UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark one)

For the Thirteen Weeks Ended September 25, 2004

OR

For the transition period from ____________to____________

Commission File Number 1-9647

MAYOR’S JEWELERS, INC.

14051 N.W. 14th Street, Suite 200
Sunrise, Florida 33323
(Address of Principal Executive Offices) (Zip Code)

(954) 846-8000
(Registrant’s Telephone Number, Including Area Code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  [X]  No  [  ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)

Yes   [  ]  No  [X]

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

36,961,307 SHARES OF COMMON STOCK ($.0001 PAR VALUE)
AS OF NOVEMBER 3, 2004

Explanatory Note

     This Form 10-Q reflects restatements of the following (unaudited) financial statements: consolidated statements of operations and cash flows for the thirteen and twenty-six weeks ended September 27, 2003. The restatement reflect changes to the accounting treatment of certain warrants issued by the Company. For a description of the restatements, see “Restatements” in Note B to the accompanying unaudited consolidated condensed financial statements. This Form 10-Q also amends Item 2 with respect to the related warrant non-cash compensation expense discussion as it relates to the thirteen and twenty-six weeks ended September 27,2003.

MAYOR’S JEWELERS, INC.

FORM 10-Q

FOR THE THIRTEEN WEEKS ENDED SEPTEMBER 25, 2004

TABLE OF CONTENTS

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PART I: FINANCIAL INFORMATION

Item 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

MAYOR’S JEWELERS, INC. AND SUBSIDIARIES

See notes to unaudited consolidated condensed financial statements.

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MAYOR’S JEWELERS, INC. AND SUBSIDIARIES

See notes to unaudited consolidated condensed financial statements.

4

MAYOR’S JEWELERS, INC. AND SUBSIDIARIES

See notes to unaudited consolidated condensed financial statements.

5

MAYOR’S JEWELERS, INC. AND SUBSIDIARIES

See notes to unaudited consolidated condensed financial statements.

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MAYOR’S JEWELERS, INC. AND SUBSIDIARIES

A. Nature of Business

     Mayor’s Jewelers, Inc. and its subsidiaries (the “Company” or “Mayor’s”) consolidated condensed financial statements as of September 25, 2004 and March 27, 2004, and for the thirteen and twenty-six week periods ended September 25, 2004 and September 27, 2003 have not been audited by a Registered Public Accounting Firm, but in the opinion of the management of the Company reflect all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows for those periods. In accordance with the rules of the Securities and Exchange Commission, these consolidated condensed financial statements do not contain all disclosures required by accounting principles generally accepted in the United States of America. Results of the thirteen and twenty-six week periods ended September 25, 2004 and September 27, 2003 are not necessarily indicative of annual results because of the seasonality of the Company’s business. The information included in this Form 10-Q should be read in conjunction with the financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Annual Report on Form 10-K for the year ended March 27, 2004. Certain reclassifications were made to the prior period’s consolidated condensed balance sheet to conform to the current period presentation.

     Mayor’s is primarily engaged in the sale of fine quality jewelry, timepieces and giftware. The Company operates 28 locations in South and Central Florida and metropolitan Atlanta, Georgia.

     Management believes that barring a significant external event that materially adversely affects the Company’s current business or the current industry trends as a whole, the Company’s borrowing capacity under the credit facility, projected cash flows from operations and other short term borrowings will be sufficient to support the Company’s working capital needs, capital expenditures, any dividend payments on its preferred stock and debt service for at least the next twelve months.

B. Restatements

     The accompanying consolidated financial statements for the thirteen and twenty-six weeks ended September 27, 2003 have been restated to properly account for and/or disclose the following:

•

As more fully discussed in Note F, Henry Birks & Sons Inc. (“Birks”), the Company’s majority stockholder, granted rights to receive warrants to purchase the Company’s common stock to certain current or former employees of Birks or its affiliates, who were, or later became employees of or provided services to the Company. The rights to receive these warrants are contingent upon fulfillment of certain time based employment vesting requirements. The granted warrants are subject to variable accounting rules due to their cashless exercise feature which requires compensation expense (credit) calculated as the increase or decrease in intrinsic value of the vested warrants, based on the change in market value of the underlying stock. Non-cash compensation expense for the thirteen and twenty-six weeks ended September 27, 2003 related to these warrants was approximately $775,000. Previously to this restatement, the Company had not properly identified the granting of these rights to receive warrants by Birks as a transaction effecting the Company’s consolidated financial statements and accordingly had not recognized compensation expense for these warrants.

•

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

•	The Company restated its proforma information for the thirteen and twenty-six weeks ended September 27, 2003 to reflect the expense of the previously mentioned warrants as calculated using the fair value method as prescribed in SFAS No. 123. See Note C.

     The following information presents the impact of the non-cash compensation expense discussed above on the Company’s financial information as originally reported for the thirteen and twenty-six weeks ended September 27, 2003:

C. 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. No stock-based compensation cost has been recognized for such plans in the accompanying consolidated condensed statements of operations as all options granted had an exercise price equal to the market value of the underlying common stock on the grant date. As required by Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” which amends SFAS No. 123, “Accounting for Stock-Based Compensation,” the following tables estimate the pro-forma effect on net loss and loss per share had the Company applied the fair value recognition provision of SFAS No. 123 to stock-based employee compensation (amount shown in thousands except for per share data):

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     The fair value of each option grant was estimated as of the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants during the thirteen and twenty-six weeks ended September 27, 2003: expected volatility of 96%, risk-free interest rate of 3.09%, expected lives of approximately five years and a dividend yield of zero for the periods presented. There were no options granted during the thirteen and twenty-six weeks ended September 25, 2004. There were 40,000 options granted during the thirteen and twenty-six weeks ended September 27, 2003. The fair value of each warrant grant was estimated as of the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants: expected volatility of 49.2%, risk-free interest rate of 4.48%, expected lives of approximately twenty years and a dividend yield of zero. The weighted average fair value of warrants granted during Fiscal 2002 was $0.26.

D.

Term Loan and Credit Facility

     As of September 25, 2004, the Company had a $58 million working capital credit facility with Bank of America (formerly known as Fleet) and GMAC and a $12.7 million junior secured term loan with Back Bay Capital. On September 7, 2004, the Company entered into a Fourth Amendment to the working capital facility and the junior secured term loan (the “Amended Credit Agreement”). The Amended Credit Agreement provides for, among other things, an extended maturity date to August 20, 2006, a 1.25% reduction of interest on the junior secured term loan, an interest reduction on the Bank of America-GMAC portion of the credit facility, the elimination of a financial covenant and the increase in the capital expenditures allowed pursuant to the sole remaining financial covenant. Availability under the working capital facility is determined based upon a percentage formula applied to certain inventory and accounts receivable as amended on February 20, 2004, and has certain restrictions regarding borrowing availability. The interest rate under the credit facility as of September 25, 2004 was 5.25% (prime plus 0.5%). The junior secured term loan currently bears an effective interest rate of 12.75% and is subject to similar restrictions and covenants as the working capital facility as well as certain prepayment penalties.

     After accounting for the borrowing restrictions described above, the Company had approximately $56.5 million of borrowing capacity under its facility and, after netting the outstanding borrowings of $38.0 million and letter of credit commitments of $550,000, the Company had excess borrowing capacity of approximately $18.0 million.

E.

Inventories

     Inventories are summarized as follows:

In addition, the Company held inventory on consignment at September 25, 2004 and March 27, 2004 with a cost of approximately $11,804,000 and $11,460,000, respectively.

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F.

Related Party Transactions

     On August 20, 2002, the Company closed on a $15.05 million gross equity investment transaction with Henry Birks & Sons Inc. (“Birks”). The Company incurred expenses related to the raising of the capital of approximately $1.5 million which was netted against the proceeds in stockholders’ equity. As consideration for the investment, Birks received 15,050 shares of Series A Convertible Preferred Stock (“Series A Preferred”), a newly formed class of stock that was originally convertible into 50,166,667 shares of common stock. The conversion ratio of the Series A Preferred is subject to certain anti-dilution provisions. Birks also received warrants that were exercisable for 12,424,596 shares of common stock at $0.30 per share, 12,424,596 shares of common stock at $0.35 per share and 12,424,595 shares of common stock at $0.40 per share. The warrants also contain certain anti-dilution provisions which upon the occurrence of certain events can increase the number of warrants and decrease the exercise price. Of the net proceeds raised of $13.55 million, a fair value of $3.8 million has been allocated to the warrants. The preferred stock and warrants were issued by the Company without being registered, relying on an exemption under Section 4(2) of the Securities Act of 1933, as amended. Birks had entered into a Registration Rights Agreement with the Company, whereby Birks has the right to require the Company to register all of the shares underlying the above-described securities issued to Birks.

     On November 1, 2002 and March 14, 2003 Birks granted rights to receive 4,250,000 and 500,000, respectively, of its warrants to certain current or former employees of Birks or its affiliates, who were or later became employees of or provided services to the Company. The rights to receive these warrants are contingent upon fulfillment of certain time based employment vesting requirements. The exercise price of the granted warrants was $0.29 per share, after certain anti-dilution adjustments. The granted warrants are subject to variable accounting rules due to their cashless exercise feature which requires compensation expense (credit) calculated as the increase or decrease in intrinsic value of the vested warrants which is based on the change in market value of the underlying stock. Non-cash compensation credit for the thirteen and twenty-six weeks ended September 25, 2004 related to these warrants was $193,000 and $32,000, respectively. As of September 25, 2004, the number of warrants increased to 4,771,572, of which 4,518,889 were vested, and the exercise price was $0.29 as a result of the anti-dilution provisions as of September 25, 2004.

     On November 6, 2003, Birks exercised 32,523,787 of the warrants on a cashless basis based on an average market price of $0.766, as defined in the warrant agreements. The cashless feature of exercise resulted in the issuance of 17,352,997 shares of common stock and the forfeiture of 15,170,790 warrants. Birks had 288,195, 305,976 and 305,976 warrants exercisable at $0.29, $0.34 and $0.39, respectively, including adjustments for the anti-dilution provisions as of September 25, 2004.

     On June 15, 2004, Birks sold 500,000 and 250,000 shares of Mayor’s common stock to one of the Company’s Directors and a consultant to Birks, respectively, for $0.50 per share in a private placement sale. The sale of the 750,000 shares of common stock resulted in compensation expense of $135,000 recorded by Mayor’s which represented the difference between the market value of the stock and the selling price at the date of the sale, which is included in non-cash compensation expense in the unaudited Consolidated Condensed Statement of Operations for the twenty-six weeks ended September 25, 2004.

     The Series A Preferred provided that the holders of the Series A Preferred were entitled to receive dividends on each share of Series A Preferred at a rate per annum of $95 per share which equates to approximately $1.4 million annually, a 9.5% yield on the $15,050,000 investment. During the thirteen and twenty-six weeks ended September 27, 2003, approximately $357,000 and $715,000, respectively, of dividends were cumulated and reflected in the unaudited Consolidated Condensed Statement of Operations for that period.

     On February 20, 2004, the Company issued a newly created Series A-1 Convertible Preferred Stock (“Series A-1 Preferred”) to Birks in exchange for its shares of Series A Preferred whereby each share of Series A Preferred was exchanged for one share of Series A-1 Preferred. This exchange took place in order to effectuate the early payment of dividends already earned by Birks. The Series A-1 Preferred is substantially identical to the Series A Preferred, with the exception of certain changes primarily to the provisions regarding the payment of dividends, future dividend rates, and the conversion rate. Birks entered into an Amendment to the Registration Rights Agreement with the Company, whereby Birks has the right to require the Company to register all of the shares underlying the above described securities issued to Birks. As of September 25, 2004, the Series A-1 Preferred were convertible into 51,442,085 shares of common stock of the Company which includes an adjustment under the anti-dilution provision of the Series A-1 Preferred. Upon conversion of the Series A Preferred, Birks would own approximately 75.8% of the then outstanding common stock in Mayor’s.

     In connection with the exchange of Series A Preferred, Birks agreed to (a) reimburse the Company in full for all transaction expenses, (b) reduce the dividend rate from $95 per share to $80 per share per annum on the Series A-1 Preferred,

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resulting in a savings in cumulative dividends of approximately $225,750 annually; and (c) waive the dividend for one year on the Series A-1 Preferred. Therefore, there are no cumulative dividends affecting net loss attributable to common stockholders for the thirteen and twenty-six weeks ended September 25, 2004.

     Mayor’s Chief Executive Officer, Chief Financial Officer, Group VP-Finance, Group VP-Supply Chain Operations, Group VP-Strategy and Business Integration, Group Creative Director and other members of Mayor’s management serve in similar capacities for Birks. As of July 2004, the VP-Retail began serving in a similar capacity for Birks as for Mayor’s and the Group VP-Category Management began assisting Birks in the category management of Birks’ branded watch business. In addition, Thomas A. Andruskevich, Chairman of the Mayor’s Board of Directors, and its President and Chief Executive Officer, and Filippo Recami, a Director of Mayor’s, serve as Directors of Birks. Lorenzo Rossi di Montelera, a Director of Mayor’s, serves as the Chairman of the Board of Directors of Birks.

     Mayor’s incurred a receivable of approximately $30,000 and $22,000, respectively, during the thirteen and twenty-six weeks ended September 25, 2004, and a payable of $40,000 and $57,000, respectively, during the thirteen and twenty-six weeks ended September 27, 2003, of net costs from Birks related to advisory, management and corporate services pursuant to a Management Expense Reimbursement Agreement which was net of expenses charged to Birks from Mayor’s for similar services. Also, during the thirteen and twenty-six weeks ended September 25, 2004, Mayor’s purchased approximately $386,000 and $714,000, respectively, and $230,000 and $258,000, respectively, during the thirteen and twenty-six weeks ended September 27, 2003, of merchandise from Birks pursuant to a Manufacturing & Sale Agreement. As of September 25, 2004, the Company owed Birks $488,000 related to purchases of inventory, advisory, management and corporate services and for expenses paid by Birks on behalf of Mayor’s.

     On April 22, 2004, the Company entered into a Management Consulting Services Agreement (the “Management Agreement”) with Regaluxe Investment Sarl (“Regaluxe”), a company incorporated under the laws of Luxembourg, which became effective on May 1, 2004. Under the Management Agreement, Regaluxe provides advisory, management and corporate services to the Company. During the thirteen and twenty-six weeks ended September 25, 2004, the Company incurred costs of $125,000 and $250,000 related to such services.

     Regaluxe is the controlling shareholder of Henry Birks & Sons Holdings Inc. which is the controlling shareholder of Birks. Two of the Company’s directors, Filippo Recami and Dr. Lorenzo Rossi di Montelera, are affiliated with Regaluxe. Mr. Recami is the Chief Executive Officer and managing director of Regaluxe and Dr. Rossi is a member of the Board of Directors of Regaluxe. Furthermore, Dr. Rossi shares joint voting control over the shares of Iniziativa S.A., which owns 100% of the outstanding stock of Regaluxe. The Board of Directors of the Company waived the provisions of the Company’s Code of Conduct relating to related party transactions when the Board of Directors approved the Company entering into the Management Agreement with Regaluxe.

     On July 29, 2004, Birks, the controlling stockholder of Mayor’s, notified the Board of Directors of Mayor’s that Birks was interested in combining the Mayor’s and Birks companies. The Board of Directors of Mayor’s has formed a special committee composed only of independent board members in order to consider the Birks proposal. There can be no assurance that any discussions between Birks and Mayor’s will result in the parties entering into a definitive agreement regarding any such corporate reorganization.

G.

Legal Proceedings

     The Company is from time to time involved in litigation incident to the conduct of its business. In these pending matters, the Company believes that the resolutio