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 July 3, 1999 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 (or for such shorter period that the registrants were
required to file such reports), 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 September 22, 1999, 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>
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -July 3, 1999 (Unaudited), April 3, 1999 and
June 27, 1998 (unaudited) 3
Condensed Consolidated Statements of Operations and Retained
Deficit - Three Months Ended July 3, 1999 and June 27, 1998 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows - Three Months Ended July 3, 1999
and June 27, 1998 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
July 3, 1999, April 3, 1999 and June 27, 1998
<TABLE>
<CAPTION>
Assets July 3, April 3, June 27,
1999 1999 1998
----------- ----------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,063,495 927,982 696,494
Marketable investment securities -- 439,640 1,048,035
Inventories 2,216,269 2,309,600 2,535,148
Current portion due from officers/shareholders 33,269 42,769 45,302
Prepaid expenses and other current assets 182,991 291,809 261,462
----------- ----------- -----------
Total current assets 3,496,024 4,011,800 4,586,441
Property and equipment, net 1,262,436 1,249,289 1,445,938
Due from officers/shareholders 2,227 3,385 28,036
Other assets 218,739 195,560 206,758
----------- ----------- -----------
$ 4,979,426 5,460,034 6,267,173
=========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term obligations $ 91,872 108,280 652,665
Accounts payable 2,067,581 2,240,109 2,058,160
Accrued liabilities 674,350 706,407 813,606
----------- ----------- -----------
Total current liabilities 2,833,803 3,054,796 3,524,431
Long-term obligations 456,496 469,759 548,457
Deferred rent 79,044 63,030 63,988
Minority interest in a subsidiary 30,061 49,121 12,859
----------- ----------- -----------
Total liabilities 3,399,404 3,636,706 4,149,735
Shareholders' equity:
Common stock $.01 par value; 30,000,000 shares authorized;
15,317,454 shares issued 153,175 153,175 153,175
Additional paid-in capital 5,542,152 5,542,152 5,542,152
Retained deficit (3,096,970) (2,856,923) (2,559,554)
Accumulated other comprehensive income - net unrealized
appreciation on investment securities -- 3,259 --
Treasury stock, 3,159,245 common shares, at cost (1,018,335) (1,018,335) (1,018,335)
----------- ----------- -----------
Total shareholders' equity 1,580,022 1,823,328 2,117,438
----------- ----------- -----------
Commitments and contingencies
$ 4,979,426 5,460,034 6,267,173
=========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Retained Deficit
Three months ended July 3, 1999 and June 27, 1998
(Unaudited)
<TABLE>
<CAPTION>
July 3, June 27,
1999 1998
----------- -----------
<S> <C> <C>
Net sales $ 3,658,139 3,869,760
----------- -----------
Costs and expenses:
Cost of sales 2,176,328 2,318,804
Selling, general and administrative expenses 1,688,322 1,841,710
Depreciation and amortization 47,781 58,546
----------- -----------
3,912,431 4,219,060
Loss from operations (254,292) (349,300)
----------- -----------
Other (expense) income:
Interest expense (14,507) (29,816)
Interest income 9,692 15,364
----------- -----------
(4,815) (14,452)
Loss before income taxes and minority interest (259,107) (363,752)
Minority interest in net loss of consolidated subsidiary (19,060) (14,437)
----------- -----------
Net loss (240,047) (349,315)
Retained deficit, beginning of period (2,856,923) (2,210,239)
----------- -----------
Retained deficit, end of period (3,096,970) (2,559,554)
=========== ===========
Basic and diluted loss per common share $ (0.02) (0.03)
=========== ===========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Statements of Cash Flows
Three months ended July 3, 1999 and June 27, 1998
(Unaudited)
<TABLE>
<CAPTION>
July 3, June 27,
1999 1998
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (240,047) (349,315)
----------- -----------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 47,781 58,546
Deferred rent 16,014 1,154
Minority interest in net loss of consolidated subsidiary (19,060) (14,437)
Change in assets and liabilities affecting cash flows from operating
activities:
(Increase) decrease in:
Inventories 93,331 (101,715)
Prepaid expenses and other current assets 108,818 125,586
Other assets (23,179) (5,106)
Increase (decrease) in:
Accounts payable (172,527) 43,486
Accrued liabilities (32,057) (87,719)
----------- -----------
Net cash used in operating activities (220,926) (329,520)
----------- -----------
Cash flows from investing activities:
Purchase of marketable investment securities -- (15,295)
Sale of marketable equity securities 436,381
Purchases of property and equipment (60,929) (140,151)
Due from officers/shareholders 10,658 9,686
----------- -----------
Net cash provided by (used in) investing
activities 386,110 (145,760)
----------- -----------
Cash flows from financing activities:
Repayment of long-term obligations (29,671) (109,324)
----------- -----------
Net cash used in financing activities (29,671) (109,324)
----------- -----------
Net increase (decrease) in cash and cash
equivalents 135,513 (584,604)
Cash and cash equivalents, beginning of year 927,982 1,281,098
----------- -----------
Cash and cash equivalents, end of period $ 1,063,495 696,494
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 14,507 10,218
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
July 3, 1999 and June 27, 1998
(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.
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 (87.5 percent of the outstanding stock of which
was owned by the Parent, as of July 3, 1999). All significant intercompany
accounts have been eliminated. Reference to the Company encompasses all or
any of the aforementioned entities.
It is suggested that the accompanying unaudited condensed consolidated
financial statements be read in conjunction with the financial statements
and notes included in the Company's annual report on Form 10-K for the year
ended April 3, 1999.
The results of operations for the three months ended July 3, 1999, are not
necessarily indicative of the operating results to be expected for the year
ending April 1, 2000. The Company's business is seasonal in nature, with
the highest sales and earnings historically occurring in the third quarter
of the fiscal year, which includes the holiday selling season.
Inventories, which consist of compact discs, tapes and accessories, are
stated at the lower of cost (principally average) or market.
Certain reclassifications have been made to the (unaudited) June 27, 1998
quarterly financial information to conform to the presentation used in the
(unaudited) July 3, 1999 financial information.
(2) Earnings Per Share
In December 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("Statement
128"), which establishes new standards for computing and presenting
earnings per share ("EPS"). Earnings per share for all prior periods have
been restated to reflect the provisions of this Statement.
Basic and diluted earnings (loss) per share have been computed by dividing
net earnings (loss), by the weighted average number of shares outstanding
during the period.
6 (Continued)
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
July 3, 1999 and June 27, 1998
(Unaudited)
Basic and diluted loss per share were calculated as follows:
Three months ended Three months
Ended Ended
------------------ -------------
July 3, June 27,
1999 1998
Basic and diluted:
Net loss $ (240,047) (349,315)
============== ===========
Weighted average shares 12,158,209 12,158,209
============== ===========
Basic and diluted loss per share (0.02) (0.03)
============== ===========
(3) Marketable Securities
The Company's marketable securities consist of equity securities and
Treasury bills, and are considered available for sale with cost
approximating fair market value. Securities classified as
available-for-sale are reported at fair market value with unrealized gains
and losses included in stockholders' equity. Realized gains and losses are
included in interest and other income.
(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. Any applicable tax charge or credits are
allocated on a separate return basis. For the three month period ended July
3, 1999, there was no (benefit) provision for income taxes as the Company
has excess net operating loss carryforwards for federal income tax
purposes.
7 (Continued)
<PAGE>
URT INDUSTRIES, INC.
Item 2. Management's Discussions and Analysis of Financial Condition and
Results of Operations for the Three Months Ended July 3, 1999,
Compared to the Three Months ended June 27, 1998.
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 sections of this Annual Report or 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
Sales. Net sales from the three months ended July 3, 1999 decreased by
approximately 5.5 percent compared to the three months ended June 27, 1998. Such
decrease is primarily attributable to a 4.7 percent decrease in comparable store
sales.
Cost of Sales. The cost of sales for the first quarter of 2000 fiscal year was
lower than that of the first quarter of 1999 fiscal year due principally to a
decrease in net sales. Cost of sales as a percentage of net sales has decreased
from 59.9 percent in the first quarter of 1999 fiscal year to 59.5 percent in
the first quarter in 2000 fiscal year primarily due to an increase in certain
retail selling prices and increases in purchase discounts.
Selling, General and Administrative. Selling, general and administrative (SG&A)
expenses, including depreciation, in the first quarter of 2000 fiscal year
decreased by 8.6 percent compared to the first quarter of 1999 fiscal year. Such
decrease is primarily attributable to the fact that the Company operated one
less store in the first quarter of fiscal 2000. SG&A expenses as a percentage of
net sales decreased from 49.1 percent in the first quarter of fiscal 1999 to
47.5 percent in the first quarter of fiscal 2000.
Net Loss. The Company incurred a net loss of approximately $240,000 in the first
quarter of 2000 fiscal year versus a net loss of approximately $349,000 in the
first quarter of 1999 fiscal year. The decrease in net loss is primarily
attributable to the fact that the quarter ended June 27, 1998 included costs
associated with the opening of one new store, an increase in gross profit
percentage, a decrease in interest expense offset by a decrease in comparable
store sales.
8 (Continued)
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources. Cash generated from operations and cash
equivalents are the Company's primary source of liquidity. Management
anticipates that the cash generated from operations, cash equivalents on hand
and financing will provide sufficient liquidity to maintain adequate working
capital for operations. Management anticipates that it would use funds generated
from operations as well as possible financing, for the opening of any new
stores, which it may plan to open this fiscal year. For a discussion of
uncertainties affecting the Company's liquidity and capital resources, see note
3 to the financial statements on form 10-K for the year ended April 3, 1999.
Long-Term Obligations. At July 3, 1999, the Company had long-term obligations of
$456,496. Management anticipates that its ability to repay its long-term
obligations will be satisfied primarily through funds generated from its
operations.
OTHER MATTERS
Impact of Inflation. Although the Company cannot accurately determine the
precise effect of inflation on its operations, management does not believe
inflation has had a material effect on the results of operations in the last
three fiscal years. When the cost of merchandise items has increased, the
Company has been able to pass the increase on to its customers.
Seasonality. The Company's business is seasonal in nature, with the highest
sales and earnings historically occurring in the third fiscal quarter, which
includes the Christmas selling season.
Year 2000 Compliance. The Year 2000 Issue is the result of computer programs
being written using two digits rather than four to define the applicable year.
Any of the Company's computer programs that have data-sensitive software may
recognize a date using "00" as year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of operations.
The Company has assessed that it is required to upgrade portions of its software
which was originally purchased from outside vendors, so that its computer
systems will properly utilize dates beyond December 31, 1999. The Company has
purchased its upgraded software and expects that testing and implementation will
be completed by October, 1999. The total anticipated cost of the upgrade of the
Company's software is approximately $20,000. However, there can be no absolute
assurance that the Company can successfully implement the necessary upgrades to
its computer systems. Additionally, the Company is dependent on basic public
infrastructure, such as telecommunications and utilities, in order to function
normally. Significant long-term interruptions of this infrastructure could have
an adverse effect on the operations of the Company. Additionally, the Company
must rely on assurances from suppliers and vendors that their information
systems and key services will be Year 2000 compliant, and the Company currently
has no practical alternatives if these major suppliers experience problems.
Therefore, even if the Company, in a timely manner, successfully implements the
necessary changes to its computer systems, some problems may not be identified
or corrected in time to prevent material adverse consequences or business
interruptions to the Company, and there can be no absolute assurance that there
will not be a material adverse effect on the Company's operations, liquidity or
financial condition as a result of the Year 2000 issue.
9 (Continued)
<PAGE>
URT INDUSTRIES, INC.
OTHER INFORMATION
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.0 Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K dated September 10, 1999 was filed on or about
September 13, 1999 for the purpose of reporting on the status of this
10-Q filing.
10 (Continued)
<PAGE>
URT INDUSTRIES, INC.
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: 10/14/99 /s/ Allan Wolk
---------------------------------------------
Allan Wolk, Chairman of the Board, President
(Principal Executive Officer)
Date: 10/14/99 /s/ Jason Wolk
---------------------------------------------
Jason Wolk, Executive Vice President,
Chief Financial Officer
(Principal Financial and Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
registrant's financial statements as of and for the three month period ended
July 3, 1999, and is qualifed in its entirety by reference to such financial
statements:
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> APR-03-1999
<PERIOD-END> JUL-03-1999
<CASH> 1,063,495
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,216,269
<CURRENT-ASSETS> 3,496,024
<PP&E> 3,074,078
<DEPRECIATION> 1,811,642
<TOTAL-ASSETS> 4,979,426
<CURRENT-LIABILITIES> 2,833,803
<BONDS> 0
0
0
<COMMON> 153,175
<OTHER-SE> 1,426,847
<TOTAL-LIABILITY-AND-EQUITY> 4,979,426
<SALES> 3,658,139
<TOTAL-REVENUES> 3,658,139
<CGS> 2,176,328
<TOTAL-COSTS> 2,176,328
<OTHER-EXPENSES> 1,736,103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,507
<INCOME-PRETAX> (240,047)
<INCOME-TAX> 0
<INCOME-CONTINUING> (240,047)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (240,047)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
