UNITED STATES
SECURITIES 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 July 31, 1996 or
[ ] 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: 0-15827
SHARPER IMAGE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2493558
(State of Incorporation) (I.R.S. Employer Identification No.)
650 Davis Street, San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 445-6000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock, $0.01 par value, 8,260,480 shares as of September 13, 1996
1
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
SHARPER IMAGE CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
<CAPTION>
July 31, January 31, July 31,
Dollars in thousands, except per share amount 1996 1996 1995
---- ---- ----
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 781 $12,476 $ 2,552
Accounts receivable, net of allowance for doubtful
accounts of $539, $461 and $276 4,155 4,436 4,036
Merchandise inventories 25,646 24,313 28,035
Deferred catalog costs 2,811 4,135 4,445
Prepaid expenses and other 5,001 2,576 4,191
------- ------- -------
Total Current Assets 38,394 47,936 43,259
Property and Equipment, Net 21,702 20,726 15,146
Deferred taxes and other assets 1,999 1,794 984
------- ------- -------
Total Assets $62,095 $70,456 $59,389
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $19,902 $25,224 $20,784
Deferred revenue 4,870 4,893 4,057
Income taxes payable -- 363 22
Current portion of notes payable 250 223 155
------- ------- -------
Total Current Liabilities 25,022 30,703 25,018
Revolving loan 800 -- --
Notes Payable 3,211 3,355 759
Other Liabilities 3,553 3,640 3,330
------- ------- -------
Total Liabilities 32,586 37,698 29,107
------- ------- -------
Stockholders' Equity:
Preferred stock, $0.01 par value:
Authorized 3,000,000 shares: Issued and outstanding, none -- -- --
Common stock, $0.01 par value:
Authorized 25,000,000 shares: Issued and outstanding,
8,260,480, 8,250,980 and 8,244,700 shares 83 82 82
Additional paid-in capital 9,578 9,555 9,615
Retained earnings 19,848 23,121 20,585
------- ------- -------
Total Stockholders' Equity 29,509 32,758 30,282
------- ------- -------
Total Liabilities and Stockholders' Equity $62,095 $70,456 $59,389
======= ======= =======
<FN>
See notes to financial statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
SHARPER IMAGE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
Dollars in thousands, except per share amounts July 31, July 31,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 49,133 $ 50,778 $ 89,863 $ 93,417
Less: returns and allowances 5,877 5,926 10,981 11,622
----------- ----------- ----------- -----------
Net Sales 43,256 44,852 78,882 81,795
Other revenue 930 912 1,805 1,664
----------- ----------- ----------- -----------
44,186 45,764 80,687 83,459
----------- ----------- ----------- -----------
COST AND EXPENSES:
Cost of products 22,872 22,614 42,118 41,780
Buying and occupancy 5,785 5,199 11,385 10,102
Advertising and promotion 5,806 8,757 10,533 14,361
General, selling, and administrative 11,370 11,338 22,021 21,128
----------- ----------- ----------- -----------
45,833 47,908 86,057 87,371
----------- ----------- ----------- -----------
OPERATING LOSS (1,647) (2,144) (5,370) (3,912)
OTHER INCOME (EXPENSE):
Interest income (expense)-net (102) 92 (94) 308
Other-net (4) 121 9 118
----------- ----------- ----------- -----------
(106) 213 (85) 426
----------- ----------- ----------- -----------
Loss Before Income Tax Benefit (1,753) (1,931) (5,455) (3,486)
Income Tax Benefit (701) (772) (2,182) (1,394)
----------- ----------- ----------- -----------
Net Loss $ (1,052) $ (1,159) $ (3,273) $ (2,092)
=========== =========== =========== ===========
Weighted Average Number of Shares 8,259,393 8,237,902 8,255,799 8,243,928
Net Loss Per Share $ (0.13) $ (0.14) $ (0.40) $ (0.25)
=========== =========== =========== ===========
<FN>
See notes to financial statements.
</FN>
</TABLE>
3
<PAGE>
SHARPER IMAGE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) Six Months Ended
July 31,
--------
Dollars in thousands 1996 1995
---- ----
Cash Flows From Operating Activities:
Net loss $ (3,273) $ (2,092)
Adjustments to reconcile net loss to net cash
provided by (used for) operations:
Depreciation and amortization 1,992 1,684
Deferred rent expense 23 45
Deferred income taxes (2,182) (1,138)
Changes in:
Merchandise inventories (1,333) (4,480)
Accounts receivable 281 (802)
Deferred catalog costs, prepaid expenses and other 876 (2,121)
Accounts payable and accrued expenses (5,322) (299)
Deferred revenue and other liabilities (496) (1,810)
-------- --------
Cash Used for Operating Activities (9,434) (11,013)
-------- --------
Cash Flows From Investing Activities:
Property and equipment expenditures (3,068) (4,140)
Disposal of equipment 100 4
-------- --------
Cash Used for Investing Activities (2,968) (4,136)
-------- --------
Cash Flows From Financing Activities:
Proceeds from revolving loans 2,500 --
Payments on revolving loans (1,700) --
Issuance of common stock for stock options 24 78
Repurchase of common stock -- (497)
Principal payments on notes payable (117) (73)
-------- --------
Cash Provided by (Used for) Financing Activities 707 (492)
-------- --------
Net Decrease in Cash and Equivalents (11,695) (15,641)
-------- --------
Cash and Equivalents at Beginning of Period 12,476 18,193
-------- --------
Cash and Equivalents at End of Period $ 781 $ 2,552
======== ========
Supplemental Disclosure of Cash Paid for:
Interest $ 239 $ 84
Income Taxes $ 459 $ 1,946
See notes to financial statements.
4
<PAGE>
SHARPER IMAGE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
Three-month and six-month periods ended July 31, 1996 and 1995
(Unaudited)
NOTE A- Financial Statements
The condensed balance sheets at July 31, 1996 and 1995, the condensed statements
of operations for the three-month and six-month periods ended July 31, 1996 and
1995, and the statements of cash flows for the six-month periods ended July 31,
1996 and 1995 have been prepared by the Company, without audit. In the opinion
of management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows at July 31, 1996 and 1995, and for all periods presented, have been
made. The Company's business is seasonal in nature and the results of operations
for the interim periods presented are not necessarily indicative of the results
for the full fiscal year.
The balance sheet at January 31, 1996, presented herein, has been derived from
the audited balance sheet of the Company.
Certain information and disclosures normally included in the footnotes to the
annual financial statements prepared in accordance with generally accepted
accounting principles have been omitted from these interim financial statements.
It is suggested that these interim financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's 1995
Annual Report.
NOTE B- Revolving Loan and Notes Payable
In September 1994, the Company entered into a five-year revolving secured credit
facility with The CIT Group/Business Credit, Inc. ("CIT"). The credit facility
allows the Company to borrow funds and issue letters of credit up to $24.5
million based upon inventory levels. The credit facility is secured by the
Company's inventory, accounts receivable, general intangibles and certain other
assets. Except as described below, borrowings under the credit facility bear
interest at either prime plus 0.75% per annum, or at LIBOR plus 2.75% per annum.
The credit facility contains certain financial covenants pertaining to fixed
charge coverage ratio, leverage ratio, working capital and net worth. The credit
facility has limitations on operating leases, other borrowings, dividend
payments and stock repurchases.
In May 1996, an amendment to the secured credit facility was completed with CIT
to provide for term loans for capital expenditures ("CAPEX Term Loans") up to an
aggregate amount of $4.5 million. As a result of the amendment, the total
secured credit facility was increased from $20.0 million to $24.5 million and
the expiration has been extended for an additional two years to September 2001.
The CAPEX Term Loans allow the Company to borrow amounts for the acquisition of
capital improvements. Amounts borrowed under the CAPEX Term Loans bear interest
at either prime plus 1% per annum, or at LIBOR plus 3% per annum.
5
<PAGE>
NOTE B - Revolving Loan and Notes Payable (continued)
Each CAPEX Term Loan is to be repaid in 36 equal monthly principal installments.
Certain financial covenants of the secured credit facility were revised in the
amendment. CIT received warrants for 25,000 shares of the Company's common stock
exercisable at any time within five years at an exercise price of $6.00 per
share.
At July 31, 1996, the Company had borrowings outstanding under the revolving
loan credit facility of $800,000. Letters of credit commitments at July 31, 1996
were $1,863,000.
Notes payable included two mortgage loans collateralized by certain property and
equipment. In connection with the expansion of the Company's distribution center
which was completed in October 1995, the Company refinanced the mortgage loan
collateralized by the distribution center and paid off the existing mortgage.
The new note in the amount of $3 million was funded in December 1995, bears
interest at a fixed rate of 8.40%, provides for monthly payments of principal
and interest in the amount of $29,367, and matures in January 2011. The other
note bears interest at a variable rate equal to the rate on 30-day commercial
paper plus 3.82%, provides for monthly payments of principal and interest in the
amount of $14,320, and matures in January 2000.
NOTE C- Commitments and Contingencies
The Company is party to various legal proceedings arising from normal business
activities. Management believes that the resolution of these matters will not
have a material effect on the Company's financial position or the results of its
operations.
NOTE D- Reclassifications
Certain reclassifications have been made to prior periods financial statements
in order to conform with current period classifications.
INDEPENDENT ACCOUNTANTS REVIEW REPORT
The financial statements at July 31, 1996 and 1995 and for the three-month and
six-month periods then ended have been reviewed by the Company's independent
accountants, Deloitte & Touche LLP, whose report covering their review of the
financial statements is presented herein.
6
<PAGE>
Deloitte &
Touche LLP
- ------------- ---------------------------------------------------------------
[LOGO OMITTED] 50 Fremont Street Telephone: (415) 247-4000
San Francisco, California 94105-2230 Facsimile: (415) 247-4329
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Sharper Image Corporation
San Francisco, California
We have reviewed the accompanying condensed balance sheets of Sharper Image
Corporation as of July 31, 1996 and 1995, and the related condensed statements
of operations for the three-month and six-month periods then ended and cash
flows for the six-month period then ended. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Sharper Image Corporation as of January 31,
1996, and the related statements of operations, stockholders' equity and cash
flows for the year then ended (not presented herein); and in our report dated
March 22, 1996, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
condensed balance sheet as of January 31, 1996 is fairly stated, in all material
respects, in relation to the balance sheet from which it has been derived.
/s/ Deloitte & Touche LLP
August 21, 1996
- ----------------
Deloitte Touche
Tohmatsu
International
- ----------------
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
<TABLE>
RESULTS OF OPERATIONS
The following table is derived from the Company's Statements of Operations and
shows the results of operations for the periods indicated as a percentage of
total revenues.
<CAPTION>
Percentage of Total Revenues
----------------------------
Three Months Ended Six Months Ended
July 31, July 31,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Net store sales 73.0% 71.8% 72.3% 71.3%
Net catalog sales 24.9 26.2 25.5 26.7
Other revenue 2.1 2.0 2.2 2.0
----- ----- ----- -----
Total Revenues 100.0% 100.0% 100.0% 100.0%
Costs and Expenses:
Cost of products 51.8 49.4 52.2 50.1
Buying and occupancy 13.1 11.4 14.1 12.1
Advertising and promotion 13.1 19.1 13.1 17.2
General, selling
and administrative 25.8 24.8 27.3 25.3
Other Expense (Income) 0.2 (0.5) 0.1 (0.5)
----- ----- ----- -----
Loss Before Income Tax Benefit (4.0) (4.2) (6.8) (4.2)
Income Tax Benefit (1.6) (1.7) (2.7) (1.7)
----- ----- ----- -----
Net Loss (2.4)% (2.5)% (4.1)% (2.5)%
===== ===== ===== =====
</TABLE>
8
<PAGE>
Revenues
Net sales for the three-month and six-month periods ended July 31, 1996,
decreased $1,596,000, or 3.6%, and $2,913,000, or 3.6%, from the comparable
periods of the prior year. Returns and allowances for the three-month and
six-month periods ended July 31, 1996, were 12.0% and 12.2% of sales, as
compared with 11.7% and 12.4% of sales for the comparable prior year periods.
For the three-month and six-month periods ended July 31, 1996, as compared with
the same periods last year, net store sales decreased $611,000, or 1.9%, and
$1,202,000, or 2.0%, comparable store sales decreased by 4.9% and 5.1%, and net
catalog sales decreased $985,000, or 8.2% and $1,711,000, or 7.7%.
The decrease in net store sales for the three-month and six-month periods ended
July 31, 1996 as compared with the same prior year periods reflects a decrease
in average revenue per transaction from $106 to $95, and from $106 to $97,
partially offset by a 10.2% and 7.4% increase in total store transactions. Net
catalog sales for the three-month and six-month periods ended July 31, 1996
reflects a decrease of 21.0% and 15.2% respectively in total catalog orders as
compared to the same prior year periods, partially offset by an increase in
average revenue per order from $119 to $138, and from $122 to $133 for the
three-month and six-month periods ended July 31, 1996. The Company believes that
the decrease in net store sales, comparable store sales and net catalog sales
for the three-month and six-month periods ended July 31, 1996 is primarily due
to the planned decrease in the number of catalogs mailed and pages circulated
for The Sharper Image catalog and Sharper Image SPA(R) catalog in the effort to
partially offset high paper costs. Management believes that the decreases in
sales were also partially attributable to the Company's merchandise mix, as well
as the unavailability of certain key products due to manufacturers' delivery
constraints. The decrease in net catalog sales was partially offset by the
increase in sales from the The Sharper Image Home Collection catalog.
Cost of Products
Cost of products for the three-month and six-month periods ended July 31, 1996
increased $258,000, or 1.1%, and $338,000 or 1.0%, from the comparable prior
year periods. The gross margin rate for the three-month and six-month periods
ended July 31, 1996 was 47.5% and 47.0%, or 2.4 and 2.3 percentage points lower
than the gross margin rate of 49.9% and 49.3% for the same periods of the prior
year. The decrease in the gross margin rate is partially attributable to the
changes in the Company's merchandise mix, which reflects an increase in sales of
lower margin products, such as certain state-of-the-art electronic items and a
decrease in sales of certain higher margin products, such as the Company's
proprietary products, fitness equipment, and automotive and security items.
Buying and Occupancy
Store occupancy expense for the three-month and six-month periods ended July 31,
1996 increased $553,000 and $1,196,000 respectively, or 11.0% and 12.4%, from
the comparable prior year periods. The increase primarily reflects the occupancy
costs associated with the six new stores opened during the second half of the
prior fiscal year and the three new stores that opened during the six-month
period ended July 31, 1996, which was partially offset by the elimination of the
occupancy costs of the two stores closed during fiscal 1995 and the two stores
closed during the six-month period ended July 31, 1996.
9
<PAGE>
Advertising and Promotion Expenses
Advertising and promotion expenses for the three-month and six-month periods
ended July 31, 1996 decreased $2,951,000, or 33.7%, and $3,828,000, or 26.7%,
from the comparable prior year periods. The decrease in advertising and
promotion expenses for the three-month and six-month periods ended July 31, 1996
reflects primarily the Company's planned program to reduce advertising and
promotion expenses by reducing the number of catalogs and catalog pages mailed.
The planned reduction in advertising and promotion expense, which was primarily
catalog costs, was made in the Company's efforts to partially offset escalating
paper prices. Paper prices were sharply higher during the first quarter of this
year as compared with last year's same period. Management also believed that the
reduced number of catalogs and catalog pages would generate higher productivity
and that the planned decrease in advertising and promotion expenses would more
than offset the effect of the possible decrease in revenues caused by the
reduced advertising on a full fiscal year basis.
Based on actual sales and statistical data collected from the first quarter, the
Company believes that the planned reductions in catalog circulation was
excessive and that certain profitable sales were missed. During the second
quarter, the Company adjusted the catalog circulation upward for the balance of
the year. This resulted in a 2% increase for the three-month period ended July
31, 1996 and a 2% decrease for the six-month period ended July 31, 1996 in the
circulation of the The Sharper Image catalog. As part of the Company's planned
program, the number of pages circulated of The Sharper Image catalog was
decreased by 34% and 35% for the three-month and six-month periods ended July
31, 1996. The number of catalogs circulated decreased by 41% and 23%, while the
number of pages circulated decreased by 60% and 43% for the Sharper Image SPA
catalog for the three-month and six-month periods ended July 31, 1996.
The decrease in costs was partially offset by the rate increases in paper costs
which have had a significant adverse effect on the Company. The Company has
begun to receive meaningful rate decreases in paper costs since the end of the
second quarter as compared with prior year's same period. In an effort to
partially offset the impact of the rate increases in paper and postage costs,
the Company has implemented measures which includes reducing the catalog
dimensions, reducing the number of pages per catalog, as well as using a lighter
weight of paper. The current decrease in paper prices will allow the Company to
more aggressively prospect for new customers during the fourth quarter by
reducing catalog costs. The Company plans to continue to increase the
circulation of the Sharper Image catalog for the remainder of the year.
General, Selling and Administrative Expenses
General, selling and administrative expenses for the three-month and six-month
periods ended July 31, 1996 increased $32,000, or .3%, and $893,000, or 4.2%
from the comparable prior year periods. For the three-month period, the increase
was partially offset by reductions in contracted services for telemarketing,
customer service and distribution facilities. For the six-month period, the
increase was primarily attributable to the increase in store expenses associated
with the nine new stores opened during the past twelve months and an increase in
corporate personnel expenses to support the additional stores, the new Sharper
Image SPA catalog, and The Sharper Image Home Collection catalog concepts. Also
contributing to the increase in general, selling and administrative expenses was
an increase in net delivery expense related to mail-order shipments.
10
<PAGE>
Liquidity and Capital Resources
The Company met its short-term liquidity needs and its capital requirements in
the six-month period ended July 31, 1996 with available cash, trade credit, and
borrowings under the credit facility. During the six-month period ended July 31,
1996, the Company's cash decreased by $11,695,000 to $781,000 primarily due to
the increases in merchandise inventory, property and equipment expenditures and
funding of operating expenses for the period.
In September 1994, the Company entered into a five-year revolving secured credit
facility with The CIT Group/Business Credit, Inc., ("CIT"). The credit facility
allows the Company to borrow funds and issue letters of credit up to $24.5
million based upon inventory levels. The credit facility is secured by the
Company's inventory, accounts receivable, general intangibles and certain other
assets. Except as described below, borrowings under the credit facility bear
interest at either prime plus 0.75% per annum, or LIBOR plus 2.75% per annum.
The credit facility contains certain financial covenants pertaining to fixed
charge coverage ratio, leverage ratio, working capital and net worth. The credit
facility has limitations on operating leases, other borrowings, dividend
payments and stock repurchases.
In May 1996, an amendment to the secured credit facility was completed with CIT
to provide for term loans for capital expenditures ("CAPEX Term Loans") up to an
aggregate amount of $4.5 million. As a result of the amendment, the total
secured credit facility was increased from $20.0 million to $24.5 million and
the expiration has been extended for an additional two years to September 2001.
The CAPEX Term Loans allow the Company to borrow amounts for the acquisition of
capital improvements. Amounts borrowed under the CAPEX Term Loans bear interest
at either prime plus 1% per annum, or at LIBOR plus 3% per annum. Each CAPEX
Term Loan is to be repaid in 36 equal monthly principal installments. Certain
financial covenants of the secured credit facility were revised in the
amendment. CIT received warrants for 25,000 shares of the Company's common stock
exercisable at any time within five years at an exercise price of $6.00 per
share.
At July 31, 1996, there were borrowings of $800,000 outstanding under the
revolving loan credit facility. Letters of credit commitments at July 31, 1996
were $1,863,000.
Notes payable included two mortgage loans collateralized by certain property and
equipment. In connection with the expansion of the Company's distribution center
which was completed in October 1995, the Company refinanced the mortgage loan
collateralized by the distribution center and paid off the existing mortgage.
The new note in the amount of $3 million was funded in December 1995, bears
interest at a fixed rate of 8.40%, provides for monthly payments of principal
and interest in the amount of $29,367, and matures in January 2011. The other
note bears interest at a variable rate equal to the rate on 30-day commercial
paper plus 3.82%, provides for monthly payments of principal and interest in the
amount of $14,320, and matures in January 2000.
The Company's merchandise inventory at July 31, 1996 was approximately 9% lower
than that of July 31, 1995 while supporting the additional number of stores, new
retail concepts and the expanding wholesale business.
During the six-month period ended July 31, 1996, the Company opened two The
Sharper Image stores located in Chestnut Hill, Massachusetts, and Edina,
Minnesota and a Sharper Image SPA store located in Beverly Hills, California.
The Company remodeled two The Sharper Image stores located in Redondo Beach,
California and Chicago, Illinois. The Company closed two stores located in
11
<PAGE>
Minneapolis, Minnesota and Lahaina, Maui, Hawaii. The Company expects to have a
net of eight stores added during fiscal 1996. Total capital expenditures
estimated for the new and existing stores, including the remodel and the
relocation of a number of existing stores, corporate headquarters, and the
distribution center for fiscal 1996 are between $6 million to $8 million.
The Company believes it can fund its cash needs for the remainder of the fiscal
year through internally generated cash, trade credit and the secured revolving
loan credit facility.
General
The foregoing discussion and analysis should be read in conjunction with the
Company's financial statements and notes thereto included with this report. The
foregoing discussion contains certain forward-looking statements that are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
thereof. The Company undertakes no obligations to publicly release any revisions
to these forward-looking statements or reflect events or circumstances after the
date hereof.
12
<PAGE>
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At The Sharper Image 1996 Annual Meeting of Stockholders held on
June 10,1996 the election of directors and the ratification of
auditors was approved by stockholders.
The elected members of the Board of Directors are Richard J.
Thalheimer, Elyse Eng Thalheimer, Alan Thalheimer, Laurence W.
Feldman, Maurice Gregg and J. Gary Shansby.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amended and Restated Stock Option Plan. (Incorporated by reference
to Registration Statement on Form S-8 filed on January 19, 1996
(Registration No. 33-3327).)
10.2 1994 Non-Employee Director Stock Option Plan dated October 7, 1994.
(Incorporated by reference to Registration Statement on Form S-8
filed on January 19, 1996 (Registration No. 33-3327).)
10.3 Cash or Deferred Profit Sharing Plan, as amended. (Incorporated by
reference to Exhibit10.2 to Registration Statement on Form S-1
(Registration No. 33-12755).)
10.4 Cash or Deferred Profit Sharing Plan Amendment No. 3. (Incorporated
by reference to Exhibit 10.15 to Form 10-K for fiscal year ended
January 31, 1988.)
10.5 Cash or Deferred Profit Sharing Plan Amendment No. 4. (Incorporated
by reference to Exhibit 10.16 to Form 10-K for fiscal year ended
January 31, 1988.)
10.6 Form of Stock Purchase Agreement dated July 26, 1985 relating to
shares of Common Stock purchased pursuant to exercise of employee
stock options. (Incorporated by reference to Exhibit 10.3 to
Registration Statement on Form S-1 (Registration No. 33-12755).)
10.7 Form of Stock Purchase Agreement dated December 13, 1985 relating to
shares of Common Stock purchase pursuant to exercise of employee
stock options. (Incorporated by reference to Exhibit 10.4 to
Registration Statement on Form S-1 (Registration No. 33-12755).)
10.8 Form of Stock Purchase Agreement dated November 10, 1986 relating to
shares of Common Stock purchased pursuant to exercise of employee
stock options. (Incorporated
13
<PAGE>
by reference to Exhibit 10.5 to Registration Statement on Form S-1
(Registration No. 33-12755).)
10.9 Form of Director Indemnification Agreement. (Incorporated by
reference to Exhibit 10.42 to Registration Statement on Form S-1
(Registration No. 33-12755).)
10.10 Real Estate Installment Note and Mortgage dated October 4, 1993
among the Company and Lee Thalheimer, Trustee for the Alan
Thalheimer Trust. (Incorporated by reference to Exhibit 10.20 to
Form 10-K for fiscal year ended January 31, 1994)
10.11 Financing Agreement dated September 21, 1994 between the Company and
CIT Group/Business Credit Inc. (Incorporated by reference to Exhibit
10.12 to Form 10-Q for the quarter ended October 31, 1994)
10.12 The Sharper Image 401(K)Savings Plan (Incorporated by reference to
Exhibit 10.21 to Registration Statement of Form S-8 (Registration
No. 33-80504) dated June 21, 1994))
10.15 Form of Chief Executive Officer Compensation Plan dated February 3,
1995. (Incorporated by reference to Exhibit 10.24 to the Form 10-K
for the fiscal year ended January 31, 1995.)
10.16 Form of Annual Report for the Sharper Image 401(K) Savings Plan
(incorporated by reference to Form 11-K (Registration No. 33-80504)
for the plan year ended December 31, 1995.)
10.17 Form of Split-Dollar Agreement between the Company and Mr. R.
Thalheimer, its Chief Executive Officer dated October 13, 1995,
effective as of May 17, 1995. (Incorporated by reference to Exhibit
10.17 to the Form 10-K for the fiscal year ended January 31, 1996.)
10.18 Form of Assignments of Life Insurance Policy as Collateral, both
dated October 13, 1995, effective May 17, 1995. (Incorporated by
reference to Exhibit 10.18 to the Form 10-K for the fiscal year
ended January 31, 1996.)
10.19 Form of Amendment to the Financing Agreement dated May 15, 1996
between the Company and The CIT Group/Business Credit Inc.
(Incorporated by reference to Exhibit 10.19 to the Form 10Q for the
quarter ended April 30, 1996).
10.20 Form of Warrant to Purchase Common Stock Agreement dated May 15,
1996 between the Company and The CIT Group/Business Credit Inc.
(Incorporated by reference to Exhibit 10.19 to the Form 10Q for the
quarter ended April 30, 1996).
11.1 Statement Re: Computation of Earnings per Share.
15.0 Letter Re: Unaudited Interim Financial Information.
27.0 Financial Data Schedule.
14
<PAGE>
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K for the three
months ended July 31, 1996.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SHARPER IMAGE CORPORATION
Date: September 13, 1996 by:/s/ Craig P. Womack
------------------ --------------------
Craig P. Womack
President
Chief Operating Officer
by:/s/ Tracy Y. Wan
--------------------
Tracy Y. Wan
Senior Vice President
Chief Financial Officer
16
Exhibit 11.1
<TABLE>
SHARPER IMAGE CORPORATION
STATEMENTS RE: COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
-------- --------
Dollars in thousands, except per share amounts 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Loss $ (1,052) $ (1,159) $ (3,273) $ (2,092)
Average shares of common stock
outstanding during the period 8,259,393 8,237,902 8,255,799 8,243,928
Add:
Incremental shares from assumed
exercise of stock options (Primary) * * * *
------------- -------------- ----------- -----------
8,259,393 8,237,902 8,255,799 8,243,928
============= ============== =========== ===========
Primary loss per share $ (0.13) $ (0.14) $ (0.40) $ (0.25)
============= ============== =========== ===========
Average shares of common stock
outstanding during the period 8,259,393 8,237,902 8,255,799 8,243,928
Add:
Incremental shares from assumed
exercise of stock options (Fully-diluted) * * * *
------------- -------------- ----------- -----------
8,259,393 8,237,092 8,255,799 8,243,928
============= ============== =========== ===========
Fully-diluted loss per share $ (0.13) $ (0.14) $ (0.40) $ (0.25)
============= ============== =========== ===========
<FN>
* Incremental shares from assumed exercise of stock options are antidilutive for
primary and fully diluted loss per share, and therefore not presented.
</FN>
</TABLE>
17
Deloitte & Touche LLP
- ---------------------
[LOGO]
- --------------------------------------------------------------------------------
50 Fremont Street Telephone: (415) 247-4000
San Francisco, California 94105-2230 Facsimile: (415) 247-4329
August 21, 1996
Board of Directors
Sharper Image Corporation
San Francisco, California
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Sharper Image Corporation for the periods ended July 31, 1996 and
1995, as indicated in our report dated August 21, 1996 because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended July 31, 1996, is
incorporated by reference in Registration Statement No. 33-12755 and
Registration Statement No. 33-80504 on Forms S-8 of Sharper Image Corporation.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000811696
<NAME> SHARPER IMAGE CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<CASH> 781
<SECURITIES> 0
<RECEIVABLES> 4,694
<ALLOWANCES> (539)
<INVENTORY> 25,646
<CURRENT-ASSETS> 38,394
<PP&E> 53,031
<DEPRECIATION> (31,329)
<TOTAL-ASSETS> 62,095
<CURRENT-LIABILITIES> 25,022
<BONDS> 0
<COMMON> 83
0
0
<OTHER-SE> 29,426
<TOTAL-LIABILITY-AND-EQUITY> 62,095
<SALES> 49,133
<TOTAL-REVENUES> 44,186
<CGS> 22,872
<TOTAL-COSTS> 45,833
<OTHER-EXPENSES> 4
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 102
<INCOME-PRETAX> (1,753)
<INCOME-TAX> (701)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,052)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
