House of Taylor Jewelry, Inc. said Monday that it has entered into a definitive agreement with institutional and other accredited investors to purchase from the company senior, secured convertible notes and warrants for an aggregate principal amount of approximately $10 million. The proceeds will be used primarily to fund inventory purchases, marketing, corporate partnering initiatives, and other general working capital purposes.

The warrants allow the holders to purchase 1.9 million shares of common stock and may be exercised at any time commencing November at $5.00 per share and have a term of 60 months. The principal shareholders of the company, which include Dame Elizabeth Taylor, Kathy Ireland, and members of the Abramov family, representing approximately 80 percent of the outstanding shares, have also entered into a voting agreement with the company agreeing to vote their shares in favor of the transaction and all its terms at the company’s next meeting of shareholders to be held no later than July 31.

Management and other principal shareholders of the company participated in this private offering on the same terms as other investors.

The news came a week after the company, which provides jewelry collections marketed under the brands Elizabeth Collection, House of Taylor Jewelry, and Kathy Ireland Jewelry, reported a net loss of $3.5 million on sales of $5.6 million for the year ended Dec. 31, 2005; as compared to net income of $292,341 on sales of $6,417,421 in 2004.

The Los Angeles-based jewelry company attributed the loss and sales decline to an increase in research, development, and marketing activities. Also contributing to the net loss were one-time expenses associated with the reorganization of approximately $656,000 and non-cash amortization of approximately $590,000.

The company said it used approximately $4.9 million of cash in operating activities in 2005 and has an accumulated deficit of approximately $2.9 million as of December 31.

“We have over 200 new items throughout the collections, designed and personally selected by Dame Elizabeth and Kathy Ireland, that we plan to introduce to the trade at Couture, Signature Salons and JCK Las Vegas at the end of May,” said Jack Abramov, chairman and chief executive officer. “Our goal for 2006 is to open additional independent retail stores, boost revenues from this increased distribution network, and continue to build our brands. We are negotiating to align ourselves with manufacturers and product suppliers to offer the finest luxury products at the most competitive pricing.”

JCK