** **

**United StatesSecurities and Exchange Commission**

**WASHINGTON, D.C. 20549**

**FORM 10-Q**
| **(Mark One)**                                                                                                   |                                                                                                     |
|------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
| x                                                                                                                | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.**  |
|                                                                                                             | ** **                                                                                               |
| **For the  Quarterly Period Ended September 30, 2005**                                                      |
|                                                                                                             |
| **OR**                                                                                                           |
| ** **                                                                                                       |
| o                                                                                                                | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.** |
|                                                                                                             | ** **                                                                                               |
| **For the  Transition period from               to** |
|                                                                                                             |
| **Commission  File Number: 001-14843**                                                                           |
| ** **                                                                                                       |

**THE BOYDS COLLECTION, LTD.**

(Exact Name of Registrantas Specified in its Charter)
| **Maryland**                                                                    | **52-1418730**                          |
|---------------------------------------------------------------------------------|-----------------------------------------|
| *(State  or Other Jurisdiction of Incorporation or Organization)*               | *(I.R.S.  Employer Identification No.)* |
|                                                                            |                                    |
| **350  South Street, McSherrystown,  Pennsylvania, Attn.: Joseph E. Macharsky** | **17344**                               |
| *(Address  of Principal Executive Offices)*                                     | *(Zip  Code)*                           |

 

**(717)633-9898**

(Registrant’s TelephoneNumber, Including Area Code)

Indicate by checkmark whether the Registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes o  Nox

Indicate by checkmark whether the Registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer. See definition of “accelerated filer” in Rule 12b-2of the Exchange Act.

Large acceleratedfiler o   Acceleratedfiler o   Non-accelerated filer x

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act) Yes o   No x

Indicate thenumber of shares outstanding of each of the issuer’s classes of common stock,as of the latest practicable date:
| **Common Stock, par value $.0001 per share** | **59,008,133**                               |
|----------------------------------------------|----------------------------------------------|
| *(Class)*                                    | *(Outstanding  as of October 12, 2005)* |

 

 

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**THE BOYDSCOLLECTION, LTD.**

**TABLE OF CONTENTS**
|               | ** **                                                              | ** ** |
|---------------|-------------------------------------------------------------------------|------------|
| PART I.  | FINANCIAL  INFORMATION                                                  |       |
|          |                                                                    |       |
| **Item 1.**   | **Financial Statements:**                                               |       |
| ** **    | ** **                                                              |       |
|          | Condensed  Consolidated Balance Sheets as of December 31,          |       |
|          | 2004 and  September 30, 2005                                       |       |
|          |                                                                    |       |
|          | Condensed  Consolidated Statements of Operations for the Three and Nine |       |
|          | Months Ended  September 30, 2004 and 2005                          |       |
|          |                                                                    |       |
|          | Condensed  Consolidated Statement of Stockholders’ Deficit         |       |
|          | for the Nine  Months Ended September 30, 2005                      |       |
|          |                                                                    |       |
|          | Condensed  Consolidated Statements of Cash Flows for the                |       |
|          | Nine Months  Ended September 30, 2004 and 2005                     |       |
|          |                                                                    |       |
|          | Notes to  Condensed Consolidated Financial Statements                   |       |
|          |                                                                    |       |
| **Item 2.**   | **Management’s  Discussion and Analysis of Financial**             |       |
| ** **    | **Condition and  Results of Operations**                                |       |
| ** **    | ** **                                                              |       |
| **Item 3.**   | **Quantitative  and Qualitative Disclosures About**                     |       |
| ** **    | **Market Risk**                                                         |       |
| ** **    |                                                                    |       |
| **Item 4.**   | **Disclosure  Controls and Procedures**                                 |       |
| ** **    | ** **                                                              |       |
| PART II. | OTHER INFORMATION                                                       |       |
|          |                                                                    |       |
| **Item 1.**   | **Legal Proceedings**                                                   |       |
| ** **    | ** **                                                              |       |
| **Item 1A.**  | **Risk Factors  Which May Affect Future Performance**              |       |
| ** **    | ** **                                                              |       |
| **Item 2.**   | **Unregistered  Sales of Equity Securities and Use of Proceeds**        |       |
| ** **    | ** **                                                              |       |
| **Item 3.**   | **Defaults Upon  Senior Securities**                                    |       |
| ** **    | ** **                                                              |       |
| **Item 4.**   | **Submission of  Matters to a Vote of Security Holders**                |       |
| ** **    | ** **                                                              |       |
| **Item 5.**   | **Other Information**                                                   |       |
| ** **    | ** **                                                              |       |
| **Item  6.**  | **Exhibits**                                                            |       |
| ** **    | ** **                                                              |       |
|          | Signatures                                                              |       |
|          |                                                                    |       |
|          | Index  to Exhibits                                                      |       |

 

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**PART IFINANCIAL INFORMATION**

**Item 1.        Financial Statements.**

**THE BOYDSCOLLECTION, LTD.CONDENSED CONSOLIDATED BALANCE SHEETSAs of December 31, 2004 and September 30, 2005(Unaudited)**
| ** **                                                                                                                                                  | ** ** | **December 31,  2004** | ** ** | **September 30,  2005** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|------------------------------|------------|
| ** **                                                                                                                                                  | ** ** | **(in thousands)**     | ** ** |
| **ASSETS**                                                                                                                                                  | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| ** **                                                                                                                                                  | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| **CURRENT ASSETS:**                                                                                                                                         | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| Cash and cash equivalents                                                                                                                                   |       | $                           | 354        |                         | $          | 3,909 |   |
| Accounts receivable, less allowances of $2,390 at  December 31, 2004, and $1,355 at September 30, 2005                                            |       | 8,581                       |       | 13,833                       |       |
| Inventory—primarily finished goods, less allowance  for obsolete inventory of $2,719 at December 31, 2004, and $5,312 at  September 30, 2005 |       | 13,462                      |       | 14,052                       |       |
| Inventory in transit                                                                                                                                        |       | 2,666                       |       | 695                          |       |
| Other current assets                                                                                                                                        |       | 854                         |       | 850                          |       |
| Deferred income taxes (Note 10)                                                                                                                             |       | 19,485                      |       | —                       |       |
| Total current assets                                                                                                                                        |       | 45,402                      |       | 33,339                       |       |
|                                                                                                                                                        |       |                        |       |                         |       |
| **PROPERTY  AND EQUIPMENT - NET**(Note 4)                                                                                                                   |       | 35,081                      |       | 32,466                       |       |
|                                                                                                                                                        |       |                        |       |                         |       |
| **OTHER ASSETS:**                                                                                                                                           | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| Deferred debt issuance costs                                                                                                                                |       | 645                         |       | 3,525                        |       |
| Deferred tax asset (Note 10)                                                                                                                                |       | 145,435                     |       | —                       |       |
| Other assets                                                                                                                                                |       | 2,997                       |       | 435                          |       |
| Total other assets                                                                                                                                          |       | 149,077                     |       | 3,960                        |       |
|                                                                                                                                                        |       |                        |       |                         |       |
| **TOTAL  ASSETS**                                                                                                                                           |       | $                           | 229,560    |                         | $          | 69,765 |   |
|                                                                                                                                                        |       |                        |       |                         |       |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY/(DEFICIT)**                                                                                                    | ** ** | ** **                  | ** ** | ** **                   | ** ** |
|                                                                                                                                                        |       |                        |       |                         |       |
| **CURRENT LIABILITIES:**                                                                                                                                    | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| Accounts payable                                                                                                                                            |       | $                           | 4,420      |                         | $          | 5,417 |   |
| Debt obligations (Note 7)                                                                                                                                   |       | —                      |       | 90,892                       |       |
| Accrued expenses                                                                                                                                            |       | 5,708                       |       | 4,159                        |       |
| Income taxes payable                                                                                                                                        |       | 474                         |       | 303                          |       |
| Interest payable                                                                                                                                            |       | 570                         |       | 2,306                        |       |
| Total current liabilities                                                                                                                                   |       | 11,172                      |       | 103,077                      |       |
|                                                                                                                                                        |       |                        |       |                         |       |
| **DEBT  OBLIGATIONS**(Note 7)                                                                                                                               |       | 75,142                      |       | —                       |       |
| ** **                                                                                                                                                  | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| **STOCKHOLDERS’ EQUITY/(DEFICIT):**                                                                                                                    | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| Common stock (61,838 shares issued at  December 31, 2004, and                                                                                          |       | (41,221                     | )          | (41,254                      | )          |
| September 30,  2005, respectively) and paid-in capital in excess of par                                                                                |       |                        |       |                         |       |
| Accumulated other comprehensive loss                                                                                                                        |       | (407                        | )          | 139                          |       |
| Retained earnings                                                                                                                                           |       | 212,312                     |       | 35,190                       |       |
| Less: Treasury  shares at cost (2,834 at December 31, 2004, and                                                                                        |       |                        |       |                         |       |
| 2,830 at September 30, 2005)                                                                                                                           |       | (27,438                     | )          | (27,387                      | )          |
| Total stockholders’ equity/(deficit)                                                                                                                   |       | 143,246                     |       | (33,312                      | )          |
|                                                                                                                                                        |       |                        |       |                         |       |
| **TOTAL LIABILITIES AND  STOCKHOLDERS’ EQUITY/(DEFICIT)**                                                                                              |       | $                           | 229,560    |                         | $          | 69,765 |   |

 

Seenotes to condensed consolidated financial statements.

 

3

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**THE BOYDSCOLLECTION, LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSFor the Three and Nine Months Ended September 30, 2004 and 2005(Unaudited)**

 
| ** **                                           | ** ** | **Three Months Ended  September 30,**                  | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                           | ** ** | **2004**                                                              | ** ** | **2005**                                            | ** ** | **2004** | ** ** | **2005** | ** ** |
| ** **                                           | ** ** | **(in thousands, except per share amounts)** | ** ** |
| ** **                                           | ** ** | ** **                                                            | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| **NET  SALES**                                       |       | $                                                                     | 32,835     |                                                | $          | 26,528 |   | $ | 81,798 |   | $ | 62,172 |   |
| **COST OF  GOODS SOLD**                              |       | 12,960                                                                |       | 11,794                                              |       | 32,144 |   | 31,118 |   |
| **GROSS PROFIT**                                     |       | 19,875                                                                |       | 14,734                                              |       | 49,654 |   | 31,054 |   |
| **SELLING,  GENERAL AND ADMINISTRATIVE EXPENSES**    |       | 11,556                                                                |       | 9,828                                               |       | 33,247 |   | 30,615 |   |
| **IMPAIRMENT  OF ASSETS**(Note 4)                    |       | —                                                                |       | 1,740                                               |       | — |   | 1,740 |   |
| **IMPAIRMENT  OF GOODWILL**(Note 5)                  |       | —                                                                |       | —                                              |       | — |   | 2,600 |   |
| **INCOME/(LOSS)  FROM OPERATIONS**                   |       | 8,319                                                                 |       | 3,166                                               |       | 16,407 |   | (3,901 | ) |
| **OTHER  INCOME**(Note 6)                            |       | 131                                                                   |       | 1,602                                               |       | 35 |   | 997 |   |
| ** **                                           | ** ** | ** **                                                            | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| **INTEREST EXPENSE:**                                | ** ** | ** **                                                            | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest expense                                     |       | 1,071                                                                 |       | 2,957                                               |       | 3,093 |   | 7,929 |   |
| Amortization of deferred debt issuance costs         |       | 76                                                                    |       | 367                                                 |       | 241 |   | 922 |   |
| **TOTAL  INTEREST EXPENSE**                          |       | 1,147                                                                 |       | 3,324                                               |       | 3,334 |   | 8,851 |   |
| **INCOME/(LOSS)  BEFORE PROVISION FOR INCOME TAXES** |       | 7,303                                                                 |       | 1,444                                               |       | 13,108 |   | (11,755 | ) |
| **PROVISION  FOR INCOME TAXES**(Note 9)              |       | 2,836                                                                 |       | (82                                                 | )          | 5,322 |   | 165,367 |   |
| **NET  INCOME/(LOSS)**                               |       | $                                                                     | 4,467      |                                                | $          | 1,526 |   | $ | 7,786 |   | $ | (177,122 | ) |
|                                                 |       |                                                                  |       |                                                |       |   |   |   |   |
| **EARNINGS/(LOSS) PER SHARE:**                       | ** ** | ** **                                                            | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Basic Earnings Per Share—Net Income/(Loss)      |       | $                                                                     | 0.08       |                                                | $          | 0.03 |   | $ | 0.13 |   | $ | (3.00 | ) |
| Diluted Earnings  Per Share—Net Income/(Loss)   |       | $                                                                     | 0.08       |                                                | $          | 0.03 |   | $ | 0.13 |   | $ | (3.00 | ) |

 

Seenotes to condensed consolidated financial statements.

 

4

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**THE BOYDSCOLLECTION, LTD.CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY/(DEFICIT)For the Nine Months Ended September 30, 2005(Unaudited)**

 
| ** **                      | ** ** | ** **              | ** ** | **Common**           | ** ** | ** **          | ** ** | ** **        | ** ** | ** **   | ** ** | ** **   | ** ** | ** **           | ** ** |
|---------------------------------|------------|-------------------------|------------|----------------------|------------|---------------------|------------|-------------------|------------|--------------|------------|--------------|------------|----------------------|------------|
| ** **                      | ** ** | ** **              | ** ** | **Stock**            | ** ** | ** **          | ** ** | ** **        | ** ** | ** **   | ** ** | ** **   | ** ** | ** **           | ** ** |
| ** **                      | ** ** | **Common Stock**   | ** ** | **and Paid-in** | ** ** | **Accumulated**     | ** ** | ** **        | ** ** | ** **   | ** ** | ** **   | ** ** | ** **           | ** ** |
| ** **                      | ** ** | **Shares**              | ** ** | ** **           | ** ** | **Capital in** | ** ** | **Other**         | ** ** | ** **   | ** ** | ** **   | ** ** | **Total**            | ** ** | **Other** | ** ** |
| ** **                      | ** ** | **Issued And**     | ** ** | **Treasury**         | ** ** | **Excess**          | ** ** | **Comprehensive** | ** ** | **Retained** | ** ** | **Treasury** | ** ** | **Stockholders'**    | ** ** | **Comprehensive** | ** ** |
| ** **                      | ** ** | **Outstanding**         | ** ** | **Stock**            | ** ** | **of Par**     | ** ** | **Income/(Loss)** | ** ** | **Earnings** | ** ** | **Stock**    | ** ** | **Equity/(Deficit)** | ** ** | **Income** | ** ** |
| ** **                      | ** ** | **(in thousands)** | ** ** |
|                            |       |                    |       |                 |       |                |       |              |       |         |       |         |       |                 |       |   |   |
| **BALANCE,  JANUARY 1, 2005**   |       | 61,838                  |       | 2,834                |       | $                   | (41,221    | )                 | $          | (407         | )          | $            | 212,312    |                 | $          | (27,438 | ) | $ | 143,246 |   |   |   |
| Issuance of common stock        |       |                    |       | (4                   | )          | (33                 | )          |              |       |         |       | 51           |       | 18                   |       |   |   |
| Other comprehensive income:     |       |                    |       |                 |       |                |       |              |       |         |       |         |       |                 |       |   |   |
| Foreign currency translation    |       | —                  |       | —               |       | —              |       | 546               |       | —       |       | —       |       | 546                  |       | $ | 546 |   |
| Net loss                        |       | —                  |       | —               |       | —              |       | —            |       | (177,122     | )          | —       |       | (177,122             | )          | (177,122 | ) |
| Comprehensive loss              |       | —                  |       | —               |       | —              |       | —            |       | —       |       | —       |       | —               |       | $ | (176,576 | ) |
|                            |       |                    |       |                 |       |                |       |              |       |         |       |         |       |                 |       |   |   |
| **BALANCE, September 30, 2005** |       | 61,838                  |       | 2,830                |       | $                   | (41,254    | )                 | $          | 139          |       | $            | 35,190     |                 | (27,387    | ) | $ | (33,312 | ) |   |   |
|                                 |            |                         |            |                      |            |                     |            |                   |            |              |            |              |            |                      |            |  |  |  |  |  |  |  |  |

 

See notes to condensed consolidated financialstatements.

 

5

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**THE BOYDSCOLLECTION, LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Nine Months Ended September 30, 2004 and 2005(Unaudited)**

 
| ** **                                                                                          | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                          | ** ** | **2004**                                            | ** ** | **2005** | ** ** |
| ** **                                                                                          | ** ** | **(in thousands)**                             | ** ** |
| **CASH  FLOWS FROM OPERATING ACTIVITIES:**                                                          | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Net income/(loss)                                                                                   |       | $                                                   | 7,786      |   | $ | (177,122 | ) |
| Adjustments to reconcile net income/(loss) to net  cash provided by/(used in) operating activities: |       |                                                |       |   |   |
| Depreciation and amortization                                                                       |       | 1,397                                               |       | 1,902 |   |
| Amortization and write off of deferred debt issuance  costs                                         |       | 241                                                 |       | 922 |   |
| Bad debt expense                                                                                    |       | (216                                                | )          | 302 |   |
| Loss on sale of equipment                                                                           |       | (3                                                  | )          | — |   |
| Tax benefit from exercise of stock options                                                          |       | —                                              |       | (33 | ) |
| Deferred taxes                                                                                      |       | 5,159                                               |       | 164,920 |   |
| Impairment of goodwill/assets                                                                       |       | —                                              |       | 4,340 |   |
| Changes in assets and liabilities:                                                                  |       |                                                |       |   |   |
| Accounts receivable - net                                                                           |       | (11,604                                             | )          | (5,554 | ) |
| Inventory - net                                                                                     |       | (3,635                                              | )          | (590 | ) |
| Inventory in transit                                                                                |       | 1,433                                               |       | 1,971 |   |
| Other current assets                                                                                |       | 15                                                  |       | 4 |   |
| Other assets                                                                                        |       | (129                                                | )          | (90 | ) |
| Accounts payable                                                                                    |       | 4,297                                               |       | 997 |   |
| Accrued expenses                                                                                    |       | 681                                                 |       | (1,549 | ) |
| Income tax payable                                                                                  |       | 2,669                                               |       | (171 | ) |
| Interest payable                                                                                    |       | 768                                                 |       | 1,736 |   |
| Net cash provided by/ (used in) operating activities                                                |       | 8,859                                               |       | (8,015 | ) |
|                                                                                                |       |                                                |       |   |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES:**                                                          | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Purchase of property and equipment                                                                  |       | (12,025                                             | )          | (975 | ) |
| Net cash used in investing activities                                                               |       | (12,025                                             | )          | (975 | ) |
|                                                                                                |       |                                                |       |   |   |
| **CASH  FLOWS FROM FINANCING ACTIVITIES:**                                                          | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Net Borrowings/(Payments) on credit agreement,  “Revolver”                                |       | 13,000                                              |       | (12,750 | ) |
| Payment on credit agreement, “Term Loan”                                                  |       | (14,000                                             | )          | (28,000 | ) |
| Borrowings from credit agreement, “New Term Loan”                                         |       | —                                              |       | 45,000 |   |
| Net Borrowings from credit agreement, “New Revolver”                                      |       | —                                              |       | 11,500 |   |
| Deferred debt issuance costs                                                                        |       | —                                              |       | (3,802 | ) |
| Exercise of stock options                                                                           |       | —                                              |       | 51 |   |
| Net cash (used in)/ provided by financing activities                                                |       | (1,000                                              | )          | 11,999 |   |
| Effect of exchange rate changes on cash                                                             |       | 20                                                  |       | 546 |   |
|                                                                                                |       |                                                |       |   |   |
| **NET  INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS**                                           |       | (4,146                                              | )          | 3,555 |   |
| **CASH  AND CASH EQUIVALENTS, BEGINNING OF PERIOD**                                                 |       | 4,173                                               |       | 354 |   |
| **CASH  AND CASH EQUIVALENTS, END OF PERIOD**                                                       |       | $                                                   | 27         |   | $ | 3,909 |   |
| **CASH  PAID DURING THE PERIOD FOR INTEREST**                                                       |       | $                                                   | 2,324      |   | $ | 6,193 |   |
| **CASH PAID/(RECEIVED) DURING THE  PERIOD FOR INCOME TAXES**                                        |       | $                                                   | (2,552     | ) | $ | 597 |   |

 

Seenotes to condensed consolidated financial statements.

 

6

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**THE BOYDS COLLECTION, LTD.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS****Forthe Nine Months Ended September 30, 2005 and 2006(Amounts in thousands, except share and per share amounts)(Unaudited)**

**1.             INTERIM FINANCIAL STATEMENTS**

The Boyds Collection,Ltd. (“Boyds” or the “Company”) operates in two segments, which consist of theCompany’s wholesale gift/collectible business and the Company’s retailgift/entertainment business. In September 2002, Boyds Bear Countryästore opened in Gettysburg, Pennsylvania in November 2004, the Companyopened its second retail store in Pigeon Forge, Tennessee. These retail storesare being used to generate income and expand the brand awareness and image ofBoyds. Substantially all of the Company’s products are sourced from foreignmanufacturers in China through buying agencies.

The condensedconsolidated balance sheet as of September 30, 2005, the condensedconsolidated statements of operations for the three and nine months ended September 30,2004 and 2005, the condensed consolidated statement of stockholders’ equity forthe nine months ended September 30, 2005 and the condensed consolidatedstatements of cash flows for the nine months ended September 30, 2004 and2005 are unaudited. In the opinion of management, all adjustments, necessaryfor a fair presentation of such interim financial statements have been included.The results of operations for the nine months ended September 30, 2005 arenot necessarily indicative of the results to be expected for the full year. Thesefinancial statements should be read in conjunction with the financialstatements and notes included in Boyds’ Annual Report on Form 10-Kfiled with the Securities and Exchange Commission on March 30, 2005.

**Chapter 11 Bankruptcy Proceedings**

On October 3,2005, in connection with potential defaults on our senior secured creditagreement, we entered into a waiver agreement with our lenders. This waiveragreement provided for, among other things, the lenders’ forbearance fromexercising contractual remedies under our credit agreement on account ofexisting defaults through October 16, 2005.

On October 16,2005, we and certain of our subsidiaries filed voluntary petitions forreorganization under Chapter 11 of the United States Bankruptcy Code (the “BankruptcyCode”), in the United States Bankruptcy Court for the District of Maryland (the“Court”) (Case Nos. 05-43793; 05-43805; 05-43802; 05-43833;05-43838; 05-43863; 05-43816; 05-43848; and 05-43857).We have requested joint administration of the cases under the caption “TheBoyds Collection, Ltd., Case No. 05-43793.  We will continue to operate our businesses as “debtorsin possession” (“DIP”) under the jurisdiction of the Court, under Courtprotection from creditors and claimants and in accordance with the applicableprovisions of the Bankruptcy Code and orders of the Court.

Sincethe bankruptcy filing, all orders allowing us to conduct normal businessactivities, including the approval of our DIP financing, have been entered bythe Court. While we are in bankruptcy 

7

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proceedings,all transactions not in the ordinary course of our business require the priorapproval of the Court.

On October 16,2005, pursuant to authorization from the Court, we entered into an $8 millionDIP credit facility. This DIP facility consists of an $8 million revolverfacility which includes access for $3.5 million worth of commercial letters ofcredit. The letters of credit are required to be fully cash collateralized. TheDIP facility limits the amount of capital expenditures during its term to$250,000.

As aconsequence of our bankruptcy filing, pending litigation against us isgenerally stayed, and no party may take any action to collect its pre-petitionclaims except pursuant to order of the Court. February 14, 2006, was thedeadline for claimants to file claims arising prior to our bankruptcy filing. Differencesbetween claim amounts identified by us and claims filed by claimants will beinvestigated and resolved in connection with our claims resolution process, andonly holders of claims that are ultimately allowed for purposes of ourbankruptcy will be entitled to distributions. Since the settlement of terms ofallowed claims are subject to a confirmed plan of reorganization, the ultimatedistribution with respect to the allowed claims is not presently ascertainable.

On March 14,2006, we filed with the Court our Plan of Reorganization, which was subsequentlyamended (as amended, the “Plan”) and Disclosure Statement, which wassubsequently amended (as amended, the “Disclosure Statement”). The Plan and theDisclosure Statement set forth the terms of the proposed settlement betweenBoyds, our secured creditors, the Official Committee of Unsecured Creditors,and our stockholders. The Disclosure Statement also includes a description ofthe events that led up to our bankruptcy filing and the actions we have takento improve our financial situation while in bankruptcy.

ThePlan has been approved by the necessary constituencies and remains subject toapproval by the Court. We cannot provide any assurance that any plan ofreorganization ultimately confirmed by the Bankruptcy Court will be consistentwith the terms of the Plan and Disclosure Statement.

Ifconfirmed, the Plan will provide us with significant relief from pre-filingclaims. The Plan details how the claims of each class of creditors and interestholders will be treated.   The followingis a summary of the Plan:

·              Holdersof senior secured claims will receive (in exchange of approximately $57.7million in claims): senior secured promissory notes in the aggregate principalamount of $30.0 million, to be due in five years following the effective date ofthe Plan, which we expect will occur in June 2006, and common stockrepresenting approximately 48.5% of our common stock outstanding after the  effective date of the Plan (the “New CommonStock”).

·              Eachqualifying noteholder (a holder of our Senior Subordinated Notes that hascontinuously held beneficial interests therein for more than 18 monthsimmediately prior to our bankruptcy filing through the effective date of thePlan) shall receive cash in the amount of 22.0% of the allowed amount of itsnote claim, to be paid, if at all, on the date of a Future Transaction; plusits pro rata share of 5.0% of the New Common Stock, plus its pro rata share of50.0% of the reallocated shares which are the shares of our common stockrepresenting the difference between: (i) 5% of the New Common Stock; and (ii) theaggregate pro rata share of New Common Stock allocable to qualifyingnoteholders. A “Future Transaction” is a transaction in which we, subject tocertain exceptions, (a) merge or consolidate with another person or entityor (b) acquire  any assets, properties, rights or equity interests,in each case occurring within 36 months of the effective date of the Plan solong as the transaction is not a acquisition (i) of assets, properties orrights or assumption of liabilities in the ordinary course of our business(i.e., accounts payable, receivables, inventory, product, store leases, storeequipment and any other similar acquisitions or assumptions of liabilities); (ii) anacquisition that has aggregate consideration of $10 

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millionor less that is not an acquisition of a toy collectible business; or (iii) anacquisition that does not meet certain revenue or EBITDA thresholds.

·              Eachnon-qualifying holder (those holders of our Senior Subordinated Notes that arenot qualifying noteholders) shall receive cash in the amount of 24.0% of theallowed amount of its claim to be paid, if at all, on the date upon which aFuture Transaction is consummated.

·              Ifthe non-qualifying holders  vote toreject the Plan, then each such holder shall receive cash in the amount of 2.0% of the allowed amount of theirnotes, to be paid, if at all, on the date upon which a Future Transaction isconsummated.

·              Eachholder of an allowed general unsecured claim or claims will receive cash equalto 28% of its allowed claim or claims, if the class of such holders accepts thePlan.

·              Ifthe class of holders of general unsecured claims vote to reject the Plan, theneach such holder shall receive cash in the amount of 4% of the allowed amountof such claim to be paid on the earlier of: (a) the date upon which a Future Transaction is consummated; or (b) thefirst business day that is at least 18 months after the effective date of thePlan.

·              Securedclaims other than senior secured claims will be treated either as agreed by the parties or in a manner thatreinstates the secured claim or provides for payment to the creditor equal tothe value of such creditor’s collateral. Each holder of an allowed priorityclaim (other than a tax priority claim) shall receive, on account of and infull and complete settlement, release and discharge of such allowed priorityclaim, (a) cash equal to the amount of such claim or (b) such othertreatment as to which the we  and suchholder shall have agreed upon in writing in an amount sufficient to render suchclaim  not “impaired” under section 1124of the Bankruptcy Code, to be paid on the latest of (a) the effective dateof the Plan (or as soon thereafter as is reasonably practicable), (b) fivebusiness days after the final allowance of such claim, or (c) the date on which the we and the holder ofsuch claim  otherwise agree.

·              Allowedpriority tax claims will either be paid, at our sole option , (a) on thelatter of (i) the effective date of the Plan (or as soon thereafter as isreasonably practicable), (ii) five business days after the allowancethereof; (b) beginning the first anniversary following the effective dateof the Plan, cash payments to be made in equal annual installments, with thefinal installment being payable no later than the sixth anniversary of the dateof the assessment of such allowed priority tax claim, in an aggregate amountequal to such claim, together with interest on the unpaid balance of such claimcalculated from the effective date of the Plan through the date of payment; or (c) suchother treatment agreed to by us and the holder of such claim.

·              Eachholder of 200 or more shares of our common stock will receive its pro ratashare of 46.5% of our post bankruptcy equity.

·              Eachholder of less than 200 shares of our common stock will receive $0.15 pershare.

We arealso negotiating with one of our senior lenders to provide a new $11.0 millionrevolver with a $4.0 million seasonal over-advance option that supports lettersof credit and would provide us with access to additional capital to fundpost-reorganization operations. There can be no assurance that thesenegotiations will be successful.

There can be no assurancethat the Plan, or any other plan of reorganization, will be confirmed by the Courtor implemented successfully.

Followingthe effective date of our plan of reorganization, we expect to have fewer than300 holders of record of our common stock. Consequently, we intend to apply fortermination of the 

9

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registration of ourcommon stock under the Exchange Act of 1934, as amended, which wouldsubstantially reduce the information required to be furnished by us to ourstockholders and we would be no longer required and do not intend to filereports with the SEC.  Certain provisionsof the Exchange Act would no longer be applicable to us such as the short-swingprofit recovery provisions of Section 16(b) of the Exchange Act, therequirement of furnishing a proxy statement in connection with stockholders’meetings, and the related requirement of an annual report to stockholders.

On January 17, 2006, the Company filed forbankruptcy in the Dutch court for its Dutch subsidiary. The court approved thefiling and appointed a Trustee to close down the operations.

**Going Concern**

Boydsis currently operating under Chapter 11 of the U.S. Bankruptcy Code andcontinuation of Boyds as a going concern is contingent upon, among otherthings, Boyds ability to (i) comply with the terms and conditions of itsDIP financing; (ii) obtain confirmation of a plan of reorganization underthe U.S. Bankruptcy Code; (iii) return to profitability; (iv) generatesufficient cash flows from operations; and (v) obtain financing sources tomeet Boyds future obligations. These matters create substantial doubt aboutBoyds ability to continue as a going concern. The condensed quarterly financialstatements do not reflect any adjustments relating to the recoverability andclassification of recorded asset amounts or the amounts and classifications ofliabilities that might result from the outcome of these uncertainties. Additionally,a plan of reorganization could materially change amounts reported in thecondensed consolidated financial statements, which do no give effect to alladjustments of the carrying value of assets and liabilities that are necessaryas a consequence of reorganization under Chapter 11 bankruptcy.

**RecentlyIssued Accounting Standards**

In December 2004, the FASB issued Statementof Financial Accounting Standards (“SFAS”) No. 123R, *Share-BasedPayment* (“SFAS 123R”). SFAS 123R addresses the accounting forshare-based payments to employees, including grants of employee stock options.Under the new standard, companies will no longer be able to account forshare-based compensation transactions using the intrinsic method in accordancewith APB Opinion No. 25, *Accounting for StockIssued to Employees.*Instead, companies will be required to accountfor such transactions using a fair-value method and recognize the relatedexpense associated with share-based payments in the consolidated statement ofoperations. SFAS 123R will be effective for periods beginning after June 15,2005 and allows, but does not require, companies to restate the full fiscalyear of 2005 or retroactive restatement to earlier periods to reflect theimpact of expensing share-based payments under SFAS 123R. On January 1, 2006, the Company adoptedSFAS No. 123(R) which requires companies to expense the fair value ofemployee stock options and other forms of stock-based employee compensation inthe financial statements over the period that an employee provides service inexchange for the award. Under SFAS 123(R), the Company measures compensationcost related to stock options based on the grant-date fair value of the awardusing the Black-Scholes option-pricing model and recognizes it ratably, lessestimated forfeitures, over the vesting term of the award.  The Company believes that the impact of thisSFAS No. 123(R) will have an immaterial impact on the financialresults of the Company.

In March 2005, the SEC issued Staff AccountingBulletin No. (“SAB”) 107 regarding the Staff’s interpretation ofShare-Based Payments. This interpretation provides the Staff’s view regardinginteractions between SFAS No. 123R and certain SEC rules andregulations and provides interpretations of the valuation of share-basedpayments for public companies. The interpretive guidance is intended to assistcompanies in applying the provisions of SFAS No. 123R and investors andusers of the financial statements in analyzing the information provided. TheCompany will adopt SAB 107 in connection with its adoption of SFAS No. 123R.

10

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In November of 2004, theFASB issued SFAS No. 151, *Inventory Costs-anAmendment of ARB No. 43 .*SFAS No. 151 amends the guidancein Accounting Research Bulletin (“ARB”) No 43, Chapter 4, *InventoryPricing,* to clarify the accounting for abnormal amounts of idlefacility expense, freight, handling costs, and wasted material (spoilage). SFASNo. 151 requires that these items be recognized as current-period chargesregardless of whether they meet the criterion of “so abnormal.” Inaddition,  SFAS No. 151 requiresthat allocation of fixed production overhead to the costs of conversion bebased on the normal capacity of production facilities. The provisions of  SFAS No. 151 are effective for inventorycosts incurred during fiscal years beginning after June 15, 2005. Theadoption of  SFAS No. 151 is notexpected to have a material impact on the financial position, results ofoperations or cash flow of Boyds.

InDecember 2004, the FASB issued SFAS No. 153, *Exchange ofNonmonetary Assets* — An Amendment of APB Opinion No. 29, *Accounting for Nonmonetary Transactions*. SFAS No. 153eliminates the exception from fair value measurement from nonmonetary exchangesof similar productive assets in paragraph 21(b) of APB Opinion No. 29and replaces it with an exception for exchanges that do not have commercialsubstance. SFAS No. 153 is effective for periods beginning after June 15,2005. The adoption of this Statement is not expected to have a material impacton the financial position, results of operations or cash flow of Boyds.

In May 2005, the FASB issued SFAS No. 154*, AccountingChanges and Error Corrections -  *areplacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS No. 154requires retrospective application to prior periods financial statements forchanges in accounting principle, unless it is impracticable to determine eitherthe period-specific effects or the cumulative effect of the change. SFAS No. 154also requires that retrospective application of a change in accountingprinciple be limited to the direct effects of the change. Indirect effects of achange in accounting principle should be recognized in the period of theaccounting change. SFAS No. 154 further requires a change in depreciation,amortization or depletion method for long-live, non-financial assets to beaccounted for as a change in accounting estimate effected by a change inaccounting principle. SFAS No. 154 is effective for accounting changes andcorrections of errors made in fiscal years beginning after December 15,2005.  The adoption of this Statement isnot expected to have a material impact on the financial position, results ofoperations or cash flow of Boyds.

**2.             FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK**

At December 31, 2004and at September 30, 2005, Boyds had letters of credit outstanding underits credit agreement amounting to $4.6 million and $1.2 million, respectively. Theseletters of credit represent Boyds’ commitment to purchase inventory which is tobe produced and/or shipped.

**3.             RELATED PARTY TRANSACTIONS**

Kohlberg, Kravis Roberts &Co. L.P. and its affiliates (collectively, “KKR”) is a 59% shareholder ofBoyds. For the three and nine months ended September 30, 2004, Boyds paidto KKR approximately $0.1 million and $0.2 million, respectively, formanagement fees and related expenses. KKR has waived all management fees for2005. Any related expenses incurred by KKR in 2005 will be paid by Boyds.

**4.            ****PROPERTY AND EQUIPMENT**

The components of property and equipment at December 31,2004 and September 30, 2005 were, as follows:

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|                                                  | ** ** | **December 31,  2004** | ** ** | **September 30,  2005** | ** ** |
|--------------------------------------------------|------------|-----------------------------|------------|------------------------------|------------|
| ** **                                       | ** ** | **(in thousands)**     | ** ** |
| Land                                             |       | $                           | 3,570      |                         | $          | 3,570 |   |
| Building                                         |       | 28,346                      |       | 28,729                       |       |
| Equipment                                        |       | 5,407                       |       | 5,633                        |       |
| Software  development costs                      |       | 2,479                       |       | 2,479                        |       |
| Leasehold  improvements                          |       | 1,944                       |       | 1,957                        |       |
| Furniture and  fixtures                          |       | 1,076                       |       | 1,097                        |       |
| Total                                            |       | 42,822                      |       | 43,465                       |       |
| Less:  accumulated depreciation and amortization |       | (9,190                      | )          | (10,999                      | )          |
| Construction in  progress                        |       | 1,449                       |       | —                       |       |
| Total                                            |       | $                           | 35,081     |                         | $          | 32,466 |   |

 

The Company recorded anasset impairment charge of $1.7 million for work completed on its proposedsites in Myrtle Beach, South Carolina and Branson, Missouri as a result of theCompany’s decision in third quarter of 2005 not to move forward with thesesites. Managements decision was based on the fact that our Pigeon Forge retailstore did not meet its budget and the lack of available cash to fund these twoadditional properties.

**5.        GOODWILL**

 In July 2001,the FASB issued SFAS No. 142, *Goodwilland Other Intangible Assets*, which was effective January 1,2002 (SFAS No. 142). SFAS No.142 requires, among other things, thediscontinuance of goodwill   amortization. The Company stopped amortizing itsgoodwill as of January 1, 2002. The Company tests for impairment bycomparing the fair value of the reporting unit with the carrying value of thatunit. Fair value was determined based on the discounted cash flow method. Theimpairment was caused by a continued decline in wholesale sales and results. Goodwillis included within other assets as of December 31, 2004.

**6.        OTHER INCOME**

In July 2005, theCompany received a $1.5 million settlement for a copyright infringement case.

 

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**7.             DEBTOBLIGATIONS**

Debt Obligations issummarized as follows:
|                                                                                     |   | **December 31,** | ** ** | **September 30** |   |   |
|------------------------------------------------------------------------------------------|--------|-----------------------|------------|-----------------------|--------|--------|
|                                                                                     |   | **2004**              | ** ** | **2005**              |   |   |
|                                                                                     |   | (in  thousands)       |       |
| 9% Senior Subordinated  Notes due May 15, 2008                                      |   | 34,392                |       | 34,392                |   |   |
|                                                                                     |   |                  |       |                  |   |   |
| Credit Agreement:                                                                        |   |                  |       |                  |   |   |
| Secured Tranche  A Term Loan due April 2005 (the “Term Loan”)             |   |                  |       |                  |   |   |
| Interest based  on LIBOR or base rate as defined                                         |   | $                     | 28,000     |                  | $      | — |   |   |
| Secured  revolving credit facility due April 2005 (the “Revolver”)        |   |                  |       |                  |   |   |
| Interest based  on LIBOR or base rate as defined                                         |   | 12,750                |       | —                |   |   |
|                                                                                     |   |                  |       |                  |   |   |
| New Credit Agreement:                                                                    |   |                  |       |                  |   |   |
| Secured Term  Loan due February 2008 (the “New Term Loan”)                |   |                  |       |                  |   |   |
| Interest based  on LIBOR or base rate as defined                                         |   | —                |       | 45,000                |   |   |
| Secured  revolving credit facility due February 2008 (the “New Revolver”) |   |                  |       |                  |   |   |
| Interest based  on LIBOR or base rate as defined                                         |   | —                |       | 11,500                |   |   |
|                                                                                     |   |                  |       |                  |   |   |
|                                                                                     |   | $                     | 75,142     |                  | $      | 90,892 |   |   |
|                                                                                          |        |                       |            |                       |        |        |  |  |  |

 

The Senior Subordinated Notes (the “Notes”) havean optional redemption feature exercisable by Boyds any time on or after May 15,2005 at 101.5% of face value. Each year thereafter, the rate decreases by 1.5%.Interest on the Notes is payable semiannually on May 15 and November 15.

On February 23,2005, the Company entered into a new $45 million credit agreement, the “NewCredit Agreement” and used the proceeds to extinguish the Credit Agreementincluding the Term Loan of $28 million and the outstanding Revolver of $12.75million.

The New CreditAgreement contains a revolving credit facility “the New Revolver” with capacityof up to $20 million and a New Term Loan of $45 million. The New CreditAgreement has an interest rate of either a base rate, which is the higher ofthe prime lending rate or 0.50% above the federal funds effective rate, plus9.50% or LIBOR plus 11.00%. The Company incurred approximately $3.8 million ofdeferred financing costs associated with this transaction. The New CreditAgreement requires no scheduled principal payments until the entire outstandingamount of debt is required to be repaid at maturity in February, 2008. Thereare certain prepayment penalties for amounts paid on the New Term Loan and NewRevolver prior to maturity.

At December 31,2004 and September 30, 2005, the weighted average interest rates in effectfor the Term Loan and New Term Loan were 1.75% and 14.79%, respectively. At December 31,2004 and September 30, 2005, the weighted average interest rate in effectfor the Revolver and New Revolver were 3.38% and 15.96%, respectively.

The New Credit Agreement contained financialcovenants, tested quarterly, of minimum consolidated adjusted EBITDA (asdefined in the New Credit Agreement), maximum senior leverage and maximum totalleverage. As of October 16, 2005, the Company was in default with one ormore of the financial covenants contained in the New Credit Agreement. Inaccordance with the New Credit Agreement as described above, the amountsoutstanding became payable upon demand. Amounts

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outstanding at September 30, 2005 havebeen reclassified into current liabilities on the consolidated balance sheet.

On October 16,2005, pursuant to authorization from the bankruptcy court, Boyds entered into a$8 million DIP credit facility. This DIP facility consists of a $8 millionrevolver facility which includes access for $3.5 million worth of commercialletters of credit. The letters of credit are required to be fully cash collateralized.The Company had to borrow any money against the DIP credit facility.

**8.             SEGMENTS OF THE COMPANY AND RELATED INFORMATION**

The Company operates intwo segments which consist of the Company’s wholesale gift/collectible businessand the Company’s retail gift/entertainment business. These segments areevaluated regularly by the Company’s Chief Executive Officer in deciding how toassess performance and allocate resources. Prior to the retail operationsbecoming a significant portion of the Company’s performance, the Company hadonly one reportable segment.

The Company’s wholesalebusiness designs, imports, and distributes resin figurines, plush animals, andother specialty giftware products via a global network of independent andnational retailers and distributors.  TheCompany’s retail operation sells resin figurines, plush animals, specialtygiftware products and provides a unique interactive entertainment experiencedirectly to the end consumer at its Gettysburg, Pennsylvania flagship locationand its Pigeon Forge, Tennessee location.

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| ** **            | ** ** | **For the Three Months Ended, September 30,** | ** ** |
|-----------------------|------------|-----------------------------------------------------------------------------|------------|
| ** **            | ** ** | **2004**                                                                    | ** ** | **2005** | ** ** |
| ** **            | ** ** | **Wholesale**                                                               | ** ** | **Retail** | ** ** | **Consolidated** | ** ** | **Wholesale** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
| Sales                 |       | $                                                                           | 28,736     |   | $ | 4,099 |   | $ | 32,835 |   | $ | 19,151 |   | $ | 7,377 |   | $ | 26,528 |   |
| Gross Profit          |       | 16,764                                                                      |       | 3,111 |   | 19,875 |   | 9,663 |   | 5,071 |   | 14,734 |   |
| SG&A              |       | 9,101                                                                       |       | 2,455 |   | 11,556 |   | 6,197 |   | 3,631 |   | 9,828 |   |
| Impairment of  Assets |       | —                                                                      |       | — |   | — |   | — |   | 1,740 |   | 1,740 |   |
| Income/(Loss)         |       |                                                                        |       |   |   |   |   |   |   |   |   |   |   |
| from Operations       |       | $                                                                           | 7,663      |   | $ | 656 |   | $ | 8,319 |   | $ | 3,466 |   | $ | (300 | ) | $ | 3,166 |   |
|                  |       |                                                                        |       |   |   |   |   |   |   |   |   |   |   |

 
| ** **                     | ** ** | **For the Nine Months Ended, September 30,** | ** ** |
|--------------------------------|------------|----------------------------------------------------------------------------|------------|
| ** **                     | ** ** | **2004**                                                                   | ** ** | **2005** | ** ** |
| ** **                     | ** ** | **Wholesale**                                                              | ** ** | **Retail** | ** ** | **Consolidated** | ** ** | **Wholesale** | ** ** | **Retail** | ** ** | **Consolidated** | ** ** |
| Sales                          |       | $                                                                          | 72,048     |   | $ | 9,750 |   | $ | 81,798 |   | $ | 46,066 |   | $ | 16,106 |   | $ | 62,172 |   |
| Gross Profit                   |       | 42,291                                                                     |       | 7,363 |   | 49,654 |   | 19,838 |   | 11,216 |   | 31,054 |   |
| SG&A                       |       | 26,850                                                                     |       | 6,397 |   | 33,247 |   | 20,474 |   | 10,141 |   | 30,615 |   |
| Impairment of  Assets          |       | —                                                                     |       | — |   | — |   | — |   | 1,740 |   | 1,740 |   |
| Impairment of  Goodwill        |       | —                                                                     |       | — |   | — |   | 2,600 |   | — |   | 2,600 |   |
| Income/(Loss)                  |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| from Operations                |       | $                                                                          | 15,441     |   | $ | 966 |   | $ | 16,407 |   | $ | (3,236 | ) | $ | (665 | ) | $ | (3,901 | ) |
|                           |       |                                                                       |       |   |   |   |   |   |   |   |   |   |   |
| Total Assets                   |       | $                                                                          | 203,341    |   | $ | 27,804 |   | $ | 236,211 |   | $ | 36,392 |   | $ | 33,373 |   | $ | 69,765 |   |
| Capital  Expenditures          |       | 126                                                                        |       | 11,899 |   | 12,025 |   | 276 |   | 699 |   | 975 |   |
| Depreciation and  amortization |       | 785                                                                        |       | 612 |   | 1,397 |   | 666 |   | 1,236 |   | 1,902 |   |

 

**9.             STOCK-BASED COMPENSATION**

AtSeptember 30, 2005, Boyds had various stock-based employee compensationplans, which are described more fully in Note 14. The Company measurescompensation expense for its stock-based employee compensation plans using theintrinsic value method as prescribed by Accounting Principles Board “APB”opinion 25, “Accounting for Stock Issued to Employees”. Boyds has adopted thedisclosure only provision of SFAS No. 148 “Accounting for Stock-BasedCompensation — Transition and Disclosure,” (“SFAS No. 148”) an amendmentof SFAS No. 123; therefore no compensation expense was recognized for theCompany’s stock option plans. Had compensation expense for the Company’s stockoption plans been determined based on the fair value at the grant date forawards under the Company’s stock plan, consistent with the methodologyprescribed under SFAS No. 148, the Company’s net income and net income percommon share would have approximated the pro forma amounts indicated below:

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| ** **                              | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                              | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                              | ** ** | **2004**                         | ** ** | **2005**                        | ** ** | **2004** | ** ** | **2005** | ** ** |
|                                    |       |                             |       |                            |       |   |   |   |   |
| Net  income/(loss), as reported         |       | $                                | 4,467      |                            | $          | 1,526 |   | $ | 7,786 |   | $ | (177,122 | ) |
|                                    |       |                             |       |                            |       |   |   |   |   |
| Deduct: Total  stock-based employee     |       |                             |       |                            |       |   |   |   |   |
| compensation expense determined under   |       |                             |       |                            |       |   |   |   |   |
| fair value based method for all awards, |       |                             |       |                            |       |   |   |   |   |
| net of related tax effects              |       | 379                              |       | 414                             |       | 1,347 |   | 1,331 |   |
|                                    |       |                             |       |                            |       |   |   |   |   |
| Pro forma net  income/(loss)            |       | $                                | 4,088      |                            | $          | 1,112 |   | $ | 6,439 |   | $ | (178,453 | ) |
|                                    |       |                             |       |                            |       |   |   |   |   |
| Earnings per  share:                    |       |                             |       |                            |       |   |   |   |   |
| Basic—as reported                  |       | $                                | 0.08       |                            | $          | 0.03 |   | $ | 0.13 |   | $ | (3.00 | ) |
| Basic—pro forma                    |       | $                                | 0.07       |                            | $          | 0.02 |   | $ | 0.11 |   | $ | (3.02 | ) |
|                                    |       |                             |       |                            |       |   |   |   |   |
| Diluted—as reported                |       | $                                | 0.08       |                            | $          | 0.03 |   | $ | 0.13 |   | $ | (3.00 | ) |
| Diluted—pro forma                  |       | $                                | 0.07       |                            | $          | 0.02 |   | $ | 0.11 |   | $ | (3.02 | ) |
|                                    |       |                             |       |                            |       |   |   |   |   |

 

***Stock Option Plan***—Boyds has granted stock options under various incentivestock option plans (the “Plans”) which provide for the granting to certainemployees and directors of options to acquire Boyds’ common stock. The optionprices of stock which may be purchased under the Plans are not less than thefair value of common stock on the dates of the grants.

Outstandingoptions issued to employees vest and become exercisable over a five-year periodfrom the date of grant. The outstanding options expire ten years from the dateof grant or upon an employee’s retirement or termination from Boyds, and arecontingent upon continued employment during the applicable five-year period.

Boydshas reserved a total of 7,075,102 shares for issuance under the Plans, of which1,495,678 shares remain reserved at September 30, 2005 for futureissuances. In the first nine months of 2005, the Company granted 2,196,250 aspart of its ongoing annual key employee option grant program. The followingtable summarizes information about fixed stock options at September 30,2005: 

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| ** **              | ** ** | ** **         | ** ** | **Options Outstanding** | ** ** |
|-------------------------|------------|--------------------|------------|------------------------------|------------|
| ** **              | ** ** | **Options**        | ** ** | ** **                   | ** ** | **Exercise Price Per Share** | ** ** |
| ** **              | ** ** | **Available**      | ** ** | **Number of**           | ** ** | ** ** | ** ** | **Weighted** | ** ** |
| ** **              | ** ** | **for Grant** | ** ** | **Shares**                   | ** ** | **Range** | ** ** | **Average** | ** ** |
|                    |       |               |       |                         |       |   |   |   |   |
| January 1,  2004   |       | 1,650,939          |       | 3,709,100                    |       | $ | 4.45 - $18.00 |   | $ | 6.43 |   |
|                    |       |               |       |                         |       |   |   |   |   |
| Shares reserved         |       | 1,500,000          |       |                         |       |   |   |   |   |
| Options granted         |       | (501,144           | )          | 501,144                      |       | $ | 2.49 - $4.22 |   | $ | 2.85 |   |
| Options  exercised      |       |               |       |                         |       |   |   |   |   |
| Options  forfeited      |       | 195,361            |       | (195,361                     | )          | $ | 4.31 - $10.60 |   | $ | 7.11 |   |
|                    |       |               |       |                         |       |   |   |   |   |
| December 31,  2004 |       | 2,845,156          |       | 4,014,883                    |       | $ | 2.49 - $18.00 |   | $ | 5.95 |   |
|                    |       |               |       |                         |       |   |   |   |   |
| Shares reserved         |       | 500,000            |       |                         |       |   |   |   |   |
| Options granted         |       | (2,196,250         | )          | 2,196,250                    |       | $ | 1.73 - $2.50 |   | $ | 2.07 |   |
| Options  exercised      |       | 3,931              |       | (3,931                       | )          | $ | 4.45 |   | $ | 4.45 |   |
| Options  forfeited      |       | 342,841            |       | (342,841                     | )          | $ | 2.06 - $9.31 |   | $ | 3.58 |   |
|                    |       |               |       |                         |       |   |   |   |   |
| September 30, 2005 |       | 1,495,678          |       | 5,864,361                    |       | $ | 1.73 - $18.00 |   | $ | 4.64 |   |

 

Thefollowing table summarizes information about stock options outstanding at September 30,2005:
| ** **      | ** ** | ** **      | ** ** | **Weighted**            | ** ** | ** **      | ** ** | **Weighted**            | ** ** | **Weighted**            | ** ** |
|-----------------|------------|-----------------|------------|-------------------------|------------|-----------------|------------|-------------------------|------------|-------------------------|------------|
| **Exercise**    | ** ** | **Options**     | ** ** | **Average**             | ** ** | **Options**     | ** ** | **Average**             | ** ** | **Average**             | ** ** |
| **Price**       | ** ** | **Outstanding** | ** ** | **Exercise Price** | ** ** | **Exercisable** | ** ** | **Exercise Price** | ** ** | **Remaining Life** | ** ** |
|            |       |            |       |                    |       |            |       |                    |       |                    |       |
| $1.73 to $2.06  |       | 1,962,500       |       | $                       | 2.06       |            | 105,000    |                    | $          | 2.06                    |       | 9.7 |   |
|            |       |            |       |                    |       |            |       |                    |       |                    |       |
| $2.36 to $6.25  |       | 2,149,984       |       | $                       | 4.57       |            | 1,203,069  |                    | $          | 4.72                    |       | 7.1 |   |
|            |       |            |       |                    |       |            |       |                    |       |                    |       |
| $6.50 to $18.00 |       | 1,758,000       |       | $                       | 7.60       |            | 1,377,000  |                    | $          | 7.75                    |       | 5.8 |   |
|            |       |            |       |                    |       |            |       |                    |       |                    |       |

 

**10.          PROVISION FOR INCOME TAXES**

As of September 30, 2005, the Company has a full valuationallowance against its deferred tax assets, consisting of tax carryforwards thatwill begin to expire in 2023. The recovery of the deferred income tax assets iscontingent upon future taxable income and applicable tax laws. For the ninemonths ended September 30, 2005, the Company recorded tax expense of$165.4 million as a result of recording a $170.7 million additional valuationallowance against its deferred tax assets. This valuation allowance resultsfrom estimates by management of future taxable income in each of the federal,state, and foreign tax jurisdictions during the carry forward period and theconclusion by

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management that itis no longer more likely than not that this amount of deferred tax assets willbe realized under the criteria of SFAS No. 109, Accounting for IncomeTaxes.

**11.          COMMITMENTS & CONTINGENCIES**

Boyds is involved invarious legal proceedings, claims and governmental audits in the ordinarycourse of business. In the opinion of management, the ultimate disposition ofthese matters will not have a material adverse effect on the financialposition, results of operations or cash flows of Boyds.

Boyds also has significant licensing agreements withNASCAR, Coca-Cola, M&Ms, and Crayola.  The Company’s NASCAR license includes the topten drivers. Pursuant to this arrangement, Boyds has the ability to use theNASCAR logo or driver names, likeness, and numbers. Boyds pays a royalty basedon sales of these products to the various licensors.

**12.          EARNINGS PER SHARE**

The following is areconciliation of the numerators and denominators of the basic and dilutedearnings per share computations for the net income/(loss) available to commonstockholders:
| ** **                                           | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                           | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                           | ** ** | **2004**                         | ** ** | **2005**                        | ** ** | **2004** | ** ** | **2005** | ** ** |
| ** **                                           | ** ** | ** **                       | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Numerator for  basic and diluted earnings per share: |       |                             |       |                            |       |   |   |   |   |
| Net income/(loss)                                    |       | $                                | 4,467      |                            | $          | 1,526 |   | $ | 7,786 |   | $ | (177,122 | ) |
| Denominator:                                         |       |                             |       |                            |       |   |   |   |   |
| Denominator for basic earnings per share -           |       |                             |       |                            |       |   |   |   |   |
| weighted average shares                              |       | 59,004                           |       | 59,008                          |       | 59,004 |   | 59,007 |   |
| Effect of  dilutive securities:                      |       |                             |       |                            |       |   |   |   |   |
| Effect of shares issuable under stock option plans   |       |                             |       |                            |       |   |   |   |   |
| based on treasury stock method                       |       | 8                                |       | —                          |       | 10 |   | 67 |   |
| Denominator for  diluted earnings per share -        |       |                             |       |                            |       |   |   |   |   |
| weighted average shares                              |       | 59,012                           |       | 59,008                          |       | 59,014 |   | 59,074 |   |
|                                                 |       |                             |       |                            |       |   |   |   |   |
| EPS - Basic                                          |       | $                                | 0.08       |                            | $          | 0.03 |   | $ | 0.13 |   | $ | (3.00 | ) |
|                                                 |       |                             |       |                            |       |   |   |   |   |
| EPS - Diluted                                        |       | $                                | 0.08       |                            | $          | 0.03 |   | $ | 0.13 |   | $ | (3.00 | ) |

 

**13.      SUBSEQUENT EVENTS**

On October 3,2005, in connection with potential defaults on its senior secured creditagreement, we entered into a waiver agreement with our lenders. This waiveragreement provided for, among other things, the lenders’ forbearance fromexercising contractual remedies under our credit agreement on account ofexisting defaults through October 16, 2005.

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On October 7, 2005, The Company receivednotification from the New York Stock Exchange (“NYSE”) dated October 7,2005, that it determined that trading of the Company’s common stock (tickersymbol FOB) would be suspended prior to the opening on Monday, October 10,2005. This decision was reached in view of the fact that the Company was not incompliance with the NYSE’s newly increased continued listing standards. TheCompany was considered “below criteria” by the NYSE because the Company’saverage market capitalization was less than $75 million over a  30 trading-day period and its shareholders’equity was less than $75 million and the average closing price of the securitywas less than $1.00 over a consecutive 30 trading-day period. In addition, theNYSE noted the Company’s abnormally low selling price, which closed at $0.45 onOctober 6, 2005.

Boyd’s common stock is currently being quoted under theticker symbol “BOYD.PK” on the Pink Sheets Electronic Quotation Servicemaintained by the Pink Sheets LLC and on the OTC Bulletin Board.

On October 16,2005, we and certain of our subsidiaries filed voluntary petitions forreorganization under chapter 11 of the United States Bankruptcy Code (the “BankruptcyCode”), in the United States Bankruptcy Court for the District of Maryland (the“Court”) (Case Nos. 05-43793; 05-43805; 05-43802; 05-43833;05-43838; 05-43863; 05-43816; 05-43848; and 05-43857).We have requested joint administration of the cases under the caption “TheBoyds Collection, Ltd., Case No. 05-43793.  We will continue will continue to operateour  businesses as “debtors in possession”under the jurisdiction of the Court and in accordance with the applicable provisionsof the Bankruptcy Code and orders of the Court (See Note 1 — Chapter 11 Bankruptcy Proceedings).

On January 17,2006, the Company filed for bankruptcy in the Dutch court for its Dutchsubsidiary. The court approved the filing and appointed a Trustee to close downthe operations,

In November of2005, Boyds opened *My Boyds Bear Shop*in FAO Schwarz in New York City. This retail store in being used to generateincome and expand the brand awareness and image of Boyds.

On May 25, 2006, the Company announced that Jan Murley, ChiefExecutive Officer was leaving the Company effective on the earlier to occur of (i) theeffective date of the Company’s plan of reorganization and (ii) June 30,2006. The Company will incur approximately $0.5 million in expensesassociated with this departure.

The Company also announced the appointment of Robert Coccoluto as ChiefExecutive Officer, Peter Frost as Chief Operating Officer and Michael A. Prageras President.

**Item 2.    Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

The followingdiscussion should be read in conjunction with the financial information andrelated notes included elsewhere in this report.

**Chapter 11 Bankruptcy Proceedings**

On October 3, 2005, in connection with potentialdefaults on our senior secured credit agreement, we entered into a waiveragreement with our lenders. This waiver agreement provided for, among otherthings, the lenders’ forbearance from exercising contractual remedies under ourcredit agreement on account of existing defaults through October 16, 2005.

On October 16, 2005, we and certain of oursubsidiaries filed voluntary petitions for reorganization under Chapter 11 ofthe United States Bankruptcy Code (the “Bankruptcy Code”), in the 

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United States Bankruptcy Court for the District of Maryland (the “Court”)(Case Nos. 05-43793; 05-43805; 05-43802; 05-43833; 05-43838;05-43863; 05-43816; 05-43848; and 05-43857). We haverequested joint administration of the cases under the caption “The Boyds Collection,Ltd., Case No. 05-43793.  Wewill continue to operate our businesses as “debtors in possession” (“DIP”)under the jurisdiction of the Court, under Court protection from creditors andclaimants and in accordance with the applicable provisions of the BankruptcyCode and orders of the Court.

Since the bankruptcy filing, all orders allowing us toconduct normal business activities, including the approval of our DIPfinancing, have been entered by the Court. While we are in bankruptcyproceedings, all transactions not in the ordinary course of our businessrequire the prior approval of the Court.

On October 16, 2005, pursuant to authorizationfrom the Court, we entered into an $8 million DIP credit facility. This DIPfacility consists of an $8 million revolver facility which includes access for$3.5 million worth of commercial letters of credit. The letters of credit arerequired to be fully cash collateralized. The DIP facility limits the amount ofcapital expenditures during its term to $250,000.

As a consequence of our bankruptcy filing, pendinglitigation against us is generally stayed, and no party may take any action tocollect its pre-petition claims except pursuant to order of the Court.February 14, 2006, was the deadline for claimants to file claims arisingprior to our bankruptcy filing. Differences between claim amounts identified byus and claims filed by claimants will be investigated and resolved inconnection with our claims resolution process, and only holders of claims thatare ultimately allowed for purposes of our bankruptcy will be entitled todistributions. Since the settlement of terms of allowed claims are subject to aconfirmed plan of reorganization, the ultimate distribution with respect to theallowed claims is not presently ascertainable.

On March 14, 2006, we filed with the Court ourPlan of Reorganization, which was subsequently amended (as amended, the “Plan”)and Disclosure Statement, which was subsequently amended (as amended, the “DisclosureStatement”). The Plan and the Disclosure Statement set forth the terms of theproposed settlement between Boyds, our secured creditors, the OfficialCommittee of Unsecured Creditors, and our stockholders. The DisclosureStatement also includes a description of the events that led up to our bankruptcyfiling and the actions we have taken to improve our financial situation whilein bankruptcy.

The Plan has been approved by the necessaryconstituencies and remains subject to approval by the Court. We cannot provideany assurance that any plan of reorganization ultimately confirmed by theBankruptcy Court will be consistent with the terms of the Plan and DisclosureStatement.

If confirmed, the Plan will provide us withsignificant relief from pre-filing claims. The Plan details how the claims of eachclass of creditors and interest holders will be treated.   The following is a summary of the Plan:

·              Holders of senior secured claimswill receive (in exchange of approximately $57.7 million in claims): seniorsecured promissory notes in the aggregate principal amount of $30.0 million, tobe due in five years following the effective date of the Plan, which we expectwill occur in June 2006, and common stock representing approximately 48.5%of our common stock outstanding after the effective date of the Plan (the “New Common Stock”).

·              Each qualifying noteholder (aholder of our Senior Subordinated Notes that has continuously held beneficialinterests therein for more than 18 months immediately prior to our bankruptcyfiling through the effective date of the Plan) shall receive cash in the amountof 22.0% of the allowed amount of its note claim, to be paid, if at all, on thedate of a Future Transaction; plus its pro rata share of 5.0% of the New CommonStock, plus its pro rata share of 50.0% of the reallocated shares which are the

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shares of our common stock representing the differencebetween: (i) 5% of the New Common Stock; and (ii) the aggregate prorata share of New Common Stock allocable to qualifying noteholders. A “FutureTransaction” is a transaction in which we, subject to certain exceptions, (a) mergeor consolidate with another person or entity or (b) acquire  anyassets, properties, rights or equity interests, in each case occurring within36 months of the effective date of the Plan so long as the transaction is not aacquisition (i) of assets, properties or rights or assumption ofliabilities in the ordinary course of our business (i.e., accounts payable,receivables, inventory, product, store leases, store equipment and any othersimilar acquisitions or assumptions of liabilities); (ii) an acquisitionthat has aggregate consideration of $10 million or less that is not anacquisition of a toy collectible business; or (iii) an acquisition thatdoes not meet certain revenue or EBITDA thresholds.

·              Each non-qualifying holder (thoseholders of our Senior Subordinated Notes that are not qualifying noteholders)shall receive cash in the amount of 24.0% of the allowed amount of its claim tobe paid, if at all, on the date upon which a Future Transaction is consummated.

·              If the non-qualifying holders  vote to reject the Plan, then each suchholder  shall receive cash in the amountof 2.0% of the allowed amount of their notes, to be paid, if at all, on thedate upon which a Future Transaction is consummated.

·              Each holder of an allowed generalunsecured claim or claims will receive cash equal to 28% of its allowed claimor claims, if the class of such holders accepts the Plan.

·              If the class of holders of generalunsecured claims vote to reject the Plan, then each such holder shall receivecash in the amount of 4% of the allowed amount of such claim to be paid on theearlier of:  (a) the date upon whicha Future Transaction is consummated; or (b) the first business day that isat least 18 months after the effective date of the Plan.

·              Secured claims other than seniorsecured claims  will be treated either asagreed by the parties or in a manner that reinstates the secured claim orprovides for payment to the creditor equal to the value of such creditor’s collateral.Each holder of an allowed priority claim (other than a tax priority claim)shall receive, on account of and in full and complete settlement, release anddischarge of such allowed priority claim, (a) cash equal to the amount ofsuch claim or (b) such other treatment as to which the we  and such holder shall have agreed upon inwriting in an amount sufficient to render such claim  not “impaired” under section 1124 of theBankruptcy Code, to be paid on the latest of (a) the effective date of thePlan (or as soon thereafter as is reasonably practicable), (b) fivebusiness days after the final allowance of such claim, or (c) the date on which the we and the holder ofsuch claim  otherwise agree.

·              Allowed priority tax claims willeither be paid, at our sole option , (a) on the latter of (i) theeffective date of the Plan (or as soon thereafter as is reasonablypracticable), (ii) five business days after the allowance thereof; (b) beginningthe first anniversary following the effective date of the Plan, cash paymentsto be made in equal annual installments, with the final installment beingpayable no later than the sixth anniversary of the date of the assessment ofsuch allowed priority tax claim, in an aggregate amount equal to such claim,together with interest on the unpaid balance of such claim calculated from theeffective date of the Plan through the date of payment; or (c) such othertreatment agreed to by us and the  holderof such claim.

·              Each holder of 200 or more sharesof our common stock will receive its pro rata share of 46.5% of our postbankruptcy equity.

·              Each holder of less than 200shares of our common stock will receive $0.15 per share.

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We are also negotiating with one of our senior lendersto provide a new $11.0 million revolver with a $4.0 million seasonalover-advance option that supports letters of credit and would provide us withaccess to additional capital to fund post-reorganization operations. There canbe no assurance that these negotiations will be successful.

There can be no assurance that the Plan, or any otherplan of reorganization, will be confirmed by the Court or implementedsuccessfully.

Following the effective date of our plan ofreorganization, we expect to have fewer than 300 holders of record of ourcommon stock. Consequently, we intend to apply for termination of theregistration of our common stock under the Exchange Act of 1934, as amended,which would substantially reduce the information required to be furnished by usto our stockholders and we would be no longer required and do not intend tofile reports with the SEC.  Certainprovisions of the Exchange Act would no longer be applicable to us such as theshort-swing profit recovery provisions of Section 16(b) of theExchange Act, the requirement of furnishing a proxy statement in connectionwith stockholders’ meetings, and the related requirement of an annual report tostockholders.

On January 17, 2006, the Company filed forbankruptcy in the Dutch court for its Dutch subsidiary. The court approved thefiling and appointed a Trustee to close down the operations.

##### **GENERAL**

Boyds is a domestic designer, importer anddistributor of branded, high-quality, handcrafted collectibles and otherspecialty giftware products. Boyds sells its products primarily through anextensive network of approximately 11,000 store locations comprised ofindependent gift and collectibles retailers, premier department stores,selected catalogue retailers and other electronic and retail channels. Boydsalso sells its products directly to consumers through its two retail stores *Boyds Bear Country**ä**- Gettysburg* and *Boyds Bear Country**ä**- Pigeon Forge.*

Boyds’ salesconsist of plush animals, resin figurines, and other products. Other productsinclude collectors club sales, home décor, stationary, accessories, retail foodoperations and its interactive concepts. Collectors club sales are generatedfrom annual dues collected directly from members of Boyds’ collectors club, *The Loyal Order of Friends of Boyds*, which began in July 1996and currently has approximately 20,000 paying members, as well as from the saleof related accessories.

Boyds also has several licensing agreements for itsbranded product. The more significant agreements would include NASCAR ®, Coke ®, M&M’S ® Brand Characters, and Crayola ®. Boyds expects to begindelivering Coke ®,M&M’S ®, andCrayola ® Boydsproducts to stores in late 2005.

Boyds licenses itsproduct designs to other companies for products including home textiles, infantclothing and wallpaper. Boyds believes such licensing, in addition to providingroyalty income, helps to increase consumer awareness of Boyds’ designs andbrand image. Boyds reports royalty income in net sales.

##### Boyds exhibits its products at selectnational and regional tradeshows where orders are taken by Boyds’ employees.Boyds operates almost exclusively out of a leased office/distribution facility,owns one retail store in the general vicinity of Gettysburg, Pennsylvania, andowns a second retail store in Pigeon Forge, Tennessee. Boyds also leases warehousespace in Dunkeswell, United Kingdom.  TheCompany had also leased space in Dordrecht, The Netherlands. The lease wasterminated as a result of the bankruptcy filing on January 17, 2006 in theDutch courts.

 

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##### **SEGMENTS**

The Company operates in two segments which consist ofthe Company’s wholesale gift/collectible business and the Company’s retailgift/entertainment business. These segments are evaluated regularly by theCompany’s Chief Executive Officer in deciding how to assess performance andallocate resources.  Prior to the retailoperations becoming a significant portion of the Company’s performance, theCompany had only one reportable segment.

The Company’s wholesale business designs, imports, anddistributes resin figurines, plush animals and other specialty giftwareproducts via a global network of independent retailers and distributors. TheCompany’s retail operation sells resin figurines, plush animals, otherspecialty giftware products and provides a unique interactive entertainmentexperience, directly to the end consumer currently at its Gettysburg,Pennsylvania flagship location and Pigeon Forge, Tennessee location.

**CRITICAL ACCOUNTING POLICIES**

Preparing the Company’s financial statements inconformity with accounting principles generally accepted in the United Statesof America requires that management make estimates and assumptions that affectthe amounts reported in the financial statements and accompanying notes. Predictingfuture events is inherently an imprecise activity and as such requires the useof judgment. Actual results may vary from estimates in amounts that may bematerial to the financial statements. Management believes that the estimatesand assumptions used in connection with the amounts reported in Boyds’financial statements and related disclosures are reasonable and made in goodfaith.

The most significant accounting estimates inherent inthe preparation of Boyds’ financial statements include estimates related to thevaluation of the deferred tax assets, determining the ultimate collectabilityof accounts receivable and the realizable value of inventory.   The process of determining estimates is basedon several factors, including historical experience, current and anticipatedeconomic conditions and customer profiles. Boyds continually reevaluates thesekey factors and makes adjustments to estimates where appropriate. The followingare Boyds’ critical accounting policies, some of which require the applicationof significant estimates and assumptions.

·                  For thewholesale business, Boyds records sales when persuasive evidence of anarrangement exists, the price is fixed or determinable, items are shipped andthe collectibility of the resulting receivable is reasonably assured. For theretail business, Boyds recognizes sales upon customer receipt of themerchandise. The most significant financial statement line item, net sales,represents transactions consistent with Boyds’ primary business focus and meetsthe criteria of Staff Accounting Bulletin No. 104, including the transferof title, reasonable collectibility, and identified customer.

·            As of June 30,2005, the Company set up a valuation allowance for the remaining amount of itsdeferred tax assets, consisting of tax carryforwards that will begin to expirein 2023. For the nine months ended September 30, 2005, the Companyrecorded tax expense of $165.4 million as a result of recording a $170.7million additional valuation allowance against its deferred tax assets. Thisvaluation allowance results from estimates by management of future taxableincome in each of the federal, state, and foreign tax jurisdictions during thecarry forward period and the conclusion by management that it is no longer morelikely than not that this amount of deferred tax assets will be realized underthe criteria of SFAS No. 109, “Accounting for Income Taxes”.

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·                 Accounts receivableare presented at estimated net realizable value. Boyds uses estimates indetermining the collectability of its accounts receivable and must rely on itsevaluation of historical bad debts, customer credit ratings, current economictrends and changes in customer payment terms to arrive at appropriate reserves.

·                       Inventories arestated at the lower of cost or market. Cost is determined under the first-in,first-out method of accounting. Boyds records adjustments to the valueof inventory in situations where it appears that Boyds will not be able torecover the cost of the product. This lower of cost or market analysis is basedon Boyds’ estimate of forecasted demand by customer by product. A decrease inproduct demand due to changing customer tastes, consumer buying patterns orloss of shelf space to competitors could significantly impact Boyds’ evaluationof its excess and obsolete inventories.

·                   Underthe requirements of Statement of Financial Accounting Standards (“SFAS”)Nos.142 “Goodwill and Other Intangible Assets”, and 144 “Accounting for theImpairment and Disposal of Long-Lived Assets”, Boyds assesses the potential impairmentof identifiable intangibles and acquired goodwill on an annual basis orwhenever events or changes in circumstances indicate that the carrying valuemay not be recoverable, and assesses potential impairment of long livedassets whenever events or changes in circumstances indicate that the carryingvalue may not be recoverable. In performing these evaluations, the Companyevaluates current and future economic and business trends to develop businessforecasts of future performance and related cash flows. Such estimates requirethe use of judgment and numerous subjective assumptions.  As a result of the Company’s impairment testcompleted in the first quarter of 2005, the Company recorded an impairment lossof $2.6 million to reduce the carrying value of goodwill to zero. Theimpairment was caused by a continued decline in wholesale sales and results. Inthe third quarter of 2005, the Company decided to discontinue with its retailexpansion and recorded as asset impairment charge of $1.7 million. The chargeis attributed to the investment that the Company had made in two retailproperties, Myrtle Beach, South Carolina and Branson, Missouri in anticipationof its retail expansion in each site.

**FACTORS WHICHAFFECT BOYDS’ RESULTS OF OPERATIONS**

***Seasonality***

Boyds recognizes revenues throughout the year andgenerally ships merchandise on a first-in, first-out basis. Approximately 58%of revenues are recorded between May and October while approximately42% of revenues are recorded between November and April inanticipation of the holiday season. Boyds does not have the significantseasonal variation in its wholesale revenues that it believes is experienced bymany other giftware, collectibles or retail companies.

***Foreign Exchange***

The dollar value of Boyds’ assets abroad is notsignificant. Boyds’ sales are primarily denominated in United States dollarsand, as a result, are not subject to changes in exchange rates.

Boyds imports most of its products from manufacturersin China. Boyds’ costs could be adversely affected on a short-term basis if theChinese renminbi appreciates significantly relative to the United Statesdollar. Conversely, its costs would be favorably affected on a short-term basisif the Chinese renminbi depreciates significantly relative to the United Statesdollar. Although Boyds generally pays for its products in United Statesdollars, the cost of such products fluctuates with the value of the Chinese 

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renminbi. In the future, Boyds may, from time to time,enter into foreign exchange contracts or prepay inventory purchases as apartial hedge against currency fluctuations. Differences between the amounts ofsuch contracts and costs of specific material purchases are included ininventory and cost of sales. Boyds’ policy is to not capitalize any gains orlosses associated with foreign currency transactions or foreign exchangecontracts. Boyds intends to manage foreign exchange risks to the extentappropriate.

Boyds has sales operations based in Europe and Canada,but at this time Boyds does not expect any significant impact due tofluctuations in the Euro, the British Pound or the Canadian dollar.

**RESULTS OFOPERATIONS**

Net sales consist of sales of our products, net ofsales discounts, product returns and allowances, retail sales from the *Boyds Bear Country**TM* retailstores, collectors club sales generated from members of Boyds’ collectors cluband royalty income from licenses held by Boyds. Wholesale sales are primarilymade on a purchase order basis. Revenue associated with sales is recognizedwhen products are shipped to the customer or upon the completion of a retailtransaction.

Boyds’ gross profit margins may not be comparable tothe gross profit margins of certain other entities due to the classification ofcertain costs. Boyds includes items such as purchasing and receiving costs,internal transfer costs, and the costs of its distribution network in cost ofgoods sold. Boyds includes its inspection costs in selling, general andadministrative (“SG&A”) expenses. Other entities may classify their expensesdifferently.

In accordance with Emerging Issues Task Force (“EITF”)No. 00-10, “Accounting for Shipping and Handling Fees and Costs”,Boyds records amounts billed to customers related to shipping and handling asrevenue and all expenses related to shipping and handling as cost of goodssold.

Other income consists of interest income and exchangerate gain/loss.

The following table sets forth the components of netincome as a percentage of net sales for the period indicated:
| ** **                                    | ** ** | **Three Months**  | ** ** | **Nine Months**   | ** ** |
|-----------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                    | ** ** | **Ended**              | ** ** | **Ended**              | ** ** |
| ** **                                    | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                    | ** ** | **2004**               | ** ** | **2005**               | ** ** | **2004** | ** ** | **2005** | ** ** |
|                                          |       |                   |       |                   |       |   |   |   |   |
| Net sales                                     |       | 100.0                  | %          | 100.0                  | %          | 100.0 | % | 100.0 | % |
| Gross profit                                  |       | 60.5                   | %          | 55.5                   | %          | 60.7 | % | 49.9 | % |
| Selling, general  and administrative expenses |       | 35.2                   | %          | 37.0                   | %          | 40.6 | % | 49.2 | % |
| Impairment of  assets                         |       | 0.0                    | %          | 6.6                    | %          | 0.0 | % | 7.0 | % |
| Income/(loss) from operations                 |       | 25.3                   | %          | 11.9                   | %          | 20.1 | % | (6.3 | )% |
| Other income  (expenses), net                 |       | 0.4                    | %          | 6.0                    | %          | 0.0 | % | 1.6 | % |
| Interest expense                              |       | 3.5                    | %          | 12.5                   | %          | 4.1 | % | 14.2 | % |
| Provision for  income taxes                   |       | 8.6                    | %          | (0.3                   | )%         | 6.5 | % | 266.0 | % |
| Net  income/(loss)                            |       | 13.6                   | %          | 5.7                    | %          | 9.5 | % | (284.9 | )% |

** **

**Executive Overview**

In the third quarter of 2005, the Company’s net salesdecreased by 19%, which can primarily be attributed to the wholesale segment’sdecrease of 33% partially offset by an increase of 80% in the 

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retail segment. Thedecrease in wholesale net sales was attributable to a 41% decline in wholesalebookings (cancelable orders) in the third quarter of the year compared to thesame period in 2004. Weakness across the Specialty Gift Retail sector of theCompany’s account base and reduced sales to a number of Boyds’ larger legacyaccounts were the contributors to these reduced bookings. Retail net sales were positively impacted bythe addition of the Company’s second store in Pigeon Forge, Tennessee whichgenerated $3.2 million in sales. The Gettysburg store generated $4.2 milion insales, up $0.1 million from $4.1 million as compared to the same period in2004.

The Company’s net profit for the third quarterdecreased by $2.9 million to a profit of $1.5 million as compared to the sameperiod in 2004. This decrease can be attributed to a significant decrease insales, and an impairment of assets associated with the Company’s retailexpansion plans, all of which were partially offset by a legal settlementpayment received by the Company of $1.5 million classified as other income andongoing cost savings initiatives.

Cash used for operating activities in the first ninemonths of 2005 was approximately $8.0 million compared to $8.9 million in cashprovided by operations in the year-ago period. In the nine months of 2005, theCompany had a net increase of approximately $15.8 million of debt and investedapproximately $1.0 million of cash in property and equipment. In the ninemonths of 2004, the Company had net repayments of  approximately $1.0 million of debt andinvested approximately $12.0 million of cash, of which $10.5 million related tothe building of *Boyds Bear Country**TM*-PigeonForge.

**Three Months EndedSeptember 30, 2005 vs. Three Months Ended September 30, 2004**

*NetSales*—Net sales decreased $6.3 million, to $26.5million in the third quarter of 2005 from $32.8 million for the same quarter in2004. Sales of Boyds’ plush products decreased $4.8 million, or 25%, resinproduct sales decreased $2.0 million, or 25%, and other product sales increased$0.4 million, or 8%. As a percentage of net sales for the third quarter, plushrepresented 55%, resin products represented 22%, and other products represented23%.

Wholesale net sales in the third quarter of 2005declined $9.6 million, or 33%, to $19.1 million from $28.7 million for the samequarter in 2004. This decrease was attributable to a 41% decline in wholesalebookings (cancelable orders) in the third quarter of 2005 compared to the sameperiod in 2004. Weakness across the Specialty Gift Retail sector of the Company’saccount base and reduced sales to a number of Boyds’ larger legacy accountswere the contributors of these reduced bookings.

Retail net sales increased $3.3 million, or 80%, to$7.4 million in the third quarter of 2005 from $4.1 million in the thirdquarter of 2004. Same store retail net sales increased by $0.1 million, or 3%,to $4.2 million in the third quarter from $4.1 million for the third quarter of2004. This increase in overall retail sales can be attributed to the additionof the Company’s second retail store in Pigeon Forge, Tennessee while thecomparable retails sales can be attributed to special event traffic at theGettysburg store.

*Grossprofit—* Gross profit decreased $5.1 million, or 26%,to $14.7 million in the third quarter of 2005 from $19.9 million for the thirdquarter of 2004. Gross profit as a percentage of net sales decreased to 55.5%for the third quarter of 2005 as compared to 60.5% for the same period in 2004.The dollar decline was primarily attributable to reduced sales, an increasedproduct mix shift to lower margin product, $0.4 million relating to a reducedobsolete inventory allowance in 2004, these were partially offset by a $0.4million relating to a 2005 credit to the Company’s inventory capitalization andadditional gross profit generated by the Company’s new retail store in PigeonForge, Tennessee. Wholesale gross profit decreased by $7.1 million, or 43%, to$9.6 million in the third quarter of 2005 from $16.8 million in the thirdquarter of 2004. Retail gross profit increased by $2.0 million, to $5.1 millionin the third quarter of 2005 from $3.1 million in the third quarter of 2004.

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*Selling, General &Administrative Expenses (“SG&A”)*- SG&A expenses decreased$1.7 million, or 15%, to $9.9 million in the third quarter of 2005 from $11.6million for the third quarter of 2004. SG&A as a percent of net salesincreased to 37% for the third quarter from 35% for the same period in 2004. Thedollar decrease in SG&A expenses was a result of $0.8 million in lower wagecosts stemming from our cost saving initiatives and $0.3 million in lower callcenter costs, $0.3 million in reduced bad debt expenses, $0.2 million inreduced employee recruitment expenses, and $0.2 million in reduced expensesrelating to our home party program, these costs were partially offset byincreases of $0.2 million in depreciation and $0.2 million in professionalfees.

*Impairmentof Assets—*The Company recorded an asset impairmentcharge of $1.7 million for the three months of 2005. The charge is attributedto the investments that the Company had made in two retail properties, MyrtleBeach, South Carolina and Branson, Missouri in anticipation of its retailexpansion in each site.

*Incomefrom operations—* Income from operations declined $5.2million to a profit of $3.2 million in the third quarter of 2005 from an incomeof $8.3 million in the third quarter of 2004. Income from operations as apercentage of net sales declined to a 12% in the third quarter of 2005 from 25%in the third quarter of 2004.

*OtherIncome—*In July 2005, the Company received a $1.5million settlement for a copyright infringement case.

*Totalinterest expense—* Total interest expense increased to$3.3 million for the third quarter of 2005 as compared to $1.1 million for thethird quarter of 2004. Interest expense on outstanding debt increased for thethird quarter of 2005 by $1.9 million. This increase is due to a higherinterest rate on the Company’s outstanding debt. Additionally, the amortizationexpense associated with the deferred financing costs have increased by $0.3million as a result of capitalized costs associated with the New CreditAgreement.

*Incometax expense—* Income tax expense decreased $2.9 millionto a credit of $0.1 million in the third quarter of 2005 as compared to $2.8million for the third quarter of 2004.

*NetProfit—*Net profit decreased $2.9 million to a profitof $1.5 million in the third quarter of 2005 from a $4.5 million income for thethird quarter of 2004.

**Nine Months Ended September 30,2005 vs. Nine Months Ended September 30, 2004**

*NetSales*—Net sales decreased $19.6 million, to $62.2million in the first nine months of 2005 from $81.8 million for the same periodin 2004. Sales of Boyds’ plush products decreased $8.9 million, or 21%, resinproduct sales decreased $7.0 million, or 33%, and other product sales decreased$3.7 million, or 21%. As a percentage of net sales for the first nine months of2005, plush represented 52%, resin products represented 26%, and other productsrepresented 22%.

Wholesale net sales in the first nine months of 2005declined $25.9 million, or 36%, to $46.1 million from $72.0 million for thesame period in 2004. The decline can be primary attributable to a 49% declinein bookings (cancelable orders) in the first nine months of 2005 compared tothe same period in 2004. Weakness across the Specialty Gift Retail sector ofthe Company’s account base and reduced sales to a number of Boyds’ largerlegacy accounts were the contributors to these reduced bookings.

Retail net sales increased $6.3 million, or 64%, to$16.1 million in the first nine months of 2005 from $9.8 million for the ninemonths of 2004. Same store retail net sales decreased by $0.6 million, or 

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6%, to $9.2 million in the first nine months from $9.8million for the first nine months of 2004. The increase in retail sales can beattributed to the addition of the Company’s second retail store in PigeonForge, Tennessee while comparable retail sales decline can be attributed to thereduced tourist traffic in the Gettysburg area.

*Grossprofit—* Gross profit decreased $18.6 million, or 37%,to $31.0 million in the first nine months of 2005 from $49.7 million for thefirst nine months of 2004. Gross profit as a percentage of net sales decreasedto 50% for the first nine months of 2005 as compared to 61% for the same periodin 2004. The dollar decline was primarily attributable to reduced sales, anincreased product mix shift to lower margin product, an increased charges of $3.1million in the Company’s inventory obsolescence allowance due to slow movingproduct,  these were offset by lowerfreight charges of $1.3 million due to lower sales and the incremental grossmargin generated at the Company’s new store in Pigeon Forge. Wholesale grossprofit decreased by $20.4 million, or 55%, to $24.9 million in the nine monthsof 2005 from $45.4 million in the first nine months of 2004. Retail grossprofit increased by $3.8 million, or 52%, to $11.2 million in the first ninemonths of 2005 from $7.4 million in the first nine months of 2004.

*Selling,General & Administrative Expenses (“SG&A”)—*SG&Aexpenses decreased $2.7 million, or 8%, to $30.6 million in the first ninemonths of 2005 from $33.3 million for the first nine months in 2004. SG&Aas a percent of net sales increased to 49% for the first nine months of 2005from 41% for the same period in 2004. The dollar decrease in SG&A expenseswas a result of $3.5 million in lower wage and incentive costs stemming fromour cost saving initiatives and $0.5 million in lower bad debts allowance whichwere partially offset by $0.7 million in cell center expenses and $0.5 millionin depreciation costs associated with the Company’s new store in Pigeon Forge.

*Impairmentof Goodwill and other Assets—*The Company recorded agoodwill impairment charge of $2.6 million and an asset impairment of $1.7million for the first nine months of 2005. The charge is attributed to thegoodwill impairment testing as prescribed by SFAS No. 142, “Goodwill andOther Intangibles” caused by a continued decline in wholesale sales and results.The asset impairment of $1.7 million related to construction costs for theCompany’s proposed new retail stores in Myrtle Beach, South Carolina andBranson, Missouri which the Company has chosen not to move forward with.

*Incomefrom operations—* Income from operations declined $20.3million to a loss of $3.9 million in the first nine months of 2005 from anincome of $16.4 million for the same period of 2004. Income from operations asa percentage of net sales declined to a negative 6.3% in the nine months of2005 from 20% for the same period of 2004.

*OtherIncome—*In July 2005, the Company received a $1.5million settlement for a copyright infringement case. This amount is offset bythe unrealized loss on exchange rate of $0.6 million.

*Totalinterest expense—* Total interest expense increased to$8.9 million for the first nine months of 2005 as compared to $3.3 million forthe same period of 2004. Interest expense on outstanding debt increased for thefirst nine months of 2005 by $4.8 million. This increase is due to a higherinterest rate on the Company’s outstanding debt. Additionally, the amortizationexpense associated with the deferred financing costs has increased by $0.7million as a result of costs associated with the New Credit Agreement.

*Incometax expense—*Income tax expense increased $160.1million to $165.4 million in the first nine months of 2005 as compared to $5.3million for the first nine months of 2004. The provision was impacted by therecording of a $166.2 million additional valuation allowance against theremaining amount of its deferred tax assets. This valuation allowance resultsfrom estimates by management of future taxable income in each of the federal,state, and foreign tax jurisdictions during the carry forward period and theconclusion by management that it is no longer more likely than not that thisamount of deferred tax assets will be realized under the criteria of SFAS No. 109,“Accounting for Income Taxes”.

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*Net Loss—*Net profit decreased $184.9 million to a loss of$177.1 million in the first nine months of 2005 from a $7.8 million income forthe same period of 2004.

*Liquidity andCapital Resources*

Boyds’ primary source of liquidity is borrowings underits New Credit Agreement, which includes the New Revolver. Boyds’ primary usesof cash are to fund working capital requirements. Cash balances increased to$3.6 million in the first nine months of 2005 as compared to the balances at December 2004.

*Operating Activities*

Cash provided by operating activities decreased $16.9million, to a negative $8.0 million in the first nine months of 2005 from $8.9million for the first nine months of 2004. The cash flow decrease was primarilyattributable to the decreases in sales and accrued expenses which was partiallyoffset by increases in inventory, accounts payable and interest payable. Due tothe seasonality of our retail business, operating results for the nine monthsended September 30, 2005 are not necessarily indicative of operatingresults for the entire year. There can be no assurance that the Company willhave positive cash flows in the future.

*InvestingActivities*

Capital and investment expenditures totaled $1.0million in the first nine months of 2005 as compared to $12.0 million in thefirst nine months of 2004. This decrease in expenditures was the result of noadditional construction costs relating to the *Boyds BearCountry**TM* — Pigeon Forge, Tennessee and Myrtle Beach,South Carolina locations.

*FinancingActivities*

In connection with the recapitalization in 1998, Boydsentered into a credit agreement providing for a $325.0 million senior securedterm loan, consisting of tranche A and tranche B, and a senior securedrevolving credit facility providing for borrowings up to $40.0 million. Duringthe first quarter, the Company had additional borrowings of $10.0 million onthe revolving credit facility. On February 23, 2005, the Company enteredinto a New Credit Agreement and used the proceeds to extinguish the outstandingtranche A (the “term loan”) and revolving credit facility (the “revolver”) inthe amounts of $28.0 million and $12.8 million, respectively.

The New Credit Agreement contains a revolving creditfacility with capacity of up to $20.0 million and a new term loan of $45.0million. During the first nine months of 2005, the Company utilized $11.5million of this revolving facility. Borrowings under the New Credit Agreementbear interest at a rate per annum, equal to a margin over either a base rate,which is the higher of the prime lending rate or 0.50% above the federal fundseffective rate, plus 9.50% or LIBOR plus 11.00%.

The New Credit Agreement contains financial covenants,tested quarterly, of minimum consolidated adjusted EBITDA (as defined in theNew Credit Agreement), maximum senior leverage and maximum total leverage. Atthe end of the third and fourth quarters of 2005, Boyds must maintain (i) aconsolidated senior leverage ratio of not greater than 2.5 to 1, (ii) amaximum leverage ratio of not greater than 4.5 to 1 and (iii) a minimumconsolidated adjusted EBITDA of not less than $17.0 million. Additionally, the New Credit Agreement hascovenants that restrict the Company’s ability to incur additional indebtedness,make capital expenditures, pay dividends on and redeem capital stock, make 

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other restricted payments, make investments, sell itsassets and enter into consolidations, mergers and transfers of all orsubstantially all of its assets.

As of October 16, 2005, the Company was not incompliance with one or more of the financial covenants contained in the NewCredit Agreement. Such noncompliance constitutes an “event of default” underthe New Credit Agreement.

On August 22, 2005, all pre-existing debt wasassigned to our current lenders D.E. Shaw Laminar Portfolios, L.L.C.

On February 17, 2000, Boyds announced that itsBoard of Directors had approved the repurchase of 3.0 million shares of theCompany’s common stock. As of September 30, 2005, Boyds had repurchased344,730 shares of common stock pursuant to the stock repurchase program for anaggregate amount of approximately $1 million. These repurchases were financedout of operating cash flow. Any future repurchases under this program arelimited by the New Credit Agreement to an aggregate amount not to exceed $1.0million.

On July 27, 2000, Boyds announced that its Boardof Directors had approved a repurchase program for its outstanding 9% Series BSenior Subordinated Notes due 2008. As of September 30, 2005, Boyds hadrepurchased $52.3 million of its notes pursuant to this note repurchaseprogram. These repurchases were financed out of operating cash flow and therevolving credit facility. No repurchases were made during the quarter. Anyfuture repurchases under this program are expected to be financed similarly. Boydsmay make such purchases from time to time in the open market or in privatetransactions. No repurchases were made during the quarter.

The Company relies on the New Credit Agreement toprovide adequate funds for Boyds’ foreseeable working capital needs, plannedcapital expenditures, debt service obligations, the Stock Repurchase Program and the Bond Repurchase Program.Any future acquisitions, joint ventures or other similar transactions mayrequire additional capital and there can be no assurance that any such capitalwill be available to Boyds on acceptable terms, or at all. Boyds’ ability tofund its working capital needs, planned capital expenditures and scheduled debtpayments, to refinance indebtedness and to comply with all of the financialcovenants under its debt agreements depends on its future operating performanceand cash flow, which in turn are subject to prevailing economic conditions andto financial, business and other factors, some of which are beyond Boyds’control.

***EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS***

In December 2004, the FASB issued Statement ofFinancial Accounting Standards (“SFAS”) No. 123R, Share-Based Payment (“SFAS123R”). SFAS 123R addresses the accounting for share-based payments toemployees, including grants of employee stock options. Under the new standard,companies will no longer be able to account for share-based compensationtransactions using the intrinsic method in accordance with APB Opinion No. 25,Accounting for Stock Issued to Employees. Instead, companies will be requiredto account for such transactions using a fair-value method and recognize therelated expense associated with share-based payments in the consolidatedstatement of operations. SFAS 123R will be effective for periods beginningafter June 15, 2005 and allows, but does not require, companies to restatethe full fiscal year of 2005 or retroactive restatement to earlier periods toreflect the impact of expensing share-based payments under SFAS 123R. On January 1,2006, the Company adopted SFAS No. 123(R) which requires companies toexpense the fair value of employee stock options and other forms of stock-basedemployee compensation in the financial statements over the period that anemployee provides service in exchange for the award. Under SFAS 123(R), theCompany measures compensation cost 

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related to stock options based on the grant-date fairvalue of the award using the Black-Scholes option-pricing model and recognizesit ratably, less estimated forfeitures, over the vesting term of the award.  The Company believes that the impact of thisSFAS No. 123(R) will have an immaterial impact on the financial results ofthe Company.

In March 2005, the SEC issued Staff AccountingBulletin No. (“SAB”) 107 regarding the Staff’s interpretation ofShare-Based Payments. This interpretation provides the Staff’s view regardinginteractions between SFAS No. 123R and certain SEC rules andregulations and provides interpretations of the valuation of share-basedpayments for public companies. The interpretive guidance is intended to assistcompanies in applying the provisions of SFAS No. 123R and investors andusers of the financial statements in analyzing the information provided. TheCompany will adopt SAB 107 in connection with its adoption of SFAS No. 123R.

In November of 2004, the FASB issued SFAS No. 151,*Inventory Costs-an Amendment of ARB No. 43.*SFASNo. 151 amends the guidance in Accounting Research Bulletin (“ARB”) No 43,Chapter 4, *Inventory Pricing,* to clarify theaccounting for abnormal amounts of idle facility expense, freight, handlingcosts, and wasted material (spoilage). SFAS No. 151 requires that theseitems be recognized as current-period charges regardless of whether they meetthe criterion of “so abnormal.” In addition, SFAS No. 151 requires thatallocation of fixed production overhead to the costs of conversion be based onthe normal capacity of production facilities. The provisions of SFAS No. 151are effective for inventory costs incurred during fiscal years beginning after June 15,2005. The adoption of SFAS No. 151 is not expected to have a materialimpact on the financial position, results of operations or cash flow of Boyds.

In December 2004, the FASB issued SFAS No. 153,*Exchange of Non-monetary Assets* — AnAmendment of APB Opinion No. 29, *Accounting forNon-monetary Transactions*. SFAS No. 153 eliminates theexception from fair value measurement from non-monetary exchanges of similarproductive assets in paragraph 21(b) of APB Opinion No. 29 andreplaces it with an exception for exchanges that do not have commercialsubstance. SFAS No. 153 is effective for periods beginning after June 15,2005. The adoption of this statement is not expected to have a material impacton the financial position, results of operations or cash flow of Boyds.

In May 2005, the FASB issued SFAS No. 154*, Accounting Changes and Error Corrections -*a replacementof APB Opinion No. 20 and FASB Statement No. 3. SFAS No. 154requires retrospective application to prior periods financial statements forchanges in accounting principle, unless it is impracticable to determine eitherthe period-specific effects or the cumulative effect of the change. SFAS No. 154also requires that retrospective application of a change in accountingprinciple be limited to the direct effects of the change. Indirect effects of achange in accounting principle should be recognized in the period of theaccounting change. SFAS No. 154 further requires a change in depreciation,amortization or depletion method for long-live, non-financial assets to beaccounted for as a change in accounting estimate effected by a change inaccounting principle. SFAS No. 154 is effective for accounting changes andcorrections of errors made in fiscal years beginning after December 15,2005.  The adoption of this SFAS No. 154is not expected to have a material impact on the financial position, results ofoperations or cash flow of Boyds.

**RELATED PARTYTRANSACTIONS**

Kohlberg, Kravis Roberts & Co. L.P. and itsaffiliates (collectively, “KKR”) is a 59% shareholder of Boyds. For the threeand nine months ended September 30, 2004, Boyds paid to KKR approximately$0.1 million and $0.2 million, respectively, for management fees and relatedexpenses. KKR has waived all management fees for 2005. Any related expensesincurred by KKR in 2005 will be paid by Boyds.

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***FORWARD LOOKING STATEMENTS***

Some of the matters discussed in this report includeforward-looking statements. Statements that are predictive in nature,that depend upon or refer to future events or conditions or that include wordssuch as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates”and similar expressions are forward-looking statements.

The forward-looking statements in this reportare based on a number of assumptions and estimates, which are inherentlysubject to significant uncertainties and contingencies, many of which arebeyond the control of Boyds, and reflect future business decisions that aresubject to change. A variety of factors could cause actual results to differmaterially from those anticipated in Boyds’ forward-looking statements,including:  the inability to meet thefinancial covenant tests under the New Credit Agreement; the inability to growBoyds’ business as planned; the loss of either of Boyds’ two independent buyingagencies or any of its manufacturing sources; economic or political instabilityin the countries with which Boyds does business; changes to, or the impositionof, new regulations, duties, taxes or tariffs associated with the import orexport of goods from or to the countries with which Boyds does business; andother risk factors that are discussed in this report and, from time to time, inother Securities and Exchange Commission reports and filings. One or more ofthe factors discussed above may cause actual results to differ materially fromthose expressed in or implied by the statements in this report.

Readers are cautioned not to place undue reliance onthese forward-looking statements, which speak only as of the date of suchstatements. Boyds undertakes no obligation to publicly release the results ofany revisions to these forward-looking statements that may be made toreflect events or circumstances after the date of this report, or the date ofsuch statements, as the case may be, or to reflect the occurrence ofunanticipated events.

**Item 3.**                          Quantitativeand Qualitative Disclosures About Market Risk.

While operating during the Chapter 11 bankruptcyproceedings, Boyds faces no interest rate risk exposure in relation to itsoutstanding debt obligations of $90.9 million. Boyds has also ceased recordinginterest on its debt obligations during the Chapter 11 proceedings.

Boyds faces currency risk exposure that arises fromtranslating the results of its European and Canadian operations that aredenominated in the local currency of the Euro, the British Pound and theCanadian dollar, to the U.S. dollar. The currency risk exposure is not materialas the operations of the European and Canadian subsidiaries do not have amaterial impact on the Company’s earnings.

Boyds also faces foreign exchange risks that arisefrom paying in United States Dollars for products that are manufactured inChina. Recently, the Chinese government revalued its currency, the renminbi,ending its link to the U.S. dollar. While this is a significant change forChina, the anticipated near term impacts to the Company are believed to beminimal. While it does not do so now, in the future Boyds may, from time totime, enter into foreign exchange contracts or prepay inventory purchases as apartial hedge against currency fluctuations. Differences between the amounts ofsuch contracts and costs of specific material purchases are included ininventory and costs of sales. Boyds intends to manage foreign exchange risks tothe extent appropriate.

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**Item4.**           DisclosureControls and Procedures

Boyds maintains disclosure controls and proceduresdesigned to ensure that it is able to collect the information it is required todisclose in the reports it files with the Securities and Exchange Commission (“SEC”),and to process, summarize and disclose this information within the time periodsspecified in the rules of the SEC. Boyds carried out an evaluation of itsdisclosure controls and procedures, under the supervision and with theparticipation of the Chief Executive and Chief Financial Officers, as of September 30,2005, and based on such evaluation, Boyds’ Chief Executive and Chief FinancialOfficers believe that these disclosure controls and procedures are effective toensure that Boyds is able to collect, process and disclose the information itis required to disclose in the reports it files with the SEC within therequired time periods.

There have been no changes in Boyds’ internal controlsor in other factors that could significantly affect these controls, subsequentto the date Boyds’ Chief Executive and Chief Financial Officers completed theirevaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

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**PART II**

**OTHER INFORMATION**

**Item 1. LegalProceedings.**

On October 16, 2005, the Company and certain ofits subsidiaries (collectively, the “Debtors”) filed voluntary petitions forreorganization under chapter 11 of the Bankruptcy Code, in the Bankruptcy Court.In connection with the bankruptcy filings, the Company entered into a six monthDIP financing agreement with DE Shaw Laminar Partners and Bank of America LLCwhich provides for revolving loans in the amount of $8 million with $2 millionin collateralized letters of credit.

Management has assessed the liquidity position of theCompany and its subsidiaries as a result of the bankruptcy filing and availableDIP financing and believes that the Company and its subsidiaries will be ableto fund their post-petition obligations until a plan of reorganization isfinalized or another transaction is effected.

The Company is involved in various legal proceedings,claims and governmental audits in the ordinary course of business. In theopinion of management, the ultimate disposition of these proceedings, claimsand audits will not have a material adverse effect on the financial position,results of operations, and cash flows of the Company.

**Item 1A.  Risk Factors Which May Affect FuturePerformance**

*Prolongedcontinuation of the Chapter 11 case may harm the Debtors’ business.**  *The prolonged continuation of the Chapter 11 Casescould adversely affect the Debtors’ businesses and operations. So long as theChapter 11 Cases continue, senior management of the Debtors will be required tospend a significant amount of time and effort dealing with the Debtors’reorganization instead of focusing exclusively on business operations. Prolongedcontinuation of the Chapter 11 Cases will also make it more difficult toattract and retain management and other key personnel necessary to the successand growth of the Debtors’ businesses. In addition, the longer the Chapter 11Cases continue, the more likely it is that the Debtors’ customers, suppliers,distributors and agents will lose confidence in the Debtors’ ability tosuccessfully reorganize their businesses and seek to establish alternativecommercial relationships. Furthermore, so long as the Chapter 11 Casescontinue, the Debtors will be required to incur substantial costs forprofessional fees and other expenses associated with the proceedings. Theprolonged continuation of the Chapter 11 Cases may also require the Debtors toseek additional financing, either as part of the DIP credit facility orotherwise, in order to service their debt and other obligations. It may not bepossible for the Debtors to obtain additional financing during the pendency ofthe Chapter 11 Cases on commercially favorable terms or at all. If the Debtorswere to require additional financing during the Chapter 11 Cases and wereunable to obtain the financing on favorable terms or at all, the Debtors’chances of successfully reorganizing their businesses may be seriouslyjeopardized.

*TheDebtors may not be able to obtain confirmation of the plan.*   TheDebtors may not receive the requisite acceptances to confirm the Plan. Even ifthe requisite acceptances of the Plan are received, the Bankruptcy Court maynot confirm the Plan. A dissenting holder of a claim against or equity interestin Boyds may challenge the balloting procedures and results as not being incompliance with the Bankruptcy Code. Even if the Bankruptcy Court determinedthat the balloting procedures and results were appropriate, the BankruptcyCourt could still decline to confirm the Plan if it found that any of thestatutory requirements for confirmation had not been met, including that theterms of the Plan are fair and equitable to non-accepting Classes. Section 1129of the Bankruptcy Code sets forth the requirements for confirmation andrequires, among other things, a finding by the Bankruptcy Court that 

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(i) the Plan “does not unfairly discriminate” andis “fair and equitable” with respect to any non-accepting Classes, (ii) confirmationof the Plan is not likely to be followed by a liquidation or a need for furtherfinancial reorganization and (iii) the value of distributions tonon-accepting Holders of Claims within a particular Class under the Planwill not be less than the value of distributions such Holders would receive ifthe Debtors were liquidated under chapter 7 of the Bankruptcy Code. TheBankruptcy Court may determine that the Plan does not satisfy one or more ofthese requirements, in which case it would not be confirmable by the BankruptcyCourt.

If the Plan is not confirmed by the Bankruptcy Court,it is unclear whether the Debtors will be able to reorganize their businessesand what, if any, distributions holders of claims against or equity interestsin Boyds ultimately would receive with respect to their claims or equityinterests. If an alternative reorganization could not be agreed upon, it ispossible that the Debtors would have to liquidate their assets, in which caseit is likely that holders of claims would receive substantially less favorabletreatment than they would receive under the Plan.

*TheChange of Control Produced by the Restructuring of the Debtors may Result inLimited use of Deferred Tax Assets..**  *As furtherdiscussed in the Disclosure Statement, the issuance under the Plan of commonstock in a reorganized Boyds, along with the cancellation of existing equityinterests through the Plan, is expected to cause an ownership change to occurwith respect to the reorganized Debtors as of the effective date of the Plan.As a result, Section 382 of the Internal Revenue Code (“IRC”) may apply tolimit reorganized Boyd’s use of its consolidated net operating losses after theeffective date. Additionally, the reorganized Debtors’ ability to use anyremaining capital loss carryforwards and tax credits may be limited. The annuallimitation imposed by the particular provision of Section 382 of the IRCthat reorganized Boyds expects to apply to its ownership change generallyequals the product of (i) the fair market value of the net equity value ofreorganized Boyd’s stock at the time of the ownership change, taking intoaccount the increase in value of the corporation as a result of the surrenderor cancellation of creditor’s claims in the transaction (rather than the valuewithout taking into account such increases, as is the case under the general rule fornon-bankruptcy ownership changes) multiplied by (ii) the long-termtax-exempt rate in effect for the month in which the ownership change occurs.The long-term tax-exempt rate is published monthly by the IRS and is intendedto reflect current interest rates on long-term tax-exempt debt obligations.Accordingly, under this rule the Section 382 limitation would generallyreflect the increase in the value of reorganized Boyd’s stock resulting fromthe conversion of debt to equity in the proceeding. Section 383 of the IRCapplies a similar limitation to a capital loss carryforward and tax credits.Although it is impossible to predict with absolute certainty the net equityvalue of Reorganized Boyds immediately after the exchanges contemplated by thePlan, reorganized Boyd’s use of its net operating losses and other deferredassets is expected to be substantially limited after those exchanges.

*FinancialCondition and Liquidity.***  ****Asdiscussed in Note 1 to the accompanying consolidated financial statements,Boyds is operating as a debtor-in-possession under Chapter 11 of the U.S.Bankruptcy Code. As a result of the uncertainty surrounding Boyds currentcircumstances, it is difficult to predict Boyds actual liquidity needs andsources at this time. However, based upon current and anticipated levels ofoperations during the continuation of the bankruptcy proceedings, Boydsbelieves that its liquidity and capital resources will be sufficient tomaintain its normal operations at current levels. Boyds access to additionalfinancing while in the Chapter 11 bankruptcy process may be limited.**

*Delistingfrom the New York Stock Exchange.*   On October 10,2005, the Company’s common stock was delisted from the New York Stock Exchange.Our common stock is quoted on the New York Stock Exchange Over-the-Counter(OTC) bulletin board quotation service. This has reduced the market andliquidity of the Company’s common stock and consequently the ability of theCompany’s stockholders and broker/dealers to purchase and sell our shares in anorderly manner or at all. The volume of trading in the Company’s stock hascontinued to decline since our bankruptcy filing. Trading in the Company’scommon stock through market makers and quotation on the OTC Bulletin Board 

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entails other risks. Due in part to the decreasedtrading price of the Company’s common stock and reduced analyst coverage, thetrading price of the Company’s common stock may change quickly, and marketmakers may not be able to execute trades as quickly as they could when thecommon stock was listed on the New York Stock Exchange. Although tradingcontinues, the Company expects that trading in its common stock may cease oncea plan of reorganization is  approved anda record date for approval of the plan is established.

*Ourability to continue as a “going concern” is uncertain.**  *The accompanying condensed consolidated financialstatements have been prepared assuming that the Company will continue tooperate as a going concern which contemplates continuity of operations, timelypayment for services by customers, control of operating costs and expenses andthe realization of asset sales and liquidation of liabilities and commitments. Thebankruptcy filing and related circumstances, including our default on allpre-petition debt, the losses from operations, as well as current economicconditions, raise substantial doubts about our ability to continue as a goingconcern. The appropriateness of reporting on a going concern basis is dependentupon, among other things, the availability of sufficient capital to meetexpenses, confirmation of a plan of reorganization, future profitableoperations, customer and employee retention and the ability to generatesufficient cash from operations and financing sources to meet the Company’sobligations as they become due. The Company has assumed all of the foregoing. Shouldsome or all of the Company’s assumptions prove to be unfounded or prove to beuntrue in the future, the Company’s results of operations and financialcondition will be adversely affected and the Company’s ability to continue as agoing concern will be doubtful.

*Financialposition impacted by changing distribution channels.**  *The Company’shistoric distribution channels, mainly independent retailers, have seensignificant declines in traffic for several years. Consumers have migrated tolarger, more convenient retailers, which provide for a full array of productsand services. If the Company is unable to migrate it sales distribution tochannels which mirror consumers buying tendencies, then its revenuescould be significantly impacted.

*FinancialPosition impacted by changing consumer tastes.**  *The demand forBoyds’ products may be quickly affected by changing consumer tastes andinterests. Boyds’ results of operations depend substantially upon its abilityto continue to conceive, design, source and market new pieces and uponcontinuing market acceptance of its existing and future product lines. If Boydsfails or is significantly delayed in introducing new pieces to its existingproduct lines or creating new product line concepts or if its new products donot meet with market acceptance, its results of operations may be impaired. Anumber of companies who participate in the giftware and collectibles industriesare part of large, diversified companies that have greater financial resourcesthan Boyds and offer a wider range of products and may be less affected bychanging consumer tastes.

*Dependenceon two independent buying agencies.**  *Substantially all of the products that Boyds sellsare purchased through two independent buying agencies. One buying agency islocated in Hong Kong, and the other buying agency is located in the UnitedStates. These two buying agencies, which contract with a total of 19independent manufacturers, account for approximately 90% of Boyds’ totalimports. These two buying agencies also perform a number of functions forBoyds, including collaborating in Boyds’ product design and developmentprocess. As a result, Boyds is substantially dependent on these buying agenciesand the manufacturers with which they contract. Boyds does not have long-termcontracts with either of its primary buying agencies. Boyds believes that theloss of either of its primary buying agencies would (1) have a materialadverse affect on its financial condition and results of operations, (2) causedisruptions in its orders, (3) affect the quality of its products, and (4) possiblyrequire it to select alternative manufacturers. In 2004, the Company begancontracting its plush buying with three additional buying groups in an effortto mitigate this risk.

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*Potential economic and political risks of China.*Allof Boyds’ significant manufacturers are located in China. Although Boyds hasidentified alternate manufacturers which could meet its quality and reliabilitystandards at similar costs in China and in other countries, the loss of any oneor more of its manufacturers could have a material adverse effect on itsbusiness. Because Boyds relies primarily on Chinese manufacturers, it issubject to the following risks that could restrict its manufacturers’ abilityto make its products or increase its manufacturing costs: (1) economic andpolitical instability in China; (2) transportation delays; (3) restrictiveactions by the Chinese government; (4) the laws and policies of the UnitedStates affecting importation of goods, including duties, quotas and taxes; (5) Chinesetrade and tax laws. In particular, Boyds’ business could be adversely affectedif the Chinese renminbi appreciates significantly relative to the United Statesdollar due to the cost of its products fluctuating with the value of theChinese renminbi. Recently, the Chinese government revalued its currency, therenminbi, ending its link to the U.S. dollar. While this is a significantchange for China, the anticipated near term impacts to the Company are believedto be minimal.

*Potentialadverse trade regulations and restrictions.**  *Boyds does not own or operate any manufacturingfacilities. Instead, Boyds imports substantially all of its retail productsfrom independent foreign manufacturers, primarily in China. As a result,substantially all of its products are subject to United States Customs Serviceduties and regulations. These regulations include requirements that Boydsdisclose information regarding the country of origin on its products, such as “Handmadein China.” Within its discretion, the United States Customs Service may alsoset new regulations regarding the amount of duty to be paid, the value ofmerchandise to be reported or other customs regulations relating to Boyds’imported products. Failure to comply with these regulations may result in theimposition of additional duties or penalties or forfeiture of merchandise.

*Potentialforeign restrictions or additional costs.**  *The countries in which Boyds’ products aremanufactured may impose new quotas, duties, tariffs or other charges orrestrictions. This could adversely affect Boyds’ financial condition, resultsof operations or its ability to continue to import products at current orincreased levels. In particular, Boyds’ costs could increase, or the mix ofcountries from which Boyds imports its products may be changed, if theGeneralized System of Preferences program is not renewed or extended each year.The Generalized System of Preferences program allows selected products ofbeneficiary countries to enter the United States duty free. In addition, ifcountries that are currently accorded “Most Favored Nation” status by theUnited States, such as China, cease to have such status, Boyds could beadversely affected. Boyds cannot predict what regulatory changes may occur orthe type or amount of any financial impact these changes may have on it in thefuture.

*Potentialinfringement of Boyds’ intellectual property.**  *Boyds believes that its trademarks and otherproprietary rights are material to its success and competitive position.Accordingly, Boyds devotes resources to the establishment and protection of itsintellectual property on a worldwide basis. The actions Boyds takes toestablish and protect its trademarks and other proprietary rights may not beadequate to protect its intellectual property or to prevent imitation of itsproducts by others. Moreover, while Boyds has not experienced any proprietarylicense infringements or legal actions that have had a material impact on itsfinancial condition or results of operations, other persons have and willlikely in the future assert rights in, or ownership of, its trademarks andother proprietary rights. Boyds may not be able to successfully resolve suchconflicts. In addition, the laws of foreign countries may not always protectintellectual property to the same extent as do the laws of the United States.

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**Item 2. Unregistered Sales of Equity Securities andUse of Proceeds—None**

**Item3. Defaults Upon Senior Securities**

As of October 16, 2005, the Company was not incompliance with one or more of the financial covenants contained in the NewCredit Agreement.  Such noncomplianceconstitutes an “event of default” under the New Credit Agreement. The Companyreceived a waiver of such events of default from the lenders under the NewCredit Agreement through October 15, 2005. On October 16, 2005,Company and certain of its subsidiaries filed voluntary petitions forreorganization under Chapter 11 of the Bankruptcy Code, in the United StatesBankruptcy Court for the District of Maryland.

**Item 4. Submissionof Matters to a Vote of Security Holders—None**

**Item 5. OtherInformation**

**Item 6. Exhibits**

(a) Exhibits —See Index to Exhibits

**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

Date:  June 8,2006
|          |   | THE BOYDS COLLECTION, LTD. |
|----------|--------|----------------------------|
|     |   |                       |
|     |   |                       |   | By: |   | /s/ Jan L. Murley |
|     |   |                       |   | Name: |   | Jan L. Murley |
|     |   |                       |   | Title: |   | Chief Executive Officer |
|     |   |                       |   |   |   |   |
|     |   |                       |   |   |   |   |
|     |   |                       |   | By: |   | /s/ Joseph E. Macharsky |
|     |   |                       |   | Name: |   | Joseph E. Macharsky |
| * * |   |                       |   | Title: | * * | Chief Financial Officer |

 

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Index to Exhibits
| Exhibit               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|-----------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    No. |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.1                  |   | Certification of Chief Executive Officer Pursuant to  Rule 13a-14(a) and 15d-14(a) *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 31.2                  |   | Certification of Chief Financial Officer Pursuant to  Rule 13a-14(a) and 15d-14(a) *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 32.1                  |   | Certification of Chief Executive Officer Pursuant to  18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. (This certification is being furnished in  accordance with the Sarbanes-Oxley Act of 2002 and Commission Release No. 34-47551  and shall not be deemed “filed” with the Commission for purposes of  Section 18 of the Exchange Act, or otherwise subject to the liability of  that section, and shall not be deemed to be incorporated by reference into  any filing under the Securities Act of the Exchange Act, except to the extent  that the Registrant specifically incorporates it by reference.)*  |
| 32.2                  |   | Certification of Chief Financial Officer Pursuant to  18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. (This certification is being furnished in  accordance with the Sarbanes-Oxley Act of 2002 and Commission Release  No. 34-47551 and shall not be deemed “filed” with the Commission  for purposes of Section 18 of the Exchange Act, or otherwise subject to  the liability of that section, and shall not be deemed to be incorporated by  reference into any filing under the Securities Act of the Exchange Act,  except to the extent that the Registrant specifically incorporates it by  reference.)* |
| 99.1                  |   | Debtors Second Amended Joint Plan of Reorganization*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 99.2                  |   | Disclosure Statement for Debtors’ Second Amended  Joint Plan of Reorganization*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *                     |   | Filed herewith                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

 

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