SEC Filing - CervoMed

1 FORM 10-Q/A Securities and Exchange Commission Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 1, 2000 ----------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _______________ Commission file number 000-24477 --------------- TITAN MOTORCYCLE COMPANY OF AMERICA (Exact name of registrant as specified in its charter) Nevada 86-0776876 ------ ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2222 West Peoria Avenue, Phoenix, Arizona 85029 - ----------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (602) 861-6977 ------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares of common stock, par value $.001, outstanding as of May 8, 2000: 17,704,458 REASON FOR THE AMENDMENT The Company has restated its earnings per share calculation to account for the beneficial conversion feature associated with the Series B Redeemable Preferred Stock.

2 TITAN MOTORCYCLE CO. OF AMERICA TABLE OF CONTENTS PART I. FINANCIAL INFORMATION - ------------------------------ ITEM 1. Financial Statements Condensed Consolidated Balance Sheets as of April 1, 2000 and January 1, 2000 (Unaudited) Condensed Consolidated Statements of Operations for the thirteen-weeks ended April 1, 2000 (Restated) and April 3, 1999 (Unaudited) Condensed Consolidated Statements of Shareholders' Equity for the years ended January 1, 2000 and January 3, 1999 and the thirteen-weeks ended April 1, 2000 (Unaudited) Condensed Consolidated Statements of Cash Flow for the thirteen-weeks ended April 1, 2000 and April 3, 1999 (Unaudited) Notes to Condensed Consolidated Financial Statements ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. OTHER INFORMATION - --------------------------- ITEM 5. Other Matters ITEM 6. Exhibits and Reports on Form 8-K 2

3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements TITAN MOTORCYCLE CO. OF AMERICA Consolidated Balance Sheets APRIL 1, JANUARY 1, 2000 2000 ---- ---- (UNAUDITED) ASSETS Current assets: Cash $ 1,072,015 $ 33,700 Accounts receivable, net 3,058,666 1,228,311 Accounts receivable - related party 611,250 999,252 Inventories, net 15,280,820 17,451,996 Prepaid expenses 277,121 351,483 ------------ ------------ TOTAL CURRENT ASSETS 20,299,872 20,064,742 Property and equipment, net 1,920,983 2,013,905 Other assets 17,317 17,317 Trademarks 85,018 85,481 ------------ ------------ TOTAL ASSETS $ 22,323,190 $ 22,181,445 ============ ============ LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Bank Overdraft $ 647,761 $ 305,538 Accounts payable 3,745,683 3,891,287 Accrued expenses 2,241,699 2,158,985 Note Payable - line of credit 8,644,350 9,779,731 Current portion of notes payable 1,541,381 627,825 ------------ ------------ TOTAL CURRENT LIABILITIES 16,820,874 16,763,366 Note payable - related party 1,303,399 2,199,980 Mortgage note payable 353,432 370,407 Other long - term liabilities 66,282 76,782 ------------ ------------ TOTAL LIABILITIES 18,543,987 19,410,535 REDEEMABLE PREFERRED STOCK Cumulative preferred stock, 6000 shares outstanding $.001 par value, including accrued dividends 5,068,111 3,536,739 STOCKHOLDERS' DEFICIT Common stock, par value $.001; 100,000,000 shares authorized 17,705 17,162 Additional paid in capital 10,060,029 9,098,252 Unearned compensation (29,659) (31,475) Accumulated deficit (11,336,983) (9,849,768) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY (1,288,908) (765,829) ------------ ------------ TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT $ 22,323,190 $ 22,181,445 ============ ============ The accompanying footnotes are an integral part of these financial statements 3

4 TITAN MOTORCYCLE CO. OF AMERICA Consolidated Statements of Operations (Unaudited) THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED APRIL 1, 2000 APRIL 3, 1999 ------------- ------------- (Restated) Sales, net $ 8,021,820 $ 7,645,565 Cost of goods sold 7,509,267 6,485,346 ------------ ------------ Gross profit 512,553 1,160,219 ------------ ------------ Operating expenses: Selling, general and administrative 1,702,128 1,044,936 Research and development 22,347 84,108 ------------ ------------ Total operating expenses 1,724,475 1,129,044 Income (loss) from operations (1,211,922) 31,175 Other income (expense): Other income (expense) 1,200 8,257 Interest expense (276,493) (199,724) ------------ ------------ Total other income (expense) (275,293) (191,467) ------------ ------------ Income (loss) before income taxes (1,487,215) (160,292) Income taxes - - ------------ ------------ Net loss $ (1,487,215) $ (160,292) Amortization of beneficial conversion feature (restated) $ 500,000 - ------------ ------------ Net loss available to common shareholders (restated) $ (1,987,215) $ (160,292) ============ ============ Income (loss) per common share - basic and diluted (restated) $ (.11) $ (0.01) ============ ============ Weighted average number of common shares and equivalents Basic 17,342,040 16,467,372 Diluted 17,342,040 16,467,372 The accompanying footnotes are an integral part of these financial statements 4

5 TITAN MOTORCYCLE COMPANY OF AMERICA CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) COMMON STOCK ADDITIONAL PAID- ---------------------------------- IN SHARES AMOUNT CAPITAL ----------- ------------ ------- BALANCE, DECEMBER 31, 1997 16,210,666 $ 16,211 $ 6,480,769 Issuance of common stock for cash at $3.00 per share 166,667 167 499,833 Issuance of common stock for advertising services at $4.17 per share 60,000 60 249,940 Issuance of stock options 41,875 Amortization of unearned compensation Net income ----------- ----------- ----------- BALANCE, JANUARY 2, 1999 16,437,333 $ 16,438 $ 7,272,417 Issuance of common stock for cash 700,000 700 1,349,250 at $2.25 per share Issuance of common stock for services 23,647 24 82,976 Issuance of warrants 463,307 Preferred stock dividends (69,698) Amortization of unearned compensation Net loss ----------- ----------- ----------- BALANCE, JANUARY 1, 2000 17,160,980 $ 17,162 $ 9,098,252 Issuance of common stock 543,478 543 749,457 Issuance of warrants 280,000 Preferred dividends (67,680) Amortization of unearned compensation Net loss BALANCE, APRIL 1, 2000 (UNAUDITED) 17,704,458 $ 17,705 $10,060,029 =========== =========== =========== UNEARNED ACCUMULATED COMPENSATION DEFICIT TOTAL ------------ ------- ----- BALANCE, DECEMBER 31, 1997 $ (2,026,965) $ 4,470,015 Issuance of common stock for cash at $3.00 per share 500,000 Issuance of common stock for advertising services at $4.17 per share 250,000 Issuance of stock options (41,875) - Amortization of unearned compensation 3,134 3,134 Net income 237,479 237,479 ------------ ------------ ------------ BALANCE, JANUARY 2, 1999 $ (38,741) $ (1,789,486) $ 5,460,628 Issuance of common stock for cash 1,349,950 at $2.25 per share Issuance of common stock for services 83,000 Issuance of warrants 463,307 Preferred stock dividends (69,698) Amortization of unearned compensation 7,266 7,266 Net loss (8,060,282) (8,060,282) ------------ ------------ ------------ BALANCE, JANUARY 1, 2000 $ (31,475) $ (9,849,768) $ (765,829) Issuance of common stock 750,000 Issuance of warrants 280,000 Preferred dividends (67,680) Amortization of unearned compensation 1,816 1,816 Net loss (1,487,215) (1,487,215) BALANCE, APRIL 1, 2000 (UNAUDITED) $ (29,659) $(11,336,983) $ (1,288,908) ============ ============ ============ The accompanying footnotes are in integral part of these financial statements -5-

6 TITAN MOTORCYCLE CO. OF AMERICA Consolidated Statements of Cash Flows (Unaudited) THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED APRIL 1, 2000 APRIL 3, 1999 ------------- ------------- Cash Flows from Operating Activities: Net loss $(1,487,215) $ (160,292) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 93,395 61,073 Net change in balance sheet accounts Accounts receivable (1,442,357) (1,762,285) Inventories 2,171,176 67,011 Other assets 74,361 (133,517) Accounts payable (154,288) 300,404 Accrued expenses 97,872 403,180 ----------- ----------- Net cash used in operating expenses (647,056) (1,224,426) ----------- ----------- Cash Flows from Investing Activities: Purchase of property and equipment - (174,731) ----------- ----------- Net cash used in investing activities - (174,731) ----------- ----------- Cash Flows from Financing Activities Bank overdraft 342,223 (52,680) Issuance of stock and warrants 2,478,529 649,980 Net (decrease) increase in line of credit (1,135,381) 950,876 ----------- ----------- Net cash provided by financing activities 1,685,371 1,548,176 ----------- ----------- Net increase in cash 1,038,315 149,019 Cash and cash equivalents at beginning of year 33,700 8,398 ----------- ----------- Cash and cash equivalents at end of period $ 1,072,015 $ 157,417 =========== =========== The accompanying notes are an integral part of these financial statements. 6

7 TITAN MOTORCYCLE CO. OF AMERICA Notes to the Consolidated Financial Statements April 1, 2000 and April 3, 1999 NOTE 1 - Condensed Consolidated Financial Statements The accompanying consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at April 1, 2000 and for all periods presented have been made. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's January 1, 2000 audited consolidated financial statements. The results of operations for the period ended April 1, 2000 are not necessarily indicative of the operating results for the full year. NOTE 2-Inventory The composition of inventory as of April 1, 2000 and January 1, 2000 was as follows: 2000 1999 Raw materials and supplies $ 10,906,947 $ 10,607,330 Work-in-process 1,350,309 2,461,800 Finished Goods 3,173,564 4,382,866 ------------ ------------ Total inventories 15,430,820 17,451,996 Reserve for obsolescence (150,000) - ------------ ------------ $ 15,280,820 $ 17,451,996 ============ ============ 7

8 NOTE 3 - Earnings Per Share (Restated) In accordance with the disclosure requirements of Statement of Financial Accounting Standards No. 128, Earnings Per Share, a reconciliation of the numerator and denominator of basic and diluted EPS is provided as follows: Thirteen - Weeks Ended Thirteen - Weeks Ended April 1, 2000 April 3, 1999 -------------------------------------------- ---------------------------------------------- Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount -------------------------------------------- ---------------------------------------------- Restated Restated BASIC EPS Net income (loss) $ 1,487,215 - - $ 160,292 - - Amortization of beneficial conversion feature 500,000 - - - - - ------------ ---------- Net income (loss) available to common shareholders $ (1,987,215) 17,342,040 $ (0.11) $ (160,292) 16,467,372 $ (0.01) EFFECTS OF DILUTIVE SECURITIES Common stock options $ - - $ - $ - - $ - DILUTED EPS Net income (loss) available to common shareholders $ (1,987,215) 17,342,040 $ (0.11) $ (160,292) 16,467,372 $ (0.01) Earnings per share as previously reported in the first quarter has been restated to include the amortization of the preferred stock beneficial conversion feature which had previously been omitted. The effect was to change earnings per share from ($.09) to ($.11). NOTE 4 - Going Concern The accompanying financial statements have been prepared on a going concern basis of accounting which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the first quarter of fiscal 2000, the Company has incurred net losses of $1,487,215 million. For the two years ending January 1, 2000, the Company has incurred a net loss and net income of $8,060,282 and $237,479, respectively. As of April 1, 2000 and January 1, 2000, the Company had cash balances of approximately $1,072,015 and $34,000, respectively and an accumulated deficit of $11,336,983 million as of April 1, 2000. Additionally, as of April 1, 2000, the Company has an outstanding balance on its credit line of $8,644,350 that matures on July 10, 2000. These factors, among other things, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. 8

9 Management is pursuing various options in order to provide necessary financing. Management's plans to resolve near term cash flow issues include the following transactions: - - Negotiating a new $15 million line of credit with additional cash availability; - - A private placement equity financing to provide approximately $3 to $5 million in cash flow, less offering costs; and - - Projected improvement of operating results. Management believes if it can finalize the financing alternatives that it is pursuing together with its projected improvement in operating results for the remainder of fiscal 2000, the Company will generate sufficient resources to ensure uninterrupted performance of its operating obligations as currently structured and anticipated. The Company's continuance as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations in a timely manner, to obtain additional financing as required, and ultimately to attain profitability. There can be no assurance, however, that these sources will be available to the Company on acceptable terms or when necessary. NOTE 5 - Issuance's of Preferred and Common Stock In February 2000, the Company sold 543,478 shares of common stock under three separate private placements to three non-U.S. investors. The Company received $750,000 in proceeds related to these transactions. In March 2000, the Company sold two thousand shares of Series B Convertible Preferred Stock ("Preferred Shares"). Gross proceeds totaled $2 million with net proceeds of approximately $1.8 million. The Preferred Shares are convertible into a maximum of 3,436,000 shares of the Company's common stock. For the first year after issuance, the Preferred Shares are convertible at a fixed conversion price of $1.75 which was less than the stock price at the date of close resulting in a beneficial conversion feature at the issue date. Thereafter, the conversion price is adjusted every six months to the lesser of: - - The prior conversion price, or - - The average market price for the ten days prior to the adjustment date. As of the issue date, the Company allocated $500,000 to the beneficial conversion feature, which was fully amortized at the date of issuance. The preferred stock contains conditions for redemption which are not solely within the control of the issuer. As a result, these shares have been classified as mandatorily redeemable in the accompanying condensed consolidated financial statements. 9

10 Additionally, with the Preferred Shares, the Company issued warrants for the purchase of 250,000 shares of the Company's common stock. The Company also issued warrants for the purchase of 12,500 shares of common stock to a third party as partial compensation for their assistance in placing the Preferred Shares. The exercise price of these warrants is $2.00 per share, with an expiration date of March 9, 2005. The fair value of the warrants at the date of issuance totaled $280,000 and is reflected as an increase to additional paid in capital in the accompanying consolidated financial statements. NOTE 6 Amended and Restated Loan and Security Agreement In April 2000, the Company signed an agreement which extended the line of credit due on April 10, 2000 for an additional three-months. The extension agreement contains certain additional restrictive covenants and fees. In addition, the maximum borrowing amount has been reduced to $9 million with further reductions of $250,000 every two weeks beginning in May, 2000. The borrowing base has also been reduced as defined in the agreement. Although management anticipates it will be able to obtain a new line of credit with another financial institution, there can be no assurance that it will be able to obtain financing on acceptable terms and conditions or when necessary. NOTE 7 Newly Issued Accounting Standards In December 1999 the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101). SAB 101 summarizes application of generally accepted accounting principles related to revenue recognition and establishes certain criteria. SAB 101 is effective for the Company's second quarter in fiscal 2000. Management is currently evaluating the impact of this pronouncement. 10

11 TITAN MOTORCYCLE COMPANY OF AMERICA Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 13 WEEK PERIOD ENDED APRIL 1, 2000, COMPARED WITH 13 WEEK PERIOD ENDED APRIL 3, 1999 OVERALL Net Sales for the thirteen-week period ended April 1, 2000 of $8.0 million were up 5% over the comparable period in 1998. The Company recorded a net loss of $1.5 million, or ($0.11) per share, in 2000 compared with a net loss of $160,292 or ($0.01) per share, for 1999. RESULTS OF OPERATIONS MOTORCYCLE UNIT SHIPMENTS AND NET SALES 2000 1999 INCREASE % CHANGE ---- ---- -------- -------- Motorcycle Units 359 251 108 43% Net Sales (in $ 000's): Motorcycles $ 7,644 $ 7,472 $ 172 2.3% Motorcycle Parts and Accessories $ 378 $ 174 $ 204 117% Total Motorcycles and Parts $ 8,022 $ 7,646 $ 376 4.9% As indicated in the above chart, the Company's business consisted primarily of motorcycle sales. The Company's Clothing and Accessories product line, introduced in late 1997, continues to be well received. The increase in motorcycle shipments is due to several reasons. Chief among them is the successful introduction of the Company's new "Phoenix by Titan" bike. Additionally, the growth in the dealership network continues to be a factor in the growth of shipments. 11

12 GROSS PROFIT 2000 1999 DECREASE % CHANGE ---- ---- -------- -------- Gross Profit (In 000's) $513 $1,160 $547 47% Gross Margin % 6.3% 15.1% 8.8% In the thirteen-weeks ended April 1, 2000, gross profit decreased $513,000 or 47%, as compared to the comparable period in 1999. This decrease in gross profit is due primarily to negative labor and overhead variances as a result of lower production level due to a planned reduction of finished goods inventory. Additionally, margin was reduced due to increased sales of the Company's new, lower priced "Phoenix" line of motorcycles that generate a lower gross margin than the Company's hi-line bikes and the establishment of a $150,000 inventory reserve for obsolescence. The gross profit margin was 6.3% as compared with 15.1% in 1999. Management has plans in place to improve gross margin with volume purchases of components, motorcycle and component design, improved utilization of labor and overhead and the ramp-up of higher margin product for the remainder of fiscal 2000. OPERATING EXPENSES 2000 1999 INCREASE % CHANGE ---- ---- -------- -------- Operating Expenses (In 000's) $1,724 $1,129 $595 52.7% Operating Expense as % of Sales 21.5% 14.8% 6.7% Total operating expense for the thirteen-week period ended April 1, 2000 increased $595,000, or 52.7%, over the comparable period in 1999. This increase was due to a number of causes, including, but not limited to the following principal factors: - - an increase in rental expense to support the expanded manufacturing facility - - an increase in salaries and wages attributed to enhancing both the management and support staff necessary to support anticipated growth. - - an increase in legal and accounting expense; - - an increase in advertising, trade show and promotional activities in order to "roll-out" the Phoenix line of bikes. CONSOLIDATED INCOME TAXES The Company's effective tax rate was 0.0% in both the thirteen-week period ended April 1, 2000 and the comparable period ended April 3, 1999. The Company currently has a federal and state net operating loss carry forward of approximately $8.8 million and $5.9 million, respectively. 12

13 WORKING CAPITAL MANAGEMENT The Company supplies motorcycles to its dealers in one of two ways. First, the dealer can specify the motorcycle completely with customized paint and selected options with a lead-time of 6-8 weeks, sometimes slightly longer during peak season. Alternatively, the dealer can select a completed bike from the Company's available Finished Goods inventory list for immediate shipment or one from the current production schedule that will be available inside the normal lead time window. The Company builds some inventory of finished motorcycles during the winter months that are consumed during the spring/summer peak season. During the rest of the year the Company normally maintains a lower level of finished goods inventory. Motorcycles are typically either floored with major financial institutions by the dealer or are paid for in full prior to shipment by the Company. The Company receives payment for floored bikes within 2 weeks of shipment. During winter months the Company may provide free flooring for qualifying dealers depending on model and stock situation to help smooth shipments and keep higher levels of product available for customers. Parts used to build the bikes are usually available with short lead times, but some parts do require up to ten weeks lead-time. Due to high quality standards and reliability of delivery, the Company sets slightly higher stocking levels to assure the availability of parts to production. The Company has an ongoing program to continue to upgrade its supplier base and to selectively bring additional parts in house for production, reducing required inventory levels as well as part costs. The Company has built a strong network of dealers both domestically and internationally. Collectively, there are approximately 88 dealers currently in place with more being added every month. There are 5 types of dealers in the Company's network; independent dealers, Easyrider stores and franchises, Bikers' Dream franchises, existing Harley Davidson(TM) dealers, and Titan dealerships. To date in 2000, 4 dealers with common ownership (Titan of Los Angeles, Titan of Las Vegas, Titan of Houston and Paragon Custom dba Titan of Phoenix) represented approximately 14% of the Company's sales. Principals in the Company hold majority ownership of these dealerships. As of May 8, 2000, backlog orders stood at approximately $9 million, compared with approximately $1.4 million at the same time in 1999. 13

14 NEWLY ISSUED ACCOUNTING STANDARDS In December 1999 the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101). SAB 101 summarizes application of generally accepted accounting principles related to revenue recognition and establishes certain criteria. SAB 101 is effective for the Company's second quarter in fiscal 2000. Management is currently evaluating the impact of this pronouncement. IMPACT OF YEAR 2000 The Company has not experienced any adverse effects related to the Year 2000 issue. Costs associated with the Company's Year 2000 compliance efforts were immaterial with no additional costs anticipated. LIQUIDITY AND CAPITAL RESOURCES The Company used $647,052 million of cash in operating activities in the thirteen week period ended April 1, 2000 compared with $1,224,426 million in the comparable period in 1999. The decrease in cash used for operating expenses is due primarily to reduction in inventory of approximately $2,200,000 for the thirteen weeks ended April 1, 2000. Capital expenditures totaled $ 0 in the thirteen-week period ending April 1, 2000 compared with $174,731 in the comparable period in 1999. Cash provided through the issuance and sale of common and preferred stock totaled approximately $2,500,000 for the first quarter in fiscal 2000 as compared to approximately $650,000 million for the first quarter 1999. Additionally, the Company had a net reduction in borrowings under its line of credit of $1,135,381 million in the first quarter of fiscal 2000 as compared with a net increase of $950,876 for the same quarter in 1999. A more detailed description of cash flows can be found in the attached financial statements. For the first quarter of fiscal 2000 and fiscal 1999, the Company has incurred net losses of $1,487,215 and $160,292, respectively. For the two years ending January 1, 2000, the Company has incurred a net loss and net income of approximately $8,100,000 and $240,000, respectively. Additionally, as of April 1, 2000, the Company has an outstanding balance on its credit line of $8,644,350 that matures on July 10, 2000. As of April 1, 2000 and January 1, 2000, the Company had cash balances of approximately $1,487,000 and $34,000, respectively and an accumulated deficit of approximately $11,200,000 as of April 1, 2000. These factors, among other things, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. 14

15 Management is pursuing various options in order to provide necessary financing. As discussed in Note 4 to the consolidated financial statements, management's plans to resolve near term cash flow issues include the following transactions: - - Negotiating a new $15 million line of credit with additional cash availability; - - A private placement equity financing to provide approximately $3 to $5 million in cash flow, less offering costs; and - - Projected improvement of operating results. Management believes if it can finalize the financing alternatives that it is pursuing together with its projected improvement in operating results for the remainder of fiscal 2000, the Company will generate sufficient resources to ensure uninterrupted performance of its operating obligations as currently structured and anticipated. The Company's continuance as a growing concern is dependent upon its ability to generate sufficient cash flow to meet its obligations in a timely manner, to obtain additional financing as required, and ultimately to attain profitability. There can be no assurance, however, that these sources will be available to the Company on acceptable terms or when necessary. AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT In April 2000, the Company signed an agreement which extended the line of credit due on April 10, 2000 for an additional three-months. The extension agreement contains certain additional restrictive covenants and fees. In addition, the maximum borrowing amount has been reduced to $9 million with further reductions of $250,000 every two weeks beginning in May, 2000. The borrowing base has also been reduced as defined in the agreement. Although management anticipates it will be able to obtain a new line of credit with another financial institution, there can be no assurance that it will be able to obtain financing on acceptable terms and conditions or when necessary. 15

16 PART II - OTHER INFORMATION ITEM 5. Other Matters The Company obtained an extension from its Series B Preferred Stock shareholders extending the Company's annual shareholders' meeting from June 15, 2000 to August 15, 2000. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description - ----------- ----------- 27 Financial Data Schedule (b) Reports on Form 8-K On March 24, 2000, the Company filed a Form 8-K regarding a Series B Preferred Stock transaction. 16

17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TITAN MOTORCYCLE COMPANY OF AMERICA (Registrant) [Francis Keery] May 15, 2000 - ---------------------------- ------------------ FRANCIS KEERY DATE CHAIRMAN AND CEO [Robert Lobban] May 15, 2000 - --------------------------- ------------------ ROBERT LOBBAN DATE CHIEF FINANCIAL OFFICER 17

18 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - ------ ----------------------- 27.1 Financial Data Schedule

5 3-MOS DEC-31-2000 JAN-02-2000 APR-01-2000 1,072,015 0 3,915,931 (246,015) 15,280,820 22,323,191 2,652,865 (731,882) 22,181,445 16,820,874 2,058,967 5,068,111 0 17,705 (1,308,429) (1,290,724) 8,021,820 8,021,820 7,509,267 9,233,742 (1,200) 246,015 276,413 (1,487,215) 0 (1,487,215) 0 0 0 (1,487,215) (0.11) (0.11)