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 1, 2000 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,
2000, approximately $128,000.
As of June 1, 2000 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 94% 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% of PEC's
issued and outstanding shares of common stock is 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 1, 2000 (the "2000 fiscal year"):
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Number of stores:
At beginning of period 12 12 13 13 19
Opened during period 0 1 0 0 0
Closed during period 0 (1) (1) 0 (6)
--- --- --- --- ---
At end of period 12 12 12 13 13
Subsequent to the close of the 2000 fiscal year, PEC closed one of its
stores for which the lease expired. The eleven "Peaches" stores which are in
operation are located in the following four states: Florida (five 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".
E-Commerce
In July 2000, PEC launched its e-commerce site, www.peachesmusic.com. The
site offers over 250,000 different items, including compact discs, cassettes,
DVD's as well as digital downloading. As of the date of this filing, the web
site has not had a material impact on PEC's
-2-
<PAGE>
financial condition or results of operations.
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. They have distinct,
wood paneled 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.
The vast majority of PEC's products are purchased directly from the five
major music distributors. Such distributors are: BMG(Bertelsman Music Group),
EMD (EMI Music Distribution), Sony Music, Universal Distribution and WEA
(Warner/Elektra/Atlantic). PEC does not have material long-term purchase
agreements with any of such distributors. Such arrangement is typical in the
industry.
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 financial condition and 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
-3-
<PAGE>
limitations, to all of its major suppliers, who charge a 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.
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 2000 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, 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. In addition, the expansion of e-commerce
has resulted in competition from outside the normal geographic spheres of
competition.
Employees
As of the last day of the 2000 fiscal year, PEC had approximately 220
employees. It is not a party to any collective bargaining agreements. Relations
with employees have been satisfactory and there have been no work stoppages.
Management Agreements
During the 2000 fiscal year, as in the prior fiscal year, there were three
agreements in place pertaining to the management of PEC. Two of such agreements
were between URT and PEC and the third was between URT and Allan Wolk, URT's
Chairman, President and Chief Executive Officer. Pursuant to such agreements
(hereinafter collectively referred to as the "Management Agreements") the
following arrangements were in effect: URT was required to provide to PEC during
such period the services of Mr. Wolk as PEC's Chairman, President and Chief
Executive Officer; PEC was required to pay to Mr. Wolk during such period, so
long as he continued to provide such services, a salary in the amount described
below; the amount so paid by PEC to Mr. Wolk pursuant to such arrangements was
credited against the amount
-4-
<PAGE>
payable by URT to Mr. Wolk pursuant to the employment agreement between them
(see "EXECUTIVE COMPENSATION" below); and URT and PEC were required to continue
to equitably apportion taxes so long as they continue to file a consolidated
federal return. The salary payable by PEC to Mr. Wolk pursuant to the Management
Agreements, as revised by further agreement between URT and PEC, was $250,000
during the 1999 fiscal year and $248,000 during the 2000 fiscal year.
The Management Agreements expired on March 31, 2000 but have been extended
by URT and PEC on a month-to-month basis during the current fiscal year pending
the negotiation and preparation of proposed replacement agreements. Such
extension has been on the same terms as the Management Agreements, except that
the compensation payable by PEC to Mr. Wolk has been further reduced to a rate
of $240,000 per annum during the period of such negotiations pursuant to an oral
understanding between the two companies.
During both the 2000 and 1999 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 on the
part of an institutional lender, and is also subject to mortgages on the part of
URT and Allan Wolk (see "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").
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".
As part of its on-going long term strategic planning, PEC may sell its
leasehold interest(s) in one or more of its stores.
Item 3. LEGAL PROCEEDINGS
In February, 2000, PEC amicably resolved a lawsuit with one of its
landlords which had been commenced by PEC in the Circuit Court of the Ninth
Judicial Circuit of Orange County, Florida, about representations made by the
landlord to PEC concerning the shopping center in which one of PEC's Orlando
stores is located.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
-5-
<PAGE>
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 Pink Sheets LLC:
Bid Prices Asked Prices
------------- -------------
High Low High Low
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 ended June 30, .03125 .03125 .09 .09
Quarter ended Sept. 30, .03125 .02 .09 .05
Quarter ended Dec. 31, .02 .01 .05 .02
2000
Quarter ended March 31, .20 .01 .28125 .02
Quarter through June 1, .05 .04 .07 .06
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").
-6-
<PAGE>
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, 2000, based on
information supplied by PEC's transfer agent:
Number of Record
Title of Class Holders
-------------- ---------------
Common Stock, $.01 par value 1,435
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>
April 1, April 3, March 28, March 29, March 30,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Statement Data:
Net sales $ 15,377,711 $ 17,480,467 $ 17,077,501 $ 18,109,119 $ 23,626,489
Net loss (269,521) (89,586) (468,209) (865,313) (2,416,051)
Basic and diluted earnings per share (1) -- -- (0.01) (0.04) (0.12)
Weighted average number of common
shares outstanding (1) 39,781,270 39,781,270 39,781,270 20,055,243 19,781,270
Balance Sheet Data:
Working capital excluding liabilities
subject to compromise in 1996 (133,392) 128,620 252,883 1,513,459 6,083,691
Total assets 4,212,606 4,582,948 5,353,203 6,170,065 9,442,616
Current portion of long-term
obligations 329,234 108,280 732,319 730,239 124,774
Long-term obligations 415,525 469,759 578,127 1,337,190 810,367
Shareholders' equity 631,316 960,837 760,423 913,913 1,429,226
</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.
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
-7-
<PAGE>
FISCAL YEAR ENDED APRIL 1, 2000 ("fiscal 2000") COMPARED TO FISCAL YEAR
ENDED APRIL 3, 1999 ("fiscal 1999")
Net Sales. The Company's net sales decreased during fiscal 2000 by $2.1
million or 12%. Factors that contributed to the decrease are a 6.4% decline in
comparable store sales, the fact that the Company operated one more store during
most of fiscal 1999, as well as the fact that fiscal 1999 was a 53 week year
compared to fiscal 2000 which was a 52 week year.
Cost of Sales. The Company's cost of sales as a percentage of net sales
decreased from 59.3% in fiscal 1999 to 58.1% in fiscal 2000. The decrease is
primarily due to increases in certain retail selling prices.
Expenses. Selling, general and administrative expenses (SG&A), including
depreciation, increased as a percentage of net sales from 40.5% in fiscal 1999
to 43.4% in fiscal 2000. The increase is primarily due to the decrease in sales.
FISCAL 1999 COMPARED TO FISCAL YEAR ENDED MARCH 28, 1998
("fiscal 1998")
Net Sales. The Company's net sales for 1999 increased $403,000 or 2.4%
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 %.
Cost of Sales. The Company's cost of sales, as a percentage of net sales,
decreased from 61.5 % in 1998 to 59.3 % in 1999. Such decrease is primarily
attributable to an increase in certain retail prices and increases in purchase
discounts.
Expenses. 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.
FISCAL 1998 COMPARED TO FISCAL YEAR ENDED MARCH 29, 1997
("fiscal 1997")
Net sales. 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.
Cost of Sales. The cost of sales for 1998 was lower than that for 1997 due
principally to a
-8-
<PAGE>
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 confirmation of its Amended Plan of
Reorganization ("Plan of Reorganization") on January 17, 1997, following its
voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code (the
"Chapter 11 proceeding"). Such decrease is also attributed to increases in other
purchase discounts and an increase in certain retail selling prices.
Expenses. 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.
During 1998, the Company's primary suppliers initiated steps to help
protect the retail marketplace from certain low cost retailers of music. These
steps 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, helped the
Company to restore itself to a more competitive position. Another factor which
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.
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.
At April 1, 2000, the Company had long-term obligations of $415,525. 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
-9-
<PAGE>
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.
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 Company has from time to time received from its parent, URT, loans and other
financial assistance (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS).
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements". SAB 101
provides guidance for revenue recognition under certain circumstances. It is
effective during fiscal year 2001. Management is reviewing the effect, if any,
of SAB 101 on the Company's results of operations, financial position and cash
flows.
In June 1998, the Financial Accounting Standards Board, or FASB, issued FAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". FAS 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities . It requires the Company to measure all derivatives at
fair value and to recognize them on the balance sheet as an asset or liability,
depending on the Company's rights or obligations under the applicable derivative
contract. In July 1999, the FASB issued FAS No. 137, which deferred the
effective date of adoption of FAS 133 for one more year. The Company does not
currently own any derivative instruments and does not anticipate that FAS 133
will have any effect on its results of operations, financial position or cash
flows.
In March 1998, the Accounting Standards Executive Committee issued Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use". SOP 98-1 requires all costs related to the
development of internally used software, other than those incurred during the
application development stage, to be expensed as incurred. Costs incurred during
the application development stage are required to be capitalized and amortized
over the estimated useful life of the software. SOP 98-1 was adopted by the
Company during fiscal 2000 and did not have a material effect on the Company's
financial position or results of operations.
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 condition or results of operations.
-10-
<PAGE>
Item 8. FINANCIAL STATEMENTS
PEACHES ENTERTAINMENT CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1 to F-2
FINANCIAL STATEMENTS
Balance Sheets as of April 1, 2000 and April 3, 1999 F-3
Statements of Operations for Each of the Years in the Three-Year Period Ended April 1, 2000 F-4
Statements of Shareholders' Equity for Each of the Years in the Three-Year Period Ended
April 1, 2000 F-5
Statements of Cash Flows for Each of the Years in the Three-Year Period Ended
April 1, 2000 F-6
Notes to Financial Statements F-7 to F-17
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Directors and Shareholders
Peaches Entertainment Corporation
Hallandale, Florida
We have audited the accompanying balance sheet of Peaches Entertainment
Corporation (the Company) as of April 1, 2000, and the related statements of
operations, shareholders' equity and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides 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 1, 2000, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
RACHLIN COHEN & HOLTZ LLP
Miami, Florida
June 12, 2000, except for Note 8, as to which
date is September 14, 2000
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Directors and Shareholders
Peaches Entertainment Corporation
Hallandale, Florida
We have audited the accompanying balance sheet of Peaches Entertainment
Corporation (the "Company") as of April 3, 1999, and the related statements of
operations, shareholders' equity and cash flows for each of the years in the
two-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 the results of its operations and its cash
flows for each of the years in the two-year period ended April 3, 1999 in
conformity with generally accepted accounting principles.
KPMG LLP
Fort Lauderdale, Florida
May 28, 1999
F-2
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
BALANCE SHEETS
APRIL 1, 2000 AND APRIL 3, 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 733,697 $ 615,665
Inventories 2,058,373 2,309,600
Prepaid expenses and other current assets 151,654 247,122
----------- -----------
Total current assets 2,943,724 3,172,387
Property and Equipment 1,106,617 1,235,570
Other Assets 162,265 174,991
----------- -----------
Total assets $ 4,212,606 $ 4,582,948
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,116,659 $ 2,240,109
Accrued liabilities 616,038 680,193
Note Payable to Parent 275,000 --
Current portion of long-term obligations 54,234 108,280
Current portion of Due to Parent 15,185 15,185
----------- -----------
Total current liabilities 3,077,116 3,043,767
Long-Term Obligations 415,525 469,759
Due to Parent 30,370 45,555
Deferred Rent 58,279 63,030
----------- -----------
Total liabilities 3,581,290 3,622,111
----------- -----------
Commitments, Contingencies and Subsequent Events -- --
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 1, 2000 and April 3, 1999 397,813 397,813
Additional paid-in capital 1,979,190 2,039,190
Accumulated deficit (2,245,687) (1,976,166)
----------- -----------
Total shareholders' equity 631,316 960,837
----------- -----------
Total liabilities and shareholders' equity $ 4,212,606 $ 4,582,948
=========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
STATEMENTS OF OPERATIONS
FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED APRIL 1, 2000
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Net Sales $ 15,377,711 $ 17,480,467 $ 17,077,501
------------ ------------ ------------
Costs and Expenses:
Cost of sales 8,940,342 10,361,351 10,501,123
Selling, general and administrative expenses 6,440,301 6,781,522 6,582,377
Depreciation and amortization 232,994 304,344 270,191
------------ ------------ ------------
15,613,637 17,447,217 17,353,691
------------ ------------ ------------
Income (Loss) from Operations (235,926) 33,250 (276,190)
------------ ------------ ------------
Other Income (Expense):
Interest expense (56,564) (135,765) (219,148)
Interest income 22,969 12,929 27,129
------------ ------------ ------------
(33,595) (122,836) (192,019)
------------ ------------ ------------
Loss Before Income Taxes (269,521) (89,586) (468,209)
Provision for Income Taxes -- -- --
------------ ------------ ------------
Net Loss $ (269,521) $ (89,586) $ (468,209)
============ ============ ============
Basic and Diluted Net Loss Per Common Share $ -- $ -- $ (0.01)
============ ============ ============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED APRIL 1, 2000
<TABLE>
<CAPTION>
Common Stock
Preferred Stock Common Stock Subscribed
--------------- ------------ ----------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 29, 1997 5,000 $ 500,000 19,889,120 $ 198,892 20,000,000 $ 350,000
Net Loss -- -- -- -- -- --
Contributed Capital -- -- 20,000,000 200,000 (20,000,000) (350,000)
Payment of Preferred Stock Dividend
to Parent ($12.00 per share) -- -- -- -- -- --
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 ($12.00 per share) -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, April 3, 1999 5,000 500,000 39,781,270 397,813 -- --
Net Loss -- -- -- -- -- --
Payment of Preferred Stock Dividend
to Parent ($12.00 per share) -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, April 1, 2000 5,000 $ 500,000 39,781,270 $ 397,813 -- $ --
=========== =========== =========== =========== =========== ===========
<CAPTION>
Treasury Stock Additional
-------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
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 Dividend
to Parent ($12.00 per share) -- -- (60,000) -- (60,000)
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 ($12.00 per share) -- -- (60,000) -- (60,000)
----------- ----------- ----------- ----------- -----------
Balance, April 3, 1999 -- -- 2,039,190 (1,976,166) 960,837
Net Loss -- -- -- (269,521) (269,521)
Payment of Preferred Stock Dividend
to Parent ($12.00 per share) -- -- (60,000) -- (60,000)
----------- ----------- ----------- ----------- -----------
Balance, April 1, 2000 -- $ -- $ 1,979,190 $(2,245,687) $ 631,316
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
STATEMENTS OF CASH FLOWS
FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED APRIL 1, 2000
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (269,521) $ (89,586) $ (468,209)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 232,994 304,344 270,191
Changes in operating assets and liabilities:
(Increase) decrease in:
Inventories 251,227 123,833 422,061
Prepaid expenses and other current assets 95,468 61,297 (48,411)
Other assets 12,726 5,934 (22,163)
Increase (decrease) in:
Accounts payable (123,450) 225,435 642,805
Accrued liabilities (64,155) (142,477) (133,335)
Deferred rent (4,751) 196 (93,202)
----------- ----------- -----------
Net cash provided by operating activities 130,538 488,976 569,737
----------- ----------- -----------
Cash Flows from Investing Activities:
Purchase of property and equipment (104,041) (190,182) (180,192)
----------- ----------- -----------
Net cash used in investing activities (104,041) (190,182) (180,192)
----------- ----------- -----------
Cash Flows from Financing Activities:
Payments on amounts due to Parent (15,185) 28,584 52,062
Proceeds received from loans from Parent 275,000 -- --
Repayment of long-term obligations (108,280) (732,407) (756,983)
Dividends paid (60,000) (60,000) (60,000)
----------- ----------- -----------
Net cash provided by (used in) financing activities 91,535 (763,823) (764,921)
----------- ----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 118,032 (465,029) (375,376)
Cash and Cash Equivalents, Beginning 615,665 1,080,694 1,456,070
----------- ----------- -----------
Cash and Cash Equivalents, Ending $ 733,697 $ 615,665 $ 1,080,694
=========== =========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest $ 56,564 $ 107,181 $ 171,365
=========== =========== ===========
Supplemental Schedule of Non-Cash Operating and
Investing Activities:
In 1999 and 1998, the Parent forgave $350,000 and $374,719,
respectively, of the due to Parent, which is reflected as a
capital contribution in the accompanying financial statements.
</TABLE>
See notes to financial statements.
F-6
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
APRIL 1, 2000, APRIL 3, 1999 AND MARCH 28, 1998
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
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 an 87.5% owned subsidiary of URT
Industries, Inc. (the Parent).
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 year ended April 1,
2000 consists of 52 weeks. The fiscal year ended April 3, 1999
consisted of 53 weeks. The fiscal year ended March 28, 1998 consisted
of 52 weeks.
Cash Equivalents
The Company considers highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
There were no cash equivalents at April 1, 2000. Cash equivalents
totaled approximately $337,000 at April 3, 1999. 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.
Inventories
Inventories, which are 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.
Property and Equipment
Property and equipment are stated at cost and 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.
Advertising
Advertising costs are charged to expense as incurred.
F-7
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 from 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 provision of Statement
of Financial Accounting Standards (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. A valuation allowance is provided if it is more likely
than not that the Company will not realize the benefits of a deferred
tax asset.
Use of Estimates
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.
Fair Value of Financial Instruments
The fair value of the Company's long-term debt, note payable to
Parent, 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.
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
provision 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 intangible
assets be reviewed for impairment whenever events or changes in
circumstances indicate that
F-8
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of
(Continued)
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 exceeds 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.
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin, or SAB No. 101, "Revenue Recognition in Financial
Statements". SAB 101 provides guidance for revenue recognition under
certain circumstances. The staff accounting bulletin is effective
during fiscal year 2001. SAB 101 is not expected to have an effect on
the Company's consolidated results of operations, financial position
and cash flows.
In June 1998, the Financial Accounting Standards Board, or FASB,
issued FAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities". FAS 133 establishes accounting and reporting standards
for derivative instruments and for hedging activities. It requires us
to measure all derivatives at fair value and to recognize them on the
balance sheet as an asset or liability, depending on our rights or
obligations under the applicable derivative contract. In July 1999,
the FASB issued FAS No. 137 that deferred the effective date of
adoption of FAS 133 for one more year. The Company currently has no
derivative instruments or hedging activities.
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". SOP 98-1
requires all costs related to the development of internally used
software other than those incurred during the application development
stage to be expensed as incurred. Costs incurred during the
application development stage are required to be capitalized and
amortized over the estimated useful life of the software. SOP 98-1 was
adopted by the Company during the fiscal year 2000 and did not have a
material effect on the Company's financial position or results of
operations.
Reclassifications
Certain amounts in the 1999 and 1998 financial statements have been
reclassified to conform to the 2000 presentation.
F-9
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 2. LIQUIDITY
As of April 1, 2000, the Company reflected shareholders' equity of
approximately $631,000. Since 1993, the Company has incurred operating
losses and has an accumulated deficit balance of approximately $2.2 million
at April 1, 2000. Several factors, which have had a positive effect on the
Company's performance, include the increase in gross profit percentage and
reduction of certain expenses. The Company's ability to achieve sustained
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.
NOTE 3. BUSINESS AND CREDIT CONCENTRATIONS
Competition
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 has 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.
Significant Vendors
The Company purchased approximately 72 percent of its merchandise from
five principal suppliers during each of the fiscal years ended April
1, 2000 and April 3, 1999, respectively. Purchases from given
suppliers are, to a greater extent, determined by which of them is
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 were to lose one of its principal suppliers, it may
have a material adverse effect on the Company's results of operations
and financial position.
F-10
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 3. BUSINESS AND CREDIT CONCENTRATIONS (Continued)
Cash and Cash Equivalents
The Company maintains deposits at financial institutions that, from
time to time, may exceed federally insured limits. At April 1, 2000,
the Company had deposits in excess of federally insured limits of
approximately $390,000. The Company maintains its cash with high
quality financial institutions, which the Company believes limits
these risks.
NOTE 4. NET LOSS PER COMMON SHARE
The Company follows the provisions of SFAS No. 128, Earnings Per Share, for
computing and presenting earnings per common share. Basic and diluted net
loss has been computed by dividing net loss, less preferred dividends, by
the weighted average number of common shares outstanding during the period.
Basic and diluted net loss per common share was calculated as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Basic and diluted:
Net loss $ (269,521) $ (89,586) $ (468,209)
Preferred dividends (60,000) (60,000) (60,000)
------------ ------------ ------------
$ (329,521) $ (149,586) $ (528,209)
============ ============ ============
Weighted average shares 39,781,270 39,781,270 39,781,270
============ ============ ============
Net loss per common share $ -- $ -- $ (0.01)
============ ============ ============
</TABLE>
NOTE 5. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Land $ 395,570 $ 395,570
Building 538,093 538,093
Leasehold improvements 502,268 1,166,518
Furniture and equipment 597,019 645,577
Building under capital lease 206,964 206,964
------------ -----------
2,239,914 2,952,722
Less accumulated depreciation and amortization 1,133,297 1,717,152
------------ -----------
$ 1,106,617 $ 1,235,570
============ ===========
</TABLE>
Depreciation expense attributable to the capital lease was approximately
$10,300 for each of the years in the three-year period ended April 1, 2000.
F-11
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6. LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Capital lease obligation, due in monthly installments of $3,382
including interest at 17.5%; final payment due March 2005. $ 134,622 $ 150,137
Mortgage payable, due in monthly installments of $2,981, plus interest
at prime plus .5% (9.5% at April 1, 2000); collateralized by the
mortgaged property with depreciated cost of approximately $355,000;
final balloon payment of approximately $263,000 due September 2002. 335,137 370,912
Settlement agreement with former officer/shareholder; due in monthly
installments of $5,699; final payment paid January 2000. -- 56,990
--------- ---------
469,759 578,039
Less current portion 54,234 108,280
--------- ---------
$ 415,525 $ 469,759
========= =========
</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 $97,000, $129,000 and $113,000, respectively,
for each of the years in the three-year period ended April 1, 2000.
The following represents the future minimum lease payments under the
capital lease obligation:
<TABLE>
<S> <C>
Fiscal year:
2001 $ 40,584
2002 40,584
2003 40,584
2004 40,584
2005 40,584
---------
Total minimum lease payments 202,920
Less amount representing interest 68,298
---------
Present value of minimum lease payments $ 134,622
=========
</TABLE>
Maturities of long-term obligations, excluding the capital lease
obligation, are as follows:
<TABLE>
<S> <C>
Fiscal year:
2001 $ 35,775
2002 35,775
2003 263,587
---------
$ 335,137
=========
</TABLE>
The Company has a standby letter of credit of $81,000 available to a
landlord. 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 1,
2000 and April 3, 1999.
F-12
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 7. ACCRUED LIABILITIES
2000 1999
---- ----
Gift certificate and credit slip liability $ 133,603 $ 156,818
Payroll and related benefits 41,970 42,670
Sales and other taxes payable 104,303 131,556
Accrued overhead expenses 121,559 223,741
Other 214,603 125,408
--------- ---------
$ 616,038 $ 680,193
========= =========
NOTE 8. RELATED PARTY TRANSACTIONS
Due to Parent
In 1999, the Parent forgave $350,000, which represented the balance
remaining on an original loan of $700,000 made to the Company in 1997.
The forgiveness has been accounted for as an additional capital
contribution by the Parent. The balance at April 1, 2000 represents
the unpaid interest on the original loan with final payment due in
fiscal year 2003.
Note Payable to Parent
In April 1999, the Parent loaned the Company $275,000. This loan is
unsecured and is evidenced by a promissory note that bears no interest
with an original due date of December 29, 1999. On or about September
14, 2000, the Parent and the Company entered into an agreement under
which the following arrangements were agreed to: The Company will use
its best efforts to obtain the approval of the holder of the first
mortgage on its Mobile, Alabama property to a proposed arrangement
under which the Company would transfer such Mobile, Alabama property
to the Parent. The Parent would forgive the $275,000 debt owed by the
Company to it pursuant to the April, 1999 loan, the Parent would be
responsible for the amounts owed pursuant to the outstanding loan from
the holder of such first mortgage in accordance with the same loan
repayment schedule which is already in place with the Company. The
Company would remain responsible for the amounts owed pursuant to the
existing second and third mortgages to the Chairman of the Board and
the Parent. The Parent would lease the Mobile, Alabama property to the
Company for a period of ten years with a ten year renewal option at a
rent of $90,000 per annum ($103,500 per annum during the renewal term,
if any) and the Parent, upon satisfaction of certain conditions, would
deed over to the Company a minority interest in such property. Such
agreement further provides that if the approval of the holder of such
first mortgage is not obtained by November 1, 2000, then the Parent
and the Company shall not pursue such proposed arrangements between
them, and the Parent will instead extend the date by which the April,
1999 loan must be repaid to September 1, 2001. In anticipation of the
possible approval of the holder of such first mortgage the Parent and
the Company have entered into a lease, which is expressly subject to
such approval and the above described proposed engagements between the
Parent and the Company, under which the Parent would lease the Mobile,
Alabama property to the Company on the terms and conditions described
above. Such arrangements were approved by the directors.
F-13
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 8. RELATED PARTY TRANSACTIONS (Continued)
Related Party Loan
In May 2000, the Chairman of the Board, who is also an officer and
director of the Company, loaned the Company $200,000. This loan, which
bears interest at 12% and is due December 20, 2000, is evidenced by a
promissory note and collateralized by a mortgage on property owned by
the Company.
NOTE 9. COMMITMENTS AND CONTINGENCIES
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 during the years ended April 3, 1999 and
March 28, 1998, respectively. There was no percentage rent incurred
during the year ended April 1, 2000. Most of the leases contain
renewal options.
The aggregate minimum rental commitments at April 1, 2000 under all
non-cancelable operating leases, which have various expiration dates
through 2017, are approximately as follows:
2001 $1,097,000
2002 772,000
2003 697,000
2004 537,000
2005 360,000
Thereafter 2,697,000
----------
$6,160,000
==========
Rental expense under non-cancelable operating leases, included in
selling, general and administrative expenses in the accompanying
statements of operations, amounted to approximately $1,320,000,
$1,380,000 and $1,160,000, respectively, for each of the years in the
three-year period ended April 1, 2000.
Rental expense on a store owned by one director and his relative was
approximately $174,000, $164,000 and $131,000, respectively, for each
of the years in the three-year period ended April 1, 2000.
Legal Matters
In February 2000, the Company amicably resolved a lawsuit with one of
its landlords which had been commenced in the Circuit Court in the
Ninth Judicial Circuit of Orange County, Florida, about
representations made by the landlord to the Company concerning the
shopping center in which one of the Orlando stores is located.
F-14
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 9. COMMITMENTS AND CONTINGENCIES (Continued)
Legal Matters (Continued)
In addition, 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 would not have a
material adverse effect on the financial position or results of
operations of the Company.
Management Agreements
During the 2000 fiscal year, as in the prior fiscal year, there were
three agreements in place pertaining to the management of the Company.
Two of such agreements were between the Company and the Parent and the
third was between the Parent and the Parent's Chairman, President and
Chief Executive Officer. Pursuant to such agreements (hereinafter
collectively referred to as the "Management Agreements"), the
following arrangements were in effect: the Parent was required to
provide to the Company during such period the services of the Parent's
Chairman, President and Chief Executive Officer; the Company was
required to pay the executive's compensation during such period, so
long as he continued to provide such services; the amount so paid by
the Company pursuant to such arrangements was credited against the
amount payable by the Parent pursuant to the employment agreement in
effect and the Parent and the Company were required to continue to
equitably apportion taxes so long as they continue to file a
consolidated federal return.
The Management Agreements expired on March 31, 2000, but have been
extended on a month-to-month basis during the current fiscal year
pending the negotiation and preparation of proposed replacement
agreements. Such extension has been on the same terms as the
Management Agreements, except that the compensation payable by the
Company has been reduced during the period of such negotiations.
NOTE 10. SHAREHOLDERS' EQUITY
For each of the years in the three-year period ended April 1, 2000, the
Company had 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 authorized, issued and outstanding. The Parent is the owner of all
outstanding shares of Preferred Stock. 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 liquidating value for both the Series A
and Series B shares is par value plus all accrued and unpaid dividends.
F-15
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 11. INCOME TAXES
2000 1999 1998
---- ---- ----
Current:
Federal $ -- $ -- $ --
State -- -- --
---- ---- ----
-- -- --
---- ---- ----
Deferred:
Federal -- -- --
State -- -- --
---- ---- ----
$ -- $ -- $ --
==== ==== ====
Differences between the income tax provision and the amount computed by
applying the statutory federal income tax rate of 34% to pretax loss were
as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Income tax benefit at applicable statutory tax
rate of loss before income taxes $ (92,000) $ (30,500) $ (159,000)
Add:
State income tax benefit, net of federal benefit (15,000) (2,500) (16,000)
Change in valuation allowance 246,000 119,000 126,000
Adjustments to net operating loss carryovers
and other deferred tax assets (177,000) (102,000) 23,000
Other 38,000 16,000 26,000
----------- ----------- -----------
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 April 1, 2000 and April 3, 1999, are
presented below:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Deferred tax assets:
Inventories, principally due to additional costs
capitalized for tax purposes $ 61,000 $ 64,000
Property and equipment, net, principally due to
differences in depreciation 298,000 280,000
Accrued rent, principally due to accrual for
financial reporting purposes 44,000 25,000
NOL carryforward 1,952,000 1,692,000
Accrued expenses 7,000 48,000
Other 30,000 37,000
----------- -----------
Total gross deferred tax assets 2,392,000 2,146,000
Less valuation allowance (2,392,000) (2,146,000)
----------- -----------
Net deferred tax assets $ -- $ --
=========== ===========
</TABLE>
At April 1, 2000, the Company has a net operating loss carryforward for
federal income tax purposes of approximately $4,500,000 which is available
to offset future federal taxable income, if any, through 2014.
F-16
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 11. INCOME TAXES (Continued)
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 1, 2000 and April
3, 1999 was $2,392,000 and $2,146,000, respectively. The net change in the
total valuation allowance for the years ended April 1, 2000 and April 3,
1999 was an increase of approximately $246,000 and $119,000, respectively.
F-17
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
In March, 2000, PEC selected Rachlin Cohen & Holtz LLP ("RCH") to replace
KPMG LLP ("KPMG") as its independent public accountants. The decision to change
auditors was approved by resolution of the full board of directors.
There were no disagreements with KPMG, during either of the two most recent
fiscal years, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of KPMG, would have caused KPMG to make
reference to the subject matter of the disagreements in connection with its
audit report with respect to financial statements of PEC and there was no
disagreement or difference of opinion with KPMG regarding any "reportable
event," as that term is defined in Item 304(a)(1)(v) of Regulation S-K. KPMG's
report on the financial statements of PEC for each of the past two fiscal years
did not contain any adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
Neither PEC nor anyone on behalf of PEC consulted RCH, during either of the
two most recent fiscal years, regarding either the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the financial statements of PEC or
any matter that was either the subject of a disagreement, within the meaning of
Item 304(a)(1)(iv) of Regulation S-K, or any reportable event, as that term is
defined in Item 304 (a)(1)(v) of Regulation S-K.
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), Director 62
Brian Wolk Executive Vice-President, Chief Legal 35
Officer, General Manager-Store
Operations and Merchandising, Director
-11-
<PAGE>
Jason Wolk Executive Vice-President, Chief Financial Officer
(Principal Financial and Accounting Officer),
General Manager-Internet Operations,
Treasurer, Director 33
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 by KPMG Peat Marwick LLP, an
international accounting and consulting firm. 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.
The term of office of each director continues until the next annual meeting
of the stockholders and until his or her successor is elected. Allan 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 2000 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 $100,000 and who served as executive officers during the
2000 fiscal year:
-12-
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Long
Term
Incen.
Other Restricted Options/Stock Plan All
Name and Fiscal Salary((1)) Bonus Annual stock App. Pay-outs Other
position Year ($) ($) Compensation ($) award(s)($) Rights (#) ($) Compensation($)
----------- ---- --- --- ---------------- ----------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allan Wolk, 2000 248,000 -0- -0- -0- -0- -0- -0-
Chairman, 1999 250,000 -0- -0- -0 -0- -0- -0-
Pres. & CEO 1998 375,000 -0- -0- -0- -0- -0- -0-
</TABLE>
----------
(1) Mr. Wolk is an employee of URT. 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").
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, 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 1, 2000, URT and its directors and officers owned approximately
94% of
-13-
<PAGE>
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.
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, 2000, 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:
Amount & Nature
of Beneficial Percent
Title of Class Name Ownership of Class
-------------- ---- ---------------- --------
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
----------
(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.
-14-
<PAGE>
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%
*Less than one percent.
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. In
September 1998, PEC entered in an addendum to lease with Allan Wolk and
Sheffield Wolk under which the following lease changes were agreed to: the
expiration date of such lease was extended for a period of five years, until
March 31, 2008, at an increased rental rate during such five year period; PEC
obtained an option to renew the lease for up to two successive five-year renewal
terms (until March 31, 2018), at further increased rental rates, if such options
are exercised; and the repair and fire insurance provisions were modified. The
lease addendum was approved by the directors who had no direct personal interest
in the transaction. In the opinion of management, the terms were as reasonable
as those which could have been obtained from unaffiliated third parties.
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.
In April, 2000, PEC's landlord, Allan Wolk and Sheffield Wolk, agreed with
PEC to extend the above-described Orlando, Florida lease to March 31, 2010, to
reduce the rent payable under the lease to $145,000 per year from April 1, 2000
through such revised expiration date, and to grant PEC the option to re-new the
lease for up to two successive five-year periods at a reduced rent of $152,250
per annum during the first five-year period and at a reduced rent of $159,862
per annum during the second five-year period. Such arrangements were approved by
the directors (Allan Wolk abstaining).
In April, 1989, PEC's board of directors authorized PEC to enter into
agreements with
----------
(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.
-15-
<PAGE>
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.
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. PEC agreed to reimburse to URT any amounts for which URT might become
liable pursuant to such guaranty on the part of URT. The loan from URT and the
agreement to reimburse URT for any guaranty- related liabilities were secured by
a mortgage on PEC's Mobile, Alabama store.
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 payable at the prime
rate charged by Chase Manhattan Bank, N.A.
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 (the "April, 1999 loan").
Such amounts had been required to be repaid on or before December 29, 1999. On
or about August 1, 2000, URT and PEC entered into an agreement under which the
following arrangements were agreed to: PEC will use its best efforts to obtain
the approval of the holder of the first mortgage on its Mobile, Alabama property
to a proposed arrangement under which PEC would transfer such Mobile, Alabama
property to URT, URT would forgive the $275,000 debt owed by PEC to it pursuant
to the April, 1999 loan, URT would be responsible for the amounts owed pursuant
to the outstanding loan from the holder of such first mortgage in accordance
with the same loan repayment schedule which is already in place with PEC, PEC
would remain responsible for the amounts owed pursuant to the existing second
and third mortgages to Allan Wolk and URT, URT would lease the Mobile, Alabama
property to PEC for a period of ten years with a ten year renewal option at a
rent of $90,000 per annum ($103,500 per annum during the renewal term, if any)
and URT, upon satisfaction of certain conditions, would deed over to Peaches a
minority interest in such property. As revised on October 30, 2000, such
agreement further provides that if the approval of the holder of
-16-
<PAGE>
such first mortgage is not obtained by December 1, 2000, then URT and PEC shall
not pursue such proposed arrangements between them, and URT will instead extend
the date by which the April, 1999 loan must be repaid to September 1, 2001. In
anticipation of the possible approval of the holder of such first mortgage URT
and PEC have entered into a lease, which is expressly subject to such approval
and the above described proposed arrangements between URT and PEC, under which
URT would lease the Mobile, Alabama property to PEC on the terms and conditions
described above. Such arrangements were approved by the directors.
On or about May 11, 2000, URT's Chairman, Allan Wolk, loaned the sum of
$200,000 to PEC. Such loan is required to be repaid by PEC by no later than
December 20, 2000 with interest at the rate of 12% per annum. As security for
such loan, PEC agreed to provide a mortgage on its Mobile, Alabama store, and
URT, as an inducement to the loan of such funds on such terms, agreed to
subordinate its second mortgage with respect to such store to the mortgage so
granted to Mr. Wolk. Such arrangements were approved by the directors (Allan
Wolk abstaining).
-17-
<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 F-1
Independent Auditors' Reports F-1
Peaches Entertainment Corporation
Financial Statements:
Balance sheets as of April 1, 2000 and
April 3, 1999 F-3
Statements of operations for each of
the years in the three year period
ended April 1, 2000 F-4
Statements of shareholders' equity for each of the
years in the three year period ended April 1, 2000 F-5
Statements of cash flows for each of the years in
the three year period ended April 1, 2000 F-6
Notes to financial statements. F-7
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
-18-
<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.
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.
-19-
<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.
-20-
<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.
10.83 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.
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.
-21-
<PAGE>
10.85 Second Amendment to Lease dated April 1, 2000 between Allan Wolk and
Sheffield Wolk, as landlord, and PEC, as tenant, pertaining to Orlando
store.
10.86 Promissory Note dated May 11, 2000 from PEC in favor of Allan Wolk
Individual Retirement Account Rollover.
10.87 Mortgage with Assignment of Rents, Security Agreement and Fixture
Filing dated May 11, 2000 between PEC, as mortgagor, and Allan Wolk
Individual Retirement Account Rollover, as mortgagee.
10.88 Subordination Agreement dated May 11, 2000 between PEC, URT and Allan
Wolk Individual Retirement Account Rollover.
10.89 Letter Agreement dated August 1, 2000 between URT and PEC pertaining
to Mobile, Alabama property and 1999 loan from URT to PEC.
10.90 Letter Agreement dated April 14, 2000 between URT and PEC pertaining
to fiscal 2000 compensation payable by PEC to Allan Wolk.
10.91 Lease Agreement dated August 1, 2000 between URT and PEC pertaining to
Mobile, Alabama property.
10.92 Letter Agreement dated October 30, 2000 between URT and PEC pertaining
to extension of deadline in August 1, 2000 letter agreement.
27 Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K dated March 29, 2000 was filed by PEC on or about such date
for the purpose of reporting on PEC's change of accountants.
-22-
<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: November 22, 2000
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 November 22, 2000
-------------------------------
Allan Wolk,
Chairman of the Board ,
President (Principal
Executive Officer) and Director
By: /s/ Brian Wolk November 22, 2000
-------------------------------
Brian Wolk, Executive
Vice President, Chief Legal
Officer and Director
By: /s/ Jason Wolk November 22, 2000
--------------------------------
Jason Wolk, Executive
Vice President, Chief Financial
Officer (Principal Financial and
Accounting Officer), Treasurer
Secretary and Director
-23-
