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FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________
Commission file number 33-42701
PREMIER CONCEPTS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Colorado 84-1186026
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(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
3033 South Parker Road, Suite 120, Aurora, Colorado 80014
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 338-1800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
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None
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
[ ]
The Issuer's revenues for the fiscal year ended January 30, 2000 were
$12,377,646.
As of April 25, 2000, the aggregate market value of the Common Stock of the
Issuer based upon the closing bid price of the Common Stock as quoted on the
NASDAQ held by non-affiliates of the Issuer was $8,596,000. As of April 25,
2000, 1,660,028 shares of Common Stock of the Issuer were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant incorporates by this reference the following documents:
Part III
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Item 9. Directors, Executive Officers, Promotions and ControlPersons,
Compliance with Section16(a) of the Exchange Agreement
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
The foregoing are incorporated by reference from the Registrant's
Definitive Proxy Statement relating to its Annual Meeting of Shareholders
which will be filed as an amendment within 120 days of January 30, 2000.
Item 13. Exhibits
1. Incorporated by reference from the Company's Registration
Statement on Form SB-2; SEC File No. 333-08741.
2. Incorporated by reference from the Company's Registration
Statement on Form SB-2; SEC File No. 333-19901.
3. Incorporated by reference from the Company's Registration
Statement on Form S-1; SEC File No. 33-42701.
4. Incorporated by reference from the Company's Annual Report on
Form 10-KSB for the year ended January 25, 1998.
5. Incorporated by Reference from the Company's Registration
Statement on Form S-4, as amended, SERC File No. 333-30572, as
filed with the Commission on April 21, 2000.
Forward-Looking Statements
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In addition to historical information, this Annual 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 our control. Readers are cautioned not
to place undue reliance on these forward-looking statements, which reflect our
analysis only as of the date hereof. We undertake 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.
Reverse Split
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On April 24, 1999, we effected a 1-for-2 Reverse Split (the "Reverse
Split") of our outstanding shares of Common Stock, Warrants, Options and other
securities. All share and per share information contained in this Annual
Report relating to our Common Stock and other securities have been adjusted to
give retroactive effect to the Reverse Split.
Proposed Merger
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We have executed an Agreement and Plan of Merger with AmazeScape.com,
Inc. (AmazeScape). The pending merger is subject to stockholder approval. At
the consummation of this transaction, stockholders of AmazeScape will own
approximately 87% of the combined entity. It is anticipated that this
transaction will be accounted for as a purchase business combination. The
transaction will be treated as a reverse merger, with AmazeScape being the
surviving Company for financial statement purposes.
PART I
BUSINESS
Overview
Operating under the names "Impostors" and "Elegant Pretenders," we
specialize in the marketing and retailing of high-end reproduction jewelry
("faux jewelry"), 14-karat gold jewelry with cubic zirconia and other
synthetic stones and sterling silver jewelry with semi-precious and synthetic
stones. Our national chain of 33 retail stores sell jewelry that emulates
classic fine jewelry as well as pieces designed by famous jewelers such as
Tiffany & Co.(-Registered Mark-), Cartier(-Registered Mark-), Bulgari(-
Registered Mark-) and Harry Winston(-Registered Mark-). The product line also
includes replicas of jewelry owned by celebrities. Faux jewelry is created
with layered gold, cubic zirconia and Austrian crystal to simulate the look of
fine jewelry. We also sell a collection of genuine sterling silver jewelry
featuring semi-precious and synthetic stones. The products are purchased from
several domestic vendors and from vendors in China, Hong Kong, Italy, Korea,
Spain, Taiwan and Thailand.
The Impostors and Elegant Pretenders stores are designed to match the
elegant look of our products and to provide customers with the feeling of
shopping in an upscale, fine jewelry environment. The stores are located in
shopping malls and tourist locations, currently in Southern California,
Northern California, the states of Arizona, Colorado, Florida, Louisiana,
Maryland, Nevada, New Jersey, Pennsylvania, Virginia, 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. Since January 27, 1997, we
have opened thirteen (13) additional retail locations. During the same period,
twelve (12) retail stores were closed due to lease expirations and
unprofitable operations, bringing the total number of stores currently
operating to thirty-three (33).
Business Strategy
In March 1994, we 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 our 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
merchandising strategies.
Our business strategy the past four years has included growing the retail
chain in profitable markets, closing unprofitable stores, remodeling existing
stores, and the development of new marketing channels including direct mail
and Internet sales. Total revenues for the year ended January 30, 2000 of
$12,378,000 were 2.6% less than the total revenues of $12,706,000 for the year
ended January 31, 1999. However, the net loss improved by $315,000 from a net
loss of $1,060,000 for the year ended January 31, 1999, to $745,000 for the
year ended January 30, 2000. Business strategies continue to focus on the
leveraging on its name and goodwill to achieve additional distribution for its
products as well as seeking new retail locations that offer potential for
above average return on investment.
Principal Products
Our products are comprised of approximately 50% fine jewelry
reproductions and emulations of merchandise inspired by classic designers such
as Cartier(-Registered Mark-), Tiffany & Co. (-Registered Mark-), Bulgari(-
Registered Mark-) and Harry Winston(-Registered Mark-), and approximately 40%
of 14-karat gold featuring cubic zirconia and other synthetic stones and 10%
sterling silver with semi-precious stones and cubic zirconia. The jewelry
ranges from solitaire rings and faux pearl necklaces to earrings, pendants and
bracelets. Since the 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.
Approximately 2,500 different jewelry items are offered, with none
representing more than 10% of the 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 products are selected from existing inventory offered by
vendors. However, from time to time, purchases are made of exclusive items
that are manufactured specifically for us under special order. Because the
products are high-quality emulations of classic fine jewelry designs that
change little from year to year, no significant problems associated with
inventory obsolescence have been experienced.
Remodeling and Expansion Strategy
During the past three years, nine existing stores have been remodeled at
an average cost of $30,000 per store. Further remodeling of existing locations
will depend upon the availability of working capital from future operations,
or additional capital infusion, of which there can be no assurance. Further
remodeling of existing locations will also depend on the lease terms, as well
as the expected return on such leasehold improvements. Since January 26, 1998,
we have opened five additional retail stores and closed six locations due to
unprofitable operations and lease expirations. Further expansion of the retail
chain beyond the current 33 locations will require additional capital
infusion.
In selecting and evaluating new sites, we have developed criteria that
consider local population demographics, customer base, sales per square foot
of other retailers in the area and, most significantly, location. Of
particular focus are centers and malls with a heavy tourist trade. Absent a
high tourist component, a regional mall would be considered only if the
location offered is in a high traffic area with a mix of other fashion
tenants. We also continue to pursue opportunities in casinos and high-profile
hotels. Financial projections for any new proposed site are prepared and any
location where we believe break-even operations cannot be achieved within a
six to twelve month period are rejected. 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.
Other Marketing and Distribution Channels
Currently, over 99% of total revenues are derived from retail store
sales, while the remainder is derived from Internet and catalogue sales. In
October 1996, we developed and completed our web site "www.impostors.com." In
July 1999, we started the process of developing a new e-commerce platform
"www.premierjewelry.com" from which to showcase existing and new concepts.
While our first web site simply established an Internet presence, the new site
is intended to serve as a platform from which we can increase market share and
penetrate new markets. The new site will also replace our print catalogue that
was developed in November 1997. We expect to launch our new e-commerce
platform in the second quarter of 2000.
Market and Customers
Our business 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. Faux jewelry distinguishes
itself from traditional fashion jewelry by the quality of the metals, stones
and craftsmanship utilized in the design and manufacturing process. While
costume jewelry is typically price-pointed in the $5 to $30 range, the
majority of our faux jewelry is priced in the $30 to $100 range. The 14-karat
gold collection has price points between $45 to $1,000, with the majority in
the $100 to $400 range.
The market for our 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
target market is 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. This target market is expected to
continue to grow in accordance with the continued increases in the number of
women entering the professional workplace. It has been our experience that
the vast majority of our retail customers are women purchasing for themselves
rather than men purchasing for others.
Suppliers and Vendors
We purchase our 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 manufacture certain
products specifically for us, for which we will typically be given a 12 to 18
month exclusivity for that item by the vendor. Relationships with our vendors
of high-quality product are considered a component of our strategic advantage
over other competitors. We work closely with our vendors to constantly upgrade
the quality of our products.
Our products are currently being purchased 60% from domestic vendors and
40% from vendors in 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 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. We continually investigate new
sources of merchandise in order to maximize profit margins. We consider the
identity of our sources of supply to be proprietary to the extent that a
product's quality, source and price bear directly upon our competitive
advantage. We do not rely on any single source of supply and could readily
obtain product from new suppliers should any given source become unavailable.
We have not experienced any difficulty in obtaining merchandise and do not
anticipate any future problems or restriction of availability.
Competition
Because our 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 our faux jewelry and
14 karat gold with synthetic stones bridging the gap. We believe our products
are superior both in design and quality to jewelry offered by traditional
fashion jewelry retailers. Conversely, our advantage over expensive fine
gemstone and diamond jewelry is one of cost without a commensurate sacrifice
in appearance or durability.
We compete directly with department stores and other retailers of faux
jewelry, including home shopping channels, 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. Our exclusive emphasis
on the faux jewelry specialty market niche is designed to attract the customer
who has already decided to purchase designer inspired jewelry rather than
either costume jewelry or the high-cost piece of genuine fine jewelry.
However, we are not alone in this marketing approach, as there exist a few
other chains of retailers offering faux jewelry in a directly competitive
manner. We are aware of only one other business, N. Landau Hyman, which 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 25 faux jewelry stores,
Mystique which has 4 stores in Florida, and Diamond Essence which has a retail
store in New York and another in Chicago, and a direct marketing catalogue
concentrating exclusively on 14-karat gold jewelry with faux gemstones. our
advantage, if any, over these other retailers lies in our relationships with
our vendors, some of which we consider to be highly proprietary, economies of
scale offered by our ability to purchase large quantities of inventory from
vendors who have certain minimum quantity requirements, and in our store
locations. Nevertheless, in order for us to continue to be competitive, we
must maintain and expand our desirable store locations and distribution
channels and continue to develop strong vendor relations, none of which can be
assured.
Intellectual Property
Copyrights, trademarks and trade secrets are the principal protection for
our products, services and reputation. We own federally registered trademarks
for the following names: Impostors(-Registered Mark-), Impostors Copy Jewels(-
Registered Mark-), Elegant Pretenders(-Registered Mark-) and The Latest In
Faux(-Registered Mark-). All of the trademarks are considered by us to be
valuable property rights. We believe the protection afforded by these
intellectual property rights and the law of trade secrets to be adequate
protection for our products and/or services.
As a reseller of emulations and copies of fine designer jewelry, we 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 our products do
not purport to be exact copies, but rather emulations inspired by other
designs, we believe 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, there is 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
us to ensure that our 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. We take meticulous precaution to avoid advertising and
marketing strategies that might lead to confusion in the minds of our
customers as to the source or origins of our emulation jewelry.
We have developed and adopted methodologies designed to prevent our
infringement of the intellectual property rights of third parties; however,
there can be no assurance that we 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 we have received notice of
inadvertent infringement, it has been our 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, we have not
experienced, and do not expect to experience, any material adverse effects on
our revenues in these instances.
License Arrangements
We have granted a total of four licenses to former Impostors franchisees
granting to them the right to use the Impostors(-Registered Mark-) trademark
in a total of four 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 our discretion. It is not expected that these license arrangements will
represent a material portion of our future activity.
Employees and Consultants
We currently have approximately 85 full-time and 110 part-time employees,
of which 19 are employed in our corporate offices. Additional part-time
employees are typically hired during the peak holiday season. A manager and
assistant manager, as well as one or more sales personnel, staff each retail
store. We also have two regional managers (East and West Coasts). Store
managers are hired and supervised by the regional managers. All management and
staff personnel are employed directly by us.
In February 1999, we entered into Employment Agreements with our
President, Sissel Eckenhausen, our Chief Financial Officer, Todd Huss, and our
Chief Operating Officer, Kevin O'Brien. Each Employment Agreement has a term
of three years.
In March 1999, we entered into a Management Services Agreement with
Infusion Capital Partners, LLC for the provision of financial advisory
services. This agreement was extended in November 1999, for a 2-year term
commencing January 1, 2000. We are also party to an E-Commerce Services
Agreement with MeridianTelesis, LLC, an Internet services company that is an
affiliate of Infusion. The E- Commerce Services Agreement requires Meridian
Telesis LLC to provide coordination, oversight and consulting services to
complete our E- Commerce project, including Web site design and layout, Web
site development and programming, and the integration of a transaction
platform. The fee for these services is $95,000 of which $85,000 has been paid
to date and the remaining $10,000 is due upon completion and acceptance of the
E-commerce project.
Seasonality
Our business is highly seasonal our mall locations generating
approximately 20% of revenues during the December holiday season. Our 15
tourist locations experience fluctuations, based upon such factors as
seasonality, economic conditions and other factors affecting tourism in their
particular locations.
Properties
We currently maintain executive offices at 3033 S. Parker Road,
Suite 120, Aurora, Colorado 80014. The offices consist of 6,890 square feet,
which we hold under a 5-year lease expiring in the year 2003, for a rental of
$7,464 per month. Our executive offices represented the culmination of a
strategic plan to close our executive offices in San Francisco, California to
reduce operating expenses.
Our 33 current retail locations are operated under commercial leases with
expiration dates ranging from 2000 to 2012. Store size varies from 310 to
1,200 square feet with annual sales ranging from $200,000 to $1,600,000. Each
lease requires the payment of a minimum base rent and additional payments for
operating expenses, taxes, insurance and, in some cases, an additional rent
based upon a percent of gross sales. On a daily basis, sales, margin and
inventory turnover for each store location are monitored. 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, we are continually engaged in discussions with
our various commercial landlords over issues that arise from time to time
under the leases. All of the existing commercial retail leases are in full
force and effect as of the date of this report.
Legal Proceedings
From time to time we are 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, except
as set forth below, we are not a party to any legal proceedings outside of the
ordinary course of business or which would have a material adverse impact upon
our operations or properties.
We have been named as a defendant in a civil action filed in the Supreme
Court of the State of New York, County of Onondaga on May 21, 1999. The
lawsuit was brought by EkleCo as plaintiff, and asserts claims against us for
rent and other sums due under the commercial lease for its retail store
located in the Palisades Center in West Nyack, New York in an aggregate amount
of approximately $140,000. We have denied liability, and on July 27, 1999 we
filed a counter claim against the landlord asserting breach of contract, false
representation and fraud in inducing us to enter into the lease. We are
seeking damages in excess of $300,000. We intend to vigorously defend the
action and prosecute our counterclaims. Based upon our assessment of the facts
and consultations with legal counsel, we believe that the likelihood of a
material adverse outcome in the matter is remote.
MATTERS SUBMITTED TO VOTE OF SECURITY HOLDERS
A Special Meeting of the Shareholders of Premier Concepts, Inc. was held
on June 5, 1999. At the meeting, the following matters were acted upon:
1. Second Stock Purchase Agreement:
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A proposal to ratify and approve the Second Stock Purchase Agreement
between the company, on the one hand, and Infusion Capital Partners, LLC, on
the other, and the other transactions provided for in such Agreements.
<TABLE>
<CAPTION>
Votes for Votes Against Abstentions
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<S> <C> <C> <C>
429,688 23,298 5,502
</TABLE>
2. A proposal that in the event Proposal No. 1 is rejected by the
Shareholders, to ratify and approve the issuance by the Company to Equisition
Capital Partners, LLC a common stock purchase warrant exercisable to purchase
35,200 shares of Common Stock at an exercise price of $4.10 per share.
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions
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<S> <C> <C> <C>
429,488 2,998 6,002
</TABLE>
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PART II
MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
Price Range of Common Stock.
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Since April 23, 1997, the Common Stock and Warrants have traded on The
Nasdaq Stock Market under the symbols "FAUX," and "FAUXW," respectively. The
reported high and low trade information for the Common Stock is presented for
the periods beginning January 26, 1998, through April 25, 2000.
<TABLE>
<CAPTION>
High Low
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<S> <C> <C>
Fiscal Year 1999
First Quarter $5.50 $3.25
Second Quarter $4.75 $2.63
Third Quarter $3.50 $0.63
Fourth Quarter $1.125 $0.88
Fiscal Year 2000
First Quarter $2.375 $0.875
Second Quarter $2.00 $1.375
Third Quarter $1.25 $0.938
Fourth Quarter $21.25 $0.875
Fiscal Year 2001
Through April 25, 2000 $18.25 $6.625
</TABLE>
(1) All prices have been adjusted to give retroactive effect to a
one-for-two reverse stock split that was effective on April 24, 1999.
The high and low sales prices of the Company's Common Stock on April 25,
2000 were $8.625 and $8.25, respectively, as listed on The Nasdaq Stock
Market. As of April 25, 2000 there were approximately 540 shareholders of
record of the Company's Common Stock.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS 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
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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. Fiscal year ended January 31, 1999 contained fifty-three weeks of
operations.
Liquidity and Capital Resources
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At January 30, 2000 the cash balance of $357,653 was approximately 62%
greater than the cash balance of $221,273 at January 31, 1999.
On March 11, 1999 we received approximately $211,500 of proceeds net of
offering costs from the sale of 176,615 shares of common stock. On June 30,
1999 approximately $274,500 of proceeds net of offering costs was received
from the sale of 223,385 shares of Series A Convertible Preferred Stock in a
private placement. The preferred stock was convertible to shares of common
stock at a conversion price of $1.25 per share. Holders of the preferred
stock earned dividends at the rate of 10% per year, payable only in the form
of common stock. On November 11, 1999 the holders converted all the shares of
the preferred stock to common stock. A total of 234,419 shares were issued in
the conversion which included 11,034 shares issued attributable to accumulated
dividends. These funds are being used for the development of our e-commerce
business, and for the reduction of the principal balance of the Bank Note as
discussed below, as well as for general working capital.
On April 1, 1999 we made a principal reduction of $112,000 on the note
payable (Bank Note) with a Colorado Financial institution. Upon maturity on
May 28, 1999, the Bank Note was renewed. The renewed note bears interest at
the Bank's prime lending rate plus 1.5%, and requires monthly payments of
$1,000 plus accrued interest, beginning in June, 1999 and continuing until the
maturity date of June 20, 2000. A one time principal payment of $37,000 was
paid on December 20, 1999. The Bank Note principal balance of $404,000 is
classified as short-term debt at January 30, 2000.
On January 31, 1999, $122,000 of accounts payable relating to the spring
1998 construction of the store at Palisades Center in West Nyack, New York was
converted to a long-term note. The note requires monthly installments of
$5,000 including principal and interest at 10%, with a single payment of
$35,000 paid on January 1, 2000. The principal balance of $46,311 at January
30, 2000 is classified as current debt.
Under the terms of the Agreement and Plan of Merger, we have placed into
escrow all of the cash proceeds totaling $102,903 from the exercise of options
or warrants received after November 17, 1999, through January 30, 2000. In
the event the merger transaction is consummated, the funds will be released to
AmazeScape. In the event the merger transaction is not consummated, the funds
will be released to Premier Concepts, Inc. These escrowed funds are
classified as restricted cash at January 30, 2000.
During the year ended January 30, 2000, merchandise inventories decreased
$189,340, or approximately 10% from $1,975,595 at January 31, 1999 to
$1,786,255 at January 30, 2000. This decrease reflects effect of operating
three less stores from thirty-six (36) stores at January 31, 1999 to thirty-
three (33) at January 30, 2000. In addition, it reflects the effects of
tighter inventory controls and a more focused merchandising strategy
implemented in during the fourth quarter of the year ended January 31, 1999.
Efforts are ongoing to further our merchandising strategy to increase our
gross margins and inventory turns.
Prepaid expenses and other current assets increased $162,934 from $97,295
at January 31, 1999 to $260,229 at January 30, 2000. The increase is
primarily due to legal, accounting and other professional fees of
approximately $155,000 incurred associated with the proposed merger with
AmazeScape as discussed above. Under the terms of merger agreement, these
costs are to be paid by AmazeScape as they come due. Also included in prepaid
expenses and other current assets is approximately $17,000 representing the
imputed value of a warrant to purchase 25,000 shares of common stock at $.875
per share associated with a two year extension of a Management Services
Agreement. The agreement provides for certain consulting services including
arrangement of the first and second equity fundings as discussed above, as
well as strategic, operational and investment banking advice. On November 1,
1999 the Management Services Agreement was extended an additional two years
through December 2002. These costs are being amortized during fiscal 2001.
Also included in prepaid expenses and other current assets is
approximately $14,000 of costs associated with the replacement of our point of
sale computer systems at all the retail stores, and a point of sale and
inventory control software conversion completed in September, 1999. These
costs are being amortized over three years.
As a result of the foregoing, current assets increased by $212,877, from
$2,294,163 at January 31, 1999, to $2,507,040 at January 30, 2000.
On November 12, 1999, 228,571 shares of common stock were sold to an
investor in a private placement for $200,000. The proceeds from the sale, and
the shares of common stock, are being held in escrow. The escrowed funds are
to be used as partial collateral to facilitate a debt financing. The funds
and the shares of common stock will be released from the escrow account upon
certain terms and conditions, including the approval of the Board of Directors
and consent of the lender in the proposed debt financing. In the event the
merger transaction described above is not consummated prior to May 15, 2000,
at the investor's option the $200,000 will be released from escrow and
disbursed to the investor, and the 228,571 shares of common stock will be
returned and cancelled. These escrowed funds are classified as restricted
cash at January 30, 2000, and the escrowed shares of common stock are
classified as redeemable common stock.
In October 1996, we developed and launched our first e-commerce web site
"impostors.com" which provided our initial Internet presence. While the web
site had the capability to generate sales of our product, we have realized
only modest revenue generated directly from the web site. In July 1999, we
started the process of developing a new e-commerce platform
"premierjewelry.com" from which we intend to showcase existing and new product
concepts, and serve as a platform from which we can increase market share and
penetrate new markets. The new site, expected to launch in late April 2000,
will also replace our print catalogue that was developed in November 1997. As
of January 30, 2000, we have invested approximately $131,000 in the new
"premierjewelry.com" web site.
During the year ended January 30, 2000 approximately $49,000 was invested
in computer equipment and fixture improvements at the our corporate offices in
Aurora, Colorado, to upgrade our point of sale and inventory control, and
accounting systems. Other asset additions include $11,500 invested to develop
additional design concepts for future retail expansion, approximately $15,000
in minor improvements in existing retail locations, and $30,000 associated
with securing the lease for a retail store location in the new Aladdin Hotel
and Casino in Las Vegas, Nevada. This store is expected to open in the August
of 2000. The total investments made during the year ended January 30, 2000 of
$104,057 compares to the $835,347 invested in property and equipment for the
year ended January 31, 1999. These investments consisted of leasehold
improvements in connection with the remodeling of the stores in Palm Desert
and Pleasanton, California, and in Menlo Park, New Jersey, as well as the
construction of four new locations at the Riverwalk in New Orleans, Louisiana,
Franklin Mills in Philadelphia, Pennsylvania, Palisades Center in West Nyack,
New York, and the Fashion Outlet in Primm, Nevada.
During the year ended January 30, 2000, two stores were closed upon
expiration of the leases. These stores were located at the Paradise Valley
Mall in Phoenix, Arizona, and at the Pentagon City Mall in Arlington,
Virginia. No store closing costs were incurred with the closings of these two
stores. Our store at the Palisades Center Mall in West Nyack, New York was
closed in January 2000, due to continued poor performance. Investments in
leasehold improvements of approximately $130,000 were written off upon the
store closing and are included in store closing costs. We are in litigation
with the landlord to mitigate our losses, but as of the date of this filing,
no settlement has been reached. (See "Legal Proceedings" in Part I above.)
Based on the foregoing, property and equipment, net of accumulated
depreciation, decreased approximately $509,000, from $2,699,376 at January 31,
1999, to $2,190,331 at January 30, 2000.
Our trademark assets, representing the goodwill of the Impostors
trademark and other intellectual property, was acquired as part of the
acquisition of Impostors in 1994. This asset is being amortized over a 10-
year period, and had an amortized book value of $50,633 at January 30, 2000.
As of January 30, 2000 approximately $131,000 had been invested to design
and construct a new e-commerce web site that is expected to be launched during
the first quarter of fiscal 2000/01.
As of January 30, 2000, total outstanding liabilities were $2,402,884
compared to $2,483,036 at January 31, 1999, a decrease of $80,152. Current
liabilities decreased $59,110, from $2,232,760 at January 31, 1999 to
$2,173,650 at January 30, 2000, primarily reflecting increases in accounts
payable and accrued liabilities associated with the accrual of approximately
$155,000 of costs associated with the proposed merger with AmazeScape as
discussed above, and the reductions of the Bank Note and construction note
payable as discussed above.
In addition to the Bank Note and the store construction note payable,
both as discussed above, the current portion of long-term debt includes notes
that were part of the Impostors retail chain acquisition in February 1994.
The total debt related to these notes was reduced by $7,480 as the result of
normal scheduled payments from $19,973 at January 31, 1999, to $12,493 at
January 30, 2000.
In November 1999, a settlement was reached on a note payable that was due
for legal services relating to the acquisition of the retail chain in 1994.
On November 3, 1999, $6,000 was paid, with the $30,000 balance of the note
paid on December 28, 1999.
Accounts payable increased by $96,882 from $965,189 at January 31, 1999
to $1,062,071 at January 30, 2000. Other accrued liabilities increased by
$60,215 from $584,461 at January 31, 1999 to $644,676 at January 30, 2000.
Excluding the approximately $155,000 of costs accrued associated with the
proposed merger with AmazeScape as noted above, accounts payable and accrued
liabilities represent expenses incurred in the ordinary course of business in
connection with the operation of the Impostors retail chain.
Working capital, net of restricted cash as discussed above, increased by
$169,084, from $61,403 at January 31, 1999, to $230,487 at January 30, 2000,
primarily reflecting the increase in cash of $136,380 resulting from the
private equity investments as discussed above.
Deferred rent increased $27,990 from $201,244 at January 31, 1999, to
$229,234 at January 30, 2000, resulting from the recognition of rental expense
on a straight line basis on leases that contain predetermined fixed
escalations of the minimum rents during the initial term of the lease.
The increase in common stock of $881 from $1,775 at January 31, 1999 to
$2,656 at January 30, 2000, and the net increase in additional paid-in capital
of $637,821 from $5,660,263 to $6,298,084 at January 31, 1999 and January 30,
2000, respectively, reflects the proceeds received from the March and June,
1999 equity financings, all as discussed above, net of $14,000 of direct costs
of the offerings, and the preferred stock dividend of $10,394. In addition,
certain employees and former directors exercised incentive stock options under
our 1993 Incentive Stock Option Plan to purchase 25,000 shares of common
stock. An additional 2,160 shares of common stock were issued from the
exercises of options granted to a former director and to our President and
Chief Executive Officer they received as compensation for their personal
guarantee of our lease of our corporate offices in Denver, Colorado. Total
proceeds from the exercise of stock options were $102,903.
As a result of the net loss for the year ended January 30, 2000 of
$745,185 the accumulated deficit increased from $3,008,370 at January 31, 1999
to a deficit of $3,753,555 at January 30, 2000. As a result of the loss, and
considering the equity financing and the exercise of incentive stock options,
total stockholders' equity decreased $106,483 from $2,653,668 at January 31,
1999, to $2,547,185 at January 30, 2000.
Net cash provided by operating activities for the year ended January 30,
2000 was $150,735, compared with cash provided by operating activities of
$352,359 for the year ended January 31, 1999. This change of approximately
$202,000 primarily reflects the effect of: 1) the decrease in merchandise
inventories of approximately $189,000 for the year ended January 30, 2000,
compared to the decrease in merchandise inventories of approximately $332,000
during the comparable year ended January 31, 1999; 2) the increase in other
assets of approximately $137,000 as discussed above, as compared to the
decrease of other assets of approximately $184,000 for the year ended January
31, 1999; 3) the increase of accounts payable and accrued liabilities of
approximately $157,000 for the year ended January 30, 2000, as compared to the
increase in accounts payable and accrued liabilities of approximately $277,000
for the year ended January 31, 2000, and; 4) the $314,500 improvement of the
net loss from a net loss of approximately $1,060,000 for the year ended
January 31, 1999, to a net loss of approximately $745,000 for the year ended
January 30, 2000.
Cash used in investing activities of $235,115, primarily represents the
investment in the new e-commerce web site and improvements in computer
equipment at the corporate offices in Aurora, Colorado as discussed above.
This compares with net cash used by investing activities of $835,347 during
the year ended January 31, 1999 which primarily represents investments in new
retail stores and remodeling efforts as discussed above.
Net cash provided by financing activities for the year ended January 30,
2000, was $523,663, and represents the net proceeds of the equity financing
and exercise of incentive stock options, and payments on notes payable, both
as discussed above. This compares to net cash used by financing activities of
$101,788 for the year ended January 31, 1999, representing payments on notes
payable.
The foregoing resulted in an increase in the cash position of $439,283,
from $221,273 at January 31, 1999 to $660,556 at January 30, 2000. However,
as discussed above, approximately $303,000 of the cash at January 30, 2000, is
restricted.
On August 20, 1999 a lease was executed to open a retail store in the new
Aladdin Hotel and Casino in Las Vegas, Nevada. This store is expected to open
in August of 2000. No additional leases to open retail locations have been
executed. However, possible new locations are currently being evaluated.
Depending on location and size, the opening of a new retail location
represents an aggregate capital requirement of approximately $75,000-$200,000,
including the lease build-outs, fixtures, equipment and inventory. As
discussed above, the funds received in the March and June 1999, equity
financing, provided new capital to meet current obligations, and provided
capital to further the Company's business plan.
Also, as discussed above, in November 1999, 228,571 shares of common
stock were sold to an investor for $200,000. The proceeds from the equity
sale are being held in escrow and will be used as partial collateral to obtain
additional debt financing of up to $500,000 to provide capital for retail
expansion, further development of e-commerce, and general working capital.
Additional sources of capital are currently being evaluated to meet plans for
future capital investment and working capital needs. However, there can be no
assurance that such financing will be secured.
Results of Operations
- ---------------------
Set forth below is selected summary financial data derived from the
financial statements and financial records:
<TABLE>
<CAPTION>
Fiscal Fiscal
Year Ended Year Ended
January 30, 2000 January 31, 1999
---------------- ----------------
<S> <C> <C>
Statements of Operations Data:
Total Revenues $ 12,377,646 $ 12,705,602
Operating income (loss) (714,067) (1,051,573)
Net income (loss) (745,185) (1,059,688)
Net income (loss) available
to common shareholders (897,708) (1,059,688)
Net income (loss) per common
share (basic and diluted) (.85) (1.19)
Weighted average shares
outstanding (basic and diluted) 1,055,088 887,513
Statistical Data:
Store revenues $ 12,355,987 $ 12,525,435
Store gross margin 8,701,998 8,505,483
Store operating expenses 7,547,575 7,843,427
Store operating profit 1,024,295 662,056
Corporate overhead operating expenses 1,734,846 1,616,834
Gross margin percentage 70.3% 67.3%
Comparable same store sales (31 stores) 11,079,954 10,780,354
Comparable same store sales growth 2.8% -5.6%
Total revenues for the year ended January 30, 2000 were $12,377,646 for
the year ended January 30, 2000 as compared to $12,705,602 for the year ended
January 31, 1999, a decrease of $327,956. The decrease is partially
reflective of a decrease in wholesale sales of $156,297, from $164,560 for the
year ending January 31, 1999 to $8,263 for the year ended January 30, 2000.
This decrease was due to working capital constraints that did not allow us to
procure sufficient product for wholesale distribution. The remaining decrease
is due to net revenues lost through the closings of unprofitable stores and
stores closed upon lease expirations during fiscal years ended January 31,
1999, and January 30, 2000. Following is a schedule of store openings and
closings for the past two fiscal years:
Fiscal Year Ended January 31, 1999:
New stores opened:
The Riverwalk - New Orleans, Louisiana March 8, 1998
Franklin Mills - Philadelphia, Pennsylvania March 19, 1998
Palisades Center - West Nyack, New York April 3, 1998
Fashion Outlet - Primm, Nevada July 15, 1998
Block at Orange - Orange, California November 19, 1998
Stores closed:
Jackson Brewery - New Orleans, Louisiana March 2, 1998
Kiosk at Washington National Airport -
Arlington, Virginia July 31, 1998
Miami International Mall - Miami, Florida September 9, 1998
St. Louis Galleria - St. Louis, Missouri September 30, 1998
Dallas Galleria - Dallas, Texas January 3, 1999
Brea Mall - Brea, California January 5, 1999
Fiscal Year Ended January 30, 2000:
Stores closed:
Paradise Valley Mall - Phoenix, Arizona December 26, 1999
Pentagon City - Arlington, Virginia January 25, 2000
Palisades Center - West Nyack, New York January 25, 2000
Comparable same store sales, adjusted to the fifty-two week year, were
$11,079,954 for the year ended January 30, 2000 as compared to $10,780,354, an
increase of approximately $300,000, or 2.8%. The increase is partially
attributable to a strong fourth quarter holiday shopping season in which we
realized comparable same store sales gains of approximately 5%.
Sales from wholesale and non-store retail operations were $8,263 and
$164,560 for the years ended January 30, 2000, and January 31, 1999,
respectively. Revenues from our catalog and sales generated from our web site
have historically been minor, but are expected to increase significantly
during fiscal 2000/01 upon the launching of our new web site during the first
quarter.
For the year ended January 31, 1999, cost of goods sold was $4,158,271
and the gross margin was $8,547,331, or 67.3%. For the year ended January 30,
2000, cost of goods sold was $3,671,297 and the gross margin was $8,706,349,
or approximately 70.3%. The 3% increase in gross margin is attributed to a
more focused merchandise mix, and more effective promotional activity during
the year ended January 30, 2000 as compared to the year ended January 31,
1999.
Total operating expenses were $9,420,416 for the year ended January 30,
2000, compared to $9,598,904 for the year ended January 31, 1999, or 76.1% and
75.5% of revenues, respectively, representing a decrease of approximately
$178,500 for the comparable year. A significant portion of these expenses were
comprised of personnel expenses, which amounted to $3,970,176 and $4,110,433
for the twelve months ended January 30, 2000, and January 31, 1999,
respectively, a decrease of approximately $140,300. Occupancy costs of
$2,936,361, and $2,935,159, and other selling, and general administrative
expenses of $1,883,377 and $1,937,245 are included in total operating expenses
for the years ended January 30, 2000 and January 31, 1999, respectively.
Other selling, general and administrative expenses represent expenses incurred
in the ordinary course of business including costs of merchandise
distribution, supplies and packaging, telephone and utility expenses,
advertising, professional and legal fees, and other general store and
corporate operating costs.
Included in operating expenses are corporate overhead expenses of
$1,734,846, or 14.0% of total revenues, for the year ended January 30, 2000,
as compared to $1,616,834, or 12.7% of total revenues, for the year ended
January 31, 1999, representing an increase of approximately $118,000 for the
comparable period. The increase is primarily attributable to the hiring of
our Chief Operating Officer in November 1998, and to the expenses associated
with the Management Services Agreement as discussed above. It is expected
that corporate overhead will decrease as a percentage of sales as new retail
stores and additional distribution is added. Efforts to continue to improve
and utilize technological resources and control administrative costs are
ongoing.
Also included in total operating expenses are depreciation and
amortization expenses that were $500,373 and $501,697 for the years ended
January 30, 2000 and January 31, 1999, respectively.
During the year ended January 31, 1999 three non-performing stores were
closed. Store closing costs of $114,370 included approximately $67,000 of
leasehold write-offs, $30,000 of lease termination fees, and $5,000 of
professional fees associated with the lease termination negotiations. During
the year ended January 30, 2000, our store at the Palisades Center in West
Nyack, New York was closed due to continued poor performance. Investments in
leasehold improvements of approximately $130,000 were written off upon the
store closing and are included in store closing costs. We are in litigation
with the landlord to mitigate our losses, but as of the date of this filing no
settlement has been reached. (See "Legal Proceedings" in Part I above).
As a result of the foregoing, the loss from operations for the year ended
January 31, 2000 was $714,067, as compared with a loss from operations for the
year ended January 31, 1999 of $1,051,573, an improvement of approximately
$337,500.
Interest expense was $61,996 and $62,560 for the years ended January 30,
2000, and January 31, 1999, respectively, and is comprised primarily of
interest charged on the Bank Note and the construction note payable as
discussed above. Interest income was $11,136 and $18,133 for the years ended
January 30, 2000, and January 31, 1999, respectively, and results from the
daily investing of available cash balances.
Other income was $19,742 and $36,312 for the years ended January 30,
2000, and January 31, 1999, respectively, and consists almost entirely of
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 2000, and are renewable at our option.
Also included in other income for the year ended January 31, 1999, was
approximately $13,000 receivable from the U.S. government resulting from the
carry back of available net operating losses to fiscal year 1997.
As discussed above, in June 1999, we sold in a private placement 223,385
shares of Series A Preferred Stock ("preferred stock"). The holders of the
preferred stock were entitled to receive dividends at the annual rate of 10%
per year. The dividend was payable only upon the conversion of the preferred
stock. (See above for the terms of the conversion.) In November 1999, the
holders of the preferred stock converted all their shares to common stock.
The preferred stock dividend of $10,394 represents the value of the common
stock issued as a dividend.
Also as discussed above, the preferred stock was convertible by the
holder at any time into shares of common stock at $1.25 per share. The
difference between the $220,871 allocated to the preferred stock and $363,000
representing the underlying value of the common stock that the preferred stock
converts to at the issuance date, was recorded as an imputed dividend to the
holders of the preferred stock.
In addition, the preferred stock investors received a warrant to purchase
80,000 shares of the Company's $.002 par value Common Stock at an exercise
price of $4.10 per share. The warrant has a term of three years and expires
in June 2002.
Based on the foregoing, the net loss for the year ended January 30, 2000
was $745,185, which translates to a net loss per share of $(0.71) before
taking into effect the $152,523 of preferred stock dividends as discussed
above, based on 1,055,088 weighted average shares outstanding, or $(0.85)
after consideration of the preferred stock dividends. This compares with a
net loss for the year ended January 31, 1999 of $1,059,688, or $(1.19) per
share, based on 887,513 weighted average shares outstanding as of that date.
Year 2000
- ---------
The Year 2000 problem exists because many computer programs, embedded
systems and components were designed to refer to a year by the last two digits
of the year, such as '99" for "1999." We believe that our activities to
mitigate potential Year 2000 problems have been successful. However, there
are no assurances that the Year 2000 problems incurred by our vendors will not
have a material adverse effect on our business, financial condition or results
of operations.
Impact of Recently Issued Accounting Standards
- ----------------------------------------------
In 1998, SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, and No. 134, Accounting for Mortgage-Backed Securities Retained
After the Securitization of Mortgage Loans held for Sale by a mortgage Banking
Enterprises were issued. These pronouncements are not expected to impact the
Company.
<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditor's Report F-2
Balance Sheet - As of January 30, 2000 F-3
Statements of Operations - For the Fiscal Years Ended January 30, 2000
and January 31, 1999 F-4
Statement of Changes in Stockholders' Equity - For the Fiscal Years Ended
January 31, 1999 and January 30, 2000 F-5
Statements of Cash Flows - For the Fiscal Years Ended January 30, 2000
and January 31, 1999 F-6
Notes to Financial Statements F-7
<PAGE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Premier Concepts, Inc.
Denver, Colorado
We have audited the accompanying balance sheet of Premier Concepts, Inc.
as of January 30, 2000, and the related statements of operations, changes in
stockholders' equity, and cash flows for the fiscal years ended January 30,
2000 and January 31, 1999. 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 30, 2000, and the results of its operations and its cash
flows for the fiscal years ended January 30, 2000 and January 31, 1999, in
conformity with generally accepted accounting principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
March 3, 2000
<PAGE>
<PAGE>
PREMIER CONCEPTS, INC.
BALANCE SHEET
JANUARY 30, 2000
</TABLE>
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 357,653
Restricted cash........................................ 102,903
Merchandise inventories................................ 1,786,255
Prepaid expenses and other............................. 260,229
----------
Total current assets.............................. 2,507,040
Property and Equipment, Net................................. 2,190,331
Other Assets:
Restricted cash........................................ 200,000
Trademarks, net of accumulated amortization of
$93,367............................................... 50,633
Website development cost............................... 131,058
Other.................................................. 71,007
----------
Total Assets...................................... $5,150,069
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable.......................................... $ 466,903
Accounts payable....................................... 1,062,071
Accrued liabilities.................................... 644,676
----------
Total current liabilities......................... 2,173,650
Deferred Rent............................................... 229,234
----------
Total liabilities................................. 2,402,884
----------
Commitments and Contingency (Notes 4 and 5)
Redeemable Common Stock, $.002 par value, 228,571 shares
issued and outstanding.................................... 200,000
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value, 20,000,000 shares
authorized; no shares issued and outstanding........... --
Common stock, $.002 par value; 850,000,000 shares
authorized; 1,328,207 shares issued and outstanding.... 2,656
Additional paid-in capital................................ 6,298,084
Accumulated deficit....................................... (3,753,555)
----------
Total Stockholders' Equity........................ 2,547,185
----------
Total Liabilities and Stockholders' Equity.................. $5,150,069
==========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
--------------------------
JANUARY 30, JANUARY 31,
2000 1999
----------- -----------
<S> <C> <C>
NET REVENUES:
Retail $12,369,383 $12,541,042
Wholesale 8,263 164,560
----------- -----------
Total revenues 12,377,646 12,705,602
COST OF GOODS SOLD 3,671,297 4,158,271
----------- -----------
Gross margin 8,706,349 8,547,331
OPERATING EXPENSES:
Personnel 3,970,176 4,110,433
Occupancy 2,936,361 2,935,159
Other selling, general and administrative 1,883,377 1,937,245
Depreciation and amortization 500,373 501,697
Store closing costs 130,129 114,370
----------- -----------
Total operating expenses 9,420,416 9,598,904
----------- -----------
OPERATING LOSS (714,067) (1,051,573)
OTHER INCOME (EXPENSE):
Interest expense, net (50,860) (44,427)
Other 19,742 36,312
----------- -----------
Other expense, net (31,118) (8,115)
----------- -----------
NET LOSS (745,185) (1,059,688)
Preferred Stock Dividends (10,394) --
Preferred Stock Dividends -- Imputed (142,129) --
----------- -----------
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS $ (897,708) $(1,059,688)
=========== ===========
NET LOSS PER COMMON SHARE (BASIC AND DILUTED)$ (0.85) $ (1.19)
=========== ===========
Weighted Average Common Shares Outstanding
(Basic and Diluted) 1,055,088 887,513
=========== ===========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED JANUARY 31, 1999 AND JANUARY 30, 2000
<TABLE>
<CAPTION>
SERIES A
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
25, 1998 -- $ -- 887,513 $1,775 $5,660,263
$(1,948,682) $3,713,356
Net loss -- -- -- -- --
(1,059,688) (1,059,688)
-------- -------- --------- ------ ----------
- ----------- -----------
BALANCES, January 31,
1999 -- -- 887,513 1,775 5,660,263
(3,008,370) 2,653,668
Common stock
issued in
private
placement -- -- 176,615 353 211,190
-- 211,543
Common stock issued
for services -- -- 2,500 5 4,995
-- 5,000
Preferred stock
issued in
private
placement 223,385 22,339 -- -- 252,118
-- 274,457
Exercise of
stock options -- -- 27,160 54 102,848
-- 102,902
Warrants issued
for services -- -- -- -- 44,800
-- 44,800
Preferred stock
dividend -- -- -- -- (10,394)
-- (10,394)
Conversion of
preferred
stock (223,385) (22,339) 234,419 469 32,264
-- 10,394
Net loss -- -- -- -- --
(745,185) (745,185)
-------- -------- --------- ------ ----------
- ----------- -----------
BALANCES, January
30, 2000 -- $ -- 1,328,207 $2,656 $6,298,084
$(3,753,555) $2,547,185
======== ======== ========= ====== ==========
=========== ===========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
PREMIER CONCEPTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FISCAL
YEARS ENDED
----------------------
JANUARY 31,
2000 1999
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(745,185) $(1,059,688)
Adjustments to reconcile net loss to net
cash from operating activities:
Amortization of warrants issued for services 27,742
Depreciation and amortization 500,373 501,697
Store closing costs 130,129 77,586
Changes in operating assets and liabilities:
(Increase) decrease in:
Merchandise inventories 189,340 332,244
Other assets (136,751) 184,128
Increase (decrease) in:
Accounts payable and accrued liabilities 157,097 276,994
Other liabilities 27,990 39,398
--------- -----------
Net cash provided by operating activities 150,735 352,359
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment (104,057) (835,347)
Capital expenditures for development in Website (131,058) --
--------- -----------
Net cash used in investing activities (235,115) (835,347)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred offering costs (14,000) --
Proceeds from issuance of redeemable common
stock 200,000 --
Proceeds from issuance of common stock 220,768 --
Proceeds from issuance of preferred stock 279,231 --
Proceeds from exercise of options and warrants 102,903 --
Proceeds from issuance of notes payable 12,000 610,000
Payment on notes payable (277,239) (711,788)
--------- -----------
Net cash provided by (used in) financing
activities 523,663 (101,788)
--------- -----------
INCREASE(DECREASE)IN CASH AND CASH EQUIVALENTS 439,283 (584,776)
CASH AND CASH EQUIVALENTS, beginning of period 221,273 806,049
--------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 660,556 $ 221,273
========= ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid for interest $ 58,110 $ 72,203
========= ===========
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:
Conversion of accounts payable to note payable $ -- $ 122,000
========= ===========
Preferred stock dividend -- non-cash $ 10,394 $ --
========= ===========
</TABLE>
See accompanying notes to these financial statements.
<PAGE>
<PAGE>
PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations -- Premier Concepts, Inc. (the "Company") was
incorporated in the state of Colorado in 1988. During 1993, the Company
acquired certain real estate located in a limited stakes gaming city in
Colorado, which were exchanged during 1993 for common stock of Global Casinos,
Inc. (Global), a company which 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 30, 2000, the Company operated 33 retail stores
with a geographic concentration of stores in California, including one store
in San Francisco, California that accounted for approximately 13% and 11% of
total revenues during the fiscal years ended January 30, 2000 and January 31,
1999, respectively.
Liquidity -- The Company's business strategy has been to grow the retail
chain in profitable markets as to leverage its name and goodwill to achieve
additional distribution for its products. At January 30, 2000, the Company had
approximately $230,000 in working capital (net of restricted cash, see Note 5)
and has incurred over $1.7 million in operating losses over the last two
years. Management is attempting to return the Company to profitability by
closing unprofitable stores and restructuring store operations through the
enhancement of executive and senior management. During the year ended January
30, 2000, the Company raised approximately $500,000 in private equity fundings
through sales of the Company's common and preferred stock. It has an
additional $200,000 held in escrow for the sale of redeemable common stock
reflected outside of stockholder's equity (see Note 5).
The Company has also entered into a definitive agreement to merge with
AmazeScape.com, Inc. (AmazeScape) (see Note 7). While AmazeScape only
commenced operations in August 1999 and had no revenues through December 31,
1999 with operating losses, management believes AmazeScape has substantial
potential for growth and the combined operations will enhance the future of
the Company.
Although management cannot assure that future operations will be
profitable nor that additional debt and/or equity capital will be raised, it
believes that its capital resources will be adequate to maintain and realize
its business strategy. Should, however, losses continue it could adversely
affect future operations.
Fiscal Year -- The Company's year is a 52/53-week period ending on the
last Sunday in January. Fiscal years ended January 30, 2000 (fiscal 2000) and
January 31, 1999 (fiscal 1999) contained 364 and 371 days of activity,
respectively.
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.
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. Inventory costs include the amounts
charged by vendors and related freight-in costs.
Property and Equipment -- Property and equipment is stated at cost.
Depreciation is computed over the lesser of the lease term on each location
that the assets reside or 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. This cost is being amortized over 10 years.
Website Development Cost -- The Company is currently developing its
Website and related costs have been capitalized. After the completion of the
Website, capitalized development costs will be amortized over three years,
which is the estimated life of the current Website.
Advertising -- The Company incurs advertising expense in connection with
the marketing of its product. Advertising costs are expensed the first time
the advertising takes place. Advertising expense was $177,198 and $194,349 for
the years ended January 30, 2000 and January 31, 1999, respectively.
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.
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 accounts payable, notes
payable, and accrued liabilities approximate fair value due to their short
maturities.
License Agreements -- The Company grants license agreements to entities
for the use of the Impostors' 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 Statement of
Financial Accounting Standards (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.
Foreign Currency Transactions -- Gains and losses from the effects of
exchange rate fluctuations on transactions denominated in foreign currencies
are included in results of operations. The effects of these transactions are
immaterial for fiscal 2000 and fiscal 1999.
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 and Trademarks -- 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. No
impairment has been taken for the year ended January 30, 2000 or January 31,
1999.
Comprehensive Loss -- Comprehensive loss is defined as all changes in
stockholders' equity, exclusive of transactions with owners, such as capital
investment. Comprehensive loss includes net loss, changes in certain assets
and liabilities that are reported directly in equity such as translation
adjustment on investments in foreign subsidiaries, and certain changes in
minimum pension liabilities. The Company's comprehensive loss was equal to its
net loss for all periods presented in those financial statements.
Stock-Based Compensation -- As permitted under the SFAS No. 123,
Accounting for Stock-Based Compensation, the Company accounts for its
stock-based compensation in accordance with the provisions of Accounting
principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees. As such, compensation expense is recorded on the date of grant for
common stock issued to employees only, if the current market price of the
underlying stock exceeded the exercise price. Certain pro forma net income and
EPS disclosures for employee stock option grants are also included in the
notes to the financial statements as if the fair value method as defined in
SFAS No. 123 had been applied. Transactions in equity instruments with
non-employees for goods or services are accounted for by the fair value
method.
Net Loss Per Common Share -- The Company has adopted SFAS No. 128 which
establishes standards for computing and presenting earnings per share (EPS)
for entities with publicly held common stock. The standard requires
presentation of two categories of EPS -- basic EPS and diluted EPS. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the year. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the Company. All potential dilutive securities
are antidilutive as a result of the Company's net loss for the years ended
January 30, 2000 and January 31, 1999. Accordingly, basic and diluted EPS are
the same for each year. The Company accrued an imputed dividend on the
convertible preferred stock when determining the net loss applicable to common
shareholders (see note 5).
Impact of Recently Issued Accounting Standards -- In 1998, SFAS Nos. 133,
Accounting for Derivative Instruments and Hedging Activities and No. 134,
Accounting for Mortgage-Backed Securities Retained After the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprises were issued.
These pronouncements are not expected to impact the Company.
Reclassification -- Certain reclassifications have been made to conform
fiscal 1999 financial statements to the presentation in fiscal 2000. The
reclassification had no effect on net loss.
2. PROPERTY AND EQUIPMENT:
At January 3, 2000, property and equipment consists of the following:
<TABLE>
<S> <C>
Furniture, fixtures and equipment $ 1,754,626
Leasehold improvements 2,252,451
-----------
4,007,077
Less accumulated depreciation and amortization (1,816,746)
-----------
$ 2,190,331
===========
</TABLE>
Related depreciation and amortization expense for the years ended January
30, 2000 and January 31, 1999 was $487,973 and $489,298, respectively.
3. NOTES PAYABLE AND LONG-TERM DEBT:
Notes payable consist of the following:
<TABLE>
<CAPTION>
JANUARY 30,
2000
-----------
<S> <C>
Note payable to a bank, interest payable monthly at prime
rate plus 1.5% at January 30, 2000, $1,000 monthly
principal payments and the remaining balance due June
2000, collateralized by substantially all the assets of
the Company $404,000
Note payable to an entity for services rendered in
connection with the build-out of the Company's store in
West Nyack, New York. Payable in monthly installments of
$5,000 (single payment of $35,000 due January 1, 2000)
including interest at 10%, maturing in November 2000 46,312
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 12,493
Other 4,098
--------
$466,903
========
</TABLE>
The $404,000 note payable is subject to administrative covenants. At
January 30, 2000, the Company was in compliance with all of the covenants
related to the note.
4. COMMITMENTS:
Lease Commitments -- The Company leases its offices and retail facilities
under operating leases for terms expiring at various dates from 1999 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 years are as follows:
<TABLE>
<S> <C>
2001.................................................... $ 2,181,800
2002.................................................... 2,131,000
2003.................................................... 1,443,100
2004.................................................... 1,260,800
Thereafter.............................................. 3,751,400
-----------
Total minimum lease payments............................ $10,768,100
===========
</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 $2,936,361 and $2,935,159 for the years ended January 30,
2000 and January 31, 1999, respectively. Included in rental expense is
approximately $21,000 and $-0- of additional contingent rent based on
percentage of sales for the years ended January 30, 2000 and January 31, 1999,
respectively.
Management Services Agreement -- In March 1999, the Company entered into
a Management Services Agreement (MSA) with Infusion Capital Partners, LLC
(Infusion). The agreement provides for certain consulting services including
arrangements of the March 1999 private placement of common stock, and the June
1999 private placement of preferred stock, as discussed in Note 5, as well as
strategic, operational and investment banking advice. Infusion received cash
compensation of $50,000 and a warrant to purchase 25,000 shares of common
stock at $1.25 per share, which expires in March 2002 (see Note 5). The
warrant was valued based on its fair value of $27,000. The cash compensation
and value of the warrant were amortized over the term of the agreement which
expired December 31, 1999.
On November 1, 1999, the MSA was extended an additional two years to
December 31, 2001. Infusion received an additional warrant to purchase 25,000
shares of the Company's common stock at $.875 per share which expires in
November 2002 (see Note 5). This warrant is valued at $17,800, and is being
amortized over the term of the extension agreement.
5. REDEEMABLE COMMON STOCK AND STOCKHOLDERS' EQUITY:
Common Shares -- In January 1999, the Company's stockholders approved a 1
for 2 reverse stock split at a future date at the discretion of the Company.
In April 1999, the Company's Board of Directors approved the reverse split
effective immediately. Accordingly, all common stock reflected in the
accompanying financial statements and notes reflect this reverse split for all
periods presented.
Restricted Cash and Redeemable Common Stock -- On November 12, 1999, the
Company sold 228,571 shares of its common stock in a private placement to
International Monetary Group, Inc. (IMG). The $200,000 proceeds from the sale
and the 228,571 shares of common stock are being held in escrow. The escrowed
funds are to be used as partial collateral to facilitate a proposed sale
leaseback financing of certain of the Company's property and equipment.
However, the terms of the proposed sale leaseback transaction have not yet
been negotiated. The funds and the shares of common stock will be released
from the escrow account upon certain terms and conditions, including the
approval of the Company's Board of Directors and consent of the lender in the
proposed debt financing. In the event the merger transaction described in Note
7 is not consummated prior to May 15, 2000 at IMG's option, the $200,000 will
be released from escrow and disbursed to IMG and the Company's common stock
will be returned and canceled. IMG also received a warrant to purchase 32,000
shares of the Company's common stock for $4.10 per share, expiring in November
2001. The stock purchase agreement also entitled IMG to elect one member to
the Company's Board of Directors.
Under the terms of the Agreement and Plan of Merger described in Note 7,
the Company also has placed all of the cash proceeds totaling $102,903 from
the exercise of options or warrants received after November 17, 1999 into
escrow. In the event that the merger transaction is consummated, the funds in
escrow will be released and disbursed to AmazeScape. In the event that the
merger transaction is not consummated, the funds in escrow will be released
and disbursed to Premier Concepts, Inc.
Private Placements of Common Stock -- In March 1999, the Company received
$220,769 from an entity for 176,615 shares of the Company's common stock.
Concurrent with this transaction, the entity also received the right to elect
one member to the Company's Board of Directors.
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. The Board of
Directors has authorized the issuance of Series A and Series B preferred
stock.
Private Placement of Preferred Stock and Additional Warrants -- In June
1999, the Company sold 223,385 shares of its Series A Convertible Preferred
Stock and warrants for the purchase of 80,000 shares of common stock in a
private placement to Equisition Capital, LLC for $279,231. The Company
allocated $220,871 and $58,360 of the proceeds to the convertible preferred
stock and warrants, respectively, based on their relative fair values. The
Series A Preferred Stock is convertible by the holder at any time into shares
of common stock at $1.25 per share. It may also be converted at the Company's
option if the shares of the common stock underlying the conversion are subject
to an effective registration statement and have traded for a period of 20
consecutive trading days at a price in excess of 150% of the conversion price.
The difference between the $220,871 allocated to the preferred stock and the
underlying value of the common stock that the preferred stock converts to at
the issuance date ($363,000) has been accounted for as an imputed dividend to
the holders of the preferred stock and was recognized upon issuance as a
result of the preferred stock being immediately convertible.
The holders of the Series A Preferred Stock are entitled to receive
dividends at the annual rate of 10% per year. The dividend is payable only
upon conversion of the Series A Preferred Stock (dividend payment date). The
dividend is payable only by the issuance of shares of the Company's common
stock valued at fair market value on the dividend payment date. Each share of
Series A Preferred Stock is entitled to one vote.
The warrant to purchase 80,000 shares of the Company's common stock is at
an exercise price of $4.10 per share of common stock. The warrant expires on
June 30, 2002.
On November 11, 1999, Equisition Capital, LLC converted the Series A
Preferred Stock to common stock. A total of 234,419 shares of common stock
were issued in the conversion which included 11,034 shares (valued at $10,394)
issued attributable to the dividend feature.
Series B Convertible Preferred Stock -- On February 3, 2000, the Board of
Directors approved an amendment to the Articles of Incorporation to authorize
a new Series B Convertible Preferred Stock. The new Series B Convertible
Preferred Stock is redeemable at the option of the Company, in whole or in
part, at a liquidation value of $10,000 per share plus accrued and unpaid
dividends. The Series B preferred stock has an annual dividend rate of 3% and
such dividends are cumulative. Each share of Series B preferred stock is
convertible, at the option of the holder, into approximately 3,077 shares of
common stock. All Series B preferred stock automatically convert into common
stock upon the 2nd anniversary of the date of issuance.
Stock Purchase Warrants -- The Company has granted warrants which are
summarized as follows:
<TABLE>
<CAPTION>
FISCAL 2000 FISCAL 1999
--------------------- ---------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding, beginning of
year 437,083 $10.00 437,083 $10.00
Granted 50,000 $1.063 -- --
Granted 112,000 $4.100 -- --
------- ------ ------- ------
Outstanding, end of year 599,083 $8.151 437,083 $10.00
======= ====== ======= ======
Vested, end of year 567,083 $8.380 437,083 $10.00
======= ====== ======= ======
</TABLE>
Included in the preceding table are the 32,000 warrants granted in
conjunction with the IMG redeemable common stock, as discussed above, and can
be rescinded based on the terms of the agreement.
During fiscal 2000, the exercise price of 25,000, 25,000, and 112,000
warrants were granted less than, equal to, and in excess of the market price
of the stock on the grant date, respectively. The weighted average contractual
life for all warrants as of January 30, 2000 was approximately one year, with
the exercise prices ranging from $.875 to $10.00 The weighted average fair
value for all warrants granted in fiscal 2000 and fiscal 1999 was $.72 and
$-0-, respectively. Warrants outstanding at January 30, 2000 will expire as
follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
FISCAL YEARS OF SHARES PRICE
- ------------ --------- --------
<S> <C> <C>
2001 437,083 $10.000
2002 50,000 1.063
2003 112,000 4.100
-------
599,083
=======
</TABLE>
Stock Options -- In 1993, the Company adopted the 1993 Incentive Stock
Option Plan (the "Plan") which provides for the Company to grant options to
purchase up to 115,000 shares of the Company's common stock to officers,
employees, and directors of the Company. In fiscal 1999, the Company increased
the number of authorized shares to 165,000. On February 3, 2000, the Board of
Directors adopted a resolution to increase the number of shares of common
stock for which the options may be issued under the Plan from 165,000 to
272,500, and is pending shareholder approval. Pursuant to the Plan, the
Company may grant incentive stock options (intended to qualify under Section
422 of the Internal Revenue Code of 1986, as amended) and non-qualified stock
options.
Also on February 3, 2000, the Board of Directors approved a resolution to
adopt the Premier Concepts, Inc. 2000 Stock Option Plan ("2000 Plan"), which
would provide for the Company to grant options to purchase up to 1,750,000
shares of the Company's common stock to offices, employees, and directors of
the Company. The 2000 Plan is pending shareholder approval. No options have
been granted under the 2000 Plan.
Under a formula approved by the Board of Directors, each outside director
is automatically granted stock options on their anniversary date 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. Each option is exercisable one year after the date of grant and
expires two years thereafter.
Incentive and non-qualified stock options may not be granted at an
exercise price of less than the fair market value of the common stock on the
date of grant (except for holders of more than 10% of common stock, whereby
the exercise price must be at least 110% of the fair market value at the date
of grant for incentive stock options). The term of the options may not exceed
10 years. At January 30, 2000, the balance of unvested options will vest over
the next year. Options outstanding for the Plan at January 30, 2000 have
exercise prices that range from $1.38 to $7.19.
During fiscal 1996, the Company granted to directors of the Company 6,000
options outside of the Plan to purchase common stock in return for
guaranteeing the Company's corporate office lease. These options have an
exercise price of $5.00 per share. During January 2000, 2,160 shares of common
stock were issued for these options and 2,340 options were surrendered leaving
a balance of 1,500.
The following is a table of activity of the Plan:
<TABLE>
<CAPTION>
FISCAL 2000 FISCAL 1999
--------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding, beginning of
year 125,000 $5.026 115,500 $5.528
Granted to:
Employees 50,000 1.375 -- --
Directors 20,000 3.250 15,000 1.166
Exercised (25,000) 4.113 -- --
Forfeited (10,000) 4.000 (5,500) 5.068
Expired (12,500) 6.700 -- --
------- ------ ------- ------
Outstanding, end of year 147,500 $3.629 125,000 $5.026
======= ====== ======= ======
Vested, end of year 127,500 $3.689 107,500 $5.529
======= ====== ======= ======
</TABLE>
For all options granted during fiscal 2000 and 1999, the weighted average
market price of the Company's common stock on the grant date was approximately
equal to the weighted average exercise price. The fair market value of the
Company's common stock is determined by the quoted closing price on the date
of grant. The weighted average contractual life for all options as of January
30, 2000 was approximately 2.44 years, with the exercise prices ranging from
$1.38 to $7.19. At January 30, 2000, options for 129,000 shares were
exercisable and options for the remaining shares become exercisable pro rata
through fiscal 2001. If not previously exercised, all options outstanding
(includes 1,500 options not included in the Plan) at January 30, 2000, will
expire as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
FISCAL YEARS OF SHARES PRICE
- ------------ --------- ----------
<S> <C> <C>
2001 11,500 $5.870
2002 45,000 4.056
2003 45,000 5.056
2005 47,500 1.375
------- --------
149,000 $3.640
======= ========
</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 SFAS No. 123,
the Company's net loss and loss per share would have been increased to the pro
forma amount indicated below.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------
JANUARY 30, JANUARY 31,
2000 1999
----------- -----------
<S> <C> <C>
Net loss applicable to common shareholders:
As reported $ (897,708) $(1,059,688)
Pro forma $ (991,382) $(1,111,468)
Net loss per common share (basic) and
diluted:
As reported $ (.85) $ (1.19)
Pro forma $ (.94) $ (1.25)
</TABLE>
For purposes of this disclosure, the weighted average fair value of the
options granted in fiscal 2000 and fiscal 1999 was $1.575 and $.900,
respectively. The fair value of each employee option granted in fiscal years
2000 and 1999, was estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------
JANUARY 30, JANUARY 31,
2000 1999
----------- -----------
<S> <C> <C>
Expected volatility 129% 133%
Risk-Free interest rate 5.3% 4.2%
Expected dividends -- --
Expected terms (in years) 4.4 3
</TABLE>
6. 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 years ended:
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 31,
2000 1999
----------- -----------
<S> <C> <C>
Statutory rate (34.0%) (34.0%)
State income taxes, net of Federal income tax
benefit (3.3%) (3.3%)
Increase (reduction) in valuation allowance
related to of net operating loss
carryforwards and change in temporary
differences 37.3% 37.3%
----- -----
0% 0%
===== =====
</TABLE>
The components of the net deferred tax asset recognized as of January 30,
2000 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets (liabilities):
Current -
Capitalized inventory $ 73,000
Prepaid expense (29,000)
Allowance for doubtful accounts 13,000
Inventory reserve 20,000
Other 25,000
Non-current -
Net operating loss carryforwards 625,000
Other 18,000
Valuation allowance (745,000)
---------
Net deferred tax asset $ --
=========
</TABLE>
The valuation allowance was $494,000 at January 31, 1999 increased by
$251,000 for the year ended January 30, 2000.
At January 30, 2000, the Company had net operating loss carryforwards for
Federal tax purposes of approximately $1,675,000. 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 2020.
7. PROPOSED MERGER:
The Company has executed an Agreement and Plan of Merger with AmazeScape.
The pending merger is subject to stockholder approval. At the consummation of
this transaction, stockholders of AmazeScape will be issued 12,462,851 shares
of common stock and 120 shares of Series B convertible stock, representing
approximately 87% of the combined entity. Directors and officers of the
Company and Amazescape will receive options for the purchase of 280,000 shares
of common stock upon consummation of the merger. Additionally, the Company
will issue 250,000 shares of common stock for services providing in arranging
the merger. It is anticipated that this transaction will be accounted for as
a purchase business combination. The transaction will be treated as a reverse
merger, with AmazeScape being the surviving Company for financial reporting
purposes.
<PAGE>
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were neither changes in accountants nor disagreements of the type
required to be reported under this Item between the Company and its
independent accountants, Hein + Associates LLP, during the fiscal years ended
January 30, 2000, or January 31, 1999.
PART III
Part III, Items 9, 10, 11 and 12 are incorporated herein by reference
from the Registrant's definitive proxy statement relating to its Annual
Meeting of Shareholders which will be filed in an amendment within 120 days of
January 31, 2000.
PART IV
EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
--------
Exhibit No. Title
----------- -----
* 2.1 Agreement and Plan of Merger dated as of February 7, 2000
among Premier Concepts, AmazeScape and AmazeMerger
* 2.2 Amendment to Agreement and Plan of Merger dated April 19,
2000 among Premier Concepts, AmazeScape and AmazeMerger
3.1 Articles of Incorporation of Premier Concepts
(incorporated herein by reference to Premier Concepts'
Registration Statement on Form S-1 (File No. 33-42701))
* 3.2 Amendment to Articles of Incorporation of Premier Concepts
authorizing Series A Convertible Preferred Stock and
changing corporate name to "AmazeScape.com, Inc."
3.3 Bylaws of Premier Concepts (incorporated herein by
reference to Premier Concepts Registration Statement on
Form S-1 (File No. 33-42701)).
3.4 Amendment to Bylaws of Premier Concepts (previously filed)
4.1 Specimen Common Stock Certificate of Premier Concepts
(incorporated herein by reference to Premier Concepts
Registration Statement on Form S-1 (File No. 33-42701))
10.1 Employment Agreement dated October 15, 1999 between
AmazeScape.com, Inc. and Harrichand Persaud (previously
filed)
10.2 Employment Agreement dated October 15, 1999 between
AmazeScape.com, Inc. and Anton Nicaj (previously filed)
10.3 Service Provider Agreement dated September 1, 1999 between
AmazeScape.com, Inc. and Meglyn Enterprises, Inc.
(previously filed)
10.4 Service Provider Agreement dated September 9, 1999 between
AmazeScape.com, Inc. and New York Internet Center
(previously filed)
10.5 Management Services Agreement dated October 12, 1999
between AmazeScape.com, Inc. and Infusion Capital
Partners, LLC (previously filed)
10.6 Amendment dated January 28, 2000 to Management Services
Agreement dated December 2, 1999 between AmazeScape.com,
Inc. and Infusion Capital Partners, LLC (previously
filed)
10.7 Warrant to Purchase Shares of AmazeScape common stock
dated October 12, 1999 in favor of Infusion Capital
Partners, LLC (previously filed)
10.8 Warrant to Purchase Shares of AmazeScape common stock
dated January 28, 2000 in favor of Infusion Capital
Partners, LLC (previously filed)
10.9 Translation Services Agreement between AmazeScape.com,
Inc. and E-Lingo Corporation (previously filed)
10.10 Form of Warrants to AmazeScape Directors (previously
filed)
10.11 Employment Agreement between Registrant and Sissel
Eckenhausen (incorporated by reference to Registrant's
Annual Report on Form 10-KSB for the Year Ended January
31, 1999)
10.12 Employment Agreement between Registrant and Todd Huss
(incorporated by reference to Registrant's Annual Report
on Form 10-KSB for the Year Ended January 31, 1999)
10.13 Employment Agreement between Registrant and Kevin O'Brien
(incorporated by reference to Registrant's Annual Report
on Form 10-KSB for the Year Ended January 31, 1999)
10.14 Amendment to Employment Agreement between Registrant and
Sissel Eckenhausen (previously filed)
10.15 Amendment to Employment Agreement between Registrant and
Todd Huss (previously filed)
10.16 Amendment to Employment Agreement between Registrant and
Kevin O'Brien (previously filed)
10.17 Registrant's Consulting Agreement with Cohig & Associates,
Inc. (incorporated by reference to Registrant's
Registration Statement on Form S-1 (File No 33-42701)
10.18 Registrant's Agreement Regarding Basic Terms with Infusion
Capital Partners, LLC (incorporated by reference to
Registrant's Annual Report on Form 10-KSB for the Year
Ended January 31, 1999)
10.19 Registrant's First Stock Purchase Agreement with
Equisition Capital, LLC (incorporated by reference to
Registrant's Annual Report on Form 10-KSB for the Year
Ended January 31, 1999)
10.20 Registrant's Second Stock Purchase Agreement with Infusion
Capital Partners, LLC (incorporated by reference to
Registrant's Annual Report on Form 10-KSB for the Year
Ended January 31, 1999)
10.21 Registrant's Management Services Agreement with Infusion
Capital Partners, LLC (incorporated by reference to
Registrant's Annual Report on Form 10-KSB for the Year
Ended January 31, 1999)
10.22 Voting Agreement dated February 3, 2000 among Premier
Concepts, Sissel Eckenhausen, Ecquisition Capital, LLC and
International Monetary Group (previously filed)
23.1 Consent of Hein + Associates, LLP, independent auditors of
Premier Concepts, Inc.
* Incorporated by reference from the Company's Registration Statement
on Form S-4/A-1, SEC File No. 333-30572, filed on April 21, 2000.
Financial Statement Schedules
-----------------------------
None
Current Reports on Form 8-K
---------------------------
None
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PREMIER CONCEPTS, INC.
Date: 4/27/2000 By:/s/ Sissel Eckenhausen
---------------- --------------------------------
Sissel Eckenhausen, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Sissel Eckenhausen President, 4/27/2000
- ------------------------ Chief Executive -------------------
Officer and Director
/s/ John M. Gerber Director 4/27/2000
- ------------------------ Chairman of the Board -------------------
John M. Gerber of Directors
/s/ William Nandor Director 4/27/2000
- ------------------------ -------------------
William Nandor
/s/ Geraldine Magalnick Director 4/27/2000
- ------------------------ -------------------
Geraldine Magalnick
/s/ Gary Wolf Director 4/27/2000
- ------------------------ -------------------
Gary Wolf
/s/ Todd Huss Chief Financial Officer 4/27/2000
- ------------------------ Principal Accounting -------------------
Todd Huss Officer
<PAGE>
HEIN + ASSOCIATES LLP
Certified Public Accountants
717 SEVENTEENTH STREET, SUITE 1600
DENVER, COLORADO 80202
(303) 298-9600 (tel) (303) 298-8118 (fax)
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference of our report dated March 3, 2000,
accompanying the financial statements of Premier Concepts, Inc. in the Form S-8
Registration Statement of Premier Concepts, Inc. declared effective on October
14, 1997.
Hein + Associates LLP
Denver, Colorado
April 20, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENTS OF OPERATIONS FOUND ON PAGES F-3 AND F-4 OF THE COMPANY'S
FORM 10-KSB FOR THE YEAR ENDED JANUARY 30, 2000, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-30-2000
<PERIOD-END> JAN-30-2000
<CASH> 357,653
<SECURITIES> 0
<RECEIVABLES> 217,553
<ALLOWANCES> (35,698)
<INVENTORY> 1,786,255
<CURRENT-ASSETS> 2,507,040
<PP&E> 4,007,077
<DEPRECIATION> (1,816,746)
<TOTAL-ASSETS> 5,150,069
<CURRENT-LIABILITIES> 2,173,650
<BONDS> 0
0
0
<COMMON> 2,656
<OTHER-SE> 2,544,529
<TOTAL-LIABILITY-AND-EQUITY> 5,150,069
<SALES> 12,377,646
<TOTAL-REVENUES> 12,377,646
<CGS> 3,671,297
<TOTAL-COSTS> 9,420,416
<OTHER-EXPENSES> (19,472)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,996
<INCOME-PRETAX> (745,185)
<INCOME-TAX> 0
<INCOME-CONTINUING> (745,185)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (897,708)
<EPS-BASIC> (0.85)
<EPS-DILUTED> (0.85)
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