<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the quarterly period ended March 31, 1998.
[ ] 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 (I.R.S. Employer Identification No.)
of incorporation or organization)
3810 Wacker Drive, Mira Loma, California 91752
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (909) 360-2500
Indicate by check mark whether Registrant (1) 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 [ ]
As of March 31, 1998, there were 2,538,844 shares of the Registrant's common
stock outstanding, 3 shares of the Registrant's Series A Preferred Stock
outstanding, 5,751,385 shares of the Registrant's Series B Preferred Stock
outstanding, and 124 shares of the Registrant's Series C Preferred Stock
outstanding.
Transitional Small Business Disclosure Format
Yes [ ] No [X]
<PAGE> 2
Bikers Dream, Inc. hereby amends and restates in its entirety the Form
10-QSB for the fiscal quarter ended March 31, 1998. This amendment and
restatement is the result of a review by the Securities and Exchange
Commission. The purpose of the amendment is to make corrections as described in
footnote 9 (entitled "Restatement of certain transactions as of March 31,
1998") to the financial statements appearing in this report.
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
BIKERS DREAM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
MARCH 31, DECEMBER 31,
1998 1997
(AS RESTATED) (AS RESTATED)
------------- -------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 2,482,077 $ 667,258
Accounts receivable, net 1,034,155 961,270
Inventories 5,037,467 4,454,091
Notes receivable - 16,999
Prepaid expenses and other current assets 460,376 400,069
------------ ------------
Total current assets 9,014,075 6,499,687
Property, equipment and capitalized leases, net 999,726 1,052,195
Goodwill 2,747,389 2,800,054
Deposits and other assets 139,726 203,892
Note receivable, net of current portion - 13,039
------------ ------------
Total assets $ 12,900,916 $ 10,568,867
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 503,094 $ 670,796
Other accrued expenses 1,231,431 1,169,047
Current portion of long-term debt 92,640 89,670
Current portion of notes payable 8,709 8,709
Notes payable to shareholders 24,000 36,000
------------ ------------
Total current liabilities 1,859,874 1,974,222
Deferred rent 62,899 64,910
Notes payable, less current portion 2,575,211 2,581,280
Long-term debt, less current portion 256,263 276,766
------------ ------------
Total liabilities 4,754,247 4,897,178
Shareholders' equity:
Convertible preferred stock, Series A
no par value, aggregate liquidation 472,500 472,500
preference of $525,000, 30 shares
authorized, 3 shares issued and
outstanding at March 31, 1998 and
December 31, 1997
Convertible preferred stock, Series B
no par value, cumulative dividends, 5,751,385 5,751,385
aggregate liquidation preference of
$5,751,385, 8,000,000 shares authorized,
5,751,385 shares issued and
outstanding at March 31, 1998
and December 31, 1997
Convertible preferred stock, Series C
no par value, cumulative dividends, 3,100,000 -
aggregate liquidation preference of
$3,100,000, 300 shares authorized,
124 and 0 shares issued and
outstanding at March 31, 1998
and December 31, 1997
Common stock
25,000,000 shares authorized at 11,199,995 11,199,995
March 31, 1998; 2,538,844 and 2,544,926
issued and outstanding at
March 31, 1998 and December 31, 1997
Accumulated deficit (12,377,208) (11,752,191)
------------ ------------
Total shareholders equity 8,146,672 5,671,689
------------ ------------
Total liabilities and shareholders'
equity $ 12,900,916 $ 10,568,867
============ ============
</TABLE>
See the accompanying notes to these financial statements
2
<PAGE> 4
BIKERS DREAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Quarters Ended March 31, 1998, and 1997
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
1998 1997
(As Restated) (As Restated)
------------- -------------
<S> <C> <C>
REVENUES $4,992,789 $3,179,668
COST OF GOODS SOLD 4,272,424 2,489,427
---------- ----------
GROSS PROFIT 720,365 690,241
EXPENSES
Selling, general and administrative 1,118,646 1,181,731
expenses
Depreciation and amortization 120,435 99,503
---------- ----------
Total expenses 1,239,081 1,281,234
---------- ----------
OPERATING LOSS (518,716) (590,993)
---------- ----------
OTHER EXPENSE
Interest Expense 101,926 109,445
Other expense, net - 9,374
---------- ----------
Total other expense 101,926 118,819
---------- ----------
LOSS BEFORE PROVISION FOR INCOME TAXES (620,642) (709,812)
PROVISION FOR INCOME TAX - -
---------- ----------
NET LOSS BEFORE PREFERRED STOCK DIVIDENDS $(620,642) $ (709,812)
========== ==========
Preferred Stock Dividends (144,565) (30,875)
---------- ----------
NET LOSS AVAILABLE TO COMMON SHAREHOLDER $ (765,207) $(740,687)
========== ==========
BASIC LOSS PER SHARE $ (0.30) $ (0.66)
========== ==========
DILUTED LOSS PER SHARE $ (0.30) $ (0.66)
========== ==========
WEIGHTED-AVERAGE SHARES OUTSTANDING
BASIC 2,538,844 1,121,821
========== ==========
DILUTED 2,538,844 1,121,821
========== ==========
</TABLE>
See the accompanying notes to these financial statements
3
<PAGE> 5
BIKERS DREAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Quarters Ended March 31, 1998, and 1997
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
1998 1997
(As Restated) (As Restated)
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (620,642) $ (709,812)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 120,435 99,503
(Increase) decrease in:
Accounts receivable (72,495) (291,392)
Inventories (583,376) (553,114)
Prepaid expenses and other current
assets 2,937 61,773
Increase (decrease) in:
Accounts payable (38,687) 546,083
Other accrued expenses (71,007) (278,934)
----------- -----------
Net cash used in operating
activities (1,262,835) (1,125,893)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchases of furniture and
equipment (15,693) (110,320)
Increase (decrease) in deferred rent (2,011) 1,776
Purchase of Ultra Kustom Kycles Assets - (1,100,000)
Other 30,960 -
----------- -----------
Net cash provided by (used in)
investing activities 13,256 (1,208,544)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments made on long-term debt and
capitalized leases (21,567) (85,130)
Proceeds from issuance of preferred stock 3,100,000 -
Costs associated with issuance of common stock - 93,504
Proceeds from issuance of convertible notes
payable 800,000 -
Proceeds from issuance of notes payable - 2,210,000
Principal payments made on notes payable (802,035) (33,489)
Payments made on notes payable to shareholders (12,000) (12,000)
----------- -----------
Net cash provided by financing
activities 3,064,398 2,172,885
----------- -----------
Net increase in cash and cash
equivalents 1,814,819 (161,552)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 667,258 247,891
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,482,077 $ 86,339
=========== ===========
</TABLE>
See the accompanying notes to these financial statements
4
<PAGE> 6
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998, and 1997
1. The consolidated financial statements include the accounts of Bikers Dream,
Inc. and all of its wholly-owned subsidiaries, including the accounts of
Ultra Acquisition Corporation, Bikers Dream International, Inc., Bikers
Dream Distribution, Inc., Bikers Dream Management Services, Inc. and Bikers
Dream Eagle Enterprises, Inc. All significant inter-company accounts and
transactions are eliminated in consolidation.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary (consisting only of normal
recurring accruals) to present fairly the financial information contained
therein. These statements do not include all disclosures required by
generally accepted accounting principles and should be read in conjunction
with the audited financial statements of the Company for the year ended
December 31, 1997. The results of operations for the three months ended
March 31, 1998 are not necessarily indicative of the results to be expected
for the year ending December 31, 1998. Net loss per share was computed by
dividing net loss by the weighted average number of common shares
outstanding during the respective quarters.
2. Summary Of Significant Accounting Policies:
Revenue Recognition:
Product Sales - Motorcycle Manufacturing revenue from the sale of
product is recognized at the time of shipment. Retail revenue from the
sale of products is recognized at the time of sale to a retail customer.
Financing Income - Financing income is the Company's commission revenue
resulting from certain motorcycle sales. Such revenue is recognized at
the time finance company or other third-party lender remits payment to
the Company.
Superstore Pre-Opening Costs:
All costs associated with opening a Company-owned and operated
Superstore, with the exception of capitalized furniture, fixtures and
equipment, are expensed when incurred.
Advertising Costs:
Those costs associated with placement of advertisements in various
periodicals are expensed when the advertisement is run. Internal
development costs are expensed as incurred.
Catalog Costs:
Internal costs associated with the development of mail order catalogs
are expensed as incurred. External costs, excluding printing, relating
to the development of the catalog are capitalized and amortized over 12
months from the first publication. Costs associated with printing
catalogs are inventoried when purchased and expensed as catalogs are
sold or distributed.
Continued
5
<PAGE> 7
BIKERS DREAM, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 1998 and 1997
2. Summary Of Significant Accounting Policies, Continued:
Income Taxes:
The Company utilizes Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," which requires the recognition of
deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income taxes are
recognized for the tax consequences in future years of differences
between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
Net Loss Per Common Share:
The computation of fully diluted net loss per share was anti-dilutive in
each of the periods presented; therefore, the amounts reported for basic
and diluted are the same. Net loss per common share was determined by
dividing net loss by the weighted average shares outstanding in each
period. Effective February 5, 1998, the Company effected a 1-for-5
reverse stock split of its common stock. All shares and per share data
have been stated to reflect the stock split.
Cash and Cash Equivalents:
For purposes of the balance sheet and the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with an
original maturity at date of purchase of three months or less to be cash
equivalents.
Accounts Receivable:
At March 31, 1998, the allowance for doubtful accounts was $237,719.
This balance was $53,872 as of March 31, 1997.
Inventories:
Inventories are valued using a cost method which approximates the
first-in, first-out (FIFO) method at the lower of cost or market. The
entire inventory consists of purchased items categorized as finished
goods. At March 31, 1998, the reserve for obsolescence and slow-moving
inventory was $796,776. The reserve at March 31, 1997 was $100,000.
Continued
6
<PAGE> 8
BIKERS DREAM, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 1998 and 1997
2. Summary Of Significant Accounting Policies, Continued:
Property, Equipment and Capitalized Leases:
Property, equipment and capitalized leases are recorded at cost with
depreciation and amortization provided using the straight-line method
over the estimated useful lives of the assets which range from three to
ten years or the term of the lease, whichever is the lesser. Repairs and
maintenance are expensed as incurred. When property and equipment are
retired or disposed of, the related costs and accumulated depreciation
and amortization are eliminated from the accounts and any gain or loss
on such disposition is reflected in operations.
Goodwill:
Goodwill reflects the excess cost over the fair value of the Ultra
Kustom Cycles division motorcycle manufacturing assets acquired in
January, 1997 from Mull Acres Investments, Inc. ("MAI"). Goodwill is
being amortized over 15 years, and for 1998, includes notes receivable
from the former owners, previously classified as a current asset.
Deferred Rent:
Deferred rent arises from rent abatements negotiated at the beginning of
certain property leases. The total amount of the base rent payments is
being charged to expense on the straight-line method over the term of
the lease. The Company has recorded deferred rent to reflect the excess
of rent expense over the cash payments since the inception of the lease.
Concentration of Risk:
The Company is operating in a growing market due to the current
nationwide popularity of cruiser motorcycles. Its future success is
dependent on the continuation of interest in the recreational motorcycle
industry and cruiser motorcycles in particular.
Concentration of Credit Risk:
Other financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables.
These concentrations are limited due to the large number of customers
comprising the Company's customer base and their dispersion across
different geographic regions. The Company performs ongoing credit
evaluations of customers and generally does not require collateral.
Allowances are maintained for potential credit losses, and such losses
have been within management's expectations. As of March 31, 1998 and
1997, the Company has no significant concentrations of credit risk.
Continued
7
<PAGE> 9
BIKERS DREAM, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 1998 and 1997
2. Summary of Significant Accounting Policies, Continued:
Estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenue
and expenses during the reported period. Actual results could differ
from those estimates.
3. Property, Equipment and Capitalized Leases
Property and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated March 31, December 31,
Useful Life 1998 1997
-----------------------------------------------
<S> <C> <C> <C>
Furniture and Fixtures 7 years $ 154,329 $ 153,069
Leasehold improvements 5 - 7 years 257,849 254,825
Equipment 5 years 279,098 269,286
Computer 5 years 223,528 221,931
Autos and trucks 3 - 10 years 581,486 581,486
--------------------------
1,496,290 1,480,597
Less, accumulated depreciation (496,564) (428,402)
and amortization
--------------------------
$ 999,726 $1,052,195
========== ==========
</TABLE>
Assessments of whether there has been a permanent impairment in the
value of long-lived assets are periodically performed by considering
factors such as expected future operating results, trends and prospects,
as well as the effects of demand, competition and other economic
factors. The method used is to determine if an impairment has occurred
based upon a change in circumstances regarding the long lived assets,
followed by an analysis of cash flows regarding the assets in question.
If an impairment is determined to have occurred as a result of the
analysis, then the Company recognizes and measures that impairment using
discounted cash flow as provided by FAS 121.
Continued
8
<PAGE> 10
BIKERS DREAM, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 1998 and 1997
3. Property, Equipment and Capitalized Leases, Continued:
The Company leases certain computer equipment under agreements
classified as capital leases. These leases have original terms of two to
five years. These leases have bargain purchase options at the end of the
original term. Leased capitalized assets included in property, equipment
and capitalized leases at March 31, 1998 is as follows:
<TABLE>
<CAPTION>
March 31,
1998
---------
<S> <C>
Computers $ 91,651
Less, accumulated (49,610)
depreciation
---------
$ 42,041
=========
</TABLE>
4. Series C Preferred Stock
In April 1998, the Company sold, through a private offering 155 Units at
$25,000 per Unit. Each Unit consisted of one share of the Company's
Series C Preferred Stock (the "Preferred C") and 1,250 Series F Common
Stock Purchase Warrants (the " F Warrants") to purchase one share of the
Company's common stock at $5.00 per share. Each share of the Company's
Preferred C is convertible, at the option of the holder, at any time
after the date of issuance (the "Conversion Date"), into shares of the
Company's common stock.
5. Commitments and Contingencies:
Leases
The Company leases all of its operating facilities located in Santa Ana,
California, Sacramento, California, San Diego, California, Riverside,
California, and Dallas, Texas.
Continued
9
<PAGE> 11
BIKERS DREAM, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 1998 and 1997
6. Related Party Transactions:
In February 1998, Meyer Duffy & Associates, through various
partnerships, provided the Company an $800,000 "bridge loan", bearing
interest at 12% per annum, pending completion of the Series C Preferred
Stock offering described in Note 11. Donald Duffy, a principal of Meyer,
Duffy & Associates, is Chairman of the Board of the Company.
7. Subsequent Events
UNIT OFFERING
On April 16, 1998, the Company sold through a private offering 155 Units
at $25,000 per Unit. Each Unit consisted of one share of the Company's
Series C Preferred Stock (the "Preferred C") and 1,250 Series F Common
Stock Purchase Warrants (the "F Warrants") to purchase one share of the
Company's common stock at $5.00 per share for total consideration of
$3,875,000. Each share of the Company's Preferred C is convertible, at
the option of the holder, at any time after the date of issuance (the
"Conversion Date"), into shares of the Company's common stock. The price
at which the shares of Preferred C convert into the Company's common
stock (the "Conversion Price"), is determined by dividing $25,000 by the
greater of: (1) seventy-five percent (75%) of the average closing price
of the Company's common stock for the ten trading days immediately
preceding the Conversion Date, or (2) $2.50, provided, however, that
under no circumstance shall the Conversion Price exceed $4.00. Under
certain circumstances, the Conversion Price is subject to adjustment.
The Preferred C shall be automatically converted into the Company's
common stock in the event the closing price equals or exceeds $8 per
share for any period of twenty (20) consecutive trading days. Each F
Warrant entitles the holder to purchase one (1) share of the Company's
common stock at a purchase price of $5.00 per share.
8. Earnings (Loss) Per Share
<TABLE>
<CAPTION>
March 31,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Net income (loss) $(620,642) $(709,912)
Dividends on preferred shares, net of forfeited dividends (144,565) (30,875)
--------- ---------
Loss available to common shareholders $(765,207) $(740,787)
========= =========
Basic loss per common shareholder $ (0.30) $ (0.66)
========= =========
Diluted loss per common shareholder $ (0.30) $ (0.66)
========= =========
Weighted-average shares outstanding:
Basic 2,538,844 1,121,821
========= =========
Diluted 2,538,844 1,121,821
========= =========
</TABLE>
9. Restatement of Certain Transactions as of March 31, 1998
Goodwill (Excess of Cost Over Fair Market Value)
During the year ended December 31, 1997 the Company entered into a Mutual
Settlement and Release Agreement with Mull Acres and several individuals
affiliated with Mull Acres. Under the terms of the agreement, certain terms of
the Purchase Agreement and Notes Conversion Agreement were clarified and
modified. Some of the terms clarified and modified related to non-competition,
non-solicitation of customers, and non-interference with the Company's
employees by Mull Acres and certain specified individuals affiliated with Mull
Acres. To secure the performance of Mull Acres and the individuals affiliated
with Mull Acres, 730,000 shares of Series B convertible preferred stock were
retained by the Company in escrow.
During the year ended December 31, 1998, the management of the Company and its
legal counsel concluded that the individuals affiliated with Mull Acres
violated the terms of the Mutual Release and Settlement Agreement sufficiently
enough to allow the Company to reacquire the 730,000 shares of Series B
convertible preferred stock that were retained in escrow.
Originally the Company reduced the excess of cost over fair value during the
year ended December 31, 1998. It was later determined once the shares are
placed in escrow, they are no longer outstanding. Accordingly, the Company
restated the financial statements upon the Mutual and Settlement and Release
Agreement to reflect the reduction of goodwill (excess of cost over fair value)
and Series B preferred stock by $730,000. Since goodwill (excess of cost over
fair value) was reduced, the Company also recalculated amortization expense.
The above restatement reduces goodwill (excess of cost over fair value) and
total assets by $709,976, decreases the number of Series B preferred shares
issued and outstanding by 730,000 shares, decreases the amount of Series B
preferred stock outstanding by $730,000 and decreases depreciation and
amortization expense and net loss before preferred stock dividends by $10,198.
Accrued Preferred Dividends
The Series A and B preferred stock accrues dividends at certain stated
rates. Since the series B preferred shareholders were not entitled to
accrued dividends unless the shares were outstanding for a specific time, the
Company did not declare the dividends therefore certain amounts were not
accrued. Although the dividends were not accrued the Company should have
deducted cumulative dividends when calculating net income or loss available to
common shareholders. As of March 31, 1998 and 1997 cumulative undeclared
dividends on Series A and B totaled $405,192 and $91,875, respectively.
The above restatement increased net loss available to common shareholders for
the quarter ended March 31, 1998 by $144,565 for the increase in cumulative
dividends from December 31, 1997 to March 31, 1998.
In addition, the above restatement increased net loss available to common
shareholders for the quarter ended March 31, 1997 by $30,875 for the increase in
cumulative dividends from December 31, 1996 to March 31, 1997.
Continued
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain matters discussed in this Quarterly Report on Form 10-QSB/A are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes,"
"anticipates," "expects," "estimates," or words of similar meaning. Similarly,
references to the Company's future plans, objectives or goals are
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which are described in close proximity to such
statements and which could cause actual results to differ materially from those
anticipated as of the date of this report. Shareholders, potential investors,
and other readers are urged to consider these factors in evaluating the
forward-looking statements, and are cautioned not to rely on such
forward-looking statements. The forward-looking statements included herein are
only made as of the date of this report and the Company undertakes no obligation
to publicly update such forward-looking statements to reflect subsequent events
or circumstances.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1997
The following table sets forth for the period indicated the unaudited income and
expense items.
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
March 31, March 31,
1998 1997
(As restated) (As restated)
-------------- --------------
<S> <C> <C>
Net Revenue 4,992,789 3,179,668
Cost of Goods Sold 4,272,424 2,489,427
Gross Profit 720,365 690,241
Other (Income) and Expenses
Selling, general and 1,118,646 1,181,731
administrative expenses
Depreciation and 120,435 99,503
amortization
Interest (income) expense 101,926 109,445
Other (income) expense - 9,374
---------- ----------
1,341,007 1,400,053
Income (Loss) Before Provision for
Income Tax (620,642) (709,812)
(Provision) for Income Tax - -
---------- ----------
Net Income (Loss) $ (620,642) $ (709,812)
========== ==========
</TABLE>
Continued
11
<PAGE> 13
COMPARISON OF FIRST QUARTER ENDED MARCH 31, 1998 AND 1997:
Net sales for the three months ended March 31, 1998, was $4,992,789, an increase
of $1,813,121 or 57 % from the same period in 1997. The increase in net sales
was primarily attributable to Motorcycle Manufacturing, as units shipments
increased to 220, and higher sales from Retail Stores, which benefited from a
full quarter of the San Diego Superstore, which opened in February 1997.
Gross profit for the three months ended March 31, 1998, was $720,365, an
increase of $30,124 or 4.4% from the same period in 1997. The increase in gross
profit was primarily attributable to increased motorcycle unit shipments and
higher sales from the Retail Stores, which benefited from a full quarter of the
San Diego Superstore, which opened in February 1997. The gross profit margin for
the three months ended March 31, 1998, was 14.4% compared to 21.7% for the three
months ended March 31, 1997. The decrease in gross margin is primarily related
to higher sales from the Motorcycle Manufacturing division which experiences
lower gross margins than the Retail division.
Selling, general and administrative expenses were $1,118,646 for the quarter
ended March 31, 1998, a decrease of $63,085 or 5.3% from the same period in
1997. This decrease is mainly a result of lower corporate administrative
expenses offset by the selling, general and administrative expenses of
Motorcycle Manufacturing and the San Diego Superstore.
Operating losses decreased to $518,716, or 12% for the three months ended March
31, 1998, from the same period in 1997. The decrease in operating losses
resulted from higher gross profit offset by an increase in selling, general, and
administrative expenses.
Depreciation and amortization expense was $120,435 for the quarter ended March
31, 1998, which was $20,932 or 21% higher than the same period in 1997. The
increase is due to the addition of the machinery and equipment acquired through
Ultra Kustom Cycles and Ultra Kustom Parts and the addition of the San Diego
Superstore.
Interest expense declined to $101,926, or 6.9%, for the three months ended March
31, 1998, from the same period in 1997.
Losses before provision for income taxes declined to $620,642, or 12.6%, for the
three months ended March 31, 1998, from the same period in 1997.
There was no provision for income taxes in 1998. The Company has fully reserved
for the deferred tax asset primarily related to its net operating loss
carry-forwards beginning in the second quarter of 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 net loss for the quarter ended March 31, 1998 was $620,642 as compared to a
loss of $709,812 in the same period in 1997. This decrease of $89,170 was mainly
due to a loss in manufacturing operations, offset by the opening the new San
Diego Superstore, and improved profitability in the other retail Superstores.
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.
Continued
12
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company used $1,262,835 of cash in operating activities during the first
three months of 1998, compared to $1,125,893 in the same period in 1997. Net
losses adjusted for depreciation and amortization, used $500,207 of cash in the
first three months of 1998. The Company invested $583,376 in additional
inventory during the first three months of 1998.
The following are forward looking statements: The Company is pursuing a
long-term strategy to significantly increase motorcycle production capacity with
a goal of having the capacity to manufacture in excess of 200 units a month by
the end of 1998 and 400 units a month by the end of 1999. The Company's strategy
includes the establishment of a new manufacturing facility in the next twelve
months. Although the Company does not know the exact range of capital it will
invest to increase its manufacturing capacity and establish a new manufacturing
facility, it estimates the capital required will approximate $5-$8 million. The
Company anticipates funding its production increase with cash on hand,
internally generated funds, and additional equity and or debt offerings.
The Company has relied substantially on equity capital and debt financing to
meet its operating and growth needs. The Company's ability to increase its
manufacturing capacity and establish a new manufacturing facility will depend
upon, among other factors, the Company's ability to raise additional equity
capital and/or debt financing, implement changes to the existing manufacturing
facility, establish a new manufacturing facility, and work with existing and new
suppliers to expand their capacity. However, there can be no assurance that the
Company will be able to raise additional equity capital or debt financing. In
addition, the Company could experience delays in implementing changes to the
existing manufacturing facility and/or establishing a new manufacturing facility
as a result of the risks associated with the establishment and operation of new
manufacturing facility. There is no assurance that the Company will have the
ability to sell all the motorcycles it has the capacity to produce.
13
<PAGE> 15
Part II -- Other Information
Item 1. Legal Proceedings
In April 1998, the Company finalized a settlement agreement with
Harley-Davidson, Inc. ("Harley-Davidson") ending all disputes between
them. Harley-Davidson had brought actions against the Company for
trademark infringement and infringement of "trade dress" issues.
Without admitting or denying any violations of Harley-Davidson's
trademarks, or debating the subject of "trade dress", the Company
agreed to make certain changes to some of the components it uses to
manufacture motorcycles under the Company brand and to pay, together
with its insurers, an amount approximating Harley-Davidson's legal
expenses in the matter.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
4 Certificate of Determination of Bikers Dream, Inc.
27 Financial Data Schedule
14
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: August 17, 1999 BIKERS DREAM, INC.
By: /s/ HERM ROSENMAN
--------------------------------
Herm Rosenman, Chief Executive Officer
By: /s/ ANNE TODD
--------------------------------
Anne Todd, Chief Accounting Officer
15
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
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