Thursday, January 16, 2014
Lazare Kaplan's Revenue Rises From GIA Settlement
Lazare Kaplan International Inc. informed the Securities & Exchange Commission (SEC) that it would again be late in filing financial statements for the second fiscal quarter that ended on November 30. Lazare Kaplan has been unable to file its quarterly and fiscal year statements with the SEC since May 2009 due to material uncertainties that involve legal and asset collection issues.
Nonetheless, Lazare Kaplan has continued to provide anticipated financial results, for which its second quarter revenue rose nearly 86 percent year on year to $29 million. Revenue for the company's first half increased 22 percent to $42.5 million. Sales of goods and services during the second quarter, however, fell 13.5 percent to $13.5 million and they declined 23 percent in the first half to $27 million in large part due to lower sales of commercial polished diamonds.
Lazare Kaplan received a one-time payment of $15 million from a license settlement agreement with the Gemological Institute of America (GIA). Lazare Kaplan anticipates that future royalty payments associated with the license agreement will not exceed 10 percent of its revenue.
The company observed that current and uncertain economic conditions continue to negatively impact the diamond and jewelry industry as rough diamond prices rise more than polished diamond prices, placing significant pressures on diamond manufacturers. In addition, the company's litigation woes have impacted its ability to transact business in the ordinary course to the same extent and in the same manner as it did previously.
Once these material uncertainties are resolved, Lazare Kaplan stated that it intends and is prepared to promptly finalize and file its forms 10-K and forms 10-Q for all delinquent periods.
In the latest litigation proceedings with KBC Bank N.V. and Antwerp Diamond Bank N.V., Lazare Kaplan reiterated that it owes no amount to the Antwerp Diamond Bank under a prior $45 million credit facility, and further denies that any action under that credit may be brought in Belgium. Lazare Kaplan filed criminal proceedings in Antwerp in March 2013 against the banks alleging, among other things, fraud, embezzlement and money laundering. The proceedings are pending in the Antwerp Court of appeals.
In addition, the Antwerp Court of Commerce has currently scheduled the Antwerp Civil Litigation for hearings on February 13, 2014. Lazare Kaplan appealed several rulings by the Antwerp Court of Commerce to the Supreme Court of Belgium. The Supreme Court of Belgium is scheduled to rule on these appeals in the course of January and February 2014.
Meanwhile, in the U.S., Lazare Kaplan filed criminal charges against the two banks under Racketeer Influenced and Corrupt Organizations Act (RICO) and New York state law, and as of July 2013, the District Court instructed all parties to engage in limited discovery. On November 8, 2013, after hearing from all parties, the District Court substantially endorsed Lazare Kaplan's request for discovery related to the banking arrangements among all parties and this process is now ongoing.