<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 11, 1997.
REGISTRATION NO. 333-19901
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
--------------------------
PREMIER CONCEPTS, INC.
(Name of small business issuer in its Charter)
<TABLE>
<S> <C> <C>
COLORADO 5699 84-1186026
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
3033 S. PARKER ROAD, SUITE 120,
AURORA, COLORADO 80014
(303) 338-1800
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
SISSEL B. GREENBERG, PRESIDENT
3033 S. PARKER ROAD, SUITE 120
AURORA, COLORADO 80014
(303) 338-1800
(Name, address, including zip code, and telephone number of agent for service of
process)
--------------------------
COPIES TO:
CLIFFORD L. NEUMAN, ESQ. SAMUEL E. WING, ESQ.
NATHAN L. STONE, ESQ. JONES & KELLER, P.C.
Neuman & Cobb 1625 Broadway
1507 Pine Street Denver, Colorado 80202
Boulder, Colorado 80302 (303) 573-1600
(303) 449-2100
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462 under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE TABLE ON FOLLOWING PAGE.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING PRICE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE (1)(2) (1)(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.002 par value (3)..... 1,265,000 $4.25 $5,376,250 $1,835.88
Class A Common Stock Purchase Warrants
(4).................................. 1,265,000 $.15 $189,750 $65.43
Common Stock, $.002 Par Value,
Underlying A Warrants (5)............ 632,500 $6.375 $4,032,187.50 $1,390.41
Representative's Common Stock, $.002
par value (6)........................ 110,000 $5.10 $561,000 $193.45
Representative's Class A Warrants
(7).................................. 110,000 $.18 $19,800 $6.83
Common Stock, $.002 par value (8)..... 55,000 $6.375 $350,625 $120.91
Selling Shareholders' Common Stock,
$.002 par value issuable upon
conversion of preferred stock (9).... 102,041 $3.125 (11) $318,878.12 $109.96
Class A Common Stock Purchase Warrants
(10)................................. 483,334 $.15 (11) $72,500.10 $25.00
Common Stock, $.002 Par Value (12).... 241,667 $6.375 $1,540,627.10 $531.25
TOTAL:............................ $12,461,617 $4,297.12
</TABLE>
(1) Pursuant to Rule 416, the Registration Statement also relates to an
indeterminate number of additional shares of Common Stock issuable upon the
exercise of warrants pursuant to anti-dilution provisions contained therein,
which shares of Common Stock are registered hereunder.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(3) Consists of Common Stock offered in the offering and issuable upon exercise
of the Underwriters' Over-Allotment Option.
(4) Consists of Class A Warrants offered in the offering and Class A Warrants
issuable upon exercise of the Underwriters' Over-Allotment Option.
(5) Consists of shares of Common Stock issuable upon exercise of the Class A
Common Stock Purchase Warrants, including the Warrants issuable upon
exercise of the Underwriters' Over-Allotment Option.
(6) Consists of Common Stock issuable upon exercise of the Representative's
Share Options.
(7) Consists of Class A Warrants issuable upon exercise of the Representative's
Warrant Options.
(8) Consists of Common Stock issuable upon exercise of the Class A Warrants
issuable upon exercise of the Representative's Warrants.
(9) Consists of Common Stock offered by the Selling Shareholders issuable upon
conversion of Series A Convertible Preferred Stock.
(10) Consists of Class A Warrants reoffered by certain Selling Shareholders.
(11) Based upon the average bid and ask prices of the Common Stock being offered
by the Selling Shareholders in accordance with Rule 457(c).
(12) Consists of Common Stock issuable upon exercise of the Class A Warrants
reoffered by the Selling Shareholders.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus; one to be used
in connection with the Offering of up to 1,100,000 Shares of the Company's $.002
par value Common Stock ("Shares") and 1,100,000 Class A Warrants ("A Warrants")
("Offering Prospectus"), and one to be used in connection with the sale of
Common Stock by certain selling shareholders (the "Selling Shareholders'
Prospectus"). The Offering Prospectus and the Selling Shareholders' Prospectus
will be identical in all respects except for the alternate pages for the Selling
Shareholders' Prospectus included herein and labeled "Alternate Page for Selling
Shareholders' Prospectus."
<PAGE>
PREMIER CONCEPTS, INC.
CROSS-REFERENCE INDEX
<TABLE>
<CAPTION>
ITEM NO. AND HEADING IN FORM SB-2 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus..................... Forepart of Registration Statement and Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary and Risk Factors............................. Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Front Cover Page; Underwriting
6. Dilution............................................. Dilution
7. Selling Securityholders.............................. Selling Shareholder Prospectus--Selling Shareholders
and Plan of Distribution
8. Plan of Distribution................................. Underwriting; Selling Shareholder Prospectus--
Selling Shareholders and Plan of Distribution
9. Legal Proceedings.................................... Legal Proceedings
10. Directors, Executive Officers, Promoters and
Controlling Persons................................ Management
11. Security Ownership of Certain Beneficial Owners and
Management......................................... Security Ownership of Management and Principal
Shareholders
12. Description of Securities............................ Description of Securities
13. Interest of Named Experts and Counsel................ Legal Matters; Experts
14. Disclosure of SEC Position on Indemnification for
Securities Act Liabilities......................... Management--Indemnification and Limitation on
Liability of Directors
15. Organization Within Last Five Years.................. The Company; Business--Overview
16. Description of Business.............................. Prospectus Summary; Risk Factors; Business
17. Management's Discussion and Analysis or Plan of
Operation.......................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Financial Statements
18. Description of Property.............................. Business
19. Certain Relationships and Related
Transactions....................................... Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters............................................ Market for Common Stock
21. Executive Compensation............................... Management--Executive Compensation
22. Financial Statements................................. Financial Statements
23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ Business--Changes in Independent Public Accountants
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL , 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
PREMIER CONCEPTS, INC.
1,100,000 SHARES OF COMMON STOCK
1,100,000 CLASS A COMMON STOCK PURCHASE WARRANTS
Premier Concepts, Inc. (the "Company") is offering 1,100,000 shares of
Common Stock and 1,100,000 Class A Common Stock Purchase Warrants ("Warrants"),
which must be purchased together in this offering on the basis of one share of
Common Stock and one Warrant. The Common Stock and Warrants will trade
separately thereafter. Two Warrants entitle the holder to purchase one share of
Common Stock at a price of $5.00 ("Warrant Exercise Price") during the
three-year period commencing on the date of this Prospectus and the Warrants may
be redeemed by the Company under certain circumstances. See "Description of
Securities."
Although the Company is a publicly-held corporation, the present market for
its Common Stock is limited and sporadic. On April 8, 1997, the closing bid and
ask prices of the Common Stock on the Electronic Bulletin Board System under the
trading symbol PMRCA were $2.25 and $4.00, respectively. There is presently no
trading market for the Warrants. For a discussion of the factors considered in
determining the initial public offering prices, see "Underwriting." The
Company's Common Stock and Warrants have been approved for quotation on the
Nasdaq SmallCap Market ("Nasdaq SmallCap") under the symbols "FAUX" and "FAUXW,"
respectively.
Concurrently with the commencement of this offering, 102,041 shares of
Common Stock and 483,334 Warrants may be offered by certain Selling Shareholders
subject to certain lock-up and prospectus delivery requirements (the "Selling
Shareholders' Offering"). The Company will not receive any of the proceeds from
the sale of securities by the Selling Shareholders.
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" AT PAGE 8.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (4) DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share....................................... $3.75 $.375 $3.375
Per Warrant..................................... $.15 $.015 $.135
Total (3)....................................... $4,290,000 $429,000 $3,861,000
</TABLE>
(1) The Company has agreed to pay the Representative of the Underwriters (the
"Representative") a non-accountable expense allowance and to issue options
to the Representative to acquire the Representative's Securities as defined
in "Underwriting--Representative's Securities." The Company also has agreed
to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Underwriting."
(2) Before deducting offering expenses remaining to be paid by the Company from
proceeds of this offering of approximately $375,000 including the
non-accountable expense allowance to the Representative. See "Underwriting."
(3) The Company has granted the Representative options for 45 days from the date
of this Prospectus to purchase up to an additional 165,000 shares of Common
Stock and 165,000 Warrants on the same terms as set forth above solely to
cover over-allotments, if any. If the over-allotment options are exercised
in full, the total Price to Public, Underwriting Discount and Proceeds to
Company will be $4,933,500, $493,350 and $4,440,150 respectively. See
"Underwriting."
(4) The information contained in this Prospectus is based upon an assumed
initial offering price of $3.75 per share of Common Stock and $.15 per
Warrant.
The Common Stock and Warrants are being offered by the Underwriters, on a
firm commitment basis, subject to prior sale, when, as and if delivered to and
accepted by the Underwriters, and subject to their right to reject any order, in
whole or in part, and certain other conditions. It is expected that delivery of
the certificates representing the Common Stock and Warrants will be made on or
about April , 1997.
COHIG & ASSOCIATES, INC.
The date of this Prospectus is April , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance with the Exchange
Act files periodic reports, and other information with the Securities and
Exchange Commission (the "Commission"). Reports, and other information
concerning the Company can be inspected and copied (at prescribed rates) at the
Commission's Public Reference Section, Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, as well as at the following Regional
Offices: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material also may be obtained at prescribed
rates from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549, and are publicly available
through the Commission's web site at http:// www.sec.gov.
The Company has filed a Registration Statement on Form SB-2 with the
Commission in Washington, D.C., in accordance with the provisions of the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain portions of which have been omitted
as permitted by the rules and regulations of the Commission. For further
information pertaining to the shares of Common Stock and Warrants offered hereby
and the Company, reference is made to the Registration Statement, including the
exhibits and financial statement schedules filed as a part thereof. Statements
herein contained concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an Exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference. The Registration Statement may be
obtained from the Commission upon payment of the fees prescribed therefor and
may be examined at the principal office of the Commission in Washington, D.C.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTION WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AND
WARRANTS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK AND WARRANTS ON THE NASDAQ SMALLCAP MARKET IN ACCORDANCE WITH RULE 103 OF
REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE RELATED NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION WITH REGARD TO THE COMMON STOCK OF THE COMPANY IN THIS PROSPECTUS,
INCLUDING SHARE AND PER SHARE INFORMATION, GIVES EFFECT TO (I) A ONE-FOR-FIVE
(1-FOR-5) REVERSE STOCK SPLIT EFFECTED BY THE COMPANY ON DECEMBER 20, 1996, AND
(II) THE CONVERSION OF 416,670 SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK
INTO 102,041 SHARES OF COMMON STOCK.
THE COMPANY
Premier Concepts, Inc. ("Premier" or the "Company"), operating under the
name "Impostors," believes that its 35 retail stores make it one of the nation's
largest specialty chain retailers of faux jewelry. Specializing in the marketing
and retailing of high-end fashion and reproduction jewelry that has the
appearance, but not the cost, of fine jewelry, the Company sells products that
emulate fine jewelry and classic pieces originally 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. Also, the Company offers an extensive collection of 14 karat gold
jewelry with synthetic stones. In June 1996, the Company introduced a new
collection of genuine sterling silver featuring semi-precious and synthetic
stones. The Company's products are purchased principally from several domestic
vendors and from vendors in China, England, Hong Kong, Italy, Korea, Spain,
Taiwan and Thailand.
The 35 currently operating Impostors retail 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. Stores are considered to be in
tourist locations where more than 50% of sales are made to non-residents.
Currently, the Company has stores in Southern California, Northern California,
the states of Arizona, Colorado, Florida, Louisiana, Maryland, Missouri, New
Jersey and Washington and in the Washington, D.C. area. During the period from
August 30, 1996 to February 15, 1997, the Company opened nine stores located in
Colorado, Florida, Nevada and New Jersey, resulting in the current 35 locations.
In addition, the Company has entered into leases for four new retail stores in
Southern California, Florida, and Washington, D.C, which are scheduled to open
over the next four months.
The Company believes that it has an opportunity to become a leader in the
specialty retailing segment of the national and international market for faux
and reproduction jewelry and related accessory items through a combination of
internal growth and acquisitions. Its plans include expansion of retail store
locations, 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.
The Company was organized on July 15, 1988 under the laws of the State of
Colorado.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities offered by the Company..... 1,100,000 shares of Common Stock and 1,100,000 Warrants. Two
Warrants will entitle the holder to purchase one share of
Common Stock at the Warrant Exercise Price during the
three-year period commencing on the date of this Prospectus.
The Warrants will be redeemable under certain circumstances.
See "Description of Securities."
Common Stock outstanding before
offering............................ 662,208 shares (1)(2)(3)(4)
Common Stock outstanding after
offering............................ 1,762,208 shares (1)(2)(3)(4)(5)
Use of proceeds....................... To lease, equip and stock with inventory new retail locations,
for debt reduction, to remodel existing store locations, to
develop new marketing channels, and working capital. See "Use
of Proceeds."
NASDAQ SmallCap symbols:
Common Stock........................ "FAUX"
Warrants............................ "FAUXW"
</TABLE>
- --------------------------
(1) Does not include (i) 230,000 shares of Common Stock reserved for issuance
upon exercise of options which may be granted under the Company's 1993 Stock
Incentive Plan, 196,000 of which are subject to outstanding and unexercised
options having a weighted average exercise price of $2.55 per share, and of
which 55,000 options are subject to future vesting, (ii) 60,250 shares of
Common Stock reserved for issuance upon exercise of outstanding Class C
Common Stock Purchase Warrants ("C Warrants") at a price of $10.00 per
share, (iii) 12,000 shares of Common Stock reserved for issuance pursuant to
the exercise of other outstanding options and warrants having a weighted
average exercise price of $2.50 per share, and (iv) 60,000 shares of Common
Stock reserved for issuance pursuant to the exercise of options which may be
granted under the Company's 1995 Employee Stock Purchase Plan ("1995 ESPP").
(2) On June 24, 1996, the Company completed the sale of 416,670 shares of Series
A Convertible Preferred Stock ("Convertible Preferred Stock") and Class B
Warrants entitling the holders to acquire 41,667 shares of Common Stock (the
"Bridge Offering"), realizing net proceeds of $225,000. Includes 102,041
shares of Common Stock reserved for issuance on the date of this Prospectus
pursuant to the automatic conversion of the Convertible Preferred Stock, or
41,667 shares of Common Stock reserved for issuance upon exercise of the
outstanding Warrants. See "Description of Securities--Series A Convertible
Preferred Stock".
(3) Does not include shares reserved for issuance upon the conversion of the 12%
Convertible Promissory Notes (the "Convertible Notes"). On December 27,
1996, the Company completed a bridge financing (the "Bridge Note Financing")
consisting of $1,120,000 in Convertible Notes and 200,000 Class B Warrants,
realizing net proceeds of $1,041,600. The Company utilized $624,325 of these
proceeds to redeem from certain securityholders 189,180 of the Company's
Common Stock and 32,500 Class C Warrants. The principal balance of the
Convertible Notes is convertible, at the option of the holder, into shares
of the Company's Common Stock at a conversion value of $2.80 per share,
subject to adjustment under certain circumstances. Each Class B Warrant
entitles the holder to purchase one share of the Company's Common Stock at
an exercise price of $5.00 per share and will be automatically exchanged for
two Warrants upon the effective date of the Registration Statement of which
this Prospectus forms a part. See "Description of Securities--12%
Convertible Promissory Notes."
(4) The Bridge Note Financing was undertaken to permit the Company to redeem
certain securities owned by former shareholders in order to facilitate this
offering and the Company's application for NASDAQ listing. The Company has
agreed and intends to utilize a portion of the proceeds of the offering to
retire the Convertible Notes. See "Use of Proceeds."
(5) Assumes no exercise of Warrants and Representative's Securities to be sold
by the Company in this offering.
4
<PAGE>
The information contained in this Prospectus relates solely to the issuance
of up to 1,100,000 shares of Common Stock and 1,100,000 Warrants and additional
Common Stock and Warrants included in the Over-Allotment Options granted to the
Representative. The shares of Common Stock and Warrants are being offering and
sold to the public through the Underwriters on the terms set forth in
"Underwriting."
A separate resale Prospectus may also be used in connection with the sale by
certain securityholders of up to 102,041 shares of Common Stock and 483,334
Warrants. See "Concurrent Offering." Any sales of these securities will be made
only in accordance with Prospectus delivery requirements described in the resale
Prospectus.
RISK FACTORS
This offering involves a high degree of risk and immediate substantial
dilution. Prospective investors should carefully consider the matters set forth
under "Risk Factors" and "Dilution".
SUMMARY FINANCIAL DATA
Set forth below is selected summary financial data with respect to the
Company. Financial information for the years ended January 28, 1996 and January
26, 1997, is derived from the financial statements included elsewhere in this
Prospectus and is qualified by reference to such financial statements and the
notes related thereto or is derived from store-level schedules not included
herein.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JANUARY 28, JANUARY 26,
1996 1997
------------ ------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues........................................................................ $ 9,069,840 $ 9,773,700
Operating income (loss)............................................................... (37,298) 326,439
Income from discontinued operations................................................... 270,441 13,620
Net income............................................................................ 114,219 354,524
Net income available to common shareholders........................................... 114,219 341,949
Net income per common share........................................................... .23 .44
Weighted average common shares outstanding............................................ 495,800 777,408
STATISTICAL DATA: (2)
Store revenues........................................................................ $ 8,957,344 $ 9,739,844
Store gross margin.................................................................... 6,337,334 6,941,934
Store operating expenses.............................................................. 4,906,077 5,237,659
Store operating profit................................................................ 1,431,257 1,704,275
Corporate overhead operating expenses................................................. 1,518,416 1,386,701
Gross margin percentage............................................................... 70.3% 71.3%
Comparable same store sales (1)....................................................... 8,380,595 8,700,643
Comparable same store sales growth (1)................................................ N/A 3.8%
Comparable same store sales per square foot (1)....................................... 526.88 547.00
</TABLE>
<TABLE>
<CAPTION>
AS OF JANUARY 26, 1997
----------------------------
ACTUAL AS ADJUSTED(3)
------------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets..................................................................... $ 4,811,774 $ 6,502,351
Total liabilities................................................................ 3,814,371 2,093,948
Working capital.................................................................. 168,059 2,884,482
Stockholders' equity............................................................. 997,403 4,408,403
</TABLE>
- ------------------------
(1) Includes only the 26 stores open for the entire periods being compared.
5
<PAGE>
(2) Based on store-level schedules and is not meant to tie to the financial
statements and notes related thereto included elsewhere herein.
(3) Adjusted to reflect net proceeds from the sale by the Company in this
offering of 1,100,000 shares of Common Stock and 1,100,000 Warrants at the
assumed public offering prices of $3.75 per share and $.15 per Warrant and
the utilization of $1,370,000 of the net proceeds therefrom to retire the
Convertible Notes and other liabilities in the amount of $250,000. See "Use
of Proceeds." The "As Adjusted" information does not include the exercise of
the Warrants, the Over-Allotment Options or the options to acquire the
Representative's Securities. See "Use Of Proceeds," "Capitalization" and
"Underwriting."
6
<PAGE>
THE COMPANY
The Company was incorporated on July 14, 1988 under the laws of the State of
Colorado under the name Protron Systems, Inc. In April, 1991, under the
corporate name of Silver State Holding, Inc., the Company completed a small
initial public offering in connection with its business involving the purchase
and sale of real estate in the Colorado Springs, Colorado area. In March 1993,
following the sale of all the real estate, the Company acquired two gaming
properties in Central City, Colorado in a series of transactions in which it
issued, in the aggregate, 205,800 shares of Common Stock and changed its name to
Silver State Casinos, Inc. In September 1993, the Company exchanged its interest
in those properties for 2,500,000 shares of common stock of Global Casinos,
Inc., a Utah corporation. Between September 1993 and March 1994, the Company had
no material operations. The Company has no continuing involvement or interest in
any of the prior businesses.
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 27 Impostors retail jewelry stores and changed its name to Premier Concepts
Inc. 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 27,500 shares of Common Stock. See Note 2 to Financial Statements.
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 27 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. See Note 2 to Financial Statements.
The Company currently operates 35 Impostors stores, has executed leases for
four additional stores scheduled to open over the next four months, and has
plans to open a total of six to eight new stores in the next 12 months. See "Use
of Proceeds" and "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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FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 and are thus prospective. Such statements are subject to risks,
uncertainties and other factors which could cause actual results to differ
materially from future results expressed or implied by such forward-looking
statements. Such risks and uncertainties include, but are not limited to,
competitive pressures, changing economic conditions and other factors, some of
which will be outside of the control of the Company.
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE POSSIBILITY OF THE
LOSS OF THEIR ENTIRE INVESTMENT IN THE COMPANY'S SECURITIES AND, ALONG WITH EACH
OF THE FOLLOWING FACTORS, CONSIDER THE INFORMATION SET FORTH ELSEWHERE IN THIS
PROSPECTUS.
RISK FACTORS RELATED TO THE BUSINESS OF THE COMPANY
BANKRUPTCY OF PREDECESSOR. The Impostors operations were acquired by the
Company in 1994 out of a Chapter 11 bankruptcy proceeding by American Fashion
Jewels, Inc. ("AFJ"), the prior owner of Impostors. In its eight-year operating
history prior to the 1993 bankruptcy petition, AFJ had incurred substantial
debts, operating losses and unliquidated liabilities to numerous franchisees.
While the Company closed most of the unprofitable stores acquired from AFJ and
believes that it has defined and adopted an operating strategy which can lead to
profitable and successful operations, the Company has experienced operating
losses from its Impostors operations prior to the latest fiscal year and there
can be no assurance that the Company's efforts to achieve sustained
profitability will be any more successful than those of AFJ. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Financial Statements.
LACK OF PROFITABLE OPERATING HISTORY. For the year ended December 31, 1994,
the month ended January 29, 1995, and the fiscal year ended January 28, 1996,
the Company reported operating losses of $683,641, $203,026 and $37,298,
respectively. While the Company reported operating income of $326,439 for the
fiscal year ended January 26, 1997, there can be no assurance that future
operations will continue to be profitable. See Financial Statements.
OPERATING LEASES; RISK OF LONG-TERM COMMITMENTS. The commercial leases
covering the Company's existing 35 retail locations, combined with the four
additional leases the Company has executed for new stores, in the aggregate,
represent approximately $13 million in future fixed rental payments. In
addition, all of the Company's store leases have provisions requiring additional
payments for operating expenses, real estate taxes and additional rent based
upon a percentage of sales. There can be no assurance that store revenues will
be sufficient to cover the Company's unconditional future rent obligations under
these leases. Further, the Company's leases expire at various dates from 1997 to
2007, and upon expiration, there can be no assurance that the Company will be
able to renegotiate lease terms that are favorable to the Company, or, failing
renegotiation, locate suitable replacement facilities. In addition, the
Company's largest store in Union Square, San Francisco expires in the year 2001.
During Fiscal 1997, this store contributed $202,825 to the Company's total net
store contribution and was one of the five stores that contributed, in the
aggregate, (41%) of the total net store contribution (store revenues less direct
store expenses). The loss of the Union Square store or one or more of the other
established retail locations could have a material adverse effect on the Company
and its operations. Further, the Company's office lease was personally
guaranteed by four of the members of the Company's Board of Directors at the
time it was executed. See "Certain Transactions--Lease Guarantee" and Notes 5
and 6 to Financial Statements.
Additionally, the Company plans to lease and open six to eight additional
retail stores over the next 12 months, of which four locations are already under
lease commitment. While the Company has developed criteria utilized in
identifying new store sites, the Company has no way of predicting with
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certainty whether any new location will support a profitable retail store. As a
result, the Company's expansion activities represent a substantial risk that the
Company will commit itself to new leases for locations which will prove to be
unprofitable. See "Business--Business Strategy."
ADDITIONAL CAPITAL REQUIREMENTS; POSSIBLE ADDITIONAL DILUTION. It is
probable that the Company will require additional capital in the future to
finance its business activities. The Company's future plans include remodeling
the Company's existing stores and leasing, equipping and stocking new retail
locations during fiscal 1998. The Company also plans to heighten its
merchandizing efforts through the various home shopping networks and the
development and marketing of the Company's product catalogue. It is likely that
proceeds from this offering will be below the funding necessary for the Company
to fully develop its business strategy. Additional capital, to the extent
needed, may be obtained through borrowings or by additional equity financing.
Future equity financing may occur through the sale of either unregistered common
stock in exempt offerings or through the public offering of registered equity
securities. In any case, such additional equity financing may result in
additional dilution to investors. The Company has no arrangements for the
acquisition of additional capital, and there can be no assurance that any
additional capital, funding or revenues can be satisfactorily arranged. See
"Business," "Use of Proceeds," and "Risk Factors Related to the Offering."
SEASONALITY; FLUCTUATIONS IN CAPITAL DEMANDS. The Company's business is
highly seasonal with its mall locations generating nearly 20% of their business
during the Christmas holiday season. The Company's 17 tourist locations are less
sensitive to the effect of the holiday season, however, on a store-by-store
basis, they do experience fluctuations based upon such factors as seasonal
economic conditions, transportation costs and other factors effecting tourism in
their particular locations. This seasonality results in higher demand for
working capital at certain times of the year. Also, interim operating results
are not necessarily indicative of the Company's results of operations or
financial conditions on an annualized basis. The Company cannot accurately
predict the potential adverse effect of seasonality on its business, and there
can be no assurance that the Company can acquire or develop additional retail
locations in counter-seasonal locales or cultivate innovative marketing
campaigns which will balance out the potential adverse consequences. See
"Business--Seasonality."
MANAGEMENT'S LACK OF VOTING INFLUENCE. The Company's President, Sissel B.
Greenberg, owns only 2,600 shares of Common Stock, which represents less than 1%
of the total issued and outstanding shares. All of the Company's officers and
directors as a group own only 5,600 shares, or approximately 1% of the total
outstanding shares of Common Stock. Even giving effect to the exercise of their
outstanding options, the Company's officers and directors as a group will
exercise voting control over only 4.6% of the Company's outstanding shares of
Common Stock following completion of this offering. As a result of this lack of
voting influence as shareholders, there can be no assurance that the Company's
officers and directors will be able to implement the plans and strategies
described in this Prospectus. Further, it is possible that shareholders with
greater voting influence could initiate actions which could be adverse to those
plans or hostile to current management. See "Security Ownership of Management
and Principal Shareholders."
LIMITED LIQUIDITY AND CAPITAL RESOURCES. The operation of numerous retail
locations is very capital intensive, particularly during the holiday season. In
the past, the Company has operated on limited capital resources and has depended
primarily on funds generated from stock sales and short-term loans from its
shareholders and other short-term funding sources to make up any working capital
shortfalls. There can be no assurance that funds necessary for operations can be
generated from future stock sales and short-term loans from related parties
and/or other investors. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
RISK OF LEVERAGE AND DEFAULT. All of the Company's assets are encumbered by
debt, the service of which requires a substantial portion of the net cash flow
generated by the Company's operations. Of the proceeds of this offering,
$1,220,000 has been allocated to reduce the Company's secured debt including
retiring the
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Convertible Notes. Future losses from operations may impair the Company's
ability to service its remaining debt and retire it in accordance with its
terms. Should the Company default under any of its secured debt, a creditor
could foreclose against the Company's assets and effectively force the cessation
of the Company's business. See "Use of Proceeds" and Note 4 to Financial
Statements. Further, the Company's leveraged position impairs its ability to
obtain additional financing to fund working capital requirements, capital
expenditures or other purposes, renders the Company more vulnerable to extended
economic downturn, restricts the Company's ability to make acquisitions or
otherwise exploit business opportunities, and limits the Company's flexibility
to respond to changing economic conditions.
NEW BUSINESS AND LIMITED RETAILING EXPERIENCE. The Company has only been
engaged in the business of marketing and retailing high-end fashion and
reproduction jewelry since March, 1994. Certain of the Company's management does
not have prior retailing experience. As a result, the Company has only limited
experience in the merchandizing of fashion and reproduction jewelry, and there
can be no assurance that its intended activities will be successful or result in
profitable operations. It is also impossible to predict what effect, if any,
fluctuations in the United States or worldwide economy will have on such
industry. See "The Company" and "Business."
DEPENDENCE UPON MANAGEMENT. The Company's future success depends in a large
part on the continued service of its President, Sissel B. Greenberg, and to a
lesser extent on its marketing, sales and promotional personnel, as well as on
its ability to continue to attract, motivate and retain highly qualified
employees. Although the Company provides employees with the opportunity to
acquire equity in the Company pursuant to Incentive Stock Options granted under
the Company's 1993 Stock Incentive Plan, its key employees may nevertheless
voluntarily terminate their employment with the Company at any time. The loss of
the services of key personnel could have a material adverse effect upon the
Company's operations and marketing efforts. While the Company has a written
employment contract with its President, Sissel B. Greenberg, which expires on
June 20, 1999, there can be no assurance of her continued service to the
Company. The Company does not have key person life insurance covering its
management personnel or other key employees. See "Management."
COMPETITION. The Company faces significant competition from numerous
organizations throughout the country, and world-wide, which offer fashion and
reproduction jewelry, many of which possess significantly greater resources than
the Company and in many cases greater retailing expertise. Indirectly, the
Company competes against retailers of fashion jewelry on the low end and fine
jewelry on the upper end of the jewelry market. Within the faux jewelry
industry, the Company competes against department stores, some of whom have
significantly greater resources and retailing experience than the Company, as
well as other businesses which function exclusively as specialty retailers of
faux jewelry. The Company competes against these specialty retailers not only in
its sources of supply but also in locations for its retail stores. The Company
may suffer a competitive disadvantage due to its limited resources and lack of
retailing experience. See "Business--Competition."
RISK OF INFRINGEMENT. A significant portion of the Company's products
represent jewelry designs or concepts copied or inspired by fine jewelry
developed and sold by famous designers. While most jewelry designs are not
protected by copyright or trademark law, on occasion a particular design may be
subject to a design copyright or trademark registration obtained by the original
designer. Due to the magnitude of the number of the Company's products, it is
impracticable for the Company to research each jewelry design that it purchases
for resale to determine whether or not there may exist a copyright or trademark
registration preventing its unauthorized copy. While the Company has developed
certain merchandizing and purchasing methodologies which minimize the risk,
there can be no assurance that from time to time the Company will not
inadvertently infringe upon the intellectual property rights of third parties.
Under these circumstances, the Company may be subject to liability to the owner
of the design copyright or trademark to disgorge the Company's profits earned
from sales of the particular product, or in the alternative, liability for
statutory damages under copyright laws. See "Business--Intellectual Property."
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NO PROPRIETARY ADVANTAGE. Neither the design nor concept of any of the
Company's jewelry is subject to protection by the Company under applicable
copyright, trademark or trade secret laws. As a result, the Company holds no
proprietary advantage over others competing in the faux jewelry markets. See
"Business--Intellectual Property."
NO FIRM CONTRACTS FROM SUPPLIERS OR MANUFACTURERS. The Company does not
have any written contracts with any of its suppliers or manufacturers or
commitments from any of its suppliers or manufacturers to continue to sell
products to the Company. As a result, there is a risk that any of the Company's
suppliers or manufacturers may discontinue selling their products to the Company
for any reason. Although the Company believes that it could establish alternate
sources for most of its products, any delay in locating and establishing
relationships with other sources could result in product shortages and back
orders for the product, with a resulting loss of revenues to the Company. See
"Business--Suppliers and Vendors."
LICENSING AND OTHER GOVERNMENTAL REGULATION. For each retail location
operated by the Company, it is necessary for the Company to apply for and obtain
certificates of authority, permits and other licenses from state and local
governmental authorities permitting and/or controlling the Company's operation
of one or more retail stores in the particular state and/or municipality. Each
governmental jurisdiction has its own regulatory requirements which can impose
additional reporting requirements and costs. While the Company has been able to
obtain all necessary certificates, permits and licenses in the past, there can
be no assurance that future changes in governmental regulation or the adoption
of more stringent requirements may not have a material adverse impact upon the
Company's future operations. See "Business-- Properties."
EXPANSION INTO FOREIGN MARKETS. Although the Company intends to expand its
wholesale distribution into foreign markets, there can be no assurance that the
Company can open markets on a timely basis or that such new markets will prove
to be profitable. Significant regulation and legal barriers must be overcome
before marketing can begin in any foreign market. Also, before marketing has
commenced, it is difficult to assess the extent to which the Company's products
and sales techniques will be successful in any given country. In addition to
significant regulatory barriers, the Company may also expect problems relating
to entering new markets with different cultural bases and legal systems from
those encountered in the past. See "Business--Marketing and Distribution."
Moreover, expansion of the Company's operations into new markets may entail
substantial working capital and capital requirements associated with regulatory
compliance. The Company intends to spend a portion of the proceeds of this
offering for the purpose of expansion into foreign markets. See "Use of
Proceeds."
EFFECT OF EXCHANGE RATE FLUCTUATIONS. The Company intends to expand its
activities in foreign countries, both with respect to inventory purchases and
retail sales. As a result, exchange rate fluctuations may have a significant
effect on its sales, costs and gross margins. Further, if exchange rates
fluctuate dramatically, it may become uneconomical for the Company to establish
or continue purchasing or selling activities in certain countries. See
"Business--Other Marketing and Distribution Channels."
CONFLICTS OF INTEREST AND RELATED PARTY TRANSACTIONS. The Company has
entered into certain transactions with its former and current officers,
directors and principal shareholders relating to the issuance of securities and
an office lease. There was the potential for conflicts of interest from these
transactions. The Board of Directors has determined that any future transactions
with officers, directors or principal shareholders will be approved by the
disinterested directors and will be on terms no less favorable than could be
obtained from an unaffiliated third party. See "Certain Transactions" and
"Security Ownership of Management and Principal Shareholders."
LIMITATION OF DIRECTORS' LIABILITY. The Company's Articles of Incorporation
provide, as permitted by Colorado law, that its directors shall have no personal
liability for certain breaches of their fiduciary duties to the Company. This
provision may reduce the likelihood of derivative litigation against directors
and may discourage shareholders from bringing a lawsuit against directors for a
breach of their duty. In addition,
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the Company's Bylaws provide for mandatory indemnification of directors and
officers to the fullest extent permitted by Colorado law. See "Management."
MANAGEMENT OF GROWTH. If the Company is successful in increasing demand for
the Company's products, of which there can be no assurance, growth of the
Company could create certain additional risks. Rapid growth can be expected to
place a substantial burden on the Company's management resources and financial
controls. The Company's ability to manage its growth effectively will require
the Company to continue to implement and refine its operational, financial and
information management systems and to train, motivate and manage its employees.
The Company's ability to attract and retain qualified personnel will have a
significant affect on the Company's ability to establish and maintain its
position in the market, and failure of the Company to manage its growth
effectively could have material adverse effects on the Company's results of
operations. See "Management."
RISK FACTORS RELATED TO THIS OFFERING
OFFERING PRICES ARBITRARILY DETERMINED. The offering price of the Common
Stock and Warrants and the Warrant Exercise Price and other terms of the
Warrants being offered hereby were determined by negotiation between the Company
and the Representative and are not necessarily related to the Company's assets,
book value or financial condition, and may not be indicative of the actual value
of the Company. See "Underwriting."
BROAD DISCRETION IN APPLICATION OF PROCEEDS; UNSPECIFIED ACQUISITIONS. Of
the approximate $3,486,000 net proceeds from this offering, $1,500,000 will be
used for store openings, some of which have been recently completed, $1,370,000
will be used to retire the $1,120,000 in Convertible Notes and to repay certain
short-term debt of $250,000, $250,000 for store remodeling, and $100,000 for
development of new marketing channels. The remainder will be used for working
capital and other general corporate purposes. The net proceeds allocated to the
development of new stores and marketing is subject to change depending upon a
number of factors, including future revenue growth, the amount of cash generated
by the Company's operations and the availability of desirable locations.
Management believes that the availability of proceeds from this offering would
enhance the Company's ability to expand its business more rapidly by taking
advantage of opportunities to acquire additional retail locations, or even
competitive or complementary businesses, on a favorable basis. Although the
Company is not currently a party to any agreement or understanding with respect
to any prospective acquisition, it has explored and continues to evaluate
possible opportunities that complement the Company's business. Accordingly the
Company's management will have broad discretion concerning the exact nature of
the application of net proceeds of this offering. See "Use of Proceeds."
DILUTION. At January 26, 1997, giving retroactive effect to the conversion
of the Convertible Preferred Stock into 102,041 shares of Common Stock, the
Company had a proforma net tangible book value of $411,411 or $.62 per share
based upon 662,208 Common Stock shares outstanding. Net tangible book value per
share is determined by dividing the number of outstanding shares of Common Stock
into the net tangible book value of the Company (total assets less total
liabilities and intangible assets). After giving effect to the sale of 1,100,000
shares of Common Stock and 1,100,000 Warrants by the Company in this offering
and receipt of the estimated net proceeds therefrom, the adjusted net tangible
book value at January 26, 1997 would have been $4,247,834 or $2.41 per share of
Common Stock. This represents an immediate increase of $1.79 per share to
current shareholders and an immediate dilution of $1.49 per share or 38% to the
investors in this offering.
NEED FOR CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATIONS. Holders of
the Warrants will have the right to exercise the Warrants for the purchase of
shares of Common Stock only if there is a current and effective Registration
Statement and Prospectus covering the Warrants and the shares of Common Stock
issuable upon their exercise, and only if the shares are qualified for sale
under the securities laws of the applicable state or states. While the Company
has undertaken plans to do so, there can be no assurance
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that a current Registration Statement and Prospectus will be in effect when any
of the Warrants are attempted to be exercised. Although the Company will seek to
qualify for sale the shares of Common Stock underlying the Warrants in those
states in which the securities are to be offered, no assurance can be given that
such qualification will occur. The Warrants may be deprived of any value if a
Prospectus covering the shares issuable upon the exercise thereof is not kept
effective and current, or if such underlying shares are not, or cannot be,
registered in the applicable states. See "Description Of Securities."
POTENTIAL ADVERSE EFFECT OF WARRANT REDEMPTION. The Warrants may be
redeemed by the Company, after 12 months from the date of this Prospectus, at a
price of $0.05 per Warrant upon 45 days' notice, mailed after the closing bid
price of the Common Stock has equaled or exceeded 150% of the then current
Warrant Exercise Price (initially $5.00 per share), for a period of 20 or more
of the 30 consecutive trading days ending within 30 days preceding such notice.
Warrantholders shall have exercise rights until the close of the business day
preceding the date fixed for redemption. Redemption of the Warrants could force
the holders to exercise the Warrants and pay the Exercise Price at a time when
it may be disadvantageous for holders to do so, to sell the Warrants at the then
current market price when they might otherwise wish to hold the Warrants, or to
accept the redemption price, which is likely to be substantially less than the
market value of the Warrants at the time of redemption. The Warrants may not be
redeemed or exercised unless a Registration Statement pursuant to the Securities
Act covering the underlying shares of Common Stock is current and such shares
have been qualified for sale, or there is an exemption from applicable
qualification requirements, under the securities laws of the state of residence
of the holder of the Warrant. See "Description Of Securities."
UNDERWRITERS' INFLUENCE ON THE MARKET. A significant number of the shares
of Common Stock and Warrants may be sold to customers of the Underwriters. Such
customers may subsequently engage in transactions for the sale or purchase of
such securities through or with the Underwriters. Although they have no legal
obligation to do so, the Underwriters from time to time in the future may make a
market in and otherwise effect transactions in the Company's securities. To the
extent the Underwriters do so, they may be a dominating influence in any market
that might develop and the degree of participation by the Underwriters may
significantly affect the price and liquidity of the Company's securities. Such
market making activities, if commenced, may be discontinued at any time or from
time to time by the Underwriters without obligation or prior notice. Depending
on the nature and extent of the Underwriters' market making activities and
retail support of the Company's securities at such time, the Underwriters'
discontinuance could adversely affect the price and liquidity of the Company's
securities.
LACK OF DIVIDENDS. No cash dividend was paid for the fiscal years ended
January 28, 1996 and January 26, 1997, and the Company does not intend to
declare or pay any dividends on its outstanding shares of Common Stock in the
foreseeable future. In March 1994, the Company distributed to its shareholders
of record, pro rata, 2,409,700 shares of the common stock of Global Casinos,
Inc. previously acquired by the Company in its disposition of two casino
properties. See "Dividends."
LIMITED PUBLIC TRADING MARKET FOR THE COMPANY'S COMMON STOCK. While there
currently exists in the over-the-counter market a limited and sporadic public
trading market for the Company's Common Stock, there can be no assurance that
such a market will improve in the future, even if the Company's securities
continue to be listed on NASDAQ. There can be no assurances that an investor
will be able to liquidate his investment without considerable delay, if at all.
If a more active market does develop, the price may be highly volatile. Factors
discussed herein may have a significant impact on the market price of the shares
offered. Moreover due to the relatively low price of the Company's securities,
many brokerage firms may not effect transactions in the Company's Common Stock.
See "Description Of Securities."
RISKS OF PRICE AND VOLUME FLUCTUATIONS. The over-the-counter markets for
securities such as the Company's Common Stock and Warrants historically have
experienced extreme price and volume fluctuations during certain periods. These
broad market fluctuations and other factors, such as new product developments
and trends in the Company's industry and the investment markets generally, as
well as economic
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conditions and quarterly variations in the Company's results of operations, may
adversely affect the market price of the Company's Common Stock and Warrants.
POSSIBLE LOSS OF NASDAQ LISTING. In order to continue to be listed on
NASDAQ, the Company must satisfy certain maintenance standards applicable to all
Nasdaq-listed companies which relate to the Company's assets, capital surplus
and public trading price of its securities. In addition, NASDAQ, in its listing
approval letter, has informed the Company that the failure to maintain the
minimum initial bid price as required by applicable NASDAQ listing requirements
($3.00 per share) for 30 consecutive calendar days subsequent to this offering
may result in the immediate implementation of delisting proceedings, at which
the Company will be afforded all rights specified in NASD rules. As a result,
there can be no assurance that the Company's securities will continue to be
listed on NASDAQ. If the Company's Common Stock and Warrants are delisted from
NASDAQ, trading, if any, in those securities would thereafter be conducted in
the over-the-counter market on an electronic bulletin board established for
securities that do no meet NASDAQ listing requirements, or in what are commonly
referred to as the "pink sheets." As a result, an investor would find it
substantially more difficult to dispose of, or to obtain accurate quotations as
to the price of the Company's securities, and depending upon several factors
including future market price of the Common Stock, the Company's securities
could become subject to the "penny stock" rules. See "Risk Factors--The
Securities Enforcement and Penny Stock Reform Act of 1990."
THE SECURITIES ENFORCEMENT AND PENNY STOCK REFORM ACT OF 1990. The
Securities Enforcement and Penny Stock Reform Act of 1990 requires additional
disclosure, relating to the market for penny stocks, in connection with trades
in any stock defined as a penny stock. The Commission recently adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
Such exceptions include any equity security listed on NASDAQ and any equity
security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous operation for three years,
(ii) net tangible assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three years, or (iii) average annual revenue
of at least $6,000,000, if such issuer has been in continuous operation for less
than three years. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
See "Certain Market Information."
Although the Common Stock and Warrants have been approved for quotation on
the Nasdaq SmallCap Market, there can be no assurance that they will remain
eligible to be included on Nasdaq. In the event that the Company's Common Stock
and Warrants were no longer eligible for quotation on Nasdaq, the Common Stock
and Warrants could become subject to rules adopted by the Commission regulating
broker-dealer practices in connection with transactions in "penny stocks." Those
disclosure rules applicable to penny stocks require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized disclosure document prepared by the Securities and Exchange
Commission. That disclosure document advises an investor that investments in
penny stocks can be very risky and that the investor's salesperson or broker is
not an impartial advisor but rather paid to sell the shares. It contains an
explanation and disclosure of the bid and offer prices of the security, any
retail charges added by the dealer to those prices ("markup" or "markdown"), and
the amount of compensation or profit to be paid to or received by the
salesperson in connection with the transaction. The disclosure contains further
admonitions for the investor to exercise caution in connection with an
investment in penny stocks, to independently investigate the security as well as
the salesperson with whom the investor is working, and to understand the risky
nature of an investment in the security. Further, the disclosure includes
information regarding the market for penny stocks, explanations regarding the
influence that marketmakers may have upon the market for penny stocks and the
risk that one or two dealers may exercise domination over the market for such
security and therefore control and set prices for the security not based upon
competitive forces. The broker-dealer must also provide the customer with
certain
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other information and must make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. Further, the rules require that following
the proposed transaction the broker provide the customer with monthly account
statements containing market information about the prices of the securities.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If the Company's Common Stock or Warrants became subject to
the penny stock rules, many brokers may be unwilling to engage in transactions
in the Company's securities because of the added disclosure requirements,
thereby making it more difficult for purchasers of Common Stock and Warrants in
this offering to dispose of their securities.
SHARES ELIGIBLE FOR FUTURE SALE. As of April 10, 1997, 560,167 shares of
the Company's Common Stock, were issued and outstanding, 502,735 of which are
"restricted securities" and under certain circumstances may, in the future, be
sold in compliance with Rule 144 adopted under the Securities Act. Of these
restricted shares, 244,409 shares are being registered for resale by the Company
in a separate Registration Statement which is expected to go effective
approximately thirty days after the date of this Prospectus. Further,
concurrently with this offering, 102,041 shares of Common Stock and 483,334
Warrants are being registered for sale under the Securities Act for certain
selling shareholders. In general, under Rule 144, subject to the satisfaction of
certain other conditions, a person, including an affiliate of the Company, who
has beneficially owned restricted shares of Common Stock for at least two years
is entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class, or if the Common Stock is quoted on NASDAQ or a stock exchange, the
average weekly trading volume during the four calendar weeks immediately
preceding the sale. A person who presently is not and who has not been an
affiliate of the Company for at least three months immediately preceding the
sale and who has beneficially owned the shares of Common Stock for at least
three years is entitled to sell such shares under Rule 144 without regard to any
of the volume limitations described above. Effective April 29, 1997, the two
year holding period referred to above will be reduced to one year and the three
year holding period referred to above will be reduced to two years.
The Company has outstanding options and Class C Warrants exercisable to
purchase, in the aggregate, 268,250 shares of Common Stock at a weighted average
exercise price of $4.22 per share. The Company also has outstanding Warrants
exercisable to purchase 241,667 shares of Common Stock at a price of $5.00 per
share, which warrants are being registered concurrently with this offering. In
addition, the Company is authorized to issue an additional 34,000 options under
the Company's 1993 Stock Incentive Plan ("Incentive Plan") and an additional
60,000 options under its Employee Stock Purchase Plan ("ESPP"). The Company
plans to register for sale under the Securities Act all shares issuable upon
exercise of options granted under either the Incentive Plan or ESPP. Following
completion of the offering covered by this Prospectus, assuming no exercise of
the Underwriter's Over-Allotment Option, the Company will have outstanding
Warrants exercisable to purchase, in the aggregate, 791,667 shares of Common
Stock at a price of $5.00 per share, in addition to Warrants issuable upon
exercise of the option granted to the Representative. See also "Options to
Representative" below. The Company has undertaken to register for sale under the
Securities Act all shares issuable upon exercise of those Warrants. No
prediction can be made as to the effect, if any, that sales of shares of Common
Stock or the availability of such shares for sale will have on the market prices
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of Common Stock may be sold in the public market may adversely affect
prevailing market prices for the Common Stock and could impair the Company's
ability to raise capital in the future through the sale of equity securities.
Actual sales or the prospect of future sales of shares of Common Stock under
Rule 144 may have a depressive effect upon the price of the Common Stock and the
market therefor.
RIGHTS TO ACQUIRE SHARES. A total of 268,250 shares of Common Stock have
been reserved for issuance upon exercise of outstanding options and warrants,
all but 55,000 of which are currently exercisable. In addition, there are
outstanding Warrants exercisable to purchase an aggregate of 241,667 shares of
15
<PAGE>
Common Stock. The exercise prices of these options and warrants range between
$1.875 per share and $10.00 per share, with a weighted average exercise price of
approximately $4.22 per share. During the terms of the outstanding options and
warrants, the last of which expire in 2003, the holders thereof will have the
opportunity to profit from an increase in the market price of the Company's
Common Stock with resulting dilution to the holders of the Common Stock. The
existence of such options and warrants may adversely affect the terms on which
the Company can obtain additional financing, and the holders of such options and
warrants can be expected to exercise or convert those securities at a time when
the Company, in all likelihood, would be able to obtain additional capital by
offering shares of its Common Stock on terms more favorable to the Company than
those provided by the exercise or conversion of such options or warrants.
AUTHORIZATION OF PREFERRED STOCK. The Company's Articles of Incorporation,
as amended, authorize the issuance of up to 20,000,000 shares of preferred
stock, $.10 par value. The Board of Directors has been granted the authority to
fix and determine the relative rights and preferences of preferred shares, as
well as the authority to issue such shares, without further stockholder
approval. As a result, the Board of Directors could authorize the issuance of a
series of preferred stock which would grant to holders preferred rights to the
assets of the Company upon liquidation, the right to receive dividend coupons
before dividends would be declared to common stockholders, and the right to the
redemption to such shares, together with a premium, prior to the redemption of
Common Stock. Common stockholders have no redemption rights. In addition, the
Board could issue large blocks of voting stock to fend against unwanted tender
offers or hostile takeovers without further shareholder approval. The ability of
the Board to issue one or more series of preferred stock without further
stockholder approval could have the effect of delaying, deterring or preventing
a change in control of the Company or otherwise making it more difficult for a
person to acquire control of the Company. Further, the ability of the Board to
so issue one or more series of Preferred Stock could have a depressive effect on
the market price of the Company's Common Stock. See "Description Of Securities."
AUTHORIZATION OF ADDITIONAL SHARES. The Company's Articles of
Incorporation, as amended, authorized the issuance of up to 850,000,000 shares
of Common Stock, of which 560,167 shares are outstanding on the date of this
Prospectus. The Company's Board of Directors has the authority to issue
additional shares of Common Stock and to issue options and warrants to purchase
shares of the Company's Common Stock without shareholder approval. Future
issuance of Common Stock could be at values substantially below the offering
price in the offering and therefore could represent further substantial dilution
to investors in the offering. In addition, the Board could issue large blocks of
voting stock to fend off unwanted tender offers or hostile takeovers without
further shareholder approval. The Company has outstanding options and warrants
exercisable to purchase in the aggregate up to 268,250 shares of Common Stock at
an average exercise price of $4.22 per share. Exercise of the options will have
a further dilutive effect on existing shareholders and investors in the
offering. See "Description Of Securities."
OPTIONS TO REPRESENTATIVE. In connection with this offering, the Company
will sell to the Representatives, for a nominal cost, options (the
"Representative's Securities") to purchase up to 110,000 shares of Common Stock
and 110,000 Warrants. The Representative's Securities will be exercisable
commencing one year after the date of this Prospectus and for four years
thereafter, at an exercise price of 120% of the initial public offering prices
of the Common Stock and of the Warrants. Holders of the Representative's
Securities are given the opportunity to profit from a rise in the market price
of the Common Stock with a resulting dilution of the interest of shareholders.
Furthermore, the Company will grant certain registration rights with regards to
the Representative's Securities and such registration could result in
substantial expense to the Company. See "Underwriting--Representative's
Securities."
16
<PAGE>
USE OF PROCEEDS
The proceeds to the Company from the offering, net of expenses of the
offering remaining to be paid, estimated to be $375,000, will be approximately
$3,486,000. Management anticipates that the proceeds will be applied with the
following priority during the next 12 month period:
<TABLE>
<CAPTION>
DESCRIPTION OF USE AMOUNT PERCENT
- ------------------------------------------------------------------------------ ------------ -----------
<S> <C> <C>
Opening new retail locations(1)............................................... $ 1,500,000 43.0%
Debt reduction(2)............................................................. 1,370,000 39.3%
Remodeling existing retail locations(3)....................................... 250,000 7.2%
Development of marketing channels(4).......................................... 100,000 2.9%
Working capital(5)............................................................ 266,000 7.6%
------------ -----------
$ 3,486,000 100.00%
------------ -----------
------------ -----------
</TABLE>
- ------------------------
(1) During the next 12 months, the Company intends to open six to eight new
retail locations. The cost to open a new store will range between $100,000
and $200,000 depending on location and size. The cost of opening a new store
includes leasehold improvements, equipment and fixtures, and initial
inventory buildup. The Company is currently targeting tourist and upscale
locations in existing and new markets. To date, the Company has executed
four additional leases in California, Florida, and Washington, D.C.
Management has also engaged in negotiations with several potential lessors
in Arizona, Florida, Massachusetts, Nevada, New Jersey and New York and
shortly after the offering, expects to have identified a "target list" of
possible additional locations for expansion. Any funds not used to open new
stores will be allocated to working capital. Includes approximately $400,000
of costs already incurred by the Company in connection with recently opened
new store locations.
(2) Consists of repayment of the $1,120,000 in Convertible Notes and $200,000 in
short-term notes, of which $100,000 is collateralized by the Company's
assets, and $50,000 of selected accounts payable. The short term notes to be
retired consist of a $100,000 note which bears 12% interest which was due in
January, 1996, the $60,000 balance due on a note which, together with 12%
interest was due in January 1996, and a $35,500 note which bears interest at
12% per annum which was due on December 31, 1996. All of the note holders
holding notes in default have agreed to forebear from taking action on the
notes pending completion and payment from the proceeds of this offering. See
"Description of Securities--12% Convertible Promissory Notes."
(3) The Company's merchandising strategy focuses on high-quality designer
influenced products and an upscale shopping environment. To this end, the
Company has launched a campaign to enhance the appearance of its existing
stores. The Company intends to allocate a portion of the proceeds to remodel
up to six stores over the next 12 months.
(4) Over the next 12 months, the Company plans to enhance and upgrade its
internet website, pursue wholesale opportunities in the international
marketplace, establish arrangements with home shopping networks and complete
the Company's product catalogue. The development of these additional
marketing channels is expected to cost approximately $100,000 over the next
12 months.
(5) The proceeds allocated to working capital will be applied, to the extent
necessary, to the Company's current operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." A portion of
those proceeds may also be used for additional store remodelings in the
future. Further, as it is an inherent part of the Company's strategic plan
to achieve long-term growth and profitable operations through, in part,
acquisitions, a portion of the proceeds allocated to working capital may be
used in connection the acquisition of one or more stores or chain of stores.
While the Company regularly evaluates acquisition and business combination
opportunities, there are no
17
<PAGE>
substantive negotiations, arrangements, agreements or understandings with
respect to any potential acquisition.
The amounts set forth above represent the Company's present intentions for
the use of the proceeds from this offering. However, actual expenditures could
vary considerably depending upon many factors, including, without limitation,
changes in the economic conditions, unanticipated complications, delays and
expenses, or problems relating to the development of additional retail
locations. Any reallocation of the net proceeds of the offering will be made at
the discretion of the Board of Directors but will be in furtherance of the
Company's strategy to achieve growth and profitable operations through the
development of additional retail locations. The Company's working capital
requirements are a function of its future sales growth and expansion, neither of
which can be predicted with any reasonable degree of certainty. As a result, the
Company is unable to precisely forecast the period of time for which proceeds of
this offering will meet its working capital requirements. The Company may need
to seek funds through loans or other financing arrangements in the future, and
there can be no assurance that the Company will be able to make such
arrangements in the future should the need arise.
Pending use of the net proceeds of the offering, the funds will be invested
temporarily in certificates of deposit, short-term government securities or
similar investments. Any income from these short-term investments will be used
for working capital.
18
<PAGE>
DILUTION
At January 26, 1997, giving retroactive effect to the conversion of the
Convertible Preferred Stock into 102,041 shares of Common Stock, the Company had
a proforma net tangible book value of $411,411 or $.62 per share based upon
662,208 Common Stock shares outstanding. Net tangible book value per share is
determined by dividing the number of outstanding shares of Common Stock into the
net tangible book value of the Company (total assets less total liabilities and
intangible assets). After giving effect to the sale of 1,100,000 shares of
Common Stock and 1,100,000 Warrants by the Company in this offering at the
assumed prices of $3.75 and $.15, respectively, and receipt of the estimated net
proceeds therefrom, the adjusted net tangible book value at January 26, 1997
would have been $4,247,834 or $2.41 per share of Common Stock. This represents
an immediate increase of $1.84 per share to current shareholders and an
immediate dilution of $1.49 per share or 38% to the investors in this offering.
The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share of Common Stock and Warrant (1)...... $ 3.90
Net tangible book value per share of Common Stock before offering (2)...... $ .62
Increase per share of Common Stock attributable to new investors........... $ 1.79
---------
Adjusted net tangible book value per share of Common Stock after offering
(2)(3)(4)................................................................... $ 2.41
-----
Dilution of net tangible book value per share of Common Stock to new
investors (2)(3)(4)......................................................... $ 1.49
-----
-----
Dilution per share of Common Stock as a percentage of offering price
(2)(3)(4)................................................................... 38%
-----
-----
</TABLE>
- --------------------------
(1) Includes the price of the Warrant.
(2) Assumes that all the consideration paid by investors in the Bridge Offering
and Bridge Note Financing is allocated to the Convertible Preferred Stock
and Convertible Notes, respectively. Also assumes conversion of all shares
of Convertible Preferred Stock into 102,041 shares of Common Stock.
(3) Additional dilution to new investors will also result if shares of Common
Stock are issued upon exercise of outstanding warrants and options available
for grant under the Company's 1993 Stock Incentive Plan, which have exercise
prices of less than the offering price per share paid for shares of the
Company's Common Stock purchased in this offering. Further, warrants and
options are outstanding to purchase an aggregate of 268,250 shares of Common
Stock at a weighted average exercise price of $4.22 per share, as well as
Warrants exercisable to purchase an additional 241,667 shares of Common
Stock at a price of $5.00 per share.
(4) Assumes no exercise of Warrants or Representative's Securities.
As of the date of this Prospectus the Company has sold the outstanding
662,208 shares of Common Stock, giving effect to the conversion of 416,670
shares of Convertible Preferred Stock into 102,041 shares of Common Stock, for a
total purchase price of $2,358,910, at an average cost per share of $3.56. On
December 27, 1996, the Company completed the redemption of 189,180 of its Common
Stock shares from certain shareholders, which reduced the net number of shares
sold by the Company to 662,208. This compares to a combined purchase price of
$3.90 per share of Common Stock and a Warrant for investors in this offering.
Upon completion of this offering, and after deduction of expenses of the
offering, investors will have contributed 59.1% of the capital of the Company
for which they will have received 62.4% of the Common Stock.
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
January 26, 1997 (i) on a historical basis and (ii) as adjusted to give effect
to the conversion of the Convertible Preferred Stock, the sale of the securities
offered hereby and the initial application of the estimated net proceeds
therefrom. See "Use of Proceeds." This section should be read in conjunction
with the financial statements and notes to the financial statements which are
contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JANUARY 26, 1997
-------------------------------
AS
ACTUAL ADJUSTED(1)(2)(3)
------------- ----------------
<S> <C> <C>
Long term debt less current portion.......................... $ 1,792,624 $ 672,624
Stockholders' equity
Preferred Stock, $.10 par value, 20,000,000 shares
authorized; 416,670 shares outstanding; none outstanding
as adjusted.............................................. 41,667 --
Common Stock, $.002 par value, 850,000,000 shares
authorized; 560,167 shares issued and outstanding;
1,762,208 as adjusted(1)................................. 1,120 3,524
Additional paid-in capital................................. 2,316,125 5,766,386
Accumulated deficit.......................................... (1,361,507) (1,361,507)
Total stockholders' equity (3)............................... 997,403 4,408,403
------------- ----------------
Total capitalization......................................... $ 2,790,027 $ 5,081,027
------------- ----------------
------------- ----------------
</TABLE>
- ------------------------
(1) Adjusted to give effect to (i) the automatic conversion of the Preferred
Stock into 102,041 shares of Common Stock, (ii) the sale of 1,100,000 Shares
of Common Stock and 1,100,000 Warrants offered hereby for gross proceeds to
the Company of $3,861,000, (iii) reduced by estimated expenses of the
offering of $450,000, of which $75,000 have already been paid by the Company
and (iv) the repayment of the $1,120,000 in Convertible Notes.
(2) Does not include (i) 230,000 shares of Common Stock reserved for issuance
upon exercise of options which may be granted under the Company's 1993 Stock
Incentive Plan, 196,000 of which are subject to outstanding and unexercised
options having a weighted average exercise price of $2.55 per share, and of
which 55,000 options are subject to future vesting, (ii) 60,250 shares of
Common Stock reserved for issuance upon exercise of outstanding Class C
Common Stock Purchase Warrants ("C Warrants") at a price of $10.00 per
share, (iii) 12,000 shares of Common Stock reserved for issuance pursuant to
the exercise of other outstanding options and warrants having a weighted
average exercise price of $2.50 per share, (iv) 60,000 shares of Common
Stock reserved for issuance pursuant to the exercise of options which may be
granted under the Company's 1995 Employee Stock Purchase Plan ("1995 ESPP"),
and (v) 241,667 shares of Common Stock reserved for issuance upon exercise
of outstanding Warrants.
(3) Assumes no exercise of Warrants and Representative's Securities to be sold
by the Company in this offering.
16
<PAGE>
DIVIDENDS
No cash dividend was paid for the last two fiscal years. In March 1994,
following completion of a rights offering, the Company distributed to its
shareholders of record, PRO RATA, 2,409,700 shares of the common stock of Global
Casinos, Inc. previously acquired by the Company in its disposition of two
casino properties.
While no decision with regard to the payment of dividends in the future has,
to date, been made, the Company does not, as of the date of this Prospectus,
intend to declare or pay any dividends on its outstanding shares of Common Stock
in the foreseeable 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. The rights of Common Stock shareholders to dividends shall be subject
to the rights and preferences of Preferred Stock shareholders, if any, at the
time the dividend is declared.
17
<PAGE>
CERTAIN MARKET INFORMATION
PRICE RANGE OF COMMON STOCK
The outstanding shares of Common Stock are traded over-the-counter and
quoted on the OTC Electronic Bulletin Board on a limited and sporadic basis
under the symbol "PMRCA." The reported high and low bid and asked prices for the
Common Stock are shown below for the period through April 8, 1997. The prices
presented are bid and asked prices which represented 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 necessarily reflect actual
transactions.
<TABLE>
<CAPTION>
BID(1) ASK(1)
-------------------------- --------------------------
HIGH LOW HIGH LOW
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1994
First Quarter..................................... $ 7.50 $ 6.25 $ 10.00 $ 10.00
Second Quarter.................................... 7.50 7.50 10.00 10.00
Third Quarter..................................... 7.50 7.50 10.00 10.00
Fourth Quarter.................................... 5.00 5.00 10.00 10.00
1995
First Quarter..................................... (2) (2) (2) (2)
Second Quarter.................................... $ 5.00 $ 5.00 $ 10.00 $ 10.00
Third Quarter..................................... 5.00 1.25 10.00 3.75
Fourth Quarter.................................... 3.75 1.875 8.125 6.25
1996
First Quarter..................................... $ 2.50 $ 1.875 $ 8.125 $ 4.375
Second Quarter.................................... 2.50 1.875 4.375 4.375
Third Quarter..................................... 3.44 2.50 5.94 4.06
Fourth Quarter.................................... 2.50 2.50 3.75 3.44
1997
First Quarter (through April 8, 1997)............. $ 2.625 $ 2.25 $ 4.50 $ 4.00
</TABLE>
- ------------------------
(1) All prices have been adjusted to give retroactive effect to a one-for-five
reverse stock split which was effective on December 20, 1996.
(2) No trading activity during the period.
The bid and ask prices of the Company's Common Stock on April 8, 1997 were
$2.25 and $4.00, respectively, as quoted on the OTC Electronic Bulletin Board.
As of April 8, 1997 there were approximately 625 shareholders of record of the
Company's Common Stock.
18
<PAGE>
SELECTED FINANCIAL DATA AND STATISTICAL DATA
Set forth below is selected summary financial data with respect to the
Company. Financial information for the years ended January 28, 1996, and January
26, 1997, is derived from the financial statements included elsewhere in this
Prospectus and is qualified by reference to such financial statements and the
notes related thereto or is derived from store-level schedules not included
herein.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JANUARY 28, JANUARY 26,
1996 1997
------------- -------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues...................................................................... $ 9,069,840 $ 9,773,700
Operating income (loss)............................................................. (37,298) 326,439
Income from discontinued operations................................................. 270,441 13,620
Net income (loss)................................................................... 114,219 354,524
Net income (loss) available to common shareholders.................................. 114,219 341,949
Net income (loss) per common share.................................................. .23 .44
Weighted average common shares outstanding (2)...................................... 495,800 777,408
STATISTICAL DATA: (3)
Store revenues...................................................................... $ 8,957,344 $ 9,739,844
Store gross margin.................................................................. 6,337,334 6,941,934
Store operating expenses............................................................ 4,906,077 5,237,659
Store operating profit.............................................................. 1,431,257 1,704,275
Corporate overhead operating expenses............................................... 1,518,416 1,386,701
Gross margin percentage............................................................. 70.3% 71.3%
Comparable same store sales (2)..................................................... 8,186,449 8,700,643
Comparable same store sales growth (2).............................................. 9.9% 3.8%
Comparable same store sales per square foot (2)..................................... 572.24 547.00
</TABLE>
<TABLE>
<CAPTION>
AS OF JANUARY 26, 1997
----------------------------
ACTUAL AS ADJUSTED(3)
------------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets...................................................................... $ 4,811,774 $ 6,502,351
Total liabilities................................................................. 3,814,371 2,093,948
Working capital................................................................... 168,059 2,884,482
Stockholders' equity.............................................................. 997,403 4,408,403
</TABLE>
- ------------------------
(1) Includes only the 26 stores open for the entire periods being compared.
(2) Based on store-level schedules and is not meant to tie to the financial
statements and notes related thereto included elsewhere herein.
(3) Adjusted to reflect net proceeds from the sale by the Company in this
offering of 1,100,000 shares of Common Stock and 1,100,000 Warrants at the
assumed public offering prices of $3.75 per share and $.15 per Warrant and
the utilization of $1,370,000 of the net proceeds therefrom to retire the
Convertible Notes and other liabilities in the amount of $250,000. See "Use
of Proceeds." The "As Adjusted" information does not include the exercise of
the Warrants, the Underwriters' Over-Allotment Options or the options to
acquire the Representative's Securities. See "Use Of Proceeds,"
"Capitalization" and "Underwriting."
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this report.
RETAIL FISCAL YEAR
The method of financial reporting is a fifty-two to fifty-three (52-53) week
fiscal year ending on the last Sunday in January of each year. Likewise,
reporting quarters end on the Sunday closest to the calendar end of April, July
and October. Each reporting quarter contains 13 weeks of operations.
LIQUIDITY AND CAPITAL RESOURCES
Approximately 20% of the Company's business is generated during the
Christmas holiday season. The Company's cash position will therefore be the
highest at the end of December as compared to any other month of the year, and
tends to decrease during the first, second, and third quarters of the fiscal
year. On June 24, 1996, the Company successfully completed a bridge financing in
which it sold an aggregate of 416,670 shares of Series A Convertible Preferred
Stock and Class B Warrants entitling the holders to purchase 41,667 shares of
Common Stock, realizing net proceeds of $225,000. These proceeds were primarily
used to finance the remodeling projects for the St. Louis and Tucson locations,
to partially finance the completion of a new store in the Park Meadows Mall in
Denver, Colorado, and to purchase various fixtures and equipment associated with
improvements for other existing locations.
On December 27, 1996, the Company consummated the sale of $1,120,000 in
Convertible Promissory Notes and 200,000 Class B Warrants, realizing net
proceeds of $1,041,600. From the net proceeds, the Company utilized $624,325 to
redeem from certain former securityholders an aggregate of 189,180 shares of
Common Stock and 32,500 Class C Warrants. This redemption was necessary to
facilitate the Company's proposed secondary financing and concurrent listing of
its securities on the Nasdaq Stock Market. The Convertible Notes bear interest
at the rate of 12% per annum, payable quarterly and are convertible into shares
of Common Stock, at the option of the holder, at a conversion rate of $2.80 per
share. However, if (i) the Company fails to complete a public offering of its
securities by June 30, 1997 or (ii) the principal balance of the Convertible
Notes is not repaid by the Company by their Maturity Date, the conversion value
is reduced to $1.00 per share. The Company has agreed to repay the Convertible
Notes from the proceeds of this offering. Unless earlier converted or repaid,
the Convertible Notes mature and become due and payable on December 26, 1999.
The obligation of the Company to repay the Convertible Notes is secured by a
subordinated security agreement covering all of the Company's tangible and
intangible assets.
The Company used the remaining proceeds from the Bridge Note Financing to
pay the accrued cost incurred in the Company's opening of five new stores during
the fourth quarter, and for working capital. The proceeds of the Bridge Note
Financing were not sufficient to meet all of the Company's capital commitments
for its six additional new stores which have opened since November, 1996 and
four additional stores that are scheduled to open over the next four months.
Those capital commitments will require additional financing which a portion of
the proceeds of this offering have been allocated to satisfy. See "Use of
Proceeds."
The increases in accounts payable of $861,590, from $291,905 at January 28,
1996 to $1,153,495 at January 26, 1997 reflect expenses for new store
construction and existing store remodels that were completed during the last six
months of fiscal 1997, and expenses to purchase fixtures and equipment, to
finance the increase in inventories for new stores opened in fiscal 1997 and
three new stores opened in February, 1997 and to finance deferred offering
costs.
As a result, the Company's cash position decreased by $115,623 from $327,198
at January 28, 1996 to $211,575 at January 26, 1997.
20
<PAGE>
During fiscal 1997, the Company continued its efforts to liquidate its
common stock position in Global Casinos, Inc. Therefore, marketable securities
decreased from $45,113 at January 28, 1996 to $6,813 at January 26, 1997.
Management intends to liquidate its remaining securities holdings as allowed by
general market conditions.
During fiscal 1997, the Company invested $1,332,575 in property and
equipment. Approximately $1,027,000 of this investment represents leasehold
improvements and costs of equipment and fixtures in connection with new store
projects completed in Denver, Colorado, Bellevue, Washington, six new stores
opened since November, 1996 in Florida and New Jersey, and three new stores
opened in February, 1997 in Florida and Nevada. Approximately $184,000 of this
investment represents leasehold improvements and costs of equipment and fixtures
in connection with three existing locations remodeled in San Mateo, California,
St. Louis, Missouri, and Tucson, Arizona. Approximately $75,000 represents
investments in corporate office improvements and purchases of furniture and
fixtures in connection with the relocation of the corporate office in January,
1996. The remaining approximately $46,000 represents minor improvements and
maintenance of other existing store locations.
Therefore, property and equipment, net of accumulated depreciation,
increased $1,056,212, from $977,727 at January 28, 1996, to $2,033,939 at
January 26, 1997. At January 28, 1996, the Company's trademark assets were
$87,833 net of accumulated amortization, which represented the goodwill
associated with the Impostors trademark and other intellectual property acquired
as part of the purchase of the Impostors' assets in February, 1994.
As of January 26, 1997, the Company had total outstanding liabilities of
$3,814,371 compared to $1,994,590 at January 28, 1996, representing an increase
of $1,819,781 which was due to an increase in current liabilities of $739,941
from $1,178,567 at January 28, 1996 to $1,918,508 at January 26, 1997 and the
result of the $1,120,000 Convertible Promissory Notes executed on December 27,
1996. During fiscal 1997, management continued its efforts to purchase larger
quantities of inventories to maintain favorable inventory costs and to increase
inventory levels to accommodate the opening of the six new locations which
occurred in the months of August, November and December. As a result of the
foregoing, and the fiscal 1997 increase in accounts payable of $861,590 as
discussed above, working capital decreased by $515,113 from $683,172 at January
28, 1996 to $168,059 at January 26, 1997.
The amount borrowed from related parties was $74,420 at January 26, 1997
which reflects a reduction of $24,459 from the January 28, 1996 figure of
$98,879. During the 1997 fiscal year the Company also reduced other short- and
long-term notes by $181,663. However, other notes payable increased from
$1,138,766 at January 28, 1996 to $2,055,936 at January 26, 1997, which increase
was due to the execution of the $1,120,000 Convertible Promissory Notes executed
on December 27, 1996. As of April 1, 1997, the Company was in arrears in the
payment of two notes totaling, in the aggregate, approximately $160,000.
Management has been in discussions with the two noteholders and plans to retire
these two notes with the proceeds from this offering.
Other than the $1,120,000 Convertible Notes, the largest portion of the
Company's long-term debt is comprised of a $635,000 promissory note, which note
carries interest at the rate of 10% per annum, requires monthly interest
payments of approximately $5,300 and is due February 22, 1998. The note is
secured by the Company's assets. As a result of the Company's net income for the
fiscal year ended January 26, 1997 of $354,524, the accumulated deficit
decreased from $1,716,031 at January 28, 1996 to a deficit of $1,361,507 at
January 26, 1997. However, although the Company's equity increased by the
$225,000 proceeds realized from the bridge offering in June, 1996, the December
27, 1996 repurchase of 189,180 common shares as discussed above for a total
consideration of $624,325, resulted in a net reduction of stockholders' equity
in the 1997 fiscal year from $1,042,204 at January 28, 1996 to $997,403 at
January 26, 1997.
Net cash provided by operating activities improved for the fiscal year ended
January 26, 1997 to $1,093,363 as compared to net cash provided by operating
activities of $284,890 for the fiscal year ended
21
<PAGE>
January 28, 1996. The principal cause of the change in cash flow generated by
operations for the fiscal years ended January 26, 1997 and January 28, 1996 was
the increase in accounts payable and other accrued liabilities of $901,609 and
$99,834. The improvement in cash generated by operations also reflects the
reduction of overhead costs by approximately $130,000, and an improvement from
an operating loss for the fiscal year ended January 28, 1996 of $37,298 to an
operating income of $326,439 for the fiscal year ended January 26, 1997.
During the fiscal year ended January 26, 1997, the Company invested
$1,332,575 in capital equipment, which reflects the investments in leasehold
improvements, furniture and equipment discussed above.
Net cash provided by financing activities for the fiscal years ended January
26, 1997 and January 28, 1996 was $123,589 and $36,281, respectively. The change
of $87,308 represents the net effect of the Company obtaining additional
financing during fiscal 1997 of approximately $1,345,000 from a $225,000
convertible preferred stock offering in June, 1996 and the issuance of
convertible promissory notes of $1,120,000 on December 27, 1996. As discussed
above, $624,325 of the funds were utilized to repurchase 189,180 shares of
common stock to facilitate the Company's listing on the NASDAQ Stock Market. The
remainder of the funds were used to finance the Company's retail chain
expansion, and to fund a portion of the Company's deferred offering costs of
$425,423 at January 26, 1997.
The foregoing resulted in a decrease in the Company's cash position of
$115,623 from $327,198 January 28, 1996 to $211,575 at January 26, 1997
At January 26, 1997, the Company had a net operating loss carryforward
("NOL") for federal tax purposes of approximately $298,000 that may be utilized
to offset future profits. Due to the public offering, the usage of the NOL will
be limited under Section 382 of the Internal Revenue Code.
As mentioned above, during the months of August through December, 1996, the
Company opened six additional retail locations. These locations are at the Park
Meadows Mall in Denver, Colorado, the Coastland Center in Naples, Florida,
Sawgrass Mills in Sunrise, Florida, Bayside Marketplace in Miami, Florida, Menlo
Park in Edison, New Jersey, and Garden State Plaza in Paramus, New Jersey. In
addition, during the month of February, 1997 the Company opened three additional
locations, one at the Rio Hotel and Casino in Las Vegas, Nevada, one at
Beachplace, Fort Lauderdale, Florida, and one location at Miami International
Mall in Miami, Florida. The Company has executed four additional leases to open
new locations in the second quarter of fiscal 1998. These stores will be located
in Orange County, California, Ft. Lauderdale, Florida and Washington, DC. Other
sites are currently being evaluated. Depending on location and size, the opening
of a new retail location represents an aggregate capital commitment of
approximately $100,000-$200,000 which includes leasehold improvements,
furniture, fixtures, equipment and inventory.
The Company intends to use the proceeds from this offering to retire
$1,120,000 in Convertible Notes and $250,000 in other long- and short-term
obligations. The balance of offering proceeds will be used to fund the growth of
its retail chain and take advantage of other distribution opportunities such as
direct mail, home shopping and internet distribution. However, since the
Company's ability to sustain profitability in the future depends, to a large
extent, upon realizing economies from expansion without proportionate increases
in general and administrative expenses, the largest use of the proceeds from the
financing will be utilized to expand the number of stores to approximately 42
within the next 8 to 12 months. The Company believes the proceeds from this
offering, along with cash flow generated by operations will be sufficient to
meet the Company's capital needs over the next 12 months.
22
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, the percentage
relationship between selected items in the Statements of Operations to revenues:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY FISCAL YEAR ENDED JANUARY
28, 1996 26, 1997
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Total revenues.............................................. $ 9,069,840 100% $ 9,773,700 100%
Cost of goods sold.......................................... 2,690,658 29.7% 2,823,733 28.9%
Gross margin................................................ 6,379,182 70.3% 6,949,967 71.1%
Operating expenses.......................................... 6,416,480 70.7% 6,623,528 67.8%
Operating income (loss)..................................... (37,298) (3.1)% 326,439 3.3%
Other income (expenses), net................................ (279,924) nil 6,465 nil
Income (loss) before discontinued operations................ (156,222 ) (1.7 )% 340,904 3.5 %
Net income available to common shareholders................. 114,219 1.3 % 341,949 3.5 %
Net income per common share................................. .23 .44
</TABLE>
RESULTS OF OPERATIONS--FISCAL 1997 COMPARED TO FISCAL 1996
The Company's revenues increased from $9,069,480 for the period ended
January 28, 1996 to $9,773,700 for the fiscal year ended January 26, 1997, an
increase of $704,220 or 7.8%. The Company's revenues of $9,773,300 reflect the
26 retail locations that were open for the entire fiscal year and the additional
six locations opened during the third and fourth quarter of fiscal 1997. In
August, 1996, the Company opened its 27th location at the new Park Meadows Mall
in Denver, Colorado. In November, 1996, the Company opened three additional
locations, at the Coastland Center in Naples, Florida, at Sawgrass Mills,
Sunrise, Florida, and at the Bayside Galleria in Miami, Florida. In December,
1996 the Company opened two locations in New Jersey, one at Garden State Plaza,
in Paramus, New Jersey and one location at the Menlo Park Mall in Edison, New
Jersey.
During fiscal 1997, management's focus was to a large extent directed on the
expansion of the Company's retail chain and also on the Company's secondary
financing. As a result, wholesale revenues decreased in the period from $111,033
at January 28, 1996 to $33,856 at January 26, 1997, a decrease of $77,177. Upon
completion of the proposed financing, management expects to devote additional
personnel and resources to develop its wholesale business. However, for the next
twelve months, the wholesale business is expected to remain a small percentage
of the Company's total revenues.
For the fiscal year ended January 26, 1997, the Company's same store sales
(consisting of 26 stores) increased by 3.8% or approximately $320,000. The same
store sales increase can be attributed to a continued improvement in the
Company's merchandising strategy, focusing mainly on high quality, designer
inspired jewelry collections, and the remodeling of three locations in fiscal
1997.
Although management expects that same store sales will continue to increase
in the future, especially as existing stores are remodeled and refixtured, it is
anticipated that any material future increase in total sales will depend on the
Company's ability to expand its number of stores. The Company expects that over
the next twelve months planned store expansion will not require a proportionate
increase in corporate overhead expenses.
For the fiscal year ended January 26, 1997, cost of goods sold was
$2,823,733, and the gross margin was $6,949,967, or approximately 71.1%. For the
fiscal year ended January 28, 1996, cost of goods sold was $2,960,658, and the
gross margin was $6,379,182, or approximately 70.3%. Included in cost of goods
sold are inventory shrinkage of $62,493 and $80,266 for the fiscal years ending
January 28, 1996 and January 26, 1997, respectively. Management attributes the
improvement in gross margin of 0.8% to less promotional activity and improved
buying opportunities offering lower merchandise costs.
23
<PAGE>
Selling, general and administrative expenses were [$6,079,410] and
[$6,330,097] for the fiscal years ended January 28, 1996 and January 26, 1997,
respectively. As a percentage of revenues, selling, general and administrative
expenses decreased from 70.7% in fiscal 1996 to 67.8% in fiscal 1997. The
percentage decrease reflects the Company's ability to add additional retail
locations without a proportionate increase in corporate overhead expenses as
discussed above. The majority of the selling and administrative expenses are
comprised of personnel expenses which amounted to $2,898,069 and $2,945,431 in
fiscal 1996 and fiscal 1997 respectively. The other major operating expense
category is occupancy costs, which was $1,974,132 and $2,067,727 for the fiscal
years ending January 28, 1996 and January 26, 1997, respectively. Depreciation
and amortization expense was $337,070 and $293,431 for fiscal 1996 and fiscal
1997, respectively. The decrease of $43,639 is representative of a reduced
depreciable asset base, and the addition of new stores late in the fiscal 1997
year.
Included in selling, general and administrative expenses are corporate
overhead expenses in the amount of $1,386,701 and $1,518,416 for the fiscal
years ended January 26, 1997 and January 28, 1996, respectively, which
represents a decrease of $131,715. As a percentage, corporate overhead expenses
decreased from 16.7% of revenues in fiscal 1996 to 14.2% for fiscal 1997. The
Company attributes the decrease in corporate overhead expenses to lower
personnel and occupancy costs realized from the relocation of the corporate
offices from California to Colorado in January, 1996.
As a result of the foregoing, the Company's operating results improved from
an operating loss of $37,298 for the year ended January 28, 1996 to an operating
profit of $326,439 for the year ended January 26, 1997, an improvement of
$363,737 over the prior year.
Net interest expense was $116,722 and $108,180 for the fiscal years ended
January 26, 1997, and January 26, 1996, respectively. The increase of $8,542
represents additional interest expense incurred from the execution of the
$1,120,000 convertible notes on December 27, 1996, which interest is 12% or
approximately $11,200 per month. As discussed above, the Company utilized the
majority of the net proceeds from this financing to repurchase 189,180 common
shares for a total purchase price of $624,325, while the remainder of $417,275
was used to finance new store expansion. The Company's gain on marketable
securities of $12,264 at January 26, 1997 compared to a loss of $182,643 at
January 28, 1996 related to the Company's holdings in Global Casinos, Inc.
During fiscal 1997, the Company sold most of its holdings of these securities,
and intends to liquidate its remaining position as market conditions permit.
For the fiscal year ended January 26, 1997, the Company recorded gains on
settlements of $55,626. Gains on settlements includes a gain of approximately
$25,000 which represented a final settlement of a recorded liability and funds
held in escrow that were used to satisfy certain liabilities to unsecured
creditors of the predecessor company. Gains in settlements also includes gains
from debt settlements of approximately $26,000 realized from settlements with
former franchisees.
For the fiscal year ended January 26, 1997, other income was $55,297
compared to $10,889 for the same twelve month period in fiscal 1996. Other
income also included $25,000 in license fees from three former franchisees who
operate five independent Impostors locations. These former franchisees have
executed license agreements with the Company which entitle them to use the
Impostors name to operate their stores for one year. The license fee for one
store is $5,000 annually, which agreements may be renewed annually at the
Company's discretion. The Company recently renewed these agreements to extend
until February 1, 1998. As a result of the foregoing, income before discontinued
operations, net of income tax benefit was $340,904 compared to a loss of
$156,222 for fiscal 1996.
Income from discontinued operations of $13,620 and $270,441 for fiscal 1997
and fiscal 1996, respectively, represents negotiated settlements with creditors
relating to the Company's previous gaming operations.
Based on the foregoing, the Company reported a net income available to
common shareholders of $341,949 for the fiscal year ended January 26, 1997,
which translates to a net income per share of $.44
24
<PAGE>
based on weighted average shares outstanding of 777,408. For the fiscal year
that ended January 28, 1996, net income available to common shareholders was
$114,219 or $.23 per share, based on 495,800 weighted average shares
outstanding.
The Company's continued profitability will depend on the Company's ability
to further expand its number of retail locations in profitable markets, its
ability to generate favorable lease cost/sales ratios, its ability to continue
to control overhead expenses and its capability to take advantage of other
distribution opportunities.
Other than the foregoing, management knows of no trends, or other demands,
commitments, events or uncertainties that will result in, or that are reasonably
likely to result in a material impact on the income and expenses of the Company.
IMPAIRMENT OF LONG-LIVED ASSETS
In March 1996, the Financial Accounting Standards Board issued a statement
entitled "Accounting for Impairment of Long-Lived Assets." In the event that
facts and circumstances indicate that the cost of assets or other assets may be
impaired, an evaluation of recoverability would be performed. If an evaluation
is required, the estimated future discounted cash flows associated with the
asset would be compared to asset's carrying amount to determine if a write-down
to market value or discounted cash flow value is required. Adoption of FAS 121
had no effect on the January 26, 1997 financial statements.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Stock-Based Compensation" (FAS 123). The new
statement is effective for fiscal years beginning after December 15, 1995. FAS
123 encourages, but does not require, companies to recognize compensation
expense for grants of stock, stock options, and other equity instruments to
employees based on fair value. Companies that do not adopt the fair value
accounting rules must disclose the impact of adopting the new method in the
notes to the financial statements. Transactions in equity instruments with
non-employees for goods or services must be accounted for on the fair value
method. The Company has elected not to adopt the fair value accounting
prescribed by FAS 123 for employees, and will be subject only to the disclosure
requirements prescribed by FAS 123.
25
<PAGE>
BUSINESS
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 35 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, Florida,
Louisiana, Maryland, Missouri, Nevada, New Jersey, Washington and in the
Washington, D.C. area. The largest and most visible store is located in the
prime retail area of San Francisco's Union Square. During the period from August
30, 1996, to February 15, 1997 the Company opened nine additional retail
locations, bringing the current total to 35 stores. In addition, the Company has
entered into leases for four new retail stores in California, Florida, and
Washington, D.C., scheduled to open over the next four months.
BUSINESS STRATEGY
In March 1994, the Company acquired out of bankruptcy substantially all of
the assets and assumed certain liabilities associated with the operation of a
nationwide chain of 27 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 five stores due to unprofitable operations, and one store due
to an expired lease, reduced debt through negotiated settlements, opened 11 new
stores and implemented a new merchandizing strategy. These actions have improved
the Company's results of operations from an operating loss of $886,667 for the
13-month period ended January 29, 1995 to an operating loss of $37,298 for the
fiscal year ended January 28, 1996, to operating income of $326,439 for the
fiscal year ended June 26, 1997.
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.
26
<PAGE>
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, Imposters redirected
its focus to present 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
karat 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.
Most of the Company's products are selected by the Company from existing
inventory offered by vendors. However, from time to time the Company purchases
exclusive items that are manufactured under special order for the Company.
Because the Company's products are high-quality emulations of classic fine
jewelry designs that change little from year to year, the Company has not
experienced problems associated with inventory obsolescence.
REMODELING AND EXPANSION STRATEGY
The Company has developed a new interior design to match the elegant look of
its products and to provide its customers with the feeling of shopping in a
high-end, fine jewelry environment. During 1995, the Company completed one
interior remodel of an existing store in San Francisco, California. During 1996,
the Company completed three remodelings. In addition, the Company's new stores
will incorporate its new interior design.
The Company plans to remodel six additional stores over the next 12 months,
at an average estimated cost of $40,000 per store. See "Use of Proceeds."
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 six to eight new Impostors stores in existing and new markets
over the next 12 months. Since August 30, 1996, the Company has opened 11
additional retail stores and four more are planned in California, Florida and
Washington, D.C., and are scheduled to open over the next four months. Other
potential real estate sites in Florida, Massachusetts, Nevada and New York are
currently being evaluated, although to date no leases covering additional new
locations have been executed.
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
27
<PAGE>
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 eight stores with minimum
increases in overhead costs, with further additions requiring increased
management and other staffing.
In addition to developing its own new store locations, the Company is
continually investigating the possibility of acquiring companies in similar
lines of business, including faux jewelry, fine jewelry and accessories.
Potential candidates include small retail chains, companies currently engaged in
multimedia faux jewelry sales, as well as former Impostors franchisees. While
the Company continually investigates such acquisition opportunities, there are
no substantive negotiations, arrangements, agreement or understandings with
respect to any potential acquisition.
OTHER MARKETING AND DISTRIBUTION CHANNELS
Currently, over 99% of the Company's revenues are derived from its retail
store sales. The Company also has limited sales nationally and internationally
through distributors and wholesalers. The Company frequently receives inquiries
from overseas businesses regarding the development of wholesale and retail
distribution of its concept and products in Europe as well as the Orient. Prior
to this offering, the Company has had no resources to focus on this
international demand and products have been sold in limited amounts to accounts
in Australia, Chile, Italy and Taiwan. The Company plans to increase its
international business by hiring additional persons and/or agents to represent
its line of products internationally, and may use a portion of the offering
proceeds for investments in inventory to service any increase in its
international business, although no proceeds of this offering have been
specifically allocated for this purpose. The ability of the Company to fully
develop the potential offered by the international marketplace depends upon both
overcoming legal obstacles and the availability of additional working capital
from future operations, of which there can be no assurance.
The Company plans to develop a catalogue which initially will be distributed
through its retail stores located in tourist areas. Depending on the results of
the in-store distribution, the Company may decide to broaden the catalogue
distribution through direct mailings to new potential customers. The Company has
also explored possible multimedia distribution of its jewelry. In October, 1996,
the Company completed the development of its internet Home Page. 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 to the Company's product line.
The Company expects to have developed its Concept Program within six to eight
months following the completion of this offering, which will then be presented
to primarily domestic home shopping networks. Approximately $100,000 has been
budgeted for the development of these additional marketing channels. See "Use of
Proceeds."
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
28
<PAGE>
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 of 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 80% from domestic
vendors and 20% from vendors in England, Hong Kong, Italy, Korea, Spain, Taiwan
and Thailand. Most of the inventory is purchased from vendors' existing
inventory and designs, while some is manufactured under special order. Orders
from foreign vendors take 6 to 8 weeks to fill, with U.S. vendors delivering in
approximately 3 to 4 weeks. Most domestic vendors offer the Company terms of
payment of between 30 and 60 days and some offer up to 90 days, while many
international vendors require either prepayment or payment prior to shipment.
The Company continually investigates new sources of merchandise in order to
maximize profit margins and expects to concentrate future purchases to a larger
degree from vendors in the Pacific Rim. The Company considers the identity of
its sources of supply to be proprietary to the extent that a product's quality,
source and price bear directly upon the Company's competitive advantage. The
Company does not rely on any single source of supply and could readily obtain
product from new suppliers should any given source become unavailable. The
Company has not experienced any difficulty in obtaining merchandise and does not
anticipate any future problems or restriction of availability.
COMPETITION
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.
The Company competes directly with vendors and other retailers of faux
jewelry and indirectly with specialty retailers of accessories and related
items. 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
29
<PAGE>
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 13 faux jewelry stores, 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.
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.
30
<PAGE>
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.
EMPLOYEES AND CONSULTANT
The Company currently has approximately 110 full-time and 120 part-time
employees, of which 17 are employed in the Company's corporate offices. In
addition, the Company typically hires additional part-time employees during the
peak holiday season. 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
eight additional stores over the next 12 months. Further store expansions will
require additions to management and staff on a case-by-case basis. The success
of future expansion will depend to a large extent on the Company's ability to
attract, motivate and retain highly-qualified personnel.
As President and Chief Executive Officer, Ms. Greenberg serves under a
written employment agreement expiring on June 20, 1999. She receives a base
salary of $7,500 per month, which will increase to $10,833 per month the earlier
of June 20, 1997 or the completion of this offering. She is also 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, 40,000 shares of Common Stock of the Company at an
exercise price of $1.875 per share, all of which are fully vested, and incentive
stock options exercisable to purchase an additional 20,000 shares of common
stock at a price of $2.50 per share, of which 10,000 are vested, 10,000 will
vest ratably over two (2) years ending March, 1998, and incentive stock options
exercisable to purchase an additional 25,000 shares at a price of $3.25 per
share, of which 15,000 will vest on June 20, 1997 and 10,000 will vest on June
20, 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 and nearly five years
experience in the retail industry as Controller/Chief Financial Officer.
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, exclusive of his services as a director. 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, which have averaged
approximately $4,000 per month.
SEASONALITY
The Company's business is highly seasonal with its mall locations generating
20% of revenues during the Christmas holiday season. The Company's 15 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 current and former 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.
31
<PAGE>
The Company's 39 current and committed retail locations are or will be
operated under commercial leases with expiration dates ranging from 1997 to
2007. Store size varies from 310 to 1,200 square feet with annual sales ranging
from $220,000 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. All of the Company's existing
commercial retail leases are in full force and effect as of the date of this
Prospectus.
LEGAL PROCEEDINGS
The Company from time-to-time is involved in commercial disputes in the
ordinary course of business with vendors, landlords and other parties which on
occasion become the subject matter of litigation. At the present time, the
Company is not a party to any legal proceedings outside of the ordinary course
of business or which would have a material adverse impact upon the Company's
operations or properties.
During 1995 and 1996, the Company received requests for information from the
U.S. Securities and Exchange Commission ("SEC") related to an investigation
begun by the SEC during 1994 into various matters, including certain
transactions in securities by a former officer and director of the Company. The
Company has fully complied with all requests. The Company has been informed that
the SEC staff intends to recommend to the Commission that an action be brought
against certain persons including three of the Company's former shareholders and
two of its former directors. Although there can be no assurance, the Company's
present management does not believe that this investigation of the activities of
these persons will have a direct material impact on the Company or its business
operations.
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.
The independent accountant who was previously engaged 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 on 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 were no 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.
32
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The name, position with the Company, age of each Director or executive
officer of the Company is as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- ----------- -----------------------------------------------------------
<S> <C> <C>
Sissel B. Greenberg.................. 38 President, Chief Executive Officer and Director
William Nandor....................... 54 Director
Jack Brandon......................... 67 Director
Simona Katz Yuffa.................... 37 Director
Todd Huss............................ 44 Chief Financial Officer, Secretary, Treasurer
</TABLE>
SISSEL B. GREENBERG, President and Chief Executive Officer since July 1994
and a Director since March, 1995. From April, 1992 to July, 1994, Ms. Greenberg
was employed as Senior Financial Analyst in the investment banking department of
Chatfield Dean & Company, a national broker/dealer based in Denver, Colorado.
Her duties included evaluating companies for funding of equity capital, mergers
and acquisition, workout plan analysis and preparation. Ms. Greenberg was
actively involved in firm projects which raised in excess of $80,000,000 for
small capitalization companies. From December, 1989 to April, 1992, Ms.
Greenberg worked as a business consultant for small public companies in the
areas of Financial Management and Strategic Planning. From November, 1987 to
November, 1988, Ms. Greenberg worked as a senior supervisor of Leventhal and
Horwath, a national accounting firm. From July, 1984 until August, 1987, Ms.
Greenberg worked as an assistant CFO for Selmer Sande, A.S., a billion dollar
international contracting company based in Oslo, Norway. Ms. Greenberg graduated
from the University of Denver with a degree in Business Administration in March,
1982. Ms. Greenberg obtained her Masters in Business Administration from the
University of Denver in March, 1983.
WILLIAM NANDOR, Director. Mr. Nandor was originally retained by the Company
in March, 1995, as a consultant to assist the Company with its search for new
retail locations and other issues surrounding the Company's strategic growth
plans. Mr. Nandor was also made a director of the Company at this time. Mr.
Nandor no longer performs consulting services for the Company; however, he
remains as a director. From 1987 through 1990, Mr. Nandor was employed with
Gymboree Corporation, first as Vice-President of Retailing and then as President
and C.E.O. While with Gymboree, Mr. Nandor spearheaded its growth from a
franchised play program for parents and kids into the retail specialty arena.
Under him, the retail stores grew from inception to over 40 stores. From 1990 to
1993 Mr. Nandor served as President and C.O.O. of Impostors Copy Jewelry, Inc.,
and during 1993 and 1994 he served as Executive Vice-President and C.O.O. of
S.S.R.S. Corporation, operator of Sesame Street Retail Stores. Under his
leadership, Impostors grew from 50 retail stores to over 100 locations, and
S.S.R.S. saw an increase in locations, comparable store sales and profits. In
addition to the Company, Mr. Nandor currently serves as a member of the Board of
Directors of Lisa's Tea Treasures, Inc., a San Jose, California wholesaler and
retailer of high quality tea and other related products.
JACK BRANDON, Director. Mr. Brandon has been a director of the Company since
October 1996 and a consultant to the Company, first informally since October,
1995 and formally since February, 1996. As a consultant, Mr. Brandon is actively
involved with the Company's expansion and remodeling program. He has worked as a
real estate, retail and construction consultant since 1995. From 1988 to 1995,
Mr. Brandon served as Vice-President of Studio Development for Expressly
Portraits, a large national portrait chain with locations in over 30 states.
From 1980 to 1988, he served as Vice-President of Operations for Prints Plus, a
mall-based national print and frame retailer with over 100 stores throughout the
United States.
33
<PAGE>
From 1975 to 1980, he was Senior Vice-President of Atherton Industries, which
operated over 200 retail clothing stores.
SIMONA KATZ YUFFA, Director. Ms. Yuffa has been a director since October,
1996. Since April, 1996, Ms. Yuffa has been the Chief Financial Officer,
Director and principal shareholder of Dazbog Coffee Company, a company which she
formed and organized specializing in custom roasting and distribution of coffee
equipment and accessories. Since 1990, she has also been a director and officer,
and since 1992, controller, of Shoe Biz, Ltd., a retail western boot chain,
where she is responsible for corporate operations and finance. From 1989 to
1992, Ms. Yuffa was controller of American Water Development, Inc., where she
was involved with corporate finance and fundraising. From 1981 to 1989, she
practiced as a Public Accountant, auditing publicly-held companies and
specializing in litigation consulting. Ms. Yuffa graduated with high distinction
from Colorado State University with a Bachelor of Science degree in Business
Administration and received her license as a Certified Public Accountant in the
State of Colorado in 1982 and practiced in that capacity until 1994.
TODD HUSS, Chief Financial Officer, Secretary, Treasurer. Mr. Huss has been
the Chief Financial Officer of the Company since January, 1996 and
Secretary/Treasurer since October, 1996. Prior to joining the Company, he served
as the Chief Financial Officer for Gardenswartz Sportz, Inc., a privately-held
corporation which owned and operated eight full service retail sporting goods
stores in New Mexico and Texas. Mr. Huss graduated from California State
University-Long Beach in 1984, with a Bachelor of Science degree in business
administration and professional accounting, and subsequently worked for KPMG
Peat Marwick in its Los Angeles, California, and Albuquerque, New Mexico offices
until 1991. He received his license as a certified public accountant from
California in 1987, and from New Mexico in 1990.
During the fiscal year ended January 28, 1996, three meetings of the Board
of Directors of the Company were held. Each meeting was attended by all members
of the Board of Directors.
During the fiscal year ended January 28, 1996, the Company did not have
standing Audit, Compensation or Nominating Committees of the Board of Directors.
However, during the first quarter of fiscal 1997, the Company formed Audit and
Compensation Committees of the Board of Directors. The members of the Audit
Committee will be Simona Katz Yuffa and William Nandor. No member of the Audit
Committee receives any additional compensation for his service as a member of
that Committee. The Audit Committee is responsible for providing assurance that
financial disclosures made by Management reasonably portray the Company's
financial condition, results of operations, plan and long-term commitments. To
accomplish this, the Audit Committee oversees the external audit coverage,
including the annual nomination of the independent public accountants, reviews
accounting policies and policy decisions, reviews the financial statements,
including interim financial statements and annual financial statements, together
with auditor's opinions, inquires about the existence and substance of any
significant accounting accruals, reserves or estimates made by Management,
reviews with Management the Management's Discussion and Analysis section of the
Annual Report, reviews the letter of Management Representations given to the
independent public accountants, meets privately with the independent public
accountants to discuss all pertinent matters, and reports regularly to the Board
of Directors regarding its activities.
The Compensation Committee will consist of William Nandor and Simona Katz
Yuffa. No member of the Compensation Committee receives any additional
compensation for his service as a member of that Committee. The Compensation
Committee is responsible for reviewing pertinent data and making recommendations
with respect to compensation standards for the executive officers, including the
President and Chief Executive Officer, establishing guidelines and making
recommendations for the implementation of Management incentive compensation
plans, reviewing the performance of the President and CEO, establishing
guidelines and standards for the grant of incentive stock options to key
employees under the Company's Incentive Stock Option Plan, and reporting
regularly to the Board of Directors with respect to its recommendations.
34
<PAGE>
There were no family relationships among Directors or persons nominated or
chosen by the Company to become a Director, nor any arrangements or
understandings between any Director and any other person pursuant to which any
Director was elected as such. The present term of office of each Director will
expire at the next annual meeting of shareholders.
The executive officers of the Company are elected annually at the first
meeting of the Company's Board of Directors held after each annual meeting of
Shareholders. Each executive officer will hold office until his successor is
duly elected and qualified, until his resignation or until he is be removed in
the manner provided by the Company's ByLaws.
DIRECTOR COMPENSATION
Directors who are also executive officers of the Company receive no
additional compensation for their services as Directors.
In March 1995, the Board of Directors adopted a Formula Plan for outside
Directors pursuant to which each outside Director is entitled to receive for
each year of service as a Director non-qualified stock options exercisable to
purchase 5,000 shares of Common Stock at an exercise price equal to 100% of the
fair market value of the Company's Common Stock on the date of grant. Effective
fiscal 1998, the options issuable to outside Directors under the Formula Plan
were increased to 10,000 for each Director. Pursuant to the Formula Plan, the
Company granted retroactively for the year ended December 31, 1994 to each of
its outside Directors 5,000 non-qualified stock options exercisable at $2.50 per
share. In fiscal 1996, the Company issued options for a total of 25,000 shares
to directors of the Company under the Formula Plan and options for 12,000 shares
to four of the Company's Directors (See "Certain Transactions") in return for
personally guaranteeing the Company's corporate office lease, which options are
exercisable at a price of $2.50 per share and expire in 2001.
Further, during fiscal 1997 the Company has issued under the Formula Plan
additional options to one outside director exercisable to purchase 5,000 shares
of Common Stock at an exercise price of $3.25 per share.
In addition, outside Directors are entitled to be reimbursed for their
expenses associated with attendance at meetings or otherwise incurred in
connection with the discharge of their duties as Directors of the Company.
EXECUTIVE COMPENSATION
The following tables and discussion set forth information with respect to
all plan and non-plan compensation awarded to, earned by or paid to the Chief
Executive Officer ("CEO"), and the Company's four most highly compensated
executive officers other than the CEO, for all services rendered in all
capacities to the Company and its subsidiaries for each of the Company's last
three completed fiscal years; provided, however, that no disclosure has been
made for any executive officer, other than the CEO, whose total annual salary
and bonus does not exceed $100,000.
35
<PAGE>
TABLE 1
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION (2)(3)
----------------------------------- AWARDS
OTHER ------------------------
ANNUAL RESTRICTED PAYOUTS
COMPEN- STOCK -------------
SALARY SATION AWARD(S) OPTIONS/ LTIP PAYOUTS
NAME AND PRINCIPAL POSITION FISCAL YEAR ($)(1) BONUS ($) ($) ($) SARS(4) ($)
- ----------------------------------- ----------- --------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sissel B. Greenberg, 1997 $ 90,000 -0- -0- -0- 20,000 -0-
1996 $ 76,750 -0- $ 6,312 $ 4,500 -0- -0-
President 1994 $ 32,953 -0- -0- $ 1,000 40,000 -0-
<CAPTION>
ALL OTHER
COMPEN- SATION
NAME AND PRINCIPAL POSITION ($)
- ----------------------------------- -------------
<S> <C>
Sissel B. Greenberg, -0-
-0-
President -0-
</TABLE>
- ------------------------------
(1) Effective June 20, 1994, the Company hired its new President, Sissel B.
Greenberg, at $6,000 per month, which sum was subsequently increased to a
base salary of $7,500 per month and will be increased to $10,833 the earlier
of June 20, 1997 or the completion of this offering. Ms. Greenberg is also
eligible to participate in the Company's Incentive Stock Option Plan.
(2) All executive officers of the Company participate in the Company's group
health insurance plan. However, no executive officer received perquisites
and other personal benefits which, in the aggregate, exceeded the lesser of
either $50,000 or 10% of the total of annual salary and bonus paid during
the respective fiscal years.
(3) As of January 1, 1995, the Company assumed and agreed to pay a lease
covering an automobile acquired for the use of the Company's employees. The
total monthly lease payment is $480.
(4) The Company has granted to Ms. Greenberg incentive stock options exercisable
to purchase, in the aggregate 85,000 shares of the Company's Common Stock at
a weighted average exercise price of $2.43 per share under the Company's
Stock Incentive Plan, 50,000 of which are fully vested as of the date of
this Prospectus.
The Company currently has a written Employment Agreement with its President,
expiring June 20, 1999. The Company has no key man life insurance covering any
of its officers or employees.
EMPLOYEE STOCK PURCHASE PLAN
On June 12, 1995, the Company's shareholders ratified and approved a
qualified Employee Stock Purchase Plan ("ESPP") pursuant to Section 423 of the
Internal Revenue Code of 1986, as amended. Pursuant to the ESPP, the Company has
been authorized to offer up to 20,000 shares per year over a three-year term, or
a total of 60,000 shares, to the Company's employees. The ESPP includes certain
restrictions which preclude participation by part-time employees and employees
owning five percent (5%) or more of the Company's Common Stock. The purchase
price for the shares may not be less than eighty-five percent (85%) of the
market value of the stock on either the Enrollment Date or the Exercise Date as
those terms are defined in the ESPP. As of the date of this Prospectus, no
shares of common stock have been issued under the ESPP and there have been no
subscriptions of employees to participate in the plan.
STOCK INCENTIVE PLAN
On November 23, 1992, the Company's Shareholders adopted a Stock Incentive
Plan ("Plan") to commence in 1993. Pursuant to the Plan, stock options granted
to eligible participants may take the form of Incentive Stock Options ("ISO's")
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
or options which do not qualify as ISO's (Non-Qualified Stock Options or
"NQSO's"). An aggregate of 230,000 shares of common stock have been authorized
to be issued under the Plan. As required by Section 422 of the Code, the
aggregate fair market value of the Company's Common Stock with respect to its
ISO's granted to an employee exercisable for the first time in any calendar year
may not exceed $100,000. The foregoing limitation does not apply to NQSO's. The
exercise price of an ISO may not be less than 100% of the fair market value of
the shares of the Company's Common Stock on the date of grant. The exercise
price of an NQSO may be set by the administrator, but must not be less than fair
market value. An option is not transferable, except by will or the laws of
descent and distribution. If
36
<PAGE>
the employment of an optionee terminates for any reason (other than for cause,
or by reason of death, disability, or retirement), the optionee may exercise his
options within a ninety (90) day period following such termination to the extent
he was entitled to exercise such options at the date of termination. Either the
Board of Directors (provided that a majority of Directors are "disinterested")
can administer the Plan, or the Board of Directors may designate a committee
comprised of Directors meeting certain requirements to administer the Plan. The
Administrator will decide when and to whom to make grants, the number of shares
to be covered by the grants, the vesting schedule, the type of award and the
terms and provisions relating to the exercise of the awards. An aggregate of
196,000 shares of the Company's Common Stock are reserved for issuance upon the
exercise of options granted under the Plan.
As of January 26, 1997, incentive stock options to purchase 166,000 shares
of Common Stock were outstanding and unexercised, having a weighted average
exercise price of $2.54 per share. Of these incentive stock options, 55,000 are
subject to future vesting.
No officer of the Company receives any additional compensation for his
services as a Director. The Company has no retirement, pension, profit sharing
or insurance or medical reimbursement plans covering its Directors.
37
<PAGE>
The following table sets forth certain information concerning the exercise
of incentive stock options during the fiscal year ended January 26, 1997 by each
of the named executive officers and the fiscal year-end value of unexercised
options on an aggregated basis:
TABLE 2
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT
OPTIONS/SARS (#) FY-END($)(1)
------------------ -----------------
SHARES ACQUIRED ON VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------- ------------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Sissel B. Greenberg.......................... -0- $ -0- 50,000/35,000(2) $ -0-
</TABLE>
- ------------------------
(1) The value of unexercised options is determined by calculating the difference
between the fair market value of the securities underlying the options at
fiscal year end and the exercise price of the options.
(2) Includes options exercisable to purchase 20,000 shares of Common Stock at a
price of $2.50 granted in March, 1996, of which 10,000 options are subject
to future vesting, and an additional 25,000 options granted in January,
1997, exercisable at a price of $3.25 per share which are subject to future
vesting.
INDEMNIFICATION AND LIMITATION ON LIABILITY OF DIRECTORS
The Company's Articles of Incorporation provide that the Company shall
indemnify, to the full extent permitted by Colorado law, any director, officer,
employee or agent of the corporation made or threatened to be made a party to a
proceeding, by reason of the former or present official of the person, against
judgments, penalties, fines, settlements and reasonable expenses incurred by the
person in connection with the proceeding if certain standards are met. At
present, there is no pending litigation or proceeding involving any director,
officer, employee or agent of the Company where indemnification will be required
or permitted. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
The Company's Articles of Incorporation limit the liability of its directors
to the fullest extent permitted by the Colorado Business Corporation Act.
Specifically, directors of the Company will not be personally liable for
monetary damages for breach of fiduciary duty as directors, except for (i) any
breach of the duty of loyalty to the Company or its shareholders, (ii) acts or
omissions not in good faith or that involved intentional misconduct or a knowing
violation of law, (iii) dividends or other distributions of corporate assets
that are in contravention of certain statutory or contractual restrictions, (iv)
violations of certain laws, or (v) any transaction from which the director
derives an improper personal benefit. Liability under federal securities law is
not limited by the Articles.
38
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTION IN SECURITIES
In September 1993, the Company exchanged its interest in two gaming
properties to Global Casinos, Inc. for 2,500,000 shares of common stock of
Global Casinos. A $350,000 Promissory Note which had been held by an
unaffiliated third party was assigned to the Company in exchange for shares of
Common Stock of the Company in a private offering. The Company agreed to convert
the total outstanding balance of principal and all accrued and unpaid interest
on the Promissory Note into 200,000 shares of common stock of Global Casinos.
Those 200,000 shares were subsequently registered for sale under the Securities
Act by Global Casinos and have been used by the Company to collateralize a
venture capital loan with an affiliate of the Representative. At the time of the
agreement of the Company to convert the Promissory Note for 200,000 shares of
Global Casinos common stock, Mr. Stephen G. Calandrella served on the Board of
Directors of both the Company and Global Casinos. See Note 2 to Financial
Statements.
During 1994, the Company engaged in market transactions in the securities of
Global Casinos, Inc. and other corporations. These transactions resulted in
losses on marketable securities for the years ended December 31, 1994 and
January 28, 1996 of $146,963 and $182,643, respectively, principally due to
market declines in the value of Global Casinos, Inc. common stock. At the time
of these transactions, Mr. Gerald Jacobs, and to a limited extent, Mr.
Calandrella were members of the Board of Directors of Global Casinos and members
of the Board of Directors of the Company (Messrs. Calandrella and Jacobs
resigned as Directors of the Company in February 1995 and October 1996,
respectively), and Mr. Pete Bloomquist was Chief Financial Officer of Global
Casinos and a member of the Board of Directors of the Company, (Mr. Bloomquist
resigned as a Director in October 1996). See Note 1 to Financial Statements.
STOCK DISTRIBUTION
In March 1994, the Company undertook a stock distribution pursuant to which
it distributed to its common stockholders one share of common stock of Global
Casinos, Inc., a Utah corporation held by the Company as a portfolio security,
for each share of Company Common Stock beneficially owned on the record date of
the distribution. In connection with the stock dividend, the Company distributed
a total of 2,409,700 shares of Global Casinos, Inc. common stock to its
shareholders of record. The shares had been acquired by the Company in
connection with the exchange involving the Company's gaming property located in
Central City, Colorado. At the time of the stock distribution, Messrs. Jacobs
and Calandrella were members of the Board of Directors of both the Company and
Global Casinos, and Mr. Bloomquist was Chief Financial Officer of Global Casinos
and a member of the Company's Board of Directors. See Note 2 to Financial
Statements.
MIRAGE CONCEPTS, INC. ACQUISITION
In March, 1994, the Company acquired 100% of the outstanding common stock of
Mirage Concepts, Inc., an Arizona corporation ("Mirage"), which owned three
reproduction jewelry stores, operating under the tradenames "Mira Boutique" and
"Classic Copies." At the time of the transaction, the stockholders of Mirage
Concepts, Inc. were Raymond Stanz (50%), John C. Power (25%) and Mark R. Power
(25%). At the time, Mr. Stanz was serving as the Chief Operating Officer of the
Company, and John C. Power would have been deemed a principal shareholder of the
Company by virtue of the security ownership of Redwood Microcap Fund, Inc., of
which Mr. Power is a director and President.
The agreement for the acquisition of Mirage Concepts, Inc. initially
provided for the Company to issue to the shareholders of Mirage, PRO RATA,
27,000 units of the Company's securities, each unit consisting of one share of
Common Stock and one Common Stock Purchase Warrant exercisable through December
31, 1994 at an exercise price of $6.25 per share. However, following the closing
of the transaction, and prior to the issuance of any securities to the Mirage
shareholders, a dispute arose between Mr. Stanz, on
39
<PAGE>
the one hand, and the Company, on the other, concerning numerous matters,
including the financial condition of Mirage Concepts, Inc. at the time it was
acquired by the Company.
Following extensive negotiations, an agreement was entered into with Mr.
Stanz resolving the areas of disagreement pursuant to which (i) Mr. Stanz
resigned as an officer and director of Mirage as well as Chief Operating Officer
of the Company, (ii) Mr. Stanz transferred, sold and assigned to Rockies Fund,
Inc. 3,500 shares of the Company's Common Stock, 3,500 C Warrants, and all of
the Units which Stanz was to have received as a shareholder of Mirage Concepts,
Inc., in consideration for which Rockies Fund agreed to pay Stanz an aggregate
sum of $85,000, and (iii) the Company and Stanz exchanged mutual general
releases. Rockies Fund, Inc. was a principal shareholder of the Company whose
President and director was and is Stephen G. Calandrella, who at the time of the
Stanz agreement served as a director of the Company.
Following the resolution of the dispute with Stanz, the Company entered into
an agreement with Rockies Fund, Inc., Mr. Calandrella, Redwood Microcap Fund,
Inc., and John C. Power pursuant to which the Company issued an aggregate of
20,000 shares of Common Stock as full and final consideration for its
acquisition of Mirage Concepts, Inc. The warrants that were to have been
included in the units issuable in the Mirage transaction had already expired
unexercised and were therefore moot. See Note 2 to Financial Statements.
SHAREHOLDER GUARANTEES
In connection with the Company's acquisition of the Impostors retail jewelry
chain from bankruptcy proceedings, the Company agreed to assume and pay certain
post-petition liabilities of American Fashion Jewels, Inc. Included in those
post-petition liabilities were obligations to the law firm of Bronson & Bronson,
of San Francisco, California. This obligation is in the amount of $35,000, and
by agreement is being retired in monthly installments. By written agreement, the
Company's obligation to that law firm has been guaranteed by the Rockies Fund,
Inc., Redwood Microcap Fund, Inc., John C. Power, individually, and Stephen G.
Calandrella, individually. Under the terms of the written guarantees, in the
event any of the guarantors is required to cure the Company's default or
delinquency in any payment to that law firm, such payment can be applied, at the
option of the guarantor, to the purchase of Company Common Stock at a price per
share which is equal to the lesser of $5.00 per share or 50% of the closing bid
price of the Company's Common Stock on the date of such payment, but in no event
at a price per share less than $3.125. In addition, in the event a guarantor is
required to make any payment then Redwood would be entitled to designate one
person to serve as a member of the Company's Board of Directors for a minimum
term of one year. See Note 4 to Financial Statements.
PRIVATE OFFERING--INVESTOR GUARANTEES
On September 30, 1995, the Company entered into an Investment Term Sheet
("ITS") with Redwood Microcap Fund, Inc. ("Redwood"), a former principal
shareholder of the Company. Under the terms of the ITS, Redwood, and its
affiliates, agreed to purchase up to 240,000 shares of Common Stock at a price
of $1.25 per share, representing aggregate maximum proceeds to the Company of
$300,000 (the "Private Offering"). Further under the terms of the ITS, in
consideration of their investment of the Company's Common Stock at $1.25 per
share, investors in the Private Offering (the "Investors") severally agreed to
subscribe for and purchase all Shares of the Company's Common Stock offered in a
proposed rights offering which was never undertaken. See Note 6 to Financial
Statements.
In connection with the Private Offering, the Company sold an aggregate of
234,000 shares of Common Stock for aggregate net proceeds of $282,500. The
Company utilized the proceeds of the Private Offering to open two new stores and
to meet working capital requirements during the holiday season, the fourth
quarter of 1995.
40
<PAGE>
LEASE GUARANTEE
In April, 1996, the Company granted to four of its directors non-qualified
stock options exercisable to acquire 3,000 shares of the Company's common stock
each in exchange for each persons agreement to personally guarantee the
Company's office lease. The options are exercisable at a price of $2.50 per
share and expire in 2001. See "Securities Ownership of Management and Principal
Shareholders" and Notes 4 and 6 to Financial Statements.
All transactions between the Company and its officers, Directors, principal
shareholders, or other affiliates have been and will be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties
on an arms-length basis and will be approved by a majority of the Company's
independent, disinterested Directors.
STOCK REDEMPTION
On December 27, 1996, the Company completed the Bridge Note Financing from
which it utilized $624,325 of net proceeds to redeem from certain former
securityholders an aggregate of 189,180 shares of Common Stock and 32,500 Class
C Warrants. The redemption consisted of all the equity securities of the Company
owned by these former securityholders, and was undertaken by the Company to
expedite this offering and the Company's application to have its securities
listed on NASDAQ. The price paid to these former securityholders in connection
with this redemption was $3.25 per share of Common Stock and an aggregate
redemption price of $10,000 for all 32,500 Class C Warrants.
41
<PAGE>
(This page has been left blank intentionally.)
42
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the date of this Prospectus, the stock
ownership of each person known by the Company to be the beneficial owner of five
(5%) percent or more of the Company's Common Stock, all directors individually
and all directors and officers of the Company as a group. Each person has sole
voting and investment power with respect to the shares shown, except as noted.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------------
PERCENT(1)
--------------------------------------
NAME & ADDRESS OF BENEFICIAL OWNER NUMBER BEFORE OFFERING AFTER OFFERING(2)
- ------------------------------------------------------------ ----------- ----------------- -------------------
<S> <C> <C> <C>
Sissel B. Greenberg(3)...................................... 55,600 9.1% 3.2%
3033 S. Parker Rd., #120
Aurora, CO 80014
William Nandor(4)........................................... 8,000 1.4% 0.5%
2698 Gapwall Court
Pleasanton, California 94566
Jack Brandon................................................ -0- -0- -0-
3033 S. Parker Rd., #120
Aurora, CO 80014
Simona Katz Yuffa........................................... -0- -0- -0-
3033 S. Parker Rd., #120
Aurora, CO 80014
Todd Huss(5)................................................ 15,000 2.6% 0.9%
3033 S. Parker Rd., #120
Aurora, Colorado 80014
Raymond D. Hand(6).......................................... 57,500 10.0% 3.4%
310 Radford Place
Knoxville, Tennessee 37927
Banca Adamas S.A............................................ 80,000 14.3% 4.8%
Via Nassa 42
6901 Lugano, Switzerland
AMC Consumer(7)............................................. 61,224 10.5% 3.6%
One Main Street, Suite 312
Eatontown, NJ 07724
Caribou Bridge Fund(8)...................................... 33,114 5.8% 2.0%
5350 S. Roslyn Street, #380
Englewood, CO 80111
Lee Schlessman(9)........................................... 35,714 6.0% -0-
1301 Pennsylvania St., #800
Denver, CO 80203
Gary C. Batz(9)............................................. 53,570 8.7% -0-
c/o Fike Corporation
704 S. 10th Street
Blue Springs, FL 64015
Directors and Officers as 78,200 12.3%
a Group (5 persons)....................................... 4.5%
</TABLE>
- ------------------------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of the date of this Prospectus, or
within sixty (60) days of such date, are treated as outstanding when
determining the percent of the class owned by such individual and when
determining the percent owned by a group.
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<PAGE>
(2) Assumes that the Over-Allotment Option is not exercised, none of the
Warrants sold in this offering have been exercised and none of the
Representative's Securities have been issued.
(3) Includes incentive stock options to purchase 50,000 shares of the Company's
Common Stock at a weighted average exercise price of $2.00 per share granted
under the Company's Stock Incentive Plan. Also includes non-qualified stock
options to purchase 3,000 shares of the Company's Common Stock at an
exercise price of $2.50 per share granted to Ms. Greenberg in return for her
agreement to personally guarantee the Company's corporate office lease. Does
not include incentive stock options to purchase 35,000 shares of the
Company's Common Stock at an exercise prices ranging from $2.50 to $3.25 per
share which vest through 1998.
(4) Includes unqualified stock option exercisable to purchase 5,000 shares of
Common Stock at an exercise price of $3.25 per share.
(5) Consists of Incentive Stock Options exercisable to purchase 15,000 shares of
Common Stock at an exercise price of $2.50 per share. Does not include
additional Incentive Stock Options exercisable to purchase an additional
20,000 shares of Common Stock at an exercise prices ranging from $2.50 to
$3.25 per share which are not yet vested.
(6) Includes Class C Common Stock Purchase Warrants exercisable to acquire up to
12,500 additional shares of Common Stock at an exercise price of $10.00 per
share.
(7) Includes Class B Warrants exercisable to purchase 20,408 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
registration statement of which this Prospectus forms a part.
(8) Includes Class B Warrants exercisable to purchase 10,204 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
registration statement of which this Prospectus forms a part.
(9) Consists entirely of Class B Warrants purchased as part of the Bridge Note
Financing. Assumes all Warrants issued in exchange for the Class B Warrants
are sold in the Selling Shareholders' Offering.
44
<PAGE>
DESCRIPTION OF SECURITIES
The Company is authorized to issue up to 850,000,000 shares of $.002 par
value Common Stock and up to 20,000,000 shares of $.10 par value Preferred
Stock. As of the date of this Prospectus, 559,916 shares of Common Stock and
416,670 shares of Series A Convertible Preferred Stock were issued and
outstanding.
COMMON STOCK
Each holder of Common Stock of the Company is entitled to one vote for each
share held of record. There is no right to cumulative votes for the election of
directors. The shares of Common Stock are not entitled to pre-emptive rights and
are not subject to redemption or assessment. Each share of Common Stock is
entitled to share ratably in distributions to shareholders and to receive
ratably such dividends as may be declared by the Board of Directors out of funds
legally available therefor. Upon liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to receive, PRO RATA, the
assets of the Company which are legally available for distribution to
shareholders. The issued and outstanding shares of Common Stock are validly
issued, fully paid and non-assessable.
PREFERRED STOCK
The Company is authorized to issue up to 20,000,000 shares of $.10 par value
Preferred Stock. The preferred stock of the corporation can be issued in one or
more series as may be determined from time to time by the Board of Directors
without further stockholder approval. In establishing a series, the Board of
Directors shall give to it a distinctive designation so as to distinguish it
from the shares of all other series and classes, shall fix the number of shares
in such series, and the preferences, rights and restrictions thereof. All shares
of any one series shall be alike in every particular. All series shall be alike
except that there may be variation as to the following: (1) the rate of
distribution, (2) the price at and the terms and conditions on which shares
shall be redeemed, (3) the amount payable upon shares for distributions of any
kind, (4) sinking fund provisions for the redemption of shares, and (5) the
terms and conditions on which shares may be converted if the shares of any
series are issued with the privilege of conversion, and (6) voting rights except
as limited by law.
Although the Company currently does not have any plans to designate a series
of Preferred Stock, there can be no assurance that the Company will not do so in
the future. As a result, the Company could authorize the issuance of a series of
preferred stock which would grant to holders preferred rights to the assets of
the Company upon liquidation, the right to receive dividend coupons before
dividends would be declared to common stockholders, and the right to the
redemption of such shares, together with a premium, prior to the redemption of
Common Stock. Common stockholders have no redemption rights. In addition, the
Board could issue large blocks of voting stock to fend against unwanted tender
offers or hostile takeovers without further shareholder approval.
SERIES A CONVERTIBLE PREFERRED STOCK
The Company has issued and outstanding 416,670 shares of Series A
Convertible Preferred Stock (the "Convertible Preferred Stock") which were
issued to investors in the Bridge Offering which was completed on June 24, 1996.
Holders of shares of Convertible Preferred Stock are entitled to one vote for
each share on any matter to come before the shareholders of the Company and are
entitled to a liquidation preference of $.60 per share of Convertible Preferred
Stock in the event of a liquidation of the Company. Each outstanding share of
Convertible Preferred Stock is entitled to receive cumulative cash dividends at
the annual rate of $.051 per share, payable quarterly on the last day of
January, April July and October of each year. Each share of Convertible
Preferred Stock is convertible at the option of the holder into one share of
Common Stock (the "Conversion Shares") commencing June 24, 1997. However, each
share of Convertible Preferred Stock will convert automatically into shares of
Common Stock if the Conversion
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<PAGE>
Shares are registered for sale under the Securities Act (the "Automatic
Conversion"). In the event of an Automatic Conversion, the conversion price
shall be equal to 70% of the offering price of the Common Stock to the public in
the public offering. The Registration Statement of which this Prospectus forms a
part includes the registration for sale by the Company of the Conversion Shares
issuable upon conversion of the Convertible Preferred Stock; and all information
with regard to the capital stock of the Company contained in this Prospectus
gives effect to that Automatic Conversion. Upon such Automatic Conversion,
holders of outstanding shares of Convertible Preferred Stock shall have no
further rights as preferred stockholders of the Company other than the right to
receive certificates evidencing the Conversion Shares issuable upon such
conversion.
12% CONVERTIBLE PROMISSORY NOTE
The Company has issued an aggregate of $1,120,000 in 12% Convertible
Promissory Notes. Each Convertible Promissory Note accrues interest at a rate of
12% per annum, payable quarterly. The total outstanding balance of principal and
any accrued and unpaid interest is due and payable December 26, 1999. Holders of
the Notes have the option to convert the outstanding principal balance of the
Notes into shares of the Company's Common Stock at any time commencing the
earlier of (i) December 27, 1997, or (ii) upon the effective date of the
Registration Statement registering for sale under the Securities Act the
Conversion Shares. The conversion value at which the principal amount of the
Convertible Notes is convertible is initially $2.80 per share of Common Stock,
subject to adjustment under certain circumstances; provided, however, that if
either the Company fails to consummate a public offering on or before June 30,
1997 or the Company fails to retire the Notes on or before the Maturity Date,
the conversion value shall be reduced to $1.00 per share of Common Stock after
either such event. The obligation of the Company to repay the Convertible Notes
is secured by a subordinated security interest encumbering all of the Company's
tangible and intangible assets. The Company has agreed to repay the Convertible
Notes out of the proceeds of this offering.
CLASS A WARRANT
The Board of Directors has authorized the issuance of up to 1,858,334
Warrants, including 1,100,000 Warrants offered hereby, 165,000 Warrants subject
to the Over-Allotment Option, 110,000 Warrants subject to the Representative's
Securities and 483,334 Warrants issuable to holders of outstanding Class B
Warrants. Two Warrants entitle the holder thereof to purchase one share of
Common Stock at a price of $5.00. The Warrant Exercise Price is subject to
adjustment upon certain events such as stock splits, stock dividends and similar
transactions. The Warrants are subject to redemption by the Company, as
described below. The exercise period for the Warrants expires at 5:00 p.m.,
Denver time on the date that is three years from the date of this Prospectus
(the "Warrant Term"), after which the Warrants will expire automatically. The
Company may at any time and from time to time extend the Warrant Term or reduce
the Warrant Exercise Price, provided written notice of such extension or
reduction is given to the registered holders of the Warrants prior to the
expiration date then in effect. The Company does not presently contemplate any
extension of the Warrant Term or reduction in the Warrant Exercise Price.
Subject to compliance with applicable securities laws, Warrants certificates
may be transferred or exchanged for new certificates of different denominations
at the offices of the Warrant Agent described below. The holders of Warrants, as
such, are not entitled to vote, to receive dividends or to exercise any of the
rights of shareholders for any purpose. The Warrants may be transferred
separately from the Common Stock with which they will be issued.
EXERCISE. The Warrants may be exercised during the Warrant Term only upon
surrender of the Warrant certificate at the offices of the Company with the form
of "Election to Purchase" on the reverse side of the Warrant certificate
completed and signed, accompanied by payment of the full Exercise Price for the
number of Warrants being exercised. Warrantholders will receive one share of
Common Stock for every two Warrants exercised, subject to any adjustment
required by the Warrant Agreement. For a holder
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<PAGE>
to exercise Warrants, there must be a current Registration Statement in effect
with the Commission and various state securities authorities registering the
shares of Common Stock underlying the Warrants or, in the sole determination of
the Company and its counsel, there must be a valid exemption therefrom. The
Company has undertaken, and intends, to maintain a current Registration
Statement which will permit the exercise of the Warrants during the Warrant
Term. Maintaining a current effective Registration Statement could result in
substantial expense to the Company and there is no assurance that the Company
will be able to maintain a current Registration Statement covering the shares
issuable upon exercise of the Warrants. Holders of Warrants will have the right
to exercise the Warrants included therein for the purchase of shares of Common
Stock only if a Registration Statement is then in effect and only if the shares
are qualified for sale under securities laws of the state in which the
exercising warrantholder resides or if the Company, in its and its counsel's
sole discretion, is able to obtain valid exemptions from the foregoing
requirements. Although the Company believes that it will be able to register or
qualify the shares of Common Stock underlying the Warrants for sales in those
states where the Securities are offered, there can be no guarantee that such
registration or qualification, or an exemption therefrom, can be accomplished
without undue hardship or expense to the Company. The Warrants may be deprived
of any value if a Registration Statement covering the shares issuable upon
exercise thereof or an exemption therefrom cannot be filed or obtained without
undue expense or hardship or if such underlying shares are not registered or
exempted from such registration in the states in which the holder of a Warrant
resides. In the latter event, the only option available to a holder of a Warrant
may be to attempt to sell his or her Warrants into the market, if a market then
exists and only then in compliance with applicable securities laws and
restrictions on transfer.
REDEMPTION. The Company shall have the right, at its discretion, to call
all of the Warrants for redemption after 12 months from the date of this
Prospectus on 45 days' prior written notice at a redemption price of $.05 per
Warrant if: (i) the closing bid price of the Company's Common Stock exceeds the
Warrant Exercise Price by a least 50% during a period of at least 20 of the 30
trading days ending within 30 days preceding the notice of redemption; (ii) the
Company has in effect a current Registration Statement covering the Common Stock
issuable upon exercise of the Warrants; and (iii) the expiration of the 45 day
notice period is within the Warrant Term. If the Company elects to exercise its
redemption right, holders of Warrants may either exercise their Warrants, sell
such Warrants in the market or tender their Warrants to the Company for
redemption. Within five business days after the end of the 45 day period, the
Company will mail a redemption check to each registered holder of a Warrant who
holds unexercised Warrants as of the end of the 45 day period, whether or not
such holder has surrendered the Warrant certificates for redemption. The
Warrants may not be exercised after the end of such 45 day period.
CLASS B WARRANT
The Company has outstanding Class B Warrants exercisable to purchase, in the
aggregate, 241,667 shares of Common Stock at an exercise price of $5.00 per
share. The Class B Warrants were issued by the Company in the Bridge Offering
and the Bridge Note Financing. The Class B Warrants are exercisable at any time
commencing on the date of issuance and expiring on June 24, 1998. Upon
expiration, the Class B Warrant will terminate automatically, subject to certain
rights of the Company to extend the warrant term. The exercise price of each
Class B Warrant is subject to adjustment upon certain events such as stock
splits, stock dividends and similar transactions.
Each Class B Warrant will be automatically exchanged for two Class A
Warrants upon the Effective Date of the Registration Statement of which this
Prospectus forms a part. Upon such Effective Date, all outstanding Class B
Warrants shall be deemed surrendered for cancellation in exchange for the
issuance of twice the number of Class A Warrants; and holders of Class B
Warrants shall have the right only to receive two Class A Warrants for each
Class B Warrant beneficially owned on the Effective Date.
47
<PAGE>
Holders of outstanding Class B Warrants were granted certain registration
rights by the Company in connection with the Bridge Offering, which rights are
being exercised and fulfilled by the Registration Statement of which this
Prospectus forms a part.
CLASS C WARRANTS
The Company has outstanding Class C Warrants exercisable until December 31,
1997 to purchase 60,250 shares of Common Stock at a price of $10.00 per share.
TRANSFER AND WARRANT AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock and warrant agent for
the Warrants is Corporate Stock Transfer, Inc., Denver, Colorado.
REPORTS TO SHAREHOLDERS
The Company intends to furnish annual reports to shareholders which will
include certified financial statements reported on by its certified public
accountants. In addition, the Company may issue unaudited quarterly or other
interim reports to shareholders as it deems appropriate. The Company will comply
with the periodic reporting requirements imposed by the Securities Exchange Act
of 1934.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, a copy of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, the Underwriters named below (the "Underwriters") have
severally agreed, through Cohig & Associates, Inc. as the Representative of the
Underwriters, to purchase from the Company on a firm commitment basis, the
aggregate number of shares of Common Stock and Warrants set forth opposite their
names below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES AND
UNDERWRITERS WARRANTS
- ------------------------------------------------------------------------------------------- ----------
<S> <C>
Cohig & Associates, Inc....................................................................
----------
Total.................................................................................. 1,100,000
----------
----------
</TABLE>
The Common Stock and the Warrants are being offered by the several
Underwriters, subject to prior sale, when, as, and if delivered to and accepted
by the Underwriters and subject to their right to reject orders in whole or in
part and subject to approval of certain legal matters by counsel and to various
conditions. The nature of Underwriters' obligation is such that they must
purchase all of the Common Stock and Warrants offered hereby if any are
purchased.
The Company has granted the Representative options for 45 days from the date
of this Prospectus to purchase up to an additional 165,000 shares of Common
Stock and/or 165,000 Warrants at the assumed initial public offering prices less
the underwriting discounts of $.375 per share and $.015 per Warrant. The
Representative may exercise such options only for the purpose of covering any
over-allotments in the sale of the Common Stock and Warrants being offered.
The Underwriters have advised the Company that they propose to offer the
1,100,000 shares of Common Stock and 1,100,000 Warrants directly to the public
at the public offering price set forth on the cover page of this Prospectus and
to selected dealers at that price, less a concession of not more than $.225 per
share of Common Stock and $.009 per Warrant. After the offering, the Price to
the public and the concession may be changed by the Underwriters.
The Underwriters have advised the Company that they will not make sales of
the Common Stock or Warrants offered in this Prospectus to accounts over which
they exercise discretionary authority without specific authorization.
The Company will pay the Representative a non-accountable expense allowance
from offering proceeds, including proceeds from the over-allotment options to
the extent exercised. The Representative's expenses in excess of the
non-accountable expense allowance will be borne by the Representative. To the
extent that the expenses of the Representative are less than the non-accountable
expense allowance, the excess shall be deemed to be compensation to the
Representative. On April 29, 1996, the Company and the Representative entered
into an agreement under which the Representative will act as the Company's
exclusive financial advisor until the agreement is terminated by either party
after September 30, 1996. The Company has paid $30,000 to the Representative in
consideration of the financial advisory services relating to this offering. This
amount will be deducted from the non-accountable expense allowance due the
Representative. Accordingly, the amount payable in respect of the remaining
non-accountable expense
49
<PAGE>
allowance would be 3% of the offering proceeds including the over-allotment
option, reduced by the amount of the financial advisory fees of $30,000.
The Company will bear all costs and expenses incident to the issuance,
offer, sale and delivery of the Common Stock and Warrants. The Underwriters have
agreed to pay all fees and expenses of any legal counsel whom it may employ to
represent it separately in connection with or on account of the proposed
offering by the Company, mailing, telephone, travel and clerical costs and all
other office costs incurred or to be incurred by the Underwriters or by their
representatives in connection with this offering.
The public offering price of the Common Stock and Warrants and the exercise
price of the Warrants were determined by negotiations between the Representative
and the Company. Among the factors considered in determining the public offering
price and the Warrant exercise price were the prospects for the Company, an
assessment of the industry in which the Company operates, the assessment of
management, the number of shares of Common Stock and Warrants offered, the price
that purchasers of such securities might be expected to pay given the nature of
the Company, and the general condition of the securities markets at the time of
the offering. Accordingly, the offering price set forth on the cover page of
this Prospectus should not be considered an indication of the actual value of
the Company or the Common Stock or Warrants.
The Company has obtained the agreement of its officers and certain other
shareholders not to sell, contract to sell or otherwise dispose of, directly or
indirectly, any shares of the Common Stock of the Company beneficially held by
them, other than Common Stock offered hereby, for a period of six months after
the date of this Prospectus, without the prior written consent of the
Representative.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the 1933 Act, and, if such
indemnifications are unavailable or insufficient, the Company and the
Underwriters have agreed to damage contribution agreements between them based
upon relative benefits received from this offering and relative fault resulting
in such damages. The Company also has agreed with the Underwriters that the
Company will file and cause to become effective a Registration Statement
pursuant to Section 12(g) of the Securities Exchange Act of 1934 no later than
the date of this Prospectus.
The Company has also agreed that, at the closing of this offering, it will
enter into a consulting agreement retaining the Representative as a financial
consultant to the Company for a fee of $2,500 per month for 12 months after the
closing of this offering. The entire $30,000 fee shall be payable to the
Representative at the closing.
The foregoing does not purport to be a complete statement of the terms and
conditions of the Underwriting Agreement, copies of which are on file at the
offices of the Representative, the Company and the Commission. See "Available
Information."
REPRESENTATIVE'S SECURITIES
Upon completion of the offering, the Company will sell to the Representative
for $100 options to purchase 110,000 shares of Common Stock and 110,000 Warrants
(the "Representative's Securities"). The Representative's Securities will be
restricted from sale, transfer, assignment or hypothecation and will not be
exercisable for one year after the date of this Prospectus. Thereafter, for a
period of four years, the Representatives' Securities will be exercisable at
120% of the public offering price of the Common Stock and 120% of the public
offering price for the Warrants. The Warrants have the same exercise price as
the Warrants offered hereby. The exercise price for the Representative's
Securities is payable in cash or through the surrender of Common Stock or
Warrants having a value equal to the difference between the exercise price and
the average of the current market prices of the Common Stock for the 20
consecutive trading days commencing 21 trading days before the date the Common
Stock or Warrants are tendered for exchange.
50
<PAGE>
The Representative's Securities may not be transferred, assigned or
hypothecated for one year after the date of this Prospectus except between the
Underwriters and by their respective officers or partners. The Representative's
Securities will also contain anti-dilution provisions for stock splits,
combinations and reorganizations, piggyback registration rights, one demand
registration right at the expense of the Company, and one demand registration
right paid for by the holders of the Representative's Securities (all of which
expire five years from the date of the Prospectus) and will otherwise be in form
and substance satisfactory to the Representative. The Warrants included in the
Representative's Securities will be exercisable during the period provided in
the Warrants, commencing one year after the date of this Prospectus.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Neuman & Cobb, Boulder, Colorado. Clifford L.
Neuman, a partner in the firm of Neuman & Cobb, is the beneficial owner of
24,300 shares of the Company's Common Stock, and Nathan L. Stone, an associate
with the firm, is the beneficial owner of 300 shares of the Company's Common
Stock. Certain legal matters will passed upon for the Representative by Jones &
Keller, P.C., Denver, Colorado.
EXPERTS
The financial statements of the Company as of January 28, 1996, and for the
fiscal years ended January 26, 1997 and January 28, 1996, are included herein in
reliance on the reports of Hein + Associates LLP, independent certified public
accountants, and upon the authority of that firm as experts in auditing and
accounting.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance with the Exchange
Act files periodic reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information concerning the Company can be inspected and copied (at
prescribed rates) at the Commission's Public Reference Section, Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, as well as at the
following Regional Offices: Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material also may be obtained at
prescribed rates from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and are publicly
available through the Commission's web site at http://www.sec.gov.
The Company has filed a Registration Statement on Form SB-2 with the
Commission in Washington, D.C., in accordance with the provisions of the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain portions of which have been omitted
as permitted by the rules and regulations of the Commission. For further
information pertaining to the shares of Common Stock and Warrants offered hereby
and the Company, reference is made to the Registration Statement, including the
exhibits and financial statement schedules filed as a part thereof. Statements
herein contained concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an Exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference. The Registration Statement may be
obtained from the Commission upon payment of the fees prescribed therefor and
may be examined at the principal office of the Commission in Washington, D.C.
51
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INDEPENDENT AUDITOR'S REPORT............................................................................... F-2
BALANCE SHEET--As of January 26, 1997...................................................................... F-3
STATEMENTS OF OPERATIONS--For the Fiscal Years Ended January 28, 1996 and January 26, 1997................. F-4
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY--For the Fiscal Years Ended January 28, 1996 and January 26,
1997..................................................................................................... F-5
STATEMENTS OF CASH FLOWS--For the Fiscal Years Ended January 28, 1996 and January 26, 1997................. F-6
NOTES TO FINANCIAL STATEMENTS.............................................................................. F-7
</TABLE>
F-1
<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 26, 1997, and the related statements of operations, changes in
stockholders' equity, and cash flows for the years ended January 28, 1996 and
January 26, 1997. 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 26, 1997, and the results of its operations and its cash flows for
the years ended January 28, 1996 and January 26, 1997, in conformity with
generally accepted accounting principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
April 2, 1997
F-2
<PAGE>
PREMIER CONCEPTS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
JANUARY 26,
1997
-------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................................ $ 211,575
Marketable securities............................................................................ 6,813
Merchandise inventories.......................................................................... 1,749,643
Prepaid expenses and other....................................................................... 118,536
-------------
Total current assets......................................................................... 2,086,567
PROPERTY AND EQUIPMENT, net........................................................................ 2,033,939
OTHER ASSETS:
Trademarks, net of accumulated amortization of $56,167........................................... 87,833
Deferred offering costs.......................................................................... 425,423
Deferred tax asset............................................................................... 39,000
Other............................................................................................ 139,012
-------------
TOTAL ASSETS....................................................................................... $ 4,811,774
-------------
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt:
Related parties................................................................................ $ 74,420
Other.......................................................................................... 263,312
Accounts payable................................................................................. 1,153,495
Accrued liabilities.............................................................................. 427,281
-------------
Total current liabilities.................................................................... 1,918,508
LONG-TERM DEBT, less current portion............................................................... 1,792,624
DEFERRED RENT...................................................................................... 103,239
-------------
Total liabilities............................................................................ 3,814,371
-------------
COMMITMENTS (NOTE 5)
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value, 20,000,000 shares authorized; 416,670 shares issued and
outstanding at January 26, 1997................................................................ 41,667
Common stock, $.002 par value; 850,000,000 shares authorized; 560,167 shares issued and
outstanding.................................................................................... 1,120
Additional paid-in capital....................................................................... 2,316,123
Accumulated deficit.............................................................................. (1,361,507)
-------------
Total Stockholders' Equity................................................................... 997,403
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................................................... $ 4,811,774
-------------
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
--------------------------
JANUARY 28, JANUARY 26,
1996 1997
------------ ------------
<S> <C> <C>
NET REVENUES:
Retail.............................................................................. $ 8,958,807 $ 9,739,844
Wholesale........................................................................... 111,033 33,856
------------ ------------
Total revenues.................................................................... 9,069,840 9,773,700
COST OF GOODS SOLD.................................................................... 2,690,658 2,823,733
------------ ------------
Gross margin........................................................................ 6,379,182 6,949,967
OPERATING EXPENSES:
Selling, general and administrative................................................. 6,079,410 6,330,097
Depreciation and amortization....................................................... 337,070 293,431
------------ ------------
Total operating expenses.......................................................... 6,416,480 6,623,528
------------ ------------
OPERATING INCOME (LOSS)............................................................... (37,298) 326,439
OTHER INCOME (EXPENSE):
Interest expense, net............................................................... (108,180) (116,722)
Gain (loss) on marketable securities, net........................................... (182,643) 12,264
Gain on settlements................................................................. -- 55,626
Other............................................................................... 10,899 55,297
------------ ------------
Other, net........................................................................ (279,924) 6,465
------------ ------------
INCOME (LOSS) BEFORE INCOME TAX BENEFIT AND DISCONTINUED OPERATIONS................... (317,222) 332,904
Income tax benefit.................................................................. 161,000 8,000
------------ ------------
INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS.......................................... (156,222) 340,904
DISCONTINUED OPERATIONS:
Income from discontinued operations, net of income tax expense of
$161,000 and $8,000 for the years ended January 28, 1996 and January 26, 1997..... 270,441 13,620
------------ ------------
NET INCOME............................................................................ $ 114,219 $ 354,524
------------ ------------
------------ ------------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS........................................... $ 114,219 $ 341,949
------------ ------------
------------ ------------
NET INCOME (LOSS) PER COMMON SHARE:
Before discontinued operations...................................................... $ (.31) $ .44
Discontinued operations............................................................. .54 .02
Dividends applicable to preferred stock............................................. -- (.02)
------------ ------------
Net income per common share....................................................... $ .23 $ .44
------------ ------------
------------ ------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING............................................ 495,800 777,408
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED JANUARY 28, 1996 AND JANUARY 26, 1997
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- --------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- --------- ---------- --------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, January 30, 1995........... -- $ -- 434,388 $ 868 $ 2,245,167 $ (1,830,250) $ 415,785
Common stock issued for:
Private placement................ -- -- 234,000 468 282,032 -- 282,500
Settlement of claims............. -- -- 53,959 108 184,592 -- 184,700
Services......................... -- -- 27,000 54 44,946 -- 45,000
Net income......................... -- -- -- -- -- 114,219 114,219
--------- --------- ---------- --------- ------------ ------------- ------------
BALANCES, January 28, 1996........... -- -- 749,347 1,498 2,756,737 (1,716,031) 1,042,204
Preferred stock issued for
cash............................. 416,670 41,667 -- -- 183,333 -- 225,000
Redemption and cancellation of
common stock..................... -- -- (189,180) (378) (623,947) -- (624,325)
Net income......................... -- -- -- -- -- 354,524 354,524
--------- --------- ---------- --------- ------------ ------------- ------------
BALANCES, January 26, 1997........... 416,670 $ 41,667 560,167 $ 1,120 $ 2,316,123 $ (1,361,507) $ 997,403
--------- --------- ---------- --------- ------------ ------------- ------------
--------- --------- ---------- --------- ------------ ------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
----------------------------
JANUARY 28, JANUARY 26,
1996 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................ $ 114,219 $ 354,524
Adjustments to reconcile net income to net cash from operating activities:
Stock for services.............................................................. 45,000 --
Gain on settlements of debt..................................................... -- (55,626)
Reduction of accounts payable--discontinued operations.......................... (431,441) (21,620)
Provision for store closure..................................................... 8,307 --
Depreciation and amortization................................................... 337,070 293,431
Deferred tax asset.............................................................. -- (39,000)
(Gain) loss on marketable securities............................................ 182,643 (12,264)
Other, net...................................................................... (13,201) (46,584)
Changes in operating assets and liabilities:
(Increase) decrease in:
Marketable securities, net.................................................... 156,374 50,564
Merchandise inventories....................................................... (197,665) (355,718)
Other assets.................................................................. (40,870) (23,033)
Increase (decrease) in:
Accounts payable and accrued liabilities...................................... 99,834 901,609
Other liabilities............................................................. 24,620 47,080
------------- -------------
Net cash provided by operating activities....................................... 284,890 1,093,363
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment................................... (165,137) (1,332,575)
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred offering costs........................................................... -- (425,423)
Proceeds from the issuance of preferred stock..................................... -- 225,000
Proceeds from issuance of common stock............................................ 282,500 --
Proceeds from issuance of notes payable........................................... 100,000 1,130,000
Payment on notes payable.......................................................... (346,219) (181,663)
Redemption of common stock........................................................ -- (624,325)
------------- -------------
Net cash provided by financing activities....................................... 36,281 123,589
------------- -------------
INCREASE (DECREASE) IN CASH......................................................... 156,034 (115,623)
CASH AND CASH EQUIVALENTS, beginning of period...................................... 171,164 327,198
------------- -------------
CASH AND CASH EQUIVALENTS, end of period............................................ $ 327,198 $ 211,575
------------- -------------
------------- -------------
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid for interest............................................................ $ 102,134 $ 111,744
------------- -------------
------------- -------------
Conversion of liabilities to equity securities.................................... $ 184,700 $ --
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-6
<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
had two common directors. During 1994, the Company purchased out of bankruptcy
certain assets and liabilities of American Fashion Jewels, Inc. (Impostors) and,
in a separate transaction, Mirage Concepts, Inc. (Mirage), both of which are
retail chains of reproduction jewelry stores. As of January 26, 1997 the Company
operated 32 retail stores with a geographic concentration of stores in
California, including one store in San Francisco, California that accounted for
approximately 17% and 14% of total revenues during the fiscal year ended January
28, 1996 and January 26, 1997, respectively.
FISCAL YEAR--The Company's year is a 52/53-week period ending on the last
Sunday in January. Fiscal year ended January 28, 1996 (fiscal 1996) and January
26, 1997 (fiscal 1997) 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.
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.
DEFERRED OFFERING COSTS--The amount represents costs incurred in connection
with a proposed public offering that was in process at January 26, 1997. This
amount will be offset against the proceeds if the offering is successful, or
expensed in operations if the offering is unsuccessful.
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 26, 1997 are common stock of Global. Realized
gain (loss) on marketable securities is determined based on specific
identification of securities sold.
The change in the net unrealized holding loss for the years ended January
28, 1996 and January 26, 1997 was $20,243 and $142,402, 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 approximate 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.
F-7
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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 COMMON SHARE--Net income (loss) per common share is
calculated based upon the weighted average number of common shares outstanding
during the periods presented. Dividends, including those accrued but not yet
paid on preferred stock is deducted to arrive at net income (loss) available to
the common shareholders. Dilutive options, convertible preferred stock and
warrants have been included in the calculation of net income per common share
for the fiscal year ended January 28, 1996 and January 26, 1997.
LICENSE AGREEMENTS--The Company grants license agreements to entities for
the use of the Impostor's name. License fees are recognized as income on a
straight-line basis over the term of the agreement.
INCOME TAXES--The Company accounts for income taxes under SFAS No. 109 which
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined, based on the difference between the financial
statements and tax bases of asset and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
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.
IMPAIRMENT OF LONG-LIVED ASSETS--Effective January 29, 1996, the Company
adopted Financial Accounting Standards Board Statement 121 (FAS 121). In the
event that facts and circumstances indicate that the cost of assets or other
assets may be impaired, an evaluation of recoverability would be performed. If
an evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's carrying amount to
determine if a write-down to market value or discounted cash flow value is
required. Adoption of FAS 121 had no effect on the January 26, 1997 financial
statements.
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.
STOCK BASED COMPENSATION--In fiscal 1997, the Company adopted Financial
Accounting Standards Board "Accounting for Stock-Based Compensation" (FAS 123).
FAS 123 encourages, but does not require, companies to recognize compensation
expense for grants of stock, stock options, and other equity instruments to
employees based on fair value. Companies that do not adopt the fair value
accounting rules must disclose the impact of adopting the new method in the
notes to the financial statements. Transactions in equity instruments with
non-employees for goods or services must be accounted for on the fair value
method. The Company has elected not to adopt the fair value accounting
prescribed by FAS 123 for employees, and is subject only to the disclosure
requirements prescribed by FAS 123.
F-8
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. 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 were
held by the Company, which represents less than 5% of Global's outstanding
common stock. 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 and
January 26, 1997, the Company had accounts payable of $80,884 and $45,865,
respectively, 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 settlements with certain creditors, which has resulted in
income before income tax expense, totaling approximately $209,000 and $-0-during
the years ended January 28, 1996 and January 26, 1997, respectively. The Company
also recorded approximately $222,000 and $24,000 of income during the years
ended January 28, 1996 and January 26, 1997, respectively, 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.
3. PROPERTY AND EQUIPMENT:
At January 26, 1997, property and equipment consists of the following:
<TABLE>
<S> <C>
Furniture, fixtures and equipment............................... $1,145,577
Leasehold improvements.......................................... 1,749,882
---------
2,895,459
Less accumulated depreciation................................... (861,520)
---------
$2,033,939
---------
---------
</TABLE>
Depreciation expense for the years ended January 28, 1996 and January 26,
1997 was $316,670 and $269,044, respectively.
4. NOTES PAYABLE AND LONG-TERM DEBT:
At January 26, 1997, notes payable and long-term debt consist of the
following:
<TABLE>
<S> <C>
RELATED PARTIES
Note payable to a stockholder, at 12% principal and interest due
December 31, 1996. The Company has been in discussions with the
noteholder to extend the maturity date of the note.................... $ 35,500
Notes and advances payable to stockholders of the Company, payable on
demand, non-interest bearing.......................................... 28,920
Other................................................................... 10,000
---------
Total related parties--all current.................................. $ 74,420
---------
---------
</TABLE>
F-9
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. NOTES PAYABLE AND LONG-TERM DEBT: (CONTINUED)
<TABLE>
<S> <C>
OTHER
Convertible notes payable. Interest payable quarterly at 12%. Principal
due December 26, 1999 (see further discussion below).................. $1,120,000
Note payable to a bank, interest payable monthly at 10%, principal
payable in February 1998, collateralized by cash and inventory........ 635,000
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 former stockholders of the Company...................... 111,414
Note payable to a entity, 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
proposed public offering.............................................. 100,000
Note payable to an entity, payable in monthly installments of $10,000
plus accrued interest at 12%. Principal due October 5, 1996. The
Company has been in discussions with the noteholder to pay off the
note with the proceeds of the offering................................ 60,000
Other................................................................... 29,522
---------
2,055,936
Less current portion.................................................... (263,312)
---------
$1,792,624
---------
---------
</TABLE>
Principal payments on the above obligations at January 26, 1997 are due as
follows:
<TABLE>
<CAPTION>
RELATED
PARTIES OTHER
--------- ------------
<S> <C> <C>
1998........................................................................... $ 74,420 $ 263,312
1999........................................................................... -- 661,541
2000........................................................................... -- 1,131,083
--------- ------------
$ 74,420 $ 2,055,936
--------- ------------
--------- ------------
</TABLE>
On December 27, 1996, the Company completed the sale of $1,120,000 in
Convertible Notes and 200,000 Class B Warrants, realizing net proceeds of
$1,041,600. From the net proceeds, the Company utilized $624,325 to redeem an
aggregate of 189,180 shares of Common Stock and 32,500 Class C Warrants from
certain former securityholders. The Convertible Notes bear interest at the rate
of 12% per annum, payable quarterly and are convertible into shares of Common
Stock commencing April 1, 1997, at the option of the holder, at a conversion
value of $2.80 per share. However, if (i) the Company fails to complete a public
offering of its securities by June 30, 1997 or (ii) the principal balance of the
Convertible notes is not retired by the Company by their maturity date, the
conversion value is reduced to $1.00 per share. The Company has agreed to retire
the Convertible Notes from the proceeds of a proposed public offering. Unless
earlier converted or retired, the Convertible Notes mature and become due and
payable on December 26, 1999. The obligation of the Company to repay the
Convertible Notes is collateralized by a subordinated security agreement
covering all of the Company's tangible and intangible assets.
F-10
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. COMMITMENTS:
LEASE COMMITMENTS--The Company leases its offices and retail facilities
under operating leases for terms expiring at various dates from 1997 to 2012.
The corporate office lease has been guaranteed by a director and certain former
directors of the Company. The aggregate minimum annual lease payments under
leases for the fiscal year are as follows:
<TABLE>
<S> <C>
1998................................................... $2,138,431
1999................................................... 2,065,399
2000................................................... 1,991,567
2001................................................... 1,781,665
Thereafter............................................. 5,351,257
----------
Total minimum lease payments........................... $13,328,319
----------
----------
</TABLE>
Most leases also provide for payment of operating expenses, real estate
taxes and in some cases for additional rent based on a percentage of sales.
Rental expense was $1,977,718 and $2,067,727 for the years ended January 28,
1996 and January 26, 1997, respectively.
LITIGATION SETTLEMENT--The Company entered into a commitment to guarantee
the value of 55,000 shares of Global stock and 2,750 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 the year ended January 28, 1996, the Company settled with the former
creditor for the issuance of an additional 46,792 shares of the Company's stock,
valued at $171,625.
6. STOCKHOLDERS' EQUITY:
STOCK REDEMPTION--During December 1996, the Company redeemed from certain
securityholders, 189,180 shares of its common stock and 32,500 of its Class C
warrants for $624,325.
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.
During June 1996, the Company sold 208,335 units at $1.20 per unit in a
private offering. Each unit includes two shares of Series A Convertible
Preferred Stock and one warrant. Five warrants currently entitle the holder to
purchase one share of common stock at $5 per share and are exercisable through
June 1998. Each share of Series A Preferred Stock is entitled to $.051 per annum
cumulative dividends and is convertible commencing in June 1997 at a rate of
five shares of preferred stock for one share of common stock. If the Company
completes a public offering of common stock, the preferred shares will
automatically convert into 102,041 shares of common stock and five warrants will
automatically be exchanged for two warrants offered in the proposed public
offering.
COMMON SHARES--In December 1996, the Company's shareholders approved a 1 for
5 reverse stock split and a change in the par value from $.0004 to $.002 per
share. Accordingly, all common stock reflected in the accompanying financial
statements and notes reflect this reverse split.
During 1994, the Company sold, in a private placement, 92,750 units for
$10.00 per unit. Each unit consisted of two shares of common stock and a warrant
for the purchase one share of common stock at a
F-11
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY: (CONTINUED)
purchase price of $10.00 per share, exercisable through December 31, 1995. The
Company has extended the term of the warrants to December 31, 1997. As discussed
above, the Company redeemed warrants for the purchase of 32,500 shares of common
stock for $10,000.
During the year ended January 28, 1996, the Company sold in a private
placement, 234,000 shares of common stock at $1.25 per share. Also, during the
year ended January 28, 1996, the Company issued 53,959 shares of common stock in
settlement of liabilities and guarantees of liabilities and 27,000 shares of
common stock in payment for services, including 2,400 issued to an officer and
director, and 2,600 issued to a director. The Company has agreed to register
102,041 shares, under the Securities Act of 1933.
EMPLOYEE STOCK PURCHASE PLAN--During June 12, 1995, the Company adopted a
qualified Employee Stock Purchase Plan (ESPP). The Company has been authorized
through the ESPP to offer up to 20,000 shares per year over a three-year term,
or a total of 60,000 shares, to the Company's employees. The ESPP includes
certain restrictions which preclude participation by part-time employees and
employees owning 5% or more of the Company's common stock. The purchase price
for the shares may not be less than 85% of the market value of the stock on
either the enrollment date or the exercise date as those terms are defined in
the ESPP. No shares of common stock have been issued under the ESPP and there
have been no subscriptions of employees to participate in the plan.
STOCK OPTION PLAN--The Company has an Incentive Stock Option Plan (Plan)
which provides for the grant of options to purchase up to 230,000 shares of the
Company's common stock to officers and employees of the Company. 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 on 40,000 shares at an exercise price of
$5; in fiscal 1996, the exercise price was reduced to $1.875 per share, and the
term was extended to June 20, 2001. An additional 20,000 incentive stock options
were granted to other employees in fiscal 1996 at $1.875 per share, which expire
in December 2000 and of which 7,000 were forfeited in fiscal 1997. All of these
options are currently vested. No options have been exercised.
In March 1996, the Company granted incentive stock options for 80,000 shares
to employees, at an exercise price of $2.50, which expire in 2001. During 1996,
20,000 of these options were canceled due to termination of an employee. Of the
remaining stock options for 60,000 shares of common stock, 30,000 of these
incentive stock options have vested immediately and 15,000 vest on each of the
first and second anniversary dates.
Subsequent to January 26, 1997, the Company granted incentive stock options
for 25,000 shares of common stock to the Company's president, at an exercise
price of $3.25 and which expire in January 2002. Options for the purchase of (i)
15,000 shares of common stock vest in June 1997, (ii) 10,000 shares of common
stock vest in June 1998.
Subsequent to January 26, 1997, the Company granted incentive stock options
for 28,000 shares of common stock to employees at an exercise price of $3.25,
and which expire in January 2002. Options for the purchase of (i) 13,000 shares
of common stock vested immediately, (ii) 10,000 shares of common stock vest in
January 1998, and (iii) 5,000 shares of common stock vest in January 1999.
In April 1996, the Company adopted an non-qualified option plan (Director
Plan) for outside directors. Each outside director is to be granted stock
options for each full year of service for the purchase of 5,000 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. During fiscal 1996, the Company issued options on a
total of 25,000
F-12
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY: (CONTINUED)
shares to directors of the Company under the Director Plan and options for
12,000 shares to directors in return for guaranteeing the Company's corporate
office lease, at an exercise price of $2.50 and which expire in 2000. During
fiscal 1997, the Board of Directors approved an increase in options from 5,000
to 10,000 that will be granted to outside directors for fiscal 1998.
Subsequent to January 26, 1997, the Company granted to a director an option
for the purchase of 5,000 shares at $3.25 per share for services for the fiscal
year ended January 26, 1997, which expires January 29, 2002.
The following is a table of activity under these plans:
<TABLE>
<CAPTION>
1996 1997
------------------------ ------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Outstanding, beginning of year.................... 40,000 $ 5.00 97,000 $ 2.113
Granted to:
Employees, including exchanges................ 60,000 1.875 80,000 2.500
Directors..................................... 25,000 2.500 -- --
Directors--lease guarantee.................... 12,000 2.500 -- --
Exchanged*...................................... (40,000) (5.000) -- --
Forfeited....................................... -- -- (27,000) 2.338
----------- -----------
Outstanding, end of year.......................... 97,000 2.113 150,000 2.279
----------- -----------
----------- -----------
</TABLE>
- ------------------------
* All options outstanding at January 29, 1995 were reissued with an exercise
price at $1.875.
For all options granted during fiscal 1996 and 1997, the weighted average
market price of the Company's common stock on the grant date was approximately
equal to the weighted average exercise price. Due to the extremely limited
trading activity of the Company's common stock, for the purpose of pricing
Incentive Stock Options and Non-qualified Stock Options, the fair market value
of the Company's common stock is determined by the average of the bid price as
quoted on the OTC Electronic Bulletin Board on the date of grant and a date two
weeks subsequent to the date of grant.
The weighted average contractual life for all options as of January 26, 1997
was approximately 3.8 years, with the exercise prices ranging from $1.875 to
$2.50. At January 26, 1997, options for 120,000
F-13
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY: (CONTINUED)
were exercisable and options for the remaining shares become exercisable pro
rata through fiscal 1999. If not previously exercised, options outstanding at
January 26, 1997, will expire as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
----------- -----------
<S> <C> <C>
1998.................................................................... 5,000 $ 1.875
1999.................................................................... -- --
2000.................................................................... -- --
2001.................................................................... 45,000 2.388
2002.................................................................... 100,000 2.250
----------- -----------
150,000 $ 2.279
----------- -----------
----------- -----------
</TABLE>
PRO FORMA STOCK-BASED COMPENSATION DISCLOSURES--The Company applies APB
Opinion 25 and related interpretations in accounting for its stock options which
are granted to employees. Accordingly, no compensation cost has been recognized
for grants of options to employees since the exercise prices were not less than
the fair value of the Company's common stock on the grant dates. Had
compensation cost been determined based on the fair value at the grant dates for
awards under those plans consistent with the method of FAS 123, the Company's
net income and earnings per share would have been reduced to the pro forma
amount indicated below.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------
JANUARY 28, JANUARY 26,
1996 1997
----------- -----------
<S> <C> <C>
Net income (loss) applicable to common shareholders:
As reported....................................................... $ 114,219 $ 341,949
Pro forma......................................................... (44,599) 275,541
Net income (loss) per common share:
As reported....................................................... 0.23 0.44
Pro forma......................................................... (.09) 0.35
</TABLE>
The fair value of each employee option granted in fiscal year 1996 and 1997,
was estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------
JANUARY 28, JANUARY 26,
1996 1997
--------------- ---------------
<S> <C> <C>
Expected volatility........................................... 167% 176%
Risk-Free interest rate....................................... 6.5% 6.5%
Expected dividends............................................ -- --
Expected terms (in years)..................................... 5.0 5.0
</TABLE>
F-14
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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:
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 26,
1996 1997
------------- -------------
<S> <C> <C>
Statutory rate................................................ 34% 34%
Effect of graduated rate...................................... (4.6)% --
State income taxes, net of Federal income tax benefit......... 3.3% 3.3%
Reduction in valuation allowance due to usage of net operating
loss carryforwards and change in temporary differences...... (32.7)% (38.3)%
Other......................................................... -- 1%
----- -----
-0-% -0-%
----- -----
----- -----
</TABLE>
The components of the net deferred tax asset recognized as of January 26,
1997 are as follows:
<TABLE>
<S> <C>
Long-term deferred tax assets (liabilities):
Net operating loss carryforwards........................ $ 110,000
Valuation allowance..................................... (71,000)
---------
Net long-term deferred tax asset...................... $ 39,000
---------
---------
</TABLE>
The valuation allowance was $325,000 at January 28, 1996 decreased by
$254,000 for the year ended January 26, 1997.
At January 26, 1997, the Company had net operating loss carryforwards for
Federal tax purposes of approximately $298,000. Certain of the loss
carryforwards are subject to restrictions due to a greater than 50% change in
ownership in prior years. The loss carryforwards, unless utilized, will expire
from 2009 through 2010.
F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND IF, GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF
COMMON STOCK AND WARRANTS OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK
OR WARRANTS BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 2
The Company.................................... 6
Risk Factors................................... 7
Use of Proceeds................................ 16
Dilution....................................... 18
Capitalization................................. 19
Dividends...................................... 20
Certain Market Information..................... 21
Selected Financial Data and Statistical Data... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 23
Business....................................... 29
Management..................................... 37
Certain Transactions........................... 43
Securities Ownership of Management and
Principal Shareholders....................... 47
Description of Securities...................... 49
Underwriting................................... 53
Legal Matters.................................. 55
Experts........................................ 55
Available Information.......................... 55
Financial Statements........................... F-1
</TABLE>
1,100,000 SHARES OF COMMON STOCK
1,100,000 CLASS A COMMON STOCK
PURCHASE WARRANTS
PREMIER CONCEPTS, INC.
---------------------
PROSPECTUS
---------------------
COHIG & ASSOCIATES, INC.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
THE OFFERING
<TABLE>
<S> <C>
Securities offered by the Selling
Shareholders.................... 102,041 shares of Common Stock, $.002 par value and
483,334 Warrants. See "Description Of Securities."
Offering price.................... Prevailing market price
Common stock outstanding:......... 1,762,208 shares(1)(2)(3)
Proposed NASDAQ SmallCap symbols:
Common Stock.................... "FAUX"
Warrants........................ "FAUXW"
</TABLE>
RISK FACTORS
An investment in the Shares involves certain risks. Prospective investors
should carefully consider the factors set forth under "RISK FACTORS."
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of shares
offered by Selling Shareholders.
- ------------------------
(1) Does not include (i) 230,000 shares of Common Stock reserved for issuance
upon exercise of options which may be granted under the Company's 1993 Stock
Incentive Plan, 196,000 of which are subject to outstanding and unexercised
options having a weighted average exercise price of $2.55 per share, and of
which 55,000 options are subject to future vesting, (ii) 60,250 shares of
Common Stock reserved for issuance upon exercise of outstanding Class C
Common Stock Purchase Warrants ("C Warrants") at a price of $10.00 per
share, (iii) 12,000 shares of Common Stock reserved for issuance pursuant to
the exercise of other outstanding options and warrants having a weighted
average exercise price of $2.50 per share, and (iv) 60,000 shares of Common
Stock reserved for issuance pursuant to the exercise of options which may be
granted under the Company's 1995 Employee Stock Purchase Plan ("1995 ESPP").
(2) On June 24, 1996, the Company completed the sale of 416,670 shares of Series
A Convertible Preferred Stock ("Convertible Preferred Stock") and Class B
Warrants entitling the holders thereof to acquire 41,667 shares of Common
Stock (the "Bridge Offering"), realizing net proceeds of $225,000. Does not
include 102,041 shares of Common Stock reserved for issuance on the date of
this Prospectus pursuant to the automatic conversion of the Convertible
Preferred Stock, or 41,667 shares of Common Stock reserved for issuance upon
exercise of the outstanding Warrants. See "Description of Securities--Series
A Convertible Preferred Stock".
(3) Does not include shares reserved for issuance upon the conversion of the 12%
Convertible Promissory Notes (the "Convertible Notes"). On December 27,
1996, the Company completed a bridge financing (the "Bridge Note Financing")
consisting of $1,120,000 in Convertible Notes and 200,000 Class B Warrants,
realizing net proceeds of $1,041,600. The Company utilized $624,325 of these
proceeds to redeem from certain securityholders 189,180 of the Company's
Common Stock and 32,500 Class C Warrants. The principal balance of the
Convertible Notes is convertible after April 1, 1997, at the option of the
holder, into shares of the Company's Common Stock at a conversion value of
$2.80 per share, subject to adjustment under certain circumstances. Each
Class B Warrant entitles the holder to purchase one share of the Company's
Common Stock at an exercise price of $5.00 per share and will be
automatically exchanged for two Warrants upon the effective date of the
Registration Statement of
3
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
which this Prospectus forms a part. See "Description of Securities--12%
Convertible Promissory Notes."
4
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
SUMMARY FINANCIAL DATA
Set forth below is selected summary financial data with respect to the
Company. Financial information for the years ended January 28, 1996 and January
26, 1997, is derived from the financial statements included elsewhere in this
Prospectus and is qualified by reference to such financial statements and the
notes related thereto or is derived from store-level schedules not included
herein. In February 1995, the Company adopted its new fiscal year to begin
January 30, 1995 and end January 28, 1996; and thereafter the fiscal year will
end on the last Sunday of each January of each successive year.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JANUARY 28, JANUARY 26,
1996 1997
------------ ------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues........................................................................ $ 9,069,840 $ 9,773,700
Operating profit (loss)............................................................... (37,298) 326,439
Income from discontinued operations................................................... 270,441 13,620
Net income............................................................................ 114,219 354,524
Net income available to common shareholders........................................... 114,219 341,949
Net income per common share........................................................... .23 .44
Weighted average number of common shares outstanding.................................. 495,800 777,408
STATISTICAL DATA: (2)
Store revenues........................................................................ $ 8,957,344 $ 9,739,844
Store gross margin.................................................................... 6,337,334 6,941,934
Store operating expenses.............................................................. 4,906,077 5,237,659
Store operating profit................................................................ 1,431,257 1,704,275
Corporate overhead operating expenses................................................. 1,518,416 1,386,701
Gross margin percentage............................................................... 70.3% 71.3%
Comparable same store sales (1)....................................................... 8,380,595 8,700,643
Comparable same store sales growth (1)................................................ N/A 3.8%
Comparable same store sales per square foot (1)....................................... 526.88 547.00
</TABLE>
<TABLE>
<CAPTION>
AS OF JANUARY 26, 1997
----------------------------
ACTUAL AS ADJUSTED(3)
------------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets..................................................................... $ 4,811,774 $ 6,852,774
Total liabilities................................................................ 3,814,371 2,444,371
Working capital.................................................................. 168,059 2,459,059
Stockholders' equity............................................................. 997,403 4,408,403
</TABLE>
- ------------------------
(1) Includes only the 26 stores open for the entire periods being compared.
(2) Based on store-level schedules and is not meant to tie to the financial
statements and notes related thereto included elsewhere herein.
(3) Adjusted to reflect net proceeds from the sale by the Company in this
offering of 1,100,000 shares of Common Stock and 1,100,000 Warrants at the
public offering prices of $3.75 per share and $.15 per Warrant and the
utilization of $1,370,000 of the net proceeds therefrom to retire the
Convertible Notes and other liabilities in the amount of $250,000. See "Use
of Proceeds." The "As Adjusted" information does not include the exercise of
the Warrants, the Underwriters' Over-Allotment Options or the options to
acquire the Representative's Securities. See "Use Of Proceeds,"
"Capitalization" and "Underwriting."
5
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
SELLING SHAREHOLDERS AND PLAN OF DISTRIBUTION
This Prospectus relates to the resale to the public of 102,041 shares of
Common Stock and 483,334 Warrants by the Selling Shareholders set forth below.
The following table sets forth certain information with respect to persons for
whom the Company is registering the Common Stock for resale to the public. The
Company will not receive any of the proceeds from the sale of the Common Stock
by the Selling Shareholders. Beneficial ownership of the Common Stock by such
Selling Shareholders after this offering will depend on the number of shares
sold by each Selling Shareholder. None of the Selling Shareholders have had any
material relationship within the past three years with the Company, or any of
its predecessors or affiliates, except as specifically noted.
<TABLE>
<CAPTION>
OFFERING SHARES
BENEFICIALLY OWNED CLASS A SHARES
AS OF OFFERING SHARES WARRANTS BENEFICIALLY OWNED
DATE OFFERED OFFERED AFTER OFFERING
NAME AND ADDRESS ------------------ ------- -------- -------------------
OF BENEFICIAL OWNER NUMBER PERCENT(1) NUMBER NUMBER NUMBER PERCENT(1)
- ----------------------------------------------------------------- ------ ---------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Caribou Bridge Fund, L.L.C.(2) .................................. 28,742 5.1% 20,409 16,667 2,500 nil
5350 S. Roslyn Street, #380
Englewood, CO 80111
Corporate Communications(3) ..................................... 21,988 3.9% 15,613 12,751 -0- -0-
Network, Inc.
36 Tacoma Circle
Littleton, CO 80127
AMC Consumer(4) ................................................. 57,483 10.0% 40,816 33,334 -0- -0-
One Main Street, Suite 312
Eatontown, NJ 07724
Ralph H. Grills, Jr.(5) ......................................... 14,370 2.5% 10,204 8,333 -0- -0-
4155 East Jewell Ave., #1115
Denver, CO 80222
Rickey Chow(6) .................................................. 7,041 1.3% 5,000 4,083 -0- -0-
2135 E. California Street
San Marino, CA 91108
J.D. Bilberg Trust(6) ........................................... 7,041 1.3% 5,000 4,083 -0- -0-
Century City Trust Company, Ltd.
19800 MacArthur Blvd., #1450
Irvine, CA 92612
John Shaffer(6) ................................................. 7,041 1.3% 5,000 4,083 -0- -0-
7803 E. Lewis Street
Scottsdale, AZ 85257
Lee Schlessman(7) ............................................... 35,714 6.0% -0- 71,428 -0- -0-
1301 Pennsylvania St., #800
Denver, CO 80203
Estate of Fannabelle Z. Robineau, ............................... 17,856 3.1% -0- 35,712 -0- -0-
Acct. #30160855(7)
Larry C. Serr, Personal Rep.
12265 W. Bayaud Ave., #240
Lakewood, CO 80228
Estate of Fannabelle Z. Robineau, ............................... 8,929 1.6% -0- 17,858 -0- -0-
Acct. #30160860(7)
Larry C. Serr, Personal Rep.
12265 W. Bayaud Ave., #240
Lakewood, CO 80228
Cal Rickel & Amanda Mae Rickel, ................................. 8,929 1.6% -0- 17,858 -0- -0-
JTWROS(7)
P.O. Box 1076
Cortez, CO 81321
Gary Schlessman(7) .............................................. 8,929 1.6% -0- 17,858 -0- -0-
Lee Schlessman, POA
1301 Pennsylvania St., #800
Denver, CO 80203
</TABLE>
46
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
<TABLE>
<CAPTION>
OFFERING SHARES
BENEFICIALLY OWNED CLASS A SHARES
AS OF OFFERING SHARES WARRANTS BENEFICIALLY OWNED
DATE OFFERED OFFERED AFTER OFFERING
NAME AND ADDRESS ------------------ ------- -------- -------------------
OF BENEFICIAL OWNER NUMBER PERCENT(1) NUMBER NUMBER NUMBER PERCENT(1)
- ----------------------------------------------------------------- ------ ---------- ------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Gary Schlessman Irrevocable Trust ............................... 8,929 1.6% -0- 17,858 -0- -0-
Dtd. 4/5/94(7)
Gerald D. Marrs, TTEE
1301 Pennsylvania St., #800
Denver, CO 80203
Susan Duncan(7) ................................................. 8,929 1.6% -0- 17,858 -0- -0-
2651 S. Wadsworth Circle
Lakewood, CO 80227
Susan M. Duncan, TTEE(7) ........................................ 8,929 1.6% -0- 17,858 -0- -0-
FBD Susan M. Duncan
Irrevocable Gift Trust Dtd. 12/28/73
2651 S. Wadsworth Circle
Lakewood, CO 80227
Sandra Garnett(7) ............................................... 8,929 1.6% -0- 17,858 -0- -0-
Les Schlessman, POA
1301 Pennsylvania St., #800
Denver, CO 80203
Cheryl Bennett(7) ............................................... 8,929 1.6% -0- 17,858 -0- -0-
Less Schlessman, POA
1301 Pennsylvania St., #800
Denver, CO 80203
Frederick A. Esgar & Jayne S. ................................... 5,000 0.9% -0- 10,000 -0- -0-
Esgar, JTWROS(7)
S. Jayne Esgar
P.O. Box 215
Wiley, CO 81092
Cord Investment Company(7) ...................................... 16,428 2.9% -0- 32,856 -0- -0-
Attn: Marvin Pepper
1660 S. Albion St., Suite 412
Denver, CO 80222
Gary C. Batz(7) ................................................. 53,570 8.7% -0- 107,140 -0- -0-
c/o Fike Corporation
704 S. 10th Street
Blue Springs, FL 64015
</TABLE>
- --------------------------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of the date of this Prospectus, or
within 60 days of such date, are treated as outstanding when determining the
percent of the class owned by such individual and when determining the
percent owned by the group.
(2) Includes Class B Warrants exercisable to purchase 8,333 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
registration statement of which this Prospectus forms a part.
(3) Includes Class B Warrants exercisable to purchase 6,375 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
registration statement of which this Prospectus forms a part.
(4) Includes Class B Warrants exercisable to purchase 16,667 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
registration statement of which this Prospectus forms a part.
(5) Includes Class B Warrants exercisable to purchase 4,166 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
Registration Statement of which this Prospectus forms a part.
(6) Includes Class B Warrants exercisable to purchase 2,041 shares of Common
Stock at an exercise price of $5.00 per share. Each B Warrant will
automatically be exchanged for two Warrants upon the effective date of the
Registration Statement of which this Prospectus forms a part.
47
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
(7) Consists entirely of Class B Warrants purchased as part of the Bridge Note
Financing. Each Class B Warrant will automatically be exchanged for two
Warrants upon the effective date of the Registration Statement of which this
Prospectus forms a part.
The Selling Shareholders have agreed that they will not sell any of the
shares of Common Stock for a period of six months from the date of this
Prospectus without the consent of the Representative. Subject to this
restriction, the Selling Shareholders have advised the Company that sales of the
shares of Common Stock may be effected from time to time in transactions (which
may include block transactions) in the over-the-counter market, in negotiated
transactions, through the writing of options on the Common Stock or a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, or at negotiated prices. The
Selling Shareholders may effect such transactions by selling the Common Stock
directly to purchasers or through broker-dealers that may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Shareholders and/or the
purchasers of shares of Common Stock for whom such broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
The Selling Shareholders and any broker-dealers that act in connection with
the sale of the shares of Common Stock as principals may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and any
commissions received by them and any profit on the resale of the shares of
Common Stock as principals might be deemed to be underwriting discounts and
commissions under the Securities Act. The Selling Shareholders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares of Common Stock against certain liabilities,
including liabilities arising under the Securities Act. The Company will not
receive any proceeds from the sales of shares of Common Stock by the Selling
Shareholders. Sales of the shares of Common Stock by the Selling Shareholders,
or even the potential of such sales, would likely have an adverse effect on the
market price of the Common Stock.
The shares of Common Stock are offered by the Selling Shareholders on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act. The
Company has agreed to pay all expenses incurred in connection with the
registration of the shares offered by the Selling Shareholders; provided,
however, that the Selling Shareholders shall be exclusively liable to pay any
and all commissions, discounts and other payments to broker-dealers incurred in
connection with their sale of the shares.
CONCURRENT OFFERING
The Registration Statement of which this Prospectus forms a part also covers
1,100,000 Shares of Common Stock and 1,100,000 Warrants being offered by the
Company through the Representative in the offering.
48
<PAGE>
[Alternate Page for Selling Shareholders' Prospectus]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND IF, GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF
COMMON STOCK AND WARRANTS OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK
OR WARRANTS BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 2
The Company.................................... 6
Risk Factors................................... 7
Use of Proceeds................................ 16
Dilution....................................... 18
Capitalization................................. 19
Dividends...................................... 20
Certain Market Information..................... 21
Selected Financial Data and Statistical Data... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 23
Business....................................... 29
Management..................................... 37
Certain Transactions........................... 43
Selling Shareholders and Plan of
Distribution................................. 46
Concurrent Offering............................ 48
Description of Securities...................... 49
Underwriting................................... 53
Legal Matters.................................. 55
Experts........................................ 55
Available Information.......................... 55
Financial Statement............................ F-1
</TABLE>
102,041 SHARES OF COMMON STOCK
483,334 CLASS A COMMON STOCK
PURCHASE WARRANTS
PREMIER CONCEPTS, INC.
---------------------
PROSPECTUS
---------------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other arrangement
under which any controlling person, director or officers of the Registrant is
insured or indemnified in any manner against any liability which he may incur in
his capacity as such, is as follows:
Sections 7-109-101 through 7-109-110 of the Colorado Corporation Code
provide as follows:
7-109-101. DEFINITIONS. As used in this article:
(1) "Corporation" includes any domestic or foreign entity that is a
predecessor of a corporation by reason of a merger or other transaction in
which the predecessor's existence ceased upon consummation of the
transaction.
(2) "Director" means an individual who is or was a director of a corporation
or an individual who, while a director of a corporation, is or was serving at
the corporation's request as a director, officer, partner, trustee, employee,
fiduciary, or agent of another domestic or foreign corporation or other
person or of an employee benefit plan. A director is considered to be serving
an employee benefit plan at the corporation's request if his or her duties to
the corporation also impose duties on, or otherwise involve services by, the
director to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate or
personal representative of a director.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with respect to a proceeding
to pay a judgment, settlement, penalty, fine, including an excise tax
assessed with respect to an employee benefit plan, or reasonable expenses.
(5) "Official capacity" means, when used with respect to a director, the
office of director in a corporation and, when used with respect to a person
other than a director as contemplated in section 7-109-107, the office in a
corporation held by the officer or the employment, fiduciary, or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
corporation. "Official capacity" does not include service for any other
domestic or foreign corporation or other person or employee benefit plan.
(6) "Party" includes a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative and
whether formal or informal.
7-109-102. AUTHORITY TO INDEMNIFY DIRECTORS.
(1) Except as provided in subsection (4) of this section, a corporation may
indemnify a person made a party to a proceeding because the person is or was
a director against liability incurred in the proceeding if:
(a) The person conducted himself or herself in good faith; and
(b) The person reasonable believed:
(I) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best interests;
and
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(II) In all other cases, that his or her conduct was at least not
opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had no reasonable
cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirement of subparagraph (II) of paragraph (b) of subsection (1) of this
section. A director's conduct with respect to an employee benefit plan for a
purpose that the director did not reasonably believe to be in the interests
of the participants in or beneficiaries of the plan shall be deemed not to
satisfy the requirements of paragraph (a) of subsection (1) of this section.
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(4) A corporation may not indemnify a director under this section:
(a) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation; or
(b) In connection with any other proceeding charging that the director
derived an improper personal benefit, whether or not involving action in an
official capacity, in which proceeding the director was adjudged liable on
the basis that he or she derived an improper personal benefit.
(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
7-109-103. MANDATORY INDEMNIFICATION OF DIRECTORS. Unless limited by its
articles of incorporation, a corporation shall indemnify a person who was
wholly successful, on the merits or otherwise, in the defense of any
proceeding to which the person was a party because the person is or was a
director, against reasonable expenses incurred by him or her in connection
with the proceeding.
7-109-104. ADVANCE OF EXPENSES TO DIRECTORS.
(1) A corporation may pay for or reimburse the reasonable expenses incurred
by a director who is a party to a proceeding in advance of final disposition
of the proceeding if:
(a) The director furnishes to the corporation a written affirmation of
the director's good faith belief that he or she has met the standard of
conduct described in section 7-109-102;
(b) The director furnishes to the corporation a written undertaking,
executed personally or on the director's behalf, to repay the advance if it
is ultimately determined that he or she did not meet the standard of conduct;
and
(c) A determination is made that the facts then known to those making
the determination would not preclude indemnification under this article.
(2) The undertaking required by paragraph (b) of subsection (1) of this
section shall be an unlimited general obligation of the director but need not
be secured and may be accepted without reference to financial ability to make
repayment.
(3) Determinations and authorizations of payments under this section shall
be made in the manner specified in section 7-109-106.
7-109-105. COURT-ORDERED INDEMNIFICATION OF DIRECTORS.
(1) Unless otherwise provided in the articles of incorporation, a director
who is or was a party to a proceeding may apply for indemnification to the
court conducting the proceeding or to another court
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<PAGE>
of competent jurisdiction. On receipt of an application, the court, after
giving any notice the court considers necessary, may order indemnification in
the following manner:
(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the corporation to
pay the director's reasonable expenses incurred to obtain court-ordered
indemnification.
(b) If it determines that the director is fairly and reasonable entitled
to indemnification in view of all the relevant circumstances, whether or not
the director met the standard of conduct set forth in section 7-109-102 (1)
or was adjudged liable in the circumstances described in section 7-109-102
(4), the court may order such indemnification as the court deems proper;
except that the indemnification with respect to any proceeding in which
liability shall have been adjudged in the circumstances described in section
7-109-102 (4) is limited to reasonable expenses incurred in connection with
the proceeding and reasonable expenses incurred to obtain court-ordered
indemnification.
7-109-106. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION OF DIRECTORS.
(1) A corporation may not indemnify a director under section 7-109-102
unless authorized in the specific case after a determination has been made
that indemnification of the director is permissible in the circumstances
because the director has met the standard of conduct set forth in section
7-109-102. A corporation shall not advance expenses to a director under
section 7-109-104 unless authorized in the specific case after the written
affirmation and undertaking required by section 7-109-104(1)(a) and (1)(b)
are received and the determination required by section 7-109-104(1)-C- has
been made.
(2) The determinations required by subsection (1) of this section shall be
made:
(a) By the board of directors by a majority vote of those present at a
meeting at which a quorum is present, and only those directors not parties to
the proceeding shall be counted in satisfying the quorum; or
(b) If a quorum cannot be obtained, by a majority vote of a committee of
the board of directors designated by the board of directors, which committee
shall consist of two or more directors not parties to the proceeding; except
that directors who are parties to the proceeding may participate in the
designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph (a) of
subsection (2) of this section, and a committee cannot be established under
paragraph (b) of subsection (2) of this section, or, even if a quorum is
obtained or a committee is designated, if a majority of the directors
constituting such quorum or such committee so directs, the determination
required to be made by subsection (1) of this section shall be made:
(a) By independent legal counsel selected by a vote of the board of
directors or the committee in the manner specified in paragraph (a) or (b) of
subsection (2) of this section or, if a quorum of the full board cannot be
obtained and a committee cannot be established, by independent legal counsel
selected by a majority vote of the full board of directors; or
(b) By the shareholders.
(4) Authorization of indemnification and advance of expenses shall be made
in the same manner as the determination that indemnification or advance of
expenses is permissible; except that, if the determination that
indemnification or advance of expenses is permissible is made by independent
legal counsel, authorization of indemnification and advance of expenses shall
be made by the body that selected such counsel.
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<PAGE>
7-109-107. INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND AGENTS.
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification under section
7-109-103, and is entitled to apply for court-ordered indemnification under
section 7-109-105, in each case to the same extent as a director;
(b) A corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent as to a
director; and
(c) A corporation may also indemnify and advance expenses to an officer,
employee, fiduciary, or agent who is not a director to a greater extent, if
not inconsistent with public policy, and if provided for by its bylaws,
general or specific action of its board of directors or shareholders, or
contract.
7-109-108. INSURANCE. A corporation may purchase and maintain insurance on
behalf of a person who is or was a director, officer, employee, fiduciary, or
agent of the corporation, or who, while a director, officer, employee,
fiduciary, or agent of the corporation, is or was serving at the request of
the corporation as a director, officer, partner, trustee, employee,
fiduciary, or agent of another domestic or foreign corporation or other
person or of an employee benefit plan, against liability asserted against or
incurred by the person in that capacity or arising from his or her status as
a director, officer, employee, fiduciary, or agent, whether or not the
corporation would have power to indemnify the person against the same
liability under section 7-109-102, 7-109-103, or 7-109-107. Any such
insurance may be procured from any insurance company designated by the board
of directors, whether such insurance company is formed under the laws of this
state or any other jurisdiction of the United States or elsewhere, including
any insurance company in which the corporation has an equity or any other
interest through stock ownership or otherwise.
7-109-109. LIMITATION OF INDEMNIFICATION OF DIRECTORS.
(1) A provision treating a corporation's indemnification of, or advance of
expenses to, directors that is contained in its articles of incorporation or
bylaws, in a resolution of its shareholders or board of directors, or in a
contract, except an insurance policy, or otherwise, is valid only to the
extent the provision is not inconsistent with sections 7-109-101 to
7-109-108. If the article of incorporation limit indemnification or advance
of expenses, indemnification and advance of expenses are valid only to the
extent not inconsistent with the articles of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's power to
pay or reimburse expenses incurred by a director in connection with an
appearance as a witness in a proceeding at a time when he or she has not
been made a named defendant or respondent in the proceeding.
7-109-110. NOTICE TO SHAREHOLDER OF INDEMNIFICATION OF DIRECTOR. If a
corporation indemnifies or advances expenses to a director under this article
in connection with a proceeding by or in the right of the corporation, the
corporation shall give written notice of the indemnification or advance to
the shareholders with or before the notice of the next shareholders' meeting.
If the next shareholder action is taken without a meeting at the instigation
of the board of directors, such notice shall be given to the shareholders at
or before the time the first shareholder signs a writing consenting to such
action.
* * *
Article XIII of the Amended and Restated Articles of Incorporation of the
Company provides, in pertinent part:
Section 1. A director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except to the extent that
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<PAGE>
such exemption from liability or limitation thereof is not
permitted under the Colorado Corporation Code as the same exists
or may hereafter be amended.
Section 2. Any repeal or modification of the foregoing Section 1 by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at
the time of such repeal or modification.
Article XII of the Amended and Restated Articles of Incorporation of the
Company provides, in pertinent part:
Section 2. INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS.
(a) All officers and directors of the Corporation shall be
entitled to indemnification to the maximum extent permitted by
law or by public policy.
(b) Any mandate for indemnification, whether by statute or
order of Court, is to be expressly subject to the Corporation's
reasonable capability of paying.
-C- No person will be entitled to be reimbursed for expenses
incurred in connection with a Court proceeding to obtain Court
ordered indemnification unless such person first made reasonable
application to the Corporation and the Corporation either
unreasonably denied such application or through no fault of the
applicant was unable to consider such application within a
reasonable time.
(d) A director who is or was made a party to a proceeding
because he is or was an officer, employee, or agent of the
Corporation is entitled to the same rights as if he were or had
been made a party because he was a director.
(e) To the maximum extent permitted by law or by public policy,
directors of this Corporation are to have no personal liability
for monetary damages for breach of fiduciary duty as a director.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering are to be borne by the Company, are
as follows:
<TABLE>
<S> <C>
SEC Filing Fee.................................................... $ 4,298
NASD Fee.......................................................... 1,747
Printing Expenses................................................. 70,000
Accounting Fees and Expenses...................................... 48,000
Legal Fees and Expenses........................................... 130,000
Blue Sky Fees and Expenses........................................ 20,000
Registrar and Transfer Agent Fee.................................. 5,000
Underwriter's Non-Accountable Expense Allowance................... 128,700
Miscellaneous..................................................... 42,255
---------
Total*.......................................................... $ 450,000
---------
---------
</TABLE>
- ------------------------
* Of this amount, approximately $75,000 has been paid prior to the offering and
the balance is expected to be paid from the proceeds of the offering.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
1. In January, 1994, the Company sold a total of 16,285 shares of Common
Stock to 45 accredited investors for an aggregate consideration of $274,509. The
shares were acquired for investment purposes
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and were subject to appropriate transfer restrictions. These shares were not
registered under the Act in reliance upon Section 3(b) thereof and Regulation D,
Rule 506 thereunder.
2. In March, 1994, the Company issued 80,000 shares of Common Stock to
eight accredited investors in consideration of $145,000. These shares were
acquired for investment purposes and were subject to appropriate transfer
restrictions. These shares were not registered under the Act in reliance upon
Section 4(2) thereof.
3. In order to finance the acquisition of Impostors, the Company also
undertook a private placement of its securities in March 1994 consisting of
Units comprised of one (1) share of Common Stock and one (1) Class C Common
Stock Purchase Warrant. In connection with the private placement, the Company
sold an aggregate of 185,511 Units at a private offering price of $5.00 per Unit
for a total consideration of $894,281. These shares were acquired by 18
accredited investors for investment purposes and were subject to appropriate
transfer restrictions. These shares were not registered under the Act in
reliance upon Section 3(b) thereof and Regulation D, Rule 506 thereunder.
4. In March 1994, the Company issued 27,500 shares of Common Stock to the
unsecured creditors of American Fashion Jewels, Inc. pursuant to the confirmed
Plan of Reorganization in the bankruptcy proceedings. The shares were not
registered under the Act in reliance upon Section 1145 of the United States
Bankruptcy Code and Section 3(10) of the Act.
5. In March 1994, the Company issued 20,000 shares of Common Stock to two
accredited investors in exchange for 100% of the issued and outstanding shares
of Mirage Concepts, Inc., an Arizona corporation which owned three (3)
additional reproduction jewelry stores. The shares were acquired for investment
purposes and are subject to appropriate transfer restrictions. These shares were
not registered under the Act in reliance upon Section 4(2) thereof.
6. In 1994, the Company issued an aggregate of 2,750 shares of Common Stock
to 11 investors in settlement of a dispute involved in pending litigation. The
shares were acquired for investment purposes and were subject to appropriate
transfer restrictions. The shares were not registered under the Act in reliance
upon Section 4(2) thereof.
7. In December 1994, the Company issued to six employees as a bonus an
aggregate of 660 shares of Common Stock valued at $5.00 per share. The shares
were acquired for investment purposes and were subject to appropriate transfer
restrictions. The shares were not registered under the Act in reliance upon
Section 4(2) thereof.
8. In October 1995, the Company issued an additional 46,792 shares of
Common Stock to 11 investors in settlement of a dispute involved in pending
litigation. The shares were acquired for investment purposes and were subject to
appropriate transfer restrictions. The shares were not registered under the Act
in reliance upon Section 4(2) thereof.
9. In December 1995, the Company sold an aggregate of 234,000 shares of
Common Stock for gross proceeds of $292,500, or $1.25 per share. The shares were
acquired by eight accredited investors for investment purposes and were subject
to appropriate transfer restrictions. The shares were not registered under the
Act in reliance upon Section 3(b) thereof and Regulation D, Rule 506 thereunder.
10. In 1995, the Company issued 7,000 shares of Common Stock in settlement
of claims valued at $35,000. These shares were acquired by two accredited
investors for investment purposes and were subject to appropriate transfer
restrictions. The shares were not registered under the Act in reliance upon
Section 4(2) thereof.
11. In January 1996, the Company issued 22,000 shares of Common Stock in
consideration of services to the Company valued at $27,500. These shares were
acquired by one accredited investor for investment purposes and were subject to
appropriate transfer restrictions. The shares were not registered under the Act
in reliance upon Section 4(2) thereof.
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<PAGE>
12. In January 1996, the Company issued 5,000 shares of Common Stock in
consideration of services to the Company valued at $17,500. These shares were
acquired by two accredited investors for investment purposes and were subject to
appropriate transfer restrictions. The shares were not registered under the Act
in reliance upon Section 4(2) thereof.
13. In June 1996, the Company issued 416,670 shares of Convertible Preferred
Stock and 208,335 Class B Common Stock Warrants in consideration of $250,000.
These securities were acquired by three accredited investors for investment
purposes and were subject to appropriate transfer restrictions. The securities
were not registered under the Act in reliance upon Section 4(2) thereof.
14. In December, 1996, the Company sold and issued an aggregate of
$1,120,000 in 12% Convertible Promissory Notes and 200,000 Class B Warrants.
These securities were acquired by 13 accredited investors for investment
purposes and were subject to appropriate transfer restrictions. The securities
were not registered under the Act in reliance upon Section 4(2) thereof, and
Regulation D, Rule 506 thereunder.
ITEM 27. EXHIBITS.
a. The following Exhibits are filed as part of this Registration Statement
pursuant to Item 601 of Regulation S-B:
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------ -----------------------------------------------------------------------------------------------
<C> <S>
*****1.1 Underwriting Agreement
1.2 Agreement Among Underwriters
1.3 Master Selected Dealer Agreement
1.4 Financial Advisory Agreement
1.5 Form of Lock-up Agreement
1.6 Letter of Intent with Cohig & Associates, Inc.
**3.1 Articles of Incorporation
**3.2 Certificate and Articles of Amendment
**3.3 By-Laws
**4.1 Specimen Certificate of Common Stock
*4.2 Specimen Class A Warrant Certificate
*4.3 Designations of Series A Convertible Preferred Stock
*4.4 1992 Stock Incentive Plan
*4.5 1995 Employee Stock Purchase Plan
4.6 Representative's Share Option Agreement
4.7 Representative's Warrant Option Agreement
*****4.8 Specimen Convertible Promissory Note
*****4.9 Specimen Convertible Promissory Note and Warrant Purchase Agreement
5.0 Opinion of Neuman & Cobb
**10.1 Copy of signed Stock Transfer Agent Agreement
*10.2 Warrant Agreement
***10.3 Amendment No. 1 to Definitive Agreement and Plan of Reorganization, dated March 16, 1993
***10.4 Amended Plan of Reorganization dated January 24, 1994
***10.5 Order Confirming Amended Plan of Reorganization dated February 24, 1994
***10.6 Commitment Letter dated January 4, 1994
***10.7 Amendment to Commitment Letter dated January 21, 1994
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------ -----------------------------------------------------------------------------------------------
<C> <S>
***10.8 Conveyance and Bill of Sale dated March 3, 1994
***10.9 Assumption Agreement dated March 3, 1994
*10.10 Employment Agreement with Sissel Greenberg
*10.11 Consulting Agreement with Cohig & Associates, Inc.
****16 Letter of Schumacher & Bruce, Inc. on change in certifying accountant
24.1 Consent of Neuman & Cobb
*****24.2 Consent of Hein + Associates, LLP
</TABLE>
- ------------------------
* Incorporated by reference from the Company's Registration Statement on
Form SB-2, SEC File No. 333-8741.
** 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
***** Filed with this Amendment.
ITEM 28. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
4. To provide, upon effectiveness, certificates in such denominations and
registered in such names as are required to permit prompt delivery to each
purchaser.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Pre-Effective Amendment No. 2 to Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Aurora,
State of Colorado on the 11th day of April, 1997.
PREMIER CONCEPTS, INC.
By /s/ SISSEL GREENBERG
------------------------------------------
Sissel Greenberg,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Pre-Effective Amendment No. 2 to Registration Statement has been signed by the
following persons in the capacities with Premier Concepts, Inc. and on the dates
indicated.
SIGNATURE POSITION DATE
- ---------------------------- ------------------------------ -----------------
/s/ SISSEL GREENBERG
- ---------------------------- Chief Executive Officer April 11, 1997
Sissel Greenberg Director
/s/ WILLIAM NANDOR
- ---------------------------- Director April 11, 1997
William Nandor
/s/ JACK BRANDON
- ---------------------------- Director April 11, 1997
Jack Brandon
/s/ SIMONA KATZ YUFFA
- ---------------------------- Director April 11, 1997
Simona Katz Yuffa
/s/ TODD HUSS
- ---------------------------- Chief Financial Officer April 11, 1997
Todd Huss Principal Accounting Officer
II-9
<PAGE>
UNDERWRITING AGREEMENT
March 6, 1997
Cohig & Associates, Inc.
As Representative of the Several
Underwriters Named in Schedule I Hereto
6300 South Syracuse Way, Suite 430
Englewood, Colorado 80111
Gentlemen:
Premier Concepts, Inc., a Colorado corporation (the "Company"), hereby
confirms its agreement with you (the "Representative") and with the other
Underwriters, including the Representative, named in Schedule I hereto
(hereinafter "the Underwriters") as follows:
SECTION 1
DESCRIPTION OF SECURITIES
The Company proposes to issue and sell to the Underwriters shares (the
"Shares") of Common Stock, $.002 par value per share, and Redeemable Common
Stock Purchase Warrants (the "Warrants") (the Shares and the Warrants shall
collectively be referred to as the "Securities"). The Underwriters propose to
purchase 1,100,000 Shares ("Firm Shares") and 1,100,000 Warrants ("Firm
Warrants") (collectively, the "Firm Securities") at a purchase price of $3.75
per Share and $0.15 per Warrant. The Shares and the Warrants may be purchased by
the Underwriters only together on the basis of one Share and one Warrant. The
Underwriters shall also have options (the "Over-allotment Options") to purchase
up to an additional 165,000 Shares ("Over-allotment Shares") and/or 165,000
Warrants ("Over-allotment Warrants") (collectively, the "Over-allotment
Securities"), as provided in Section 3.1 hereof.
Each Warrant shall entitle the holder to purchase one share of Common Stock
at $5.00 per share until March 5, 2000. The Company may, after one year from
the Effective Date (hereafter defined) redeem the Warrants on forty-five (45)
days' written notice at a price of $.05 per Warrant at such time as the market
price of the Common Stock exceeds $7.50 per share for 20 of the 30 trading days
ending within 30 days preceding the date of the notice of redemption. To redeem
the Warrants, the Company must have in effect a current registration statement
registering the Common Stock issuable upon exercise of the Warrants. The shares
of Common Stock underlying the Warrants are referred to herein as the "Warrant
Shares."
The Company proposes to issue and sell to the Representative and its
designees on the Closing Date (hereinafter defined) for an aggregate purchase
price of $100, options ("Share Options") to purchase 110,000 shares of Common
Stock and options ("Warrant Options") to purchase 110,000 Warrants. Each Share
Option shall be exercisable at $4.50 per share; and each Warrant Option is
exercisable at $0.18 per warrant. The Share Options and the Warrant Options are
collectively referred to as the "Representative's Options." The terms of the
warrants receivable upon exercise of the Warrant Options (the "Representative's
Warrants"), including the exercise price, shall be identical to the terms of the
Warrants.
<PAGE>
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Underwriters to enter into this Agreement, the
Company hereby represents and warrants to and agrees with each Underwriter that:
2.1 REGISTRATION STATEMENT AND PROSPECTUS. A registration statement on
Form SB-2 (File No. 333-19901) has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations of the Securities and Exchange Commission
(the "Commission") thereunder, and said registration statement has been filed
with the Commission. Copies of such registration statement and any amendments,
and all forms of the related prospectuses contained therein, have been delivered
to the Representative. Such registration statement, including the prospectus,
Part II, and documents incorporated by reference therein and financial schedules
and exhibits thereto, as amended at the time when it shall become effective, is
herein referred to as the "Registration Statement," and the prospectus included
as part of the Registration Statement on file with the Commission when it shall
become effective or, if the procedure in Rule 430A of the Rules and Regulations
(as defined below) under the Securities Act is followed, the prospectus that
discloses all the information that was omitted from the prospectus on the
effective date pursuant to such Rule, and in either case, together with any
changes contained in any prospectus filed with the Commission by the Company
with your consent after the effective date of the Registration Statement, is
herein referred to as the "Final Prospectus." If the procedure in Rule 430A is
followed, the prospectus included as part of the Registration Statement on the
date when the Registration Statement became effective is referred to herein as
the "Effective Prospectus." Any prospectus included in the Registration
Statement and in any amendments thereto prior to the effective date of the
Registration Statement is referred to herein as a "Preliminary Prospectus." For
purposes of this Agreement, "Rules and Regulations" mean the rules and
regulations adopted by the Commission under the Securities Act.
Included in the Registration Statement are the Firm Securities and the
Over-allotment Securities; 632,500 shares of Common Stock reserved against
exercise of the Firm Warrants and the Over-allotment Warrants; 165,000 shares of
Common Stock and 110,000 Warrants reserved against exercise of the
Representative's Options; 102,041 shares of Common Stock to be issued upon
conversion of 416,670 shares of Series A Preferred Stock; and 483,334 Warrants
reoffered by certain Selling Shareholders, including 241,667 shares of Common
Stock underlying such Warrants.
As used in this Agreement, the term "Effective Date" refers to the date the
Commission declares the Registration Statement effective pursuant to Section 8
of the Securities Act.
2.2 ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. The Commission has
not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Securities, and each Preliminary Prospectus has
conformed in all material respects with the requirements of the Securities Act
and the applicable Rules and Regulations and to the best of the Company's
knowledge has not included at the time of filing any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; except that the
foregoing shall not apply to statements in or
Premier Concepts, Inc. -2-
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<PAGE>
omissions from any Preliminary Prospectus in reliance upon, and in conformity
with, written information furnished to the Company by the Representative, or
from any Underwriter through the Representative, specifically for use in the
preparation thereof.
When the Registration Statement becomes effective and on the Closing Date
(hereinafter defined), the Registration Statement, the Effective Prospectus (and
on the Closing Date, the Final Prospectus) will contain all statements which are
required to be stated therein in accordance with the Securities Act and the
Rules and Regulations. No such document will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; except that the
foregoing does not apply to information contained in or omitted from the
Registration Statement or the Effective Prospectus or Final Prospectus in
reliance upon written information furnished by the Representative, or by any
Underwriter through the Representative, specifically for use in the preparation
thereof. The Company will not at any time hereafter file any amendments to the
Registration Statement or in accordance with Rule 424(b) of the Rules and
Regulations of which the Representative shall not have been previously advised
in advance of filing or to which the Representative shall reasonably object in
writing.
2.3 FINANCIAL STATEMENTS. Hein + Associates, LLP, whose reports appear in
the Effective Prospectus and the Final Prospectus, are, and during the periods
covered by their reports were, independent accountants as required by the
Securities Act and the applicable Rules and Regulations. The financial
statements and schedules (including the related notes) included in the
Registration Statement, any Preliminary Prospectus or the Effective Prospectus
or the Final Prospectus, present fairly the financial position, the results of
operations, and changes in financial position of the entities purported to be
shown thereby at the dates and for the periods indicated; and such financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods indicated.
The financial information and related notes and schedules included in the
Registration Statement, any Preliminary Prospectus or the Final Prospectus
comply in all material respects with the requirements of the Securities Act and
the Rules and Regulations and present fairly the financial position of the
Company and its subsidiaries as of the dates indicated, and the results of
operation for the periods therein specified. Such financial information,
including the related notes and schedules, have been prepared on a basis
consistent with the historical financial statements included in the Registration
Statement, the Preliminary Prospectus and the Final Prospectus, except for the
adjustments specified herein, and give effect to assumptions made on a
reasonable basis to give effect to historical and proposed transactions
described in the Registration Statement, any Preliminary Prospectus and the
Final Prospectus. The financial information and statistical data, and other
data, set forth in the Final Prospectus under the captions "Prospectus Summary--
Financial and Operating Data," "Selected Financial Data," "Dilution" and
"Capitalization" are derived from and prepared on a basis consistent with such
financial information.
2.4 NO MATERIAL ADVERSE CHANGE. Except as may be reflected in or
contemplated by the Effective Prospectus or the Final Prospectus, subsequent to
the dates as of which information is given in the Effective Prospectus or the
Final Prospectus, and prior to the Closing Date, (a) there shall not have been
any material adverse change in the condition, financial or otherwise, of the
Company or in its business taken as a whole; (b) there shall not have been any
material transaction
Premier Concepts, Inc. -3-
Underwriting Agreement
<PAGE>
entered into by the Company other than transactions in the ordinary course of
business; (c) the Company shall not have incurred any material liabilities,
obligations or claims, contingent or otherwise, which are not disclosed in
the Effective Prospectus or the Final Prospectus; (d) except in the ordinary
course of business and with the consent of the Representative, there shall
not have been nor will there be any change in the capital stock or long-term
debt (except current payments) of the Company; and (e) the Company has not
and will not have paid or declared any dividends or other distributions on
its capital stock.
2.5 NO DEFAULTS. Other than as disclosed in the Effective Prospectus or
the Final Prospectus, the Company is not in any default (which has not been
waived) in the performance of any obligation, agreement or condition contained
in any debenture, note or other evidence of indebtedness or any indenture or
loan agreement. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated, and compliance with the
terms of this Agreement will not conflict with or result in a breach of any of
the terms, conditions or provisions of, or constitute a default under, the
articles of incorporation, as amended, or by-laws of the Company; any note,
indenture, mortgage, deed of trust, or other material agreement or instrument to
which the Company is a party or by which it or any of its property is bound,
other than for which the Company has received a consent or waiver of such
conduct, breach or default or except where such default would not have a
material adverse effect on the business of the Company; or any existing law,
order, rule, regulation, writ, injunction, or decree of any government,
governmental instrumentality, agency or body, arbitration tribunal or court,
domestic or foreign, having jurisdiction over the Company or its property. The
consent, approval, authorization, or order of any court or governmental
instrumentality, agency or body is not required for the consummation of the
transactions herein contemplated except such as may be required under the
Securities Act or under the securities laws of any state or jurisdiction.
2.6 INCORPORATION AND STANDING. Each of the Company and its Subsidiaries
(as defined in Section 12.7 hereof) is, and at the Closing Date (hereinafter
defined) and the Over-allotment Closing Date (hereinafter defined) will be, duly
incorporated and validly existing in good standing as a corporation under the
laws of the jurisdiction of its organization, with full power and authority
(corporate and other) to own its property and conduct its business, present and
proposed, as described in the Effective Prospectus and the Final Prospectus; the
Company has full power and authority to enter into this Agreement; is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which the character or location of its properties (owned or leased) or the
nature of its business makes such qualification necessary except where the
failure to be so qualified would not have a material adverse effect on the
Company; and each of the Company and its Subsidiaries holds all material
licenses, certificates, and permits from governmental authorities necessary for
the conduct of its business as described in the Effective Prospectus and Final
Prospectus.
2.7 CAPITALIZATION. The Company's authorized and outstanding
capitalization on the Effective Date and on the Closing Date (hereinafter
defined), and on the Over-allotment Closing Date (hereinafter defined) are and
will be as set forth under the caption "Capitalization" in the Effective
Prospectus and the Final Prospectus. The Common Stock, the Warrants, and the
Representative's Options conform to the description thereof contained under the
captions "Description of Securities" and "Underwriting" in the Effective
Prospectus and the Final Prospectus.
Premier Concepts, Inc. -4-
Underwriting Agreement
<PAGE>
The outstanding shares of Common Stock have been, and the Securities, upon
issuance and delivery against payment therefor in the manner described
herein, will be, duly authorized and validly issued, fully paid and
nonassessable. No sales of securities have been made by the Company in
violation of the registration or anti-fraud provisions of the Securities Act
or in violation of any other federal law or laws of any state or jurisdiction.
2.8 LEGALITY OF SECURITIES. The Shares, the Warrants, the
Representative's Options, and the Common Stock and Representative's Warrants
issuable upon the exercise of the Representative's Options have been duly and
validly authorized and, when issued and delivered against payment therefor as
provided in this Agreement, will be validly issued, fully paid and
nonassessable. There are no preemptive rights or other rights to subscribe
for or to purchase, or any restriction upon the voting or transfer of, any
shares of Common Stock pursuant to the Company's articles of incorporation,
by-laws or other governing documents or any agreement or other instrument to
which the Company or any of its Subsidiaries is a party or by which any of
them may be bound. Neither the filing of the Registration Statement nor the
offering or sale of the Securities as contemplated by this Agreement gives
rise to any rights, other than those which have been waived or satisfied, for
or relating to the registration of any shares of Common Stock. All of the
outstanding shares of capital stock of each Subsidiary of the Company are
owned directly or indirectly by the Company, free and clear of any claim,
lien, encumbrance or security interest. The Warrants and the
Representative's Options, when sold and delivered, will constitute valid and
binding obligations of the Company enforceable in accordance with the terms
thereof. A sufficient number of shares of Common Stock of the Company has
been reserved for issuance upon exercise of the Warrants, the
Representative's Options and the Representative's Warrants.
2.9 PRIOR SALES. No unregistered securities of the Company, of an
affiliate or of a predecessor of the Company have been sold within three
years prior to the date hereof, except as disclosed in the Registration
Statement.
2.10 LITIGATION. Except as set forth in the Effective Prospectus and
the Final Prospectus, there is, and at the Closing Date there will be, no
action, suit or proceeding before any court, arbitration tribunal or
governmental agency pending, or to the knowledge of the Company, threatened,
which might result in judgments against the Company not adequately covered by
insurance or which collectively might result in any material adverse change
in the condition (financial or otherwise), the business or the prospects of
the Company, or which would materially affect the properties or assets of the
Company.
2.11 REPRESENTATIVE'S OPTIONS. Upon delivery of and payment for the
Representative's Options to be sold by the Company as set forth in Section
3.4 of this Agreement, the Representative and designees of the Representative
will receive good and marketable title thereto, free and clear of all liens,
encumbrances, charges and claims whatsoever; and the Company will have on the
Effective Date and at the time of delivery of such Representative's Options
the requisite power and authority to sell, transfer and deliver such
Representative's Options in the manner provided hereunder.
2.12 FINDER. The Company knows of no outstanding claims against it for
compensation for services in the nature of a finder's fee, origination fee or
financial consulting fee with respect
Premier Concepts, Inc. -5-
Underwriting Agreement
<PAGE>
to the offer and sale of the Securities hereunder except as previously
disclosed in writing to the Representative.
2.13 EXHIBITS; CONTRACTS; AGREEMENTS. There are no contracts or other
documents which are required to be filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have
not been so filed and each contract to which the Company is a party and to
which reference is made in the Effective Prospectus and the Final Prospectus
has been duly and validly executed by the Company and, to the best of the
Company's knowledge, is in full force and effect in all material respects in
accordance with its terms, and none of such contracts have been assigned by
the Company; and the Company knows of no present situation or condition or
fact which would prevent compliance with the terms of such contracts, as
amended to date. Except for amendments or modifications of such contracts in
the ordinary course of business, the Company has no intention of exercising
any right which it may have to cancel any of its obligations under any of
such contracts, and has no knowledge that any other party to any of such
contracts has any intention not to render full performance under such
contracts. All material terms of each contract, agreement, plan, arrangement
or understanding to which the Company is a party, or to which it may
reasonably be expected to become a party, have been fully disclosed in the
Effective Prospectus and Final Prospectus.
2.14 TAX RETURNS. The Company has filed all federal and state tax
returns which are required to be filed by it and has paid all taxes shown on
such returns and on all assessments received by it to the extent such taxes
have become due. All taxes with respect to which the Company is obligated
have been paid or adequate accruals have been set up to cover any such unpaid
taxes.
2.15 PROPERTY. Except as otherwise set forth in or contemplated by the
Effective Prospectus and the Final Prospectus, the Company and its
Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by
them, in each case free and clear of all liens, encumbrances and defects,
except such as are described in the Effective Prospectus and the Final
Prospectus or such as do not materially effect the value of such property and
do not interfere with the use made or proposed to be made of such property by
the Company or such Subsidiaries; and any real property and buildings held
under lease by the Company and its Subsidiaries are held by them under valid,
existing, and enforceable leases with such exceptions as are not material and
do not interfere with the use made or proposed to be made of such property
and buildings by the Company and such Subsidiaries.
2.16 AUTHORITY. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding and legally enforceable obligation of the
Company, except as rights to indemnity hereunder may be limited by federal or
state securities laws or public policy and except as enforceability may be
limited by bankruptcy, insolvency, or similar laws affecting creditors rights
generally and by general equitable principles.
2.17 LOCK-UP. The Company has obtained from each of its officers, his
or her written agreement that for a period of one year from the Effective
Date he/she will not, without the prior
Premier Concepts, Inc. -6-
Underwriting Agreement
<PAGE>
written consent of the Representative, sell or otherwise dispose of any
shares of Common Stock of the Company owned directly or indirectly or
beneficially by him/her.
2.18 USE OF FORM SB-2. The Company is eligible to use Form SB-2 for
the offer and sale of the Securities.
2.19 GOVERNMENTAL COMPLIANCE. Neither the Company nor any Subsidiary is
in violation of any law, ordinance, governmental rule or regulation or court
decree to which it may be subject which violation might reasonably be
expected to have a material adverse effect on the condition (financial or
other), properties, prospective results of operations or net worth of the
Company and its Subsidiaries.
2.20 STABILIZATION. The Company has not taken and may not take,
directly or indirectly, any action designed to cause or result in, or which
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Shares or the Warrants.
2.21 CUSIP NUMBER. The Company has obtained CUSIP numbers for the
Common Stock and the Warrants.
2.22 SUBSIDIARIES. The Company has no Subsidiaries and it has no
present intention of acquiring or forming any subsidiaries, except as
disclosed in the Effective Prospectus or the Final Prospectus.
2.23 BOOKS AND ACCOUNTS. The books, records and accounts of the Company
and each of its subsidiaries accurately and fairly reflect, in reasonable
detail, the transactions in and dispositions of the assets of the Company and
each of its subsidiaries. The systems of internal accounting controls
maintained by the Company and each of its subsidiaries are sufficient to
provide reasonable assurances that (w) transactions are executed in
accordance with management's general or specific authorization; (x)
transactions are recorded as necessary (A) to permit preparation of financial
statements in conformity with generally accepted accounting principles and
(B) to maintain accountability for assets; and (z) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
2.24 EMPLOYEES. No labor disturbance by the employees of the Company or
any of its subsidiaries exists or is imminent; and the Company is not aware
of any existing or imminent labor disturbance by the employees of any
principal suppliers, contract manufacturing organizations, manufacturers,
authorized dealers or distributors that might be expected to result in any
material adverse change in the condition (financial or otherwise), earnings,
operations, business or prospects of the Company and its subsidiaries,
considered as a whole. No collective-bargaining agreement exists with any of
the Company's or any of the Company's subsidiaries' employees and, to the
best knowledge of the Company, no such agreement is imminent.
2.25 POLITICAL CONTRIBUTIONS. Neither the Company nor any of its
subsidiaries has, directly or indirectly, at any time (x) made any
contributions to any candidate for political office, or
Premier Concepts, Inc. -7-
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<PAGE>
failed to disclose fully any such contribution, in violation of law; (y) made
any payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or allowed by all applicable laws; or (z)
violated nor is it in violation of any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
2.26 ENVIRONMENTAL LIABILITIES. Neither the Company nor any of its
subsidiaries has any liability, known or unknown, matured or not matured,
absolute or contingent, assessed or unassessed, imposed or based upon any
provision of, or has received notice of any potential liability under, any
foreign, federal, state or local law, rule or regulation or the common law,
or any tort, nuisance or absolute liability theory, or under any code, order,
decree, judgment or injunction applicable to the Company or any of its
subsidiaries relating to public health or safety, worker health or safety or
pollution, damage to or protection of the environment, including, without
limitation, laws relating to damage to natural resources, emissions,
discharges, releases or threatened releases of hazardous materials into the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), or otherwise relating to
the manufacture, processing, use treatment, storage, generation, disposal,
transport or handling of hazardous materials. As used herein, "hazardous
material" includes chemical substances, wastes, pollutants, contaminants,
hazardous or toxic substances, constituents, materials or wastes, whether
solid, gaseous or liquid in nature.
2.27 INVESTMENT COMPANY ACT. The Company is familiar with the
Investment Company Act of 1940, as amended (the "1940 Act"), and the rules
and regulations thereunder, and has in the past conducted, and intends in the
future to conduct, its affairs in such a manner as to ensure that it will not
become an "investment company" within the meaning of the 1940 Act and such
rules and regulations.
2.28 PROPRIETARY RIGHTS. Each of the Company and each of its
Subsidiaries owns or possesses adequate rights to use all material trade
secrets, know-how, trademarks, service marks, trade names and copyrights
described or referred to in the Final Prospectus as owned by or used by any
of them, or which are necessary for the conduct of their business as
described in the Final Prospectus; and neither the Company nor any of its
Subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, tradenames or
copyrights which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a material adverse effect
on the business, properties, condition (financial or otherwise), prospects or
results of operations of the Company and its Subsidiaries, taken as a whole.
SECTION 3
PURCHASE AND SALE OF THE SECURITIES
3.1 PURCHASE OF SECURITIES AND OVER-ALLOTMENT OPTION. Subject to the
terms and conditions and upon the basis of the representations and warranties
herein set forth, the Company agrees to issue and sell to the Underwriters,
and each of the Underwriters agrees to purchase from the Company at a price
of $3.375 per Share and $0.135 per Warrant, severally and not jointly, the
number of Shares and Warrants set forth opposite their respective names in
Schedule I hereto. The Underwriters agree to offer the Shares and Warrants
to the public as set forth in the Final Prospectus.
Premier Concepts, Inc. -8-
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<PAGE>
The Company hereby grants to the Representative an option to purchase
from the Company, solely for the purpose of covering over-allotments in the
sale of Firm Securities, all or any portion of the Over-allotment Shares
and/or the Over-allotment Warrants for a period of forty-five (45) days after
the Effective Date at the purchase price set forth above. The Representative
shall notify the Company of its intention to exercise the Over-allotment
Option at least three (3) days prior to such exercise or exercises.
3.2 SUBSTITUTION OF UNDERWRITERS. If any Underwriter defaults in its
obligation to purchase the number of Securities which it has agreed to
purchase under this Agreement, the non-defaulting Underwriters shall be
obligated to purchase (pro rata in proportion to the number of Securities set
forth opposite the name of each non-defaulting Underwriter in Schedule I
hereto) the total number of Securities which the defaulting Underwriter
agreed but failed to purchase; except that the non-defaulting Underwriters
shall not be obligated to purchase any of the Securities if the total number
of Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase exceeds 9.09% of the total number of Securities, and any
non-defaulting Underwriter shall not be obligated to purchase more than 110%
of the number of Securities set forth opposite its name in Schedule I hereto
purchasable by it pursuant to the terms of Section 3.1; and provided further
that the non-defaulting Underwriters shall not be obligated to purchase any
Securities which the defaulting Underwriter or Underwriters agreed to
purchase if such additional purchase would cause the Underwriter to be in
violation of the net capital rule of the Commission or other applicable law.
If the foregoing maximums are exceeded, the non-defaulting Underwriters, and
any other underwriters satisfactory to the Representative who so agree, shall
have the right, but will not be obligated, to purchase (in such proportions
as may be agreed upon among them) all the Securities. In any such case, the
Representative shall have the right to postpone the Closing determined as
provided in Section 3.3.2 hereof for not more than seven Business Days after
the date originally fixed as the Closing pursuant to said Section 3.3.2 in
order that any necessary changes in the Registration Statement, the
Prospectus or any other documents or arrangements may be made. If the
non-defaulting Underwriters or the other underwriters satisfactory to the
Representative do not elect to purchase the Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase, this Agreement
shall terminate without liability on the part of any non-defaulting
Underwriter or the Company except for the payment of expenses to be borne by
the Company and the Underwriters as provided in Section 3.5 and the indemnity
and contribution agreements of the Company and the Underwriters contained in
Section 6 hereof.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company or to the non-defaulting Underwriters
for damages caused by its default hereunder.
3.3 PUBLIC OFFERING PRICE. After the Commission notifies the Company
that the Registration Statement has become effective, the Underwriters
propose to offer the Firm Securities to the public at an initial public
offering price of $3.75 per Share and $0.15 per Warrant as set forth in the
Final Prospectus. The Underwriters may allow such discounts and concessions
upon sales to selected dealers as may be determined from time to time by the
Representative.
3.3.1 PAYMENT FOR SECURITIES. Payment for the Securities
(including any Securities included in the Over-allotment Option which the
Representative agrees to purchase) shall be made to the Company or its
order by certified or official bank check or checks, in the amount of the
purchase price by or on behalf of the Representative at the
Premier Concepts, Inc. -9-
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offices of the Representative in Englewood, Colorado, upon delivery
to the Representative or its designee of certificates for the Shares
and Warrants in definitive form in such numbers and registered in
such names as the Representative requests in writing at least three
full business days prior to such delivery. At the request of the
Representative, the Company shall deliver the Securities to the
Representative through the facilities of The Depository Trust Company
or as otherwise directed.
3.3.2 CLOSING. The time and date of delivery and payment
hereunder is herein called the "Closing Date" and shall take place at the
office of the Representative in Englewood, Colorado, or at such other
location as may be specified by the Representative, on the fourth Business
Day (as hereinafter defined) following the Effective Date; provided,
however, that such date may be extended for not more than an additional
seven business days by the Representative. Should the Representative elect
to exercise any part of the Over-allotment Option pursuant to Section 3.1
above, the time and date of delivery and payment for such Over-allotment
Shares and/or Over-allotment Warrants shall be the third Business Day
following such exercise of the Over-allotment Option, or each earlier date
as may be agreed upon by the Representative and the Company. Said date is
referred to as the "Over-allotment Closing Date."
3.3.3 INSPECTION OF CERTIFICATES. For the purpose of expediting
the checking and packaging of the certificates for the Securities, if
requested by the Representative, the Company agrees to make the
certificates available for inspection by the Representative at the main
office of the Representative in Englewood, Colorado, at least two full
business days prior to the proposed delivery date.
3.4 SALE OF REPRESENTATIVE'S OPTIONS. On the Closing Date the Company
will sell and deliver to the Representative and its designees, for a purchase
price of $100, Share Options and Warrant Options dated as of the date of the
Prospectus substantially in the form filed as an Exhibit to the Registration
Statement with such changes therein, if any, as may be agreed upon by the
Company and the Representative, to purchase 110,000 Shares at $4.50 per Share
and 110,000 Underwriters' Warrants at $0.18 per Warrant. The Company shall
not be obligated to sell and deliver the Representative's Options, and the
Representative will not be obligated to purchase and pay for the
Representative's Options, except upon payment for the Securities pursuant to
Subsection 3.3.1 hereof.
The Representative's Options shall be non-transferable for a period of
one (1) year following the Effective Date except to the Underwriters and
their respective officers or partners. The Representative's Options shall
also contain anti-dilution provisions for stock splits, recombinations and
reorganizations, a one-time demand registration provision, customary
piggyback registration rights, a right to convert the options to Shares and
Warrants in a "cashless exercise," and shall otherwise be in form and
substance satisfactory to the Representative. The Representative's Options
will be exercisable during the four year period commencing one (1) year after
the Effective Date.
3.5 REPRESENTATIVE'S EXPENSE ALLOWANCE. It is understood that the
Company shall reimburse the Representative, for itself alone and not on
behalf of the other Underwriters, for its expenses on a nonaccountable basis
in the amount of 3% ($128,700) of the gross proceeds from
Premier Concepts, Inc. -10-
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<PAGE>
the sale of the Shares and the Warrants ($0.1125 per Share and $.0045 per
Warrant) including proceeds from the sale of the Over-allotment Shares and/or
the Over-allotment Warrants (hereinafter the "Expense Allowance"). The
Representative acknowledges receipt of $30,000 paid pursuant to a corporate
consulting agreement, which will be deducted from the Expense Allowance. On
the Closing Date and, if applicable, on the Over-allotment Closing Date, the
Representative shall be entitled to withhold the unpaid balance of such
Expense Allowance. The Representative shall be solely responsible for all
expenses incurred by it in connection with the offering including, but not
limited to, the expenses of its own counsel except as set forth in Section
5.7 hereof. Notwithstanding the foregoing, if the Registration Statement
does not become effective, or the offering is never commenced after it
becomes effective, or if this Agreement is terminated as provided herein, the
Representative will retain so much of the Expense Allowance which has been or
should have been received by the Representative from the Company as is equal
to its actual accountable out-of-pocket expenses and reimburse the remainder,
if any, to the Company, provided that the amount to be reimbursed will not
exceed $30,000. The Representative's expenses shall include, but are not to
be limited to, a fee to compensate the Representative for the services and
time of Representative's counsel (internal and external), plus any additional
expenses and fees, including but not limited to, travel expenses, postage
expenses, duplication expenses, confirmation and other record preparation
expenses, long-distance telephone expenses, consultant and investigator
expenses and other expenses incurred by the Representative in connection with
the proposed offering.
3.6 REPRESENTATIONS OF THE PARTIES. The parties hereto respectively
represent that as of the Closing Date the representations herein contained
and the statements contained in all the certificates theretofore or
simultaneously delivered by any party to another, pursuant to this Agreement,
shall in all material respects be true and correct.
3.7 POST-CLOSING INFORMATION. The Representative covenants that
reasonably promptly after the Closing Date, it will supply the Company with
all information required from the Representative which must be supplied to
the Commission, if any, and such additional information as the Company may
reasonably request to be supplied to the securities authorities for such
states in which the Securities have been qualified for sale.
3.8 RE-OFFERS BY SELECTED DEALERS. On each sale by the Underwriters of
any of the Securities to selected dealers, the Representative shall require
the selected dealer purchasing any such Securities to agree to re-offer the
same on the terms and conditions of the offering set forth in the Final
Prospectus.
3.9 FINANCIAL CONSULTING AGREEMENT. Upon the closing of the proposed
offering, the Company shall enter into a Financial Consulting Agreement with
the Representative pursuant to which the Representative shall receive a
consulting fee of $2,500 per month, payable in advance at the time of
closing, for twelve (12) months from the Closing Date, for services which
shall include, but are not limited to, advising the Company in connection
with financial planning, corporate organization and structure, financial
matters in connection with the operation of the business of the Company,
private and public equity and debt refinancing, the Company's relations with
its securities holders, and the preparation and distribution of periodic
reports; and the Representative shall periodically provide to the Company an
analysis of the Company's financial statements.
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<PAGE>
SECTION 4
REGISTRATION STATEMENT AND PROSPECTUS
4.1 DELIVERY OF REGISTRATION STATEMENTS. The Company shall deliver to
the Representative without charge two (2) manually signed copies of the
Registration Statement, including all financial statements and exhibits filed
therewith and any amendments or supplements thereto, and shall deliver
without charge to the Representative ten (10) conformed copies of the
Registration Statement and any amendment or supplement thereto, including
such financial statements and exhibits. The signed copies of the
Registration Statement so furnished to the Representative will include
manually signed copies of any and all consents and certificates of the
independent public accountant certifying to the financial statements included
in the Registration Statement and signed copies of any and all opinions,
consents and certificates of any other persons whose profession gives
authority to statements made by them and who are named in the Registration
Statement as having prepared, certified, or reviewed any part thereof.
4.2 DELIVERY OF PRE-EFFECTIVE PROSPECTUS. The Company will cause to be
delivered to the Underwriters and to other broker-dealers, without charge,
prior to the Effective Date, as many copies of each Preliminary Prospectus
filed with the Commission bearing in red ink the statement required by Item
501(c)(8) of Regulation S-K (Reg. 229.501(c)(8)) as may be required by the
Representative. The Company consents to the use of such documents by the
Underwriters and by selected dealers prior to the Effective Date of the
Registration Statement.
4.3 DELIVERY OF PROSPECTUS. The Company will deliver, without charge,
copies of the Effective Prospectus and the Final Prospectus at such addresses
and in such quantities as may be required by the Underwriters for the
purposes contemplated by this Agreement and shall deliver said printed copies
of the Effective Prospectus and the Final Prospectus to the Underwriters and
to selected dealers within one business day after the Effective Date.
4.4 FURTHER AMENDMENTS AND SUPPLEMENTS. If during such period of time
as in the opinion of the Representative or its counsel the Final Prospectus
is required to be delivered under the Securities Act, any event occurs or any
event known to the Company relating to or affecting the Company shall occur
as a result of which the Final Prospectus as then amended or supplemented
would include an untrue statement of a material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time after the Effective Date to amend or supplement the
Final Prospectus to comply with the Securities Act, the Company will
forthwith notify the Representative thereof and prepare and file with the
Commission such further amendment to the Registration Statement or supplement
the Final Prospectus (at the expense of the Company) so as to correct such
statement or omission or effect such compliance. The Company shall furnish
and deliver to the Representative and to others whose names and addresses are
designated by the Representative, all at the cost of the Company, a
reasonable number of copies of the amended or supplemented Prospectus which
as so amended or supplemented will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the Prospectus not misleading in the light of the circumstances as of the
date of such Prospectus, amendment, or supplement, and which will comply in
all respects with the Securities Act. In the event the Underwriters are
required to deliver a Prospectus beyond completion of their participation in
the public offering, upon request the Company will prepare
Premier Concepts, Inc. -12-
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<PAGE>
promptly such Prospectus or Prospectuses as may be necessary to permit
continued compliance with the requirements of Section 10 of the Securities
Act.
4.5 USE OF PROSPECTUS. The Company authorizes the Underwriters and all
selected dealers to whom any of the Securities may be sold to use the
Effective Prospectus and the Final Prospectus, as from time to time amended
or supplemented, in connection with the offer and sale of the Securities and
in accordance with the applicable provisions of the Securities Act, the Rules
and Regulations and state Blue Sky or securities laws.
SECTION 5
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Underwriters that:
5.1 OBJECTION OF REPRESENTATIVE TO AMENDMENTS OR SUPPLEMENTS. The
Company will not at any time, whether before or after the Effective Date,
file any amendment or supplement to the Registration Statement or Prospectus,
unless and until a copy of such amendment or supplement has been furnished
to the Representative a reasonable period of time prior to the proposed
filing thereof; or to which the Representative or counsel for the
Representative have reasonably objected, in writing, on the ground that such
amendment or supplement is not in compliance with the Securities Act or the
Rules and Regulations.
5.2 COMPANY'S BEST-EFFORTS TO CAUSE REGISTRATION STATEMENT TO BECOME
EFFECTIVE. The Company will use its best efforts to cause the Registration
Statement to become effective or, if the procedure in Rule 430A of the Rules
and Regulations is followed, comply with the provisions of and make all
requisite filings with the Commission pursuant to such Rule and to notify the
Representative promptly (in writing, if requested) of all such filings. The
Company shall promptly advise the Representative, and will confirm such
advice in writing (a) when the Registration Statement shall become effective
and when any amendment thereto shall have become effective and when any
amendment of or supplement to the Effective Prospectus or the Final
Prospectus shall be filed with the Commission; (b) when the Commission makes
a request or suggestion for any amendment to the Registration Statement or
the Effective Prospectus or the Final Prospectus or for additional
information and the nature and substance thereof; and (c) of the happening of
any event which in the judgment of the Company makes any material statement
in the Registration Statement or Effective Prospectus or the Final Prospectus
untrue or which requires the making of any changes in the Registration
Statement or the Effective Prospectus or Final Prospectus in order to make
the statements therein not misleading. The Company shall also promptly
notify the Representative, and confirm such notice in writing, when the
Company has knowledge of the issuance by the Commission of an order
suspending the effectiveness of the Registration Statement pursuant to
Section 8 of the Securities Act, suspending or preventing the use of any
Preliminary Prospectus or the Effective Prospectus or Final Prospectus or
suspending the qualification of the Securities for offering or sale in any
jurisdiction, or of the institution of any proceedings for any such purpose.
The Company will use every reasonable effort to prevent the issuance of any
order suspending the effectiveness of the Registration Statement or refusing
or suspending the qualification of the Securities, and to obtain as soon as
possible a lifting of any such suspension order, the reversal of any such
refusal to qualify, and the termination of any such suspension.
Premier Concepts, Inc. -13-
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<PAGE>
5.3 PREPARATION AND FILING OF AMENDMENTS AND SUPPLEMENTS. The Company
agrees to prepare and file promptly with the Commission, upon request of the
Representative, such amendments or supplements to the Registration Statement
or Final Prospectus, in form satisfactory to counsel to the Company, as may
be necessary, in the opinion of counsel to the Representative and of counsel
to the Company; and it shall use its best efforts to cause the same to become
effective as promptly as possible.
5.4 BLUE SKY QUALIFICATION. The Company has used and will use its best
efforts to qualify (blue-sky) the sale of the Securities in those states as
may be agreed upon by the Company and the Representative. Copies of all
applications for the registration of securities and related documents (except
for the Registration Statement and Preliminary or Final Prospectus) filed by
the Representative's counsel with the various states have been supplied to
the Company's counsel, concurrently with their transmission to the various
states, and copies of all comments and orders received from the various
states have been and shall be immediately supplied to the Company's counsel.
Immediately prior to the Effective Date, counsel for the Representative shall
advise the Representative in writing of all states wherein the offering is
exempt or has been registered for sale, canceled, withdrawn or denied, the
date of such event(s) and the number of Securities registered for sale in
each such state. After settlement and closing, the Representative shall
notify its counsel of the number of Securities sold in each such jurisdiction.
5.5 FINANCIAL STATEMENTS. The Company at its own expense will prepare
and give such financial statements and other information to the Commission,
or the proper public bodies of the states in which the Securities may be
registered or qualified, as may be required by them.
5.6 REPORTS AND FINANCIAL STATEMENTS TO THE REPRESENTATIVE. During the
period ending three years from the Closing Date, the Company will deliver to
the Representative copies of each annual report of the Company, and will
deliver to the Representative, within 90 days after the close of each fiscal
year of the Company, a financial report of the Company and its Subsidiaries,
if any, on a consolidated basis, and a similar financial report of all
unconsolidated Subsidiaries, if any. All such reports will include a balance
sheet as of the end of the preceding fiscal year, a statement of operations,
a statement of cash flows and an analysis of shareholders' equity covering
such fiscal year, and all will be in reasonable detail and certified by
independent public accountants for the Company. These requirements will be
satisfied if the Company provides to the Representative copies of its Forms
10-K, Forms 10-Q and Forms 8-K (or other appropriate forms) when they are
filed with the Commission.
If the Company shall fail to furnish the Representative with financial
statements as herein provided, within the times specified herein, the
Representative, after giving reasonable notice of not less than 30 days (and
if the financial statements are not provided within such 30 day period),
shall have the right to have such financial statements prepared by
independent public accountants of its own choosing and the Company agrees to
furnish such independent public accountants such data and assistance and
access to such records as they may reasonably require to enable them to
prepare such statements and to pay their reasonable fees and expenses in
preparing the same.
Premier Concepts, Inc. -14-
Underwriting Agreement
<PAGE>
During the period ending three years from the Closing Date the Company
shall also provide to the Representative copies of all other statements,
documents, or other information which the Company shall mail or otherwise
make available to any class of its security holders, or which it shall file
with the Commission; and, upon request in writing from the Representative,
the Company shall furnish to the Representative such other information as may
reasonably be requested and which may be properly disclosed to the
Representative with reference to the property, business and affairs of the
Company and its Subsidiaries, if any; provided such written request includes
an agreement to keep confidential any information which should not be
disclosed to the public.
5.7 EXPENSES PAID BY THE COMPANY. The Company will pay or cause to be
paid, whether or not the transactions contemplated hereunder are consummated
or the Registration Statement is prevented from becoming effective or this
Agreement is terminated, (a) all expenses (including stock transfer taxes)
incurred in connection with the delivery to the several Underwriters of the
Securities; (b) all fees and expenses (including, without limitation, fees
and expenses of the Company's accountants and counsel, but excluding fees and
expenses of counsel for the Underwriters other than those described in (9)
below) in connection with the preparation, printing, filing, delivery and
shipping of the Registration Statement (including financial statements
therein and all amendments and exhibits thereto), each Preliminary
Prospectus, the Effective Prospectus and the Final Prospectus as amended or
supplemented, and the printing, delivery and shipping of this Agreement and
other underwriting documents, including Underwriter's Questionnaires,
Underwriters' Powers of Attorney, Blue Sky Memoranda, Agreements Among
Underwriters, and Selected Dealer Agreements; (c) the filing fee of the
National Association of Securities Dealers, Inc.; (d) any applicable listing
fees; (e) the cost of printing certificates representing the Shares and
Warrants; (f) the cost and charges of any transfer agent or registrar, and
the Warrant agent; (g) the fees and expenses of the Representative's counsel
for qualifying the Securities under the blue sky laws of various
jurisdictions; and (h) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise provided for
in this Section. It is understood, however, that, except as provided in this
Section, the Underwriters shall pay all of their own costs and expenses,
including the fees of their counsel, stock transfer taxes on resale of any of
the Securities by them, and any advertising expenses connected with any
offers they may make.
5.8 REPORTS TO SHAREHOLDERS. During the period ending five years from
the Closing Date the Company will, as promptly as possible, but not later
than 180 days after the end of its annual fiscal year, render and distribute
reports to its shareholders which will include audited statements of its
operations and cash flows during such period and its balance sheet as of the
end of such period, as to which statements the Company's independent
certified public accountants shall have rendered an opinion.
5.9 SECTION 11(A) FINANCIALS. The Company will make generally
available to its security holders and will deliver to the Representative, as
soon as practicable, an earnings statement (as to which no opinion need be
rendered but which will satisfy the provisions of Section 11(a) of the
Securities Act) covering a period of at least 12 months beginning after the
Effective Date. Compliance by the Company with Rule 158 promulgated under the
Securities Act shall satisfy the requirements of this Section 5.9.
Premier Concepts, Inc. -15-
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<PAGE>
5.10 POST-EFFECTIVE AVAILABILITY OF PROSPECTUS. The Company will
comply, at its own expense, with all requirements imposed upon it by the
Securities Act, as now or hereafter amended, by the Rules and Regulations, as
from time to time may be in force, and by any order of the Commission, so far
as necessary to permit the continuance of sales or dealings in the Shares and
the Warrants and the exercise of the Warrants.
5.11 APPLICATION OF PROCEEDS. The Company will apply the net proceeds
from the sale of the Securities substantially in the manner specifically set
forth in the Final Prospectus. Any deviation from such application must be in
accordance with the Final Prospectus and may occur only after approval by the
board of directors of the Company and then only after the board of directors
has obtained the written opinion as to the propriety of any such deviation
provided by recognized legal counsel well versed in the federal and state
securities laws.
5.12 AGREEMENTS OF CERTAIN SHAREHOLDERS. The Company has delivered to
the Representative, prior to the execution of this Agreement, the agreement
of each officer, that for a period of one year from the Effective Date such
persons shall not sell, contract to sell, pledge, hypothecate, grant any
option to purchase or otherwise dispose of any portion of the shares of
Common Stock owned directly, indirectly or beneficially by such person prior
to the Effective Date, without the Representative's prior written consent.
5.13 DELIVERY OF DOCUMENTS. At the Closing, the Company has delivered
to the Representative true and correct copies of the articles of
incorporation of the Company and all amendments thereto; true and correct
copies of the by-laws of the Company and of the minutes of all meetings of
the directors and shareholders of the Company held prior to the Closing Date
which in any way relate to the subject matter of this Agreement. All such
copies shall be certified by the Secretary of the Company.
5.14 COOPERATION WITH REPRESENTATIVE'S DUE DILIGENCE. At all times
prior to the Closing Date, the Company will cooperate with the Representative
in such investigation as the Representative may make or cause to be made of
all the properties, management, business and operations of the Company, and
the Company will make available to the Representative in connection therewith
such information in its possession as the Representative may reasonably
request.
5.15 APPOINTMENT OF TRANSFER AGENT AND WARRANT AGENT. The Company has
appointed Corporate Stock Transfer, Inc., as Transfer Agent for the Common
Stock and Warrant Agent for the Warrants, subject to the closing of the
offering. The Company will not change or terminate such appointment for a
period of three years from the Effective Date without first obtaining the
written consent of the Representative, which consent shall not be
unreasonably withheld.
5.16 COMPLIANCE WITH CONDITIONS PRECEDENT. The Company will use all
reasonable efforts to comply or cause to be complied with the conditions
precedent to the several obligations of the Underwriters in Section 8 hereof.
Premier Concepts, Inc. -16-
Underwriting Agreement
<PAGE>
5.17 FILING OF FORM SR. If required under the Securities Act, the
Company agrees to file with the Commission all required reports on Form SR in
accordance with the provisions of Rule 463 promulgated under the Securities
Act and to provide a copy of such reports to the Representative and its
counsel.
5.18 BOUND VOLUME. The Company shall supply to the Representative and
the Representative's counsel, at the Company's cost, three bound volumes each
of all of the public offering materials within a reasonable time after the
closing, not to exceed three months.
5.19 LISTING IN MOODY'S AND STANDARD & POOR'S. The Company is listed in
Moody's Over-The-Counter Manual or Standard & Poor's Standard Corporation
Records, and it agrees to maintain such listings.
5.20 NASDAQ. The Company has received approval to have the Common Stock
and Warrants quoted on NASDAQ as of the Effective Date and it shall continue
such listing on NASDAQ or on a national securities exchange during the entire
period each such security is outstanding; provided that the Company is in
compliance with NASDAQ maintenance requirements. The NASDAQ symbols shall be
mutually agreeable to the Company and the Representative.
5.21 SECONDARY TRADING QUALIFICATION. The Company agrees to use its
best efforts to qualify the Common Stock and Warrants for secondary trading
as soon as legally possible in such states as are requested by the
Representative from time to time, including, without limitation, California
and Texas.
5.22 RIGHT OF INSPECTION. For a period of three years after the
Effective Date, the Representative, at the Representative's expense, will
have the right to have a person or persons selected by the Representative
review the books and records of the Company upon seven days' written notice
and at reasonable times. Such person or persons will be required to execute a
confidentiality agreement which will, in part, prohibit disclosure of
information to any party except the Representative, which information shall
be held in confidence unless otherwise specifically agreed to by the Company
in writing.
5.23 OUTSIDE DIRECTORS, COMMITTEES, EXECUTIVE COMPENSATION. The Company
shall use its best efforts to have at least two members elected to its board
of directors who are not officers or employees of the Company ("outside
directors") on the Effective Date of the Registration Statement, and to cause
two such outside directors to be nominated as directors for two additional
one-year terms. The Company will form independent audit and compensation
committees which shall be comprised of at least three of the Company's
directors, at least a majority of whom shall be outside directors.
5.24 REGISTRATION UNDER THE EXCHANGE ACT. The Company currently files
reports pursuant to Section 15(d) of the Exchange Act as of the Effective Date.
The Common Stock and Warrants will be registered under Section 12(g) of the
Exchange Act. The Company has filed a Registration Statement under Section
12(g) of the Exchange Act with respect to the Common Stock and Warrants. The
Company has delivered a copy of such filing to the Representative and to legal
Premier Concepts, Inc. -17-
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<PAGE>
counsel for the Representative. The Company shall use its best efforts to
cause the registration statement under the Exchange Act to become effective
not later than the Effective Date, or as soon thereafter as possible.
SECTION 6
INDEMNIFICATION AND CONTRIBUTION
6.1 INDEMNIFICATION BY COMPANY. The Company shall indemnify and hold
harmless each Underwriter and their respective officers, directors, employees
and agents against any and all loss, claim, damage or liability, joint or
several, to which such Underwriter or such person ("covered person") may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, or liability (or action with respect thereto) arises out of or
is based upon (a) any violation of any registration requirements; (b) any
improper use of sales literature by the Company; (c) any untrue statement or
alleged untrue statement made by the Company in Section 2 hereof; (d) any
untrue statement or alleged untrue statement of a material fact contained (i)
in the Registration Statement, any Preliminary Prospectus, the Effective
Prospectus, or the Final Prospectus or any amendment or supplement thereto,
or (ii) in any application or other document, executed by the Company
specifically for such application or based upon written information furnished
by the Company, filed in order to qualify the Securities under the securities
laws of the states where filings were made (any such application, document,
or information being hereinafter called "Blue Sky Application"); or (e) the
omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, the Effective Prospectus, or the Final Prospectus or
any amendment or supplement thereto or in any Blue Sky Application a material
fact required to be stated therein or necessary to make the statements
therein not misleading; and shall reimburse each Underwriter or covered
person for any legal or other reasonable expenses incurred by such
Underwriter or covered person in connection with investigating or defending
against or appearing as a third-party witness in connection with any such
loss, claim, damage, liability or action, notwithstanding the possibility
that payments for such expenses might later be held to be improper, in which
case the person receiving them shall promptly refund them; except that the
Company shall not be liable in any such case to the extent, but only to the
extent, that any such loss, claim, damage, or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company through the Representative by or on
behalf of any Underwriter specifically for use in the preparation of the
Registration Statement, any Preliminary Prospectus, the Effective Prospectus
and the Final Prospectus or any amendment or supplement thereto, or any Blue
Sky Application.
6.2 INDEMNIFICATION BY UNDERWRITERS. Each Underwriter severally, but
not jointly, shall indemnify and hold harmless the Company against any and
all loss, claim, damage or liability, joint or several, to which the Company
may become subject under the Securities Act or otherwise, insofar as such
loss, claim, damage, liability (or action in respect thereto) arises out of
or are based upon (a) any untrue statement or alleged untrue statement of a
material fact contained (i) in the Registration Statement, any Preliminary
Prospectus, the Effective Prospectus or the Final Prospectus or any amendment
or supplement thereto or (ii) in any Blue Sky Application; or (b) the
omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, the Effective Prospectus or the Final Prospectus or
any amendment or supplement thereto or in
Premier Concepts, Inc. -18-
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<PAGE>
any Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein not misleading; except that such
indemnification shall be available in each such case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon information and in
conformity with written information furnished to the Company through the
Representative or on behalf of such Underwriter specifically for use in the
preparation thereof; and shall reimburse any legal or other expenses
reasonably incurred by the Company in connection with the investigation or
defending against any such loss, claim, damage, liability, or action.
6.3 RIGHT TO PROVIDE DEFENSE. Promptly after receipt by an indemnified
party under Section 6.1 or 6.2 above of written notice of the commencement of
any action, the indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under such section, notify the
indemnifying party in writing of the claim or the commencement of that
action; the failure to notify the indemnifying party shall not relieve it of
any liability which it may have to an indemnified party, except to the extent
that the indemnifying party did not otherwise have knowledge of the
commencement of the action and the indemnifying party's ability to defend
against the action was prejudiced by such failure. Such failure shall not
relieve the indemnifying party from any other liability which it may have to
the indemnified party or any person identified in Section 6.4 below. If any
such claim or action shall be brought against an indemnified party, and it
shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election
to assume the defense of such claim or action, the indemnifying party shall
not be liable to the indemnified party under such section for any legal or
other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation; except
that the Representative shall have the right to employ counsel to represent
the Representative and those other Underwriters who may be subject to
liability arising out of any claim in respect of which indemnity may be
sought by the Underwriters against the Company under such section if, in the
Representative's reasonable judgment, it is advisable for the Representative
and those Underwriters to be represented by separate counsel, and in that
event the fees and expenses of such separate counsel shall be paid by the
Company.
6.4 CONTRIBUTION. If the indemnification provided for in Sections 6.1
and 6.2 of this Agreement is unavailable or insufficient to hold harmless an
indemnified party, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, or liabilities referred to in Sections 6.1 or 6.2 above (a)
in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other
from the offering of the Securities; or (b) if the allocation provided by
clause (a) above is not permitted by applicable law, in such proportion as is
appropriate to reflect the relative benefits referred to in clause (a) above
but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, or liabilities, as well as
any other relevant equitable considerations. The relative benefits received
by the Company and the Underwriters shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting
Premier Concepts, Inc. -19-
Underwriting Agreement
<PAGE>
discounts and un-itemized expenses received by the Underwriters, in each case
as set forth in the table on the cover page of the Final Prospectus.
Relative fault shall be determined by reference to, among other things,
whether the untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company or the
Underwriter and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such untrue statement or
omission. For purposes of this Section 6.4, the term "damages" shall include
any counsel fees or other expenses reasonably incurred by the Company or the
Underwriters in connection with investigating or defending any action or
claim which is the subject of the contribution provisions of this Section
6.4. Notwithstanding the provisions of this Section 6.4, no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of any such
untrue statements or omissions. No person adjudged guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Under this Section 6.4, each Underwriter's
obligations to contribute are several in proportion to their respective
underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted
against it in respect of which contribution may be sought, it shall promptly
give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or
parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise (except as specifically provided in Section 6.4 hereof).
6.5 EXTENSION OF OBLIGATIONS. The obligations of the Company under
this Section 6 shall be in addition to any other liability which the Company
may otherwise have, and shall extend, upon the same terms and conditions, to
each person, if any, who controls any Underwriter within the meaning of the
Securities Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability that the respective Underwriters may
otherwise have, and shall extend, upon the same terms and conditions, to each
director of the Company (including any person who, with his consent, is named
in the Registration Statement as about to become a director of the Company),
to each officer of the Company who has signed the Registration Statement, and
to each person, if any, who controls the Company within the meaning of the
Securities Act.
6.6 REIMBURSEMENT OF UNDERWRITERS. In addition to its obligations
under Section 6.1 of this Agreement, the Company agrees that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any loss, claim, damage, or
liability described in Section 6.1 of this Agreement, it will reimburse the
Underwriters, and each of them, on a monthly basis (or more often, if
requested) for all reasonable legal or other expenses incurred in connection
with investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligation to reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any portion, or all, of
any such interim reimbursement payments are so held to have been improper,
the Underwriters receiving
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<PAGE>
the same shall promptly return such amounts to the Company together with
interest, compounded daily, determined on the basis of the prime rate (or
other commercial lending rate for borrowers of the highest credit rating)
announced from time to time by Norwest Bank of Denver, Denver, Colorado (the
"Prime Rate"). Any such interim reimbursement payments that are not made to
the Underwriters within 30 days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request until the date paid.
6.7 REIMBURSEMENT OF THE COMPANY. In addition to their obligations
under Section 6.2 of this Agreement, the Underwriters agree that, as an
interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any loss, claim,
damage or liability described in Section 6.2 of this Agreement, they will
reimburse the Company on a monthly basis (or more often, if requested) for
all reasonable legal or other expenses incurred by the Company in connection
with investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Underwriters'
obligation to reimburse the Company for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any portion, or all, of any such
interim reimbursement payments are so held to have been improper, the Company
shall promptly return such amounts to the Underwriters together with
interest, compounded daily, determined on the basis of the Prime Rate. Any
such interim reimbursement payments that are not made to the Company within
30 days of a request for reimbursement shall bear interest at the Prime Rate
from the date of such request until the date paid.
SECTION 7
EFFECTIVENESS OF AGREEMENT
This Agreement shall become effective (a) at 10:00 a.m., Colorado time,
on the first full business day after the Effective Date, or (b) upon release
by the Representative of the Securities for sale after the Effective Date,
whichever shall first occur. The Representative shall notify the Company
immediately after the Representative shall have taken any action, by release
or otherwise, whereby this Agreement shall have become effective. For
purposes of this Agreement, the release of the initial public offering of the
Firm Securities for sale to the public shall be deemed to have been made when
the Representative releases, by telegram or otherwise, firm offers of the
Firm Securities to securities dealers or release for publication of a
newspaper advertisement relating to the Firm Securities, whichever occurs
first. This Agreement shall, nevertheless, become effective at such time
earlier than the time specified above, after the Effective Date, as the
Representative may determine by notice to the Company.
SECTION 8
CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS
The obligations of the several Underwriters hereunder to purchase the
Securities and to make payment to the Company hereunder on the Closing Date
and on the Over-allotment Closing Date, if any, shall be subject to the
accuracy, as of the Closing Date and the Over-allotment Closing Date, of each
of the representations and warranties on the part of the Company herein
contained, to the performance by the Company of all its agreements herein
contained, to the
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<PAGE>
fulfillment of or compliance by the Company with all covenants and conditions
hereof, and to the following additional conditions:
8.1 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement and all post-effective amendments thereto filed with the Commission
prior to the Closing Date or the Over-allotment Closing Date shall have
become effective and any and all filings required by Rule 424 and Rule 430A
of the Rules and Regulations shall have been made; no stop order suspending
the effectiveness of the Registration Statement or any amendment or
supplement thereto shall have been issued; no proceeding for that purpose
shall have been initiated or threatened by the Commission or be pending; any
request for additional information on the part of the Commission (to be
included in the Registration Statement or Final Prospectus or otherwise)
shall have been complied with to the satisfaction of the Commission; and
neither the Registration Statement, the Effective Prospectus or Final
Prospectus, nor any amendment thereto shall have been filed to which counsel
to the Representative shall have reasonably objected in writing or have not
given their consent.
8.2 ACCURACY OF REGISTRATION STATEMENT. The Representative shall not
have advised the Company that the Registration Statement or the Effective
Prospectus or Final Prospectus or any amendment thereof or supplement thereto
contains an untrue statement of a fact which, in the opinion of counsel to
the Representative, is material, or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein, or
is necessary to make the statements therein not misleading.
8.3 CASUALTY AND OTHER CALAMITY. Since the Effective Date the Company
shall not have sustained any loss on account of fire, explosion, flood,
accident, calamity or any other cause, of such character as materially
adversely affects its business or property considered as an entire entity,
whether or not such loss is covered by insurance, and no officer or director
of the Company shall have suffered any injury, sickness or disability of a
nature which would materially adversely affect his or her ability to properly
function as an officer or director of the Company.
8.4 LITIGATION AND OTHER PROCEEDINGS. Other than as disclosed in the
Registration Statement or Prospectus, there shall be no litigation instituted
or threatened against the Company and there shall be no proceeding instituted
or threatened against the Company before or by any federal or state
commission, regulatory body or administrative agency or other governmental
body, domestic or foreign, wherein an unfavorable ruling, decision or finding
would materially adversely affect the business, management, licenses,
operations or financial condition or income of the Company considered as an
entity.
8.5 LACK OF MATERIAL CHANGE. Except as contemplated herein or as set
forth in the Registration Statement and Final Prospectus, during the period
subsequent to the date of the last audited balance sheet included in the
Registration Statement, the Company (a) shall have conducted its business in
the usual and ordinary manner as the same was being conducted on the date of
the last audited balance sheet included in the Registration Statement, and
(b) except in the ordinary course of its business, the Company shall not have
incurred any liabilities, claims or obligations (direct or contingent) or
disposed of any of its assets, or entered into any material transaction or
suffered or experienced any substantially adverse change in its condition,
financial or otherwise. The capital stock and surplus accounts of the
Company shall be substantially the
Premier Concepts, Inc. -22-
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<PAGE>
same as at the date of the last audited balance sheet included in the
Registration Statement, without considering the proceeds from the sale of the
Securities, other than as may be set forth in the Final Prospectus, and
except as the surplus reflects the result of continued profits or losses from
operations consistent with prior periods.
8.6 REVIEW BY REPRESENTATIVE'S COUNSEL. The authorization of the
Shares, the Warrants, the Warrant Shares, the Representative's Options and
the Common Stock and Warrants issuable upon the exercise of the
Representative's Options, the Registration Statement, the Effective
Prospectus and the Final Prospectus and all corporate proceedings and other
legal matters incident thereto and to this Agreement shall be reasonably
satisfactory in all respects to counsel to the Representative.
8.7 OPINION OF COUNSEL. The Company shall have furnished to the
Representative the opinion, dated the Closing Date and, if applicable, the
Over-allotment Closing Date, addressed to the Representative, from Neuman &
Cobb, counsel to the Company, to the effect that based upon a review by them
of the Registration Statement, Effective Prospectus and the Final Prospectus,
the Company's articles of incorporation, by-laws, and relevant corporate
proceedings and contracts, and examination of such statutes they deem
necessary and such other investigation by such counsel as they deem necessary
to express such opinion:
(a) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Colorado, and
has the corporate power and authority to own its properties and to carry on
its business as described in the Registration Statement and Effective
Prospectus and the Final Prospectus.
(b) The Company is duly qualified and in good standing as a foreign
corporation authorized to do business in all jurisdictions in which the
character of the properties owned or held under lease or the nature of the
business conducted requires such qualification except where the failure to
qualify would not have a material adverse effect on the business of the
Company.
(c) The authorized and outstanding capital stock of the Company is as
set forth in the Effective Prospectus and Final Prospectus; the Common
Stock of the Company, the Warrants, and the Representative's Options
conform in all material respects to the statements concerning them in the
Effective Prospectus and Final Prospectus; the outstanding Common Stock of
the Company contains no preemptive rights; the Shares, the Warrants, and
the Representative's Options have been, and the Common Stock issuable upon
exercise of the Share Options and the Representative's Options, will be,
duly and validly authorized and, upon issuance thereof and payment therefor
in accordance with this Agreement, validly issued, fully paid and
nonassessable, and will not be subject to the preemptive rights of any
shareholder of the Company.
(d) A sufficient number of shares of Common Stock have been duly
reserved for issuance upon the exercise of the Warrants, the
Representative's Options and the Warrants issuable upon exercise of the
Representative's Options.
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<PAGE>
(e) To such counsel's knowledge, no consents, approvals,
authorizations or orders of agencies, officers or other regulatory
authorities are required for the valid authorization, issuance or sale of
the Common Stock, the Warrants and the Representative's Options
contemplated by this Agreement, except for those consents, approvals,
authorizations, and orders which the Company has obtained and which are in
full force and effect under the Securities Act, the Exchange Act, and under
applicable state securities laws in connection with the purchase and
distribution of such securities by the Underwriters, and the clearance of
the underwriting compensation by the NASD.
(f) The issuance and sale of the Securities and the Representative's
Options, the consummation of the transactions herein contemplated, and the
compliance with the terms of this Agreement will not conflict with or
result in a breach of any of the terms, conditions, or provisions of or
constitute a default under the articles of incorporation or by-laws of the
Company; nor, to such counsel's knowledge, will they conflict with or
result in a breach of any of the terms, conditions, or provisions of any
note, indenture, mortgage, deed of trust, or other agreement or instrument
to which the Company is a party or by which the Company or any of its
property is bound, other than for which the Company has received a consent
or waiver of such conflict, breach or default, or where such conflict or
breach would not have a material adverse effect on the business of the
Company; or any existing law (provided this paragraph shall not relate to
federal or state securities laws), order, rule, regulation, writ,
injunction, or decree known to such counsel of any government, governmental
instrumentality, agency, body, arbitration tribunal, or court, domestic or
foreign, having jurisdiction over the Company or its property.
(g) On the basis of a reasonable inquiry by such counsel, including
participation in conferences with representatives of the Company and its
accountants at which the contents of the Registration Statement and the
Effective Prospectus and the Final Prospectus and related matters were
discussed, and without expressing any opinion as to the financial
statements or other financial data contained therein: (i) nothing has come
to such counsel's attention which leads them to believe that the
Registration Statement and the Final Prospectus, as amended or supplemented
by any amendments or supplements thereto made by the Company prior to the
Closing Date, do not comply as to form in all material respects with the
requirements of the Securities Act; (ii) nothing has come to their
attention which leads them to believe that the Registration Statement or
the Final Prospectus, as amended or supplemented by any such amendments or
supplements thereto, contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading; (iii) they do not know of any contract or
other document required to be described in or filed as an exhibit to the
Registration Statement which is not so described or filed; and (iv) the
Registration Statement has become effective under the Securities Act, and,
to the best of their knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated by the
Commission.
(h) This Agreement has been duly authorized and executed by the
Company and is a valid and binding agreement of the Company, except as
rights to indemnity
Premier Concepts, Inc. -24-
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<PAGE>
hereunder may be limited by federal or state securities laws or public
policy and except as enforceability may be limited by bankruptcy,
insolvency, or similar laws affecting creditors rights generally and by
general equitable principles.
(i) Except as disclosed in the Registration Statement, the Effective
Prospectus, and the Final Prospectus, the Company is not in default of any
of the material contracts, licenses, leases or agreements to which it is a
party, and the offering of the Shares, the Warrants and the
Representative's Options will not cause the Company to become in default of
any of its material contracts, licenses, leases or agreements.
(j) To such counsel's knowledge the Company is not currently offering
any securities for sale except as described in the Registration Statement.
(k) Counsel has no knowledge of any promoter, affiliate, parent or
subsidiaries of the Company except as are described in the Registration
Statement and Final Prospectus.
(l) To the knowledge of counsel, and without making any statement as
to title, except as described in the Registration Statement, the Company
owns all properties described in the Registration Statement as being owned
by it; the properties are free and clear of all liens, charges,
encumbrances or restrictions; all of the leases, subleases and other
agreements under which the Company holds its properties are in full force
and effect; the Company is not in default under any of the material terms
or provisions of any of the leases, subleases or other agreements; and
there are no claims against the Company concerning its rights under the
leases, subleases and other agreements and concerning its right to
continued possession of its properties.
(m) To the knowledge of counsel, the Company has been issued by the
appropriate federal, state and local regulatory authorities the required
licenses, certificates, authorizations or permits necessary to conduct its
business as described in the Registration Statement and to retain
possession of its properties. Counsel is unaware of any notice of any
proceeding relating to the revocation or modification of any of these
certificates or permits.
(n) To the knowledge of counsel, the Company has paid all taxes which
are shown as due and owing on the financial statements included in the
Registration Statement and Final Prospectus.
As to all factual matters, including without limitation the issuance of
stock certificates and receipt of payment therefor, the states in which the
Company transacts business, and the adoption of resolutions reflected by the
Company's minute book, such counsel may rely on the certificate of an
appropriate officer of the Company. Counsel's opinion as to the validity and
enforceability of any and all contracts and agreements referenced herein may
exclude any opinion as to the validity or enforceability of any indemnification
or contribution provisions thereof, or as the validity or enforceability of any
such contract or agreement may be limited by bankruptcy or other laws relating
to or affecting creditors' rights generally and by equitable principles.
Premier Concepts, Inc. -25-
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<PAGE>
8.8 ACCOUNTANT'S LETTER. The Representative shall have received letters
addressed to it dated the Effective Date, the Closing Date and, if applicable,
the Over-allotment Closing Date, respectively, and a draft of such letter at
least five days prior to the Effective Date, the Closing Date and, if
applicable, the Over-allotment Closing Date, from Hein + Associates, L.L.C.,
confirming that they are independent public accountants with respect to the
Company within the meaning of the Act and the published Rules and Regulations.
In the letter dated the date of this Agreement, they shall state their
conclusions and findings with respect to such financial, accounting, and
statistical information and other matters contained in the Registration
Statement as have been approved by the Representative prior to the execution of
this Agreement. In the letter dated the Closing Date (and if applicable, the
Over-allotment Closing Date), they shall state as of such date (or, with respect
to matters involving changes or developments since the respective dates as of
which specified financial information is given in the Final Prospectus, as of a
date not more than five days prior to the date of such letter) their conclusions
and findings with respect to the financial information and other matters covered
by their letter dated the date of this Agreement, the purpose of the letter to
be delivered on the Closing Date (and, if applicable, the Over-allotment Closing
Date) being to update in all respects the conclusions and findings set forth in
the prior letter or letters. The Representative shall be furnished without
charge, in addition to the original signed copies, such number of signed or
photostatic or conformed copies of such letters as the Representative shall
reasonably request.
8.9 OFFICER'S CERTIFICATE. The Company shall furnish to the
Representative certificates, each signed by the President and Chief Financial
Officer of the Company, one dated as of the Effective Date, one dated as of the
Closing Date, and, if applicable, one dated as of the Over-allotment Closing
Date, to the effect that:
(a) The representations and warranties of the Company in this
Agreement are true and correct at and as of the date of the certificate, and the
Company has complied with all the agreements and has satisfied all the
conditions on its part to be performed or satisfied at or prior to the date of
the certificate.
(b) The Registration Statement has become effective and to the best
of the knowledge of the respective signers no order suspending the effectiveness
of the Registration Statement has been issued and no proceeding for that purpose
has been initiated or is threatened by the Commission.
(c) The respective signers have each examined the Registration
Statement and the Final Prospectus and any amendments and supplements thereto,
and to the best of their knowledge the Registration Statement and the Final
Prospectus and any amendments and supplements thereto contain all statements
required to be stated therein, do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and, since the Effective
Date, there has occurred no event required to be set forth in an amended or a
supplemented Prospectus which has not been so set forth.
8.10 TENDER OF DELIVERY OF SECURITIES. All of the Securities being offered
by the Company and being purchased from the Company by the Underwriters, and the
Representative's
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<PAGE>
Options being purchased from the Company by the Representative, shall be
tendered for delivery in accordance with the terms and provisions of this
Agreement.
8.11 BLUE-SKY REGISTRATION OR QUALIFICATION. The Shares and the Warrants
shall be registered or qualified in such states as the Representative and the
Company may agree pursuant to Section 5.4, and each such registration or
qualification shall be in effect and not subject to any stop order or other
proceeding on the Closing Date or the Over-allotment Closing Date. On the
Effective Date, on the Closing Date and, if applicable, the Over-allotment
Closing Date, the Representative shall receive from counsel for the
Representative, written information which contains the following:
(a) the names of the states in which applications to register or
qualify the Shares, the Warrants and the Warrant Shares have been filed;
(b) the status of such registrations or qualifications in such states
as of the date of such letter;
(c) a list containing the name of each such state in which the
Shares, the Warrants and the Warrant Shares may be legally offered and sold by a
dealer licensed in such state and the number of each which may be legally
offered and sold in the offering in each such state as of the date of such
letter;
(d) with respect to the written information provided on the Effective
Date, a representation that such counsel will promptly update such written
information if counsel receives actual notice of any material changes in the
information provided therein between the Effective Date and the Closing Date
and, if applicable, Over-allotment Closing Date;
(e) the names of the states in which the offer and sale of the Shares
and Warrants in the offering is exempt from registration or qualification; and
(f) a statement that the Underwriters and selected dealers in the
offering may rely upon the information contained therein.
8.12 APPROVAL OF REPRESENTATIVE'S COUNSEL. All opinions, letters,
certificates and evidence mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Representative, whose approval
shall not be unreasonably withheld. The suggested form of such documents shall
be provided to the counsel for the Representative at least three business days
before the dates they are to be provided, that is, the Effective Date, the
Closing Date, and the Over-allotment Closing Date, if applicable.
8.13 OFFICERS' CERTIFICATE AS A COMPANY REPRESENTATION. Any certificate
signed by an officer of the Company and delivered to the Representative or
counsel for the Representative shall be deemed a representation and warranty by
the Company to the Underwriters as to the statements made therein.
8.14 OPINION OF REPRESENTATIVE'S COUNSEL. The Representative shall have
received from Jones & Keller, P.C., counsel for the Representative, an opinion
dated the Closing Date, with respect to the issuance and sale of the Securities,
and such other related matters as the
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<PAGE>
Representative may reasonably require, and the Company shall have furnished
such counsel with all documents which they may request for the purpose of
enabling them to pass upon such matter.
SECTION 9
TERMINATION
9.1 TERMINATION BECAUSE OF NONCOMPLIANCE. This Agreement may be
terminated in its entirety by the Representative by notice to the Company prior
to its effectiveness in the event that the Company shall have failed or been
unable to comply with any of the terms, conditions or provisions of this
Agreement which the Company is required by this Agreement to be performed,
complied with or fulfilled (including but not limited to those specified in
Sections 2, 3, 4, 5, and 8 hereof) within the respective times herein provided
for, unless compliance therewith or performance or satisfaction thereof shall
have been expressly waived by the Representative in writing.
9.2 MARKET OUT TERMINATION. This Agreement may be terminated by the
Representative by notice to the Company at any time if, in the sole judgment of
the Representative, payment for and delivery of the Securities is rendered
impracticable or inadvisable because of:
(a) Material adverse changes in the Company's business, business
prospects, management, earnings, properties or conditions, financial or
otherwise, which are outside the ordinary course of business;
(b) Any action, suit, or proceedings, at law or in equity, hereafter
threatened or filed against the Company by any person or entity, or by any
federal, state or other commission, board or agency wherein any unfavorable
result or decision could materially adversely affect the business, business
prospects, properties, financial condition or income or earnings of the Company;
(c) Additional material governmental restrictions not in force and
effect on the date hereof shall have been imposed upon the trading in securities
generally, or new offering or trading restrictions shall have been generally
established by a registered securities exchange, the Commission, NASD or other
applicable regulatory authority, or trading in securities generally on any such
exchange, NASDAQ or otherwise, shall have been suspended, or a general
moratorium shall have been established by federal or state authorities;
(d) Substantial and material changes in the condition of the market
beyond normal fluctuations such that it would be undesirable, impracticable or
inadvisable in the judgment of the Representative to proceed with this Agreement
or with the public offering of the Securities;
(e) Any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the judgment
of the Representative, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the sale of and payment for the Securities; or
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<PAGE>
(f) Any suspension of trading in the securities of the Company in
the over-the-counter market or the interruption or termination of quotations
of any security of the Company on the NASDAQ System.
9.3 EFFECT OF TERMINATION HEREUNDER. Any termination of this Agreement
pursuant to this Section 9 shall be without liability of any character
(including, but not limited to, loss of anticipated profits or consequential
damages) on the part of any party hereto, except that the Company shall
remain obligated to pay the costs and expenses provided to be paid by it
specified in Sections 3.5 and 5.7; and the Company and the Underwriters shall
be obligated to pay, respectively, all losses, claims, damages or
liabilities, joint or several, under Sections 6.1 or 6.4 in the case of the
Company and Sections 6.2 or 6.4 in the case of the Underwriters.
SECTION 10
REPRESENTATIVE'S REPRESENTATIONS AND WARRANTIES
The Representative represents and warrants to and agrees with the Company
that:
10.1 REGISTRATION AS BROKER-DEALER AND MEMBER OF NASD. The
Representative is registered as a broker-dealer with the Commission and is
registered as a securities broker-dealer in all states in which it will sell
Securities and is a member in good standing of the National Association of
Securities Dealers, Inc.
10.2 NO PENDING PROCEEDINGS. There is not now pending or threatened
against the Representative any action or proceeding of which it has been
advised, either in any court of competent jurisdiction, before the Commission
or any state securities regulatory authority concerning activities as a
broker or dealer which are foreseen as affecting the Representative's
capacity to complete the terms of this Agreement.
10.3 COMPANY'S RIGHT TO TERMINATE. In the event any action or
proceeding of the type referred to in Section 10.2 above shall be instituted
or threatened against the Representative at any time prior to the Effective
Date hereunder, or in the event there shall be filed by or against the
Representative in any court pursuant to any federal, state, local or
municipal statute, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of its assets
or if it makes an assignment for the benefit of creditors, the Company shall
have the right on three days' written notice to the Representative to
terminate this Agreement without any liability to the Representative or the
Company of any kind except for the payment of all expenses as provided herein.
10.4 REPRESENTATIVE'S COVENANTS. The Representative covenants and
agrees with the Company that (a) it will not offer or sell the Securities in
any state or other jurisdiction where it has not been advised in writing by
legal counsel for the Company that the Securities are qualified for the offer
and sale therein or exempt from such requirements; (b) it will not make any
representation to any person in connection with the offer and sale of the
Securities covered hereby except as set forth in the Registration Statement
or as authorized in writing by the Company and the Representative; (c) it
will comply in good faith with all laws, rules and regulations applicable to
the
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<PAGE>
distribution of the securities, including the Conduct Rules of the NASD; and
(d) the Representative has the authority to execute this Agreement on behalf
of all of the Underwriters.
SECTION 11
NOTICE
Except as otherwise expressly provided in this Agreement:
11.1 NOTICE TO THE COMPANY. Whenever notice is required by the
provisions of this Underwriting Agreement to be given to the Company, such
notice shall be in writing addressed to the Company as follows:
Premier Concepts, Inc.
3033 South Parker Road, Suite 120
Denver, Colorado 80014
Attn: Sissel B. Greenberg, President
with a copy to:
Clifford L. Neuman, Esq.
Nathan L. Stone, Esq.
Neuman & Cobb
1507 Pine Street
Boulder, Colorado 80302
11.2 NOTICE TO THE REPRESENTATIVE. Whenever notice is required by the
provisions of this Agreement to be given to the Representative, such notice
shall be given in writing addressed to the Representative as follows:
Cohig & Associates, Inc.
6300 South Syracuse Way, Suite 430
Englewood, Colorado 80111
Attn: Harold M. Golz, Executive Vice President
with a copy to:
Samuel E. Wing, Esq.
Jones & Keller, P.C.
1625 Broadway, Suite 1600
Denver, Colorado 80202
11.3 EFFECTIVE DATE OF NOTICES. Such notices shall be effective on the
date of delivery set forth on the receipt if the notice is sent by registered
or certified mail or any expedited delivery, or, if sent regular mail, three
days from the day of mailing.
Premier Concepts, Inc. -30-
Underwriting Agreement
<PAGE>
SECTION 12
MISCELLANEOUS
12.1 BENEFIT. This Agreement is made solely for the benefit of the
Representative, other Underwriters , the Company, their respective officers,
directors and controlling persons referred to in Section 15 of the Securities
Act and such other persons as are identified in this Agreement, and their
respective successors and assigns, and no other person shall acquire or have
any right under or by virtue of this Agreement. The term "successor" or the
term "successors and assigns" as used in this Agreement shall not include any
purchasers, as such, of any of the Securities.
12.2 SURVIVAL. The respective indemnities, agreements, representations,
warranties, and covenants of the Company or its officers and the
Representative or the Underwriters as set forth in or made pursuant to this
Agreement and the indemnity and contribution agreements contained in Section
6 hereof of the Company and the Underwriters (as defined in Section 6) shall
survive and remain in full force and effect, regardless of (a) any
investigation made by or on behalf of the Company or the Underwriters or any
such officer or director thereof or any controlling person of the Company or
of the Underwriters, (b) delivery of or payment for the Securities, and (c)
the Closing Date and, if applicable, the Over-allotment Closing Date, and any
successor of the Company or the Underwriters or any controlling person,
officer or director thereof, as the case may be, shall be entitled to the
benefits hereof.
12.3 GOVERNING LAW. The validity, interpretation and construction of
this Agreement and of each part hereof will be governed by the laws of the
State of Colorado.
12.4 ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding between the parties hereto, and supersedes all agreements and
understandings including, but not limited to, the Letter of Intent dated
April 29, 1996.
12.5 REPRESENTATIVE'S INFORMATION. The statements with respect to the
public offering of the Securities on the inside and outside of both the front
and back cover pages of the Prospectus and under the caption "Underwriting"
in the Final Prospectus constitute the written information furnished by or on
behalf of the Representative referred to in Section 2.2 hereof, in Section
6.1 hereof and Section 6.2 hereof.
12.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together will constitute one and the same instrument.
12.7 DEFINITION OF "BUSINESS DAY" AND "SUBSIDIARY". For purposes of
this Agreement, (a) "Business Day" means any day on which the New York Stock
Exchange, Inc. is open for trading and (b) "Subsidiary" has the meaning set
forth in Rule 405 of the Rules and Regulations.
Premier Concepts, Inc. -31-
Underwriting Agreement
<PAGE>
Please confirm that the foregoing correctly sets forth the Agreement
between you and the Company.
Very truly yours,
ATTEST:
PREMIER CONCEPTS, INC.
By By
-------------------------------- ---------------------------------
Secretary Sissel B. Greenberg, President
WE HEREBY CONFIRM AS OF THE DATE HEREOF THAT THE ABOVE SETS FORTH THE
AGREEMENT BETWEEN THE COMPANY AND US.
COHIG & ASSOCIATES, INC.
(for itself and as Representative of
the several Underwriters named in
Schedule I hereto)
By
---------------------------------
Premier Concepts, Inc. -32-
Underwriting Agreement
<PAGE>
PREMIER CONCEPTS, INC.
(A Colorado Corporation)
SCHEDULE I
This Schedule sets forth the name of each Underwriter referred to in the
Underwriting Agreement and the number of Shares and Warrants to be purchased
by each Underwriter.
Number
Name of Shares and Warrants
---- ----------------------
Cohig & Associates, Inc. 800,000
Kashner Davidson Securities
Corporation 150,000
Paulson Investment Company, Inc. 150,000
---------
Total 1,100,000
---------
---------
Premier Concepts, Inc. -33-
Underwriting Agreement
<PAGE>
EXHIBIT 4.8
THE SECURITIES IN THE FORM OF THE CONVERTIBLE PROMISSORY NOTE AND SHARES OF
COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE OF PREMIER CONCEPTS, INC.
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES CANNOT BE SOLD,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED, EXCEPT IN ACCORDANCE WITH THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS.
CONVERTIBLE PROMISSORY NOTE
$_____________ Denver, Colorado
_________________, 199___
FOR VALUE RECEIVED, PREMIER CONCEPTS, INC., a Colorado corporation, and
its successors and assign, (the "Maker") promises to pay to the order of
______________________________ (the "Holder") at ________________ or at such
other place as Holder may from time to time designate in writing, the
principal sum of ______________________ Dollars ($________________ ) in
lawful money of the United States of America, together with interest on so
much thereof as is from time to time outstanding at the rate hereinafter
provided, and payable as hereinafter provided. This secured obligation of
Maker is referred to as the "Note" and is one of a series of Convertible
Promissory Notes, not exceeding in the aggregate the principal face amount of
$1,120,000 which are being issued by the Company under the Convertible Note
Purchase Agreement described in paragraph 4 below.
1. INTEREST RATE. The unpaid principal balance of this Note shall
bear interest commencing on the date of this Note as the rate twelve percent
(12%) per annum, simple interest.
2. PAYMENT/MATURITY DATE. Subject to paragraph 4 below, the total
outstanding principal balance hereof, together with accrued and unpaid
interest, shall be due and payable in full three years from the date hereof;
provided, however, that if permitted to do so by the Securities and Exchange
Commission and the Nasdaq Stock Market, Maker shall pay the unpaid principal
balance of this Note together with all accrued and unpaid interest out of the
proceeds of the next primary public offering by the Company of its securities
(the "Public Offering").
3. DEFAULT INTEREST AND ATTORNEY FEES. Upon declaration of a default
hereunder, the balance of the principal remaining unpaid, interest accrued
thereon, and all other costs, and fees shall bear interest at the rate of
fifteen percent (15%) per annum from the date or default, or the date of
advance, as applicable. In the event of default, the Maker and all other
parties liable hereon agree to pay all costs of collection, including
reasonable attorneys' fees.
4. CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT. This Note is
issued pursuant to and is entitled to the benefits of a certain Convertible
Note and Warrant Purchase Agreement, of even date, between the Maker and
Holder (as the same may be amended from time to time, hereinafter referred to
as the "Agreement"), and each holder of this Note, by its acceptance hereof,
agrees to be bound by the provisions of the Agreement, a copy of which may be
inspected by the
<PAGE>
legal holder hereof at the principal office of the Company. As provided in
the Agreement, in case of an Event of Default, as defined in the Agreement,
(i) the principal of this Note may become or may be declared due and payable
in the manner and with the effect provided in the Agreement, and (ii) this
Note is convertible at the option of the holder into shares of common stock
of the Company in the manner set forth in the Agreement.
5. SECURITY AGREEMENT. The obligation of Maker under this Note shall
be secured by a grant to Holder of a security interest in the tangible and
intangible assets of Maker pursuant to a Security Agreement and Financing
Statement of even date herewith. The security interest of Holder shall be
undivided and held as tenancy in common with other holders of Notes of the
Company given as part of the same series.
6. INTEREST CALCULATION. Daily interest shall be calculated on a
365-day year and the actual number of days in each month.
7. PREPAYMENT. This Note may be prepaid, in whole or in part, at any
time without premium or penalty. The Company may exercise its right to
prepay all or a portion of the outstanding principal balance by sending to
Holder thirty (30) days' prior written notice of such prepayment; whereupon a
Holder may elect, pursuant to the Agreement, to convert all or a portion of
the principal balance called for prepayment at any time prior to the date
next preceding the prepayment date, at the conversion value then in effect.
8. COSTS OF COLLECTION. Maker agrees that if, and as often as, this
Note is placed in the hands of an attorney for collection or to defend or
enforce any of Holder's rights hereunder or under any instrument securing
payment of this Note, Maker shall pay to Holder its reasonable attorneys'
fees and all court costs and other expenses incurred in connection therewith,
regardless of whether a lawsuit is ever commenced or whether, if commenced,
the same proceeds to judgment or not. Such costs and expenses shall include,
without limitation, all costs, reasonable attorneys' fees, and expenses
incurred by Holder in connection with any insolvency, bankruptcy,
reorganization, foreclosure, deed in lieu of foreclosure or similar
proceedings involving Maker or any endorser, surety, guarantor, or other
person liable for this Note which in any way affect the exercise by Holder of
its rights and remedies under this Note, or any other document or instrument
securing, evidencing, or relating to the indebtedness evidenced by this Note.
9. DEFAULT. At the option of Holder, the unpaid principal balance of
this Note and all accrued interest thereon shall become immediately due,
payable, and collectible, without notice or demand, upon the occurrence at
any time of any of the following events, each of which shall be deemed to be
an event of default hereunder:
a. Maker's failure to make any payment of principal, interest, or
other charges on or before the date on which such payment becomes due and
payable under this Note.
b. Maker's breach or violation of any agreement or covenant
contained in this Note, the Convertible Note and Warrant Purchase Agreement
or in any other document or instrument securing, evidencing, or relating to
the indebtedness evidenced by this Note.
c. Dissolution, liquidation or termination of Maker.
<PAGE>
10. APPLICATION OF PAYMENTS. Any payment made against the indebtedness
evidenced by this Note shall be applied against the following items in the
following order: (1) costs of collection, including reasonable attorney's
fees incurred or paid and all costs, expenses, default interest, late charges
and other expenses incurred by Holder and reimbursable to Holder pursuant to
this Note (as described herein); (2) default interest accrued to the date of
said payment; (3) ordinary interest accrued to the date of said payment; and
(4) finally, outstanding principal.
11. ASSIGNMENT OF NOTE. This Note may not be assigned by Holder or
Maker without the express written consent of the other party.
12. NON-WAIVER. No delay or omission on the part of Holder in
exercising any rights or remedy hereunder shall operate as a waiver of such
right or remedy or of any other right or remedy under this Note. A waiver on
any one or more occasion shall not be construed as a bar to or waiver of any
such right and/or remedy on any future occasion.
13. MAXIMUM INTEREST. In no event whatsoever shall the amount paid, or
agreed to be paid, to Holder for the use, forbearance, or retention of the
money to be loaned hereunder ("Interest") exceed the maximum amount
permissible under applicable law. If the performance or fulfillment of any
provision hereof, or any agreement between Maker and Holder shall result in
Interest exceeding the limit for Interest prescribed by law, then the amount
of such Interest shall be reduced to such limit. If, from any circumstance
whatsoever, Holder should receive as Interest an amount which would exceed
the highest lawful rate, the amount which would be excessive Interest shall
be applied to the reduction of the principal balance owing hereunder (or, at
the option of Holder, be paid over to Maker) and not to the payment of
Interest.
14. PURPOSE OF LOAN. Maker certifies that the loan evidenced by this
Note is obtained for business or commercial purposes and that the proceeds
thereof will not be used primarily for personal, family, household, or
agricultural purposes.
15. WAIVER OF PRESENTMENT. Maker and the endorsers, sureties,
guarantors and all persons who may become liable for all or any part of this
obligation shall be jointly and severally liable for such obligation and
hereby jointly and severally waive presentment and demand for payment, notice
of dishonor, protest and notice of protest, and any and all lack of diligence
or delays in collection or enforcement hereof. Said parties consent to any
modification or extension of time (whether one or more) of payment hereof,
the release of all or any part of the security for the payment hereof, and
the release of any party liable for payment of this obligation. Any
modification, extension, or release may be without notice to any such party
and shall not discharge said party's liability hereunder.
16. GOVERNING LAW. As an additional consideration for the extension of
credit, Maker and each endorser, surety, guarantor, and any other person who
may become liable for all or any part of this obligation understand and agree
that the loan evidenced by this Note is made in the State of Colorado and the
provisions hereof will be construed in accordance with the laws of the State
of Colorado, and such parties further agree that in the event of default this
Note may be enforced in any court of competent jurisdiction in the State of
Colorado, and they do hereby submit to the
-3-
<PAGE>
jurisdiction of such court regardless of their residence or where this Note
or any endorsement hereof may be executed.
17. BINDING EFFECT. The term "Maker" as used herein shall include the
original Maker of this Note and any party who may subsequently become liable
for the payment hereof as an assumer with the consent of the Holder, provided
that Holder may, at its option, consider the original Maker of this Note
alone as Maker unless Holder has consented in writing to the substitution of
another party as Maker. The term "Holder" as used herein shall mean Holder
or, if this Note is transferred, the then Holder of this Note.
18. RELATIONSHIP OF PARTIES. Nothing herein contained shall create or
be deemed or construed to create a joint venture or partnership between Maker
and Holder, Holder is acting hereunder as a lender only.
19. SEVERABILITY. Invalidation of any of the provisions of this Note
or of any paragraph, sentence, clause, phrase, or word herein, or the
application thereof in any given circumstance, shall not affect the validity
of the remainder of this Note.
20. AMENDMENT. This Note may not be amended, modified, or changed,
except only by an instrument in writing signed by both of the parties.
21. TIME OF THE ESSENCE. Time is of the essence for the performance of
each and every obligation of Maker hereunder.
IN WITNESS WHEREOF, the undersigned has executed this Note this _______
day of December, 1996.
PREMIER CONCEPTS, INC., a Colorado
corporation
By:
------------------------------------
Sissel Greenberg, President
- ----------------------------------
-4-
<PAGE>
EXHIBIT 4.9
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
THIS CONVERTIBLE NOTE PURCHASE AGREEMENT is made and entered into this
_____ day of _______________, 199__, by and between PREMIER CONCEPTS, INC., a
Colorado corporation (the "Company"), and ____________________ ("Purchaser").
ARTICLE I
PURCHASE, SALE AND TERMS OF NOTE
1.1 THE NOTE. The Company has authorized the issuance and sale of its
Convertible Note, due _______________, 19____ (the "Note", which term shall
also include any notes delivered in exchange or replacement therefor).
1.2 THE WARRANT. The Company has authorized the issuance and sale of
Class B Warrants (the "Warrant") exercisable to purchase shares of the
Company's Common Stock at an exercise price of $5.00 per share. Each Warrant
is automatically exchangeable for two public warrants (the "Public
Warrants"), if and when offered and sold by the Company in connection with a
registered underwritten public offering of its securities (the "Public
Offering").
1.3 THE CONVERTED SHARES. The Company has authorized and has reserved
and covenants to continue to reserve, free of preemptive rights and other
preferential rights, a sufficient number of its previously authorized but
unissued shares of its common stock to satisfy the rights of conversion of
the holder of the Note and the exercise of the Warrants. Any shares of
common stock issuable upon conversion of the Note or exercise of the Warrant,
and such shares when issued, are herein referred to as the "Converted Shares"
and "Warrant Shares," respectively.
1.4 PURCHASE AND SALE OF NOTE; CLOSING. The Company agrees to issue
and sell to the Purchaser, and, subject to and in reliance upon the
representations, warranties, covenants, terms and conditions of this
Agreement, the Purchaser agrees to purchase from the Company, the Note in
principal denomination of ______________________________ ($____________). The
purchase price shall be the principal amount of the Note so purchased. At
the Closing the Company will issue and deliver the Note to be sold at such
Closing to the Purchaser against payment of the purchase price thereof by a
check or checks payable to the order of the Company.
1.5 EXERCISE OF THE WARRANTS. The Company agrees to issue and sell to
the Purchaser one Warrant for every $5.60 in principal Note denomination. At
the closing, the Company will issue and deliver the Warrants to be sold
concurrently with the sale of the Note.
1.6 PAYMENT. Principal and interest shall be payable in lawful money
of the United States of America, in immediately available funds, at the
principal office of the Purchaser or at such other place as the legal holder
may designate from time to time in writing to the Company. Other terms and
conditions of payment are more fully set forth in the Convertible Note to be
delivered to Purchaser at Closing, which terms and conditions are hereby
incorporated herein by reference.
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Purchaser to enter into this Agreement, the
Company hereby represents, warrants to and agrees with the Placement Agent as
follows:
2.1 The Investment Term Sheet dated December 12, 1996 ("ITS") with
respect to the Notes and all exhibits thereto, copies of which have
heretofore been delivered by the Company to the Purchaser, has been carefully
prepared by the Company, all in compliance and conformity with Regulation D
(particularly Rule 506 thereof) promulgated pursuant to the Securities Act of
1933, as amended (the "Act"), and with comparable or similar provisions of
the state securities laws of Colorado, and it does not include any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein not misleading. Any additional written or oral
information provided by authorized persons to prospective purchasers as set
forth in the ITS will not contain any untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
2.2 The financial statements of the Company, together with related
schedules and notes, present fairly its results of operations and financial
position for the periods and as of the dates presented; such financial
statements have been prepared in accordance with generally-accepted
principles of accounting and all material adjustments necessary for a fair
presentation of the Company's results of operations and financial position
have been made as of and for each period presented.
2.3 Subsequent to the date of the ITS and during the term of the
Offering, the Company shall promptly notify the Purchaser and prepare an
amendment or a supplement to the ITS, if appropriate to discloseL (i) any
material adverse change in the condition, financial or otherwise, of the
Company or in its business taken as a whole; (ii) any material transaction
entered into by the Company other than transactions in the ordinary course of
business; and(ii) any material obligations, contingent or otherwise, which
are not otherwise disclosed in the ITS.
2.4 The Company is not in default in the performance of any obligation,
agreement or condition contained in any debenture, note or other evidence of
indebtedness or any indenture or loan agreement of the Company, other than as
set forth in the ITS. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated, and compliance with the
terms of this Agreement will not conflict with or result in a breach of any
of the terms, conditions or provisions of, or constitute a default under, the
articles of incorporation, as amended, or bylaws, any note, indenture,
mortgage, deed of trust, or other agreement or instrument to which the
Company is a party or by which it or any of its property is bound, or any
existing law, order, rule, regulation, writ, injunction, or decree of any
government, governmental instrumentality, agency or body, arbitration
tribunal or court, domestic or foreign, having jurisdiction over the Company,
or its property. The consent, approval, authorization, or order of any court
or governmental instrumentality, agency or body is not required for the
consummation of the transactions herein contemplated except such as may be
required under the blue sky or securities laws of any state or jurisdiction.
2.5 The Company is duly incorporated and validly existing in good
standing as a corporation under the laws of the State of Colorado, with full
power and authority (corporate and other) to own property and conduct
business, present and proposed, as described in the ITS; the Company has full
power and authority to enter into this Agreement.
-2-
<PAGE>
2.6 The Notes have been duly and validly authorized and, when issued
and delivered against payment therefor as provided in this Agreement, will be
validly issued, fully paid and binding obligations of the Company in
accordance with the terms under which they are issued. The common stock into
which the Notes are convertible conforms to its description in the ITS.
2.7 There is no action, suit or proceeding before any court or
governmental agency, authority or body pending or to the knowledge of the
Company threatened that might result in judgments against the Company not
adequately covered by insurance that would materially adversely affect the
Company except those set forth in the ITS.
2.8 Except as otherwise set forth in or contemplated by the ITS, the
Company has good title, free and clear of all liens, encumbrances and
defects, except liens for current taxes not due and payable, to all property
and assets that are described in the ITS as being owned by the Company,
subject only to such exceptions as are not material and do not adversely
affect the present or prospective business of the Company; except for bank
debt referred to in the ITS.
2.9 Gross sales of the Company for its third fiscal quarter ended
October 27, 1996 were in excess of $2,300,000 and that no material
adjustments, extraordinary expenses or liabilities outside the ordinary
course of business have been made or incurred or are required to be made or
recognized.
2.10 The execution and delivery by the Company of this Agreement has
been duly authorized by all necessary corporate action and this Agreement is
the valid, binding and legally enforceable obligation of the Company.
2.11 The ITS contains any and all information that is specified in Rule
502(b) of Regulation D.
2.12 Neither the Company, nor any affiliate has, either directly or
through any agent, sold, offered for sale, solicited offers to buy, or
otherwise negotiated in respect of will, either directly or through an agent,
sell, offer for sale, solicit offers to buy, or otherwise approach or
negotiate in respect to securities which, together with the Notes, are or
will be an integrated offering that would require the registration of the
Offering contemplated by this Agreement pursuant to the Act.
2.13 The Company shall exercise reasonable care in accordance with
502(d) of Regulation D to assure that the purchaser of the Notes are not
underwriters within the meaning of Section 2(11) of the Act, and shall place
a legend on each certificate for the Notes stating that the Notes have not
been registered under the Act and setting forth or referring to the
restrictions on transferability and sale of the Notes.
ARTICLE III
COVENANTS OF THE COMPANY
3.1 AFFIRMATIVE COVENANTS OF THE COMPANY.
Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that, so long as the Note is outstanding, it
will perform and observe the following covenants and provisions:
(a) PUNCTUAL PAYMENT. Pay the principal and interest on the Note
at the times and places and in the manner provided in the Note.
-3-
<PAGE>
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain
its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, PROVIDED, HOWEVER, that nothing
herein contained shall prevent any merger, consolidation or transfer of
assets. Preserve and maintain all licenses and other rights to use
patents, processes, licenses, trademarks, trade names or copyrights
owned or possessed by it and deemed by them to be necessary to the
conduct of business.
(c) COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental
authority, non-compliance with which could materially adversely affect
its business or condition, financial or other.
(d) INSPECTION. Permit, upon reasonable request, the Purchaser or
any agents or representatives thereof, to examine and make copies of and
extracts from the records and books of account of, and visit and inspect
the properties of the Company, and to discuss the affairs, finances and
accounts of the Company with any of its officers or directors and
independent accountants.
(e) RESERVATION OF COMMON STOCK. Reserve and keep available out
of the Company's authorized but unissued shares of common stock, solely
for the purpose of effecting the conversion of the Note and exercise of
the Warrant, such number of its shares of common stock as shall from
time to time be sufficient to effect the conversion of the Note and
exercise of the Warrant, and if at any time the number of authorized but
unissued shares of common stock shall not be sufficient to effect the
conversion of the Note and exercise of the Warrant, the Company shall
take such corporate action as may be necessary to increase its
authorized but unissued shares of common stock to such number of shares
as shall be sufficient for such purpose.
ARTICLE IV
CONVERSION OF NOTE
4.1 OPTIONAL CONVERSION RIGHT.
Subject to and in compliance with the provisions of this Article
IV, the principal amount outstanding on the Note may, at the option of
the holder thereof, be converted into fully-paid and non-assessable
shares of common stock of the Company ("Common Stock").
4.2 TIME OF OPTIONAL CONVERSION.
The date upon which the holder may convert the Note to common stock
shall be any time after the earlier of (i) one year from the date of the
Note or (ii) the effective date of a Registration Statement (the
"Registration Statement"), registering for sale under the Securities Act
of 1933, as amended (the "Securities Act"), the Conversion Shares;
provided, however, that in no event shall all or any portion of the Note
be convertible prior to April 1, 1997.
4.3 PREPAYMENT OF NOTE.
Notwithstanding the provisions of Sections 4.1 and 4.2 above, in
the event the Company elects to prepay all or any portion of the Note
prior to the Maturity Date, the Company shall send to Purchaser thirty
(30) days' prior written notice of such prepayment; whereupon Purchaser
may elect to
-4-
<PAGE>
convert all or a portion of the principal balance called for prepayment
at any time prior to the date next preceding the prepayment date, at the
Applicable Conversion Value then in effect.
4.4 AUTOMATIC CONVERSION.
In the event the one-time demand registration right granted to
Purchaser as part of the group of holders representing more than 50% of the
Notes in the Registration Rights Agreement more fully described in Article VI
hereof, then the exercise of such demand registration rights shall constitute
the irrevocable and unconditional agreement of the Purchaser to convert the
entire outstanding principal amount of the Note into shares of Common Stock
at the then applicable conversion value immediately following the effective
date of the Registration Statement filed pursuant to the exercise of such
demand registration rights; and such Note shall be deemed automatically
converted into shares of the Company's Common Stock at the then applicable
conversion value immediately following the effective date of such
Registration Statement.
4.5 APPLICABLE CONVERSION VALUE.
Subject to the adjustments provided for herein, the price per share
at which the Note may be converted into common stock (the "Applicable
Conversion Value") shall be $2.80 per share of Common Stock if converted
prior to the Maturity Date of the Note, and the Applicable Conversion Value
shall be reduced to $1.00 per share of Common Stock as to any unpaid portion
of the principal amount of the Note if either (i) the Company fails to
consummate a Public Offering of its securities on or before June 30, 1997, or
(ii) all or any portion of the outstanding balance of the Note is not paid on
or before the Maturity Date of the Note.
4.6 ADJUSTMENT FOR CAPITAL REORGANIZATION, RECLASSIFICATION OR TRANSFER
OF ASSETS.
In the event the Common Stock issuable upon conversion of the Note
shall be changed into the same or different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification or
otherwise, or in the event the Company shall at any time issue Common Stock
by way of dividend or other distribution on any stock of the Company, or
subdivide or combine the outstanding shares of Common Stock, then in each
such event the noteholder shall have the right thereafter to exercise such
Note and receive the kind and amount of shares of stock and other securities
and property receivable upon such reorganization, reclassification or other
change by holders of the number of shares of Common Stock into which such
Note might have been exercised immediately prior to such reorganization,
reclassification or change. In the case of any such reorganization,
reclassification or change, the Conversion Value shall also be appropriately
adjusted so as to maintain the aggregate Conversion Value. Further, in case
of any consolidation or merger of the Company with or into another
corporation in which consolidation or merger the Company is not the
continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety, or substantially
as an entirety, the Company shall cause effective provision to be made so
that the noteholder shall have the right thereafter, by converting the Note,
to purchase the kind and amount of shares of stock and other securities and
property receivable upon such consolidation, merger, sale or conveyance by
holders of the number of shares of Common Stock into which such Note might
have been exercised immediately prior to such consolidation, merger, sale or
conveyance, which provision shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for
Agreement. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common
Stock and to successive consolidations, mergers, sales or conveyances.
Notwithstanding the foregoing, no adjustment of the Conversion Value shall be
made
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as a result of or in connection with (1) the issuance of Common Stock of the
Company pursuant to options, warrants and share purchase agreements now in
effect or hereafter outstanding or created, (2) the establishment of option
plans of the Company, the modification, renewal or extension of any plan now
in effect or hereafter created, or the issuance of Common Stock upon exercise
of any options pursuant to such plans, (3) the issuance of Common Stock in
connection with an acquisition, consolidation or merger of any type in which
the Company is the continuing corporation, or (4) the issuance of Common
Stock in consideration of such cash, property or service as may be approved
by the Board of Directors of the Company and permitted by applicable law.
4.7 CONTINUATION OF TERMS.
Upon any reorganization, consolidation or merger referred to in
this Article IV, the Note shall continue in full force and effect until
conversion by the holder thereof and the terms hereof shall be applicable to
the shares of stock and other securities and property receivable on the
conversion of any Note after the consummation of such reorganization,
consolidation, merger or any similar event and shall be binding upon the
issuer of any such stock or other securities, including, in the case of any
such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of the Note.
4.8 EXERCISE OF CONVERSION PRIVILEGE.
To exercise its conversion privilege or in the event of the
automatic conversion of the Note, the holder of the Note shall surrender such
Note being converted to the Company at its principal office, and shall give
written notice to the Company at that office that such holder is delivering
the Note for conversion. Such notice shall also state the name or names
(with address or addresses) in which the certificate or certificates for
shares of common stock issuable upon such conversion shall be issued. The
Note surrendered for conversion shall be accompanied by proper assignment
thereof to the Company or in blank.
4.9 NOTICE OF RECORD DATE.
In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive
any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company, any merger or consolidating of the Company, or a transfer of
all or substantially all of the assets of the Company to any other
corporation, or any other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding up of the Company,
then and in each such event the Company shall mail or cause to be mailed to
the holder a notice specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right and a
description of such dividend, distribution or right, (ii) the date on which
any
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such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective and (iii) the time, if any, that is to be fixed, as to when
the holders of record of common stock (or other securities) shall be entitled
to exchange their shares of common stock (or other securities) for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding up. Such notice shall be mailed at least thirty (30) days prior
to the date specified in such notice on which such action is to be taken.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to the Company to issue its Note to Purchaser
and to issue its Common Stock to Purchaser pursuant to the conversion rights
set forth in Article IV hereof, Purchaser represents and warrants to the
Company in connection with the investment in the Note and upon the exercise
of the conversion rights set forth in Article IV hereof (said Note and common
stock hereinafter collectively referred to as the "Securities") as follows:
5.1 Purchaser, by reason of his knowledge and experience in financial
and business matters, and/or such knowledge and experience of his purchaser
representative, if retained, believes himself capable of evaluating the
merits and risks of this investment.
5.2 In connection therewith, Purchaser represents and warrants his
understanding that his investment is extremely speculative and subject to a
high degree of risk. Purchaser further understands that because of the
speculative nature of his investment, he may lose his entire investment and
Purchaser represents that he has the economic wherewithal to absorb a total
loss of his investment.
5.3 Purchaser acknowledges receipt of such information as he and his
purchaser representative, if retained, deem necessary or appropriate as a
prudent and knowledgeable investor in evaluating the investment. Purchaser
acknowledges that the Company has made available to him or his purchaser
representative the opportunity to obtain additional information to evaluate
the merits and risks of this investment. Purchaser acknowledges that he and
his purchaser representative, if retained, had the opportunity to ask
questions of the Company, and, to the extent he or his offeree
representative, as the case may be, availed himself of such opportunity, he
received satisfactory answers from the Company, or its affiliates,
associates, or employees concerning the terms and conditions of the offering.
5.4 Based upon the foregoing, Purchaser acknowledges the risk and
highly speculative aspect of the securities he is acquiring in the Company,
and understands the proposed use of the funds by the Company, he is familiar
with the management, contemplated operations, financial conditions and all
other factors regarding the Company, and has fully satisfied himself with
respect to the nature of the investment, and has received no assurances of
any kind whatsoever relative thereto, nor have there been any other
representations made by the Company or any of its principals or affiliates
regarding any potential increment in value of the Company's stock which may
be acquired by Purchaser pursuant to the exercise of the conversion rights
contained herein.
5.5 Purchaser hereby represents, warrants and agrees that he is
acquiring the securities solely for his own account, for investment, and not
with a view to the distribution or resale thereof. The undersigned further
represents that his financial condition is such that he is not under any
present necessity or constraint to dispose of such shares to satisfy any
existing or contemplated debt or undertaking.
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5.6 PURCHASER IS AWARE OF THE FACT THAT THE SECURITIES (INCLUDING THE
NOTE, WARRANTS AND COMMON STOCK WHICH MAY BE ACQUIRED) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND ACCORDINGLY, THAT SUCH
SECURITIES MUST BE HELD INDEFINITELY UNLESS THEY ARE SUBSEQUENTLY REGISTERED
UNDER SAID ACT OR UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY, A SALE
OR TRANSFER MAY BE MADE WITHOUT REGISTRATION THEREUNDER. Purchaser is
further aware that he is not and may not ever be entitled to make any sales
or transfers of the securities pursuant to the exemption afforded by Rule 144
promulgated under said Act. Purchaser agrees that any certificate evidencing
the securities may bear a legend restricting the transfer thereof subject to
the approval of the Company that the transfer is lawful.
5.7 Purchaser agrees that the securities being acquired will not be
sold, transferred or assigned without a valid registration statement being in
effect or, in the opinion of counsel for the Company, pursuant to an
exemption from registration.
5.8 Purchaser understands that no federal or state agency has
recommended or endorsed the purchase of the shares or passed on the adequacy
of the information provided by the Company.
ARTICLE VI
REGISTRATION RIGHTS
At Closing, Purchaser shall execute a Registration Rights Agreement
granting to Purchaser, under certain circumstances and subject to certain
restrictions, a one-time demand and certain participatory or piggyback
registration right. Except as provided for therein, the Company shall have
no obligation to register the Conversion Stock under the Securities Act.
ARTICLE VII
EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT.
If any of the following events ("Events of Default") shall occur
and be continuing:
(a) The Company shall fail to pay any principal or interest on the
Note when due; or
(b) Any representation or warranty made by the Company in
connection with this Agreement, shall prove to have been incorrect when
made in any material respect; or
(c) The Company shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement or the Note on its
part to be performed or observed after written notice thereof shall have
been given to the Company by any registered holder of the Note;
(d) Any event which would constitute a default under the Security
Agreement or Financing Statement given by the Company to secure its
obligations under the Note; or
(e) The Company shall be involved in financial difficulties as
evidenced (i) by it admitting in writing its inability to pay its debts
generally as they become due; (ii) by its commencement of a voluntary
case under Title 11 of the United States Code as from time to time
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in effect, or by its authorizing, by appropriate proceedings of its
Board of Directors or other governing body, the commencement of such a
voluntary case; (iii) by the entry of an order by a court of competent
jurisdiction (a) finding it to be bankrupt or insolvent, or (b) ordering
or approving its liquidation, reorganization or any modification or
alteration of the rights of its creditors, or (iv) by its making an
assignment for the benefit of, or entering into a composition with, its
creditors, or appointing or consenting to the appointment of a receiver
or other custodian for all or a substantial part of its property.
7.2 RIGHTS UPON DEFAULT.
If an Event of Default shall occur and remain uncured after thirty
(30) days, then the holder may declare the entire Note, principal and
interest, to be due and payable at once.
ARTICLE VIII
MISCELLANEOUS
8.1 PAYMENT OF EXPENSES OF PREVAILING PARTY IN DISPUTE.
Unless otherwise specifically provided for herein, in the event
that there is a dispute concerning this Agreement, including, without
limitation, the issue of compliance with any term of this Agreement, the
court may in its discretion, direct that the prevailing party shall be
entitled to reimbursement from the other party of reasonable attorneys' fees
and other expenses incurred in resolving the said dispute.
8.2 SURVIVAL AND INCORPORATION OF REPRESENTATIONS.
The representations, warranties, covenants and agreements made
herein or in any certificates or documents executed in connection herewith
shall survive the execution and delivery thereof, and all statements
contained in any certificate or other document delivered by the company
hereunder or in connection herewith shall be deemed to constitute
representations and warranties made by the company in this Agreement.
8.3 INCORPORATION BY REFERENCE.
All appendices to this Agreement and all documents delivered
pursuant to or referred to in this Agreement are herein incorporated by
reference and made a part hereof.
8.4 PARTIES IN INTEREST.
All covenants, agreements, representations, warranties and
undertakings in this Agreement contained by and on behalf of any of the
parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether or not so expressed.
8.5 AMENDMENTS AND WAIVERS.
This Agreement may not be amended, nor may compliance with any
term, covenant, agreement, condition or provision set forth herein be waived
(either generally or in a particular instance and either retroactively or
prospectively) unless such amendment or waiver is agreed to in writing by all
parties hereto.
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8.6 WAIVER.
No waiver of any breach of any one of the agreements, terms,
conditions, or covenants of this Agreement by the parties shall be deemed to
imply or constitute a waiver of any other agreement, term, condition, or
covenant of this Agreement. The failure of either party to insist on strict
performance of any agreement, term, condition, or covenant, herein set forth,
shall not constitute or be construed as a waiver of the rights of either or
the other thereafter to enforce any other default of such agreement, term,
condition, or covenant; neither shall such failure to insist upon strict
performance be deemed sufficient grounds to enable either party hereto to
forego or subvert or otherwise disregard any other agreement, term,
condition, or covenants of this Agreement.
8.7 GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of Colorado.
8.8 NOTICES.
All notices required or permitted hereunder shall be sufficient if
delivered personally or mailed to the parties at the address set forth above
or at such other address as either party may designate in writing from time
to time. Any notice by mailing shall be effective 96 hours after it has been
deposited in the United States certified mail, return receipt requested, duly
addressed and with postage prepaid.
8.9 FAX/COUNTERPARTS.
This Agreement may be executed by telex, telecopy or other
facsimile transmission, and may be executed in counterparts, each of which
shall be deemed an original, but all of which shall together constitute one
agreement.
8.10 CAPTIONS.
The caption and heading of various sections and paragraphs of this
Agreement are for convenience only and are not to be construed as defining or
limiting, in any way, the scope or intent of the provisions hereof.
8.11 SEVERABILITY.
Wherever there is any conflict between any provision of this
Agreement and any statute, law, regulation or judicial precedent, the latter
shall prevail, but in such event the provisions of this Agreement thus
affected shall be curtailed and limited only to the extent necessary to bring
it within the requirement of the law. In the event that any part, section,
paragraph or clause of this Agreement shall be held by a court of proper
jurisdiction to be invalid or unenforceable, the entire Agreement shall not
fail on account thereof, but the balance of the Agreement shall continue in
full force and effect unless such construction would clearly be contrary to
the intention of the parties or would result in unconscionable injustice.
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8.12 EXECUTION OF DOCUMENTS.
The parties hereto agree to execute and deliver any and all other
documents necessary and convenient to effectuate the sale and purchase herein
provided for, and both parties, as an inducing condition, represent that they
have the authority to enter into this Agreement and to make the foregoing
commitments for themselves.
8.13 TIME.
Time is of the essence of this Agreement and each of its provisions.
8.14 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof. There are no
representations, warranties, conditions, or obligations except as herein
specifically provided. Any amendment or modification hereof must be in
writing.
IN WITNESS WHEREOF, the parties have signed the Agreement the date and
year first above written.
PURCHASER
By:
-------------------------------
PREMIER CONCEPTS, INC.
Attest:
By:
- -------------------------------- -------------------------------
Secretary Sissel Greenberg, President
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INDEPENDENT AUDITOR'S CONSENT
We consent to the use in the Post-Effective Amendment No. 2 to Registration
Statement on Form SB-2 and related Prospectus of Premier Concepts, Inc. of our
report dated April 2, 1997, accompanying the financial statements of Premier
Concepts, Inc. contained in such Registration Statement, and to the use of our
name and the statements with respects to us, as appearing under the heading
"Experts" in the Prospectus.
HEIN + ASSOCIATES LLP
Denver, Colorado
April 11, 1997
