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 June 29, 1996 Commission File No. 0-12375
PEACHES ENTERTAINMENT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Florida 59-2166041
(State or Other Jurisdiction (I.R.S. Employer I.D. No.)
of Incorporation or 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 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 June 29, 1996, there were outstanding:
19,781,270 shares of common stock
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets-June 29, 1996 (Unaudited)
and March 30, 1996 3
Condensed Statements of Operations and Retained
Earnings (Deficit) Three Months Ended June 29, 1996
and July 1, 1995 (Unaudited) 4
Condensed Statements of Cash Flows-Three Months Ended
June 29, 1996 and July 1, 1995 (Unaudited) 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 3. Default Upon Mortgage Payable 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PEACHES ENTERTAINMENT CORPORATION
Condensed Balance Sheets
June 29, 1996 and March 30, 1996
<TABLE>
<CAPTION>
June 29, March 30,
Assets 1996 1996
----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,433,081 1,917,566
Inventories 3,830,275 4,954,260
Prepaid inventory 396,981 254,249
Prepaid expenses and other current assets 201,647 279,346
Refundable income taxes 9,136 9,136
----------- -----------
Total current assets 5,871,120 7,414,557
Property and equipment, net 1,797,778 1,843,708
Other assets 164,594 184,351
----------- -----------
$ 7,833,492 9,442,616
=========== ===========
Liabilities and Shareholders' Equity
Liabilities not subject to compromise
Current liabilities:
Current portion of long-term obligations 113,785 124,774
Accounts payable 428,651 103,038
Accrued liabilities 1,130,849 1,103,054
----------- -----------
Total current liabilities 1,673,285 1,330,866
Long-term obligations 781,849 810,367
Deferred rent 199,860 200,723
----------- -----------
Total liabilities not subject to compromise 2,654,994 2,341,956
Liabilities subject to compromise 4,280,167 5,671,434
----------- -----------
Total liabilities 6,935,161 8,013,390
----------- -----------
Shareholders' equity:
Preferred stock, $100 par value;
50,000 shares authorized;
5,000 shares issued and outstanding 500,000 500,000
Common stock, $.01 par value;
40,000,000 shares authorized;
20,107,850 shares issued 201,079 201,079
Additional paid-in capital 1,284,471 1,284,471
Retained deficit (1,027,324) (496,429)
----------- -----------
958,226 1,489,121
Treasury stock, 326,580 common shares, at cost (59,895) (59,895)
----------- -----------
Total shareholders' equity 898,331 1,429,226
Commitments and contingencies
----------- -----------
$ 7,833,492 9,442,616
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
-3-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Condensed Statements of Operations and Retained Earnings (Deficit)
Three months ended June 29, 1996 and July 1, 1995
(Unaudited)
<TABLE>
<CAPTION>
June 29, July 1,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Net sales $ 4,305,821 6,268,280
----------- -----------
Costs and expenses:
Cost of sales 2,824,152 3,997,811
Selling, general and administrative expenses 1,910,425 2,539,685
Management fee -- 187,500
----------- -----------
4,734,577 6,724,996
----------- -----------
Loss from operations (428,756) (456,716)
----------- -----------
Other (expense) income:
Interest expense (18,613) (20,732)
Interest income 14,012 1,606
----------- -----------
(4,601) (19,126)
----------- -----------
Loss before reorganization costs and provision for income taxes (433,357) (475,842)
Reorganization costs:
Professional fees (97,538) --
----------- -----------
Loss before provision for income taxes (530,895) (475,842)
Provision for income taxes -- --
----------- -----------
Net loss (530,895) (475,842)
Retained (deficit) earnings, beginning of period (496,429) 1,964,622
Preferred stock dividend -- (15,000)
----------- -----------
Retained (deficit) earnings, end of period $(1,027,324) 1,473,780
=========== ===========
Net loss per common share $ (.03) (.02)
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Condensed Statements of Cash Flows
Three months ended June 29, 1996 and July 1, 1995
(Unaudited)
<TABLE>
<CAPTION>
June 29, July 1,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (530,895) (475,842)
----------- -----------
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 74,366 135,530
Deferred rent (863) 15,215
Changes in assets and liabilities affecting cash flows from operating
activities:
(Increase) decrease in:
Inventories 1,123,985 221,573
Prepaid inventory (142,732) --
Prepaid expenses and other current assets 77,699 12,596
Other assets 19,757 29,621
Increase (decrease) in:
Accounts payable 325,613 (400,388)
Accrued liabilities 27,795 (334,938)
Long-term obligations (17,097) --
Liabilities subject to compromise (1,391,267) --
----------- -----------
Net cash used in operating activities (433,639) (796,633)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (28,436) (64,885)
Proceeds from sale of land -- 300,000
----------- -----------
Net cash (used in) provided by investing
activities (28,436) 235,115
----------- -----------
Cash flows from financing activities:
Repayment of long-term obligations (22,410) (21,776)
Dividends paid -- (15,000)
----------- -----------
Net cash used in financing activities (22,410) (36,776)
----------- -----------
Net decrease in cash and cash equivalents (484,485) (598,294)
Cash and cash equivalents, beginning of period 1,917,566 1,537,293
----------- -----------
Cash and cash equivalents, end of period $ 1,433,081 938,999
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 18,613 20,732
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
-5-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
(1) Basis of Financial Statement Presentation
The accompanying unaudited condensed 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 financial statements and notes
included in the Peaches Entertainment Corporation (the "Company") annual
report on Form 10-K for the year ended March 30, 1996.
As of June 29, 1996, the Company was an 87 percent-owned subsidiary of URT
Industries, Inc. (the "Parent").
The results of operations for the three months ended June 29, 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 23 percent of the Company's sales have occurred in the first
fiscal quarter.
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) July 1, 1995
quarterly financial information to conform to the presentation used in the
(unaudited) June 29, 1996 financial information.
(2) Reorganization and Emergence From Chapter 11
On January 16, 1996 (the "Petition Date"), the Company commenced
reorganization proceedings under Chapter 11 of the United States Bankruptcy
Code. On January 17, 1997, the Company's plan of reorganization was
confirmed by the Bankruptcy Court for the Southern District of Florida
("Bankruptcy Court"). In Chapter 11, the Company 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, the Company 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.
-6- (continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
As debtor-in-possession, the Company 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. The
Company affirmed 13 leases (5 of which were modified on terms more
favorable to the Company) and rejected 8 leases.
On August 5, 1996, the Company 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 the Company's inventory
suppliers, but excluding landlords under leases rejected by the
Company, are entitled to 100 percent of their allowed claims (the
total of which is approximately $4,922,000). The Company's 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 the Company 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.
-7- (continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
In order for the Company 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 the Company's authorized common stock (including
218,730 treasury shares), contributed $350,000 to the capital of the
Company, waived an aggregate of $75,000 of dividends payable by the Company
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 the Company. 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 the Company. As a result, the Parent is the
beneficial owner of approximately 93.5% of the Company's issued and
outstanding shares of common stock and all of its issued and outstanding
shares of preferred stock.
In March 1997, the Parent and the Company agreed that if the Company's
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 the Company 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 the Company 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) Loss Per Common Share
Net loss per common share was computed by dividing net loss, less preferred
stock dividends, by the weighted average number of total common shares
outstanding during the periods.
(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 Parent. Any applicable tax charge or credits are allocated
on a separate return basis. For the three month period ended June 29, 1996,
there was no (benefit) provision 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:
June 29, March 30,
1996 1996
---------- ----------
(unaudited)
Lease rejection claims $ 600,000 600,000
Trade and other miscellaneous claims 3,680,167 5,071,434
---------- ----------
$4,280,167 5,671,434
========== ==========
-8- (continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
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.
-9- (continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Item 2. Management's Discussions and Analysis of Financial Condition and
Results of Operations for the Three Months Ended June 29, 1996, Compared
to the Three Months ended July 1, 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 three months ended June 29, 1996 (such three month period is
hereafter referred to as "1996") decreased by approximately 31.3 percent
compared to the three months ended July 1, 1995 (such three month period is
hereafter referred to as "1995"). Such decrease is attributed to a decrease in
comparable store sales (12.1 percent), and a decrease in sales in those stores
that closed during 1996 versus 1995 (19.2 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, the Company's 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 PEC 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 63.8 percent in 1995 to 65.5 percent in 1996 due to a reduction in retail
prices in an effort to meet the increased competition, a change in terms with
the Company's 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 alternate sources with higher prices.
-10- (continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
Selling, general and administrative (SG&A) expenses in 1996 decreased by 24.8
percent compared to 1995. Such decrease is attributable to a increase in
comparable store expenses (.3 percent), a decrease in store operating expenses
of stores that opened or closed during 1996 versus 1995 (23.1 percent) and a
decrease in corporate overhead (2 percent). SG&A expenses as a percentage of net
sales increased from 40.5 percent in 1995 to 44.3 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 $531,000 in 1996 versus a net
loss of approximately $475,000 in 1995 due to the reduction in net sales and
gross profit as described above, in addition to reorganization costs of
approximately $97,000.
Liquidity and Capital Resources
The Company had working capital of $4,197,835 at June 29, 1996 (excluding
liabilities subject to compromise in 1996) compared to working capital of
$6,083,691 at March 30, 1996 and a current ratio (the ratio of total current
assets to total current liabilities) of 3.5 to 1 at June 29, 1996 (excluding
liabilities subject to compromise in 1996) compared to a current ratio of 5.6 to
1 at March 30, 1996. The amount of the liabilities subject to compromise at June
29, 1996 is $4,280,167.
At June 29, 1996, the Company had long-term obligations of $781,849 (excluding
liabilities subject to compromise of $4,280,167). 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 financial
statements (Reorganization and Emergence from Chapter 11).
-11- (continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
OTHER INFORMATION
PART II
Item 1. Legal Proceedings
(i) Bankruptcy filings
On January 16, 1996 (the "Petition Date"), Peaches Entertainment
Corporation (the "Company") commenced reorganization proceedings under
Chapter 11 of the United States Bankruptcy Code. On January 17, 1997,
the Company's plan of reorganization was confirmed by the Bankruptcy
Court. In Chapter 11, the Company 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, the Company 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, the Company 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. The Company affirmed 13 leases (5 of
which were modified on terms more favorable to the Company) and
rejected 8 leases.
-12- (continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
On August 5, 1996, the Company 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 inventory suppliers, but
excluding landlords under leases rejected by the Company, are
entitled to 100 percent of their allowed claims (the total of
which is approximately $4,922,000). The Company's 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 the Company 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.
In order for the Company 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 the Company's
authorized common stock (including 218,730 treasury shares),
contributed $350,000 to the capital of the Company, waived an
aggregate of $75,000 of dividends payable by the Company 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 the Company. The
loan will be repaid to the Parent with interest at prime over a period
of four years beginning on the third anniversary of
-13-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
the effective date, is subordinate to the amounts owed to the
principal suppliers, and is secured by inventory and all of the assets
of the Company. As a result, the Parent is the beneficial owner of
approximately 93.5% of the Company's issued and outstanding shares of
common stock and all of its issued and outstanding shares of preferred
stock.
In March 1997, the Parent and the Company agreed that if the Company's
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
the Company 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 the Company
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.
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 three-month period ended June 29, 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.
-14-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
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.
PEACHES ENTERTAINMENT CORPORATION
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)
-15-
<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
June 29,1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-END> JUN-29-1996
<CASH> 1,433,081
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 3,830,275
<CURRENT-ASSETS> 5,871,120
<PP&E> 4,639,433
<DEPRECIATION> 2,841,655
<TOTAL-ASSETS> 7,833,492
<CURRENT-LIABILITIES> 1,673,285
<BONDS> 0
0
500,000
<COMMON> 201,079
<OTHER-SE> 197,252
<TOTAL-LIABILITY-AND-EQUITY> 7,833,492
<SALES> 4,305,821
<TOTAL-REVENUES> 4,305,821
<CGS> 2,824,152
<TOTAL-COSTS> 2,824,152
<OTHER-EXPENSES> 1,910,425
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,613
<INCOME-PRETAX> (530,895)
<INCOME-TAX> 0
<INCOME-CONTINUING> (530,895)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (530,895)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
