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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A-1
AMENDED AND RESTATED
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended January 28, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from _______ to ______
Commission file number: 33-42701
PREMIER CONCEPTS, INC.
____________________________________________
(Name of Small Business Issuer in its Charter)
Colorado 71-0668346
________________________________ ________________________
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
3033 South Parker Road, Suite 120, Aurora, Colorado 80014
___________________________________________________ __________
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (303) 338-1800
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Title of Class
None
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The Issuer's revenues for fiscal year ended January 28, 1996 were $9,069,840.
As of May 1, 1996, the aggregate market value of the Common Stock of the Issuer
based upon the closing bid price of the Common Stock as quoted on the OTC
Electronic Bulletin Board held by non-affiliates of the Issuer was $1,904,173.
As of May 1, 1996, 3,744,695 shares of Common Stock of the Issuer were
outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
The Registrant incorporates by this reference the following documents:
Part III
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Item 9. Directors, Executive Officers, Promotions and Control Persons,
Compliance with Section 16(a) of the Exchange Agreement
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
The foregoing are incorporated by reference from the Registrant's
Definitive Proxy Statement relating to it Annual Meeting of Shareholders which
will be filed as an amendment within 120 days of January 28, 1996.
Item 13. Exhibits
1. Incorporated by reference from the Company's Registration Statement
on Form S-1; SEC File No. 33-42701.
2. Incorporated by reference from the Company's Current Report on Form
8-K dated March 3, 1994, as amended on January 23, 1995.
3. Incorporated by reference from the Company's Current Report on Form
8-K dated February 16, 1995.
4. Incorporated by reference from the Company's Annual Report on Form
10-KSB for the year ended December 31, 1994.
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PART I
BUSINESS
THE COMPANY
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The Company was incorporated on July 14, 1988 under the laws of the State
of Colorado under the name Protron Systems, Inc. From inception until March
1994, it engaged in several prior businesses under various names, all of which
have been either disposed of or discontinued.
In March, 1994, the Company acquired from American Fashion Jewels, Inc.,
d.b.a. Impostors, and its affiliates (collectively "AFJ"), substantially all of
the assets and properties utilized in connection with the operation of the
chain of 29 Impostors retail jewelry stores. In a parallel transaction, the
Company acquired certain additional leases utilized in connection with the
operation of the retail businesses. Impostors' assets consisted of cash,
accounts receivable, inventory, leasehold improvements, equipment, furniture,
fixtures, leases, licenses, contracts, trademarks and registrations thereof,
trade names, servicemarks and registrations thereof, and other miscellaneous
assets having a book value of approximately $3,700,000. In consideration of
the assets, the Company assumed and agreed to pay certain current and long-term
liabilities, including certain bankruptcy administrative claims, post-petition
liabilities, priority claims, notes payable and other accounts payable in the
aggregate amount of approximately $3,147,000, and issued to the unsecured
creditors of AFJ an aggregate of 137,500 shares of Common Stock.
AFJ opened its first reproduction jewelry store in San Francisco,
California in 1985. By 1988, Impostors had grown to ten corporate owned
stores, with nine additional stores operating as Impostors licensees.
Impostors began selling franchises in 1989, adding two additional corporate
stores and 36 franchise locations. By 1991, the chain had grown to 43
corporate stores and 69 franchises, for a total of 112 locations. In 1992, AFJ
began to experience problems in its relationships with franchisees. Many
franchisees were not paying for the merchandise purchased from Impostors, or
were purchasing merchandise from unauthorized sources. As a result, management
began to terminate its relationships with certain franchisees for failure to
comply with the terms of the franchise agreements. By the end of January, 1993,
12 franchisees had filed suits seeking in excess of $2,000,000 in damages. The
amount of resources and management time devoted to defending the lawsuits
interfered with operations and the Company's ability to raise new capital. On
May 28, 1993, AFJ and its affiliates filed four Chapter 11 cases in the United
States Bankruptcy Court for the Northern District of California, which cases
were later consolidated for joint administration. The Company's acquisition of
"Impostors" was confirmed by the Bankruptcy Court on March 3, 1994.
Concurrently with the Company's purchase of the 29 then operating Impostors
stores, the Company also acquired three additional reproduction jewelry stores
from Mirage Concepts, Inc. in exchange for 20,000 shares of its Common Stock.
Those stores were located in California and Arizona.
The Company currently operates 26 Impostors stores with plans to open 10
new stores in the next 12 months. See "Business -- Expansion Strategy."
The Company's principal offices are located at 3033 S. Parker Road, Suite
120, Aurora, Colorado 80014. Its telephone number at that address is (303)
338-1800.
OVERVIEW
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Operating under the name "Impostors," Premier Concepts, Inc. (the
"Company") specializes in the marketing and retailing of high-end reproduction
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jewelry ("faux jewelry") and 14 karat gold jewelry with cubic zirconia and
other synthetic stones. Through its national chain of 26 currently operating
retail stores, the Company sells jewelry that emulates classic fine jewelry as
well as pieces designed by famous jewelers such as Tiffany & Co.(-Registered
Mark-), Cartier(-Registered Mark-), Bulgari(-Registered Mark-) and Harry
Winston. The Company's product line also includes replicas of jewelry owned by
Princess Diana, The Duchess of Windsor, Elizabeth Taylor and other celebrities.
The Company's faux jewelry is created with layered gold, cubic zirconia and
Austrian crystal to simulate the look of fine jewelry. In June 1996, the
Company introduced a new collection of genuine sterling silver jewelry
featuring semi-precious and synthetic stones. The Company's products are
purchased from several domestic vendors and from vendors in China, England,
Hong Kong, Italy, Korea, Spain, Taiwan and Thailand.
The Impostors stores are designed to match the elegant look of the
Company's products and to provide customers with the feeling of shopping in an
upscale, fine jewelry environment. The Company's stores are located in
shopping malls and tourist locations. Currently, the Company's stores are
located in Southern California, Northern California, the states of Arizona,
Louisiana, Missouri and Washington and in the Washington, D.C. area. In
addition, the Company has entered into a lease to open a new store in the Park
Meadows shopping mall in the Denver metropolitan area, which is scheduled to
open September, 1996. The Company's largest and most visible store is located
in the prime retail area of San Francisco's Union Square.
BUSINESS STRATEGY
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In March 1994, the Company acquired out of bankruptcy substantially all of
the assets and assumed certain liabilities used in connection with the
operation of a nationwide chain of 29 faux jewelry stores which were then
operating under the trademark "Impostors." In the months following the
Company's entry into the faux jewelry industry, results of operations continued
to deteriorate principally due to the continuing burden of excessive operating
and overhead expenses, pre-petition and post-petition bankruptcy liabilities,
the unprofitability of certain stores, as well as the continuation of
ineffective marketing and merchandizing strategies. In June 1994, the Company
hired a new president, Sissel B. Greenberg, who immediately began implementing
a transition plan calculated to reverse the negative impacts of the Company's
predecessor's ineffective business strategy. In furtherance of the turnaround
effort, the Company has reduced overhead by moving its corporate offices from
San Francisco to Denver, closed four stores due to unprofitable operations,
reduced debt through negotiated settlements, opened two new stores and
implemented a new merchandizing strategy. These actions have reduced the
Company's operating loss from $886,667 for the 13-month period ended January
29, 1995 to a loss of $37,298 for the fiscal year ended January 28, 1996.
With its turnaround strategy in place, Premier believes that it has an
opportunity to become a leader in the specialty retailing segment of the market
for faux and reproduction jewelry and related accessory items through a
combination of internal growth and acquisitions. Its plans include adding new
stores and remodeling existing stores, development of new marketing channels
including multimedia and direct mail, and the marketing of its high-end jewelry
reproductions and store concept internationally through licensing and
distribution arrangements.
Principal Products
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Since inception, Impostors' merchandising strategy has evolved through
several phases. Initially, the concept was based on the marketing and
retailing of jewelry representing faux copies of expensive fine and designer
jewelry. However, in 1993, when AFJ filed for Chapter 11 protection, the<PAGE>
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"Rediscover Impostors" program presented a new business focus presenting the
merchandise in a theme oriented style and focusing on more trendy fashion
jewelry. Price points were significantly lowered for a day-in, day-out value.
A significant decline in revenues and margins resulted from this program. As
part of the turnaround plan, the merchandise has been refocused to designer and
fine jewelry inspired faux jewelry, with more emphasis on 14 karat gold and
most recently, genuine sterling silver.
The Company's products are comprised of approximately 60% fine jewelry
reproductions and emulations of merchandise inspired by classic designers such
as Cartier(-Registered Mark-), Tiffany & Co.(-Registered Mark-), Bulgari(-
Registered Mark-) and Harry Winston, and approximately 40% of 14 karat gold
featuring cubic zirconia and other synthetic stones. The jewelry ranges from
solitaire rings and faux pearl necklaces to earrings, pendants and bracelets.
Since the Company's products are set in layered 18 karat gold over jewelers
bronze or 18 karat gold over sterling silver, the jewelry can be offered at
substantially less cost than the original pieces. The use of cubic zirconia
and other laboratory grown stones offers a more affordable product by emulating
the look and feel of expensive gemstone jewelry. The Company recently
introduced a collection of genuine sterling silver with semi-precious and
synthetic stones.
The Company offers approximately 3,000 different jewelry items, with none
representing more than 10% of the Company's total annual sales. As a group, 14
carat gold items constitute the largest classification, representing 40% of
total inventory. Throughout the year, individual stores offer between 1,000
and 2,000 different pieces, with certain specialty items being added from time
to time for seasonal or other marketing purposes.
Approximately 20% of the Company's products represent exclusive items that
are manufactured under special order for the Company. The remaining 80% are
selected by the Company from existing inventory offered by vendors. Because
the Company's products are high-quality emulations of classic fine jewelry
designs that change little from year to year, the Company has not experienced
problems associated with inventory obsolescence.
Remodeling and Expansion Strategy
---------------------------------
The Company has developed a new interior design to match the elegant look
of its products and to provide its customers with the feeling of shopping in a
high-end, fine jewelry environment. During 1995, the Company completed one
interior remodel of an existing store in San Francisco, California. During
1996, the Company has completed two remodelings, one in St. Louis, Missouri and
one in Tucson, Arizona and has three additional remodelings in process, all
scheduled for completion in August 1996. In addition, the Company's new store
in Park Meadows shopping mall in the Denver metropolitan area will incorporate
its new interior design.
The Company plans to remodel eight additional stores over the next two
years, at an average estimated cost of $25,000 per store. Additional
remodeling activity will depend upon the availability of working capital from
future operations, of which there can be no assurance. The Company also plans
to open ten new Impostors stores in existing and new markets over the next 12
months. The Company has entered into a lease to open a new store in the Park
Meadows shopping mall in the Denver metropolitan area. The store is scheduled
to open in September 1996. Other potential real estate sites in Florida,
Massachusetts, Nevada, New Jersey and New York are currently being evaluated,
although to date no decisions regarding additional new locations have been
made.
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In selecting and evaluating new sites, the Company has developed criteria
which consider local population demographics, customer base, sales per square
foot of other retailers in the area, and most significantly, location. The
Company focuses on centers and malls with a heavy tourist trade. Absent a high
tourist component, a regional mall would be considered only if the location
offered is in a high traffic area with a mix of other fashion tenants. The
Company also plans to pursue opportunities in casinos and high-profile hotels.
The Company develops financial projections for any new proposed site and will
reject any location where it believes break-even operations cannot be achieved
within a three- to six-month period. The opening of a new retail location
represents an aggregate capital requirement of approximately $100,000 to
$200,000, depending on location and size, which includes initial leasehold
expenses and improvements, purchases of furniture, fixtures and equipment and
initial inventory costs.
Since the Company's inventory, accounting and information systems are
highly automated, it believes that it has the present capacity to handle the
accounting, informational and inventory tracking needs for up to 100 stores.
Current management could manage an additional 10 stores with minimum increases
in overhead costs, with further additions requiring increased management and
other staffing.
In addition to developing its own new store locations, the Company is
continually investigating the possibility of acquiring companies in similar
lines of business, including faux jewelry, fine jewelry and accessories.
Potential candidates include small retail chains, companies currently engaged
in multimedia faux jewelry sales, as well as former Impostors franchisees.
While the Company continually investigates such acquisition opportunities,
there are no substantive negotiations, arrangements, agreement or
understandings with respect to any potential acquisition.
Other Marketing and Distribution Channels
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Currently, over 98% of the Company's revenues are derived from its retail
store sales. The Company also has limited sales nationally and internationally
through distributors and wholesalers. The Company frequently receives
inquiries from overseas businesses regarding the development of wholesale and
retail distribution of its concept and products in Europe as well as the
Orient. Prior to this offering, the Company has had no resources to focus on
this international demand and products have been sold in limited amounts to
accounts in Australia, Chile, Italy and Taiwan. The Company plans to increase
its international business by hiring additional persons and/or agents to
represent its line of products internationally, and may use a portion of the
offering proceeds for investments in inventory to service any increase in its
international business, although no proceeds of this offering have been
specifically allocated for this purpose. The ability of the Company to fully
develop the potential offered by the international marketplace depends upon the
availability of additional working capital from future operations, of which
there can be no assurance.
The Company plans to develop a catalogue which initially will be
distributed through its retail stores located in tourist areas. Depending on
the results of the in-store distribution, the Company may decide to broaden the
catalogue distribution through direct mailings to new potential customers. The
Company has also explored possible multimedia distribution of its jewelry. It
is in the process of developing an internet Home Page, which it expects to have
completed in August 1996. Additionally, the Company has initiated discussions
to market its concept and products to the home shopping networks, and intends,
through an independent producer, to develop a "Concept Program" around its
theme of designer inspired and faux jewelry. Part of this process includes the
licensing of a spokesperson, who may be a celebrity, to add credibility and
entertainment. <PAGE>
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MARKET AND CUSTOMERS
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The Impostors' niche bridges the markets between costume and fine jewelry
by offering high-quality reproductions of classic and designer fine jewelry and
also a collection of 14 karat gold and sterling silver with cubic zirconia,
semi-precious and synthetic stones. The Company's faux jewelry distinguishes
itself from traditional fashion jewelry by the quality of the metals, stones
and craftsmanship utilized in the design and manufacturing process. While
costume jewelry is typically price-pointed in the $5 to $30 range, the majority
of the Company's faux jewelry is priced in the $30 to $100 range. The 14 karat
gold collection has pricepoints between $45 to $1,000 range, with the majority
in the $100 to $400.
The market for the Company's products is to a large extent defined by a
knowledgeable customer's desire to have the look, feel and design of classic
fine jewelry and expensive diamond and gemstone jewelry, without the cost. The
Company targets women between the ages of 30 and 60 who are either purchasing
jewelry reproductions in place of or to complement expensive fine jewelry, or
professional women who want the look of fine jewelry but are unwilling or
unable to pay the fine jewelry price tag. The Company expects this market to
continue to grow in accordance with the expected increases in the number of
women entering the professional workplace. The Company also expects to benefit
from the maturation of the baby boomer generation who, according to the United
States Census Bureau, will have reached the age of 45 by the year 2000. It has
been the Company's experience that the vast majority of its retail customers
are women purchasing for themselves rather than men purchasing for others.
SUPPLIERS AND VENDORS
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The Company purchases its products from vendors who have an established
history of manufacturing high quality jewelry products. These vendors offer a
standard product line through catalogues and trade shows, and also will
manufacture certain products specially for the Company, for which the Company
will typically be given a 12 to 18 month exclusivity for that item by the
vendor. The Company's relationship with its vendors of high-quality product is
considered a component in its strategic advantage over other competitors. The
Company works closely with its vendors to constantly upgrade the quality of its
products.
The Company's products are currently being purchased 60% from domestic
vendors and 40% from vendors in England, Hong Kong, Italy, Korea, Spain, Taiwan
and Thailand. Approximately 20% of the inventory is manufactured under a
special order arrangement, with the other 80% purchased from vendors' existing
inventory and designs. Orders from foreign vendors take 6 to 8 weeks to fill,
with U.S. vendors delivering in approximately 3 to 4 weeks. All vendors offer
the Company terms of payment of between 30 and 90 days. The Company
continually investigates new sources of merchandise in order to maximize profit
margins and expects to concentrate future purchases to a larger degree from
vendors in the Pacific Rim. The Company considers the identity of its sources
of supply to be proprietary to the extent that a product's quality, source and
price bear directly upon the Company's competitive advantage. The Company does
not rely on any single source of supply and could readily obtain product from
new suppliers should any given source become unavailable. The Company has not
experienced any difficulty in obtaining merchandise and does not anticipate any
future problems or restriction of availability.
COMPETITION
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Because the Company's products address a market niche for the look and
feel of fine jewelry without the cost, it experiences both indirect and direct
competition from others. Indirect competition comes from costume and fashion
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jewelry at the low end and fine jewelry on the upper end, with the Company's
faux jewelry and 14 karat gold with synthetic stones bridging the gap. The
Company believes its products are superior both in design and quality to
jewelry offered by traditional fashion jewelry retailers. Conversely, the
Company's advantage over expensive fine gemstone and diamond jewelry is one of
cost without a commensurate sacrifice in appearance or durability.
Within its market, the Company competes directly with vendors and other
retailers of faux jewelry. Department stores typically offer lower-end costume
and fashion jewelry, or on occasion will offer higher-end faux jewelry designed
by their own exclusive designers. While some department stores will have a
limited offering of faux jewelry, the Company's exclusive emphasis on this
specialty market niche is designed to attract the customer who has already
decided to purchase faux jewelry rather than either costume jewelry or the high
cost genuine piece of fine jewelry. However, the Company is not alone in this
marketing approach, as there exist a few other chains of retailers offering
faux jewelry in a directly competitive manner. The Company is aware of only
one other business, N. Landau Hyman, that has a comparable number of specialty
retail stores that focus on the sale of faux jewelry. Other specialty
retailers who focus on the sale of faux jewelry include Elegant Illusions which
has approximately 10 stores in California and Minnesota, Mystique which has 4
stores in Florida, and Diamond Essence which has 3 retail stores in New York
and Chicago and a direct marketing catalogue concentrating exclusively on 14
karat gold jewelry with faux gemstones. The Company's advantage, if any, over
these other retailers lies in its relationships with its vendors, some of which
it considers to be highly proprietary, economies of scale offered by the
Company's ability to purchase large quantities of inventory from vendors who
have certain minimum quantity requirements, and in its store locations.
Nevertheless, in order for the Company to continue to be competitive, it must
maintain and expand its desirable store locations and continue to develop its
strong vendor relations, neither of which can be assured.
INTELLECTUAL PROPERTY
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Copyrights, trademarks and trade secrets are the principal protection for
the Company's products, services and reputation. The Company owns federally
registered trademarks for the following names: Impostors(-Registered Mark-),
Impostors De Classique Copy Jewels(-Registered Mark-), Impostors Copy Jewels(-
Registered Mark-), Elegant Pretenders(-Registered Mark-), and The Latest In
Faux(-Registered Mark-). All of the trademarks are considered by the Company
to be valuable property rights. The protection afforded by these intellectual
property rights and the law of trade secrets is believed by the Company to be
adequate protection for its products and or services.
As a reseller of emulations and copies of fine designer jewelry, the
Company must avoid infringing any copyrights or trademarks claimed by the
original designer. A copyright protects the manner of expression of a piece of
a jewelry rather than the idea or concept behind making it. As the Company's
products do not purport to be exact copies, but rather emulations inspired by
other designs, the Company believes that the sale of faux jewelry does not per
se violate the copyright interest of others. Nevertheless, if a particular
jewelry design is subject to copyright protection, that copyright expires after
75 years, if owned by a corporation, or after 50 years after the creator's
death, if an individual. Prior to 1988, in order for a designer to claim
copyright protection to a piece of jewelry, a copyright notice would have to
have been affixed to the original piece. Thus, any jewelry sold in the United
States before 1988 without a copyright notice is considered to be in the public
domain. However, fine jewelry designed and sold in the United States after
1988 could be subject to copyright protection without the necessity of a
copyright notice on the original piece. As a result, the Company has no<PAGE>
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effective way of determining if a particular piece of fine jewelry is subject
to copyright protection claimed by its original designer. It is, therefore,
important for the Company to ensure that its products do not purport to be
exact copies of an original, but only inspired by the original designs.
Although infrequent, it is possible for a designer to claim trademark
protection if it can establish that the customer realizes that a particular
piece of jewelry comes from a particular manufacturer. In order to be claimed,
however, a registered trademark indication must usually be placed on the
original piece. The Company takes meticulous precaution to avoid advertising
and marketing strategies that might lead to confusion in the minds of its
customers as to the source or origins of its emulation jewelry.
The Company has developed and adopted methodologies designed to prevent
its infringement of the intellectual property rights of third parties; however,
there can be no assurance that it will not be subject to claims for inadvertent
infringement from time to time. While there have been only four instances of
claimed infringement in the past, when the Company has received notice of
inadvertent infringement, it has been its policy to voluntarily cease and
desist selling the particular product. As an average store has more than 1,000
different items of jewelry on display and offered for sale, the Company has not
experienced, and does not expect to experience, any material adverse effects on
its revenues in these instances.
LICENSE ARRANGEMENTS
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The Company has granted a total of three licenses to former Impostors
franchisees granting to them the right to use the Impostors trademark in a
total of five retail locations for a period of one year. Each license requires
the payment of $5,000 per store per year, and is renewable annually at the
discretion of the Company. It is not expected that these license arrangements
will represent a material portion of the Company's future activity.
EMPLOYEES AND CONSULTANT
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The Company currently has 70 full-time and 90 part-time employees, of
which 14 are employed in the Company's corporate offices. Each retail store is
staffed by a manager and assistant manager, as well as one or more sales
personnel. The Company also has four area managers and one regional manager
(for the East Coast). Store managers are hired and supervised by area
managers. All management and staff personnel are employed directly by the
Company.
The Company believes that it currently has sufficient management to add 10
additional stores over the next 12 months. Further store expansions will
require additions to management and staff on a case-by-case basis. The success
of future expansion will depend to a large extent on the Company's ability to
attract, motivate and retain highly-qualified personnel.
As President and Chief Executive Officer Ms. Greenberg serves under a
written employment agreement expiring on June 20, 1997. She receives a base
salary of $7,500 per month and is eligible to participate in the Company's
Incentive Stock Option Plan ("ISOP"). Ms. Greenberg was granted incentive
stock options pursuant to the ISOP exercisable to purchase, in the aggregate,
200,000 shares of Common Stock of the Company at an exercise price of $.375 per
share, all of which are fully vested, and incentive stock options exercisable
to purchase an additional 100,000 shares of common stock at a price of $.50 per
share, of which 50,000 are vested and 50,000 will vest ratably over two (2)
years ending March, 1998.
In January 1996, the Company hired Todd Huss as its Chief Financial
Officer. Mr. Huss brings with him nearly 10 years of experience as a licensed
certified public accountant, primarily with KPMG Peat Marwick.<PAGE>
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Effective February 1996, the Company retained Jack Brandon, the former
Vice-President of a 200 store portrait studio retail chain. It is expected
that Mr. Brandon will devote approximately 30 to 40 hours per month on behalf
of the Company. Mr. Brandon also provides construction oversight services for
new Impostor locations and remodels. Fees for these services are paid on a
job-by-job basis.
SEASONALITY
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The Company's business is highly seasonal with its mall locations
generating 20% of revenues during the Christmas holiday season. The Company's
12 tourist locations experience fluctuations, based upon such factors as
seasonality, economic conditions and other factors effecting tourism in their
particular locations.
PROPERTIES
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The Company currently maintains executive offices at 3033 S. Parker Road,
Suite 120, Aurora, Colorado 80014. The offices consist of approximately 5,000
square feet which the Company holds under a 5-year lease expiring in the year
2001, for a rental of $5,150 per month. The lease is guaranteed by four of the
Company's directors. The opening of the Company's executive offices
represented the culmination of a strategic plan to close its executive offices
in San Francisco, California to reduce operating expenses. The Company expects
the move to represent substantial savings over the next several years.
The Company's 26 retail locations are each operated under commercial
leases with expiration dates ranging from 1996 to 2002. Store size varies from
310 to 1,200 square feet with annual sales ranging from $200,000 to $1,500,000.
Each lease requires the payment of a minimum base rent and additional payments
for operating expenses, taxes, insurance, in some cases, and additional rent
based upon a percent of gross sales. The Company monitors on a daily basis
sales, margin and inventory turn-over for each store location. This
information is used not only to develop criteria for additional store
expansions but also to determine acceptable parameters for lease renewals as
they arise. In the ordinary course of business, the Company is continually
engaged in discussions with its various commercial landlords over issues that
arise from time to time under the leases. The lease for the Company's store in
the Stoneridge Mall in San Francisco is currently terminated but the subject of
renegotiations which the Company expects to be completed in the second fiscal
quarter. All of the remaining Company's existing commercial retail leases are
in full force and effect as of the date of this Prospectus.
CHANGES IN INDEPENDENT PUBLIC ACCOUNTANTS
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On February 16, 1995 the Company's Board of Directors approved a change in
the Company's independent accountant. The change was effective February 16,
1995.
The independent accountant who was previously engaged and dismissed by the
Company as the principal accountant to audit the Company's financial statements
was Schumacher & Bruce. None of Schumacher & Bruce's reports over the past two
years and the financial statements of the Company contained any adverse opinion
or disclaimer of opinion, or was qualified or was modified as to uncertainty,
audit scope or accounting principles except the following: The report of
Schumacher & Bruce dated June 9, 1994 accompanying the audited balance sheet of
the Company as of December 31, 1993 and the related statements of operations,
changes in stockholders' (deficit), and cash flows for the years ended December
31, 1993 and 1992 was qualified assuming that the Company would continue as a
going concern. There have not been any disagreements between the Company and
Schumacher & Bruce on any matter of accounting principle or practice, financial
statement disclosure, or auditing scope or procedure during the past two years
and through the date of the change in certifying accountants.<PAGE>
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The Company retained the accounting firm of Hein + Associates LLP to serve
as the Company's independent accountant to audit the Company's financial
statements. This engagement was effective February 16, 1995. Prior to its
engagement as the Company's independent accountant, Hein + Associates, LLP had
not been consulted by the Company either with respect to the application of
accounting principles to a specific transaction or the type of audit opinion
that might be rendered on the Company's financial statements.
LEGAL PROCEEDINGS
The Company is currently involved in the following legal proceedings:
i. 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 in 1994 has 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. This matter is pending.
ii. CINER MANUFACTURING COMPANY, INC. V. PREMIER CONCEPTS, INC. Civil
Action No. C 95-3264, United States District Court for the Northern
District of California.
This matter has been brought by the plaintiff in November, 1995
alleging copyright infringement and unfair competition by the Company's
unauthorized advertising, manufacturing and sale of jewelry using plaintiff's
copyrighted designs. The Company has denied the allegations in the Complaint,
and the matter has been scheduled for binding arbitration pursuant to a
stipulation in which it is agreed that the minimum award will be $2,000 and the
maximum award will be $10,000. Subsequently the arbitration has been completed
with the Company ordered to pay $3,500. The matter is fully resolved as of the
date of this amended Report.
In 1995, the Company filed a Complaint in the Puerto Rico District
Court for San Juan against R & L Imports Corporation for amounts due on
inventory delivered by the Company, and on amounts due on the Customer
Agreement and Settlement Agreement executed by the defendant and American
Fashion Jewels, Inc. on January 20, 1994. Since the filing of this Complaint,
the defendant has continued to use the Company's "Impostors" trademark after
expiration of the License Agreement authorizing such use. The Complaint shall
be modified to add this claim. 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 Cancio, Nadal, Rivera
& Diaz.
iv. SEC INVESTIGATION.
During 1995, 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; however, as of May 1, 1996,
neither management of the Company nor the Company's legal counsel have been
informed of the results, if any, of the SEC's investigation or of any timetable
for the SEC to complete its investigation. <PAGE>
<PAGE>
MATTERS SUBMITTED TO VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of its shareholders
during the fourth quarter of its fiscal year ended January 28, 1996.
<PAGE>
<PAGE>
PART II
MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
PRICE RANGE OF COMMON STOCK.
- ---------------------------
The outstanding shares of Common Stock are traded over-the-counter and
quoted on the OTC Electronic Bulletin Board. The reported high and low bid and
asked prices for the Common Stock are shown below for the period through March
31, 1996: (1)
<TABLE>
<CAPTION>
Bid Ask
--- ---
High Low High Low
<S> <C> <C> <C> <C>
1994
- ----
First Quarter 1.25 1.25 2.00 2.00
Second Quarter 1.50 1.50 2.00 2.00
Third Quarter 1.50 1.50 2.00 2.00
Fourth Quarter 1.00 1.00 2.00 2.00
1995
- ----
First Quarter -0- -0- -0- -0-
Second Quarter 1.00 1.00 2.00 2.00
Third Quarter 1.00 0.25 2.00 0.75
Fourth Quarter 0.75 0.375 1.625 1.25
1996
- ----
First Quarter 0.50 0.375 1.625 0.625
The bid price of the Company's Common Stock as of March 31, 1996 was
$0.625. The prices presented are bid and asked prices which represent prices
between broker-dealers and do not include retail mark-ups and mark-downs or any
commission to the broker-dealer. The prices do not reflect prices in actual
transactions.
As of May 1, 1996, there were approximately 166 holders of record of the
Company's Common Stock.
DIVIDENDS
- ---------
No cash dividend was paid for the fiscal years ended December 31, 1994,
January 29, 1995 or January 28, 1996. The Company does not intend to declare
or pay any dividends on its outstanding shares of Common Stock in the future.
Future dividend policy is subject to the discretion of the Board of Directors,
and is dependent upon a number of factors including future earnings, capital
requirements and the financial condition of the Company. Although no shares of
Preferred Stock have been issued, in the event such shares are issued, the
rights of Common Stock shareholders to dividends shall be subject to the rights
and preferences of Preferred Stock shareholders.
- -----------------------------
(1) Current bid and asked prices are being quoted by the Company's market
maker, Hanifen Imhoff. These prices may not regularly appear on the OTC
Bulletin Board.<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
In 1995, the Company changed its fiscal year from a calendar year ended
December 31 to a retail year which ends on the last Sunday in January. It
should also be noted that the fiscal year that ended December 31, 1994 included
only ten months of operations of the Impostors retail chain, as the date of the
Impostors acquisition was February 24, 1994.
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this report.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Due to seasonality of the Company's business, 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 in the year. Further, since the Company changed
its fiscal year in 1995 from a calendar to a retail year-end as discussed
above, balance sheet comparisons are for the period at December 31, 1994 and
January 28, 1996. As such, the Company's cash position decreased $272,004,
from $599,202 at December 31, 1995 to $327,198 at January 28, 1996, primarily
due to a significant reduction of accounts payable during the month of January.
At January 28, 1996, marketable securities consisted of the Company's
holdings in Global Casinos, Inc. During 1995, the Company sold 185,500 of its
shares in Global Casinos, Inc. which proceeds were utilized for reduction of
short-term debt. Also, at January 28, 1996, the Company's holdings of Global
Casinos, Inc. shares reflect a decrease in value of approximately $93,900, from
$139,067 at December 31, 1994 to $45,113 at January 28, 1996.
Property and equipment decreased $287,602, from $1,265,329 at December 31,
1994 to $977,727 at January 28, 1996, resulting mainly from normal
depreciation, but also from the closing of five stores during the year. In the
third quarter of 1995, the Company opened its two new stores in Bellevue,
Washington and Tucson, Arizona which added approximately $125,000 to fixed
assets at January 28, 1996. At December 31, 1994, the Company recorded
$187,000 in trademark assets, representing the goodwill of the Impostors
trademark and other intellectual property acquired in the Impostors
transaction. This asset, whose amortized book value was $164,900 at January
28, 1996, is being amortized over a 10-year period.
As of January 28, 1996, the Company had outstanding liabilities of
$1,994,590 compared to $3,556,504 for the fiscal year ended December 31, 1994,
a decrease of $1,561,914, or 44%. Current liabilities decreased $1,284,526, or
52%, from $2,436,093 at December 31, 1994 to $1,178,567 at January 28, 1996.
Working capital therefore improved $696,462, from $(13,290) at December 31,
1994 to $683,172 at January 28, 1996.
The amount borrowed from related parties equaled $98,879 at January 28,
1996 compared to $204,527 at December 31, 1994, representing a reduction of
$105,648. Current notes payable of approximately $378,902 include post
petition liabilities of $285,315 that the Company assumed in connection with
the Impostors transaction in 1994. These notes, which totaled $522,102 at
December 31, 1994, were reduced during fiscal 1996 by $236,787.
The Company's long-term debt, net of current portion, at January 28, 1996
was $759,864 compared to $890,902 at December 31, 1994. Long-term debt
consists mainly of a $635,000, 10% promissory note collateralized by the
Company's inventory, which is due February 22, 1998. The remainder of long-
term debt represents notes to creditors holding the post-petition liabilities
assumed in the Impostors acquisition.<PAGE>
<PAGE>
Accounts payable decreased during fiscal 1996 by $612,494, or 67.7%, from
$904,399 at December 31, 1994 to $291,905 at January 28, 1996. Approximately
$200,000 of the total accounts payable at year-end relates to the operation of
the Impostors stores, while the remaining $90,000 is attributable to the
Company's operations prior to the Impostors acquisition. During 1995,
management was able to negotiate settlements with several of the Company's
creditors that related to the Company's casino operations in 1991 and 1992.
During fiscal 1996, the Company therefore recorded a gain from the
restructuring of certain of these liabilities of $145,331, net of income tax
benefit of $64,000. During 1995, the Company also extinguished $282,110 of
accounts payable that also related to the Company's previous gaming operations.
Approximately $60,000 of the reduction in accounts payable in fiscal 1996
represented amounts previously accrued from a 1994 consulting agreement which
was never executed. Approximately $80,000 in additional liabilities were
assumed by a third party due to its financial interest in the casino property
collateralizing this debt.
Management expects that settlement negotiations will continue in its
current fiscal year to attempt to settle the $90,000 accounts payable remaining
from the Company's previous gaming operations. However, there can be no
assurances that further settlement with these creditors can be obtained in the
future.
At December 31, 1994, the Company had reserved $143,000 for future store
closings. During 1995 this reserve was fully utilized to offset the closing of
five of the Company's retail stores. On March 1, 1995, the Company closed its
stores in Twelve Oaks, Michigan, and on April 1, 1995, its store in Montclair
Plaza, California was closed. Both of these stores were closed upon the
expiration of their respective leases due to unprofitable operations. On
August 31, 1995, the Company closed its store in the Embarcadero Center in San
Francisco, California due to its continued lackluster performance. On
October 12, 1995, the Company vacated its retail space at the Stonestown
Galleria, California whereby management negotiated a termination of its lease
in exchange for continuing to pay its monthly minimum rents for three months
following the closing of the store. On October 15, 1995, the Company's
location on Rodeo Drive, California in Beverly Hills was closed due to the
landlord's termination of this store's month-to-month lease.
At December 31, 1994 the Company had accrued a guarantee liability of
$109,000. In October, 1995, the claim underlying the guarantee was settled
through the issuance of 233,958 of the Company's common shares. The Company
was able to settle additional claims during 1995 with the issuance of 35,000 of
the Company's common shares. These transactions are included in the Company's
Statement of Changes in Stockholders' Equity as "settlement of claims" during
the fiscal year ending January 29, 1995.
Other accrued liabilities of $408,881 at January 28, 1996 represent
expenses accrued in the ordinary course of business in connection with the
operation of the Company's retail chain. Approximately $155,000 of this amount
consisted of accrued salaries, $116,000 accrued sales taxes payable and $70,000
represented accrued medical insurance.
As discussed above, in 1995 the Company changed its fiscal year from a
calendar to a retail year-end. Due to a net loss of $214,784 in the month of
January 1995, the Company's equity decreased from $630,569 at December 31, 1994
to $415,785 at January 29, 1995. During fiscal 1996, shareholders' equity was
improved through the completion of a private placement of common shares which
resulted in approximately $282,000 in additional equity capital. Also during
1995, approximately $185,000 of claims and $45,000 of services were converted
to equity. Net income for the year of approximately $174,000 further added to
the Company's equity which increased $686,419 during fiscal 1996, from $415,785
at January 29, 1995 to $1,102,204 at January 28, 1996.<PAGE>
<PAGE>
Net cash provided by operating activities for the period ended January 28,
1996 was $128,516 compared to cash used in operating activities of $58,944 for
the year ended December 31, 1994. Offset against cash provided by financing
activities of $382,500, consisting of $282,500 from issuance of common stock
and $100,000 from proceeds of issuance of notes payable, were principal
payments on notes of $346,219, resulting in net cash provided by financing
activities of $36,281. Net cash used in investing activities was $8,763,
consisting of $165,137 in capital expenditures for property and equipment and
proceeds from the sale of investments of $156,374. The foregoing resulted in
an improvement in the Company's cash position of $156,034, from $171,164 at
January 29,1995 to $327,198 at January 28, 1996.
In January, 1996, the Company completed a private offering of common
stock, realizing net proceeds of $282,500 from the sale of 1,170,000 shares.
The proceeds of the offering were utilized to pay the costs of one store
opening and two remodelings.
The Company continues to require working capital to finance its operating
losses during slow sales periods. During 1995, the Company covered part of its
working capital needs from borrowing $100,000 from an unrelated party. This
note is payable in monthly installments of $10,000 plus accrued interest of
12%. The Company used its position in Global Casinos, Inc. common stock to
reduce its debt collateralized by these shares as well as for working capital.
The Company intends to liquidate its remaining shares in Global Casinos, Inc.
to help meet its working capital requirements in fiscal 1997. However, there
can be no assurance favorable market conditions will exist, such that the
Company's shares in Global Casinos, Inc. can be liquidated on terms favorable
to the Company. In addition, management is continuing to seek additional
working capital financing through conventional financing. However, as of the
date of this filing, no permanent financing has been obtained. The Company
therefore continues to rely on its short-term funding sources to meet its
working capital needs, and its financial position could be materially adversely
affected if these funding sources are unable or unwilling to continue to
provide the Company with operating capital.
At January 29, 1996, the Company had a net operating loss carryforward for
federal tax purposes of $680,000 that will be utilized to offset future
operating profits.
Subsequent to year-end, the Company signed a Letter of Intent covering a
proposed secondary public offering. As currently proposed, the offering would
consist of a number of shares of common stock and warrants, which will be
offered to the public at a price to be agreed upon that will result in gross
proceeds of approximately $3,500,000. The Letter of Intent in non-binding and
subject to change and numerous conditions precedent. As a result, there can be
no assurance that the secondary offering will be completed in accordance with
the terms currently contemplated.
Subsequent to year-end, 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. The proceeds of the bridge offering were utilized to
complete three store remodeling projects and to pay for the expenses associated
with opening the new Park Meadows store.
As indicated by the foregoing, the Company continually investigates and
evaluates means to raise additional capital to improve and expand its
operations. However, there can be no assurance that the Company's efforts in
this regard will be successful.<PAGE>
<PAGE>
RESULTS OF OPERATIONS - FISCAL 1996 COMPARED TO FISCAL 1995
- -----------------------------------------------------------
One Month Ended January 29, 1995.
--------------------------------
As discussed below, the Company changed its fiscal year from a calendar
year-end to a retail year-end in 1995. As such, a one-month operating period
ended January 29, 1995 was reported in the Company's financial statements.
Total revenues for the period were $543,377. Cost of goods sold was
$228,076 resulting in a gross margin of $315,301, or 58%. The margin
percentage reflects management's effort to reduce inventories and preparation
for the close of two stores in March, 1995.
Operating expenses of $518,327 which included personnel expenses of
$231,802 and occupancy expenses of $174,592, resulted in an operating loss of
$203,026 for the one-month period. Also included in operating expenses was
depreciation of $29,663 and general administrative expenses of $82,270. This
interest expense was $11,899.
As a result of the foregoing, the Company reported a net loss for this
one-month period ended January 29, 1995 of $214,784, or $(.10) per share on
2,171,000 weighted average shares outstanding.
Net cash used in operating activities of $410,030 was the result of a
significant reduction in accounts payable of $435,030, which was partially
offset by cash provided by a $201,735 reduction in merchandise inventories.
Payments on notes payable were $18,008. As a result of the foregoing, the
Company's cash position decreased to $428,038, from $599,202 at January 1, 1996
to $171,164 at January 29, 1995.
Reporting periods and comparability.
-----------------------------------
In 1995 the Company changed its fiscal year from a calendar year to a
retail year that ends on the last Sunday in January. As such, the Company's
financial statements were reported for the year ending December 31, 1994
("Fiscal 1994"), a one month period ending January 29, 1995, and the year
ending January 28, 1996 ("Fiscal 1996"). The Impostors acquisition was
completed on February 24, 1994, and accordingly results of operations for the
period ended December 31, 1994 reflect only ten (10) months of Impostors
operations. Prior to the Impostors acquisition, which includes the period from
January 1, 1994 through February 23, 1994 (approximately two months), the
Company had no significant operating activity. Therefore, for purposes of
comparison, the one-month period from January 1, 1995 through January 29, 1995
has been combined with Fiscal 1994 and therefore represents thirteen (13)
months of combined operations but only eleven (11) months of operations of
Impostors. This combined period is referred to in the following discussion as
"the period ended January 29, 1995."
The financial data used analyzing the Company's results of operations for
the periods ended January 28, 1996 (Fiscal 1996) and January 29, 1995 (Fiscal
1995) are as follows:
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended Period Ended
January 28, 1996 January 29, 1995
----------------- ----------------
<S> <C> <C>
Sales 9,069,840 8,335,790
Cost of Goods Sold 2,690,658 2,797,607
Gross Margin 6,379,182 5,538,183
Operating Expenses 6,416,480 6,424,850
Operating Loss (37,298) (886,667)
Other Income (Expenses) 2,186 (344,296)
Income (Loss) Before Extraordinary
Item 28,888 (1,179,963)
Net Income (Loss) 174,219 (1,038,726)
Net Income (Loss) Per Share 0.07 (.57)
The Company's revenues increased from $8,335,790 for the period ended
January 29, 1995 to $9,069,840 for the year ended January 28, 1996. During
1995, the Company's same-store sales increased by 10%, or approximately
$738,000. (The 1995 same-store sales includes only stores open for the entire
period to which it is being compared. For the purpose of comparable same-store
sales only, the period ended January 29, 1995 includes 12 months of sales.
However, the financial statement data for the same period includes only 11
months of Impostors operations, as this store was acquired in late February,
1994.) On a percentage basis, sales improved most significantly in the
beginning of the year, mainly due to higher inventory levels compared to the
same period in 1994, when the Company had just emerged from its bankruptcy
proceedings. The Company's sales also improved due to a refocus in the
Company's merchandising strategy, from less fashion-oriented merchandise to
more fine jewelry looks.
During Fiscal 1996, the Company closed four stores due to unprofitable
operations. One location was also closed due to the landlord's termination of
a month-to-month lease. In October 1995, the Company opened a new location in
the Tucson Mall in Tucson, Arizona, and in November 1995, the Company opened a
new store in Bellevue Square, Bellevue, Washington. During the period ended
January 28, 1996, the sales per store ranged from approximately $197,000 to
approximately $1,460,000 for the highest sales volume store. A majority of the
retail stores generate between $250,000 and $450,000 in annual sales. The
Company believes that existing stores have potential for further improvements
in sales and contribution through the continuation of a focused merchandise mix
as well as from a higher inventory turn rate. In addition, remodeling and
updating the overall look of the stores should further enhance these stores'
performance. In 1995, the Company remodeled its store at the Stoneridge Mall
in Northern California to reflect a more contemporary look and color scheme.
In March 1996, the Company's store in the St. Louis Galleria in St. Louis,
Missouri was remodeled and relocated to an improved location in the mall. The
Company's remodeling efforts will continue to the extent that funds are
available and the expected sales increases justifies the capital investment.
Approximately $111,000 of the Company's sales in Fiscal 1996 represented
sales to wholesale clients, while the comparable amount for the period ended
January 29, 1995 was $154,954. The Company's wholesale business was primarily<PAGE>
<PAGE>
to former franchisees that signed licensee agreements with the Company allowing
the licensees a continued use of the Impostors mark. In March, 1996 these
licensee agreements expired, and management is considering renewal of these
agreements on a case-by-case basis. As of the date of this report, three of
these agreements, representing five stores, have been renewed for an annual
licensee fee of $5,000 per store.
For the period ended January 28, 1996, cost of goods sold was 29.7%
compared to 33.6% for the period ended January 29, 1995. Gross margin
therefore improved by approximately 4% from 66.4%, or $5,538,183 for the period
ended January 29, 1995 to 70.3% or $6,379,182 for the period ended January 28,
1996. Approximately 3% of the gross margin increase resulted from the
relatively higher discounts obtained on merchandise where the Company bought
larger quantities. The Company's gross margin also improved from an increase
in the amount of products purchased from the Orient which normally offers a
lower merchandise cost than if the same products were bought from domestic
vendors. In addition, less promotional activity without erosion in sales in
Fiscal 1996 compared to the period ended January 29, 1995 generated overall
improved gross margins in most product categories. Gross margin incorporates
the costs of shrinkage and freight, which for Fiscal 1996 were approximately
$52,000 and $51,000 respectively. These expenses were approximately $146,000
and $49,000 respectively in Fiscal 1995. 1% of the total 4% gross margin
improvement therefore resulted from an approximate $94,000 reduction in
shrinkage in Fiscal 1996 as compared to Fiscal 1995.
Selling, general and administrative expenses were essentially unchanged at
$6,416,480 for the period ended January 28, 1996 compared to $6,424,850 for the
period ended January 29, 1995. The majority of these expenses were comprised
of salaries and wages which amounted to $2,473,000 compared to approximately
$2,500,000 for the period ended January 29, 1995. Occupancy costs were
$1,974,000 compared to $1,740,000 for the period ended January 29, 1995.
Depreciation and amortization was $337,070 for the period ended January 28,
1996, compared to $312,146 for the period ended January 29, 1995. Provision
for store closures was $143,000 at January 29, 1995. The Company did not
reserve any amounts for store closures at January 28, 1996 as none of the
Company's current retail locations are expected to be closed during fiscal
1997.
As part of management's efforts to reduce the Company's overhead expenses,
in January 1996, the Company relocated its corporate headquarters from San
Francisco, California to Denver, Colorado.
As a result of the foregoing, the Company improved its result from
operations by $849,369, or 96%, from a loss of $886,667 for the period ended
January 29, 1995, to an operating loss of $37,298 for the period ended January
28, 1996. Due to a reduction in notes and loans outstanding, interest expense
decreased by $49,296, or approximately 31%, from $157,476 for the period ended
January 29, 1995 to $108,180 for the period ended January 28, 1996. The net
loss on marketable securities, which primarily related to the Company's
holdings of common stock in Global Casinos, Inc. increased by $35,680, from a
loss of $146,963 at January 29, 1995 to a loss of $182,643 at January 28, 1996.
The loss on the marketable securities includes an unrealized loss of $93,232,
reflecting a decrease in the market value of the Global Casinos, Inc. shares at
January 28, 1996 as compared to the investment cost basis of these shares at
January 29, 1995. Extinguishment of accounts payable at January 28, 1996,
related to the Company's previous gaming operations resulted in a gain of
$282,110.
Extraordinary gain of $145,331, net of income tax benefit of $64,000 for
the period ended January 28, 1996 represented gains from the restructure and
settlement of debts related to the Company's operations prior to the Impostors
acquisition. At December 31, 1994, the gain from debt restructure was
$141,237, net of income tax benefit of $51,000.<PAGE>
<PAGE>
Based on the foregoing, at January 28, 1996, the Company reported an
improvement in net income of $1,212,927, from a net loss of $1,038,708 for the
period ended January 29, 1995 to a net income of $174,219 for the period ended
January 28, 1996, which, based on average shares outstanding 2,450,0000,
translates to a net income per share, after extraordinary items, of $.07. This
compares to a net loss for the period ended January 29, 1995 of $.58 per share
based on weighted average shares outstanding of 1,779,000.
Inflation and changing prices have not had a material impact on the
Company's prices, net sales and revenues and income from continuing operations,
and are not expected to have a material impact in the future.
In March 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Impairment of Long-Lived Assets." This new
standard is effective for years beginning after December 15, 1995 and would
change the Company's method of determining impairment of long-lived assets.
Although the Company has not performed a detailed analysis of the impact of
this new standard on the Company's financial statements, the Company does not
believe that adoption of the new standards will have a material effect on the
financial statements.
In October 1995, the Financing 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 currently does not intend to adopt the fair value
accounting prescribed by FAS 123, 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>
FINANCIAL STATEMENTS
The following financial statements are filed as part of this report:
Independent Auditor's Reports
Balance Sheet - For the Year Ended January 28, 1996
Statements of Operations - For the Fiscal Year Ended January
28, 1996, for the Month Ended January 29, 1995 and for the Year
Ended December 31, 1994
Statements of Changes In Stockholders' Equity - For the Period
from January 1, 1994 through January 28, 1996
Statements of Cash Flows - For the Fiscal Year Ended January
28, 1996, for the Month Ended January 29, 1995 and for the Year
Ended December 31, 1994
Notes to Financial Statements
<PAGE>
<PAGE>
Premier Concepts, Inc.
Financial Statements
For the Fiscal Year Ended January 28, 1996,
For the Month Ended January 29, 1995,
and For the Year Ended December 31, 1994
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditor's Reports. . . . . . . . . . . . . . . . . . . . . F-2
Balance Sheet - For the Year Ended January 28, 1996 . . . . . . . . . F-3
Statements of Operations - For the Fiscal Year Ended January 28,
1996, for the Month Ended January 29, 1995, and for the Year Ended
December 31, 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Statement of Changes in Stockholders' Equity - For the Period from
January 1, 1994 through January 28, 1996 . . . . . . . . . . . . . . . F-5
Statements of Cash Flows - For the Fiscal Year Ended January 28,
1996, for the Month Ended January 29, 1995, and for the Year Ended
December 31, 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . F-7
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Premier Concepts, Inc.
Denver, Colorado
We have audited the accompanying balance sheet of Premier Concepts,
Inc. as of January 28, 1996, and the related statements of
operations, changes in stockholders' equity, and cash flows for the
fiscal year ended January 28, 1996, for the month ended January 29,
1995 and for the year ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. 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
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Premier
Concepts, Inc., as of January 28, 1996, and the results of its
operations and its cash flows for the fiscal year ended January 28,
1996, for the month ended January 29, 1995, and for the year ended
December 31, 1994, in conformity with generally accepted accounting
principles.
/s/ Hein + Associates llp
Hein + Associates llp
Denver, Colorado
April 5, 1996
<PAGE>
<PAGE>
</TABLE>
<TABLE>
PREMIER CONCEPTS, INC.
BALANCE SHEET
JANUARY 28, 1996
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash and cash equivalents $327,198
Marketable securities 45,113
Merchandise inventories 1,393,925
Prepaid expenses and other current assets 95,503
----------
Total current assets 1,861,739
Property and Equipment, net 977,727
Trademarks, net of accumulated amortization
of $39,100 164,900
Other Assets 92,428
----------
Total Assets $3,096,794
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of
long-term debt:
Related parties $ 98,879
Other 378,902
Accounts payable 291,905
Other accrued liabilities 408,881
----------
Total current liabilities 1,178,567
Long-term Debt, less current portion 759,864
Deferred Rent 56,159
----------
Total liabilities 1,994,590
Commitments and Contingencies (Note 5)
Stockholders' Equity:
Preferred stock, $.10 par value, 20,000,000
shares authorized; none outstanding -
Common stock, $.0004 par value;
850,000,000 shares authorized;
3,744,695 shares issued and outstanding 1,498
Additional paid-in capital 2,756,737
Accumulated deficit (1,656,031)
-----------
Total Stockholders' Equity 1,102,204
-----------
Total Liabilities and Stockholders' Equity $3,096,794
==========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
<TABLE>
PREMIER CONCEPTS, INC.
STATEMENTS OF OPERATIONS
<CAPTION>
For the Fiscal For the Fiscal For the Fiscal
Year Ended Year Ended Year Ended
January 28, January 29, December 31,
1996 1995 1994
-------------- -------------- ---------------
<S> <C> <C> <C>
Revenues:
Retail $8,958,807 $539,409 $7,641,427
Wholesale 111,033 3,968 150,986
------------ ------------ ------------
Total revenues 9,069,840 543,377 7,792,413
Cost of Goods Sold 2,690,658 228,076 2,569,531
------------ ------------ ------------
Gross margin 6,379,182 315,301 5,222,882
Operating Expenses:
Selling, general and administrative 6,087,717 488,664 5,451,377
Provision for store closures (8,307) - 143,000
Depreciation and amortization 337,070 29,663 312,146
------------ ------------ ------------
Total operating expenses 6,416,480 518,327 5,906,523
------------ ------------ ------------
Operating Loss (37,298) (203,026) (683,641)
Other Income (Expenses):
Interest expense, net (108,180) (11,899) (145,577)
Loss on marketable securities, net (182,643) - (146,963)
Reduction of accounts payable 282,110 - -
Other 10,899 141 (39,998)
------------ ------------ ------------
Other, net 2,186 (11,758) (332,538)
------------ ------------ ------------
Loss Before Income Tax Benefit and
Extraordinary Item (35,112) (214,784) (1,016,179)
Income tax benefit 64,000 - 51,000
------------ ------------ ------------
Income (Loss) Before Extraordinary Item 28,888 (214,784) (965,179)
Extraordinary item - Gain on restructure
of debt, net of income tax expense
of $64,000 and $51,000 for the
years ended January 28, 1996 and
December 31, 1994 145,331 - 141,237
------------ ------------ ------------
Net Income (Loss) $174,219 $ (214,784) $ (823,942)
======== =========== ===========
Net Income (Loss) Per Share:
Before extraordinary item $.01 $ (.10) $ (.55)
Extraordinary item .06 - .08
------------ ------------ ------------
Net income (loss) per share $ .07 $ (.10) $ (.47)
===== ========= =========
Weighted Average Shares Outstanding 2,479,000 2,171,000 1,740,000
========= ========= =========
</TABLE>
See accompanying notes to these financial statements.<PAGE>
<PAGE>
PREMIER CONCEPTS, INC.
<TABLE>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1994 THROUGH JANUARY 28, 1996
<CAPTION>
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit Total
--------- ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1994 507,206 $203 $223,742 $(791,524) $(567,579)
Common stock issued for:
Rights offering 81,425 33 274,476 - 274,509
Private placement 927,556 371 893,910 - 894,281
Acquisition of Impostors
and Mirage 637,500 255 794,745 - 795,000
Settlement of claims 13,750 5 54,995 - 55,000
Compensation to employees 3,300 1 3,299 - 3,300
Net loss - - - (823,942) (823,942)
--------- ------ ---------- ----------- -----------
Balances, December 31, 1994 2,170,737 868 2,245,167 (1,615,466) 630,569
Net loss - - - (214,784) (214,784)
--------- ------ ---------- ----------- -----------
Balances, January 29, 1995 2,170,737 868 2,245,167 (1,830,250) 415,785
Common stock issued for:
Private placement 1,170,000 468 282,032 - 282,500
Settlement of claims 268,958 108 184,592 - 184,700
Services 135,000 54 44,946 - 45,000
Net income - - - 174,219 174,219
--------- ------ ---------- ----------- -----------
Balances, January 28, 1996 3,744,695 $1,498 $2,756,737 $(1,656,031) $1,102,204
========= ====== ========== ============ ==========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
<TABLE>
PREMIER CONCEPTS, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Fiscal For the For the
Year Ended Month Ended Year Ended
January 28, January 29,December 31,
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $174,219 $(214,784) $(823,942)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Stock for services 45,000
Gain on restructuring debt (209,331) - (192,237)
Reduction of accounts payable (282,110) - -
Provision for store closure 8,307 - 143,000
Depreciation and amortization 337,070 29,663 312,146
Loss on marketable securities 182,643 - 146,963
Other, net (13,201) - 25,307
Changes in operating assets and liabilities:
(Increase) decrease in:
Merchandise inventories (197,665) 201,735 (122,259)
Other assets (40,870) 6,356 382,853
Increase (decrease) in:
Accounts payable & accrued liabilities 99,834 (435,030) 39,716
Other liabilities 24,620 2,030 29,509
---------- ---------------------
Net cash provided by (used in)
operating activities 128,516 (410,030) (58,944)
Cash Flows from Investing Activities:
Capital expenditures for property and
equipment (165,137) - (56,445)
Cash balances of businesses acquired - - 367,313
Proceeds from sale of investments 156,374 - 155,283
Purchase of investments - - (223,909)
---------- ---------------------
Net cash (used in) provided
by investing activities (8,763) - 242,242
Cash Flows from Financing Activities:
Proceeds from issuance common stock 282,500 - 1,236,381
Proceeds from issuance of notes payable 100,000 - 466,453
Payment on notes payable (346,219) (18,008) (1,296,407)
---------- ---------------------
Net cash provided by financing activities 36,281 (18,008) 406,427
---------- ---------------------
Increase (Decrease) in Cash 156,034 (428,038) 589,725
Cash and Cash Equivalents, beginning of year 171,164 599,202 9,477
---------- --------- ------------
Cash and Cash Equivalents, end of year $327,198 $171,164 $599,202
======== ======== ========
Supplemental Schedule of Cash Flow Information:
Cash paid for interest $102,134 $ 11,899 $135,319
======== ======== ========
Purchase of Impostors and Mirage
with common stock $ - $ - $650,000
======== ======== ========
Conversion of liabilities to
equity securities $ 184,700 $ - $149,000
========= ======== ========
</TABLE>
See accompanying notes to these financial statements.<PAGE>
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
--------------------------------------------------------
Nature of Operations -
--------------------
Premier Concepts, Inc. (the Company) was incorporated in the state of
Colorado in 1988. During 1993, the Company acquired certain real estate
located in a limited stakes gaming city in Colorado, which were exchanged
during 1993 for common stock of Global Casinos, Inc. (Global), a company which
has a common director. As further discussed in Note 2, during 1994, the
Company purchased out of bankruptcy certain assets and liabilities of Impostors
and, in a separate transaction, Mirage Concepts, Inc. (Mirage), both of which
are a retail chain of reproduction jewelry stores. The Company presently
operates 26 retail stores with a geographic concentration of stores in
California, including one store in California which accounted for 17% of total
revenues during the fiscal year ended January 28, 1996.
Fiscal Year -
-----------
The Company was on a calendar year through December 31, 1994. The Company
changed its fiscal year to a 52/53-week period ending on the last Sunday in
January effective for periods ending after December 31, 1994. The period ended
January 29, 1995 had 29 days of activity. Fiscal year ended January 28, 1996
contained 364 days of activity.
Merchandise Inventories -
-----------------------
Merchandise inventories are stated at the lower of cost or market. Cost
is calculated using the average-cost method.
Property and Equipment -
----------------------
Property and equipment is stated at cost. Depreciation is computed over
the estimated useful lives of the assets using the straight-line method
generally, over a 5- to 10-year period. Leasehold improvements are amortized
on the straight-line method over the lesser of the lease term or the useful
life. Expenditures for ordinary maintenance and repairs are charged to expense
as incurred. Upon retirement or disposal of assets, the cost and accumulated
depreciation are eliminated from the account and any gain or loss is reflected
in the statement of operations.
Trademarks -
----------
A portion of the Impostors purchase price was allocated to trademarks (see
Note 2). This cost is being amortized over 10 years. The Company evaluates
the recoverability of this intangible based on projected, undiscounted future
cash flows exclusive of interest.
Deferred Rent -
-------------
Many of the Company's store leases contain predetermined fixed escalations
of the minimum rentals during the initial term. For these leases, the Company
recognizes the related rental expense on a straight-line basis and records the
difference as deferred rent.
Marketable Securities -
---------------------
<PAGE>
<PAGE>
Trading securities, all of which are equity investments, are carried at
market value at the balance sheet date. All of the marketable securities at
January 28, 1996 are common stock of Global. Realized gain (loss) on
marketable securities is determined based on specific identification of
securities sold.
The change in the net unrealized holding loss for the year ended January
28, 1996, for the month ended January 29, 1995, and for the year ended December
31, 1994 was $20,243, $155, and $53,164, respectively.
Fair Value of Financial Instruments -
-----------------------------------
The estimated fair values for financial instruments are determined at
discrete points in time based on relevant market information. These estimates
involve uncertainties and cannot be determined with precision. The carrying
amounts of marketable securities, accounts payable, and accrued liabilities
approximates fair value. The fair value of certain notes payable is less than
their carrying value as generally their interest rates are lower than the
Company's current effective annual borrowing rate, however, the difference is
not considered significant.
Cash Equivalents -
----------------
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three months or less
to be cash equivalents.
Net Income (Loss) Per Share -
---------------------------
Net income (loss) per common share is calculated based upon the weighted
average number of shares outstanding during the periods presented. Stock
options and warrants have not been included in the calculation of net income
(loss) per share for the one month ended January 29, 1995 and for the year
ended December 31, 1995, as the result is antidilutive. Dilutive options have
been included in the calculation of net income per share for the fiscal year
ended January 28, 1996.
Income Taxes -
------------
The Company accounts for income taxes under SFAS No. 109 which requires
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are
determined, based on the difference between the financial statements and tax
bases of asset and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.
License Agreements -
------------------
The Company grants license agreements to entities for use of the
Impostor's name. License fees are recognized as income on a straight-line
basis over the term of the agreement.
Use of Estimates -
----------------
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts reported
in these financial statements and accompanying notes. Actual results could
differ from those estimates.
<PAGE>
<PAGE>
Impact of Recently Issued Accounting Standards -
----------------------------------------------
In March 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Impairment of Long-Lived Assets." This new
standard is effective for years beginning after December 15, 1995 and would
change the Company's method of determining impairment of long-lived assets.
Although the Company has not performed a detailed analysis of the impact of
this new standard on the Company's financial statements, the Company does not
believe that adoption of the new standard will have a material effect on the
financial statements.
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 currently does not intend to adopt the fair value
accounting prescribed by FAS 123, and will be subject only to the disclosure
requirements prescribed by FAS 123.
Provision for Store Closures and Write-Down Productive Assets -
-------------------------------------------------------------
The Company accrues costs associated with store closures that are
incremental to other costs incurred prior to commitment date as a direct result
of the exit plan. The Company also accrues any amounts to be incurred under
contractual obligations that existed prior to the commitment date and will
continue after the exit plan is completed with no economic benefit. The
Company also writes down productive assets to their net realizable value when
it is determined the productive assets are permanently impaired. During the
year ended December 31, 1994, the Company accrued a provision for store
closures of $143,000 based upon the above described accounting policies.
Liquidity -
---------
At January 28, 1996, the Company had working capital of $683,172 and a
stockholders' equity of $1,102,204. The Company incurred a loss before income
tax benefit and extraordinary item of $35,112 for the year ended January 28,
1996. Additionally, the Company realized a gain on the extinguishment of
accounts payable of approximately $282,000, which is included in the loss
before extraordinary item. Impostors emerged from bankruptcy in February 1994,
and the Company has experienced liquidity difficulties in the past.
As shown in the Company's financial statements, the Company's sales have
increased during the fiscal year ended January 28, 1996, which has also
resulted in improved financial performance. As discussed further in Note 6,
the Company obtained additional capital through a private placement of common
stock and is in the process of obtaining bridge financing and undertaking a
proposed public offering of common stock and warrants. Management believes
through these efforts and improved operations, the Company will be able to
resolve its liquidity difficulties.
2. ACQUISITIONS AND DISPOSITIONS:
-----------------------------
In 1993, the Company exchanged its ownership in certain real estate and a
note receivable for 2,700,000 shares of common stock in Global and with the
exception of 290,300 shares, (representing less than 5% of Global), the
remaining 2,409,700 shares of Global's common stock was distributed to
stockholders of the Company during 1993. The Company has two common directors
<PAGE>
<PAGE>
with Global. After distributing the Global common stock to the Company's
stockholders, there remained substantial liabilities to uncollateralized
creditors related to prior activities of the Company. Certain of these
creditors have filed claims against the Company demanding payment. The Company
has been negotiating settlements with most of these creditors, which has
resulted in an extraordinary gain and other income from the reduction in
accounts payable totaling approximately $491,000 and $192,000 during the years
ended January 28, 1996 and December 31, 1994, respectively. Reduction in
accounts payable represents the reversal of recorded amounts based upon
management's estimates of amounts which may ultimately be paid, but the Company
has not received formal releases from payment from the creditors.
Retail Jewelry Stores -
---------------------
During 1994, the Company acquired substantially all of the assets and
liabilities of a retail jewelry chain from a corporation which had filed for
protection under the United States Bankruptcy Court. The retail jewelry chain
was comprised of 30 retail jewelry stores, operating under the trademark
"Impostors." However, one store was closed in 1994 and five stores were closed
during the year ended January 28, 1996. In an affiliated bankruptcy
proceeding, the Company acquired certain additional commercial leases utilized
in connection with the operation of the retail business. In connection with
this transaction, the Company issued 537,500 shares of its common stock, which
was valued by the bankruptcy court at $695,000. The Company also assumed
liabilities of approximately $3,147,000, and acquired assets of approximately
$3,697,000, including trademarks and tradename valued at $204,000. For
financial statement purposes, this transaction has been treated as a purchase
by the Company of Impostors.
Also during 1994, the Company acquired Mirage, which, at the time of
acquisition, owned and operated three retail costume jewelry stores. The
Company and Mirage had a common officer and a common stockholder prior to the
acquisition date. The Company issued 100,000 shares of common stock valued at
$100,000 for the acquisition of Mirage. The Company also assumed liabilities
of approximately $76,000, and acquired assets of approximately $176,000. For
financial statement purposes, this transaction has been treated as a purchase
by the Company of Mirage.
The accompanying statement of operations includes Impostors and Mirage
since March 1, 1994, the date of acquisition.
3. PROPERTY AND EQUIPMENT:
----------------------
At January 28, 1996, property and equipment consists of the following:
Furniture, fixtures and equipment $ 717,869
Leasehold improvements 845,015
---------
1,562,884
Less accumulated depreciation 585,157
---------
$ 977,727
=========
Depreciation expense for the year ended January 28, 1996, month ended
January 29, 1995, and for the year ended December 31, 1994 was $316,670,
$27,963, and $295,146, respectively.
<PAGE>
<PAGE>
4. NOTES PAYABLE AND LONG-TERM DEBT:
--------------------------------
Notes payable and long-term debt as of January 28, 1996 consist of the
following:
Related Parties
- ---------------
Note payable to a stockholder, payable in monthly
installments of $5,000 plus accrued interest at 18%,
collateralized by marketable securities. $ 30,958
Note payable to a stockholder, at 12% principal and
interest due January 1996. Management is negotiating
an extension on the payment of principal. 39,000
Notes and advances payable to stockholders of the
Company, payable on demand, non-interest bearing. 28,920
--------
Total related parties - all current $ 98,878
========
Other
- -----
Note payable to a bank, interest payable monthly at
10%, principal payable in February 1998,
collateralized by cash and inventory. $635,000
Note payable to a financial institution, interest
payable monthly at 12%, principal payable in January
1996. Management has been in discussions with the
noteholder to pay off the note with part of the
proceeds from a public offering. 100,000
Payable to a vendor and creditor of Impostors from
bankruptcy settlement (less unamortized discount of
$8,743), payable by adding 10% to the cost of current
purchases. Discounted at 7.7% assumed interest rate,
collateralized by receivables, inventory, property
and equipment (see Note 5). 87,591
Notes payable to creditors of Impostors from
bankruptcy settlement, payable in monthly
installments plus accrued interest at 6% to 8%, over
variable terms through December 1999. A note
totaling $35,000 is guaranteed by certain
stockholders of the Company. 197,724
Note payable to a company, payable in monthly
installments of $10,000 plus accrued interest at 12%,
through November 1996. 100,000
Other 18,453
----------
1,138,768
Less current portion (378,904)
-----------
$ 759,864
==========
<PAGE>
<PAGE>
Principal payments on the above obligations are due as follows:
Related
Parties Other
------- -----
1997 $98,878 $378,904
1998 - 725,326
1999 - 26,787
2000 - 7,751
------- ----------
$98,878 $1,138,768
======= ==========
5. COMMITMENTS AND CONTINGENCIES:
-----------------------------
Lease Commitments -
-----------------
The Company leases its offices and retail facilities under operating
leases for terms expiring at various dates from 1996 to 2002. The corporate
office lease has been guaranteed by the directors of the Company. The aggregate
minimum annual lease payments under leases in effect at January 28, 1996 are as
follows:
Year Ending Operating
January 28, Leases
----------- ---------
1997 $1,487,312
1998 1,385,860
1999 1,190,250
2000 1,056,871
Thereafter 1,767,854
----------
Total minimum lease payments $6,888,147
==========
Most leases also provide for payment of operating expenses, real estate
taxes and for additional rent based on a percentage of sales. Rental expense
was $1,977,718, $174,592, and $1,739,802 for the year ended January 28, 1996,
for the month ended January 29, 1995, and for the fiscal year ended December
31, 1994, respectively.
Litigation Settlement -
---------------------
The Company entered into a commitment to guarantee the value of 55,000
shares of Global stock and 13,750 shares of the Company's common stock related
to a settlement with a former creditor. Under the terms of the agreement, the
Company agreed to buy back or guarantee that the total "asking" price of the
combined common shares would equal $200,000 at March 1, 1995. In fiscal 1996,
the Company settled with the former creditor for the issuance of an additional
233,958 shares of the Company's stock, valued at $171,625.
Payable to Vendor -
-----------------
The Company has agreed to purchase a minimum of $500,000 of merchandise
annually from the vendor through 1997 or until Impostors' liability to the
vendor prior to Impostor's bankruptcy has been paid in full. Payment for
merchandise purchased will be paid at 110% of the cost, with the additional 10%
to be applied against the outstanding balance of the vendor's claim until paid
in full (see Note 4).
<PAGE>
<PAGE>
6. STOCKHOLDERS' EQUITY:
--------------------
Preferred Stock -
---------------
The Board of Directors has authority to divide the class of the preferred
stock into series and to fix and determine the relative rights and preferences
of the shares of any such series as permitted by the Company's articles of
incorporation at the time of designation.
Common Shares -
-------------
During 1994, the Company declared a 1 for 4 reverse stock split and
changed the par value from $.0001 to $.0004 per share. Accordingly, all common
stock reflected in the financial statements and accompanying notes reflect the
effect of the reverse split.
During 1994, the Company sold, in a private placement, 463,750 Units for
$2.00 per Unit. Each Unit consisted of two shares of common stock and a
warrant for the purchase one share of common stock at a purchase price of $2.00
per share, exercisable through December 31, 1995. Proceeds of $894,281 is net
of $33,219 expenses of the offering. The Company has extended the term of the
warrants to December 31, 1996.
During 1994, the Company completed a rights offering of 250,000 shares of
the Company's common stock at $3.60 per share and the right to a distribution
of 1,000,000 shares of Global stock from the Company, which was part of a
distribution of Global stock to all of the Company's stockholders (see Note 2).
During 1994, the 81,425 remaining shares and 168,575 shares of this offering
were sold. Proceeds of $881,378 is net of $18,622 costs of the offering.
During fiscal 1996, the Company sold in a private placement, 1,170,000
shares of common stock at $.25 per share.
During fiscal 1996, the Company issued 268,958 shares of common stock in
settlement of liabilities and 135,000 shares of common stock in payment for
services, including 12,000 issued to an officer and director, and 13,000 issued
to a director. Also, the Company has agreed to register 247,703 shares in a
Registration Statement, to be filed in fiscal 1997.
Options -
-------
The Company has an Incentive Stock Option Plan (Plan) which provides for
the grant of options to purchase up to 650,000 shares of the Company's common
stock to officers and employees of the Company. The Company's Board of
Directors have approved, subject to shareholder approval, an additional 500,000
shares to be reserved for the Plan. Options are granted at a price equal to
the market value at the date of grant. Options were granted in 1994 to an
officer/director for 200,000 shares at an exercise price of $1; in fiscal 1996,
the exercise price was reduced to $.375 per share, and the term was extended to
December 31, 1998. An additional 65,000 incentive stock options were granted
to other employees in fiscal 1997 at $.375 per share which expire in February
15, 2003. All of these options are currently vested.
In March 1996, the Company granted incentive stock options for 400,000
shares to employees, at an exercise price of $.50, which expire in 2001.
200,000 of these incentive stock options vest immediately and 100,000 on each
of the first and second anniversary dates.
In April 1996, the Company had adopted an non-qualified option plan
(Director Plan) for outside directors. Each outside director is granted stock
options for the purchase of 25,000 shares of common stock at a price equal to
100% of the fair market value of the Company's common stock at the date of
<PAGE>
<PAGE>
grant. In fiscal 1996, the Company issued options for a total of 125,000
shares to directors of the Company under the Director Plan and options for
60,000 shares to directors in return for guaranteeing the Company's corporate
office lease, at an exercise price of $.50 and which expire in 2001.
7. INCOME TAXES:
------------
The Company's actual effective tax rate differs from U.S. Federal
corporate income tax rate of 34% as follows for the fiscal year ended January
28, 1996.
Statutory rate 34%
Effect of graduated rate (4.6%)
State income taxes, net of Federal income tax benefit 3.3%
Reduction in valuation allowance due to usage of net
operating loss carryforwards and change in temporary
differences (32.7%)
--------
$ -0-%
=======
The components of the net deferred tax asset recognized as of January 28,
1996 are as follows:
Current deferred tax assets (liabilities):
Unrealized loss on investments $ 56,000
Accrued expenses not currently deductible for tax 35,000
Other, net (2,000)
Valuation allowance (89,000)
---------
Net current deferred tax asset $ -
=========
Long-term deferred tax assets (liabilities):
Net operating loss carryforwards $231,000
Other, net 5,000
Valuation allowance (236,000)
---------
Net long-term deferred tax asset $ -
=========
The valuation allowance was $546,000 at December 31, 1994, increased by
$73,000 in the one month ended January 29, 1995, and decreased by $302,000 for
the year ended January 28, 1996.
At January 28, 1996, the Company had net operating loss carryforwards for
Federal tax purposes of approximately $680,000. The loss carryforwards, unless
utilized, will expire from 2009 through 2010.
The Company's ability to use its net operating loss (NOL) carryforwards to
offset future income is subject to restrictions attributable to equity
transactions that result in change in ownership as defined by the Internal
Revenue Code. These restrictions will limit, on an annual basis, the Company's
future use of its NOL loss carryforwards. The estimated NOL carryforward has
been reduced by approximately $400,000 as a result of changes in ownership and
a change in line of business which occurred in 1994 and prior years.
<PAGE>
<PAGE>
8. SUBSEQUENT EVENTS:
-----------------
Subsequent to year-end, the Company has signed a letter of intent (LOI)
with an underwriter for a public offering of common stock and redeemable
warrants for the purchase of common stock to provide gross proceeds of
approximately $3,500,000. The Company anticipates that the offering price of
the common stock and warrants will be between $3.00 and $3.75 per share and
between $.05 and $.15 per warrant. Two warrants will allow the holder to
purchase one share of common stock at an exercise price of 150% of the offering
price for a period of three years after the date of the prospectus. The
underwriter has a 45-day option (overallotment option) to purchase up to 15% of
the total number of shares of common stock and/or 15% of the total number of
warrants underwritten in the offering. In addition, the Company will grant to
the underwritten options to purchase common stock and warrants equal to 10% of
the common stock and warrants sold in the offering (excluding overallotment
option common stock and warrants). The warrants will be exercisable at 120% of
the offering price for a period of four years commencing 12 months after the
date of the definitive prospectus used in the offering. The Board of Directors
has approved a one-for-five reverse stock split, to be effective with the
closing of the proposed offering. The LOI is subject to change or
cancellation.
The Company is also attempting to arrange for certain bridge financing by
offering a minimum of 210,000 units at $1.20 per unit (pre-split). Each unit
includes two shares of Series A convertible Preferred stock and one warrant for
the purchase of one share of common stock at $1 per share. Each share of
Series A Preferred Stock is entitled to $.0525 per annum cumulative dividends,
is convertible into one share of common stock anytime commencing one year from
the closing of the bridge financing, and converts automatically into common
stock on the effectiveness of a public offering.
<PAGE>
<PAGE>
PART III
Part III, Items 9, 10, 11 and 12 are incorporated herein by reference from
the Registrant's definitive proxy statement relating to its Annual Meeting of
Shareholders which will be filed in an amendment within 120 days of January 28,
1996.
PART IV
EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
Financial Statements
--------------------
The following financial statements are filed as part of this report:
1. Independent Auditor's Reports
2. Balance Sheet - For the Year Ended January 28, 1996
3. Statements of Operations - For the Fiscal Year Ended January 28,
1996, for the Month Ended January 29, 1995 and for the Year Ended
December 31, 1994
4. Statements of Changes In Stockholders' Equity - For the Period from
January 1, 1994 through January 28, 1996
5. Statements of Cash Flows - For the Fiscal Year Ended January 28,
1996, for the Month Ended January 29, 1995 and for the Year Ended
December 31, 1994
6. Notes to Financial Statements
Financial Statement Schedules
-----------------------------
None
<PAGE>
<PAGE>
Current Reports on Form 8-K
---------------------------
None
Exhibits
---------
Exhibit No Title
- ---------- -----
* Exhibit 1.1 Underwriting Agreement
* Exhibit 3.1 Articles of Incorporation
* Exhibit 3.2 Certificate and Articles of Amendment
* Exhibit 3.3 By-Laws
* Exhibit 4.1 Specimen Certificate of Common Stock
* Exhibit 4.2 Proposed form of 14% Subordinated Debenture
** Exhibit 4.3 Silver State Holding, Inc. Incentive Stock Option
Plan, dated November 9, 1992
* Exhibit 10.1 Copy of Fund Escrow
* Exhibit 10.2 Copy of signed Stock Transfer Agent Agreement
** Exhibit 10.3 Amendment No. 1 to Definitive Agreement and Plan of
Reorganization, dated March 16, 1993
** Exhibit 10.4 Amended Plan of Reorganization dated January 24, 1994
** Exhibit 10.5 Order Confirming Amended Plan of Reorganization dated
February 24, 1994
** Exhibit 10.6 Commitment Letter dated January 4, 1994
** Exhibit 10.7 Amendment to Commitment Letter dated January 21, 1994
** Exhibit 10.8 Conveyance and Bill of Sale dated March 3, 1994
** Exhibit 10.9 Assumption Agreement dated March 3, 1994
*** Exhibit 16 Letter of Schumacher & Bruce, Inc. on change in
certifying accountant
- -----------------------------
* Incorporated by reference from the Company's Registration Statement on
Form S-1; SEC File No. 33-42701.
** Incorporated by reference from the Company's Current Report on Form 8-K
dated March 3, 1994
*** Incorporated by reference from the Company's Current Report on Form 8-K
dated February 16, 1995
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PREMIER CONCEPTS, INC.
Date: 7/31/96 By: /s/ Sissel Greenberg
________________________ ___________________________________
Sissel Greenberg, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Sissel Greenberg President 7/31/96
_______________________________ and Director __________
Sissel Greenberg
/s/ Todd Huss Principal Financial Officer 7/31/96
______________________________ Principal Accounting Officer __________
Todd Huss
/s/ Peter Bloomquist Secretary and Director 7/31/96
_______________________________ __________
Peter Bloomquist
/s/ Gerald Jacobs Director 7/31/96
_______________________________ __________
Gerald Jacobs
/s/ Charles Powell Director 7/31/96
_______________________________ __________
Charles Powell
/s/ William Nandor Director 7/31/96
_______________________________ __________
William Nandor
