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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): April 15, 1997
RYKA Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 0-16611 04-2958132
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
555 South Henderson Road
Suite B
King of Prussia, Pennsylvania 19406
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (610) 337-2200
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ITEM 5. OTHER EVENTS.
As of the date hereof, RYKA Inc. ("RYKA" or the "Company") has not filed
its Form 10-K for the year ended December 31, 1996 as a result of the liquidity
and capital resources issues described below.
On August 15, 1996, the Company entered into a credit facility with a
lender which replaced the Company's prior credit facility. The new credit
facility initially had a term of one year and increased the amount that RYKA
could borrow to $4,500,000 based upon certain advance ratios with interest at
prime plus 0.25%. Concurrently with RYKA, KPR Sports International, Inc.
("KPR"), an affiliated company wholly-owned by Michael Rubin, the Company's
Chief Executive Officer, closed a new credit facility with the same lender.
On November 8, 1996, the bank notified KPR that it was in default of
certain financial covenants, specifically the debt to net worth ratio and
required tangible net worth, and certain provisions relating to financial
information. RYKA was in compliance with its financial covenants and was not in
default of its loan with the lender.
On February 7, 1997, in conjunction with KPR entering into a forbearance
agreement regarding its credit facility, the Company entered into an amendment
to its credit facility that provided for, among other things, a reduction in the
line of credit from $5,000,000 to $3,000,000 and a termination date, as
amended, of April 18, 1997 for the Company's credit facility, the same
termination date as KPR's amended credit facility.
The Company and KPR are currently in negotiations with the lender to extend
their credit facilities. The Company and KPR are also in negotiations with
certain investors to obtain equity financing. In addition, the Company is in the
process of engaging an investment bank to raise additional equity financing.
The Company anticipates that within five days the Company will have
formulated a more defined plan to raise such financing at which time the Company
expects that it will file its Form-K for the year ended December 31, 1996.
If the Company is unable to extend its credit facility or is unable to
obtain alternative financing, there is no assurance that the Company will be
able to continue operations. Further, there is no assurance that the Company
will be able to obtain alternative financing, or, if obtained, such financing
will be on terms satisfactory for the Company. Moreover, given the dependence of
RYKA on certain support provided by KPR including, but not limited to, financial
support, administrative support, warehousing and office rental, KPR's ability to
obtain continued funding or additional funding for its operations could
significantly adversely impact the ability of RYKA to continue in business
independent of KPR.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RYKA INC.
By:/s/ Michael G. Rubin
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Michael G. Rubin
Chairman and Chief Executive Officer
Date: April 15, 1997
