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As an OEM with
patented technology a unique business plan
and the right financing relationships for their products, dealers and customers Viper
Powersports has a leg up in bringing superior motorcycles and engines to the market
Consumer-Non-Cyclical
Motorcycles
(VPWS-OTCBB)
Viper Powersports Inc.
1500 Rand Tower
Minneapolis, MN 55402
Phone: 612-333-1313
John Lai
President
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
February 9, 2006
BIO:
John Lai, President, Viper Powersports
John is the founder and CEO of Genesis Capital Group, Inc. a venture capital company
specializing in start-ups. He is the past CFO of Buyitnow.
CEOCFO: Mr. Lai, what attracted you to Viper?
Mr. Lai: “The business model is quite different from
what others have done in the past. When we looked at the industry from the cruiser
segment, in the last twenty years, everyone that has come into the market has just copied
Harley-Davidson (HDI-NYSE). Our goal was to build high-end factory custom cruisers with
cutting edge style that were functional and ridable not another cookie cutter product. The
Japanese with their sport bikes were continually concentrating on technology to improve
ride, handling characteristics and reliability but that effort was not being made in the
American cruiser segment. We came in to the marketplace utilizing this technology as well
as Formula I, and developed motorcycles with features that provides the motorcycle rider
an opportunity to experience the benefits of styling, performance and reliability.”
CEOCFO: Why do we need
another motorcycle in the marketplace?
Mr. Lai: “The motorcycle market has shown tremendous
amount of growth over the years and if you look at the high-end custom cruiser side of the
market, it has grown 20% a year since 1999. We felt there was a void in that space because
all the custom bike builders are basically assemblers that buy parts from everyone else
and put things on the motorcycle. Therefore, we focused on developing a motorcycle on a
sheet of paper, where the parts designed to fit properly so you get a lot less vibration
and much better performance in our products. We integrated a lot of technology that allows
these bikes to perform better than the others out there do. We have entered the market and
developed a reputation of a cutting-edge, performance oriented company.”
CEOCFO: What is unique about Viper motorcycles?
Mr. Lai: “Let’s compare the Harley Fatboy vs. a
Viper Diablo; Fatboy is about 750 pounds and generates about 65 horses at the rear wheel.
The Diablo is about 600 pounds and it generates about 120 horses at the rear wheel. We
have an adjustable air-ride suspension system that is unique and proprietary. It allows
the rider to adjust ride height and shock travel on-the-fly Our forward controls are
adjustable affording almost anyone regardless of stature the ability to adapt a perfect
riding position at their comfort level.
Second of all, our engines are all billet construction; traditional engine technology is
casting. Sand or metal cast is subject to porosity and oxidation. Billet is just a block
of aluminum that is machined by robotics and has a beautiful jewelry shine. No other
custom builder utilizes Computer-Assisted Design (CAD) with CNC technology. There are
other applications such as anodizing in order to offer colors such as purple, black or
whatever color you want. Our engines have multiple patents that allow it to run a lot
cooler; about 30% cooler and generate more horsepower for the same displacement, which
greatly enhances overall reliability. There are so many technologically advanced features
in our bikes from adjustable suspension and ride height to state of the art engine design
that anyone can instantly see that this is an engineered product and not a kit bike.
Anyone that came out with a shiny bike five years ago, could sell a lot of bikes, but that
has changed now. Harley has gotten their first surplus, their sell through is bad and now
you have to do more than look good, you have to perform. That is where we started and
focused on five years ago and continue to engineer products at a level above everybody
else.”
CEOCFO: Where are you
selling?
Mr. Lai: “We are selling through Harley dealers, Big Dog
dealers and a network of diverse independent dealers. All of our dealers have to be GE
Capital (General Electric Capital Corporation) approved. The significance of that is that
there is basically, in the United States, about 3600 or 3700 dealerships. Out of that,
only 20% of them would follow GE Capital; that means we have no receivables. As an
example, a typical dealer will give us an order for next year and before we ship GE will
invoice the dealer Prior to shipping, GE pays us and the dealer is charged an interest
rate established by GE. Therefore, GE is basically fortifying all of our product and
allowing our dealers the opportunity to represent Viper products without depleting their
cash. This is a major coup for a small company and we are one of the smallest company that
they have ever financed.”
CEOCFO: What is it about
Viper that would encourage GE to work with you?
Mr. Lai: “Our management team. If you look at Terry
Nesbitt, he was a National Sales Manager with a major company and is President of Viper
Motorcycle; and I am president of Viper Powersports, which is a new holding company. He
built the company and I think in his first year, he sold well over 2000 units. Because of
those relationships, GE felt comfortable that we have a viable business plan and that we
would become a successful company increasing our volumes as we move forward. They have
taken a long-term approach with us, believing that we will be successful and that our
product is unique and different.”
CEOCFO: Will you tell us
about your production capabilities and facilities?Mr. Lai:
“We recently announced that we acquired a facility in Monticello, Minnesota, which is
about thirty miles northwest of Minneapolis. This facility is about 33,000 square feet,
and is zoned for expansion based on our needs and growth. Therefore, we believe that we
will meet or exceed our five-year production plan. That is both for engines and for
motorcycles, because our other division/subsidiary is Viper Performance, which will be
selling our engines and other components to the after market. When we designed our product
we focused on improving the components, but we also did not go away from the platform. Our
engine will be a good upgrade in a Harley Davidson as an after market product as well as
Big Dog, primarily because of a need for more power. The motorcycle industry is going
through a phase that the automotive industry went through in the 50’s. Everybody
wants more horsepower. Except for the V-Rod, the most powerful engine that a Harley has is
about 72 horses and today they are not really cool until you have 100 horses. So we
believe there is a tremendous opportunity for Viper to offer our engines in the
after-market as a replacement engine.”
CEOCFO: What is the
financial picture for Viper?
Mr. Lai: “We are debt-free. We are going into production
in the second quarter and expect to be shipping product to consumers near the end of
second quarter. We have a low break-even, approximately 300 units. The principle reason
for that is that we design and manufacture components in-house. We are in a better
position to control our costs, and offer superior margins than our competitors. We are in
good shape and we expect sometime early next year to be positive cash flow.”
CEOCFO: Will you
continue to manufacture in the US?
Mr. Lai: “Correct! We will be manufacturing out of
Monticello. We will be introducing our newest model, the Diamondback in Cincinnati on
February 3rd – 5th (2006) at the V-twin Expo, which is a major
show for dealers. Following that, in Daytona, we will unveil another model, the Dragon
Chopper. That is one of the larger consumer shows in the United States, so we are
geared-up for a major marketing push. We are assisting the dealers in their marketing push
to the retailers with the best product, programs and margins in the industry.”
CEOCFO: Why should potential investors be interested?
Mr. Lai: “We believe that our plan is definitely
attainable in the next five years, with real considerable numbers and we should be able to
obtain a nice return for our investors. The industry is basically trading at three times
the lowest price per sale or thirty times price earnings per share. If you were to apply
both numbers to our stock, going out five years, you’d have a 30% discount, there is
a significant return for our shareholders on an annualized basis. As a company, we can’t
give projections, but I’ve given you guidelines as to what analysts will be looking
at from a pricing standpoint. Therefore, we believe that there is room for big
appreciation in the stock.”
CEOCFO: In closing, what do investors overlook about Viper?
Mr. Lai: “I think that the biggest negative that we have
right now is that when you are on the small trading scale in terms of being on the Pink
Sheets, bet we are making moves to change that to be coming on more profiled trading
platforms. I think that we will be picking up Wall Street research coverage, probably by
sometime in the mid-quarter of 2006, which will help a lot. The major problem however, is
exposure and understanding how different we are from everybody else, because we don’t’
invest in kit bike components; we do everything on cast stations. The significance of that
as an example, other manufacturers develop a gas tank and they will spend about 1½ to
$2½ million in 3 to 5 years to develop that gas tank. Once they develop it they have to
do seven years of production before they can recapture the const in to it. We’ve put
ours in cap; we spend probably 10 to $15 thousand in thirty days, put it in the cad model
and then we are able to send it to our vendors and say, ‘how much would it cost to
make this on a unit cost basis. Our unit cost can go higher, but we have the ability to
change the design right away, because we don’t have the investment in to it. If the
consumers come back and say, ‘boy the gas tank would look better this way, if you
styled it this way’. If our dealers would allow their customers to tell them that, we
could make that change, while competitors cannot, because they’ve invested in the
tooling.”
CEOCFO: You have a big advantage in starting when you did;
you don’t have these legacy systems and these legacy ideas.
Mr. Lai: “Yes, and the technology of robotics had not
advanced to the point of where it is today; not even two years ago. We are able to do
stuff on our robotics that three years ago would take five hours to do; we can do in 25
minutes.”
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