UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 28, 1996 Commission File No. 0-6882
URT INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Florida 59-1167907
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer I.D. No.)
Organization)
1180 E. Hallandale Beach Blvd., Hallandale, FL 33009
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (954) 454-5554
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 and (2) has been subject to the filing requirements for
at least the past 90 days.
YES _X_ NO ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
At December 28, 1996, there were outstanding:
10,857,068 shares of Class A common stock
1,301,141 shares of Class B common stock
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-December 28, 1996
(Unaudited) and March 30, 1996 3
Condensed Consolidated Statements of Operations and Retained
(Deficit) Earnings-Three Months Ended December 28, 1996
and December 30, 1995 (Unaudited) 4
Condensed Consolidated Statements of Operations and Retained
(Deficit)Earnings-Nine Months Ended December 28, 1996
and December 30, 1995 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows-Nine Months
Ended December 28, 1996 and December 30, 1995 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 3. Defaults Upon Mortgage Payable 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
- 2 -
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 28, 1996 and March 30, 1996
<TABLE>
<CAPTION>
December 28, March 30,
Assets 1996 1996
------ ---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,215,121 3,258,061
Marketable investment securities -- 1,761,336
Inventories 3,228,724 4,954,260
Prepaid inventory 131,549 254,249
Current portion due from officers/shareholders 30,832 30,832
Prepaid expenses and other current assets 366,925 350,197
Refundable income taxes 9,838 9,136
------------ ------------
Total current assets 8,982,989 10,618,071
Property and equipment, net 1,676,796 1,868,246
Due from officers/shareholders 83,815 110,722
Other assets 175,730 191,879
------------ ------------
$ 10,919,330 12,788,918
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term obligations 114,658 124,774
Accounts payable 909,473 103,038
Accrued liabilities 1,623,040 1,202,176
------------ ------------
Total current liabilities 2,647,171 1,429,988
Long-term obligations 720,274 810,367
Deferred rent 185,165 200,723
Minority interest in a subsidiary 25,165 173,005
------------ ------------
Total liabilities not subject to compromise 3,577,775 2,614,083
Liabilities subject to compromise 3,991,976 5,671,434
------------ ------------
Total liabilities 7,569,751 8,285,517
------------ ------------
Shareholders' equity:
Common stock, $.01 par value; 30,000,000 shares
authorized; 15,317,454 shares issued 153,175 153,175
Additional paid-in capital 5,542,152 5,542,152
Retained deficit (1,327,413) (173,591)
------------ ------------
4,367,914 5,521,736
Treasury stock, 3,159,245 common shares at cost (1,018,335) (1,018,335)
------------ ------------
Total shareholders' equity 3,349,579 4,503,401
Commitments and contingencies
------------ ------------
$ 10,919,330 12,788,918
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Retained Earnings (Deficit)
Three months ended December 28, 1996 and December 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
---- ----
<S> <C> <C>
Net sales $ 5,360,117 7,316,776
----------- -----------
Costs and expenses:
Cost of sales 3,368,983 4,812,032
Selling, general and administrative 2,071,976 2,452,532
Store closing costs -- 191,693
----------- -----------
5,440,959 7,456,257
----------- -----------
Loss from operations (80,842) (139,481)
----------- -----------
Other (charges) credits:
Interest expense (17,908) (27,458)
Interest income 145,940 45,092
----------- -----------
128,032 17,634
----------- -----------
Loss before reorganization costs and minority
interest in net loss of consolidated subsidiary 47,190 (121,847)
Reorganization costs:
Professional fees (107,722) --
----------- -----------
Loss before minority interest in net loss of
consolidated subsidiary (60,532) (121,847)
Minority interest in net loss of consolidated subsidiary (5,887) (18,707)
----------- -----------
Net loss (54,645) (103,140)
Retained (deficit) earnings, beginning of period (1,272,768) 942,599
----------- -----------
Retained (deficit) earnings, end of period $(1,327,413) 839,459
=========== ===========
Net loss per common share $ (.01) (.01)
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Retained Earnings (Deficit)
Nine months ended December 28, 1996 and December 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
---- ----
<S> <C> <C>
Net sales $ 13,553,987 18,911,992
------------ ------------
Costs and expenses:
Cost of sales 8,672,179 12,194,083
Selling, general and administrative 6,061,983 7,915,568
Store closing costs -- 191,693
------------ ------------
14,734,162 20,301,344
------------ ------------
Loss from operations (1,180,175) (1,389,352)
------------ ------------
Other (charges) credits:
Interest expense (54,839) (84,875)
Interest income 236,150 151,485
------------ ------------
181,311 66,610
------------ ------------
Loss before reorganization costs and minority
interest in net loss of consolidated subsidiary (998,864) (1,322,742)
Reorganization costs:
Professional fees (302,798) --
------------ ------------
Loss before minority interest in net loss of
consolidated subsidiary (1,301,662) (1,322,742)
Minority interest in net loss of consolidated subsidiary (147,840) (174,257)
------------ ------------
Net loss (1,153,822) (1,148,485)
Retained (deficit) earnings, beginning of period (173,591) 1,987,944
------------ ------------
Retained (deficit) earnings, end of period $ (1,327,413) 839,459
============ ============
Net loss per common share $ (.09) (.09)
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- 5 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine months ended December 28, 1996 and December 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,153,822) (1,148,485)
----------- -----------
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 222,997 358,171
Deferred rent (15,558) (10,619)
Minority interest in net loss of subsidiary (147,840) (174,257)
Loss on write-off of leasehold improvements -- 190,601
Changes in assets and liabilities affecting cash flows from
operating activities:
(Increase) decrease in:
Inventories 46,078 234,212
Prepaid inventory 122,700 --
Prepaid expenses and other current assets (16,728) 12,685
Other assets 16,149 62,284
Refundable income taxes (702) 9,035
Increase (decrease) in:
Accounts payable 806,435 729,595
Accrued liabilities 420,864 5,031
Long-term obligations (51,291) 51,252
----------- -----------
Net cash provided by operating activities 249,282 319,505
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (31,546) (143,589)
Repayment of due from officers/shareholders 26,907 21,132
Proceeds from disposition of property and equipment -- 615,243
Purchase of marketable investment securities -- (10,525)
Sales of marketable investment securities 1,761,336 --
----------- -----------
Net cash provided by investing activities 1,756,697 482,261
----------- -----------
Cash flows from financing activities:
Repayment of long-term obligations (48,919) (110,028)
Acquisition of treasury stock -- (37,905)
----------- -----------
Net cash used in financing activities (48,919) (147,933)
----------- -----------
Net increase in cash and cash equivalents 1,957,060 653,833
Cash and cash equivalents, beginning of period 3,258,061 2,014,147
----------- -----------
Cash and cash equivalents, ending of period $ 5,215,121 2,667,980
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 54,839 84,875
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- 6 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 28, 1996 and December 30, 1995
(Unaudited)
(1) Basis of Financial Statement Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all footnotes and information necessary for a
fair presentation of financial position, results of operations, and cash
flows in conformity with generally accepted accounting principles. However,
in the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation have been made.
It is suggested that the accompanying unaudited condensed consolidated
financial statements be read in conjunction with the consolidated financial
statements and notes included in the Company's annual report on Form 10-K
for the year ended March 30, 1996.
The results of operations for the nine months ended December 28, 1996, are
not necessarily indicative of the operating results to be expected for the
year ending March 29, 1997. The Company's business is seasonal.
Historically, approximately 30 percent of the Company's sales have occurred
in the third fiscal quarter.
The consolidated financial statements include the accounts of URT
Industries, Inc. (the "Parent") and its wholly owned nonoperating
subsidiary, and its majority-owned operating subsidiary, Peaches
Entertainment Corporation ("Peaches") (87 percent of the outstanding stock
of which was owned by the Parent as of December 28, 1996). All significant
intercompany accounts have been eliminated. Reference to the Company
encompasses any or all of the aforementioned entities.
Certain reclassifications have been made to the (unaudited) December 30,
1995 quarterly financial information to conform to the presentation used in
the (unaudited) December 28, 1996 financial information.
(2) Reorganization and Emergence From Chapter 11
On January 16, 1996 (the "Petition Date"), Peaches Entertainment
Corporation commenced reorganization proceedings under Chapter 11 of the
United States Bankruptcy Code. On January 17, 1997, the plan of
reorganization was confirmed by the Bankruptcy Court for the Southern
District of Florida ("Bankruptcy Court"). In Chapter 11, Peaches continued
to manage its affairs and operate its business as debtor-in-possession
while it developed a plan of reorganization to restructure and allow its
emergence from Chapter 11. As debtor-in-possession in Chapter 11, Peaches
could not engage in transactions outside of the ordinary course of business
without approval, after notice and hearing, of the Bankruptcy Court.
Under Chapter 11 proceedings, litigation and actions by creditors to
collect certain claims in existence at the petition date ("prepetition")
are stayed, absent specific bankruptcy court authorization to pay such
claims. The Company believes that appropriate provisions have been made in
the accompanying financial statements for the prepetition claims that could
be estimated at the date of these financial statements. Such claims are
reflected as "liabilities subject to compromise." Additional claims
(liabilities subject to compromise) may arise subsequent to the filing date
resulting from the rejection of executory contracts, including leases, and
from the determination of the court (or agreed to by parties-in-interest)
of allowed claims for contingencies and disputed amounts.
- 7 - (Continued)
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
As debtor-in-possession, Peaches has the right, subject to Bankruptcy Court
approval and certain other limitations, to assume or reject certain
executory contracts, including unexpired leases. Any claim for damages
resulting from the rejection of an executory contract or an unexpired lease
is treated as a general unsecured claim in the Chapter 11 proceedings.
Peaches affirmed 13 leases (5 of which were modified on terms more
favorable to Peaches) and rejected 8 leases.
On August 5, 1996, Peaches filed its plan of reorganization with the
Bankruptcy Court. An amended plan of reorganization was filed on October
23, 1996. The amended plan of reorganization was confirmed on January 17,
1997, (the "confirmation date"), and became effective February 3, 1997 (the
"effective date"), subject to all conditions precedent being satisfied in
which all conditions precedent were satisfied on February 19, 1997. Among
the principle terms of the confirmed plan, subject to certain changes
contained in the order of approval, are the following:
o All unsecured creditors, including all of Peaches' inventory
suppliers, but excluding landlords under leases rejected by Peaches,
are entitled to 100 percent of their allowed claims (the total of
which is approximately $4,922,000). Peaches' seven principal suppliers
(whose allowed claims total approximately $4,372,000 out of such
$4,922,000) are entitled to payment and inventory returns equal to
approximately 70 percent of their allowed claims (80 percent in the
case of one such supplier) within approximately 60 days after the
effective date, and the balance (approximately $1,284,000) is payable
with interest at prime over a period of 24 months commencing March
1997. The remaining unsecured creditors (whose allowed claims total
approximately $550,000) were entitled to and received the full amount
of their allowed claims on the effective date. The principal suppliers
will be secured by a perfected first lien and security interest in the
inventory originally distributed by the secured party which was sold
to the Company or is otherwise in the possession and owned by the
Company.
o Landlords under the leases rejected by Peaches in connection with the
bankruptcy filing will be entitled to 30 percent of the allowed claims
with respect to such leases, all of which will be payable on the
effective date.
o The mortgage holder will receive 100 percent of the allowed claim,
with interest, in accordance with the amortization schedule previously
in effect, except that the balloon payment on such mortgage which
would otherwise have been due in September 1997 was extended to
September 2002. All mortgage payments under the amortization schedule
were paid timely during the Chapter 11 proceedings.
o The priority tax claim in the approximate amount of $118,000, which is
owed to the Florida Department of Revenue, will be payable with
interest at 8 percent over two years from the effective date.
o The priority administrative claims, including professional fees in the
approximate amount of $200,000 which have been incurred in connection
with the reorganization, are payable on the effective date.
- 8 - (Continued)
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
In order for Peaches to be able to effect the Plan of Reorganization on the
terms described above, the Parent, in exchange for the issuance to it of 20
million shares of Peaches authorized common stock has contributed $350,000
to the capital of Peaches, waived an aggregate of $75,000 of dividends
payable by Peaches to the Parent, guaranteed, subject to the terms of the
Plan, the approximately $1,284,000 which is due the principal suppliers in
accordance with the foregoing, and loaned $700,000 to Peaches. The loan
will be repaid to the Parent with interest at prime over a period of four
years beginning on the third anniversary of the effective date, is
subordinate to the amounts owed to the principal suppliers, and is secured
by inventory and all the assets of Peaches.
In March 1997, the Parent and Peaches agreed that the above-described
$700,000 loan would be reduced by an amount equal to the lesser of $200,000
or the difference between $1,000,000 and the total shareholders' equity of
Peaches as of the end of its 1997 fiscal year, without taking such debt
reduction into account, and cause the amount of such aggregate debt
reduction to be transferred to the capital account of Peaches in exchange
for shares of a new class of cumulative preferred stock, entitled Series C
preferred stock, in an amount as shall be determined by dividing the amount
of such aggregate debt reduction by $100. The Series C preferred stock to
be so issued shall have a par value of $100 and a cumulative preferred
dividend of 10% per annum. The approval of the holders of a majority of the
shares of Series C preferred stock, voting as a separate class, shall be
required with respect to all matters on which the shareholders have a right
to vote. On June 9, 1997, the above agreement was rescinded.
(3) Net Loss Per Common Share
Net loss per common share was computed by dividing net loss by the weighted
average number of total common shares outstanding during the periods.
- 9 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(4) Income Taxes
The Company follows Statement of Financial Accounting Standard ("SFAS") No.
109 "Accounting for Income Taxes." The Company files a consolidated tax
return with its subsidiaries. For the nine-month period ended December 28,
1996, there was no provision (benefit) for income taxes as the Company has
net operating loss carryforwards for federal income tax purposes.
(5) Liabilities Subject to Compromise
Liabilities subject to compromise include the following:
December 28, March 30,
1996 1996
---- ----
(unaudited)
Lease rejection claims $ 600,000 600,000
Trade and other miscellaneous claims 3,391,976 5,071,434
---------- ----------
$3,991,976 5,671,434
========== ==========
Subsequent to the petition date, the Company negotiated agreements with all
of its major suppliers, with the approval of the Bankruptcy Court, which
permitted the Company to make returns of unneeded inventory for credit
against prepetition indebtedness. On January 17, 1997, the Company's plan
of reorganization was confirmed by the Bankruptcy Court. The Company
recorded an extraordinary gain of approximately $486,000 primarily as a
result of the settlement of lease rejection claims (note 2) during the
fourth quarter of fiscal 1997.
- 10 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussions and Analysis of Financial Condition and Results
of Operations for the Nine Months Ended December 28, 1996, Compared to the
Nine Months ended December 30, 1995.
From time to time, the Company may make certain statements that contain
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995). Words such as "believe," "anticipate," "estimate,"
"project" and similar expressions are intended to identify such forward-looking
statements. Forward-looking statements may be made by management orally or in
writing, including, but not limited to, in press releases, as part of this
Management's Discussion and Analysis of Financial Condition and Results of
Operations and as a part of other filings. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of their
respective dates, and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should any of the underlying assumptions prove incorrect, actual results of
current and future operations may vary materially from those anticipated,
estimated or projected.
Results of Operations
Net sales for the nine months ended December 28, 1996 (such nine month period is
hereafter referred to as "1996") decreased by approximately 28.3 percent
compared to the nine months ended December 30, 1995 (such nine month period is
hereafter referred to as "1995"). Such decrease is attributed to a decrease in
comparable store sales (15.9 percent), and a decrease in those stores that
closed during 1996 versus 1995 (12.4 percent).
During the last few years, nontraditional music retailers such as appliance and
computer retailers and super bookstores have begun to sell prerecorded music and
video products. They have adopted policies of selling music product at near or
below wholesale cost as a means of attracting customers to sell other products.
Peaches continued to suffer the effect of such competition during 1996 and, as a
result, filed its voluntary petition for relief under Chapter 11 of the
Bankruptcy Code on January 16, 1996.
Recently, Peaches primary suppliers have taken steps to help protect the retail
marketplace from certain low cost retailers of music. These steps include not
disbursing cooperative advertising funds to retailers which engage in low cost
selling practices in violation of the minimum advertised pricing policies of
such suppliers. Management believes that such initiatives, in combination with
the other factors mentioned immediately below, should help the Company to
restore itself to a competitive position in subsequent fiscal years. Other
factors which, in management's opinion, should help the Company to restore
itself to a competitive position in the future are the closing of the six
unprofitable stores which were closed during 1996, the closing of the former
headquarters and warehouse, the termination of other unprofitable business
arrangements as described herein and concentration on advantages which Peaches
has over certain of its competitors, including larger inventory, convenient
store locations and a high level of customer service.
The cost of sales for 1996 was lower than that for 1995 due principally to a
decrease in net sales. Cost of sales as a percentage of net sales has decreased
from 64.7 percent in 1995 to 64.0 percent in 1996 due to increased purchase
discounts in 1996.
- 11 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Selling, general and administrative (SG&A) expenses in 1996 decreased 23.4
percent compared to 1995. Such decrease is attributable to a decrease in
comparable store expenses (.1 percent), a decrease in store operating expenses
of stores that opened or closed during 1996 versus 1995 (17.2 percent) and a
decrease in corporate overhead (6.2 percent). SG&A expenses as a percentage of
net sales increased from 41.9 percent in 1995 to 44.7 percent in 1996 due to the
fixed nature of certain expenses and the decrease in net sales in addition to
the aforementioned items.
The Company incurred a net loss of approximately $1,153,000 in 1996 versus a net
loss of approximately $1,148,000 in 1995 due to the reduction in net sales and
gross profit as described above, in addition to reorganization costs of
approximately $303,000.
The decrease in inventory is mainly due to the decrease in the number of stores,
as well as, inventory returns as a result of the Chapter 11 filing, which also
caused the decrease in liabilities subject to compromise. The increase in
accounts payable and accrued liabilities is due to the reduction of prepayments
due to the Chapter 11 filing.
Liquidity and Capital Resources
The Company had working capital of $6,335,818 at December 28, 1996 (excluding
liabilities subject to compromise in 1996) compared to working capital of
$9,188,083 at March 30, 1996 and a current ratio (the ratio of total current
assets to total current liabilities) of 3.4 to 1 at December 28, 1996 (excluding
liabilities subject to compromise in 1996) compared to a current ratio of 7.4 to
1 at March 30, 1996. The amount of the liabilities subject to compromise at
December 28, 1996 is $3,991,976.
At December 28, 1996, the Company had long-term obligations of $720,274
(excluding liabilities subject to compromise of $3,991,976). Management
anticipates that its ability to repay its long-term obligations will be
satisfied primarily through funds generated from its operations.
Management anticipates that cash generated from operations and cash equivalents
on hand will provide sufficient liquidity to maintain adequate working capital
for operations. Management would attempt to obtain financing for the opening of
any new stores during the next few years.
Inflation trends have not had an impact upon revenue because increases in costs
have been passed along to customers.
The Company's business is seasonal in nature, with the highest sales and
earnings occurring in the third fiscal quarter, which includes the Christmas
selling season.
For a discussion of recent developments and uncertainties affecting the
Company's liquidity and capital resources, see note 2 to the condensed
consolidated financial statements (Reorganization and Emergence for Chapter 11).
- 12 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
OTHER INFORMATION
PART II
Item 1. Legal Proceedings
(i) Bankruptcy filings
On January 16, 1996 (the "Petition Date"), Peaches Entertainment
Corporation commenced reorganization proceedings under Chapter 11 of
the United States Bankruptcy Code. On January 17, 1997, the plan of
reorganization was confirmed by the Bankruptcy Court for the Southern
District of Florida ("Bankruptcy Court"). In Chapter 11, Peaches
continued to manage its affairs and operate its business as
debtor-in-possession while it developed a plan of reorganization to
restructure and allow its emergence from Chapter 11. As
debtor-in-possession in Chapter 11, Peaches could not engage in
transactions outside of the ordinary course of business without
approval, after notice and hearing, of the Bankruptcy Court.
Under Chapter 11 proceedings, litigation and actions by creditors to
collect certain claims in existence at the petition date
("prepetition") are stayed, absent specific bankruptcy court
authorization to pay such claims. The Company believes that
appropriate provisions have been made in the accompanying financial
statements for the prepetition claims that could be estimated at the
date of these financial statements. Such claims are reflected as
"liabilities subject to compromise." Additional claims (liabilities
subject to compromise) may arise subsequent to the filing date
resulting from the rejection of executory contracts, including leases,
and from the determination of the court (or agreed to by
parties-in-interest) of allowed claims for contingencies and disputed
amounts.
As debtor-in-possession, Peaches has the right, subject to Bankruptcy
Court approval and certain other limitations, to assume or reject
certain executory contracts, including unexpired leases. Any claim for
damages resulting from the rejection of an executory contract or an
unexpired lease is treated as a general unsecured claim in the Chapter
11 proceedings. Peaches affirmed 13 leases (5 of which were modified
on terms more favorable to Peaches) and rejected 8 leases.
On August 5, 1996, Peaches filed its plan of reorganization with the
Bankruptcy Court. An amended plan of reorganization was filed on
October 23, 1996. The amended plan of reorganization was confirmed on
January 17, 1997, (the "confirmation date"), and became effective
February 3, 1997 (the "effective date"), subject to all conditions
precedent being satisfied in which all conditions precedent were
satisfied on February 19, 1997. Among the principle terms of the
confirmed plan, subject to certain changes contained in the order of
approval, are the following:
o All unsecured creditors, including all of Peaches' inventory
suppliers, but excluding landlords under leases rejected by
Peaches, are entitled to 100 percent of their allowed claims (the
total of which is approximately $4,922,000). Peaches' seven
principal suppliers (whose allowed claims total approximately
$4,372,000 out of such $4,922,000) are entitled to payment and
inventory returns equal to
- 13 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
approximately 70 percent of their allowed claims (80 percent in
the case of one such supplier) within approximately 60 days after
the effective date, and the balance (approximately $1,284,000) is
payable with interest at prime over a period of 24 months
commencing March 1997. The remaining unsecured creditors (whose
allowed claims total approximately $550,000) were entitled to and
received the full amount of their allowed claims on the effective
date. The principal suppliers will be secured by a perfected
first lien and security interest in the inventory originally
distributed by the secured party which was sold to the Company or
is otherwise in the possession and owned by the Company.
o Landlords under the leases rejected by Peaches in connection with
the bankruptcy filing will be entitled to 30 percent of the
allowed claims with respect to such leases, all of which will be
payable on the effective date.
o The mortgage holder will receive 100 percent of the allowed
claim, with interest, in accordance with the amortization
schedule previously in effect, except that the balloon payment on
such mortgage which would otherwise have been due in September
1997 was extended to September 2002. All mortgage payments under
the amortization schedule were paid timely during the Chapter 11
proceedings.
o The priority tax claim in the approximate amount of $118,000,
which is owed to the Florida Department of Revenue, will be
payable with interest at 8 percent over two years from the
effective date.
o The priority administrative claims, including professional fees
in the approximate amount of $200,000 which have been incurred in
connection with the reorganization, are payable on the effective
date.
In order for Peaches to be able to effect the Plan of Reorganization
on the terms described above, the Parent, in exchange for the issuance
to it of 20 million shares of Peaches authorized common stock has
contributed $350,000 to the capital of Peaches, waived an aggregate of
$75,000 of dividends payable by Peaches to the Parent, guaranteed,
subject to the terms of the Plan, the approximately $1,284,000 which
is due the principal suppliers in accordance with the foregoing, and
loaned $700,000 to Peaches. The loan will be repaid to the Parent with
interest at prime over a period of four years beginning on the third
anniversary of the effective date, is subordinate to the amounts owed
to the principal suppliers, and is secured by inventory and all the
assets of Peaches.
In March 1997, the Parent and Peaches agreed that the above-described
$700,000 loan would be reduced by an amount equal to the lesser of
$200,000 or the difference between $1,000,000 and the total
shareholders' equity of Peaches as of the end of its 1997 fiscal year,
without taking such debt reduction into account, and cause the amount
of such aggregate debt reduction to be transferred to the capital
account of Peaches in exchange for shares of a new class of cumulative
preferred stock, entitled Series C preferred stock, in an amount as
shall be determined by dividing the amount of such aggregate debt
reduction by $100. The Series C preferred stock to be so issued shall
have a par value of $100 and a cumulative preferred dividend of 10%
per annum. The approval of the holders of a majority of the shares of
Series C preferred stock, voting as a separate class, shall be
required with respect to all matters on which the shareholders have a
right to vote. On June 9, 1997, the above agreement was rescinded.
- 14 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Item 3. Defaults Upon Mortgage Payable
As a result of the bankruptcy filing, the Company was in default under the
indentures governing the mortgage payable. As discussed in note 2 of the
notes to the condensed financial statements on Form 10-Q for the nine-month
period ended December 28, 1996, under Chapter 11 proceedings, litigation
and actions by creditors to collect certain claims in existence at the
petition date are stayed, absent specific Bankruptcy Court authorizations
to pay such claims. On January 17, 1997, the plan of reorganization was
confirmed by the Bankruptcy court and became effective February 3, 1997,
subject to satisfaction of certain conditions which were satisfied by
February 19, 1997. The confirmed plan of reorganization provided for the
repayment of the mortgage payable under the original note provisions,
except that the balloon payment was extended to September 2002.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None
- 15 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
URT INDUSTRIES, INC.
Registrant
Date: June 27, 1997 /s/ Allan Wolk
--------------------------------------------
Allan Wolk, Chairman of the Board, President
(Principal Executive Officer)
Date: June 27, 1997 /s/ Jason Wolk
--------------------------------------------
Jason Wolk, Executive Vice President,
Chief Financial Officer
(Principal Financial and Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
registrant's financial statements as of and for the nine month period ended
December 28, 1996, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-END> DEC-28-1996
<CASH> 5,215,121
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 3,228,724
<CURRENT-ASSETS> 8,982,989
<PP&E> 4,713,265
<DEPRECIATION> (3,036,469)
<TOTAL-ASSETS> 10,919,330
<CURRENT-LIABILITIES> 2,647,171
<BONDS> 0
0
0
<COMMON> 153,175
<OTHER-SE> 3,196,404
<TOTAL-LIABILITY-AND-EQUITY> 110,919,330
<SALES> 13,553,987
<TOTAL-REVENUES> 13,553,987
<CGS> 8,672,179
<TOTAL-COSTS> 8,672,179
<OTHER-EXPENSES> 6,061,983
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,839
<INCOME-PRETAX> (1,301,662)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,301,662)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,301,662)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
