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 March 31, 2000.
[ ] 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.)
6655 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)
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: 6,464,216 shares of Common Stock,
$.05 par value per share, as of March 31, 2000.
Transitional Small Business Disclosure Format (check one):
Yes ; No X .
<PAGE>
The Vermont Teddy Bear Co., Inc.
Index to Form 10-QSB
March 31, 2000
Page No.
Part I - Financial Information
Financial Statements
Balance Sheet as of March 31, 2000 3
Statements of Operations for the Three and Nine
Months ended March 31, 2000 4
Statements of Cash Flows for the Three and Nine
Months ended March 31, 2000 5
Notes to Financial Statements 6
Management's Discussion and Analysis 11
Part II - Other Information
Item 4. Submission of Matters to a Vote of Stockholders 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 23
</PAGE>
<TABLE>
THE VERMONT TEDDY BEAR CO., INC.
Balance Sheet
March 31, 2000
(Unaudited)
<S> <C>
ASSETS
Cash, cash equivalents(includes restricted $ 6,447,863
cash of $365,000)
Accounts receivable, trade 467,252
Inventories 3,366,583
Prepaid expenses and other current assets 647,892
Deferred income taxes 150,405
-----------
Total Current Assets 11,079,995
===========
Property and equipment, net 8,120,957
Deposits and other assets 939,201
Note receivable 35,000
-----------
Total Assets $20,175,153
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of:
Long-term debt $ -
Capital lease obligations 139,290
Accounts payable 2,574,076
Accrued expenses 993,552
Income taxes payable 100,000
----------
Total Current Liabilities 3,806,918
Long-term debt, net of current portion -
Capital lease obligations, net of current portion 5,424,618
Deferred income taxes 150,405
----------
Total Liabilities $9,381,941
Series C Convertible Redeemable Preferred Stock
Authorized 110 shares; 65.1 shares issued and
outstanding, $651,000 liquidation value. 455,748
Stockholders' Equity:
Preferred stock, $.05 par value:
Authorized 1,000,000 shares Series A; issued
And outstanding, 90 shares. 1,170,000
Authorized 375,000 shares Series B; 204,912
shares issued, No shares outstanding. -
Common stock, $.05 par value:
Authorized 20,000,000 shares: issued 6,487,236
shares, outstanding 6,464,216 shares. 324,362
Additional paid-in capital 11,562,308
Treasury stock at cost: 23,020 shares. (117,500)
Accumulated deficit (2,601,706)
-----------
Total Stockholders' Equity $10,337,464
Total Liabilities and Stockholders' Equity $20,175,153
===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
THE VERMONT TEDDY BEAR CO., INC.
Statements of Operations
For the Three and Nine Months Ended March 31, 2000 and 1999
(Unaudited)
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
03/31/00 03/31/99 03/31/00 03/31/99
----------- ---------- ----------- ----------
Net Revenues $10,921,316 $7,280,441 $23,444,113 $15,132,190
Cost of Goods Sold 3,818,232 2,638,783 8,874,481 5,766,838
----------- ---------- ----------- ----------
Gross Profit 7,103,084 4,641,658 14,569,632 9,365,352
Selling, General and Administrative Expenses:
Selling Expenses 4,089,403 2,486,568 8,620,739 5,521,599
General and
Administrative Expenses 1,229,566 821,241 2,879,551 2,218,590
----------- ---------- ----------- ----------
5,318,969 3,307,809 11,500,290 7,740,189
----------- ---------- ----------- ----------
Operating Income 1,784,115 1,333,849 3,069,342 1,625,163
Interest Income 55,628 23,296 126,648 43,512
Interest Expense (132,026) (154,471) (419,210) (466,656)
Other Income 101 150 15,816 1,116
----------- ---------- ----------- ----------
Income Before Income
Taxes 1,707,818 1,202,824 2,792,596 1,203,135
Income Tax Provision (91,644) - (91,644) -
Net Income 1,616,174 1,202,824 2,700,952 1,203,135
Series A Preferred
Stock Dividends (18,000) (18,000) (54,000) (54,000)
Series C Preferred Stock
Dividends (9,000) (9,000) (27,000) (15,000)
Accretion of Original Issue
Discount in connection
with Series C preferred
stock warrants (13,623) (13,623) (40,869) (22,705)
----------- ---------- ----------- ---------
Net Income-Common
Stockholders 1,575,551 1,162,201 2,579,083 1,111,430
=========== ========== =========== =========
Basic Net Income Per
Common Share $0.24 $0.21 $0.41 $0.21
=========== ========== =========== ==========
Diluted Net Income Per
Common Share $0.18 $0.16 $0.30 $0.17
========== ========== =========== ==========
Weighted Average Number of
Common Shares Outstanding 6,457,958 5,516,160 6,316,316 5,297,012
========== ========== =========== ==========
Weighted Average Number of
Diluted Common Shares
Outstanding 8,678,471 7,175,489 8,572,840 6,532,918
========== ========== =========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
THE VERMONT TEDDY BEAR CO., INC.
Statements of Cash Flows
For the Nine Months Ended March 31, 2000 and 1999
(Unaudited)
<S> <C> <C>
2000 1999
---------- ----------
Cash flows from operating activities
Net Income $2,700,952 $1,203,135
Adjustments to reconcile net income to net cash
provided by(used for) operating activities:
Depreciation and amortization 620,016 693,640
Gain/Loss on disposal of fixed assets (958) 29,315
Changes in assets and liabilities:
Accounts receivable,trade (128,967) 15,707
Inventories (1,330,509) (26,797)
Prepaid and other current assets (177,964) (129,854)
Deposits and other assets 24,917 (97,105)
Accounts payable (29,033) 878,238
Accrued expenses and other liabilities 183,059 (76,962)
Income Taxes 65,000 -
---------- ----------
Net cash provided by operating activities 1,926,513 2,489,317
Cash flows from investing activities:
Purchase of property and equipment (567,781) (124,878)
Proceeds from sale of fixed assets 24,201 1,751
Note Receivable 22,500 22,500
---------- ----------
Net cash used for investing activities (521,080) (100,627)
Cash flows from financing activities:
Payments of short-term debt - (45,603)
Payments of long-term debt (329,946) (186,980)
Principal payments on capital lease obligations (184,274) (167,234)
Issuance of common stock, exercise of stock options 183,511 44,848
Issuance of common stock, Series B warrant exercise 30,656 -
Issuance of preferred stock - 600,000
Purchase of Treasury Stock - (10,676)
---------- ----------
Net cash provided by(used for) financing activities (300,053) 234,355
---------- ----------
Net increase in cash and cash equivalents 1,105,380 2,623,045
Cash and cash equivalents, beginning of period 5,342,483 1,527,052
---------- ----------
Cash and cash equivalents, end of period $6,447,863 $4,150,097
========== ==========
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest 414,860 465,081
Cash paid for taxes 47,212 -
Supplemental Disclosures of Non-cash Investing and Financing Activities:
Conversion of preferred stock to common stock 1,397 8,848
Series B Warrant exercise for common stock 524,164 -
The accompanying notes are an integral part of these financial statements.
</TABLE>
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, 1999, included in the Company's filing with the SEC on Form 10-KSB. The
Company's sales are seasonal in nature 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.
Earnings Per Share
In accordance with SFAS No. 128, Earnings Per Share, basic and diluted net
income (loss) per common share is calculated by dividing net income (loss) by
the weighted number of common shares outstanding for all periods presented.
SFAS No. 128 establishes standards for computing and presenting earnings per
share and applies to entities with publicly held common stock or potential
common stock. The Company has applied the provisions of SFAS No. 128 and Staff
Accounting Bulletin (SAB) No. 98 retroactively to all periods presented.
The following table reconciles the weighted average common shares
outstanding to the shares used in the computation of basic and diluted common
shares outstanding:
Three Months Ended Nine Months Ended
03/31/00 03/31/99 03/31/00 03/31/99
--------------------- -------------------
Weighted average number
of shares used in basic
EPS calculation 6,457,958 5,516,160 6,316,316 5,297,012
Add: Common Shares
Issuable Upon Exercise of:
Stock Options 1,656,257 763,082 1,656,757 901,036
Warrants 738,109 1,361,801 738,109 1,312,671
Convertible Pref Stock 619,947 657,105 619,947 657,105
Total Common
Shares Issuable 3,014,313 2,781,988 3,014,813 2,870,812
Less: Shares repurchased under
Treasury Stock method (793,800) (1,122,659) (758,289) 1,634,906
Weighted average number of shares
used in diluted EPS calculation 8,678,471 7,175,489 8,572,840 6,532,918
========= ========= ========= =========
Diluted weighted average shares outstanding for the three and nine months
ended March 31, 2000 exclude 10,500 and 10,000 potential common shares because
the price of the options was greater than the average market price of the common
stock for those periods respectively. Diluted weighted average shares
outstanding for the three and nine months ended March 31, 1999 exclude 86,130
and 102,255 potential common shares and warrants because the price of the
options and warrants was greater than the average market price of the common
stock for that period.
New Accounting Pronouncements
The Securities and Exchange Commission released Staff Accounting Bulletin
(SAB) No. 101, Revenue Recognition in Financial Statements, on December 3, 1999.
This SAB provides additional guidance on the accounting for revenue recognition,
including both broad conceptual discussions as well as certain industry-specific
guidance. The guidance is effective for the first quarter of fiscal 2000, and
would be adopted by recording the effect of any prior revenue transaction
affected as a "cumulative effect of a change in accounting principle" as of
January 3, 2000. The Company does not expect this new guidance to have a
material effect on the Company's results of operations or financial position.
Capitalized Software Costs
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use, requiring computer software costs
associated with internal use software to be expensed as incurred until certain
capitalization criteria are met. The Company adopted SOP 98-1 beginning July 1,
1999. The adoption of this Statement did not have a material impact on the
Company's financial position or results of operations.
Start-up Activities
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, Reporting on Costs of Start-Up Activities,
requiring all costs associated with pre-opening, pre-operating, and organization
activities to be expensed as incurred. The Company adopted SOP 98-5 beginning
July 1, 1999. The adoption of this Statement did not have a material impact on
the Company's financial position or results of operations.
Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and
displaying comprehensive income and its components. The Company adopted
the statement in its quarter ending March 31, 1998. The Company does
not have any other items of comprehensive income. As such,
comprehensive income is equal to net income as presented in the
consolidated statements of operations.
Income Taxes
The Company accounts for income taxes in accordance with the
Statement of Financial Accounting Standards (SFAS) 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. In view of the Company's previous operating results, a
valuation allowance has been provided to fully reserve its deferred tax
assets due to the uncertainty of their realization. If the Company is
able to achieve sufficient profitability to realize all or a portion of
its deferred assets, the valuation allowance will be reduced through a
credit to the income tax provision in future periods.
Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Inventories
Inventories are stated at the lower of cost or market using the
first-in, first-out method. Inventories consisted of the following at
March 31, 2000:
Raw materials $ 500,064
Work in process 290,815
Finished goods 2,575,704
----------
$3,366,583
==========
Debt and Borrowings
On December 31, 1997, the Company borrowed $200,000 from Green
Mountain Capital L.P. in the form of a five-year term note. The note
bears interest at 12 percent per annum, is repayable in monthly installments
through December 31, 2002, and is secured by a security interest in the
Company's real and personal property. In conjunction with the issuance of the
notes, Green Mountain Capital received warrants to purchase 100,000 shares of
Common Stock at an exercise price of $1.00 per share, subject to certain anti-
dilution provisions. On November 5, 1999, the loan together with all other
remaining indebtedness to Green Mountain Capital in the amount of $259,000 was
paid in full and the warrant was exercised.
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. The Company entered into the sale-leaseback to pay off a
maturing mortgage, pay down a line of credit, and improve its liquidity. 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
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."
Segment Information
Operating segments represent components of the Company's business that are
evaluated regularly by key management in assessing performance and resource
allocation. The Company has determined that its reportable segments consist of
Bear-Gram Gift Delivery Service, Retail Operations, and Wholesale/Corporate
(including licensing).
The Bear-Gram delivery service involves sending personalized teddy bears
directly to recipients for special occasions such as birthdays, anniversaries,
weddings, and new births, as well as holidays such as Valentine's Day,
Christmas, and Mother's Day. Bear-Gram orders are placed through the toll free
number, on-line, or through the catalog.
The Company actively promotes family tours of its teddy bear factory
and store at the factory location in Shelburne, located ten miles south of
Burlington, Vermont. In an effort to make a visit to the factory more
entertaining and draw additional traffic, the Company has implemented the
Make-A-Friend-For-Life bear assembly area, where visitors can participate
in the creation of their own teddy bear.
During its fiscal year 1998, the Company began pro-actively developing
opportunities in the corporate affinity market and certain wholesale markets as
a business segment.
Bear-Gram Retail Wholesale/
Service Operations Corporate
--------- ---------- ----------
THREE MONTHS
ENDED 03/31/00
Net Revenues $10,509,310 $ 321,859 $ 90,147
Cost of Goods Sold 3,676,496 134,539 7,197
----------- ---------- ----------
Gross Margin 6,832,814 187,320 82,950
Gross Margin % 65.0% 58.2% 92.0%
THREE MONTHS
ENDED 03/31/99
Net Revenues $6,929,629 239,813 $110,999
Cost of Goods Sold 2,512,941 88,786 37,056
---------- ---------- ---------
Gross Margin 4,416,688 151,027 73,943
Gross Margin % 63.7% 63.0% 66.6%
Bear-Gram Retail Wholesale/
Service Operations Corporate
--------- ---------- ----------
NINE MONTHS
ENDED 03/31/00
Net Revenues $19,078,546 $2,219,266 $2,146,301
Cost of Goods Sold 6,760,582 839,502 1,274,397
----------- ---------- ----------
Gross Margin 12,317,964 1,379,764 871,904
Gross Margin % 64.6% 62.2% 40.6%
NINE MONTHS
ENDED 03/31/99
Net Revenues $12,623,928 $1,932,867 $575,395
Cost of Goods Sold 4,670,775 813,131 282,932
----------- ---------- --------
Gross Margin 7,953,153 1,119,736 292,463
Gross Margin % 63.0% 57.9% 50.8%
Revenues from individual customers, revenues between business segments,
and revenues, operating profit and identifiable assets of foreign operations
are not significant.
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, 1999. 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 March 31, 2000 and 1999.
Net revenues for the three month period ended March 31, 2000 totaled
$10,921,000, a 50.0 percent increase from net revenues of $7,280,000 for the
three-month period ended March 31, 1999. By business segment, Bear-Gram gift
delivery service revenues, which include radio, internet, and direct mail
revenues, rose $3,578,000. The increase is attributable to the expansion of the
Company's direct response radio advertising campaign into new markets around the
country and increased sales from the Company's www.vermontteddybear.com web-
site. Net revenues from the wholesale/corporate segment, which includes
licensing revenues, decreased $21,000 as the Company bought back $102,000 of
inventory from one of its wholesale customers, Zany Brainy, Inc., to sell
through the Company's Shelburne, Vermont retail location. Retail revenues at
the Company's Shelburne, Vermont factory retail location increased $82,000.
Gross margin increased to $7,103,000 for the quarter ended March 31, 2000,
from $4,642,000 for the quarter ended March 31, 1999. As a percentage of net
revenues, gross margin increased to 65.0 percent from 63.8 percent for the
three-month periods ended March 31, 2000, and 1999. The increase in gross
margin percent resulted primarily from the increased revenues and higher margins
in the Bear-Gram segment as the Company introduced products with higher unit
margins. These higher margins were partially offset by a lower gross margin
percent in the retail segment due to the product mix sold. The wholesale/
corporate gross margin for the quarter does not reflect usual gross margins, but
was skewed by an inventory buyback from Zany Brainy, Inc. of product they
purchased in the previous quarter. The wholesale/corporate gross margin without
the buyback was 65.3 percent which compares to the three month period ended
March 31, 1999 of 66.6 percent.
Selling expenses increased to $4,089,000 for the three-month period March
31, 2000, from $2,487,000 for the three-month period ended March 31, 1999. This
$1,602,000 increase was attributable to an increase in Bear-Gram advertising
costs, which includes radio, catalog, Internet and print costs, of $932,000,
increases to call center and customer service costs of $605,000, increases to
design and selling costs associated with the Company's expanded wholesale/
corporate business segment of $34,000 and increases to retail operations costs
of $31,000. Selling expenses as a percentage of revenues were 37.4 percent
and 34.2 percent for the three months ended March 31, 2000 and 1999
respectively.
General and administrative expenses were $1,230,000 for the quarter ended
March 31, 2000, compared to $821,000 for the quarter ended March 31, 1999. This
increase to general and administrative costs was primarily due to officer and
employee bonus accruals of $210,000, increased order processing fees from higher
net revenues of $99,000, increased Information Technology support costs of
$50,000, and increased accounting and consulting fees of $16,000. General and
administrative expenses as a percentage of net revenues were 11.3 percent for
the three months ended March 31, 2000 and March 31, 1999.
The Company has provided approximately $91,000 for estimated federal income
taxes for the three months ended March 31, 2000 based on the year to date
financial results. There was no income tax provision during the same periods of
1999.
As a result of the foregoing factors, net income to common stockholders
totaled $1,576,000 for the quarter ended March 31, 2000, compared to a net
income to common stockholders of $1,162,000, for the quarter ended March 31,
1999.
Comparison of the nine-month periods ended March 31, 2000 and 1999.
Net revenues for the nine month period ended March 31, 2000 totaled
$23,444,000, a 54.9 percent increase from net revenues of $15,132,000 for the
nine month period ended March 31, 1999. By business segment, Bear-Gram gift
delivery service revenues, which include radio, internet, and direct mail
revenues, rose $6,455,000. The increase is attributable to the expansion of the
Company's direct response radio advertising campaign into new markets around the
country and increased sales from the Company's www.vermontteddybear.com web-
site. Net revenues from the wholesale/corporate segment, which includes
licensing revenues, increased $1,571,000 as the Company added several new
customers in the corporate affinity market and increased sales to its largest
wholesale customer, Zany Brainy, Inc. Retail revenues increased $286,000.
Increases in revenue at the Shelburne, Vermont factory retail location of
$488,000 more than offset a decrease of $202,000 due to the closing of the
company's satellite retail stores in Freeport, Maine and North Conway, New
Hampshire, which were in operation during a portion of the nine months ended
March 31, 1999.
Gross margin increased to $14,570,000 for the nine months ended March 31,
2000, from $9,365,000 for the nine months ended March 31, 1999. As a percentage
of net revenues, gross margin increased to 62.1 percent from 61.9 percent for
the nine month periods ended March 31, 2000, and 1999. Increases in gross profit
margin percent resulted primarily from the introduction of new products with
higher unit margins in both the Bear-Gram and Retail segments. These increases
were partially offset by decreases in gross margin percent resulting primarily
from increased wholesale/corporate segment revenues at a lower margin.
Selling expenses increased to $8,621,000 for the nine month period March
31, 2000, from $5,522,000 for the nine month period ended March 31, 1999. This
$3,099,000 increase was primarily due to increased Bear-Gram advertising costs,
which includes radio, catalog, Internet and print costs, of $2,079,000,
increased customer service and call center costs of $887,000, and increases to
design and selling costs associated with the Company's expanded wholesale/
corporate business segment of $103,000. The Shelburne retail operation
increases of $169,000 were offset by decreases in the costs associated with
closing the Company's satellite retail stores of $138,000. Selling expenses as
a percentage of revenues were 36.8 percent and 36.5 percent for the nine months
ended March 31, 2000 and 1999, respectively.
General and administrative expenses were $2,880,000 for the nine months
ended March 31, 1999, compared to $2,219,000 for the nine months ended March 31,
1999. This increase to general and administrative costs was primarily due to
officer and employee bonus accruals of $210,000, increased order processing fees
resulting from higher net revenues of $181,000, increased Information Technology
support costs of $113,000, increased accounting and consulting fees of $68,000,
and severance costs associated with the departure of Spencer Putnam, former Vice
President of Operations of $57,000. Due to increased sales, general and
administrative expenses decreased as a percentage of net revenues to 12.3
percent for the nine months ended March 31, 2000, from 14.7 percent for the nine
months ended March 31, 1999.
The Company has provided approximately $91,000 for estimated federal income
taxes for the nine months ended March 31, 2000 based on the year to date
financial results. There was no income tax provision during the same periods of
1999.
As a result of the foregoing factors, net income to common stockholders
totaled $2,579,000, for the nine months ended March 31, 2000, compared to a net
income to common stockholders of $1,111,000, for the nine months ended March 31,
1999.
Liquidity and Capital Resources
As of March 31, 2000, the Company's cash position increased to $6,448,000,
from $5,342,000 at June 30, 1999. Restricted cash balances at these dates were
$365,000 and $363,000, respectively. The largest component of restricted cash
at March 31, 2000 and June 30, 1999 was a $300,000 certificate of deposit
required in connection with the Company's sale-leaseback transaction on July 18,
1997. Cash increases provided by operating income, issuances of common stock
and a decrease in accrued expenses were partially offset by increases in
inventories, purchases of equipment, and payments on the long term debt.
Inventories increased as a result of quantities of materials and teddy bear
outfits and accessories imported from overseas to maintain sufficient inventory
levels associated with increased net revenues. The increase in payment of long
term debt is attributed to the early retirement of debt owed to Green Mountain
Capital. On November 5, 1999, the loan together with all other remaining
indebtedness to Green Mountain Capital in the amount of $259,000 was paid in
full.
On November 3, 1998, the Company closed on a private placement of
$600,000 of its Series C Convertible Redeemable Preferred Stock ("Series C
Preferred Stock") to an investor group lead by The Shepherd Group LLC.
Accompanying the Series C Preferred Stock are warrants to purchase 495,868
shares of the Company's Common Stock at an exercise price of $1.05 per share,
which will expire seven years from the date of issuance. In connection with the
issuance of the Series C Preferred Stock, a warrant to purchase 42,500 shares of
the Company's Common Stock was issued at an exercise price of $1.05 to the
Company's lessor in the sale-leaseback transaction. Because of the mandatory
redemption provision, the Series C Preferred Stock net of the value of the
warrants has been classified as long term debt in the accompanying balance
sheet. The Company has valued the warrants using the Black Scholes valuation
model. The value of $272,449 was applied as a discount to the face value of the
Series C Preferred Stock on the Company's balance sheet. The Company will
accrete this discount, with charges to retained earnings over a five year
period.
The following table shows the shares and dollar amounts of changes to the
Series C Preferred Stock Account:
Shares Amount
Issuance of Series C Preferred Stock 60 $ 600,000
Less: Discount related to Warrant Issuance $ (272,449)
Add: Series C Preferred Stock Dividend 5.1 $ 51,000
Add: Accretion of Discount Related to
Warrant Issuance $ 77,197
----------
$ 455,748
==========
Each of the shares of Series C Preferred Stock has a liquidation value of
$10,000 per share, and is convertible into 9,523 shares of the Company's Common
Stock. The Series C Preferred Stock requires redemption upon the tenth
anniversary of its issuance, with both the Company and the Series C Preferred
stockholders having call and put rights, respectively, beginning on the fifth
anniversary of issuance. The Series C Preferred stock carries voting rights on
an as-converted basis, and, as a class, has the right to elect two members to
the Company's Board of Directors. Both the Series C Preferred Stock and the
accompanying warrants carry certain anti-dilution provisions. The Series C
Preferred Stock has a cumulative preferred dividend of six percent per annum,
payable quarterly. As of March 31, 2000, $51,000 of dividends were accrued.
The dividends are required to be paid in additional shares of Series C
Preferred Stock for the first two and one-half years after issuance, and
thereafter may be paid in cash or additional shares of Series C Preferred Stock,
at the Company's option.
The Company believes that its existing cash and cash equivalent balances,
together with funds generated from operations, will be sufficient to finance the
Company's operations for at least the next twelve months.
Contingencies
On October 24, 1996, the company entered into a ten-year lease for 2,600
square feet on Madison Avenue in New York City. On December 7, 1997, the
Company's 538 Madison Avenue location was closed due to structural problems at
neighboring 540 Madison Avenue. On December 16, the Company announced that it
was permanently closing that retail location. The City of New York deemed the
538 Madison Avenue building uninhabitable from December 8, 1997 to April 9,
1998, and the Company has not made any rent payments on the lease since
December, 1997. On December 24, 1998, after the Company terminated the lease on
written notice to the landlord, the Company received a notice from its landlord
of 538 Madison Avenue alleging that it was in default under the lease for
failure to resume occupancy, and demand for back rent for the period July 8,
1998 to December 31, 1998 in the amount of $144,355. Further on January 4, 1999
the Company received a demand to resume rent payments beginning January 1999.
The Company disputes the landlord's position and believes it is not obligated to
resume occupancy or pay rent under the lease. As a result, on May 25, 1999, the
Company commenced action in the Supreme Court of the State of New York, County
of New York against 538 Madison Realty Company. The action seeks breach of
contract damages and a declaration that the contract at issue, the former lease
between the parties, has been terminated. The landlord moved to dismiss the
action based on purported documentary evidence, the lease, itself. That motion
was denied by order entered April 12, 2000. The parties have unsuccessfully
attempted to resolve their disputes and are presently engaged in discovery. The
Company has accrued management's estimated cost of $220,000 to settle this
contingency, but no assurance can be given that this dispute can be settled for
this amount. In the event that the Company is not successful in its suit
against 538 Madison Realty Company, the remaining amount owed under the lease
over its remaining term at face value is $2,825,000.
On July 15, 1998, the Company filed a lawsuit against Tyco Industries,
Inc., entitled The Vermont Teddy Bear Co., Inc. vs. Tyco Industries, Inc., in
the United States District Court for the Northern District of New York, alleging
that Tyco failed to make minimum royalty payments totaling $300,000 as required
by its contract with the Company dated September 11, 1995. Tyco denied liability
for the minimum royalties in its answer to the Company's complaint and filed a
counter claim for unspecified relief. The Company has denied any liability on
the counter claim and is vigorously pursuing this claim to collect amounts due,
however no assurances can be made that the amounts will be received from Tyco.
On January 10, 2000, motions for summary judgement by the Company and Tyco were
denied and the case will be scheduled for a trial of disputed factual issues.
No trial date is set. The Company recorded $125,000 as a receivable in 1997 for
the second installment of royalties owed which is included in other assets as of
March 31, 2000 in the accompanying financial statements. At that time, the
Company had no notice or knowledge that payment of the royalty was disputed by
Tyco. After notice of a dispute, the Company did not record any further
receivables.
Year 2000 Disclosure
The Company has been addressing computer software modifications or
replacements to enable transactions to process properly in the year 2000. Key
financial, information processing and operating systems, including accounting,
point of sale, phone, manufacturing, shipping and facilities systems were
updated to year 2000 compliance in the fiscal year ended June 30, 1999.
Virtually all of these modifications or replacements were made in order for
the Company to handle increased order volume in addition to enabling
transactions to process properly in the year 2000. Therefore, the cost of
changes directly related to addressing year 2000 compliance were not significant
to the financial statements.
As a contingency, the Company scheduled all raw materials and outfits
needed from offshore vendors for manufacture of its Valentine's Day product to
be delivered prior to December 31, 1999. The Company experienced no adverse
effects from the year 2000 change, however no assurance can be given with
respect to any potential adverse effects on the Company of any failure by other
parties due to future year 2000 related problems.
Item 4. Submission of Matters to a Vote of Stockholders
- --------------------------------------------------------
No matter was submitted to a vote of security holders during the second
quarter of the fiscal year covered by this report.
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).
3.5 Restated Certificate of Incorporation of the Company (filed with the
Securities and Exchange Commission as exhibit 3.5 to the Company's 10-QSB for
the quarter ended September 30, 1998 and incorporated herein by reference).
3.6 Amended and Restated By-Laws of the Company (filed with the Securities and
Exchange Commission as exhibit 3.6 to the Company's 10-QSB for the quarter ended
September 30, 1998 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).
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 4.7 to the Company's 1998 Annual Report 10-KSB
(File No. 33-69898 and incorporated herein by reference).
4.8 Stock Purchase Warrant Agreement, dated December 31, 1997, in connection
with the $200,000 Term Loan of Green Mountain Capital (filed with the Securities
and Exchange Commission as exhibit 4.8 to the Company's 10-QSB for the quarter
ended December 31, 1997, and incorporated herein by reference.)
4.9 Securities Purchase Agreement, dated September 25, 1998, between the
Company and The Shepherd Group LLC, in connection with the Company's private
placement of sixty shares of Series C Convertible Redeemable Preferred Stock
(filed with the Securities and Exchange Commission as exhibit 10.47 to the
Company's 1998 Annual Report 10-KSB (File No. 33-69898) and incorporated herein
by reference).
4.10 Amendment, dated November 3, 1998, between the Company and The Shepherd
Group LLC, to the Securities Purchase Agreement dated September 25, 1998 (filed
with the Securities and Exchange Commission as exhibit 4.10 to the Company's 10
QSB for the quarter ended September 30, 1998 and incorporated herein by
reference).
4.11 Form of Warrant, issued in connection with the private placement of the
Company's Series C Convertible Redeemable Preferred Stock (filed with the
Securities and Exchange Commission as exhibit 4.11 to the Company's 10-QSB for
the quarter ended September 30, 1998 and incorporated herein by reference).
4.12 Warrant to purchase 42,500 shares of the Company's Common Stock, issued to
URSA (VT) QRS 12-30, Inc., dated November 3, 1998, in connection with the
issuance of the Company's Series C Convertible Redeemable Preferred Stock (filed
with the Securities and Exchange Commission as exhibit 4.12 to the Company's 10-
QSB for the quarter ended December 31, 1998 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).
10.13 Employment Agreement and Loan Arrangement, dated July 31, 1995, between
the Company and R. Patrick Burns providing the terms of Mr. Burns' employment
with the Company as Chief Executive Officer (filed with the Securities and
exchange Commission as exhibit 10.13 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 on Form SB-2 (File No.33-69898)
and incorporated herein by reference).
10.17 Commitment Letter issued by Vermont National Bank, Burlington, Vermont,
dated September 18, 1995, in connection with a Commercial Mortgage Loan and a
Line of Credit Loan (filed with the Securities and Exchange Commission as
exhibit 10.17 to the Company's 10-KSB for the transition period ended June 30,
1995 and incorporated herein by reference).
10.18 Loan Agreement, dated September 26, 1995, between the Company and
Vermont National Bank regarding $3,500,000 Term Loan and $1,000,000 Line of
Credit Loan (filed with the Securities and Exchange Commission as exhibit 10.18
to the Company's 10-KSB for the transition period ended June 30, 1995 and
incorporated herein by reference).
10.19 Commercial Term Note, dated September 26, 1995, issued in connection with
the $3,500,000 Term Loan of Vermont National Bank (filed with the Securities and
Exchange Commission as exhibit 10.19 to the Company's 10-KSB for the transition
period ended June 30, 1995 and incorporated herein by reference).
10.20 Commercial Time Note, dated September 26, 1995, issued in connection with
the $1,000,000 Line of Credit Loan of Vermont National Bank (filed with the
Securities and Exchange Commission as exhibit 10.20 to the Company's 10-KSB for
the transition period ended June 30, 1995 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).
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-
9898) 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 exhibit 10.34 to the Company's
1997 Annual Report 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
10.35 to the Company's 1997 Annual Report 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 10.36 to the Company's 1997 Annual
Report 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 10.37 to
the Company's 1997 Annual Report 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 10.38 to the Company's 1997 Annual Report 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 consulting
agreement with the Company (filed with the Securities and Exchange Commission as
exhibit 10.39 to the Company's 10-QSB for the quarter ended September 30, 1997
and incorporated herein by reference).
10.40 Employment Agreement, dated December 3, 1997, between the Company and
Elisabeth B. Robert (filed with the Securities and Exchange Commission as
exhibit 10.40 to the Company's 10-QSB for the quarter ended December 31, 1997
and incorporated herein by reference).
10.41 Loan Agreement, dated December 31, 1997, between Green Mountain Capital,
L.P. and the Company, in connection with a $200,000 Term Loan (filed with the
Securities and Exchange Commission as exhibit 10.41 to the Company's 10-QSB for
the quarter ended December 31, 1997 and incorporated herein by reference).
10.42 Convertible Note, dated December 31, 1997, in the principal amount of
$200,000, issued in connection with the $200,000 Term Loan of Green Mountain
Capital (filed with the Securities and Exchange Commission as exhibit 10.42 to
the Company's 10-QSB for the quarter ended December 31, 1997 and incorporated
herein by reference).
10.43 Employment Agreement, dated March 13, 1998, between the Company and
Spencer C. Putnam (filed with the Securities and Exchange Commission as exhibit
10.43 to the Company's 10-QSB for the quarter ended March 31, 1998 and
incorporated herein by reference).
10.44 Employment Agreement, dated April 30, 1998, between the Company and
Robert D. Delsandro, Jr. (filed with the Securities and Exchange Commission as
exhibit 10.44 to the Company's 10-QSB for the quarter ended March 31, 1998 and
incorporated herein by reference).
10.45 Non-Binding Proposal and Management Agreement, dated May 21, 1998, between
the Company and The Shepherd Group LLC, in connection with the Company's private
placement of sixty shares of Series C Convertible Redeemable Preferred Stock
(filed with the Securities and Exchange Commission as Exhibits A and B to the
Company's definitive proxy statement for its Special Meeting of Stockholders
held September 11, 1998 and incorporated herein by reference).
10.46 Amendment to Employment Agreement, dated June 1, 1998, between the Company
and Elisabeth B. Robert (filed with the Securities and Exchange Commission as
exhibit 10.46 to the Company's 1998 Annual Report 10-KSB (File No. 33-69898) and
incorporated herein by reference).
10.47 Securities Purchase Agreement, dated September 25, 1998, between the
Company and The Shepherd Group LLC, in connection with the Company's private
placement of sixty shares of Series C Convertible Redeemable Preferred Stock
(filed with the Securities and Exchange Commission as exhibit 10.47 to the
Company's 10-QSB for the quarter ended September 30, 1998 and incorporated
herein by reference).
10.48 Amendment to Employment Agreement, dated June 11, 1999, between the
Company and Elisabeth B. Robert (filed as exhibit 10.48 to the Company's 1999
Annual Report 10-KSB and incorporated herein by reference).
24 Power of Attorney (filed with the Securities and Exchange Commission as
exhibit 24 to the Company's Registration Statement on Form SB-2 (File No. 33-
69898) and incorporated herein by reference).
Reports on Form 8-K
There were no reports filed on Form 8-K during the three-month period ended
March 31, 2000.
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: May 15, 2000 /s/ Elisabeth B. Robert
--------------------------------,
Elisabeth B. Robert,
Chief Executive Officer and
Chief Financial Officer
<TABLE> <S> <C>
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<S> <C>
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE MARCH 31, 2000 BALANCE SHEET
AND THE NINE MONTH STATEMENT OF OPERATIONS ENDED
MARCH 31, 2000 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> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,447,863
<SECURITIES> 0
<RECEIVABLES> 467,252
<ALLOWANCES> 0
<INVENTORY> 3,366,583
<CURRENT-ASSETS> 11,079,995
<PP&E> 12,723,762
<DEPRECIATION> 4,602,805
<TOTAL-ASSETS> 20,175,153
<CURRENT-LIABILITIES> 3,806,918
<BONDS> 5,563,908
0
1,170,000
<COMMON> 324,362
<OTHER-SE> 8,843,102
<TOTAL-LIABILITY-AND-EQUITY> 20,175,153
<SALES> 23,444,113
<TOTAL-REVENUES> 23,444,113
<CGS> 8,874,481
<TOTAL-COSTS> 8,874,481
<OTHER-EXPENSES> 11,484,474
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<INTEREST-EXPENSE> 292,562
<INCOME-PRETAX> 2,792,596
<INCOME-TAX> 91,644
<INCOME-CONTINUING> 2,579,083
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