UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
F O R M 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended October 29, 1995
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 0-00167
THE VILLAGE GREEN BOOKSTORE, INC.
(Exact name of Small Business Issuer as specified in its charter)
New York 16-1181167
(State or other jurisdiction of (IRS Employer
incorporation or organization) I.D. number)
1357 Monroe Avenue
Rochester, New York 14618
(Address of principal executive offices)
(716) 442-1151
(Issuer's telephone number, including area code)
Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of common stock outstanding as of October 29, 1995 was
3,741,255.
<PAGE>
THE VILLAGE GREEN BOOKSTORE, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Statement of Operations
for the three and nine months ended October 29,
1995 and October 30, 1994.........................3
Consolidated Balance Sheets as of
October 29, 1995 and January 29, 1995.............4
Consolidated Statement of Cash Flows for the
nine months ended October 29, 1995 and
October 30, 1994..................................6
Notes to Consolidated Financial
Statements........................................7
Item 2. Management's Discussion and Analysis
of Financial Conditions and
Results of Operations.............................9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...............................n/a
Item 2. Changes in Securities...........................n/a
Item 3. Defaults Upon Senior Securities.................n/a
Item 4. Submission of Matter of a Vote of
Security Holders...............................12
Item 5. Other Information...............................n/a
Item 6. Exhibits and Reports on Form 8-K.................12
Index to Exhibits........................................14
2
<PAGE>
Item 1. Financial Statements.
THE VILLAGE GREEN BOOKSTORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
OCTOBER 29, 1995 AND OCTOBER 30, 1994
Three Months Ended Nine Months Ended
October 29, October 30, October 29, October 30,
1995 1994 1995 1994
----------- ----------- ----------- --------
Net Sales $ 2,390,224 $ 2,097,692 $ 7,367,374 $ 6,667,774
Cost of Goods Sold 1,499,722 1,475,773 4,588,936 4,371,505
------------ ------------ ------------ -----------
Gross Profit $ 890,502 $ 621,919 $ 2,778,438 $ 2,296,269
Selling, General, and
Administrative Expenses 1,205,921 1,017,398 3,323,469 2,759,271
------------ ------------ ------------ -----------
Loss from Operations $ (315,419) $ (395,479) $ (545,031) $ (463,002)
Other Income (Expense)
Interest Expense (24,233) (57,524) (86,697) (150,638)
Amortization of
Offering Costs (23,781) (69,606) (147,718) (185,036)
Other Income 16,202 15,087 61,664 32,338
Gain on Disposal
of Assets 1,500 0 1,500 0
Loss on Disposal
of Assets 0 (12,576) 0 (14,139)
------------ ------------ ------------ ------------
Total Other Income
(Expense) $ (30,312) $ (124,619) $ (171,251) $ (317,475)
------------ ------------ ------------ ------------
Loss before Income taxes $ (345,731) $ (520,098) $ (716,282) $ (780,477)
Income Tax 0 (2,794) (850) (2,794)
------------ ------------ ------------ ------------
Net Loss $ (345,731) $ (522,892) $ (717,132) $ (783,271)
============ ============ ============ ============
Per Share Amounts
Net Loss $ (0.09) $ (0.31) $ (0.22) $ (0.52)
============ ============ ============ ============
See Notes to Consolidated Financial Statements
3
<PAGE>
THE VILLAGE GREEN BOOKSTORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 29, 1995 AND JANUARY 29, 1995
ASSETS
October 29, January 29,
Current Assets 1995 1995
----------- -----------
Cash and Cash Equivalents $ 377,595 $ 519,470
Accounts Receivable
Trade 16,961 14,206
Employees, net of allowance
for doubtful accounts of $6,523 14,101 12,029
Officers and Former Officers 40,734 54,940
Other 127,081 137,086
Note Receivable-Related Party 0 68,000
Merchandise Inventories 6,333,447 4,732,204
Prepaid Expenses 392,103 221,572
--------- ---------
Total Current Assets $ 7,302,022 $5,759,507
Property & Equipment, net
of Accumulated Depreciation 1,716,883 1,237,400
Deferred Debt Issuance Costs 47,562 195,281
Deferred Stock Offering Costs 0 163,563
Security Deposits 139,020 139,020
--------- ---------
Total Assets $ 9,205,487 $7,494,771
========= =========
See Notes to Consolidated Financial Statements
4
<PAGE>
THE VILLAGE GREEN BOOKSTORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 29, 1995 AND JANUARY 29, 1995
LIABILITIES AND STOCKHOLDERS EQUITY
October 29, January 29,
Current Liabilities 1995 1995
----------- -----------
Accounts Payable $ 2,608,146 $ 3,348,472
Current Portion of Debt 1,226,222 1,825,197
Accrued Payroll Expense 61,225 55,430
Accrued Taxes Payable 58,672 65,990
Other Current Liabilities 164,936 183,093
---------- ----------
Total Current Liabilities $ 4,119,201 $ 5,478,182
Long-Term Debt 21,381 1,246,163
Stockholders' Equity
Common Stock, $.001 par
Authorized 10,000,000 shares
Issued and Outstanding
3,741,255 shares and 1,710,880
shares at July 30, 1995 and
January 29, 1995, respectively 3,741 1,711
Additional Paid-In Capital 8,242,154 3,232,573
Retained Deficit (3,180,990) (2,463,858)
----------- -----------
Total Stockholders' Equity $ 5,064,905 $ 770,426
----------- ----------
Total Liabilities and
Stockholders' Equity $ 9,205,487 $ 7,494,771
=========== ==========
See Notes to Consolidated Financial Statements
5
<PAGE>
THE VILLAGE GREEN BOOKSTORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the Nine Months Ended October 29, 1995 and October 30, 1994
Nine Months Ended
October 29, October 30,
1995 1994
----------- -----------
Operating Activities:
Net Loss $ (717,132) $ (783,271)
Adjustments to reconcile Net Loss
to Net Cash Used in Operating Activities:
Depreciation 205,490 133,311
Amortized Debt Offering Costs 147,718 185,036
Loss on Disposal of Property
and Equipment 0 14,139
Gain on Disposal of Property
and Equipment 1,500 0
Changes in Operating Assets and Liabilities:
Accounts Receivable 5,178 42,931
Inventory and Prepaid Expenses (1,771,774) (396,772)
Accounts Payable and Accrued Expenses (760,006) (676,066)
----------- -----------
Net Cash Used In Operating Activities $(2,889,026) $(1,480,692)
Investing Activities:
Purchase of Property and Equipment (686,473) (367,425)
Notes Receivable 68,000 0
Security Deposits 0 (41,055)
----------- -----------
Net Cash Used In Investing Activities $ (618,473) $ (408,480)
Financing Activities:
Payments on Credit Lines, Long-Term
Debt and Capital Lease Obligations (1,823,757) (34,037)
Debt Issuance Costs 0 (190,250)
Stock Offering Costs (1,288,650) 0
Proceeds from Issuance of Common Stock 6,650,325 584,750
Purchase of Treasury Stock (186,500) 0
Proceeds from Borrowings 0 1,200,000
Cash from Officers 14,206 0
----------- ----------
Net Cash Provided by
Financing Activities 3,365,624 1,560,463
----------- ----------
Net Change In Cash (141,875) (328,709)
Balance at Beginning of Year 519,470 517,685
----------- ----------
Cash Balance at End of Period $ 377,595 $ 188,976
=========== ==========
Cash Paid For:
Interest $ 86,697 $ 150,638
Income Taxes $ 850 $ 2,794
See Notes to Consolidated Financial Statements
6
<PAGE>
THE VILLAGE GREEN BOOKSTORE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The consolidated balance sheet as of October 29, 1995 and the
consolidated statements of operations for the three and nine months
ended October 29, 1995 and October 30, 1994, and the consolidated
statements of cash flows for the nine months ended October 29, 1995
and October 30, 1994 have been prepared by the Company without audit.
In the opinion of management, all adjustments (which include only
normal adjustments) necessary to present fairly the financial
position, results of operations and changes in financial position at
those dates have been made. The operating results for the quarter
ended October 29, 1995 are not necessarily indicative of the results
that may be expected for the fiscal period ending January 28, 1996, as
the Company's sales volume is seasonal.
Note 2. The Company completed a private placement on June 28, 1993 (the
"1993 Private Placement"). This private placement consisted of
$1,800,000 7.5% senior subordinated secured notes and $200,000 for
400,000 shares of common stock. Costs associated with this private
placement have been allocated between the debt and equity portions of
the private placement. The costs allocated to the equity portion
offset the increase in additional paid-in capital. The unamortized
costs allocated to the debt portion were expensed in full during the
quarter ended April 30, 1995 as the principal was repaid from the
proceeds of the Public Offering (see Note 4).
Note 3. On April 28, 1994, the Company consummated a private placement
with respect to an aggregate of $1.2 million Principal Amount 7%
Convertible Senior Subordinated Debentures of the Company due two
years from the date of issuance, convertible into shares of the
Company's Common Stock at any time prior to maturity, unless
previously redeemed, at an initial conversion price of $5.00 per
share.
The Debentures are subordinated in right of payment to any future
bank indebtedness up to $1 million and are expressly senior in right
of payment to all other Company obligations (but subordinated to the
payment of any future bank or institutional indebtedness up to $1
million). The Debentures are redeemable, in whole only, from time to
7
<PAGE>
time at the option of the Company at a redemption price equal to 100%
of the principal amount thereof plus accrued interest, provided that
the Debentures may not be redeemed prior to maturity unless, during
any period of 20 consecutive trading days ending within 30 days prior
to the giving of the notice of redemption, the market price for the
Common Stock is at least 125% of the conversion price.
Costs associated with this debt, totalling $190,250, have been
included in Deferred Debt Issuance Costs and will be amortized over
the life of the debt, which is two years.
Interest on the Debentures is payable semi-annually.
Note 4. On March 23, 1995, the Company consummated a public offering of
2,000,000 Units through Thomas James Associates, Inc., now known as
H.J. Meyers & Co., Inc., as Representative of the Underwriters. Each
Unit consisted of one share of the Company's Common Stock, par value
$.001 per share and one Redeemable Common Stock Purchase Warrant. The
public offering price of the Units was $3.00 per Unit. The net
proceeds of the Public Offering was approximately $4.7 million, giving
effect to expenses related to the offering.
The Company retired all outstanding indebtedness from the 1993
Private Placement with the net proceeds from the Public Offering.
Note 5. On April 30, 1995, the Company received net proceeds of
approximately $569,000 pursuant to the partial exercise of the
over-allotment option in connection with the public offering.
Note 6. In May, 1995, the Company retired its 186,500 shares of Treasury
Stock.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
OVERVIEW
On March 23, 1995, the Company consummated a public offering of 2,000,000
Units through Thomas James Associates, Inc., now known as H.J. Meyers and Co.,
Inc., as Representative of the Underwriters (the "Public Offering"). Each Unit
consisted of one share of the Company's Common Stock, par value $.001 per share
and one Redeemable Common Stock Purchase Warrant. The Public Offering price of
the Units was $3.00 per Unit. The net proceeds of the Public Offering was
approximately $4.7 million, giving effect to expenses related to the offering.
On April 30, 1995, the Company received net proceeds of approximately
$569,000 pursuant to the partial exercise of the over-allotment option in
connection with the Public Offering.
The Company retired all outstanding indebtedness from the 1993 Private
Placement with the net proceeds from the Public Offering.
FINANCIAL POSITION
Cash and cash equivalents amounted to $377,595 at October 29, 1995 as
compared to $519,470 at January 29, 1995. Cash was increased as a result of the
Public Offering, with approximately $2.0 million being used to purchase
inventory for new retail stores and increase inventory at existing locations,
$900,000 used to prepare two new stores which opened in November 1995,
$1,800,000 used to retire the debt relating to the 1993 Private Placement and
approximately $100,000 used to purchase treasury stock. Inventories increased by
$1,601,243 from $4,732,204 at January 29, 1995 to $6,333,447 at October 29,
1995. Accounts Receivable-Officers and Former Officers were reduced due to
payment received from a former officer. Prepaid expenses increased by $170,531
due primarily to costs associated with the opening of an additional store and
costs associated with the November 1995 opening of two new locations. Other
current liabilities, accrued payroll and accrued sales taxes payable decreased,
in the aggregate, by $19,680 from $304,513 at January 29, 1995 to $284,833 at
October 29, 1995. The current portion of long-term debt decreased by $1.8
million as a result of the repayment of amounts due under the 1993 Private
Placement, and increased by $1.2 million due to the reclassification of the debt
associated with the 1994 Private Placement.
9
<PAGE>
RESULTS OF OPERATIONS
Three Months Ended Nine Months Ended
Statement of October 29, October 30, October 29, October 29,
Operations Data 1995 1994 1995 1994
---- ---- ---- ----
Net Sales $2,390,224 $2,097,692 $7,367,374 $6,667,774
---------- ---------- ---------- ----------
As a Percentage of Net Sales: % % % %
Same Stores 87.4 100.0 89.9 100.0
New Stores 12.6 0.0 10.1 0.0
------ ------ ------ -----
Total Net Sales 100.0 100.0 100.0 100.0
Cost of Sales 62.7 70.4 62.3 65.6
------ ------ ------ -----
Gross Profit 37.3 29.6 37.7 34.4
Selling, General and
Administrative Expenses 50.5 48.5 45.1 41.4
------ ------ ------ -----
Loss from Operations (13.2) (18.9) (7.4) (6.9)
Net Loss (14.5) (24.9) (9.7) (11.7)
====== ====== ====== ======
Net sales for the three months ended October 29, 1995 were $2,390,224 as
compared with $2,097,692 for the three months ended October 30, 1994, an
increase of 13.9%. For the nine months ended October 29, 1995, net sales were
$7,367,374, as compared with $6,667,774 for the nine months ended October 30,
1994. Comparable store sales decreased by 0.7% for the nine month period. Sales
at two new stores have not met expectations due to low name recognition in their
respective markets.
Gross profit margin for the three months ending October 29, 1995 was 37.3%,
as compared to 29.6% for the same period last year. For the nine months ended
October 29, 1995, gross profit margin was 37.7% as compared to 34.4% for the
nine months ended October 30, 1994. In absolute dollars, gross profit increased
from $621,919 for the three months ended October 30, 1994 to $890,502 for the
three months ended October 29, 1995. For the nine months ended October 29, 1995,
absolute gross profit dollars increased to $2,778,438 from $2,296,269 for the
nine months ended October 30, 1994. The increase in absolute gross profit
dollars of $268,583 and $482,169 for the three and nine month periods presented
resulted from improved margins and increased sales volume during the current
fiscal year.
Selling, general, and administrative expenses for the three months ended
October 29, 1995 increased by $188,523, or 18.5%. For the nine months ended
October 29, 1995, selling, general and administrative expenses increased by
$561,198, or 20.4%. The increases are attributable to the operation of three
additional stores during the current fiscal year as against the same period
10
<PAGE>
last year. On a same store basis, selling, general and administrative expenses
decreased by approximately $73,000 for the three months ended October 29, 1995
over the three months ended October 30, 1994. For the nine months ended October
29, 1995, selling, general and administrative expenses increased on a same store
basis by approximately $12,300 over the nine months ended October 30, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $3,182,821 at October 29, 1995, as compared to $281,325
as of January 29, 1995. This increase was principally the result of the Public
Offering and repayment of the debt associated with the 1993 Private Placement.
The Company's current ratio as of October 29, 1995 was 1.77 to one, as compared
to 1.05 to one at January 29, 1995.
Each Unit of the Public Offering consisted of one share of the Company's
Common Stock, par value $.001 per share and one Redeemable Common Stock Purchase
Warrant. The Public Offering price of the Units was $3.00 per Unit. The net
proceeds of the Public Offering was approximately $4.7 million, giving effect to
expenses related to the offering.
On April 30, 1995, the Company received net proceeds of approximately
$569,000 pursuant to the partial exercise of the over-allotment option in
connection with the Public Offering.
The Company retired all outstanding indebtedness from the 1993 Private
Placement with the net proceeds from the Public Offering.
At present, the Company has sufficient capital resources and cash flow to
maintain operations. The Company is seeking a new banking relationship in order
to establish a line of credit to finance its working capital requirements.
11
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of the Company took place on
September 7, 1995. The following matters were voted
on:
Votes Votes
For Withheld
------- --------
Election of Directors
Raymond C. Sparks 3,212,200 9,785
John W. Borek 3,211,920 10,065
Steven B. Sands 3,212,200 9,785
John P. Holmes 3,212,450 9,535
Michael S. Smith 3,052,350 169,635
Ratification of Deloitte & Touche, LLP
as independent auditors
of the Company:
Votes For: 3,197,647
Votes Against: 8,178
Abstaining: 16,160
Amendment to the 1993 Stock Option Plan:
Votes For: 766,458
Votes Against: 248,937
Abstain: 233,743
Non-Vote: 1,972,847
Reincorporation from New York to Delaware:
Votes For: 1,204,380
Votes Against: 26,493
Abstain: 18,238
Non-Vote: 1,972,874
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
11 Computation of Earnings per Common Share
(b) Reports on Form 8-K.
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE VILLAGE GREEN BOOKSTORE, INC.
Dated: December 18, 1995 BY: /s/ Raymond C. Sparks
---------------------
Raymond Sparks,
President
Treasurer
Chief Operating Officer
Chief Financial Officer
13
<PAGE>
INDEX TO EXHIBITS
Exhibit Page
Number Number
- ------- ------
11 Computation of Earnings per Common Share 15
14
THE VILLAGE GREEN BOOKSTORE, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
Three Months Ended Nine Months Ended
October 29, October 30,
1995 1995
------------------ -----------------
Primary Earnings Per Share (1)
Net Loss After Taxes $ (345,731) $ (717,132)
Weighted Average
Common Shares Outstanding 3,741,255 3,320,895
Primary Loss Per Share $ (0.09) $ (0.22)
(1) Warrants and options, which are potentially dilutive, were not considered in
the calculations because these items were anti-dilutive due to the net losses
incurred during the reporting period.
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Company's Quarterly Report on Form 10-QSB at October 29, 1995 and
is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-28-1996
<PERIOD-END> OCT-29-1995
<CASH> 377,595
<SECURITIES> 0
<RECEIVABLES> 205,400
<ALLOWANCES> 6,523
<INVENTORY> 6,333,447
<CURRENT-ASSETS> 7,302,022
<PP&E> 2,548,036
<DEPRECIATION> 831,153
<TOTAL-ASSETS> 9,205,487
<CURRENT-LIABILITIES> 2,919,201
<BONDS> 1,200,000
0
0
<COMMON> 3,741
<OTHER-SE> 5,061,164
<TOTAL-LIABILITY-AND-EQUITY> 9,205,487
<SALES> 2,390,224
<TOTAL-REVENUES> 2,390,224
<CGS> 1,499,722
<TOTAL-COSTS> 1,499,722
<OTHER-EXPENSES> 1,205,921
<LOSS-PROVISION> (1,500)
<INTEREST-EXPENSE> 24,233
<INCOME-PRETAX> (345,731)
<INCOME-TAX> 0
<INCOME-CONTINUING> (345,731)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (345,731)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
