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 April 3, 1999 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,
1999, approximately $155,000.
As of June 2, 1999 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, and certain of its
directors and officers presently own approximately 93.5% of PEC's issued and
outstanding shares of common stock and all of its issued and outstanding shares
of preferred stock, and control PEC. The remaining approximately 6.5% 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 April 3, 1999 (the "1999 fiscal year"):
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Number of stores:
At beginning of period 12 13 13 19 20
Opened during period 1 0 0 0 1
Closed during period (1) (1) (0) (6) (2)
--- --- --- --- ---
At end of period 12 12 13 13 19
The twelve "Peaches" stores which are in operation are located in the
following four states: Florida (six stores), Virginia (three stores), North
Carolina (two stores), and Alabama (one store). The utilized space of the stores
ranges from approximately 7,000 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".
-2-
<PAGE>
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 1999 fiscal year, PEC purchased merchandise from
approximately 60 suppliers, among whom the principal ones during most of fiscal
1999 were BMG, EMI, PGD, SONY, Universal and WEA. Approximately 72% of the
merchandise purchased during the 1999 fiscal year came from such principal
suppliers. In PEC's fourth quarter of fiscal 1999, Seagram Co., Ltd, the owner
of Universal, completed its purchase of PGD. This action has brought PEC's
number of principal suppliers from six to five. Although PEC does not anticipate
an adverse effect as a result of the above, 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 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,
subject to certain limitations, to all of its major 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.
-3-
<PAGE>
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 1999 fiscal year, sales between April and June were
approximately 22% of total sales; sales between July and September were
approximately 22% of total sales; sales between October and December were
approximately 31% of total sales; and sales between January and March were
approximately 25% of total sales.
Competition
The retail sale of prerecorded music and video products is highly
competitive. There are hundreds of retail, 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 super
bookstores, 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 238
employees. It is not a party to any collective bargaining agreements. Relations
with employees have been satisfactory and there have been no work stoppages.
Intercorporate Agreements
There are three agreements in place pertaining to the management of PEC.
Two of such agreements are between URT and PEC and the third is between URT and
Allan Wolk, PEC's Chairman, President and Chief Executive Officer. 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 was 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, and to $250,000 per annum, effective April 1,
-4-
<PAGE>
1998 and continuing until April 3, 1999.
As a result of the above-described arrangements, the salary required to be
paid by PEC to Allan Wolk was reduced from $375,000 during the 1998 fiscal year
to $250,000 during the 1999 fiscal year. During both the 1999 and 1998 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.
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
In April, 1999, PEC instituted a legal action in the Circuit Court of the
Ninth Judicial Circuit of Orange County, Florida against the landlord with
respect to one of its Orlando, Florida stores. Among the allegations in the
complaint are fraudulent misrepresentations as to the nature of the landlord's
shopping center. PEC is seeking all available remedies in both law and equity.
The action is presently pending.
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 National Quotation Bureau, Incorporated:
-5-
<PAGE>
Bid Prices Asked Prices
---------- ------------
High Low High Low
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 ended June 30, .001 .001 .10 .05
Quarter ended September 30, .01 .001 .10 .08
Quarter ended December 31, .01 .01 .08 .08
1999
Quarter ended March 31, .06 .01 .125 .08
Quarter through June 1, .03 .03 .09 .09
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").
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 2, 1999, based on
information supplied by PEC's transfer agent:
Number of Record
Title of Class Holders
-------------- -------
Common Stock, $.01 par value 1,452
-6-
<PAGE>
Item 6. SELECTED FINANCIAL DATA
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>
April 3, March 28, March 29, March 30, April 1,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating Statement Data
Net sales $ 17,480,467 17,077,501 18,109,119 23,626,489 31,960,986
Net loss (89,586) (468,209) (865,313) (2,416,051) (1,995,408)
Basic and diluted earnings per
share (1) -- (0.01) (0.04) (0.12) (0.10)
Weighted average number of
common shares outstanding (1) 39,781,270 39,781,270 20,055,243 19,781,270 19,781,270
Balance Sheet Data
Working capital excluding
liabilities subject to compromise
in 1996 $ 128,620 252,883 1,513,459 6,083,691 2,058,184
Total assets 4,582,948 5,353,203 6,170,065 9,442,616 11,224,889
Current portion of long-term
obligations 108,280 732,319 730,239 124,774 110,028
Long-term obligations 469,759 578,127 1,337,190 810,367 929,654
Shareholders' equity 960,837 760,423 913,913 1,429,226 3,890,277
</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.
-7-
<PAGE>
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 APRIL 3, 1999 ("1999") COMPARED TO FISCAL YEAR ENDED
MARCH 28, 1998 ("1998")
Net sales for 1999 increased $403,000 or 2.4 percent compared to 1998. The
increase is primarily due to the fact that the Company operated one more store
for a portion of 1999 offset by a comparable store decrease of 1.6 percent.
Cost of sales, as a percentage of net sales, decreased from 61.5 percent in 1998
to 59.3 percent in 1999. Such decrease is primarily attributable to an increase
in certain retail prices and increases in purchase discounts.
Selling, general and administrative expenses, including depreciation, expressed
as a percentage of net sales increased to 40.5 in 1999 compared to 39.9 in 1998.
The increase is primarily attributable to expenses incurred throughout the
Company's first quarter of 1999 relating to the new store that did not actually
open until after the first quarter began.
The Company had a net loss of $90,000 in 1999 compared with a net loss of
$468,000 in 1998. The reduction of net loss is primarily attributable to the
increase in gross profit percentage discussed above, a decrease in interest
expense as well as an approximately $45,000 reduction of net loss due to the
fact that fiscal 1999 was a 53 week year while fiscal 1998 was a 52 week year.
-8-
<PAGE>
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.
The Company incurred a net loss of $468,000 in 1998 versus a net loss of
$865,000 in 1997. The significant 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. Another factor which has had a
positive effect on the Company's performance is the increase in gross profit
percentage. Also, the Company's Chapter 11 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
-9-
<PAGE>
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 $865,000 in 1997 versus a net loss of
$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.
Liquidity and Capital Resources
Cash generated from operations and cash equivalents are the Company's primary
source of liquidity. Management anticipates that the cash generated from
operations, cash equivalents on hand and financing will provide sufficient
liquidity to maintain adequate working capital for operations. Management used
cash on hand as well as funds received from its landlord for the building of the
new store which opened in May 1998. For a discussion of uncertainties affecting
the Company's liquidity and capital resources, see note 3 to the financial
statements accompanying this Form 10-K.
At April 3, 1999, the Company had long-term obligations of $469,759. Management
anticipates that its ability to repay its long-term obligations will be
satisfied primarily through funds generated from its operations or from possible
financing.
Although the Company cannot accurately determine the precise effect of inflation
on its operations, management does not believe inflation has had a material
effect on the results of operations in the last three fiscal years. When the
cost of merchandise items has increased, the Company has been able to pass the
increase on to its customers.
-10-
<PAGE>
The Company's business is seasonal in nature, with the highest sales and
earnings historically occurring in the third fiscal quarter, which includes the
Christmas selling season.
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have data-sensitive software may recognize a date using
"00" as year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations. The Company has
assessed that it is required to upgrade portions of its software which was
originally purchased from outside vendors, so that its computer systems will
properly utilize dates beyond December 31, 1999. The Company has purchased its
upgraded software and expects that testing and implementation will be completed
by August, 1999. The total anticipated cost of the upgrade of the Company's
software is approximately $20,000. However, there can be no absolute assurance
that the Company can successfully implement the necessary upgrades to its
computer systems. Additionally, the Company is dependent on basic public
infrastructure, such as telecommunications and utilities, in order to function
normally. Significant long-term interruptions of this infrastructure could have
an adverse effect on the operations of the Company. Additionally, the Company
must rely on assurances from suppliers and vendors that their information
systems and key services will be Year 2000 compliant, and the Company currently
has no practical alternatives if these major suppliers experience problems.
Therefore, even if the Company, in a timely manner, successfully implements the
necessary changes to its computer systems, some problems may not be identified
or corrected in time to prevent material adverse consequences or business
interruptions to the Company, and there can be no absolute assurance that there
will not be a material adverse effect on the Company's operations, liquidity or
financial condition as a result of the Year 2000 issue.
New Accounting Policies
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. Adoption of
Statement 130 did not have a material effect 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. The Company operates as one segment.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company owns no derivative financial instruments or derivative
commodity instruments. The Company's exposure to changes in interest rates is
limited to cash, cash equivalents, investments and long-term debt. Changes in
interest rates by 10% would not have a material impact on the Company's
financial position or results of operations.
-11-
<PAGE>
Item 8. FINANCIAL STATEMENTS
PEACHES ENTERTAINMENT CORPORATION
Financial Statements
April 3, 1999 and March 28, 1998
(With Independent Auditors' Report Thereon)
-12-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Table of Contents
Page
----
Independent Auditors' Report F-2
Financial Statements:
Balance Sheets as of April 3, 1999 and March 28, 1998 F-3
Statements of Operations for each of the years in the
three-year period ended April 3, 1999 F-4
Statements of Shareholders' Equity for each of the
years in the three-year period ended April 3, 1999 F-5
Statements of Cash Flows for each of the years in the
three-year period ended April 3, 1999 F-7
Notes to Financial Statements F-9
-13-
<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 April 3, 1999 and March 28, 1998, and the
related statements of operations, shareholders' equity and cash flows for each
of the years in the three-year period ended April 3, 1999. 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 April 3, 1999 and March 28, 1998, and the results of its
operations and its cash flows for each of the years in the three-year period
ended April 3, 1999 in conformity with generally accepted accounting principles.
May 28, 1999
Ft. Lauderdale, Florida
KPMG LLP
-14-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Balance Sheets
April 3, 1999 and March 28, 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 615,665 1,080,694
Inventories 2,309,600 2,433,433
Prepaid expenses and other current assets 247,122 308,419
----------- -----------
Total current assets 3,172,387 3,822,546
Property and equipment, net 1,235,570 1,349,732
Other assets 174,991 180,925
----------- -----------
$ 4,582,948 5,353,203
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term obligations $ 108,280 732,319
Current portion of due to Parent 15,185 --
Accounts payable 2,240,109 2,014,674
Accured liabilities 680,193 822,670
----------- -----------
Total current liabilities 3,043,767 3,569,663
Long-term obligations 469,759 578,127
Due to Parent 45,555 382,156
Deferred rent 63,030 62,834
----------- -----------
Total liabilities 3,622,111 4,592,780
----------- -----------
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;
39,781,270 shares issued as of April 3, 1999 and
March 28, 1998 397,813 397,813
Additional paid-in capital 2,039,190 1,749,190
Retained deficit (1,976,166) (1,886,580)
----------- -----------
Total shareholders' equity 960,837 760,423
Commitments and contingencies
----------- -----------
$ 4,582,948 5,353,203
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-15-
(F-3)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Statements of Operations
For each of the years in the three-year period ended April 3, 1999
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 17,480,467 17,077,501 18,109,119
------------ ------------ ------------
Cost and expenses:
Cost of sales 10,361,351 10,501,123 11,453,125
Selling, general and administrative expenses 6,781,522 6,538,377 7,121,666
Depreciation and amortization 304,344 270,191 448,862
------------ ------------ ------------
17,447,217 17,309,691 19,023,653
------------ ------------ ------------
Income (loss) from operations 33,250 (232,190) (914,534)
------------ ------------ ------------
Other (expense) income:
Interest expense (135,765) (219,148) (88,345)
Interest income 12,929 27,129 30,832
------------ ------------ ------------
(122,836) (192,019) (57,513)
------------ ------------ ------------
Loss before reorganization costs, income taxes
and extraordinary gain (89,586) (424,209) (972,047)
------------ ------------ ------------
Reorganization costs:
Professional fees -- (44,000) (379,645)
------------ ------------ ------------
-- (44,000) (379,645)
------------ ------------ ------------
Loss before income taxes and extraordinary gain (89,586) (468,209) (1,351,692)
Provision for income taxes -- -- --
------------ ------------ ------------
Loss before extraordinary gain (89,586) (468,209) (1,351,692)
Extraordinary gain due to reorganization (note 2) -- -- 486,379
------------ ------------ ------------
Net loss $ (89,586) (468,209) (865,313)
============ ============ ============
Basic and diluted earnings per common share:
Loss before extraordinary gain $ -- (0.01) (0.07)
Extraordinary gain -- -- 0.03
------------ ------------ ------------
Net loss $ -- (0.01) (0.04)
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
-16-
(F-4)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Consolidated Statements of Shareholders' Equity
For each of the years in the three-year period ended April 3, 1999
<TABLE>
<CAPTION>
Preferred stock Common stock subscribed Common stock
------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 30, 1996 5,000 $ 500,000 -- $ -- 20,107,850 201,079
Net loss -- -- -- -- -- --
Contributed capital -- -- 20,000,000 350,000 (218,730) (2,187)
----------- ----------- ----------- ----------- ----------- -----------
Balance, March 29, 1997 5,000 500,000 20,000,000 350,000 19,889,120 198,892
Net loss -- -- -- -- -- --
Contributed capital -- -- (20,000,000) (350,000) 20,000,000 200,000
Payment of preferred stock -- -- -- -- -- --
dividend to parent
Cancellation of treasury stock -- -- -- -- (107,850) (1,079)
----------- ----------- ----------- ----------- ----------- -----------
Balance, March 28, 1998 5,000 500,000 -- -- 39,781,270 397,813
Net loss -- -- -- -- -- --
Contributed capital -- -- -- -- -- --
Payment of preferred stock dividend
to parent -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, April 3, 1999 5,000 500,000 -- -- 39,781,270 397,813
=========== =========== =========== =========== =========== ===========
</TABLE>
-17-
(F-5)
<PAGE>
<TABLE>
<CAPTION>
Treasury stock Additional
------------------------- paid-in Retained
Shares Amount capital deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, March 30, 1996 326,580 (59,895) 1,284,471 (496,429) 1,429,226
Net loss -- -- -- (865,313) (865,313)
Contributed capital (218,730) 40,115 -- (37,928) 350,000
----------- ----------- ----------- ----------- -----------
Balance, March 29, 1997 107,850 (19,780) 1,284,471 (1,399,670) 913,913
Net loss -- -- -- (468,209) (468,209)
Contributed capital -- -- 524,719 -- 374,719
Payment of preferred stock -- -- (60,000) -- (60,000)
dividend to parent
Cancellation of treasury stock (107,850) 19,780 -- (18,701) --
----------- ----------- ----------- ----------- -----------
Balance, March 28, 1998 -- -- 1,749,190 (1,886,580) 760,423
Net loss -- -- -- (89,586) (89,586)
Contributed capital -- -- 350,000 -- 350,000
Payment of preferred stock dividend
to parent -- -- (60,000) -- (60,000)
----------- ----------- ----------- ----------- -----------
Balance, April 3, 1999 -- -- 2,039,190 (1,976,166) 960,837
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
-18-
(F-6)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Statements of Cash Flows
For each of the years in the three-year period ended April 3, 1999
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (89,586) (468,209) (865,313)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Extraordinary gain -- -- (486,379)
Depreciation and amortization 304,344 270,191 448,862
Deferred rent 196 (93,202) (44,687)
Changes in assets and liabilities affecting cash flows from operating
activities:
(Increase) decrease in:
Inventories 123,833 422,061 25,200
Prepaid expenses and other current assets 61,297 (48,411) 273,587
Refundable income taxes -- -- 9,136
Other assets 5,934 (22,163) 25,589
Increase (decrease) in:
Accounts payable 225,435 642,805 1,268,831
Accrued liabilities (142,477) (133,335) (147,049)
Liabilities subject to compromise -- -- (1,854,514)
---------- ---------- ----------
Net cash provided by (used in) operating
activities 488,976 569,737 (1,346,737)
---------- ---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (190,182) (180,192) (44,885)
---------- ---------- ----------
Net cash (used in) provided by investing
activities (190,182) (180,192) (44,885)
---------- ---------- ----------
Cash flows from financing activities:
Due to Parent 28,584 52,062 704,813
Capital contribution -- -- 350,000
Repayment of long-term obligations (732,407) (756,983) (124,687)
Dividends paid (60,000) (60,000) --
---------- ---------- ----------
Net cash (used in) provided by financing
activities (763,823) (764,921) 930,126
---------- ---------- ----------
</TABLE>
-19-
(F-7)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Statements of Cash Flows
For each of the years in the three-year period ended April 3, 1999
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net (decrease) increase in cash and cash
equivalents (465,029) (375,376) (461,496)
Cash and cash equivalents, beginning of year 1,080,694 1,456,070 1,917,566
----------- ----------- -----------
Cash and cash equivalents, end of year $ 615,665 1,080,694 1,456,070
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest $ 107,181 171,365 88,345
=========== =========== ===========
Income tax payments (refund), net $ -- -- --
=========== =========== ===========
Supplemental schedule of non-cash operating and investing
activities relating to the reorganization:
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 obligations, 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.
In 1999, the Parent forgave $350,000 of the Due to Parent, which is reflected as
a capital contribution in the accompanying financial statements.
See accompanying notes to financial statements.
-20-
(F-8)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
April 3, 1999, March 28, 1998 and March 29, 1997
(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 operates in a
single-industry segment, the operation of a chain of retail entertainment
stores. The Company is a 87.5 percent-owned subsidiary of URT Industries,
Inc. (the "Parent").
(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 nontrade
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. As of April 3, 1999, all trade and
non-trade suppliers have been paid 100 percent of their allowed claims. 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 in 1997 an extraordinary gain of
$486,379 primarily as a result of the settlement of lease rejection claims.
(3) Liquidity
As of April 3, 1999, the Company has a net worth of approximately $1
million. Since 1993, the Company has incurred operating losses and has an
accumulated deficit balance of approximately $2 million at April 3, 1999.
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
including non-traditional music outlets, such as appliance retailers and
super book stores, 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. 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
certain expenses. The Company's ability to achieve substained profitable
-21-
(F-9)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
April 3, 1999, March 28, 1998 and March 29, 1997
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.
(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 April 3,
1999 consisted of 53 weeks. The fiscal years ended March 28, 1998 and
March 29, 1997 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 $337,000 and $399,000 at April
3, 1999 and March 28, 1998, 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 5 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.
-22-
(F-10)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
April 3, 1999, March 28, 1998 and March 29, 1997
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.
(f) Reorganization Costs
Reorganization costs include professional fees relating to legal,
accounting and consulting services provided in connection with the
Chapter 11 proceedings.
(g) 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.
(h) Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of
The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long Lived Assets to Be Disposed Of. 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.
-23-
(F-11)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
April 3, 1999, March 28, 1998 and March 29, 1997
(i) Reclassifications
Certain amounts in the 1998 and 1997 financial statements have been
reclassified to conform with the 1999 presentation.
(5) Earnings Per Share
In December 1997, the Company adopted the provisions of SFAS No. 128,
Earnings Per Share, which establishes new standards for computing and
presenting earnings per share. Earnings per share for all prior periods
have been restated to reflect the provisions of this Statement.
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.
Basic and diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
April 3, March 28, March 29,
1999 1998 1997
---------------- ---------- -----------
<S> <C> <C> <C>
Basic and diluted:
Net loss plus preferred dividends $ (149,586) (528,209) (865,313)
================ ========== ===========
Weighted average shares 39,781,270 39,781,270 20,055,243
================ ========== ===========
Net loss per share $ -- (.01) (.04)
================ ========== ===========
</TABLE>
(6) Property and Equipment, Net
Property and equipment consist of the following at April 3, 1999 and March
28, 1998:
1999 1998
----------- -----------
Land $ 395,570 395,570
Building 538,093 538,093
Leasehold improvements 1,166,518 1,456,260
Furniture and equipment 645,577 677,333
Building under capitalized lease 206,964 206,964
----------- -----------
2,952,722 3,274,220
Less accumulated depreciation and amortization (1,717,152) (1,924,488)
----------- -----------
$ 1,235,570 1,349,732
=========== ===========
-24-
(F-12)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
April 3, 1999, March 28, 1998 and March 29, 1997
(7) Long-term Obligations
Long-term obligations consist of the following at April 3, 1999 and March
28, 1998:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Capitl lease obligation, due in monthly installments of
$3,382, including interest at 17.5%; final payment due
March 2005 $ 150,137 163,178
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 $768,088; final balloon payment of
$245,700 due September 2002 (note 2) 370,912 406,688
Settlement agreement with former officer/shareholder, due
in monthly installments of $5,699, final payments due
January 2000 56,990 125,465
Promissory notes, due in installments of $26,744 for
21 months and one payment of $347,675 (paid in February 1999),
plus interest at prime; collateralized by inventory (note 2) -- 615,115
----------- -----------
578,039 1,310,446
Less current portion (108,280) (732,319)
----------- -----------
$ 469,759 578,127
=========== ===========
</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 approximately $113,000 for 1999, 1998 and 1997.
The following represents future minimum lease payments under the capital
lease obligation:
Fiscal year Amount
----------- ------
2000 $ 40,600
2001 40,600
2002 40,600
2003 40,600
2004 40,600
Thereafter 40,600
--------
Total minimum lease payments 243,600
Less amount representing interest 93,463
--------
Present value of minimum lease payments $150,137
========
-25-
(F-13)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
April 3, 1999, March 28, 1998 and March 29, 1997
Maturities of long-term obligations, excluding the capital lease
obligation, to maturity, are as follows:
Fiscal year Amount
----------- ------
2000 $ 92,765
2001 35,775
2002 35,775
2003 263,587
2004 --
Thereafter --
--------
$427,902
========
The Company has a standby letter of credit of $75,600 available to a
landlord that was not drawn upon as of April 3, 1999. The standby letter of
credit is fully collateralized by a certificate of deposit, which is
included in other assets. In addition, one of the Company's banks is
obligated to provide an irrevocable letter of credit of $150,000. No
letters of credit were drawn upon as of April 3, 1999.
(8) Accrued Liabilities
Accrued liabilities consist of the following at April 3, 1999 and March 28,
1998:
1999 1998
-------- --------
Gift certificate and credit slip liability $156,818 155,873
Payroll and related benefits 42,670 102,244
Sales and real estate taxes payable 131,556 141,446
Accrued overhead expenses 223,741 259,017
Other 125,408 164,090
-------- --------
$680,193 822,670
======== ========
(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 (all of which have been paid as of April 3, 1999)
in accordance with the foregoing, and loaned $700,000 to the Company. The
loan was required 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. In 1999, the
Parent forgave $350,000. The forgiveness has been accounted for as an
additional capital contribution by the Parent.
-26-
(F-14)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
April 3, 1999, March 28, 1998 and March 29, 1997
(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 April 3, 1999. Most of the leases contain renewal
options.
The aggregate minimum rental commitments under all noncancelable
operating leases at April 3, 1999 are as follows:
Fiscal year Amount
----------- -----------
2000 $ 1,229,827
2001 1,148,775
2002 986,891
2003 948,733
2004 901,761
Thereafter 5,246,565
-----------
$10,462,552
===========
Rental expense under noncancelable operating leases, included in
selling, general and administrative expenses in the accompanying
statements of operations, amounted to $1,380,000 and $1,160,000 and
$1,217,000, respectively, for each of the years in the three-year
period ended April 3, 1999.
Rental expense on stores owned by two directors and/or their relatives
was $164,062, $131,250, and $131,250, respectively, for each of the
years in the three-year period ended April 3, 1999.
(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.
-27-
(F-15)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
April 3, 1999, March 28, 1998 and March 29, 1997
(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
employment, 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; 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 April 3, 1999, 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.
-28-
(F-16)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
April 3, 1999, March 28, 1998 and March 29, 1997
(12) Income Taxes
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $ -- -- --
State -- -- --
------- ------- -------
Deferred:
Federal -- -- --
State -- -- --
------- ------- -------
-- -- --
------- ------- -------
$ -- -- --
======= ======= =======
</TABLE>
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>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Income tax benefit at applicable statutory
tax rate of loss before income taxes
$ (30,500) (159,000) (294,000)
Add:
State income tax benefit, net of
federal benefit (2,500) (16,000) (31,000)
Change in valuation allowance 119,000 126,000 185,000
Capitalized reorganization expenses
and other permanent differences -- -- 50,000
Adjustments to net operating loss
carryovers and other deferred tax
assets (102,000) 23,000 76,000
Other 16,000 26,000 14,000
--------- --------- ---------
Income tax provision for the year $ -- -- --
========= ========= =========
</TABLE>
-29-
(F-17)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
April 3, 1999, March 28, 1998 and March 29, 1997
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at April 3, 1999 and March 28, 1998,
are presented below.
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Inventories, principally due to additional costs
capitalized for tax purposes $ 64,000 80,000
Property and equipment, net, principally due to
differences in depreciation 280,000 233,000
Accrued rent, principally due to accrual for
financial reporting purposes 25,000 23,000
NOL carryforward 1,692,000 1,608,000
Accrued expenses 48,000 46,000
Other 37,000 37,000
----------- -----------
Total gross deferred tax assets 2,146,000 2,027,000
Less valuation allowance (2,146,000) (2,027,000)
----------- -----------
Net deferred tax assets $ -- --
=========== ===========
</TABLE>
At April 3, 1999, the Company has a net operating loss carryforward for
federal income tax purposes of approximately $4,291,120 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 April 3, 1999 and March
28, 1998 was $2,146,000 and $2,027,000, respectively. The net change in the
total valuation allowance for the years ended April 3, 1999 and March 28,
1998 was an increase of approximately $119,000 and $126,000, respectively.
(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.
-30-
(F-18)
<PAGE>
(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 77 percent and 74 percent of its
merchandise from seven principal suppliers during the fiscal year ended
April 3, 1999 and March 28, 1998, 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, if the Company was to
lose one of its principal suppliers, it may have a material adverse effect
on the Company's results of operations and financial position.
-31-
(F-19)
<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 61
Brian Wolk Executive Vice-President, Chief Legal 34
Officer, General Manager-Store Operations
and Merchandising, and Director
Jason Wolk Executive Vice-President, Chief Financial Officer
(Principal Financial and Accounting Officer),
Treasurer and Director 32
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 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
-32-
<PAGE>
both companies in September, 1995, and was appointed Executive Vice-President of
both companies in March, 1996.
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-Intercorporate Agreements").
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 1999 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 $100,000 and who served as executive officers during the
1999 fiscal year:
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Long
Term
Incen.
Other Restricted Options/Stock Plan All
Name and Fiscal Salary((1)) Bonus Annual stock App. Pay-outs Other
position Year ($) ($) Compensation($) award(s)($) Rights (#) ($) Compensation($)
-------- ---- --- --- --------------- ----------- ---------- --- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allan Wolk, 1999 250,000 -0- -0- -0- -0- -0- -0-
Chairman, 1998 375,000 -0- -0- -0- -0- -0- -0-
Pres. & CEO 1997 491,667 -0- -0- -0- -0- -0- -0-
</TABLE>
- ----------
(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- Intercorporate Agreements").
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
-33-
<PAGE>
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.
Compensation Committee Interlocks and Insider Participation
PEC does not have a compensation committee or other board committee
performing equivalent functions. During the 1999 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 2, 1999, URT and its directors and officers owned approximately
93.5% of the issued and outstanding shares of the PEC common stock and URT owned
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.
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
2, 1999, 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:
-34-
<PAGE>
<TABLE>
<CAPTION>
Amount & Nature
of Beneficial Percent
Title of Class Name Ownership of Class
- -------------- ---- --------- --------
<S> <C> <C> <C>
Class A Common Executive Officers
Stock, par value and Directors
$.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
-----
Scorpio Music, Inc.
P. O. Box A
Trenton, N.J. 08691 1,195,550(4) 11.0%
Class B Common Executive Officers
Stock, par value and Directors
$.01 per share ------------------
Allan Wolk 786,654(5) 58.4%
----------
All officers and
directors as a group
(1 person) 786,654 58.4%
</TABLE>
*Less than one percent.
- --------
(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 Music, Inc.'s reported president and 100% shareholder, as
to which no confirmation of ownership has been made by URT's transfer agent. The
total of such 160,000 shares reported as owned by John T. Gervasoni and the
1,195,550 shares reported as owned by Scorpio Music Inc. is 1,355,550, or
approximately 12.5% of the outstanding URT Common A shares.
(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.
-35-
<PAGE>
As set forth in the above table and footnotes, Allan Wolk and members of
his immediate family own approximately 30% or 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, Mr. Wolk may be deemed to have effective control of
URT.
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 a specified amount, 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.
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.
-36-
<PAGE>
In order to enable PEC to effect its Chapter 11 Plan of Reorganization in
February, 1997, 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. 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 was required to be paid back by PEC with interest at the
prime rate charged by Chase Manhattan Bank, N.A..
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. On or about March 31, 1999, URT, in order to further
strengthen PEC's financial condition, agreed to forgive the remaining $350,000
principal balance, excluding interest. Such interest is required to be repaid in
accordance with the terms of the original loan documents described above.
On or about September 15, 1998, URT loaned the sum of $150,000 to PEC. Such
amounts were repaid by PEC to URT on or about December 24, 1998. On or about
April 20, 1999, URT loaned the sum of $275,000 to PEC. Such amounts are required
to be repaid on or before December 29, 1999.
On or about July 22, 1998, two of the directors and officers of URT and
PEC, Brian Wolk and Jason Wolk, each received from URT, in recognition of
substantial services provided to URT and PEC, 1,200,000 shares of the PEC common
stock owned by URT. Such shares were transferred subject to the condition that
if either such individual should voluntarily leave the employ of PEC, or his
employment is terminated by PEC for cause, during the 24 month period ending
July 21, 2000, then such individual would be required to sell his 1,200,000
shares back to URT for the amount which the parties agreed to be the value of
such 1,200,000 shares upon execution of the agreement. Such arrangements were
approved by the directors of URT (with the affected individual abstaining as to
the vote with respect to the arrangements with him).
-37-
<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 .......................................13
Independent Auditors' Report ............................14
Peaches Entertainment Corporation Financial
Statements:
Balance sheets as of March 28, 1998 and March 29,
1997 ....................................................15
Statements of operations for each of the years in
the three year period ended March 28, 1998 ..............16
Statements of shareholders' equity for each of the
years in the three year period ended March 28,
1998 ....................................................17
Statements of cash flows for each of the years in
the three year period ended March 28, 1998 ..............19
Notes to financial statements. ..........................21
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
-38-
<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.
10.36 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.
10.60 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.
-39-
<PAGE>
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.
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.
-40-
<PAGE>
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 June 26, 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 June 26, 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 June 26, 1998.
10.78 Promissory Note dated September 15, 1998 made by PEC to URT, as payee,
incorporated by reference to Exhibit 10.9 of URT's 10-K Annual Report
dated July 19, 1999.
10.79 First Addendum to Lease dated September 30, 1998 between Allan Wolk
and Sheffield Wolk, as Landlord, and PEC, as tenant, pertaining to Ft.
Lauderdale Store, incorporated by reference to Exhibit 10.10 of URT's
10-K Annual Report dated July 19, 1999.
10.80 Loan Forgiveness Agreement dated November 29, 1998 between URT and
PEC, incorporated by reference to Exhibit 10.11 of URT's 10-K Annual
Report dated July 19, 1999.
10.81 Letter Agreement dated December 23, 1998 between URT and PEC
pertaining to services of Allan Wolk, incorporated by reference to
Exhibit 10.12 of URT's 10- K Annual Report dated July 19, 1999.
10.82 Promissory Note dated April 19, 1999 made by PEC to URT, as payee,
incorporated by reference to Exhibit 10.15 of URT's 10-K Annual Report
dated July 19, 1999.
-41-
<PAGE>
10.84 Letter Agreement dated July 9, 1999 between URT and PEC pertaining to
salary of Allan Wolk, incorporated by reference to Exhibit 10.16 of
URT's 10-K Annual Report dated July 19, 1999.
27 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K on or about February 16, 1999
for the purpose of reporting a filing delay with respect to a Report
on Form 10-Q which has since been filed.
-42-
<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,
Chairman of the Board
Dated: July 26, 1999
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 26, 1999
--------------------------------
Allan Wolk,
Chairman of the Board,
President (Principal
Executive Officer) and Director
By: s/Brian Wolk July 26, 1999
--------------------------------
Brian Wolk, Executive
Vice President, Chief Legal
Officer, General Manager-Store
Operations & Merchanising,
and Director
By: s/Jason Wolk July 26, 1999
--------------------------------
Jason Wolk, Executive
Vice President, Chief Financial
Officer (Principal Financial and
Accounting Officer), Treasurer
Secretary and Director
-43-
<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 April 3, 1999 and
is qualified in its entirety by reference to such financial statements:
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOs
<FISCAL-YEAR-END> APR-03-1999
<PERIOD-END> APR-03-1999
<CASH> 615,665
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,309,600
<CURRENT-ASSETS> 3,172,387
<PP&E> 2,952,722
<DEPRECIATION> 1,717,152
<TOTAL-ASSETS> 4,582,948
<CURRENT-LIABILITIES> 3,043,767
<BONDS> 578,039
0
500,000
<COMMON> 397,813
<OTHER-SE> 63,024
<TOTAL-LIABILITY-AND-EQUITY> 4,582,948
<SALES> 17,480,467
<TOTAL-REVENUES> 17,480,467
<CGS> 10,361,351
<TOTAL-COSTS> 17,447,217
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135,765
<INCOME-PRETAX> (89,586)
<INCOME-TAX> 0
<INCOME-CONTINUING> (89,586)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (89,586)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
