<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 26, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file number 0-21119
PREMIER CONCEPTS, INC.
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(Exact Name of Small Business Issuer as Specified in its Charter)
Colorado 84-1186026
- ---------------------------- ----------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
3033 South Parker Road, Suite 120, Aurora, Colorado, 80014
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(Address of principal executive offices) (Zip Code)
(303) 338-1800
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(Issuer's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the last 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
As of December 5, 1997, the Registrant had 1,790,208 shares of its $.002
par value Common Stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
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INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Balance Sheet as of October 26, 1997 and
January 26, 1997 4
Statement of Operations for the Three
Months Ended October 26,, 1997 and Three
Months Ended October 27, 1996 5
Statement of Operations for the Nine
Months Ended October 26, 1997 and Nine
Months Ended October 27, 1996. 6
Statement of Cash Flows for the Nine
Months Ended October 26, 1997 and Nine
Months Ended October 27, 1996 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations 9
Liquidity and Capital Resources 9
Results of Operations 12
PART II. OTHER INFORMATION 19
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote
of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
The method of financial reporting is a fifty-two - fifty-three (52-
53) week fiscal year ending on the last Sunday in January of each year.
The accompanying Balance Sheet at October 26, 1997, Statement of
Operations for the Three and Nine Months Ended October 26, 1997 and October
27, 1996, and Statement of Cash Flows for the Nine Months Ended October 26,
1997 and October 27, 1996 are unaudited but reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the
financial position and results of operations for the interim period
presented. The Balance Sheet as of January 26, 1997 is derived from the
audited financial statements, but does not include all disclosures required
by generally accepted accounting principles. As a result, these financial
statements should be read in conjunction with the Company's Form 10-KSB for
the year ended January 27, 1997.
FORWARD-LOOKING STATEMENTS
- --------------------------
In addition to historical information, this Quarterly Report
contains "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, and are thus prospective. The
forward-looking statements contained herein are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those reflected in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, competitive
pressures, changing economic conditions, those discussed in the Section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and other factors, some of which will be outside
the control of the Company. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. The Company undertakes no obligation
to publicly revise these forward-looking statements to reflect events or
circumstances that arise after the date hereof. Readers should refer to
and carefully review the information in future documents the Company files
with the Securities and Exchange Commission.
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<TABLE>
PREMIER CONCEPTS, INC.
BALANCE SHEET
AS OF OCTOBER 26, 1997 AND JANUARY 26, 1997
<CAPTION>
October 26, January 26,
1997 1997
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<S> <C> <C>
ASSETS
Current Assets:
Cash & Cash Equivalents $ 505,772 $ 218,388
Inventories 2,389,840 1,749,643
Prepaid Expenses & Other Current Assets 470,701 118,536
-------------- --------------
Total Current Assets 3,366,313 2,086,567
Property and Equipment, net 2,523,081 2,033,939
Trademarks, net 78,533 87,833
Deferral Offering Costs -- 425,423
Deferred Tax Asset 39,000 39,000
Other Assets 100,160 139,012
-------------- --------------
Total Assets $ 6,107,087 $ 4,811,774
============== ==============
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
Current Liabilities:
Notes Payable and Current Portion of
Long Term Debt:
Related Parties $ -- $ 74,420
Other 697,438 263,312
Accounts Payable 862,343 1,153,495
Other Accrued Liabilities 368,568 427,281
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Total Current Liabilities $ 1,928,349 $ 1,918,508
Long-Term Debt, Less Current Portion 22,049 1,792,624
Other Liabilities 153,719 103,239
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Total Liabilities 2,104,117 3,814,371
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Stockholders' Equity:
Preferred Stock, $.10 par value,
20,000,000 shares authorized; none
issued and outstanding at October 26,
1997; 416,670 issued and outstanding
at January 26, 1997 -- 41,667
Common Stock, $.002 par value; 850,000,000
shares authorized; 1,790,208 shares
issued and outstanding at October 26,
1997; 560,167 shares issued and
outstanding at January 26, 1997 3,540 1,120
Additional Paid-in Capital 5,656,789 2,316,123
Accumulated Deficit (1,657,359) (1,361,507)
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Total Stockholders' Equity 4,002,970 997,403
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Total Liabilities & Equity $ 6,107,087 $ 4,811,774
============== ==============
</TABLE>
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<TABLE>
PREMIER CONCEPTS, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED OCTOBER 26, 1997 AND OCTOBER 27, 1996
(UNAUDITED)
<CAPTION>
Three Months Three Months
Ended Ended
October 26, October 27,
1997 1996
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<S> <C> <C>
Revenues:
Retail Sales $ 2,997,157 $ 2,314,523
Wholesale Sales 31,975 15,935
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Total Revenues 3,029,132 2,330,458
Cost of Goods Sold 926,831 668,321
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Gross Margin 2,102,301 1,662,137
Operating Expenses:
Selling, General & Administrative 2,243,727 1,515,085
Depreciation & Amortization 112,587 72,016
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Total Operating Expenses 2,356,314 1,587,101
Operating Profit (Loss) (254,013) 75,036
Other Income (Expenses):
Interest, net (9,222) (24,928)
Increase (Decrease) in Fair Value
of Tradable Securities -- (3,806)
Other 52,076 41,268
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Other, net 42,854 12,534
Loss Before Income Tax Benefit (211,159) 87,570
Income Tax Benefit 150,000 --
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Net Income (Loss) $ (61,159) $ 87,570
============== ==============
Net Income (Loss) Available to Common
Shareholders $ (61,159) $ 82,570
============== ==============
Net Income (Loss) Per Share
Net Income (Loss) $ (0.03) $ 0.11
Dividends Applicable to Preferred
Stock -- (0.01)
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Net Income (Loss) Per Share $ (0.03) $ 0.10
============== ==============
Weighted Average Shares Outstanding 1,782,296 818,689
============== ==============
</TABLE>
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<TABLE>
PREMIER CONCEPTS, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED OCTOBER 26, 1997 AND OCTOBER 27, 1996
<CAPTION>
Nine Months Nine Months
Ended Ended
October 26, October 27,
1997 1996
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<S> <C> <C>
Revenues:
Retail Sales $ 8,583,235 $ 6,623,960
Wholesale Sales 37,646 23,950
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Total Revenues 8,620,881 6,287,910
Cost of Goods Sold 2,530,497 1,847,986
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Gross Margin 6,090,384 4,439,924
Operating Expenses:
Selling, General & Administrative 6,192,421 4,365,891
Depreciation & Amortization 314,472 212,330
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Total Operating Expenses 6,506,893 4,578,221
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Operating Profit (Loss) (416,509) (138,297)
Other Income (Expenses):
Interest, net (95,842) (79,350)
Increase (Decrease) in Fair Value
-- Tradable Securities -- 12,458
Other 66,499 70,516
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Other, net (29,343) 3,624
Loss Before Income Tax Benefit and
Discontinued Operation (445,852) (134,673)
Income Tax Benefit 150,000 10,000
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Income (Loss) Before Discontinued Operation (295,852) (124,673)
Income from Discontinued Operation -- 16,177
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Net Income (Loss) $ (295,852) $ (108,496)
============== ==============
Net Income (Loss) Available to Common
Shareholders $ 295,852) $ (116,496)
============== ==============
Net Profit (Loss) Per Share
Before Discontinued Operation $ (0.21) $ (0.17)
Discontinued Operations -- 0.02
Dividends Applicable to Preferred Stock (.00) (0.01)
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Net Profit (Loss) Per Share $ (0.21) $ (0.16)
============== ==============
Weighted Average Shares Outstanding 1,383,843 748,939
============== ==============
</TABLE>
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<TABLE>
PREMIER CONCEPTS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED OCTOBER 26, 1997 AND OCTOBER 27, 1996
<CAPTION>
Nine Months Nine Months
Ended Ended
October 26, October 27,
1997 1996
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<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ (295,852) $ (108,496)
Adjustments to reconcile net income
(loss) to net cash from operating
activities:
Gain on restructuring of debt -- (14,250)
Income from discontinued operations -- (26,177)
Depreciation and amortization 314,472 212,330
(Gain) loss on marketable securities -- (12,458)
Stock compensation to employees 24,000 --
Other, net 35,431 (12,079)
Changes in operating assets and liabilities:
(Increase) decrease in:
Inventories (640,197) (194,329)
Other assets (352,165) (69,466)
Increase (decrease) in:
Accounts payable and accrued
liabilities (349,865) 506,254
Other liabilities 50,480 35,363
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Net cash provided (used) by
operating activities (1,213,696) 316,692
Cash Flows From Investing Activities:
Capital expenditures for property
and equipment (794,314) (475,185)
Proceeds from sale of investments -- 50,564
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Net cash provided by (used in)
investing activities (794,314) (424,621)
Cash Flows From Financing Activities:
Deferred Offering Costs (179,791) (211,542)
Proceeds from issuance of preferred stock -- 225,000
Proceeds from issuance of common stock 3,882,633 --
Payments on notes payable (1,407,448) (185,108)
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Net cash provided (used) by
financing activities 2,295,394 (171,650)
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Increase (Decrease) in Cash and
Cash Equivalents 287,384 (279,579)
Cash & Cash Equivalents, beginning of
period 218,388 327,198
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Cash & Cash Equivalents, end of period $ 505,772 $ 47,619
============== ==============
Supplemental Schedule of Cash Flow
Information:
Cash paid for interest $ 142,946 $ 86,073
============== ==============
</TABLE>
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PREMIER CONCEPTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 26, 1997
COMMITMENTS AND CONTINGENCIES
-----------------------------
LITIGATION. The Company is subject to legal proceedings, claims and
liabilities, which arise in the ordinary course of its business. In the
opinion of management, the disposition of these actions will not have a
material adverse effect upon the Company's financial position or results of
operations. (See PART II. OTHER INFORMATION--Item 1. Legal Proceedings.)
SEASONALITY AND QUARTERLY FLUCTUATIONS
--------------------------------------
The Company's faux jewelry chain historically has realized lower sales
during the first three quarters which has resulted in the Company incurring
losses during those quarters. To this end, the Company generated an
operating loss during the nine months ended October 26, 1997 of $(416,509),
as compared to an operating loss of $(138,297) for the nine months ended
October 27, 1996.
The Company historically realizes approximately twenty percent (20%) of
its revenues during December as a result of the Christmas season. If the
Company's sales are substantially below seasonal expectations during
December, the Company's annual results will be adversely affected.
<PAGE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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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
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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 - OCTOBER 26, 1997 COMPARED TO JANUARY 26,
1997
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On April 25, 1997 a secondary public offering was successfully
completed in which 1,100,00 units were sold, each unit consisting of one
share of Common Stock and one Class A Common Stock Purchase Warrant
(Warrant). Two Warrants entitle the holder to purchase one share of Common
Stock at a price of $5.00 during the three year period ending April 21,
2000. Proceeds of approximately $3.3 million were realized, after costs of
the offering, of which $1,120,000 was used to retire Convertible Promissory
Notes (Convertible Notes) issued on December 27, 1997 as part of a bridge
financing completed to repurchase shares of Common Stock from certain
shareholders and to provide working capital. An additional $273,887 was
used to retire various other short term notes.
During the nine months ended October 26, 1997, merchandise
inventories increased $640,197, or approximately 37%, from $1,749,643 at
January 26, 1997, to $2,389,840 at October 26, 1997. This increase
reflects normal increases for the December season, and merchandise
purchased for eight new stores opened during the nine months ended
October 26, 1997, as follows:
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<TABLE>
<CAPTION>
Store Location Date Opened
------------------ --------------------------------------- -----------------
<S> <C> <C>
Elegant Pretenders The Rio Hotel and Casino, Las Vegas, NV February 7, 1997
Impostors Miami International Mall, Miami, FL February 17, 1997
Impostors Beach Place, Ft. Lauderdale, FL February 14, 1997
Impostors The Falls, Miami, FL June 28, 1997
Impostors North County Fair, Escondido, CA July 13, 1997
Impostors Kiosk Washington National Airport, Arlington, VA July 19, 1997
Impostors Arizona Mills, Tempe, AZ November 20, 1997
Impostors Pointe Orlando, Orlando, FL November 21, 1997
</TABLE>
<PAGE>
<PAGE>
Prepaid expenses and other current assets increased $352,165,
from $118,536 at January 26, 1997, to $470,701 at October 26, 1997.
Included in prepaid expenses and other current assets are estimated federal
and state income tax payments of approximately $63,000, and a current
deferred income tax asset of $150,000 resulting from accumulated operating
losses during the first three quarters.
As a result of the foregoing, current assets increased by
$1,279,746, from $2,086,567 at January 26, 1997, to $3,366,313 at
October 26, 1997.
During the nine months ended October 26, 1997, $794,314 was
invested in property and equipment, consisting of leasehold improvements in
connection with the April relocation of the store in the Valley Fair
Shopping Center in Santa Clara, California, the remodel of the Horton Plaza
store in San Diego, California, completed in July, 1997, the remodel of the
Borgata store in Scottsdale, Arizona, completed in October, 1997, and the
eight new stores as noted above. In October, 1997 the Grossmont Center
store in La Mesa, California was closed upon expiration of the lease.
Therefore, property and equipment, net of accumulated depreciation,
increased $489,142, from $2,033,939 at January 26, 1997, to $2,523,081 at
October 26, 1997.
Trademark assets, representing the goodwill of the Impostors
trademark and other intellectual property was acquired as part of the
acquisition of Impostors in March, 1994. The asset, with an amortized book
value was $78,533 at October 26, 1997, is being amortized over a 10-year
period.
Deferred offering costs of $425,423 at January 26, 1997 increased
by $179,791 prior to completion of the secondary public offering on
April 25, 1997, as noted above. These costs, totaling $605,214 were netted
against the offering proceeds.
As of October 26, 1997, total outstanding liabilities were
$2,104,117 compared to $3,814,371 at January 26, 1997, a decrease of
$1,710,254, which reflects the retirement of the Convertible Notes and
other long term debt totaling approximately $1.4 million. Total current
liabilities increased slightly, from $1,918,508 at January 26, 1997 to
$1,928,349 at October 26, 1997. Accounts payable and accrued liabilities
were decreased by approximately $350,000, primarily reflecting payments to
contractors for new store projects completed in the fourth quarter of
fiscal 1996/97, and in the first quarter of the current year. In the first
quarter, a $635,000 bank note that matures in February, 1998, was
reclassified as a current liability. The note carries interest at the rate
of ten percent (10%) per annum and is payable in monthly interest only
payments of $5,300. Discussions with the bank and various financial
institutions in Colorado are ongoing to restructure the note as part of a
banking services consolidation. As a result of the foregoing, working
capital increased by $1,269,905, from $168,059 at January 26, 1997, to
$1,437,964 at October 26, 1997.
Amounts borrowed from related parties of $74,420 at January 26,
1997, were retired during the second quarter. Current notes payable
increased from $263,312 at January 26, 1997, to $697,438 at October 26,
1997, an increase of $434,126, primarily as a result of the
reclassification of the bank note as discussed above.
Long-term debt, net of the current portion, was $22,049 at
October 26, 1997, as compared to $1,792,624 at January 26, 1997, a decrease
of approximately $1.77 million, which was the result of the payments of the
Convertible Notes and reclassification of the bank note, as discussed
above. The remainder of long-term debt represents notes that were part of
the Impostors retail chain acquisition in March, 1994.
Accounts payable decreased by $291,152 or approximately 25%, from
$1,153,495 at January 26, 1997 to $862,343 at October 26, 1997, primarily
as a result of payments to contractors for new store projects completed in
the fourth quarter of fiscal 1996/97, and in the first quarter of the
current year, as discussed above. Other accrued liabilities decreased by
$58,713 from $427,281 at January 26, 1997 to $368,568 at October 26, 1997,
or approximately 14%. The decrease is attributable to payments of certain
liabilities incurred in fiscal 1997 as part of the public offering
completed in April, 1997. Accrued liabilities at October 26, 1997,
represent expenses incurred in the normal course of business.
As a result of the Company's net loss for the nine months of
$295,852, the accumulated deficit increased from $1,361,507 at January 26,
1997 to a deficit of $1,657,359 at October 26, 1997. As discussed above,
on April 25, 1997, the Company successfully completed a secondary offering
of 1,100,000 units consisting of one share of Common Stock and two
Warrants, which after costs of the offering, increased stockholders' equity
by $3,270,886. As a result, total stockholders' equity increased from
$997,403 at January 26, 1997, to $4,002,970 at October 26, 1997.
Net cash used in operating activities for the nine months ended
October 26, 1997, was $1,213,696, compared with cash provided by operating
activities of $316,692 for the nine months ended October 27, 1996. This was
a result of increased inventory balances in preparation for the December
shopping season, and for the eight new stores opened during the period, and
the significant reductions of accounts payable as discussed above.
Cash used in investing activities of $794,314, represents
investments in stores as discussed above. This compares with net cash used
by investing activities of $424,621 during the nine months ended
October 27, 1996, and represents an increase of $369,693.
Net cash provided by financing activities for the nine months
ended October 26, 1997, was $2,295,394, primarily representing the
completion of the secondary offering in April, 1997. This compares to net
cash used by financing activities of $171,650 for the nine months ended
October 27, 1996, which resulted from costs incurred in connection with the
public offering, payments on notes payable, and proceeds of $225,000
realized from the completion of a bridge financing in which an aggregate of
416,670 shares of Series A Convertible Preferred Stock and 208,335 Class B
Warrants were sold. The Preferred shares automatically converted to
102,041 shares of common stock upon completion of the public offering on
April 25, 1997.
The foregoing resulted in an increase in cash and cash
equivalents of $287,384, from $218,388 at January 26, 1997, to $505,772 at
October 26, 1997.
Leases to open four additional locations over the next six to
nine months have been executed. These new stores will be located in
California, Louisiana, New York, and in Nevada. Other retail locations are
currently being evaluated, although to date no additional retail leases
have been executed. Depending on location and size, the opening of a new
retail location represents an aggregate capital requirement of
approximately $75,000-$150,000, including the leasehold improvements,
fixtures, equipment and inventory. Sufficient capital is available to
complete the new store openings which are currently committed. However,
additional new stores will require new sources of capital, of which there
can be no assurance.
In the third quarter of fiscal 1998, the Company was named as a
defendant in a civil action brought in the District Court of the Southern
District of New York. (See Part II, Item 1, Legal Proceedings) While the
Company believes that it will be successful in its defense of this civil
action, the cost of such defense could be significant and may represent a
material commitment of the Company's limited working capital.
RESULTS OF OPERATIONS - THREE MONTHS ENDED OCTOBER 26, 1997 COMPARED TO
THREE MONTHS ENDED OCTOBER 27, 1996
- ---------------------------------------------------------------------------
Set forth below is selected summary financial data derived from
the financial statements and financial records.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
October 26, October 27,
1997 1996
-------------- --------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total Revenues $ 3,029,132 $ 2,330,458
Operating income (loss) (254,013) 75,036
Net income (loss) (61,159) 87,570
Net income (loss) available to common
shareholders (61,159) 82,570
Net income (loss) per common share (0.03) 0.10
Weighted average shares outstanding 1,782,296 818,689
STATISTICAL DATA:
Store revenues $ 2,996,812 $ 2,314,445
Store gross margin 2,090,417 1,660,508
Store operating expenses 1,896,572 1,257,596
Store operating profit 193,846 402,912
Corporate overhead operating expenses 459,381 329,506
Gross margin percentage 69.4% 71.7%
Comparable same store sales (26 stores) 2,015,886 2,091,944
Comparable same store sales growth (3.6)% N/A
</TABLE>
Total revenues for the three months ended October 26, 1997 were
$3,029,132 as compared to $2,330,458 for the comparable period ended
October 27, 1996, an increase of $698,674, or 30%. The increase is due to
the addition of 12 new locations since August 30, 1996. Comparable same
store sales were $2,015,886 for the three months ended October 26, 1997 as
compared to $2,091,994 for the comparable period ended October 27, 1996, a
decrease of 3.6%. The decrease in comparable same store sales during the
quarter is attributed to unusually warm weather that caused a general
decrease in regional mall and tourist traffic, particularly in the mid-
Atlantic, the southeast, and southwest. In addition, two high volume
locations were remodeled during the quarter, which required the stores to
be closed or operated on a limited basis. A continued focus on the
merchandise quality, maintaining stock levels in key items, and the
continued remodeling of retail locations is expected to improve sales in
existing locations.
Sales from wholesale and non store retail sales of $32,320 and
$16,013 are included in total revenues for the three months ended
October 26, 1997 and October 27, 1996, respectively.
For the three months ended October 26, 1997, cost of goods sold
was $926,831 and the gross margin was $2,102,301, or approximately 69.4%.
For the three months ended October 27, 1996, cost of goods sold was
$668,321 and the gross margin was $1,662,137, or approximately 71.3%. The
1.9% decrease in gross margin is attributed to a special merchandise
promotion in August and September to stimulate early season sales. The
margin was also affected by reduced purchasing from the Orient due to
quality issues. In addition, the margin was also slightly affected by
marked down merchandise sold in our outlet location in Florida.
Selling, general and administrative expenses were $2,243,727 for
the three months ended October 26, 1997, compared to $1,515,085 for the
period ended October 27, 1996, or 74.1% and 65.0% of revenues,
respectively. The majority of these expenses were comprised of personnel
expenses, which amounted to $1,016,469, and $689,504 for the three months
ended October 26, 1997, and October 27, 1996, respectively, and occupancy
costs of $730,825, and $506,879 respectively. Included in selling, general
and administrative expenses are certain prepaid non-recurring professional
and consulting fees associated with the secondary public offering completed
in April, 1997, and are being amortized over the periods of the services
being performed. Depreciation and amortization expense was $112,587 for the
three months ended October 26, 1997, and $72,016 for the three months ended
October 27, 1996.
Included in operating expenses are corporate overhead expenses of
$459,381, or 15.2% of total revenues, for the three months ended
October 26, 1997, as compared to $329,506, or 14.1% of total revenues, for
the three months ended October 27, 1996. The increase is attributable to a
non-recurring common stock bonus to the Chief Executive Officer of $32,000.
It is expected that overall corporate overhead will decrease as a
percentage of sales as new retail stores and additional distribution
channels are added. Efforts to continue to improve and utilize
technological resources and control administrative costs are ongoing.
As a result of the foregoing, the loss from operations for the
three months ended October 26, 1997 was $254,013, as compared with an
operating profit for the three months ended October 27, 1996 of $75,036.
Interest expense was $19,065 and $25,869 for the three months
ended October 26, 1997, and October 27, 1996, respectively, and is
comprised primarily of interest charged on the $635,000 bank note discussed
above. Interest expense for the three months ended October 26, 1997, was
offset by approximately $9,800 of interest income realized from the short
term investment of cash proceeds remaining from the public offering
completed on April 25, 1997.
Unrealized loss on investments of $3,806 for the period ended
October 27, 1996, relates to holdings of common stock in Global Casinos,
Inc.(Global). Since October 27, 1996, most of the investment has been
liquidated, and as of October 26, 1997, holdings of Global common stock
were immaterial. The remaining shares of Global were liquidated in
November, 1997.
For the three months ended October 26, 1997, other income was
$52,076. Approximately $45,600 represents a refund from the State of
California for overpayment of sales taxes in 1994. The remaining $6,500
are recognized license fees associated with extension agreements that will
allow certain former franchisees to use the Impostors trademark. The
license agreements have a one year term expiring in January, 1998, and are
renewable at our option.
For the three months ended October 27, 1996, other income was
$41,268, and includes a gain of approximately $25,000 which resulted from a
final settlement of a recorded liability and funds held in escrow that were
used to satisfy certain liabilities to unsecured creditors of the
predecessor company, and approximately $10,000 in gains realized from
debtor settlements with former Impostors franchisees. Also included are
approximately $6,000 in license fees.
For the three months ended October 26, 1997, an income tax
benefit of $150,000 was recorded to recognize the tax effect of the
accumulated losses during the first three quarters of fiscal 1998. Based
on historical results, it is expected that fourth quarter operating results
will offset the accumulated losses through October 26, 1997.
Based on the foregoing, the net loss for the three months ended
October 26, 1997 was $61,159, which translates to a net loss per share of
$(0.03) based on 1,782,296 weighted average shares outstanding. This
compares with a net income for the three months ended October 27, 1996 of
$87,570, or $0.11 per share, based on 818,689 weighted average shares
outstanding.
Other than the foregoing, no trends, or other demands,
commitments, events or uncertainties are known that will result in, or that
are reasonably likely to result in, a material impact on the income and
expenses of the Company.
RESULTS OF OPERATIONS - NINE MONTHS ENDED OCTOBER 26, 1997 COMPARED TO NINE
MONTHS ENDED OCTOBER 27, 1996
- ---------------------------------------------------------------------------
Set forth below is selected summary financial data derived from the
financial statements and financial records.
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
October 26, October 27,
1997 1996
-------------- --------------
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total Revenues $ 8,620,881 $ 6,287,910
Operating income (loss) (416,509) (138,297)
Net income (loss) (295,852) (108,496)
Net income (loss) available to common
shareholders (295,852) (116,496)
Net income (loss) per common share (0.21) (0.16)
Weighted average shares outstanding 1,383,843 748,939
STATISTICAL DATA:
Store revenues $ 8,582,457 $ 2,314,445
Store gross margin 6,083,110 1,660,508
Store operating expenses 5,348,786 1,257,596
Store operating profit 734,235 402,912
Corporate overhead operating expenses 1,157,556 329,506
Gross margin percentage 70.7% 71.7%
Comparable same store sales (26 stores) 6,104,964 2,091,944
Comparable same store sales growth 1.8% N/A
</TABLE>
Total revenues for the nine months ended October 26, 1997 were $8,620,881
as compared to $6,287,910 for the comparable period ended October 27, 1996,
an increase of $2,332,971, or 37.1%. The increase is due to the addition
of 12 new locations since August 30, 1996, and an increase in comparable
same store sales of 1.8%. Comparable same store sales were $6,104,964 for
the nine months ended October 26, 1997 as compared to $5,999,627 for the
comparable period ended October 27, 1996, an increase of approximately
$105,000. The decrease in comparable same store sales from the 4.6% gain
reported through the six months ended July 27, 1997 is attributable to
unusually warm weather during the quarter ended October 26, 1997, that
caused a general decrease in regional mall and tourist traffic,
particularly in the mid-Atlantic, the southeast, and southwest. In
addition, two high volume locations were remodeled during the quarter,
which required the stores to be closed or operate on a limited basis. A
continued focus on the merchandise quality, maintaining stock levels in key
items, and the remodeling of retail locations is expected to continue to
improve sales in existing locations.
Sales from wholesale and non store retail sales of $37,646 and $23,950
are included in total revenues for the nine months ended October 26, 1997
and October 27, 1996, respectively.
For the nine months ended October 26, 1997, cost of goods sold was
$2,530,497 and the gross margin was $6,090,384, or approximately 70.7%.
For the nine months ended October 27, 1996, costs of goods sold was
$1,847,986 and the gross margin was $4,439,924, or relatively unchanged at
approximately 70.6%.
Selling, general and administrative expenses were $6,192,420 for the nine
months ended October 26, 1997, compared to $4,365,891 for the period ended
October 27, 1996, or 71.8% and 69.4% of revenues, respectively. The
majority of these expenses were comprised of personnel expenses, which
amounted to $2,846,844, and $2,034,254 for the nine months ended
October 26, 1997, and October 27, 1996, respectively, and occupancy costs
of $2,104,028, and $1,468,866 respectively. Included in selling, general
and administrative expenses are certain non-recurring professional and
consulting fees associated with the secondary public offering completed in
April, 1997. These costs were not offset against the offering proceeds and
are being amortized over periods ranging from six months to one year. Also
included in selling, general and administrative expenses are certain non-
capitalized store signage, fixturing, and supplies that are purchased from
time to time for store remodels and enhancements, which benefit future
periods. Depreciation and amortization expense was $314,472 for the nine
months ended October 26, 1997, and $212,330 for the nine months ended
October 27, 1996.
Included in operating expenses are corporate overhead expenses of
$1,157,556, or 13.4% of total revenues for the nine months ended
October 26, 1997, as compared to $1,101,521, or 16.1% of total revenues,
for the nine months ended October 27, 1996. It is expected that corporate
overhead will continue to decrease as a percentage of sales as new retail
stores and additional distribution are added. Efforts to continue to
improve and utilize technological resources and control administrative
costs are ongoing.
As a result of the foregoing, the loss from operations for the nine
months ended October 26, 1997 was $416,509, as compared with a loss from
operations for the six months ended October 27, 1996 of $138,297.
Interest expense was $128,966 and $81,713 for the nine months ended
October 26, 1997, and October 27, 1996, respectively. Interest for the
nine months ended October 26, 1997 includes approximately $66,500
attributed to non-recurring interest paid and deferred financing costs
written off upon retirement of the Convertible Notes on April 25, 1997.
Interest expense for the six months ended October 26, 1997, was partially
offset by $33,125 of interest income realized from the short term
investment of cash proceeds from the public offering completed on April 25,
1997.
Unrealized gain on investments of $12,458 for the period ended
October 27, 1996, relates to holdings of common stock in Global Casinos,
Inc.(Global). Since October 27, 1996, most of the investment has been
liquidated, and as of October 26, 1997, holdings of Global common stock
were immaterial. The remaining shares of Global were liquidated in
November, 1997.
For the nine months ended October 26, 1997, other income was $66,499.
Approximately $45,600 represents a refund from the State of California for
overpayment of sales taxes in 1994. In addition, recognized license fees
of $19,500 associated with extension agreements that will allow certain
former franchisees to use the Impostors trademark are included in other
income. The license agreements have a one year term expiring in January,
1998, and are renewable at our option, consisting almost entirely of
recognized license fees associated with extension agreements that will
allow certain former franchisees to use the Impostors trademark. The
license agreements have a one year term expiring in January, 1998, and are
renewable at our option.
For the nine months ended October 27, 1996, other income was $70,516,
which included approximately $19,000 in license fees. Other income also
includes a gain of approximately $25,000 which represents a final
settlement of a recorded liability and funds held in escrow that were used
to satisfy certain liabilities to unsecured creditors of the predecessor
company, and approximately $28,000 in gains realized in settlements with
former franchisees.
For the nine months ended October 27, 1996, income from discontinued
operations of $16,177, and income tax benefit of $10,000, represented
negotiated settlements with several creditors that had resulted from
business activities prior to the acquisition of Impostors.
For the nine months ended October 26, 1997, an income tax benefit of
$150,000 was recorded to recognize the tax effect of the accumulated losses
during the first three quarters of fiscal 1998. Based on historical
results, it is expected that fourth quarter operating results will offset
the accumulated losses through October 26, 1997.
Based on the foregoing, the net loss available to common shareholders for
the nine months ended October 26, 1997 was $295,852, which translates to a
net loss per share of $(0.21) based on 1,383,843 weighted average shares
outstanding. This compares with a net loss available to common
shareholders for the six months ended October 27, 1996 of $116,496, or
$(0.16) per share, based on 748,939 weighted average shares outstanding as
of that date.
Other than the foregoing, no trends, or other demands, commitments,
events or uncertainties are known that will result in, or that are
reasonably likely to result in, a material impact on the income and
expenses.
EARNINGS PER SHARE
- ------------------
In February, 1997, the Financial Accounting Standards Board issued SFAS
128, "Earnings Per Share." SFAS 128 establishes new standards for
computing and presenting earnings per share ("EPS"). Specifically, SFAS
128 replaces the currently required presentation of primary EPS with a
presentation of basic EPS, requires dual presentation of basic and diluted
EPS on the face of the income statement for all entities with complex
capital structures, and requires a reconciliation of the numerator and
denominator of the basic and diluted EPS computations to the financial
statements issued for periods ending after December 15, 1997, and early
application is not permitted. Upon adoption, SFAS 128 requires restatement
of prior period EPS presented to conform to the requirements of SFAS 128.
Management believes the adoption of SFAS 128 will not have a material
effect on the Company's previously issued financial statements.
COMPREHENSIVE INCOME
- --------------------
In June, 1997, the Financial Accounting Standards Board issued SFAS 130,
"Reporting Comprehensive Income." SFAS 130 establishes standards for
reporting and display of comprehensive income and its components (revenues,
expense, gains, losses) in a full set of general purposes financial
statements. Specifically, SFAS 130 requires that all items that meet the
definition of components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. However, SFAS 130 does not specify when to recognize or how to
measure the items that make up comprehensive income. SFAS 130 is effective
for fiscal years beginning after December 15, 1997, and early application
is permitted. SFAS 130 requires reclassification of financial statements
for all periods presented for comparative purposes. Management believes
the adoption of SFAS 130 will not have a material effect on the Company's
future financial statements.
REPORTING FOR SEGMENTS
- ----------------------
In June, 1997, the Financial Accounting Standards Board issued SFAS 131,
"Financial Reporting for Segments of a Business Enterprise." SFAS 131
supersedes the "industry segment" concept of SFAS 14 with a "management
approach" concept as the basis for identifying reportable segments. SFAS
131 is effective for fiscal years beginning after December 15, 1997, and
early application is permitted. Management believes the adoption of SFAS
131 will not have a material effect on the Company's future financial
statements.
Other than what has been discussed above, no trends, or other demands,
commitments, events or uncertainties are known that will result in, or that
are reasonably likely to result in a material impact on the income and
expenses of the Company.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- ---------------------------
The Company is currently involved in the following legal
proceedings:
HAMILTON CONSULTING, INC., ASHER FENSTERHEIM AND JAY BOTCHMAN V.
PREMIER CONCEPTS, INC. D/B/A IMPOSTERS AND COHIG & ASSOCIATES, INC., Civil
Action No. 97 CIV.6761 pending in the United States District Court,
Southern District of New York. In their complaint, the Plaintiffs allege
breach of contract by the Company, tortuous interference with contract by
the Defendant Cohig & Associates, Inc. ("Cohig), and tortuous interference
with prospective economic advantage by Cohig. Specifically, Plaintiffs
allege they entered into an enforceable agreement with the Company to
effect a business combination, and that the Company's refusal to consummate
the transaction constitutes breach of contract. The Plaintiffs further
allege that the Company's refusal to consummate the business combination
was due, in part, to conduct of the Defendant Cohig, and that Cohig's
alleged conduct constitutes interference with the contractual relationship
between Plaintiffs and the Company, and tortuous interference with the
Plaintiffs' prospective economic advantage. Since the Company has no
signed agreements with any party and there exist no documents evidencing
any meeting of the minds or intention to be bound to any such agreements,
the Company disputes that there existed any enforceable agreement with the
plaintiffs, or any of them, with respect to any possible business
combination. While the Company is confident that it will prevail should
this matter proceed to trial, the legal expenses incurred in defending the
matter could be significant and may represent an material commitment to the
Company's working capital. Additionally, the Company has agreed to
indemnify Cohig and its agents and affiliates from any liability incurred
by Cohig in connection with the matter to the extent not otherwise covered
by insurance.
Item 2. Changes in Securities
- -------------------------------
None
Item 3. Default Upon Senior Securities
- ----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
No matters were submitted to a vote of security holders during the
quarter ended October 26, 1997.
Item 5. Other Information
- ---------------------------
None
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------
EXHIBITS:
Exhibit 27 - Financial Data Schedule
REPORTS ON FORM 8-K:
None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
PREMIER CONCEPTS, INC.
Dated: December 15, 1997 By: /s/ Sissel Greenberg
--------------------- -----------------------------------
Sissel Greenberg, President
Dated: December 15, 1997 By: /s/ Todd Huss
--------------------- -----------------------------------
Todd Huss, Chief Financial Advisor,
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENTS OF OPERATIONS FOUND ON PAGES 4, 5 AND 6 OF THE COMPANY'S
FORM 10-QSB FOR THE NINE MONTHS ENDED OCTOBER 26, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BE REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> OCT-26-1997
<CASH> 505,772
<SECURITIES> 0
<RECEIVABLES> 116,977
<ALLOWANCES> (19,000)
<INVENTORY> 2,389,840
<CURRENT-ASSETS> 3,366,313
<PP&E> 3,602,263
<DEPRECIATION> (1,079,182)
<TOTAL-ASSETS> 6,107,087
<CURRENT-LIABILITIES> 1,928,349
<BONDS> 0
0
0
<COMMON> 3,540
<OTHER-SE> 3,999,430
<TOTAL-LIABILITY-AND-EQUITY> 6,107,087
<SALES> 8,620,881
<TOTAL-REVENUES> 8,620,881
<CGS> 2,530,497
<TOTAL-COSTS> 6,506,893
<OTHER-EXPENSES> 29,343
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128,966
<INCOME-PRETAX> (445,852)
<INCOME-TAX> (150,000)
<INCOME-CONTINUING> (295,852)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (295,852)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
