FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended March 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
Commission file number 33-98288
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Piercing Pagoda, Inc. Employee Stock Purchase Plan
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive offices:
Piercing Pagoda, Inc.
3910 Adler Place
Bethlehem, PA 18017
<PAGE>
Independent Auditors' Report
To the Compensation Committee of the
Board of Directors of Piercing Pagoda, Inc.
We have audited the accompanying statements of financial condition of the
Piercing Pagoda, Inc. Employee Stock Purchase Plan (the "Plan") as of March 31,
1997 and 1996, and the related statements of income and changes in plan equity
for the year ended March 31, 1997 and the period from November 1, 1995
(inception) to March 31, 1996. These financial statements are the responsibility
of the Plan's administrator. 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 the
Plan's administrator, 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 condition of the Plan as of March 31, 1997
and 1996, and the income and changes in plan equity for the year ended March 31,
1997 and the period from November 1, 1995 (inception) to March 31, 1996, in
conformity with generally accepted accounting principles.
Allentown, Pennsylvania KPMG Peat Marwick LLP
May 23, 1997
<PAGE>
PIERCING PAGODA, INC.
EMPLOYEE STOCK PURCHASE PLAN
Statements of Financial Condition
March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
Assets
<S> <C> <C>
Investment in Piercing Pagoda, Inc. common stock
(9,412 and 1,606 shares, cost of $138,127 and
$19,111, at March 31, 1997 and 1996,
respectively) ................................. $237,653 24,492
Participant contributions receivable from Piercing
Pagoda, Inc. ................................... 40,274 22,327
Total assets ....................................... $277,927 46,819
Equity
Plan equity ...................................... $277,927 46,819
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PIERCING PAGODA, INC.
EMPLOYEE STOCK PURCHASE PLAN
Statements of Income and Changes in Plan Equity
Year ended March 31, 1997 and Period from November 1, 1995
(inception) to March 31, 1996
<TABLE>
<CAPTION>
1997 1996
Income:
<S> <C> <C>
Participant contributions ......................... $ 141,358 41,438
Unrealized appreciation on common stock ........... 94,145 5,381
Realized gains on distributions ................... 3,320 --
238,823 46,819
Withdrawals:
Distributions to Plan participants, at market value (7,715) --
Increase in plan equity ............................. 231,108 46,819
Plan equity at beginning of period .................. 46,819 --
Plan equity at end of period ........................ $ 277,927 46,819
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PIERCING PAGODA, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
March 31, 1997 and 1996
(1) Description of the Plan
The following description of the Piercing Pagoda, Inc. Employee Stock
Purchase Plan (the "Plan") provides general information only. Participants
should refer to the Plan prospectus for more complete information.
The purpose of the Plan is to encourage and assist employees of Piercing
Pagoda, Inc. (the "Company") and its subsidiary, by giving them the
opportunity to acquire an equity interest in the Company through the
purchase of shares of the Company's common stock at a discount. A maximum
of 96,000 shares of common stock may be purchased under the Plan. The Plan
was adopted by the Board of Directors in October 1995 and was approved by
the stockholders of the Company in September 1996. The Plan began
operations on November 1, 1995.
(2) Summary of Significant Accounting Policies
Investment Valuation
Investments are stated at market value based upon available market
quotations. Market value was $25.25 and $15.25 per share at March 31, 1997
and 1996, respectively. The cost values of investments under the Plan are
calculated using an average cost methodology.
Fiscal Year
The Plan's fiscal year ends March 31st.
Administrative Expenses
All administrative expenses of the Plan are paid for by the Company.
Federal Income Tax
The Plan is intended to qualify as an "employee stock purchase plan" under
Sections 421 and 423 of the Internal Revenue Code of 1986. Under existing
federal income tax laws, the Plan is not subject to federal income tax.
When any shares of stock are sold by a participant, any gain or loss must
be recognized by that participant.
<PAGE>
PIERCING PAGODA, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements, Continued
March 31, 1997 and 1996
(3) Purchase and Distribution of Shares
Purchases are made by the Plan quarterly with the shares purchased
deposited into a brokerage firm account maintained for the Plan. The
common stock is purchased at a price equal to the lower of 85% of the
closing market price on the Nasdaq market on the first or last day of the
purchase period.
In the event of the termination of a participant's employment for any
reason, including retirement or death, all shares of common stock then
held for his or her benefit shall be registered in such individual's name.
Any amounts credited to such individual prior to the purchase of common
stock shall be refunded, without interest, to such individual.
Additionally, participants may elect, in accordance with Plan provisions,
to have common stock registered in the participant's name or have the Plan
sell shares credited to their account and receive cash.
(4) Participant Contributions Receivable
Participant contributions receivable from the Company represents payroll
deductions for the most recent purchase period for which a stock purchase
has not yet been made and deductions which are less than the cost of one
share of common stock that will be carried forward for use in purchasing
shares on the next quarterly purchase date.
(5) Unrealized Appreciation
Changes in unrealized appreciation in common stock of the Plan are as
follows:
1997 1996
Unrealized appreciation:
Beginning of period $ 5,381 -
End of period 99,526 5,381
Change in unrealized appreciation $ 94,145 5,381
<PAGE>
PIERCING PAGODA, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements, Continued
March 31, 1997 and 1996
(6) Realized Gains on Distributions
The realized gains on distributions of common stock as a result of
participant withdrawals is as follows:
1997 1996
Value of shares distributed:
Market value $ 7,643 -
Cost basis 4,323 -
Realized gains on distributions to participants $ 3,320 -
<PAGE>
PIERCING PAGODA, INC.
EMPLOYEE STOCK PURCHASE PLAN
Index to Exhibit
Exhibit No. Description Page
1 Consent of KPMG Peat Marwick LLP,
Independent Certified Public
Accountants 10
<PAGE>
SIGNATURES
------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
Piercing Pagoda, Inc. Employee Stock
Purchase Plan
BY: Compensation Committee of Piercing
Pagoda, Inc. Board of Directors as Plan
Administrator
/s/ Alan R. Hoefer
Alan R. Hoefer
/s/ Mark A. Randol
Mark A. Randol
Dated: June 24, 1997
<PAGE>
Consent of Independent Auditors
The Board of Directors
Piercing Pagoda, Inc.:
We consent to incorporation by reference in the Registration Statement (No.
33-98288) on Form S-8 of Piercing Pagoda, Inc. of our report dated May 23, 1997,
relating to the statements of financial condition of the Piercing Pagoda, Inc.
Employee Stock Purchase Plan as of March 31, 1997 and 1996, and the related
statements of income and changes in plan equity for the year ended March 31,
1997 and the period from November 1, 1995 (inception) to March 31, 1996, which
report is included in the March 31, 1997 Annual Report on Form 11-K of the
Piercing Pagoda, Inc. Employee Stock Purchase Plan.
Allentown, Pennsylvania KPMG Peat Marwick LLP
June 25, 1997
