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 December 31, 1999 .
[ ] 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: 6,452,716 shares of Common Stock,
$.05 par value per share, as of December 31, 1999.
Transitional Small Business Disclosure Format (check one):
Yes ; No X .
<PAGE>
The Vermont Teddy Bear Co., Inc.
Index to Form 10-QSB
December 31, 1999
Page No.
Part I - Financial Information
Financial Statements
Balance Sheet as of December 31, 1999 3
Statements of Operations for the Three and Six
Months ended December 31, 1999 4
Statements of Cash Flows for the Three and Six
Months ended December 31, 1999 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 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 24
</PAGE>
<PAGE>
<TABLE>
THE VERMONT TEDDY BEAR CO., INC.
Balance Sheet
December 31, 1999
(Unaudited)
ASSETS
<S> <C>
Cash, cash equivalents(includes restricted $4,233,477
cash of $365,000)
Accounts receivable, trade 1,008,241
Inventories 3,245,170
Prepaid expenses and other current assets 588,499
Deferred income taxes 150,405
----------
Total Current Assets 9,225,792
Property and equipment, net 8,057,311
Deposits and other assets 1,334,350
Note receivable 42,500
-----------
Total Assets $18,659,953
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of:
Long-term debt $ 845
Capital lease obligations 166,157
Accounts payable 2,896,696
Accrued expenses 819,640
Income taxes payable -
-----------
Total Current Liabilities 3,883,338
===========
Long-term debt, net of current portion -
Capital lease obligations, net of current portion 5,460,672
Deferred income taxes 150,405
-----------
Total Liabilities $ 9,494,415
Series C Convertible Redeemable Preferred Stock
Authorized 110 shares; 64.2 shares issued and
outstanding, $642,000 liquidation value. 433,125
Stockholders' Equity:
Preferred stock, $.05 par value:
Authorized 1,000,000 shares Series A; issued
and outstanding, 90 shares. 1,152,000
Authorized 375,000 shares Series B; 204,912
shares issued, No shares outstanding. -
Common stock, $.05 par value:
Authorized 20,000,000 shares: issued 6,475,736
shares, outstanding 6,452,716 shares. 323,787
Additional paid-in capital 11,551,383
Treasury stock at cost: 23,020 shares. (117,500)
Accumulated deficit (4,177,257)
----------
Total Stockholders' Equity $ 8,732,413
Total Liabilities and Stockholders' Equity $18,659,953
===========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
THE VERMONT TEDDY BEAR CO., INC.
Statements of Operations
For the Three and Six Months Ended December 31, 1999 and 1998
(Unaudited)
Three Months Ended Six Months Ended
12/31/99 12/31/98 12/31/99 12/31/98
<S> <C> <C> <C> <C>
Net Revenues $7,638,170 $4,805,029 $12,522,797 $7,851,749
Cost of Goods Sold 3,127,295 1,868,581 5,056,249 3,128,055
---------- ---------- ----------- ----------
Gross Profit 4,510,875 2,936,448 7,466,548 4,723,694
Selling, General and Administrative Expenses:
Selling Expenses 2,733,595 1,937,085 4,531,336 3,035,031
General and
Administrative Expenses 927,548 743,856 1,649,985 1,397,349
---------- ---------- ---------- ----------
3,661,143 2,680,941 6,181,321 4,432,380
---------- ---------- ---------- ----------
Operating Income 849,732 255,507 1,285,227 291,314
Interest Income 32,535 9,691 71,020 20,216
Interest Expense (140,974) (154,332) (287,184) (312,185)
Other Income 2,245 361 15,715 966
---------- ---------- ---------- ----------
Income Before Income Taxes 743,538 111,227 1,084,778 311
Income Tax Provision - - - -
---------- ---------- ---------- ----------
Net Income 743,538 111,227 1,084,778 311
Series A Preferred
Stock Dividends (18,000) (18,000) (36,000) (36,000)
Series C Preferred
Stock Dividends (9,000) (6,000) (18,000) (6,000)
Accretion of Original Issue
Discount in connection with
Series C preferred stock (13,623) (9,082) (27,246) (9,082)
---------- ---------- ---------- ----------
Net Income (Loss)-
Common Stockholders 702,915 78,145 1,003,532 (50,771)
========== ========== ========== ==========
Basic Net Income(Loss)
Per Common Share $0.11 $0.02 $0.16 ($0.01)
========== ========== ========== ==========
Diluted Net Income(Loss)
Per Common Share $0.08 $0.01 $0.12 ($0.01)
========== ========== ========== ==========
Weighted Average Number of
Common Shares Outstanding 6,357,720 5,195,908 6,246,265 5,189,820
========== ========== ========== ==========
Weighted Average Number of
Diluted Common Shares
Outstanding 8,641,761 5,620,645 8,511,597 5,189,820
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
</PAGE>
<PAGE>
<TABLE>
THE VERMONT TEDDY BEAR CO., INC.
Statements of Cash Flows
For the Six Months Ended December 31, 1999 and 1998
(Unaudited)
1999 1998
<S> <C> <C>
Cash flows from operating activities
Net Income $1,084,778 $ 311
Adjustments to reconcile net income to net cash
provided by(used for) operating activities:
Depreciation and amortization 457,189 482,501
Gain/Loss on disposal of fixed assets (958) 29,315
Changes in assets and liabilities:
Accounts receivable,trade (669,956) (100,620)
Inventories (1,209,096) 17,337
Prepaid and other current assets (118,571) (134,358)
Deposits and other assets (357,345) (95,640)
Accounts payable 293,587 27,335
Accrued expenses and other liabilities 9,147 (227,940)
Income Taxes (35,000) -
---------- ----------
Net cash provided by(used for) operating activities (546,225) (1,759)
Cash flows from investing activities:
Purchases of property and equipment (354,195) (86,292)
Proceeds from sale of fixed assets 24,201 1,751
Note Receivable 15,000 15,000
---------- ---------
Net cash used for investing activities (314,994) (69,541)
Cash flows from financing activities:
Payments of short-term debt - (45,603)
Payments of long-term debt (329,101) (95,489)
Principal payments on capital lease obligations (121,353) (10,130)
Issuance of common stock, exercise of stock options 172,011 42,997
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 (247,787) 381,099
---------- ---------
Net increase(decrease) in cash and cash equivalents (1,109,006) 309,799
Cash and cash equivalents, beginning of period 5,342,483 1,527,052
---------- ----------
Cash and cash equivalents, end of period $4,233,477 $1,836,851
========== ==========
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest 282,834 311,135
Cash paid for income taxes 35,000 -
Supplemental Disclosures of Non-cash Investing
and Financing Activities:
Conversion of preferred stock to common stock 1,397 -
Series B Warrant exercise for common stock 524,164 -
Series C preferred stock dividends 18,000 6,000
Accretion of original issue discount in connection
With Series C preferred stock 27,246 9,082
The accompanying notes are an integral part of these financial statements.
</TABLE>
</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, 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:
<TABLE>
Three Months Ended Six Months Ended
12/31/99 12/31/98 12/31/99 12/31/98
<S> <C> <C> <C> <C>
Weighted average number
of shares used in basic
EPS calculation 6,357,720 5,195,908 6,246,265 5,189,820
Add: Common Shares
Issuable Upon Exercise of:
Stock Options 1,666,757 509,511 1,666,757 -
Warrants 738,109 1,162,060 738,109 -
Convertible Pref Stock 611,377 1,123,571 611,377 -
--------- --------- --------- ---------
Total Common
Shares Issuable 3,016,243 2,795,142 3,015,243 -
Less: Shares repurchased
under treasury
Stock method (732,202) (1,370,405) (749,911) -
Weighted average number
of shares used in diluted
EPS calculation 8,641,761 5,620,645 8,511,597 5,189,820
========= ========= ========= =========
</TABLE>
Diluted weighted average shares outstanding for the three and six
months ended December 31, 1999 exclude 5,500 and 6,500 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 months ended
December 31, 1998 exclude 257,241 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
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 is not expected to have a material impact on the Company's
financial position or results of operations.
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 is not expected to 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
December 31, 1999:
Raw materials $ 566,896
Work in process 325,259
Finished goods 2,353,015
----------
$3,245,170
==========
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, which is currently the fastest
growing segment of the Company's business.
<TABLE>
Bear-Gram Retail Wholesale/
Service Operations Corporate
--------- ---------- ----------
<S> <C> <C> <C>
THREE MONTHS
ENDED 12/31/99
Net Revenues $5,653,282 $ 681,299 $1,303,589
Cost of Goods Sold 2,090,738 261,537 775,020
Gross Margin 3,562,544 419,762 528,569
Gross Margin % 63.0% 61.6% 40.6%
THREE MONTHS
ENDED 12/31/98
Net Revenues $3,854,082 $ 558,088 $392,859
Cost of Goods Sold 1,427,243 248,946 192,392
Gross Margin 2,426,839 309,142 200,467
Gross Margin % 63.0% 55.4% 51.0%
Bear-Gram Retail Wholesale/
Service Operations Corporate
--------- ---------- ----------
SIX MONTHS
ENDED 12/31/99
Net Revenues $8,569,236 $1,897,407 $2,056,154
Cost of Goods Sold 3,084,086 704,963 1,267,200
Gross Margin 5,485,150 1,192,444 788,954
Gross Margin % 64.0% 62.9% 38.4%
SIX MONTHS
ENDED 12/31/98
Net Revenues $5,694,299 $1,693,054 $464,396
Cost of Goods Sold 2,157,834 724,345 245,876
Gross Margin 3,536,465 968,709 218,520
Gross Margin % 62.1% 57.2% 47.1%
</TABLE>
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 December 31, 1999 and 1998.
Net revenues for the three month period ended December 31, 1999
totaled $7,638,000, a 59.0 percent increase from net revenues of
$4,805,000 for the three-month period ended December 31, 1998. By
business segment, Bear-Gram gift delivery service revenues, which include
radio, internet, and direct mail revenues, rose $1,799,000. 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 $911,000 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 $123,000.
Increases in revenue at the Shelburne, Vermont factory retail location of
$148,000 more than offset revenues of $25,000 lost due to the closing of
the company's satellite retail store location in North Conway, New
Hampshire which was in operation during a portion of the quarter ended
December 31, 1998.
Gross margin increased to $4,511,000 for the quarter ended December
31, 1999, from $2,936,000 for the quarter ended December 31, 1998. As a
percentage of net revenues, gross margin decreased to 59.1 percent from
61.1 percent for the three-month periods ended December 31, 1999, and
1998. Decreases in gross margin percent resulted primarily from
increased wholesale/corporate segment revenues at a lower margin. This
decrease more than offset the increases in gross margin percent
resulting from the increased revenues and higher margins in the retail
segment as the factory store introduced imported products with higher
unit margins. Gross margin percent for the Bear-Gram segment remained constant
as the Company began operation of its new manufacturing
facility in Newport, Vermont on November 1, 1999.
Selling expenses increased to $2,734,000 for the three-month period
December 31, 1999, from $1,937,000 for the three-month period ended
December 31, 1998. This $797,000 increase was attributable to an
increase in Bear-Gram advertising costs, which includes radio, catalog,
Internet and print costs, of $594,000, increases to call center and
customer service costs of $181,000, and increases to design and selling
costs associated with the Company's expanded wholesale/corporate
business segment of $32,000. These increases were offset by decreases
in retail operations costs of $10,000 associated with closing the
Company's satellite retail store in North Conway, New Hampshire which
was in operation during a portion of the three months ended December 31,
1998. Selling expenses as a percentage of revenues were 35.8 percent
and 40.3 percent for the three months ended December 31, 1999 and 1998
respectively.
General and administrative expenses were $928,000 for the quarter
ended December 31, 1999, compared to $744,000 for the quarter ended
December 31, 1998. This increase to general and administrative costs
was primarily due to increased order processing fees from higher net
revenues of $82,000, and severance costs associated with departure of
Spencer Putnam, former Vice President of Operations, of $57,000. Due to
increased net revenues, general and administrative expenses decreased as
a percentage of net revenues to 12.1 percent for the three months ended
December 31, 1999, from 15.5 percent for the three months ended December
31, 1998.
As a result of the foregoing factors, net income to common
stockholders totaled $703,000 for the quarter ended December 31, 1999,
compared to a net income to common stockholders of $78,000, for the
quarter ended December 31, 1998.
Comparison of the six-month periods ended December 31, 1999 and 1998.
Net revenues for the six month period ended December 31, 1999
totaled $12,523,000, a 60.0 percent increase from net revenues of
$7,852,000 for the six month period ended December 31, 1998. By
business segment, Bear-Gram gift delivery service revenues, which include
radio, internet, and direct mail revenues, rose $2,875,000. 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 $1,592,000 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 $204,000.
Increases in revenue at the Shelburne, Vermont factory retail location of
$406,000 more than offset revenues of $202,000 lost 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
six months ended December 31, 1998.
Gross margin increased to $7,467,000 for the six months ended
December 31, 1999, from $4,724,000 for the six months ended December 31,
1998. As a percentage of net revenues, gross margin decreased to 59.6
percent from 60.2 percent for the six month periods ended December 31,
1999, and 1998. Decreases in gross margin percent resulted primarily
from increased wholesale/corporate segment revenues at a lower margin.
This decrease more than offset the increases in gross profit margin
percent in both the Bear-Gram and Retail segments as the Company
introduced new products in these segments with higher unit margins.
Selling expenses increased to $4,531,000 for the six month period
December 31, 1999, from $3,035,000 for the six month period ended
December 31, 1998. This $1,496,000 increase was primarily due to
increased Bear-Gram advertising costs, which includes radio, catalog,
Internet and print costs, of $1,146,000, increased customer service and
call center costs of $281,000, and increases to design and selling costs
associated with the Company's expanded wholesale/corporate business
segment of $69,000. The Shelburne retail operation increases were
offset by decreases in the costs associated with closing the Company's
satellite retail stores. Selling expenses as a percentage of revenues
were 36.2 percent and 38.7 percent for the six months ended December 31,
1999 and 1998, respectively.
General and administrative expenses were $1,650,000 for the six
months ended December 31, 1999, compared to $1,397,000 for the six
months ended December 31, 1998. This increase to general and
administrative costs was primarily due to increased order processing
fees resulting from higher net revenues of $82,000, 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
13.2 percent for the six months ended December 31, 1999, from 17.8
percent for the six months ended December 31, 1998.
As a result of the foregoing factors, net income to common
stockholders totaled $1,004,000, for the six months ended December 31,
1999, compared to a net loss to common stockholders of $51,000, for the
six months ended December 31, 1998.
Liquidity and Capital Resources
- -------------------------------
As of December 31, 1999, the Company's cash position decreased to
$4,233,000, 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 December 31, 1999 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 decreased
primarily as the result of increases to inventory and accounts
receivable and payments on long term debt. Inventories increased as a
result of quantities of materials and teddy bear outfits and accessories
imported from overseas for Valentine's Day for which delivery was
received prior to December 31, 1999 to reduce exposure to Year 2000
risks. Accounts receivable increases are due to higher revenues in the
wholesale/corporate segment to customers who are offered payment terms.
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:
<TABLE>
Shares Amount
------ ------
<S> <C> <C>
Issuance of Series C Preferred Stock 60 $ 600,000
Less: Discount related to
Warrant Issuance $(272,449)
Add: Series C Preferred Stock Dividend 2.4 $ 24,000
Add: Accretion of Discount Related to
Warrant Issuance $ 36,328
---------
$ 387,879
=========
</TABLE>
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 December 31, 1999, $42,000 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.
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
$679,000 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.
On July 12, 1996, the Company privately placed $550,000 of Series B
convertible Preferred Stock. The 204,912 shares, $.05 par value, of
Series B Convertible Preferred Stock were issued to twelve individuals.
Series B stockholders 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 14, 1997, subject to certain
anti-dilution rights. As the result of subsequent financing transactions,
the anti-dilution provisions of the Series B agreement were activated,
and on February 3, 1999, 176,970 shares of Series B Convertible Preferred
Stock was converted into 474,989 shares of the Company's Common Stock.
On July 19, 1999, the remaining 27,942 shares of Series B Preferred
Convertible Stock were converted into 74,996 shares of the Company's
Common Stock. On or about July 3, 1999, 215,157 warrants associated with
the Series B Preferred Stock were exercised and converted into 519,265
shares of the Company's Common Stock. The Company received $523,692 in
consideration for these shares. As of June 30, 1999 $493,508 was
classified as advances from Series B Stockholders on the Company's balance
sheet. As of December 31, 1999, the total consideration for
these shares is classified as equity in Common Stock on the balance
sheet.
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 January 13, 2000 the Company along with Zany Brainy, Inc. and in
cooperation with the Consumer Product Safety Commission voluntarily
recalled 15,500 miniature skateboard key chains attached to Z.Z.
Jamboarder teddy bears which were designed and imported by the Company
exclusively for Zany Brainy. The Company determined after shipping that
the skateboards' wheels can come off, posing a choking hazard to young
children. The Company is aware of two reports of wheels coming off
these skateboards, but no injuries have been reported. Zany Brainy
sold the teddy bears with key chains nationwide through their stores,
website and catalog from November 1999 through December 1999.
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, 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 has not answered or asserted
counter-claims, but moved to dismiss the action based on purported
documentary evidence, the lease, itself. The motion has been fully
briefed and was submitted to the Court on September 14, 1999. The
motion was subsequently argued on October 25, 1999. No decision has been
issued. The parties have agreed to attempt to mediate their disputes.
The Company has accrued management's estimated cost of $195,000 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 December 31, 1999
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 5. Other Business
- -----------------------
On September 29, 1999 the Company entered into a one year lease
with four one year renewal options for a new manufacturing facility in
Newport, Vermont for 12,000 square feet. Annual lease payments are
$42,000. On November 1, 1999, the Company began operation of the
facility with 25 skilled sewers stitching teddy bear parts. As of
January 15, 2000 there were 55 full time employees in the Newport
facility manufacturing complete teddy bears, from stitching to stuffing,
pinning and assembly, and back sealing. The bears are then shipped back
to the Shelburne plant for order fulfillment.
On November 30, 1999 the Company entered into an eight month lease
for 20,000 square feet of warehouse space in Williston, Vermont. Lease
payments over the term of the lease total $70,000. This lease replaces
the lease for 10,000 square feet of off-site warehouse space in
Shelburne, Vermont.
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.
33-69898) 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 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 December 31, 1999.
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: February 14, 1999 /s/ Elisabeth B. Robert,
------------------------
Elisabeth B. Robert,
Chief Executive Officer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE DECEMBER 31, 1999 BALANCE SHEET
AND THE SIX MONTH STATEMENT OF OPERATIONS ENDED
DECEMBER 31, 1999 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 4,233,477
<SECURITIES> 0
<RECEIVABLES> 1,008,241
<ALLOWANCES> 0
<INVENTORY> 3,245,170
<CURRENT-ASSETS> 9,225,792
<PP&E> 12,510,176
<DEPRECIATION> 4,452,865
<TOTAL-ASSETS> 18,659,953
<CURRENT-LIABILITIES> 3,883,338
<BONDS> 5,627,674
0
1,152,000
<COMMON> 323,787
<OTHER-SE> 7,256,626
<TOTAL-LIABILITY-AND-EQUITY> 18,659,953
<SALES> 12,522,797
<TOTAL-REVENUES> 12,522,797
<CGS> 5,056,249
<TOTAL-COSTS> 5,056,249
<OTHER-EXPENSES> 6,165,606
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 216,164
<INCOME-PRETAX> 1,084,778
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,003,532
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,003,532
<EPS-BASIC> 0.16
<EPS-DILUTED> 0.12
</TABLE>
