U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ X ] Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997 .
[ ] Transition report under Section 13 or 15(d) of the
Exchange Act
For the transition period from _______________ to
_______________.
Commission file number 1-12580 .
THE VERMONT TEDDY BEAR CO., INC.
(Exact name of small business issuer as specified in its
charter)
New York 03-0291679
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2236 Shelburne Road, Post Office Box 965
Shelburne, Vermont 05482
(Address of principal executive offices)
(802) 985-3001
(Issuer's telephone number)
Not Applicable
(Former name, former address, and former fiscal year, if
changed since last report)
<PAGE>
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act 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
State the number of shares outstanding of each of the
issuers classes of common equity, as of the latest
practicable date: 5,173,018 shares of Common Stock, $.05
par value per share, as of October 10, 1997.
Transitional Small Business Disclosure Format (check one):
Yes ; No X .
The Vermont Teddy Bear Co., Inc.
<PAGE>
Index to Form 10-QSB
September 30, 1997
Page
No.
Part I - Financial Information
Financial Statements
Balance Sheet as of September 30, 1997
3
Statements of Operations for the Three
Months ended September 30, 1997 and 1996
4
Statements of Cash Flows for the Three
Months ended September 30, 1997 and 1996
5
Notes to Financial Statements
6
Management's Discussion and Analysis
9
Part II - Other Information
Item 5. Other Information
12
Item 6. Exhibits and Reports on Form 8-K
12
<PAGE>
Signatures
16
<PAGE>
The Vermont Teddy Bear Co., Inc.
Balance Sheets
September 30, 1997
ASSETS
Current Assets:
Cash and cash equivalents
(includes restricted cash of $359,000) $
778,666
Accounts receivable, trade
73,958
Inventories
3,440,529
Prepaid expenses and other current
543,276
Deferred income
259,016
----
--------
Total Current Assets
5,095,445
Property and equipment, net
9,649,616
Deposits and other assets
875,097
Note receivable
95,000
----
--------
Total Assets $
15,715,158
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $
241,405
Current portion of:
Long-term debt
148,482
Capital lease obligations
209,923
Accounts payable
1,813,284
Accrued expenses
<PAGE>
686,262
----
--------
Total Current Liabilities
3,099,356
Long-term debt, net of current portion
335,853
Capital lease obligations, net of current portion
5,919,176
Deferred income taxes
259,016
----
--------
Total Liabilities $
9,613,401
Stockholders' Equity:
Preferred stock, $.05 par value:
Authorized 1,000,000 Series A;
issued and outstanding, 90 shares. $
900,000
Authorized 375,000 Series B;
issued and outstanding, 204,912 shares.
10,245
Common stock, $.05 par value:
Authorized 20,000,000 shares;
issued 5,182,088 shares,
outstanding 5,170,088 shares
259,105
Additional paid-in capital
10,574,353
Treasury stock, at cost, 12,000 shares
(106,824)
Accumulated deficit
(5,535,122)
----
--------
Total Stockholders' Equity $
6,101,757
Total Liabilities and Stockholders' Equity $
15,715,158
============
The accompanying notes are an integral part of these
financial statements.
<PAGE>
<PAGE>
The Vermont Teddy Bear Co., Inc.
Statements of Operations
For the Three Months Ended September 30, 1997 and 1996
1997
1996
Net Revenues $ 2,941,704 $
2,924,256
Cost of Goods Sold 1,214,041
1,175,283
----------- --
---------
Gross Profit 1,727,663
1,748,973
Selling, General and Administrative Expenses:
Selling Expenses 1,357,272
1,207,084
General and Administrative Expenses 601,363
648,303
----------- --
---------
1,958,635
1,855,387
----------- --
---------
Operating Loss (230,972)
(106,414)
Interest Income 7,325
15,512
Interest Expense (159,805)
(109,906)
Other Income (Expense) 2,242
(14,622)
----------- --
---------
Loss Before Income Taxes (381,210)
(215,430)
Income Tax Provision -
86,172
----------- --
---------
Net Loss (381,210)
(129,258)
Preferred Stock Dividends (18,000)
(18,000)
----------- --
---------
Net Loss -- Common Stockholders $ (399,210) $
(147,258)
===========
<PAGE>
===========
Net Loss Per Common Share $ (0.08) $
(0.03)
===========
===========
Weighted Average Number of
Common Shares Outstanding 5,163,133
5,160,750
===========
===========
The accompanying notes are an integral part of these
financial statements.
<PAGE>
The Vermont Teddy Bear Co., Inc.
Statements of Cash Flows
For the Three Months Ended September 30, 1997 and 1996
1997
1996
Cash Flows From Operating Activities:
Net Loss $ (381,210)
$ (129,258)
Adjustments to reconcile net income (loss)
to net cash used for operating activities
Depreciation and amortization 234,304
227,562
<PAGE>
Loss on sale/disposal of fixed assets (179)
18,191
Changes in assets and liabilities:
Accounts receivable, trade (27,654)
34,380
Inventories (138,216)
(459,823)
Prepaid and other current assets (156,329)
(226,815)
Deposits and other assets (602,749)
(74,765)
Accounts payable (749,252)
(39,164)
Accrued expenses and other liabilities 10,915
81,813
Income taxes payable -
(86,172)
----------
----------
Net cash used for operating activities (1,810,370)
(654,051)
Cash Flows From Investing Activities:
Acquisition of property and equipment (43,844)
(160,671)
Proceeds from sale of fixed assets 6,038
-
----------
----------
Net cash used for investing activities (37,806)
(160,671)
Cash Flows From Financing Activities:
Borrowings of short-term debt 313,136
40,617
Borrowings of long-term debt -
57,104
Payments of short-term debt (621,731)
(10,585)
Payments of long-term debt (3,331,760)
(47,929)
Proceeds from sale-leaseback of
building and property 5,863,874
-
Principal payments on capital
lease obligations (47,588)
(25,068)
Issuance of common stock, exercise of
stock option 9,338
-
Issuance of preferred stock -
<PAGE>
501,132
----------
----------
Net cash provided by financing activities 2,185,269
515,271
Net Increase (Decrease) in Cash and
Cash Equivalents 337,093
(299,451)
Cash and Cash Equivalents, Beginning of Period 441,573
1,121,500
----------
----------
Cash and Cash Equivalents, End of Period $ 778,666
$ 822,049
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest $ 163,870
$ 109,564
Cash paid for taxes $ -
$ -
Supplemental Disclosures of Non-Cash Investing and Financing
Activities:
Capital lease from sale-leaseback of
building and property $5,863,874
$ -
The accompanying notes are an integral part of these
financial statements.
<PAGE>
Notes to Financial Statements
Basis of Presentation
The interim financial statements of The Vermont Teddy
Bear Co., Inc. (the "Company") included herein have been
prepared, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission
("SEC") and, in the opinion of management, reflect all
adjustments necessary to present fairly the financial
condition and results of operations for such interim
periods. Certain information and footnote disclosures
normally included in the financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these financial
statements be read in conjunction with the audited financial
statements and notes thereto for the fiscal year ended June
30, 1997, included in the Company's filing with the SEC on
Form 10-KSB. The Company's sales are seasonal in nature
<PAGE>
and, therefore, the results for these interim periods are
not necessarily indicative of the results for the respective
years.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Net Earnings Per Share
Net earnings per common share is determined by dividing
the net earnings available to common stockholders by the
weighted number of shares of Common Stock and Common Stock
equivalents, where dilutive, outstanding during the period.
In February 1997, the Financial Accounting Standards Board
issued FASB No. 128, "Earnings per Share" and SFAS No. 129,
"Disclosure Information about Capital Structure" effective
for interim periods and fiscal years ending after December
15, 1997. Earlier adoption is not permitted. SFAS No. 128
modifies the calculations of primary and fully diluted
earnings per share and replaces them with basic and diluted
earnings per share. Basic earnings per share includes no
dilution and is calculated by dividing net income by the
weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential
dilution of stock options that could share in the earnings
of an entity, similar to fully diluted earnings per share.
Earnings per share in these financial statements would not
be affected under the new pronouncement. The adoption of
SFAS No. 129 will have no impact on the Company's current
disclosures.
Income Taxes
The Company accounts for income taxes in accordance
with the Statement of Financial Accounting Standards No.
109, "Accounting for income taxes," which requires the use
of the liability method. This standard determines deferred
income taxes based on the estimated future tax effects of
any differences between the financial statement and the
basis of tax assets and liabilities, given the provisions of
the enacted tax laws. Based upon the Company's recent
losses, a valuation allowance has been provided to fully
reserve its deferred tax assets. If the Company is able to
<PAGE>
achieve sufficient profitability to realize all or a portion
of its deferred assets, the valuation allowance will be
reduced through a credit to income in future periods.
Inventories
Inventories are stated at the lower of cost or market
using the first-in, first-out method. Inventories consisted
of the following at September 30, 1997:
Raw materials $ 574,418
Work in process 122,477
Finished goods 2,743,634
-----------
$ 3,440,529
Debt and Borrowings
The Company is operating without a working capital line
of credit facility, effective July 18, 1997. As such, the
Company's ability to fund its operations over the short-term
is dependent upon its success in achieving its business plan
for fiscal 1998 or obtaining additional financing. If the
Company is unsuccessful in achieving its business plan or
obtaining additional financing, its short-term liquidity may
be adversely impacted, which could require a curtailment of
certain business activities that, in turn, could have a
material adverse effect on the Company's business.
On October 10, 1997, the Company received a binding
commitment letter from Green Mountain Capital L.P., whereby
it agreed to lend the Company up to $200,000 in the form of
a five-year term loan. The loan would bear interest at 12
percent per annum, would be repayable in monthly
installments over the five-year term, and would be secured
by a security interest in the Company's real and personal
property. In conjunction with the issuance of the notes,
Green Mountain Capital will receive warrants to purchase
100,000 shares of Common Stock, at an exercise price of
$1.00 per share, subject to certain anti-dilution
provisions. (The prior warrants granted to Green Mountain
Capital to purchase 20,000 shares at $3.375 will be canceled
upon the issuance of this new warrant.) The right to
exercise these warrants begins two years from the date of
the loan, and expires the earlier of five years after the
full repayment of the loan and existing notes or seven years
from the date of the loan.
On July 18, 1997, the Company completed a
sale-leaseback transaction, involving its factory
headquarters and a portion of its property located in
Shelburne, Vermont. This financing replaced the Company's
mortgage and line of credit agreement with the Vermont
<PAGE>
National Bank. The Company received approximately $5.9
million in cash, of which approximately $3.3 million was
used to pay off the existing mortgage with the Vermont
National Bank. The balance, approximately $2.6 million, was
used for general working capital purposes, to pay down a
$600,000 balance on the Company's line of credit (which was
retired as the result of the termination of the original
mortgage loan), and transaction costs of $591,000 associated
with the sale-leaseback. The lease obligation, secured by
the business assets of the Company, is payable on a
twenty-year amortization schedule through July 2017. The
transaction was accounted for under the financing method in
accordance with Statement of Financial Accounting Standard
No. 98, "Accounting for Leases."
As of June 30, 1997, the Company had a $1,000,000
revolving line of credit from a bank, which was terminated
on July 18, 1997, pursuant to the Company's sale-leaseback
transaction.
On December 26, 1995, Green Mountain Capital L.P.
entered into an agreement with the Company to lend up to
$500,000 in the form of five-year term notes. As of June
30, 1997, the entire $500,000 had been borrowed. The notes
bear interest at 12% per annum and are repayable in monthly
installments through December 2000. The notes are secured
by a subordinated security interest in the Company's
personal property. A commitment fee on any undrawn portion
of the facility of 2% per annum is due monthly. In
conjunction with the issuance of the notes, Green Mountain
Capital received warrants to purchase 20,000 shares of
Common Stock at an exercise price of $3.375 per share. The
right to exercise these warrants begins December 26, 1997
and expires the earlier of December 26, 2002 or five years
after full repayment of the loan. As of September 30, 1997,
the entire $500,000 had been borrowed, and $368,776 was
outstanding as of that date. As of September 30, 1996,
$200,000 had been borrowed, and $170,000 was outstanding as
of that date. In the event that the Company borrows
additional funds from Green Mountain Capital under the
October 10, 1997 binding commitment letter discussed above,
the aforementioned warrants to purchase 20,000 shares of
Common stock will be canceled.
Related Party Transaction
On October 10, 1997, subsequent to his resignation as
President of the Company, the Company entered into a
consulting agreement with R. Patrick Burns, which began on
November 1, 1997 and will continue through October 31, 1999.
In consideration of the consulting services to be provided,
the Company will pay fees of $75,000 per year, payable
monthly, as well as the forgiveness of amounts due the
<PAGE>
Company totaling $116,818. Additionally, stock options
granted to Mr. Burns which would have vested as of August 1,
1998, had Mr. Burns remained continuously employed by the
Company, vested as of November 1, 1997.
Management's Discussion and Analysis
The following discussion and analysis provides
information that the Company's management believes is
relevant to an assessment and understanding of the Company's
results of operations and financial condition. The
discussion should be read in conjunction with the financial
statements and footnotes which appear elsewhere in this
report, as well as the 10-KSB filing for the fiscal year
ending June 30, 1996. This report contains forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1993 and Section 21E of the Securities Exchange Act
of 1934. The words "believe," "expect," "anticipate,"
"intend," "estimate," and other expressions which are
predictions of or indicate future events and trends and
which do not relate to historical matters identify forward-
looking statements. Such statements involve risks and
uncertainties that could cause actual results to differ
materially from those set forth in such forward-looking
statements. The Company undertakes no obligation to
publicly update or revise any forward-looking statement,
whether as a result of new information, future events or
otherwise.
Results of Operations
Comparison of the three-month periods ended September 30,
1997 and 1996.
Net revenues for the Company for the three-month period
ended September 30, 1997 totaled $2,942,000, a 0.6 percent
increase from net revenues of $2,924,000 for the three-month
period ended September 30, 1996. By business segment,
retail store revenues increased $325,000 , with new
locations in New York, New York and Freeport, Maine
providing additional sources of revenue. Wholesale revenues
rose $29,000, and licensing revenues rose $8,000. Direct
mail revenues decreased $65,000, due to smaller residuals
from a Mother's Day catalog with fewer circulated pages, as
compared to the prior year. Bear-Gram revenues declined by
$279,000.
Gross margin decreased to $1,728,000 for the quarter
ended September 30, 1997, from $1,749,000 for the quarter
ended September 30, 1996. As a percentage of net revenues,
gross margin decreased to 58.7 percent from 59.8 percent,
for the three months ended September 30, 1997, and 1996,
respectively.
<PAGE>
Selling expenses increased to $1,357,000 for the three-
month period September 30, 1997, from $1,207,000 for the
three-month period ended September 30, 1996. This $150,000
increase was attributable primarily to operating costs
related to the Company's stores in New York, New York and
Freeport, Maine, which were not in operation during the
prior fiscal year, as well as an increase in advertising
related to the Company's officially-licensed National
Football Leaguer teddy bears. Direct mail and promotional
advertising costs decreased in the quarter. As a percentage
of net revenues, selling expenses were 46.1 percent and 41.3
percent for the three months ended September 30, 1997, and
1996, respectively.
General and administrative expenses were $601,000 for
the quarter ended September 30, 1997, compared to $648,000
for the quarter ended September 30, 1996. Increased legal
fees were offset by reduced wages and a reduction in the
Company's sales tax accrual. As a percentage of net
revenues, general and administrative expenses were 20.4
percent and 22.2 percent for the three months ended
September 30, 1997, and 1996, respectively.
Interest expense increased to $160,000 for the quarter
ended September 30, 1997, from $110,000 for the quarter
ended September 30, 1996. Quarterly interest expenses are
anticipated to be higher in fiscal 1998 than in fiscal 1997,
due to the effects of the sale-leaseback of the Company's
headquarters in Shelburne, Vermont, which was effected on
July 18, 1997.
Due to its continuing loss position, the Company
recorded no tax benefit for its operating loss for the
quarter ended September 30, 1997, compared to a tax benefit
of $86,000 for the quarter ended September 30, 1996.
As a result of the foregoing factors, the net loss to
common stockholders totaled $399,000, or eight cents per
common share, for the quarter ended September 30, 1997,
compared to a net loss to common stockholders of $147,000,
or three cents per common share, for the quarter ended
September 30, 1996.
Liquidity and Capital Resources
The Company is operating without a working capital line
of credit facility, effective July 18, 1997. As such, the
Company's ability to fund its operations over the short-term
is dependent upon its success in achieving its business plan
for fiscal 1998 or obtaining additional financing. If the
Company is unsuccessful in achieving its business plan or
obtaining additional financing, its short-term liquidity may
<PAGE>
be adversely impacted, which could require a curtailment of
certain business activities that, in turn, could have a
material adverse effect on the Company's business.
As of September 30, 1997, the Company's cash position
increased to $779,000, from $442,000 at June 30, 1997.
Restricted cash balances at these dates were $359,000 and
$365,000, respectively. The largest component of restricted
cash at September 30, 1997 was a $300,000 certificate of
deposit pledged to URSA (VT) QRS-30, Inc. in connection with
the sale-leaseback transaction. The largest component of
restricted cash at June 30, 1997 was a $300,000 certificate
of deposit with the Vermont National Bank. Proceeds from
the sale-leaseback transaction more than offset the
repayment of the Company's mortgage loan with the Vermont
National Bank and a decrease in accounts payable.
Inventories increased to $3,441,000 at September 30,
1997, from $3,302,000 at June 30, 1997. The increase is
primarily the result of preparations for the upcoming
Fall/Holiday selling season. Accounts payable totaled
$1,813,000 at September 30, 1997, compared to $2,563,000 at
June 30, 1997. The decrease in accounts payable reflects
the payment of Mother's Day related advertising and
production-related invoices.
On October 10, 1997, the Company received a binding
commitment letter from Green Mountain Capital L.P., whereby
it agreed to lend the Company up to $200,000 in the form of
a five-year term loan. The loan would bear interest at 12
percent per annum, would be repayable in monthly
installments over the five-year term, and would be secured
by a security interest in the Company's real and personal
property. In conjunction with the issuance of the notes,
Green Mountain Capital will receive warrants to purchase
100,000 shares of Common Stock, at an exercise price of
$1.00 per share, subject to certain anti-dilution
provisions. (The prior warrants granted to Green Mountain
Capital to purchase 20,000 shares at $3.375 will be canceled
upon the issuance of this new warrant.) The right to
exercise these warrants begins two years from the date of
the loan, and expires the earlier of five years after the
full repayment of the loan and existing notes or seven years
from the date of the loan.
On July 18, 1997, the Company completed a
sale-leaseback transaction, involving its factory
headquarters and a portion of its property located in
Shelburne, Vermont. This financing replaced the Company's
mortgage and line of credit agreement with the Vermont
National Bank. The Company received approximately $5.9
million in cash, of which approximately $3.3 million was
used to pay off the existing mortgage with the Vermont
National Bank. The balance, approximately $2.6 million, was
<PAGE>
used for general working capital purposes, to pay down a
$600,000 balance on the Company's line of credit (which was
retired as the result of the termination of the original
mortgage loan), and transaction costs of $591,000 associated
with the sale-leaseback. The lease obligation, secured by
the business assets of the Company, is payable on a
twenty-year amortization schedule through July 2017. The
transaction was accounted for under the financing method in
accordance with Statement of Financial Accounting Standard
No. 98, "Accounting for Leases."
On July 12, 1996, the Company privately placed $550,000
of Series B convertible Preferred Stock. The 204,912 Series
B preferred shares, held of record by twelve shareholders,
are not entitled to any dividends or voting rights, but each
share was originally convertible into one share of the
Company's Common Stock at any time on or after July 12,
1997. Accompanying the issuance of the Preferred Stock were
warrants to purchase 204,912 shares of the Company's Common
at a price of $2.434 per share, exercisable between July 12,
1997 and July 12, 1999, subject to certain anti-dilution
provisions. In addition, finder's warrants for 10,245
common shares were issued with the same terms and
conditions. On July 18, 1997, as the result of a warrant
granted in conjunction with the sale-leaseback transaction,
the anti-dilution provisions of the Series B Preferred Stock
agreement were activated. Each share of Series B Preferred
Stock is now convertible into 1.85 shares of Common Stock.
Common shares issued as the result of the conversion of the
Series B Preferred Stock and/or the exercise of the warrant
shall be considered "restricted securities" and shall be
subject to certain registration rights. On liquidation,
dissolution, or winding up of the Company, holders of Series
B Preferred Stock are entitled to be paid on a pari passu
basis with any holders of Series A Preferred Stock.
On December 26, 1995, Green Mountain Capital L.P.
agreed to lend the company up to $500,000 in the form of
five-year term notes. As of June 30, 1997, the entire
$500,000 had been borrowed. The notes bear interest at 12
percent per annum, are repaid in monthly installments
through December 26, 2000, and are secured by a subordinated
security interest in the Company's personal property. In
conjunction with the issuance of the notes, Green Mountain
Capital received warrants to purchase 20,000 shares of
Common Stock, at an exercise price of $3.375 per share. The
right to exercise these warrants begins December 26, 1997,
and expires the earlier of December 26, 2002 or five years
after full repayment of the loan. In the event that the
Company borrows additional funds from Green Mountain Capital
under the October 10, 1997 binding commitment letter
discussed above, the aforementioned warrants to purchase
20,000 shares of Common stock will be canceled.
<PAGE>
Item 5. Other Information
On October 10, 1997 the Board of Directors of the
Company appointed Elisabeth B. Robert to the position of
President. Ms. Robert has previously served as the
Company's Chief Financial Officer since September, 1995, and
will also continue to serve in that role. Ms. Robert assumed
the title of President from R. Patrick Burns, who stepped
down from that position. Mr. Burns remains active as a
consultant to the Company and as a member of the Company's
Board of Directors.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
3.3 Restated Certificate of Incorporation of the Company
(filed with
the Securities and Exchange Commission as exhibit 3.3
to the
Company's 1996 Annual Report on Form 10-KSB (File No.
33-69898)
and incorporated herein by reference).
3.4 Amended and Restated By-Laws of the Company (filed
with the
Securities and Exchange Commission as exhibit 3.4 to
the Company's
10-QSB for the quarter ended December 31, 1996 and
incorporated
herein by reference).
4.1 Representative's Warrant issued to Barington Capital
Group, L.P.
upon the consummation of the initial public offering
of the
Company's Common Stock in November 1993 (filed with
the Securities
and Exchange Commission as exhibit 4.1 to the
Company's 1993 Annual
Report on Form 10-KSB (File No. 33-69898) and
incorporated herein
by reference).
4.2 Form of Common Stock Certificate (filed with the
Securities and
Exchange Commission as exhibit 4.2 to the Company's
Registration
Statement on Form SB-2 (File No. 33-69898) and
incorporated herein
by reference).
<PAGE>
4.3 Form of Warrant, issued in connection with the private
placement of
204,912 shares of the Company's Series B Convertible
Preferred
Stock (filed with the Securities and Exchange
Commission as exhibit
4.3 to the Company's 1996 Annual Report on Form 10-KSB
(File No.
33-69898) and incorporated herein by reference).
4.4 Form of Subscription Agreement issued in connection
with the
private placement of 204,912 shares of the Company's
Series B
Convertible Preferred Stock (filed with the
Securities and Exchange
Commission as exhibit 4.4 to the Company's 1996 Annual
Report on
Form 10-KSB (File No. 33-69898) and incorporated
herein by
reference).
4.5 Waiver of Joan H. Martin, dated April 12, 1996, issued
in
connection with waiver of accrued dividends on Series
A Preferred
Stock (filed with the Securities and Exchange
Commission as exhibit
4.5 to the Company's 1996 Annual Report on Form 10-KSB
(File No.
33-69898) and incorporated herein by reference).
4.6 Warrant to purchase 43,826.087 shares of the Company's
Common
Stock, dated April 12, 1996, issued in connection with
Joan H.
Martin's waiver of accrued dividends on Series A
Preferred Stock
(filed with the Securities and Exchange Commission as
exhibit 4.6
to the Company's 1996 Annual Report on Form 10-KSB
(File No.
33-69898) and incorporated herein by reference).
4.7 Stock Purchase Warrant Agreement, dated July 10, 1997,
between the
Company and URSA (VT) QRS-30, Inc., in conjunction
with the sale-
leaseback of the Company's headquarters in Shelburne,
Vermont
(filed with the Securities and Exchange Commission as
exhibit 4.6
to the Company's 1997 Annual Report on Form 10-KSB
(File No.
<PAGE>
33-69898) and incorporated herein by reference).
10.2 Stock warrants issued to Edmund H. Shea, Jr. IRA, Allan
Lyons and
William Maines in connection with the bridge financing
prior to the
initial public offering of the Company's Common Stock
in November
1993 (a form of which was filed with the Securities
and Exchange
Commission as exhibit 10.2 to the Company's
Registration Statement
on Form SB-2 (File No. 33-69898) and incorporated
herein by
reference).
10.10 Incentive Stock Option Plan adopted by the Company
on August 16,
1993, with form of Incentive Stock Option Agreement
(filed with the
Securities and Exchange Commission as exhibit 10.10 to
the
Company's Registration Statement on Form SB-2 (File
No. 33-69898)
and incorporated herein by reference).
10.11 Securities Purchase Agreement, dated June 10, 1987
between the
Company and VTB Investment Group and Joan Hixon Martin
(filed with
the Securities and Exchange Commission as exhibit
10.11 to the
Company's Registration Statement on Form SB-2 (File
No. 33- 69898)
and incorporated herein by reference).
10.12 Agreement, dated as of June 19, 1995, between the
Company and John
N. Sortino, providing the terms of Mr. Sortino's
separation
agreement with the Company (filed with the Securities
and Exchange
Commission as exhibit 10.12 to the Company's 10-KSB
for the
transition period ended June 30, 1995 and incorporated
herein by
reference).
10.14 Employment Agreement, dated November 1, 1993,
between the Company
and Spencer C. Putnam (filed with the Securities and
Exchange
Commission as exhibit 10.14 to the Company's
Registration Statement
<PAGE>
on Form SB-2 (File No. 33-69898) and incorporated
herein by
reference).
10.24 Amended 1993 Incentive Stock Option Plan of the
Company, amended as
of November 28, 1995 (filed with the Securities and
Exchange
Commission as exhibit 10.24 to the Company's 10-QSB
for the quarter
ended March 31, 1995 and incorporated herein by
reference).
10.25 Loan Agreement, dated December 26, 1995, between
Green Mountain
Capital, L.P. and the Company in connection with a
$500,000 Term
Loan (filed with the Securities and Exchange
Commission as exhibit
10.25 to the Company's 10-QSB for the quarter ended
December 31,
1995 and incorporated herein by reference).
10.26 Convertible Note, dated December 26, 1995, in the
principal amount
of $200,000, issued in connection with the $500,000
Term Loan of
Green Mountain Capital (filed with the Securities and
Exchange
Commission as exhibit 10.26 to the Company's 10-QSB
for the quarter
ended December 31, 1995 and incorporated herein by
reference).
10.27 Stock Purchase Warrant Agreement, dated December
26, 1995, in
connection with the $500,000 Term Loan of Green
Mountain Capital
(filed with the Securities and Exchange Commission as
exhibit 10.27
to the Company's 10-QSB for the quarter ended December
31, 1995 and
incorporated herein by reference).
10.28 Employment and Loan Agreements, dated June 30,
1996, between the
Company and R. Patrick Burns (filed with the Securities
and
Exchange Commission as exhibit 10.28 to the Company's
1996 Annual
Report on Form 10-KSB (File No. 33-69898) and
incorporated herein
by reference).
<PAGE>
10.29 Employment Agreement, dated July 1, 1996, between
the Company and
Elisabeth B. Robert (filed with the Securities and
Exchange
Commission as exhibit 10.29 to the Company's 1996
Annual Report on
Form 10-KSB (File No. 33-69898) and incorporated
herein by
reference).
10.30 Amended 1993 Incentive Stock Option Plan of the
Company, amended as
of November 22, 1996 (filed with the Securities and
Exchange
Commission as exhibit 10.30 to the Company's 10-QSB
for the quarter
ended December 31, 1996 and incorporated herein by
reference).
10.31 Non-Employee Directors Stock Option Plan adopted
by the Company on
November 22, 1996 (filed with the Securities and
Exchange
Commission as exhibit 10.31 to the Company's 10-QSB
for the quarter
ended December 31, 1996 and incorporated herein by
reference).
10.32 Employment Agreement, dated as of July 1, 1996,
between the Company
and Spencer C. Putnam (filed with the Securities and
Exchange
Commission as exhibit 10.32 to the Company's 10-QSB
for the quarter
ended December 31, 1996 and incorporated herein by
reference).
10.33 Convertible Note, dated November 19, 1996, in the
principal amount
of $300,000, issued in connection with the $500,000
Term Loan of
Green Mountain Capital (filed with the Securities
and Exchange
Commission as exhibit 10.33 to the Company's 10-QSB
for the quarter
ended December 31, 1996 and incorporated herein by
reference).
10.34 Lease Agreement, dated October 24, 1996, in
connection with the
Company's lease of 2,600 square feet at 538 Madison
Avenue in New
York, New York(filed with the Securities and Exchange
Commission as
<PAGE>
exhibit 10.29 to the Company's 1997 Annual Report on
Form 10-KSB
(File No. 33-69898) and incorporated herein by
reference).
10.35 Consulting Agreement, dated December 31, 1996,
between the Company
and Venture Management Group, Inc., regarding the
provision of
consulting services to the Company (filed with the
Securities and
Exchange Commission as exhibit 10.29 to the Company's
1997 Annual
Report on Form 10-KSB (File No. 33-69898) and
incorporated herein
by reference).
10.36 Lease Agreement, dated January 17, 1997, in
connection with the
Company's lease of 6,000 square feet at 55 Main Street
in Freeport,
Maine (filed with the Securities and Exchange
Commission as exhibit
10.29 to the Company's 1997 Annual Report on Form 10-
KSB (File No.
33-69898) and incorporated herein by reference).
10.37 Lease Agreement, dated July 10, between the
Company and URSA (VT)
QRS-30, Inc., regarding the sale-leaseback of the
Company's
headquarters in Shelburne, Vermont (filed with the
Securities and
Exchange Commission as exhibit 10.29 to the Company's
1997 Annual
Report on Form 10-KSB (File No. 33-69898) and
incorporated herein
by reference).
10.38 Binding commitment letter, dated October 10, 1997,
from Green
Mountain Capital LP, in connection with a $200,000
term loan (filed
with the Securities and Exchange Commission as exhibit
10.29 to the
Company's 1997 Annual Report on Form 10-KSB (File No.
33-69898) and
incorporated herein by reference) .
10.39 Agreement, dated as of October 10, 1997, between
the Company and R.
Patrick Burns, providing the terms of Mr. Burns'
separation and
<PAGE>
consulting agreement with the Company (filed herein).
Reports on Form 8-K
Notice of the Company's sale-leaseback transaction
with URSA (VT) QRS 12-30, Inc. involving the sale of its
manufacturing and headquarters building and a portion of its
real estate, and the lease with URSA by which the Company
leases back the building and real property sold, was filed
on Form 8-K with the Securities and Exchange Commission on
August 4, 1997.
Signatures
In accordance with the requirements of the Exchange
Act, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
The Vermont Teddy Bear Co., Inc.
Date: November 14, 1997 /s/ Elisabeth B. Robert,
---------------------------
Elisabeth B. Robert,
Chief Executive Officer and
Chief Financial Officer
<PAGE>
EXHIBIT 10.39
October 8, 1997
Mr. R. Patrick Burns
The Vermont Teddy Bear Co., Inc.
2236 Shelburne Road
P.O. Box 965
Shelburne, Vermont 05482
Re: Consulting Agreement
Dear Pat:
This letter will confirm recent discussions concerning your
resignation as President and Chief Executive Officer, and
the attendant termination of your employment agreement with
The Vermont Teddy Bear Co., Inc. (the "Company"), and its
replacement with a consulting arrangement. As stated below,
all of the terms of this agreement are subject to the
approval of the Company's Board of Directors.
As you have agreed, your current employment agreement, dated
<PAGE>
as of June 30, 1996, shall terminate effective today,
October 8, 1997 (the "Effective date"), and as of the
Effective Date you shall resign as President and Chief
Executive Officer of the Company. Subject to continued
election by the Company's shareholder's, you shall remain on
the Company's Board of Directors. Additionally, as of the
Effective Date, you shall be engaged by the Company as a
consultant on the following terms:
1. Duties. As of the Effective Date, you shall be engaged
by the Company as a consultant and you will be available to
carry out consulting projects assigned to you by the Board
of Directors or by the Company's interim CEO or any new CEO
employed by the Company in the future. Apart from these
consulting activities, you shall have no other authority to
act for the Company.
2. Compensation. From the Effective Date until November
1, 1997, you shall be paid the salary that would have
otherwise been due under your current employment agreement.
As of November 1, 1997, your compensation as a consultant
shall be Seventy-Five Thousand Dollars ($75,000) per year,
payable monthly. The cost to the Company of your car and
term life insurance currently provided under your employment
agreement shall be deducted from your consulting fees. You
shall be responsible for any out of pocket expenses incurred
by you in connection with your consulting activities. As
additional compensation, the Company shall forgive the loan
made to you in the original amount of $116, 818.18, as of
June 30, 1997.
3. Stock Options. All of the stock options that have been
granted to you and previously vested shall remain vested.
Additionally, all of the stock options that have been
granted to you and, had you remained employed by the
Company, would have vested as of August 1, 1998, shall vest
immediately. In the event of a Change in Control, as
defined in your June 30, 1996 and your July 31, 1995
Employment Agreements, prior to January 1, 1998, all Nine
Hundred Thousand (900,000) stock options granted to you
shall vest according to the terms of your Stock Options
Agreements dated, June 3, 1997. As stated in the option
agreements, if these options are not exercised within three
(3) months of the termination of your employment with the
Company, they will become non-qualified stock options.
4. Covenant Not to Compete. While you are engaged as a
consultant to the Company, and for a period of two (2) years
thereafter, you agree that you will not directly or
indirectly, as officer, director, shareholder, employee,
consultant or agent engage in any plush business which
competes with the business of the Company, nor will you take
action to interfere with the business of the Company.
<PAGE>
5. Release. By execution of this letter, you hereby
release the Company and it directors, officers, employees,
and agents from all claims, losses or liabilities of any
kind which you might have arising out of your employment
with the Company, except claims that may arise under this
agreement.
6. Term. The terms of this agreement shall be in effect
for a period of two years, terminating on October 31, 1999.
In the event that the Company terminates this agreement
earlier, all of the compensation due to you under Section 2
above shall become immediately due and payable.
The terms of this agreement are subject to approval by the
Company's Board of Directors. If these terms are acceptable
to you and accurately reflect your own understanding of the
agreements between you and the Company on this matter,
please so indicate by signing in the space provided below.
Very Truly Yours,
The Vermont Teddy Bear Co., Inc.
/s/ Fred Marks
----------------------
Fred Marks, Chairman of the Board
AGREED AND ACCEPTED:
/s/ R. Patrick Burns
----------------------
R. Patrick Burns
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE SEPTEMBER 30, 1997 BALANCE SHEET
AND THE THREE MONTH STATEMENT OF OPERATIONS ENDED
SEPTEMBER 30, 1997 FOR THE VERMONT TEDDY BEAR CO., INC.
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PAGE>
<PERIOD-END> SEP-30-1997
<CASH> 778,666
<SECURITIES> 0
<RECEIVABLES> 73,958
<ALLOWANCES> 0
<INVENTORY> 3,440,529
<CURRENT-ASSETS> 5,095,445
<PP&E> 12,455,225
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<TOTAL-ASSETS> 15,715,158
<CURRENT-LIABILITIES> 3,099,356
<BONDS> 6,613,434
0
910,245
<COMMON> 259,105
<OTHER-SE> 4,932,407
<TOTAL-LIABILITY-AND-EQUITY> 15,715,158
<SALES> 2,941,704
<TOTAL-REVENUES> 2,941,704
<CGS> 1,214,041
<TOTAL-COSTS> 1,214,041
<OTHER-EXPENSES> 1,956,394
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152,479
<INCOME-PRETAX> (381,210)
<INCOME-TAX> 0
<INCOME-CONTINUING> (399,210)
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