SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended July 31, 2001
Commission File No. 333-45226
VERMONT PURE HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
Delaware 03-0366218
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Route 66; PO Box C; Randolph, VT 05060
(Address of principal executive offices) (Zip Code)
(802) 728-3600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
--------------- ------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class September 7, 2001
----- -------------------
Common Stock, $.001 Par Value 20,668,338
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
INDEX
Page Number
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
July 31, 2001 (unaudited) and
October 31, 2000 3
Consolidated Statements of Operations
and Comprehensive Income (unaudited) for
the Nine Months and Three Months ended
July 31, 2001 and 2000 4
Consolidated Statements of Cash Flows
(unaudited) for the Nine Months ended
July 31, 2001 and 2000 5
Notes to Consolidated Financial Statements
(unaudited) 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-16
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 17
Part II - Other Information 18-23
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature 24
2
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 31, October 31,
2001 2000
----------------- ----------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 1,061,190 $ 1,408,158
Investments - Money Market Fund 725,000 3,301,064
Investments - Certificate of Deposit (restricted balance) 250,000 975,000
Accounts receivable - net of allowance 8,307,925 6,725,810
Inventory 2,989,903 2,778,535
Current portion of deferred tax asset 798,000 798,000
Other current assets 1,337,917 1,145,311
------------------- ------------------
TOTAL CURRENT ASSETS 15,469,935 17,131,878
------------------- ------------------
PROPERTY AND EQUIPMENT - net of accumulated depreciation 21,226,824 21,052,513
------------------- ------------------
OTHER ASSETS:
Intangible assets - net of accumulated amortization 66,649,826 68,469,382
Deferred tax asset 3,756,000 3,756,000
Other assets 592,272 415,867
------------------- ------------------
TOTAL OTHER ASSETS 70,998,098 72,641,249
------------------- ------------------
TOTAL ASSETS $ 107,694,857 $ 110,825,640
=================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,481,706 $ 4,535,118
Current portion of customer deposits 169,836 50,525
Accrued expenses 2,386,082 2,738,930
Current portion of long term debt 3,541,910 6,821,673
Current portion of obligations under capital leases - 9,064
------------------- ------------------
TOTAL CURRENT LIABILITIES 9,579,534 14,155,310
Long term debt 49,260,223 51,411,510
Long term obligations under capital leases - 16,747
Line of credit 2,200,000 460,000
Customer deposits 2,660,764 2,453,335
------------------- ------------------
TOTAL LIABILITIES 63,700,521 68,496,902
------------------- ------------------
CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - $.001 par value, 500,000
authorized shares, none issued and outstanding - -
Common stock - $.001 par value, 50,000,000
authorized shares, 20,668,338 issued and outstanding
shares at July 31, 2001 and 20,217,774 at October 31, 2000 20,668 20,218
Paid in capital 55,312,698 54,249,016
Accumulated deficit (10,833,676) (11,940,496)
Other comprehensive loss (505,355) -
------------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 43,994,336 42,328,738
------------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 107,694,857 $ 110,825,640
=================== ==================
See notes to consolidated financial statements
3
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
Three months ended July 31, Nine months ended July 31,
------------------------------------- -------------------------------------
2001 2000 2001 2000
----------------- ---------------- ----------------- -----------------
(unaudited) (unaudited) (unaudited) (unaudited)
SALES $ 18,974,434 $ 10,158,368 $ 48,739,591 $ 24,806,803
COST OF GOODS SOLD 8,488,534 4,675,045 21,643,564 10,219,169
----------------- ---------------- ----------------- -----------------
GROSS PROFIT 10,485,900 5,483,323 27,096,027 14,587,634
----------------- ---------------- ----------------- -----------------
OPERATING EXPENSES:
Selling, general and administrative expenses 6,453,774 4,062,463 17,716,632 11,412,755
Advertising expenses 1,142,665 851,867 2,469,025 1,982,896
Amortization 636,594 185,073 1,905,905 526,409
----------------- ---------------- ----------------- -----------------
TOTAL OPERATING EXPENSES 8,233,033 5,099,403 22,091,562 13,922,060
----------------- ---------------- ----------------- -----------------
INCOME FROM OPERATIONS 2,252,867 383,920 5,004,465 665,574
----------------- ---------------- ----------------- -----------------
OTHER INCOME (EXPENSE):
Interest (1,241,445) (442,505) (3,903,481) (1,176,779)
Miscellaneous (2,380) - 5,836 272,887
----------------- ---------------- ----------------- -----------------
TOTAL OTHER EXPENSE (1,243,825) (442,505) (3,897,645) (903,892)
----------------- ---------------- ----------------- -----------------
NET INCOME (LOSS) $ 1,009,042 $ (58,585) $ 1,106,820 $ (238,318)
----------------- ---------------- ----------------- -----------------
NET INCOME (LOSS) PER SHARE - BASIC $ 0.05 $ (0.01) $ 0.05 $ (0.02)
================= ================ ================= =================
NET INCOME (LOSS) PER SHARE - DILUTED $ 0.05 $ (0.01) $ 0.05 $ (0.02)
================= ================ ================= =================
Weighted Average Shares Used in Computation - Basic 20,516,477 10,290,591 20,307,411 10,290,036
================= ================ ================= =================
Weighted Average Shares Used in Computation - Diluted 20,882,987 10,290,591 20,465,869 10,290,036
================= ================ ================= =================
NET INCOME (LOSS) $ 1,009,042 $ (58,585) $ 1,106,820 $ (238,318)
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized losses on derivatives designated as
cash flow hedges. (121,620) - (505,355) -
----------------- ---------------- ----------------- -----------------
COMPREHENSIVE INCOME (LOSS) $ 887,422 $ (58,585) $ 601,465 $ (238,318)
----------------- ---------------- ----------------- -----------------
See notes to consolidated financial statements
4
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended July 31,
--------------------------------
2001 2000
--------------- ---------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $1,106,820 $(238,319)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation 2,670,509 1,381,523
Amortization 1,905,905 526,409
Gain on settlement of note receivable - (295,000)
Loss (Gain) on disposal of property and equipment 56,962 (67,637)
Changes in assets and liabilities (net of effect of acquisitions):
Increase in accounts receivable (1,582,115) (1,082,684)
(Increase) Decrease in inventory (211,368) 709,238
Increase in other current assets (192,606) (511,068)
Increase in other assets (142,755) (1,026,004)
Decrease in accounts payable (1,053,411) (40,153)
Increase in customer deposits 326,742 182,969
(Decrease) Increase in accrued expenses (331,000) 274,019
--------------- ---------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,553,683 (186,707)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (2,955,329) (2,261,856)
Purchase of property, plant and equipment from bond financing - (2,390,395)
Purchase of money market investment from bond - (4,125,423)
Proceeds from sale of money market investment 3,301,064 2,390,395
Proceeds from sale of fixed assets 31,700 92,310
Collection of note receivable - 1,270,000
Cash used for acquisitions - net of cash acquired (120,000) (263,983)
--------------- ---------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 257,435 (5,288,952)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 3,240,000 2,559,208
Proceeds from debt - 4,295,881
Payments on line of credit (1,500,000) -
Principal payments of debt (5,237,217) (475,718)
Sale of common stock 339,131 11,250
--------------- ---------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (3,158,086) 6,390,621
--------------- ---------------
NET (DECREASE) INCREASE IN CASH (346,968) 914,962
CASH - Beginning of year 1,408,158 367,018
--------------- ---------------
CASH - End of period $1,061,190 $ 1,281,980
=============== ===============
Cash paid for interest $3,467,987 $ 1,046,747
=============== ===============
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Equipment acquired under capital leases $ - $ 145,844
=============== ===============
Debt converted to common stock $ 725,000 $ -
=============== ===============
See notes to consolidated financial statements
5
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and in the opinion
of management contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial
position, results of operations, and cash flows for the periods
presented. The results have been determined on the basis of generally
accepted accounting principles and practices applied consistently with
the Form 10-K for the year ended October 31, 2000.
Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted. The accompanying
consolidated financial statements should be read in conjunction with
the financial statements and notes thereto incorporated by reference
from the Company's Annual Report on Form 10-K for the year ended
October 31, 2000.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations," and SFAS No.142, "Goodwill and Other Intangible
Assets." These standards become effective for fiscal years beginning
after December 15, 2001. For the Company, that would be fiscal year
2003. However, the Company is considering early implementation for
fiscal year 2002. With the adoption of SFAS No. 142, the Company would
discontinue the periodic amortization of existing goodwill and test
the remaining value of relevant intangible assets for possible
impairment within six months, and periodically thereafter, based on
the required valuation criteria. Based on the value of intangible
assets as of July 31, 2001, application of non-amortization provisions
would result in a reduction of expenses of $2.5 million in the first
full fiscal year in which they are applied. The new pronouncements
require business combinations after June 30, 2001 to be accounted for
using the purchase method of accounting and outlines new criteria for
purchase price allocation. Goodwill acquired after June 30, 2001 will
not be amortized. No material transactions have been completed after
June 30, 2001.
3. INTEREST RATE HEDGE
a) On April 2, 2001 and July 24, 2001, the Company entered into
separate three year "swap" agreements with Webster Bank to fix a total
6
of $8,000,000 ($4,000,000 each) of its senior debt with the bank. The
agreement fixes the variable LIBOR rate portion of the debt at 5.28%
and 5.00%, respectively. Under the Company's loan agreement with the
bank, the current applicable margin is 1.75% resulting in a total
fixed rate of 7.03% and 6.75% for each respective agreement for the
contract period. The margin is subject to change based on the
Company's performance as outlined in the loan agreement with Webster
Bank.
b) The Company adopted Statements of Accounting Standards (SFAS) No.
133 and No. 137 on November 1, 2001. The Company periodically executes
interest rate swaps as part of its strategy to curtail its interest
rate risk. Such instruments are considered hedges under SFAS No. 133
and 137. Moreover, since the instrument is intended to hedge against
variable cash flows, it is considered a cash flow hedge. As a result,
the change in the fair value of the derivative will be recognized as
comprehensive income (loss) until the hedged item is recognized in
earnings. Cumulatively, the fair value of the Company's three
outstanding swaps decreased $121,620 and $505,355 for the three and
nine months ending July 31, 2001, respectively.
4. LONG TERM DEBT
a) Bonds
On November 1, 2000 the Company paid its obligation under its Series A
Industrial Revenue Bond issue. Proceeds for the payment of $3,207,374
were obtained from the Company's money market investment fund that was
restricted for that use under the terms of the financing for the
Crystal Rock merger.
b) Line of Credit
During the nine months ending July 31, 2001 the Company borrowed, net
of paydowns, $1,740,000 from its working capital line of credit with
Webster Bank. As of July 31, 2001 the total obligation outstanding
under this facility was $2,200,000. The line of credit has a limit of
$5,000,000 and matures on October 5, 2002. In addition, letters of
credit totaling $509,153 secured by the line were issued on the
Company's behalf further reducing the availability of the line by that
amount.
c) Debt Conversion to Stock
During the nine months ending July 31, 2001, 331,562 shares of the
Company's common stock were issued in conjunction with conversion of
$725,000 of an outstanding convertible debenture. The original face
amount of the debenture is $975,000. As of July 31, 2001, the
conversion leaves $250,000 to be converted by October 2001.
5. CONTINGENCIES
Legal - On July 27, 2000 the Company filed a lawsuit in Vermont
Federal Court against Descartes Systems/Endgame Solutions for
non-performance of the professional services agreement between the two
companies. In the suit Vermont Pure alleges that vendor did not
adequately perform the services rendered in connection with
approximately $500,000 of unpaid billings. Descartes filed a motion to
7
dismiss the case based on the premise the Vermont Federal Court is not
the proper jurisdiction and that the case should be arbitrated in
Ontario, Canada.
In an order dated April 11, 2001, the District Court granted
Descartes' Motion to Dismiss the case. Subsequently, the parties have
agreed to arbitrate the matter in the state of Florida at a time and
place uncertain.
Capital Expansion - On June 26, 2001 the Company's Board of Directors
approved a capital expenditure of $1,042,000 for a second production
line at the Randolph, Vermont location. As of July 31, 2001 deposits
totaling $275,000 had been paid on various related equipment. The
second production line is expected to be operational in November 2001.
Acquisition - The Company has signed a letter of intent and has given
a deposit of $250,000 for the purchase of a business by its Home and
Office delivery division. The purchase price will primarily be
financed with additional debt and shares of the Company's common
stock. Webster Bank has committed to providing the necessary
financing, subject to certain conditions that the Company expects to
meet. The transaction is scheduled to be completed on or about
November 1, 2001.
8
PART I - Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto as filed in the Company's Annual Report
on Form 10-K for the year ended October 31, 2000.
Forward-Looking Statements
When used in the Form 10-Q and in future filings by the Company with the
Securities and Exchange Commission, the words or phrases "will likely result"
and "the Company expects," "will continue," "is anticipated," "estimated,"
"project," or "outlook" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, each of which
speaks only as of the date made. Such statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. Among these
risks are water supply and bottling capacity constraints in the face of
significant growth, dependence on outside distributors, reliance on commodity
price fluctuations as they influence raw material pricing, and exposure to
fluctuating interest rates coupled with the Company's ability to meet its debt
obligations. The Company has no obligation to publicly release the result of any
revisions which may be made to any forward-looking statements to reflect
anticipated or unanticipated events or circumstances occurring after the date of
such statements.
Results of Operations
The Company completed a merger with Crystal Rock Spring Water Company in October
2000. This transaction had a significant impact on nearly all of the Company's
quantitative results. For comparison purposes only, the tables for the
respective reporting periods set forth,
(1) the fiscal year 2000 consolidated condensed unaudited operating results
for Vermont Pure Holdings, Ltd.,
(2) the fiscal year 2000 consolidated condensed unaudited operating results
for Crystal Rock Spring Water Company,
(3) adjustments consistent with the pro forma financial statements
presented in the Company's Proxy Statement/Prospectus dated September 8,
2000 with respect to the transaction ("the merger proxy"), as if the merger
had occurred on October 31, 1999, and
(4) the "Combined" totals of (1), (2) and (3).
The tables also set forth,
9
(5) the fiscal year 2001 consolidated condensed unaudited operating results
for Vermont Pure Holdings, Ltd.
Although they are derived from the financial statements of the Company and
Crystal Rock, the figures in the tables, including without limitation the " Pro
Forma Combined" column, are not, and should not be considered to be, financial
statements prepared in accordance with generally accepted accounting principles,
nor are they necessarily indicative of future results. The table is intended
solely to provide a basis for a more meaningful comparison of the consolidated
unaudited financial information with the combined unaudited operating results
for the Company for the respective reporting periods in fiscal year 2000.
Certain expenses have been reclassified from operating expense to cost of goods
sold from the Company's operating statement of a year ago to provide consistency
between the two companies and comparison to 2001.
For the Three Months Ending July 31, 2001 (Third Quarter):
(000's of $) (1) (2) (3) (4) (5)
Unaudited Three Months Three Months Three Months Three Months
Ending Ending Ending Ending
---------------- --------------- --------------- ------------------ ----------------
July 31, July 31, July 31, 2000 July 31, 2001
---------------- --------------- --------------- ------------------ ----------------
2000 2000 Pro Forma FY00 Pro Forma FY01
---------------- --------------- --------------- ------------------ ----------------
Vermont Pure Crystal Rock Adjustments Combined Consolidated
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Sales $ 10,158 $ 7,083 $ 17,241 $ 18,974
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Cost of Goods Sold 5,245 3,146 $ 4 8,395 8,489
-------- -------- ------ ---------- ----------
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Gross Profit 4,913 3,937 (4) 8,846 10,485
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Operating Expenses 4,529 2,821 324 7,674 8,233
-------- -------- -------- ---------- ----------
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Income (Loss) from Operations 384 1,116 (328) 1,172 2,252
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Interest Expense 443 76 858 1,377 1,241
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Other (Income) Expense - (5) - (5) (2)
------ ---- ------ ---- ---
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Income (Loss) before Taxes (59) 1,045 (1,186) (200) 1,009
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Provision for Income Taxes - 434 (294) 140 0
------ --------- -------- ---------- -------
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Net Income (Loss) $ (59) $ 611 $(892) $ (340) $ 1,009
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Sales - Sales for the third quarter of fiscal year 2001 were $18,974,000
compared to $17,241,000 for the pro forma combined companies in the
corresponding period of 2000, an increase of $1,733,000, or 10%.
Sales for the home and office category for the third quarter of fiscal 2001 were
$12,444,000 compared to the combined total of $11,747,000 for the corresponding
period of fiscal year 2000, an increase of $697,000 or 6%. The increase in sales
is attributable to market growth - a growth rate consistent with current trends
in this industry category. Of the total home and office category sales for the
quarter, five gallon water sales totaled $6,425,000, an increase of 17% over the
combined total for the same period a year ago; coffee and other products were
$3,999,000, a decrease of 8% over the combined total for the same period a year
ago; and equipment rentals were $2,020,000, an increase of 4% over the combined
total for same period a year ago. In addition to market growth, the increase in
water sales is indicative of the relatively cooler summer weather a year ago
compared to warmer seasonal weather in the third quarter of the current fiscal
10
year. The decrease in the sales of other products is due to a shift of the sale
of some of the Company's products to an outside distributor.
Sales for retail-size products for the third quarter of fiscal 2001 were
$6,530,000 compared to a combined total of $5,494,000 for the corresponding
period of fiscal year 2000, an increase of $1,036,000 or 19%. The increase is
attributable to higher overall selling prices and strong demand for private
label products. In addition, from a comparative perspective the third quarter of
fiscal year 2000 was weaker because cooler weather lowered demand. For the third
quarter of the year, sales of Vermont Pure and Private Label brands increased 4%
and 73%, respectively. Sales of the Hidden Spring brand decreased 10%. The
relatively small increase in the Vermont Pure brand for the period is indicative
of increasing competitive pressures in the branded market and well as softening
of the retail market, in general. The decrease in sales of the Hidden Spring
brand is indicative of the competitive market and the loss of a significant
customer through bankruptcy. Strong growth of private label brands reflects both
new account acquisitions and market share gains in the established customer base
during the period. For the quarter, private label sales accounted for 41% of
this category. Average selling prices of retail-size products for the three
months ending July 31, 2001 increased 5% from the corresponding period of the
previous year.
Cost of Goods Sold/Gross Profit - For the third quarter of fiscal 2001, Cost of
Goods Sold was $8,489,000 compared to the pro forma combined total of $8,395,000
for the same period in fiscal 2000. Gross Profit for the third quarter was
$10,485,000, or 55% of sales, compared to the pro forma combined total of
$8,846,000, or 51% of sales, for the corresponding period a year ago. Gross
profit increased as a result of higher sales. In addition, average selling
prices for retail size products, which have been decreasing over the past few
years, have stabilized. The increase in gross margin as a percentage of sales is
largely reflective of an increase in sales volume combined with higher average
selling prices and a decrease in cost of goods sold. The decrease in cost of
goods sold was generated by increased production volume and efficiency.
Operating Expenses - For the third quarter of fiscal year 2001 total operating
expenses were $8,233,000 compared to the pro forma combined total for the
corresponding period in fiscal year 2000 of $7,674,000, an increase of $559,000,
or 7%. Selling, general and administrative expenses increased $599,000, or 9%,
for the quarter compared to the pro forma combined total for corresponding
period a year ago. The increase was primarily due to expenses required to
accommodate the growth in sales. Advertising and promotional expense decreased
$14,000, or 1%, during the third quarter of 2001 compared to the combined total
for the corresponding period a year earlier. Costs decreased in the home and
office delivery category as a result of the elimination of duplicate advertising
in the same markets after the merger. The Company's advertising and promotion is
predominantly associated with the sales of the retail-size packages. For retail
size packages, the aggregate per case expense for advertising and promotion
decreased to $.73 in the third quarter of 2001 from $.90 in the comparable
period in the prior year. For the third quarter of fiscal year 2001,
amortization decreased $26,000 to $637,000 from the pro forma combined total of
$663,000 for the same period a year ago. Amortization decreased because certain
intangibles from prior small acquisitions were fully amortized prior to the
third quarter of fiscal year 2001.
11
Income from Operations - Income from operations for the third quarter of fiscal
2001 was $2,252,000 as compared to pro forma combined total of $1,172,000 for
the corresponding period last year, an improvement of $1,080,000. The increase
is a result of sales growth and cost savings derived from combining the two
companies.
Other Income/Expense - On a pro forma basis, net interest expense decreased
$136,000 to $1,241,000 in the third quarter of fiscal 2001 from the pro forma
combined total of $1,377,000 in the third quarter of fiscal year 2000. The
decrease in interest expense was a result of lower actual interest rates than
those assumed in the pro forma results.
Net Income/Loss - On a pro forma basis, the Company's net income for the second
quarter of fiscal year 2001 was $1,009,000, or $.05 per share (basic), compared
to a pro forma combined net loss of $340,000, or $.02 per share (basic), for the
corresponding period last year. The improvement of $1,349,000 is attributable to
the increased sales and the Company's ability to implement cost savings as a
result of the combination.
For the Nine Months Ending July 31, 2001:
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
(000's of $) (1) (2) (3) (4) (5)
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Unaudited Nine Months Nine Months Nine Months Nine Months
Ending Ending Ending Ending
---------------- --------------- --------------- ------------------ ----------------
July 31, July 31, July 31, 2000 July 31, 2001
---------------- --------------- --------------- ------------------ ----------------
2000 2000 Pro Forma FY00 Pro Forma FY01
---------------- --------------- --------------- ------------------ ----------------
Vermont Pure Crystal Rock Adjustments Combined Consolidated
---------------- --------------- --------------- ------------------ ----------------
Sales $ 24,806 $ 19,509 $44,315 $ 48,740
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Cost of Goods Sold 12,037 7,908 $ 12 19,957 21,644
--------- -------- -------- ---------- ----------
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Gross Profit 12,769 11,601 (12) 24,358 27,096
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Operating Expenses 12,103 8,404 973 21,480 22,092
--------- -------- -------- ---------- -----------
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Income (Loss) from Operations 666 3,197 (985) 2,878 5,004
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Interest Expense 1,177 244 2,572 3,993 3,903
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Other (Income) Expense (273) (25) - (298) 6
---------- ------ ------- ------- ------
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Income (Loss) before Taxes (238) 2,978 (3,557) (817) 1,107
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Provision for Income Taxes - 1,237 (882) 355 0
------- --------- --------- ---------- -----
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Net Income (Loss) $ (238) $1,741 $ (2,675) $(1,171) $ 1,107
- --------------------------------- ---------------- --------------- --------------- ------------------ ----------------
Sales - Sales for the nine months ending July 31, 2001 were $48,740,000 compared
to $44,315,000 for the pro forma combined companies in the corresponding period
of 2000, an increase of $4,425,000, or 10%.
Sales for the home and office category for the first nine months of fiscal 2001
were $34,995,000 compared to the combined total of $32,799,000 for the
corresponding period of fiscal year 2000, an increase of $2,196,000 or 7%. The
increase in sales is attributable to market growth and market share gains in
core markets. Of the total home and office category sales for the nine month
period, five gallon water sales totaled $16,827,000, a 13% increase from the
combined total for the same period a year ago; coffee and other products were
$12,199,000, an decrease of 1% over the combined total for the same period a
year ago; and equipment rentals were $5,969,000, an increase of 6% over the
combined total for same period a year ago. In addition to market growth, the
12
increase in water sales is indicative of the relatively cooler summer weather a
year ago compared to warmer seasonal weather in the third quarter of the current
fiscal year. The decrease in the sales of other products is due to a shift of
the sale of some of the Company's products to an outside distributor.
Sales for retail size products for the nine months ending July 31, 2001 were
$13,745,000 compared to a combined total of $11,516,000 for the corresponding
period of fiscal year 2000, an increase of $1,193,000 or 19%. Sales of the
Vermont Pure and Private Label brands for the period increased 8% and 67%,
respectively and sales of the Hidden Spring brand decreased by 8%. The increase
in the Vermont Pure brand was attributable to market expansion and maturing
distributor relationships in established markets. The decrease of the Hidden
Spring brand is indicative of competitive activity in mature market and the loss
of a major customer through bankruptcy. Growth of private label brands reflects
both new account acquisitions and market share gains in the established customer
base during the period. For the period, private label sales accounted for 38% of
this category. After falling steadily due to competitive conditions, pricing for
this line of products has stabilized in the current year. Average selling prices
of retail-size products for the nine months ending July 31, 2001 increased 1%
from corresponding period the previous year.
Cost of Goods Sold/Gross Profit - For the nine months ending July 31, 2001, Cost
of Goods Sold was $21,644,000 compared to the pro forma combined total of
$19,957,000 for the same period in fiscal 2000. Gross Profit for the period was
$27,096,000, or 56% of sales, compared to the pro forma combined total of
$24,358,000, or 55% of sales, for the corresponding period a year ago. Gross
profit increased as result of higher sales, an increase in average selling
price, production efficiency, and cost savings as a result of the merger. As
discussed in the merger proxy and the Company's most recent Form 10-K,
management expects to reduce cost of goods, as a percentage of sales, through
increased purchasing power as a result of the merger and redesigning and
reconfiguring its packaging to be less costly and more efficient. Although the
Company is on schedule with many of these plans, no assurance can be given that
it will be successful in improving gross profit margins.
Operating Expenses - For the nine months ending July 31, 2001, operating
expenses totaled $22,092,000 compared to the pro forma combined total of
$21,480,000 for the corresponding period in fiscal year 2000, an increase of
$612,000, or 3%. Selling, general and administrative expenses increased by
$767,000, or 5%, for the first nine months of fiscal 2001 compared to the pro
forma combined total for the corresponding period a year ago. The increase was
primarily due to expenses required to accommodate the growth in sales. The
percentage increase of these expenses was less than the growth rate of sales for
the period. This was a result of operating synergies derived from merging
overlapping distribution infrastructure, consolidation of administrative
personnel, and improved economies of scale in certain administrative costs such
as insurance and employee benefits. As of July 31, 2001, management had not
completely implemented its consolidation plan outlined in the notes to the pro
forma financial statements of the merger proxy. Although the Company is still on
schedule to achieve these savings, no assurance can be given that they will be
achieved.
Advertising and promotional expense decreased $103,000, or 4%, during the nine
months ended July 31, 2001 compared to the combined total for the corresponding
period a year earlier. Costs decreased in the home and office delivery category
13
as a result of the elimination of duplicate advertising in the same markets
after the merger. The Company's advertising and promotion is predominantly
associated with the sales of the retail-size packages. The Company's aggregate
per case expense for advertising and promotion decreased 9% in the first nine
months of 2001 from the comparable period the prior year. The pricing
environment for these products has changed such that the Company's distributors
seek price discounts instead of advertising and promotion support. As a result,
these costs have declined steadily, in conjunction with average selling prices,
over the last several years. However, the Company anticipates that it will have
to continue to spend significant amounts for promotion and advertising to stay
competitive in the future.
For the nine months ending July 31, 2001, amortization decreased $52,000 to
$1,907,000 from the pro forma combined total of $1,959,000 for the same period a
year ago. Amortization decreased because certain intangibles from prior small
acquisitions were fully amortized prior to the first half of fiscal year 2001.
Income from Operations - Income from operations for the first nine months of
fiscal 2001 was $5,004,000 as compared to pro forma combined total of $2,878,000
for the corresponding period last year, an increase of $2,126,000. The increase
is a result of sales growth and cost savings derived from combining the two
companies.
Other Income/Expense - On a pro forma basis, net interest expense decreased
$90,000 to $3,903,000 in the first nine months of fiscal 2001 from the pro forma
combined total of $3,993,000 in the first nine months of fiscal year 2000. The
decrease in interest expense was a result of lower than expected interest rates
in the second and third quarters of fiscal 2001.
Net Income/Loss - On a pro forma basis, the Company's net income for the first
nine months of fiscal year 2001 was $1,107,000, or $.05 per share (basic),
compared to a pro forma combined net loss of $1,171,000, or $.06 per share
(basic) for the corresponding period last year. The improvement of $2,278,000 is
attributable to the increased sales and the Company's ability to implement cost
savings as a result of the combination.
Future Effects/Trends - In conjunction with the merger the Company incurred a
significant amount of goodwill and substantial debt. The cost to amortize the
goodwill and service the debt on an annual basis is considerable. Goodwill
amortization expense as a result of the transaction is $2.4 million per year.
Interest in the first year is expected to be $5.1 million. The Company expects
continued sales growth and improving operating efficiencies to more than offset
these amounts. Historical sales trends of the two companies support profit
margin growth that the Company anticipates will more than offset increased costs
resulting from the merger. However, no assurance can be given that these trends
will continue.
On June 29, 2001 the Financial Accounting Standards Board approved SFAS 141 and
142 concerning new accounting procedures for business combinations and goodwill
and intangible assets. The Company plans to adopt these pronouncements starting
in fiscal year 2002. As a result, the Company's financial statements will be
materially impacted. Under the new statements, the Company is required to assess
its goodwill to determine if it is impaired. If any portion of the goodwill on
14
the books is determined to be impaired, that total impaired amount will be
written off during the year. The Company has not yet tested its goodwill to
accordance with the new statements. In addition, in fiscal year 2002 and beyond,
the Company will no longer be amortizing goodwill. Consequently, eliminating
amortization of goodwill will increase the Company's net income by that amount.
Liquidity and Capital Resources
During the nine months ending July 31, 2001, the Company generated cash through
profitable operations. Conversely, cash was used to fund the seasonal increase
in accounts receivable and inventory and to pay down accounts payable and
accrued expenses.
Cash used for operating activities was largely a result of paying down accrued
expenses and accounts payable during the period. Although cash was used to fund
the more seasonal retail business, the Company has also used cash to take
advantage of pricing opportunities and enhance vendor relationships. An increase
in accounts receivable and inventory in the first nine months of the fiscal year
is reflective of the seasonal increase in sales in the second half of the year.
The Company used $2,953,000 for capital expansion during the year. The Company
used $1,630,000 for the purchase of bottles, racks, dispensing equipment, and
vehicles to satisfy the increased capital requirements of a home and office
distribution system that has more than doubled in size over the last year. The
Company expanded and upgraded its production line for retail products during the
second quarter of 2001. These capital improvements will provide more packaging
options and increase production efficiency and product quality in the future. In
June 2001, the Company committed to a substantial equipment expansion that would
more than double its present bottling capacity for its retail-size products.
This project is expected to be completed by January 2002 and will cost $1
million. Combined capital spending for production related equipment was $880,000
through July 31, 2001. As of July 31, 2001, $275,000 was under deposit for the
purchase of new equipment related to this project. In addition, $220,000 of cash
was used to acquire customer lists and associated equipment during the period.
The source for the cash used for the Company's operating and capital activities
during the first nine months of the fiscal year was the line of credit provided
by Webster Bank. During the period, the Company had net borrowings totaling
$1,740,000 from the line. As of July 31, 2001 the total obligation outstanding
under this facility was $2,200,000. The line of credit has a limit of $5,000,000
and matures October 5, 2002. Letters of credit totaling $509,000 secured by the
line were also issued on the Company's behalf further reducing the availability
of the line by that amount. The Company expects that its cash on hand and the
cash generated from its future operations combined with the commitment from the
bank will provide sufficient capital for the next two fiscal years. However, no
assurance can be given that this will be the case and that adequate financing at
reasonable interest rates will be secured if more cash is needed either prior to
or subsequent to the maturity of the line.
On November 1, 2000 the Company paid its obligation under its Series A
Industrial Revenue Bond issue. Proceeds for the principal payment of $3,195,000
were applied from the Company's money market investment fund that was restricted
for that use under the terms of the financing for the Crystal Rock merger. In
15
addition, the Company repaid principal totaling $1,875,000 on its term note with
Webster Bank during the first six months of its fiscal year.
The Company received $243,000 in proceeds from the sale of stock as a result of
the exercise of options related to the Employee Stock Purchase Plan and option
agreements with employees and directors.
The Company has signed a letter of intent and given a deposit for the purchase
of a business in the Home and Office delivery category. The business is located
in the Company's market area and has sales of approximately $3 million per year.
The purchase price will primarily be financed with additional debt and shares of
the Company's stock. Webster Bank has committed to providing the necessary
financing, subject the certain conditions. The transaction is expected to be
completed on or about November 1, 2001.
16
PART I - Item 3
QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to the Company's operations result primarily from changes
in interest rates and commodity prices.
Interest Rate Risks - At July 31, 2001 the Company had approximately $15,325,000
of long term debt subject to variable interest rates. Under the loan and
security agreement with Webster Bank the Company currently pays interest at a
rate of LIBOR plus a margin of 1.75%. The margin is subject to change based on
the Company's performance as outlined in the loan agreement with Webster Bank. A
hypothetical 100 basis increase in the LIBOR rate would result in an additional
$153,250 of interest expense on an annualized basis. The Company uses interest
rate "swap" agreements to curtail interest rate risk. On November 3, 2000, the
Company entered into a swap agreement with Webster Bank to fix $8,000,000 of its
long term debt at 8.32% interest for three years. On April 2, 2001, the Company
entered into a swap agreement with Webster Bank to fix an additional $4,000,000
of its long term debt at 7.03% interest for three years. On July 24, 2001, the
Company entered into a swap agreement with Webster Bank to fix an additional
$4,000,000 of its long term debt at 6.75% interest for three years.
Commodity Price Risks
Plastic - PET
Although the Company has a three-year contract with its vendors that sets
the purchase price of its PET bottles, the vendors are entitled to pass on to
the Company any resin price increases. These prices are related to supply and
demand market factors for PET and, to a lesser extent, the price of petroleum,
from which PET is derived. Over the last twelve months prices have fluctuated up
and down within a $.10 per pound range. A hypothetical resin price increase of
$.05 per pound would result in an approximate price increase per bottle of $.003
or, at current volume levels, $196,000 a year.
Coffee
The cost of the Company's coffee purchases are dictated by commodity
prices. It enters into contracts to mitigate market fluctuation of these costs
by fixing the price for certain periods. Currently it has fixed the price of its
anticipated supply through December 31, 2001 and March 31, 2002 at "green"
prices ranging from $.75-$.91 per pound. The Company is not insulated from price
fluctuations beyond that date. It expects to enter into similar agreements prior
to the expiration of the current contracts to continue to fix the price of its
supply. However, the prices in future contracts are presently unknown. At
existing sales levels, an increase in pricing of $.10 per pound would result in
approximately $100,000 of additional cost annually to the Company if it had not
fixed its pricing. In this case, competitors that had fixed pricing might have a
competitive advantage.
17
PART II - Other Information
Item 1 - Legal Proceedings
In March of 1999, the Company contracted with Descartes Systems Group, Inc.
("Descartes"), an Ontario corporation, to provide professional services related
to the design, installation, maintenance, operation and training for computer
hardware and software. The computer hardware and software was marketed to the
Company as a product that would provide computerized management of the Company's
direct distribution through its delivery network, and associated billing and
accounting.
On July 27, 2000, the Company filed a lawsuit against Descartes and an
affiliate of Descartes entitled Vermont Pure Holdings, Ltd. v. Descartes Systems
Group, Inc. and Endgame Systems, Inc. f/k/a DSD Solutions, Inc., in the United
States District Court for the District of Vermont. The action is docketed as
Civil Action No. 2:00-CV-269. The Company has sought monetary damages against
Descartes and Endgame in an amount exceeding $100,000 for the Company's losses
associated with failures of the systems and services provided by the defendants.
In addition, the Company has sought a Declaratory Judgment invalidating the
defendant's demand for payments in the amount of $411,841.10.
The defendants filed a motion in response to the suit to dismiss it based
on the premise that federal court is not the proper jurisdiction and the case
should be arbitrated in Ontario, Canada. In an order dated April 11, 2001, the
District Court granted DesCartes' Motion to Dismiss the case. Subsequently, the
parties have reached an agreement to arbitrate the case in the state of Florida
at a date uncertain. The Company intends to vigorously defend its claim through
out this process.
Item 2 - Changes in Securities
(a) As reported by the Company in its Annual Report on Form 10-K for
fiscal year 1999, on October 1, 1999, the Company issued its $975,000
non-interest bearing Convertible Debenture due September 30, 2001 (the
"Debenture") to Marcon Capital Corporation, now known as Middlebury Venture
Partners ("Middlebury"). The transaction was exempt from registration under
the Securities Act of 1933 as a private placement under Section 4(2)
thereof. Middlebury is entitled to convert the Debenture into shares of the
Company's Common Stock at a conversion price equal to 85% of the average
closing price of the Common Stock during the 20 business days prior to
conversion. If the Debenture is not sooner converted, it shall, subject to
the satisfaction of various conditions, be automatically converted into
Common Stock on the maturity date, September 30, 2001.
On May 4 and June 20, 2001, Middlebury converted a face amount of
$150,000 and $275,000 of the Debenture into 70,422 and 120,087 shares,
respectively, of the Company's Common Stock. The Debenture was converted at
respective share prices of $2.13 and $2.29 on May 4 and 20, 2001, or 85% of
the average closing price during the relevant measurement period. The
transaction was exempt from registration under the Securities Act of 1933
under Section 3(a)(9) thereof. The remaining outstanding face amount of the
Debenture is $250,000.
18
(b) None
(c) None
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
- ------
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
Exhibit
Number Description
- ------ -------------
2.1 Agreement and Plan of Merger and Contribution by and among
Vermont Pure Holdings, Ltd., Crystal Rock Spring Water Company,
VP Merger Parent, Inc. VP Acquisition Corp. and the stockholders
named therein, dated as of May 5, 2000. (Incorporated by
reference to Appendix A to the Form S-4 Registration Statement
filed by Vermont Pure Holdings, Ltd., f/k/a VP Merger Parent,
Inc., File No. 333-45226, on September 6, 2000 (the "S-4
Registration Statement").)
2.2 Amendment to Agreement and Plan of Merger and Contribution by and
among Vermont Pure Holdings, Ltd., Crystal Rock Spring Water
Company, VP Merger Parent, Inc., VP Acquisition Corp., and the
stockholders named therein, dated as of August 28, 2000.
(Incorporated by reference to Exhibit 2.1 of the S-4 Registration
Statement.)
2.3 Amendment to Agreement and Plan of Merger and Contribution by and
among Vermont Pure Holdings, Ltd., Crystal Rock Spring Water
Company, VP Merger Parent, Inc., VP Acquisition Corp. and the
stockholders named therein, dated as of September 20, 2000.
(Incorporated by reference to Exhibit 2.2 of Form 8-K filed by
Vermont Pure Holdings, Ltd., f/k/a VP Merger Parent, Inc., File
No. 333-45226, on October 19, 2000 (the "Merger 8-K".)
19
3.1 Certificate of Incorporation of the Company. (Incorporated by
reference to Exhibit B to Appendix A to the Proxy Statement
included in the S-4 Registration Statement.)
3.2 Certificate of Amendment of Certificate of Incorporation of the
Company filed October 5, 3.2 2000. (Incorporated by reference to
Exhibit 4.2 of the Merger 8-K.)
3.3 By-laws of the Company, amended March 27, 2001
4.1 Form of Lockup Agreement among the Company, Peter K. Baker, Henry
E. Baker, and John B. Baker. (Incorporated by reference to
Exhibit N to Appendix A to the Proxy Statement included in the
S-4 Registration Statement.)
4.2 Registration Rights Agreement among the Company, Peter K Baker,
Henry E. Baker, John B. Baker, and Ross Rapaport. (Incorporated
by reference to Exhibit 4.6 of the Merger 8-K.)
10.1* 1993 Performance Equity Plan. (Incorporated by reference from
Exhibit 10.9 of Registration Statement 33-72940.)
10.2* 1998 Incentive and Non-Statutory Stock Option Plan, as amended.
(Incorporated by reference to Appendix C to the Proxy Statement
included in the S-4 registration statement.)
10.3* 1999 Employee Stock Purchase Plan. (Incorporated by reference to
Exhibit A of the 1999 Proxy Statement of Vermont Pure Holdings,
Ltd. f/k/a Platinum Acquisition Corp.)
10.4 Amended and Restated Spring Water Licenses and Supply Agreement
between Vermont Pure Holdings, Ltd. and Pristine Mountain Springs
of Vermont, Inc and Amsource, LLC dated April 13, 1999.
(Incorporated by reference from Exhibit 10.25 of Form 10-K for
the Year Ended October 30, 1999.)
10.5 Convertible Debenture Agreement dated September 30, 1999 between
Vermont Pure Holdings, Ltd. and Middlebury Venture Partners, Inc.
(f/k/a Marcon Capital Corporation) in the amount of $975,000.
(Incorporated by reference from Exhibit 10.27 of Form 10-K for
the Year Ended October 30, 1999.)
20
10.6* Employment Agreement between the Company and Timothy G. Fallon.
(Incorporated by reference to Exhibit 10.13 of the S-4
Registration Statement.)
10.7* Employment Agreement between the Company and Bruce S. MacDonald.
(Incorporated by reference to Exhibit 10.14 of the S-4
Registration Statement.)
10.8* Employment Agreement between the Company and Peter K. Baker.
(Incorporated by reference to Exhibit 10.15 of the S-4
Registration Statement.)
10.9* Employment Agreement between the Company and John B. Baker.
(Incorporated by reference to Exhibit 10.16 of the S-4
Registration Statement.)
10.10* Employment Agreement between the Company and Henry E. Baker.
(Incorporated by reference to Exhibit 10.17 of the S-4
Registration Statement.)
10.11 Lease of Buildings and Grounds in Watertown, Connecticut from the
Baker's Grandchildren Trust. (Incorporated by reference to
Exhibit 10.22 of the S-4 Registration Statement.)
10.12 Lease of Grounds in Stamford, Connecticut from the Henry E. Baker
(Incorporated by reference to Exhibit 10.24 of the S-4
Registration Statement.)
21
10.13 Lease of Building in Stamford, Connecticut from Henry E. Baker.
(Incorporated by reference to Exhibit 10.23 of the S-4
Registration Statement.)
10.14 Loan and Security Agreement between the Company and Webster Bank
dated October 5, 2000. 10.14 (Incorporated by reference to
Exhibit 10.14 of Form 10-K filed January 29, 2001 for the Year
Ended October 31, 2000.)
10.15 Term Note from the Company to Webster Bank dated October 5, 2000.
(Incorporated by reference to Exhibit 10.15 of Form 10-K filed
January 29, 2001 for the Year Ended October 31, 2000.)
10.16 Subordinated Note from the Company to Henry E. Baker dated
October 5, 2000. (Incorporated 10.16 by reference to Exhibit
10.16 of Form 10-K filed January 29, 2001 for the Year Ended
October 31, 2000.)
10.17 Subordinated Note from the Company to Joan Baker dated October 5,
2000. (Incorporated by 10.17 reference to Exhibit 10.17 of Form
10-K filed January 29, 2001 for the Year Ended October 31, 2000.)
10.18 Subordinated Note from the Company to John B. Baker dated October
5, 2000. (Incorporated 10.18 by reference to Exhibit 10.18 of
Form 10-K filed January 29, 2001 for the Year Ended October 31,
2000.)
10.19 Subordinated Note from the Company to Peter K. Baker dated
October 5, 2000. (Incorporated 10.19 by reference to Exhibit
10.19 of Form 10-K filed January 29, 2001 for the Year Ended
October 31, 2000.)
10.20 Subordinated Note from the Company to Ross S. Rapaport, Trustee,
dated October 5, 2000. (Incorporated by reference to Exhibit
10.20 of Form 10-K filed January 29, 2001 for the Year Ended
October 31, 2000.)
22
10.21 Subordination and Pledge Agreement from Henry E. Baker to Webster
Bank dated October 5,2000. (Incorporated by reference to Exhibit
10.21 of Form 10-K filed January 29, 2001 for the Year Ended
October 31, 2000.)
10.22 Subordination and Pledge Agreement from Joan Baker to Webster
Bank dated October 5,2000. (Incorporated by reference to Exhibit
10.22 of Form 10-K filed January 29, 2001 for the Year Ended
October 31, 2000.)
10.23 Subordination and Pledge Agreement from John B. Baker to Webster
Bank dated October 5, 2000. (Incorporated by reference to Exhibit
10.23 of Form 10-K filed January 29, 2001 for the Year Ended
October 31, 2000.)
10.24 Subordination and Pledge Agreement from Peter K. Baker to Webster
Bank dated October 5,2000. (Incorporated by reference to Exhibit
10.24 of Form 10-K filed January 29, 2001 for the Year Ended
October 31, 2000.)
10.25 Subordination and Pledge Agreement from Ross S. Rapaport,
Trustee, to Webster Bank dated October 5,2000. (Incorporated by
reference to Exhibit 10.25 of Form 10-K filed January 29, 2001
for the Year Ended October 31, 2000.)
10.26 Agreement between Vermont Pure Springs, Inc. and
Zuckerman-Honickman Inc. dated October 15, 1998. (Incorporated by
reference to the S-4 Registration Statement.
10.27 Loan Purchase Agreement between Vermont Pure Holdings, Ltd. and
Middlebury Venture Partners, Inc., dated September 30, 1999.
(Incorporated by reference to Exhibit 10.26 to Form 10K for the
Year Ended October 30,1999.
* Relates to compensation
Reports on Form 8-K (None)
23
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: September 14, 2001
Randolph, Vermont
VERMONT PURE HOLDINGS, LTD.
By: /s/ Bruce S. MacDonald
-------------------------
Bruce S. MacDonald
Vice President, Chief Financial Officer
(Principal Accounting Officer and
Principal Financial Officer)
24