SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended March 28, 1998 Commission File No. 0-12375
PEACHES ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-2166041
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1180 East Hallandale Beach Boulevard, Hallandale, Florida 33009
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 454-5554
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES _X_ NO ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
YES ___ NO _X_
The aggregate market value (based on the average closing bid and asked prices)
of the voting stock held by non-affiliates of the registrant was, as of June 1,
1998, approximately $65,480.
As of June 1, 1998 the registrant's transfer agent reported as issued and
outstanding:
39,781,270 Shares of Common Stock
<PAGE>
PART I
Item 1. BUSINESS
Peaches Entertainment Corporation ("PEC" or the "Company"), a Florida
corporation, began business in 1982. It is engaged in the operation of retail
stores which sell prerecorded music, videos, and related products (the "Retail
Business") in the Southeastern part of the United States under the name
"PEACHES".
URT Industries, Inc. ("URT"), a Florida corporation, presently owns
approximately 94% of PEC's issued and outstanding shares of common stock and all
of its issued and outstanding shares of preferred stock and controls PEC. The
remaining approximately 6% of PEC's issued and outstanding shares of common
stock are owned by non-affiliated persons.
The Peaches Stores
The following table sets forth the number of "Peaches"stores (the
"'Peaches' stores") which were open at the beginning of the year, which opened
during the year, which closed during the year and which were open at the end of
the year, with respect to PEC's last five complete fiscal years ending with the
fiscal year ended March 28, 1998 (the "1998 fiscal year"):
1998 1997 1996 1995 1994
---- ---- ---- ----- ----
Number of stores:
At beginning of period 13 13 19 20 21
Opened during period 0 0 0 1 0
Closed during period (1) (0) (6) (2) (1)
--- --- --- --- ---
At end of period 12 13 13 19 20
Subsequent to the conclusion of the 1998 fiscal year, PEC opened a new
store in Orlando, Florida, thus bringing to thirteen the total number of
"Peaches" stores which are in operation, as of the date of this filing. Such
thirteen stores are located in the following four states: Florida (seven
stores), Virginia (three stores), North Carolina (two stores), and Alabama (one
store). The utilized space of the stores ranges from approximately 6,000 square
feet to approximately 14,000 square feet. Each store either has its own parking
area or is located in a shopping center which provides parking. PEC has options
to renew most of its leases for various periods.
Two of the Florida stores, one in Fort Lauderdale and the other in Orlando,
are currently leased from the Chairman of PEC and his brother, a former director
of PEC. (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").
For information concerning real property owned by PEC, see "Properties".
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Trademarks
PEC is the registered owner of and owns nationwide rights to the tradename,
service mark and trademark "PEACHES" (the "Trademarks") in connection with the
operation of the Retail Business.
Operation of the Peaches Stores
The "Peaches" stores are all similar in appearance, except for PEC's
mall-type store. They have distinct, wood panelled interiors, are decorated in a
manner which identifies them as "Peaches" stores and carry a wide selection of
prerecorded music as well as recorded and blank video tapes, accessory items and
specialty items such as T-shirts and crates. Some stores are free standing and
others are contiguous to other stores in shopping centers. At present, each
"Peaches" store is managed by an individual director who is responsible for
re-orders of merchandise and displaying merchandise sold in the store, hiring
and firing personnel and other matters relating to store administration. Certain
other matters, including pricing, relationships with landlords and the purchase
and allocation of new releases, are handled by the home office. PEC has a
computerized inventory control system in place at each of its stores.
As of the last day of the 1998 fiscal year, PEC purchased merchandise from
approximately 60 suppliers, among whom the principal ones were BMG, EMI, PGD,
SONY, Universal and WEA. Approximately 69% of the merchandise purchased during
the 1998 fiscal year came from such six principal suppliers. Seagram Co., Ltd.,
the owner of Universal, has recently announced the possible purchase of PGD.
This possible action would bring the number of principal suppliers from six to
five. It is unknown what impact, if any, this acquisition would have on the
ongoing results of operations of PEC.
Purchases from given suppliers are, to a great extent, determined by which
of them are manufacturing or distributing the most popular prerecorded music
products at a given time, as well as the credit and other terms on which such
suppliers are willing to sell to PEC. PEC is not obligated to purchase
merchandise from any supplier. It has numerous alternate sources of supply for
inventory. However, a loss of one of its six principal suppliers may have a
materially adverse effect on PEC's results of operations.
Merchandise is delivered directly by suppliers to the stores. The usual
terms received by PEC from suppliers provide for payment to be made within 60
days from the end of the month in which a purchase was made. In addition, PEC
normally receives an additional 30 to 120 days to pay for certain purchases
during the course of the year. Such terms are usual in the industry.
Under current industry procedure, PEC is able to return merchandise,
without limitation, to all suppliers, who charge a net penalty if returns exceed
certain percentages of the dollar amounts of gross purchases. Such return
policies do not have a materially adverse effect on PEC's business.
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For a period of time after PEC's voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code, on January 16, 1996, PEC was
not able to obtain delivery from most of its principal suppliers of merchandise,
and was not able to return merchandise in accordance with the return policies
described above. This resulted in higher inventory costs and lower gross profits
for PEC. However, shortly after confirmation of PEC's Amended Plan of
Reorganization (the "Plan of Reorganization") by the U.S. Bankruptcy Court on
January 17, 1997, and the effective date of such Plan of Reorganization on
February 19, 1997 (the "Effective Date"), arrangements were made with all of
PEC's principal suppliers and most of its other suppliers such that the terms
with respect to payment for merchandise and the return of unused merchandise for
credit have been the same or similar to the terms which were in effect prior to
such proceeding (the "Chapter 11 proceeding"). For more information concerning
the Chapter 11 proceeding, see "LEGAL PROCEEDINGS" and "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
Advertising in local newspapers and media is determined by consultation
between each store director and PEC management. PEC also engages in cooperative
advertising with suppliers who pay a portion of the cost. In addition to the
director, each "Peaches" store is staffed with managers, cashiers and sales and
stock room personnel. The stores are open seven days a week.
Quarterly results are affected by the timing of holidays, the timing and
strength of new releases, new store openings/closings and sales performance of
existing stores. During the 1998 fiscal year, sales between April and June were
approximately 24% of total sales; sales between July and September were
approximately 22% of total sales; sales between October and December were
approximately 30% of total sales; and sales between January and March were
approximately 24% of total sales.
Competition
The retail sale of prerecorded music and video products is highly
competitive. There are hundreds of retail stores and department, discount and
variety stores and supermarkets which offer such merchandise to the public.
PEC's share of the retail market in the Southeastern United States is not
significant. In recent years, in addition to usual competition, there has been a
proliferation of non-traditional music outlets, such as appliance retailers and
superbookstores, some of whom have used very aggressive price cutting tactics
including selling some products below actual cost in order to attract customers
and sell non-music and video products. For a discussion of actions taken to
address such competitive factors, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
Employees
As of the last day of the 1998 fiscal year, PEC had approximately 239
employees.
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It is not a party to any collective bargaining agreements. Relations with
employees have been good and there have been no work stoppages.
Intercorporate Agreements
There are three agreements in place pertaining to the management of PEC.
Among the arrangements which are in place pursuant to such agreements are the
following: for the period from January 1, 1996 through March 31, 2000, URT will
continue to provide to PEC the services of Mr. Wolk as PEC's Chairman, President
and Chief Executive Officer; PEC is required to pay to Mr. Wolk during such
period, so long as he continues to provide such services, a salary in the amount
described below; and URT and PEC will continue to equitably apportion taxes so
long as they continue to file a consolidated federal return. The salary so
payable by PEC to Mr. Wolk pursuant to such arrangements is $500,000 per annum,
except that such amount has been reduced to $400,000 per annum, effective March
1, 1997 and continuing until February 28, 1999, and except further that such
amount was further reduced to $300,000 per annum, effective January 1, 1998 and
continuing until March 28, 1998.
As a result of the above-described arrangements, the salary required to be
paid by PEC to Allan Wolk was reduced from $491,667 during the fiscal year ended
March 29, 1997 (the "1997 fiscal year") to $375,000 during the 1998 fiscal year.
During both the 1998 and 1997 fiscal years, Mr. Wolk devoted approximately
75% of his contractual working time to the business of PEC.
Item 2. PROPERTIES
PEC's headquarters are located in Hallandale, Florida in a building which
is leased by PEC. Such building contains a total of approximately 6,000 square
feet of office space.
PEC owns real property in Mobile, Alabama on which it constructed and
operates a "Peaches" store. Such property is subject to a first mortgage to an
institutional lender and to a second mortgage to URT.
All "Peaches" stores, other than the Mobile, Alabama store discussed
immediately above, are leased. For information concerning such other stores
operated by PEC, see "BUSINESS--The Peaches Stores".
Item 3. LEGAL PROCEEDINGS
The 1998 fiscal year was PEC's first full year of operations subsequent to
the confirmation and Effective Date of the Plan of Reorganization. A portion of
the amounts allowed
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to creditors pursuant to the Plan of Reorganization were paid within 60 days of
the Effective Date. The additional amounts owed pursuant to the Plan of
Reorganization are described more fully below:
(a) PEC's seven principal suppliers (whose allowed claims total
approximately $4,372,000) were entitled to 100% of their allowed claims as
follows: payment and inventory returns equal to approximately 70% of their
allowed claims (80% in the case of one such supplier) within approximately 60
days after the Effective Date; and the balance of the payments to such seven
principal suppliers (originally approximately $1,284,000) with interest over a
period of 24 months commencing in March, 1997. Such debt has been reduced to the
sum of $615,115, as of the end of the 1998 fiscal year. The remaining sum so due
to such suppliers is secured by a perfected first lien and security interest in
the inventory originally distributed by such suppliers or which is otherwise in
the possession of and owned by PEC.
(b) PEC's sole secured creditor, the holder of the first mortgage with
respect to the store property owned by PEC in Mobile, Alabama, whose allowed
claim was approximately $466,000, is entitled to 100% of such amount, 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 has been extended to September, 2002.
(c) The priority tax claim of the Florida Department of Revenue in the
original amount of approximately $118,000 has been payable with interest over a
period of two years commencing 30 days from the Effective Date.
PEC has made all payments, when due, of those amounts already required to
be paid under its Plan of Reorganization.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Price Range of Common Stock
PEC's Common Stock is quoted by market makers on the over-the-counter
market. The following table sets forth the closing high and low, bid and asked
quotations for PEC's Common Stock for the calendar periods indicated, based on
information supplied by the
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National Quotation Bureau, Incorporated:
Bid Prices Asked Prices
---------- ------------
High Low High Low
1996
Quarter ended March 31, 1/32 .001 9/32 7/32
Quarter ended June 30, .03125 .03125 .21875 .15625
Quarter ended Sept. 30, .03125 .001 .15625 .15625
Quarter ended Dec. 31, .03125 .005 .15625 .05
1997
Quarter ended March 31 .005 .001 .05 .05
Quarter ended June 30, .001 .001 .05 .05
Quarter ended Sept. 30, .001 .001 .05 .05
Quarter ended Dec. 31, .001 .001 .05 .05
1998
Quarter ended March 31, .001 .001 .05 .05
Quarter through June 1, .001 .001 .05 .05
The above over-the-counter quotations represent prices between dealers, do
not include retail markups, markdowns or commissions and do not necessarily
represent actual transactions.
Dividends
Since its inception, there has been no payment of dividends on PEC's Common
Stock. Payment of dividends on such stock in the future will depend upon PEC's
earnings and needs.
PEC is required to pay dividends on its outstanding shares of preferred
stock (see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Liquidity and Capital Resources"). In connection with the
Chapter 11 proceeding, the owner of such preferred stock, URT, waived dividends
on such stock for the period beginning January 1, 1996 and ending March 29, 1997
(See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").
Approximate Number of Equity Security Holders
The following table indicates the approximate number of holders of record
of each class of PEC's common equity securities as of June 1, 1998, based on
information supplied by PEC's transfer agent:
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Number of Record
Title of Class Holders
Common Stock, $.01 par value 1,488
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data and other operating
information of the Company. The selected financial data should be read in
conjunction with the financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
March 28, March 29, March 30, April 1, April 2,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating statement data:
Net sales $17,077,501 18,109,119 23,626,489 31,960,953 36,303,455
Net loss (468,209) (865,313) (2,416,051) (1,995,408) (108,456)
Basic and dilutive earnings per share (1) (.01) (.04) (.12) (0.10) (0.01)
Weighted average number of common
shares outstanding (1) 39,781,270 20,055,243 19,781,270 19,781,270 19,781,270
Balance sheet data:
Working capital excluding liabilities subject to
compromise in 1996 $ 252,883 1,513,459 6,083,691 2,058,184 3,550,371
Total assets 5,353,203 6,170,065 9,442,616 11,224,889 13,390,533
Current portion of long-term obligations 732,319 730,239 124,774 110,028 131,173
Long-term obligations 578,127 1,337,190 810,367 929,654 705,109
Shareholders' equity 760,423 913,913 1,429,226 3,890,277 5,945,685
Store data:
Weighted average square feet of selling space 84,512 88,012 88,012 130,157 137,145
Weighted average sales per square foot
of selling space $ 202 206 268 246 265
Number of stores open at end of period 12 13 13 19 20
</TABLE>
There were no cash dividends declared for common stock in any of the periods
presented.
(1) In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 128 which requires the disclosure
of basic earnings per share and diluted earnings per share. Earnings per
share for all prior periods have been restated to reflect the provisions of
this Statement.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
From time to time, PEC (sometimes referred to herein as 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. These risks include, but are not limited to: changes in the
competitive environment for the Company's products, including the entry or exit
of non-traditional retailers of the Company's products to or from its markets;
the release by the music industry of an increased or decreased number of "hit
releases"; general economic factors in markets where the Company's products are
sold; and other factors discussed in this filing and the Company's other
filings. 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
FISCAL YEAR ENDED MARCH 28, 1998 ("1998") COMPARED TO FISCAL YEAR ENDED MARCH
29, 1997 ("1997")
Net sales for 1998 decreased by 5.7% compared to 1997. Such decrease is
attributed to a 3.2% decrease in comparable store sales, and a 2.5% decrease in
sales due to one store that closed in 1998.
The cost of sales for 1998 was lower than that for 1997 due principally to a
decrease in net sales. Cost of sales as a percentage of net sales decreased from
63.2% in 1997 to 61.4% in 1998 due principally to the fact that during the first
quarter of 1998 the Company began to receive discounts associated with normal
trade terms as a result of the conclusion of the Chapter 11 proceeding. Such
decrease is also attributed to increases in other purchase discounts and an
increase in certain retail selling prices.
Selling, general and administrative expenses, including depreciation and
amortization ("SG&A") in 1998 decreased by 10.1% compared to 1997. Such decrease
is attributed to a decrease in corporate overhead (7.8%) and a decrease due to
the closing of one of the Company's stores (2.5%), offset by an increase in
comparable store expenses (0.2%). SG&A expenses, as a percentage of net sales,
decreased from 42% in 1997 to 40% in 1998 primarily due to such overhead
reductions.
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The Company incurred a net loss of approximately $468,000 in 1998 versus a net
loss of approximately $865,000 in 1997. The reduction of net loss is attributed
to an increase in gross profit percentage and a decrease in expenses as
discussed above.
The Company's primary suppliers have taken steps to help protect the retail
marketplace from certain low cost retailers of music. These steps have included
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, have helped the Company to
restore itself to a more competitive position. Other factors which have had a
positive effect on the Company's performance are the increase in gross profit
percentage and reduction of expenses. Also, the Company's Plan of Reorganization
was confirmed during the last quarter of 1997. The benefits of the
reorganization included the termination of the leases associated with the six
unprofitable stores which were closed during 1996, the closing of the Company's
former headquarters and warehouse, and the termination of other unprofitable
business arrangements. Other competitive advantages over certain competitors
include a large selection of inventory, convenient store locations, a high level
of customer service and the widely recognized "Peaches" name.
FISCAL YEAR ENDED MARCH 29, 1997 ("1997") COMPARED TO FISCAL YEAR ENDED MARCH
30, 1996 ("1996")
Net sales for 1997 decreased 23.4% compared to 1996. 13.3% of such decrease is
attributed to the fact that 1996 included sales for stores that had been open
during 1996 and were closed during or near the end of 1996. The balance of such
decrease (10.1%) is attributed to comparable store sales.
The cost of sales for 1997 was lower than that for 1996 due principally to a
decrease in net sales. Cost of sales as a percentage of net sales decreased from
64.8% in 1996 to 63.2% in 1997 due to increased purchase discounts in 1997 and
the fact that 1996 reflected the effects of buying a portion of PEC's inventory
during the Chapter 11 proceeding from alternate sources with higher prices.
SG&A expenses in 1997 decreased 21.4% compared to 1996. Such decrease is
attributed to a decrease in store operating expenses of stores that had been
open during 1996, but were closed during or near the end of 1996 (15.0%), a
decrease in corporate overhead (0.3%), and a decrease in comparable store
expenses (6.1%). SG&A expenses, as a percentage of net sales, increased from
40.2% in 1996 to 41.8% in 1997 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 $865,000 in 1997 versus a net
loss of
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approximately $2,416,000 in 1996. The significant reduction of net loss is
attributed to the success of the Chapter 11 proceeding. However, such success
was offset by professional fees and lost gross profits as a result of not
obtaining similar terms from trade creditors to those that existed prior to the
Chapter 11 proceeding until approximately the first quarter of 1998, at which
time the Company's primary suppliers provided terms with respect to purchases
and returns that were the same as those in place prior to the Petition Date.
Also, further overhead reductions were not evident until 1998.
FISCAL YEAR ENDED MARCH 30, 1996 ("1996") COMPARED TO FISCAL YEAR ENDED APRIL 1,
1995 ("1995")
Net sales for 1996 decreased 26.1% compared to 1995. Such decrease is attributed
principally to the closing of unprofitable stores during 1996, as well as the
effect of the opening of new stores during 1996 by certain of PEC's competitors.
11.8% of such decrease was attributable to comparable store sales and 14.3% of
such decrease was attributable to stores that opened or closed during 1996
versus 1995.
During the last few years, non-traditional music retailers such as appliance
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. The
Company 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 in the early part of the last quarter of 1996.
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 increased from
63.7% in 1995 to 64.8% in 1996 due to a reduction in retail prices in an effort
to meet the increased competition, a change in terms with PEC's principal
suppliers during the Chapter 11 proceeding and the effects of buying a portion
of PEC's inventory during the Chapter 11 proceeding from alternate sources with
higher prices.
SG&A expenses in 1996 decreased 17.1% compared to 1995. Such decrease is
attributed to a decrease in store operating expenses of stores that opened or
closed during 1996 versus 1995 (15.0%) and a decrease in corporate overhead
(2.5%), offset by an increase in comparable store expenses (0.4%). SG&A
expenses, as a percentage of net sales, increased from 35.9% in 1995 to 40.2% 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 $2,416,000 in 1996 versus a net
loss of approximately $1,995,000 in 1995 due principally to the costs associated
with the closing of four stores, professional fees associated with the Chapter
11 proceeding and the reduction of net sales and gross profits as described
above. The two other stores closed during 1996 are
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reflected in the financial statements for 1995.
Liquidity and Capital Resources
The Company had working capital of $252,883 at March 28, 1998 compared to
working capital of $1,513,459 at March 29, 1997. The Company had a current ratio
(the ratio of total current assets to total current liabilities) of 1.07 to 1 at
March 28, 1998, compared to a current ratio of 1.5 to 1 at March 29, 1997.
At March 28, 1998, the Company had long-term obligations of $578,127, compared
to long-term obligations of 1,337,190 at March 29, 1997. Management anticipates
that the Company's 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 used funds generated from operations as well as funds
to be received from its landlord for the building of the new store which opened
in May, 1998. 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 during the next few years.
Inflation trends have not had an impact upon revenues 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.
The Company has issued and outstanding 2,500 shares of $100 par, 11%, Series A
cumulative preferred stock and 2,500 shares of $100 par, 13%, Series B
cumulative preferred stock. All of such shares are owned by URT. The total
amount of the dividends payable with respect to the outstanding preferred stock
is $60,000 per annum. However, during the 1997 fiscal year, the Company did not
pay any dividends to URT with respect to its preferred stock, due to URT's
waiver of such dividends during such period. (See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS").
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 date-sensitive software may recognize a date using
"00" as the 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 will be 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. These upgrades are currently
available, and the Company believes that the cost of these upgrades will not
have a material impact on the
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ongoing results of operations or financial position of the Company. However, the
Company could be adversely impacted if year 2000 modifications are not properly
completed by either the Company, or its suppliers, banks or any other entity
with whom the Company conducts business.
In February, 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 128, "Earnings Per Share"
("Statement 128"). Statement 128 is effective for financial statements issued
for periods ending after December 15, 1997. Statement 128 establishes standards
for computing and presenting earnings per share ("EPS"), simplifies the
standards previously found in APB No. 15, "Earnings Per Share", and makes them
comparable to international EPS Standards. In December, 1997, the Company
adopted the provisions of Statement 128. Earnings per share for all prior
periods have been restated to reflect the provisions of this Statement.
In June, 1997, the FASB issued Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income" ("Statement 130"). Statement 130
establishes standards for the reporting and display of comprehensive income and
its components in a full set of general purpose financial statements and is
effective for fiscal years beginning after December 31, 1997. Management does
not anticipate a significant impact of the adoption of Statement 130 on the
Company's financial position, results of operations or cash flows.
In 1997, the FASB issued Statement of Financial Accounting Standard No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("Statement
131"). Statement 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that these enterprises report selected information about
operating segments in interim financial reports to shareholders. Statement 131
is effective for financial statements for the periods beginning after December
15, 1997. Management does not anticipate a significant impact of the adoption of
Statement 131 on the Company's financial position, results of operation or cash
flows.
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Item 8. FINANCIAL STATEMENTS
PEACHES ENTERTAINMENT CORPORATION
Financial Statements
March 28, 1998 and March 29, 1997
(With Independent Auditors' Report Thereon)
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PEACHES ENTERTAINMENT CORPORATION
Table of Contents
Independent Auditors' Report 16
Financial Statements:
Balance Sheets as of March 28, 1998 and March 29, 1997 17
Statements of Operations for each of the years in the three
year period ended March 28, 1998 18
Statements of Shareholders' Equity for each of the years in
the three year period ended March 28, 1998 19
Statements of Cash Flows for each of the years in the three
year period ended March 28, 1998 21
Notes to Financial Statements 23
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<PAGE>
Independent Auditors' Report
Directors and Shareholders
Peaches Entertainment Corporation
Hallandale, Florida:
We have audited the accompanying balance sheets of Peaches Entertainment
Corporation (the "Company") as of March 28, 1998 and March 29, 1997, and the
related statements of operations, shareholders' equity and cash flows for each
of the years in the three-year period ended March 28, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Peaches Entertainment
Corporation as of March 28, 1998 and March 29, 1997, and the results of its
operations and its cash flows for each of the years in the three-year period
ended March 28, 1998 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
July 13, 1998
-16-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Balance Sheets
March 28, 1998 and March 29, 1997
<TABLE>
<CAPTION>
Assets 1998 1997
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,080,694 $ 1,456,070
Inventories 2,433,433 2,855,494
Prepaid expenses and other current assets 308,419 260,008
----------- -----------
Total current assets 3,822,546 4,571,572
Property and equipment, net 1,349,732 1,439,731
Other assets 180,925 158,762
----------- -----------
$ 5,353,203 $ 6,170,065
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term obligations 732,319 730,239
Accounts payable 2,014,674 1,371,869
Accrued liabilities 822,670 956,005
----------- -----------
Total current liabilities 3,569,663 3,058,113
Long-term obligations 578,127 1,337,190
Due to Parent 382,156 704,813
Deferred rent 62,834 156,036
----------- -----------
Total liabilities 4,592,780 5,256,152
Shareholders' equity:
Preferred stock, $100 par value; 50,000 shares authorized; 5,000 shares
issued and outstanding 500,000 500,000
Common stock subscribed; 0 shares and 20,000,000 shares issued as of
March 28, 1998 and March 29, 1997, respectively -- 350,000
Common stock, $.01 par value; 40,000,000 shares authorized; 39,781,270
shares and 19,889,120 shares issued as of March 28, 1998 and March 29,
1997, respectively 397,813 198,892
Additional paid-in capital 1,749,190 1,284,471
Retained deficit (1,886,580) (1,399,670)
----------- -----------
760,423 933,693
Treasury stock, 0 and 107,850 common shares, at cost, as of March 28, 1998
and March 29, 1997, respectively -- (19,780)
----------- -----------
Total shareholders' equity 760,423 913,913
Commitments and contingencies
$ 5,353,203 $ 6,170,065
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-17-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Statements of Operations
For each of the years in the three-year period ended March 28, 1998
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $17,077,501 $18,109,119 $23,626,489
----------- ----------- -----------
Costs and expenses:
Cost of sales 10,501,123 11,453,125 15,316,441
Selling, general and administrative expenses 6,538,377 7,121,666 9,058,785
Depreciation and amortization 270,191 448,862 455,156
Store closing costs -- -- 189,623
Management fees -- -- 562,500
----------- ----------- -----------
17,309,691 19,023,653 25,582,505
----------- ----------- -----------
Loss from operations (232,190) (914,534) (1,956,016)
----------- ----------- -----------
Other (expense) income:
Interest expense (219,148) (88,345) (111,451)
Interest income 27,129 30,832 22,566
----------- ----------- -----------
(192,019) (57,513) (88,885)
----------- ----------- -----------
Loss before reorganization costs, income taxes
and extraordinary gain (424,209) (972,047) (2,044,901)
Reorganization costs:
Professional fees (44,000) (379,645) (88,223)
Store closing costs -- -- (282,927)
----------- ----------- -----------
(44,000) (379,645) (371,150)
----------- ----------- -----------
Loss before income taxes and extraordinary gain (468,209) (1,351,692) (2,416,051)
Provision for income taxes -- -- --
----------- ----------- -----------
Loss before extraordinary gain (468,209) (1,351,692) (2,416,051)
Extraordinary gain due to reorganization (note 2) -- 486,379 --
----------- ----------- -----------
Net loss $ (468,209) $ (865,313) $(2,416,051)
=========== =========== ===========
Basic and diluted earnings per common share:
Loss before extraordinary gain (.01) (.07) (.12)
Extraordinary gain -- .03 --
----- ----- -----
Net loss (.01) (.04) (.12)
===== ===== =====
</TABLE>
See accompanying notes to financial statements.
-18-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Statements of Shareholders' Equity
For each of the years in the three-year period ended March 28, 1998
<TABLE>
<CAPTION>
Preferred stock Common stock subscribed
----------------------------- ------------------------------
Shares Amount Shares Amount
----------- ----------- ----------- -----------
Balance, April 1, 1995 5,000 $ 500,000 -- $ --
Net loss -- -- -- --
Payment of preferred stock dividend to
Parent -- -- -- --
----------- ----------- ----------- -----------
Balance, March 30, 1996 5,000 500,000 -- --
Net loss -- -- -- --
Contributed capital -- -- 20,000,000 350,000
----------- ----------- ----------- -----------
Balance, March 29, 1997 5,000 500,000 20,000,000 350,000
Net loss -- -- -- --
Contributed capital -- -- (20,000,000) (350,000)
Payment of preferred stock dividend to
parent -- -- -- --
Cancellation of treasury stock -- -- -- --
----------- ----------- ----------- -----------
Balance, March 28, 1998 5,000 $ 500,000 -- $ --
=========== =========== =========== ===========
<CAPTION>
Common stock
--------------------------
Shares Amount
<S> <C> <C>
Balance, April 1, 1995 20,107,850 $ 201,079
Net loss -- --
Payment of preferred stock dividend to
Parent -- --
----------- -----------
Balance, March 30, 1996 20,107,850 201,079
Net loss -- --
Contributed capital (218,730) (2,187)
----------- -----------
Balance, March 29, 1997 19,889,120 198,892
Net loss -- --
Contributed capital 20,000,000 200,000
Payment of preferred stock dividend to
parent -- --
Cancellation of treasury stock (107,850) (1,079)
----------- -----------
Balance, March 28, 1998 39,781,270 $ 397,813
=========== ===========
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
Treasury stock Additional Retained
------------------------------- paid-in earnings
Shares Amount capital (deficit) Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
326,580 $ (59,895) $ 1,284,471 $ 1,964,622 $ 3,890,277
- - - (2,416,051) (2,416,051)
- - - (45,000) (45,000)
----------- ----------- ----------- ----------- -----------
326,580 (59,895) 1,284,471 (496,429) 1,429,226
- - - (865,313) (865,313)
(218,730) 40,115 - (37,928) 350,000
----------- ----------- ----------- ----------- -----------
107,850 (19,780) 1,284,471 (1,399,670) 913,913
- - - (468,209) (468,209)
- - 524,719 - 374,719
- - (60,000) - (60,000)
(107,850) 19,780 - (18,701) -
----------- ----------- ----------- ----------- -----------
- $ - $ 1,749,190 $(1,886,580) $ 760,423
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
-20-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Statements of Cash Flows
For each of the years in the three-year period ended March 28, 1998
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (468,209) (865,313) (2,416,051)
---------- ---------- ----------
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Extraordinary gain -- (486,379) --
Depreciation and amortization 270,191 448,862 455,156
Loss on abandonment of leasehold improvements
-- -- 190,601
Deferred rent (93,202) (44,687) (299,747)
Changes in assets and liabilities affecting cash flows
from operating activities:
(Increase) decrease in:
Inventories 422,061 25,200 624,477
Prepaid expenses and other current assets (48,411) 273,587 (244,182)
Refundable income taxes -- 9,136 248,093
Other assets (22,163) 25,589 4,997
Increase (decrease) in:
Accounts payable 642,805 1,268,831 (4,027,492)
Accrued liabilities (133,335) (147,049) (420,893)
Long-term obligations -- -- (61,022)
Liabilities subject to compromise -- (1,854,514) 5,671,434
Changes due to reorganization activities:
Loss on abandonment of leasehold improvements -- -- 296,509
---------- ---------- ----------
Net cash (used in) provided by operating
activities 569,737 (1,346,737) 21,880
---------- ---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (180,192) (44,885) (168,331)
Proceeds from disposition of land, property and equipment
-- -- 615,243
---------- ---------- ----------
Net cash (used in) provided by investing
activities (180,192) (44,885) 446,912
---------- ---------- ----------
Cash flows from financing activities:
Due to Parent 52,062 704,813 --
Capital contribution -- 350,000 --
Repayment of long-term obligations (756,983) (124,687) (43,519)
Dividends paid (60,000) -- (45,000)
---------- ---------- ----------
Net cash provided by (used in) financing
activities (764,921) 930,126 (88,519)
---------- ---------- ----------
</TABLE>
-21-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net (decrease) increase in cash and cash
equivalents $ (375,376) (461,496) 380,273
Cash and cash equivalents, beginning of year 1,456,070 1,917,566 1,537,293
---------- ---------- ----------
Cash and cash equivalents, end of year $1,080,694 1,456,070 1,917,566
========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest $ 171,365 88,345 111,451
========== ========== ==========
Income tax payments (refund), net $ -- -- (248,093)
========== ========== ==========
</TABLE>
Supplemental schedule of non-cash operating and investing activities relating to
the reorganization:
<TABLE>
<S> <C>
Liabilities subject to compromise, March 30, 1996 $5,671,434
Less: Inventory returns for credit 2,073,566
Cash paid 1,854,514
Extraordinary gain (primarily as a result of lease rejection claims -
note 2) 486,379
----------
Long-term obligation, March 29, 1997 $1,256,975
==========
</TABLE>
In 1998, the Parent forgave $374,719 of the Due to Parent, which is reflected as
a capital contribution in the accompanying financial statements.
See accompanying notes to financial statements.
-22-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
March 28, 1998, March 29, 1997 and March 30, 1996
(1) Organization and Basis of Presentation
Peaches Entertainment Corporation (the "Company") is engaged in the
business of retailing prerecorded music, video and accessory items,
principally in the southeastern United States. The Company is a 93.5
percent-owned subsidiary of URT Industries, Inc. (the "Parent"). The
Company operates in a single industry segment, the operation of a chain of
retail entertainment stores.
(2) Confirmation of Amended Plan of Reorganization
On January 16, 1996 (the "Petition Date"), the Company commenced
reorganization proceedings under Chapter 11 of the United States Bankruptcy
Code. An amended plan of reorganization was confirmed by the Bankruptcy
Court on January 17, 1997 (the "confirmation date"), and became effective
February 3, 1997 (the "effective date"), subject to satisfaction of certain
conditions which were satisfied February 19, 1997. All trade and non-trade
suppliers received 100 percent of their allowed claims which were either
paid on the effective date or are reflected in current and long-term
obligations in the financial statements, payable primarily over a two year
period from the effective date. The mortgage holder will receive 100
percent of the allowed claim, with interest, except the balloon payment was
extended from September 1997 to September 2002. 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 were paid on the effective date. The Company recorded an
extraordinary gain of $486,379 primarily as a result of the settlement of
lease rejection claims.
(3) Liquidity
Since 1993, the Company has incurred operating losses and has an
accumulated deficit balance of approximately $1.9 million at March 28,
1998. In 1996, the Company commenced reorganization proceedings under
Chapter 11 and in the last quarter of 1997 the Company's plan of
reorganization was confirmed. The Company believes that it has benefited
from its reorganization which includes the termination of the leases
associated with the six unprofitable stores which were closed during 1996,
the closing of the Company's former headquarters and warehouses, and the
termination of other unprofitable business arrangements.
Additionally, the Company's primary suppliers have taken steps to help
protect the retail marketplace from certain low cost retailers of music.
These steps have included 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 above, have helped the Company to restore itself to a more
competitive position. Other factors which have had a positive effect on the
Company's performance are the increase in gross profit percentage and
reduction of expenses. The Company's ability to achieve substained
profitable operations is dependent on continuing to obtain products at
competitive prices, restructuring operations to minimize cash expenditures
and successfully competing with larger retailers who have greater capital
resources than the Company. Management believes that cash flow from
operations or additional financing available from other sources will be
sufficient to fund operations during the next fiscal year. There is no
assurance that such events will occur or such financing will be available.
(Continued)
-23-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
(4) Summary of Significant Accounting Policies
(a) Fiscal Year
The Company's fiscal year consists of 52 or 53 weeks ending on the
Saturday closest to the end of March. The fiscal years ended March 28,
1998, March 29, 1997 and March 30, 1996 consisted of 52 weeks,
respectively.
(b) Cash Equivalents
The Company considers highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
Cash equivalents totaled approximately $399,000 and $-0- at March 28,
1998 and March 29, 1997, respectively. The carrying amount
approximates fair value because of the short-term maturity of these
investments. The fair values are estimated based on quoted market
prices for these or similar instruments.
(c) Inventories
Inventories, comprised of compact discs, cassettes, digital video
disks, videos and accessories, are stated at the lower of cost
(principally average) including freight in, or market.
(d) Property and Equipment
Property and equipment are stated at cost. The assets are depreciated
over their estimated useful lives ranging from five to 31.5 years
using both straight-line and accelerated methods. The Company's policy
is to retire assets from its accounts as they become fully
depreciated.
(e) Income Taxes
The Company files a consolidated income tax return with its Parent.
Any applicable tax charges or credits are allocated to the Company on
a separate return basis. Provision is made for deferred income taxes
which result from certain items of income and expense being reported
for tax purposes in periods different than those reported for
financial reporting purposes. These items relate principally to the
methods of accounting for store leases with future scheduled rent
payment increases, inventory and the utilization of different methods
of depreciation for financial statement and income tax purposes.
The Company accounts for income taxes under the provisions of
Financial Accounting Standards Board's ("SFAS") No. 109, which
generally requires recognition of deferred tax liabilities and assets
for the future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined on differences between the
financial reporting and tax bases of assets and liabilities and are
measured by applying enacted tax rates and laws for the taxable years
in which those differences are expected to reverse. Under SFAS No.
109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the
enactment date.
(Continued)
-24-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
(f) Store Closing Costs
Store closing costs are recorded in the period the Company decides to
close the store. Such costs include the book value of abandoned
leasehold improvements, provision for the present value of future
lease obligations, less estimated sub-rental income as well as other
costs incident to the store closing.
(g) Reorganization Costs
Reorganization costs include: (a) professional fees relating to legal,
accounting and consulting services provided in connection with the
Chapter 11 proceedings and (b) costs and expenses associated with the
closing of locations.
(h) Use of Estimates by Management
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reported period. Actual results could differ
from those estimates.
(i) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long Lived Assets to be
Disposed Of, on March 31, 1996. This statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. The adoption of this
Statement did not have a material impact on the Company's financial
position, results of operations or liquidity.
(j) Reclassifications
Certain amounts in the 1997 and 1996 financial statements have been
reclassified to conform with the 1998 presentation.
(5) 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.
(Continued)
-25-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
Basic and diluted earnings per share have been computed by dividing net
loss, less preferred dividends by the weighted average number of shares
outstanding during the period. Convertible Series A Preferred Stock
outstanding were not included in the computation of diluted earnings per
share for the year ended March 30, 1996 as the inclusion would be
antidilutive. In March 1997, the convertible feature was eliminated.
Basic and diluted earnings per share were calculated as follows:
March 28, March 29, March 30,
1998 1997 1996
----------- ----------- -----------
Basic and diluted:
Net loss less preferred
dividends $ (528,209) $ (865,313) $(2,461,051)
=========== =========== ===========
Weighted average shares 39,781,270 20,055,243 19,781,270
=========== =========== ===========
Net loss per share $ (.01) $ (.04) $ (.12)
=========== =========== ===========
(6) Property and Equipment, Net
Property and equipment consist of the following at March 28, 1998 and March
29, 1997:
1998 1997
---- ----
Land $ 395,570 395,570
Building 538,093 538,093
Leasehold improvements 1,456,260 1,732,924
Furniture and equipment 677,333 1,029,642
Building under capitalized lease 206,964 206,964
---------- ----------
3,274,220 3,903,193
Less accumulated depreciation and amortization (1,924,488) (2,463,462)
---------- ----------
$1,349,732 1,439,731
========== ==========
(Continued)
-26-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
(7) Long-term Obligations
Long-term obligations consist of the following at March 28, 1998 and March
29, 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Capital lease obligation, due in monthly installments of $3,382,
including interest at 17.5%; final payment due March 2005 $ 163,178 $ 174,139
Mortgage payable, due in equal installments of $2,981 per month,
plus interest at prime plus 0.5%; collateralized by the
mortgaged property with depreciated cost of $785,140; final
balloon payment of $245,700 due September 2002 (note 2) 406,688 442,462
Settlement agreement with former officer, due in monthly
installments of $5,699, final payment due January 2000 125,465 193,853
Promissory notes, due in installments of $26,744 for 21 months and
one payment of $347,675 (due February 1999), plus interest
at prime; collateralized by inventory (note 2) 615,115 1,256,975
---------- ----------
1,310,446 2,067,429
Less current portion 732,319 730,239
---------- ----------
$ 578,127 $1,337,190
========== ==========
</TABLE>
The capital lease pertains to the building portion of property owned by one
director and one former director. The rent expense on the land portion of
this lease was $113,000 for 1998, 1997 and 1996.
The following represents future minimum lease payments under the capital
lease obligation:
Fiscal year Amount
----------- ------
1999 $ 40,600
2000 40,600
2001 40,600
2002 40,600
2003 40,600
Thereafter 80,960
---------
Total minimum lease payments 283,960
Less amount representing interest (120,782)
---------
Present value of minimum lease payments $ 163,178
=========
(Continued)
-27-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
Maturities of long-term obligations, excluding the capital lease
obligation, to maturity, are as follows:
Fiscal year Amount
----------- ------
1999 $ 719,278
2000 92,853
2001 35,775
2002 35,775
2003 263,587
Thereafter -
----------
$1,147,268
==========
The Company has a standby letter of credit of $75,600 available to a
landlord that was not drawn upon as of March 28, 1998. The standby letter
of credit is fully collateralized by a certificate of deposit, which is
included in other assets. In addition, the Company has an irrevocable
letter of credit of $150,000 that was not drawn upon as of March 28, 1998.
(8) Accrued Liabilities
Accrued liabilities consist of the following at March 28, 1998 and March
29, 1997:
1998 1997
---- ----
Gift certificate and credit slip liability $155,873 $184,884
Payroll and related benefits 102,244 99,701
Sales and real estate taxes payable 141,446 188,087
Accrued overhead expenses 259,017 267,002
Other 164,090 216,331
-------- --------
$822,670 $956,005
======== ========
(9) Due to Parent
In order for the Company to be able to effect the plan of reorganization,
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 and is subordinate to the amounts owed to
principal suppliers and is secured by inventory and all the assets of the
Company. In 1998, the Parent forgave $350,000 of principal and $24,719 of
accrued interest. The forgiveness has been accounted for as an additional
capital contribution by the Parent at March 28, 1998.
(Continued)
-28-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
(10) Commitments and Contingencies
(a) Leases
The Company is a lessee under various operating leases, several of
which provide for percentage rent. An insignificant amount of
percentage rent was incurred in each of the years in the three-year
period ended March 28, 1998. Most of the leases contain renewal
options.
The aggregate minimum rental commitments under all noncancelable
operating leases at March 28, 1998 are as follows:
Fiscal year Amount
----------- ------
1999 $1,316,310
2000 951,002
2001 865,404
2002 707,852
2003 715,277
Thereafter 2,797,822
----------
$7,353,667
==========
Rental expense under noncancelable operating leases, included in
selling, general and administrative expenses in the accompanying
statements of operations amounted to $1,160,000, $1,217,000 and
$1,853,000, respectively, for each of the years in the three-year
period ended March 28, 1998.
Rental expense on stores owned by two directors and/or their relatives
was $131,250, $131,250 and $215,417, respectively, for each of the
years in the three-year period ended March 28, 1998.
In January 1998, the Company entered into a lease agreement for the
operation of a new store in Orlando, Florida. This will be the
Company's fourth store in the Orlando area. This store is expected to
open during the first quarter of the next fiscal year.
(b) Legal Matters
The Company is a party to various other claims, legal actions and
complaints arising in the ordinary course of its business. In the
opinion of management, all such matters are without merit or involve
such amounts that an unfavorable disposition will not have a material
impact on the financial position or results of operations of the
Company.
(c) Employment Agreement
On March 18, 1996, the United States Bankruptcy Court Southern
District of Florida approved the settlement of an employment agreement
with a former officer. The Company is to pay an amount of $273,550
over a period of four years (note 7). Under the original terms of
employmenet, the officer would have been entitled to in excess of
$870,000 in aggregate.
(d) Management Agreement
On March 29, 1993, as amended, the Company entered into a management
and intercorporate agreement (the "Management Agreement") with the
Parent whereby the Company was required to pay the Parent an annual
fee; the Parent was required to provide the Company with the services
of the person who is the president and chairman;
(Continued)
-29-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
the Parent was required to pay the Company for certain accounting and
administrative services performed by the Company; and so long as the
Parent and the Company filed consolidated income tax returns, their
respective liabilities for such taxes would be equitably apportioned
as provided in such agreement. Effective as of the close of business
on December 31, 1995, the Management Agreement was terminated and
replaced with three new agreements which became effective January 1,
1996 through March 31, 2000. In lieu of paying a management fee to the
Parent, the three new agreements require payment to the Parent's
president and chairman as long as he continues to provide services
similar to those performed under the original Management Agreement.
(11) Shareholders' Equity
For each of the years in the three-year period ended March 28, 1998, the
Company had 2,500 shares of $100 par, 11 percent, Series A Cumulative
Preferred Stock and 2,500 shares of $100 par, 13 percent, Series B
Cumulative Preferred Stock authorized, issued and outstanding. The Parent
is the owner of all outstanding shares of Preferred Stock. In connection
with the reorganization, the Parent agreed to waive dividends in its shares
for the period beginning January 1, 1996 and ending March 29, 1997. The
Company can issue up to 50,000 shares of preferred stock, and the directors
have the authority to issue such shares in one or more additional series.
Each share of Series A and Series B Cumulative Preferred Stock is entitled
to one vote and has the same voting powers as the common stock, except that
all matters on which the vote of shareholders is required must, in order to
be approved, receive the requisite vote of either (i) both the Series A and
Series B, voting as separate classes or (ii) the common stock and either
the Series A or Series B, voting as separate classes. The shares of Series
A stock may be convertible into shares of the Company's common stock upon
the holders' compliance with certain surrender and notice provisions. In
March 1997, the conversion feature was eliminated. The liquidating value
for both the Series A and Series B shares is par value plus all accrued and
unpaid dividends.
(12) Income Taxes
The provision for income taxes consists of:
1998 1997 1996
---- ---- ----
Current:
Federal $ -- $ -- --
State -- -- --
---- ---- ----
-- -- --
Deferred:
Federal -- -- --
State -- -- --
---- ---- ----
-- -- --
---- ---- ----
$ -- $ -- --
==== ==== ====
(Continued)
-30-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
Reasons for differences between income tax provision and the amount
computed by applying the statutory federal income tax rate of 34 percent to
pretax loss were:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income tax benefit at applicable statutory tax rate of loss before
income taxes $(159,000) (294,000) (821,000)
Add:
State income tax benefit, net of federal benefit (16,000) (31,000) (81,000)
Change in valuation allowance 126,000 185,000 852,000
Capitalized reorganization expenses and other permanent
differences -- 50,000 --
Adjustments to net operating loss and other deferred tax
assets 23,000 76,000 --
Other 26,000 14,000 50,000
--------- -------- --------
Income tax provision for the year $ -- -- --
========= ======== ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at March 28, 1998 and March 29, 1997
are presented below.
Deferred tax assets: 1998 1997
---- ----
Inventories, principally due to additional costs
capitalized for tax purposes $ 80,000 $ 106,000
Property and equipment, net, principally due to
differences in depreciation 233,000 221,000
Accrued rent, principally due to accrual for
financial reporting purposes 23,000 58,000
NOL carryforward 1,608,000 1,409,000
Accrued expenses 46,000 72,000
Other 37,000 35,000
---------- ----------
Total gross deferred tax assets 2,027,000 1,901,000
Less valuation allowance (2,027,000) (1,901,000)
---------- ----------
Net deferred tax assets $ -- $ --
========== ==========
At March 28, 1998, the Company has a net operating loss carryforward for
federal income tax purposes of approximately $5,233,000 which is available
to offset future federal taxable income, if any, through 2013.
A valuation allowance is provided to reduce deferred tax assets to a level
which, more likely than not, will be realized. The net deferred assets
reflect management's estimate of the amount which will be realized from
future profitability which can be predicted with reasonable certainty. The
valuation allowance for deferred tax assets as of March 28, 1998 and March
29, 1997 was $2,027,000 and $1,901,000, respectively. The net change in the
total valuation allowance for the years ended March 28, 1998 and March 29,
1997 was an increase of approximately $126,000 and $185,000, respectively.
(Continued)
-31-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
(13) Fair Value of Financial Instruments
The fair value of the Company's long-term debt and due to Parent is
estimated by discounting the future cash flows for each instrument at rates
currently offered to the Company for similar debt instruments of comparable
maturities, which approximates the carrying value.
(14) Business and Credit Concentrations
The retail sale of prerecorded music and video products is highly
competitive. The Company's share of the retail market in the Southeastern
United States is not significant. The number of stores and types of
competitors faced by the Company's stores increased significantly,
including non-mall discount stores, consumer electronics superstores and
other mall based music, video and book specialty retailers expanding into
non-mall multimedia superstores of their own. The Company's stores operate
in a retail environment in which many factors that are difficult to predict
and outside the Company's control can have a significant impact on store
and Company sales and profits. These factors include the timing and
strength of new product offerings and technology, pricing strategies of
competitors, openings and closings of competitors' stores, the Company's
ability to continue to receive adequate product from its vendors on
acceptable credit terms, effects of weather and overall economic
conditions, including inflation, consumer confidence, spending habits and
disposable income.
The Company purchased approximately 74 percent and 76 percent of its
merchandise from seven principal suppliers during the fiscal year ended
March 28, 1998 and March 29, 1997, respectively. Purchases from given
suppliers are, to a great extent, determined by which of them are
manufacturing or distributing the most popular prerecorded music products
at a given time, as well as the credit and other terms on which such
suppliers are willing to sell to the Company. The Company is not obligated
to purchase merchandise from any supplier. However, loss of one of the
Company's principal suppliers may have a material adverse effect on the
Company's results of operations and financial position.
-32-
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As of the date of this filing, the directors and executive officers of PEC
are:
Name Position Age
---- -------- ---
Allan Wolk Chairman of the Board,
President (Chief Executive
Officer) and Director 60
Brian Wolk Executive Vice-President, Chief Legal 32
Officer and Director
Jason Wolk Executive Vice-President, Chief Financial Officer
(Principal Financial and Accounting Officer),
Treasurer and Director 30
Allan Wolk has been the Chief Executive Officer and a director of PEC since
its formation in 1982. He has also been the Chief Executive Officer of URT since
its formation. He has been engaged in the prerecorded music business for more
than 40 years, principally in the rack merchandising and retail segments
thereof.
Brian Wolk, an attorney, has been employed by PEC in various capacities and
at various times since 1982 and has been employed by it, full time, since 1992.
He is a son of Allan Wolk. He has been a director of PEC and URT since 1994 and
a vice-president of both companies since June, 1995. He was appointed Executive
Vice-President and Chief Legal Officer of both companies in March, 1996.
Jason Wolk, a certified public accountant, has been employed by PEC in
various capacities and at various times since 1983 and has been employed by it,
full time, since 1994. He is a son of Allan Wolk. Prior to his full time
employment by PEC, he had been employed as an accountant by KPMG Peat Marwick
LLP. He has been a director of PEC and URT since 1994 and a vice-president and
the secretary of both companies since June, 1995. He was appointed Treasurer and
Chief Financial Officer (Principal Financial and Accounting Officer) of both
companies in September, 1995, and was appointed Executive Vice-President of both
companies in March, 1996.
-33-
<PAGE>
The term of office of each director continues until the next annual meeting
of the stockholders and until his or her successor is elected. Mr. Wolk has an
employment agreement with URT. Under the management agreements referred to
above, PEC has the right to use the services of Mr. Wolk (See
"BUSINESS--Management Agreements Between URT and PEC").
Item 11. EXECUTIVE COMPENSATION
The following table sets forth compensation paid or accrued by PEC for
services rendered in all capacities to it during the 1998 fiscal year and the
two prior fiscal years to (i) PEC's chief executive officer ("CEO") and (ii)
each of the other most highly compensated executive officers of PEC whose cash
compensation exceeded $100,000 and who served as executive officers during the
1998 fiscal year:
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Long
Options/ Term
Other Stock Incen. All
Annual Restricted App. Plan Other
Name and Fiscal Salary Bonus Compensa- stock Rights Pay-outs Compensa-
position Year ($) ($) tion($) award(s)($) (#) ($) tion($)
- -------- ------ ------ --- ------- ----------- --- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allan Wolk, 1998 375,000(1) -0- -0- -0- -0- -0- -0-
Chairman, 1997 491,667(1) -0- -0- -0- -0- -0- -0-
Pres. & CEO 1996 125,000(1) -0- -0- -0- -0- -0- 308,222(2)
</TABLE>
-34-
<PAGE>
- ----------
(1) Mr. Wolk is employed and compensated under an employment agreement with URT
which continues in effect until March 31, 2000. PEC receives the services
of Mr. Wolk under the management agreements described above. Pursuant to
such agreements, PEC is required to pay a salary to Mr. Wolk, and the
amount so paid by PEC to Mr. Wolk is credited against the amount payable by
URT to Mr. Wolk pursuant to the employment agreement between them (See
"BUSINESS-- Management Agreements Between URT and PEC"). The salary paid by
PEC to Mr. Wolk during the 1996 fiscal year was in addition to certain
amounts paid by PEC to URT during such year as a management fee with
respect to the services of Mr. Wolk under agreements that had been in
effect until January 1, 1996.
(2) Such amount represents a one-time distribution to Mr. Wolk as a result of
the termination, effective May 12, 1995, of the PEC defined benefit plan
and trust.
Employment Contracts
There are no employment contracts or severance agreements in place between
PEC and any of its executive officers. However, pursuant to the arrangements
described above, PEC is entitled to the services of Allan Wolk, its Chairman,
President and Chief Executive Officer, through March 31, 2000, and PEC is
obligated to pay a salary to him (See "BUSINESS--Management Agreements Between
URT and PEC").
Compensation Committee Interlocks and Insider Participation
PEC does not have a compensation committee or other board committee
performing equivalent functions. During the 1997 fiscal year, all deliberations
concerning executive officer compensation or any other arrangements between PEC
and any executive officers were conducted by PEC's full board of directors,
provided, however, that no director voted on compensation payable to him as an
executive officer or any other arrangement between him and PEC.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of June 1, 1998, URT owns 37,781,270 shares of PEC common stock,
constituting approximately 94% of the issued and outstanding shares of such
common stock, and all of PEC's issued and outstanding shares of Series A and
Series B preferred stock. All of such shares of PEC stock are owned directly
with voting and investment power.
-35-
<PAGE>
As set forth in the following table, Allan Wolk and members of his
immediate family own approximately 30% of URT's Class A common stock and
approximately 58% of URT's Class B common stock. The two classes of URT's common
stock are identical except that each class votes separately so that all matters
requiring the vote of stockholders require the approval of both classes of
common stock voting as separate classes. By reason of such ownership and his
position as Chairman of URT and Chairman of PEC, Mr. Wolk may be deemed to have
effective control of PEC.
The following table contains information concerning the number of shares of
each class of URT's common stock which was owned by each person who, as of June
1, 1998, owned, beneficially, more than 5% thereof, and the number of shares of
each class of such stock owned beneficially, directly or indirectly, by each
executive officer and director and by all directors and executive officers as a
group on such date:
<TABLE>
<CAPTION>
Amount & Nature
of Beneficial Percent
Title of Class Name Ownership of Class
- -------------- ---- --------- --------
Executive Officers
and Directors
------------------
<S> <C> <C> <C>
Class A Common
Stock, par value
$.01 per share Allan Wolk 3,194,186(1) 29.4%
Allan Wolk and
Lawrence Strauss,
as Trustees 33,072(2) *
Brian Wolk 12,980(3) *
Jason Wolk 17,480(3) *
---------
All officers and
directors as a
group (3 persons) 3,257,718 30.0
Other
-----
</TABLE>
-36-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Scorpio Music, Inc.
P. O. Box A
Trenton, N.J. 08691 1,195,550(4) 11.0%
Executive Officers and Directors
--------------------------------
Class B Common
Stock, par value
$.01 per share Allan Wolk 786,654(5) 58.4%
=========
All officers and
directors as a
group (1 person) 786,654 58.4%
</TABLE>
(1) Includes 3,150,786 shares owned by Allan Wolk, 25,920 shares owned by his
wife and 17,480 shares held by him for his daughter. However, Mr. Wolk has
renounced all voting and investment power with respect to those shares of
URT which are held by him for his daughter. He believes that his wife will
vote the shares owned by her in favor of proposals which he favors, but
disclaims beneficial ownership of any shares owned by her or held for the
benefit of his daughter.
(2) Such shares are held by Lawrence Strauss and Allan Wolk as trustees for the
benefit of children of Sheffield Wolk, Mr. Wolk's brother. Allan Wolk has
renounced all voting and investment power with respect to those shares of
URT which are so held in trust for the benefit of children of Mr. Wolk's
brother. All such powers as trustee are exercised exclusively by the
co-trustee, and Mr. Wolk disclaims beneficial ownership of such shares.
(3) Such shares are held in the name of Allan Wolk, as custodian. However, Mr.
Wolk has renounced all voting and investment power with respect to those
shares of URT which are held by him for his two sons, and disclaims
beneficial ownership of such shares. Such shares, being listed separately
here, are not included under the shares listed as beneficially owned by
Allan Wolk.
(4) Based on information supplied by URT's transfer agent. Does not include
160,000 shares reported in a Schedule 13D, dated June 14, 1989, as owned by
John T. Gervasoni, Scorpio's reported president and 100% shareholder, as to
which no confirmation of ownership has been made by URT's transfer agent.
(5) Includes 780,174 shares owned by Allan Wolk and 6,480 shares owned by his
wife. Mr. Wolk believes that his wife will vote the shares owned by her in
favor of proposals which he favors, but disclaims beneficial ownership of
such shares.
(*) Less than one percent.
-37-
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As a result of their purchase in 1983 from an unaffiliated third party
seller, Allan Wolk and his brother, Sheffield Wolk, a former director of PEC,
are the owners of the land and building on which the PEC store in Fort
Lauderdale, Florida is located. Such property was and continues to be subject to
a lease with PEC as tenant, which had been negotiated by the prior owner. During
the 1995 fiscal year, PEC made and paid for certain renovations to the premises.
Based on the provisions of the lease, the owners agreed to be responsible for
$26,225 of the cost of such renovations which, with interest, is being deducted
by PEC over a period of 36 months.
In December, 1984, PEC entered into a long-term lease with Allan Wolk and
Sheffield Wolk for premises owned by them in Orlando, Florida. The lease term
commenced in December, 1984, and is for a period of twenty years with two
additional five year terms. The lease is a triple net lease. The lease provides
for a net minimum rental rate of $125,000 per annum from the rental commencement
date through March 31, 1985; a rate of $140,000 per annum during the following
five year period; a rate of $145,000 per annum during the next five year period;
a rate of $160,000 during the next five year period; and increases of $5,000
during every five year period thereafter. Notwithstanding the foregoing,
commencing with the sixth rental year, if net sales at the store during any
rental year are less than $1,800,000, the annual net minimum rental rate for
such year will be the same as that which had been in effect during the preceding
five year period. The lease was approved by disinterested directors and, in the
opinion of management, is as reasonable as those which could have been obtained
from unaffiliated third parties.
Because of the profitability of the above-referenced Fort Lauderdale and
Orlando stores, the leases for such two stores were among the leases which PEC
elected to assume during its Chapter 11 proceeding with the approval of the
Bankruptcy Court.
In April, 1989, PEC's board of directors authorized PEC to enter into
agreements with its officers and directors under which they would be entitled to
be indemnified by PEC and have their expenses advanced to them in the event of
any claim against them in their capacities as officers and directors. Such
agreements were entered into with all then-existing officers and directors of
PEC on or about May 22, 1989. On or about July 14, 1995, and pursuant to the
further authorization of the board of directors on such date, PEC entered into
indemnification agreements with the two additional officers and directors, Brian
Wolk and Jason Wolk, who were appointed to their respective positions subsequent
to 1989. The indemnification agreements so entered into with Brian Wolk and
Jason Wolk are in the same form as the indemnification agreements entered into
in 1989 with the then-existing officers and directors.
-38-
<PAGE>
In order to enable PEC to effect its Plan of Reorganization, URT, in
exchange for the issuance to it of 20,000,000 shares of PEC's authorized common
stock (including 218,730 treasury shares), took the following steps: contributed
$350,000 to the capital of PEC; waived an aggregate of $75,000 of dividends
payable by PEC to URT with respect to the period running from January 1, 1996 to
March 31, 1997; loaned $700,000 to PEC; and agreed that, subject to the terms of
the Plan of Reorganization, it would guarantee the approximately $1,284,000 then
payable to PEC's principal suppliers after the Effective Date pursuant to the
arrangements described in "LEGAL PROCEEDINGS" above. In order to facilitate the
issuance of such shares to URT, URT also waived its right to convert to common
stock the Series A preferred stock of PEC which is owned by URT. The loan from
URT (as modified in the manner described below) is required to be paid back by
PEC with interest at the prime rate charged by Chase Manhattan Bank, N.A. over a
period of four years beginning on the third anniversary of the Effective Date.
The debt so owed by PEC to URT is subordinate to the amounts owed to PEC's
principal suppliers, and is secured by a second mortgage on PEC's Mobile,
Alabama property.
On or about November 29, 1997, URT, in order to further strengthen PEC's
financial condition, agreed to forgive repayment of one-half of the $700,000
which was loaned by URT to PEC, together with the interest then accrued on the
$350,000 so forgiven. The remaining $350,000 of the indebtedness is required to
be repaid by PEC to URT in accordance with the terms of the original loan
documents described above.
-39-
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
Page
----
1. Financial Statements
Table of Contents 15
Independent Auditors' Report 16
Peaches Entertainment Corporation
Financial Statements:
Balance sheets as of March 28,
1998 and March 29, 1997 17
Statements of operations for each of
the years in the three year period
ended March 28, 1998 18
Statements of shareholders' equity for each of the
years in the three year period ended March 28, 1998 19
Statements of cash flows for each of the years in
the three year period ended March 28, 1998 21
Notes to financial statements 23
2. Financial Statement Schedules
Schedules have been omitted which are not applicable
or where the required information is shown in the
financial statements or the notes thereto.
3. Exhibits
-40-
<PAGE>
Exhibit No.
3.1 Articles of Incorporation of Peaches Entertainment Corporation ("PEC")
dated March 3, 1982, incorporated by reference to Exhibit No. 3.3 to URT
Industries, Inc. ("URT") and PEC's Registration Statement No. 2-81065.
3.1-1 Amendment to PEC's Articles of Incorporation dated January 17, 1983,
incorporated by reference to Exhibit No. 3.3-1 to URT's and PEC's
Registration Statement No. 2-81065.
3.2 By-Laws of PEC incorporated by reference to Exhibit No. 3.4 to URT's and
PEC's Registration Statement No. 2-81065.
3.3 Form of Amendment to PEC's Articles of Incorporation, incorporated by
reference to Exhibit No. 3.5 to PEC's Registration Statement No. 2-81065.
10.35 Lease dated July 1, 1984 between Shirley Wolk and PEC applicable to North
Miami Beach, Florida premises, incorporated by reference to Exhibit No.
13.46 to URT's Registration Statement No. 2-63747.
10.36 Lease dated December 13, 1984 between Allan Wolk and Sheffield Wolk and
PEC applicable to Orlando, Florida premises, incorporated by reference to
Exhibit No. 13.47 to URT's Registration Statement No. 2-63747.
10.40 Amendment to Lease dated February 25, 1986 between Allan Wolk and
Sheffield Wolk and PEC applicable to Orlando, Florida premises,
incorporated by reference to Exhibit No. 10(ss) to URT's Form 10-K Annual
Report for the year ended March 29, 1986.
10.47 Indemnification Agreement dated May 22, 1989 between Allan Wolk and PEC,
incorporated by reference to Exhibit 10.47 to PEC's Form 10-K Annual
Report dated June 27, 1989.
10.48 Indemnification Agreement dated May 22, 1989 between David Jackowitz and
PEC, incorporated by reference to Exhibit 10.48 to PEC's Form 10-K Annual
Report dated June 27, 1989.
10.54 Lease dated December 22, 1989 between Sunbeam Properties, Inc. and PEC
applicable to Miramar, Florida premises, incorporated by reference to
Exhibit 10.54 to PEC's Form 10-K Annual Report dated June 27, 1991.
-41-
<PAGE>
10.60 Letter Agreement dated January 1, 1996 between URT and PEC pertaining to
termination of Management and Intercorporate Agreement dated March 29,
1993, incorporated by reference to Exhibit 10(jjjj) to URT's Form 10-K
Annual Report dated April. 25, 1997.
10.61 Letter Agreement dated January 1, 1996 between URT and PEC pertaining to
services of Allan Wolk, incorporated by reference to Exhibit 10(kkkk) to
URT's Form 10-K Annual Report dated April 25, 1997.
10.62 Indemnification Agreement dated July 14, 1995 between Brian Wolk and PEC,
incorporated by reference to Exhibit 10.67 to PEC's 10-K Annual Report
dated April 25, 1997.
10.63 Indemnification Agreement dated July 14, 1995 between Jason Wolk and PEC,
incorporated by reference to Exhibit 10.63 to PEC's 10-K Annual Report
dated April 25, 1997.
10.64 PEC's Amended Plan of Reorganization, dated October 23, 1996,
incorporated by reference to Exhibit 1 to PEC's Form 8-K dated April 7,
1997.
10.65 Order Confirming PEC's Amended Plan of Reorganization, as Modified, dated
January 17, 1997, incorporated by reference to Exhibit 2 to PEC's Form
8-K dated April 7, 1997.
10.66 URT Promissory Note dated January 27, 1997 made by PEC to URT,
incorporated by reference to Exhibit 10.66 to PEC's 10-K Annual Report
dated April 25, 1997.
10.67 Security Agreement dated January 27, 1997 between PEC and URT,
incorporated by reference to Exhibit 10.67 to PEC's 10-K Annual Report
dated April 25, 1997.
10.68 Mortgage Agreement with Assignment of Rents, Security Agreement and
Fixture Filing dated January 27, 1997 by PEC in favor of URT,
incorporated by reference to Exhibit 10.68 to PEC's 10-K Annual Report
dated April 25, 1997.
10.69 Reimbursement Agreement dated January 27, 1997 between PEC and URT,
incorporated by reference to Exhibit 10.69 to PEC's 10-K Annual Report
dated April 25, 1997.
10.70 Subordination Agreement dated January 27, 1997 between PEC, URT and
selected creditors, incorporated by reference to Exhibit 10.70 to PEC's
10-K Annual Report dated April 25, 1997.
-42-
<PAGE>
10.71 Subordination Agreement dated January 27, 1997 between PEC, URT and
creditor, incorporated by reference to Exhibit 10.71 to PEC's 10-K Annual
Report dated April 25, 1997.
10.72 Surrender and Waiver Agreement dated January 27, 1997 between PEC and
URT, incorporated by reference to Exhibit 10.72 to PEC's 10-K Annual
Report dated April 25, 1997.
10.73 Waiver Agreement dated March 1, 1997 between PEC and URT, incorporated by
reference to Exhibit 10.73 to PEC's 10-K Annual Report dated April 25,
1997.
10.74 Stock Purchase Agreement dated March 24, 1997 between PEC and URT,
incorporated by reference to Exhibit 10.74 to PEC's 10-K Annual Report
dated April 25, 1997.
10.75 Letter agreement dated March 17, 1997 between URT and PEC pertaining to
salary of Allan Wolk, incorporated by reference to Exhibit 10(zzzz) to
URT's 10- K Annual Report dated July 13, 1998.
10.76 Loan Forgiveness Agreement dated November 29, 1997 between URT and PEC,
incorporated by reference to Exhibit 10.2 to URT's 10-K Annual Report
dated July 13, 1998.
10.77 Letter agreement dated May 26, 1998 between URT and PEC pertaining to
salary of Allan Wolk, incorporated by reference to Exhibit 10.3 to URT's
10-K Annual Report dated July 13, 1998.
27 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K on or about February 10, 1998 for
the purpose of reporting a filing delay with respect to a Report on Form
10-Q which has since been filed.
-43-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Allan Wolk
-----------------------------
Allan Wolk,
Chairmain of the Board
Dated: July 13, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Title Date
By: /s/ Allan Wolk July 13, 1998
--------------------------------
Allan Wolk,
Chairman of the Board ,
President (Principal
Executive Officer) and Director
By: /s/ Brian Wolk July 13, 1998
--------------------------------
Brian Wolk, Executive
Vice President, Chief Legal
Officer and Director
By: /s/ Jason Wolk July 13, 1998
--------------------------------
Jason Wolk, Executive
Vice President, Chief Financial
Officer (Principal Financial and
Accounting Officer), Treasurer
Secretary and Director
-44-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
registrant's financial statements as of and for the year ended March 28, 1998
and is qualified in its entirety by reference to such financial statements:
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-28-1998
<PERIOD-END> MAR-28-1998
<CASH> 1,080,694
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,433,433
<CURRENT-ASSETS> 3,822,546
<PP&E> 3,274,220
<DEPRECIATION> (1,924,488)
<TOTAL-ASSETS> 5,353,203
<CURRENT-LIABILITIES> 3,569,663
<BONDS> 578,127
0
500,000
<COMMON> 397,813
<OTHER-SE> (137,390)
<TOTAL-LIABILITY-AND-EQUITY> 5,353,203
<SALES> 17,077,501
<TOTAL-REVENUES> 17,077,501
<CGS> 10,501,123
<TOTAL-COSTS> 10,501,123
<OTHER-EXPENSES> 6,808,568
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 219,148
<INCOME-PRETAX> (468,209)
<INCOME-TAX> 0
<INCOME-CONTINUING> (468,209)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (468,209)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
