<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended September 30, 2000
[ ] 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 small business issuer as specified in its charter)
California 33-0140149
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3810 Wacker Drive, Mira Loma, California 91752
(Address of principal executive offices)
(909) 360-2500
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities and Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of September 30, 2000, 8,920,946
shares of the issuer's common stock were outstanding.
Transitional Small Business Disclosure Format
Yes [ ] No [X]
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Bikers Dream, Inc., dba Ultra Motorcycle Company
We have reviewed the accompanying consolidated balance sheet of Bikers Dream,
Inc., dba Ultra Motorcycle Company and subsidiaries as of September 30, 2000,
and the related consolidated statements of operations and cash flows for the
each of the nine month periods ended September 30, 2000 and 1999. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred recurring
losses from operations, its total current liabilities exceed its total current
assets, and its accumulated deficit was $23,018,300 as of September 30, 2000.
This raises substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Bikers Dream, Inc., dba Ultra
Motorcycle Company and subsidiaries as of December 31, 1999, and the related
statements of operation, shareholders' equity and cash flows for the year then
ended (not presented herein); and in our report dated April 4, 2000, we
expressed an unqualified opinion on those financial statements. However, our
report contained an explanatory paragraph that expressed substantial doubt about
the Company's ability to continue as a going concern. We have not performed any
auditing procedures since that date. In our opinion, the information set forth
in the accompanying balance sheet as of December 31, 1999 is fairly stated, in
all material respects, in relation to the balance sheet from which it has been
derived.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
October 19, 2000, except for Note 3 for which the date is November 9, 2000.
2
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Part I. Financial Information
Item 1. Financial Statements
BIKERS DREAM INC., DBA ULTRA MOTORCYCLE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 276,459 $ 1,434,781
Investments 500,000 --
Accounts receivable, net of allowance for doubtful accounts
of $511,305 (unaudited) and $312,376 1,720,329 2,250,939
Other receivables 35,203 54,175
Inventories, net of reserves 3,615,547 4,354,194
Prepaid expenses and other current assets 90,032 240,279
Notes receivable 165,483 --
Net Assets of discontinued operations -- 1,248,088
------------ ------------
Total Current Assets 6,403,053 9,582,456
Furniture and equipment, net 865,232 988,248
Notes receivable, net of unamortized discount 876,701 --
Excess cost over fair value of net assets acquired, net 2,255,642 2,404,907
Debt issuance costs, net 40,444 80,888
Deposits and other assets 122,876 346,413
------------ ------------
Total assets $ 10,563,948 $ 13,402,912
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of notes payable $ 4,530,929 $ 153,881
Current portion of capital lease obligations 53,860 62,584
Accounts payable 937,615 2,685,624
Accrued expenses 1,624,590 1,949,426
Accrued legal and settlement costs 70,000 813,000
Advances on financing agreements - related party -- 309,087
Notes payable - related parties 156,638 600,000
Net current liabilities of discontinued operations 24,273 --
------------ ------------
Total current liabilities 7,397,905 6,573,602
Notes payable, less current portion 42,500 4,564,562
Capital lease obligations, less current portion 103,715 90,324
------------ ------------
Total liabilities 7,544,120 11,228,488
------------ ------------
Shareholders, equity
Series A, convertible preferred stock, no par value $ -- $ --
Aggregate liquidation Preference of $175,000,
30 shares authorized, 0 (unaudited) and 0 shares
Issued and outstanding
Series B, convertible preferred stock, no par value 702,194 702,194
Cumulative dividends, Aggregate liquidation
preference of $702,194, per share: 8,000,000 shares
Authorized, 702,194 (unaudited) and 702,194 shares
issued and Outstanding
Series C, convertible preferred stock, no par value -- --
Cumulative dividends, Aggregate liquidation
preference of $25,000, 300 shares authorized, 0
(unaudited) and 0 shares issued and outstanding
Series D, convertible preferred stock, $0.01 par value -- 18
Cumulative Dividends, aggregate liquidation preference of
$1,780,000, 3,500 shares Authorized 0 (unaudited)
and 1,780 shares issued outstanding
Additional-paid-in-capital, Series D Preferred Stock -- 1,438,526
Common stock, no par value 25,335,964 23,831,804
25,000,000 shares authorized
8,920,946 (unaudited) and 5,725,896
issued and outstanding
Accumulated deficit (23,018,330) (23,798,118)
------------ ------------
Total Shareholders' equity 3,019,828 2,174,424
------------ ------------
Total liabilities and shareholders' equity $ 10,563,948 $ 13,402,912
============ ============
</TABLE>
SEE THE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
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BIKERS DREAM INC., DBA ULTRA MOTORCYCLE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
AND 1999(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 7,037,727 $ 5,798,412 $ 23,252,005 $ 18,108,166
COST OF GOODS SOLD 5,780,108 4,597,733 19,137,964 13,072,714
------------ ------------ ------------ ------------
GROSS PROFIT 1,257,619 1,200,679 4,114,041 5,035,452
------------ ------------ ------------ ------------
EXPENSES
Selling, general and
administrative expenses 841,325 1,326,818 3,275,799 3,856,916
Depreciation and amortization 142,933 138,084 389,147 384,083
------------ ------------ ------------ ------------
Total expenses 984,258 1,464,902 3,664,946 4,240,999
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) FROM
CONTINUING OPERATIONS 273,361 (264,223) 449,095 794,453
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (151,240) (193,662) (530,327) (619,378)
Interest income 29,366 4,145 67,592 28,517
Other income from litigation
and settlements -- -- 622,000 --
Gain sale of technology -- -- 96,000 --
Extinguishment of debt -
related party -- -- 366,000 --
Gain on disposal of furniture
and equipment -- -- 4,087 --
Other expense, net 10,909 1,541 6,757 4,927
------------ ------------ ------------ ------------
Total other income (expense) (110,965) (187,976) 632,109 (585,934)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE DISCONTINUED
OPERATIONS AND PREFERRED STOCK
DIVIDENDS 162,396 (452,199) 1,081,204 208,519
INCOME (LOSS) ON DISCONTINUED
OPERATIONS,
net of provision for
income taxes of $0 (unaudited) 8,239 (233,996) (245,158) (533,093)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE PREFERRED STOCK
DIVIDENDS 170,635 (614,996) 836,046 (324,574)
PREFERRED STOCK DIVIDENDS, net of
forfeited dividends -- (71,107) -- 318,428
------------ ------------ ------------ ------------
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS' $ 170,635 $ (543,889) $ 836,046 $ (643,002)
============ ============ ============ ============
BASIC AND DILUTED EARNINGS (LOSS) PER
SHARE
from continuing operations $ 0.02 $ (0.07) $ 0.13 $ (0.02)
from discontinued operations -- $ (0.05) $ (0.03) $ (.010)
------------ ------------ ------------ ------------
TOTAL BASIC AND DILUTED
EARNINGS (LOSS) PER SHARE $ 0.02 $ (0.12) $ 0.10 $ (0.12)
============ ============ ============ ============
BASIC AND DILUTED WEIGHTED-AVERAGE
SHARES OUTSTANDING 7,925,772 5,147,226 7,925,772 5,162,978
============ ============ ============ ============
</TABLE>
SEE THE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
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BIKERS DREAM INC., DBA ULTRA MOTORCYCLE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
September 30, September 30,
2000 1999
------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations $ 1,081,204 $ 208,519
Adjustments to reconcile net income from continuing
operations to net cash used in operating activities
Gain on sale of furniture and equipment (4,087) --
Depreciation and amortization 389,147 384,083
Accrued interest income (62,367) --
Amortization of loan costs 40,444 120,103
Issuance of stock for services -- 60,000
Extinguishment of debt-related party (366,000) --
Other income from litigation and settlements (622,000) --
Gain on sale of technology (96,000) --
(Increase) decrease in
Accounts receivable 530,610 (353,342)
Other receivables 18,972 (6,835)
Inventories 698,647 (2,171,832)
Prepaid expenses and other current assets 170,247 (93,320)
Deposits and other assets 19,537 (250,991)
(Increase) decrease in
Accounts payable (1,622,130) 1,631,711
Accrued expenses (452,166) 300,832
Accrued legal and settlement costs (101,674) --
----------- -----------
Net cash used in continuing operating activities (377,616) (171,072)
Net cash provided by (used in) discontinued operating
activities (253,183) 203,716
----------- -----------
Net cash provided by (used in) operating activities (630,799) 32,644
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of furniture and equipment (97,368) (323,390)
Cash received on notes payable 14,690 --
Cash received upon sales of
furniture and equipment 16,000 --
Purchase of marketable securities -- (13,045)
----------- -----------
Net cash used in continuing investing activities (66,678) (336,435)
Net cash used in discontinued investing activities -- (207,779)
----------- -----------
Net cash used in investing activities (66,678) (544,214)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable 66,500 --
Payments on notes payable and
capital lease obligations (258,258) (178,782)
Advances on financing agreements -
related parties, net (74,087) (1,126,579)
Payments on notes payable - related parties (195,000) --
Debt issuance costs -- (101,859)
Proceeds from issuance of preferred
stock, net of costs -- 1,367,000
Exercise of warrants -- 159,503
Additional paid-in capital received
from related parties -- 107,656
Payment on subscriptions receivable -- 90,000
----------- -----------
Net cash provided by (used in)
continuing financing activities (460,845) 316,939
Net cash provided by (used in)
discontinued financing activities -- --
----------- -----------
Net cash provided by (used in) financing activities (460,845) 316,939
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,158,322) (194,631)
Cash and cash equivalents, beginning of period 1,434,781 689,679
----------- -----------
Cash and cash equivalents, end of period $ 276,459 $ 495,048
=========== ===========
</TABLE>
SEE THE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
5
<PAGE> 6
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of Bikers Dream,
Inc., d.b.a. Ultra Motorcycle Company and all of its wholly owned subsidiaries,
including the accounts of Ultra Motorcycle Company, Bikers Dream International,
Inc., Bikers Dream Distribution, Inc., Bikers Dream Management Services, and
Bikers Dream Eagle Enterprises, Inc. (collectively, the "Company"). All
significant intercompany accounts and transactions are eliminated in
consolidation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION:
Revenue from the sale of motorcycles is recognized upon shipment to the
customer.
INCOME TAXES:
The Company utilizes Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," which requires the recognition of deferred
tax assets and liabilities 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.
The provision for income taxes represents the tax payable for the period and the
change during the period in deferred tax assets and liabilities.
NET INCOME (LOSS) PER SHARE:
The Company utilizes SFAS No. 128, "Earnings per Share." Basic income (loss) per
share is computed by dividing the net income (loss) by the weighted-average
number of common shares available. Diluted income (loss) per share is computed
similar to basic earnings per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive.
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CASH AND CASH EQUIVALENTS:
For purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with original maturities of three months or less to
be cash equivalents.
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is determined by the
specific identification method for finished motorcycles and work-in-process
inventories and the first-in-first-out (FIFO) method for parts inventories.
Finished goods include capitalized overhead costs, which include primarily
labor.
FURNITURE AND EQUIPMENT:
Furniture and equipment, including capitalized leases, are stated at cost less
accumulated depreciation and amortization. The Company provides for depreciation
and amortization using the straight-line method over the estimated useful lives
or the term of the lease, whichever is less.
CONCENTRATION OF RISK:
The Company is operating in a growing market due to the current nationwide
popularity of custom motorcycles. Its future success is dependent on the
continuation of interest in the recreational motorcycle industry.
CONCENTRATION OF CREDIT RISK:
Other financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of accounts receivable. 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
September 30, 2000, the Company has no significant concentrations of credit
risk.
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 disclosures of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenue and expenses during the reported period.
Actual results could differ from those estimates.
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WARRANTY EXPENSES:
Included in accrued expenses are accrued warranty expenses. Estimated future
warranty obligations related to motorcycles and parts are provided by charges to
operations in the period in which the related revenue from the sales of
motorcycles or parts is recognized.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company measures its financial assets and liabilities in accordance with
generally accepted accounting principles. For certain of the Company's financial
instruments, including cash and cash equivalents, accounts receivable, accounts
payable, and accrued expenses, the carrying amounts approximate fair value due
to their short maturities. The amounts shown for notes payable also approximate
fair value because current interest rates offered to the Company for debt of
similar maturities are substantially the same.
RECLASSIFICATIONS:
Certain amounts included in the 1999 financial statements have been reclassified
to conform to the 2000 presentation.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED:
The excess of the purchase price over the estimated fair value of the assets
acquired has been recorded as excess cost over fair value of net assets
acquired, which is being amortized on a straight-line basis over fifteen years.
When events and circumstances so indicate, all long-term assets, including the
excess cost over fair value of net assets acquired, are assessed for
recoverability based upon cash flow forecasts. As of September 30, 2000 the
Company has not recognized any impairment losses.
DISCONTINUED OPERATIONS:
On January 31, 2000, the Company completed the sale of the assets of its Retail
Division to V-Twin Holdings, Inc. ("V-Twin"), which is a publicly traded company
that is a consolidator of independent motorcycle dealerships. The assets of the
Retail Division included the five Company-owned stores located in California,
Texas, and North Carolina, substantially all of the fixed assets and inventories
at the retail stores, certain intellectual property assets including the trade
name "Bikers Dream," and the domain name "bikers-dream.com." As a result of the
sale, the results of the operations of the Retail Division have been
reclassified as discontinued operations and prior periods have been restated.
3. CONTINGENCIES
In November 2000, the Company became aware of a complaint filed on or about
September 7, 2000 in a civil action styled People of the State of California ex
rel. State
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Air Resources Board v. Ultra Acquisition Corporation, Ultra Acquisition
Corporation dba Ultra Cycles/Bikers Dream, Bikers Dream of Santa Ana, Bikers
Dream of San Diego, Bikers Dream of Sacramento, Herm Rosenman, Hal Collins and
Does 1 through 50, inclusive, in the Superior Court of the State of California,
County of Orange, Case No. OOCC10745. The compliant alleges violations of
California's motor vehicle air pollution control laws committed by defendants in
connection with the sale of motorcycles without required certification by the
California State Air Resources Board ("ARB"). The action seeks to enjoin any
further violations and to recover a penalty. The Company has initiated
discussions with the ARB with the intention of obtaining a prompt resolution of
this matter on terms which will not materially impair the Company's financial
condition. In addition, the Company will tender the defense of this action to
all appropriate insurance carriers. The Company does not have sufficient
information regarding the claims which are the subject of the complaint to
assess the likely outcome of this matter. Accordingly, no assurance can be given
as to the ultimate outcome of this matter.
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 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 under the heading "Certain Trends and Uncertainties" below. These
risks and uncertainties could cause the 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.
GENERAL
From 1990 until 1996, the Company operated primarily as a motorcycle retailer.
Prior to 1997, the Company was attempting to establish a network of franchised
Bikers Dream stores, but suspended such efforts at the end of 1996. In 1997, the
Company established its Motorcycle Manufacturing and Distribution ("Motorcycle")
division by completing the acquisition of the motorcycle and parts manufacturing
assets of Ultra Kustom Cycles. Since the acquisition of the Motorcycle Division,
the Company has devoted a significant
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<PAGE> 10
amount of resources to restructuring and repositioning the Company from a
retailer to a premier motorcycle manufacturer and distributor.
Between 1997 and 1999, the Company operated two divisions: Motorcycle and Retail
Stores (the "Retail Division"). The Retail Division sold motorcycles,
after-market parts and accessories and performed service work on motorcycles at
five Superstores in Santa Ana, Sacramento and San Diego, California, Farmers
Branch, Texas, and Conover, North Carolina, licensed the Company's intellectual
property and use of its business model and operating manuals to approximately 16
independently owned Bikers Dream Superstores, and operated an e-commerce site
for the sale of motorcycle parts, accessories and apparel. On January 31, 2000,
the Company sold to V-Twin Holdings, Inc. ("V-Twin") the assets related to the
operation of the Retail Division. The assets sold included all fixed assets,
inventory and equipment used in the Retail Division, the right to operate the
Retail Division under the assumed name "Bikers Dream", all intellectual property
assets relating to the Retail Division, the right to use the domain name
"bikers-dream.com", all rights under license agreements with independently owned
Bikers Dream Superstores, and rights under real property leases and equipment
leases.
The sale of the Retail Division has enabled the Company to focus on
strengthening its core motorcycle manufacturing business. Since the sale on
January 31, 2000, the Company has been focused on restructuring the Company to
meet the needs of a manufacturer of motorcycles, including the development of a
profitable and stable dealer base, and the resolution of those issues discussed
in Part II, Item 6 of the Company's Annual Report for the fiscal year ended
December 31, 1999 under the caption, "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Outlook and Ability of Company
to Continue as Going Concern." Although no assurances can be given, the Company
expects to expand its market share through the introduction of new highly styled
performance motorcycle models and the addition of dealers in geographic regions
of the country with longer riding seasons. In addition to emphasizing quality
control of its manufactured product, the Company is beginning to develop its
customer service infrastructure and has recently introduced an Ultra motorcycle
owners club and is redesigning its web site "www.ultracycles.com". The club will
provide a forum for Ultra owners to participate in riding events and to exchange
information.
RESULTS OF OPERATIONS
During 1999, the Company conducted its operations through two operating
divisions: Motorcycle and Retail. The Motorcycle division manufactures large
displacement "V" twin powered heavyweight cruiser motorcycles at the Company's
Mira Loma, California facility. Prior to its sale in January 2000, the Retail
Division sold new and used motorcycles, parts and accessories through the
Company's five owned Superstores.
As noted above, in January 2000, the Company sold to V-Twin Holdings, Inc. the
assets related to the operation of the Retail Division. As stated in Note 2 to
the Company's financial statements filed with the Company's Annual Report on
Form 10-KSB for the
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fiscal year ended December 31, 1999, and Note 2 to the financial statements
included in this report, the results of operations of the Retail Division have
been reclassified as discontinued operations and prior periods have been
restated.
COMPARISON OF THE FISCAL QUARTERS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUES. Revenues for the three months ended September 30, 2000 were $7,038,000
as compared to $5,798,000 for the comparable period in 1999, representing an
increase of $1,240,000 or 21%. The Company attributes a large portion of the
increase in revenues to sales of its new "Fat Pounder" model, which was
introduced as a 2000 model in late 1999 and the introduction of its
"Sledgehammer" model in early August, 2000. The number of motorcycles sold
during the three months ended September 30, 2000 decreased to 365, from 404 for
the comparable period in 1999, while the number of dealerships decreased to
approximately 80 at September 30, 2000, from 100 for the comparable period in
1999. As a result, dealer sales productivity (the number of motorcycles sold to
dealers divided by the number of dealers) increased from an average of
approximately 1.3 motorcycles per month for the three months ended September 30,
1999, to an average of approximately 1.4 motorcycles per dealer per month for
the three months ended September 30, 2000.
COST OF GOODS SOLD/GROSS PROFIT. Cost of goods sold for the three months ended
September 30, 2000 was $5,780,000 or 82% of revenues), as compared to $4,598,000
(representing 79% of revenues) for the comparable period a year earlier,
representing an increase of $1,182,000 or 26%. Cost of goods sold include direct
and indirect manufacturing costs, administrative costs to purchase and sell
Ultra Kustom parts, warranty costs, and costs related to the assembly of
motorcycles. The Company attributes the increase of $1,182,000 in cost of goods
sold to higher material and labor costs (including increased payroll taxes and
benefits) related to the increased level of motorcycle sales during the period,
costs of making quality improvements, and sales of models during the period with
higher manufacturing costs than models sold during the same period in 1999.
During the three-month period ended September 30, 2000, warranty expenses
decreased by approximately $380,000 from the expenses incurred in the
three-month period ended September 30, 1999 as a result of a decrease in the
number of claims and the cost per claim. This improvement was partially offset
by charges made for obsolete inventory and shrinkage which were higher than the
period a year ago by approximately $162,000.
As described in the Company's Annual Report on Form 10-KSB for the fiscal year
period ended December 31, 1999, the Company incurred a significant increase in
warranty expense from $842,000 for the fiscal year ended December 31, 1998 to
$1,795,000 for the fiscal year ended December 31, 1999, representing an increase
of $954,000 or approximately 113%. Included in the $1,795,000 figure was an
increase of $247,000 in the fourth quarter of 1999 to increase the contingency
of liabilities on units sold under warranty. During the three month period ended
September 30, 2000, warranty costs declined from $703,000 for the three month
period ended September 30, 1999 to
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$323,000 for the three month period ended September 30, 2000, representing a
decrease of $380,000 or 54%.
Gross profit for the three months ended September 30, 2000 was $1,258,000
(representing 18% of revenues), as compared to $1,201,000 (representing 21% of
revenues) for the three month period ended September 30, 1999. This represents
an increase in gross profit of $57,000 or 5%. Gross profit as a percentage of
revenues (i.e., gross margin) for the three months ended September 30, 2000 was
18% or 3% lower than the 21% gross margin for the three months ended September
30, 1999. The gross margin for the three months ended September 30, 2000 was
adversely impacted by the cost increases discussed above and by sales discounts
given during the current period. The discounts were made to help dealers sell
the 2000 models in their inventory and to replace them with the new 2001 models.
These cost increases were reduced by the March price increase of approximately
7% which became fully implemented in the current fiscal quarter. The March 2000
price increase is discussed in detail under the subheading "Comparison of the
Nine Months ended September 30, 2000 and 1999 -- Cost of Goods Sold, Gross
Profit".
As described in Note 14 in the Financial Statements in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999, the Company
recognized an aggregate of $969,000 of charges to cost of goods sold in
connection with three significant adjustments that were all recorded in the
fourth quarter. The periods attributed to these charges could not be identified
by the Company's management. If these charges recorded in the fourth quarter of
1999 were attributed to the first three quarters of 1999, the gross profit for
these quarters would have been lower than reported in the unaudited interim
financial statements for such periods.
EXPENSES. Selling, general and administrative expenses were $841,000 or 12% of
sales for the three months ended September 30, 2000, as compared to $1,327,000
or 23% of sales, for the three months ended September 30, 1999.
Selling, general, and administrative expenses consist primarily of corporate
operating expenses, professional fees, and salaries. The decrease of $485,000 is
largely attributable to decreased advertising, decreased use of temporary
employees, decreased use of consultants, decreased loan origination fees
(financial audits) and reduced travel and lower administrative salaries.
Depreciation and amortization expense for the three months ended September 30,
2000 totaled $143,000 as compared to $138,000 for the same period in 1999. The
expense recorded in 1999 is $5,000 lower than September 30, 2000 as a result of
disposals of equipment made in fiscal year 1999.
OPERATING INCOME FROM CONTINUING OPERATIONS. As a consequence of the foregoing,
the operating income from continuing operations for the three months ended
September 30, 2000 increased to $273,000 as compared to an operating loss from
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continuing operations of $264,000 for the three months ended September 30, 1999,
an increase in profitability of $538,000.
OTHER INCOME (EXPENSE). For the three months ended September 30, 2000, other
expense totaled $111,000 in comparison with total other expenses of $188,000 for
the three months ended September 30, 1999, a decrease of $77,000. Other expenses
decreased as a result of lower interest payments and increased interest income.
INCOME BEFORE PROVISION FOR INCOME TAXES, DISCONTINUED OPERATIONS, PREFERRED
STOCK DIVIDENDS AND BENEFICIAL CONVERSION. Income before provision for income
taxes, discontinued operations, preferred stock dividends and beneficial
conversion for the three months ended September 30, 2000 was $162,000 and
consists of the operating income from continuing operations of $273,000 and
other expense of $111,000 as previously described above.
INCOME TAXES. The provision for income taxes for the three-month period ended
September 30, 2000 is $0. The Company has fully reserved for the deferred tax
asset related to its net operating loss carry-forwards. 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.
LOSS ON DISCONTINUED OPERATIONS. In accordance with APB No. 30, in order to
record the loss on disposal of its Retail Division for the year ended December
31, 1999, the Company estimated the future operating losses of the Retail
Division for the period up until the sale of the division, which was January 31,
2000. As described in the Company's report on Form 10-QSB for the quarter ended
March 31, 2000, during the quarter ended March 31, 2000, the Company recognized
an adjustment on the provision for losses on discontinued operations in the
amount of $139,000. This adjustment was primarily attributable to an increase of
the reserve balance on accounts receivable at the Retail Division. During the
three-month period ending September 30, 2000 the Company recorded miscellaneous
reductions (related to accrued expenses) to the provision which reduced expenses
by $8,000 for the three-month period ended September 30, 2000. In comparison the
loss on discontinued for the three months ended September 30, 1999 was $234,000.
The total provision for the expense incurred in the discontinued operations is
net of a provision for income taxes of $0.
PREFERRED STOCK DIVIDENDS AND BENEFICIAL CONVERSION FEATURE GRANTED TO SERIES C
PREFERRED STOCKHOLDERS. During the three months ended September 30, 2000, there
were no costs associated with preferred stock dividends or beneficial conversion
features.
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS. For the three months ended
September 30, 2000, the net income available to common stockholders was $171,000
as compared to a net loss of $615,000 for the same period in fiscal 1999. The
increased profitability of $786,000 is the result of an increase in income from
operations and the decrease in other expense as described above.
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COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUES. Revenues for the nine months ended September 30, 2000 were $23,252,000
as compared to $18,108,000 for the comparable period in 1999, representing an
increase of $5,144,0000 or 28.4%.
The number of motorcycles sold during the nine months ended September 30, 2000
increased to 1,239, from 1,169 for the comparable period in 1999, while the
number of dealerships decreased to approximately 80 at September 30, 2000, from
100 for the comparable period in 1999. As a result, dealer sales productivity
(the number of motorcycles sold to dealers divided by the number of dealers)
increased from an average of approximately 1.0 motorcycles per dealer per month
for the nine months ended September 30, 1999, to an average of approximately 1.7
motorcycles per dealer per month for the nine months ended September 30, 2000.
COST OF GOODS SOLD/GROSS PROFIT. Cost of goods sold for the nine months ended
September 30, 2000 was $19,138,000 (representing 82% of revenues), as compared
$13,073,000 (representing 72% of revenues) for the comparable period a year
earlier, representing an increase of $6,065,000 or 46%. Cost of goods sold
includes direct and indirect manufacturing costs administrative costs to
purchase and sell Ultra Kustom parts, warranty costs, and costs related to the
assembly of motorcycles. The Company attributes $5,744,000 of the increase in
cost of goods sold to higher material, labor and freight costs related to
motorcycle production during the period and an increase of $674,000, for charges
made for obsolete inventory and inventory shrinkage, in comparison to those
costs incurred in the nine months ended September 30, 1999. Warranty expense for
the period ending September 30, 2000 was lower than warranty expense incurred
the period ended September 30, 1999 by $353,000 as the costs incurred decreased
on a per claim basis.
Gross profit for the nine months ended September 30, 2000 was $4,114,000
(representing 18% of revenues), as compared to $5,035,000 (representing 28% of
revenues) for the period ended September 30, 1999. This represents a decrease in
gross profit of $921,000 or 18%. The decrease in gross profit as a percentage of
revenues (i.e., gross margin) are attributable to the increase in cost of goods
sold as described above and sales discounts given to dealers as described above
in the discussion of results for the three months ended September 30, 2000.
The decrease in gross profit for the nine month period ended September 30, 2000
also can be attributed to the pricing of the Company's 2000 model year
motorcycles. When the Company designed and determined the cost of manufacture of
its 2000 model year motorcycles, it implemented a price increase that it
believed would maintain the historical rate of gross profit. In February 2000,
the Company reviewed its manufacturing costs and determined that its earlier
cost estimates were lower than the actual costs of manufacture. As a result, the
Company implemented a price increase of approximately 7 percent, effective March
1, 2000, on orders received after March 1, 2000. The Company
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will continue to monitor its production cost and when required, make the
appropriate price increases. In addition, the Company has initiated a material
cost reduction program to reduce manufacturing costs. While the Company believes
that it will be able to return to previous levels of gross profit, no assurances
can be given that gross profit will increase in the future.
As described in Note 14 in the Financial Statements in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999, the Company
recognized an aggregate of $969,000 of charges to cost of goods sold in
connection with three significant adjustments that were all recorded in the
fourth quarter. The periods attributed to these charges could not be identified
by the Company's management. If these charges recorded in the fourth quarter of
1999 were attributed to the first three-quarters of 1999, the gross profit for
these quarters would have been lower than reported in the unaudited interim
financial statements for such periods.
EXPENSES. Selling, general and administrative expenses were $3,276,000 or 14% of
sales for the nine months ended September 30, 2000, as compared to $3,857,000 or
21% of sales, for the nine months ended September 30, 1999.
Selling, general, and administrative expenses consist primarily of corporate
operating expenses, professional fees, and salaries. The decrease of $581,000 is
primarily attributable to a decrease in advertising expenses of approximately
$154,000 resulting from a decrease in media advertisements. As part of the
Company's restructuring, costs were also reduced in controllable areas such as
catalog and literature production (a reduction of approximately $104,000),
travel and entertainment (a reduction of approximately $83,000) and loan
origination fees (a reduction of approximately $60,000 fees charged by potential
lenders to audit the Company financial records). In addition to the reductions
described above, the Company was able to reduce salaries by approximately
$100,000 and all other controllable expenses were reduced by approximately
$80,000 in comparison to the nine-month period ended September 30, 1999.
Depreciation and amortization expense for the nine months ended September 30,
2000 totaled $389,000 as compared to $384,000 for the same period in 1999.
OPERATING INCOME FROM CONTINUING OPERATIONS. As a consequence of the foregoing,
operating income from continuing operations for the nine months ended September
30, 2000 was $449,000 as compared to an operating income from continuing
operations of $794,000 for the nine months ended September 30, 1999.
OTHER INCOME (EXPENSE). For the nine months ended September 30, 2000 other
income totaled $632,000 in comparison with total other expenses of $586,000 for
the nine months ended September 30, 1999 or an increase of $1,218,000. Other
income includes $622,000 under the line item entitled "Other income from
litigation and settlements," of which $613,000 represents a reduction of
liabilities recorded on December 31, 1999 for the negotiated settlement of the
Kinnicutt lawsuit. Other income
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also includes $366,000 under the line item entitled "Extinguishment of debt -
related party," which represents the negotiated reduction of notes payable held
by w3 Holdings (which includes interest that was forgiven). (See also discussion
of settlement under the caption below entitled "General Discussion of Liquidity
and Capital Resources.") In addition to the foregoing, other income also
includes a gain on the sale of technology in the amount of $96,000.
INCOME BEFORE PROVISION FOR INCOME TAXES, DISCONTINUED OPERATIONS, PREFERRED
STOCK DIVIDENDS AND BENEFICIAL CONVERSION. Income before provision for income
taxes, discontinued operations, preferred stock dividends and beneficial
conversion for the nine months ended September 30, 2000 was $1,081,000 and
consists of the operating income from continuing operations of $449,000 and
other income of $632,000.
INCOME TAXES. The provision for income taxes for the nine-month period ended
September 30, 2000 is $0. The Company has fully reserved for the deferred tax
asset related to its net operating loss carry-forwards. 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.
LOSS ON DISCONTINUED OPERATIONS. In accordance with APB No. 30, in order to
record the loss on disposal of its Retail Division for the year ended December
31, 1999, the Company estimated the future operating losses of the Retail
Division for the period up until the sale of the division, which was January 31,
2000. During the first nine months of 2000, it became evident that the provision
as of December 31, 1999 made for the operating loss for the period ended January
31, 2000 was deficient by approximately $245,000. This adjustment to the
operating loss of discontinued operations is primarily attributable to an
increase of the reserve balance for uncollected accounts receivable at the
Retail Division of $190,000 and an adjustment of $63,000 to recognize the write
off of certain assets related to the settlement litigation arising from the
operation of a retail location in Daytona Beach, Florida, and a recovery of
approximately $8,000 on other estimated costs. The operating loss of $245,000
for discontinued operations is net of a provision for income taxes of $0.
PREFERRED STOCK DIVIDENDS AND BENEFICIAL CONVERSION FEATURE GRANTED TO SERIES C
PREFERRED STOCKHOLDERS. During the nine months ended September 30, 2000, there
were no costs associated with preferred stock dividends or beneficial conversion
features. However, during the nine months ended September 30, 1999 costs were
recognized for the Series D preferred stock a beneficial conversion feature,
which totaled $318,000.
NET INCOME/(LOSS) AVAILABLE TO COMMON STOCKHOLDERS. For the nine months ended
September 30, 2000, the net income available to common stockholders was $836,000
as compared to a net loss of $643,000 for the same period in fiscal 1999. The
increased profitability of $1,479,000 is the result of operating income of
$449,000 and
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other income of $632,000 less the loss on discontinued operations of $245,000 as
explained in the preceding discussion.
GENERAL DISCUSSION OF LIQUIDITY AND CAPITAL RESOURCES. The Company finances the
manufacture of its motorcycles from proceeds of sales. Most of the Company's
vendors require payment terms of 30 days or less. Other than for certain
extraordinary liabilities as described below under the caption entitled "Ability
of the Company to Continue as a Going Concern," management believes that the
Company can, at its current level of operations, adequately meet its
liabilities, including liabilities to vendors, by using available internal cash.
In the past, the Company has also looked to outside funding sources to address
its liquidity and working capital needs. These include private equity placements
and secured debt-financing arrangements with lenders.
EXISTING FINANCING ARRANGEMENTS
In April 1998 the Company completed a private placement of Series C Convertible
Preferred Stock, which generated approximately $3.75 million in cash. In June
1998, the Company obtained a three-year senior secured loan in the amount of
$4.5 million from Tandem Capital of Nashville, Tennessee. Tandem subsequently
assigned the loan to FINOVA Mezzanine Capital, Inc. The loan bears interest at
12% per annum and stipulates quarterly interest payments. The FINOVA loan is
secured by a first priority lien on substantially all of the Company's assets.
FINOVA received warrants to purchase a total of 457,500 shares of the Company's
common stock, after giving effect to the Company's 5-for-1 reverse stock split
effective on February 5, 1998. Of these warrants, 87,500 are exercisable at a
price of $5 per share and expire in November 2002. The remaining 370,000
warrants are exercisable at an initial exercise price equal to $4 1/16 payable
in cash or in-kind by debt cancellation and expire in June 2003. The exercise
price of the 370,000 warrants is reset on the first anniversary of the closing
of the loan at the lesser of (i) $4 1/16 or (ii) the average closing bid price
of the Company's Common Stock for the 20 trading days immediately preceding such
anniversary. In addition, under the FINOVA loan agreement, the Company is
obligated to issue to FINOVA on each anniversary of the closing date of the
loan, until the loan is paid in full, a warrant to purchase 200,000 additional
shares of Common Stock at an exercise price equal to the greater of (i) $4.00,
or (ii) 80% of the average closing bid price of the Company's Common Stock for
the 20 days preceding such anniversary date. Each such warrant shall be
exercisable for five years from the date of issue. The proceeds of the FINOVA
loan were used to repay $2.5 million of then-existing long-term debt, with the
remaining $2 million used to expand the Company's motorcycle manufacturing
operations. Since the original closing date, the Company has become obligated to
issue a warrant to purchase 400,000 additional shares of Common Stock in
accordance with the terms of the FINOVA loan agreement as set forth above.
Prior to the quarter ended June 30, 2000, the Company's indebtedness to FINOVA
in the amount of $4,500,000 had been classified as a non-current liability on
the Company's
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consolidated balance sheet. As of June 30, 2000 the FINOVA note is required to
be shown as a current liability.
In May 1998 the Company entered into an agreement with Cana Capital Corporation,
a company owned by Bruce Scott, a former director of the Company, pursuant to
which Cana Capital would provide $1.5 million in floor financing for the
Company's motorcycles. In April 1999 Cana Capital elected to terminate the
flooring agreement. Thereafter, Cana Capital allowed the Company several months
to pay off the balance on the floor financing. In approximately August 1999, a
dispute arose between Cana Capital and the Company as to claims the Company had
against Cana Capital, which offset part of the balance remaining on the floor
financing. Cana Capital subsequently filed suit against the Company in the
Circuit Court for the Fourth Judicial Circuit, Duval County, Florida. The
Company defended the action and cross-complained against Cana Capital to offset
the balance owed on the floor financing, which, according to the Company's
records, was approximately $235,000 as of June 30, 2000. Advances under the Cana
Capital line of credit had an interest of rate of 2% over the prime rate if used
to finance the acquisition of new vehicles, and 5% over the prime rate if used
to finance the acquisition of used vehicles. In July 2000 the Company
successfully reached a settlement agreement with Cana Capital and Mr. Scott
which required payment by the Company to Cana Capital by July 31, 2000. On July
28, 2000, the Company fulfilled its obligations under the settlement agreement.
In exchange for the payment, Cana Capital agreed to provide the Company the
original title to motorcycles financed under the Cana Capital floor line and has
dismissed its suits with prejudice.
In October 1998, the Company obtained a bridge loan in the amount of $300,000
from MD Strategic L.P. ("MD Strategic"), a partnership in which Don Duffy, a
former director of the Company, is a principal. The loan was originally
evidenced by an unsecured note bearing interest at 18% per annum and was due,
together with accrued interest, on the earlier of December 31, 1999 or upon
receipt by the Company of funds from a third-party lender. In January 2000, MD
Strategic assigned the note, on which there was, accrued approximately $82,200
in interest and fees, to W3 Holdings, Inc. ("W3 Holdings"). W3 Holdings extended
the term of the note to March 31, 2000. On July 5, 2000 the Company completed an
agreement on the payment of the debt with W3 Holdings as described below.
In November 1999, the Company obtained a second bridge loan in the amount of
$300,000 from William Whalen, a stockholder of the Company. The loan originally
was evidenced by two promissory notes in the principal amounts of $200,000 and
$100,000 respectively, each bearing interest at a rate of 12% per annum and
maturing on September 30, 2000. In January 2000, the notes were replaced by two
amended and restated promissory notes in the principal amounts of $156,638 and
$150,000, respectively. The amended and restated $156,638 note evidences
$150,000 of the principal amount of the original $200,000 note, $4,338 of
accrued interest on the original $200,000 note and $2,300 of accrued interest on
the original $100,000 note. The amended and restated $150,000 note evidences the
entire principal amount of the original $100,000 note, plus $43,362 of their
original principal amount of the $200,000 note. Both
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the $156,638 and $150,000 amended and restated notes bear interest at a rate of
12% per annum and were scheduled to mature on March 31, 2000. Mr. Whalen
subsequently assigned the amended and restated note in the amount of $150,000 to
W3 Holdings, while continuing to hold the amended and restated note in the
amount of $156,638. In July 2000, the Company reached a settlement of its
obligations owing on the two promissory notes held by w3 Holdings. The combined
sum of principal and interest owing on the notes was approximately $560,000 at
the time the settlement was reached. The Company negotiated a compromise payment
of $195,000 to extinguish all indebtedness on the note. Final payment of the
$195,000 was made on July 20, 2000. Mr. Whalen has agreed in principle to extend
to March 2001 the maturity date of the $156,638 note, on which there was accrued
$12,771 in interest as of September 30, 2000. The Company is continuing to
negotiate with Mr. Whalen to obtain an additional extension of the maturity date
to 2002.
In February 1999 and October 1999, the Company received an aggregate of
$1,665,000 (net of issuance costs) upon the issuance of 2,060 shares of Series D
Convertible Preferred Stock, each share having a stated value of $1,000. (60 out
of the 2,060 shares were issued in payment of placement agent fees, and
therefore the Company did not receive cash for those shares.) As of March 10,
2000, all issued and outstanding shares of Series D Convertible Preferred Stock,
having an aggregate stated value of $2,060,000, plus accrued and unpaid
dividends on such shares, had been converted into a total of 3,728,452 shares of
common Stock. The number of shares of Common Stock issued upon the conversion of
each share of Series D Convertible Preferred Stock was calculated by adding
$1,000 to the amount of accrued and unpaid dividends on such share and dividing
the resulting sum by the conversion price. The conversion price was equal to the
lesser of (i) 110% of the closing bid price of the Common Stock on the last
trading day before the date of issuance of the share of Series D Preferred Stock
being converted, or (ii) 90% of the average of the four lowest closing bid
prices of the Common Stock during the last 22 trading days before the date of
conversion.
CONSOLIDATED STATEMENT OF CASH FLOWS.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Net cash used in operating activities for the nine month period ended September
30, 2000 was $631,000 as compared to net cash provided by operating activities
of $33,000 for the period ended September 30, 1999. Net cash used in operating
activities includes net cash used in continuing operating activities and net
cash used in discontinued operating activities. Discontinued operations consist
of the Retail Division that was sold on January 31, 2000.
Net cash used in continuing operating activities for the nine month period ended
September 30, 2000, was $378,000 as compared, to $171,000 for the comparable
period in 1999, representing a change of approximately $207,000. During the nine
months ended September 30, 2000, the primary use of cash was in the reduction of
trade accounts payable of $1,622,000 and a decrease of accrued expenses of
$452,000, which was partially offset by cash provided by improved collection of
motorcycle receivables as
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accounts receivable decreased $531,000 and utilization of inventory, which
decreased by $699,000.
The net cash used in discontinued operating activities was $253,000 for the
nine-month period ended September 30, 2000. For the same period in 1999, the
discontinued operations used cash totaling $204,000.
Net cash used in investing activities is $67,000 for the nine month period ended
September 30, 2000, as compared to $544,000 net cash used in investing
activities for the same nine month period in 1999. The principal use of cash
during the nine months ended September 30, 2000 was the purchase of a trade show
exhibit booth. The principal use of cash for the period ended September 30, 1999
was the purchase of assets related to the move to the Mira Loma facility and the
implementation of new computer hardware and software that totaled $323,000.
During the nine-month period ended September 30, 1999 $208,000 was used by the
discontinued operations.
Net cash used by financing activities for the nine month period ended June 30,
2000 is $461,000 and consists advances on financing agreements, payments on
notes payable and capital lease obligations of approximately $528,000, after
refinancing the SBA loan of $67,000 related to the Kinnicutt settlement, and
repayments of advances on floor plan financing from Cana Capital of
approximately $74,000.
Net cash provided by financing activities for the nine month period ended June
30, 1999 was approximately $317,000. This sum consisted of primarily the
proceeds from the placement of the Series D Preferred Stock in February 1999 of
approximately $1,367,000. The exercise of Series C Warrants provided cash of
$160,000 during the period. The principle use of cash during the nine-month
period ended September 30, 1999 was the payment made to retire debt on the Cana
Capital floor plan financing which was reported under the line item titled
"Advances on financing agreements-related party" and totaled $1,127,000.
For the nine months ended September 30, 2000, there was a net decrease in cash
and cash equivalents of $1,158,000. The primary use of cash during the nine
month period consisted of approximately $1,622,000 used in the reduction of
trade accounts payable and $461,000 used to make payments on notes payable,
lease obligations and financing agreements. Cash was provided through improved
collection of accounts receivable of $531,000 and use of inventory which
decreased $699,000.
For the nine months ended September 30, 1999 the net decrease in cash and cash
equivalents was approximately $195,000. The major source of cash during the
period was the approximately $1,367,000 in net proceeds from the sale of Series
D preferred stock. Cash of $1,127,000 was used to make payments on the Cana
Capital floor plan financing. The other significant use of cash in the period
was for the relocation of the Company to Mira Loma and the resulting fixed asset
additions, which totaled $323,000.
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OUTLOOK AND ABILITY OF COMPANY TO CONTINUE AS A GOING CONCERN
As described in their independent accountants' report dated April 4, 2000 which
appears in the Company's Annual Report for fiscal 1999 on Form 10-KSB, and in
Note 2 to the Company's financial statements appearing in that annual report,
entitled "Summary of Significant Accounting Policies -- Going Concern and Basis
of Presentation", the Company's independent auditors state that the Company has
incurred recurring losses from operations, and that its total liabilities exceed
its tangible assets as of December 31, 1999.
In Part II, Item 6 of the Company's annual report on Form 10-KSB for the fiscal
year ended December 31, 1999, under the caption entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Outlook and Ability of Company to Continue as a Going Concern," the Company
described several extraordinary liabilities that were of primary concern to the
Company. These included the Company's liability under the promissory notes held
by w3 Holdings and Mr. Whalen, the Company's liability to pay the judgment in
the Kinnicutt lawsuit, as described in Part II, Item 1 of the Company's report
on Form 10-QSB for the quarter ended June 30, 2000, and the Company's obligation
to repay its $4,500,000 loan from FINOVA Capital Corporation when that loan
becomes due in June 2001.
As discussed above, the Company has satisfied the indebtedness owing to w3
Holdings in full. The Company has also settled its lawsuit with Cana Capital
Corporation and Bruce Scott, as discussed above. The Company also has settled
the Kinnicutt litigation as described in Part II, Item 1 of the Company's report
on Form 10-QSB for the quarter ended June 30, 2000.
Finally, as discussed above under the caption "Existing Financing Arrangements,"
Mr. Whalen has agreed in principle to extend to at least March 31, 2001 the
maturity date of the $156,638 note, on which there was accrued $12,771 in
interest as of September 30, 2000. The Company is continuing to negotiate with
Mr. Whalen to obtain an additional extension of the maturity date to 2002.
As a result of the foregoing, as of the date of the filing of this report, the
Company has settled or discharged liabilities of approximately $1,600,000.
Although cash payments made to date of $199,000 together with future payments of
approximately $65,000 to settle these matters have reduced the Company's current
liquidity, management remains confident that it can continue to meet its
obligations to vendors and suppliers through the generation of operating income.
However, no assurances can be given.
The remaining significant liability of the Company is the Company's obligation
to repay its $4,500,000 secured loan from FINOVA Capital Corporation when that
loan matures in June 2001. As noted above, the Company has reclassified this
loan on its consolidated balance sheet as of September 30, 2000 as a current
liability. The Company may not be able to repay the FINOVA loan unless it
obtains an extension, or refinancing on terms
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acceptable to the Company. The ability of the Company to extend or refinance the
FINOVA loan will be affected by, among other factors, the ability of the Company
to sustain profitability by the loan's maturity date. While the Company had net
income of approximately $1,474,000 for the fiscal quarter ended June 30, 2000
and net income of approximately $171,000 for the fiscal quarter ended September
30, 2000, the Company has a prior history of operating losses and accumulated
deficit. See discussion below under the caption entitled, "Certain Trends and
Uncertainties -- The Company may not be able to implement the changes necessary
to sustain profitability in future periods." There can be no assurances that the
Company will be able to sustain profitability in future periods. If the Company
is unable to extend or refinance the FINOVA loan at maturity, whether due to the
Company's inability to sustain profitability or for other reasons, such event
will have a material adverse effect on the Company's financial condition.
The ability of the Company to continue generating a profit is paramount to
resolving its working capital issues and to obtain an extension or refinancing
of the FINOVA loan when that loan matures in June 2001. The Company's ability to
sustain profitability in future periods will depend upon a number of factors,
including the ability of the Company to introduce new products, increase sales,
and maintain a level of production which is responsive to seasonal demands.
Management believes that several steps can be taken to sustain profitability.
These include implementation of better internal controls, reduction of expenses,
improvements in purchasing, cash management, and inventory control. In addition,
the Company plans to increase consumer awareness of its products through
effective advertising and improved customer relations by increasing its dealer
network. However, there can be no assurances that the Company will be able to
successfully implement any of the changes described above, or that the Company
will in fact achieve profitability in future periods.
Any additional equity financing which the Company may obtain in the future may
be dilutive to shareholders, and any additional debt financing may impose
substantial restrictions on the ability of the Company to operate and raise
additional funds.
SEASONALITY
Generally, the Company's Motorcycle division exhibits a moderate level of
seasonality as dealer demand for motorcycles tends to increase in the second and
third quarters as motorcycle sales are greatest in the spring and summer months.
INFLATION
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.
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<PAGE> 23
CERTAIN TRENDS AND UNCERTAINTIES
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is hereby filing cautionary
statements identifying important risk factors that could cause the Company's
actual results to differ materially from those projected in forward-looking
statements of the Company made by or on behalf of the Company.
The Company wishes to caution readers that these factors, among others, could
cause the Company's actual results to differ materially from those expressed in
any projected, estimated or forward-looking statements relating to the Company.
The following factors should be considered in conjunction with any discussion of
operations or results by the Company or its representatives, including any
forward-looking discussion, as well as comments contained in press releases,
presentations to securities analysts or investors, or other communications by
the Company.
In making these statements, the Company is not undertaking to address or update
each factor in future filings or communications regarding the Company's business
or results, and is not undertaking to address how any of these factors may have
caused changes to discussions or information contained in previous filings or
communications. In addition, certain of these matters may have affected the
Company's past results and may affect future results.
THE COMPANY MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT THE CHANGES NECESSARY FOR
THE COMPANY TO REMAIN A GOING CONCERN. Due to the Company's prior history of
operating losses and working capital deficiency, Singer Lewak Greenbaum &
Goldstein LLP, the Company's auditors, have included an explanatory paragraph in
their report to the Company's consolidated financial statements for the year
ended December 31, 1999 that expresses substantial doubt as to the Company's
ability to continue as a going concern. There can be no assurances that the
Company will be able to successfully implement the changes necessary for the
Company to remain a going concern. See "Report of Independent Certified Public
Accountants", dated April 4, 2000, included in the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1999 filed with the
Securities and Exchange Commission on April 14, 2000. See also paragraph below
entitled, "The Company may not be able to implement the changes necessary to
sustain profitability in future periods."
THE COMPANY MAY NOT BE ABLE TO IMPLEMENT THE CHANGES NECESSARY TO SUSTAIN
PROFITABILITY IN FUTURE PERIODS. While the Company had net income of
approximately $1,474,000 for the fiscal quarter ended June 30, 2000 and net
income of approximately $171,000 for the fiscal quarter ended September 30,
2000, the Company has a prior history of operating losses and accumulated
deficits. The Company had a net operating loss of approximately $809,000 for the
fiscal quarter ended March 31, 2000. Prior to that period, the Company had
operating net losses of approximately $6.1 million and $5.7 million for the
fiscal years
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<PAGE> 24
ended December 31, 1999 and 1998, respectively. As of December 31, 1999, the
Company's accumulated deficit was approximately $23,798,000. The Company may not
be able to implement the changes necessary to sustain profitability in future
periods. These changes include implementation of better internal controls,
reduction of expenses, and improvements in purchasing, cash management, and
inventory control. The Company's ability to sustain profitability will also
depend upon other factors, including the ability of the Company to introduce new
products, increase sales and maintain a level of production, which is responsive
to seasonal demands. There can be no assurances that the Company will be able to
successfully implement any of these changes, or that the Company will be able to
sustain profitability in future periods.
THE COMPANY MAY NOT BE ABLE TO REPAY OR REFINANCE ITS EXISTING SECURED TERM LOAN
ON TERMS ACCEPTABLE TO THE COMPANY. The Company's $4.5 million secured term loan
with FINOVA Mezzanine Capital expires in June 2001. See discussion in Part I,
Item 2, of this report, entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations -General Discussion of Liquidity
and Capital Resources." The Company may not be able to repay the FINOVA loan
unless it obtains an extension or refinancing on terms acceptable to the
Company.
The ability of the Company to extend or refinance the FINOVA loan will be
affected by, among other factors, the ability of the Company to sustain
profitability by the loan's maturity date. While the Company had net income of
approximately $1,474,000 for the fiscal quarter ended June 30, 2000 and net
income of approximately $171,000 for the fiscal quarter ended September 30,
2000, the Company has a prior history of operating losses and accumulated
deficits. The Company had a net operating loss of approximately $809,000 for the
fiscal quarter ended March 31, 2000. Prior to that period, the Company had
operating net losses of approximately $6.1 million and $5.7 million for the
fiscal years ended December 31, 1999 and 1998, respectively. As of December 31,
1999, the Company's accumulated deficit was approximately $23,798,000. See
discussion above under the caption entitled, "The Company may not be able to
implement the changes necessary to sustain profitability in future periods."
There can be no assurances that the Company will be able to sustain
profitability in future periods.
If the Company is unable to extend or refinance the FINOVA loan at maturity,
whether due to the Company's inability to sustain profitability or for other
reasons, such event will have a material adverse effect on the Company's
financial condition.
IF THE AMOUNT OF CAPITAL NEEDED TO FUND OPERATIONS EXCEEDS CURRENT ASSETS, THE
COMPANY MAY NOT BE ABLE TO OBTAIN ADDITIONAL EQUITY OR DEBT FINANCING. If the
Company needs to seek additional debt or equity financing in the future, there
is no assurance that sufficient financing will be available or, if available,
that it will be on terms favorable to the Company or its shareholders. Any
additional equity financing may cause substantial dilution to the Company's
existing equity holders. Many factors may cause the amount of
24
<PAGE> 25
capital needed to fund operations to exceed current estimates, including, among
other unanticipated events, the Company's inability to:
- increase quarterly production volume;
- lower per unit production costs;
- control departmental costs; or
- manage inventory effectively.
Additional financing may not be available on terms favorable to the Company, or
at all. If adequate funds are not available or are not available on acceptable
terms, the Company may not be able to take advantage of business opportunities.
In addition, if the Company elects to raise capital by issuing additional shares
of stock, existing stockholders may incur dilution.
THE COMPANY'S COMMON STOCK WAS DELISTED FROM THE NASDAQ SMALL CAP MARKET
EFFECTIVE OCTOBER 18, 2000, WHICH MAY MAKE IT DIFFICULT FOR THE COMPANY'S
SHAREHOLDERS TO BUY, SELL AND OBTAIN PRICING INFORMATION ABOUT THE COMPANY'S
COMMON STOCK. Effective October 18, 2000, the Company's Common Stock was
delisted from The NASDAQ Small Cap Market due to the failure of the Company to
evidence a closing bid price of at least $1.00 per share since April 4, 2000, as
well as the failure of the Company to comply with NASDAQ Marketplace Rule
4310(c)(2)(B)(iii) in that it has failed to demonstrate net income of at least
$500,000 in the latest fiscal year. The Company's Common Stock previously had
been listed on The NASDAQ Small Cap Market since June 1998 under the symbol
"BIKR." The Company's Common Stock is currently trading on the OTC Bulletin
Board under the symbol "BIKR.OB".
The delisting could have an adverse effect on the Company's business prospects.
The NASDAQ market system provides brokers and others with immediate access to
the best bid and asked prices, as well as other information, about the Company's
common stock. With the loss of the designation, shareholders may find it more
difficult to buy, sell and obtain pricing information about our common stock.
The Company also risks no longer qualifying as a "margin security" as defined by
the Federal Reserve Board and becoming subject to the SEC's "penny stock" rules
thereby reducing the attractiveness of the Company's stock as an investment
vehicle and making it more difficult for the investor to purchase and sell the
Company's stock.
THE COMPANY HAS LIMITED EXPERIENCE WITH MANUFACTURING OPERATIONS. The Company
entered the motorcycle manufacturing business in 1997. Previously, the Company's
operations had involved only the operation of retail stores selling new and used
motorcycles and motorcycle parts and accessories. Although the Company has
acquired considerable manufacturing experience since it entered the
25
<PAGE> 26
business in 1997, that experience is more limited than that of other motorcycle
manufacturers which have been in operation for a longer period of time.
THE COMPANY'S PRODUCTS COULD CONTAIN DEFECTS CREATING PRODUCT RECALLS AND
WARRANTY CLAIMS WHICH COULD MATERIALLY ADVERSELY AFFECT THE COMPANY'S FUTURE
SALES AND PROFITABILITY. The Company's products could contain unforeseen
defects. These defects could give rise to product recalls and warranty claims. A
product recall could delay or even halt production until the Company is able to
address the reason for any defects. Recalls may also have a materially negative
effect on the brand image and public perception of the Company's motorcycles.
This could materially adversely affect the Company's future sales. Recalls or
other defects would be costly and could require substantial expenditures.
Unanticipated defects could also result in litigation against the Company. Given
the nature of its products, the Company expects that it will be subject to
potential product liability claims that could, in the absence of sufficient
insurance coverage, have a material adverse impact on the Company. The Company
cannot assure you that it will be able to secure or maintain adequate liability
insurance to cover all product liability claims. Any large product liability
claim could materially adversely affect the Company's ability to market its
motorcycles and could have a material adverse impact on the Company's business,
operating results and financial condition.
THE COMPANY MAY NOT BE ABLE TO MAINTAIN OR INCREASE ITS CURRENT LEVEL OF SALES
IF CHANGES IN POPULAR TRENDS OR ECONOMIC CONDITIONS CAUSE A DECLINE IN MARKET
DEMAND FOR HEAVYWEIGHT CRUISER MOTORCYCLES. The base retail price of one of the
Company's heavyweight cruiser motorcycles ranges from approximately $20,000 to
$25,000. Motorcycles within this price range are luxury goods. Therefore, market
demand for heavyweight cruisers such as those manufactured by the Company may be
particularly susceptible to changes in popular trends and economic conditions.
These economic factors include, among others:
- employment levels;
- business conditions;
- interest rates;
- general level of inflation; and
- taxation rates.
If such changes cause a decline in market demand for heavyweight cruiser
motorcycles, the Company may not be able to maintain or increase its current
level of sales.
THE COMPANY MAY NOT BE ABLE TO MAINTAIN OR INCREASE ITS CURRENT LEVEL OF SALES
IF IT DOES NOT CONTINUE TO EXPAND ITS
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<PAGE> 27
DEALER NETWORK. Motorcycles manufactured by the Company are sold through
approximately 86 independent Ultra Cycles dealers, of which approximately 55 are
currently active as of October 26, 2000.
The Company may not be able to maintain or increase its current level of sales
if it does not continue to expand its dealer network, and there is no assurance
that the Company will be able to do so.
THE COMPANY'S COMPETITIVE POSITION WITHIN ITS NICHE OF THE HEAVYWEIGHT CRUISER
MOTORCYCLE MARKET COULD SUFFER IF EXISTING COMPETITORS EXPAND OPERATIONS OR
OTHER MOTORCYCLE MANUFACTURERS INSTITUTE SIMILAR PRODUCT OFFERINGS. The Company
seeks to avoid direct competition with Harley-Davidson, which has the largest
share of the heavyweight cruiser motorcycle market, by competing within a
specialized niche. The Company's competitive strategy focuses on product
performance and style, pricing and service. For example, the Company offers on
all models, at no additional charge over base prices, customized features like
polished or painted high-performance engines and a four-year, unlimited mileage
warranty where the first six months are provided by a factory service warranty
and thirty-six months are provided by a third party service contract. These
features and benefits all combine to present an image that differentiate the
rider from the Harley-Davidson consumer. The Company's main competitors within
this niche of the heavyweight cruiser motorcycle market are Titan Motorcycles,
Big Dog Motorcycles, Indian and American Iron Horse. In the event that the
Company's existing competitors expand their manufacturing operations, or other
motorcycle manufacturers institute product offerings on terms similar to those
offered by the Company, the Company's competitive position within its niche of
the heavyweight cruiser motorcycle market could suffer.
THE ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK UNDERLYING OPTIONS AND
WARRANTS MAY CAUSE SIGNIFICANT DILUTION OF EXISTING SHAREHOLDERS' INTERESTS. As
of December 31, 1999, 1,347,583 warrants and 1,266,387 options were outstanding,
770,527 of the options were fully vested. During the nine months ended September
30, 2000 the Company issued 200,000 warrants, no options were issued and there
was no change in the number of options that are fully vested. Under the terms of
the agreement governing its $4.5 million term loan from FINOVA Mezzanine
Capital, the Company is obligated to issue to FINOVA on each anniversary of the
closing date of the term loan, until such loan is paid in full, a warrant to
purchase 200,000 additional shares of common stock at an exercise price equal to
the greater of (1) $4.00, or (2) 80% of the average closing bid price of the
common stock for the 20 days preceding such anniversary date. Since June 1998,
the date of the FINOVA loan, the Company became obligated to issue a warrant to
purchase 400,000 additional shares of Common Stock pursuant to the foregoing
provision.
The issuance in June 2000 of 200,000 shares and the issue of 200,000 shares in
June 1999 brings the total warrants issued to FINOVA to 857,500 as of September
30, 2000. The issuance of additional shares of common stock upon exercise of the
warrants and options
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<PAGE> 28
described in this paragraph could result in significant dilution to existing
security holders of the Company.
THE POSSIBLE ISSUANCE OF ADDITIONAL PREFERRED STOCK MAY ADVERSELY AFFECT RIGHTS
OF HOLDERS OF COMMON STOCK AND MAY RENDER MORE DIFFICULT CERTAIN UNSOLICITED
TAKEOVER PROPOSALS WHICH WOULD BE IN THE BEST INTEREST OF SHAREHOLDERS. As of
the date of this report, the Company has 702,194 shares of preferred stock
outstanding. The Articles of Incorporation of the Company permit the Board of
Directors to designate the terms of, and issue, up to 9,297,806 additional
shares of preferred stock without further shareholder approval. The issuance of
additional shares of preferred stock could adversely affect the rights of
holders of common stock by, among other things, establishing preferential
dividends, liquidation rights and voting power. In addition, the issuance of
preferred stock might render more difficult, and therefore discourage, certain
unsolicited takeover proposals which would be in the best interest of
shareholders, such as a tender offer, proxy contest or removal of incumbent
management.
THE COMPANY RELIES HEAVILY ON THIRD PARTY PARTS SUPPLIERS AND ANY SIGNIFICANT
ADVERSE VARIATION IN QUANTITY, QUALITY OR COST WOULD NEGATIVELY AFFECT OUR
OPERATIONS. We operate primarily as an assembler and rely heavily on a number of
major component manufacturers to supply us with almost all of our parts. Any
significant adverse variation in quantity, quality or cost would adversely
affect our volume and cost of production until we could identify alternative
sources of supply.
OUR FAILURE TO COMPLY WITH VARIOUS REGULATORY APPROVALS AND GOVERNMENTAL
REGULATIONS COULD NEGATIVELY IMPACT OUR OPERATIONS. Our motorcycles must comply
with certain governmental approvals and certifications regarding noise,
emissions and safety characteristics. Our failure to comply with these
requirements could prevent us or delay us from selling our products which would
have a significant negative impact on our operations.
OUR QUARTERLY RESULTS MAY FLUCTUATE SIGNIFICANTLY WHICH MAY RESULT IN THE
VOLATILITY OF OUR STOCK PRICE. Our quarterly operating results may fluctuate
significantly as a result of a variety of factors, many of which are outside of
our control. These factors include:
- the amount and timing of orders from dealers;
- disruptions in the supply of key components and parts;
- seasonal variations in the sale of our products; and
- general economic conditions.
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WE ARE SUBJECT TO CONTINGENT LIABILITIES UNDER A DEALER FLOOR PLAN FINANCING
PROGRAM WHICH COULD EXPOSE US TO SIGNIFICANT FINANCIAL OBLIGATIONS.
Approximately 80% of our dealers receive floor plan financing for our products
through several lending institutions. The dealers are the obligors under these
floor plan agreements and are responsible for all principal and interest
payments. However, we are subject to a standard repurchase agreement which
requires us to buy back any of our motorcycles at the wholesale price if the
defaults and the motorcycles are repossessed by the lender. While we have only
had to repurchase less than approximately $175,000 or ten motorcycles since
August of 1997, as of September 30, 2000, total estimated outstanding
obligations of all 80 dealers is estimated to range between $4,600,000 and
$8,300,000. Our profitability would be significantly negatively impacted if we
were forced to repurchase a large number of these motorcycles.
Other important risk factors that could cause the Company's actual results to
differ materially from those expressed or implied by the Company or on behalf of
the Company are discussed elsewhere within this Form 10-QSB and Part I, Item 2
of this report, entitled, "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In November 2000, the Company became aware of a complaint filed on or about
September 7, 2000 in a civil action styled People of the State of California ex
rel. State Air Resources Board v. Ultra Acquisition Corporation, Ultra
Acquisition Corporation dba Ultra Cycles/Bikers Dream, Bikers Dream of Santa
Ana, Bikers Dream of San Diego, Bikers Dream of Sacramento, Herm Rosenman, Hal
Collins and Does 1 through 50, inclusive, in the Superior Court of the State of
California, County of Orange, Case No. OOCC10745. The compliant alleges
violations of California's motor vehicle air pollution control laws committed by
defendants in connection with the sale of motorcycles without required
certification by the California State Air Resources Board ("ARB"). The action
seeks to enjoin any further violations and to recover a penalty. The Company has
initiated discussions with the ARB with the intention of obtaining a prompt
resolution of this matter on terms which will not materially impair the
Company's financial condition. In addition, the Company will tender the defense
of this action to all appropriate insurance carriers. The Company does not have
sufficient information regarding the claims which are the subject of the
complaint to assess the likely outcome of this matter. Accordingly, no assurance
can be given as to the ultimate outcome of this matter.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed or incorporated by reference
as part of this report:
<TABLE>
<S> <C>
2.1 Agreement and Plan of Reorganization dated August 4, 1994
among HDL Communications (now known as Bikers Dream, Inc.),
Biker Dream, Inc. and the stockholders of Bikers Dream,
Inc., as amended by agreements dated November 11, 1994,
February 3, 1995 and February 20, 1995.(1)
2.2 Asset Purchase Agreement dated January 30, 1997 among the
Company, Ultra Acquisition Corporation and Mull Acres
Investments, Inc.(2)
2.3 Asset Purchase Agreement dated January 18, 2000 between
Bikers Dream, Inc. and V-Twin Holdings, Inc.(3)
3.1 Articles of Incorporation, as amended, of Bikers Dream, Inc.
(formerly known as HDL Communications)(1)
3.1.1 Certificate of Amendment of Articles of Incorporation dated
June 21, 1996(4)
3.1.2 Certificate of Correction of Certificate of Amendment of
Articles of Incorporation dated July 25, 1997(5)
3.1.3 Certificate of Ownership of HDL Communications (now known as
Bikers Dream, Inc.)(1)
3.1.4 Certificate of Determination of Series B Convertible
Preferred Stock(5)
3.1.5 Certificate of Determination of Series C Convertible
Preferred Stock(6)
</TABLE>
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<PAGE> 31
<TABLE>
<S> <C>
3.1.6 Certificate of Determination of Series D Convertible
Preferred Stock(7)
3.2 Bylaws, as amended, of Bikers Dream, Inc. (1)
4.1 Form of Certificate of Common Stock of Bikers Dream, Inc.(8)
4.2 Articles of Incorporation of the Company, as amended
(included as Exhibits 3.1, 3.1.1, 3.1.2, 3.1.4, 3.1.5 and
3.1.6)
4.3 By-laws, as amended, of the Company (included as Exhibit
3.2).
4.4 Loan Agreement dated June 22, 1998 between FINOVA Mezzanine
Capital Inc. (formerly known as Sirrom Capital Corporation
d/b/a/ Tandem Capital) and the Company and Ultra Acquisition
Corporation as Borrowers(8).
4.5 First Amendment to Loan Agreement and Loan Documents dated
as of January 31, 2000 between FINOVA Mezzanine Capital Inc.
and the Company and Ultra Motorcycle Company (f/k/a Ultra
Acquisition Corporation) as Borrowers(9).
15 Letter of Singer Lewak Greenbaum & Goldstein LLP regarding
awareness of use of report dated October 19, 2000, except
for Note 3 for which the date is November 9, 2000.
27 Financial Data Schedule
</TABLE>
--------------
(1) Previously filed as an exhibit to the Company's Registration
Statement on Form SB-2 (Registration No. 33-92294) filed with
the Commission on May 31, 1995 and Amendment No. 1 thereto filed
with the Commission on October 16, 1995.
(2) Previously filed as an exhibit to the Company's Form 8-K dated
January 30, 1997 filed with the Commission on February 14, 1997.
(3) Previously filed as an exhibit to the Company's Form 8-K dated
January 18, 2000 filed with the Commission on January 26, 2000.
(4) Previously filed as an exhibit to the Company's Form 10-KSB
report for the fiscal year ended December 31, 1996 filed with
the Commission on April 15, 1997.
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<PAGE> 32
(5) Previously filed as an exhibit to the Company's Form 10-QSB
report for the fiscal quarter ended September 30, 1997 filed
with the Commission on November 14, 1997.
(6) Previously filed as an exhibit to the Company's Form 10-QSB
report for fiscal quarter ended March 31, 1998 filed with the
Commission on May 15, 1998.
(7) Previously filed as an exhibit to the Company's registration
statement on Form S-3 filed with the Commission on February 11,
1999.
(8) Previously filed as an exhibit to the Company's Form 10-KSB
report for the fiscal year ended December 31, 1998 filed with
the Commission on April 15, 1999.
(9) Previously filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the period ended December 31, 1999 filed with
the Commission on April 14, 2000.
(b) Reports on Form 8-K
NONE
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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: November 14, 2000 Bikers Dream, Inc.
By: /s/ Harold L. Collins
------------------------------
Harold L. Collins,
Chief Operating Officer
Principal Executive Officer
By: /s/ Michael J. Fisher
------------------------------
Michael J. Fisher
Chief Financial Officer
33
