-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KjoY8xjOgeaCarRtuprE2m/pHmAo0XvZFI+Ntuy+h6Js/4mWrnZg1x275fMdwhrZ vzjNHYJkegLGmevWlPmk1A== 0000912057-02-015747.txt : 20020419 0000912057-02-015747.hdr.sgml : 20020419 ACCESSION NUMBER: 0000912057-02-015747 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020419 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN JEWELRY CORP CENTRAL INDEX KEY: 0001098332 STANDARD INDUSTRIAL CLASSIFICATION: JEWELRY, PRECIOUS METAL [3911] IRS NUMBER: 841516192 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28663 FILM NUMBER: 02615439 BUSINESS ADDRESS: STREET 1: 131 WEST 35TH STREET CITY: NEW YORK STATE: NY ZIP: 10001 BUSINESS PHONE: 2127360880 MAIL ADDRESS: STREET 1: 131 WEST 35TH STREET CITY: NEW YORK STATE: NY ZIP: 10001 FORMER COMPANY: FORMER CONFORMED NAME: ADVANCED CEILING SUPPLIES INC DATE OF NAME CHANGE: 19991103 10KSB 1 a2076627z10ksb.txt 10KSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission file number 0-28663 AMERICAN JEWELRY CORP. - -------------------------------------------------------------------------------- (Name of small business issuer in its charter) Nevada 65-0675444 - ----------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 131 West 35th Street, New York, NY 10001 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: 212-736-0880 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.001 par value 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 registrant 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 Item405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant'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. / / State issuer's revenues for its most recent fiscal year December 31, 2001: $4,538,369. The aggregate market value as at March 28, 2002 of the Common Stock of the issuer, its only class of voting stock, held by non-affiliates was approximately $378,921.10 calculated on the basis of the closing price of such stock on the Nasdaq Bulletin Board on that date. Such market value excludes shares owned by all executive officers and directors (but includes shares owned by their spouses); this should not be construed as indicating that all such persons are affiliates. The number of shares outstanding of the issuer's Common Stock as at March 28, 2002 was 4,789,211,040. DOCUMENTS INCORPORATED BY REFERENCE None. Transitional Small Business Disclosure Format Yes /X/ No / / 2 FORWARD LOOKING STATEMENTS CERTAIN STATEMENTS IN THIS REPORT UNDER THE CAPTIONS "ITEM 1. BUSINESS," "ITEM 2. PROPERTIES" AND "ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION," AND ELSEWHERE IN THIS REPORT CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT"). SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULT, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY, OR INDUSTRY TRENDS AND RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, TRENDS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS, UNCERTAINTIES AND OTHER FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: GENERAL ECONOMIC AND BUSINESS CONDITIONS; INDUSTRY CONDITIONS AND TRENDS; COMPETITION; CHANGES IN BUSINESS STRATEGY OR DEVELOPMENT PLANS; AVAILABILITY, TERMS AND DEPLOYMENT OF DEBT AND EQUITY CAPITAL; RELATIVE VALUES OF THE UNITED STATES CURRENCY TO CURRENCIES IN THE COUNTRIES IN WHICH THE COMPANY'S CUSTOMERS AND COMPETITORS ARE LOCATED; AVAILABILITY OF QUALIFIED PERSONNEL; CHANGES IN, OR THE FAILURE TO COMPLY WITH, GOVERNMENT REGULATIONS. THESE AND CERTAIN OTHER FACTORS ARE DISCUSSED FROM TIME TO TIME IN THIS REPORT AND FROM TIME TO TIME IN OTHER COMPANY REPORTS HEREAFTER FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE COMPANY DOES NOT ASSUME AN OBLIGATION TO UPDATE THE FACTORS DISCUSSED IN THIS REPORT AND OTHER FACTORS REFERENCED IN THIS REPORT. WHEN USED IN THIS REPORT, THE WORDS "MAY", "WILL, "EXPECT," ANTICIPATE," "CONTINUE," "ESTIMATE," "PROJECT," "INTEND", "STRATEGY" AND "PRO FORMA" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS REGARDING EVENTS, CONDITIONS AND FINANCIAL TRENDS THAT MAY AFFECT THE COMPANY'S FUTURE PLANS OF OPERATIONS, BUSINESS STRATEGY, OPERATING RESULTS AND FINANCIAL POSITION. ANY FORWARD LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO RISKS AND SIGNIFICANT UNCERTAINTIES AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE INCLUDED WITHIN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. PART 1 ITEM 1. BUSINESS. The Company was incorporated in May 1996 under the name Travelnet International, Corp. In 1998 the Company discontinued as a tour organizer and changed its name to United Ventures Group, Inc. On October 13, 2000, pursuant to the approval of the Company's stockholders at its Annual Meeting of Stockholders, the Company changed its name to American Jewelry Corp. In November 1998, the Company acquired all of the outstanding shares of common stock of Shilaat Corp., a New York corporation, in exchange for the issuance of 3,750,000 shares of common stock of the Company. Shilaat Corp. is not an operating entity but owns all of the outstanding shares of common stock of Jarnow Corp., the Company's only active subsidiary. Between November 1993 and April 1994, Jarnow acquired the assets of Ultimar Creations, Inc., a manufacturer of fashion earrings and rings, for a consideration of approximately $1,575,000, the assets of the American Charm division of Goldline Co., a manufacturer of charms, for a consideration of approximately $394,000, and the assets of Joe Eisenberger & Co., Inc., a manufacturer of staple earrings and rings for a consideration of approximately $2,948,000. Jarnow Corp. ceased all active operation on or about July 1, 2001 at 3 which time all active operations were continued by American Jewelry Corp. The Company reincorporated as a Nevada corporation, effective January 31, 2002. The Company is a manufacturer, designer and distributor of karat gold jewelry in the United States. It offers its customers a large selection of jewelry styles, consistent product quality and prompt delivery of product orders. The principal product line is a wide assortment of 14 karat gold earrings, charms, bracelets and rings. The Company offers over 1000 styles of gold charms, earrings, bracelets and rings, with the majority of such products retailing between $50 and $300. Some of the gold jewelry is accented with colored gemstones. CUSTOMERS AND MARKETS. The Company's customers include mass merchandisers and jewelry wholesalers and distributors. In each of fiscal 2000 and 2001, the Company's five largest customers accounted for approximately 80% of revenues. In 2001, Designs by FMC, a wholesaler, accounted for approximately 60% of sales. No other Customer accounted for in excess of 10% of revenues. In 2000, AAN, Ltd. accounted for sales of approximately 19%, Designs by FMC, IT, Corp. and JYB Corp accounted for 17%, each. No other customer accounted for more than 10% of our sales in 2000. The Company is dependent on these large customers and the loss of, or decreased orders from, the largest customers could have a material adverse effect on the business. RAW MATERIALS. The principal raw materials purchased by the Company are gold and semi-precious stones. Approximately 98% of the Company's purchases are gold and 2% are precious and semi-precious stones. The Company purchases its gold requirements primarily from Linea Nuova in Lima, Peru and HSBC Bank in New York, as well as other local and offshore suppliers in both small and large quantities. Gold acquired for manufacture is at least .9995 fine and is then combined with other metals to produce 14 karat and 10 karat gold. The term "karat" refers to the gold content of alloyed gold, measured from a maximum of 24 karats (100% fine gold). Varying quantities of metals such as silver, copper, nickel and zinc are combined with fine gold to produce 10 and 14 karat gold of different colors. TRADEMARKS. The Company owns United States trademarks for some of its various brand names including American Charm -Registered Trademark- and Jarnow - -Registered Trademark- but these trademarks are not material to its business. The Company also uses various unregistered tradenames, trademarks and service marks. COMPETITION. The Company encounters competition primarily from manufacturers with national and international distribution capabilities and, to a lesser extent, from small regional suppliers of jewelry. The principal competitive factors in the industry are price, quality, design and customer service. The Company's specialized customer service programs are important competitive factors in sales to non-traditional jewelry retailers, including television shopping networks and discount merchandisers. ENVIRONMENTAL. Due to the manufacturing operations of the Company, the Company is required to comply with regulations relating to the disposal of waste water and hazardous wastes and operation of air exhaust systems. The Company is required to send samples of its wastewater to a laboratory certified by the State of New York for analysis on a semi-annual basis. In the past, this analysis has come back reporting acceptable levels of metals in waste waters. The 4 only hazardous waste generated by the Company results from using cyanide in the bombing operation. Because the Cyanide waste is shipped to a precious reclaimer, the Company is exempt from such regulations. The Company is required to obtain a permit from the New York City Department of Environmental Protection Bureau of Air Resources to operate any exhaust fans. EMPLOYEES. The Company maintains an in-house design staff to create new designs for its products and to work closely with its senior officers and marketing personnel to develop new products meeting the needs of its customers. At December 31, 2001 the Company employed twenty-nine full time employees. Of such employees, two were employed in management, three in sales and design, nineteen in refining, machining, finishing, polishing, assaying, and fabricating, and five in administration. ITEM 2. PROPERTIES. As of December 31, 2001, the Company's executive offices and the main production and distribution center for its jewelry is housed in leased facilities totaling approximately 8,500 square feet in New York, New York. The Company believes its facilities are adequate for its present needs. The term of the sub-lease is five (5) years, which commenced on October 2, 2000 and terminates on October 2, 2005. The terms of the sub-lease provide for monthly rental payments until June 1, 2002 in the amount of $13,780, plus monthly maintenance of $5,100 initially. The yearly rent shall increase commencing on June 1st of each year as follows: (i) in 2002 the monthly rent shall increase to $14,470 per month, plus monthly maintenance; (ii) in 2003 the monthly rent shall increase $15,195; and (iii) in 2004 the monthly rent shall increase to $15,955. Monthly maintenance payments may be subject to increase or decrease. ITEM 3. LEGAL PROCEEDINGS. The Company is involved in the following lawsuits and claims: a) A pleading denominated as a "Petition for Delivery of Property Not in Possession of Defendant Lyle Pfeffer" ("Petition") was filed in the Supreme Court of the State of New York, County of Rockland, on or about January 17, 2001, by the receiver for the National Heritage Life Insurance Company ("NHL"). The Petition alleges various causes of action which, in summary, collectively allege that, in connection with a New Jersey real estate transaction that occurred in the later part of 1993, Jarnow, a subsidiary of the Company, was the recipient of certain sums of money that were initially fraudulently obtained (by a third-party) from NHL. The Petition seeks damages in the amount of $6,200,000.00. The Company filed an Answer on March 16, 2001, denying the allegations set forth in the Petition. Management is vigorously contesting the allegations set forth in the Petition, and believes that these allegations are without merit. While the Court has set some discovery target dates, and has scheduled a conference for June 19, 2002, in view of the fact that motion practice has not begun and discovery is still at its incipient stages, it is highly likely that this matter will require several extensions of these deadlines pushing the matter over to 2003. Accordingly, at this time, it is too premature to evaluate the likelihood of an 5 unfavorable outcome in the event this matter should go to trial or the likelihood of settlement prior to trial. b) On or about February 4, 2000, a Preliminary Order of Forfeiture (the "Order") was filed by the US Government pursuant to a Special Verdict of Forfeiture rendered by a jury. The Company is among the sixty-two items/entities listed in the Order to which the government asserts an entitlement and/or (undefined) ownership interest. Pursuant to the Order, the Company had thirty days from the final date of publication of the notice in a newspaper or receipt of actual notice from the government, by which to file a petition asserting claims to any right, title or interest in the properties listed in the order. On or about July 11, 2000, the Company filed a Petition of Innocent Owner on behalf of the Company (then known as United Ventures Group, Inc.), its affiliates, subsidiaries and shareholders, which refutes and denies the government's allegations in this matter. On September 5, 2001, the Order was dismissed as against the Company, with prejudice, following the Company's filing of a motion to dismiss the Order. c) On December 7, 1999, a complaint was filed alleging various causes of action relating to the Company's (i) alleged failure to timely file a registration statement, and (ii) alleged default on a promissory note. The obligation to file a registration statement and the promissory note relate to the plaintiffs' purchase of a certain 8% Convertible Debenture due 2002 of the Company in the original principal amount of $1,200,000 (the "Debenture"). The Complaint seeks damages in excess of one million dollars ($1,000,000). The Company filed an Answer, and Affirmative Defenses on or about February 3, 2000. The plaintiffs and the Company executed a settlement agreement dated as of December 31, 2000, which provides for dismissal of the matter with prejudice provided that third-party purchasers deliver to the plaintiffs one million dollars ($1,000,000) as payment on their purchase of the Debenture by March 29, 2001. Since the date of the settlement agreement, the purchasers have paid the plaintiffs all amounts due and owing on the Debenture, and the case has been settled. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. PART II 6 ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock has been traded on the Nasdaq Electronic Bulletin Board under the symbol AMJC since May 1, 2001 following a reverse stock split. Prior to that, the Company's Common Stock traded on the Nasdaq Electronic Bulletin Board under the symbol AMJY since October 20, 2000 and previously under the symbol UVGI, since October 7, 1998. The following table sets forth the high and low bid prices for the Company's Common Stock for each quarterly period for each of the last two fiscal years from January 1, 2000 through December 31, 2001, as reported by Nasdaq. The Nasdaq quotations are without retail markups, markdowns or commissions and may not represent actual transactions.
HIGH LOW ---- --- FISCAL 2000 ----------- First Quarter 0.9375 0.0313 Second Quarter 0.4531 0.0625 Third Quarter 0.1875 0.0156 Fourth Quarter 0.2031 0.0156 FISCAL 2001 ----------- First Quarter 0.019 0.009 Second Quarter 0.007 0.004 Second Quarter (Post-Split) 0.730 0.065 Third Quarter 0.070 0.006 Fourth Quarter 0.012 0.002
There were approximately 130 holders of record of common stock as of December 31, 2001. Holders of common stock are entitled to dividends, when, as, and if declared by the Board of Directors out of funds legally available therefore. The holders of the Common Stock may not receive dividends until the holders of the Preferred Stock, if issued, receive all accrued but unpaid dividends. The Company has not paid any cash dividends on its common stock and, intends to retain earnings, if any, for the immediate future to finance the development and expansion of the business. In addition, the terms of convertible debentures prohibit the Company from paying dividends without the lender's consent. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. RESULTS OF OPERATIONS COMPARISON OF FISCAL YEAR ENDED DECEMBER 31, 2001 AND FISCAL YEAR ENDED DECEMBER 31, 2000 NET SALES. Net sales amounted to $4,539,000 for the year ended December 31, 2001, compared to $9,044,000, a decrease of $4,506,000 or 50% from the year ended December 31, 2000. The decrease is due to a slow down in the economy during 2001, which particularly affected the jewelry industry. This trend has been continuing into early 2002. GROSS PROFIT. Gross profit decreased by $1,031,000 or 59% to a margin of $702,000 for the year ended December 31, 2001, from $1,733,000 for the year ended 7 December 31, 2000. Gross profit as a percentage of net revenue decreased to 15% for the year ended December 31, 2001 from 19% for the year ended December 31, 2000. The decrease in gross profit and its respective percentage of net revenues is attributable to a reduction of sales and management's liquidation of inventory via close-outs at or near cost as well as write-down of inventories to market value. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased by $515,000 or 30% to $2,226,000 or 49% of net revenues for the year ended December 31, 2001, from $1,711,000 or 19% of net revenues for the year ended December 31, 2000. Costs increased primarily due to increased costs related to restructuring of the Company's debt and equity. INTEREST EXPENSES. Interest expenses decreased to $5,000 for the year ended December 31, 2001 from $353,000 for the year ended December 31, 2000. The decrease is primarily due to the elimination of notes payable to a financial institution and reduction of outstanding debentures payable that were in place in 2000. Interest non-cash decreased in 2001 to 8,633,057 from $23,326,000 in 2000 due to imputed interest on reduced Convertible Debentures, beneficial convertible features and a conversion inducement expense. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company financed operations principally through collections of accounts receivable, loans from financing institutions, issuance of stock and advances from officers. In the year ended December 31, 2001, the Company financed operations from proceeds from sales. As a result of repayment of all debts to financial institutions and the substantial reduction of debentures payable, we believe we are able to finance future operations from cash generated from sales. Working capital decreased by $5,503,000 to $2,733,000 at December 31, 2001, from $8,236,000 at December 31, 2000. The Company's operating activities provided cash in the amount of $451,000 for the year ended December 31, 2001 as compared to cash provided in the amount of $3,532,000 during the year ended December 31, 2000. Net cash used in investing activities was $10,000 for the year ended December 31, 2001, as compared to $760,000 during the year ended December 31, 2000. The Company's primary investing activity in 2001 was the purchase of treasury stock. The activity in 2000 primarily consisted of the purchase of equipment and customer lists. The Company used net cash in financing activities in the amount of $539,000 during the year ended December 31, 2001, as compared to cash used of $2,770,000 during the year ended December 31, 2000. The principal use of cash in financing activities for the year ended December 31, 2001 was the repayment of stockholders' loans. The principal use of cash in financing activities for the year ended December 31, 2000 was repayment of debt to the financial institution and stockholders. The principal source of funds from financing activities in both years was proceeds from debentures. 8 AMERICAN JEWELRY CORP. AND SUBSIDIARIES REPORT ON AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001 AND 2000 AMERICAN JEWELRY CORP. AND SUBSIDIARIES --------------------------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------
PAGE NUMBER ------ Independent Auditors' Report F-2 Consolidated Financial Statements: Balance Sheet F-3 Statements of Operations F-4 Statements of Stockholders' Equity F-5 Statements of Cash Flows F-6 Notes to Financial Statements F-7 - F-15
INDEPENDENT AUDITORS' REPORT ---------------------------- To the Board of Directors and Stockholders American Jewelry Corp. New York, New York We have audited the accompanying consolidated balance sheet of American Jewelry Corp. and Subsidiaries as of December 31, 2001 and the related statements of operations, stockholders' equity and cash flows for the year then ended. 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 auditing standards generally accepted in the United States of America. 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 audit provides 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 American Jewelry Corp. and Subsidiaries as of December 31, 2001 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has experienced recurring losses and has an accumulated deficit. The Company is dependent on continued financing from investors to sustain its activities and there is no assurance that such financing will be available. These factors raise substantial doubt about the company's ability to continue as a going concern. Management's plans on regard to these matters are also described in note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Allen G. Roth, P.A. Allen G. Roth, P.A Certified Public Accountant New York, New York April 12, 2002 F-2 AMERICAN JEWELRY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 2001
ASSETS ------ CURRENT ASSETS: Cash $ 331 Accounts receivable-net of allowance for doubtful accounts of $ 120,000 926,051 Inventories 3,352,215 Prepaid expenses 18,820 ------------ ------------ TOTAL CURRENT ASSETS 4,297,417 ------------ PROPERTY AND EQUIPMENT, net 343,187 OTHER ASSETS : Intangible assets 262,500 Deposits 36,450 ------------ $ 4,939,554 ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Bank overdraft $ 5,000 Accounts payable and accrued expenses 1,305,633 Convertible debentures 253,830 ------------ TOTAL CURRENT LIABILITIES 1,564,463 ------------ DUE TO STOCKHOLDERS 390,534 ------------ STOCKHOLDERS' EQUITY: Preferred stock, $.001 par value - 5,000,000 shares authorized, 200,000 Series A shares issued and outstanding 200 Common Stock, $.001 par value - 350,000,000 shares authorized, 349,938,258 shares issued and outstanding 349,938 Additional paid-in capital 53,191,468 Treasury stock, at cost, 45,000 shares (10,428) Accumulated deficit (50,546,621) ------------ TOTAL STOCKHOLDERS' EQUITY 2,984,557 ------------ $ 4,939,554 ============
See notes to consolidated financial statements F-3 AMERICAN JEWELRY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ---------------------------- 2001 2000 ------------ ------------ Net sales $ 4,538,369 $ 9,044,308 Cost of goods sold 3,836,625 7,311,743 ------------ ------------ Gross profit 701,744 1,732,565 ------------ ------------ Selling, general and administrative expenses 2,225,961 1,711,174 Non-cash compensation 230,000 2,159,805 Bad debts (recovery) -- (1,871,706) Write-down of inventory 5,000,000 -- ------------ ------------ Operating expenses 7,455,961 1,999,273 ------------ ------------ Operating loss (6,754,217) (266,708) Interest expense 5,000 352,772 Interest expense - non-cash 8,633,057 23,325,880 ------------ ------------ Loss before extraordinary items (15,392,274) (23,945,360) Extraordinary item - loss on early extinguishment of debt, net of taxes -- 397,138 ------------ ------------ Net loss $(15,392,274) $(24,342,498) ============ ============ Basic and diluted net loss per common share: Continuing operations $ (0.16) $ (64.45) Extraordinary item -- (1.07) ------------ ------------ Net loss $ (0.16) $ (65.52) ============ ============ Weighted average common shares outstanding 93,523,850 371,556 ============ ============
See notes to consolidated financial statements F-4 AMERICAN JEWELRY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Preferred Stock, Series A ($.001par value) ($.001par value) Additional ------------------------------- ---------------------------- Paid-In Shares Amount Shares Amount Capital ----------------------------------------------------------------------------- Balance, January 1, 2000 24,930,992 $ 24,931 200,000 $ 200 $ 10,950,067 Issuance of common stock for compensation 405,000 405 -- -- 83,775 Amortization of deferred compensation -- -- -- -- -- Issuance of common stock for settlement of debt 4,000,000 4,000 -- -- 4,130,981 Issuance of stock for convertible debentures' principal and interest 270,515,398 270,515 -- -- 3,275,500 Issuance of common stock for compensation to shareholders 7,750,000 7,750 -- -- 2,067,875 Subscription received reversed -- -- -- -- (799,996) Stock and cash issued to acquire Advanced Ceiling 400,000 400 -- -- (200,400) Beneficial conversion features and conversion inducement expense of convertible debentures -- -- -- -- 22,585,000 Officers' compensation contributed to capital -- -- -- -- 450,000 Interest due to shareholders contributed to capital -- -- -- -- 477,055 Net loss -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Balance, December 31, 2000 308,001,390 308,001 200,000 200 43,019,857 Issuance of common stock for convertible debentures principal and interest 41,936,868 41,937 -- -- 808,554 Amortization of deferred compensation -- -- -- -- -- Proceeds from convertible debentures -- -- -- -- 500,000 Acquisition of treasury stock -- -- -- -- -- Beneficial conversion features and conversion inducement expense of convertible debentures -- -- -- -- 8,633,057 Officers' compensation contributed to capital -- -- -- -- 230,000 Net loss -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ 349,938,258 $ 349,938 200,000 $ 200 $ 53,191,468 ============ ============ ============ ============ ============ Treasury Subscription Accumulated Deferred Stockholders' stock Receivable deficit Compensation Equity ------------------------------------------------------------------------------- Balance, January 1, 2000 $ -- $ (957,578) $(10,811,849) $ (136,667) $ (930,896) Issuance of common stock for compensation -- -- -- -- 84,180 Amortization of deferred compensation -- -- -- 136,667 136,667 Issuance of common stock for settlement of debt -- -- -- -- 4,134,981 Issuance of stock for convertible debentures' principal and interest -- -- -- -- 3,546,015 Issuance of common stock for compensation to shareholders -- -- -- -- 2,075,625 Subscription received reversed -- 799,996 -- -- -- Stock and cash issued to acquire Advanced Ceiling -- -- -- -- (200,000) Beneficial conversion features and conversion inducement expense of convertible debentures -- -- -- -- 22,585,000 Officers' compensation contributed to capital -- -- -- -- 450,000 Interest due to shareholders contributed to capital -- -- -- -- 477,055 Net loss -- -- (24,342,498) -- (24,342,498) ------------ ------------ ------------ ------------ ------------ Balance, December 31, 2000 -- -- (35,154,347) -- 8,173,711 Issuance of common stock for convertible debentures principal and interest -- -- -- -- 850,491 Amortization of deferred compensation -- -- -- -- -- Proceeds from convertible debentures -- -- -- -- 500,000 Acquisition of treasury stock (10,428) -- -- -- (10,428) Beneficial conversion features and conversion inducement expense of convertible debentures -- -- -- -- 8,633,057 Officers' compensation contributed to capital -- -- -- -- 230,000 Net loss -- -- (15,392,274) -- (15,392,274) ------------ ------------ ------------ ------------ ------------ $ (10,428) $ -- $(50,546,621) $ -- $ 2,984,557 ============ ============ ============ ============ ============
F-5 AMERICAN JEWELRY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, ----------------------- 2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(15,392,274) $(24,342,498) ------------ ------------ Adjustment to reconcile net loss to net cash provided by operating activities: Depreciation 130,960 90,027 Amortization 75,000 273,795 Officers' compensations contributed to capital 230,000 450,000 Stock compensation -- 2,159,805 Write-down of inventories 5,000,000 -- Discount on convertible debentures -- 442,327 Imputed interest on loan from shareholders -- 477,055 Interest expenses on conversion benefit 8,633,057 22,814,053 Amortization of deferred compensation -- 136,667 Extinguishment of debt -- 397,138 Change in assets and liabilities: Accounts receivable 808,084 638,720 Inventories 566,605 866,910 Prepaid expenses and other assets (18,820) -- Other assets 4,450 (23,275) Accounts payable and accrued expenses 413,819 (848,552) ------------ ------------ Total adjustments 15,843,155 27,874,670 ------------ ------------ Net cash provided by operating activities 450,881 3,532,172 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of treasury stock (10,428) -- Acquisition of property and equipment -- (385,000) Acquisition of customer list -- (375,000) ------------ ------------ Net cash used in investing activities (10,428) (760,000) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of notes payable - financial instituions -- (2,163,551) Proceeds from convertible debentures 500,000 2,409,000 Repayment of loan payable -- (130,000) Increase in cash overdraft 5,000 -- Stock subscription received -- 157,582 Repayment to stockholders (1,044,430) (3,043,360) ------------ ------------ Net cash used in financing activities (539,430) (2,770,329) ------------ ------------ Net increase (decrease) in cash (98,977) 1,843 Cash - beginning of year 99,308 97,465 ------------ ------------ Cash - end of year $ 331 $ 99,308 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 5,000 $ 312,616 ============ ============ Income taxes paid $ -- $ -- ============ ============ OFFICERS' COMPENSATION CONTRIBUTED TO CAPITAL $ 230,000 $ 450,000 ============ ============ IMPUTED INTEREST ON LOANS AND CONVERTIBLE DEBENTURES $ -- $ 598,266 ============ ============ NON-CASH FINANICING AND INVESTING ACTIVITIES: Write-off of deferred financing and offering costs $ -- $ 236,295 ============ ============ Issuance of stock for settlement of debt $ 850,491 $ 4,446,040 ============ ============
See notes to consolidated financial statements F-6 AMERICAN JEWELRY CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 1. THE COMPANY AND BASIS OF PRESENTATION - "GOING CONCERN" American Jewelry Corp. ("AMJ") formerly known as United Ventures Group, Inc. and as Travelnet International, Corp. ("Travelnet") was organized in May 1996. In 1999, Travelnet discontinued its operations as a tour organizer and changed its name to United Ventures Group, Inc. and then in the year 2000 changed its name to American Jewelry Corp. On April 11, 2000, American Jewelry Corp., ("AMJ") completed a merger with Advanced Ceiling Supplies Corp. ("ACSC"). The transaction was consummated pursuant to a share purchase agreement that was entered into by and among AMJ, a Delaware Corp., ACSC, a Colorado Corp. and certain shareholders of ACSC. ACSC was subsequently merged with and into AMJ. Hereinafter, AMJ, Shilaat, and Jarnow are collectively referred to as the "Company". The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplate the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred significant losses resulting in an accumulated deficit at December 31, 2001 of approximately $50 million. The Company continues to be dependent on continued financing from investors to sustain its activities. There is no assurance that such financing will be available. These factors raise substantial doubt about the Company's ability to continue as a going concern. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES - The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-7 INVENTORIES - Inventories consisting mainly of gold are stated at the lower of cost, determined by the first-in first-out method, or market. ALLOWANCE FOR DOUBTFUL ACCOUNTS AND RETURNS - Provisions for losses on accounts receivable are made in amounts required to maintain an adequate allowance for doubtful accounts. Accounts receivables are written off against such allowance when it is determined by the Company that collection will not be received. PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost. Depreciation is provided using the straight-line method over their estimated useful lives of 5 years. Depreciation expense for December 31, 2001 and 2000 is $130,960 and $90,027, respectively. REVENUE RECOGNITION - The Company recognizes sales upon shipment of its products. The Company also provides for bad debts that are uncollectible. In circumstances where there is significant uncertainty to reasonably estimate the extent of payments to be received the Company uses the cost recovery method whereby revenue is recorded only when collection occurs. INCOME TAXES - Income taxes are accounted for under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. IMPAIRMENT OF LONG-LIVED ASSETS - The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. At December 31, 2001, the Company believes that there has been no impairment of its long-lived assets. FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts reported in the balance sheet for cash, receivables, and accounts payable approximate their fair market value based on the short-term maturity of these instruments. DERIVATIVE INSTRUMENTS - The Company adopted Statement of Financial Accounting Standard No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging Activities" as amended by SFAS No. 137 for the year ended December 31, 2000. SFAS No. 133 establishes a new model for accounting for derivatives and hedging activities and supersedes and amends a number of existing standards. The application of the new pronouncement did not have a material impact on the Company's financial statements. F-8 EARNINGS PER SHARE - The Company has adopted the provisions of Financial Accounting Standards No. 128, "Earnings Per Share". Basic earnings per share is based on the weighted average number of shares outstanding. Potential common shares included in the computation of diluted earnings per share are not presented in the financial statements, as their effect would be anti-dilutive. STOCK BASED COMPENSATION - The Company accounts for stock transactions in accordance with APB Opinion No. 25, "Accounting For Stock Issued To Employees." In accordance with Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting For Stock - Based Compensation," the Company adopted the pro forma disclosure requirements of SFAS 123. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated. 3. NEW ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("FASB") No. 141, Business Combinations, which supercedes Accounting Principles Board Opinion ("APB") No. 16, Business Combinations. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and establishes specific criteria for the recognition of intangible assets separately from goodwill. In July 2001, the FASB also issued SFAS No. 142, Goodwill and Other Intangible Assets, which supercedes APB. No. 17, Intangible Assets. SFAS No. 142 requires that goodwill and indefinite lived intangible assets no longer be amortized, but be tested for impairment at least annually. SFAS No. 142 also requires that the amortization period of intangible assets with finite lives be no longer limited for forty years. The provisions of SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting for legal obligations associated with the retirement of tangible long-lives assets that result from the acquisition, construction, or development and (or) the normal operation of a long-lived asset, accept for certain obligations of lessees. This statement does not apply to obligations that arise solely from a plan to dispose of a long-lived asset. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The company is evaluating the impact of SFAS No. 143 on it's results of operation and financial position. In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supercedes SFAS No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived F-9 Assets to be Disposed of, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business (as previously defined in the Opinion). This Statement also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The provisions of SFAS No. 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. Management has evaluated SFAS No. 141, 142, 143 and 144 and has determined that there will not be a significant impact on the Company's operating results. 4. INVENTORIES Inventories consist of the following at December 31, 2001: Raw Materials $ 390,142 Finished Goods 2,962,073 ---------- $3,352,215 ==========
5. PROPERTY AND EQUIPMENT Property and equipment at December 31, 2001 consisted of the following: Factory machinery and equipment $624,859 Furniture and fixtures 5,800 Leasehold improvements 47,900 -------- Less: Accumulated depreciation 335,372 -------- $343,187 ========
6. INTANGIBLE ASSETS - NET The Company acquired a customer list from a competitor for $375,000. Amortization expense of the customer list amounted to $75,000 and $37,500 for the years ended December 31, 2001 and 2000, respectively. 7. DUE TO STOCKHOLDERS As of December 31, 2001 two major stockholders advanced $390,534 to the Company. Such amount is unsecured and is due and payable on January 15, 2003, with interest at five percent per annum, commencing January 2002. F-10 8. COMMITMENTS AND CONTINGENCIES Lease commitment - As of December 31, 2001, the Company's executive offices and the main production and distribution center for its jewelry is housed in leased facilities totaling approximately 8,500 square feet in New York, New York. The Company believes its facilities are adequate for its present needs. The term of the sub-lease is five (5) years, which commenced on October 2, 2000 and terminates on October 2, 2005. The terms of the sub-lease provide for monthly rental payments until June 1, 2002 in the amount of $13,780, plus monthly maintenance of $5,100 initially. The yearly rent shall increase commencing on June 1st of each year as follows: (i) in 2002 the monthly rent shall increase to $14,470 per month, plus monthly maintenance; (ii) in 2003 the monthly rent shall increase $15,195; and (iii) in 2004 the monthly rent shall increase to $15,955. Monthly maintenance payments may be subject to increase or decrease. For the years ended December 31, 2001 and 2000, the Company incurred total rent expense amounting to $244,000 and $222,000 respectively. The Company is involved in the following lawsuits and claims: a) A pleading denominated as a "Petition for Delivery of Property Not in Possession of Defendant Lyle Pfeffer" ("Petition") was filed in the Supreme Court of the State of New York, County of Rockland, on or about January 17, 2001, by the receiver for the National Heritage Life Insurance Company ("NHL"). The Petition alleges various causes of action which, in summary, collectively allege that, in connection with a New Jersey real estate transaction that occurred in the later part of 1993, Jarnow a subsidiary of the Company, was the recipient of certain sums of money that were initially fraudulently obtained (by a third-party) from NHL. The Petition seeks damages in the amount of $6,200,000.00. The Company filed an answer on March 16, 2001, denying the allegations set forth in the petition. Management is vigorously contesting the allegations set forth in the Petition, and believes that these allegations are without merit. While the court has set some discovery target dates, and has scheduled a conference for June 19, 2002, in view of the fact that motion practice has not begun and discovery is still at its incipient stages, it is highly likely that this matter will require several extensions of these deadlines pushing the matter over to 2003. Accordingly, at this time, it is too premature to evaluate the likelihood of an unfavorable outcome in the event this matter should go to trial or the likelihood of settlement prior to trial. The foregoing notwithstanding, management and the principals are of the belief that at least fifty percent of the six million dollars in damages sought by the Receiver is susceptible to dismissal by motion for summary judgment prior to completion of discovery and significantly before trial. F-11 b) On or about February 4, 2000, a Preliminary Order of forfeiture (the "Order") was filed by the US Government pursuant to a Special Verdict of Forfeiture rendered by a jury. The Company is among the sixty-two items/entities listed in the Order to which the government asserts an entitlement and/or (undefined) ownership interest. Pursuant to the Order, the Company had thirty days from the final date of publication of the notice in a newspaper or receipt of actual notice from the government, by which to file a petition asserting claims to any right, title or interest in the properties listed in the order. On or about July 11, 2001, the Company filed a Petition of Innocent Owner on behalf of the Company (then known as United Ventures Group, Inc.), its affiliates, subsidiaries and shareholders, which refutes and denies the government's allegations in this matter. On September 5, 2001, the Order was dismissed as against the Company, with prejudice, following the Company's filing of a motion to dismiss the Order. c) On December 7, 1999, a complaint was filed alleging various causes of action relating to the Company's (i) alleged failure to timely file a registration statement, and (ii) alleged default on a promissory note. The obligation to file a registration statement and the promissory note relate to the plaintiffs' purchase of a certain 8% Convertible Debenture due 2002 of the Company in the original amount of $1,200,000 (the "Debenture"). The Complaint seeks damages in excess of one million dollars ($1,000,000). The Company filed an Answer, and Affirmative Defenses on or about February 3, 2000. The plaintiffs and the Company executed a settlement agreement dated as of December 31, 2000, which provides for dismissal of the matter with prejudice provided that third-party purchasers deliver to the plaintiffs one million dollars ($1,000,000) as payment on their purchase of the Debenture by March 29, 2001. Since the date of the settlement agreement, the purchasers have paid the plaintiffs all amounts due and owing on the Debenture, and the case has been settled. The Company believes that the various asserted claims and litigation in which it is involved will not materially affect its financial position, future operating results or cash flows, although no assurance can be given with respect to the ultimate outcome of any such claim or litigation. 9. ECONOMIC DEPENDENCY AND CREDIT RISK Shipments to a single customer constituted 59 percent of the Company's sales during the year ended December 31, 2001. F-12 10. STOCKHOLDERS' EQUITY COMMON STOCK AND PREFERRED STOCK: In March 1999, the Company issued 200,000 shares of Series A Preferred Stock at $.001 per shares to two principal shareholders, which gave them 54% of the votes on any matter that requires a vote of shareholders. In January 2000, the Company approved an amendment to its Certificate of Incorporation to raise the authorized shares of its stock to 125,000,000 shares of which 120,000,000 shall be designated as common stock with a par value of $.001 per share, and 5,000,000 shall be designated as preferred stock with a par value of $.001 per share. On October 13, 2000, the Company approved an amendment to its Certificate of Incorporation to further raise the authorized shares of its stock to 355,000,000 shares of which 350,000,000 shall be designated as common stock with a par value of $.001 per share, and 5,000,000 shall be designated as preferred stock with a par value of $.001 per share. In April 2001 the Company effected a 1 for 300 reverse split of its common stock. The financial statements give retroactive effect to this transaction. In January 2002 the Company approved an amendment to the Certificate of Incorporation to further increase the authorized common shares to 600 million shares. CONVERTIBLE DEBENTURES: a) January 1999, the Company authorized the issuance of up to $10,000,000 of convertible debentures. In April 1999, the Company entered into a Securities Purchase Agreement ("Agreement") for the sale of debentures for an aggregate purchase price of $1,300,000. Such debentures are due in 2002 and bear an interest rate of 8% per annum. The debentures are convertible into shares of the Company's common stock based on the lower of $ 2.318 or 70% of the market price of the Company's common stock at the time of conversion. The net proceeds from this agreement were $997,000. Pursuant to the Agreement, the Company agreed to issue warrants to purchase up to 300,000 shares of the Company's common stock at $.70 per share and up to 1,114,285 shares at $3.325 per share. These warrants were subsequently cancelled. In February 2000, the Company converted $195,679 of the debentures into 4,358,945 shares of the Company's common stock. F-13 On December 31, 2000, a settlement agreement was made with the existing debenture holders for the above remaining debenture of $1,104,321. The agreement provides that $104,321 face amount of the Debenture be converted into 10,000,000 shares of Company's common stock. The debenture holder then entered into a purchase agreement with a third party to sell the debenture for $1,000,000. The Company is in the process of exchanging these debentures with a debenture that has been amended to extend the maturity date an additional year and to amend the conversion price to the lower of (i) 92% of the average of the closing sale price of the Company's Common Stock for the five trading days prior to the applicable conversion rate or (ii) $.015, subject to typical adjustments in the event of stock splits and the like. The debentures were further amended to amend the conversion price to the lower of (i) 70% of the average of the closing sale price of the Company's Common Stock for the five trading days prior to the applicable conversion rate or (ii) $.015, subject to typical adjustments. The Company has also entered into an agreement with the purchasers of the debentures, which provides for limitations on the amount of debentures to be converted. b) During year 2000, debentures for $1,000,000 have been issued for amounts received of $950,000 net of $50,000 of closing expense. Another debenture was issued for $1,000,000 for cash received $865,000 net of $135,000 of closing expense by United Venture Acquisition Corp., a subsidiary of the Company, which was subsequently merged with and into the Company. A third debenture was issued for $1,000,000 for cash received $294,000 net of closing expense of $46,000 by Venture Acquisition, Inc., a subsidiary of the Company, which was subsequently merged with and into the Company. The balance of the debenture of $650,000 has not yet received. In addition to these three debentures the Company received $300,000 with $50,000 discount from debentures issued during the year ending December 31, 1999. The total amounts received have been converted to 270,515,398 shares of the Company's common stock with the recording of $22,585,000 beneficial convertible features and conversion inducement expense. During the year 2001 the Company issued 41,936,868 post-split shares upon conversion of debentures of $850,491 and incurred beneficial conversion and inducement costs of $8,633,057 in connection therewith. STOCK OPTION PLAN: In December 1999, The Company approved the establishment of a stock option plan for the issuance of 600,000 shares of its common stock. At December 31, 2001 there were no options outstanding. 11. INCOME TAXES The Company accounts for income taxes under the provisions of SFAS 109. SFAS No. 109 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax loss and tax F-14 credit carryforward. SFAS 109 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. At December 31, 2001, the Company had net deferred tax assets of approximately $4,800,000. The Company has established a valuation allowance for the full amount of such deferred tax assets at December 31, 2001, as management of the Company has not been able to determine that it is more likely than not that the deferred tax assets will be realized. The following table reflects the Company's deferred tax assets and (liabilities) at December 31, 2001: Net operating loss deduction $ 4,800,000 Valuation allowance (4,800,000) Net deferred asset $ -- ===========
The provision for income taxes (benefits) differs from the amount computed by applying the statutory federal income tax rate to income loss before income taxes as follows:
2001 2000 ----------- ----------- Income tax (benefit) computed at statutory rate $(5,400,000) $(8,500,000) Effect of permanent differences 3,000,000 8,900,000 Utilization of net operating loss carried forward (2,400,000) (400,000) Tax benefit not recognized -- -- ----------- ----------- Provision for income taxes (benefit) $ -- $ -- =========== ===========
The net operating loss carryforward at December 31, 2001 was approximately $13,700,000 and expires in the years 2012 to 2021. F-15 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. The following information is presented with respect to the background of each of the directors and executive officers of the Company:
Name Age Position - ---- --- -------- Isaac Nussen 51 President, CEO and Director George Weisz 61 Chief Operating Officer, Vice President, Secretary and Director Meyer Klepner 44 Director Eric J. Rothschild 69 Director *Israel Braun 55 Director
Isaac Nussen has served as President, CEO and Director since November 1998. Since 1993 he also served in the same positions for Jarnow Corporation. He is responsible for marketing and sales. Mr. Nussen served as an executive officer of other jewelry manufacturing companies for over 25 years. Mr. Nussen currently serves on the board of directors of MTN Holdings, Inc and Intrac, Inc. George Weisz (a.k.a. Ghidale Weisz) has served as Chief Operating Officer, Vice President and Secretary since November 1998. Since 1993 he also served in the same positions for Jarnow Corporation. He is responsible for day to day operations including development and manufacturing. Mr. Weisz served as an executive officer of other jewelry manufacturing companies for over 25 years. Mr. Weisz currently serves on the board of directors of MTN Holdings, Inc and Intrac, Inc. Meyer Klepner has served as a director since August 1, 2001. He has been the proprietor of a paper goods company in Israel since 1990. Eric J. Rothschild has served as a director since November 1998. For the past five years, and prior thereto, he has been a self-employed physician and a member of Orangeburg Orthopedic Associates. * Israel Braun resigned as a director of the Company in January 2001. Mr. George Weisz and Mr. Isaac Nussen are brothers in law. Martin Weisz is George Weisz's son. 9 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE There was no director, officer or beneficial owner of more than 10% of the class of equity securities of the Registrant that failed to file on a timely basis. ITEM 10. EXECUTIVE COMPENSATION. The Summary Compensation Table below sets forth compensation paid by the Company for the three fiscal years ended December 31, 2001 and December 31, 2000 for services in all capacities for its CEO and President. No other principal executive officer received a total annual salary and bonus which exceeded $100,000. SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------ Name and Principal Annual Other Annual Position Year Compensation Compensation Awards Options - ---------------------- ------------------------------------------------------- Isaac Nussen, 2001 $ 110,000 none none President ------------------------------------------------------- 2000 - none none - ------------------------------------------------------------------------------ George Weisz, Chief 2001 $ 110,000 none none Operations Officer ------------------------------------------------------- 2000 - none none - ------------------------------------------------------------------------------
Mr. Weisz and Mr. Nussen are entitled to receive an annual salary of $225,000 each, however they did not receive the entire salary allowed and are owed the amounts from the Company not paid by the Company in prior years. In addition, both are entitled to receive a bonus of 2.5% of net profit (before taxes) in excess of $500,000 in each fiscal year commencing with the fiscal year ending December 31, 1999, cost of living increase, a life insurance policy in the face amount of $1,000,000 payable to them. In addition, on a change of control, in the event either or both Mr. Weisz or Mr. Nussen, terminate their employment with the Company, they will each be entitled to receive a lump sum payment equal to 290% of their respective annual compensation for the five years preceding the date of termination. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth information, as at March 29, 2002 with respect to the shares of Common Stock which are beneficially owned by (i) any person (including any "group", as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934), who is known to the Company to be the beneficial owner of more than five percent of the Company's outstanding Common Stock, (ii) the executive officers of the Company named in the Summary Compensation Table under the caption "Executive Compensation" above, (iii) each director of the Company and (iv) all executive officers and directors of the Company as a group: 10
PERCENT OF SHARES BENEFICIALLY NAME AND ADDRESS SHARES OWNED OWNED - ------------------------------------ ---------------- --------------- GEORGE WEISZ(1) 131 WEST 35TH STREET NEW YORK, NEW YORK 10001 5,000,000 * ISAAC NUSSEN(1) 131 WEST 35TH STREET NEW YORK, NEW YORK 10001 5,000,000 * ERIC J. ROTHSCHILD 131 WEST 35TH STREET NEW YORK, NEW YORK 10001 -0- - MEYER KLEPNER -0- - ALL OFFICERS AND DIRECTORS AS A GROUP (4 PERSONS) 10,000,000 *
- ----------- * Less than one (1) percent (1) George Weiss and Isaac Nussen are the holders of preferred stock entitling the holders to the right to vote 54% of the total votes entitled to vote at a meeting of stockholders of the Company. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. At December 2001, the Company owed George Weisz and Isaac Nussen $390,534 in connection with certain interest free loans made to the Company. ITEM 13. EXHIBITS AND REPORTS ON FORM 10-KSB. a) EXHIBITS Exhibit Number Description -------------- ------------------------------------------------------------ *3.1 Certificate of Incorporation of the Registrant. *3.2 Amendment to Certificate of Incorporation *3.3 Bylaws of the Registrant. *4.1 Form of Registrant's Common Stock Certificate. *10.1 Stock Option Plan. *10.2 Securities Purchase Agreement relating to the Debentures. *10.3 Form of 8% Convertible Debentures. 11 *10.4 Form of Warrant between the Registrant and the Debenture Holder. Share Purchase Agreement dated April 3, 2000, by and among UVGI, Advanced Ceiling and the **10.5 shareholders of Advanced Ceiling. **10.6 Plan of Merger dated April 7, 2000. **10.7 Form of Acceptance and Sale Agreement dated April 3, 2000. ***10.8 Limitations on Conversion and Resale of 8% Convertible Debentures ***10.9 Form of Amended 8% Convertible Debentures. ***10.10 Purchase Lease and Service Agreement dated October 2, 2000. ***10.11 Independent Contractor's Agreement dated October 2, 2000. * This exhibit has been incorporated by reference from Registration Statement on Form SB-2, file no. 333-92037, filed on December 3, 1999. ** This exhibit has been incorporated by reference from the Current Report on Form 8-K, file no. 000-28663, filed on June 15, 2000. *** This exhibit has been incorporated by reference from the Annual Report on Form 10-KSB, file no. 000-28663, filed on April 17, 2001. b) REPORTS ON FORM 8-K No Reports on Form 8-K were filed by the Company during the last fiscal quarter of the Company's fiscal year ended December 31, 2001. 12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN JEWELRY CORP. Dated: April 15, 2002 By: /s/ Isaac Nussen ------------------------------------- Isaac Nussen President and Chief Executive Officer 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 CAPACITY DATE - ------------------ --------------------------------------- ------------------ /s/ Isaac Nussen President, Chief Executive Officer and - ------------------ Director April 15, 2002 Isaac Nussen /s/ George Weisz Chief Operating Officer and Director April 15, 2002 - ------------------ George Weisz /s/ Meyer Klepner Director April 15, 2002 - ------------------ Meyer Klepner - ------------------ Director __________, 2002 - ------------------ Eric Rothschild 13 -----END PRIVACY-ENHANCED MESSAGE-----