SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                   ----------

                                    FORM 10-K

                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


For the fiscal year ended March 28, 1998             Commission File No. 0-12375


                        PEACHES ENTERTAINMENT CORPORATION

             (Exact name of registrant as specified in its charter)

           Florida                                                59-2166041

(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

1180 East Hallandale Beach Boulevard, Hallandale, Florida               33009
        (Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code:               (954) 454-5554

Securities registered pursuant to Section 12(b) of the Act:       None

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                         YES  _X_           NO  ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

                         YES  ___           NO  _X_

The aggregate market value (based on the average closing bid and asked prices)
of the voting stock held by non-affiliates of the registrant was, as of June 1,
1998, approximately $65,480.

As of June 1, 1998 the registrant's transfer agent reported as issued and
outstanding:

                        39,781,270 Shares of Common Stock





<PAGE>



                                     PART I

Item 1.  BUSINESS

     Peaches Entertainment Corporation ("PEC" or the "Company"), a Florida
corporation, began business in 1982. It is engaged in the operation of retail
stores which sell prerecorded music, videos, and related products (the "Retail
Business") in the Southeastern part of the United States under the name
"PEACHES".

     URT Industries, Inc. ("URT"), a Florida corporation, presently owns
approximately 94% of PEC's issued and outstanding shares of common stock and all
of its issued and outstanding shares of preferred stock and controls PEC. The
remaining approximately 6% of PEC's issued and outstanding shares of common
stock are owned by non-affiliated persons.

The Peaches Stores

     The following table sets forth the number of "Peaches"stores (the
"'Peaches' stores") which were open at the beginning of the year, which opened
during the year, which closed during the year and which were open at the end of
the year, with respect to PEC's last five complete fiscal years ending with the
fiscal year ended March 28, 1998 (the "1998 fiscal year"):

                                     1998     1997     1996     1995     1994
                                     ----     ----     ----    -----     ----

Number of stores:
At beginning of period                13       13       19       20       21
Opened during period                   0        0        0        1        0
Closed during period                  (1)      (0)      (6)      (2)      (1)
                                     ---      ---      ---      ---      ---

At end of period                      12       13       13       19       20

     Subsequent to the conclusion of the 1998 fiscal year, PEC opened a new
store in Orlando, Florida, thus bringing to thirteen the total number of
"Peaches" stores which are in operation, as of the date of this filing. Such
thirteen stores are located in the following four states: Florida (seven
stores), Virginia (three stores), North Carolina (two stores), and Alabama (one
store). The utilized space of the stores ranges from approximately 6,000 square
feet to approximately 14,000 square feet. Each store either has its own parking
area or is located in a shopping center which provides parking. PEC has options
to renew most of its leases for various periods.

     Two of the Florida stores, one in Fort Lauderdale and the other in Orlando,
are currently leased from the Chairman of PEC and his brother, a former director
of PEC. (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").

     For information concerning real property owned by PEC, see "Properties".



                                       -2-

<PAGE>

Trademarks

     PEC is the registered owner of and owns nationwide rights to the tradename,
service mark and trademark "PEACHES" (the "Trademarks") in connection with the
operation of the Retail Business.

Operation of the Peaches Stores

     The "Peaches" stores are all similar in appearance, except for PEC's
mall-type store. They have distinct, wood panelled interiors, are decorated in a
manner which identifies them as "Peaches" stores and carry a wide selection of
prerecorded music as well as recorded and blank video tapes, accessory items and
specialty items such as T-shirts and crates. Some stores are free standing and
others are contiguous to other stores in shopping centers. At present, each
"Peaches" store is managed by an individual director who is responsible for
re-orders of merchandise and displaying merchandise sold in the store, hiring
and firing personnel and other matters relating to store administration. Certain
other matters, including pricing, relationships with landlords and the purchase
and allocation of new releases, are handled by the home office. PEC has a
computerized inventory control system in place at each of its stores.

     As of the last day of the 1998 fiscal year, PEC purchased merchandise from
approximately 60 suppliers, among whom the principal ones were BMG, EMI, PGD,
SONY, Universal and WEA. Approximately 69% of the merchandise purchased during
the 1998 fiscal year came from such six principal suppliers. Seagram Co., Ltd.,
the owner of Universal, has recently announced the possible purchase of PGD.
This possible action would bring the number of principal suppliers from six to
five. It is unknown what impact, if any, this acquisition would have on the
ongoing results of operations of PEC.

     Purchases from given suppliers are, to a great extent, determined by which
of them are manufacturing or distributing the most popular prerecorded music
products at a given time, as well as the credit and other terms on which such
suppliers are willing to sell to PEC. PEC is not obligated to purchase
merchandise from any supplier. It has numerous alternate sources of supply for
inventory. However, a loss of one of its six principal suppliers may have a
materially adverse effect on PEC's results of operations.

     Merchandise is delivered directly by suppliers to the stores. The usual
terms received by PEC from suppliers provide for payment to be made within 60
days from the end of the month in which a purchase was made. In addition, PEC
normally receives an additional 30 to 120 days to pay for certain purchases
during the course of the year. Such terms are usual in the industry.

     Under current industry procedure, PEC is able to return merchandise,
without limitation, to all suppliers, who charge a net penalty if returns exceed
certain percentages of the dollar amounts of gross purchases. Such return
policies do not have a materially adverse effect on PEC's business.



                                       -3-

<PAGE>



     For a period of time after PEC's voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code, on January 16, 1996, PEC was
not able to obtain delivery from most of its principal suppliers of merchandise,
and was not able to return merchandise in accordance with the return policies
described above. This resulted in higher inventory costs and lower gross profits
for PEC. However, shortly after confirmation of PEC's Amended Plan of
Reorganization (the "Plan of Reorganization") by the U.S. Bankruptcy Court on
January 17, 1997, and the effective date of such Plan of Reorganization on
February 19, 1997 (the "Effective Date"), arrangements were made with all of
PEC's principal suppliers and most of its other suppliers such that the terms
with respect to payment for merchandise and the return of unused merchandise for
credit have been the same or similar to the terms which were in effect prior to
such proceeding (the "Chapter 11 proceeding"). For more information concerning
the Chapter 11 proceeding, see "LEGAL PROCEEDINGS" and "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

     Advertising in local newspapers and media is determined by consultation
between each store director and PEC management. PEC also engages in cooperative
advertising with suppliers who pay a portion of the cost. In addition to the
director, each "Peaches" store is staffed with managers, cashiers and sales and
stock room personnel. The stores are open seven days a week.

     Quarterly results are affected by the timing of holidays, the timing and
strength of new releases, new store openings/closings and sales performance of
existing stores. During the 1998 fiscal year, sales between April and June were
approximately 24% of total sales; sales between July and September were
approximately 22% of total sales; sales between October and December were
approximately 30% of total sales; and sales between January and March were
approximately 24% of total sales.

Competition

     The retail sale of prerecorded music and video products is highly
competitive. There are hundreds of retail stores and department, discount and
variety stores and supermarkets which offer such merchandise to the public.
PEC's share of the retail market in the Southeastern United States is not
significant. In recent years, in addition to usual competition, there has been a
proliferation of non-traditional music outlets, such as appliance retailers and
superbookstores, some of whom have used very aggressive price cutting tactics
including selling some products below actual cost in order to attract customers
and sell non-music and video products. For a discussion of actions taken to
address such competitive factors, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

Employees

     As of the last day of the 1998 fiscal year, PEC had approximately 239
employees.

                                       -4-

<PAGE>



It is not a party to any collective bargaining agreements. Relations with
employees have been good and there have been no work stoppages.

Intercorporate Agreements

     There are three agreements in place pertaining to the management of PEC.
Among the arrangements which are in place pursuant to such agreements are the
following: for the period from January 1, 1996 through March 31, 2000, URT will
continue to provide to PEC the services of Mr. Wolk as PEC's Chairman, President
and Chief Executive Officer; PEC is required to pay to Mr. Wolk during such
period, so long as he continues to provide such services, a salary in the amount
described below; and URT and PEC will continue to equitably apportion taxes so
long as they continue to file a consolidated federal return. The salary so
payable by PEC to Mr. Wolk pursuant to such arrangements is $500,000 per annum,
except that such amount has been reduced to $400,000 per annum, effective March
1, 1997 and continuing until February 28, 1999, and except further that such
amount was further reduced to $300,000 per annum, effective January 1, 1998 and
continuing until March 28, 1998.

     As a result of the above-described arrangements, the salary required to be
paid by PEC to Allan Wolk was reduced from $491,667 during the fiscal year ended
March 29, 1997 (the "1997 fiscal year") to $375,000 during the 1998 fiscal year.

     During both the 1998 and 1997 fiscal years, Mr. Wolk devoted approximately
75% of his contractual working time to the business of PEC.


Item 2.  PROPERTIES

     PEC's headquarters are located in Hallandale, Florida in a building which
is leased by PEC. Such building contains a total of approximately 6,000 square
feet of office space.

     PEC owns real property in Mobile, Alabama on which it constructed and
operates a "Peaches" store. Such property is subject to a first mortgage to an
institutional lender and to a second mortgage to URT.

     All "Peaches" stores, other than the Mobile, Alabama store discussed
immediately above, are leased. For information concerning such other stores
operated by PEC, see "BUSINESS--The Peaches Stores".

Item 3. LEGAL PROCEEDINGS

     The 1998 fiscal year was PEC's first full year of operations subsequent to
the confirmation and Effective Date of the Plan of Reorganization. A portion of
the amounts allowed

                                       -5-

<PAGE>



to creditors pursuant to the Plan of Reorganization were paid within 60 days of
the Effective Date. The additional amounts owed pursuant to the Plan of
Reorganization are described more fully below:

     (a) PEC's seven principal suppliers (whose allowed claims total
approximately $4,372,000) were entitled to 100% of their allowed claims as
follows: payment and inventory returns equal to approximately 70% of their
allowed claims (80% in the case of one such supplier) within approximately 60
days after the Effective Date; and the balance of the payments to such seven
principal suppliers (originally approximately $1,284,000) with interest over a
period of 24 months commencing in March, 1997. Such debt has been reduced to the
sum of $615,115, as of the end of the 1998 fiscal year. The remaining sum so due
to such suppliers is secured by a perfected first lien and security interest in
the inventory originally distributed by such suppliers or which is otherwise in
the possession of and owned by PEC.

     (b) PEC's sole secured creditor, the holder of the first mortgage with
respect to the store property owned by PEC in Mobile, Alabama, whose allowed
claim was approximately $466,000, is entitled to 100% of such amount, with
interest, in accordance with the amortization schedule previously in effect,
except that the balloon payment on such mortgage which would otherwise have been
due in September, 1997 has been extended to September, 2002.

     (c) The priority tax claim of the Florida Department of Revenue in the
original amount of approximately $118,000 has been payable with interest over a
period of two years commencing 30 days from the Effective Date.

     PEC has made all payments, when due, of those amounts already required to
be paid under its Plan of Reorganization.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                     PART II


Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Price Range of Common Stock

     PEC's Common Stock is quoted by market makers on the over-the-counter
market. The following table sets forth the closing high and low, bid and asked
quotations for PEC's Common Stock for the calendar periods indicated, based on
information supplied by the



                                       -6-

<PAGE>



National Quotation Bureau, Incorporated:

                                            Bid Prices        Asked Prices
                                            ----------        ------------
                                           High     Low       High     Low

1996

        Quarter ended March 31,             1/32    .001       9/32     7/32
        Quarter ended June 30,             .03125   .03125    .21875   .15625
        Quarter ended Sept. 30,            .03125   .001      .15625   .15625
        Quarter ended Dec. 31,             .03125   .005      .15625   .05

1997

        Quarter ended March 31             .005     .001      .05      .05
        Quarter ended June 30,             .001     .001      .05      .05
        Quarter ended Sept. 30,            .001     .001      .05      .05
        Quarter ended Dec. 31,             .001     .001      .05      .05

1998

        Quarter ended March 31,            .001     .001      .05      .05
        Quarter through June 1,            .001     .001      .05      .05

     The above over-the-counter quotations represent prices between dealers, do
not include retail markups, markdowns or commissions and do not necessarily
represent actual transactions.

Dividends

     Since its inception, there has been no payment of dividends on PEC's Common
Stock. Payment of dividends on such stock in the future will depend upon PEC's
earnings and needs.

     PEC is required to pay dividends on its outstanding shares of preferred
stock (see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Liquidity and Capital Resources"). In connection with the
Chapter 11 proceeding, the owner of such preferred stock, URT, waived dividends
on such stock for the period beginning January 1, 1996 and ending March 29, 1997
(See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").

Approximate Number of Equity Security Holders

     The following table indicates the approximate number of holders of record
of each class of PEC's common equity securities as of June 1, 1998, based on
information supplied by PEC's transfer agent:



                                       -7-

<PAGE>

                                                         Number of Record
                 Title of Class                               Holders

                 Common Stock, $.01 par value                  1,488

Item 6. SELECTED FINANCIAL DATA

     The following table sets forth selected  financial data and other operating
     information of the Company.  The selected  financial data should be read in
     conjunction   with  the   financial   statements   and  related  notes  and
     "Management's Discussion and Analysis of Financial Condition and Results of
     Operations."

<TABLE>
<CAPTION>
                                                              March 28,      March 29,      March 30,      April 1,       April 2,
                                                                1998           1997           1996           1995           1994
                                                                ----           ----           ----           ----           ----
<S>                                                         <C>             <C>            <C>            <C>            <C>       
Operating statement data:
      Net sales                                             $17,077,501     18,109,119     23,626,489     31,960,953     36,303,455

      Net loss                                                 (468,209)      (865,313)    (2,416,051)    (1,995,408)      (108,456)

      Basic and dilutive earnings per share (1)                    (.01)          (.04)          (.12)         (0.10)         (0.01)

      Weighted average number of common
         shares outstanding (1)                              39,781,270     20,055,243     19,781,270     19,781,270     19,781,270

Balance sheet data:
      Working capital excluding liabilities subject to
         compromise in 1996                                 $   252,883      1,513,459      6,083,691      2,058,184      3,550,371

      Total assets                                            5,353,203      6,170,065      9,442,616     11,224,889     13,390,533

      Current portion of long-term obligations                  732,319        730,239        124,774        110,028        131,173

      Long-term obligations                                     578,127      1,337,190        810,367        929,654        705,109

      Shareholders' equity                                      760,423        913,913      1,429,226      3,890,277      5,945,685

Store data:
      Weighted average square feet of selling space              84,512         88,012         88,012        130,157        137,145

      Weighted average sales per square foot
         of selling space                                   $       202            206            268            246            265

      Number of stores open at end of period                         12             13             13             19             20
</TABLE>

There were no cash  dividends  declared  for common  stock in any of the periods
presented.

(1)  In 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
     Financial  Accounting Standard (SFAS) No. 128 which requires the disclosure
     of basic  earnings per share and diluted  earnings per share.  Earnings per
     share for all prior periods have been restated to reflect the provisions of
     this Statement.

                                       -8-

<PAGE>

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

From time to time, PEC (sometimes referred to herein as the "Company") may make
certain statements that contain "forward-looking" information (as defined in the
Private Securities Litigation Reform Act of 1995). Words such as "believe",
"anticipate", "estimate", "project" and similar expressions are intended to
identify such forward-looking statements. Forward-looking statements may be made
by management orally or in writing, including, but not limited to, in press
releases, as part of this Management's Discussion and Analysis of Financial
Condition and Results of Operations and as a part of other sections of this
Annual Report or other filings. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of their
respective dates, and are subject to certain risks, uncertainties and
assumptions. These risks include, but are not limited to: changes in the
competitive environment for the Company's products, including the entry or exit
of non-traditional retailers of the Company's products to or from its markets;
the release by the music industry of an increased or decreased number of "hit
releases"; general economic factors in markets where the Company's products are
sold; and other factors discussed in this filing and the Company's other
filings. Should one or more of these risks or uncertainties materialize, or
should any of the underlying assumptions prove incorrect, actual results of
current and future operations may vary materially from those anticipated,
estimated or projected.

Results of Operations

FISCAL YEAR ENDED MARCH 28, 1998 ("1998") COMPARED TO FISCAL YEAR ENDED MARCH
29, 1997 ("1997")

Net sales for 1998 decreased by 5.7% compared to 1997. Such decrease is
attributed to a 3.2% decrease in comparable store sales, and a 2.5% decrease in
sales due to one store that closed in 1998.

The cost of sales for 1998 was lower than that for 1997 due principally to a
decrease in net sales. Cost of sales as a percentage of net sales decreased from
63.2% in 1997 to 61.4% in 1998 due principally to the fact that during the first
quarter of 1998 the Company began to receive discounts associated with normal
trade terms as a result of the conclusion of the Chapter 11 proceeding. Such
decrease is also attributed to increases in other purchase discounts and an
increase in certain retail selling prices.

Selling, general and administrative expenses, including depreciation and
amortization ("SG&A") in 1998 decreased by 10.1% compared to 1997. Such decrease
is attributed to a decrease in corporate overhead (7.8%) and a decrease due to
the closing of one of the Company's stores (2.5%), offset by an increase in
comparable store expenses (0.2%). SG&A expenses, as a percentage of net sales,
decreased from 42% in 1997 to 40% in 1998 primarily due to such overhead
reductions.

                                       -9-

<PAGE>

The Company incurred a net loss of approximately $468,000 in 1998 versus a net
loss of approximately $865,000 in 1997. The reduction of net loss is attributed
to an increase in gross profit percentage and a decrease in expenses as
discussed above.

The Company's primary suppliers have taken steps to help protect the retail
marketplace from certain low cost retailers of music. These steps have included
not disbursing cooperative advertising funds to retailers which engage in low
cost selling practices in violation of the minimum advertised pricing policies
of such suppliers. Management believes that such initiatives, in combination
with the other factors mentioned immediately below, have helped the Company to
restore itself to a more competitive position. Other factors which have had a
positive effect on the Company's performance are the increase in gross profit
percentage and reduction of expenses. Also, the Company's Plan of Reorganization
was confirmed during the last quarter of 1997. The benefits of the
reorganization included the termination of the leases associated with the six
unprofitable stores which were closed during 1996, the closing of the Company's
former headquarters and warehouse, and the termination of other unprofitable
business arrangements. Other competitive advantages over certain competitors
include a large selection of inventory, convenient store locations, a high level
of customer service and the widely recognized "Peaches" name.

FISCAL YEAR ENDED MARCH 29, 1997 ("1997") COMPARED TO FISCAL YEAR ENDED MARCH
30, 1996 ("1996")

Net sales for 1997 decreased 23.4% compared to 1996. 13.3% of such decrease is
attributed to the fact that 1996 included sales for stores that had been open
during 1996 and were closed during or near the end of 1996. The balance of such
decrease (10.1%) is attributed to comparable store sales.

The cost of sales for 1997 was lower than that for 1996 due principally to a
decrease in net sales. Cost of sales as a percentage of net sales decreased from
64.8% in 1996 to 63.2% in 1997 due to increased purchase discounts in 1997 and
the fact that 1996 reflected the effects of buying a portion of PEC's inventory
during the Chapter 11 proceeding from alternate sources with higher prices.

SG&A expenses in 1997 decreased 21.4% compared to 1996. Such decrease is
attributed to a decrease in store operating expenses of stores that had been
open during 1996, but were closed during or near the end of 1996 (15.0%), a
decrease in corporate overhead (0.3%), and a decrease in comparable store
expenses (6.1%). SG&A expenses, as a percentage of net sales, increased from
40.2% in 1996 to 41.8% in 1997 due to the fixed nature of certain expenses and
the decrease in net sales in addition to the aforementioned items.

The Company incurred a net loss of approximately $865,000 in 1997 versus a net
loss of

                                      -10-

<PAGE>

approximately $2,416,000 in 1996. The significant reduction of net loss is
attributed to the success of the Chapter 11 proceeding. However, such success
was offset by professional fees and lost gross profits as a result of not
obtaining similar terms from trade creditors to those that existed prior to the
Chapter 11 proceeding until approximately the first quarter of 1998, at which
time the Company's primary suppliers provided terms with respect to purchases
and returns that were the same as those in place prior to the Petition Date.
Also, further overhead reductions were not evident until 1998.

FISCAL YEAR ENDED MARCH 30, 1996 ("1996") COMPARED TO FISCAL YEAR ENDED APRIL 1,
1995 ("1995")

Net sales for 1996 decreased 26.1% compared to 1995. Such decrease is attributed
principally to the closing of unprofitable stores during 1996, as well as the
effect of the opening of new stores during 1996 by certain of PEC's competitors.
11.8% of such decrease was attributable to comparable store sales and 14.3% of
such decrease was attributable to stores that opened or closed during 1996
versus 1995.

During the last few years, non-traditional music retailers such as appliance
retailers and super bookstores have begun to sell prerecorded music and video
products. They have adopted policies of selling music product at near or below
wholesale cost as a means of attracting customers to sell other products. The
Company continued to suffer the effect of such competition during 1996 and, as a
result, filed its voluntary petition for relief under Chapter 11 of the
Bankruptcy Code in the early part of the last quarter of 1996.

The cost of sales for 1996 was lower than that for 1995 due principally to a
decrease in net sales. Cost of sales as a percentage of net sales increased from
63.7% in 1995 to 64.8% in 1996 due to a reduction in retail prices in an effort
to meet the increased competition, a change in terms with PEC's principal
suppliers during the Chapter 11 proceeding and the effects of buying a portion
of PEC's inventory during the Chapter 11 proceeding from alternate sources with
higher prices.

SG&A expenses in 1996 decreased 17.1% compared to 1995. Such decrease is
attributed to a decrease in store operating expenses of stores that opened or
closed during 1996 versus 1995 (15.0%) and a decrease in corporate overhead
(2.5%), offset by an increase in comparable store expenses (0.4%). SG&A
expenses, as a percentage of net sales, increased from 35.9% in 1995 to 40.2% in
1996 due to the fixed nature of certain expenses and the decrease in net sales
in addition to the aforementioned items.

The Company incurred a net loss of approximately $2,416,000 in 1996 versus a net
loss of approximately $1,995,000 in 1995 due principally to the costs associated
with the closing of four stores, professional fees associated with the Chapter
11 proceeding and the reduction of net sales and gross profits as described
above. The two other stores closed during 1996 are


                                      -11-

<PAGE>

reflected in the financial statements for 1995.

Liquidity and Capital Resources

The Company had working capital of $252,883 at March 28, 1998 compared to
working capital of $1,513,459 at March 29, 1997. The Company had a current ratio
(the ratio of total current assets to total current liabilities) of 1.07 to 1 at
March 28, 1998, compared to a current ratio of 1.5 to 1 at March 29, 1997.

At March 28, 1998, the Company had long-term obligations of $578,127, compared
to long-term obligations of 1,337,190 at March 29, 1997. Management anticipates
that the Company's ability to repay its long-term obligations will be satisfied
primarily through funds generated from its operations.

Management anticipates that cash generated from operations and cash equivalents
on hand will provide sufficient liquidity to maintain adequate working capital
for operations. Management used funds generated from operations as well as funds
to be received from its landlord for the building of the new store which opened
in May, 1998. Management anticipates that it would use funds generated from
operations as well as possible financing, for the opening of any new stores
which it may plan to open during the next few years.

Inflation trends have not had an impact upon revenues because increases in costs
have been passed along to customers.

The Company's business is seasonal in nature, with the highest sales and
earnings occurring in the third fiscal quarter, which includes the Christmas
selling season.

The Company has issued and outstanding 2,500 shares of $100 par, 11%, Series A
cumulative preferred stock and 2,500 shares of $100 par, 13%, Series B
cumulative preferred stock. All of such shares are owned by URT. The total
amount of the dividends payable with respect to the outstanding preferred stock
is $60,000 per annum. However, during the 1997 fiscal year, the Company did not
pay any dividends to URT with respect to its preferred stock, due to URT's
waiver of such dividends during such period. (See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS").

The year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations. The Company has
assessed that it will be required to upgrade portions of its software which was
originally purchased from outside vendors, so that its computer systems will
properly utilize dates beyond December 31, 1999. These upgrades are currently
available, and the Company believes that the cost of these upgrades will not
have a material impact on the


                                      -12-

<PAGE>

ongoing results of operations or financial position of the Company. However, the
Company could be adversely impacted if year 2000 modifications are not properly
completed by either the Company, or its suppliers, banks or any other entity
with whom the Company conducts business.

In February, 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 128, "Earnings Per Share"
("Statement 128"). Statement 128 is effective for financial statements issued
for periods ending after December 15, 1997. Statement 128 establishes standards
for computing and presenting earnings per share ("EPS"), simplifies the
standards previously found in APB No. 15, "Earnings Per Share", and makes them
comparable to international EPS Standards. In December, 1997, the Company
adopted the provisions of Statement 128. Earnings per share for all prior
periods have been restated to reflect the provisions of this Statement.

In June, 1997, the FASB issued Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income" ("Statement 130"). Statement 130
establishes standards for the reporting and display of comprehensive income and
its components in a full set of general purpose financial statements and is
effective for fiscal years beginning after December 31, 1997. Management does
not anticipate a significant impact of the adoption of Statement 130 on the
Company's financial position, results of operations or cash flows.

In 1997, the FASB issued Statement of Financial Accounting Standard No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("Statement
131"). Statement 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that these enterprises report selected information about
operating segments in interim financial reports to shareholders. Statement 131
is effective for financial statements for the periods beginning after December
15, 1997. Management does not anticipate a significant impact of the adoption of
Statement 131 on the Company's financial position, results of operation or cash
flows.






                                      -13-

<PAGE>

Item 8.    FINANCIAL STATEMENTS


                        PEACHES ENTERTAINMENT CORPORATION

                              Financial Statements

                        March 28, 1998 and March 29, 1997

                   (With Independent Auditors' Report Thereon)



                                      -14-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                                Table of Contents






Independent Auditors' Report                                                  16

Financial Statements:
       Balance  Sheets as of March 28, 1998 and March 29, 1997                17
       Statements of Operations for each of the years in the three
           year period ended March 28, 1998                                   18
       Statements of Shareholders' Equity for each of the years in
           the three year period ended March 28, 1998                         19
       Statements of Cash Flows for each of the years in the three
           year period ended March 28, 1998                                   21
       Notes to Financial Statements                                          23




                                      -15-
<PAGE>



                          Independent Auditors' Report

Directors and Shareholders
Peaches Entertainment Corporation
Hallandale, Florida:

We have  audited  the  accompanying  balance  sheets  of  Peaches  Entertainment
Corporation  (the  "Company")  as of March 28, 1998 and March 29, 1997,  and the
related statements of operations,  shareholders'  equity and cash flows for each
of the years in the  three-year  period  ended March 28, 1998.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining on a test basis,  evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  financial  position  of  Peaches   Entertainment
Corporation  as of March 28,  1998 and March 29,  1997,  and the  results of its
operations  and its cash  flows for each of the years in the  three-year  period
ended  March  28,  1998  in  conformity  with  generally   accepted   accounting
principles.


                                                   KPMG PEAT MARWICK LLP


July 13, 1998


                                      -16-


<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                                 Balance Sheets

                        March 28, 1998 and March 29, 1997

<TABLE>
<CAPTION>
                                      Assets                                                            1998                1997
                                                                                                        ----                ----
<S>                                                                                                  <C>                <C>        
Current assets:
      Cash and cash equivalents                                                                      $ 1,080,694        $ 1,456,070
      Inventories                                                                                      2,433,433          2,855,494
      Prepaid expenses and other current assets                                                          308,419            260,008
                                                                                                     -----------        -----------
                      Total current assets                                                             3,822,546          4,571,572

Property and equipment, net                                                                            1,349,732          1,439,731
Other assets                                                                                             180,925            158,762
                                                                                                     -----------        -----------

                                                                                                     $ 5,353,203        $ 6,170,065
                                                                                                     ===========        ===========

                       Liabilities and Shareholders' Equity

Current liabilities:
      Current portion of long-term obligations                                                           732,319            730,239
      Accounts payable                                                                                 2,014,674          1,371,869
      Accrued liabilities                                                                                822,670            956,005
                                                                                                     -----------        -----------

                      Total current liabilities                                                        3,569,663          3,058,113

Long-term obligations                                                                                    578,127          1,337,190
Due to Parent                                                                                            382,156            704,813
Deferred rent                                                                                             62,834            156,036
                                                                                                     -----------        -----------

                      Total liabilities                                                                4,592,780          5,256,152

Shareholders' equity:
      Preferred stock, $100 par value; 50,000 shares authorized; 5,000 shares
         issued and outstanding                                                                          500,000            500,000
      Common stock subscribed; 0 shares and 20,000,000 shares issued as of 
         March 28, 1998 and March 29, 1997, respectively                                                    --              350,000
      Common stock,  $.01 par value;  40,000,000 shares  authorized; 39,781,270                                 
         shares and 19,889,120  shares issued as of March 28, 1998 and March 29,
         1997, respectively                                                                              397,813            198,892
      Additional paid-in capital                                                                       1,749,190          1,284,471
      Retained deficit                                                                                (1,886,580)        (1,399,670)
                                                                                                     -----------        -----------

                                                                                                         760,423            933,693

      Treasury stock, 0 and 107,850 common shares, at cost, as of March 28, 1998
         and March 29, 1997, respectively                                                                   --              (19,780)
                                                                                                     -----------        -----------
                      Total shareholders' equity                                                         760,423            913,913

Commitments and contingencies

                                                                                                     $ 5,353,203        $ 6,170,065
                                                                                                     ===========        ===========
</TABLE>

See accompanying notes to financial statements.


                                      -17-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                            Statements of Operations

       For each of the years in the three-year period ended March 28, 1998


<TABLE>
<CAPTION>
                                                                                     1998               1997               1996
                                                                                     ----               ----               ----

<S>                                                                               <C>                <C>                <C>        
Net sales                                                                         $17,077,501        $18,109,119        $23,626,489
                                                                                  -----------        -----------        -----------
Costs and expenses:
      Cost of sales                                                                10,501,123         11,453,125         15,316,441
      Selling, general and administrative expenses                                  6,538,377          7,121,666          9,058,785
      Depreciation and amortization                                                   270,191            448,862            455,156
      Store closing costs                                                                --                 --              189,623
      Management fees                                                                    --                 --              562,500
                                                                                  -----------        -----------        -----------

                                                                                   17,309,691         19,023,653         25,582,505
                                                                                  -----------        -----------        -----------

                 Loss from operations                                                (232,190)          (914,534)        (1,956,016)
                                                                                  -----------        -----------        -----------

Other (expense) income:
      Interest expense                                                               (219,148)           (88,345)          (111,451)
      Interest income                                                                  27,129             30,832             22,566
                                                                                  -----------        -----------        -----------

                                                                                     (192,019)           (57,513)           (88,885)
                                                                                  -----------        -----------        -----------

                 Loss before reorganization costs, income taxes
                     and extraordinary gain                                          (424,209)          (972,047)        (2,044,901)

Reorganization costs:
      Professional fees                                                               (44,000)          (379,645)           (88,223)
      Store closing costs                                                                --                 --             (282,927)
                                                                                  -----------        -----------        -----------

                                                                                      (44,000)          (379,645)          (371,150)
                                                                                  -----------        -----------        -----------

Loss before income taxes and extraordinary gain                                      (468,209)        (1,351,692)        (2,416,051)

Provision for income taxes                                                               --                 --                 --

                                                                                  -----------        -----------        -----------
                 Loss before extraordinary gain                                      (468,209)        (1,351,692)        (2,416,051)

Extraordinary gain due to reorganization (note 2)                                        --              486,379               --
                                                                                  -----------        -----------        -----------

                 Net loss                                                         $  (468,209)       $  (865,313)       $(2,416,051)
                                                                                  ===========        ===========        ===========

Basic and diluted earnings per common share:
      Loss before extraordinary gain                                                     (.01)              (.07)              (.12)
      Extraordinary gain                                                                 --                  .03               --
                                                                                        -----              -----              -----

                 Net loss                                                                (.01)              (.04)              (.12)
                                                                                        =====              =====              =====
</TABLE>

See accompanying notes to financial statements.


                                      -18-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                       Statements of Shareholders' Equity

       For each of the years in the three-year period ended March 28, 1998


<TABLE>
<CAPTION>
                                                                        Preferred stock                  Common stock subscribed
                                                                 -----------------------------       ------------------------------
                                                                    Shares            Amount           Shares             Amount
                                                                 -----------       -----------       -----------        -----------

Balance, April 1, 1995                                                 5,000       $   500,000              --          $      --   

      Net loss                                                          --                --                --                 --   

          Payment of preferred stock dividend to
             Parent                                                     --                --                --                 --   
                                                                 -----------       -----------       -----------        -----------

Balance, March 30, 1996                                                5,000           500,000              --                 --   

      Net loss                                                          --                --                --                 --   

      Contributed capital                                               --                --          20,000,000            350,000
                                                                 -----------       -----------       -----------        -----------

Balance, March 29, 1997                                                5,000           500,000        20,000,000            350,000

      Net loss                                                          --                --                --                 --   

      Contributed capital                                               --                --         (20,000,000)          (350,000)

      Payment of preferred stock dividend to
         parent                                                         --                --                --                 --   

      Cancellation of treasury stock                                    --                --                --                 --   
                                                                 -----------       -----------       -----------        -----------

Balance, March 28, 1998                                                5,000       $   500,000              --          $      --   
                                                                 ===========       ===========       ===========        ===========



<CAPTION>
                                                            Common stock
                                                     --------------------------
                                                        Shares         Amount
                                           
<S>                                                   <C>           <C>        
Balance, April 1, 1995                                20,107,850    $   201,079

      Net loss                                              --             --   

          Payment of preferred stock dividend to
             Parent                                         --             --   
                                                     -----------    -----------

Balance, March 30, 1996                               20,107,850        201,079

      Net loss                                              --             --   

      Contributed capital                               (218,730)        (2,187)
                                                     -----------    -----------

Balance, March 29, 1997                               19,889,120        198,892

      Net loss                                              --             --   

      Contributed capital                             20,000,000        200,000

      Payment of preferred stock dividend to
         parent                                             --             --   

      Cancellation of treasury stock                    (107,850)        (1,079)
                                                     -----------    -----------

Balance, March 28, 1998                               39,781,270    $   397,813
                                                     ===========    ===========
</TABLE>



                                      -19-
<PAGE>




<TABLE>
<CAPTION>
           Treasury stock                   Additional            Retained
   -------------------------------            paid-in             earnings
      Shares              Amount              capital             (deficit)               Total
   -----------         -----------          -----------          -----------           -----------

<S>                        <C>                <C>                  <C>                   <C>      
       326,580         $   (59,895)         $ 1,284,471         $  1,964,622           $ 3,890,277

          -                   -                    -              (2,416,051)           (2,416,051)


          -                   -                    -                 (45,000)              (45,000)
   -----------         -----------          -----------          -----------           -----------

       326,580             (59,895)           1,284,471             (496,429)            1,429,226

          -                   -                    -                (865,313)             (865,313)

      (218,730)             40,115                 -                 (37,928)              350,000
   -----------         -----------          -----------          -----------           -----------

       107,850             (19,780)           1,284,471           (1,399,670)              913,913

          -                   -                    -                (468,209)             (468,209)

          -                   -                 524,719                 -                  374,719


          -                   -                 (60,000)                -                  (60,000)

      (107,850)             19,780                 -                 (18,701)                 -
   -----------         -----------          -----------          -----------           -----------

          -            $      -             $ 1,749,190          $(1,886,580)          $   760,423
   ===========         ===========          ===========          ===========           ===========
</TABLE>


See accompanying notes to financial statements.



                                      -20-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                            Statements of Cash Flows

       For each of the years in the three-year period ended March 28, 1998


<TABLE>
<CAPTION>
                                                                                               1998            1997          1996
                                                                                               ----            ----          ----
<S>                                                                                        <C>            <C>          <C>        
Cash flows from operating activities:
      Net loss                                                                             $ (468,209)      (865,313)    (2,416,051)
                                                                                           ----------     ----------     ----------

      Adjustments  to  reconcile  net loss to net cash  (used  in)  provided  by
         operating activities:
             Extraordinary gain                                                                  --         (486,379)          --   
             Depreciation and amortization                                                    270,191        448,862        455,156
             Loss on abandonment of leasehold improvements
                                                                                                 --             --          190,601
             Deferred rent                                                                    (93,202)       (44,687)      (299,747)
             Changes in assets and liabilities affecting cash flows
                 from operating activities:
                     (Increase) decrease in:
                        Inventories                                                           422,061         25,200        624,477
                        Prepaid expenses and other current assets                             (48,411)       273,587       (244,182)
                        Refundable income taxes                                                  --            9,136        248,093
                        Other assets                                                          (22,163)        25,589          4,997
                     Increase (decrease) in:
                        Accounts payable                                                      642,805      1,268,831     (4,027,492)
                        Accrued liabilities                                                  (133,335)      (147,049)      (420,893)
                        Long-term obligations                                                    --             --          (61,022)
                        Liabilities subject to compromise                                        --       (1,854,514)     5,671,434
             Changes due to reorganization activities:
                 Loss on abandonment of leasehold improvements                                   --             --          296,509

                                                                                           ----------     ----------     ----------
                            Net cash (used in) provided by operating
                                activities                                                    569,737     (1,346,737)        21,880
                                                                                           ----------     ----------     ----------

Cash flows from investing activities:
      Purchases of property and equipment                                                    (180,192)       (44,885)      (168,331)
      Proceeds from disposition of land, property and equipment
                                                                                                 --             --          615,243
                                                                                           ----------     ----------     ----------

                            Net cash (used in) provided by investing
                                activities                                                   (180,192)       (44,885)       446,912
                                                                                           ----------     ----------     ----------

Cash flows from financing activities:
      Due to Parent                                                                            52,062        704,813           --   
      Capital contribution                                                                       --          350,000           --   
      Repayment of long-term obligations                                                     (756,983)      (124,687)       (43,519)
      Dividends paid                                                                          (60,000)          --          (45,000)
                                                                                           ----------     ----------     ----------

                            Net cash provided by (used in) financing
                                activities                                                   (764,921)       930,126        (88,519)
                                                                                           ----------     ----------     ----------
</TABLE>


                                      -21-
<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                       Statements of Cash Flows, Continued




<TABLE>
<CAPTION>
                                                                                               1998          1997           1996
                                                                                               ----          ----           ----
<S>                                                                                        <C>            <C>            <C>      
                            Net (decrease) increase in cash and cash
                                equivalents                                                $ (375,376)      (461,496)       380,273

Cash and cash equivalents, beginning of year                                                1,456,070      1,917,566      1,537,293
                                                                                           ----------     ----------     ----------

Cash and cash equivalents, end of year                                                     $1,080,694      1,456,070      1,917,566
                                                                                           ==========     ==========     ==========


Supplemental  disclosures of cash flow information:  
     Cash paid (received) during the period for:
         Interest                                                                          $  171,365         88,345        111,451
                                                                                           ==========     ==========     ==========

         Income tax payments (refund), net                                                 $     --             --         (248,093)
                                                                                           ==========     ==========     ==========
</TABLE>

Supplemental schedule of non-cash operating and investing activities relating to
the reorganization:

<TABLE>
            <S>                                                                                      <C>
            Liabilities subject to compromise, March 30, 1996                                        $5,671,434
                  Less:  Inventory returns for credit                                                 2,073,566
            Cash paid                                                                                 1,854,514
            Extraordinary gain (primarily as a result of lease rejection claims -
                  note 2)                                                                               486,379
                                                                                                     ----------

            Long-term obligation, March 29, 1997                                                     $1,256,975
                                                                                                     ==========
</TABLE>

In 1998, the Parent forgave $374,719 of the Due to Parent, which is reflected as
a capital contribution in the accompanying financial statements.

See accompanying notes to financial statements.


                                      -22-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

                March 28, 1998, March 29, 1997 and March 30, 1996

(1)  Organization and Basis of Presentation

     Peaches  Entertainment  Corporation  (the  "Company")  is  engaged  in  the
     business  of  retailing  prerecorded  music,  video  and  accessory  items,
     principally  in the  southeastern  United  States.  The  Company  is a 93.5
     percent-owned  subsidiary  of URT  Industries,  Inc.  (the  "Parent").  The
     Company operates in a single industry segment,  the operation of a chain of
     retail entertainment stores.

(2)  Confirmation of Amended Plan of Reorganization

     On  January  16,  1996  (the  "Petition   Date"),   the  Company  commenced
     reorganization proceedings under Chapter 11 of the United States Bankruptcy
     Code. An amended plan of  reorganization  was  confirmed by the  Bankruptcy
     Court on January 17, 1997 (the  "confirmation  date"), and became effective
     February 3, 1997 (the "effective date"), subject to satisfaction of certain
     conditions which were satisfied  February 19, 1997. All trade and non-trade
     suppliers  received 100 percent of their  allowed  claims which were either
     paid on the  effective  date or are  reflected  in  current  and  long-term
     obligations in the financial statements,  payable primarily over a two year
     period from the  effective  date.  The  mortgage  holder  will  receive 100
     percent of the allowed claim, with interest, except the balloon payment was
     extended from September 1997 to September 2002.  Landlords under the leases
     rejected  by the  Company in  connection  with the  bankruptcy  filing were
     entitled to 30 percent of the allowed  claims with  respect to such leases,
     all of which were paid on the  effective  date.  The  Company  recorded  an
     extraordinary  gain of $486,379  primarily as a result of the settlement of
     lease rejection claims.

(3)  Liquidity

     Since  1993,  the  Company  has  incurred   operating  losses  and  has  an
     accumulated  deficit  balance of  approximately  $1.9  million at March 28,
     1998.  In 1996,  the Company  commenced  reorganization  proceedings  under
     Chapter  11  and in  the  last  quarter  of  1997  the  Company's  plan  of
     reorganization  was confirmed.  The Company  believes that it has benefited
     from its  reorganization  which  includes  the  termination  of the  leases
     associated with the six unprofitable  stores which were closed during 1996,
     the closing of the Company's former  headquarters  and warehouses,  and the
     termination of other unprofitable business arrangements.

     Additionally,  the  Company's  primary  suppliers  have taken steps to help
     protect the retail  marketplace  from certain low cost  retailers of music.
     These steps have included not disbursing  cooperative  advertising funds to
     retailers  which engage in low cost  selling  practices in violation of the
     minimum advertised pricing policies of such suppliers.  Management believes
     that such  initiatives,  in  combination  with the other factors  mentioned
     immediately  above,  have  helped the  Company to restore  itself to a more
     competitive position. Other factors which have had a positive effect on the
     Company's  performance  are the  increase in gross  profit  percentage  and
     reduction  of  expenses.   The  Company's  ability  to  achieve  substained
     profitable  operations  is dependent on  continuing  to obtain  products at
     competitive prices,  restructuring operations to minimize cash expenditures
     and  successfully  competing with larger retailers who have greater capital
     resources  than the  Company.  Management  believes  that  cash  flow  from
     operations or  additional  financing  available  from other sources will be
     sufficient  to fund  operations  during the next fiscal  year.  There is no
     assurance that such events will occur or such financing will be available.

                                                                     (Continued)


                                      -23-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

(4)  Summary of Significant Accounting Policies

     (a)  Fiscal Year

          The  Company's  fiscal year  consists of 52 or 53 weeks  ending on the
          Saturday closest to the end of March. The fiscal years ended March 28,
          1998,  March  29,  1997 and  March  30,  1996  consisted  of 52 weeks,
          respectively.

     (b)  Cash Equivalents

          The  Company  considers  highly  liquid  investments   purchased  with
          original  maturities  of three months or less to be cash  equivalents.
          Cash equivalents totaled approximately  $399,000 and $-0- at March 28,
          1998  and  March  29,  1997,   respectively.   The   carrying   amount
          approximates  fair value because of the  short-term  maturity of these
          investments.  The fair  values are  estimated  based on quoted  market
          prices for these or similar instruments.

     (c)  Inventories

          Inventories,  comprised of compact  discs,  cassettes,  digital  video
          disks,  videos  and  accessories,  are  stated  at the  lower  of cost
          (principally average) including freight in, or market.

     (d)  Property and Equipment

          Property and equipment are stated at cost. The assets are  depreciated
          over their  estimated  useful  lives  ranging  from five to 31.5 years
          using both straight-line and accelerated methods. The Company's policy
          is  to  retire   assets  from  its   accounts  as  they  become  fully
          depreciated.

     (e)  Income Taxes

          The Company  files a  consolidated  income tax return with its Parent.
          Any  applicable tax charges or credits are allocated to the Company on
          a separate  return basis.  Provision is made for deferred income taxes
          which result from certain items of income and expense  being  reported
          for  tax  purposes  in  periods  different  than  those  reported  for
          financial  reporting  purposes.  These items relate principally to the
          methods of  accounting  for store  leases with future  scheduled  rent
          payment increases,  inventory and the utilization of different methods
          of depreciation for financial statement and income tax purposes.

          The  Company  accounts  for  income  taxes  under  the  provisions  of
          Financial   Accounting  Standards  Board's  ("SFAS")  No.  109,  which
          generally requires  recognition of deferred tax liabilities and assets
          for the future tax  consequences  of events that have been included in
          the financial statements or tax returns.  Under this method,  deferred
          tax assets and liabilities  are determined on differences  between the
          financial  reporting and tax bases of assets and  liabilities  and are
          measured by applying  enacted tax rates and laws for the taxable years
          in which those  differences  are  expected to reverse.  Under SFAS No.
          109, the effect on deferred tax assets and  liabilities of a change in
          tax rates is  recognized  in income in the period  that  includes  the
          enactment date.

                                                                     (Continued)


                                      -24-
<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

     (f)  Store Closing Costs

          Store closing costs are recorded in the period the Company  decides to
          close the  store.  Such  costs  include  the book  value of  abandoned
          leasehold  improvements,  provision  for the  present  value of future
          lease obligations,  less estimated  sub-rental income as well as other
          costs incident to the store closing.

     (g)  Reorganization Costs

          Reorganization costs include: (a) professional fees relating to legal,
          accounting and  consulting  services  provided in connection  with the
          Chapter 11 proceedings and (b) costs and expenses  associated with the
          closing of locations.

     (h)  Use of Estimates by Management

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities and disclosure of contingent assets and liabilities at the
          date of the financial  statements and the reported  amounts of revenue
          and expenses during the reported  period.  Actual results could differ
          from those estimates.

     (i)  Impairment of Long-Lived  Assets and Long-Lived  Assets to Be Disposed
          Of

          The Company adopted the provisions of SFAS No. 121, Accounting for the
          Impairment  of  Long-Lived  Assets  and for Long  Lived  Assets  to be
          Disposed  Of,  on  March  31,  1996.  This  statement   requires  that
          long-lived assets and certain identifiable intangibles be reviewed for
          impairment  whenever events or changes in circumstances  indicate that
          the carrying amount of an asset may not be recoverable. Recoverability
          of  assets  to be held and used is  measured  by a  comparison  of the
          carrying  amount of an asset to future net cash flows  expected  to be
          generated by the asset.  If such assets are considered to be impaired,
          the impairment to be recognized is measured by the amount by which the
          carrying  amount of the assets  exceed  the fair value of the  assets.
          Assets to be  disposed of are  reported  at the lower of the  carrying
          amount  or fair  value  less  costs  to  sell.  The  adoption  of this
          Statement did not have a material  impact on the  Company's  financial
          position, results of operations or liquidity.

     (j)  Reclassifications

          Certain  amounts in the 1997 and 1996 financial  statements  have been
          reclassified to conform with the 1998 presentation.

(5)  Earnings Per Share

     In December  1997,  the Company  adopted the  provisions  of  Statement  of
     Financial  Accounting  Standards No. 128,  "Earnings Per Share" ("Statement
     128"),  which  establishes  new  standards  for  computing  and  presenting
     earnings per share  ("EPS").  Earnings per share for all prior periods have
     been restated to reflect the provisions of this statement.

                                                                     (Continued)


                                      -25-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

     Basic and diluted  earnings  per share have been  computed by dividing  net
     loss,  less  preferred  dividends by the weighted  average number of shares
     outstanding  during  the  period.  Convertible  Series  A  Preferred  Stock
     outstanding  were not included in the  computation of diluted  earnings per
     share  for the  year  ended  March  30,  1996  as the  inclusion  would  be
     antidilutive. In March 1997, the convertible feature was eliminated.

     Basic and diluted earnings per share were calculated as follows:

                                          March 28,     March 29,     March 30,
                                            1998          1997          1996
                                        -----------   -----------   -----------

     Basic and diluted:
           Net loss less preferred 
               dividends                $  (528,209)  $  (865,313)  $(2,461,051)
                                        ===========   ===========   ===========

           Weighted average shares       39,781,270    20,055,243    19,781,270
                                        ===========   ===========   ===========

     Net loss per share                 $      (.01)  $      (.04)  $      (.12)
                                        ===========   ===========   ===========

(6)  Property and Equipment, Net

     Property and equipment consist of the following at March 28, 1998 and March
     29, 1997:

                                                          1998           1997
                                                          ----           ----

     Land                                             $  395,570        395,570
     Building                                            538,093        538,093
     Leasehold improvements                            1,456,260      1,732,924
     Furniture and equipment                             677,333      1,029,642
     Building under capitalized lease                    206,964        206,964
                                                      ----------     ----------
                                                       3,274,220      3,903,193
     Less accumulated depreciation and amortization   (1,924,488)    (2,463,462)
                                                      ----------     ----------

                                                      $1,349,732      1,439,731
                                                      ==========     ==========

                                                                     (Continued)


                                      -26-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

(7)  Long-term Obligations

     Long-term  obligations consist of the following at March 28, 1998 and March
     29, 1997:

<TABLE>
<CAPTION>
                                                                                   1998                1997
                                                                                   ----                ----
<S>                                                                            <C>                  <C>       
     Capital lease obligation,  due in monthly  installments of $3,382,
           including interest at 17.5%; final payment due March 2005           $  163,178           $  174,139

     Mortgage payable,  due in equal  installments of $2,981 per month,
           plus  interest  at prime  plus 0.5%;  collateralized  by the
           mortgaged property with depreciated cost of $785,140; final
           balloon payment of $245,700 due September 2002 (note 2)                406,688              442,462

     Settlement agreement with  former officer, due in monthly
           installments of $5,699, final payment due January 2000                 125,465              193,853

     Promissory notes, due in installments of $26,744 for 21 months and
           one payment of $347,675 (due February 1999), plus interest
           at prime; collateralized by inventory (note 2)                         615,115            1,256,975
                                                                               ----------           ----------

                                                                                1,310,446            2,067,429

Less current portion                                                              732,319              730,239
                                                                               ----------           ----------

                                                                               $  578,127           $1,337,190
                                                                               ==========           ==========
</TABLE>

     The capital lease pertains to the building portion of property owned by one
     director and one former  director.  The rent expense on the land portion of
     this lease was $113,000 for 1998, 1997 and 1996.

     The following  represents  future  minimum lease payments under the capital
     lease obligation:

                      Fiscal year                           Amount
                      -----------                           ------

                          1999                            $  40,600
                          2000                               40,600
                          2001                               40,600
                          2002                               40,600
                          2003                               40,600
                       Thereafter                            80,960
                                                          ---------
     Total minimum lease payments                           283,960

     Less amount representing interest                     (120,782)
                                                          ---------

     Present value of minimum lease payments              $ 163,178
                                                          =========


                                                                     (Continued)


                                      -27-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

     Maturities   of  long-term   obligations,   excluding   the  capital  lease
     obligation, to maturity, are as follows:

                      Fiscal year                           Amount
                      -----------                           ------
                          1999                           $  719,278
                          2000                               92,853
                          2001                               35,775
                          2002                               35,775
                          2003                              263,587
                       Thereafter                              -
                                                         ----------
                                                         $1,147,268
                                                         ==========

     The Company has a standby letter of credit of $75,600 available to a
     landlord that was not drawn upon as of March 28, 1998. The standby letter
     of credit is fully collateralized by a certificate of deposit, which is
     included in other assets. In addition, the Company has an irrevocable
     letter of credit of $150,000 that was not drawn upon as of March 28, 1998.

(8)  Accrued Liabilities

     Accrued  liabilities  consist of the  following at March 28, 1998 and March
     29, 1997:

                                                           1998           1997
                                                           ----           ----

     Gift certificate and credit slip liability          $155,873       $184,884
     Payroll and related benefits                         102,244         99,701
     Sales and real estate taxes payable                  141,446        188,087
     Accrued overhead expenses                            259,017        267,002
     Other                                                164,090        216,331
                                                         --------       --------

                                                         $822,670       $956,005
                                                         ========       ========

(9)  Due to Parent

     In order for the  Company to be able to effect the plan of  reorganization,
     the Parent,  in exchange for the issuance to it of 20 million shares of the
     Company's  authorized  common stock (including  218,730  treasury  shares),
     contributed $350,000 to the capital of the Company,  waived an aggregate of
     $75,000 of  dividends  payable by the  Company to the  Parent,  guaranteed,
     subject to the terms of the Plan, the approximately $1,284,000 which is due
     the  principal  suppliers  in  accordance  with the  foregoing,  and loaned
     $700,000  to the  Company.  The loan  will be  repaid  to the  Parent  with
     interest  at prime  over a period  of four  years  beginning  on the  third
     anniversary of the effective date and is subordinate to the amounts owed to
     principal  suppliers  and is secured by inventory and all the assets of the
     Company.  In 1998, the Parent forgave  $350,000 of principal and $24,719 of
     accrued  interest.  The forgiveness has been accounted for as an additional
     capital contribution by the Parent at March 28, 1998.

                                                                     (Continued)


                                      -28-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

(10) Commitments and Contingencies

     (a)  Leases

          The Company is a lessee under  various  operating  leases,  several of
          which  provide  for  percentage  rent.  An  insignificant   amount  of
          percentage  rent was  incurred in each of the years in the  three-year
          period  ended  March 28,  1998.  Most of the  leases  contain  renewal
          options.

          The  aggregate  minimum  rental  commitments  under all  noncancelable
          operating leases at March 28, 1998 are as follows:

                       Fiscal year                      Amount
                       -----------                      ------
                          1999                        $1,316,310
                          2000                           951,002
                          2001                           865,404
                          2002                           707,852
                          2003                           715,277
                       Thereafter                      2,797,822
                                                      ----------
                                                      $7,353,667
                                                      ==========

          Rental  expense  under  noncancelable  operating  leases,  included in
          selling,  general  and  administrative  expenses  in the  accompanying
          statements  of  operations  amounted  to  $1,160,000,  $1,217,000  and
          $1,853,000,  respectively,  for each of the  years  in the  three-year
          period ended March 28, 1998.

          Rental expense on stores owned by two directors and/or their relatives
          was  $131,250,  $131,250 and $215,417,  respectively,  for each of the
          years in the three-year period ended March 28, 1998.

          In January 1998,  the Company  entered into a lease  agreement for the
          operation  of a new  store  in  Orlando,  Florida.  This  will  be the
          Company's  fourth store in the Orlando area. This store is expected to
          open during the first quarter of the next fiscal year.

     (b)  Legal Matters

          The  Company is a party to various  other  claims,  legal  actions and
          complaints  arising in the  ordinary  course of its  business.  In the
          opinion of  management,  all such matters are without merit or involve
          such amounts that an unfavorable  disposition will not have a material
          impact on the  financial  position  or  results of  operations  of the
          Company.

     (c)  Employment Agreement

          On March  18,  1996,  the  United  States  Bankruptcy  Court  Southern
          District of Florida approved the settlement of an employment agreement
          with a former  officer.  The  Company is to pay an amount of  $273,550
          over a period of four  years  (note 7).  Under the  original  terms of
          employmenet,  the  officer  would have been  entitled  to in excess of
          $870,000 in aggregate.

     (d)  Management Agreement

          On March 29, 1993, as amended,  the Company  entered into a management
          and  intercorporate  agreement (the  "Management  Agreement") with the
          Parent  whereby the  Company was  required to pay the Parent an annual
          fee;  the Parent was required to provide the Company with the services
          of the  person  who is the  president  and  chairman;

                                                                     (Continued)


                                      -29-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

          the Parent was required to pay the Company for certain  accounting and
          administrative  services performed by the Company;  and so long as the
          Parent and the Company filed  consolidated  income tax returns,  their
          respective  liabilities for such taxes would be equitably  apportioned
          as provided in such  agreement.  Effective as of the close of business
          on December 31, 1995,  the  Management  Agreement was  terminated  and
          replaced with three new agreements which became  effective  January 1,
          1996 through March 31, 2000. In lieu of paying a management fee to the
          Parent,  the three new  agreements  require  payment  to the  Parent's
          president  and chairman as long as he  continues  to provide  services
          similar to those performed under the original Management Agreement.

(11) Shareholders' Equity

     For each of the years in the  three-year  period ended March 28, 1998,  the
     Company  had 2,500  shares of $100 par,  11  percent,  Series A  Cumulative
     Preferred  Stock  and  2,500  shares  of $100  par,  13  percent,  Series B
     Cumulative Preferred Stock authorized,  issued and outstanding.  The Parent
     is the owner of all  outstanding  shares of Preferred  Stock. In connection
     with the reorganization, the Parent agreed to waive dividends in its shares
     for the period  beginning  January 1, 1996 and ending March 29,  1997.  The
     Company can issue up to 50,000 shares of preferred stock, and the directors
     have the authority to issue such shares in one or more  additional  series.
     Each share of Series A and Series B Cumulative  Preferred Stock is entitled
     to one vote and has the same voting powers as the common stock, except that
     all matters on which the vote of shareholders is required must, in order to
     be approved, receive the requisite vote of either (i) both the Series A and
     Series B,  voting as separate  classes or (ii) the common  stock and either
     the Series A or Series B, voting as separate classes.  The shares of Series
     A stock may be convertible  into shares of the Company's  common stock upon
     the holders'  compliance with certain surrender and notice  provisions.  In
     March 1997, the conversion  feature was eliminated.  The liquidating  value
     for both the Series A and Series B shares is par value plus all accrued and
     unpaid dividends.

(12) Income Taxes

     The provision for income taxes consists of:

                                   1998             1997           1996
                                   ----             ----           ----
          Current:
                Federal            $ --             $ --             --
                State                --               --             --
                                   ----             ----           ----
                                     --               --             --
          Deferred:
                Federal              --               --             --
                State                --               --             --
                                   ----             ----           ----
                                     --               --             --
                                   ----             ----           ----
                                   $ --             $ --             --
                                   ====             ====           ====


                                                                     (Continued)


                                      -30-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

     Reasons  for  differences  between  income  tax  provision  and the  amount
     computed by applying the statutory federal income tax rate of 34 percent to
     pretax loss were:

<TABLE>
<CAPTION>
                                                                                  1998             1997            1996
                                                                                  ----             ----            ----
<S>                                                                            <C>               <C>              <C>      
     Income tax benefit at applicable statutory tax rate of loss before
           income taxes                                                        $(159,000)        (294,000)        (821,000)
     Add:
           State income tax benefit, net of federal benefit                      (16,000)         (31,000)         (81,000)
           Change in valuation allowance                                         126,000          185,000          852,000
           Capitalized reorganization expenses and other permanent
              differences                                                           --             50,000             --   
           Adjustments to net operating loss and other deferred tax
              assets                                                              23,000           76,000             --   
           Other                                                                  26,000           14,000           50,000
                                                                               ---------         --------         --------

     Income tax provision for the year                                         $    --               --               --
                                                                               =========         ========         ========
</TABLE>

     The tax  effects of  temporary  differences  that give rise to  significant
     portions  of the  deferred  tax assets at March 28, 1998 and March 29, 1997
     are presented below.

     Deferred tax assets:                                  1998          1997
                                                           ----          ----
     Inventories, principally due to additional costs
        capitalized for tax purposes                   $   80,000    $  106,000
     Property and equipment, net, principally due to
        differences in depreciation                       233,000       221,000
     Accrued rent, principally due to accrual for
        financial reporting purposes                       23,000        58,000
     NOL carryforward                                   1,608,000     1,409,000
     Accrued expenses                                      46,000        72,000
     Other                                                 37,000        35,000
                                                       ----------    ----------

                Total gross deferred tax assets         2,027,000     1,901,000

     Less valuation allowance                          (2,027,000)   (1,901,000)
                                                       ----------    ----------

                Net deferred tax assets                $     --      $     --
                                                       ==========    ==========

     At March 28, 1998,  the Company has a net operating loss  carryforward  for
     federal income tax purposes of approximately  $5,233,000 which is available
     to offset future federal taxable income, if any, through 2013.

     A valuation  allowance is provided to reduce deferred tax assets to a level
     which,  more likely than not,  will be realized.  The net  deferred  assets
     reflect  management's  estimate of the amount  which will be realized  from
     future profitability which can be predicted with reasonable certainty.  The
     valuation  allowance for deferred tax assets as of March 28, 1998 and March
     29, 1997 was $2,027,000 and $1,901,000, respectively. The net change in the
     total valuation  allowance for the years ended March 28, 1998 and March 29,
     1997 was an increase of approximately $126,000 and $185,000, respectively.


                                                                     (Continued)


                                      -31-
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

(13) Fair Value of Financial Instruments

     The fair  value  of the  Company's  long-term  debt  and due to  Parent  is
     estimated by discounting the future cash flows for each instrument at rates
     currently offered to the Company for similar debt instruments of comparable
     maturities, which approximates the carrying value.

(14) Business and Credit Concentrations

     The  retail  sale  of  prerecorded  music  and  video  products  is  highly
     competitive.  The Company's share of the retail market in the  Southeastern
     United  States  is not  significant.  The  number  of  stores  and types of
     competitors   faced  by  the  Company's  stores  increased   significantly,
     including non-mall discount stores,  consumer  electronics  superstores and
     other mall based music, video and book specialty  retailers  expanding into
     non-mall multimedia  superstores of their own. The Company's stores operate
     in a retail environment in which many factors that are difficult to predict
     and outside the Company's  control can have a  significant  impact on store
     and  Company  sales and  profits.  These  factors  include  the  timing and
     strength of new product  offerings and  technology,  pricing  strategies of
     competitors,  openings and closings of competitors'  stores,  the Company's
     ability  to  continue  to  receive  adequate  product  from its  vendors on
     acceptable   credit  terms,   effects  of  weather  and  overall   economic
     conditions,  including inflation, consumer confidence,  spending habits and
     disposable income.

     The  Company  purchased  approximately  74  percent  and 76  percent of its
     merchandise  from seven  principal  suppliers  during the fiscal year ended
     March 28,  1998 and March 29,  1997,  respectively.  Purchases  from  given
     suppliers  are,  to a  great  extent,  determined  by  which  of  them  are
     manufacturing or distributing the most popular  prerecorded  music products
     at a given  time,  as well as the  credit  and  other  terms on which  such
     suppliers are willing to sell to the Company.  The Company is not obligated
     to purchase  merchandise  from any  supplier.  However,  loss of one of the
     Company's  principal  suppliers may have a material  adverse  effect on the
     Company's results of operations and financial position.


                                      -32-
<PAGE>

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.


                                    PART III


Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     As of the date of this filing, the directors and executive officers of PEC
are:

   Name                            Position                                  Age
   ----                            --------                                  ---

Allan Wolk          Chairman of the Board,
                      President (Chief Executive
                      Officer) and Director                                   60

Brian Wolk          Executive Vice-President, Chief Legal                     32
                      Officer and Director

Jason Wolk          Executive Vice-President, Chief Financial Officer
                      (Principal Financial and Accounting Officer),
                      Treasurer and Director                                  30

     Allan Wolk has been the Chief Executive Officer and a director of PEC since
its formation in 1982. He has also been the Chief Executive Officer of URT since
its formation. He has been engaged in the prerecorded music business for more
than 40 years, principally in the rack merchandising and retail segments
thereof.

     Brian Wolk, an attorney, has been employed by PEC in various capacities and
at various times since 1982 and has been employed by it, full time, since 1992.
He is a son of Allan Wolk. He has been a director of PEC and URT since 1994 and
a vice-president of both companies since June, 1995. He was appointed Executive
Vice-President and Chief Legal Officer of both companies in March, 1996.

     Jason Wolk, a certified public accountant, has been employed by PEC in
various capacities and at various times since 1983 and has been employed by it,
full time, since 1994. He is a son of Allan Wolk. Prior to his full time
employment by PEC, he had been employed as an accountant by KPMG Peat Marwick
LLP. He has been a director of PEC and URT since 1994 and a vice-president and
the secretary of both companies since June, 1995. He was appointed Treasurer and
Chief Financial Officer (Principal Financial and Accounting Officer) of both
companies in September, 1995, and was appointed Executive Vice-President of both
companies in March, 1996.



                                      -33-
<PAGE>




     The term of office of each director continues until the next annual meeting
of the stockholders and until his or her successor is elected. Mr. Wolk has an
employment agreement with URT. Under the management agreements referred to
above, PEC has the right to use the services of Mr. Wolk (See
"BUSINESS--Management Agreements Between URT and PEC").


Item 11. EXECUTIVE COMPENSATION

     The following table sets forth compensation paid or accrued by PEC for
services rendered in all capacities to it during the 1998 fiscal year and the
two prior fiscal years to (i) PEC's chief executive officer ("CEO") and (ii)
each of the other most highly compensated executive officers of PEC whose cash
compensation exceeded $100,000 and who served as executive officers during the
1998 fiscal year:

Summary Compensation Table

<TABLE>
<CAPTION>
                              Annual Compensation                                         Long Term Compensation
                              -------------------                                         ----------------------
                                                                                    Awards                  Payouts
                                                                                    ------                  -------

                                                                                                            Long
                                                                                            Options/        Term
                                                             Other                           Stock          Incen.        All
                                                             Annual         Restricted        App.          Plan          Other
Name and            Fiscal     Salary            Bonus       Compensa-         stock         Rights         Pay-outs      Compensa-
position             Year      ($)               ($)         tion($)        award(s)($)        (#)          ($)           tion($)
--------            ------     ------            ---         -------        -----------        ---          --------      ----------

<S>                  <C>       <C>                 <C>          <C>              <C>            <C>          <C>          <C>
Allan Wolk,          1998      375,000(1)         -0-          -0-              -0-            -0-          -0-              -0-
  Chairman,          1997      491,667(1)         -0-          -0-              -0-            -0-          -0-              -0-
  Pres. & CEO        1996      125,000(1)         -0-          -0-              -0-            -0-          -0-           308,222(2)
</TABLE>



                                      -34-
<PAGE>

----------

(1)  Mr. Wolk is employed and compensated under an employment agreement with URT
     which continues in effect until March 31, 2000. PEC receives the services
     of Mr. Wolk under the management agreements described above. Pursuant to
     such agreements, PEC is required to pay a salary to Mr. Wolk, and the
     amount so paid by PEC to Mr. Wolk is credited against the amount payable by
     URT to Mr. Wolk pursuant to the employment agreement between them (See
     "BUSINESS-- Management Agreements Between URT and PEC"). The salary paid by
     PEC to Mr. Wolk during the 1996 fiscal year was in addition to certain
     amounts paid by PEC to URT during such year as a management fee with
     respect to the services of Mr. Wolk under agreements that had been in
     effect until January 1, 1996.

(2)  Such amount represents a one-time distribution to Mr. Wolk as a result of
     the termination, effective May 12, 1995, of the PEC defined benefit plan
     and trust.


Employment Contracts

     There are no employment contracts or severance agreements in place between
PEC and any of its executive officers. However, pursuant to the arrangements
described above, PEC is entitled to the services of Allan Wolk, its Chairman,
President and Chief Executive Officer, through March 31, 2000, and PEC is
obligated to pay a salary to him (See "BUSINESS--Management Agreements Between
URT and PEC").

Compensation Committee Interlocks and Insider Participation        

     PEC does not have a compensation committee or other board committee
performing equivalent functions. During the 1997 fiscal year, all deliberations
concerning executive officer compensation or any other arrangements between PEC
and any executive officers were conducted by PEC's full board of directors,
provided, however, that no director voted on compensation payable to him as an
executive officer or any other arrangement between him and PEC.


Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of June 1, 1998, URT owns 37,781,270 shares of PEC common stock,
constituting approximately 94% of the issued and outstanding shares of such
common stock, and all of PEC's issued and outstanding shares of Series A and
Series B preferred stock. All of such shares of PEC stock are owned directly
with voting and investment power.


                                      -35-
<PAGE>

     As set forth in the following table, Allan Wolk and members of his
immediate family own approximately 30% of URT's Class A common stock and
approximately 58% of URT's Class B common stock. The two classes of URT's common
stock are identical except that each class votes separately so that all matters
requiring the vote of stockholders require the approval of both classes of
common stock voting as separate classes. By reason of such ownership and his
position as Chairman of URT and Chairman of PEC, Mr. Wolk may be deemed to have
effective control of PEC.

     The following table contains information concerning the number of shares of
each class of URT's common stock which was owned by each person who, as of June
1, 1998, owned, beneficially, more than 5% thereof, and the number of shares of
each class of such stock owned beneficially, directly or indirectly, by each
executive officer and director and by all directors and executive officers as a
group on such date:

<TABLE>
<CAPTION>
                                                             Amount & Nature
                                                             of Beneficial                  Percent
Title of Class                    Name                          Ownership                   of Class
--------------                    ----                          ---------                   --------

                               Executive Officers
                                  and Directors
                               ------------------

<S>                               <C>                          <C>                           <C>
Class A Common
Stock, par value
$.01 per share                    Allan Wolk                   3,194,186(1)                  29.4%


                                  Allan Wolk and
                                  Lawrence Strauss,
                                  as Trustees                     33,072(2)                    *

                                  Brian Wolk                      12,980(3)                    *

                                  Jason Wolk                      17,480(3)                    *
                                                               ---------

                                  All officers and
                                  directors as a
                                  group (3 persons)            3,257,718                     30.0


                                      Other
                                      -----
</TABLE>



                                      -36-
<PAGE>

<TABLE>
<S>                               <C>                          <C>                           <C>
                                  Scorpio Music, Inc.
                                  P. O. Box A
                                  Trenton, N.J. 08691          1,195,550(4)                  11.0%


                        Executive Officers and Directors
                        --------------------------------

Class B Common
Stock, par value
$.01 per share                    Allan Wolk                     786,654(5)                  58.4%

                                                               =========
                                  All officers and
                                  directors as a
                                  group (1 person)               786,654                     58.4%
</TABLE>

(1)  Includes 3,150,786 shares owned by Allan Wolk, 25,920 shares owned by his
     wife and 17,480 shares held by him for his daughter. However, Mr. Wolk has
     renounced all voting and investment power with respect to those shares of
     URT which are held by him for his daughter. He believes that his wife will
     vote the shares owned by her in favor of proposals which he favors, but
     disclaims beneficial ownership of any shares owned by her or held for the
     benefit of his daughter.

(2)  Such shares are held by Lawrence Strauss and Allan Wolk as trustees for the
     benefit of children of Sheffield Wolk, Mr. Wolk's brother. Allan Wolk has
     renounced all voting and investment power with respect to those shares of
     URT which are so held in trust for the benefit of children of Mr. Wolk's
     brother. All such powers as trustee are exercised exclusively by the
     co-trustee, and Mr. Wolk disclaims beneficial ownership of such shares.

(3)  Such shares are held in the name of Allan Wolk, as custodian. However, Mr.
     Wolk has renounced all voting and investment power with respect to those
     shares of URT which are held by him for his two sons, and disclaims
     beneficial ownership of such shares. Such shares, being listed separately
     here, are not included under the shares listed as beneficially owned by
     Allan Wolk.

(4)  Based on information supplied by URT's transfer agent. Does not include
     160,000 shares reported in a Schedule 13D, dated June 14, 1989, as owned by
     John T. Gervasoni, Scorpio's reported president and 100% shareholder, as to
     which no confirmation of ownership has been made by URT's transfer agent.

(5)  Includes 780,174 shares owned by Allan Wolk and 6,480 shares owned by his
     wife. Mr. Wolk believes that his wife will vote the shares owned by her in
     favor of proposals which he favors, but disclaims beneficial ownership of
     such shares.

(*)  Less than one percent.


                                      -37-
<PAGE>

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     As a result of their purchase in 1983 from an unaffiliated third party
seller, Allan Wolk and his brother, Sheffield Wolk, a former director of PEC,
are the owners of the land and building on which the PEC store in Fort
Lauderdale, Florida is located. Such property was and continues to be subject to
a lease with PEC as tenant, which had been negotiated by the prior owner. During
the 1995 fiscal year, PEC made and paid for certain renovations to the premises.
Based on the provisions of the lease, the owners agreed to be responsible for
$26,225 of the cost of such renovations which, with interest, is being deducted
by PEC over a period of 36 months.

     In December, 1984, PEC entered into a long-term lease with Allan Wolk and
Sheffield Wolk for premises owned by them in Orlando, Florida. The lease term
commenced in December, 1984, and is for a period of twenty years with two
additional five year terms. The lease is a triple net lease. The lease provides
for a net minimum rental rate of $125,000 per annum from the rental commencement
date through March 31, 1985; a rate of $140,000 per annum during the following
five year period; a rate of $145,000 per annum during the next five year period;
a rate of $160,000 during the next five year period; and increases of $5,000
during every five year period thereafter. Notwithstanding the foregoing,
commencing with the sixth rental year, if net sales at the store during any
rental year are less than $1,800,000, the annual net minimum rental rate for
such year will be the same as that which had been in effect during the preceding
five year period. The lease was approved by disinterested directors and, in the
opinion of management, is as reasonable as those which could have been obtained
from unaffiliated third parties.

     Because of the profitability of the above-referenced Fort Lauderdale and
Orlando stores, the leases for such two stores were among the leases which PEC
elected to assume during its Chapter 11 proceeding with the approval of the
Bankruptcy Court.

     In April, 1989, PEC's board of directors authorized PEC to enter into
agreements with its officers and directors under which they would be entitled to
be indemnified by PEC and have their expenses advanced to them in the event of
any claim against them in their capacities as officers and directors. Such
agreements were entered into with all then-existing officers and directors of
PEC on or about May 22, 1989. On or about July 14, 1995, and pursuant to the
further authorization of the board of directors on such date, PEC entered into
indemnification agreements with the two additional officers and directors, Brian
Wolk and Jason Wolk, who were appointed to their respective positions subsequent
to 1989. The indemnification agreements so entered into with Brian Wolk and
Jason Wolk are in the same form as the indemnification agreements entered into
in 1989 with the then-existing officers and directors.


                                      -38-
<PAGE>

     In order to enable PEC to effect its Plan of Reorganization, URT, in
exchange for the issuance to it of 20,000,000 shares of PEC's authorized common
stock (including 218,730 treasury shares), took the following steps: contributed
$350,000 to the capital of PEC; waived an aggregate of $75,000 of dividends
payable by PEC to URT with respect to the period running from January 1, 1996 to
March 31, 1997; loaned $700,000 to PEC; and agreed that, subject to the terms of
the Plan of Reorganization, it would guarantee the approximately $1,284,000 then
payable to PEC's principal suppliers after the Effective Date pursuant to the
arrangements described in "LEGAL PROCEEDINGS" above. In order to facilitate the
issuance of such shares to URT, URT also waived its right to convert to common
stock the Series A preferred stock of PEC which is owned by URT. The loan from
URT (as modified in the manner described below) is required to be paid back by
PEC with interest at the prime rate charged by Chase Manhattan Bank, N.A. over a
period of four years beginning on the third anniversary of the Effective Date.
The debt so owed by PEC to URT is subordinate to the amounts owed to PEC's
principal suppliers, and is secured by a second mortgage on PEC's Mobile,
Alabama property.

     On or about November 29, 1997, URT, in order to further strengthen PEC's
financial condition, agreed to forgive repayment of one-half of the $700,000
which was loaned by URT to PEC, together with the interest then accrued on the
$350,000 so forgiven. The remaining $350,000 of the indebtedness is required to
be repaid by PEC to URT in accordance with the terms of the original loan
documents described above.


                                      -39-
<PAGE>

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)  The following documents are filed as part of this report.

                                                                            Page
                                                                            ----

          1.   Financial Statements

               Table of Contents                                              15

               Independent Auditors' Report                                   16

               Peaches Entertainment Corporation
               Financial Statements:

                  Balance sheets as of March 28,  
                  1998 and March 29, 1997                                     17

                  Statements of operations for each of
                  the years in the three year period
                  ended March 28, 1998                                        18

                  Statements of shareholders' equity for each of the
                  years in the three year period ended March 28, 1998         19

                  Statements of cash flows for each of the years in
                  the three year period ended March 28, 1998                  21

                  Notes to financial statements                               23

          2.   Financial Statement Schedules

                   Schedules have been omitted which are not applicable
                   or where the required information is shown in the
                   financial statements or the notes thereto.

          3.   Exhibits


                                      -40-
<PAGE>

Exhibit No.

3.1    Articles of Incorporation of Peaches Entertainment Corporation ("PEC")
       dated March 3, 1982, incorporated by reference to Exhibit No. 3.3 to URT
       Industries, Inc. ("URT") and PEC's Registration Statement No. 2-81065.

3.1-1  Amendment to PEC's Articles of Incorporation dated January 17, 1983,
       incorporated by reference to Exhibit No. 3.3-1 to URT's and PEC's
       Registration Statement No. 2-81065.

3.2    By-Laws of PEC incorporated by reference to Exhibit No. 3.4 to URT's and
       PEC's Registration Statement No. 2-81065.

3.3    Form of Amendment to PEC's Articles of Incorporation, incorporated by
       reference to Exhibit No. 3.5 to PEC's Registration Statement No. 2-81065.

10.35  Lease dated July 1, 1984 between Shirley Wolk and PEC applicable to North
       Miami Beach, Florida premises, incorporated by reference to Exhibit No.
       13.46 to URT's Registration Statement No. 2-63747.

10.36  Lease dated December 13, 1984 between Allan Wolk and Sheffield Wolk and
       PEC applicable to Orlando, Florida premises, incorporated by reference to
       Exhibit No. 13.47 to URT's Registration Statement No. 2-63747.

10.40  Amendment to Lease dated February 25, 1986 between Allan Wolk and
       Sheffield Wolk and PEC applicable to Orlando, Florida premises,
       incorporated by reference to Exhibit No. 10(ss) to URT's Form 10-K Annual
       Report for the year ended March 29, 1986.

10.47  Indemnification Agreement dated May 22, 1989 between Allan Wolk and PEC,
       incorporated by reference to Exhibit 10.47 to PEC's Form 10-K Annual
       Report dated June 27, 1989.

10.48  Indemnification Agreement dated May 22, 1989 between David Jackowitz and
       PEC, incorporated by reference to Exhibit 10.48 to PEC's Form 10-K Annual
       Report dated June 27, 1989.

10.54  Lease dated December 22, 1989 between Sunbeam Properties, Inc. and PEC
       applicable to Miramar, Florida premises, incorporated by reference to
       Exhibit 10.54 to PEC's Form 10-K Annual Report dated June 27, 1991.



                                      -41-
<PAGE>

10.60  Letter Agreement dated January 1, 1996 between URT and PEC pertaining to
       termination of Management and Intercorporate Agreement dated March 29,
       1993, incorporated by reference to Exhibit 10(jjjj) to URT's Form 10-K
       Annual Report dated April. 25, 1997.

10.61  Letter Agreement dated January 1, 1996 between URT and PEC pertaining to
       services of Allan Wolk, incorporated by reference to Exhibit 10(kkkk) to
       URT's Form 10-K Annual Report dated April 25, 1997.

10.62  Indemnification Agreement dated July 14, 1995 between Brian Wolk and PEC,
       incorporated by reference to Exhibit 10.67 to PEC's 10-K Annual Report
       dated April 25, 1997.

10.63  Indemnification Agreement dated July 14, 1995 between Jason Wolk and PEC,
       incorporated by reference to Exhibit 10.63 to PEC's 10-K Annual Report
       dated April 25, 1997.

10.64  PEC's Amended Plan of Reorganization, dated October 23, 1996,
       incorporated by reference to Exhibit 1 to PEC's Form 8-K dated April 7,
       1997.

10.65  Order Confirming PEC's Amended Plan of Reorganization, as Modified, dated
       January 17, 1997, incorporated by reference to Exhibit 2 to PEC's Form
       8-K dated April 7, 1997.

10.66  URT Promissory Note dated January 27, 1997 made by PEC to URT,
       incorporated by reference to Exhibit 10.66 to PEC's 10-K Annual Report
       dated April 25, 1997.

10.67  Security Agreement dated January 27, 1997 between PEC and URT,
       incorporated by reference to Exhibit 10.67 to PEC's 10-K Annual Report
       dated April 25, 1997.

10.68  Mortgage Agreement with Assignment of Rents, Security Agreement and
       Fixture Filing dated January 27, 1997 by PEC in favor of URT,
       incorporated by reference to Exhibit 10.68 to PEC's 10-K Annual Report
       dated April 25, 1997.

10.69  Reimbursement Agreement dated January 27, 1997 between PEC and URT,
       incorporated by reference to Exhibit 10.69 to PEC's 10-K Annual Report
       dated April 25, 1997.

10.70  Subordination Agreement dated January 27, 1997 between PEC, URT and
       selected creditors, incorporated by reference to Exhibit 10.70 to PEC's
       10-K Annual Report dated April 25, 1997.



                                      -42-
<PAGE>



10.71  Subordination Agreement dated January 27, 1997 between PEC, URT and
       creditor, incorporated by reference to Exhibit 10.71 to PEC's 10-K Annual
       Report dated April 25, 1997.

10.72  Surrender and Waiver Agreement dated January 27, 1997 between PEC and
       URT, incorporated by reference to Exhibit 10.72 to PEC's 10-K Annual
       Report dated April 25, 1997.

10.73  Waiver Agreement dated March 1, 1997 between PEC and URT, incorporated by
       reference to Exhibit 10.73 to PEC's 10-K Annual Report dated April 25,
       1997.

10.74  Stock Purchase Agreement dated March 24, 1997 between PEC and URT,
       incorporated by reference to Exhibit 10.74 to PEC's 10-K Annual Report
       dated April 25, 1997.

10.75  Letter agreement dated March 17, 1997 between URT and PEC pertaining to
       salary of Allan Wolk, incorporated by reference to Exhibit 10(zzzz) to
       URT's 10- K Annual Report dated July 13, 1998.

10.76  Loan Forgiveness Agreement dated November 29, 1997 between URT and PEC,
       incorporated by reference to Exhibit 10.2 to URT's 10-K Annual Report
       dated July 13, 1998.

10.77  Letter agreement dated May 26, 1998 between URT and PEC pertaining to
       salary of Allan Wolk, incorporated by reference to Exhibit 10.3 to URT's
       10-K Annual Report dated July 13, 1998.

27     Financial Data Schedule

       (b)    Reports on Form 8-K.


       The Company filed a report on Form 8-K on or about February 10, 1998 for
       the purpose of reporting a filing delay with respect to a Report on Form
       10-Q which has since been filed.


                                      -43-
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                               PEACHES ENTERTAINMENT CORPORATION

                                               By: /s/ Allan Wolk
                                                   -----------------------------
                                                   Allan Wolk,
                                                   Chairmain of the Board

Dated: July 13, 1998

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

                Title                                                Date

By:    /s/ Allan Wolk                                            July 13, 1998
       --------------------------------
       Allan Wolk,
       Chairman of the Board ,
       President (Principal
       Executive Officer) and Director


By:    /s/ Brian Wolk                                            July 13, 1998
       --------------------------------
       Brian Wolk, Executive
       Vice President, Chief Legal
       Officer and Director

By:    /s/ Jason Wolk                                            July 13, 1998
       --------------------------------
       Jason Wolk, Executive
       Vice President, Chief Financial
       Officer (Principal Financial and
       Accounting Officer), Treasurer
       Secretary and Director




                                      -44-