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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A-2
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
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
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Commission file number: 33-42701
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PREMIER CONCEPTS, INC.
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(Name of Small Business Issuer in its Charter)
Colorado 71-0668346
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(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
3033 South Parker Road, Suite 120, Aurora, Colorado 80014
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (303) 338-1800
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Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Title of Class
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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
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 26 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.
With the opening of its new store in the Park Meadows Shopping Mall
on August 30, 1996, the Company currently operates 27 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.
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OVERVIEW
Operating under the name "Impostors," Premier Concepts, Inc. (the
"Company") specializes in the marketing and retailing of high-end
reproduction 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 trademark), Cartier (registered trademark),
Bulgari (registered trademark) 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, Colorado, 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 a new retail complex at the Rio Hotel and Casino in
Las Vegas, Nevada, which is scheduled to open in February, 1997. The
Company's largest and most visible store is located in the prime retail
area of San Francisco's Union Square.
BUSINESS STRATEGY
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 26 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.
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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.
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PRINCIPAL PRODUCTS
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 "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 trademark), Tiffany & Co.
(registered trademark), Bulgari (registered trademark) 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.
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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
one additional remodeling in process, scheduled for completion in
September 1996. In addition, the Company's new stores 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 opened a new store in the Park
Meadows shopping mall in the Denver metropolitan area on August 30, 1996,
and has signed a lease for a new retail store at the Rio Hotel and Casino
in Las Vegas, Nevada. The store is scheduled to open in February, 1997.
Other potential real estate sites in Florida,
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Massachusetts, Nevada, New Jersey and New York are currently being
evaluated, although to date no decisions regarding additional new
locations have been made.
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.
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OTHER MARKETING AND DISTRIBUTION CHANNELS
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. To date, 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. 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. While
the Company has signed a Letter of Intent to undertake a secondary public
offering of its securities and has filed a Registration Statement with the
Securities and Exchange Commission covering such proposed public offering,
there can be no assurance that the offering will be successful or that the
Company will be able to utilize a portion of the proceeds from the
offering for the purpose of developing its opportunities internationally.
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 September 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.
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MARKET AND CUSTOMERS
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, with the majority in the $100 to $400
range.
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
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.
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In connection with the Company's acquisition of the Impostors retail
chain out of the bankruptcy proceedings, the Company agreed to purchase a
minimum $500,000 of merchandise annually through 1997 from a vendor to the
Company's predecessor, or until the Company's predecessor's liability to
the vendor, totalling initially approximately $85,000, has been paid in
full. Payment for merchandise purchased is paid at 110% of cost, with the
additional 10% applied against the outstanding balance due to the vendor.
COMPETITION
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 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
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 trademark), Impostors De Classique Copy Jewels (registered
trademark), Impostors Copy Jewels (registered trademark), Elegant
Pretenders (registered trademark), and The Latest In Faux (registered
trademark). 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.
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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 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
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.
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EMPLOYEES AND CONSULTANT
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.
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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.
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
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
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.
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CHANGES IN INDEPENDENT PUBLIC ACCOUNTANTS
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.
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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 for the years ended December 31, 1993 and 1992 or 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.
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.
<PAGE>
iii. Premier Concepts, Inc. v. R & L Imports Corporation.
----------------------------------------------------
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.
<PAGE>
<PAGE>
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.
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.
___________________________
<TABLE>
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:<F1>
<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
<FN>
<F1> 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.
</FN>
</TABLE>
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.
<PAGE>
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.
<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, for a total reduction of approximately
$209,000 in the payable balances prior to the negotiations. 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.
<PAGE>
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>
<CAPTION>
Fiscal Year Ended Period Ended
January 28, 1996 January 29,
1995
----------------- --------------
- --
<S> <C> <C>
Revenues 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)
Discontinued Operation (156,222) (1,179,963)
Net Income (Loss) 114,219 (1,038,726)
Net Income (Loss) Per Share 0.05 (.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 to former franchisees that signed licensee
<PAGE>
<PAGE>
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.
At January 28, 1996, the Company had accounts payable of $80,884 that
related to the prior activities of the Company. Certain of these
creditors have filed claims against the Company demanding payment. The
Company has negotiated settlement with certain creditors, which resulted
in income before income tax expense totalling approximately $209,000 for
the fiscal year ended January 28, 1996. The Company also recorded
approximately $222,000 of income during the year ended January 28, 1996 as
a result of the reduction in recorded amounts of accounts payable based
upon management's estimates of amounts which may ultimately be paid.
However, the Company has not received formal releases from payment from
these creditors. These amounts have all been treated as income from
discontinued operation.
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.
<PAGE>
<PAGE>
Based on the foregoing, at January 28, 1996, the Company reported an
improvement in net income of $1,152,945, from a net loss of $1,038,726 for
the period ended January 29, 1995 to a net income of $114,219 for the
period ended January 28, 1996, which, based on average common shares
outstanding 2,450,0000, translates to a net income per common share, after
discontinued operations, of $.05. This compares to a net loss for the
period ended January 29, 1995 of $.58 per share based on weighted average
common 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 One 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
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 One 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
<PAGE>
Financial Statement Schedules
-----------------------------
None
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>
PREMIER CONCEPTS, INC.
FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JANUARY 28, 1996,
FOR THE ONE MONTH ENDED JANUARY 29, 1995,
AND FOR THE YEAR ENDED DECEMBER 31, 1994
<PAGE>
<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 One 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 One Month Ended January 29, 1995,
and for the Year Ended December 31, 1994 . . . . . . . . . . . . . . F-6
NOTES TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . F-7
F-1
<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 one 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 one month ended January 29, 1995, and for the year ended
December 31, 1994, in conformity with generally accepted accounting
principles.
Hein + Associates llp
Denver, Colorado
April 5, 1996
F-2
<PAGE>
<PAGE>
</TABLE>
<TABLE>
PREMIER CONCEPTS, INC.
BALANCE SHEET
JANUARY 28, 1996
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 $39,100 104,900
OTHER ASSETS 92,428
----------
TOTAL ASSETS $3,036,794
===========
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 (1,716,031)
---------
Total Stockholders' Equity 1,042,204
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,036,794
==========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
<PAGE>
<TABLE>
PREMIER CONCEPTS, INC.
STATEMENTS OF OPERATIONS
<CAPTION>
FOR THE FOR THE FOR THE
FISCAL ONE MONTH YEAR
YEAR ENDED ENDED 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)
Other 10,899 141 (39,998)
---------- ---------- ----------
Other, net (279,924) (11,758) (332,538)
---------- ---------- ----------
LOSS BEFORE INCOME TAX BENEFIT
AND DISCONTINUED OPERATIONS (317,222) (214,784) (1,016,179)
Income tax benefit 161,000 - 51,000
--------- --------- ---------
LOSS BEFORE DISCONTINUED
OPERATIONS (156,222) (214,784) (965,179)
DISCONTINUED OPERATIONS -
Income from discontinued
operations, net of income
tax expense of $161,00
and $51,000 for the years
ended January 28, 1996 and
December 31, 1994 270,441 - 141,237
--------- --------- ---------
NET INCOME (LOSS) $ 114,219$ (214,784) $ (823,942)
========= ========= =========
NET INCOME (LOSS) PER SHARE:
Before discontinued
operations $ (.06) $ (.10) $ (.55)
Discontinued operations .11 - .08
--------- --------- ---------
Net income (loss) per sh $.05 $(.10) $(.47)
--------- --------- ---------
WEIGHTED AVERAGE SHARES
OUTSTANDING 2,479,000 2,171,000 1,740,000
========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
<PAGE> PREMIER CONCEPTS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1994 THROUGH JANUARY 28, 1996
<TABLE>
<CAPTION>
Common Stock Additional
------------
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 - - - 114,219 114,219
--------- --------- --------- --------- ---------
BALANCES, January 28, 1996 3,744,695 $1,498 $2,756,737$(1,716,031) $1,042,204
========= ========= ========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
FISCAL ONE MONTH YEAR
YEAR ENDED ENDED ENDED
JANUARY 28,JANUARY 29,DECEMBER 31,
1996 1995 1994
--------------------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $114,219 $(214,784) $(823,942)
Adjustments to reconcile net income
(loss) to net cash from operating
activities:
Stock for services 45,000
Reduction of accounts
payable - discontinued
operations (431,441) - (192,237)
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 and 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 of
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 $ 35,319
========= ========= =========
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.
F-6
<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.
INVENTORIES -
-----------
Inventories consist primarily of merchandise which is held for
resale. Inventories are stated at the lower of cost or market, as
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. During the year ended January 28, 1996,
the Company determined that it was remote a $60,000 payable to a
consultant (that was capitalized as part of the trademark acquired
from Impostors) would ever be paid. Accordingly, trademarks were
reduced to reflect the reduction in the payable.
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 -
---------------------
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.
F-7
<PAGE>
<PAGE>
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 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 assets 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 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.
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.
F-8
<PAGE>
<PAGE>
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 $1,042,204. The Company incurred an
operating loss (before interest expense and other income) of
$(37,298) for the year ended January 28, 1996. The Company does
experience seasonal sales and the Company's net income for 1996 is
substantially composed of income from extinguishment and reversal
of prior payables related to a predecessor business (see Note 2).
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 2,500,000 and 200,000 shares of
common stock, respectively, in Global, of which 2,409,700 shares
of Global's common stock were distributed to stockholders' of the
Company during 1993. The remaining 290,300 shares are still held
by the Company, which represent less than 5% of Global's
outstanding common stock. The Company has two common directors
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. As of January 28, 1996, the Company had accounts payable
of $80,884 that related to the prior activities of the Company.
Certain of these creditors have filed claims against the Company
F-9
<PAGE>
<PAGE>
demanding payment. The Company has negotiated settlements with
certain creditors, which has resulted in income before income tax
expense, totaling approximately $192,000 and $209,000 during the
years ended December 31, 1994 and January 28, 1996, respectively.
The Company also recorded approximately $222,000 of income during
the year ended January 28, 1996, as a result of the reduction in
recorded amounts of accounts payable 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.
Accordingly, these amounts were recorded as income from
discontinued operations, net of income tax expense.
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:
<TABLE>
<S> <C>
Furniture, fixtures and equipment $ 717,869
Leasehold improvements 845,015
---------
1,562,884
Less accumulated depreciation 585,157
---------
$ 977,727
=========
</TABLE>
F-10
<PAGE>
<PAGE>
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.
4. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt as of January 28, 1996 consists
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
F-11
<PAGE>
<PAGE>
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
=========
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
==========
F-12
<PAGE>
<PAGE>
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 one 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).
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.
F-13
<PAGE>
<PAGE>
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. Two-hundred thousand 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 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 34.0%
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-%
------
F-14
<PAGE>
<PAGE>
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 tax35,000
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.
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
F-15
<PAGE>
<PAGE>
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.
F-16
<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: September 4, 1996 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 September 4, 1996
- -------------------------- and Director -----------------
Sissel Greenberg
/s/ Todd Huss Principal Financial Officer September 4, 1996
- ---------------- Principal Accounting Officer -----------------
Todd Huss
/s/ Peter Bloomquist Secretary and Director September 4, 1996
- ------------------------- ----------------
Peter Bloomquist
/s/ Gerald Jacobs Director September 4, 1996
- ------------------------- -----------------
Gerald Jacobs
/s/ Charles Powell Director September 4, 1996
- -------------------------- -----------------
Charles Powell
/s/ William Nandor Director September 4, 1996
- --------------------------- -----------------
William Nandor
