<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB/A
AMENDMENT #1
[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)
<TABLE>
<S> <C>
California 33-0140149
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
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.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BIKERS DREAM, INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
RESTATED
SEPTEMBER 30, DECEMBER 31,
1995 1994
-------- --------
(UNAUDITED)
CURRENT ASSETS
<S> <C> <C>
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 ---
DEPOSITS 49,930 37,219
----------- -----------
$ 2,955,602 $ 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>
RESTATED
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------ -------------
(UNAUDITED)
CURRENT LIABILITIES
<S> <C> <C>
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 (1,541,004) (135,122)
------------ ------------
Total stockholders' equity 1,719,175 313,868
------------- -----------
$ 2,955,602 $ 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
---- ---- ---- ----
RESTATED RESTATED
REVENUES:
<S> <C> <C> <C> <C>
Product sales $ 2,121,538 $ 1,271,860 $ 5,367,804 $ 3,150,150
Financing contracts 97,062 0 97,062 0
----------- ----------- ----------- -----------
Total revenues 2,218,600 1,271,860 5,464,866 3,150,150
COST OF GOODS SOLD 1,560,090 1,002,647 4,064,959 2,359,400
----------- ----------- ----------- -----------
GROSS PROFIT 658,510 269,213 1,399,907 790,750
----------- ----------- ----------- -----------
OTHER (INCOME) AND EXPENSES
Selling, general and administrative
expenses 1,187,005 376,348 2,740,634 795,553
Depreciation and amortization 25,225 7,757 58,864 20,233
Interest (income) expense 18,820 (6,279) 18,667 (152)
Franchise income (63,774) (38,500) (72,274) (53,500)
Other expense (income) 340 -- (3,250) --
----------- ----------- ----------- -----------
1,167,616 339,326 2,742,641 762,134
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (509,106) (70,113) (1,342,734) 28,616
PROVISION (BENEFIT) FOR INCOME TAXES 0 (24,450) 63,151 6,600
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (509,106) $ (45,663) $(1,405,885) $ 22,016
=========== =========== =========== ===========
NET INCOME (LOSS), per common share $ (0.10) $ (0.07) $ (0.32) $ 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
------ ------
RESTATED
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $(1,405,885) $ 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
Decrease in notes payable (167,000) --
----------- -----------
Total adjustments (735,269) (632,393)
----------- -----------
Net cash used in operating activities (2,141,154) (610,377)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchase of fixed assets (509,726) 8,939
----------- -----------
Net cash provided by (used in) investing activities (509,726) 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 2,811,189 741,990
Payments received on note receivable from stockholder 24,616 20,978
Proceeds from issuance of long-term debt 85,348 --
----------- -----------
Net cash provided by financing activities 2,828,067 688,433
----------- -----------
</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
======== ========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITY:
A note payable in the amount of $500,000 was converted to stock at
March 13, 1995.
See the accompanying notes to these financial statements
6
<PAGE> 7
BIKERS DREAM, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - GENERAL
The consolidated, restated 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 restated 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 including the write-off of
$238,266 previously reported as Goodwill relating to the acquisition of a former
franchisee's assets, and the reclassification of revenues related to the
financing of motorcycle sales with third parties from cost of goods sold to
revenue. 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 and 1995 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 - 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 8 - 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 9 - 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 paid in full 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 10 - 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 published its second catalogue in
early 1996 which was a 100 page special edition version for Daytona Bike Week
(March 1-10,1996).
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, six 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 now is authorized to sell franchises in all states and possessions
of the United States as of year end 1995. 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
$340,000, and another franchise from a California franchisee for approximately
$140,000 in the fourth quarter of 1995. The Company has also to refunded the
$15,000 franchise fee plus out-of-pocket expenses of approximately $6,000 to a
non-operating California franchisee in the fourth quarter of 1995. The Company
is also negotiating to settle a dispute with a former California franchise
applicant as to the terms of a proposed franchise, and has settled that
12
<PAGE> 13
dispute in the fourth quarter of 1995.
The Company received notice during the first quarter of 1996
that two franchisees had filed suit for breach of contract. The Company has not
resolved these matters as of March 31, 1996. Another franchisee has signed a
mutual release agreement with the Company, in February 1996, and no longer
continues as a franchisee 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
---- ---- ---- ----
RESTATED RESTATED
<S> <C> <C> <C> <C>
Total Revenue $ 2,218,600 $ 1,271,860 $ 5,464,866 $ 3,150,150
Cost of goods sold 1,560,090 1,002,647 4,064,959 2,359,400
----------- ----------- ----------- -----------
Gross Profit 658,510 269,213 1,399,907 790,750
----------- ----------- ----------- -----------
Other expenses (income)
Selling, general & 1,187,005 376,348 2,740,634 795,553
administrative
Depreciation and 25,225 7,757 58,864 20,233
amortization
Interest (income) 18,820 (6,279) 18,667 (152)
expense
Franchise income (63,774) (38,500) (72,274) (53,500)
Other expense (income) 340 -- (3,250) --
----------- ----------- ----------- -----------
1,167,616 339,326 2,742,641 762,134
----------- ----------- ----------- -----------
Income (Loss) before
provision for income taxes (509,106) (70,113) (1,342,734) 28,616
Provision (Benefit) for income taxes -- (24,450) 63,151 6,600
----------- ----------- ----------- -----------
Net Income (Loss) $ (509,106) $ (45,663) $(1,405,885) $ 22,016
=========== =========== =========== ===========
</TABLE>
COMPARISON OF RESTATED THIRD QUARTER AND RESTATED NINE MONTHS ENDED SEPTEMBER
30, 1995 AND 1994:
14
<PAGE> 15
Total revenues for the third quarter ended September 30, 1995
were $2,218,600, an increase of $946,740 or 74.4% from the third quarter ended
September 30, 1994. The increase in total revenue is due to the opening of the
Company's second and third Superstores in Dallas, Texas and Tampa Bay, Florida
during the quarter and the recognition of the Company's participation in
arranging financing contracts between customers and third party financing
companies relating to the sale of motorcycles.
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-recurrence 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.
Total revenues for the nine months ended September 30, 1995
were $5,464,866, an increase of $2,314,716 or 73.5% 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 29.7% 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 25.6% 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 $1,187,005
for the third quarter ended September 30, 1995 which represents an increase of
$810,657 or 215.4% 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
and 4) the acquisition of a former franchisee's tangible assets in excess of
their fair market value ($238,266), which was expensed during the current
quarter.
Selling, general and administrative expenses were $2,740,634
for the first nine months of 1995, an increase of $1,945,081 or 244.5% 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
$509,106 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 $1,405,885 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 $1.2 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: April 12, 1996 By: /s/ Dennis Campbell
---------------------------------------
Dennis Campbell, President
By: /s/ William R. Gresher
---------------------------------------
William R. Gresher, Vice President and
Chief Financial Officer
19
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