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 September 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 ___ NO _X_
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
At September 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
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-September 28, 1996
(Unaudited) and March 30, 1996 3
Condensed Consolidated Statements of Operations and Retained
Earnings (Deficit)-Three Months Ended September 28, 1996 and
September 30, 1995 (Unaudited) 4
Condensed Consolidated Statements of Operations and Retained
Earnings (Deficit)-Six Months Ended September 28, 1996 and
September 30, 1995 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows-Six Months
Ended September 28, 1996 and September 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
</TABLE>
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 28, 1996 and March 30, 1996
<TABLE>
<CAPTION>
September 28, March 30,
Assets 1996 1996
------ ------------ ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,566,538 3,258,061
Marketable investment securities 584,709 1,761,336
Inventories 3,423,745 4,954,260
Prepaid inventory 601,886 254,249
Current portion due from officers/shareholders 30,832 30,832
Prepaid expenses and other current assets 337,304 350,197
Refundable income taxes 9,838 9,136
------------ ------------
Total current assets 8,554,852 10,618,071
Property and equipment, net 1,745,316 1,868,246
Due from officers/shareholders 91,598 110,722
Other assets 177,213 191,879
------------ ------------
$ 10,568,979 12,788,918
============ ============
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term obligations 114,212 124,774
Accounts payable 658,501 103,038
Accrued liabilities 1,438,187 1,202,176
------------ ------------
Total current liabilities 2,210,900 1,429,988
Long-term obligations 753,131 810,367
Deferred rent 192,050 200,723
Minority interest in a subsidiary 31,052 173,005
------------ ------------
Total liabilities not subject to compromise 3,187,133 2,614,083
Liabilities subject to compromise 3,977,622 5,671,434
------------ ------------
Total liabilities 7,164,755 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 (1,272,768) (173,591)
------------ ------------
4,422,559 5,521,736
Treasury stock, 3,159,245 and 2,781,253 common shares in 1996
and 1995, respectively, at cost (1,018,335) (1,018,335)
------------ ------------
Total shareholders' equity 3,404,224 4,503,401
Commitments and contingencies ------------ ------------
$ 10,568,979 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 September 28, 1996 and September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
September 28, September 30,
1996 1995
----------- -----------
<S> <C> <C>
Net sales $ 3,888,049 5,326,936
----------- -----------
Costs and expenses:
Cost of sales 2,479,044 3,384,239
Selling, general and administrative 1,954,399 2,678,519
----------- -----------
4,433,443 6,062,758
----------- -----------
Loss from operations (545,394) (735,822)
----------- -----------
Other (charges) credits:
Interest expense (18,318) (36,685)
Interest income 37,051 55,933
----------- -----------
18,733 19,248
----------- -----------
Loss before reorganization costs, provision for income
taxes and minority interest in net loss of
consolidated subsidiary (526,661) (716,574)
Reorganization costs:
Professional fees (97,538) --
----------- -----------
Loss before provision for income taxes and minority
interest in net loss of consolidated subsidiary
(624,199) (716,574)
Provision for income taxes -- --
----------- -----------
Loss before minority interest in net loss of
consolidated subsidiary (624,199) (716,574)
Minority interest in net loss of consolidated subsidiary (73,035) (91,413)
----------- -----------
Net loss (551,164) (625,161)
Retained (deficit) earnings, beginning of period (721,604) 1,567,760
----------- -----------
Retained (deficit) earnings, end of period $(1,272,768) 942,599
=========== ===========
Net loss per common share $ (.05) (.06)
=========== ===========
</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)
Six months ended September 28, 1996 and September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
September 28, September 30,
1996 1995
------------ ------------
<S> <C> <C>
Net sales $ 8,193,870 11,595,216
------------ ------------
Costs and expenses:
Cost of sales 5,303,196 7,382,051
Selling, general and administrative 3,990,007 5,463,036
------------ ------------
9,293,203 12,845,087
------------ ------------
Loss from operations (1,099,333) (1,249,871)
------------ ------------
Other (charges) credits:
Interest expense (36,931) (57,417)
Interest income 90,210 106,393
------------ ------------
53,279 48,976
------------ ------------
Loss before reorganization costs, provision and income
taxes and minority interest in net loss of
consolidated subsidiary (1,046,054) (1,200,895)
Reorganization costs:
Professional fees (195,076) --
------------ -----------
Loss before provision for income taxes and minority
interest in net loss of consolidated subsidiary
(1,241,130) (1,200,895)
Provision for income taxes -- --
------------ ------------
Loss before minority interest in net loss of
consolidated subsidiary (1,241,130) (1,200,895)
Minority interest in net loss of consolidated subsidiary (141,953) (155,550)
------------ ------------
Net loss (1,099,177) (1,045,345)
Retained (deficit) earnings, beginning of period (173,591) 1,987,944
------------ ------------
Retained (deficit) earnings, end of period $ (1,272,768) 942,599
============ ============
Net loss per common share $ (.09) (.09)
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Six months ended September 28, 1996 and September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
September 28, September 30,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,099,177) (1,045,345)
----------- -----------
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 154,477 247,489
Deferred rent (8,673) 28,919
Minority interest in net loss of subsidiary (141,953) (155,550)
Changes in assets and liabilities affecting cash flows
from operating activities:
(Increase) decrease in:
Inventories 1,530,515 625,601
Prepaid inventory (347,637) --
Prepaid expenses and other current assets 12,893 70,548
Other assets 14,666 55,179
Refundable income taxes (702) (631)
Increase (decrease) in:
Accounts payable 555,463 (878,926)
Accrued liabilities 236,011 (320,737)
Long-term obligations (34,194) 73,848
Liabilities subject to compromise (1,693,812) --
----------- -----------
Net cash used in operating activities (822,123) (1,299,605)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (31,546) (133,242)
Repayment of due from officers/shareholders 19,124 13,948
Proceeds from property and equipment -- 615,243
Purchase of marketable investment securities -- (62,962)
Sales of marketable investment securities 1,176,627 --
----------- -----------
Net cash provided by investing activities 1,164,205 432,987
----------- -----------
Cash flows from financing activities:
Repayment of long-term debt (33,605) (110,028)
Acquisition of treasury stock -- (528)
----------- -----------
Net cash used in financing activities (33,605) (110,556)
----------- -----------
Net (decrease) increase in cash and cash equivalents 308,477 (977,174)
Cash and cash equivalents, beginning of period 3,258,061 2,014,147
----------- -----------
Cash and cash equivalents, ending of period $ 3,566,538 1,036,973
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 36,931 48,976
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 28, 1996 and September 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 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 six months ended September 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 24 percent of the Company's sales have occurred
in the second 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 September 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) September 30,
1995 quarterly financial information to conform to the presentation used in
the (unaudited) September 28, 1996 financial information.
(2) Reorganization and Emergence From Chapter 11
On January 16, 1996 (the "Petition Date"), Peaches commenced reorganization
proceedings under Chapter 11 of the United States Bankruptcy Code. On
January 17, 1997, Peaches' 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, which 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 as agreed to by parties-in-interest) of
allowed claims for contingencies and disputed amounts.
- 7 -
<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, as modified by the Bankruptcy
Court's order of January 17, 1997, was confirmed by the Bankruptcy Court on
such date (the "confirmation date"), and became effective February 3, 1997
(the "effective date"), subject to satisfaction of certain conditions which
were satisfied by February 19, 1997. Among the principal terms of the
confirmed plan 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) were entitled to and received 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 amounts owed to the principal suppliers are secured by a
perfected first lien and security interest in the inventory originally
distributed by the secured parties which was sold to the Company or is
otherwise in possession and owned by the Company.
o Landlords under the leases rejected by Peaches in connection with the
bankruptcy filing were entitled to 30 percent of the allowed claims
with respect to such leases, all of which was paid 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 2 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, were paid on the effective date.
- 8 -
<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 of the assets of Peaches. As a result of the above
transactions, the Parent is the beneficial owner of approximately 93.5
percent of Peaches' issued and outstanding shares of common stock and all
of its issued and outstanding shares of preferred stock.
In March 1997, the Parent and Peaches agreed that if Peaches' financial
statements for its 1997 fiscal year show total shareholders' equity of less
than $1,000,000, 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. Any Series C preferred stock to be so issued pursuant to such
arrangement will 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, would be
required with respect to all matters on which the shareholders have a right
to vote.
(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.
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<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 six-month period ended September 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:
September 28, March 30,
1996 1996
---------- ----------
(unaudited)
Lease rejection claims $ 600,000 600,000
Trade and other miscellaneous claims 3,377,622 5,071,434
---------- ----------
$3,977,622 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 $488,000, primarily as a
result of the settlement of lease rejection claims (note 2) during the
fourth quarter of fiscal 1997.
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussions and Analysis of Financial Condition and
Results of Operations for the Six Months Ended September 28, 1996,
Compared to the Six Months ended September 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 six months ended September 28, 1996 (such six month period is
hereafter referred to as "1996") decreased by approximately 29.3 percent
compared to the six months ended September 30, 1995 (such six month period is
hereafter referred to as "1995"). Such decrease is attributed to a decrease in
comparable store sales (11.8 percent), and a decrease in sales in those stores
that closed during 1996 versus 1995 (17.5 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 large 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 increased
from 63.7 percent in 1995 to 64.7 percent in 1996 due to a reduction in retail
prices in an effort to meet the increased competition, a change in terms with
Peaches principal suppliers during the Chapter 11 proceeding and the effects of
buying a portion of the Company's inventory during the Chapter 11 proceeding
from alternative sources with higher prices.
-11-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Selling, general and administrative (SG&A) expenses in 1996 decreased 27 percent
compared to 1995. Such decrease is attributable to a decrease in comparable
store expenses (1.2 percent), a decrease in store operating expenses of stores
that opened or closed during 1996 versus 1995 (18.2 percent) and a decrease in
corporate overhead (7.6 percent). SG&A expenses as a percentage of net sales
increased from 47.1 percent in 1995 to 48.7 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 $1,099,000 in 1996 versus a net
loss of approximately $1,045,000 in 1995 due to the reduction in net sales and
gross profit as described above, in addition to reorganization costs of
approximately $195,000.
Liquidity and Capital Resources
The Company had working capital of $6,301,952 at September 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 3.9 to 1 at September 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 September 28, 1996 is $3,977,622.
At September 28, 1996, the Company had long-term obligations of $753,131
(excluding liabilities subject to compromise of $3,977,622). 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 ("Peaches") commenced reorganization proceedings
under Chapter 11 of the United States Bankruptcy Code. On January
17, 1997, Peaches' 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, which 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 as 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, as
modified by the Bankruptcy Court's order of January 17, 1997, was
confirmed by the Bankruptcy Court on such date (the "confirmation
date") and became effective February 3, 1997 (the "effective
date"), subject to satisfaction of certain conditions which were
satisfied by February 19, 1997. Among the principal terms of the
confirmed plan 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
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
$4,922,000). Peaches' seven principal suppliers (whose
allowed claims total approximately $4,372,000 out of such
$4,922,000) were entitled to and received 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 amounts owed to the principal suppliers
are secured by a perfected first lien and security interest
in the inventory originally distributed by the secured
parties which was sold to the Company or is otherwise in
possession and owned by the Company.
o Landlords under the leases rejected by Peaches in connection
with the bankruptcy filing were entitled to 30 percent of
the allowed claims with respect to such leases, all of which
was paid 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 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, were paid 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 of the assets of Peaches. As a result of the above
transactions, the Parent is the beneficial owner of approximately
93.5 percent of Peaches issued and outstanding shares of common
stock and all of its issued and outstanding shares of preferred
stock.
In March 1997, the Parent and Peaches agreed that if Peaches'
financial statements for its 1997 fiscal year show total
shareholders' equity of less than $1,000,000, 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. Any Series C preferred
stock to be so
- 14 -
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
issued purusant to such arrangement will have a par value of $100
and a cumulative preferred dividend of 10 percent per annum. The
approval of the holders of a majority of the shares of Series C
preferred stock, voting as a separate class, would be required
with respect to all matters on which the shareholders have a
right to vote.
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 six-month period ended September 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
Reports on Form 8-K dated July 12, 1996 and August 23, 1996 were filed
by the Company on or about such dates to report that the Company did
not file its Form 10-K for the year ended March 30, 1996 and its Form
10-Q for the quarter ended June 29, 1996 by the dates by which they
were scheduled to be filed due to the Company's petition for relief
under Chapter 11 of the U.S. Bankruptcy Code and delays in finalizing
the plan of reorganization.
- 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: 5/29/97 /s/ Allan Wolk
--------------------------------------------
Allan Wolk, Chairman of the Board, President
(Principal Executive Officer)
Date: 5/29/97 /s/ Jason Wolk
--------------------------------------------
Jason Wolk, Executive Vice President,
Chief Financial Officer
(Principal Financial and Accounting Officer)
- 16 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
registrant's financial statements as of and for the six month period ended
September 28, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-END> SEP-28-1996
<CASH> 3,566,538
<SECURITIES> 584,709
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 3,423,745
<CURRENT-ASSETS> 8,554,852
<PP&E> 4,702,972
<DEPRECIATION> 2,957,656
<TOTAL-ASSETS> 10,568,979
<CURRENT-LIABILITIES> 2,210,900
<BONDS> 0
0
0
<COMMON> 153,175
<OTHER-SE> 3,251,049
<TOTAL-LIABILITY-AND-EQUITY> 10,568,979
<SALES> 8,193,870
<TOTAL-REVENUES> 8,193,870
<CGS> 5,303,196
<TOTAL-COSTS> 5,303,196
<OTHER-EXPENSES> 3,990,007
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (36,931)
<INCOME-PRETAX> (1,241,130)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,099,177)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,099,177)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
