SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] Annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934 for the calendar year ended December 31, 1999 or
[ ] Transition report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 for the transition period from ______________________ to
______________________
Commission File Number: 33-80504
A. Full title of the Plan and the address of the Plan, if different
from that of the issuer named below:
The Sharper Image 401k Savings Plan
650 Davis Street
San Francisco, CA 94111
B. Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office:
Sharper Image Corporation
650 Davis Street
San Francisco, CA 94111
1
<PAGE>
THE SHARPER IMAGE
401k SAVINGS PLAN
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Page
----
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits,
as of December 31, 1999 and 1998 4
Statements of Changes in Net Assets Available for Benefits,
for the years ended December 31, 1999 and 1998 5
Notes to Financial Statements 6-9
SUPPLEMENTAL SCHEDULE:
Schedule of Assets Held for Investment Purposes as of
December 31, 1999 10
OTHER INFORMATION:
Exhibit 23.1 - Independent Auditors' Consent 12
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Administrative Committee,
The Sharper Image 401k Savings Plan
San Francisco, California
We have audited the accompanying statements of net assets available for benefits
of The Sharper Image 401k Savings Plan (the "Plan") as of December 31, 1999 and
1998, and the related statements of changes in net assets available for benefits
for the years then ended. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1999 and 1998, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
table of contents is presented for the purpose of additional analysis and is not
a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The schedule is the responsibility of the Plan's management. Such schedule
has been subjected to the auditing procedures applied in our audit of the basic
1999 financial statements and, in our opinion, is fairly stated in all material
respects when considered in relation to the basic financial statements taken as
a whole.
/s/ Deloitte & Touche LLP
--------------------------
San Francisco, CA
May 26, 2000
3
<PAGE>
THE SHARPER IMAGE
401k SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
December 31,
-------------
1999 1998
---- ----
Total Investments at Fair Value $ 5,085,052 $ 3,653,989
----------- -----------
Receivables:
Employee Contributions 34,236 21,251
Employer Contributions 152,475 72,951
----------- -----------
Total Receivables 186,711 94,202
----------- -----------
Liabilities-Excess Contributions (9,020) 0
----------- -----------
Net Assets Available for Benefits $ 5,262,743 $ 3,748,191
=========== ===========
See accompanying notes to financial statements.
4
<PAGE>
THE SHARPER IMAGE
401k SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
Year Ended
December 31,
------------
1999 1998
---- ----
ADDITIONS TO NET ASSETS:
Investment income:
Net appreciation in fair value of investments $ 509,889 $ 605,996
Interest and dividend income 324,119 175,509
--------- ---------
Total investment income 834,008 781,505
Employer contributions 152,475 72,951
Employee contributions 920,277 750,733
--------- ----------
Total additions 1,906,760 1,605,189
--------- ---------
DEDUCTIONS FROM NET ASSETS:
Benefits paid to terminated participants (377,236) (569,724)
Administrative expenses (14,972) (11,227)
---------- ----------
Total deductions (392,208) (580,951)
---------- ----------
NET INCREASE IN NET ASSETS 1,514,552 1,024,238
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 3,748,191 2,723,953
---------- ----------
End of year $5,262,743 $3,748,191
========== ==========
See accompanying notes to financial statements.
5
<PAGE>
THE SHARPER IMAGE
401k SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE PLAN
The following description of The Sharper Image (the "Company") 401k Savings
Plan (the "Plan") provides only general information. Participants should
refer to the Plan agreement for a more complete description of the Plan's
provisions.
General- The Plan was established on April 1, 1994 and was amended on August
1, 1999. The Plan is a defined contribution plan covering all employees who
have completed one year of service with at least 1,000 hours and are age
twenty-one or older. The Plan is intended to qualify under Sections 401(a)
and 401(k) of the Internal Revenue Code ("IRC"). The purpose of the Plan is
to provide retirement and other benefits for employees of the Company. It is
subject to the provisions of the Employee Retirement Income Security Act of
1974 ("ERISA").
Contributions- Prior to the amended Plan date of August 1, 1999, participants
were allowed to contribute 1% to 10% of their annual compensation, plus up to
100% of any employer paid cash bonus, not to exceed the maximum deductible
amount of $10,000 for the year ended December 31. The August 1, 1999 amended
Plan has the same terms except it allows participants to contribute 1% to 20%
of their annual compensation. Participants may also effect rollover
distributions to the Plan from other qualified defined benefit or
contribution plans. Contributions to the Plan are invested by the Trustee,
PNC Bank, N.A ("PNC"), in one or more of the investment funds in whole
percentage increments as directed by Plan participants. The Company made
employer matching contributions equal to 100% of the participants
contribution up to a maximum of $500 and $250 per participant for the years
ended December 31, 1999 and 1998, respectively.
Participant Accounts- Each participant's account is credited with the
participant's contributions, the Company's matching contribution, and
allocations of Plan earnings. Forfeited balances of terminated participants'
nonvested accounts remain in the Plan and will be applied first to the
payment of administrative expenses and then to reduce future Company
contributions.
Vesting- Participants are immediately vested in the contributions they make
to the Plan, plus actual earnings thereon. Vesting in the Company's matching
contributions, made on their behalf, plus earnings thereon is based on years
of service. A participant is 100% vested after five years of credited
service.
Participant Loans- Participant loans are available to active employees. The
loan amount available is 50% of a participant's vested account balance, with
a minimum loan of $1,000 and a maximum loan of $50,000. As of December 31,
1999, there were 29 loans outstanding with interest rates ranging from 8.75%
to 9.25%, and as of December 31, 1998, there were 33 loans outstanding, with
an interest rate of 9.5%.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998 (continued)
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE PLAN (continued)
Distribution of Benefits- Upon termination of service for any reason,
including death, disability or retirement, a participant may receive the
value of their vested interest as a lump-sum distribution. Terminated
participants with an account balance of less than $5,000 will automatically
receive a lump sum distribution.
Plan Termination- Although the Company has not expressed any intent to
terminate the Plan agreement, it may do so at any time. The Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan under the provisions of ERISA. In the event of Plan
termination, the assets under the Plan will be valued and fully vested, and
each participant will be entitled to distributions respecting his or her
account.
Tax Status- The Plan is a standardized prototype cash or deferred profit
sharing plan sponsored by PNC. A favorable determination letter for this
standardized prototype was issued by the Internal Revenue Service ("IRS") on
April 10, 1990 and a favorable determination letter for the amendment to the
standardized prototype was issued by the IRS on February 8, 1993. The Plan
Administrator believes that the Plan is currently designed and is being
operated in compliance with the applicable requirements of the IRC.
Therefore, no provision for income taxes has been included in the Plan's
financial statements.
Reclassifications- The Plan has adopted Statement of Position 99-3,
Accounting for and Reporting of Certain Defined Contribution Plan Investments
and Other Disclosure Matters. As a result, the Plan's 1998 financial
statements have been reclassified to eliminate the by-fund disclosures.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting- The financial statements of the Plan are prepared under
the accrual method of accounting.
Forfeiture Accounts- At December 31, 1999 and 1998, forfeited non-vested
account balances totaled $5,332 and $14,975, respectively. These accounts
will be used to offset future expenses of the Plan. In addition, during 1999
and 1998, Plan administrative expenses totaling $14,972 and $11,227,
respectively, were deducted from these account balances.
Investment Valuation and Income Recognition- The Plan's investments are
stated at fair value. Shares of registered investment companies are valued at
quoted market prices which represent the net asset value of shares held by
the Plan at year-end. Fair value for the Company's unitized common stock,
which is listed on NASDAQ, is valued at its quoted market price. Participant
loans are carried at the unpaid principal balance, which approximates fair
value.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on an accrual basis. Dividends are recorded on
the ex-dividend date.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998 (continued)
--------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Payment of Benefits- Benefits are recorded when paid.
Administrative Expenses- Plan administrative expenses are primarily paid
through forfeited balances of terminated participants' non-vested portion of
the Company's matching contributions. If the forfeiture balance is less than
administrative expense, the deficiency will be paid by the Company with an
additional contribution. If the forfeitures exceed the administrative
expenses, the Company may reduce the employer contribution for such plan
year.
Use of Estimates- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, and changes therein, and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
3. INVESTMENTS
Investments that represent 5% or more of the Plan's net assets at December
31, 1999 and 1998 are separately identified in the following table:
December 31, 1999 December 31, 1998
----------------- -----------------
Number of Number of
Shares or Fair Shares or Fair
Par Value Value Par Value Value
--------- ----- --------- -----
BlackRock:
Balanced Fund 37,183 $ 772,658 34,290 $ 679,624
Large Cap Growth
Equity Fund 71,777 1,752,792 50,920 1,069,327
Index Equity Fund 37,218 1,046,942 33,912 804,050
Money Market Fund 517,404 693,749 538,598 690,065
Sharper Image Corp.
Common Stock Fund 14,189 291,048 10,126 190,952
During the years ended December 31, 1999 and 1998, the Plan's investments
(including gains and losses on investments bought and sold, as well as held
during the year) appreciated in value by $509,889 and $605,996, respectively,
as follows:
1999 1998
---- ----
Mutual Funds $477,685 $461,914
Sharper Image Corp. Common Stock 32,204 144,082
--------- --------
$509,889 $605,996
======== ========
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998 (continued)
--------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by PNC, or by a
majority owned subsidiary of PNC. PNC is the trustee as defined by the Plan
and, therefore, these transactions qualify as party-in-interest transactions.
As of December 31, 1999 and 1998, the value of the mutual funds managed by
PNC and its majority owned subsidiary was $4,351,046 and $3,329,955,
respectively. In addition, the Plan invests in shares of the Company's
unitized common stock fund and, therefore, these transactions also qualify as
party-in-interest transactions. As of December 31, 1999 and 1998, the value
of the Company's common stock held by the Plan was $291,048 and $190,952,
respectively.
5. DUE TO PARTICIPANTS WHO HAVE WITHDRAWN
As of December 31, 1999 and 1998, net assets available for benefits included
$29,771 and $7,475, respectively, due to participants who had withdrawn from
participation in the Plan. The net assets available for benefits also
includes vested funds from former Company employees who can no longer make
contributions to the Plan, but who have elected to retain their funds in
their investments accounts, as allowed in the Plan's provisions. The amount
of funds in the net assets available for former employees who have not
requested distribution at year-end is $612,039 and $328,112 at December 31,
1999 and 1998, respectively.
* * * * * * * * * * *
9
<PAGE>
THE SHARPER IMAGE
401k SAVINGS PLAN
<TABLE>
SCHEDULE H, Line 4i - SUPPLEMENTAL SCHEDULE OF ASSETS HELD FOR INVESTMENT
PURPOSES - DECEMBER 31, 1999
<CAPTION>
Number of
Shares or Fair
Description of Investment Par Value Cost Value
------------------------- --------- ---- -----
<S> <C> <C> <C>
FIXED INCOME SECURITIES
BlackRock Balanced Equity Fund * 37,183 $ 638,117 $ 772,658
EQUITY SECURITIES
BlackRock Large Cap Growth Equity Fund * 71,777 1,307,565 1,752,792
BlackRock Index Equity Fund * 37,218 747,607 1,046,942
American Century Equity Growth Fund 1,146 27,929 30,055
Invesco Emerging Growth Fund 2,652 38,285 49,389
Janus Worldwide Fund 2,120 120,339 162,045
GOVERNMENT SECURITIES
BlackRock Intermediate Government Bond Fund * 7,438 74,781 72,520
MONEY MARKET & INSURANCE (GIC) FUNDS
BlackRock Money Market Fund * 517,404 616,700 693,749
PNC Investment Contract Fund * 5,873 11,924 12,385
COMMON STOCK
Sharper Image Corporation Common Stock Fund * 14,189 198,959 291,048
PARTICIPANT LOANS
Twenty-nine loans outstanding with interest
rates ranging from 8.75% to 9.25% 201,469 -- 201,469
----------- -----------
Total Investments $ 3,782,206 $ 5,085,052
=========== ===========
<FN>
* - Party-in-interest.
</FN>
</TABLE>
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
THE SHARPER IMAGE 401k SAVINGS PLAN
BY SHARPER IMAGE CORPORATION
PLAN ADMINISTRATOR
Date: June 27, 2000 by:/s/ Jeffrey P. Forgan
---------------------- ------------------------
Jeffrey P. Forgan
Senior Vice President,
Chief Financial Officer and
Plan Administrator
11
