Gatorz Inc. has entered into an agreement dated April 4, 2013 to purchase 98 percent all of the outstanding shares of Ryderz Compound, Inc., which operates a chain of 34 retail stores in the United States under the XRyderz or No Fear store banners.
Gatorz purchased Ryderz on the following terms:
- Gatorz purchased all of the outstanding common shares of Ryderz for $1.00;
- Gatorz purchased all of the outstanding preference shares in consideration for:
- (i) $500,000 payable through the issuance of a promissory note which bears interest at a rate of 10 percent per annum, payable in arrears, and which is due two years following the completion of the acquisition;
- (ii) the grant of options to acquire up to 150,000 common shares of Gatorz at a price of 10 cents per share for a period of five years;
- (iii) Ryderz entering into a services and supply agreement with one of the vendors of the preference shares for a minimum term of 36 months; and
- (iv) Payment by Ryderz of $200,000 to one of the vendors in satisfaction of monies previously owed by Ryderz to that vendor and the issuance to that vendor of a promissory note in the principal amount of $1 million in satisfaction of additional monies owed by Ryderz to that vendor, which promissory note shall bear interest a rate of LIBOR plus 1 percent, payable in arrears, and which shall be due two years following completion of the acquisition.
- (i) $500,000 payable through the issuance of a promissory note which bears interest at a rate of 10 percent per annum, payable in arrears, and which is due two years following the completion of the acquisition;
Headquartered in Carlsbad, CA, Ryderz operates action sports and casual youth lifestyle apparel and accessories stores under the XRyderz and No Fear banners. The company losts $3.23 million on sales of $19.2 million in the year ended Jan. 31, compared to a loss of $670,251 on sales of $10.9 million the prior year.
Ryderz licenses the Fearless brand for sale in their retail stores and on the web. The company also sells apparel and accessories consistent with its lifestyle focus from leading third party vendors including Oradd, Fox, Famous, Fatal, Spy Optic, Oakley and Gatorz. The companys customers are typically young males, with the men’s category accounting for 70 percent of sales in fiscal 2012 while women’s and youth make up 15 percent and 5 percent of sales, respectively.
As of Jan. 31, 2013, Ryderz operated 34 retail stores in five states, including California, Nevada, Arizona, Oregon and Hawaii. Additionally, the company operates an e-commerce platform under the brand name XRyderz. Ryderz had revenues in fiscal 2012 of $19 million, with assets of $3.9 million and liabilities of $6.3 million.
Concurrent financing
Gatorz also today announced that it has received a loan from Kloiber Holdings, LLC (“Kloiber”) pursuant to which Kloiber has agreed to loan to Gatorz $1.5 million at a rate of 12 percent per annum and shall be repayable in full, together with all accrued interest, in three years.
Gatorz intends to use the proceeds of this loan to re-brand additional stores to the XRyderz brand, open new stores and for general working capital purposes.
Mike DiAnna, President & Chairman of the Board of Gatorz stated: The acquisition of Ryderz Compound represents the next step in our strategic plan to build a leading action sports retail business footprint in the United States and strengthen our foundation for future brand development globally. With the combined organization culture and operating philosophies, this gives us great confidence we can successfully leverage our expertise to selectively expand a broad offering of authentic brands and products in a gratifying retail experience, while offering superior customer service.
“Ryderz Compound is well positioned in several important states in the West. This acquisition provides the Company with an immediate presence and market share in a key region of the United States,” said Robert Reynolds, CEO of Gatorz. “Ryderz has done a terrific job in servicing the Action Sports market and we look to continue on expounding on the existing offering and growing our retail presence in other key regions.”
| 12 months | 6.5 months | |||
| Jan 31/13 | Jan 31/12 | |||
| Sales, net | 19,181,397 | 10,919,602 | ||
| Cost of sales | 18,860,819 | 9,495,570 | ||
| Gross profit | 320,578 | 1,424,032 | ||
| Selling general and administrative | 3,201,266 | 2,023,466 | ||
| Loss from operations | (2,880,688 | ) | (599,434 | ) |
| Interest & other expenses | 344,648 | 70,817 | ||
| Pretax income | (3,225,336 | ) | (670,251 | ) |
| Tax expense | 1,135 | |||
| Net Income | (3,226,471 | ) | (670,251 | ) |
| As at | Jan 31/13 | Jan 31/12 | ||
| Cash | 75,370 | 36,585 | ||
| Inventory | 1,949,290 | 2,661,152 | ||
| Other current assets | 280,826 | 570,740 | ||
| Long term assets | 1,673,703 | 1,333,619 | ||
| Total Assets | 3,979,189 | 4,602,096 | ||
| Current liabilities | 5,017,148 | 2,439,911 | ||
| Long term liabilities | 1,056,339 | 1,087,589 | ||
| Shareholder equity | (2,094,298 | ) | 1,074,596 | |
| Total liabilities and shareholder equity | 3,979,189 | 4,602,096 |
| 12 months | 6.5 months | |||
| Jan 31/13 | Jan 31/12 | |||
| Sales, net | 19,181,397 | 10,919,602 | ||
| Cost of sales | 18,860,819 | 9,495,570 | ||
| Gross profit | 320,578 | 1,424,032 | ||
| Selling general and administrative | 3,201,266 | 2,023,466 | ||
| Loss from operations | (2,880,688 | ) | (599,434 | ) |
| Interest & other expenses | 344,648 | 70,817 | ||
| Pretax income | (3,225,336 | ) | (670,251 | ) |
| Tax expense | 1,135 | |||
| Net Income | (3,226,471 | ) | (670,251 | ) |
| As at | Jan 31/13 | Jan 31/12 | ||
| Cash | 75,370 | 36,585 | ||
| Inventory | 1,949,290 | 2,661,152 | ||
| Other current assets | 280,826 | 570,740 | ||
| Long term assets | 1,673,703 | 1,333,619 | ||
| Total Assets | 3,979,189 | 4,602,096 | ||
| Current liabilities | 5,017,148 | 2,439,911 | ||
