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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
   FORM 10-Q/A Amendment No. 1
 (Mark one) x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Thirteen Weeks Ended June 26, 2004 OR o
    
    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 1-9647 MAYORS JEWELERS, INC.  Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
    
    59-2290953
(I.R.S. Employer
Identification No.)
 14051 N.W. 14th Street, Suite 200
Sunrise, Florida 33323
(Address of Principal Executive Offices) (Zip Code) (954) 846-8000
(Registrants Telephone Number, Including Area Code) Indicate by check mark 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 (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 o Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.) Yes o    No x Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date. 36,961,307 SHARES OF COMMON STOCK ($.0001 PAR VALUE)
AS OF AUGUST 4, 2004




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Explanatory Note This Amendment No. 1 on Form 10-Q/A (this Amendment) amends the
Companys Quarterly Report on Form 10-Q for the thirteen weeks ended June 26,
2004, originally filed with the Securities and Exchange Commission on August 5,
2004 (the Original Filing). This Amendment is being filed in order to reflect
restatements of the following (unaudited) financial statements: consolidated
statements of operations, stockholders equity, and cash flows for the thirteen
weeks ended June 26, 2004, and consolidated balance sheets as of June 26, 2004
and March 27, 2004. The restatement reflects changes to the accounting
for convertible preferred stock and common warrants issued by the
Company. For a description of the
restatements, see Restatements in Note B to the accompanying unaudited
consolidated condensed financial statements in this Amendment. This Form 10-Q/A
also amends Item 2 with respect to the related warrant non-cash compensation
expense (credit) discussion. Except as described above, this Amendment continues to speak as of the
date of the Original Filing.




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MAYORS JEWELERS, INC. FORM 10-Q/A FOR THE THIRTEEN WEEKS ENDED JUNE 26, 2004 TABLE OF CONTENTS  
 Page No.PART I: FINANCIAL INFORMATIONItem 1.
 Consolidated Condensed Financial Statements - UnauditedConsolidated Condensed Balance Sheets as of June 26, 2004 (as Restated) and March 27, 2004 (as Restated)
    
    
    3Consolidated Condensed Statements of Operations for the thirteen weeks ended June 26, 2004 (as Restated) and June 28, 2003
    
    
    4Consolidated Condensed Statements of Cash Flows for the thirteen weeks ended June 26, 2004 (as Restated) and June 28, 2003
    
    
    5Notes to Consolidated Condensed Financial Statements (as Restated)
    
    
    6-10Item 2.
 Managements Discussion and Analysis of Financial Condition and Results
 of Operations (as Restated)
    
    
    10-13Item 3. Quantitative and Qualitative Disclosures About Market Risks
    
    
    13Item 4. Controls and Procedures
    
    
    13PART II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    13Item 6. Exhibits and Reports on Form 8-K
    
    
    13-14Signatures
    
    
    15Sec 302 Chief Executive Officer CertificationSec 302 Chief Financial Officer CertificationSec 906 Chief Executive Officer CertificationSec 906 Chief Financial Officer Certification
  2




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PART I: FINANCIAL INFORMATION 
 Item 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS MAYORS JEWELERS, INC. AND SUBSIDIARIES 
 CONSOLIDATED CONDENSED
BALANCE SHEETS - UNAUDITED
 (Amounts shown in thousands except share and per share data)
 June 26,
    
    March 27,2004
    
    2004(as Restated,see
Note B)
    
    (as Restated,see
Note B)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    891
    
    
    $
    1,233Accounts receivable (net of allowance for doubtful accounts of
$1,019 and $999, at June 26, 2004 and March 27, 2004,
respectively)
    
    
    5,072
    
    
    
    6,661Inventories
    
    
    79,068
    
    
    
    80,825Other current assets
    
    
    625
    
    
    
    1,194Total current assets
    
    
    85,656
    
    
    
    89,913Property, net
    
    
    14,148
    
    
    
    14,634Other assets
    
    
    538
    
    
    
    668Total non-current assets
    
    
    14,686
    
    
    
    15,302Total assets
    
    $
    100,342
    
    
    $
    105,215LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    10,677
    
    
    $
    13,833Accrued expenses
    
    
    7,441
    
    
    
    9,457Credit facility
    
    
    35,438
    
    
    
    33,005Total current liabilities
    
    
    53,556
    
    
    
    56,295Other long term liabilities
    
    
    2,810
    
    
    
    2,768Term loan
    
    
    12,668
    
    
    
    12,668Total long term liabilities
    
    
    15,478
    
    
    
    15,436Stockholders Equity:Series A-1 convertible preferred stock, $.001 par value, 15,050
shares authorized and issued at June 26, 2004 and March 27,
2004, liquidation value of $15,050,000
    
    
    
    
    
    
    Common stock, $.0001 par value, 50,000,000 shares authorized,
46,945,261 issued at June 26, 2004 and March 27, 2004
    
    
    5
    
    
    
    5Additional paid-in capital
    
    
    207,277
    
    
    
    206,981Accumulated deficit
    
    
    (146,574
    )
    
    
    (144,102
    )Less: 9,983,954 shares of treasury stock, at cost
    
    
    (29,400
    )
    
    
    (29,400
    )Total stockholders equity
    
    
    31,308
    
    
    
    33,484Total liabilities and stockholders equity
    
    $
    100,342
    
    
    $
    105,215
 See notes to unaudited consolidated condensed financial statements. 3




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MAYORS JEWELERS, INC. AND SUBSIDIARIES 
 CONSOLIDATED
STATEMENTS OF OPERATIONS - UNAUDITED
 (Amounts shown in thousands except share and per share data)
 Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedJune 26, 2004
    
    June 28, 2003(as Restated,see
Note B)Net sales
    
    $
    29,138
    
    
    $
    24,505Cost of sales
    
    
    16,985
    
    
    
    14,601Gross profit
    
    
    12,153
    
    
    
    9,904Selling, general and administrative expenses
    
    
    12,384
    
    
    
    11,800Non-cash compensation expense
    
    
    296
    
    
    
    Depreciation and amortization
    
    
    833
    
    
    
    851Total operating expenses
    
    
    13,513
    
    
    
    12,651Operating loss
    
    
    (1,360
    )
    
    
    (2,747
    )Interest and other income
    
    
    3
    
    
    
    60Interest and other financial costs
    
    
    (1,115
    )
    
    
    (1,102
    )Loss from operations before income taxes
    
    
    (2,472
    )
    
    
    (3,789
    )Income tax
    
    
    
    
    
    
    Net loss
    
    
    (2,472
    )
    
    
    (3,789
    )Preferred stock cumulative dividend
    
    
    
    
    
    
    (357
    )Net loss attributable to common stockholders
    
    $
    (2,472
    )
    
    $
    (4,146
    )Weighted average shares outstanding, basic and diluted
    
    
    36,961,307
    
    
    
    19,608,310Loss per share, basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.21
    )
 See notes to unaudited consolidated condensed financial statements. 4




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MAYORS JEWELERS, INC. AND SUBSIDIARIES 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS - UNAUDITED
 (Amounts shown in thousands)
 Thirteen
    
    ThirteenWeeks Ended
    
    Weeks EndedJune 26, 2004
    
    June 28, 2003(as Restated,see
Note B)Cash flows from operating activities:Net loss
    
    $
    (2,472
    )
    
    $
    (3,789
    )Adjustments to reconcile net loss to net cash used in
by operating activities:Depreciation and amortization
    
    
    833
    
    
    
    851Amortization of debt costs
    
    
    125
    
    
    
    74Provision for doubtful accounts
    
    
    106
    
    
    
    26Non-cash compensation expense related to warrants
and Birks
sale of stock
    
    
    296
    
    
    
    Gain on sale of fixed assets
    
    
    (18
    )
    
    
    Decrease (increase) in assets:Accounts receivable
    
    
    1,483
    
    
    
    146Inventories
    
    
    1,757
    
    
    
    (6,491
    )Other assets
    
    
    574
    
    
    
    68(Decrease) increase in liabilities:Accounts payable
    
    
    (3,156
    )
    
    
    4,122Accrued expenses and other long term liabilities
    
    
    (1,974
    )
    
    
    954Net cash used in continuing operations
    
    
    (2,446
    )
    
    
    (4,039
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (107
    )Net cash used in operating activities
    
    
    (2,446
    )
    
    
    (4,146
    )Cash flows from investing activities:Proceeds from sales of fixed assets
    
    
    18
    
    
    
    78Capital expenditures, net
    
    
    (347
    )
    
    
    (332
    )Net cash used in investing activities
    
    
    (329
    )
    
    
    (254
    )Cash flows from financing activities:Borrowings under line of credit
    
    
    32,749
    
    
    
    31,199Line of credit repayments
    
    
    (30,316
    )
    
    
    (26,786
    )Net cash provided by financing activities
    
    
    2,433
    
    
    
    4,413Net (decrease) increase in cash and cash equivalents
    
    
    (342
    )
    
    
    13Cash and cash equivalents at beginning of year
    
    
    1,233
    
    
    
    276Cash and
cash equivalents at end of period
    
    $
    891
    
    
    $
    289Supplemental cash flow information:Interest paid
    
    $
    1,115
    
    
    $
    1,128Non-cash investing and financing activities:Property acquired with debt
    
    $
    231
    
    
    $
    130
 See notes to unaudited consolidated condensed financial statements. 5




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MAYORS JEWELERS, INC. AND SUBSIDIARIES 
 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 A. Nature of Business Mayors Jewelers, Inc. and its subsidiaries (the Company or Mayors)
consolidated condensed financial statements as of June 26, 2004 and March 27,
2004, and for the thirteen week periods ended June 26, 2004 and June 28, 2003
have not been audited by a Registered Public Accounting Firm, but in the opinion of
the management of the Company reflect all adjustments (which include only
normal recurring accruals) necessary to present fairly the financial position,
results of operations and cash flows for those periods. In accordance with the
rules of the Securities and Exchange Commission, these consolidated condensed
financial statements do not contain all disclosures required by accounting
principles generally accepted in the United States of America. Results of the
thirteen week periods ended June 26, 2004 and June 28, 2003 are not necessarily
indicative of annual results because of the seasonality of the Companys
business. The information included in this Form 10-Q should be read in
conjunction with the financial statements and notes thereto, together with
Managements Discussion and Analysis of Financial Condition and Results of
Operations contained in the Companys Annual Report on Form 10-K for the year
ended March 27, 2004. Mayors is primarily engaged in the sale of fine quality jewelry,
timepieces and giftware. The Company operates 28 locations in South and
Central Florida and metropolitan Atlanta, Georgia. Management believes that barring a significant external event that
materially adversely affects the Companys current business or the current
industry trends as a whole, the Companys borrowing capacity under the credit
facility, projected cash flows from operations and other short term borrowings
will be sufficient to support the Companys working capital needs, capital
expenditures, any dividend payments on its preferred stock and debt service for
at least the next twelve months. B. Restatements The
accompanying consolidated financial statements for the thirteen weeks
ended June 26, 2004 have been restated to properly account
for and/or disclose the following: 
    
    As more fully disclosed in Note F, Henry
Birks & Sons Inc. (Birks), the Companys
majority stockholder, granted rights to receive warrants to purchase
the Companys
common stock to certain current or former employees of Birks or its
affiliates, who were, or later became employees of or provided
services to the Company. The rights to receive these warrants are
contingent upon fulfillment of certain time based employment vesting
requirements. The granted warrants are subject to variable accounting
rules due to their cashless exercise feature which requires
compensation expense (credit) calculated as the increase or decrease
in intrinsic value of the vested warrants based on the change in
market value of the underlying stock. Non-cash compensation expense
for the thirteen weeks ended June 26, 2004 related to these
warrants was approximately $161,000.
Previous to this restatement, the Company had not properly identified the granting
of these rights to receive warrants by Birks as a transaction
effecting the Companys consolidated financial statements and accordingly had not recognized
compensation expense for these warrants.

The Company corrected
the fair value of common stock warrants issued to approximately
$3.8 million from $1.0 million and recognized a beneficial
conversion feature for the Series A Preferred Stock as a result
of the valuation of the warrants. The beneficial conversion resulted
in a non-cash dividend to Birks at the time of the investment since
the Series A Preferred Stock were convertible immediately.

The Company restated
its proforma information to reflect the expense of the previously
mentioned warrants as calculated using the fair value method as
prescribed in SFAS No. 123. See Note C.
 The
following information presents the impact of the non-cash
compensation expense discussed above, as well as a
reclassification of other non-cash compensation expense of $135,000 from
selling, general and administrative expenses to non-cash compensation expense,
on the Companys financial information as originally reported as
of and for the thirteen weeks ended June 26, 2004: Thirteen Weeks EndedJune 26, 2004(as Previously Reported)
    
    (as Restated)Selling, general and administrative expenses
    
    
    12,519
    
    
    
    12,384Non-cash compensation expense
    
    
    
    
    
    
    296Operating loss
    
    
    (1,199
    )
    
    
    (1,360
    )Interest and other income
    
    
    3
    
    
    
    3Interest and other financial costs
    
    
    (1,115
    )
    
    
    (1,115
    )Loss from
operations before income taxes
    
    
    (2,311
    )
    
    
    (2,472
    )Income taxes
    
    
    
    
    
    
    Net loss
    
    
    (2,311
    )
    
    
    (2,472
    )Preferred stock cumulative dividend
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (2,311
    )
    
    $
    (2,472
    )Loss per share, basic and diluted:Continuing operations
    
    $
    (0.06
    )
    
    $
    (0.07
    )Discontinued operations
    
    
    (0.00
    )
    
    
    (0.00
    )$
    (0.06
    )
    
    $
    (0.07
    )
 6




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As of June 26, 2004(as Previously Reported)
    
    (as Restated)Additional paid-in capital
    
    $
    206,249
    
    
    $
    207,277Accumulated deficit
    
    
    (145,546
    )
    
    
    (146,574
    )
 C. Accounting for Stock-Based Compensation (as Restated, see Note B) The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees, and related interpretations in
accounting for its stock-based compensation plans. No stock-based compensation
cost has been recognized for such plans in the accompanying consolidated
condensed statements of operations as all options granted had an exercise price
equal to the market value of the underlying common stock on the grant date. As
required by Statement of Financial Accounting Standards (SFAS) No. 148,
"Accounting for Stock-Based Compensation-Transition and Disclosure, which
amends SFAS No. 123, Accounting for Stock-Based Compensation, the following
table estimates the pro-forma effect on net loss and loss per share had the
Company applied the fair value recognition provision of SFAS No. 123 to
stock-based employee compensation: Thirteen Weeks
    
    Thirteen WeeksEnded June 26, 2004
    
    Ended June 28, 2003(as Restated)
    
    (as Restated)(In thousands, except per share amounts)Net loss attributable to common stockholders as reported
    
    $
    (2,472
    )
    
    $
    (4,146
    )Add back non-cash compensation expense for warrants
recorded pursuant to APB 25
    
    
    161
    
    
    
    Adjusted net loss
    
    
    (2,311
    )
    
    
    (4,146
    )Stock-based employee compensation expense determined
under fair-value-based method for all awards, net of tax
    
    
    (191
    )
    
    
    (397
    )Pro-forma net loss
    
    $
    (2,502
    )
    
    $
    (4,543
    )Loss per shareAs reported basic and diluted:
    
    $
    (0.07
    )
    
    $
    (0.21
    )Pro-forma basic and diluted:
    
    $
    (0.07
    )
    
    $
    (0.23
    )
 The fair value of each option grant was estimated as of the date of grant
using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants during the thirteen weeks ended June 26,
2004 and June 28, 2003: expected volatility of 93% and 93%, respectively,
risk-free interest rate of 3.84% and 2.49%, respectively, expected lives of
approximately five years and a dividend yield of zero for the periods
presented. There were no options granted during the thirteen weeks ended June
26, 2004 and June 28, 2003. The fair value of each warrant grant was estimated
as of the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used for grants: expected volatility of
49.2%, risk-free interest rate of 4.48%, expected lives of approximately twenty
years and a dividend yield of zero. The weighted average fair values of
warrants granted during Fiscal 2002 were $0.26. D. Term Loan and Credit Facility As of June 26, 2004, the Company had a $58 million working capital credit
facility with Fleet Retail Finance and GMAC and a $12.7 million junior secured
term loan with Back Bay Capital. Both of the debt facilities have a maturity
date of August 20, 2005 and are collateralized by substantially all of the
Companys assets. Availability under the working capital facility is determined
based upon a percentage formula applied to certain inventory and accounts
receivable as amended on February 20, 2004, and has certain restrictions
regarding borrowing availability. The interest rate under the working capital 7




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facility as of June 26, 2004 was 5.25% (prime plus 1.25%). The working capital
facility currently contains certain financial covenants that limit capital
expenditures. The junior secured term loan currently bears an effective
interest rate of 14% and is
subject to similar restrictions and covenants as the working capital
facility as well as certain prepayment penalties. Based on this, after accounting for the foregoing borrowing restrictions,
the Company had approximately $48.3 million of borrowing capacity under its
facility and, after netting the outstanding borrowings of $35.4 million and
letter of credit commitments of $600,000, the Company had excess borrowing
capacity of approximately $12.3 million. E. Inventories Inventories are summarized as follows: (amounts shown in thousands)June 26,
    
    March 27,2004
    
    2004Raw materials
    
    $
    1,266
    
    
    $
    1,415Finished
goods
    
    
    77,802
    
    
    
    79,410$
    79,069
    
    
    $
    80,825
 In addition, the Company held
inventory on consignment at June 26, 2004 and
March 27, 2004 with a cost of approximately $12,568,000 and
$11,460,000, respectively. F. Related Party
Transactions (as Restated, see Note B) On August 20, 2002, the Company closed on a $15.05 million gross equity
investment transaction with Henry Birks & Sons Inc. (Birks). The Company
incurred expenses related to the raising of the capital of approximately $1.5
million which was netted against the proceeds in stockholders equity. As
consideration for the investment, Birks received 15,050 shares of Series A
Convertible Preferred Stock (Series A Preferred), a newly formed class of
stock that was originally convertible into 50,166,667 shares of common stock.
The conversion ratio of the Series A Convertible Preferred Stock to common
stock is subject to certain anti-dilution provisions. Birks also received
warrants that were exercisable for 12,424,596 shares of common stock at $0.30
per share, 12,424,596 shares of common stock at $0.35 per share and 12,424,595
shares of common stock at $0.40 per share. The warrants also contain certain
anti-dilution provisions which upon the
occurrence of certain events can increase the number of warrants and
decrease the exercise price. Of the net proceeds raised of $13.55 million, a fair
value of $3.8 million has been allocated to the warrants. The preferred stock
and warrants were issued by the Company without being registered, relying on an
exemption under 4(2) of the Securities Act of 1933, as amended. Birks had
entered into an Amended and Restated Registration Rights Agreement with the
Company, whereby Birks has the right to require the Company to register all of
the shares underlying the above described securities issued to Birks. On November 1, 2002 and March 14, 2003 Birks granted rights to receive
4,250,000 and 500,000, respectively, of its warrants to certain current or
former employees of Birks or its affiliates, who were or later became employees
of or provided services to the Company. The rights to receive these warrants
are contingent upon fulfillment of certain time based employment vesting
requirements. The exercise price of the granted warrants was $0.29 per share,
after certain anti-dilution adjustments. The granted warrants are subject to
variable accounting rules due to their cashless exercise feature which requires
compensation expense (credit) calculated as the increase or decrease in
intrinsic value of the vested warrants, based on the change in market value of
the underlying stock. Non-cash compensation expense for the thirteen weeks
ended June 26, 2004 related to these warrants was approximately
$161,000. As of
June 26, 2004, the number of warrants increased to 4,771,572, of which
4,339,248 were vested, and the exercise price was $0.29 as a result of the
anti-dilution provisions contained in the warrant agreements. On November 6, 2003, Birks exercised 32,523,787 of the warrants on a
cashless basis based on an average market price of $0.766, as defined in the
warrant agreements. The cashless feature of exercise resulted in the issuance
of 17,352,997 shares of common stock and the forfeiture of 15,170,790 warrants.
Birks had 288,195, 305,976 and 305,976 warrants exercisable at $0.29, $0.34
and $0.39, respectively, including adjustments for the anti-dilution provisions
as of June 26, 2004. On March 22, 2004, Birks sold 1,000,000 shares of Mayors common stock at
$0.50 per share in a private placement sale to the spouse of one of the
Companys Directors. The sale of stock resulted in compensation expense of
$200,000 recorded by Mayors which represents the difference between the market
value of the stock and the selling price at the date of the sale. On June 15,
2004, Birks sold 500,000 and 250,000 shares of Mayors common stock to one of
the Companys Directors and a consultant to Birks, respectively, for $0.50 per
share in a private placement sale. The sale of the 750,000 shares of common
stock resulted in compensation expense of $135,000 recorded by Mayors which
represented the difference between the market value of the stock and the
selling price at the date of the sale, which is included in non-cash
compensation expense in the Consolidated Condensed Statement of Operations for
the thirteen weeks ended June 26, 2004. 8




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The Series A Preferred provided that the holders of the preferred stock
were entitled to receive dividends on each share of preferred stock at a rate
per annum of $95 per share which equates to approximately $1.4 million
annually, a 9.5% yield on the $15,050,000 investment. During the thirteen weeks
ended June 28, 2003, approximately $357,000 of dividends were cumulated and
reflected in the Consolidated Condensed Statement of Operations for that
period. On February 20, 2004, the Company issued a newly created Series A-1
Convertible Preferred Stock (Series A-1 Preferred) to Birks in exchange for
its shares of Series A Preferred whereby each share of Series A Preferred was
exchanged for one share of Series A-1 Preferred. This exchange took place in
order to effectuate the early payment of dividends already earned by Birks.
The Series A-1 Preferred is substantially identical to the Series A Preferred,
with the exception of certain changes primarily to the provisions regarding the
payment of dividends, future dividend rates, and the conversion rate. As of
June 26, 2004, the Series A-1 Preferred were convertible into 51,442,085 shares
of common stock of the Company which includes an adjustment under the
anti-dilution provision of the Series A-1 Preferred. Upon conversion of the
preferred shares, Birks would own approximately 75.8% of the then outstanding
common stock in Mayors. In connection with the exchange of preferred shares, Birks agreed to (a)
reimburse the Company in full for all Transaction expenses, (b) reduce the
dividend rate from $95 per share to $80 per share per annum on the Series A-1
Preferred, resulting in a savings in cumulative dividends of approximately
$225,750 annually; and (c) waive the dividend for one year on the Series A-1
Preferred. Therefore, there are no cumulative dividends affecting net income
attributable to common stockholders for the thirteen weeks ended June 26, 2004. Mayors Chief Executive Officer, Chief Financial Officer, Group
VP-Finance, Group VP-Supply Chain Operations, Group VP-Strategy and Business
Integration, Group Creative Director and other members of Mayors management
serve in similar capacities for Birks. As of July 2004, the VP-Retail began
serving in a similar capacity for Birks as for Mayors and the Group
VP-Category Management began assisting Birks in the category management of
Birks branded watch business. In addition, Thomas A. Andruskevich, Chairman of
the Mayors Board of Directors, and its President, and Chief Executive Officer,
and Filippo Recami, a Director of Mayors, serve as Directors of Birks.
Lorenzo Rossi di Montelera, a Director of Mayors, serves as the Chairman of
the Board of Directors of Birks. During the thirteen weeks ended June 26, 2004 and June 28, 2003, Mayors
incurred approximately $8,000 and $14,000, respectively, of net costs from
Birks related to advisory, management and corporate services pursuant to the
Management Expense Reimbursement Agreement which was net of expenses charged to
Birks from Mayors for similar services. Also, during the thirteen weeks ended
June 26, 2004 and June 28, 2003, Mayors purchased approximately $327,000 and
$28,000, respectively, of merchandise from Birks pursuant to a Manufacturing &
Sale Agreement. As of June 26, 2004, the Company owed Birks $352,000 related to
purchases of inventory, advisory, management and corporate services and for
expenses paid by Birks on behalf of Mayors. On April 22, 2004, the Company entered into a Management Consulting
Services Agreement (the Agreement) with Regaluxe Investment Sarl, a company
incorporated under the laws of Luxembourg (Regaluxe), to become effective on
May 1, 2004. Under the Agreement, Regaluxe is to provide advisory, management
and corporate services to the Company. During the thirteen weeks ended June
26, 2004, the Company incurred costs of $125,000 related to such services. Regaluxe is the controlling shareholder of Henry Birks & Sons Holdings
Inc. which is the controlling shareholder of Birks. Two of the Companys
directors, Filippo Recami and Dr. Lorenzo Rossi di Montelera, are affiliated
with Regaluxe. Mr. Recami is the Chief Executive Officer and managing director
of Regaluxe, and Dr. Rossi is a member of the Board of Directors of Regaluxe.
Furthermore, Dr. Rossi shares joint voting control over the shares of
Iniziativa S.A., which owns 100% of the outstanding stock of Regaluxe. The
Board of Directors of the Company waived the provisions of the Companys Code
of Conduct relating to related party transactions when the Board of Directors
approved the Company entering into the Agreement with Regaluxe. G. Legal Proceedings The Company is from time to time involved in litigation incident to the
conduct of its business. In these pending matters, the Company believes that
the resolution of these matters should not materially affect the Companys
financial position; however, there can be no assurance as to the final result
of these legal matters. 9




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H. Subsequent Events On July 29, 2004, Birks, the controlling stockholder of Mayors, notified
the Board of Directors of Mayors that Birks was interested in combining the
Mayors and Birks companies. The Board of Directors of Mayors has formed a
special committee composed only of independent board members in order to
consider the Birks proposal. Mayors and Birks have not discussed the material
terms of the proposed transaction and there can be no assurance that any
discussions between Birks and Mayors will result in the parties entering into
a definitive agreement regarding any such corporate reorganization. 
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS(as Restated, see Explanatory Note on
page 1) Results of Operations The discussion and analysis below contains trend analysis and other
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The
Companys actual results could differ materially from those anticipated in any
forward-looking statements as a result of certain factors set forth below and
elsewhere in this report and in the Companys Annual Report on Form 10-K for
the year ended March 27, 2004 and other reports filed with the Securities and
Exchange Commission. Overview Mayors currently operates 28 luxury jewelry stores in South and Central
Florida and metropolitan Atlanta, Georgia. The retail jewelry market is
particularly subject to the level of consumer discretionary income and the
subsequent impact on the type and value of goods purchased. With the
consolidation of the retail industry, the Company believes that competition and
consolidation both within the luxury goods retail industry and with other
competing general and specialty retailers and discounters will continue to
increase. The luxury watch brand business comprise a significant portion of the
Companys business, which management believes is a result of the Companys
ability to effectively market high-end watches. If, for any reason, the Company
is unable to obtain or sell certain watches, it could have a material adverse
effect on the Companys business, financial condition and operating results. The success of the Companys operations depends to a certain extent on the
ability of mall anchor tenants and other attractions to generate customer
traffic in the vicinity of the Mayors stores. The negative performance of a
mall could have an adverse effect on Mayors operations, caused by events such
as the loss of mall anchor tenants in the regional malls where the Mayors
stores are located, the opening of competing regional malls or stores and other
economic downturns affecting customer mall traffic. One of the Companys core strategies is to continue to increase gross
profit and gross margin over the next several years. The Companys strategy for
gross profit and gross margin improvement is to reduce the cost of merchandise
purchased through leveraging the Companys purchasing power and increasing
sales of exclusive and brand merchandise, and to move the mix of sales towards
higher margin jewelry items, including a renewed focus on the bridal business.
In addition, the Company expects to refine the allocation and management of
inventory in its stores, and as a result, other direct costs such as the cost
of financing inventory and inventory markdowns are expected to decrease.
However, there can be no assurance that the Companys strategy to increase
gross profit and gross margin will be successful. In addition, the Company is
focusing on controlling and decreasing, where appropriate, operating costs
which include the sharing of services of certain officers and other members of
senior management. The relationship with Birks has brought synergies to both
companies in several areas, including the production of holiday catalogs,
television campaigns and other marketing efforts; the attainment of favorable
terms on its banking facilities; and the ability to strengthen and/or
consolidate supplier relationships with improved terms as a result of
leveraging the credibility and stronger purchasing power of the combined
companies. The retail jewelry business is seasonal in nature with a higher proportion
of sales and a significant portion of the Companys earnings generated during
the third fiscal quarter holiday selling season and, therefore, the results of
its operations for the thirteen weeks ended June 26, 2004 and June 28, 2003 are
not necessarily indicative of the results of the entire fiscal year. 10




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Thirteen Weeks Ended June 26, 2004 compared to the Thirteen Weeks ended June 28, 2003 The Companys net sales for the thirteen weeks ended June 26, 2004 were
$29.1 million compared to $24.5 million for the thirteen weeks ended June 28,
2003. The increase in revenues for the thirteen weeks ended June 26, 2004 is
primarily due to the result of an effective mix of merchandising and increase
of inventory unit offerings in stores, due in part to the improved financial
position of the Company and enhanced marketing and customer events, as well as
increased consumer confidence and spending compared to the same period last
year. Comparable store sales (sales in stores open in both thirteen week
periods), increased 18.5% over the similar thirteen week period in 2003. Gross profit was $12.2 million and 41.7% of sales for the thirteen weeks
ended June 26, 2004 compared to $9.9 million and 40.4% of sales for the
thirteen weeks ended June 28, 2003. The Company believes the increase in gross
profit and gross margin (gross profit as a percentage of sales) is primarily
due to the continued successful execution of merchandising strategies which
began to be implemented last fiscal year. Selling, general and administrative expenses were $12.4 million or 42.5%
of net sales for the thirteen weeks ended June 26, 2004 compared to $11.8
million or 48.2% of net sales for the thirteen weeks ended June 28, 2003. The
increase in selling, general and administrative expenses for the thirteen weeks
ended June 26, 2004 is primarily a result of the increase in variable costs
related to the increase in sales and expanded marketing efforts. The decrease
in selling, general and administrative expenses as a percentage of sales is due
to the positive impact of the increase in comparable stores sales which were
able to better absorb the fixed costs compared to the prior year fiscal
quarter. Non-cash compensation expense was $296,000 for the thirteen weeks ended
June 26, 2004. Non-cash compensation expense of $161,000 resulted from the
increase in the intrinsic value of vested warrants, based on the underlying
value of the stock and subject to variable accounting, issued to certain
current or former employees of Birks or its affiliates, who were or later
became employees of or provided services to the Company. Non-cash compensation
expense for the thirteen weeks ended June 26, 2004 also includes the private
sale of stock owned by Birks which resulted in compensation expense of $135,000
recorded by Mayors, which represented the difference between the market value
of the stock and the selling price at the date of the sale. Depreciation and amortization expenses were $0.8 million for the thirteen
weeks ended June 26, 2004 compared to $0.9 million for the thirteen weeks ended
June 28, 2003. Interest and other income was $3,000 for the thirteen weeks ended June 26,
2004 compared to $60,000 for the thirteen weeks ended June 28, 2003. Interest
and other financial costs were $1.1 million for the thirteen weeks ended June
26, 2004 and June 28, 2003. FINANCIAL CONDITION Liquidity and Capital Resources As of June 26, 2004, the Company had a $58 million working capital credit
facility with Fleet Retail Finance and GMAC and a $12.7 million junior secured
term loan with Back Bay Capital. Both of the debt facilities have a maturity
date of August 20, 2005 and are collateralized by substantially all of the
Companys assets. Availability under the working capital facility is determined
based upon a percentage formula applied to certain inventory and accounts
receivable as amended on February 20, 2004, and has certain restrictions
regarding borrowing availability. The interest rate under the working capital
facility as of June 26, 2004 was 5.25% (prime plus 1.25%). The working capital
facility currently contains certain financial covenants that limit capital
expenditures. The junior secured term loan currently bears an effective
interest rate of 14% and is subject to similar restrictions and covenants as
the working capital facility as well as certain prepayment penalties. Based on this, after accounting for the foregoing borrowing restrictions,
the Company had approximately $48.3 million of borrowing capacity under its
working capital facility at June 26, 2004 and, after netting the outstanding
borrowings of $35.4 million and letter of credit commitments of $600,000, the
Company had excess borrowing capacity of approximately $12.3 million. The
Company relies on its short term borrowings under the credit facility to
finance its operations on a day to day basis. Substantially all of the assets
of the Company have been pledged under the facility and term loan. During the thirteen weeks ended June 26, 2004, cash flows from continuing
operating activities used $2.4 million in cash. The use of cash for operating
activities was primarily the result of the working capital needs due to the net
loss for the thirteen weeks ended June 26, 2004, the decrease in accounts
payable and accrued expenses offset by the decrease in 11




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inventories and accounts receivable. During the thirteen weeks ended June 28, 2003, cash flows from
continuing operating
activities used $4.0 million in cash. Cash flows for discontinued
operations used $0.1 million in cash. The use of cash for operating activities
was primarily the result of the working capital needs due to the net loss for
the thirteen weeks ended June 28, 2003, the increase in inventories, offset by
the increase in accounts payable and accrued expenses. Net cash used in investing activities was $0.3 million during the thirteen
weeks ended June 26, 2004 and June 28, 2003 primarily related to capital
expenditures. Net cash provided by financing activities of $2.4 million and $4.4 million
during the thirteen weeks ended June 26, 2004 and June 28, 2003, respectively,
related to net borrowings under the credit facility. Management believes that barring a significant external event that
materially adversely affects Mayors current business or the current industry
trends as a whole, Mayors borrowing capacity under the credit facility,
projected cash flows from operations and other short term borrowings will be
sufficient to support the Companys working capital needs, capital expenditures
and debt service for at least the next twelve months. FORWARD-LOOKING STATEMENTS This report and other written reports and releases and oral statements
made from time to time by the Company contain forward-looking statements which
can be identified by their use of words like plans, expects, believes,
will, anticipates, intends, projects, estimates, could, would,
may, planned, goal, and other words of similar meaning. All statements
that address expectations, possibilities or projections about the future,
including without limitation statements about the Companys strategies for
growth, expansion plans, sources or adequacy of capital, expenditures and
financial results are forward-looking statements. One must carefully consider such statements and understand that many
factors could cause actual results to differ from the forward-looking
statements, such as inaccurate assumptions and other risks and uncertainties,
some known and some unknown. No forward-looking statement is guaranteed and
actual results may vary materially. Such statements are made as of date
provided, and the Company assumes no obligation to update any forward-looking
statements to reflect future developments or circumstances. One should carefully evaluate such statements by referring to the factors
described in the Companys filings with the Securities and Exchange Commission,
especially on Forms 10-K, 10-Q and 8-K. Particular review is to be made of
Items 1, 2, 3 and 7 of the Form 10-K and Part I, Item 2 of the Forms 10-Q
where the Company discusses in more detail various important risks and
uncertainties that could cause actual results to differ from expected or
historical results. The Company notes these factors for investors as permitted
by the Private Securities Litigation Act of 1995. Since it is not possible to
predict or identify all such factors, the identified items are not a complete
statement of all risks or uncertainties. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in conformity with accounting
principles generally accepted in the United State of America requires the
Company to make estimates and assumptions about future events and their impact
on amounts reported in the financial statements and related notes. Since future
events and their impact cannot be determined with certainty, the actual results
may differ from those estimates. These estimates and assumptions are evaluated
on an on-going basis and are based on historical experience and on various
factors that are believed to be reasonable. The Company has identified certain critical accounting policies below. Reserve for inventory shrink and slow moving inventory.The reserve for
inventory shrink is estimated for the period from the last physical inventory
date to the end of the reporting period on a store by store basis and at the
Companys distribution center. Such estimates are based on experience and the
shrinkage results from the last physical inventory. The shrinkage rate from the
most recent physical inventory, in combination with historical experience, is
the basis for providing a shrink reserve. The Company writes down its inventory for estimated slow moving inventory
equal to the difference between the cost of inventory and the estimated market
value based on assumptions about future demand and market conditions. If actual
market conditions are less favorable than those projected by management,
additional inventory write-downs may be required. 12




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Allowance for doubtful accounts. The Company maintains allowances for
doubtful accounts for estimated losses resulting from the inability of its
customers to make required payments. If the financial condition of Mayors
customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional allowances may be required. Long-lived Assets.Long-lived assets held and used by the Company are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. Measurement of an
impairment loss for such long-lived assets would be based on the fair value of
the asset. Long-lived assets to be disposed of are reported at the lower of the
carrying amount or fair value less cost to sell. 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Interest Rate Risks The Companys credit facility accrues interest at floating rates,
currently based upon prime plus 1.25%. The Company manages its borrowings under
this credit facility each day in order to minimize interest expense. The impact
on the Companys earnings per share of a one-percentage point interest rate
change on the outstanding balance as of June 26, 2004 would increase or
decrease earnings per share by approximately $354,000 or $.01 per share. The Company extends credit to its Mayors customers under its own
revolving charge plan with up to three-year payment terms. Finance charges,
when applicable, are generally currently assessed on customers balances at a
rate of 1.5% per month. Since the interest rate is fixed at the time of sale,
market interest rate changes would not impact the Companys finance charge
income. 
 Item 4. CONTROLS AND PROCEDURES. (a) Evaluation of Disclosure Controls and Procedures. As of the last day of the period
covered by this report, the Company carried out an evaluation, under the supervision and with the
participation of management, including the Chief Executive Officer and Chief Financial Officer of
the Company, of the effectiveness of the design and operation of the Companys disclosure controls
and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that its disclosure controls and procedures were effective as of the date of their
evaluation in timely alerting them to material information relating to the Company (including the
Companys consolidated subsidiaries) required to be included in reports the Company files or
submits under the Securities Exchange Act of 1934. (b) Changes in Internal Controls.On November 9, 2004 and December 1, 2004, the Company
released its preliminary conclusions regarding an expected restatement of its financial statements
for the fiscal quarters ended November 2, 2002, September 27, 2003, December 27, 2003, and June 26,
2004, the fiscal years ended March 29, 2003 and March 27, 2004, and the selected quarterly
financial data for the fiscal quarter ended March 27, 2004. During the financial reporting process associated with the Companys third quarter of fiscal
2004 financial results, the Company determined that certain errors had occurred in the Companys
accounting treatment of certain warrants that were issued by the Company to Henry Birks & Sons Inc.
(Birks), the Companys majority stockholder, in connection with Birks August 20, 2002 equity
investment of $15.05 million in the Company, and later assigned in part to certain individuals
affiliated with Birks, and the Company also determined that it should reconsider certain
conclusions regarding the allocation of the fair value of the equity investment between the Series
A Convertible Preferred Stock (the Preferred Stock) and the warrants issued to Birks in
connection with the transaction. The Company has determined that as a result of the assignment of the warrants to those
recipients, the Company should have reflected a non-cash compensation adjustment relating to the
increase or decrease in the intrinsic value of the warrants that could be attributed to the
services provided by the recipients to the Company based on the vesting schedule of the warrants.
The increase or decrease in value of these warrants is required to be reflected in the Companys
financial statements as calculated at the end of each reporting period. The Company also concluded
that a fair value of approximately $3.8 million should have been allocated to the warrants rather
than the original allocation of approximately $1 million, and the
Company recognized a beneficial conversion feature for the Preferred
Stock as a result of the valuation of the warrants. After becoming
aware of the accounting issues, the Audit Committee of the Board of
Directors initiated a review with the assistance of
independent legal counsel of the circumstances surrounding the
assignment of the warrants. The Companys senior management team (Management) conducted a thorough review of the
accounting treatment of the warrants and the allocation of the fair value of the equity investment
by Birks. As a result of this review, the Audit Committee has recommended to Management that the
following corrective actions be taken:  
    Establish a formal review procedure for all contracts, legal agreements and significant
transactions;
    Establish a procedure to confirm that all of the appropriate documents and information
have been properly considered in connection with the preparation, completeness and accuracy
of the Companys consolidated financial statements;
    Develop a procedure through which an appropriate person in the Companys Accounting and
Reporting Division is apprised on a timely basis of all significant capital transactions,
compensation transactions, and significant related party transactions, of the Company and
Birks, so that they can make decisions and determinations regarding the accounting and
disclosure requirements for the Company, if any, that surround such transactions; and
    Require that an appropriate person in the Companys Accounting and Reporting Division
issue a formal report each quarter to the Companys Audit Committee on the accounting and
reporting matters surrounding all major transactions or legal agreements that the Company
entered into since the previous Audit Committee meeting. Additionally, as previously announced, on December 16, 2004, the Board of Directors of the
Company appointed Lawrence R. Litowitz to serve as Interim Chief Financial Officer and the
Principal Accounting Officer of the Company, and reassigned the current officer performing such
duties. The appointment of Mr. Litowitz is considered interim until a permanent Chief Financial
Officer is selected. The Company is also undertaking a thorough review of its internal controls as a part of the
Companys preparation for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act
of 2002. Section 404 requires the Companys management to report on, and the auditors to attest to,
the effectiveness of the Companys internal control structure and procedures for financial
reporting. Other than the changes identified above, there have been no changes to the Companys
internal control over financial reporting that occurred since the beginning of the Companys third
fiscal 2004 quarter that have materially affected, or are reasonably likely to materially affect,
the Companys internal control over financial reporting. 
 PART II: OTHER INFORMATION 
 Item 1. Legal Proceedings The Company is from time to time involved in litigation incident to the
conduct of its business. There are no pending legal proceedings at this time
reportable pursuant to this Item 1. Although certain litigation of the Company
is routine and incidental, and such litigation can result in large monetary
awards for compensatory or punitive damages, the Company believes that no
litigation that is currently pending involving the Company will have a material
adverse effect on the Companys financial condition. 
 Item 6. Exhibits and Reports on Form 8-K List of Exhibits: 3.1
    
    Certificate of Incorporation. Incorporated by reference from Exhibit
3(i) of Mayors Form 8-K filed on July 14, 2000.3.2
    
    Bylaws. Incorporated by reference from Exhibit 3.2 of Mayors Form
10-K filed on May 15, 1995.
 13




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31.1
    
    Certification by Thomas A. Andruskevich, Chairman of the Board,
President and Chief Executive Officer, pursuant to Exchange Act Rules
13a-14(a) and 15d-14(a).31.2
    
    Certification by Lawrence R.
Litowitz, Interim Chief Financial Officer, pursuant to Exchange Act Rules 13a-14(a) and
15d-14(a).32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 (b) Reports on Form 8-K: On April 29, 2004, the Company filed a Report on Form 8-K, reporting
in Item 5 therein that the Company entered into a Management Consulting
Services Agreement (the Agreement) with Regaluxe Investment Sarl, to
become effective on May 1, 2004. On June 9, 2004, the Company filed a Report on Form 8-K, reporting in
Item 12 therein the issuance of a press release on June 8, 2004, reporting
financial results for the fourth fiscal quarter and fiscal year ended
March 27, 2004. 14




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. MAYORS JEWELERS,
INC.(Registrant)By:
    
    /s/ Thomas A. AndruskevichChairman of the Board, President andChief Executive Officer
 Date: January 7, 2005 15