Nevada
|
33-1025552
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
|
13134
Route 62
|
||
Salem, Ohio
|
44460
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer
o
|
Accelerated
filer
o
|
Non-accelerated
filer o
(Do not check if a smaller reporting company)
|
Smaller
reporting company
x
|
Item
Number in
Form
10-K
|
Page
|
|||
PART
I
|
||||
1
|
Business
|
3
|
||
1A.
|
Risk
Factors
|
8
|
||
1B.
|
Unresolved
Staff Comments
|
12
|
||
2.
|
Properties
|
12
|
||
3.
|
Legal
Proceedings
|
13
|
||
4.
|
Submission
of Matters to a Vote of Security Holders
|
13
|
||
PART
II
|
||||
5.
|
Market
for Registrant's Common Equity and Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
13
|
||
6.
|
Selected
Financial Data
|
16
|
||
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
16
|
||
7A.
|
Quantitative
and Qualitative Disclosure About Market Risk
|
22
|
||
8.
|
Financial
Statements and Supplementary Data
|
22
|
||
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
22
|
||
9A(T).
|
Controls
and Procedures
|
22
|
||
9B.
|
Other
Information
|
23
|
||
PART
III
|
||||
10.
|
Directors,
Executive Officers and Corporate Governance
|
23
|
||
11.
|
Executive
Compensation
|
24
|
||
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
25
|
||
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
26
|
||
14.
|
Principal
Accountant Fees and Services
|
27
|
||
PART
IV
|
|
|||
15.
|
Exhibits,
Financial Statement Schedules
|
27
|
·
|
$1,250,000
on the date of closing; and
|
·
|
$1,675,000
through the issuance to King’s Motorsports of a 6% $1,675,000 aggregate
principal amount note (the "King's
Note").
|
·
|
American
Honda Motor Company, Inc.;
|
·
|
Yamaha
Motor Corporation;
|
·
|
American
Suzuki Motor Corporation;
|
·
|
Kawasaki
Motors Corp. U.S.A., Inc.;
|
·
|
Ducati
North America; and
|
·
|
Polaris
Industries, Inc.
|
·
|
accounting;
|
·
|
finance;
|
·
|
insurance;
|
·
|
employee
benefits;
|
·
|
strategic
planning;
|
·
|
marketing;
|
·
|
purchasing;
and
|
·
|
management
information systems (MIS).
|
|
·
|
Super Store Concept.
The "Super Store" has proven to be an effective strategy in the successful
consolidation of many other retail industries. Super Stores are the choice
of consumers nationwide. These large stores represent and imply the widest
offerings, the lowest prices, and, we believe, will contribute to the
development of a more mainstream motorsports
marketplace.
|
|
·
|
Sales and Service
Effectiveness. Consumers have become more sophisticated in
evaluating and purchasing products, as a result of the wide-spread
availability of the internet and greater access to information, and, as a
result, require a more comprehensive offering, as well as intelligent and
informative presentations. Our superstore selling space provides a larger
display of products, with a greater choice of brands and styles. We
believe that a greater choice of products, under one roof, will lead to a
more satisfying shopping experience for customers and, in turn, increased
product sales.
|
|
·
|
Competitive Workforce
Development. A significant portion of the compensation we pay to
our sales staff is commission based. We believe that commission-based
compensation provides incentive for our salespersons to expend their
greatest efforts to sell our products and services. Since their
compensation is directly related to sales, our ability to hire successful
salespersons is conditioned upon their belief that our dealerships will
generate significant traffic and provide the inventory levels necessary to
maximize sales opportunities. Our goal to build a “market leader”
presence, proper inventory levels and an overall aggressive yet tactful
approach, we believe, will attract the successful salespersons we need to
sell our products and services.
|
|
·
|
Inventory Utilization.
We believe that by housing our inventory in one large central facility,
and distributing products from that facility to each of our dealerships,
on an as-needed basis, we will be able to deliver products to our
customers faster than other dealerships which are required to wait for
delivery of out-of-stock products.
|
|
·
|
Marketing Efficiencies.
With a regional presence, and the use of single creative themes, tested
for effectiveness, we believe that we will be able to take advantage of
semi-national and possibly national marketing opportunities which
typically offer reduced advertising rates based on the utilization of
economies of scale. We also plan to maximize our use of cooperative
advertising.
|
|
·
|
E-Commerce and Mail Order
Opportunities. We have developed e-commerce and mail order
strategies for the sale of parts and accessories that will expand our
customer base outside of our dealership territories. We believe that the
expansion of our business, over the internet and through mail order
business, will assist us in the development of a national presence and
create customer interest to visit one of our “Super Stores,” although no
assurance can be given that it will have such effect. We believe that
increased efforts on internet and mail-order sales, will increase revenues
and also create additional opportunities for strategic business
relationships with dealerships outside of the territories where our
dealerships are located, although no assurance can be
given.
|
|
·
|
quarterly
variations in our operating
results;
|
|
·
|
large
purchases or sales of common stock;
|
|
·
|
actual
or anticipated announcements of new products or services by us or
competitors;
|
|
·
|
acquisitions
of new dealerships;
|
|
·
|
investor
perception of our business prospects or the motorcycle/power sports
industry in general;
|
|
·
|
general
conditions in the markets in which we compete;
and
|
|
·
|
economic
and financial conditions.
|
LOCATION
|
PRINCIPAL
USES OF SPACE
|
(IN
SQUARE FEET)
|
LEASE
EXPIRATION
|
|||
Salem,
Ohio
|
Offices,
showroom
|
75,000
|
December
2016, and may be extended to December 2026
|
|||
Skokie,
Illinois
|
Offices,
showroom and service facility
|
95,000
|
May
31, 2015 and may be renewed until May 31,
2025
|
BID
|
ASK
|
||||||||||
Quarter
Ended
|
High
|
Low
|
High
|
Low
|
|||||||
3/31/07
|
.16
|
.16
|
.24
|
.24
|
|||||||
6/31/07
|
.30
|
.30
|
.33
|
.33
|
|||||||
9/30/07
|
.25
|
.25
|
.40
|
.40
|
|||||||
12/31/07
|
.28
|
.25
|
.29
|
.29
|
|||||||
3/31/08
|
.28
|
.16
|
.30
|
.18
|
|||||||
6/30/08
|
.18
|
.14
|
.15
|
.10
|
|||||||
9/30/08
|
.19
|
.12
|
.23
|
.17
|
|||||||
12/31/08
|
.10
|
.09
|
.14
|
.07
|
Number of
securities to
be issued upon
exercise
of outstanding
options,
warrants and
rights
|
Weighted
average
exercise price of
outstanding
options,
warrants and
rights
|
Number of
securities
remaining
available for
future issuance
under
equity
compensation
plan (excluding
securities
reflected in
column (a))
|
||||||||||
Plan
Category
|
(a)
|
(b)
|
(c)
|
|||||||||
Equity
compensation plan
approved
by security holders
|
— | — | — | |||||||||
Equity
compensation plan not
approved
by security holders
|
1,500,000 | (1) | $ | 1.25 | 0 |
2008
|
2007
|
Increase (Decrease)
|
% Change
|
|||||||||||||
Total
Revenues
|
$ | 87,547,927 | $ | 98,696,692 | $ | (11,148,765 | ) | -11.2 | % | |||||||
Cost
of Sales
|
$ | 74,979,381 | $ | 84,109,662 | $ | (9,130,281 | ) | -10.8 | % | |||||||
Gross
Profit
|
$ | 12,568,546 | $ | 14,587,030 | $ | (2,018,484 | ) | -13.8 | % | |||||||
Operating
Expenses
|
$ | 12,124,990 | $ | 12,190,626 | $ | (65,636 | ) | -0.5 | % | |||||||
Income
from Operations
|
$ | 443,556 | $ | 2,396,404 | $ | (1,952,848 | ) | -81.5 | % | |||||||
Other
Income and (Expense)
|
$ | (838,082 | ) | $ | (1,098,960 | ) | $ | (260,878 | ) | 23.7 | % | |||||
Income
(Loss) before Provision (Benefit) for Income Taxes
|
$ | (394,526 | ) | $ | 1,297,444 | $ | (1,691,970 | ) | -130.4 | % | ||||||
Net
Income (Loss) before Preferred Dividends
|
$ | 39,174 | $ | 766,444 | $ | (721,270 | ) | -94.8 | % |
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
NAME
|
AGE
|
POSITIONS
HELD AND TENURE
|
||
Russell
A. Haehn
|
61
|
Chairman,
Chief Executive Officer and Director since January 2004
|
||
Gregory
A. Haehn
|
63
|
President,
Chief Operating Officer and Director since January
2004
|
|
·
|
Honest
and ethical conduct, including the ethical handling of actual or perceived
conflicts of interest between personal and professional
relationships;
|
|
·
|
Full,
fair, accurate, timely and understandable disclosure in reports and
documents that are filed with, or submitted to, the SEC and in other
public communications made by an
issuer;
|
|
·
|
Compliance
with applicable governmental laws, rules and
regulations;
|
|
·
|
The
prompt internal reporting of violations of the code to an appropriate
person or persons identified in the code;
and
|
|
·
|
Accountability
for adherence to the code.
|
Name
and Positions
|
Fiscal
Year
|
Salary
($)
|
Bonus
($)
|
Option
Awards ($)
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||||
Russell
A. Haehn,
|
2008
|
$
|
96,425
|
-0-
|
-0-
|
$
|
102,845
|
(1)
|
$
|
199,270
|
|||||
Chairman
and
|
2007
|
$
|
106,000
|
-0-
|
-0-
|
$
|
220,715
|
(1)
|
$
|
326,715
|
|||||
Chief
Executive Officer
|
|||||||||||||||
Gregory
A. Haehn,
|
2008
|
$
|
65,000
|
-0-
|
-0-
|
$
|
19,100
|
(2)
|
$
|
84,100
|
|||||
President
and
|
2007
|
$
|
71,700
|
-0-
|
-0-
|
$
|
21,200
|
(2)
|
$
|
92,900
|
|||||
Chief
Operating Officer
|
(1)
|
Other
compensation payable to Russell Haehn includes amounts payable to Mr.
Haehn directly from manufacturers of certain of the products we sell, as
an incentive to sell these products. The total amounts paid to Mr.
Haehn during the years set forth in the above table were $90,845
in 2008 and $208,715 in 2007. Mr. Haehn also received an automobile
allowance of $12,000 per year in each of those
years.
|
(2)
|
Other
compensation payable to Gregory Haehn reflects an automobile allowance of
$12,000 in each of 2008 and 2007 and an aggregate of $7,100 paid to Mr.
Haehn in 2008 and $9,200 in 2007 directly from manufacturers of certain of
the products we sell, as an incentive to sell these
products.
|
Option
Awards
|
||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
Option
Exercise
Price
|
Option
Expiration
Date
|
||||||
Russell A.
Haehn
|
1,000,000
|
—
|
$
|
1.25
|
8/16/2009
|
|||||
Gregory
A. Haehn
|
500,000
|
—
|
$
|
1.25
|
8/16/2009
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER
MATTERS
|
Name
|
Number of
Shares Owned
Beneficially (1)
|
Approximate
Percent of Class
Owned (1)(2)(3)
|
||||
Russell
A. Haehn (4)(6)
|
5,785,000
|
41.5
|
%
|
|||
Gregory
A. Haehn (5)(6)
|
3,235,000
|
24.1
|
%
|
|||
All
Executive Officers and Directors, as a Group (two persons)
|
9,020,000
|
62.4
|
%
|
(1)
|
Beneficial
ownership information is based on information provided to the Company.
Except as indicated, and subject to community property laws when
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them. Except as otherwise indicated, the address of
such persons is the Company's offices at 13134 State Route 62, Salem, Ohio
44460.
|
(2)
|
The
percentages shown are calculated based upon 12,948,316 shares of common
stock outstanding on April 8, 2009. The numbers and percentages shown
include the shares of common stock actually owned as of April 8, 2009 and
the shares of common stock that the person or group had the right to
acquire within 60 days of April 8, 2009. In calculating the percentage of
ownership, all shares of common stock that the identified person or group
had the right to acquire within 60 days of April 8, 2009 upon the exercise
of options and warrants are deemed to be outstanding for the purpose of
computing the percentage of the shares of common stock owned by such
person or group, but are not deemed to be outstanding for the purpose of
computing the percentage of the shares of common stock owned by any other
person.
|
(3)
|
Notwithstanding
each person or group's beneficial ownership of the Company's common stock,
since the Series A Shares are entitled to vote together with the common
stock on all matters submitted to shareholders for their approval, each
person's or groups percentage voting interest (assuming exercise of all
options) is: Russell A. Haehn - 30.7%; Gregory A. Haehn - 17.6%; and all
executive officers and directors as a group -
46.6%.
|
(4)
|
Includes
a five-year non-qualified stock option, granted to Mr. Russell Haehn on
August 16, 2004, to purchase up to 1,000,000 shares of common stock at an
exercise price of $1.25 per share.
|
(5)
|
Includes
(i) 2,655,000 shares of common stock owned directly by Mr. Haehn and (ii)
80,000 shares of common stock owned by Mr. Haehn's minor children. Does
not include an additional 80,000 shares of common stock owned by two other
of Mr. Haehn's children for which he disclaims any beneficial ownership.
Also includes a five-year non-qualified stock option, granted to Mr.
Gregory Haehn on August 16, 2004, to purchase up to 500,000 shares of
common stock at an exercise price of $1.25 per
share.
|
(6)
|
Russell
Haehn and Gregory Haehn are
brothers.
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
2008
|
2007
|
|||||||
Annual
Audit Fees
|
$ | 70,000 | $ | 60,000 | ||||
Audit-Related
Fees
|
$ | 39,000 | (1) | $ | 55,000 | (1) | ||
Tax
Fees
|
$ | — | $ | — | ||||
Other
Fees
|
$ | — | $ | — | ||||
Total
Fees
|
$ | 109,000 | $ | 115,000 |
(1)
|
Fees
paid for quarterly review of financial
statements.
|
2.1
|
Stock
Purchase and Reorganization Agreement dated as of December 30, 2003
(1).
|
|
2.2
|
Repurchase
Agreement dated December 30, 2003 (1).
|
|
2.3
|
Stock
Purchase Agreement dated as of December 30, 2003 (1).
|
|
2.4
|
Share
Purchase Agreement dated as of December 30, 2003 (1).
|
|
2.5
|
Asset
Purchase Agreement dated April 2004 (Exhibit 2.1) (2).
|
|
3.1
|
Restated
Articles of Incorporation of Giant Motorsports, Inc.
(3).
|
|
3.2
|
Bylaws
of Giant Motorsports, Inc. (4).
|
|
4.1
|
Form
of Warrant for 1,000,000 shares of common stock dated January 20, 2004
(1).
|
|
4.2
|
Form
of Warrant for 100,000 shares of common stock dated April 19, 2004
(5).
|
|
4.3
|
Stock
Option Agreement with Russell A. Haehn (1,000,000 shares) (Exhibit 4.2)
(6).
|
4.4
|
Stock
Option Agreement with Gregory A. Haehn (500,000 shares) (Exhibit 4.3)
(6).
|
|
4.5
|
Certificate
of Designation of Series A Convertible Preferred Stock (Exhibit 99.1)
(7).
|
|
4.6
|
Form
of Investor Warrant (September 2005 Private Placement) (Exhibit 99.2)
(7).
|
|
4.7
|
Form
of Purchase Option (September 2005 Private Placement) (Exhibit 99.3)
(7).
|
|
4.8
|
Registration
Rights Agreement (September 2005 Private Placement (Exhibit 99.4)
(7).
|
|
4.9
|
Specimen
stock certificate for shares of common stock (8).
|
|
4.10
|
Specimen
stock certificate for Series A Shares (8).
|
|
4.11
|
Specimen
Warrant Certificate (9).
|
|
4.12
|
Form
of Warrant Agreement between Olde Monmouth Stock Transfer Co., Inc. and
the Company (9).
|
|
10.1
|
Agency
Agreement between Giant Motorsports, Inc. and HCPF/Brenner Securities LLC
dated September 9, 2005 (7).
|
|
10.2
|
Lease
dated October 1, 2006, effective January 1, 2007, between Russell A.
Haehn d/b/a Marck's Real Estate and W.W. Cycles,
Inc. (10)
|
|
20.1
|
Secured
Promissory Note dated April 2004 in the principal amount of $1,675,000
(2).
|
|
20.2
|
Commercial
Security Agreement dated April 2004
(2).
|
20.3
|
Management
Agreement between King's Motorsports Inc. d/b/a Chicago Cycle and Giant
Motorsports, Inc. dated April 2004 (2).
|
|
21
|
Subsidiaries
(11).
|
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Rule 13a-4(a)) (11).
|
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Rule 13a-14(a)) (11).
|
|
32.1
|
Certificate
of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Rule
13a-14(b)) (11).
|
|
32.2
|
Certificate
of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Rule
13a-14(b)) (11).
|
|
|
GIANT
MOTORSPORTS, INC.
|
||
By:
|
/s/
Russell A. Haehn
|
|
Russell
A. Haehn
Chairman
and Chief Executive Officer
April
10, 2009
|
April
10, 2009
|
/s/
Russell A. Haehn
|
|
Russell
A. Haehn
Chairman
and Chief Executive Officer
(principal
executive officer)
|
||
/s/
Gregory A. Haehn
|
||
April
10, 2009
|
Gregory
A. Haehn
President
and Chief Operating Officer
(principal
financial and accounting
officer)
|
2008
|
2007
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 549,551 | $ | 919,784 | ||||
Accounts
receivable, net
|
3,114,135 | 3,421,107 | ||||||
Inventories
|
16,906,246 | 25,626,033 | ||||||
Deferred
tax assets
|
244,000 | 22,000 | ||||||
Prepaid
expenses
|
32,982 | 28,069 | ||||||
TOTAL
CURRENT ASSETS
|
20,846,914 | 30,016,993 | ||||||
FIXED
ASSETS, NET
|
1,295,743 | 1,666,828 | ||||||
OTHER ASSETS | ||||||||
Intangibles,
net
|
1,688,950 | 1,688,950 | ||||||
Deposits
|
45,600 | 45,600 | ||||||
TOTAL
OTHER ASSETS
|
1,734,550 | 1,734,550 | ||||||
$ | 23,877,207 | $ | 33,418,371 |
2008
|
2007
|
|||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Current
portion of long-term debt
|
$ | 472,639 | $ | 796,510 | ||||
Notes
payable, floor plans
|
15,047,756 | 24,748,401 | ||||||
Notes
payable, officers
|
226,510 | 119,551 | ||||||
Note
payable, shareholder
|
100,000 | - | ||||||
Accounts
payable, trade
|
2,319,670 | 1,055,932 | ||||||
Accrued
expenses
|
464,035 | 583,102 | ||||||
Accrued
income taxes
|
59,000 | 436,200 | ||||||
Customer
deposits
|
487,368 | 834,594 | ||||||
TOTAL
CURRENT LIABILITIES
|
19,176,978 | 28,574,290 | ||||||
DEFERRED
TAX LIABILITIES
|
139,000 | 13,500 | ||||||
LONG-TERM
DEBT, Net of current portion
|
205,712 | 428,488 | ||||||
TOTAL
LIABILITIES
|
19,521,690 | 29,016,278 | ||||||
COMMITMENTS
|
||||||||
STOCKHOLDERS'
EQUITY
|
||||||||
Preferred
stock, $.001 par value, authorized 5,000,000 shares
|
||||||||
5,000
shares designated Series A Convertible, $1,000 stated
|
||||||||
value
2,450 shares issued and outstanding at
|
||||||||
December
31, 2008 and 2007
|
2,450,000 | 2,450,000 | ||||||
Common
stock, $.001 par value, authorized 75,000,000 shares
|
||||||||
12,452,651
and 11,791,747 shares issued and outstanding at
|
||||||||
December
31, 2008 and 2007, respectively
|
12,949 | 12,453 | ||||||
Additional
paid-in capital
|
2,141,942 | 2,053,218 | ||||||
Additional
paid-in capital - Options
|
93,426 | 93,426 | ||||||
Additional
paid-in capital - Warrants
|
1,724,800 | 1,724,800 | ||||||
Additional
paid-in capital - Beneficial conversions
|
1,303,400 | 1,303,400 | ||||||
Issuance
cost on preferred series A convertible
|
(786,762 | ) | (786,762 | ) | ||||
Retained
earnings (deficit)
|
(2,584,238 | ) | (2,448,442 | ) | ||||
TOTAL
STOCKHOLDERS' EQUITY
|
4,355,517 | 4,402,093 | ||||||
$ | 23,877,207 | $ | 33,418,371 |
2008
|
2007
|
|||||||
REVENUES
|
||||||||
Sales
|
$ | 85,261,044 | $ | 95,699,650 | ||||
Finance,
insurance and extended service revenues
|
2,286,883 | 2,997,042 | ||||||
TOTAL
REVENUES
|
87,547,927 | 98,696,692 | ||||||
COST
OF SALES
|
74,979,381 | 84,109,662 | ||||||
GROSS
PROFIT
|
12,568,546 | 14,587,030 | ||||||
OPERATING
EXPENSES
|
||||||||
Selling
expenses
|
7,481,390 | 7,973,104 | ||||||
General
and administrative expenses
|
4,643,600 | 4,217,522 | ||||||
12,124,990 | 12,190,626 | |||||||
INCOME
FROM OPERATIONS
|
443,556 | 2,396,404 | ||||||
OTHER
INCOME AND (EXPENSE)
|
||||||||
Other
income, net
|
152,368 | 193,464 | ||||||
Interest
expense, net
|
(990,450 | ) | (1,272,885 | ) | ||||
Gain
(loss) on sale of assets
|
- | (19,539 | ) | |||||
(838,082 | ) | (1,098,960 | ) | |||||
INCOME
(LOSS) BEFORE PROVISION (BENEFITS) FOR TAXES
|
(394,526 | ) | 1,297,444 | |||||
PROVISION
(BENEFIT) FOR TAXES
|
(433,700 | ) | 531,000 | |||||
INCOME
(LOSS) BEFORE PREFERRED DIVIDENDS
|
39,174 | 766,444 | ||||||
PREFERRED
DIVIDENDS
|
(174,970 | ) | (185,287 | ) | ||||
NET
INCOME (LOSS) ATTRIBUTABLE TO
|
||||||||
COMMON
SHAREHOLDERS
|
$ | (135,796 | ) | $ | 581,157 | |||
BASIC
INCOME (LOSS) PER SHARE
|
$ | (0.01 | ) | $ | 0.05 | |||
DILUTED
INCOME (LOSS) PER SHARE
|
$ | 0.00 | $ | 0.02 | ||||
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
||||||||
BASIC
|
12,866,837 | 12,225,073 | ||||||
DILUTED
|
12,866,837 | 28,904,647 |
Preferred
Stock
|
Common
Stock
|
Paid-in
capital -
|
Paid-in
capital -
|
Paid-in
capital -
|
Issuance
costs
|
Retained
|
||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Paid-in
capital
|
Options
|
Warrants
|
Beneficial
conversion
|
preferred
series A
|
earnings
(Deficit)
|
Total
|
||||||||||||||||||||||||||
Balance,
December 31, 2006
|
2,450 | $ | 2,450,000 | 11,791,747 | $ | 11,792 | $ | 1,868,592 | $ | 93,426 | $ | 1,724,800 | $ | 1,303,400 | $ | (786,762 | ) | $ | (3,029,599 | ) | $ | 3,635,649 | ||||||||||||||
Common
shares dividends issued
|
- | - | 660,904 | 661 | 184,626 | - | - | - | - | (185,287 | ) | - | ||||||||||||||||||||||||
Net
income for the year ended December 31, 2007
|
- | - | - | - | - | - | - | - | - | 766,444 | 766,444 | |||||||||||||||||||||||||
Balance,
December 31, 2007
|
2,450 | 2,450,000 | 12,452,651 | 12,453 | 2,053,218 | 93,426 | 1,724,800 | 1,303,400 | (786,762 | ) | (2,448,442 | ) | 4,402,093 | |||||||||||||||||||||||
Common
shares dividends issued
|
- | - | 495,665 | 496 | 88,724 | - | - | - | - | (174,970 | ) | (85,750 | ) | |||||||||||||||||||||||
Net
income for the year ended December 31, 2008
|
- | - | - | - | - | - | - | - | - | 39,174 | 39,174 | |||||||||||||||||||||||||
Balance,
December 31, 2008
|
2,450 | $ | 2,450,000 | 12,948,316 | $ | 12,949 | $ | 2,141,942 | $ | 93,426 | $ | 1,724,800 | $ | 1,303,400 | $ | (786,762 | ) | $ | (2,584,238 | ) | $ | 4,355,517 |
2008
|
2007
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
income
|
$ | 39,174 | $ | 766,444 | ||||
Adjustments
to reconcile net income to net cash
|
||||||||
provided
by operating activities:
|
||||||||
Depreciation
|
429,687 | 441,481 | ||||||
Provision
for doubtful accounts
|
103,395 | 35,373 | ||||||
Deferred
federal income taxes (credit)
|
(96,500 | ) | 84,800 | |||||
(Gain)
on sale of fixed assets
|
- | (184 | ) | |||||
Loss
on disposal of fixed assets
|
- | 19,723 | ||||||
Decrease
in accounts receivable, net
|
203,577 | 347,238 | ||||||
(Increase)
in inventories
|
8,719,787 | (4,358,898 | ) | |||||
(Increase)
decrease in prepaid expenses
|
(4,913 | ) | (17,938 | ) | ||||
Increase
in customer deposits
|
(347,226 | ) | 638,348 | |||||
Increase in floor plan liability
|
(9,700,645 | ) | 3,862,514 | |||||
(Decrease)
in accounts payable trade
|
1,263,738 | (931,220 | ) | |||||
Increase
(decrease) in accrued expenses
|
(496,267 | ) | 525,363 | |||||
NET
CASH PROVIDED BY OPERATING ACTIVITIES
|
113,807 | 1,413,044 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchase
of fixed assets
|
(58,602 | ) | (73,482 | ) | ||||
Proceeds
from sale of fixed assets
|
- | 7,000 | ||||||
(Increase)
in deposits
|
- | (4,600 | ) | |||||
NET
CASH (USED IN) INVESTING ACTIVITIES
|
(58,602 | ) | (71,082 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Payments
on long-term debt
|
(546,647 | ) | (345,759 | ) | ||||
Loans
(payments) received from officer loan
|
106,959 | (232,949 | ) | |||||
Loan
received from shareholder
|
100,000 | - | ||||||
Preferred
stock dividends to shareholders
|
(85,750 | ) | - | |||||
NET
CASH (USED IN) FINANCING ACTIVITIES
|
(425,438 | ) | (578,708 | ) | ||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(370,233 | ) | 763,254 | |||||
CASH
AND CASH EQUIVALENTS, beginning of Year
|
919,784 | 156,530 | ||||||
|
||||||||
CASH
AND CASH EQUIVALENTS, end of Year
|
$ | 549,551 | $ | 919,784 |
2008
|
2007
|
|||||||
OTHER
SUPPLEMENTARY CASH FLOW INFORMATION
|
||||||||
Debt
incurred for acquisition of vehicles and equipment
|
$ | - | $ | 57,092 | ||||
Interest
paid
|
$ | 990,450 | $ | 1,272,885 | ||||
Income
taxes paid
|
$ | 40,000 | $ | 10,000 | ||||
Preferred
stock dividends paid in common stock
|
$ | 89,220 | $ | 185,287 |
Fixtures,
and equipment
|
3-7 years
|
Vehicles
|
5 years
|
Leasehold
Improvements
|
39
years
|
|
|||||
2008
|
2007
|
||||
Goodwill
|
$ | 1,588,950 |
1,588,950
|
||
Licensing
Agreement
|
100,000 |
100,000
|
|||
TOTAL
|
$ | 1,688,950 |
1,688,950
|
Years Ended December
|
||||||||
2008
|
2007
|
|||||||
Net
income (loss) attributed to common shares
|
$ | (135,796 | ) | $ | 581,157 | |||
Weighted-average
common shares outstanding (Basic)
|
12,866,837 | 12,225,073 | ||||||
Weighted-average
common stock equivalents:
|
||||||||
Warrants
|
0 | 16,114,000 | ||||||
Options
|
0 | 565,574 | ||||||
Weighted-average
common shares outstanding (diluted)
|
12,866,837 | 28,904,647 |
2008
|
2007
|
|||||||
A/R-Customers
and dealers
|
$ | 1,488,294 | $ | 1,771,686 | ||||
A/R-Manufacturers
|
670,654 | 787,201 | ||||||
A/R-Employees
|
64,789 | 25,994 | ||||||
Contracts
in transit
|
915,398 | 861,226 | ||||||
3,139,135 | 3,446,107 | |||||||
Allowance
for doubtful accounts
|
25,000 | 25,000 | ||||||
$ | 3,114,135 | $ | 3,421,107 |
2008
|
2007
|
|||||||
Parts
and accessories
|
$ | 2,364,941 | $ | 2,188,250 | ||||
Vehicles
|
14,541,305 | 23,437,783 | ||||||
TOTALS
|
$ | 16,906,246 | $ | 25,626,033 |
2008
|
2007
|
|||||||
Fixtures
and equipment
|
$ | 2,165,584 | $ | 2,132,504 | ||||
Vehicles
|
448,439 | 422,917 | ||||||
Leasehold
improvements
|
617,065 | 617,065 | ||||||
3,231,088 | 3,172,486 | |||||||
Less
accumulated depreciation
|
(1,935,345 | ) | (1,505,658 | ) | ||||
NET
FIXED ASSETS
|
$ | 1,295,743 | $ | 1,666,828 |
2008
|
2007
|
|||||||
Kawasaki
Motors Finance Company floor plan agreement provides for borrowings up to
$2,300,000. The manufacturer at its discretion may increase the
borrowings. Interest is payable monthly and fluctuates with
prime and varies based on the type of unit financed and the length of time
the unit remains on the floor plan (ranging from 6.0% to 18.0% at December
31, 2008 and 8.5% to 9.5% at December 31, 2007). Principal
payments are due upon the sale of the specific units
financed.
|
$ | 2,237,758 | $ | 2,291,608 | ||||
GE
Commercial Distribution Finance floor plan agreement for Yamaha units
provides for borrowings up to $1,900,000. The manufacturer at
its discretion may increase the borrowings. Interest is payable
monthly and fluctuates with prime and varies based on the type of unit
financed and the length of time the unit remains on the floor plan
(ranging from 4.0% to 7.0% at December 31, 2008 and 7.5% at December 31,
2007). Principal payments are due upon the sale of the specific units
financed.
|
1,504,138 | 2,595,894 | ||||||
GE
Commercial Distribution finance floor plan agreement for Suzuki units
provides for borrowings up to $150,000. The manufacturer at its discretion
may increase the borrowings. Interest is payable monthly and
fluctuates with prime and varies based on the type of unit financed and
the length of time the unit remains on the floor plan (ranging from 5.5%
to 13.0% at December 31, 2008 and 7.5% to 15.0% at December 31,
2007). Principal payments are due upon the sale of the specific
units financed.
|
2,506,246 | 6,448,146 | ||||||
Polaris
Acceptance floor plan agreement provides for borrowings up to
$600,000. The manufacturer at its discretion may increase the
borrowings. The agreement is collateralized by specific units
financed. Interest is payable monthly and fluctuates with prime and varies
based on the type of unit financed and the length of time the unit remains
on the floor plan (ranging from 8.75% to 13.0% at December 31, 2008 and
12.0% to 16.5% at December 31, 2007). Principal payments are
due the earlier of date of sale or one year after
financing.
|
539,423 | 413,700 |
Fifth
Third Bank floor plan agreement provides for borrowings up to
$2,500,000. The manufacturer at its discretion may increase the
borrowings. Interest is payable monthly and fluctuates with
prime and varies based on the type of unit financed and the length of time
the unit remains on the floor plan (3.25% at December 31, 2008 and 7.25%
at December 31, 2007, respectively). Principal payments are due
upon the sale of the specific units financed.
|
1,374,751 | 2,725,631 | ||||||
American
Honda Finance floor plan agreement provides for borrowings up to $200,000.
The manufacturer at its discretion may increase the
borrowings. Interest is payable monthly and fluctuates with
prime and varies based on the type of unit financed and the length of time
the unit remains on the floor plan. (3.25% to 5.61% at December
31, 2008 and 7.25% at December 31, 2007, respectively). Principal payments
are due upon the sale of the specific units financed.
|
539,906 | 856,782 | ||||||
GE
Commercial Distribution Finance floor plan agreement for Ducati units
provides for borrowings up to $800,000. Interest is payable monthly and
fluctuates with prime and varies based on the type of unit financed and
the length of time the unit remains on the floor plan (ranging from 7.5%
to 10.50% at December 31, 2008, and 9.5% to 10.5% at December 31,
2007). Principal payments are due upon the sale of the specific
units financed.
|
788,283 | 798,764 | ||||||
GE
Commercial Distribution Finance floor plan agreement for Yamaha units
provides for borrowings up to $2,100,000. Interest is payable monthly and
fluctuates with prime and varies based on the type of unit financed and
the length of time the unit remains on the floor plan (ranging from 3.25%
to 7.0% at December 31, 2008 and 7.5% to 10.5% at December 31,
2007). Principal payments are due upon the sale of the specific
units financed.
|
1,197,392 | 1,210,118 | ||||||
GE
Commercial Distribution Finance floor plan agreement for Suzuki units
provides for borrowings up to $150,000. The manufacturer at its discretion
may increase the borrowings. Interest is payable monthly and
fluctuates with prime and varies based on the type of unit financed and
the length of time the unit remains on the floor plan (ranging from 3.25%
to 12.0% at December 31, 2008 and 7.5% to 8.5% at December 31,
2007). Principal payments are due upon the sale of the specific
units financed.
|
1,745,530 | 3,545,557 |
Fifth
Third Bank floor plan agreement provides for borrowing up to
$2,500,000. Interest is payable monthly and fluctuates with
prime and varies based on the type of unit financed and the length of time
the unit remains on the floor plan (3.25% at December 31, 2008 and 7.25%
at December 31, 2007). Principal payments are due upon the sale of the
specific units financed.
|
727,995 | 2,062,177 | ||||||
Kawasaki
Motors Finance Company floor plan agreement provides for borrowings up to
$1,500,000. Interest is payable monthly and fluctuates with
prime and varies based on the type of unit financed and the length of time
the unit remains on the floor plan (ranging from 3.25% to 18.0% at
December 31, 2008 and 8.5% to 18.0% at December 31, 2007). Principal
payments are due upon the sale of the specific units
financed.
|
1,135,146 | 1,494,424 | ||||||
GE
Commercial Distribution Finance floor plan agreement for Special Product
units provides for borrowings up to $150,000. The manufacturer at its
discretion may increase the borrowings. Interest is payable
monthly and fluctuates with prime and varies based on the type of unit
financed and the length of time the unit remains on the floor plan
(ranging from 3.25% to 9.0% at December 31, 2008 and 10.5% at December 31,
2007). Principal payments are due upon the sale of the specific
units financed.
|
102,641 | 45,015 | ||||||
GE
Commercial Distribution Finance floor plan agreement for CPI units
provides for borrowings up to $250,000. The manufacturer at its discretion
may increase the borrowings. Interest is payable monthly and
fluctuates with prime and varies based on the type of unit financed and
the length of time the unit remains on the floor plan (ranging from 3.25%
to 10.0% at December 31, 2008 and 9.0% to 10.5% at December 31, 2007 ).
Principal payments are due upon the sale of the specific units
financed.
|
236,399 | 260,585 | ||||||
GE
Commercial Distribution Finance floor plan agreement for Ducati units
provides borrowings up to $3,500,000. Interest is payable monthly and
fluctuates with prime and varies based on the type of unit financed and
the length of time the unit remains on the floor plan (ranging from 3.25%
to 9.5% at December 31, 2008). Principal payments are due upon the sale of
the specific units financed.
|
412,148 | -0- | ||||||
TOTALS
|
$ | 15,047,756 | $ | 24,748,401 |
2008
|
2007
|
|||||||
A
$330,000 note payable with HSK Funding bearing interest at 15.5% at
December 31, 2008.
|
$ | -0- | $ | 320,000 | ||||
Note
payable to bank bearing interest at 9.96%, payable in monthly installments
of $929, through May 2011, collateralized by vehicle.
|
23,855 | 32,170 | ||||||
Note
payable to bank bearing interest at 6.95%, payable in monthly installments
of $897, through June 2009, collateralized by vehicle.
|
5,273 | 15,286 | ||||||
A
$250,000 revolving line of credit at a bank bearing interest at a variable
rate of prime plus 1% (4.25% and 8.25% at December 31, 2008 and 2007,
respectively). The loan is collateralized by substantially all the
Company’s assets and the building owned personally by an
officer.
|
249,863 | 249,863 | ||||||
Note
payable to bank bearing interest at prime plus 1% payable in monthly
principal installments of $17,360 plus interest, through August
2010. The note is collateralized by substantially all Company’s
assets, and shareholder guarantees.
|
399,360 | 607,680 | ||||||
678,351 | 1,224,998 | |||||||
Less
current maturities
|
472,639 | 796,510 | ||||||
TOTALS
|
$ | 205,712 | $ | 428,488 |
YEAR ENDING
|
AMOUNT
|
|||
2009
|
$ | 472,639 | ||
2010
|
201,181 | |||
2011
|
4,531 | |||
2012
|
-0- | |||
2013
|
-0- | |||
TOTAL
|
$ | 678,351 |
|
2008
|
2007
|
||||||
Federal:
|
||||||||
Current
|
$ | (337,200 | ) | $ | 492,750 | |||
Deferred
|
(96,500 | ) | 38,250 | |||||
TOTALS
|
$ | (433,700 | ) | $ | 531,000 |
2008
|
2007
|
|||||||
Deferred
tax assets – current and long-term:
|
||||||||
Allowance
for doubtful accounts and net
|
||||||||
operating
loss carryforward
|
$ | 244,000 | $ | 22,000 | ||||
Deferred
tax liabilities - long-term:
|
||||||||
Depreciation
and amortization
|
(139,000 | ) | (38,250 | ) | ||||
TOTALS
|
$ | 105,000 | $ | (16,250 | ) |
AMOUNT
|
||||
2009
|
$ | 1,072,535 | ||
2010
|
1,096,069 | |||
2011
|
1,120,311 | |||
2012
|
1,145,283 | |||
1,171,003 | ||||
$ | 5,605,201 |