UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended January 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 I.D. No.)
Incorporation or Organization)
1180 E Hallandale Beach Blvd., Hallandale, FL 33009
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (954) 454-5554
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrants were
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
YES _X_ NO ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest
At February 25, 2000, there were outstanding:
39,781,270 shares of common stock
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Index
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - January 1, 2000, April 3, 1999 and
December 26, 1998 (Unaudited) 3
Condensed Statements of Operations and Retained Deficit - Three
Months Ended January 1, 2000 and December 26, 1998 (Unaudited) 4
Condensed Statements of Operations and Retained Deficit - Nine
Months Ended January 1, 2000 and December 26, 1998 (Unaudited) 5
Condensed Statements of Cash Flows - Nine Months Ended
January 1, 2000 and December 26, 1998 (Unaudited) 6
Notes to Condensed Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PEACHES ENTERTAINMENT CORPORATION
Condensed Balance Sheets
January 1, 2000, April 3, 1999 and December 26, 1998
(unaudited)
<TABLE>
<CAPTION>
January 1, April 3, December 26,
2000 1999 1998
----------- ----------- ------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,423,441 615,665 1,576,469
Inventories 2,240,646 2,309,600 2,821,832
Prepaid expenses and other current assets 256,997 247,122 263,578
----------- ----------- -----------
Total current assets 3,921,084 3,172,387 4,661,879
Property and equipment, net 1,205,126 1,235,570 1,345,558
Other assets 199,506 174,991 184,369
----------- ----------- -----------
$ 5,325,716 4,582,948 6,191,806
=========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term obligations $ 59,149 108,280 493,436
Current portion of due to Parent 290,185 15,185 --
Accounts payable 2,822,683 2,240,109 3,033,582
Accrued liabilities 763,844 680,193 1,019,828
----------- ----------- -----------
Total current liabilities 3,935,861 3,043,767 4,546,846
Long-term obligations 429,388 469,759 488,625
Due to parent 45,555 45,555 413,466
Deferred rent 96,000 63,030 61,911
----------- ----------- -----------
Total liabilities 4,506,804 3,622,111 5,510,848
----------- ----------- -----------
Shareholders' equity:
Preferred stock, $100 par value; 50,000 shares authorized;
5,000 shares issued and outstanding 500,000 500,000 500,000
Common stock, $.01 par value; 40,000,000 shares authorized;
39,781,170 shares issued 397,813 397,813 397,813
Additional paid-in capital 1,994,190 2,039,190 1,704,190
Retained deficit (2,073,091) (1,976,166) (1,921,045)
----------- ----------- -----------
Total shareholders' equity 818,912 960,837 680,958
Commitments and contingencies
----------- ----------- -----------
$ 5,325,716 4,582,948 6,191,806
=========== =========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
3
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PEACHES ENTERTAINMENT CORPORATION
Condensed Statements of Operations and Retained Deficit
Three months ended January 1, 2000 and
December 26, 1998
(Unaudited)
January 1, December 26,
2000 1998
----------- -----------
Net sales $ 4,617,637 5,331,522
----------- -----------
Cost and expenses:
Cost of sales 2,710,500 3,141,285
Selling, general and administrative expenses 1,592,155 1,692,210
Depreciation and amortization 29,930 58,429
----------- -----------
4,332,585 4,891,924
Income from operations 285,052 439,598
----------- -----------
Other (expense) income:
Interest expense (13,995) (37,312)
Interest income 3,029 1,040
----------- -----------
(10,966) (36,272)
Net income before income taxes 274,086 403,326
Provision for income taxes -- --
----------- -----------
Net income 274,086 403,326
Retained deficit, beginning of period (2,347,177) (2,324,371)
----------- -----------
Retained deficit, end of period $(2,073,091) (1,921,045)
=========== ===========
Basic and diluted earnings per share $ 0.01 0.01
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Condensed Statements of Operations and Retained Deficit
Nine months ended January 1, 2000 and December 26, 1998
(Unaudited)
January 1, December 26,
2000 1998
------------ ------------
Net sales $ 11,701,838 13,126,196
------------ ------------
Costs and expenses:
Cost of sales 6,845,172 7,796,882
Selling, general and administrative expenses 4,792,322 5,086,526
Depreciation and amortization 126,939 174,768
------------ ------------
11,764,433 13,058,176
------------ ------------
(Loss) income from operations (62,595) 68,020
------------ ------------
Other (expense) income:
Interest expense (42,700) (109,574)
Interest income 8,370 7,089
------------ ------------
(34,330) (102,485)
Net loss before income taxes (96,925) (34,465)
Provision for income taxes -- --
------------ ------------
Net loss (96,925) (34,465)
Retained deficit, beginning of period (1,976,166) (1,886,580)
------------ ------------
Retained deficit, end of period $ (2,073,091) (1,921,045)
============ ============
Basic and diluted loss per share $ -- --
============ ============
See accompanying notes to condensed financial statements.
5
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Condensed Statements of Cash Flows
Nine months ended January 1, 2000 and December 26, 1998
(Unaudited)
<TABLE>
<CAPTION>
January 1, December 26,
2000 1998
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (96,925) (34,465)
----------- -----------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 126,939 174,768
Deferred rent 32,970 (923)
Changes in assets and liabilities affecting cash flows from
operating activities:
(Increase) decrease in:
Inventories 68,954 (388,399)
Prepaid expenses and other current assets (9,875) 44,841
Other assets (24,515) (3,444)
Increase (decrease) in:
Accounts payable 582,574 1,018,908
Accrued liabilities 83,651 197,158
----------- -----------
Net cash provided by operating activities 763,773 1,008,444
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (96,496) (170,594)
----------- -----------
Net cash used in investing activities (96,496) (170,594)
----------- -----------
Cash flows from financing activities:
Repayment of long-term obligations (89,501) (328,385)
Dividends paid (45,000) (45,000)
Due to parent 275,000 31,310
----------- -----------
Net cash provided by (used in) financing activities 140,499 (342,075)
----------- -----------
Net increase in cash and cash equivalents 807,776 495,775
Cash and cash equivalents, beginning of period 615,665 1,080,694
----------- -----------
Cash and cash equivalents, end of period $ 1,423,441 1,576,469
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 42,700 28,600
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
6
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
January 1, 2000 and December 26, 1998
(unaudited)
(1) Basis of Financial Statement Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore,
do not include all footnotes and information necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. However, in the
opinion of management, all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation have been made.
It is suggested that the accompanying unaudited condensed financial
statements be read in conjunction with the financial statements and notes
included in the Peaches Entertainment Corporation (the "Company") annual
report on Form 10-K for the year ended April 3, 1999.
As of January 1, 2000, the Company was a 87.5 percent-owned subsidiary of
URT Industries, Inc. (the "Parent").
The results of operations for the nine months ended January 1, 2000, are
not necessarily indicative of the operating results to be expected for the
year ending April 1, 2000. The Company's business is seasonal in nature,
with the highest sales and earnings historically occurring in the third
quarter of its fiscal year, which includes the holiday selling season.
Inventories, which consist of compact discs, tapes and accessories, are
stated at the lower of cost (principally average) or market.
Certain reclassifications have been made to the (unaudited) December 26,
1998 quarterly financial information to conform to the presentation used in
the (unaudited) January 1, 2000 financial information.
(2) Earnings Per Share
Basic and diluted loss 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 loss per share were calculated as follows:
Nine months Nine months
Ended Ended
January 1, December 26,
2000 1998
----------- ------------
Basic and diluted:
Net loss less preferred dividends $ (141,925) (79,465)
============ ===========
Weighted average shares 39,781,270 39,781,170
============ ===========
Basic and diluted loss per share (--) (--)
============ ===========
(Continued)
7
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Condensed Financial Statements
January 1, 2000 and December 26, 1998
(unaudited)
(3) Income Taxes
The Company follows Statement of Financial Accounting Standard ("SFAS") No.
109, Accounting for Income Taxes. The Company files a consolidated tax
return with its Parent. Any applicable tax charge or credits are allocated
on a separate return basis. For the nine month period ended January 1,
2000, there was no provision for income taxes as the Company has excess net
operating loss carryforwards for federal income tax purposes.
(Continued)
8
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PEACHES ENTERTAINMENT CORPORATION
Item 2. Management's Discussions and Analysis of Financial Condition and Results
of Operations for the Three Months and Nine Months Ended January 1, 2000,
Compared to the Nine Months ended December 26, 1998.
From time to time, the Company may make certain statements that contain
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995). Words such as "believe," "anticipate," "estimate,"
"project" and similar expressions are intended to identify such forward-looking
statements. Forward-looking statements may be made by management orally or in
writing, including, but not limited to, in press releases, as part of this
Management's Discussion and Analysis of Financial Condition and Results of
Operations and as a part of other sections of this Annual Report or other
filings. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their respective dates, and
are subject to certain risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should any of the underlying
assumptions prove incorrect, actual results of current and future operations may
vary materially from those anticipated, estimated or projected.
RESULTS OF OPERATIONS
Sales. The Company's net sales decreased during the third quarter ended January
1, 2000 of the Company's fiscal year ended April 1, 2000 by $713,885 or 13.4
percent compared to the third quarter of fiscal 1999. Comparable store sales for
the third quarter were down 7.9 percent. Sales for the thirty-nine weeks ended
January 1, 2000 decreased by $1,424,358 or 10.9 percent which is primarily due
to the fact the Company operated one more store in the third quarter of fiscal
1999 as well as the fact that comparable sales for the thirty-nine weeks ended
January 1, 2000 were down 6.3 percent.
Cost of Sales. The Company's cost of sales as a percentage of net sales
decreased from 58.9 percent in the previous year's third quarter to 58.7 percent
for the third quarter ended January 1, 2000, as well as from 59.4 percent in the
previous year first thirty-nine weeks to 58.5 percent in the current years
thirty-nine weeks ended January 1, 2000. The decreases in cost of sales as a
percentage of sales is primarily attributable to increases in certain retail
prices.
Selling, General and Administrative. Selling, general and administrative
("SG&A") expenses, including depreciation, expressed as a percentage of net
sales increased to 35.1 percent for the third quarter ended January 1, 2000
compared to 32.8 percent in the prior year third quarter. The increase is
primarily attributable the decrease in net sales offset by a decrease in
comparable store expenses of 2.5 percent. Selling, general and administrative
expenses including depreciation, expressed as a percentage of net sales
increased to 42 percent for the thirty-nine weeks ended January 1, 2000 compared
to 40.1 percent in the thirty-nine weeks ended December 26, 1998. The increase
is primarily attributable to the decrease in net sales offset by a decrease in
comparable store expenses of 6.3 percent.
Net Income (Loss). The Company had net income of approximately $274,000 for the
third quarter ended January 1, 2000 compared to net income of approximately
$403,000 for the third quarter ended December 26, 1998. The decrease in net
income is primarily attributable to the decrease in net sales discussed above.
The net loss for the thirty-nine weeks ended January 1, 2000 was approximately
$97,000 compared to a net loss of approximately $34,000 for the thirty-nine
weeks ended December 26, 1998. The increase in net loss is primarily
attributable to the decrease in net sales discussed above.
(Continued)
9
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources. Cash generated from operations and cash
equivalents are the Company's primary source of liquidity. Management
anticipates that the cash generated from operations, cash equivalents on hand
and financing will provide sufficient liquidity to maintain adequate working
capital for operations. Management anticipates that it would use funds generated
from operations as well as possible financing, for the opening of any new
stores, which it may plan to open. For a discussion of uncertainties affecting
the Company's liquidity and capital resources, see note 3 to the financial
statements on form 10-K for the year ended April 3, 1999.
Long-Term Obligations. At January 1, 2000, the Company had long-term obligations
of $429,388. Management anticipates that its ability to repay its long-term
obligations will be satisfied primarily through funds generated from its
operations.
OTHER MATTERS
Impact of Inflation. Although the Company cannot accurately determine the
precise effect of inflation on its operations, management does not believe
inflation has had a material effect on the results of operations in the last
three fiscal years. When the cost of merchandise items has increased, the
Company has been able to pass the increase on to its customers.
Seasonality. The Company's business is seasonal in nature, with the highest
sales and earnings historically occurring in the third fiscal quarter, which
includes the Christmas selling season.
Year 2000 Compliance. The Year 2000 Issue is the result of computer programs
being written using two digits rather than four to define the applicable year.
Any of the Company's computer programs that have data-sensitive software may
recognize a date using "00" as year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of operations.
The Company has assessed that it is required to upgrade portions of its software
which was originally purchased from outside vendors, so that its computer
systems will properly utilize dates beyond December 31, 1999. The Company has
purchased its upgraded software and testing and implementation was completed in
November 1999. The cost of the upgrade of the Company's software was
approximately $20,000. The cost of the new hardware was approximately $40,000.
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. The Company has not had any failures or disruptions to
its financial and operating systems as of the date of this filing.
10 (Continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
OTHER INFORMATION
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None
(Continued)
11
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEACHES ENTERTAINMENT CORPORATION
Registrant
Date:
--------------------- --------------------------------------------
Allan Wolk, Chairman of the Board, President
(Principal Executive Officer)
Date:
--------------------- --------------------------------------------
Jason Wolk, Executive Vice President,
Chief Financial Officer
(Principal Financial and Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
registrant's financial statements as of and for the nine month period ended
January 1, 2000, and is qualified in its entirety by reference to such financial
statements:
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Apr-1-2000
<PERIOD-END> Jan-1-2000
<CASH> 1,423,441
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,240,646
<CURRENT-ASSETS> 3,921,084
<PP&E> 3,049,216
<DEPRECIATION> (1,844,090)
<TOTAL-ASSETS> 5,325,716
<CURRENT-LIABILITIES> 3,935,861
<BONDS> 0
0
500,000
<COMMON> 397,813
<OTHER-SE> (78,901)
<TOTAL-LIABILITY-AND-EQUITY> 5,325,716
<SALES> 11,701,838
<TOTAL-REVENUES> 11,701,838
<CGS> 6,845,172
<TOTAL-COSTS> 6,845,172
<OTHER-EXPENSES> 4,919,261
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (42,700)
<INCOME-PRETAX> (96,925)
<INCOME-TAX> 0
<INCOME-CONTINUING> (96,925)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (96,925)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
