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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 29, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission file number 33-42701
PREMIER CONCEPTS, INC.
----------------------------------------------------------
(Exact Name of Small Business Issuer as
Specified in its Charter)
Colorado 84-1186026
---------------------------- ------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number
3033 South Parker Road, Suite 120, Aurora, Colorado 80014
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 338-1800
-----------------------------------------------
(Issuer's telephone number, including area code)
-----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the last 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of December 13, 2000, the Registrant had 1,662,190 shares of its $.002 par
value Common Stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements 3
Balance Sheet as of October 29, 2000 and January 30, 2000 4
Statement of Operations for the Three Months Ended October 29,
2000 and October 31, 1999 6
Statement of Operations for the Nine Months Ended October 29,
2000 and October 31, 1999 7
Statement of Cash Flows for the Nine Months Ended October 29,
2000 and October 31, 1999 8
Notes to Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 11
Liquidity and Capital Resources 11
Results of Operations 16
PART II. OTHER INFORMATION 24
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The method of financial reporting is a fifty-two - fifty-three (52-53)
week fiscal year ending on the last Sunday in January of each year. The
accompanying balance sheet at October 29, 2000, statements of operations for
the three and nine months ended October 29, 2000, and October 31, 1999, and
statements of cash flows for the nine months ended October 29, 2000, and
October 31, 1999 are unaudited but reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the financial position
and results of operations for the interim period presented. The interim
financial statements are not necessarily indicative of results of operations
expected for the fiscal year. The balance sheet as of January 30, 2000 is
derived from the audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. As a
result, these financial statements should be read in conjunction with the
Premier Concepts Form 10-KSB for the year ended January 30, 2000.
Forward-Looking Statements
In addition to historical information, this Quarterly Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective. The forward-looking
statements contained herein are subject to certain risks and uncertainties
that could cause actual results to differ materially from those reflected in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, competitive pressures, changing economic
conditions, those discussed in the Section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and other
factors, some of which will be outside the control of Premier Concepts.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof.
Premier Concepts undertakes no obligation to publicly revise these forward-
looking statements to reflect events or circumstances that arise after the
date hereof. Readers should refer to and carefully review the information in
future documents Premier Concepts files with the Securities and Exchange
Commission.
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<TABLE>
<CAPTION>
PREMIER CONCEPTS, INC.
BALANCE SHEET
AS OF OCTOBER 29, 2000 AND JANUARY 30, 2000
(UNAUDITED)
October 29, January 30,
2000 2000
------------ -----------
<S> <C> <C>
ASSETS
------
Current Assets:
Cash & Cash Equivalents $ 408,513 $ 357,653
Restricted Cash - 102,903
Merchandise Inventories 1,640,127 1,786,255
Prepaid Expenses & Other Current Assets 111,958 260,229
------------ -------------
Total Current Assets 2,160,598 2,507,040
Property and Equipment, net 2,107,632 2,190,331
Other Assets:
Restricted Cash 200,000 200,000
Trademarks, net 41,333 50,633
Website Development Costs, net 122,216 131,058
Other 72,545 71,007
------------ -------------
Total Assets $ 4,704,324 $5,150,069
============ =============
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
`Current Liabilities:
Notes Payable $ 193,535 $ 466,903
Accounts Payable 1,167,992 1,062,071
Accrued Liabilities 519,060 644,676
------------ -------------
Total Current Liabilities 1,880,587 2,173,650
Long-term Debt 267,500 -
Deferred Rent 240,823 229,234
------------ -------------
Total Liabilities 2,388,910 2,402,884
------------ -------------
Redeemable Common Stock and Warrants,
$.002 par value, 228,571 shares issued
and outstanding and 32,000 warrants 200,000 200,000
Shareholders' Equity:
Preferred Stock, $.10 par value,
20,000,000 shares authorized; none
issued and outstanding at October 29,
2000 and January 30, 2000 - -
Series B Convertible Preferred Stock,
3% cumulative, redeemable, convertible
to 369,231 shares of common stock, 120
shares authorized; none issued and
outstanding at October 29, 2000 and
January 30, 2000 - -
Common Stock, $.002 par value; 850,000,000
shares authorized; 1,433,619 shares
issued and outstanding at October 29,
2000, and 1,328,207 shares issued and
outstanding at January 30, 2000 2,867 2,656
Additional Paid-in Capital 7,034,690 6,298,084
Accumulated Deficit (4,922,143) (3,753,555)
------------ ------------
Total Stockholders' Equity 2,115,414 2,547,185
------------ ------------
Total Liabilities & Equity $ 4,704,324 $5,150,069
============ ============
</TABLE>
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<TABLE>
<CAPTION>
PREMIER CONCEPTS, INC.
STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED OCTOBER 29, 2000 AND OCTOBER 31, 1999
(UNAUDITED)
Three Months Three Months
Ended October Ended October
29, 2000 30, 1999
------------- ----------------
<S> <C> <C>
Total Revenues 2,536,146 2,958,986
Cost of Goods Sold 781,253 855,092
------------ ------------
Gross Margin 1,754,893 2,103,894
Operating Expenses:
Personnel 874,372 1,007,322
Occupancy 691,520 748,199
Other Selling, General and
Administrative 411,445 481,214
Depreciation and Amortization 134,749 129,995
------------ ------------
Total Operating Expenses 2,112,086 2,366,730
Operating Loss (357,193) (262,836)
Other Income (Expenses):
Merger costs (173,287) -
Interest, net (7,035) (17,724)
Other 4,368 6,505
------------ ------------
Other, net (175,954) (11,219)
------------ ------------
Net Loss (533,147) (274,055)
Preferred Stock Dividends - (9,540)
------------ ------------
Net Loss Available to Common Shareholders $ (533,147) $ (283,595)
============ ============
Net Loss Per Common Share
(Basic and Diluted): $ (0.37) $ (0.27)
============ ============
Weighted Average Shares Outstanding 1,433,619 1,069,128
============ ============
</TABLE>
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<TABLE>
<CAPTION>
PREMIER CONCEPTS, INC.
STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED OCTOBER 29, 2000 AND OCTOBER 31, 1999
(UNAUDITED)
Nine Months Nine Months
Ended October 29, Ended October
2000 31, 1999
---------------- -------------
<S> <C> <C>
Total Revenues 7,754,589 8,547,921
Cost of Goods Sold 2,386,250 2,568,863
------------ ------------
Gross Margin 5,368,339 5,979,058
Operating Expenses:
Personnel 2,731,537 2,871,354
Occupancy 2,062,649 2,181,903
Other Selling, General and
Administrative 1,191,691 1,306,713
Depreciation and Amortization 373,354 378,369
------------ ------------
Total Operating Expenses 6,359,231 6,738,339
Operating Loss (990,892) (759,281)
Other Income (Expenses):
Merger costs (173,287) -
Interest, net (18,737) (41,572)
Other 14,328 14,815
------------ ------------
Other, net (177,696) (26,757)
------------ ------------
Net Loss (1,168,588) (786,038)
Preferred Stock Dividends - (9,540)
Preferred Stock Dividends - Imputed - (157,560)
------------ ------------
Net Loss Available to Common Shareholders $(1,168,588) $ (953,138)
============ ============
Net Loss Per Common Share
(Basic and Diluted): $ (0.82) $ (0.95)
============ ============
Weighted Average Shares Outstanding 1,418,949 1,007,509
============ ============
</TABLE>
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<TABLE>
<CAPTION>
PREMIER CONCEPTS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED OCTOBER 29, 2000 AND OCTOBER 31, 1999
(UNAUDITED)
Nine Months Ended Nine Months Ended
October 29, 2000 October 31, 1999
----------------- -----------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $(1,168,588) $ (786,038)
Adjustments to reconcile net loss
to net cash from operating
activities:
Amortization of warrants
issued for services 6,675 16,200
Depreciation and amortization 373,354 378,369
Changes in operating assets and
liabilities:
(Increase) decrease in:
Merchandise inventories 146,128 (100,172)
Other assets 140,058 (47,981)
Increase (decrease) in:
Accounts payable and accrued
liabilities (19,695) 266,524
Other liabilities 11,589 38,884
------------- ---------------
Net cash used by operating
activities (510,479) (234,214)
Cash Flows From Investing Activities:
Capital expenditures for property
and equipment (261,855) (80,042)
Capital expenditures for development
of website (10,658) (106,353)
------------- ---------------
Net cash used by investing
activities (272,513) (186,395)
Cash Flows From Financing Activities:
Proceeds from exercise of options
and warrants 724,970 -
Proceeds from sales of warrants 11,847 -
Increase in restricted cash from
exercise of options and warrants,
and sale of warrants (743,658) -
Decrease in restricted cash for
capital expenditures and working
capital 846,561 -
Deferred offering costs - (14,000)
Proceeds from issuance of common stock -
220,769
Proceeds from issuance of preferred
stock - 279,231
Issuance of note payable 60,815 12,000
Payments on notes payable (66,683) (160,961)
------------- ---------------
Net cash provided by financing
activities 833,852 337,039
------------- ---------------
Increase (Decrease) in Cash and Cash
Equivalents 50,860 (83,570)
Cash & Cash Equivalents, beginning of
period 357,653 221,273
------------- ---------------
Cash & Cash Equivalents, end of period $ 408,513 $ 137,703
============= ================
Supplemental Schedule of Cash Flow
Information:
Cash paid for interest $ 34,487 $ 35,077
============= ================
Preferred stock dividend - Non-cash $ - $ 9,540
============= ================
</TABLE>
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PREMIER CONCEPTS, INC.
NOTES TO FINANCIAL STATEMENTS
October 29, 2000
(UNAUDITED)
COMMITMENTS AND CONTINGENCIES
-----------------------------
LITIGATION. Premier Concepts is subject to legal proceedings, claims and
liabilities, which arise in the ordinary course of its business. In the
opinion of management, the disposition of these actions will not have a
material adverse effect upon Premier's financial position or results of
operations. (See PART II. OTHER INFORMATION--Item 1. Legal Proceedings.)
SEASONALITY AND QUARTERLY FLUCTUATIONS
--------------------------------------
Our faux jewelry chain, operating under the trade names Impostors,
Elegant Pretenders and Joli Joli, historically has realized lower sales during
the first three quarters which has resulted in incurring operating losses
during those quarters. To this end, we have generated an operating loss
during the nine months ended October 29, 2000 of $990,892, as compared to an
operating loss of $759,281 for the nine months ended October 31, 1999.
Our retail business is highly seasonal with our mall locations generating
approximately 20% of revenues during the December holiday season. Our 10
tourist locations experience fluctuations, based upon such factors as
seasonality, economic conditions and other factors affecting tourism in their
particular locations.
PROPOSED MERGER:
---------------
In February 2000, Premier Concepts executed an Agreement and Plan of
Merger with AmazeScape.com, Inc. In October 2000, the Agreement and Plan of
Merger was terminated by Premier Concepts. As a result, approximately
$173,000 of merger costs relating to a receivable from AmazeScape for costs
incurred on our behalf in connection with the proposed merger were written
off. These costs primarily included legal, accounting, and printing fees.
Under the terms of the merger agreement, these costs were to be paid by
AmazeScape as they came due. We are currently contemplating various options
available to us to recover all or part of these costs from AmazeScape.
REDEEMABLE COMMON STOCK AND WARRANTS:
------------------------------------
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 were
to be used as partial collateral to facilitate a debt financing. In the event
the proposed merger with AmazeScape.com was not consummated prior to November
30, 2000, at the investor's option the $200,000 would 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 October 29, 2000, and the escrowed shares of common stock are
classified as redeemable common stock.
Subsequent to October 29, 2000, the investor declined to exercise its
right to purchase the common stock and warrant. As such, the common stock and
warrant are being released from escrow to Premier Concepts, and will be
cancelled. For purposes of calculating earnings per share, the escrowed
shares were not considered for the three or nine months ended October 29,
2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this report.
RETAIL FISCAL YEAR
The method of financial reporting is a fifty-two to fifty-three (52-53)
week fiscal year ending on the last Sunday in January of each year. Likewise,
reporting quarters end on the Sunday closest to the calendar end of April,
July and October. Each reporting quarter contains 13 weeks of operations.
LIQUIDITY AND CAPITAL RESOURCES - OCTOBER 29, 2000 COMPARED TO JANUARY 30,
2000
At October 29, 2000 our operating cash balance of $408,513 was
approximately 14% greater than the cash balance of $357,653 at January 30,
2000. The cash balance of October 29, 2000 includes approximately $400,000
received from an escrow account. Under the terms of the Agreement and Plan of
Merger with AmazeScape.com, Inc., any funds received from the exercise or
sales of equity securities during the merger process were to be held in escrow
until the completion of the merger. In October 2000, we terminated the
Agreement with AmazeScape, and the funds were released to us. Previous to the
release, these funds were classified as restricted cash.
During the nine months ended October 29, 2000, merchandise inventories
decreased $146,128, or approximately 8%, representing the normal reduction of
inventories during the slower summer retail season. Merchandise inventories
are expected to increase during the fourth quarter in preparation of the 2000
holiday shopping season.
Prepaid expenses and other current assets, which includes prepaid
operating expenses and accounts receivable, decreased by approximately
$148,000. This decrease is due do the write-off of approximately $173,000
relating to a receivable from AmazeScape for costs incurred in connection with
the proposed merger. These costs primarily included legal, accounting, and
printing fees. Under the terms of the merger agreement, these costs were to
be paid by AmazeScape as they came due. We are currently contemplating
various options available to us to recover all or part of these costs from
AmazeScape.
Also included in prepaid expenses and other current assets is
approximately $10,400 representing the remaining 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 possible debt and
equity financing, 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
as professional services over the life of the extended agreement.
As a result of the foregoing, current assets, net of restricted cash as
discussed above, decreased by $243,539 from $2,404,137 at January 30, 2000 to
$2,160,598 at October 29, 2000.
For the nine months ended October 29, 2000, accounts payable and accrued
expenses decreased slightly by $19,695, or approximately 1%, and is attributed
primarily to the related decrease in merchandise inventory. Accounts payable
and accrued expenses primarily include amounts payable to merchandise vendors
and other suppliers of products and services used in the ordinary course of
business.
Notes payable and long-term debt decreased slightly by approximately
$5,900. This decrease is the result of regularly scheduled payments made of
$66,683. In September 2000, an officer loaned the Company $30,000 for short-
term working capital. The note bears interest at the rate of 10% per year,
requires no periodic principal or interest payments, and matures on December
31, 2000. In July 2000, a short-term note in the amount of $13,515 was issued
to finance a portion of our directors' and officers' liability insurance
package. The note bears interest at 12.5%, requires monthly principal and
interest payments of $1,817, and matures in March 2001. In March 2000, a
short-term note in the amount of $17,023 was issued to finance a portion of
our commercial liability insurance package. The note bears interest at 11%,
requires monthly principal and interest payments of $1,979, and matures on
November 28, 2000.
Included in notes payable and long-term debt is a bank note with a
principal balance of $389,580 at October 29, 2000. Prior to October 5, 2000,
this note required monthly principal payments of $1,000 plus accrued interest
at the Bank's prime lending rate plus 1.5%. The note matured on June 20,
2000, and was extended to October 5, 2000, under essentially the same terms.
On October 5, 2000, the note was renewed. The renewed note requires monthly
principal and interest payments of $8,000 beginning on December 5, 2000. In
addition, one time principal payments of $3,580 and $70,000 are due on
November 20, 2000 and December 20, 2000, respectively. The note bears
interest at the Bank's prime lending rate plus 3% (12.5% at October 29, 2000),
and matures on December 5, 2001 at which time all unpaid principal and
interest are due.
Also included in notes payable is approximately $18,000 representing the
balance of a note payable to a contractor relating to the construction of a
store in Palisades Center in West Nyack, New York in 1998. This store was
closed in January 2000 due to poor performance. This note required monthly
installments of $5,000 including principal and interest at 10% and was to
mature in November 2000. In November we negotiated an extension of the
maturity date to December 22, 2000.
As a result of the foregoing, current liabilities decreased approximately
$293,000 from $2,173,650 at January 30, 2000, to $1,880,587 at October 29,
2000. Working capital, net of restricted cash as discussed below, increased
$49,524 from $230,487 at January 30, 2000 to $280,011 at October 29, 2000.
During the nine months ended October 29, 2000 we invested approximately
$262,000 in property and equipment. Approximately $219,000 was invested in
development, design and construction for our new store at the Aladdin Hotel
and Casino in Las Vegas, Nevada. The new store, operating under the trade
name "Joli-Joli" opened for business on August 17, 2000. In addition, during
the nine months ended October 29, 2000, we invested approximately $7,000 to
remodel our Impostors store at Harbor Place in Baltimore, Maryland. Also
during the nine months ended October 29, 2000 we invested approximately
$24,000 to upgrade our accounting software and systems at our corporate
offices in Aurora, Colorado. This compares with approximately $80,000
invested in property and equipment for the nine months ended October 31, 1999,
which consisted primarily of furniture and equipment improvements at our
corporate offices, costs associated with the securing of our location at the
Aladdin Hotel and Casino, and other minor improvements at existing retail
locations.
Based on the foregoing, property and equipment, net of accumulated
depreciation, decreased $82,699, from $2,190,331 at January 30, 2000, to
$2,107,632 at October 29, 2000.
In October 1996, we developed and launched our first e-commerce website
"impostors.com" which provided our initial Internet presence. While the
website had the capability to generate sales of our product, we realized only
modest revenue generated directly from the website. In July 1999, we started
the process of developing a new e-commerce platform "premierjewelry.com" from
which we showcase existing and new product concepts. As of October 29, 2000,
we had invested $141,716 in the development of the new "premierjewelry.com"
website, of which approximately $10,700 was invested during the nine months
ended October 29, 2000. The new site was launched on May 30, 2000. The
investment is being amortized over three years, and at October 29, 2000, we
had amortized $19,500 of this investment.
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 $41,333 at October 29, 2000.
Other non-current assets primarily include security deposits made to
landlords and utility service providers. The balance of $72,545 at October
29, 2000 is relatively unchanged from the January 30, 2000 balance of $71,007.
Deferred rent increased $11,589 from $229,234 at January 30, 2000, to
$240,823 at October 29, 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.
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 were
to be used as partial collateral to facilitate a debt financing. In the event
the proposed merger with AmazeScape.com was not consummated prior to November
30, 2000, at the investor's option the $200,000 would 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 October 29, 2000, and the escrowed shares of common stock are
classified as redeemable common stock. Subsequent to October 29, 2000, the
investor declined to exercise its right to purchase the common stock and
warrant. As such, the common stock and warrant are being released from escrow
to Premier Concepts, and will be cancelled.
During the nine months ended October 29, 2000 certain employees purchased
30,000 shares of common stock through the exercise of stock options awarded
from our Incentive Stock Option Plan. The total proceeds from the exercise of
these options were $69,375.
Also during the nine months ended October 29, 2000, 35,462 shares of
common stock were issued from exercises of the public "A" warrants that were
issued as part of the public offering completed in April 1997. Two "A"
warrants are exercisable to purchase one share of common stock at an exercise
price of $10.00 per share. In October 2000, the expiration date for these
warrants was extended to October 26, 2001. The total proceeds received from
the exercise of these warrants were $354,620.
Also during the nine months ended October 29, 2000, 39,950 shares of
common stock were issued from the exercise of other options and warrants. Of
this, 29,450 shares of common stock were issued from the exercise of options
held by the representatives of the underwriter of our public offering
completed in April 1997. These options are exercisable to purchase one share
of common stock at an exercise price of $9.00 per share, and expire in April
2002. The total proceeds from exercise of these options were $265,050. At
October 29, 2000, there remained outstanding 25,550 representative options.
In addition, 8,000 shares were issued to an investor from the exercise of
warrants acquired from the June 1999 private placement of convertible
preferred stock. These warrants are exercisable to purchase one share of
common stock at an exercise price of $4.10, and expire in June 2002. The
total proceeds received from exercise of these 8,000 warrants were $32,800.
At October 29, 2000, 72,000 of the warrants issued in connection with the June
1999 private placement remained outstanding. Additionally, 2,500 shares were
issued to an investor from the exercise of warrants acquired in March 1999 as
compensation for providing services under a Management Services Agreement.
These warrants are exercisable to purchase one share of common stock at an
exercise price of $1.25 per share, and expire in June 2002. The total
proceeds received from exercise of these warrants were $3,125. At October 29,
2000, 22,500 of these warrants were outstanding.
During the nine months ended October 29, 2000, the representatives of the
underwriter of our public offering completed in April 1997, exercised options
to purchase 32,908 "A" warrants, the terms of which are described above. The
options are exercisable to purchase one "A" warrant at an exercise price of
$.36 per warrant. The total proceeds received from the exercise of these
options to purchase warrants were $11,487. At October 29, 2000, 22,092
options to purchase "A" warrants were outstanding.
The total proceeds received from the exercise of options and warrants was
$736,817 for the nine months ended October 29, 2000. Under the terms of the
Agreement and Plan of Merger with AmazeScape, we had placed into escrow all of
the cash proceeds from the exercise of options or warrants received after
November 17, 1999. In July 2000, by agreements with AmazeScape, $370,000 was
released from the escrow account. Of these funds released, Premier Concepts
received $300,000, of which $100,000 was designated to pay construction costs
for our new store at the Aladdin Hotel and Casino as discussed above, with the
remaining $200,000 available as general working capital. By agreement,
AmazeScape received $70,000 of the released funds, which were used to pay for
certain professional fees incurred in association with the proposed merger.
Premier Concepts also received an additional $50,000 of these funds in August
2000. As discussed above, in October 2000, we terminated the Agreement and
Plan of Merger with AmazeScape, and as such the remaining approximately
$400,000 was released from the escrow account to Premier Concepts and is
included in our cash balance at October 29, 2000.
As a result of the foregoing, common stock increased $211, from $2,656
(1,328,207 shares outstanding) at January 30, 2000, to $2,867 (1,433,619
shares outstanding) at October 29, 2000. Additional paid in capital increased
$736,606 from $6,298,084 at January 30, 2000 to $7,034,690 at October 29,
2000.
As a result of the net loss for the nine months ended October 29, 2000 of
$1,168,588, the accumulated deficit increased from $3,753,555 at January 30,
2000 to $4,922,143 at October 29, 2000. Considering the net loss and the
equity transactions as discussed above, total stockholders' equity decreased
$431,771 from $2,547,185 at January 30, 2000 to $2,115,414 at October 29,
2000.
Net cash used by operating activities was $510,479 for the nine months
ended October 29, 2000 compared with $234,214 for the nine months ended
October 31, 1999. The change of approximately $276,000 primarily represents
the cash effect of the increase in the net loss for the nine months and the
decreases in merchandise inventories, other assets, and accounts payable and
accrued liabilities as discussed above.
Net cash used by investing activities was $272,513 for the nine months
ended October 29, 2000 compared with $186,395 for the nine months ended
October 31, 1999. The change of approximately $86,000 is attributable to our
investment in the new store at the Aladdin Hotel and Casino in Las Vegas,
Nevada, and our investment in the website during the nine months ended October
31, 1999, and October 29, 2000, all as discussed above.
Net cash provided by financing activities for the nine months ended
October 29, 2000 was $833,852, and primarily represents the proceeds from the
exercise of options and warrants and the sales of warrants as discussed above.
This compares to net cash provided by financing activities of $337,039 for the
nine months ended October 31, 1999, which represented $211,544 in proceeds
(net of $9,225 of costs of the offering) from a private placement of common
stock in March 1999, $274,456 in proceeds (net of $4,775 of costs of the
offering) from a private placement of preferred stock in June, 1999 and a
$112,000 principal reduction of our bank note, as well as regularly scheduled
payments on notes payable.
The foregoing resulted in an increase of $50,860 in our operating cash
position from $357,653 at January 30, 2000 to $408,513 at October 29, 2000.
This compares with a decrease in cash of $83,570 from $221,273 at January 31,
1999 to $137,703 at October 31, 1999.
As of the date of this report, no additional leases to open retail
locations have been executed. However, possible new locations are evaluated
on an ongoing basis. 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. 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 - THREE MONTHS ENDED OCTOBER 29, 2000 COMPARED TO THREE
MONTHS ENDED OCTOBER 31, 1999
Set forth below is selected summary financial data derived from the
financial statements and financial records.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
October 29, 2000 October 31, 1999
----------------- -----------------
<S> <C> <C>
Statements of Operations Data:
Total Revenues $ 2,536,146 $ 2,958,989
Operating loss (357,193) (262,836)
Net loss (533,147) (274,055)
Net loss available to common
shareholders (533,147) (283,595)
Net loss per common share (.37) (.27)
Weighted average shares outstanding 1,433,619 1,069,128
Statistical Data:
Store revenues $ 2,528,908 $ 2,956,552
Store gross margin 1,751,583 2,101,681
Store operating expenses 1,687,513 1,932,604
Store operating profit 64,070 169,076
Corporate overhead operating expenses 409,920 433,379
Gross margin percentage 69.2% 71.1%
Comparable same store sales (31 stores) 2,401,377 2,608,339
Comparable same store sales growth -7.9% 15.5%
</TABLE>
Total revenues for the three months ended October 29, 2000 were
$2,536,146 as compared to $2,958,986 for the comparable period ended October
31, 1999, a decrease of $422,840, or 14%. Comparable same store sales were
$2,401,377 for the three months ended October 29, 2000 as compared to
$2,608,339 for the comparable period ended October 31, 1999, a decrease of
approximately $207,000, or 7.9%. Of the comparable same store sales decrease,
approximately $152,000 is attributed to three stores located in the
predominantly tourist areas of San Francisco, California, Las Vegas, Nevada,
and Orlando, Florida. Non-same store sales of approximately $348,200 and
$127,500 for the three months ended October 31, 1999, and October 29, 2000,
respectively, is attributable to three stores closed during the year ended
January 30, 2000, two stores closed in June and September 2000, and one new
store opened in August 2000:
Aladdin Hotel and Casino, Las Vegas, NV - opened August 17, 2000;
Paradise Valley, Phoenix, AZ - closed December 26, 1999 upon expiration
of lease;
Pentagon City, Arlington, VA - closed January 25, 2000 upon expiration of
lease;
Palisades Center, West Nyack, NY - closed January 25, 2000 due to poor
performance;
Tyson's Corner, McLean, VA - closed June 27, 2000 upon expiration of
lease; and,
Main Place, Santa Ana, CA - closed September 19, 2000 upon expiration of
lease.
Also included in total revenues are approximately $7,238 and $2,434 for
the quarters ended October 29, 2000 and October 31, 1999, respectively. These
revenues generally represent sales generated from our website, catalog and
sales to wholesale customers.
For the three months ended October 29, 2000, cost of goods sold was
$781,253 and the gross margin was $1,754,893, or 69.2%. For the three months
ended October 31, 1999, cost of goods sold was $855,092 and the gross margin
was $2,103,894, or 71.1%. The decrease in the gross margin percentage is
attributed primarily to discount and promotional activities during the quarter
to clear out seasonal merchandise in preparation for the upcoming holiday
shopping season. The gross margin is expected to increase during the fourth
quarter. Included in cost of goods sold are freight charges incurred in the
acquisition of our merchandise from vendors. Total freight charges included
in cost of goods sold was $25,214, or 1.0% of total revenue for the quarter
ended October 29, 2000. This compares with freight charges of $22,130, or
0.75% of total revenue for the quarter ended October 31, 1999.
Total operating expenses were $2,112,086 for the quarter ended October
29, 2000, compared to $2,366,730 for the quarter ended October 31, 1999, or
83.3% and 80.0% of revenues, respectively. The majority of these expenses
were comprised of store and corporate office personnel expenses, which
amounted to $874,372, or 34.5% of revenues, and $1,007,322, or 34.0% of
revenues for the quarters ended October 29, 2000, and October 31, 1999,
respectively, a decrease of approximately $133,000. This decrease is
attributed primarily to operating three fewer stores during the quarter ended
October 29, 2000, than during the quarter ended October 31, 1999. Total
personnel costs for our corporate personnel remained relatively unchanged from
approximately $208,000 to $216,000 for the quarters ended October 31, 1999,
and October 29, 2000, respectively.
Occupancy costs of $691,520, and $748,199, are included in total
operating expenses for the three months ended October 29, 2000 and October 31,
1999, respectively. The decrease of approximately $57,000 represents
operating three fewer stores during the quarter ended October 29, 2000
compared to the quarter ended October 31, 1999.
Other selling, general and administrative expenses of $411,445 and
$481,214 are included in total operating expenses for the quarters ended
October 29, 2000 and October 31, 1999, respectively, representing a decrease
of approximately $70,000. Following is a comparative summary of costs
included in other selling, general and administrative expenses, and their
relationship to total revenues for the periods:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
October 29, 2000 October 31, 1999
----------------- -----------------
<S> <C> <C> <C> <C>
Advertising and promotion $ 53,344 2.1% $ 69,133 2.30%
Banking fees 59,428 2.3% 66,048 2.2%
Merchandise distribution 20,648 0.8% 41,312 1.4%
Repairs and rentals 19,303 0.8% 14,750 0.5%
Property insurance, fees, and taxes 40,670 1.6% 21,498 0.7%
Professional and service fees 45,133 1.8% 70,492 2.4%
Supplies and product packaging 50,828 2.0% 60,300 2.0%
Telephone and utilities 60,352 2.4% 57,316 1.9%
Travel 41,649 1.6% 64,176 2.2%
Other 20,090 0.8% 16,189 0.5%
------------ -----------
$ 411,445 16.2% $ 481,214 16.3%
============ ===========
</TABLE>
Included in total operating expenses are corporate overhead expenses of
$409,920, or 16.2% of total revenues, for the three months ended October 29,
2000, as compared to $433,379, or 14.6% of total revenues, for the three
months ended October 31, 1999, representing a decrease of approximately
$23,500 for the comparable period. 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 $134,749 and $129,995 for the quarters ended
October 29, 2000 and October 31, 1999, respectively. Included in depreciation
and amortization for the quarter ended October 29, 2000 is $11,700 of
amortization of our website investment. Total depreciation expense relating
to our property and equipment was $119,949 and $126,895 for the quarters ended
October 29, 2000, and October 31, 1999, a decrease of approximately $7,000 and
is primarily attributed to the three stores closed during the year ended
January 30, 2000, as discussed above.
As a result of the foregoing, the loss from operations for the quarter
ended October 29, 2000 was $357,193, as compared with a loss from operations
for the quarter ended October 31, 1999 of $262,836, an increase of $94,357.
As discussed above, in October we terminated the Agreement and Plan of
Merger with AmazeScape. As a result, we wrote-off $173,287 of merger costs
relating to a receivable from AmazeScape for costs incurred on our behalf in
connection with the proposed merger. These costs primarily included legal,
accounting, and printing fees. Under the terms of the merger agreement, these
costs were to be paid by AmazeScape as they came due. We are currently
contemplating various options available to us to recover all or part of these
costs from AmazeScape.
Interest expense was $10,359 and $19,493 for the quarters ended October
29, 2000, and October 31, 1999, respectively, and is comprised primarily of
interest charged on the Bank Note as discussed above. Interest income was
$3,324 and $1,769 for the quarters ended October 29, 2000, and October 31,
1999, respectively, and results from the daily investing of available cash
balances.
Other income was $4,368 and $6,505 for the quarters ended October 29,
2000, and October 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 2001, and are renewable at our option.
On June 30, 1999 we issued 223,385 shares of Series A Convertible
Preferred Stock in a private placement for $279,231. Each share of preferred
stock was convertible to a share of common stock at $1.25 per share. All
shares of the Series A Preferred Stock were converted to common stock in
November 1999. The holders of the Series A Preferred Stock were entitled to
receive dividends at the annual rate of 10% per year based on the preferred
stock's stated value of $1.25 per share. For the three months ended October
31, 1999, the dividend to the holders of the preferred stock was $9,540.
Based on the foregoing, the net loss for the three months ended October
29, 2000 was $533,147, which translates to a net loss per share of $(0.37)
based on 1,433,619 weighted average shares outstanding. This compares with a
net loss for the three months ended October 31, 1999 of $283,595, or $(0.27)
per share, based on 1,069,128 weighted average shares outstanding as of that
date.
RESULTS OF OPERATIONS - NINE MONTHS ENDED OCTOBER 29, 2000 COMPARED TO NINE
MONTHS ENDED OCTOBER 31, 1999
Set forth below is selected summary financial data derived from the
financial statements and financial records.
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
October 29, 2000 October 31, 1999
----------------- -----------------
<S> <C> <C>
Statements of Operations Data:
Total Revenues $ 7,754,589 $ 8,547,921
Operating loss (990,892) (759,281)
Net loss (1,168,588) (786,038)
Net loss available to common shareholders (1,168,588) (953,138)
Net loss per common share (.82) (.95)
Weighted average shares outstanding 1,418,949 1,007,509
Statistical Data:
Store revenues $ 7,740,524 $ 8,528,814
Store gross margin 5,365,239 5,976,003
Store operating expenses 5,105,829 5,459,806
Store operating profit 259,410 516,197
Corporate overhead operating expenses 1,228,461 1,276,467
Gross margin percentage 69.2% 69.9%
Comparable same store sales (31 stores) 7,395,144 7,464,292
Comparable same store sales growth -0.9% 2.9%
</TABLE>
Total revenues for the nine months ended October 29, 2000 were $7,754,589
as compared to $8,547,921 for the comparable period ended October 31, 1999, a
decrease of $793,332, or 9.3%. Comparable same store sales were $7,395,144
for the nine months ended October 29, 2000 as compared to $7,464,292 for the
comparable period ended October 31, 1999, a decrease of approximately $48,000,
or 0.9%. Non-same store sales of approximately $1,064,522 and $345,380 for
the nine months ended October 31, 1999, and October 29, 2000, respectively, is
attributable to three stores closed during the year ended January 30, 2000,
two stores closed in June and September 2000, and one store opened in August
2000:
Aladdin Hotel and Casino, Las Vegas, NV - opened August 17, 2000;
Paradise Valley, Phoenix, AZ -- closed December 26, 1999 upon expiration
of lease;
Pentagon City, Arlington, VA - closed January 25, 2000 upon expiration of
lease;
Palisades Center, West Nyack, NY - closed January 25, 2000 due to poor
performance;
Tyson's Corner, McLean, VA - closed June 27, 2000 upon expiration of
lease; and,
Main Place, Santa Ana, CA - closed September 19, 2000 upon expiration of
lease.
Also included in total revenues are approximately $14,000 and $19,000 for
the nine months ended October 29, 2000 and October 31, 1999, respectively.
These revenues generally represent sales generated from our website, catalog
and sales to wholesale customers.
For the nine months ended October 29, 2000, cost of goods sold was
$2,386,250 and the gross margin was $5,368,339, or 69.2%. For the nine months
ended October 31, 1999, cost of goods sold was $2,568,863 and the gross margin
was $5,979,058, or 69.9%. The decrease in the gross margin percentage is
attributed primarily to discount and promotional activities during the third
quarter to clear out seasonal merchandise in preparation for the upcoming
holiday shopping season. The gross margin is expected to increase during the
fourth quarter. Included in cost of goods sold are freight charges incurred
in the acquisition of our merchandise from vendors. Total freight charges
included in cost of goods sold was $77,195, or 1.0% of total revenue for the
nine months ended October 29, 2000. This compares with freight charges of
$63,804, or 0.75% of total revenue for the nine months ended October 31, 1999.
Total operating expenses were $6,359,231 for the nine months ended
October 29, 2000, compared to $6,738,339 for the nine months ended October 31,
1999, or 82.0% and 78.8% of revenues, respectively. The majority of these
expenses were comprised of store and corporate office personnel expenses,
which amounted to $2,731,537, or 35.2% of revenues, and $2,871,354, or 33.6%
of revenues for the nine months ended October 29, 2000, and October 31, 1999,
respectively, a decrease of approximately $140,000. This decrease is
attributed primarily to operating three fewer stores during the nine months
ended October 29, 2000, than during the nine months ended October 31, 1999.
However, the increase in the relative percentage to sales is primarily the
result of a store staffing increase initiated during the second quarter of
fiscal year ended January 30, 2000, to provide greater store security as well
as increased floor coverage during store operating hours to enhance customer
service. We expect that store personnel expenses will decrease as a
percentage of revenue as our operational and sales training programs are fully
implemented. Total personnel costs for our corporate personnel remained
relatively unchanged from $650,001 to $661,973 for the nine months ended
October 31, 1999, and October 29, 2000, respectively.
Occupancy costs of $2,062,649, and $2,181,903, are included in total
operating expenses for the nine months ended October 29, 2000 and October 31,
1999, respectively. The decrease of approximately $119,000 represents
operating three fewer stores during the nine months ended October 29, 2000
compared to the nine months ended October 31, 1999.
Other selling, general and administrative expenses of $1,191,691 and
$1,306,713 are included in total operating expenses for the nine months ended
October 29, 2000 and October 31, 1999, respectively, representing a decrease
of approximately $115,000. Following is a comparative summary of costs
included in other selling, general and administrative expenses, and their
relationship to total revenues for the periods:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
October 29, 2000 October 31, 1999
----------------- -----------------
<S> <C> <C> <C> <C>
Advertising and promotion $ 154,675 2.0% $ 171,538 2.0%
Banking fees 181,682 2.3% 189,222 2.2%
Merchandise distribution 102,699 1.3% 105,431 1.2%
Repairs and rentals 52,412 0.7% 48,506 0.6%
Property insurance, fees, and taxes 107,498 1.4% 60,234 0.7%
Professional and service fees 114,168 1.5% 192,488 2.3%
Supplies and product packaging 158,631 2.0% 166,951 2.0%
Telephone and utilities 157,037 2.0% 170,740 2.0%
Travel 118,066 1.5% 156,274 1.8%
Other 44,823 0.6% 45,329 0.5%
------------ -----------
$1,191,691 15.4% $1,306,713 15.3%
============ ===========
</TABLE>
Included in total operating expenses are corporate overhead expenses of
$1,228,461, or 15.8% of total revenues, for the nine months ended October 29,
2000, as compared to $1,276,467, or 14.9% of total revenues, for the nine
months ended October 31, 1999, representing a decrease of approximately
$48,000 for the comparable period. 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 $373,354 and $378,369 for the nine months
ended October 29, 2000 and October 31, 1999, respectively. Included in
depreciation and amortization for the nine months ended October 29, 2000 is
$19,500 of amortization of our website investment. Total depreciation expense
relating to our property and equipment was $344,554 and $369,069 for the nine
months ended October 29, 2000, and October 31, 1999, respectively, a decrease
of approximately $24,500 and is attributed to the three stores closed during
the year ended January 30, 2000, as discussed above.
As a result of the foregoing, the loss from operations for the nine
months ended October 29, 2000 was $990,892, as compared with a loss from
operations for the nine months ended October 31, 1999 of $759,281, an increase
of $231,611.
As discussed above, in October we terminated the Agreement and Plan of
Merger with AmazeScape. As a result, we wrote-off $173,287 of merger costs
relating to a receivable from AmazeScape for costs incurred on our behalf in
connection with the proposed merger. These costs primarily included legal,
accounting, and printing fees. Under the terms of the merger agreement, these
costs were to be paid by AmazeScape as they came due. We are currently
contemplating various options available to us to recover all or part of these
costs from AmazeScape.
Interest expense was $34,327 and $48,990 for the nine months ended
October 29, 2000, and October 31, 1999, respectively, and is comprised
primarily of interest charged on the Bank Note as discussed above. Interest
income was $15,587 and $7,419 for the nine months ended October 29, 2000, and
October 31, 1999, respectively, and results from the daily investing of
available cash balances.
Other income was $14,328 and $14,815 for the nine months ended October
29, 2000, and October 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 2001, and are renewable at our option.
On June 30, 1999 we issued 223,385 shares of Series A Convertible
Preferred Stock in a private placement for $279,231. Each share of preferred
stock was convertible to a share of common stock at $1.25 per share. On the
date of issuance, the underlying shares of common stock had a market value of
$1.625 per share. The amount of $83,769, representing the difference between
the conversion price and the market value of the underlying common stock on
the issuance date, was recorded as an imputed dividend on June 30, 1999. In
addition, the investor also received a warrant to purchase 80,000 shares of
common stock at an exercise price of $4.10 per share. The imputed value of the
warrant was estimated to be $73,791, and was also recorded as a dividend at
June 30, 1999. In addition, the holders of the preferred stock were entitled
to receive dividends at the annual rate of 10% per year based on the preferred
stock's stated value of $1.25 per share. For the three months ended October
31, 1999, the dividend to the holders of the preferred stock was $9,540.
Based on the foregoing, the net loss for the nine months ended October
29, 2000 was $1,168,588, which translates to a net loss per share of $(0.82)
based on 1,418,949 weighted average shares outstanding. This compares with a
net loss for the nine months ended October 31, 1999 of $953,138, or $(0.95)
per share, based on 1,007,509 weighted average shares outstanding as of that
date.
Other than the foregoing, no trends, or other demands, commitments,
events or uncertainties are known that will result in, or that are reasonably
likely to result in, a material impact on the income and expenses of the
Company.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. 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 previously disclosed in prior reports, 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.
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
quarter ended October 29, 2000.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
Exhibit 27 - Financial Data Schedule
Reports on Form 8-K:
None
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PREMIER CONCEPTS, INC.
Dated: December 13, 2000 By: /s/ Sissel Eckenhausen
------------------------- --------------------------
Sissel Eckenhausen, President
Dated: December 13, 2000 By: /s/ Todd Huss
------------------------- --------------------------
Todd Huss, Chief Financial
Advisor, Principal Accounting
Officer
