated transactions. The Company will receive no
proceeds from the sale of such shares of Common Stock by the Selling
Shareholders. The expenses of preparing and filing the Registration Statement of
which this Prospectus forms a part are being paid by the Company.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The shares offered hereby were or will be acquired by the Selling
Shareholders from the Company upon the conversion of convertible Preferred Stock
or exercise of warrants, and are "restricted securities" under the Securities
Act of 1933, as amended (the "Act"). This Prospectus has been prepared for the
purpose of registering the shares under the Act to allow for future sales by the
Selling Shareholders to the public without restriction. To the knowledge of the
Company, the Selling Shareholders have made no arrangement with any brokerage
firm for the sale of the shares. The Selling Shareholders may be deemed to be
"underwriters" within the meaning of the Act. Any commissions received by a
broker or dealer in connection with resales of the shares may be deemed to be
underwriting commissions or discounts under the Act. See "Plan of Distribution."
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
The date of this Prospectus is December ___,1996.
<PAGE> 4
The Company's Common Stock is traded on the National Association of
Securities Dealers Electronic Bulletin Board ("NASD Electronic Bulletin Board")
under the symbol BIKR. On December 12, 1996, the last reported bid price for
such shares, as reported by the NASD Electronic Bulletin Board, was $2.312 per
share and the last reported ask price was $2.437.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERING CONTEMPLATED HEREBY, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE SELLING SHAREHOLDERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission. Reports, proxy statements and other information filed by
the Company with the Securities and Exchange Commission may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: 75 Park Place, New York, New York 10007; and the
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60621; and copies of such material may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W. Judiciary Plaza, Washington,
D.C. 20549 at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Securities and Exchange Commission and are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB, as amended, for the
fiscal year ended December 31 1995;
(b) The Company's Quarterly Reports on Form 10-QSB for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996;
(c) The Company's definitive Proxy Statement dated May 1, 1996;
(d) The Company's Current Report on Form 8-K dated September 9, 1996;
(e) The description of the Company's Common Stock contained in the
Registration Statement filed pursuant to Section 12 of the Exchange Act,
together with all amendments or reports filed for the purpose of updating such
description.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the Offering of Common Stock offered hereby shall be deemed
to be incorporated by reference into this Prospectus and to be part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is incorporated or deemed to be incorporated herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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<PAGE> 5
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents referred to above which have been incorporated into this Prospectus by
reference (other than exhibits to such documents). Requests for such copies
should be directed to Donald J. Duffy, co-Chief Executive Officer, Bikers Dream,
Inc., 1420 Village Way, Santa Ana, California 92705 (Telephone:(714) 835-8464).
THE COMPANY
The Company sells and services used Harley-Davidson motorcycles and
sells aftermarket parts and accessories for Harley-Davidson motorcycles. In
addition, the Company recently acquired rights to sell motorcycles manufactured
by Ultra Kustom Cycles, a division of Mull Acres Investments, Inc. ("Mull
Acres"). The Company has formed a limited liability company with Mull Acres in
part to effect the distribution of these motorcycles.
The Company, which was formerly known as HDL Communications, was
incorporated in California in October, 1985. The Company was engaged in the
publishing business until June, 1989, when it discontinued operations. The
Company remained inactive until March 13, 1995 when it acquired 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 Company's principal executive offices are located at 1420 Village
Way, Santa Ana, California 92705, and its telephone number is (714) 835-8464.
RISK FACTORS
In addition to the other information in this Prospectus, the following
risk factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered by this Prospectus. An
investment in the Common Stock offered hereby is speculative in nature and
involves a high degree of risk.
LIMITED OPERATING HISTORY; OPERATING LOSSES
Bikers Dream commenced its operations in July, 1990 and has increased
the size and scope of operations significantly in 1995 and 1996. Accordingly,
the Company has a limited operating history. Investors have only a brief
operating record to review in evaluating the performance of Bikers Dream. Bikers
Dream had losses, before provision for income taxes, of $164,275, $16,211 and
$2,287,967 for its fiscal years ended December 31, 1993, 1994 and 1995,
respectively, for the first nine months of fiscal year 1996, Bikers Dream had a
net loss of $2,561,213. There is no assurance that Bikers Dream will be
profitable in fiscal 1996 or thereafter. In addition, since the Company has
recently begun to devote resources to the business of distributing new
motorcycles manufactured by Ultra Kustom Cycles, a business in which the Company
was not previously engaged, the Company is entering a segment of its business in
which it previously has not had any experience and in which it will engage
directly in competition with Harley Davidson.
COMPETITION
The market in which the Company competes is highly competitive. The
main source of competition is the licensed Harley-Davidson motorcycle dealer
network which primarily sells new Harley-Davidson motorcycles, accessories and
parts and provides repair/maintenance service on all Harley-Davidson models. The
Company believes that most of the licensed Harley-Davidson dealers do not
emphasize the sale of used Harley-Davidson motorcycles or sell aftermarket
accessories and apparel. In the event, however, that the sale of new motorcycles
manufactured by Ultra Kustom Cycles becomes a more significant part of the
Company's business activities, such competition with dealers selling new
Harley-Davidson motorcycles will be intensified. In addition, there are a
substantial number of motorcycle shops which provide aftermarket parts, services
and accessories to Harley-Davidson motorcycle owners. The Company believes that
most of the aftermarket motorcycle shops are small, privately owned businesses
with limited facilities, capital and other resources. The Company
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<PAGE> 6
knows of only one organization which is attempting to compete with the
Harley-Davidson dealer network on a national basis. This organization emphasizes
apparel, and does not offer the broad line of parts and accessories offered by
the Company. There can be no assurance, however, that current competitors will
not expand their facilities and operations or that new competitors with
substantial capital and other resources will not enter the market.
DEPENDENCE ON MANAGEMENT
The Company depends on members of senior management as well as on its
ability to attract, retain and motivate additional qualified personnel. The
competition for such personnel is intense, and the loss of the services of one
or more of these key employees could have a material adverse effect on the
Company. There can be no assurance that the Company will be successful in
retaining its existing key employees or in attracting and retaining any
additional personnel it requires.
DEPENDENCE ON CONTINUED POPULARITY OF HARLEY-DAVIDSON MOTORCYCLES
The success of the Company's business as presently conducted is
directly related to the popularity of Harley-Davidson motorcycles. There are
over 600,000 Harley-Davidson motorcycles currently registered in the United
States. The Company believes, based upon Harley-Davidson's current production
plans, that the number of Harley-Davidson motorcycles registered in the United
States will increase to approximately 900,000 by 1999. There can be no assurance
that the current popularity of Harley-Davidson motorcycles will continue or that
the expected production rate of new Harley-Davidson motorcycles will actually
occur.
CONTROL BY DIRECTORS
The Company's directors and their respective affiliates own an
aggregate of 888,457 shares of Common Stock (not including 900,000 shares
issuable upon the exercise of options held by the directors). Accordingly, the
existing directors will be able to exert significant control over the policy and
affairs of the Company, including the election of directors. In addition,
Rowland W. Day II has the right for a period of three years after March 13,
1995, to designate two of the members of the Company's Board of Directors, one
of whom may be Mr. Day.
MANAGEMENT OF GROWTH
The Company's continued growth depends in part upon its ability to
expand into new geographic areas, through the opening of new Superstores. There
can be no assurance that the Company will be successful in such expansion. The
Company's current expansion plans including its plans to enter into the business
of distributing new motorcycles manufactured by Ultra Kustom Cycles, could
continue to place a significant strain on the Company's management, working
capital and financial and management control systems. The Company's results of
operations will be adversely affected if revenues do not increase sufficiently
to compensate for the increase in operating expenses resulting from any
expansion and there can be no assurance that any expansion will be profitable or
that it will not adversely affect the Company's results of operations. In
addition, the success of any expansion plans will depend in part upon the
Company's ability to continue to improve and expand financial and management
control systems, to attract, retain and motivate key employees, and to raise
additional capital. There can be no assurance that the Company will be
successful in these regards.
ADDITIONAL CAPITAL REQUIREMENTS, GOING CONCERN
The Company will require substantial additional capital to implement
its expansion plan and to support future growth. Any additional equity financing
may be dilutive to stockholders, and debt financing may impose substantial
restrictions on the Company's ability to operate and raise additional funds.
There can be no assurance that additional capital will be available or that, if
available, such capital will be on satisfactory terms.
The Company's independent accountant has issued an opinion in
connection with its audit of the financial results of fiscal year ended December
31, 1995, indicating that, in view of recurring losses from operations and the
uncertainty of the ability of the Company to raise additional funds and
ultimately achieve positive operating cash flows, substantial doubt exists as to
the Company's ability to continue as a going concern. Although Management is
continuing efforts to raise additional capital and implement profit enhancement
policies, there can be no assurance that its efforts in these respects will be
successful.
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FRANCHISING AND DEALERSHIP ACTIVITIES
The Company has been in the process of establishing a network of
franchised or licensed dealership Bikers Dream stores. The franchises or
dealership stores are modeled after the Company-owned Superstores and are
expected to be located throughout the United States to service the mid-size
markets not directly serviced by large Company-owned Superstores. The Company
sold ten Bikers Dream franchises (three in California and seven in other
states). The franchises were sold at a price of $15,000 per franchise. Three of
these franchises are currently open and operating, of which two have filed suit
for breach of contract. One of these suits has been settled for a relatively
nominal amount and cancellation of the franchise agreement. In addition, the
Company is conducting negotiations with several other potential candidates for
the sale of Bikers Dream dealership rights.
The Company marketed its franchises primarily by advertising in
motorcycle and specialty magazines. The franchise advertisement appeared in
a portion of a larger general advertisement featuring the Company's products,
service and mail-order catalogue. The majority of responses to the franchise
advertisements had been from Harley owners and enthusiasts.
The Company was advised in March, 1995, by its retained special
franchise counsel that certain previous franchise sales and offers to sell
franchises were not 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 December 1, 1996, is authorized to sell franchises in all states and
possessions of the United States.
The Company restructured its franchise program, and resumed its
franchise sales activities in August, 1995. Bikers Dream has resolved disputes
with three franchisees, and one person who was negotiating to acquire a Bikers
Dream franchise in California in accordance with the remedies available under
California franchise laws. As a result the Company has acquired one operating
franchise from a California franchisee for approximately $340,000, another for
approximately $140,000. The total assets acquired in connection with these
acquisitions was $204,697 consisting of inventory in the amount of $75,116,
deposits and other assets in the amount of $22,572 and furniture, fixtures and
equipment in the amount of $107,009. The excess of the purchase price over the
value of assets acquired was expensed in the third and fourth quarters of 1995.
The total of asset acquisitions aggregated to less than 10% of the Company's
existing assets at that time.
In addition, the Company has made refund to another franchisee in the
amount of $20,176. The Company has also accrued the return of the franchise fee
for a franchise which never opened. In addition, the Company has paid a
prospective California franchisee $22,500 for a full release of any and all past
and future claims.
The Company signed a new franchise agreement with one of its existing
franchisees (which has subsequently closed), and received notice of suit from
two of its franchisees in February and March of 1996, one of which has been
settled, and the other of which Management believes at this time is likely to be
a claim of no material consequence. The Company is currently evaluating its
relationship with two other franchisees. The Company also signed a mutual
release agreement in February, 1996 with another franchise which canceled the
relationship with Bikers Dream. Management believes that it will resolve the
existing dispute with one franchisee and that the remaining two franchisees will
accept the Company's offer regarding the restructured franchise program and
remain franchisees of the Company.
The Company has ceased the sale of franchises at this time and does
not anticipate selling any franchises in the future.
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The below table summarizes the status of all franchises to date.
BIKERS DREAM, INC.
FRANCHISE STATUS REPORT
<TABLE>
<CAPTION>
Signed Opened Assets Signed Signed No
Entered Original For Purchased New Release Filed Suit Longer A
Number Location Negotiations Contract Business By BDI Agreement Agreement Suit Resolved Franchise
- ------ -------- ------------ -------- -------- ------ --------- --------- ---- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Thousand Oaks, CA X X X X X
2 Sacramento, CA X X X X X
3 Canyon Country, CA X X X X
4 Edison, NJ X X X X
5 Albuquerque, NM. X X X
6 Oklahoma City, OK. X X X X X X X
7 Burlington, IA X X X X X
8 Scottsdale, AZ X X X
9 Las Vegas, NV X X X X X
10 Conover, NC X X X X
</TABLE>
ABSENCE OF DIVIDENDS
The Company has not paid any cash dividends on its Common Stock since
its organization, and it is not anticipated that any cash dividends will be paid
in the foreseeable future.
LIMITED PUBLIC MARKET FOR SECURITIES OF THE COMPANY.
Although the Company's Common Stock is listed on the National
Association of Securities Dealers ("NASD") Electronic Bulletin Board, there is
expected to be only an extremely limited and sporadic trading market for the
Common Stock.
NASDAQ LISTING; RISK OF LOW-PRICED SECURITIES
The Company believes it currently satisfies NASDAQ's listing criteria
for its Small Cap Market, and has filed a listing application, although there
can be no guarantee of approval. If the Company is accepted for listing but is
subsequently unable to meet NASDAQ's maintenance criteria in the future,
trading, if any, would continue to be conducted in the over-the-counter market
in the so-called "pink sheets" or the NASD Electronic Bulletin Board, where it
is presently conducted. Under those circumstances, investors could find it more
difficult to dispose of, or to obtain accurate quotations as to the price of,
the Company's securities.
In addition, the Common Stock is subject to Rules 15g1-15g6 promulgated
under the Securities Exchange Act of 1934 (the "Exchange Act") that imposes
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally, a person with assets in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 together with his or her spouse). For
transactions covered by this rule, the broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and may
affect the ability of investors to sell their securities in the secondary
market.
The Commission has also adopted regulations which define a "penny
stock" to be any equity security that has a market price (as defined) of less
than $5.00 per share or an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless
exempt, the regulations require the delivery, prior to the transaction, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. The broker-dealer must also disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. While many NASDAQ-listed securities are
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<PAGE> 9
covered by the definition of penny stock, transactions in a NASDAQ-listed
security are exempt from all but the sole market-maker provision for (i) issuers
who have $2,000,000 in tangible assets ($5,000,000 if the issuer has not been in
continuous operation for three years), (ii) transactions in which the customer
is an institutional accredited investor, or (iii) transactions that are not
recommended by the broker-dealer. In addition, transactions in a NASDAQ security
directly with a NASDAQ market-maker for such security are subject only to the
sole market-maker disclosure, and the disclosure with respect to commissions to
be paid to the broker-dealer and the registered representative.
The Company's Common Stock, as of the date of this Prospectus, is
within the definitional scope of a penny stock. As a result, the regulations on
penny stocks could limit the ability of broker/dealers to sell the Company's
securities and thus the ability of purchasers of the Company's securities to
sell their securities in the secondary market.
OUTSTANDING OPTIONS
As of the date of this Prospectus, the Company had granted options to
purchase 550,000 shares of Common Stock at a price of $1.00 per share, options
to purchase 332,500 shares of Common Stock at a price of $1.50 per share,
options to purchase 330,000 shares at a price of $2.50 per share and 207,300
options at prices ranging from $1.56 to $2.875 per share*. Under the terms of
the options, the holders are given the opportunity to profit from a rise in the
market price of the Common Stock, and their exercise may dilute the book value
per share of the Common Stock. The existence of the options may adversely affect
the terms on which the Company may obtain additional equity financing since the
holders are likely to exercise their options at a time when the Company would
otherwise be able to obtain needed capital on terms more favorable to the
Company than could be obtained through the exercise of such options. See
"Description of Securities." *[UPDATE]
RULE 144 SALES
Of the shares of the Company's Common Stock presently outstanding,
approximately 5,179,500 are "restricted securities" as that term is defined by
Rule 144 promulgated under the Securities Act and in the future may be sold only
in compliance with Rule 144 or pursuant to registration under the Securities Act
or pursuant to another exemption therefrom. Many of such shares have been, as of
the date of this Prospectus, registered for resale on registration statements
filed with the Commission on Form SB-2. For so long as the Registration
Statement of which this Prospectus is a part is current and effective, the
shares owned by the Selling Shareholders and offered hereby may be sold without
regard to the volume limitations, described below, set forth in Rule
144.Generally, under Rule 144, each person having held restricted securities for
a period of two years may, every three months, sell in ordinary brokerage
transactions an amount of shares which does not exceed the greater of one
percent (1%) of the Company's then outstanding shares of Common Stock, or the
average weekly volume of trading of such shares of Common Stock as reported
during the preceding four calendar weeks. A person who has not been an affiliate
of the Company for at least the three months immediately preceding the sale and
who has beneficially owned shares of the Common Stock for at least three years
is entitled to sell such shares under Rule 144 without regard to any of the
limitations described above. Of such restricted shares, approximately 139,000
are currently eligible for sale under Rule 144, and an additional 2,400,000
restricted shares will be eligible for sale under Rule 144 in March 1997. Actual
sales, or the prospect of sales by the present stockholders of the Company or by
future holders of restricted securities under Rule 144, or otherwise, may, in
the future, have a depressive effect upon the price of the Company's shares of
Common Stock in any market that may develop therefor, and also could render
difficult sales of the Company's securities purchased by investors herein.
PLAN OF DISTRIBUTION
The shares being offered hereby will be offered and sold by the Selling
Shareholders for their own accounts. The Company will not receive any of the
proceeds from the sale of the shares pursuant to this Prospectus. The Company
has agreed to bear the expenses of the registration of the shares, including
legal and accounting fees, and such expenses are estimated to be $20,000.
The Selling Shareholders may offer and sell the shares from time to
time in transactions on the NASD Electronic Bulletin Board (or, if the Company's
listing application is accepted, the NASDAQ Small Cap Market) or in negotiated
transactions, at market prices prevailing at the time of sale or at negotiated
prices. Sales may be made to or through broker-dealers who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Shareholders or the purchasers of shares for whom such broker-dealers
may act as agent or to whom they may sell as principal, or both (which
compensation as to a particular broker-dealer may be in excess of customary
commissions).
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<PAGE> 10
The Selling Shareholders and any broker-dealers acting in connection
with the sale of the shares hereunder may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Act, and any commissions received by them
and any profit realized by them on the resale of Shares as principals may be
deemed underwriting compensation under the Act.
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
Selling Shareholders. Except as set forth below, none of the Selling
Shareholders is currently an affiliate of the Company, and none of them has had
a material relationship with the Company during the past three years.
<TABLE>
<CAPTION>
====================================================================================================================
Maximum Beneficial Ownership
Beneficial Ownership Number of Shares of and Percentage of
Name of Selling Shareholder of Common Stock at Common Stock Offered Common Stock After
December 1, 1996(1) for Sale(1) Giving Effect to
Proposed Sale(2)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JDN Partners, L.P. 216,667 216,667 0
Bull Dog Capital Partners, L.P. 433,334 433,334 0
Elizabeth M. Custer, TTEE FBO 216,667 216,667 0
William M. Custer
Merchant Enterprises, Ltd. 216,667 216,667 0
Habiba Rebecca Sassoon 216,667 216,667 0
Tonga Partners 216,667 216,667 0
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
(1) Includes shares of Common Stock which may be acquired through the
conversion of convertible preferred stock and the exercise of warrants
(2) Assumes the sale of all shares covered by this Prospectus. There can be
no assurance that any of the Selling Stockholders will sell any or all
of the shares of Common Stock offered by them hereunder.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of
25,000,000 shares of Common Stock without par value, of which approximately
8,350,031 shares were outstanding as of September 30, 1996. The shares are fully
paid and not subject to future calls or assessments.
Holders of shares of Common Stock are entitled to one vote for each
share on all matters to be voted on by the shareholders and, upon the giving of
notice as required by law, are entitled to cumulate their votes in the election
of directors. Holders of shares of Common Stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time by the Board of
Directors in its discretion, from funds legally available therefor. In the event
of a liquidation, dissolution or winding up of the Company, the holders of
shares of Common Stock are entitled to share pro rata all assets remaining after
payment in full of all liabilities. Holders of Common Stock have no preemptive
or other subscription rights, and there are no conversion rights or redemption
or sinking fund provisions with respect to such shares.
In connection with its acquisition of Bikers Dream, Inc., the Company
agreed not to issue, without the unanimous approval of its Board of Directors,
during each year of a three year period commencing on March 13, 1995, any shares
of Common Stock, or any shares convertible into Common Stock, or any options,
warrants or other rights to purchase shares of Common Stock, in excess of 5% of
the total number of shares of Common Stock outstanding immediately after the
8
<PAGE> 11
consummation of such acquisition (such number of outstanding shares being
4,700,000), except for shares issued in connection with acquisitions or shares
issued upon exercise of options and warrants outstanding immediately after the
consummation of such acquisition.
PREFERRED STOCK
In September, 1996, the Company issued seven (7) units (the "Units"),
each unit consisting of one share of preferred stock and one warrant (which
warrant is described below). Each share of the Preferred Stock is convertible
into 50,000 Shares of the Company's Common Stock at $3.50 per share. The
Preferred Stock may only be converted into shares of Common Stock after the
registration statement (of which this Prospectus is a part) of such Common Stock
became effective.
Holders of the Preferred Stock may convert at any time hereafter
provided that the holder notifies the Company with written notice via U.S. Mail,
Courier, or facsimile transmission of the intention to convert. The Company may
call for conversion at any time after the registration statement becomes
effective if (a) the average closing price of the Common Stock is $7.50 per
share or more for ten (10) consecutive trading days, or (b) any time after the
third anniversary of the private placement, whichever occurs first, provided
that the Company shall have given written notice to holders within ten (10)
business days of its intention to call for conversion.
If the holder of the Preferred Stock exercises its conversion
privilege, the adjusted conversion price will be 75% of the greater of (a) the
average of the closing bid for the Common Stock for the ten (10) trading days
immediately prior to receipt of notice by Company to convert, or (b) the closing
bid price on the day immediately preceding receipt of notification of intent to
convert by Company. If the adjusted conversion price is lower than $3.50 per
share, then the holders would convert into such a greater number of shares based
upon the adjusted conversion price, but in no event shall the conversion price
be less than $1.50 per share (i.e., one (1) share of the Preferred Stock would
convert into a maximum of 116,667 shares of Common Stock). Under no
circumstances will the conversion price exceed $3.50 per share.
WARRANTS
The warrants consisting part of the Units will be issued to the holders
of the Preferred Stock six (6) months following the issuance of the Preferred
Stock, or at such earlier date as the Board of Directors of the Company may
approve. Holders who have converted the Preferred Stock into Common Stock prior
to the issuance of the warrants shall not be entitled to warrants.
The warrants will carry a an exercise price of $5.00 per share or such
lower price as the Board of Directors may determine. The warrants will expire
three (3) years following the date of their issuance. The warrants will be
callable by the Company at such time when the Company's Common Stock closes at
$7.50 or more for a ten (10) consecutive trading days, after which the Company
must notify holders of warrants of such redemption within ten (10) business
days. The call price of each warrant will be at $5.00, or such lower price that
the Board of Directors may authorize at the time the warrants were issued.
OPTIONS
The Company has granted options to purchase 550,000 shares of Common
Stock at an exercise price of $1.00 per share. The options are exercisable at
any time prior to March 13, 1998.
In April, 1995, the Company granted options under the Company's
Non-Qualified Stock Option Plan to each of its four then current directors to
purchase, at an exercise price of $1.50 per share, 50,000 shares of Common
Stock. The options are immediately vested as to 10,000 shares and the balance
will vest at the rate of 2,500 shares per quarter over a four year period. Two
directors appointed in December, 1995, were each granted options to purchase
50,000 shares at prices of $1.56 and $2.875 per share.
The Company has granted to employees under the Company's Incentive
Stock Option Plan options to purchase 132,500 shares of Common Stock at an
exercise price of $1.50 per share, and options to purchase 240,000 shares of
Common Stock at an exercise price of $2.50 per share. Incentive Stock Option
Plan options have been granted to additional
9
<PAGE> 12
employees to purchase up to 37,300 shares of Common Stock at prices ranging from
$1.875 per share up to $2.875 per share.
The Company has granted a Non-Qualified option to William R. Gresher to
purchase, at an exercise price of $2.50 per share, 60,000 shares of Common
Stock. The option is immediately vested as to 10,000 shares and the remaining
portion of the option is vested over a five year period commencing in September,
1995. The Company has granted a Non-Qualified option to Meyer Duffy to purchase,
at an exercise price of $2.50 per share, 30,000 shares of Common Stock, and
another option to purchase 50,000 shares at $1.70 per share. Additional
Non-Qualified options have been granted to another consultant to purchase, at an
exercise price of $2.125, 70,000 shares of Common Stock.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Company's Common Stock is
American Securities Transfer, 1825 Lawrence Street, Suite 444, Denver, Colorado
80202.
EXPERTS
The audited financial statements of the Company as of December 31, 1995
and for the year then ended appearing in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995, have been audited by _____________,
independent accountants. The information, as set forth in their reports are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the legality of the securities
offered hereby will be passed upon for the Company by Day Campbell & McGill,
3070 Bristol, Suite 650, Costa Mesa, California 92626. Rowland W. Day II, a
partner in the firm, beneficially owns 1,129,781 shares of Common Stock
(including shares issuable upon exercise of options), the firm itself owns
70,845 shares of Common Stock, and partners in the firm other than Mr. Day own
in the aggregate 41,400 shares of the Company's Common Stock, not including the
shares issuable upon exercise of the previously referenced options. Rowland W.
Day, II, is also acting on an interim basis as co-Chief Executive Officer of the
Company.
10
<PAGE> 13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses payable in connection with the distribution of the securities
being registered (estimated except for the registration fee), all of which will
be borne by the Registrant, are as follows:
<TABLE>
<S> <C>
Registration Fee $ 902
Legal Fees and Expenses $ 10,000
Accounting Fees $ 8,500
Miscellaneous Expenses $ 698
--------
Total $ 20,000
</TABLE>
Item 15. Indemnification of Directors and Officers.
The liability of the Registrant's controlling person, officers or
directors is or may be affected in such capacity by the following:
Section 317 of the California General Corporation Law makes provision
for the indemnification of officers and directors in terms sufficiently broad to
include indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act"). The Amended and Restated Articles of Incorporation of
the Registrant authorize the Registrant to provide indemnification of its
officers, directors and agents for breach of duty to the Registrant and its
shareholders through bylaw provisions or indemnification agreements, or both, in
excess of the indemnification otherwise permitted by California law, subject to
certain limitations.
The Registrant's Bylaws provide for the indemnification of its officers
and directors to the fullest extent permitted by law. In addition, the
Registrant currently maintains directors' and officers' liability insurance and
has entered into indemnification agreements with its directors and certain of
its officers.
In addition, as permitted by Section 2094(a)(10) of the California
General Corporation Law, the Amended and Restated Articles of Incorporation of
the Registrant provide that the liability of a director of the Registrant for
monetary damages shall be eliminated to the fullest extent permissible under
California law. However, as provided by California law, such limitation of
liability will not act to limit the liability of a director for (i) acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) acts or omissions that a director believes to be contrary
to the best interest of the Registrant or its shareholders or that involve the
absence of good faith on the part of the director, (iii) any transaction from
which a director derived an improper personal benefit, (iv) acts or omissions
that show a reckless disregard for the director's duty to the Registrant or its
shareholders in circumstances in which the director was aware or should have
been aware, in the ordinary course of performing a director's duties, of a risk
of serious injury to the Registrant or its shareholders, (v) acts or omissions
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the Registrant or its shareholders, (vi)
any improper transactions between a director and the Registrant in which the
director has a material financial interest or (vii) any unlawful distributions
to the shareholders of the Registrant or any unlawful loan of money or property
to, or a guarantee of the obligation of, any director of officer of the
Registrant.
II-1
<PAGE> 14
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
<S> <C> <C> <C>
4.1* - Articles of Incorporation of the Company
4.2* - Certificate of Amendment to Articles of Incorporation
4.3* - Amended and Restated Bylaws of the Company
5*** - Opinion of Day Campbell & McGill as to the legality of the shares of
Common Stock registered hereunder.
23.1*** - Consent of _______________________, independent accountants.
23.2*** - Consent of Day Campbell & McGill (included in Exhibit Number 5).
</TABLE>
- ------------------------------------
* Filed as an exhibit to the Company's Registration Statement on Form SB-2
dated May 24, 1996 (Registration No.33-92294).
** Filed as an exhibit to Post-effective Amendment No. 3 to the Company's
Registration Statement on Form SB-2 dated August 22, 1996 (Registration
No.33-92294).
*** To be filed by amendment.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
Provided however, that paragraphs (1)(i) and (1)(ii) shall not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of post-effective amendment to
this Registration Statement any of the securities being registered which remain
unsold at the termination of the offering.
(4) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
issuer's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 15
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Ana, State of California, on December 12, 1996.
BIKERS DREAM, INC.
Registrant
By: /s/ Rowland W. Day II
---------------------------
Rowland W. Day II
Co-Chief Executive Officer
By: /s/ Donald J. Duffy
---------------------------
Donald J. Duffy
Co-Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
following capacities on December 12, 1996:
<TABLE>
<S> <C>
/s/ Donald J. Duffy December 12, 1996
- --------------------------------------------
Donald J. Duffy
Co-Chief Executive Officer, Director
(Co-Principal Executive Officer)
/s/ Rowland W. Day II December 12, 1996
- -------------------------------------------
Rowland W. Day II
Co-Chief Executive Officer, Secretary
(Co-Principal Executive Officer) Director
/s/ Owen M. Naccarato December 12, 1996
- ------------------------------------------
Owen M. Naccarato
Corporate Controller and Assistant Secretary
(Principal Financial Officer)
December __, 1996
- ------------------------------------------
Humbert B. Powell, III
Director
</TABLE>
II-4
