UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2000
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from January 01, 2000 to September 30, 2000
Commission file number 001-14600
D.G. JEWELRY INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Province of Ontario N/A
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 Petrolia Road
Toronto, Ontario Canada M3J 2X7
- ---------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
(416) 665-8844 (Registrant's telephone number, including area code)
-------------
Check whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes |X| No |_|
The number of shares outstanding of the registrant's Common Stock, No
Par Value, on November 17, 2000 was 6,434,530 shares.
D.G. JEWELRY INC.
SEPTEMBER 30, 2000 QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Interim Consolidated Balance Sheets as of September 30, 2000
and December 31, 1999...........................................................1
Interim Consolidated Statements of Income
for the nine months ended September 30, 2000 and 1999...........................2
Interim Consolidated Statements of Cash Flows
for the nine months ended September 30, 1999....................................3
Notes to Consolidated Financial Statements........................................4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................................7
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......................10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................................10
Item 2. Changes in Securities and Use of Proceeds........................................10
Item 3. Defaults Upon Senior Securities..................................................10
Item 4. Submission of Matters to a Vote of Security Holders..............................10
Item 5. Other Information................................................................11
Item 6. Exhibits and Reports on Form 8-K.................................................11
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements
as defined by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements, which are other statements of historical facts. These
statements are subject to uncertainties and risks including, but not limited to,
product and service demand and acceptance, changes in technology, economic
conditions, the impact of competition and pricing, government regulation, and
other risks defined in this document and in statements filed from time to time
with the Securities and Exchange Commission. All such forward-looking statements
are expressly qualified by these cautionary statements and any other cautionary
statements that may accompany the forward-looking statements. In addition, D.G.
Jewelry Inc. (the "Company") disclaims any obligations to update any
forward-looking statements to reflect events of circumstances after the date
hereof.
ii
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
D.G.Jewelry Inc.
Interim Consolidated Balance Sheets As of September 30, 2000 and December 31,
1999 (Amounts expressed in US dollars) (Unaudited)
September 30, December 31,
2000 1999
$ $
ASSETS
CURRENT ASSETS
Cash 15,223 1,359,104
Accounts receivable 25,430,395 24,129,922
Inventory 25,771,607 23,310,675
Cash surrender of life insurance (Note 2) 58,240 57,232
Prepaid expenses and sundry assets 55,319 102,673
---------- ----------
51,330,784 48,959,606
PROPERTY, PLANT AND EQUIPMENT 1,200,777 1,128,875
INVESTMENT (DEFFICIENCY) IN 50% OWNED INVESTEE COMPANY (132,804) 141
GOODWILL 1,040,000 1,110,000
---------- ----------
53,438,757 51,198,622
---------- ----------
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness (Note 3) 21,002,437 19,280,551
Accounts payable and accrued expenses 4,793,273 5,892,801
Income taxes payable 3,830,620 3,195,246
Current portion of loans payable 187,706 541,849
---------- ----------
29,814,036 28,910,447
LOANS PAYABLE (Note 4) 2,000,652 2,201,770
---------- ----------
31,814,688 31,112,217
SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 5) 10,940,329 10,940,329
ACCUMULATED OTHER COMPREHENSIVE INCOME(LOSS) (Note 6) 477,318 613,896
RETAINED EARNINGS 10,206,422 8,532,180
---------- ----------
21,624,069 20,086,405
---------- ----------
53,438,757 51,198,622
---------- ----------
1
D.G.Jewelry Inc.
Interim Consolidated Statements of Income
For the three and nine months ended September 30, 2000 and 1999 (Amounts
expressed in US dollars) (Unaudited)
For Period ended September 30,
three months nine months
$ $ $ $
2000 1999 2000 1999
SALES 8,347,414 6,974,520 26,020,862 23,118,091
Cost of Sales 5,407,658 4,519,246 17,212,663 15,421,779
GROSS PROFIT 2,939,756 2,455,274 8,808,199 7,696,312
--------- --------- ---------- ----------
35.22% 35.20% 33.85% 33.29%
EXPENSES
Selling 629,543 564,363 1,694,837 1,442,061
General and administrative 522,532 233,823 1,285,208 883,280
--------- --------- ---------- ----------
1,152,075 798,186 2,980,045 2,325,341
--------- --------- ---------- ----------
Operating income 1,787,681 1,657,088 5,828,154 5,370,971
--------- --------- ---------- ----------
Interest expenses 517,470 506,207 1,351,677 1,105,527
Other expenses 255,854 63,408 473,168 336,381
Loss on investment in 50% owned investee company 58,184 500,822 132,945 500,822
--------- --------- ---------- ----------
831,508 1,070,437 1,957,790 1,942,730
--------- --------- ---------- ----------
Income before income taxes and unusual item 956,173 586,651 3,870,364 3,428,241
Unusual Item (Note 7) 677,418 767,674 1,212,071 2,009,223
--------- --------- ---------- ----------
Income Before Income Taxes 278,755 (181,023) 2,658,293 1,419,018
Provision for income taxes 147,665 - 984,051 512,826
--------- --------- ---------- ----------
Net income 131,090 (181,023) 1,674,242 906,192
Earnings per common share (Note 8) 0.02 (0.03) 0.25 0.15
--------- --------- ---------- ----------
Earnings per common share assuming dilution (Note 8) 0.02 (0.03) 0.25 0.15
--------- --------- ---------- ----------
Average weighted number of shares
Basic 6,649,655 6,374,197 6,649,655 6,027,419
--------- --------- ---------- ----------
Diluted 6,649,655 6,498,773 6,649,655 6,244,624
--------- --------- ---------- ----------
2
D.G.Jewelry Inc.
Interim Consolidated Statements of Cash Flows for the nine months ended
September 30, 2000 and September 30, 1999 (Amounts
expressed in US dollars) (Unaudited)
September 30, September 30,
2000 1999
$ $
Cash flow from operating activities: 1,674,242 906,192
---------- ----------
Net income
Adjustments to reconcile net income to net cash
used in operating activities:
Amortization 256,421 355,769
Decrease (increase) in accounts receivable (2,266,632) (3,814,703)
Decrease (increase) in inventory (3,394,289) 1,349,164
Decrease (increase) in cash surrender value of life insurance (3,300) 1,345
Decrease (increase) in prepaid expenses and sundry assets 43,243 (43,529)
Increase (decrease) in accounts payable and accrued expenses (863,581) (1,071,026)
Increase (decrease) in income taxes 855,157 (681,929)
Unusual item (Note 7) 1,687,583
---------- ----------
Total adjustments (5,372,981) (2,217,326)
---------- ----------
Net cash used in operating activities (3,698,739) (1,311,134)
---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment (258,323) (504,348)
Investment in 50% owned investee company 140,754 (517,539)
- -
---------- ----------
Net cash used in investing activities (117,569) (1,021,887)
---------- ----------
Cash flows from financing activities:
Proceeds from/(repayment of) bank indebtedness 2,493,877 (94,437)
Proceeds from/(repayment of) loans payable (445,408) (1,123,089)
Issuance of capital stock - 3,927,330
---------- ----------
Net cash provided by financing activities 2,048,469 2,709,804
---------- ----------
Effect of foreign currency exchange rate changes 423,958 (614,744)
---------- ----------
Net increase (decrease) in cash and cash equivalents (1,343,881) (237,961)
Cash and cash equivalents
Beginning of period 1,359,104 305,784
---------- ----------
End of period 15,223 67,823
---------- ----------
Interest paid 1,327,575 1,105,527
---------- ----------
Income taxes paid 301,425 227,423
---------- ----------
3
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Consolidated Financial Statements Presentation
These Interim Consolidated Financial Statements have been prepared in accordance
with Form 10-QSB specifications and, therefore, do not include all information
and footnotes normally shown in full annual Financial Statements. These
financial statements consolidate, using the purchase method, the accounts of the
company and its two wholly-owned subsidiaries, Diamonair, Inc. and Aviv, Inc.
All material intercompany accounts have been eliminated. The investment in
NETJEWELS.COM is accounted for based on the equity method.
b) Principal Activities
The company was incorporated in Canada on October 18, 1979. The company is
principally engaged in the production and trading of jewelry in Canada and the
United States of America.
c) Cash and Bank Indebtedness
Cash and bank indebtedness includes cash in bank, amounts due to banks, and any
other highly liquid investments purchased with a maturity of three months or
less. The carrying amount approximates fair value because of the short maturity
of those instruments.
d) Other Financial Instruments
The carrying amount of the company's accounts receivable approximates fair value
because of the short maturity of these instruments.
e) Long-term Financial Instruments
The fair value of each of the company's long-term financial assets and debt
instruments is based on the amount of future cash flows associated with each
instrument discounted using an estimate of what the company's current borrowing
rate for similar instruments of comparable maturity would be.
f) Inventory
Raw materials and work-in-process are valued at the lower of cost (first-in,
first-out basis) or market.
Finished goods are valued at the lower of cost or market. Cost is calculated
using selling price less normal gross margin.
g) Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are mainly depreciated on
the declining balance basis over their estimated useful lives.
Leasehold improvements are amortized on the straight-line basis over the terms
of the lease.
h) Goodwill
Goodwill is the excess of cost over the value of tangible assets acquired on the
acquisition of subsidiary companies. It is being amortized on the straight-line
basis over 40 years.
The valuation and amortization of goodwill is evaluated on an ongoing basis and,
if considered permanently impaired, goodwill is written down. The determination
as to whether there has been an impairment in value is made by comparing the
carrying value of the goodwill to the projected undiscounted net revenue stream
to be generated by the related activity.
i) Sales
Sales represent the invoiced value of goods supplied to customers. Sales are
recognized upon delivery of goods and passage of title to customers.
4
j) Foreign Currency Translation
The translation of the Interim Financial Statements from Canadian dollars
("CDN$") into United States dollars is performed for the convenience of the
reader. Balance Sheet accounts are translated using closing exchange rates in
effect at the Balance Sheet date and income and expense accounts are translated
using an average exchange rate prevailing during each reporting period. No
representation is made that the Canadian dollar amounts could have been, or
could be, converted into United States dollars at the rates on the respective
dates and or at any other certain rates. Adjustments resulting from the
translation are included in the cumulative translation adjustments in
stockholders' equity.
k) Use of Estimates
The preparation of Interim Financial Statements requires management to make
estimates and assumptions that affect certain reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the Interim Financial Statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
l) Long-Lived Assets
On January 1, 1996, the company adopted the provosions of SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of SFAS No. 21 requires that long-lived assets to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Management used its best estimate of the undiscounted cash flows to
evaluate the carrying amount and have determined that no impairment has
occurred.
m) Stock Based Compensation
In December 1995, FAS No. 123, Accounting for Stock-based Compensation, was
issued. It introduced the use of a fair value-based method of accounting for
stock-based compensation. It encourages, but does not require, companies to
recognize compensation to employees based on the new fair value accounting
rules. The company chose to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. Accordingly, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the company's stock at the
measurement date over the amount an employee must pay to acquire the stock.
n) Concentrations of Credit Risks
The company's receivables are unsecured and are generally due in 90 days.
Currently, the company's customers are primarly local, national and
international users of jewelry products. The company's receivables do not
represent significant concentrations of credit risk as at September 30, 2000,
due to the wide variety of customers, markets and geographic areas to which the
company's products are sold.
o) Net Income and Fully Diluted Net Income Per Weighted Average Common Stock
Net income per common stock is computed by dividing net income for the period by
the weighted average number of common stock outstanding during the period.
Fully diluted net income per common stock is computed by dividing net income for
the period by the weighted average number of common stock outstanding during the
period, assuming that all stock options were exercised. Stock warrants have not
been included in the fully diluted net income per common stock calculations as
their inclusion would have been anti-dilutive.
2. CASH SURRENDER VALUE OF LIFE INSURANCE
5
The cash surrender value of life insurance represents the value of life
insurance policies of former directors of Aviv, Inc.
3. BANK INDEBTEDNESS
The bank indebtedness bears interest at the bank's prime lending rate plus 3/4%
per annum. As security, the company has provided a general assignment of
accounts receivable, a general security agreement constituting a first charge
over all present and future personal property of the company and an assignment
of key man life insurance of a director payable to the bank. The facility
contains covenants specifying minimum and maximum financial ratios. The
agreement contains restrictions on changes in ownership and line of business, on
further encumbrances of assets and on the guarantees and other contingent
liabilities.
4. LOANS PAYABLE
Loans Payable includes loans from stockholders of $1,844,450 as on September 30,
2000.($1,905,356 as on December 31,1999)
5. CAPITAL STOCK
a) Authorized
I) 5,000,000 Class A preference Shares
2) An unlimited number of common stock
Issued September 30, December 31,
2000 1999
$ $
6,624,655 Common Stock (6,408,780 10,827,104 10,827,104
for December 31, 1999)
1,265,000 Warrants 113,225 113,225
---------- ----------
10,940,329 10,940,329
Proceeds of $ 557,387.50 receivable from the issuance of 215,875 common shares
on exercise of stock options in January, 2000 less subscrption receivable of $
557,387.50 resulted in no increase in the dollar amount of capital stock.
b) Stock Option Plan
1996 Plan - 500,000 authorized (all issued)
1998 Plan - 500,000 authorized (all issued; 4,250 forfeited)
1999 Plan - 500,000 authorized (44,500 issued)
6. COMPREHENSIVE INCOME
The company has adopted Statement of Financial Accounting Standards No. 130
"reporting Comprehensive Income" as of January 1, 1998 which requires new
standards for reporting and display of comprehensive income and its components
in the financial statements. However, it does not affect net income or total
stockholders' equity. The components of comprehensive income are as follows:
September 30 December 31,
2000 1999
$
Net Income 1,692,242 1,000,228
Other comprehensive income (loss):
Foreign currency translation adjustments (136,578) 558,395
---------- ----------
1,605,664 1,558,623
========== ==========
6
Accumulated other comprehensive loss, December 31, 1997 (359,434)
Foreign currency translation adjustments for the year ended
December 31, 1998 414,935
--------
Accumulated other comprehensive loss, December 31, 1998 55,501
Foreign currency translation adjustments for the year ended
December 31, 1999 558,395
--------
Accumulated other comprehensive loss, December 31, 1999 613,896
Foreign currency translation adjustments for the nine months
ended September 30, 2000 (136,578)
--------
Accumulated other comprehensive income, September 30, 2000 477,318
========
7. UNUSUAL ITEM
The 1999 amount represents $1, 687, 783 being the net book value of waxes, modes
and models that management decided to write-off. and $321,640 which represents
the value of accounts receivable from the 50% owned NetJewels.com that
management decided to write-off. The prior figures for the three and nine months
ended September 30, 1999 have been revised to correct the accounting error of
not writing off the net book value of waxes, models and moulds and a portion of
accounts receivable from the 50% owned NetJewels.com as indicated above.
Consequently, the following 1999 amounts have been revised:
i) Net income for the three months ended September 30, 1999 has decreased from $
236,627 to a Net loss of $ 181,023; consequently, the earnings per common share
and earnings per common share assuming dilution for the three months ended
September 31, 1999 have both decreased from $ 0.04 to a loss of $0.03.
ii) Net income for the nine months ended September 30, 1999 has decreased from $
2,565,391 to $ 906,192; consequently, the earnings per common share and earnings
per common share assuming dilution for the nine months ended September 31, 1999
have decreased from $ 0.43 and $ 0.41 to $0.26 and $0.26 respectively.
The entire 2000 amount represents the value of accounts receivable from the 50%
owned NetJewels.com that the management decided to write-off ($ 884,653) and a
provision for the estimated costs of moving the manufacturing plant from Houston
to the Toronto location ($ 327,418). The Aviv plant was closed effective
November 06, 2000. All the manufacturing was moved to our Toronto plant; the
customer service and repairs functions were kept in Houston, as was our jewelry
store, New York Gold and Diamonds.
8. NET INCOME PER COMMON SHARE
Net income per common share is computed by dividing net income by the weighted
average number of common shares outstanding.
Fully diluted income per share is computed by dividing net income by the
weighted average number of shares calculated using the "treasury stock" method.
9. CHANGE OF NAME
The Company changed the name from "D.G. Jewellery of Canada Ltd." to "D.G.
Jewelry Inc." effective July 29, 1999.
10. CONTINGENCY
The Company is a defendant in a lawsuit arising from an agreement with Haymarket
LLC. On November 16, 2000, the jury rendered a verdict in favor of the Company
which was reversed by the judge who directed a verdict for the plaintiff. The
judge indicated he will put a stay on the obligation to give additional shares
to the plaintiff and the determination of monetary damages pending the appeal of
the Company to the higher court. No provision has been recorded in the accounts
for possible loss. Should any expenditures be incurred by the Company for the
resolution of this lawsuit, they will be charged to the operations of the year
in which such expenditures are incurred.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The statements contained in this filing that are not historical are forward
looking statements within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act, including statements regarding the Company's
expectations, liquidity, anticipated cash needs and availability and anticipated
expense levels. All forward looking statements included in this report are based
on information available to the Company on the date hereof, and the Company
assumes no obligation to update any such forward looking statement. It is
important to note that the Company's actual results could differ materially from
those in such forward looking statements.
7
Results of Operations
Three Months September 30, 2000 Compared to the Three Months Ended September
30,1999.
Revenues for the three months ended September 30, 2000 were $ 8.3 million, or
approximately 20% increase over the third quarter of 1999 revenues of
approximately $7.0 million. This increase is mainly the result of increased
sales to the internet and television customer base.
Gross profit for the third quarter of 2000 was $2.9 million which is an increase
of $ 484,482 (19.75%) over the third quarter This9was attributed to the increase
in sales.
For the quarter ended September 30, 2000 gross profit increased from 35.20% in
1999 to 35.22% in 2000.
Selling expenses increased in the quarter by approximately $ 65,000 from $
564,363 in 1999 to $ 629,543 in 2000 (11.7%). The increase for the three months
is mostly due to the increase in sales.
Administrative expenses of $522,532 for the three months ended September 30,
2000 were approximately 123% higher than the three months ended September 3o,
1999 mainly due to additions to our administrative staff and some computer
related expenses.
The increase in interest expense for the three months ended September 30, 2000
as compared to the three months ended September 30, 1999 was approximately
$11,000. The increase was due mainly interest rate fluctuations and an increased
loan level.
The unusual items decreased by approximately $ 90,000 or 12%. The 1999 unusual
items consisted of $ 446,034 of net book value of waxes, models and molds and $
321,640 of accounts receivable from the 50% owned NetJewels.com that the
management decided to write-off. The unusual items pertaining to 2000 include $
350,000 of accounts receivable from the 50%
owned NetJewels.com that management decided to write-off and $ 327,418 allocated
to moving costs of the Houston manufacturing plant to our Toronto location
relating to Aviv Inc.
As a result of the above factors, net income for the third quarter of 2000 as
compared to the third quarter in 1999 increased to $ 131,090 from a loss of $
181,023 (after unusual item of $ 767,674 for 1999).
Nine Months September 30, 2000 Compared to the Nine Months Ended September
30,1999.
Revenues for the nine months ended September 30, 2000 were $ 26.0 million, or
approximately 12.6% increase over the 1999 revenues of approximately $23.0
million. This increase is mainly the result of increased sales to the internet
and television customer base.
Gross profit for the nine months ended September 30,2000 was $8.8 million which
is an increase of $ 1,111,887 (14.4%) over the same period in 1999. The increase
is attributed to the increase in gross profit as a percentage of sales and
increased sales. For the period ended September 30, 2000 gross profit increased
from 33.29% in 1999 to 33.85% in 2000.
Selling expenses increased in the nine months by approximately $ 253,000 from $
1,442,061 in 1999 to $ 1,694,837 in 2000 (17.5%). The increase for the nine
months is mostly due to the increase in sales.
Administrative expenses of $1.285,208 for the nine months ended September 30,
2000 were approximately 45.5% higher than the nine months ended September 30,
1999 mainly due to additions to our administrative staff and some computer
related expenses.
8
The increase in interest expense for the nine months ended September 30, 2000 as
compared to the nine months ended September 30, 1999 was approximately $246,000.
The increase was due mainly interest rate fluctuations and an increased loan
level.
The unusual items decreased by approximately $800,000 or 40%. The 1999 unusual
items consisted of $ 1,687,583 of net book value of waxes, models and molds and
$ 321,640 of accounts receivable from the 50% owned NetJewels.com that the
management decided to write-off. The unusual items pertaining to 2000 include $
884,653 of accounts receivable from the 50%
owned NetJewels.com that management decided to write-off and $ 327,418 allocated
to moving costs of the Houston manufacturing plant to our Toronto location
relating to Aviv Inc.
As a result of the above factors, net income for the nine months ended September
30, 2000 as compared to the nine months ended September 30, 1999 increased to $
1,674,242 from $ 906,192 (after unusual item of $ 2,009,223 for 1999.).
Liquidity and Capital Resources
The net cash used in operating activities increased by approximately $ 2.4
million for the nine months ended September 30, 2000 over September 30, 1999.
The principal use of cash was traced mainly to an increase in inventory of $3.4
million.
The cash flow used in investing activities decreased by approximately $ 0.9
million for the nine months ended September 30, 2000 over September 30, 1999,
which was mainly owing to a decrease in purchases of property, plant and
equipment.
The cash flow from bank financing increased by approximately $ 2.5 million as
compared to the previous period in 1999. The Company repaid approximately $
650,000 less in loans.
The Company did not receive proceeds from the issuance of capital stock for the
nine months ended September 30, 2000, as compared to the proceeds of $ 3,927,330
for the previous period in 1999.
YEAR 2000 BUSINESS SYSTEM IMPLEMENTATION
As many computer systems and other equipment with embedded chips or processes
(collectively, "Business Systems") use only two digits to represent the year,
they may be unable to process accurately certain data before, during or after
the year 2000. As a result, business and governmental entities are at risk for
possible miscalculations or systems failures causing disruptions in their
business operations. The company has committed to and is in the process of
implementing a Y2K readiness program, with the objective of having all of their
significant Business Systems, including those that affect facilities and
manufacturing activities, functioning properly, well in advance of January 1,
2000.
9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit arising from an agreement with Haymarket
LLC. On November 16, 2000, the jury rendered a verdict in favor of the Company
which was reversed by the judge who directed a verdict for the plaintiff. The
judge indicated he will put a stay on the obligation to give additional shares
to the plaintiff and the determination of monetary damages pending the appeal of
the Company to the higher court.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 10, 2000, the Company held its 1999 Annual Meeting of
Stockholders. At the annual meeting, the Company's stockholders were asked to
vote upon: (i) the election of six directors to serve for the ensuing year; (ii)
an amendment to the Company's articles of incorporation to authorize 5,000,000
preferred shares; and (iii) the appointment of an independent accounting firm
for the ensuing year.
The following persons were elected as directors of the company for the
ensuing year by the votes next to such persons name:
For Withheld Against
Samuel J. Berkovits 6,149,738 0 48,316
Meyer Feiler 6,149,738 0 48,316
Theodore L. Bonsignore 6,149,738 0 48,316
Jay M. Kaplowitz 6,149,738 0 48,316
Steven Reichmann 6,149,738 0 48,316
Saul M. Muskat 6,149,738 0 48,316
10
Samuel J. Berkovits, Meyer Feiler, Theodore L. Bonsignore, Jay M. Kaplowitz,
Steven Reichmann and Saul M. Muskat were duly elected as Directors of the
Corporation to serve until the Annual Meeting of Stockholders in the year 2001
or until their respective successors have been duly elected and qualified.
The amendment to the Company's articles of incorporation authorizing
5,000,000 shares of preferred stock was approved by the following vote:
For Against Abstain
2,656,867 76,951 8,460
3,455,776 shares were not voted on this proposal.
Schwartz, Levitsky, Feldman, LLP, Chartered Accountants was approved to
act as the Company's independent chartered accountants for the ensuing year by
the following vote:
For Against Abstain
6,160,728 35,566 1,760
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the three month
period ended September 30, 2000.
(c) Exhibits.
27 Financial Data Schedule
11
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
D.G. JEWELRY INC.
Dated: November 20, 2000 By:/s/ Jack Berkovits
-------------------------------------
Jack Berkovits
Chief Executive Officer
12
EXHIBIT INDEX
27 Financial Data Schedule