MAYORS JEWELERS INC/DE - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED FEBRUARY 2, 2002 OR

[ ] 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.
(Exact name of Registrant as specified in its charter)

DELAWARE 59-2290953

(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

14051 N.W. 14TH STREET
SUNRISE, FLORIDA 33323
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (954) 846-2709

Securities registered pursuant to Section 12(b) of the Act:

COMMON STOCK, $.0001 PAR VALUE
RIGHTS TO PURCHASE COMMON STOCK

Securities registered pursuant to Section 12(g) of the Act: NONE

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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [X]

As of April 12, 2002, the aggregate market value of the voting stock
beneficially held by non-affiliates of the registrant was $20,301,486. The
aggregate market value was computed with reference to the closing price on the
American Stock Exchange on such date. Affiliates are considered to be executive
officers and directors of the registrant and their affiliates for which
beneficial ownership is not disclaimed.

As of April 12, 2002, 19,525,749 shares of Common Stock ($.0001 par value)
were outstanding.

LOCATION OF EXHIBIT INDEX: The index of exhibits is contained in Part IV
herein on page number 48.

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MAYOR'S JEWELERS, INC.

TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS

GENERAL -- RECENT DEVELOPMENTS

The information in this section pertains to the business of Mayor's
Jewelers, Inc. and its subsidiaries ("Mayor's" or the "Company"). Fiscal 2001,
throughout this document, refers to the Company's fiscal year ended February 2,
2002. Please refer to Item 7 regarding "Forward-Looking Statements."

On May 17, 2002, Mayor's executed an agreement in principle (the
"Agreement") with Henry Birks & Sons Holdings Inc. of Canada. The Agreement
provides for Birks to invest in or cause to be provided to Mayor's $11.5 million
in cash. Upon completion of the transaction, Birks will receive Preferred Stock
that will be convertible into Common Stock of Mayor's generally representing 58%
of the Common Stock on a fully diluted basis. Prior to conversion, Birks will be
able to elect a majority of the Board of Directors of Mayor's. Birks will also
receive warrants to purchase an additional 10% of the Common Stock (on fully
diluted basis) at an exercise price of $.50 per share.

Mayor's and Birks will enter into a series of agreements through which
Birks will provide management, merchandising and sales support of Mayor's.
Completion of the transaction is subject to certain conditions, including
without limitation, execution of definitive agreements (which the parties hope
to accomplish in June) and the affirmative vote of the stockholders of Mayor's
at a meeting of stockholders to be held as soon as practicable. Pending the
closing, Birks will provide consulting services to Mayor's pursuant to a
consulting agreement.

MAYOR'S JEWELERS

Mayor's is an upscale retailer of fine quality guild jewelry, watches and
giftware. Mayor's was founded in 1910 and as of February 2, 2002, operated 24
stores in Florida, four stores in Texas, two stores each in California and
Illinois, 1 store each in Arizona, Michigan, Nevada and metropolitan Washington
DC, and five stores in the Atlanta, Georgia metropolitan area. The Nevada store
was closed in March, 2002. Mayor's has a long-established reputation in its
principal market areas as a premier guild jeweler offering fine quality
merchandise in an elegant environment conducive to the purchase of luxury items.
As a guild jeweler, the Company does not sell "costume" or gold filled jewelry;
rather, all of its jewelry products are constructed of 18 karat gold, platinum,
or sterling silver, with or without precious gemstones, with significant
emphasis on quality and craftsmanship. The average price per item of all
merchandise sold in Fiscal 2001 was approximately $1,400, an amount the Company
believes is substantially higher than that of any other publicly-traded domestic
jewelry retailer.

Mayor's distinguishes itself from most of its competitors by offering a
larger selection of distinctive and higher quality merchandise at many different
price points, and by placing substantial emphasis on professionalism and
training in its sales force. Mayor's buyers procure distinctive merchandise
directly from manufacturers, diamond cutters and other suppliers throughout the
world, enabling Mayor's to sell fine quality merchandise often not available
from other jewelers in its markets. Management believes it has one of the best
trained staff of sales professionals in the industry as a result of Mayor's
emphasis on classroom training, in-store training and participation in
industry-recognized educational programs.

The Company's principal offices are located at 14051 Northwest 14th Street,
Sunrise, Florida 33323 (telephone: (954) 846-8000).

RESTRUCTURING PLAN

During Fiscal 1999, the Company embarked upon an expansion strategy that
saw it open five stores in Fiscal 1999, ten stores in Fiscal 2000 and seven
stores in Fiscal 2001. Merchandising and marketing issues, the poor economic
climate combined with a capital intensive expansion strategy that the Company
executed in Fiscal 1999 through Fiscal 2001 served to force the Company to
retrench from that strategy as part of a restructuring plan recently adopted
that the Company will seek to execute during Fiscal 2002 (the

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"Restructuring Plan"). Included in the Restructuring Plan are the hiring of a
new CEO with a strong background in merchandising, and initiatives to properly
capitalize the Company, refinance its existing debt, close unprofitable stores
and re-merchandise stores in its core Florida and Georgia markets. For a
description of the Restructuring Plan, please refer to Item 7 regarding
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Restructuring Plan."

The object of the Restructuring Plan is to put the Company back on the path
to future profitability. Accordingly, the Company believes short-term growth
will come from rebuilding the Company's presence within existing markets where
Mayor's has enjoyed strong brand recognition. Only upon successful
implementation of this plan will management then revisit initiatives for future
growth outside its existing core marketplace. In the event the Company is unable
to successfully implement its Restructuring Plan, its business, financial
condition, operating results and cash flows will be materially adversely
affected. Furthermore, failure to obtain adequate funding will most probably
prevent the Company from being able to pay its Fiscal 2002 debt service
obligations and sustain the Company's working capital needs. In this event,
there would be substantial doubt that the Company would be able to continue
operations in the normal course of business at which time the Company would have
to consider all of its alternatives. Please refer to Item 7 regarding
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Restructuring Plan" and "Forward-Looking Statements."

PRODUCTS

Mayor's offers a large selection of distinctive and high quality
merchandise at many different price points. This merchandise includes designer
jewelry, diamond fashion and precious gemstones, rings, wedding bands, earrings,
bracelets, necklaces, pearls, charms, its own private label baby jewelry and
Swiss timepieces that are often not available from other jewelers in its
markets. All of Mayor's jewelry products are constructed of 18 karat gold,
platinum, or sterling silver with significant emphasis on quality and
craftsmanship. Mayor's carries a large selection of brand name watches,
including watches made by Rolex, Cartier, Patek Philippe, Baume & Mercier,
Omega, Charriol, Tag Heuer, Ebel, Breitling, Locman, Corum, Rado, Chopard,
Jaeger le Coultre and Raymond Weil, designer jewelry including jewelry made by
David Yurman, Jose Hess, Ponte Vecchio, Antonini and Peter Storm and a variety
of high quality giftware, including giftware made by Correia, Mont Blanc and
Moser.

During Fiscal 2001 net sales by product were as follows: watches -- 41%;
diamond basic -- 22%; jewelry -- 25%; other -- 12%. The Rolex brand, which is
included in watch sales, accounted for approximately 24% of total Mayor's net
sales. While Mayor's has historically enjoyed excellent relationships with its
vendors, certain of the Company's vendors have expressed some concerns about the
Company's current financial condition. If such vendors terminated their
relationships with the Company, it could have a material adverse effect on the
Company's business, financial condition and operating results.

PURCHASING

The Mayor's staff of buyers procures distinctive merchandise directly from
manufacturers, diamond cutters, and other suppliers worldwide enabling Mayor's
to sell fine quality merchandise often not available from others jewelers in its
markets. Buyers generally specialize in purchasing merchandise in categories
such as diamonds, precious gemstones, pearls, watches, gold jewelry, and
giftware. Buyers frequently visit both Mayor's and competitors' stores to
compare value, selection, and service, as well as to observe client reaction to
merchandise selection and determine future needs.

The Company's buying power has allowed Mayor's to pass its savings on to
its clients through competitively-priced merchandise at Mayor's stores. While
Mayor's does not emphasize discounting, it does actively compete with other
jewelry retailers on the basis of price, particularly with regard to brand name
items such as watches, with respect to which comparison shopping is common.

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Watches

Mayor's purchases watches from a number of leading manufactures and
suppliers. During Fiscal 2001, merchandise supplied by Rolex, the Company's
largest supplier, accounted for approximately 24% of Mayor's net sales. Certain
brand name watch manufacturers, including Rolex, have distribution agreements
with the Company that among other matters provide for specific sales locations,
yearly renewal terms, and early termination provisions at the manufacturer's
discretion. Rolex has informed the Company that its account has been placed on
"hold status." In the event that Rolex does not lift the hold and begin
accepting new orders for watches or if Rolex terminates its distribution
agreement with the Company, it would have a material adverse effect on the
Company's business, financial condition and operating results. Moreover, certain
of the Company's vendors have expressed some concerns about the Company's
current financial condition. If such vendors terminated their relationships with
the Company, it could also have a material adverse effect on the Company's
business, financial condition and operating results. Please refer to Item 7
regarding "Forward-Looking Statements and Cautionary Factors That May Affect
Future Results."

Diamond and Gemstones

During Fiscal 2001, revenues from sales of diamond jewelry and diamond
jewelry with gemstones represented approximately 31% of Mayor's net sales.
Whenever possible, Mayor's purchases unset diamonds and other precious gemstones
directly from cutters in international markets, such as Antwerp, Bangkok and Tel
Aviv, gold jewelry from Italy, and pearls from Japan. These diamonds and other
gemstones are frequently furnished to independent goldsmiths for setting,
polishing and finishing pursuant to Company instructions as well as to Mayor's
facilities in order to deliver a finished product at the best possible value.

Other Products

In Fiscal 2001, Mayor's purchased jewelry and giftware for sale in Mayor's
stores from over 500 suppliers. Many of these suppliers have long-standing
relationships with Mayor's. However, certain of the Company's vendors have
expressed some concerns about the Company's current financial condition. If such
vendors terminated their relationships with the Company, it could also have a
material adverse effect on the Company's business, financial condition and
operating results. Please refer to Item 7 regarding "Forward-Looking
Statements."

AVAILABILITY OF PRODUCTS

Although purchases of several critical raw materials, notably gold and
gemstones, are made from a limited number of sources, the Company believes that
there are numerous alternative sources for all raw materials used in the
manufacture of its finished jewelry, and that the failure of any principal
supplier would not have a material adverse effect on operations. Any changes in
foreign or domestic laws and policies affecting international trade may have a
material adverse effect on the availability or price of the diamonds, other
gemstones, precious metals and non-jewelry products purchased by the Company.

CHANGING PRICES AND AVAILABILITY

Changes in foreign or domestic laws and policies affecting international
trade may also have an adverse effect on the availability or price of the
diamonds, gemstones and precious metals required by the Company. Other risks to
the Company's supplies of merchandise include fluctuation in the price of
precious gems and metals. Because substantially all of the Company's purchase
transactions are denominated in U.S. dollars, the Company does not engage in any
hedging activities in foreign currencies. The Company does not speculate in gems
or precious metals or engage in any hedging activity with respect to possible
fluctuations in the prices of these items, since historically the Company has
been able to make compensatory adjustments in its retail prices as material
fluctuations in the price of supplies have occurred. If such fluctuations should
be unusually large, rapid or prolonged, there is no assurance that the necessary
adjustments could be made quickly enough to prevent the Company from being
adversely affected. Please refer to Item 7 regarding "Forward-Looking
Statements."

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SEASONALITY

The Company's jewelry business is highly seasonal, with the fourth quarter
(which includes the Holiday shopping season) historically contributing
significantly higher sales than any other quarter during the year. Approximately
36% of the Company's Fiscal 2001 net sales were made during the fourth quarter.

MANUFACTURING

In addition to Mayor's purchasing finished jewelry and the subcontracting
of certain fabrication activities to others, Mayor's also has a jewelry design
studio and manufacturing and repair facility located in its executive offices.
In keeping with Mayor's identity as a full-service guild jeweler, this studio
and workshop offers custom designed jewelry in response to customers' special
requests and manufactures jewelry for retail sale when it is economical to do
so. Mayor's also provides jewelry and watch refurbishment and repair services,
which are performed in stores or at the Mayor's centralized repair facility. In
addition to repair work, jewelers will perform other work, including ring sizing
on new purchases and repairs covered under warranty.

RETAIL OPERATIONS, MERCHANDISING AND MARKETING

General

The Company distinguishes itself from most of its competitors by offering a
selection of distinctive and higher quality merchandise at many different price
points. Mayor's keeps substantially its entire inventory on display in its
stores rather than at its distribution facility. Although each store stocks a
representative array of jewelry, watches, giftware and other accessories,
certain inventory is tailored to meet local tastes and historical merchandise
sales patterns of the individual store.

The Company believes that the elegant ambiance of its stores and attractive
merchandise displays play an important role in providing an atmosphere for
encouraging sales. The Company pays careful attention to detail in the design
and layout of each of its stores, particularly lighting, colors, choice of
materials and placement of display cases. The Company also places substantial
emphasis on its window displays as a means of attracting walk-in traffic and
reinforcing its distinctive image. The Company's display department designs and
creates window and store merchandise case displays for all stores. Window
displays are frequently changed to provide variety and to reflect seasonal
events such as Christmas, Valentine's Day and Mother's Day.

A manager, an assistant manager, four additional sales professionals, and
an office manager along with an office associate staff a typical Mayor's store,
which has a historical average of approximately $4 million in annual sales. Each
store manager reports to one of three regional directors. The three regional
directors report to the Vice President of Stores. Many Mayor's stores also have
a watchmaker or jeweler on the premises to make repairs. Management believes
that the availability of these craftsmen reinforces the Company's image as a
full-service guild jeweler and encourages customers to patronize its stores.

Personnel and Training

Mayor's places substantial emphasis on the professionalism of its sales
force to maintain its position as a leading upscale jeweler. Mayor's strives to
hire only highly motivated, friendly and customer-oriented individuals. All new
sales professionals attend a course where they are trained in technical areas of
the jewelry business, specific service techniques and Mayor's commitment to
client service. In general, Mayor's trains its sales personnel to establish a
personal rapport with each client, to identify client preferences with respect
to both product and price range, and to successfully conclude a sale. Management
believes that attentive personal service and knowledgeable sales professionals
are key components of Mayor's success.

As part of Mayor's commitment to training, the Company established "Mayor's
University", a formalized system of in-house training with a primary focus on
client service that involves extensive classroom training, the use of detailed
operational manuals, in-store mentorship programs and product knowledge testing.
In order to retain their employment with the Company, all attendees must perform
satisfactorily on written tests and quizzes that are administered during the
training program. To help ensure successful skill transference from the
classroom training environment to the sales floor, a manager works with each new
sales professional on a

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one-to-one basis in the store for a structured 90 day period and then a
bi-weekly coaching session on an ongoing basis. Each new sales professional is
partnered with a mentor in the store who trains the new associate on basic
operational procedures. In addition, the Company conducts in-house training
seminars on a periodic basis and administers training modules with audits to (i)
enhance the quality and professionalism of all sales professionals, (ii) measure
the level of knowledge of each sales professional, and (iii) identify needs for
additional training. The Company also provides store managers with more
extensive management and client service training that emphasizes "on-the-job"
coaching and training instruction techniques.

Mayor's also stresses external training for its sales professionals. The
Company encourages all associates to complete a series of courses offered by the
Gemological Institute of America (GIA), an independent industry-recognized
diamond grading laboratory and gemological school.

Advertising and Promotion

Mayor's marketing intent is to build on its well-established reputation in
its traditional market areas as a premier guild jeweler offering fine quality
merchandise in an elegant, sophisticated environment conducive to the purchase
of luxury items. Mayor's stresses its role as a fashion leader that does not
promote discounting, but instead prices all of its merchandise with the goal of
delivering consistent value to its clients. Mayor's marketing efforts, which
consist of advertising, direct mailings, promotional events, attractive store
design and elegant display, are shaped in large part by demographic and consumer
trends affecting both the jewelry industry generally and Mayor's specifically.

Mayor's advertisements stress its image as a full-service guild jeweler,
its tradition of integrity, value and reliability, its longevity in the jewelry
business and its emphasis on superior client service. In addition,
advertisements frequently associate Mayor's with internationally recognized
brand names such as Rolex, Patek Philippe, Cartier and Mikimoto. Advertising and
promotions for all stores are developed by Company personnel at its headquarters
in conjunction with outside advertising agencies.

Credit Operations

Sales under Mayor's proprietary credit card accounted for approximately 31%
of the Company's net sales during Fiscal 2001. Mayor's credit programs are
intended to complement its overall merchandising and sales strategy by
encouraging larger and more frequent sales to a loyal customer base.

Mayor's extends credit solely to its Mayor's customers under its own
private label revolving charge account. Clients may select from two financing
plans: the 3 Month Interest Free Plan or the Revolving Plan with interest.
Finance charges, which are subject to a rate ceiling imposed by state law, are
currently assessed on the average daily balance method at a rate of 1.5% per
month, unless otherwise controlled by state law.

Mayor's credit operations are located at the Company's corporate office.
The credit staff makes all credit decisions; sales personnel or store managers
are not authorized to grant credit. Mayor's has developed a detailed
creditworthiness analysis on which it bases its credit decisions. Mayor's
custom-designed, computerized accounts receivable systems provide credit
personnel with on-line decision making information, including new account
processing, credit authorizations and client inquiries.

As of February 2, 2002, Mayor's had approximately 62,000 credit card
holders. Mayor's utilizes its credit card client base in its targeted marketing
programs.

Mayor's has an Account Receivable Management Department, which manages
delinquent accounts. Representatives are trained on advanced account management
techniques and programs, which have been developed in-house by the credit
organization. Early stage delinquencies are handled with an approach to client
goodwill. If an account continues to progress in delinquency, more assertive
action is taken. Ultimately, if a delinquent account cannot be collected
in-house, outside legal action is undertaken. During Fiscal 2001, Mayor's net
bad debt expense as a percentage of credit sales was approximately 5.2 percent.

All clients may also take advantage of Mayor's layaway plan, which allows
them to set aside and pay for items over a limited period of time with no
interest charges.

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DISTRIBUTION

The Company's retail locations receive the majority of their merchandise
directly from the Company's distribution warehouse located in Sunrise, Florida.
Merchandise is shipped from the distribution warehouse utilizing various air and
ground carriers. Presently, a small portion of merchandise is delivered directly
to the retail locations from suppliers. The Company transfers merchandise
between retail locations to balance inventory levels and to fulfill customer
requests.

COMPETITION

The retailing industry is highly competitive and particularly subject to
the level of consumer discretionary income and the subsequent impact on the type
and value of goods purchased. The Company's competitors include foreign and
domestic jewelry retailers, national and regional jewelry chains, department
stores, catalog showrooms, discounters, direct mail suppliers, televised home
shopping networks, manufacturers, distributors and large wholesalers and
importers, some of whom have greater resources than the Company. The Company
believes that competition in its markets is based primarily on price, design,
product quality and service. With the consolidation of the retail industry that
is occurring, the Company believes that competition with other general and
specialty retailers and discounters will continue to increase. The success of
the Company will depend on various factors, including the successful
implementation of the Restructuring Plan, general economic and business
conditions affecting consumer spending, the performance of the Company's retail
operations, the acceptance by consumers of the Company's retail programs and
concepts, and the ability of the Company to manage its stores. Please refer to
Item 7 regarding "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Restructuring Plan" and "Forward Looking
Statements."

REGULATION

The Company generally utilizes the services of independent customs agents
to comply with U.S. customs laws in connection with its purchases of gold,
diamond and other jewelry merchandise from foreign sources.

The Company's operations are affected by numerous federal and state laws
that impose disclosure and other requirements upon the origination, servicing
and enforcement of credit accounts and limitations on the maximum amount of
finance charges that may be charged by a credit provider. In addition to the
Company's private label credit cards, credit to the Company's customers is
primarily through bank cards such as Visa(R), Mastercard(R) and Discover(R),
without recourse to the Company based upon a customer's failure to pay. Any
change in the regulation of credit that would materially limit the availability
of credit to the Company's traditional customer base could adversely affect the
Company's results of operations or financial condition. Please refer to Item 7
regarding "Forward-Looking Statements."

EMPLOYEES

As of April 1, 2002, the Company employed approximately 519 persons on a
full-time basis, including approximately 379 in regional and local sales in the
Mayor's stores, 15 in inventory and distribution and 125 in administrative and
support functions. In addition, the Company also employed approximately 6
persons on a part-time or temporary basis, which varies with the seasonal nature
of its business. In connection with the Company's restructuring plan, the
Company intends to reduce the number of employees. None of its employees are
governed by a collective bargaining agreement, and the Company believes that its
relations with employees are good, although there can be no assurances that such
relations will not be adversely affected by the Company's Restructuring Plan.
Please refer to Item 7 regarding "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Restructuring Plan" and
"Forward Looking Statements."

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ITEM 2. PROPERTIES

The Company's corporate headquarters is owned by the Company and located on
11.1 acres in a 131,000 square-foot building in Sunrise, Florida.

As of April 1, 2002, Mayor's had a total of 40 leased stores, all of which
are currently operating; the Desert Passage store in Las Vegas, Nevada was
closed in March, 2002. Mayor's leases its stores, with rent being a fixed
minimum base plus a percentage of the store's sales volume (subject to certain
adjustments) over a specified threshold. The Mayor's lease terms are generally
ten years from inception. Lease rental payments are also subject to annual
increases for tax and maintenance. The Company intends to close 12 of the stores
listed below pursuant to its restructuring plan. Stores noted with "*" are
expected to be closed during 2002 as part of the Company's Restructuring Plan.
Please refer to Item 7 regarding "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Restructuring Plan." The
following table summarizes all operating store leases:

ITEM 3. 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 reportable
pursuant to this Item 3. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company did not submit any matters to a vote of security holders in the
fourth quarter of the fiscal year ended February 2, 2002.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock has been listed on the American Stock Exchange
since the Company's initial public offering in August 1987. The following table
sets forth for the periods indicated, the range of sales prices per share on the
American Stock Exchange Composite Tape as furnished by the National Quotation
Bureau, Inc.

The last reported sales price of the Common Stock on the American Stock
Exchange Composite Tape on April 12, 2002 was $1.05. On April 12, 2002, the
Company had 691 stockholders of record.

The Company has never paid a cash dividend on its Common Stock. The Company
currently anticipates that any earnings will be retained for use in the
operation and expansion of its business and does not intend to pay any cash
dividends on its Common Stock in the foreseeable future. Any future
determination as to cash dividends will depend upon the earnings, capital
requirements and financial condition of the Company at that time, applicable
legal restrictions and such other factors as the Board of Directors may deem
appropriate. Currently, the Company's working capital facility prohibits
dividend payments.

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ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
the Consolidated Financial Statements and Related Notes thereto appearing
elsewhere in this Form 10-K and "Item 7 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations."

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(1) Discontinued operations include other charges for the fifty-two weeks ended
January 29, 2000 which consist of a $2 million write-off of goodwill for
Exclusive Diamonds, International related to the termination of the Sam's
agreement.

(2) The fifty-three weeks ended February 3, 2001 and fifty-two weeks ended
January 29, 2000 and January 30, 1999 were adjusted by certain
reclassifications to conform to the presentation for the fifty-two weeks
ended February 2, 2002. These reclassifications include loss prevention,
marketing, design center and credit department expenses from general and
administrative expenses to store operating and selling expenses and
advertising and marketing expenses.

(3) Restructuring, asset impairments and other charges for the fifty-two weeks
ended February 2, 2002 include amounts for the write-down of the fixed
assets for the stores that are scheduled to be closed, a reserve for early
termination of the leases for the stores that are scheduled to be closed, a
write-down of the corporate headquarters building which the Company placed
on the market for sale, consulting fees related to a strategic cost
reduction project, and non-recurring legal fees associated with shareholder-
related matters.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

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 other reports filed with the Securities and
Exchange Commission.

The years ended February 2, 2002, February 3, 2001 and January 29, 2000 are
referred to herein as Fiscal 2001, Fiscal 2000 and Fiscal 1999, respectively.

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 loss of mall anchor tenants
in the regional malls where the Mayor's stores are located, the opening of
competing regional malls or other economic downturns affecting customer mall
traffic could have an adverse effect on the Company's net sales and
profitability.

The retail jewelry business is seasonal in nature with a higher proportion
of sales and a significant portion of earnings generated during the fourth
quarter holiday selling season.

RESTRUCTURING PLAN

Mayor's Jewelers operated 41 luxury jewelry stores in ten states as of
February 2, 2002. The Desert Passage store in Las Vegas, Nevada was closed in
March, 2002. Merchandising and marketing issues, the poor economic climate and a
capital intensive expansion strategy that the Company executed in Fiscal 1999
through Fiscal 2001, were dominant factors in contributing to the Company's poor
operating performance for Fiscal 2001. These results have drained the Company of
significant amounts of capital, which in turn has required Mayor's to
restructure itself in an effort to position the Company for future
profitability. Accordingly during Fiscal 2001, Mayor's adopted a multi-faceted
Restructuring Plan. The Restructuring Plan includes the hiring of a new CEO with
extensive merchandising and marketing experience, an infusion of capital, the
refinancing or restructuring of the Company's $80 million bank facility, the
closure of 13 unprofitable stores and termination of three leases for stores
that are not yet built, the remerchandising of its 28 core Florida and Georgia
stores, the termination of redundant employees and the disposition of certain
non-performing assets.

As part of its Restructuring Plan, on May 17, 2002, Mayor's executed an
agreement in principle (the "Agreement") with Henry Birks & Sons Holdings Inc.
of Canada ("Birks"). The Agreement provides for Birks to invest in or cause to
be provided to Mayor's $11.5 million in cash. Upon completion of the
transaction, Birks will receive Preferred Stock that will be convertible into
Common Stock of Mayor's generally representing 58% of the Common Stock on a
fully diluted basis. Prior to conversion, Birks will be able to elect a majority
of the Board of Directors of Mayor's. Birks will also receive warrants to
purchase an additional 10% of the Common Stock (on a fully diluted basis) at an
exercise price of $.50 per share.

Mayor's and Birks will enter into a series of agreements through which
Birks will provide management, merchandising and sales support to Mayor's.
Completion of the transaction is subject to certain conditions, including
without limitation, execution of definitive agreements (which the parties hope
to accomplish in June) and the affirmative vote of the stockholders of Mayor's
at a meeting of stockholders to be held as soon as practicable. Pending the
closing, Birks will provide consulting services to Mayor's pursuant to a
consulting agreement.

The Company continues to work on the refinancing of a senior revolving
facility for which refinancing it has a commitment letter subject to certain
future developments. Until the time a refinancing is in place, the Company will
continue to operate under an amendment to its existing working facility and may
seek extensions of such amendment. There can be no assurances that the Company
will be successful in its refinancing efforts.

14

A significant condition to any investment by Birks and any refinancing will
be the payment of the exit costs for the closing of 13 unprofitable stores and
the termination of three lease commitments for stores that have not been built.
The 13 unprofitable stores include 11 properties outside of the Company's core
Florida and Georgia marketplace as well as two stores in Florida. The Nevada
store was closed in March, 2002. See "Item 2 -- Properties." The closing of
these stores marks a significant retrenchment of the Company's recent expansion
strategy into states where Mayor's does not enjoy the brand loyalty that it has
enjoyed in the Southeast U.S. The three lease commitments for stores that are
not built include one in Ohio and two in Florida. While the Company believes the
two Florida locations would enhance the Company's core market, their
construction is dependent upon funding of additional capital resources in order
to fund their construction.

The Company believes short-term growth will come from rebuilding the
Company's presence within existing markets where Mayor's has enjoyed strong
brand recognition. If the Company successfully executes its Restructuring Plan,
the Company may consider limited growth opportunities including acquisitions of,
or investments in businesses similar or complimentary to that of the Company. In
the event the Company is unable to successfully implement its Restructuring
Plan, its business, financial condition, operating results and cash flows will
be materially adversely affected. Furthermore, failure to obtain adequate
funding will most probably prevent the Company from being able to pay its Fiscal
2002 debt service obligations and sustain the Company's working capital needs.
In this event, there would be substantial doubt that the Company would be able
to continue operations in the normal course of business at which time the
Company would have to consider all of its alternatives.

As the Company refocuses on its core business, it hopes to execute a
productive merchandising strategy in its remaining 28 stores. The Company
believes that with the appropriate capital resources that the above mentioned
investment will hopefully provide, it will be able to execute initiatives that
will drive the business toward positive comparable store sales results, although
there can be no assurance that such results shall occur.

The following table for continuing operations sets forth for the periods
indicated the percentage of net sales for certain items in the Company's
Consolidated Statements of Operations and other information:

SALES

The Company's net sales from continuing operations for Fiscal 2001 were
$163.7 million compared to $181.3 million and $157.6 million for Fiscal 2000 and
Fiscal 1999, respectively. Comparative store net sales for Fiscal 2001 decreased
17.1% compared to Fiscal 2000. The decrease in net sales for Fiscal 2001 is due
to merchandising and marketing issues coupled with the slowdown of the economy
and the effects that the tragic events of September 11th had on the Company's
retail environment. Comparative store net sales for Fiscal

15

2000 increased 2.9% compared to Fiscal 1999. The increase in net sales in Fiscal
2000 is due to revenue contribution of new stores as well as the comparable
store sales increase, created in part because of the fifty-three week calendar
for Fiscal 2000.

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 both within the luxury goods retail industry and with other
competing general and specialty retailers and discounters will continue to
increase. The luxury watch brands business comprises a significant portion of
the Mayor's business, which is a result of the Company's ability to effectively
market high-end watches. Rolex has informed the Company that its account has
been placed on "hold status." In the event that Rolex does not lift the hold and
begin accepting new orders for watches or if Rolex terminates its distribution
agreement with the Company, it would have a material adverse affect on the
Company's business, financial condition and operating results. Moreover, certain
of the Company's vendors have expressed some concerns about the Company's
current financial condition. If such vendors terminated their relationships with
the Company, it could also have a material adverse affect on the Company's
business, financial condition and operating results. Please refer to Item 7
regarding "Forward-Looking Statements."

COST OF SALES AND GROSS PROFIT

Gross profit as a percentage of net sales in Fiscal 2001 was 37.1% compared
to 43.5% and 39.6% in Fiscal 2000 and Fiscal 1999, respectively. The decrease in
gross profit as a percentage of net sales for Fiscal 2001 is primarily due to
the liquidation of slow moving and discontinued inventory through caravan events
that traveled through various stores. The increase in gross profit as a
percentage of net sales for Fiscal 2000 compared to Fiscal 1999 is a primarily
because of improvements achieved through sales and purchasing efficiencies and
merchandise management initiatives that improved initial markup and inventory
management.

If the Restructuring Plan is successful, the Company is hopeful that the
opportunity exists to increase gross profit over the next couple of years. Areas
for gross margin improvement include strategies to lower the cost of merchandise
purchased and to move the mix of sales towards higher margin jewelry items. 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 slow moving
reserves are expected to decrease. There can be no assurance that the Company
will be able to increase gross profit.

STORE OPERATING AND SELLING EXPENSES

Store operating and selling expenses were $53.8 million, or 32.9% of sales
for Fiscal 2001 compared to $45.3 million, or 25.0% of sales, and $43.2 million,
or 27.4% of sales, for Fiscal 2000 and Fiscal 1999, respectively. The increase
in store operating and selling expenses for Fiscal 2001 over Fiscal 2000 is
mainly attributable to an increase in the number of stores. The increase in
percentage for Fiscal 2001 is attributable to a decline in comparable store
sales and in lack of performance in the new stores. The decrease in store
operating and selling costs as a percentage of sales for Fiscal 2000 over Fiscal
1999 is a result of increased comparable store sales. The increase in store
operating and selling expenses for Fiscal 2000 over Fiscal 1999 is mainly
attributable to an increase in the number of stores, and to increases in
chargecard and check processing fees and in percentage rent, which are all
directly related to the increased sales. As a percentage of sales, store
operating and selling costs fell to 25.0% in Fiscal 2000 from 27.4% in Fiscal
1999 as a result of increased comparable store sales.

The Company does not believe there is significant opportunity to reduce
these expenses other than the decrease that will occur as a result of the 13
closing stores as discussed under "Restructuring Plan" above.

STORE CONTRIBUTION

Store contribution fell to $6.9 million, or 4.2% of sales, in Fiscal 2001
from $33.5 million, or 18.5% of sales, in Fiscal 2000 primarily because of the
lack of profitability of the Company's newly constructed stores and reduction in
same store sales. Store contribution increased to $33.5 million, or 18.5% of
sales, in Fiscal

16

2000 from $19.3 million, or 12.2% of net sales, in Fiscal 1999 as a result of
improvements in sales and gross margin.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses were $14.6 million for Fiscal 2001
compared to $16.2 million and $16.5 million for Fiscal 2000 and Fiscal 1999,
respectively. General and administrative expenses as a percentage of net sales
decreased to 8.9% in Fiscal 2001 and Fiscal 2000 compared to 10.4% Fiscal 1999.
The decrease in general and administrative expenses in Fiscal 2001 is primarily
a result of a corporate restructuring. The decrease in Fiscal 2000 is primarily
a result of the greater efficiencies in these expenses as sales increased.
General and administrative expenses also include store opening costs of
$187,000, $674,000 and $392,000 for Fiscal 2001, Fiscal 2000 and Fiscal 1999,
respectively. These costs are expensed as incurred.

ADVERTISING AND MARKETING EXPENSES

Advertising and marketing expenses were $8.8 million in Fiscal 2001
compared to $8.6 million and $3.5 million in Fiscal 2000 and Fiscal 1999,
respectively. The increase in Fiscal 2001 is primarily attributable to a watch
and bridal book that was produced that fiscal year. The increase in Fiscal 2000
is primarily attributable to the Company's efforts to introduce the Mayor's name
for the new stores in metropolitan Washington DC, Nevada, Michigan, Texas and
California, as well as starting to develop a national brand identity during that
year.

RESTRUCTURING, ASSET IMPAIRMENTS AND OTHER CHARGES

Restructuring, Asset Impairments and Other Charges for Fiscal 2001 were
$28.2 million. This includes consulting fees related to a strategic cost
reduction project, non-recurring legal fees associated with shareholder related
matters, a write-down of the corporate headquarters building which the Company
placed on the market for sale, the write-down of the fixed assets for the stores
that are scheduled to be closed, and a reserve for early termination of the
leases for the stores that are scheduled to be closed.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expenses were $9.8 million for Fiscal 2001,
compared to $8.0 million and $7.6 million for Fiscal 2000 and Fiscal 1999,
respectively. The increase in depreciation expense for Fiscal 2001 and Fiscal
2000 is a result of the capital expenditures associated with the construction of
new and remodeled stores. The increase in amortization expense for Fiscal 2001
and Fiscal 2000 is primarily attributable to the amortization of goodwill
recorded in connection with the Mayor's acquisition, as well as to the
amortization of financing costs relating to the Company's revolving credit
facility.

GOODWILL IMPAIRMENT WRITEDOWN

Goodwill impairment writedown for Fiscal 2001 was $22.3 million. Management
determined that the long term future cash flows did not support the carrying
value and recorded an impairment charge to take the goodwill to zero.

INTEREST AND OTHER INCOME AND INTEREST EXPENSE

Interest and other income was $174,000 in Fiscal 2001, $213,000 in Fiscal
2000 and $90,000 in Fiscal 1999, respectively. Interest expense was $3.8 million
for Fiscal 2001, compared to $3.5 million and $2.6 million for Fiscal 2000 and
Fiscal 1999, respectively. The increase in interest expense for Fiscal 2001 and
Fiscal 2000 is primarily attributable to the increase in the outstanding balance
of the credit facility due to the build out of new stores and the incremental
inventory needed to stock these stores.

17

LIQUIDITY AND CAPITAL RESOURCES

On May 17, 2002, Mayor's executed an agreement in principle (the
"Agreement") with Henry Birks & Sons Holdings Inc. of Canada ("Birks"). The
Agreement provides for Birks to invest in or cause to be provided to Mayor's
$11.5 million in cash. Upon completion of the transaction, Birks will receive
Preferred Stock that will be convertible into Common Stock of Mayor's
representing 58% of the Common Stock on a fully diluted basis. Prior to
conversion, Birks will be able to elect a majority of the Board of Directors of
Mayor's. Birks will also receive warrants to purchase an additional 10% of the
Common Stock (on a fully diluted basis) at an exercise price of $.50 per share.

The Company continues to work on the refinancing of a senior revolving
facility, depending upon successful negotiation of the revolving credit and
security agreement. Until the time a refinancing is in place, the Company will
continue to operate under an amendment to its existing working facility which
expires May 30, 2002 and may seek extensions of such amendment. There can be no
assurances that the Company will be successful in its refinancing efforts.

The failure to obtain adequate funding will most probably prevent the
Company from being able to pay its Fiscal 2002 debt services obligations and
sustain the Company's working capital needs. In this event, there would be
substantial doubt that the Company would be able to continue operations in the
normal course of business at which time the Company would have to consider all
of its alternatives.

The Company currently has an $80 million working capital facility with a
syndicate of lenders. Availability under this facility is determined based upon
a percentage formula applied to inventory and accounts receivable. This working
capital facility was amended in September 2001 after the Company's second
quarter of Fiscal 2001 operating performance caused it to fail to comply with
certain financial covenants of the facility. At that time the facility was
amended to waive all financial covenants for the second quarter as well as for
the remainder of Fiscal 2001. As consideration for this amendment, the Company
agreed to increase the interest margin from LIBOR plus 2.25% to LIBOR plus
4.00%. The rate on the facility as of February 2, 2002 was 5.9%. Further, as
conditions for the amendment, the Company agreed to restrictions regarding
borrowing availability, which included requiring the Company to provide the bank
group with an $8 million cushion on the lesser of collateral availability or the
$80 million cap provided for by the facility. This amendment had an original
expiration of April 30, 2002. However, on April 30, 2002, the Company executed
an additional amendment to extend the deadline for restructuring the facility
from April 30, 2002 to May 30, 2002.

As of February 2, 2002, after accounting for the foregoing borrowing
restrictions, the Company had approximately $59.8 million of borrowing capacity
and, after netting the outstanding borrowings of $53.5 million and letter of
credit commitments of $675,000, the Company had a net borrowing availability of
approximately $5.6 million. Additionally, because the Company has experienced
deterioration in its leverage ratio, its commitment fee has been raised to .375%
from .25% and it also pays a 2.5% fee on outstanding letters of credit. The
working capital facility also currently contains financial covenants that limit
capital expenditures, limit incurring of additional debt and prohibits the
payment of dividends. There can be no assurance that the Company's future
operating results will be sufficient to meet the requirements of the foregoing
covenants.

The Company presented its Restructuring Plan to its bank group on April 9,
2002. The plan outlined several initiatives including the need to fund the exit
from unprofitable stores, the need to fund current operating losses and the
purchases of inventories needed to remerchandise the stores in its core Florida
and Georgia markets. The plan also indicated that the sources of capital for
these funding requirements would come from selling the Company's headquarters,
obtaining certain presently restricted cash assets and from outside additional
debt and equity capital. Accordingly, the Company has asked for and received
from the bank group an amendment to extend the deadline from April 30, 2002 to
May 30, 2002 for restructuring the working capital facility. The Company
currently is in negotiation with Birks to participate in the funding of this
requirement; however, no assurances can be made that management will succeed in
its efforts. Failure to do so will not allow the Company to execute its
Restructuring Plan. Further, it will most probably prohibit the Company from
being able to sustain Fiscal 2002 debt service and working capital needs. In
this event, there

18

would be substantial doubt that the Company would be able to continue operations
in the normal course of business at which time the Company would have to
consider all of its alternatives.

During Fiscal 2001, cash flows from continuing operating activities
provided $5.2 million in cash. Cash flows net of discontinued operations used
$4.8 million in cash. The Company's business is highly seasonal. Consequently,
seasonal working capital needs peak in October and November, before the holiday
shopping season. During Fiscal 2001, these seasonal needs and the Company's
additional stores opened during Fiscal 2001 were supplied primarily by the
Company's cash from operating activities. During Fiscal 2001, the Company's peak
level of inventory for both continuing and discontinued operations was $114.2
million requiring a maximum outstanding borrowing on the line of credit of $71.0
million.

Net cash used in investing activities was $6.4 million in Fiscal 2001,
primarily related to capital expenditures for seven new stores opened in 2001.
Fiscal 2001 capital expenditures also include back office computer software and
hardware.

On April 16, 1999, the Company's Board of Directors authorized the
expenditure of up to $15 million to repurchase the Company's common stock over a
period of one year. On October 29, 1999, the authorized amount to repurchase was
increased by an additional $5 million, which has subsequently increased another
$10 million to a total of $30 million. The acquired shares will be held in
treasury or canceled. As of February 2, 2002, the Company had repurchased
9,983,954 shares at a cost of $29.4 million, all held in treasury.

RESTRUCTURING, ASSET IMPAIRMENTS AND OTHER CHARGES

Merchandising and marketing issues and the poor economic climate combined
with a capital intensive expansion strategy that the Company executed in Fiscal
1999 through Fiscal 2001, were dominant factors in contributing to the Company's
poor operating performance in Fiscal 2001. The results have drained the Company
of significant amounts of capital which in turn has required Mayor's to
restructure itself in an effort to position the Company for future
profitability. Accordingly during Fiscal 2001, the Company adopted a
multi-faceted restructuring plan. The Restructuring Plan includes the hiring of
a new CEO with a strong background in merchandising, an infusion of capital, the
refinancing or other working out of the Company's $80 million bank facility, the
closure of 13 unprofitable stores and termination of three leases for stores
that are not yet built, the re-merchandising of its 28 core Florida and Georgia
stores, the termination of redundant employees and the disposition of certain
non-performing assets. The Restructuring Plan is expected to be completed by the
end of the Fiscal 2002.

A summary of the charges recorded in Fiscal 2001 is as follows (in
thousands):

Restructuring............................................... $ 8,574
Write-down of assets........................................ 16,196
Goodwill impairment write-off............................... 22,265
Other charges............................................... 3,444
-------
$50,479
=======

The restructuring costs include employee severance costs of approximately
$0.9 million and total costs to exit stores including lease termination and
professional fees of $7.7 million. As of February 2, 2002, an accrual of $8.6
million remained for restructuring costs expected to be paid in Fiscal 2002. The
write-down of assets includes $11.3 million for the write-down of leasehold
improvements and assets related to the closing locations and $4.9 million for
the write-down of the corporate headquarters building and related assets to
reflect their estimated fair value determined by comparable market information.
These assets will be taken out of service at the time properties are vacated and
consequently will not be depreciated further after they are vacated.
Depreciation expense related to these assets was approximately $2.7 million
annually. The Restructuring Plan included the elimination of approximately 207
positions in the field and the closure of 13 locations during Fiscal 2002. The
Nevada location was closed in March 2002.

19

The goodwill impairment of $22.3 million is a write off of goodwill
associated with the Mayor's acquisition. Management determined that the
long-term future cash flows did not support the carrying value and recorded an
impairment charge to take the goodwill to zero.

Other charges consist of one-time charges of $1.3 million for strategic
cost reduction, $0.7 million for non-recurring legal fees associated with
shareholder related matters, and $1.4 million related to severance.

EFFECTS OF INFLATION

Gold prices are affected by political, industrial and economic factors and
by changing perceptions of the value of gold relative to currencies. Investors
commonly purchase gold and other precious metals perceived to be rising in value
as a hedge against a perceived increase in inflation, thereby bidding up the
price of such metals. The Company's sales volume and net income are potentially
affected by the fluctuations in prices of gold, diamonds and other precious or
semi-precious gemstones as well as watches and other accessories. The Company
does not hedge its gold inventories. Hedging is not available with respect to
possible fluctuations in the price of precious and semi-precious gemstones,
watches or other accessories.

The Company's selling, general and administrative expenses are directly
affected by inflation resulting in an increased cost of doing business. Although
inflation has not had and the Company does not expect it to have a material
effect on operating results, there is no assurance that the Company's business
will not be affected by inflation in the future.

INTEREST RATE RISK

The Company's credit facility accrues interest at floating rates, currently
based upon LIBOR plus 4.00% or the bank's adjusted base rate plus 2.75%, at the
Company's option. 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 February 2, 2002 would increase or decrease earnings
per share by $.01 per share.

The Company extends credit to its Mayor's customers under its own revolving
charge plan with up to two-year payment terms. Finance charges 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.

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 the 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 SEC, 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 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.

20

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 generally
accepted accounting principles 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's accounting policies are more fully discussed in Note E to the
financial statements. The Company has identified certain critical accounting
policies below.

Allowance for slow moving and obsolete inventory. The Company writes down
its inventory for estimated unmarketable inventory or obsolescence 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.

Accrued Restructuring Estimates. The Company has recorded a reserve for
the early termination of the leases, legal fees and store closing costs for
stores that are scheduled to be closed as discussed previously.

The Company's accrual for lease liabilities could be materially affected by
factors such as our ability to secure subleases, the creditworthiness of
sublessees and our success at negotiating early termination agreements with
lessors. These factors are significantly dependent on the general health of the
economy and resultant demand for commercial property.

While management believes that the current estimates of discontinued
operations liabilities are adequate, it is possible that future events could
require the Company to make significant adjustments for revisions to these
estimates.

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.

21

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX

22

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Mayor's Jewelers, Inc
Sunrise, Florida

We have audited the accompanying consolidated balance sheets of Mayor's
Jewelers, Inc. and its subsidiaries (the "Company") as of February 2, 2002 and
February 3, 2001 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended February 2, 2002. Our audits also included the financial statement
schedule listed at Item 14(a)(2). These financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule 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 audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Mayor's Jewelers, Inc. and
subsidiaries as of February 2, 2002 and February 3, 2001, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended February 2, 2002, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note B to the
consolidated financial statements, the Company's recurring losses from
continuing operations, the need to obtain a new or restructured credit facility,
need for an additional capital infusion, and ability to successfully accomplish
its restructuring plan raise substantial doubt about its ability to continue as
a going concern. Management's plans concerning these matters are also described
in Note B. The consolidated financial statements do not contain any adjustments
that might result from the outcome of this uncertainty.

As discussed in Note E(6) to the consolidated financial statements during the
year ended January 29, 2000, the Company changed its method of accounting for
certain direct and indirect costs related to inventory in prior years.

/s/ DELOITTE & TOUCHE LLP
Certified Public Accountants

Miami, Florida
May 3, 2002, except for the eighth and ninth paragraphs of Note B,
as to which the date is May 17, 2002.

23

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(AMOUNTS SHOWN IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

See notes to consolidated financial statements.

24

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS SHOWN IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

See notes to consolidated financial statements.

25

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

See notes to consolidated financial statements.

26

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS SHOWN IN THOUSANDS)

See notes to consolidated financial statements.

27

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED
FEBRUARY 2, 2002, FEBRUARY 3, 2001 AND JANUARY 29, 2000

A. NATURE OF BUSINESS:

Mayor's Jewelers, Inc. and subsidiaries ("Mayor's" or the "Company") is
primarily engaged in the sale of jewelry, watches and other consumer products,
operating Mayor's luxury jewelry stores. The Company operates 40 locations in
South and Central Florida, metropolitan Atlanta, Georgia, Chicago, Illinois,
metropolitan Washington DC, Scottsdale, Arizona, Troy, Michigan, Dallas, Texas
and Newport Beach and Sacramento, California.

The Company's consolidated financial statements are prepared on a
52/53-week retail fiscal year basis. The fifty-two weeks ended February 2, 2002,
the fifty-three weeks ended February 3, 2001 and the fifty-two weeks ended
January 29, 2000 are referred to herein as Fiscal 2001, Fiscal 2000 and Fiscal
1999, respectively.

B. BASIS OF PRESENTATION AND MANAGEMENT PLANS:

The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
incurred recurring losses from continuing operations and is dependent on equity
and debt financing to sustain its operations and to execute its Restructuring
Plan in Fiscal 2002. Additionally, certain of the Company's vendors have
expressed some concerns about the Company's current financial condition. Rolex,
a vendor which accounted for approximately 24% of the Company's total net sales
in Fiscal 2001, has informed the Company that its account has been put on "hold
status." In the event Rolex does not lift the hold and begin accepting new
orders for Rolex or if Rolex, or any other such vendors, terminates its
distribution agreement with the Company, it would have a material adverse affect
on the Company's business, financial condition and operating results. These
conditions indicate that the Company may be unable to continue as a going
concern for a reasonable period of time.

The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classifications of liabilities that might be necessary should
the Company be unable to continue as a going concern. Management of the Company
is taking several actions in its attempts to alleviate this situation.

MANAGEMENT'S PLANS

The multi-faceted Restructuring Plan includes, among other significant
initiatives, seeking an infusion of new debt and equity including the
possibility of, the refinancing of the Company's current bank debt, the closing
of thirteen unprofitable and under-performing stores, the liquidation of certain
non-performing assets and the reduction of various field and corporate costs.
See Note C for costs associated with the Restructuring Plan.

The stores targeted for closure include eleven properties outside of the
Company's core Florida and Georgia marketplace, as well as two stores in
Florida. The closing of these stores marks a significant retrenchment of the
Company's recent expansion strategy into states where Mayor's does not enjoy the
brand loyalty that it has enjoyed in Florida and Georgia.

Assets earmarked for liquidation include certain unproductive inventories,
the Company's headquarters building and associated real estate in Sunrise,
Florida, fixed assets in the stores targeted for closure and certain other
assets.

As part of its Restructuring Plan the Company is in the process of seeking
additional capital. The effort includes but is not limited to a possible
refinancing of the Company's existing bank debt and a potential infusion of new
debt and equity from a third party investor.

28

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Consistent with that effort, the Company has executed a term sheet with
Fleet Retail Finance and Back Bay Capital for a three year $80 million revolving
facility. The financing is subject to certain conditions, including but not
limited to certain lease payment termination provisions related to the
Restructuring Plan, due diligence, document preparation and negotiation of
financial covenants. Further, the Company has executed an amendment whereby the
Company's existing $80 million bank facility has been continued until May 30,
2002. See Note H for the terms of the existing bank facility.

Additionally, on May 17, 2002, Mayor's executed a non-binding agreement in
principle (the "Agreement") with Henry Birks & Sons Holdings Inc. of Canada
("Birks"). The Agreement provides for Birks to invest in or cause to be provided
to Mayor's $11.5 million in cash. Upon completion of the transaction, Birks will
receive Preferred Stock that will be convertible into a majority interest in the
common stock of Mayor's on a fully diluted basis. Prior to conversion, Birks
will be able to elect a majority of the Board of Directors of Mayor's. Birks
will also receive warrants to purchase an additional 10% of the Common Stock (on
a fully diluted basis).

Mayor's and Birks will enter into a series of agreements through which
Birks will provide management, merchandising and sales support to Mayor's.
Completion of the transaction is subject to certain conditions, including
without limitation, execution of definitive agreements and the affirmative vote
of the stockholders of Mayor's at a meeting of stockholders to be held as soon
as practicable. Pending the closing, Birks will provide consulting services to
Mayor's pursuant to a consulting agreement.

No assurance, however, can be given that the Company will be successful in
refinancing the revolving credit facility or closing such a transaction with
Birks.

C. RESTRUCTURING, ASSET IMPAIRMENTS AND OTHER CHARGES

Merchandising and marketing issues and the poor economic climate combined
with a capital intensive expansion strategy that the Company executed in Fiscal
1999 through Fiscal 2001 were dominant factors in contributing to the Company's
poor operating performance in Fiscal 2001. The results have drained the Company
of significant amounts of capital which in turn has required Mayor's to
restructure itself in an effort to position the Company for future
profitability. Accordingly, the Company recently has embarked on a multi-
faceted restructuring plan (the "Restructuring Plan"). The Restructuring Plan
was adopted in the fourth quarter of Fiscal 2001 to terminate redundant
employees, close underperforming stores and dispose of certain non performing
assets. The Restructuring Plan is expected to be completed by the end of the
second quarter of 2002.

A summary of the charges recorded in Fiscal 2001 is as follows (in
thousands):

Restructuring............................................... $ 8,574
Write-down of assets........................................ 16,196
Other charges............................................... 3,444
-------
28,214
Goodwill impairment write-off............................... 22,265
-------
$50,479
=======

The restructuring costs include employee severance costs of approximately
$.9 million and total costs to exit stores including lease termination and
professional fees of $7.7 million. As of February 2, 2002, an accrual of $8.6
million remained for restructuring costs expected to be paid in Fiscal 2002. The
write-down of assets includes $11.3 million for the write-down of leasehold
improvements and assets related to the closing locations and $4.9 million for
the write-down of the corporate headquarters building and related assets to
reflect their estimated fair value determined by comparable market information.
These assets will be taken out of service at the time properties are vacated and
consequently will not be depreciated further after they are vacated.

29

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Depreciation expense related to these assets was approximately $2.7 million
annually. The Restructuring Plan included the elimination of approximately 207
positions in the field as well as Mayor's former chief executive officer and the
closure of 13 locations during Fiscal 2002. The Nevada location was closed in
March, 2002.

The goodwill impairment of $22.3 million is a write off of goodwill
associated with the Mayor's acquisition. Management determined that the long
term future cash flows did not support the carrying value and recorded an
impairment charge to take the goodwill to zero.

Other charges consists of one-time charges of $1.3 million for strategic
cost reduction, $.7 million for non-recurring legal fees associated with
shareholder related matters and $1.4 million related to severance.

D. DISCONTINUED OPERATIONS:

The Company also retailed fine jewelry, watches and certain other select
non-jewelry consumer products primarily to warehouse club members through Sam's
Club, a division of Wal-Mart, Inc., pursuant to an agreement whereby the Company
operated a concession at all of Sam's domestic and Puerto Rico locations through
February 1, 2001. During April 1999, the Company was informed by Sam's that the
concession agreement would not be renewed beyond its expiration date.

Sam's Division is therefore accounted for as a discontinued operation due
to the expiration on February 1, 2001. In connection therewith, the Company
recorded a gain from disposition of $13.6 million, net of a tax liability of
$393,000, in Fiscal 2000. Sam's Division sales for Fiscal 2000 and Fiscal 1999
were $227.3 million and $277.6 million, respectively. Income (loss) from
discontinued operations for Fiscal 2000 and Fiscal 1999 were ($1.6) million and
$26.4 million, respectively. The net liabilities of the discontinued operations
for Fiscal 2000 included $4.7 million in accounts payable and $187,000 in other
liabilities.

E. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(1) Principles of Consolidation -- The consolidated financial statements
include the accounts of the Mayor's Jewelers, Inc. and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in the consolidation.

(2) Use of Estimates -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America 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.

(3) Sales of Consignment Merchandise -- Income is recognized on the sale of
inventory held on consignment at such time as the merchandise is sold.

(4) Sales Returns -- The Company generally gives its customers the right to
return merchandise purchased by them and records an accrual at the time of sale
for the effect of the estimated returns.

(5) Accounts Receivable -- Accounts receivable arise primarily from
customers' use of the Mayor's credit cards. Several installment sales plans are
offered which vary as to repayment terms and finance charges assessed. Finance
charges, when applicable, accrue at rates ranging from 10% to 18% per annum.
Finance charge income for Fiscal 2001 was $3.6 million, Fiscal 2000 was $3.0
million and Fiscal 1999 was $2.1 and is recorded as net sales in the
accompanying Consolidated Statements of Operations.

Certain sales plans of Mayor's provide for revolving lines of credit under
which the payment terms may exceed one year. In accordance with industry
practice, these receivables are included in current assets in the accompanying
Consolidated Balance Sheets. The portion of these receivables as of February 2,
2002 that is

30

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

not scheduled to be collected during the year ending February 1, 2003 is
approximately $12.8 million or 44% of Mayor's chargecard receivable.

(6) Inventories -- The Mayor's inventories are valued at last-in, first-out
("LIFO") cost which is not in excess of market. Under the first-in, first-out
("FIFO") cost method of accounting, the Mayor's LIFO inventories would have been
substantially the same as what is reported at February 2, 2002. The Company
records reserves for lower of cost or market, damaged goods, and slow-moving
inventory.

Costs incurred in acquiring, receiving, preparing and distributing
inventory to the point of being ready for sale were included in inventories
prior to Fiscal 1999. The amount of these costs included in inventory as of
January 29, 2000 was approximately $2.2 million. During Fiscal 1999, the Company
changed its methodology from capitalizing such costs in the inventory balance to
expensing these costs as incurred. As a result of this change in accounting
principle, the Company recognized a $2.2 million charge.

(7) Property -- Property is stated at cost net of accumulated deprecation
and is depreciated using the straight-line method over the following estimated
useful lives of the respective assets:

Leasehold improvements are amortized over the shorter of the term of the
respective lease, including renewal options, or the useful life of the asset.

(8) Income Taxes -- The Company accounts for income taxes in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes." Under SFAS 109, deferred income taxes reflect the net tax
effects of (a) temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the bases for income tax
purposes, and (b) operating loss and tax credit carryforwards.

(9) Cash and Cash Equivalents -- The Company considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.

(10) Cost in Excess of Fair Value of Assets Acquired ("Goodwill") -- The
Company on an ongoing basis evaluates the recoverability of the carrying amount
of Goodwill based on projected operating income. Goodwill resulting from the
Mayor's acquisition was written-off in full during Fiscal 2001 due to management
having determined that the long term cash flows did not support the carrying
value and is included in operating loss in the Consolidated Statement of
Operations. Accumulated amortization as of February 3, 2001 was $4.0 million.

(11) 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 generally at the
lower of the carrying amount or fair value less cost to sell.

(12) Deferred Financing Costs -- The Company amortizes deferred financing
costs incurred in connection with its financing agreements using the effective
interest method over the related period. Such deferred costs are included in
other assets in the accompanying Consolidated Balance Sheets.

(13) Advertising Costs -- Advertising costs are charged to expense as
incurred. The Company and its vendors participate in cooperative advertising
programs in which the vendors reimburse the Company for a

31

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

portion of certain advertising costs. Advertising expense, net of vendor
cooperative advertising allowances, amounted to $8.8 million, $8.6 million and
$3.5 million in Fiscal 2001, 2000 and 1999, respectively.

(14) Pre-opening Expenses -- Pre-opening expenses related to the opening of
new and relocated stores are expensed as incurred.

(15) Comprehensive Income (Loss) -- Comprehensive income (loss) includes
all changes in equity during a period except those resulting from investments by
owners and distributions to owners.

(16) Reclassifications -- Certain amounts in the prior years' financial
statements have been reclassified to conform to the current year presentation.

(17) Newly Issued Accounting Standards -- In June 1999, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133". SFAS 137 amends SFAS 133 "Accounting for Derivative
Instruments for Hedging Activities" by deferring the effective date of SFAS 133
to fiscal years beginning after June 15, 2000. SFAS 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
133 requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. SFAS 133 was
amended in June 2000 by SFAS No. 138 for certain derivative instruments and
hedging activities as indicated by SFAS 138. The effect of adopting SFAS 133 did
not have a significant effect on the Company's consolidated financial
statements.

In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." These standards establish
accounting and reporting for business combinations. SFAS No. 141 requires all
business combinations entered into subsequent to June 30, 2001 to be accounted
for using the purchase method of accounting. SFAS No. 142 provides that goodwill
and other intangible assets with indefinite lives will not be amortized, but
will be tested for impairment on an annual basis. Mayor's will adopt SFAS No.
142 in the first quarter of 2002. The impact of such adoption is not anticipated
to have a material effect on Mayor's financial statements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which is effective for fiscal
years beginning after December 15, 2001. This Statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," and 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 that
opinion). This statement also amends Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," to eliminate the exception to consolidation
for subsidiaries for which control is likely to be temporary. Mayor's will adopt
SFAS No. 144 in the first quarter of 2002. The impact of such adoption is not
anticipated to have a material effect on Mayor's financial statements.

(18) Earnings (Loss) Per Share -- Earnings (loss) per share is calculated
based upon the weighted average number of shares outstanding during each period.
Diluted earnings (loss) per share is not presented as the assumed conversion of
options and warrants would be anti-dilutive and as a result, such presentation
is not warranted.

32

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

F. INVENTORIES:

Inventories are summarized as follows:

G. PROPERTY:

The components of property are as follows:

Depreciation expense for Fiscal 2001, Fiscal 2000 and Fiscal 1999 was
approximately $7.4 million, $5.8 million and $5.7 million, respectively.

During Fiscal 2001, certain capital assets were impaired in connection with
the Company's restructuring plan (see Note C) resulting in a charge to
operations and a write-down of fixed assets of approximately $16.2 million.

H. LONG-TERM DEBT:

The Company currently has an $80 million working capital facility with a
bank group that expires on July 28, 2003 and is collateralized by substantially
all of the Company's assets. Availability under this facility is determined
based upon a percentage formula applied to inventory and accounts receivable.
This working capital facility was amended in September 2001 after the Company's
second quarter of Fiscal 2001 operating performance caused it to fail to comply
with certain financial covenants of the facility. At that time the facility was
amended to waive all financial covenants for the second quarter as well as for
the remainder of Fiscal 2001. As consideration for this amendment, the Company
agreed to increase the interest margin from LIBOR plus 2.25% to LIBOR plus
4.00%. The rate on the facility as of February 2, 2002 was 5.9%. Further, as
conditions for the amendment, the Company agreed to restrictions regarding
borrowing availability, which included requiring the Company to provide the bank
group with an $8 million cushion on the lesser of

33

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

collateral availability or the $80 million cap provided for by the facility.
Based on this, the Company had a $59.8 million borrowing capacity at February 2,
2002. This amendment had an original expiration of April 30, 2002. However, on
April 30, 2002, the Company executed an additional amendment to extend the
deadline for restructuring the facility from April 30, 2002 to May 30, 2002. At
February 2, 2002, the Company had approximately $53.5 million outstanding under
its facility which is classified as a current liability and had $.7 million in
letters of credit outstanding.

The Company presented its restructuring plan to its bank group on April 9,
2002. The plan outlined several initiatives including the need to fund the exit
from unprofitable stores, current operating losses and the purchases of
inventories needed to remerchandise the stores in its core Florida and Georgia
markets. The plan also indicated that the sources of capital for these funding
requirements would come from selling the Company's headquarters, from
liquidating restricted cash assets and from outside additional debt and equity
capital. Accordingly, the Company has asked for and received from the bank group
an amendment to extend the deadline from April 30, 2002 to May 30, 2002 for
restructuring the working capital facility. The Company currently is in
negotiation with outside capital resources to participate in the funding of this
requirement and management believes that it will be successful in reaching an
agreement by the May 30th deadline; however, no assurance can be made that
management will succeed in its efforts. Failure to do so will not allow the
Company to execute its restructuring plan. Further, it will most probably
prohibit the Company from being able to sustain Fiscal 2002 debt service and
working capital needs. In this event, there would be substantial doubt that the
Company would be able to continue operations in the normal course of business at
which time the Company would have to consider all of its alternatives.

The Company continues to work on the refinancing of a senior revolving
facility (see Note B), depending upon certain future developments. Until the
time a refinancing is in place, the Company will continue to operate under an
amendment to its existing working facility and may seek extensions of such
amendment. There can be no assurances that the Company will be successful in its
refinancing efforts.

Information concerning the Company's short-term borrowings follows. Under
the credit facility, borrowings that exceed $50 million are considered short
term. As of February 3, 2001, there were no short-term borrowings.

34

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

I. INCOME TAXES:

The significant items comprising the Company's net deferred taxes as of
February 2, 2002 and February 3, 2001 are as follows:

The components of the provision (benefit) for income taxes consists of the
following:

The provision (benefit) for income taxes varies from the amount computed by
applying the statutory rate for the reasons summarized below:

35

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has a federal net operating loss carryforward of approximately
$3.3 million and state net operating loss carryforward of approximately $21.6
million. The amount of Mayor's NOL included in the $3.3 million is approximately
$1.4 million, of which, due to Section 382 limitations, the Company can utilize
each year approximately $1.5 million. The federal net operating loss
carryforward expires beginning in 2010 through 2020 and the state net operating
loss carryforward expires beginning in 2005 through 2020. The Company also has
an alternative minimum tax credit carryforward of approximately $1.8 million to
offset future federal income taxes. The valuation allowance has been recorded to
offset the net deferred tax asset to the amount that the Company believes, after
evaluating the currently available evidence, will more likely than not be
realized.

At the time the Company purchased Exclusive Diamonds International, Limited
("EDI") in August of 1990, EDI applied to and received from the Israeli
government under the Capital Investments Law of 1959 "approved enterprise"
status, which results in reduced tax rates given to foreign owned corporations
to stimulate the export of Israeli manufactured products. The "approved
enterprise" tax benefit was available to EDI until the year 2000. Upon its sale
or liquidation, EDI will be subject to a 10% tax on any income that was
previously exempted from tax as a result of its "approved enterprise" status.
Furthermore, depending on the specific form of the transaction, the Company may
be subject to additional Israeli taxes, at rates ranging from 15% to 36%, upon
the sale of either EDI's assets or the Company's stock of EDI.

Mayor's 1994, 1995 and 1996 federal income tax returns are currently under
examination by the IRS. The impact of the IRS examination on the Company's
financial condition, results of operations and cash flow, if any, cannot be
ascertained at this time.

J. COMMITMENTS AND CONTINGENCIES:

In connection with prior financing arrangements, there are outstanding
warrants to purchase 519,756 shares of common stock at $2.25 per share which
expire May 31, 2005 and warrants to purchase 234,000 shares of common stock at
$3.25 to $4.00 per share which expire May 1, 2005.

Operating Leases. The Company leases all of its Mayor's division retail
stores under operating leases. The rentals are based primarily on a percentage
of sales with required minimum annual rentals. In addition, most leases are
subject to annual adjustment for increases in real estate taxes and maintenance
costs. The Company also has non-cancelable operating leases for copiers, postage
machines, and computer equipment. At February 2, 2002, the Company was obligated
for the following minimum annual rentals under non-cancelable operating leases
(excluding the leases related to the stores included in the Restructuring Plan):

36

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of February 2, 2002, the minimum annual rentals related to the stores
included in the Restructuring Plan are:

Rent expense for the Mayor's stores was approximately $11.8 million
including $1.0 million of contingent rent for Fiscal 2001, $9.6 million
including $1.8 million of contingent rent for Fiscal 2000 and $7.7 million
including $2.4 million of contingent rent for Fiscal 1999.

K. LEGAL PROCEEDINGS:

The Company is involved in litigation arising from the normal course of
business. The Company believes the facts and the law support its position and
those matters should not materially affect the Company's financial position;
however, there can be no assurance as to the final result of legal matters.

L. EMPLOYEE BENEFIT PLANS:

STOCK OPTION PLANS

As of February 2, 2002 the Company had 1,310,039 shares of common stock
available for grant to its key employees and directors under its 1987 and 1991
Stock Option Plans. Under these plans, the option price must be equal to the
market price of the stock on the date of the grant, or in the case of an
individual who owns 10% or more of common stock, the minimum price must be 110%
of the market price.

Options granted to date generally become exercisable from six months to
three years after the date of grant, provided that the individual is
continuously employed by the Company, or in the case of directors, remains on
the Board of Directors. All options generally expire no more than ten years
after the date of grant.

EMPLOYEE STOCK PURCHASE PLAN

In June 1987, the Board of Directors approved an Employee Stock Purchase
Plan, which permits eligible employees to purchase common stock from the Company
at 85% of its fair market value through regular payroll deductions.

A total of 562,500 shares are reserved for issuance under the Employee
Stock Purchase Plan of which 71,503, 87,796 and 76,261 shares were issued during
the Fiscal years 2001, 2000 and 1999.

PROFIT SHARING PLANS

In December 1992, the Board of Directors approved the Jan Bell Marketing,
Inc. 401(k) Profit Sharing Plan & Trust (the "Plan"), which permits eligible
employees to make contributions to the Plan on a pretax salary reduction basis
in accordance with the provisions of Section 401(k) of the Internal Revenue
Code. The Company makes a cash contribution of 25% of the employee's pretax
contribution, up to 4% of the employee's

37

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

compensation, in any calendar year. The employer match for Fiscal 2001, Fiscal
2000 and Fiscal 1999 were $133,086, $187,587 and $202,094, respectively.

ACCOUNTING FOR STOCK-BASED COMPENSATION

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. Accordingly, no compensation cost has been
recognized for such plans. Had compensation cost for the Company's stock-based
compensation plans been determined using the fair value method described in
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," at the grant dates for awards granted in Fiscal 2001, Fiscal 2000
and Fiscal 1999 under these plans, the Company's net earnings and earnings per
share would have been reduced to the proforma amounts presented below:

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 in Fiscal 2001, Fiscal 2000 and Fiscal 1999:
expected volatility of 59%, 59% and 84%, respectively, risk-free interest rate
of 4.50%, 4.70% and 6.58%, respectively, expected lives of approximately five
years and a dividend yield of zero for all three fiscal years presented. The
weighted average fair values of options granted during Fiscal 2001, Fiscal 2000
and Fiscal 1999 were $2.83, $2.94 and $3.03, respectively.

38

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a summary of the activity in the option plans during
Fiscal 2001, Fiscal 2000 and Fiscal 1999:

A summary of the status of the option plans as of February 2, 2002 is
presented below:

M. FAIR VALUE OF FINANCIAL INSTRUMENTS:

The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies. However, considerable
judgment is required in interpreting market data to develop the estimates of
fair value.

Accordingly, the estimates presented herein are not necessarily indicative
of the amounts that would be realized in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.

The following methods and assumptions were used to estimate fair value:

- The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable, and accrued expenses approximate fair value because of
their short term nature.

- The fair value of the Company's long term debt approximates carrying
value based on the quoted market prices for the same or similar issues.

39

MAYOR'S JEWELERS, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

N. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

40

PART III

ITEM 10. OFFICERS AND DIRECTORS

The following table sets forth the names, ages and positions of the
Company's directors and officers.

BIOGRAPHICAL INFORMATION

JOSEPH CICIO

Mr. Cicio is the Chief Executive Officer of the Company. Prior to joining
the Company, Mr. Cicio was a Retail Merchandising and Marketing Consultant from
spring 2000 through February 2002. From December 1997 through September 2001,
Mr. Cicio served as President of Retail Development for Sun International. From
June 1996 through June 1997, he was President of Retail Development for Donna
Karan International. From February 1995 through June 1996, Mr. Cicio was
Co-Chairman, Chief Executive Officer and Chief Merchandising Officer of the
Randy Kemper Corporation, a manufacturer of women's designer sportswear. From
March 1992 through February 1995, Mr. Cicio held executive positions with I.
Magnim Department Stores. From February 1976 through March 1992 he held a
variety of executive and management positions with R.H. Macys & Co., Inc.

DAVID BOUDREAU

Mr. Boudreau is the Chief Financial Officer and Senior Vice President of
Finance and Treasurer of the Company. Prior to becoming Chief Financial Officer
of the Company in 1997, Mr. Boudreau was Senior Vice President of Finance from
1994 through 1997 and Senior Vice President of Special Projects from 1989
through 1994. He joined the company as Controller and Treasurer in 1986 after
working with the Company as an outside staff accountant from 1983 through 1986.
He has been a Director of the Company since 2000.

MARC WEINSTEIN

Marc Weinstein has been employed as the Chief Operating Officer and Senior
Vice President of the Company since July 1996. Prior to joining the Company, Mr.
Weinstein spent approximately 19 years with the Burger King Corporation. During
his tenure at Burger King, he gained extensive retailing, operations and human
resource knowledge on both a domestic and international basis while holding a
multitude of positions

41

such as Vice President Managing Director of Europe, Vice President of Operations
and Vice President of Human Resources. He has been a Director of the Company
since 2000.

ALBERT RAHM, II

Mr. Rahm has been the Vice President of Stores of the Company since January
2000. From April 1991 through January 2000, Mr. Rahm served as an Assistant
Manager, a Manager and a Regional Vice President for the Company. Prior to
joining the Company in April 1991, Mr. Rahm owned and operated three retail
jewelry stores for a fourteen-year period in Shreveport, Louisiana.

AIDA ALVAREZ

Ms. Alvarez has been the Vice President of Merchandising and Marketing for
the Company since February 2001. From August 1989 through February 2001, Ms.
Alvarez served as General Merchandise Manager, Divisional Merchandise Manager
and Head Watch Buyer for the Company.

GREGG BEDOL

Mr. Bedol has worked to help retailers improve profitability through
application of advanced technologies and operational improvements for more than
twenty years. He is the founder and Chief Executive Officer of Bedol Retail
Ventures, Inc., a retail consulting firm and umbrella company that holds
investments in other businesses that have served the retail industry since 1991.
From 1997 through 2001, Mr. Bedol served as Chief Executive Officer of RetailOps
LLC. Mr. Bedol has retail consulting experience at several organizations,
including the predecessor of Accenture. He has been a Director of the Company
since 1996.

THOMAS EPSTEIN

Mr. Epstein has been a private investor and financial consultant since
1990. Mr. Epstein was affiliated with Zaleski, Sherwood & Co., Inc. from April
1986 to September 1990. From 1980 to 1986, Mr. Epstein was employed by Bankers
Trust Company in various capacities, including Vice President. Mr. Epstein was
chairman of the Board of Directors of GSS/Array Technology Public Co., Ltd.
until July 2001. He has been a Director of the Company since 1995.

MARGARET GILLIAM

Ms. Gilliam is the founder and President of Gilliam & Co., a company that
advises potential investors on both public and private investments and advises
businesses on strategic initiatives. From 1975 through 1997, Ms. Gilliam oversaw
investment research in the retail and soft goods industries. Her most recent
position in this field was as Director-Equity Research at Credit Suisse First
Boston. She has also held similar positions with other financial service
organizations such as Goldman, Sachs & Company. Ms. Gilliam is a director of
Horizon Group Properties, a real estate entity specializing in outlet malls,
Harold's Stores, a fashion retailer, and the Walking Company, a specialty
footwear and accessory retailer. She is also a Director of Family Counseling
Service in Westhampton Beach, New York and Friends of McGill University. She has
been a Director of the Company since 1998.

AVIGDOR KAPLAN

Since 1997, Mr. Kaplan has been the President of Clal Insurance Group and
served as Chairman of the Board of various subsidiary companies within Clal
Insurance Group. From 1992 to 1997, Mr. Kaplan served as Director General of
Kupat-Holim "Sick (Health/Welfare) Fund" and also served as Chairman of the
Board of various subsidiaries for the Fund. Mr. Kaplan has been a Director of
the Company since 2001.

PETER OFFERMANN

Since May 1994, Mr. Offermann has been the President of Offermann
Financial, Inc., a financial consulting firm providing strategic financial
advice. Mr. Offermann is also the Chairman and Chief Executive

42

Officer of ATC Group Services, Inc., an environmental consulting company. From
1999 to February 2002, he served as a Director of Philip Services Corporation.
From 1994 to 1999 Mr. Offermann was Executive Vice President and Chief Financial
Officer of TLC Beatrice. From 1968 through May 1994, he served in a number of
positions with Bankers Trust Company and its affiliates, including as Managing
Director of BT Investment Partners, Inc. from October 1992 through May 1994,
Managing Director of BT Securities Corporation from October 1991 through October
1992, and Managing Director of Bankers Trust Company from 1986 through 1991. Mr.
Offermann serves as a director of National Auto Finance, Inc. He has been a
Director of the Company since 1996 and Chairman of the Board since February 28,
2002.

ROBERT G. ROBISON

Mr. Robison has been a partner of the law firm of Morgan, Lewis & Bockius
LLP since 1991. He has been a Director of the Company since 1996.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(THE "EXCHANGE ACT")

Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission ("SEC") initial reports of ownership and reports of changes in
ownership of voting common stock and other equity securities of the Company.
Officers, directors and greater-than-ten-percent stockholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.

To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended February 2, 2002("Fiscal
2001"), all Section 16(a) filing requirements applicable to its officers,
directors and greater-than-ten-percent beneficial owners were complied with.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth certain information regarding compensation
paid by the Company to the Chief Executive Officer and to each of the three
other most highly compensated executive officers (the

43

"Named Executive Officers") of the Company during Fiscal 2001 and during each of
the past three fiscal years:

SUMMARY COMPENSATION TABLE

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(1) Except as otherwise explained, the amounts set forth in this column for each
individual represent payments of annual premiums by the Company for whole
life insurance policies or financial investments provided to executive
officers.
(2) February 28, 2002, Mr. Arguetty's employment as Chief Executive Officer was
terminated by the Company. On May 6, 2002, Mr. Arguetty resigned as a
Director of the Company.
(3) Includes a $31,800 reimbursement for a club membership used for business
development purposes.
(4) Mr. Bowers was employed as the General Counsel and Senior Vice President of
Legal until November 9, 2001.
(5) Includes payment of $245,507 in severance benefits under the terms of Mr.
Bowers' employment agreement.

Shown below is further information regarding employee stock options awarded
during Fiscal 2001 under the 1991 Stock Option Plan to the Named Executive
Officers. No stock appreciation rights were awarded during Fiscal 2001.

OPTION GRANTS IN LAST FISCAL YEAR

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(1) Individual option grants generally become exercisable in installments over a
three-year period commencing on the date of grant subject to continued
employment. Options can become immediately exercisable upon the occurrence
of certain corporate events, including a change in control of the Company or
delivery of written notice of stockholder's meeting to consider a merger,
sale of assets or similar reorganization.
(2) All grants were made at or above 100% of fair market value as of the date of
the grant.
(3) In accordance with SEC rules, the Black-Scholes pricing model was used to
estimate the grant date present value. The values indicated were calculated
using the following assumptions: (i) an expected
44

volatility of 59%; (ii) an expected dividend yield of 0%; (iii) a risk-free
interest rate at the date of grant based upon a term equal to the expected
life of the option of 4.5%; (iv) an expected option life equal to the
anticipated period of time from date of grant to exercise of five years; and
(v) no discounts for non-transferability or risk of forfeiture. The
estimated values have been included solely for purposes of disclosure in
accordance with the rules of the SEC and represent theoretical values. The
actual value, if any, an executive may realize will depend upon the increase
in the market price of voting common stock through the date of exercise.
Such an increase would benefit all stockholders.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

The following table shows stock option exercises by Named Executive
Officers in Fiscal 2001, including the aggregate value of gains on the date of
exercise. In addition, the table includes the number of shares covered by both
exercisable and unexercisable stock options as of February 2, 2002. Also
reported are the values for "in-the-money" options which represent the positive
spread between the exercise price of any such existing stock options and the
fiscal year-end price of $1.21 per share of voting common stock. No Named
Executive Officers exercised stock options in Fiscal 2001.

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(1) Fair market value of shares at exercise minus the exercise price.

EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
PROVISIONS

Mr. Arguetty was employed as the Chief Executive Officer until February 28,
2002, when he was terminated by the Company. Under the terms of Mr. Arguetty's
employment agreement, he receives payment of base salary for a one-year period,
the vesting of certain options plus other severance benefits. The total amount
of the severance payment due to Mr. Arguetty is $458,800. On May 15, 2002, Mr.
Arguetty received a payment of $100,921.62 towards his total severance payment.
The remaining portion of the severance payment will be made by the Company on a
bi-weekly basis in equal installments.

Mr. Boudreau is employed as the Chief Financial Officer, Senior Vice
President of Finance and Treasurer. Under the terms of his employment agreement,
Mr. Boudreau receives a base annual salary of $220,000 and has the opportunity
to receive an annual cash bonus based upon the achievement of objective
performance criteria, such as net income, operating cash flow and return on
working capital. The agreement allows the Company to terminate Mr. Boudreau for
cause without termination benefits or without cause upon the payment of base
salary for a one-year period and the vesting of certain options. If Mr. Boudreau
is terminated within a two-year period after a change in control, he will
receive the payment of base salary for up to two years plus certain benefits.

Mr. Weinstein is employed as the Chief Operating Officer and Senior Vice
President of the Company. Under the terms of his employment agreement, Mr.
Weinstein receives a base annual salary of $200,000 and has the opportunity to
receive an annual cash bonus based upon the achievement of objective performance
criteria, such as net income, operating cash flow and return on working capital.
The agreement allows the Company to terminate Mr. Weinstein for cause without
termination benefits or without cause upon the payment of base salary for a
one-year period and the vesting of certain options. If Mr. Weinstein is
terminated within a two-year period after a change in control, he will receive
the payment of base salary for up to two years plus certain benefits.

45

Mr. Bowers was employed as the General Counsel and Senior Vice President of
Legal until November 9, 2001 when he left the Company. Under the terms of Mr.
Bowers' employment agreement, he received payment of base salary for a one-year
period, the vesting of certain options plus other severance benefits.

Albert Rahm, II and Aida Alvarez were appointed executive officers on May
15, 2002.

Mr. Rahm is employed as the Vice President of Stores. Mr. Rahm receives a
base annual salary of $185,000 and has the opportunity to receive an annual cash
bonus based upon the achievement of objective performance criteria, such as net
income, operating cash flow and return on working capital. The agreement allows
the Company to terminate Mr. Rahm for cause without termination benefits or
without cause upon the payment of base salary for a one-year period and the
vesting of certain options. If Mr. Rahm is terminated within a two-year period
after a change in control, he will receive the payment of base salary for up to
two years plus certain benefits. In May 2002, Mr. Rahm received a Stay Bonus in
the amount of $92,500. During Fiscal 2001, Mr. Rahm received a grant of 36,000
stock options with an exercise price of $3.79 per share and a grant of 10,000
stock options with an exercise price of $1.56 per share.

Ms. Alvarez is employed as the Vice President of Merchandising and
Marketing. Ms. Alvarez receives a base annual salary of $144,000 and has the
opportunity to receive an annual cash bonus based upon the achievement of
objective performance criteria, such as net income, operating cash flow and
return on working capital. The agreement allows the Company to terminate Ms.
Alvarez for cause without termination benefits or without cause upon the payment
of base salary for a one-year period and the vesting of certain options. If Ms.
Alvarez is terminated within a two-year period after a change in control, she
will receive the payment of base salary for up to two years plus certain
benefits. In May 2002, Ms. Alvarez received a Stay Bonus in the amount of
$72,000. During Fiscal 2001, Ms. Alvarez received a grant of 72,000 stock
options with an exercise price of $3.79 per share and a grant of 10,000 stock
options with an exercise price of $1.56 per share.

DIRECTOR COMPENSATION

Directors who are not employees of the Company receive compensation of
$20,000 per year plus reimbursement of reasonable expenses for attending
meetings and automatically receive options to purchase at an exercise price
equal to the market price on the grant date, 20,000 voting common shares on the
date of their initial election and 10,000 each year thereafter on January 1.
Such options are fully exercisable six months after the grant date and until two
years after a person ceases to be a director. Directors who are employees of the
Company do not receive additional compensation for services as a director.

ITEM 12. SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of May 13, 2002, 19,525,749 shares of common stock were outstanding. The
following table sets forth, as of May 13, 2002, the beneficial ownership of
voting common stock of the Company by each director,

46

executive officer, by all directors and executive officers as a group and by all
persons known by the Company to be the beneficial owners of more than 5% of the
voting common stock:

- ---------------

(1) Unless otherwise provided, the address for each "Beneficial Owner" is 14051
Northwest 14th Street, Sunrise, Florida 33323.
(2) Unless otherwise noted, each person has sole voting and investment power
over the shares listed opposite his or her name. An asterisk is used to
indicate less than 1% of the class outstanding.
(3) Includes options to purchase 2,668,133 shares, of which certain options are
held by various family and estate planning vehicles. Does not include
shares of common stock registered in the name of Marbella Resources
Limited, wholly owned by the Amid Trust, of which Mr. Arguetty's family has
beneficial interests, but with respect to which Mr. Arguetty is not a
beneficiary and has no voting or dispositive power. See footnote (15)
below.
(4) Includes options to purchase 80,000 shares.
(5) Includes options to purchase 411,667 shares.
(6) Includes options to purchase 115,000 shares.
(7) Includes options to purchase 60,000 shares.
(8) Includes options to purchase 30,000 shares.
(9) Includes options to purchase 80,000 shares.
(10) Includes options to purchase 80,000 shares.
(11) Includes options to purchase 361,334 shares.
(12) Includes options to purchase 34,666 shares.
(13) Includes options to purchase 53,334 shares.

47

(14) Includes all shares held by Eliahu Ben-Shmuel, E.P. Family Partners, Hay
Foundation and Tropical Time, Inc. as set forth in a Schedule 13D filed on
February 21, 2001.
(15) Marbella Resources Limited reported this ownership as of May 27, 1999.
(16) Dimensional reported this ownership as of January 30, 2002.
(17) Franklin reported this ownership as of February 2, 2001.
(18) Includes 4,007,799 shares issuable upon the exercise of stock options for
all executive officers and directors.

ITEM 13. CERTAIN RELATED TRANSACTIONS

The law firm of Morgan, Lewis & Bockius LLP, of which Mr. Robison is a
partner, performs certain legal services for the Company.

The Company has engaged Samuel A. Getz, a former Officer and Director of
the Company, as a consultant until September 22, 2002, at the rate of $12,500
per month. His consulting arrangements also provide that if (1) Isaac Arguetty
ceases to be the Chief Executive Officer of the Company, or (2) the individuals
who constitute the "Incumbent Board" (generally individuals serving as directors
on March 24, 2001 and their successors) cease for any reason to constitute at
least a majority of the members of the Board, then the entire amount of the
remaining consulting fees shall be paid to him on the date that either (1) or
(2) occurs.

On April 26, 2001, the Company entered into a Voting and Standstill
Agreement with Eliahu Ben-Shmuel and Phillip Goldstein. Messrs. Ben-Shmuel and
Goldstein had previously indicated their respective intentions to present
certain proposals and an opposition slate of three directors at the forthcoming
annual meeting. The agreement generally provides that if the Company has not
entered into an agreement to merge with, or sell substantially all of its assets
to, another person by October 26, 2001, Mr. Ben-Shmuel will be entitled to
designate one director to fill an existing vacancy in the class of directors
that serve until the 2002 Annual Meeting. Mr. Ben-Shmuel's designee must qualify
as an "independent" director, must not be an affiliate (as defined under the
Securities Act of 1933, as amended) of his, and must be reasonably acceptable to
the Company at the time of his designation. Under certain circumstances, the
agreement will terminate (a) if Mr. Ben-Shmuel does not beneficially own at
least 5% of the voting securities of the Company, (b) on October 26, 2002, (c)
the date that the Company enters into an agreement to sell the Company, (d) on
November 26, 2001 and Ben-Shmuel's designee has not been appointed to the Board
of Directors or (e) the day following the 2002 Annual Meeting and Ben-Shmuel's
designee is not elected to the Board of Directors at the 2002 Annual Meeting.

In addition, Messrs. Ben-Shmuel and Goldstein agreed to vote all of their
beneficially owned voting securities of the Company with respect to the election
or removal of directors either (i) in accordance with the recommendations of a
majority of the Board of Directors or (ii) in the same proportions as the
stockholders. Mr. Ben-Shmuel, however, reserved the right to vote for the
election or retention of his designee. Messrs. Ben-Shmuel and Goldstein also
granted to the Company an irrevocable proxy to vote their voting securities of
the Company with respect to the foregoing. Each also agreed that until October
26, 2002, he will not take certain actions, including any "solicitation" for
"proxies", initiate or propose any stockholder proposals for submission to a
vote of stockholders, or form, join or in any way participate in any "group"
with respect to the foregoing.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) Financial Statements. The following is a list of the consolidated
financial statements of Mayor's Jewelers, Inc. and subsidiaries included in Item
8 of Part II.

INDEPENDENT AUDITORS' REPORT.

CONSOLIDATED BALANCE SHEETS -- February 2, 2002 and February 3, 2001.

48

CONSOLIDATED STATEMENTS OF OPERATIONS -- Years Ended February 2, 2002,
February 3, 2001 and January 29, 2000.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- Years Ended February 2,
2002, February 3, 2001 and January 29, 2000.

CONSOLIDATED STATEMENTS OF CASH FLOWS -- Years Ended February 2, 2002,
February 3, 2001 and January 29, 2000.

(a)(2) Financial Statement Schedules. The following is the financial
statement schedule filed as part of this Form 10-K: Schedule II. All other
schedules are omitted because they are not applicable, or not required, or
because the required information is included in the financial statements or
notes thereto.

(a)(3) The following list of schedules and exhibits are included or
incorporated by reference as indicated in this Form 10-K:

(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
during the fourth quarter ended February 2, 2002.

50

SCHEDULE II

MAYOR'S JEWELERS, INC. VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS SHOWN IN THOUSANDS)

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(1) Net of recoveries

51

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf of the undersigned, thereunto duly authorized.

MAYOR'S JEWELERS, INC.

Date: May 20, 2002
/s/ JOSEPH CICIO
--------------------------------------
Joseph Cicio,
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:

52

INDEX TO EXHIBITS