<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 27, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from __________ to __________
Commission file number 33-42701
PREMIER CONCEPTS, INC.
----------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Colorado 84-1186026
- ----------------------- ----------------------------
(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
3033 South Parker Road, Suite 120, Aurora, Colorado 80014
----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 338-1800
--------------
(Issuer's telephone number, including area code)
-------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the last 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 [ ]
As of December 11, 1996, the Registrant had 3,744,695 shares of its $.0004 par
value Common Stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
<PAGE>
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Balance Sheet as of October 27, 1996 and
January 28, 1996 4
Statement of Operations for the Three Months
Ended October 27, 1996 and Three Months Ended
October 29, 1995 5
Statement of Operations for the Nine Months
Ended October 27, 1996 and Nine Months Ended
October 29, 1995 6
Statement of Changes in Stockholders' Equity for
the Nine Months Ended October 27, 1996 7
Statement of Cash Flows for the Nine Months Ended
October 27, 1996 and Nine Months Ended October 29, 1995 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 10
Liquidity and Capital Resources 10
Results of Operations 12
PART II. OTHER INFORMATION 17
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
/TABLE
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Company's method of financial reporting is a fifty-two - fifty-
three (52-53) week fiscal year ending on the last Sunday in January of each
year. The accompanying Balance Sheet at October 27, 1996, Statement of
Operations for the Three and Nine Months Ended October 27, 1996 and the Three
and Nine Months Ended October 29, 1995, Statement of Changes in Stockholders'
Equity for the Period from January 29, 1996, through October 27, 1996, and
Statement of Cash Flows for the Nine Months Ended October 27, 1996 and
October 29, 1995 are unaudited but reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the financial position
and results of operations for the interim period presented. The Balance Sheet
as of January 28, 1996 is derived from the audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles. As a result, these financial statements should be read in
conjunction with the Company's Form 10-KSB/A for the year ended January 28,
1996.
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<PAGE>
PREMIER CONCEPTS, INC.
BALANCE SHEET
AS OF OCTOBER 27, 1996 AND JANUARY 28, 1996
<TABLE>
<CAPTION>
OCTOBER 27, 1996 JANUARY 28, 1996
(UNAUDITED) (AUDITED)
--------------- ----------------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash & Cash Equivalents $ 47,619 $ 327,198
Investments, at market 7,006 45,113
Inventories 1,588,254 1,393,925
Prepaid Expenses & Other Current Assets 239,303 95,503
------------ -------------
Total Current Assets 1,882,182 1,861,739
Property and Equipment, net 1,180,215 977,727
Trademarks, net 90,933 104,900
Deferred Offering Costs 211,542
Other Assets 104,507 92,428
------------ -------------
Total Assets $ 3,469,379 $ 3,036,794
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
Current Liabilities:
Notes Payable and Current Portion
of Long Term Debt:
Related Parties $ 64,420 $ 98,879
Other 282,762 378,902
Accounts Payable 1,006,839 291,905
Other Accrued Liabilities 174,024 408,881
------------ -------------
Total Current Liabilities 1,528,045 1,178,567
Long-Term Debt, Less Current Portion 691,104 759,864
Other Liabilities 91,522 56,159
------------ -------------
Total Liabilities 2,310,671 1,994,590
------------ -------------
Shareholders' Equity:
Preferred Stock, $.10 par value,
20,000,000 shares authorized;
416,670 issued and outstanding
at July 28, 1996 41,667 --
Common Stock, $.002 par value;
850,000,000 shares authorized;
3,744,695 shares issued and
outstanding 1,498 1,498
Additional Paid-in Capital 2,940,070 2,756,737
Accumulated Deficit (1,824,527) (1,716,031)
------------ -------------
Total Stockholders' Equity 1,158,708 1,042,204
------------ -------------
Total Liabilities & Equity $ 3,469,379 $ 3,036,794
=========== ===========
/TABLE
<PAGE>
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
OCTOBER 28, 1996 OCTOBER 29, 1995
------------------ ------------------
<S> <C> <C>
Retail Sales $ 2,314,523 $ 2,090,648
Wholesale Sales 15,935 1,273
------------ -------------
Total Revenues 2,330,458 2,091,921
Cost of Goods Sold 668,321 623,948
------------ -------------
Gross Margin 1,662,137 1,467,973
Operating Expenses:
Selling, General & Administrative 1,515,085 1,481,614
Provision for Store Closures -- (9,526)
Depreciation & Amortization 72,016 82,481
------------ -------------
Total Operating Expenses 1,587,101 1,554,569
------------ -------------
Operating Profit (Loss) 75,036 (86,596)
Other Income (Expenses):
Interest, net (24,928) (32,110)
Increase (Decrease) in Fair
Value -- Tradeable Securities (3,806) (4,595)
Other 41,268 (1,626)
------------ -------------
Other, net 12,534 (38,331)
Profit (Loss) Before Income Tax
Benefit and Discontinued Operation 87,570 (124,927)
Income Tax Benefit -- 54,000
------------ -------------
Profit (Loss) Before Discontinued
Operation 87,570 (70,927)
Income from Discontinued Operation -- 87,440
------------ -------------
Net Income $ 87,570 $ 16,513
=========== ===========
Net Income Available to Common
Shareholders $ 82,570 $ 16,513
=========== ===========
Net Income (Loss) Per Share
Before Discontinued Operation $ 0.02 $ (0.02)
Discontinued Operations -- 0.02
Dividends Applicable to
Preferred Stock 0.00 --
------------ -------------
Net Income (Loss) Per Share $ 0.02 $ (0.00)
=========== ============
Weighted Average Shares Outstanding 4,093,445 3,079,799
========= =========
/TABLE
<PAGE>
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 28, 1996 OCTOBER 29, 1995
------------------ ------------------
<S> <C> <C>
Retail Sales $6,263,960 $6,188,869
Wholesale Sales 23,950 42,381
------------ -------------
Total Revenues 6,287,910 6,231,250
Cost of Goods Sold 1,847,986 1,950,465
------------ -------------
Gross Margin 4,439,924 4,280,785
Operating Expenses:
Selling, General & Administrative 4,365,891 4,453,164
Provision for store closures -- (8,107)
Depreciation & Amortization 212,330 252,992
------------ -------------
Total Operating Expenses 4,578,221 4,698,049
------------ -------------
Operating Loss (138,297) (417,264)
Other Income (Expenses):
Interest, net (79,350) (97,968)
Increase (Decrease) in Fair
Value -- Tradeable Securities 12,458 (150,471)
Other 70,517 88,755
------------ -------------
Other, net 3,624 (159,684)
Loss Before Income Tax Benefit and
Discontinued Operation (134,673) (576,948)
Income Tax Benefit 10,000 109,000
------------ -------------
Loss Before Discontinued Operation (124,673) (467,948)
Income from Discontinued Operation 16,177 177,830
------------ -------------
Net Loss $ (108,496) $ (290,118)
============ ===========
Net Loss Available to Common
Shareholders $ (116,496) $ (290,118)
============ ===========
Net Profit (Loss) Per Share
Before Discontinued Operation $ (0.03) $ (0.21)
Discontinued Operations .00 .08
Dividends Applicable to Preferred
Stock -- --
------------ -------------
Net Profit (Loss) Per Share $ (0.03) $ (0.13)
============ =============
Weighted Average Shares Outstanding 3,744,695 2,274,257
========= =========
/TABLE
<PAGE>
<PAGE>
<TABLE>
PREMIER CONCEPTS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM JANUARY 28, 1996 THROUGH OCTOBER 27, 1996
(UNAUDITED)
<CAPTION>
Common Stock Preferred Stock Additional
------------------- ------------------------Paid-In Accumulated
Shares Amount Shares Amount Capital (Deficit) Total
------- ------ --------- ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
January 28, 1996 -- -- 3,744,695 $1,498 $2,756,737 $(1,716,031) $1,042,204
Preferred stock
issued for cash 416,670 41,667 -- -- 183,333 -- 225,000
Net Loss Through
October 27, 1996 -- -- -- -- -- (108,496) (108,496)
------- ------ --------- ------ ---------- ------------ -----------
Balances,
October 27, 1996 416,670 41,667 3,744,695 $1,498 $2,940,070 $(1,824,527) $1,158,708
======= ====== ========= ====== ========== ============ ==========
/TABLE
<PAGE>
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 27, 1996 AND OCTOBER 29, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 27, 1996 OCTOBER 29, 1995
----------------- -----------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $(108,496) $(290,118)
Adjustments to reconcile net income
(loss) to net cash from operating
activities:
Gain on restructuring of debt (14,250) --
Provision for store closure (8,107)
Discontinued operations (26,177) (286,330)
Depreciation and amortization 212,330 252,992
(Gain) loss on marketable securities (12,458) 150,471
Other, net (12,079) 6,022
Changes in operating assets and liabilities:
(Increase) decrease in:
Inventories (194,329) (330,066)
Other assets (143,800) (34,003)
Increase (decrease) in:
Accounts payable and accrued liabilities 506,254 515,607
Other liabilities 35,363 (90,320)
------------ -------------
Net cash provided (used) by operating
activities 242,358 (113,852)
Cash Flows From Investing Activities:
Proceeds from sale of investments 50,564 150,058
Capital expenditures for property and
equipment (400,851) (11,445)
------------ -------------
Net cash provided by (used in)
investing activities (350,287) 138,613
Cash Flows From Financing Activities:
Deferred offering costs (211,542) --
Proceeds from issuance of preferred stock 225,000 --
Proceeds from issuance of common stock -- 156,625
Proceeds from issuance of notes payable -- 100,000
Payments on notes payable (185,108) (313,791)
------------ -------------
Net cash used by financing activities (171,650) (57,166)
------------ -------------
Decrease in Cash (279,579) (32,405)
Cash & Cash Equivalents, beginning of period 327,198 171,164
------------ -------------
Cash & Cash Equivalents, end of period $ 47,619 $ 138,759
=========== ============
Supplemental Schedule of Cash Flow
Information:
Cash paid for interest $ 86,073 $ 98,807
=========== ============
/TABLE
<PAGE>
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 27, 1996
(Unaudited)
COMMITMENTS AND CONTINGENCIES
- -----------------------------
LITIGATION
----------
The Company is subject to legal proceedings, claims and liabilities, which
arise in the ordinary course of its business. In the opinion of management, the
disposition of these actions will not have a material adverse effect upon the
Company's financial position or results of operations. (See PART II. OTHER
INFORMATION--Item 1. Legal Proceedings.)
SEASONALITY AND QUARTERLY FLUCTUATIONS
- --------------------------------------
The Company's faux jewelry chain, Impostors, historically has realized
lower sales during the first three quarters which has resulted in the Company
incurring losses during those quarters. However, the Company recorded a net
profit in the third quarter in the amount of $87,570, and combined with net
losses in the first two quarters, the Company has generated a net loss during
the nine months ended October 27, 1996 of $(108,496).
The Company historically realizes approximately twenty percent (20%) of
its revenues during December as a result of the Christmas season. If the
Company's sales are substantially below seasonal expectations during December,
the Company's annual results will be adversely affected.
IMPAIRMENT OF LONG-LIVED ASSETS
- -------------------------------
In March 1996, the Financial Accounting Standards Board issued a statement
entitled "Accounting for Impairment of Long-Lived Assets." In the event that
facts and circumstances indicate that the cost of assets or other assets may be
impaired, an evaluation of recover ability would be performed. If an
evaluation is required, the estimated future in discounted cash flows
associated with the asset would be compared to asset's carrying amount to
determine if a write-down to market value or discounted cash flow value is
required. Adoption of FAS 121 had no effect on the unaudited October 27, 1996,
financial statements.
STOCK-BASED COMPENSATION
- ------------------------
In October 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Stock-Based Compensation" (FAS 123). The new
statement is effective for fiscal years beginning after December 15, 1995. FAS
123 encourages, but does not require, companies to recognize compensation
expense for grants of stock, stock options, and other equity instruments to
employees based on fair value. Companies that do not adopt the fair value
accounting rules must disclose the impact of adopting the new method in the
notes to the financial statements. Transactions in equity instruments with
non-employees for goods or services must be accounted for on the fair value
method. The Company has elected not to adopt the fair value accounting
prescribed by FAS 123 for employees, and will be subject only to the disclosure
requirements prescribed by FAS 123.
Other than what has been discussed above, management knows of no trends,
or other demands, commitments, events or uncertainties that will result in, or
that are reasonably likely to result in a material impact on the income and
expenses of the Company.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF PREMIER CONCEPTS, INC.
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this report.
RETAIL FISCAL YEAR
- ------------------
The method of financial reporting is a fifty-two to fifty-three (52-53)
week fiscal year ending on the last Sunday in January of each year. Likewise,
reporting quarters end on the Sunday closest to the calendar end of April, July
and October. Each reporting quarter contains 13 weeks of operations.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Approximately 20% of the Company's business is generated during the
Christmas holiday season. The Company's cash position will therefore be the
highest at the end of December as compared to any other month of the year, and
tends to decrease during the first, second, and third quarters of the fiscal
year. On June 24, 1996, the Company successfully completed a bridge financing
in which it sold an aggregate of 416,670 shares of Series A Convertible
Preferred Stock and 208,335 Class B Warrants, realizing net proceeds of
$225,000. These proceeds were primarily used to finance the remodeling
projects for the St. Louis and Tucson locations, to partially finance the
completion of a new store in the Park Meadows Mall in Denver, Colorado, and to
purchase various fixtures and equipment associated with improvements for other
existing locations. The Company's net accounts payable and other accrued
liabilities increased approximately $542,000 during the nine months ended
October 27, 1996. The bridge financing funds and increases in accounts payable
have been largely used to finance new store construction and existing store
remodels that were completed during the first nine months of fiscal 1997, to
purchase fixtures and equipment, to finance increases in inventories for the
Christmas holiday season and anticipated new store openings in the fourth
quarter, to finance offering costs, net losses, and to reduce notes payable. As
a result, the Company's cash position decreased by $279,579 from $327,198 at
January 28, 1996 to $47,619 at October 27, 1996.
During the first nine months of fiscal 1997, the Company continued its
efforts to liquidate its common stock position in Global Casinos, Inc.
Therefore, marketable securities decreased from $45,113 at January 28, 1996 to
$7,006 at October 27, 1996. Management intends to liquidate its remaining
securities holdings as allowed by the general market conditions.
During the nine months ended October 27, 1996, the Company invested
$400,851 in leasehold improvements, furniture and equipment. Approximately
$354,000 of this investment represents leasehold improvements, furniture and
fixtures in connection with the remodels and investments in the locations in
San Mateo, California, St. Louis, Missouri, Tucson, Arizona, Bellevue,
Washington, and Denver, Colorado, as well as minor improvements and maintenance
of other existing locations. The balance of approximately $47,000 represents
investments in corporate office improvements and purchases of furniture and
equipment in connection with the relocation of the corporate office in January,
1996.
Therefore, property and equipment, net of $783,520 in accumulated
depreciation, increased $202,488 from $977,727 at January 28, 1996, to
$1,180,215 at October 27, 1996. At January 28, 1996, the Company's trademark
assets were $104,900, net of accumulated amortization, which represented the
goodwill associated with the Impostors trademark and other intellectual
property acquired as part of the purchase of the Impostors' assets in February,
1994. The Company's trademark asset is being amortized over a 10 year period,
and had an amortized book value of $90,933 at October 27, 1996.
The Company has incurred costs in connection with its proposed public
financing of $211,542 which primarily represent professional services, printing
and other administrative costs. It is estimated that the total costs to
complete the offering will approximate $375,000 which will be offset against
the proceeds from the financing when it is completed. However, the offering
has been delayed and, while the Company plans to complete it in the fourth
quarter, there can be no assurance that the financing will, in fact, be
successfully consummated in that period.
As of October 27, 1996, the Company had total outstanding liabilities of
$2,310,671 compared to $1,994,590 at January 28, 1996, representing an increase
of $316,081 which was due to an increase in current liabilities of $349,478,
from $1,178,567 at January 28, 1996 to $1,528,045 at October 27, 1996. This
increase was primarily the result of an increase in net accounts payable of
approximately $715,000 which was used to help finance offering costs, store
remodelings and net losses from operations and to reduce notes payable. Also,
management continued its efforts to purchase larger quantities of inventories
to maintain favorable inventory costs and to increase inventory levels to
accommodate the opening of Park Meadows, and the new store openings which
occurred in the months of November and December, and the normal inventory
build-up for the Christmas holiday season. As a result of the foregoing,
working capital decreased by $329,035, from $683,172 at January 28, 1996 to
$354,137 at October 27, 1996.
The amount borrowed from related parties was $64,420 at October 27, 1996
which reflects a reduction of $34,459, from the January 28, 1996 figure of
$98,879. During the nine month period, the Company also reduced other short
and long term notes by $164,900, which resulted in other notes payable of
$973,866 as of October 27, 1996 compared to $1,138,766 at January 28, 1996. As
of October 27, 1996, the Company was in arrears in the payment of two notes
totalling, in the aggregate, approximately $150,000. Management has been in
discussions with the two noteholders and plans to retire these two notes with
the proceeds from its proposed public financing.
The largest portion of the Company's long-term debt is comprised of a
$635,000 promissory note, which note carries interest at the rate of 10% per
annum and is payable in monthly interest payments of approximately $5,300 and
is due February 22, 1998. The note is secured by the Company's assets. The
remainder of the Company's long-term notes of $56,104, plus the current portion
of $84,897, represent liabilities that the Company assumed as part of the of
the Impostors acquisition in February, 1994.
As a result of the Company's net loss for the nine months of $108,496, the
accumulated deficit increased from $1,716,031 at January 28, 1996 to a deficit
of $1,824,527 at October 27, 1996. However, due to the Company realizing
$225,000 from the Bridge Offering in June, 1996, stockholders' equity increased
in the nine months from $1,042,204 at January 28, 1996 to $1,158,708 at
October 27, 1996.
Net cash provided by operating activities for the period ended October 27,
1996 was $242,358, compared to net cash used by operating activities of
$(113,852) for the nine months ended October 29, 1995. The primary changes in
cash flow generated by operations in the nine month periods ended October 27,
1996, and October 29, 1995 reflects the increase in accounts payable and other
accrued liabilities of $506,254 and $515,607 for the two periods respectively.
The improvement in cash generated by operations was principally due to lower
overhead costs and a resulting reduction in the operating loss for the period,
and the Company's reduced position of investments in securities holdings.
During the nine months ended October 27, 1996, the Company invested
$400,851 in capital equipment, which reflects the investments in leasehold
improvements, furniture and equipment discussed above. During the period,
management continued its efforts to sell its holdings of Global Casinos common
stock, which resulted in proceeds of $50,564.
Net cash used in financing activities for the nine months ended
October 27, 1996 and October 29, 1995 was $171,650 and $57,166 respectively.
The majority of the change was the result of reduced payments on notes payable
in 1996 as compared to 1995 in the amount of $128,683, and $211,542 of deferred
offering costs incurred in connection with the proposed public financing
discussed above.
The foregoing resulted in a decrease in the Company's cash position of
$91,140, from $138,759 at October 29, 1995 to $47,619 at October 27, 1996.
At January 28, 1996, the Company had a net operating loss carryforward for
federal tax purposes of approximately $680,000 that may be utilized to offset
future profits.
As mentioned above, during the months of August, September, October,
November and December, the Company opened six additional retail locations.
These locations are at the Park Meadows Mall in Denver, Colorado, the Coastland
Center in Naples, Florida, Sawgrass Mills in Sunrise, Florida, Bayside
Marketplace in Miami, Florida, Menlo Park in Edison, New Jersey, and Garden
State Plaza in Paramus, New Jersey. In addition, the Company has executed six
additional leases to open new locations in the first quarter of fiscal 1998.
These stores will be located in Miami, Florida, Orange County, California, two
locations in Ft. Lauderdale, Florida, Washington DC, and Las Vegas, Nevada.
Other sites are currently being evaluated. Depending on location and size, the
opening of a new retail location represents an aggregate capital commitment of
approximately $100,000-$200,000 which includes leasehold improvements,
furniture, fixture, equipment and inventory.
The Company's ability to complete its proposed public offering was delayed
due principally to regulatory issues surrounding two of its shareholders.
Because of the delay in the proposed public financing and in order to permit
the Company to divest the shareholders with regulatory issues, the Company is
undertaking a bridge offering of up to $1,120,000 in 12% Convertible Promissory
Notes (the "Notes") and 200,000 Class B Warrants (the "Warrants"), on a
$728,000 minimum, all or none, and $1,120,000 maximum basis. From the proceeds
of the $728,000 minimum offering, the Company intends to utilize approximately
$600,000 to purchase and redeem all of the shares of the Company's securities
owned by the shareholders in question. The balance of the bridge offering
proceeds will be utilized by the Company for working capital. Based upon
indications to date, the Company expects to complete up to the maximum in the
bridge offering prior to December 31, 1996. Assuming that the Company
completes the bridge offering of Notes and the redemption of the Common Shares
to resolve the regulatory issues, the Company hopes to be able to complete the
public offering prior to the end of fiscal 1997.
Rather than to retire long-term debt, the Company intends to use the
proceeds from its proposed secondary financing to fund the growth of its retail
chain and take advantage of other distribution opportunities such as direct
mail, home shopping and internet distribution. However, since the Company's
ability to achieve profitability in the future depends, to a large extent, upon
realizing economies from expansion without proportionate increases in general
and administrative expenses, the majority of the proceeds from the financing
will be utilized to expand the number of stores to 40 within the next 12
months.
The Company believes the proceeds from the proposed public offering, along
with cash flow generated by operations will be sufficient to meet the Company's
capital needs over the next 12 months. However, if the Company is unsuccessful
in securing the contemplated financing, its ability to pursue additional
opportunities for distribution and retail store expansion will be significantly
impaired and the results of operations for future periods may be adversely
affected.
RESULTS OF OPERATIONS
- ---------------------
The following table sets forth for the periods indicated, the percentage
relationship between selected items in the Consolidated Statements of
Operations to net sales:
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
OCTOBER 27, 1996 OCTOBER 29, 1995
-------------------- --------------------
<S> <C> <C> <C> <C>
Revenues $6,287,910 100% $6,231,250 100%
Cost of goods sold 1,847,986 29.4% 1,950,465 31.3%
Gross Margin 4,439,924 70.6% 4,280,785 68.7%
Operating Expenses 4,578,221 72.8% 4,698,049 75.4%
Operating loss (138,297) (0.2%) (417,264) (6.7%)
Other Income (expenses), net 3,624 0.0% (159,684) (2.6%)
Loss before discontinued (124,673) (2.0%) (467,948) (7.5%)
operation
Net Loss available to common (116,496) (1.8%) (290,118) (4.7%)
shareholders
Net Loss per common share (.03) (.13)
</TABLE>
RESULTS OF OPERATIONS - THREE MONTHS ENDED OCTOBER 27, 1996 COMPARED TO THREE
MONTHS ENDED OCTOBER 29, 1995
- -----------------------------------------------------------------------------
The Company's retail revenues for the three months ended October 27, 1996
were $2,314,523 compared to $2,090,648 for the comparable period in 1995, an
increase of $223,875, or 10.7%. Comparable same store sales were $2,062,689
for the three months ended October 27, 1996 as compared to $1,960,701 for the
three months ended October 29, 1995, an increase of 5.2%, accounting for nearly
half the overall increase for the quarter. The balance of the increase was
attributable to the opening of the Company's twenty-seventh store at the Park
Meadows Mall in Denver, Colorado in late August, and sales from two other
locations that were opened in October and November, 1995. Management
attributes its increase in comparable same store sales to an continued
improvement in merchandise mix which included the introduction of a genuine
sterling silver line of products in May, 1996, and quicker stock replenishment
of fast-selling items. Management also attributes increases in same-store
sales to improved store design in its remodeled locations.
Sales from wholesale operations, primarily to international customers,
franchisees and jewelry repair income, were $15,935 and $1,273 for the three
months ended October 27, 1996 and October 29, 1995, respectively.
For the three months ended October 27, 1996, cost of goods sold was
$668,321 resulting in a gross margin of $1,662,137, or 71.3%. This compares to
the three months ended October 29, 1995 in which cost of goods sold was
$623,948 resulting in a gross margin of $1,467,973, or 70.1%. Included in cost
of goods sold are estimates for inventory shrinkage of $23,098 and $41,840 for
the three months ended October 27, 1996 and October 29, 1995, respectively.
Inventory shrinkage estimates are based on historical experience and are
charged based on sales volume. The improvement in gross margin percentage is
the result of adjustments to the shrinkage reserve rate, and less promotional
activity and capitalizing on buying opportunities offering lower merchandise
costs.
Selling, general and administrative expenses were $1,515,085 for the three
months ended October 27, 1996, compared to $1,481,614 for the three months
ended October 29, 1995. The majority of these expenses were comprised of
personnel expenses, which amounted to $689,504 and $690,879 for the three
months ended October 27, 1996, and October 29, 1995 respectively, and occupancy
costs of $506,879 and $479,795 respectively, an increase of approximately
$26,000 which is due to the additional three stores operated during the period
and slight increases in base rents and common area charges for several existing
locations for fiscal 1997. Depreciation and amortization expense was $72,016
for the three months ended October 27, 1996, and $82,481 for the three months
ended October 29, 1995.
Included in total selling, general and administrative expenses are
corporate overhead expenses of $318,394, and $349,112 for the three months
ended October 27, 1996, and October 29, 1995 respectively, a decrease of
approximately $30,000, or 8.8%. The Company attributes the decrease in
overhead expenses to lower personnel and occupancy costs realized by the
relocation of the corporate offices from California to Colorado in January,
1996.
As a result of the foregoing, the Company's net operating profit for the
three months ended October 27, 1996 was $75,036 as compared to an operating
loss of $(86,596) for the comparable three months ended October 29, 1995, an
improvement of approximately $162,000 over the comparable three month period.
Net interest expense was $24,928 and $32,110 for the three months ended
October 27, 1996 and October 29, 1995 respectively. The decrease of
approximately $7,200 is attributable to a continued effort to reduce debt.
Other income for the three month period ended October 27, 1996 was
$41,268, as compared to other expenses of $1,626 for the same period in 1995.
Other income includes a gain of approximately $25,000 which resulted from a
final settlement of a recorded liability and funds held in escrow that were
used to satisfy certain liabilities to unsecured creditors of the predecessor
company, and approximately $10,000 in gains realized from debt settlements with
former Impostors franchisees.
Other income for the three month period ended October 27, 1996 also
includes approximately $6,000 income from license fees from three former
franchisees operating five locations, who executed license agreements with the
Company that entitles them to use the Impostors trademark for one year. These
license agreements, which require an annual licensee fee of $5,000, will expire
in January and February of 1997. The Company may renew these agreements at its
discretion.
Based on the foregoing, the Company reported net income for the three
months ended October 27, 1996 of $87,570. Taking into effect the preferred
stock cumulative dividends, which is accrued but not paid, the net income
available to common shareholders was $82,570 which translates to net income of
$.02 per share based on 4,093,445 weighted average shares outstanding. This
compares with net income for the three months ended October 29, 1995 of
$16,513, or $0.00 per share, based on 3,079,799 weighted average shares
outstanding, and represents an improvement of $66,057, or $.02 per share.
RESULTS OF OPERATIONS - NINE MONTHS ENDED OCTOBER 27, 1996 COMPARED TO NINE
MONTHS ENDED OCTOBER 29, 1995
- ---------------------------------------------------------------------------
Retail revenues for the period ended October 29, 1995 were $6,188,869
which reflects revenues from 29 retail locations. The Company's retail
revenues for the nine months ended October 27, 1996, which represent revenues
from 26 retail locations, and one additional store which opened on August 31,
1996 at the Park Meadows Mall in Denver, Colorado, were $6,263,960 an increase
of $75,091. Wholesale sales were $23,950 and $42,381 for the nine months ended
October 27, 1996, and October 29, 1995 respectively. Comparable same store
sales (24 stores) were $5,794,447 for the nine months ended October 27, 1996
compared to $5,605,465 for the same period in 1995, an increase of 3.4%.
Management's attributes this increase to a continued improvement in the
Company's merchandise assortment and strategy, which included the introduction
of a genuine sterling silver line of products in May, 1996. As well, the
Company's remodeled locations are benefitting from an improved store design.
Although management expects that same store sales may increase marginally
in the future, it is anticipated that any material future increase in total
sales will depend upon the Company's ability to expand its number of stores.
The Company expects that over the next twelve months planned store expansions
will not require a proportionate increase in corporate overhead.
For the nine months ended October 27, 1996, cost of goods sold was
$1,847,986 and the gross margin was $4,434,924, or approximately 70.6%. For
the nine months ended October 29, 1995, cost of goods sold was $1,905,465 and
the gross margin was $4,280,705 or approximately 68.7%. Included in cost of
goods sold are estimates for inventory shrinkage of $66,543 and $123,800 for
the nine months ended October 27, 1996 and October 29, 1995, respectively. The
Company attributes the improvement in gross margin percentage to adjustments to
the shrinkage reserve rate, and less sales promotional activity and
capitalizing on buying opportunities offering lower merchandise costs.
Selling, general and administrative expenses were $4,365,891 for the nine
months ended October 27, 1996, compared to $4,453,164 for the period ended
October 29, 1995. The majority of these expenses were comprised of personnel
expenses, which amounted to $2,034,254 and $2,115,045 for the nine months ended
October 27, 1996 and October 29, 1995, respectively, and occupancy costs of
$1,468,886 and $1,468,587 respectively. Depreciation and amortization expense
was $212,330 for the nine months ended October 27, 1996, and $252,992 for the
nine months ended October 29, 1995, representing a reduction of $40,662 due to
a reduced depreciable asset base.
Included in total selling, general and administrative expenses are
corporate overhead expenses of $971,923, and $1,069,974 for the nine months
ended October 27, 1996, and October 29, 1995 respectively, a decrease of
approximately $98,000, or 9.2%. The Company attributes the decrease in
overhead expenses to lower personnel and occupancy costs realized by the
relocation of the corporate offices from California to Colorado in January,
1996.
As a result of the foregoing, the Company's net operating loss for the
nine months ended October 27, 1996 was $138,927. This compares with a loss
from operations for the nine months ended October 29, 1995 of $417,264, an
improvement of approximately $279,000 over the comparable nine month period.
Net interest expense was $79,350 and $97,968 for the nine months ended
October 27, 1996, and October 29, 1995, respectively. The Company's gain on
investments of $12,458 for the period ended October 27, 1996 relates to the
Company's holdings of common stock in Global Casinos, Inc. During the nine
months ended October 27, 1996, the Company sold most of its holdings of these
securities and management intends to liquidate its remaining holdings of Global
common stock as allowed by general market conditions. For the period ended
October 29, 1995, the Company reported loss of $150,471 on its investment in
tradable securities.
For the nine months ended October 27, 1996, other income, net of other
expenses, was $70,517. Of this amount, approximately $19,000 represented
license fees from three former franchisees operating five locations, who
executed license agreements with the Company that entitles them to use the
Impostors trademark for one year. These license agreements, which require an
annual license fee of $5,000, will expire in January and February of 1997. The
Company may renew these agreements at its discretion. Other income also
includes a gain of approximately $25,000 which represents a final settlement of
a recorded liability and funds held in escrow that were used to satisfy certain
liabilities to unsecured creditors of the predecessor company, and
approximately $28,000 in gains realized in settlements with former franchisees.
For the nine months ended October 29, 1995, other income, net of other
expenses, was $88,755, of which approximately $72,000 represented income from a
settlement with a former franchisee, which receivable had been previously
written off in fiscal 1995.
Income from discontinued operations, net of income tax benefit, was
$16,177 and $177,830 for the six months ended July 30, 1995. The income from
discontinued operations reflects negotiated settlements with creditors relating
to the Company's previous gaming operations.
Based on the foregoing, the Company reported a net loss available to
common shareholders for the nine months ended October 27, 1996 of $116,496,
which translates to a net loss per share, after income from discontinued
operations, of $0.03 based on 3,744,695 weighted average shares outstanding.
This compares with a reported net loss available to common shareholders for the
nine months ended October 29, 1995 of $290,118 or $0.13 per common share, based
on 2,274,257 weighted average shares outstanding as of that date. Future
profitability will depend upon the Company's ability to expand its number of
store locations, favorable lease cost-to-sales ratios and management's
continued ability to control overhead expenses, and the ability to take
advantage of other synergistic distribution opportunities.
Other than the foregoing, management knows of no trends, or other demands,
commitments, events or uncertainties that will result in, or that are
reasonably likely to result in, a material impact on the income and expenses of
the Company.
IMPAIRMENT OF LONG-LIVED ASSETS
- -------------------------------
In March 1996, the Financial Accounting Standards Board issued a statement
entitled "Accounting for Impairment of Long-Lived Assets." In the event that
facts and circumstances indicate that the cost of assets or other assets may be
impaired, an evaluation of recover ability would be performed. If an
evaluation is required, the estimated future in discounted cash flows
associated with the asset would be compared to asset's carrying amount to
determine if a write-down to market value or discounted cash flow value is
required. Adoption of FAS 121 had no effect on the unaudited October 27, 1996,
financial statements.
STOCK-BASED COMPENSATION
- ------------------------
In October 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Stock-Based Compensation" (FAS 123). The new
statement is effective for fiscal years beginning after December 15, 1995. FAS
123 encourages, but does not require, companies to recognize compensation
expense for grants of stock, stock options, and other equity instruments to
employees based on fair value. Companies that do not adopt the fair value
accounting rules must disclose the impact of adopting the new method in the
notes to the financial statements. Transactions in equity instruments with
non-employees for goods or services must be accounted for on the fair value
method. The Company has elected not to adopt the fair value accounting
prescribed by FAS 123 for employees, and will be subject only to the disclosure
requirements prescribed by FAS 123.
Other than what has been discussed above, management knows of no trends,
or other demands, commitments, events or uncertainties that will result in, or
that are reasonably likely to result in a material impact on the income and
expenses of the Company.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is currently involved in the following legal proceedings:
PREMIER CONCEPTS, INC. V. WILLIAM T. AND MARTHA A. JACKLING,
------------------------------------------------------------
Civil Action No. 7599-94 pending in the State Court of New York, County
of Monroe. This action has also been brought by the Company to collect
approximately $80,000 due and owing on open account from former
franchisees of AFJ. In the case, the Company has also asserted against
the Defendants' claims of trademark infringement, unfair competition
and breach of contract in connection with the Defendants' continued use
of the Company's registered trademark "Impostors" without legal
authorization.
PREMIER CONCEPTS, INC. V. R & L IMPORTS CORPORATION.
----------------------------------------------------
The Company has filed a Complaint in the Puerto Rico District Court for
San Juan against R & L Imports Corporation for amounts due for
inventory purchased by R & L Imports Corporation from the Company, and
on amounts due on the notes payable executed as part of the Customer
and Settlement Agreements entered into by the defendant and American
Fashion Jewels, Inc. on January 20, 1994. The Company seeks damages in
excess of $27,000. Both claims are supported by written contracts and
written admissions by the defendant. The Company is represented in
Puerto Rico by the law firm of Cancio, Nadal, Rivera & Diaz.
PREMIER CONCEPTS, INC. V. ST. MORITZ, INC.
------------------------------------------
The Company has obtained a judgment in the amount of $28,664 in the
County Court for Dallas County, Texas against St. Moritz, Inc. for
amounts due on inventory purchased by St. Moritz from the Company
between October, 1995 and January, 1996. Management is currently
analyzing the cost benefit of enforcing the judgment.
SEC INVESTIGATION.
------------------
During 1995 and 1996, the Company received requests for information
from the U.S. Securities and Exchange Commission ("SEC") related to an
investigation begun by the SEC during 1994 into various matters,
including certain transactions in securities by a former officer and
director of the Company. The Company has fully complied with all
requests. The Company has been informed that the SEC staff intends to
recommend to the Commission that an action be brought against certain
persons including two of the Company's shareholders and two of its
former directors. Although there can be no assurance, the Company's
present management does not believe that this investigation of the
activities of these persons will have a direct material impact on the
Company or its business operations.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
quarter ended October 27, 1996.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
Exhibit 27 - Financial Data Schedule
Reports on Form 8-K:
None
<PAGE>
<PAGE>
SIGNATURE
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 hereunto duly authorized.
PREMIER CONCEPTS, INC.
Dated: December 16, 1996 By: /s/ Sissel Greenberg
------------------- ------------------------------------
Sissel Greenberg, President
Dated: December 16, 1996 By: /s/ Todd Huss
------------------- ------------------------------------
Todd Huss, Chief Financial Advisor,
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-28-1996
<PERIOD-END> OCT-27-1996
<CASH> 47,619
<SECURITIES> 7,006
<RECEIVABLES> 60,542
<ALLOWANCES> (27,000)
<INVENTORY> 1,588,254
<CURRENT-ASSETS> 1,882,182
<PP&E> 2,802,825
<DEPRECIATION> (1,622,610)
<TOTAL-ASSETS> 3,469,379
<CURRENT-LIABILITIES> 1,528,045
<BONDS> 0
0
41,667
<COMMON> 1,498
<OTHER-SE> 1,115,543
<TOTAL-LIABILITY-AND-EQUITY> 3,469,379
<SALES> 2,330,458
<TOTAL-REVENUES> 2,330,458
<CGS> 668,321
<TOTAL-COSTS> 668,321
<OTHER-EXPENSES> 1,599,635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,928
<INCOME-PRETAX> 87,570
<INCOME-TAX> 0
<INCOME-CONTINUING> 87,570
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,570
<EPS-PRIMARY> .022
<EPS-DILUTED> .020
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