<PAGE> 1
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 April 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
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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 April 28, 1996 was
3,741,255.
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THE VILLAGE GREEN BOOKSTORE, INC.
---------------------------------
INDEX
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page
----
<S> <C>
Item 1. Financial Statements
Consolidated Statement of Operations
for the three months ended
April 28, 1996 and April 30, 1995....................................................3
Consolidated Balance Sheets as of
April 28, 1996 and January 28, 1996..................................................4
Consolidated Statement of Cash Flows for the
three months ended April 28, 1996 and
April 30, 1995 ......................................................................6
Notes to 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...................................................................12
Item 3. Defaults Upon Senior Securities.....................................................12
Item 6. Exhibits and Reports on Form 8-K....................................................12
Index to Exhibits............................................................................14
Exhibit 11...................................................................................15
</TABLE>
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS.
THE VILLAGE GREEN BOOKSTORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
APRIL 28, 1996 AND APRIL 30, 1995
<TABLE>
<CAPTION>
APRIL 28, 1996 APRIL 30, 1995
------------------ ------------------
<S> <C> <C>
Net Sales $ 2,597,470 $ 2,423,148
Cost of Goods Sold 1,661,988 1,502,375
------------------ ------------------
Gross Profit $ 935,482 $ 920,773
Selling, General, and
Administrative Expenses 1,356,245 1,002,922
------------------ ------------------
Loss from Operations $ (420,763) $ (82,149)
Other Income (Expense)
Interest Expense (21,000) (36,759)
Amortization of Offering Costs (23,781) (100,155)
Other Income 5,505 17,428
------------------
Total Other Income (Expense) $ (39,276) $ (119,486)
------------------ ------------------
Loss before Income taxes $ (460,039) $ (201,635)
Income Tax 0 (600)
------------------ ------------------
Net Loss $ (460,039) $ (202,235)
================== ==================
Per Share Amounts Net Loss $ (0.12) $ (0.08)
================== ==================
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 4
THE VILLAGE GREEN BOOKSTORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 28, 1996 AND JANUARY 28, 1996
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS APRIL 28, 1996 JANUARY 28, 1996
- ----------------------------------------------- ------------------- -------------------
<S> <C> <C>
Cash and Cash Equivalents $ 12,338 $ 383,918
Receivables 130,654 130,974
Merchandise Inventories 5,447,016 6,306,808
Prepaid Expenses 253,102 290,141
------------------- -------------------
Total Current Assets $ 5,843,110 $ 7,111,841
Property & Equipment, net of
Accumulated Depreciation 1,896,562 1,933,838
Other Assets 162,803 161,585
------------------- -------------------
Total Assets $ 7,902,475 $ 9,207,264
=================== ===================
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
THE VILLAGE GREEN BOOKSTORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 28, 1996 AND JANUARY 28, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES APRIL 28, 1996 JANUARY 28, 1996
- --------------------------------------------- ------------------- --------------------
<S> <C> <C>
Accounts Payable $ 2,637,554 $ 3,348,472
Current Portion of Debt 1,216,214 1,231,227
Accrued Payroll Expense 79,608 77,565
Accrued Taxes Payable 69,035 81,442
Other Current Liabilities 329,903 468,115
------------------- --------------------
Total Current Liabilities $ 4,332,314 $ 5,190,991
Long-Term Debt 13,965 13,965
STOCKHOLDERS' EQUITY
- ---------------------------------------------
Common Stock, $.001 par
Authorized 10,000,000 shares
Issued 3,741,355 shares and 3,741,255
shares at April 28, 1996 and January
28, 1996, respectively
Outstanding, 3,741,255 shares and
1,710,880 shares at April 30, 1995 and
January 29, 1995, respectively 3,742 3,741
Additional Paid-In Capital 8,117,453 8,117,154
Retained Deficit (4,564,999) (4,118,587)
------------------- --------------------
Total Stockholders' Equity $ 3,556,196 $ 4,002,308
------------------- --------------------
Total Liabilities and Stockholders' Equity $ 7,902,475 $ 9,207,264
=================== ====================
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
THE VILLAGE GREEN BOOKSTORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
QUARTERS ENDED APRIL 28, 1996 AND APRIL 30, 1995
<TABLE>
<CAPTION>
OPERATING ACTIVITIES APRIL 28, 1996 APRIL 30, 1995
- --------------------------------------------------------- ----------------- ------------------
<S> <C> <C>
Net Loss $ (460,039) $ (202,235)
Adjustments to reconcile Net Loss to Net
Cash Used in Operating Activities:
Depreciation 107,046 63,798
Amortized Debt Offering Costs 23,781 100,155
Changes in Operating Assets and Liabilities:
Accounts Receivable (1,525) 6,474
Inventory and Prepaid Expenses 896,831 (497,245)
Accounts Payable and Accrued Expenses (859,494) (948,853)
----------------- ------------------
Net Cash Used In Operating Activities (293,400) (1,477,906)
Investing Activities:
Purchase of Property and Equipment (40,312) (193,743)
Notes Receivable 0 68,000
----------------- ------------------
Net Cash Used In Investing Activities (40,312) (125,743)
Financing Activities:
Payments on Credit Lines, Long-Term Debt and
Capital Lease Obligations (15,013) (1,814,976)
Debt Issuance Costs (25,000) 0
Stock Offering Costs 0 (1,278,920)
Proceeds from Issuance of Common Stock 300 6,650,325
Purchase of Treasury Stock 0 (186,500)
Proceeds from Borrowings 0 0
Cash from (Payments to) Officers 1,845 15,263
----------------- ------------------
Net Cash Provided by (Used In) Financing
Activities (37,868) 3,385,192
----------------- ------------------
Net Change In Cash (371,580) 1,781,543
Balance at Beginning of Year 383,918 519,470
----------------- ------------------
Cash Balance at End of Period $ 12,338 $ 2,301,013
================= ==================
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE> 7
THE VILLAGE GREEN BOOKSTORE, INC.
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The consolidated balance sheet as of April 28, 1996 and the
consolidated statements of income for the three months ended
April 28, 1996 and April 30, 1995, the consolidated statements of
changes in financial position for the three months ended April
30, 1995 and May 1, 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 April 28, 1996 are not
necessarily indicative of the results that may be expected for
the fiscal period ending January 28, 1997, as the Company's sales
volume is seasonal.
Note 2. 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 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.
The Debentures became due and payable on April 28, 1996
and the Company is currently negotiating an extension of the
maturity date with the holders of the Debentures.
Note 3. On March 23, 1995, the Company consummated a public offering
of 2,000,000 Units through Thomas James Associates, Inc. as
Representative of the Underwriters. Each Unit consists 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
7
<PAGE> 8
proceeds of the public offering was approximatelY $4.7 million,
giving effect to expenses related to the offering.
Note 4. On April 30, 1995, the Company received net proceeds of
approximately $569,000 pursuant to the Underwriting Agreement
signed in relation to the transaction described in Note 4. The
proceeds were received through the partial exercise of the
over-allotment option.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
- --------
The Company competes with a diverse group of national book retailers,
including WaldenBooks, Borders Bookshop, Barnes & Noble, B. Dalton, Crown Books,
Encore Books and Books-A-Million. In recent years, many competing national
chains have expanded in size and number of outlets, and have developed and
opened superstores within many of the Company's existing markets. As a result of
these competitive conditions, the Company closed two stores during the first
quarter of 1996 and two more stores subsequent to the first quarter of 1996. The
Company has altered its strategic objectives to address these competitive
conditions by introducing the Kideology(TM) retail concept. The Company's
strategic objective is to continue to operate retail bookstores in the areas in
which it currently competes while adding additional Kideology(TM) stores in new
and existing locations. The Company recently entered into a letter of intent
with GBFC, Inc., a finance company ("GBFC"). GBFC had been discussing with the
Company, subject to further due diligence investigation, the possibility of
lending up to $2 million to the Company pursuant to a Secured Revolving Credit
Facility. GBFC advised the Company on June 10, 1996 that GBFC would not be
pursuing a lending relationship. On or about May 28, 1996, the Company forwarded
interest payments to the holders of its $1.2 million subordinated debentures
(the "Debentures"). The outstanding principal under the Debentures became due
and payable on April 28, 1996 and to date, the Company has not repaid the
outstanding principal amount on the Debentures. The Company is currently
negotiating an extension of the maturity date for the Debentures and is pursuing
other financing alternatives in order to repay such outstanding indebtedness. No
assurances can be given that the Company will be successful in obtaining
financing from other sources or that the Company will be successful in
implementing its new business strategy or Kideology(TM) retail concept.
FINANCIAL POSITION
- ------------------
Cash and cash equivalents amounted to $12,338 at April 28, 1996 as compared
to $383,918 at January 28, 1996. Cash decreased as a result of reduction of
accounts payable due to payments made primarily to vendors and increased
operating costs. Inventories decreased by $859,792 from $6,306,808 at January
28, 1996 to $447,016 at April 28, 1996 primarily as a result of the closing of
two stores. Prepaid expenses decreased by $37,039 as a result of the closing of
the Glen Mills store. Other current liabilities, accrued payroll and accrued
sales taxes payable decreased, in the aggregate, by $148,576 from $627,122 at
January 28, 1996 to $478,546 at April 28, 1996.
9
<PAGE> 10
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
- --------
The Company competes with a diverse group of national book retailers,
including WaldenBooks, Borders Bookshop, Barnes & Noble, B. Dalton, Crown Books,
Encore Books and Books-A-Million. In recent years, many competing national
chains have expanded in size and number of outlets, and have developed and
opened superstores within many of the Company's existing markets. As a result of
these competitive conditions, the Company closed two stores during the first
quarter of 1996 and two more stores subsequent to the first quarter of 1996. The
Company has altered its strategic objectives to address these competitive
conditions by introducing the Kideology(TM) retail concept. The Company's
strategic objective is to continue to operate retail bookstores in the areas in
which it currently competes while adding additional Kideology(TM) stores in new
and existing locations. The Company recently entered into a letter of intent
with GBFC, Inc., a finance company ("GBFC"). GBFC had been discussing with the
Company, subject to further due diligence investigation, the possibility of
lending up to $2 million to the Company pursuant to a Secured Revolving Credit
Facility. GBFC advised the Company on June 10, 1996 that GBFC would not be
pursuing a lending relationship. On or about May 28, 1996, the Company forwarded
interest payments to the holders of its $1.2 million subordinated debentures
(the "Debentures"). The outstanding principal under the Debentures became due
and payable on April 28, 1996 and to date, the Company has not repaid the
outstanding principal amount on the Debentures. The Company is currently
negotiating an extension of the maturity date for the Debentures and is pursuing
other financing alternatives in order to repay such outstanding indebtedness. No
assurances can be given that the Company will be successful in obtaining
financing from other sources or that the Company will be successful in
implementing its new business strategy or Kideology(TM) retail concept.
FINANCIAL POSITION
- ------------------
Cash and cash equivalents amounted to $12,338 at April 28, 1996 as compared
to $383,918 at January 28, 1996. Cash decreased as a result of reduction of
accounts payable due to payments made primarily to vendors and increased
operating costs. Inventories decreased by $859,792 from $6,306,808 at January
28, 1996 to $5,447,016 at April 28, 1996 primarily as a result of the closing of
two stores. Prepaid expenses decreased by $37,039 as a result of the closing of
the Glen Mills store. Other current liabilities, accrued payroll and accrued
sales taxes payable decreased, in the aggregate, by $148,576 from $627,122 at
January 28, 1996 to $478,546 at April 28, 1996.
10
<PAGE> 11
RESULTS OF OPERATIONS
- ---------------------
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------
STATEMENT OF OPERATIONS DATA APRIL 28, 1996 APRIL 30, 1995
- ----------------------------------------------------------- --------------------------- ---------------------------
<S> <C> <C>
Net Sales $ 2,423,148
As a Percentage of Net Sales: 100% 100%
Same Stores 83.5 91.6
New Stores 11.2 0
Closed Stores 5.3 8.4
--------------------------- ---------------------------
Total Net Sales 100.0 100.0
Cost of Sales 64.0 62.0
--------------------------- ---------------------------
Gross Profit 36.0 38.0
Selling, General and Administrative
Expenses 52.2 41.4
--------------------------- ---------------------------
Income from Operations (16.2) (3.4)
Net Income (17.7) (8.4)
=========================== ===========================
</TABLE>
Net sales for the three months ended April 28, 1996 were $2,597,470 as
compared with $2,423,148 for the three months ended April 30, 1995, an increase
of 7.2%. Comparable store sales decreased by 2.3% for the corresponding
period.
Gross profit margin for the three months ending April 28, 1996 was 36.0%
as compared to 38.0% for the same period last year. In absolute dollars, gross
profit increased from $920,773 for the three months ended April 30, 1995 to
$935,432 for the three months ended April 28, 1996. The increase in absolute
gross profit dollars of $14,709 resulted from increased sales volume during the
current fiscal year.
Selling, general, and administrative expenses for the three months ended
April 28, 1996 increased by $353,323 or 35.2%. The increase is attributable to
the operation of four additional stores during the first quarter ended April
28, 1996 with two stores closing and costs associated with store closures. The
closing and non-cash components accounted for $184,318 of such expense.
On a same store basis, selling, general and administrative expenses increased by
approximately $33,679. The Company is continuing to make concerted efforts to
reduce its operating costs.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital was $1,510,796 at April 28, 1996, as compared to
$1,920,950 as of January 28, 1996. The Company's auditors have stated that there
is substantial doubt about the Company's ability to continue as a going concern.
Competitive conditions have
11
<PAGE> 12
adversely affected the Company's liquidity. The Company is currently negotiating
an extension of the maturity date for its Debentures. The Company had been
negotiating for a $2 million line of credit with GBFC, Inc., a finance company.
On June 10, 1996, the Company was advised by GBFC that GBFC would not be
pursuing a lending relationship. The Company is currently pursuing other avenues
of financing although no assurances can be given that it will be successful in
raising additional capital.
12
<PAGE> 13
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS.
The Company recently received a Complaint from Glen Eagle Center
in connection with the closing of one of its stores. Glen Eagle is claiming
$20,000 in lost rents and consequential damages. The Company has counterclaimed
for breach of the lease by Glen Eagle and intends to vigorously defend such
claims.
ITEM 3. DEFAULT IN SENIOR SECURITIES.
As mentioned in the Management's Discussion and Analysis of
Financial Condition and results of operations, the Company is currently
negotiating for an extension of the maturity date of its Debentures which became
due and payable on April 28, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
---------
Exhibit 11
(b) Reports on Form 8-K.
--------------------
None
13
<PAGE> 14
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: June 12, 1996 BY: /s/ Raymond Sparks
-------------------------------
Raymond Sparks,
President
Treasurer
Chief Operating Officer
Chief Financial Officer
14
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Number
- ------ ------
<S> <C> <C>
11 Computation of Earnings per Common Share........................................................16
</TABLE>
15
<PAGE> 1
Exhibit 11
THE VILLAGE GREEN BOOKSTORE, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 28, 1996
---------------------
Primary Earnings Per Share(1)
- -----------------------------------------------------------------------------
<S> <C>
Net Loss After Taxes $ (460,039)
Weighted Average Common
Shares Outstanding 3,741,273
Primary Earnings Per Share $ (0.12)
<FN>
- --------
(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.
</TABLE>
16
