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 l934


For the fiscal year ended March 30, 1996             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 l934 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 ______        NO    X

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 closing bid and asked  prices) of the
voting stock held by  non-affiliates  of the  registrant  was, as of February 6,
1997, approximately $65,000.

As of February 12, 1997 the  registrant's  transfer agent reported as issued and
outstanding (before the issuance of an additional  20,000,000 shares as reported
below):

     19,781,270 Shares of Common Stock


<PAGE>



                                     PART I
Item 1.  BUSINESS

     Peaches  Entertainment  Corporation  ("PEC"  or the  "Company"),  a Florida
corporation, was incorporated in 1982. Its executive offices are located at 1180
East Hallandale  Beach  Boulevard,  Hallandale,  Florida,  33009.  Its telephone
number is  954-454-5554.  PEC 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 is the
beneficial owner of approximately  93.5% of PEC's issued and outstanding  shares
of common stock and all of its issued and outstanding  shares of preferred stock
and  controls  PEC.  The  remaining  approximately  6.5%  of  PEC's  issued  and
outstanding shares of common stock are owned by non-affiliated persons.

Petition for Relief under Chapter 11

     On January 16, 1996 (the "Petition Date"),  PEC filed a voluntary  petition
for  relief  under  Chapter  11  of  the  United  States  Bankruptcy  Code  (the
"Bankruptcy  Code") with the United  States  Bankruptcy  Court for the  Southern
District  of Florida  (the  "Bankruptcy  Court").  During the  pendency  of such
proceeding  (the "Chapter 11  proceeding"),  PEC continued to manage its affairs
and operate its business as a  debtor-in-possession  (subject to the approval of
the Bankruptcy Court with respect to transactions outside of the ordinary course
of business), while it developed a Plan of Reorganization that would allow it to
continue in business.  PEC's Amended Plan of  Reorganization,  dated October 23,
1996, as modified by the Bankruptcy Court's Order of January 17, 1997 (the "Plan
of Reorganization"), was confirmed by the Bankruptcy Court on such date, and was
to become effective on February 3, 1997,  subject to the satisfaction of certain
conditions. Such conditions were satisfied on February 19, 1997, and the Plan of
Reorganization  became  effective  on such date (the  "Effective  Date").  For a
discussion  of the Plan of  Reorganization  and other action taken in connection
with the Chapter 11 proceeding, see "LEGAL PROCEEDINGS" below.

The Peaches Stores

     The following  table sets forth the number of 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 ended March 30, 1996:

                                        1996     1995     1994    1993     1992
                                        ----     ----     ----    ----     ----
Number of stores:
At beginning of period                   19       20       21       22       21
Opened during period                      0        1        0        0        2
Closed during period                     (6)      (2)      (1)      (1)      (1)
                                        ---      ---      ---      ---      ---

At end of period                         13       19       20       21       22


                                       -2-

<PAGE>



     Three of the six  stores  which were  closed by PEC during the fiscal  year
ended March 30, 1996 (the "1996 fiscal  year") were closed prior to the Petition
Date.  The other three stores were closed on or about the Petition Date. All six
of such stores had been operating unprofitably, and pursuant to its rights under
the Bankruptcy Code, PEC obtained approval of the Bankruptcy Court to reject the
unexpired   term  of  the  leases   pertaining  to  such  stores.   (See  "LEGAL
PROCEEDINGS").  As to the  remaining  thirteen  stores  which are  presently  in
operation,  PEC has renegotiated five of the leases pertaining to such stores on
terms  which are more  favorable  to PEC.  The other  eight  stores  are  either
operated  under the same leases as were in effect prior to the Petition Date or,
as to the one store which is owned  rather than leased by PEC, is not subject to
any leasehold arrangement.

     The thirteen "Peaches" stores (the "'Peaches'  stores") which are presently
in operation 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  7,000 square feet to
approximately  14,000 square feet. Each store either has its own parking area or
is located in a shopping center which provides parking. PEC has options to renew
most of its leases for various periods.

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

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

Trademarks

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

Operation of the Peaches Stores

     The "Peaches"  stores are all similar in  appearance.  They have  distinct,
wood  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 ordering,  pricing and displaying
merchandise  sold in the store,  hiring and firing  personnel  and other matters
relating to store  administration,  including re-orders of merchandise.  Certain
other  matters,  including  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 1996 fiscal year, PEC purchased  merchandise from
approximately  59 suppliers,  among whom the principal ones were BMG, CEMA, PGD,
SONY,


                                       -3-

<PAGE>



UNI, WEA, and Bassin.  Approximately 81% of the merchandise purchased during the
1996 fiscal year came from such seven principal suppliers.  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,  although in some cases, the
expenses  are or  would be  greater  if such  alternate  sources  are  utilized.
Merchandise is delivered directly by suppliers to the stores.

     Prior to its filing for  protection  from its  creditors,  the usual  terms
received by PEC from  suppliers  provided  for payment to be made within 60 days
from the end of the month in which a purchase is made. In addition, PEC normally
received an  additional 30 to 120 days to pay for certain  purchases  during the
course of the year. Such terms are usual in the industry.

     Prior to its filing for protection from its creditors, PEC was also able to
return merchandise,  without limitation, to all suppliers, who charged a penalty
if  returns  exceeded  certain  percentages  of  the  dollar  amounts  of  gross
purchases.  Such  return  policies  did not have  any  adverse  effect  on PEC's
business.

     For a short period after the Chapter 11 filing,  PEC was not able to obtain
delivery  from any of its  principal  suppliers of  merchandise,  except  Bassin
(which  supplied the inventory  which might  otherwise have been ordered through
other suppliers),  and was not able to return merchandise in accordance with the
return policies described above. Eventually, during the course of the Chapter 11
proceeding all of PEC's principal suppliers resumed shipping  merchandise to PEC
and agreed to allow PEC to make returns of unneeded inventory for credit against
pre-petition  indebtedness.  In  some  cases,  suppliers  also  agreed  to  ship
merchandise on credit. During the pendency of the Chapter 11 proceeding, PEC was
able to obtain  approximately  80% of its  inventory on credit,  and was able to
return most of its unused inventory for credit against prepetition indebtedness.
Because of the resumption in deliveries  from  suppliers,  as well as the use of
alternate  sources  of  merchandise,  the  Chapter  11  filing  did  not  have a
materially  negative  effect on PEC's  ability to obtain  inventory or to return
unused  inventory for credit,  although the cost of such inventory was generally
higher than it would  otherwise have been and the terms for the return of unused
inventory were sometimes  different than those which were in effect prior to the
Petition Date.

     Subsequent to the Effective  Date, all of PEC's seven  principal  suppliers
and most of its other suppliers have agreed on terms with respect to payment for
merchandise  and the return of unused  merchandise for credit which are the same
or similar to the terms which were in effect prior to the Chapter 11 proceeding.

     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.


                                       -4-

<PAGE>



Based on management's experience to date, retail business sales fluctuate during
the year and are  generally at their highest  levels during the holiday  season,
i.e.,  between October and December.  During the last three fiscal years,  sales
between January and March were  approximately  22% of total sales for each year;
sales  between  April  and June were  approximately  24% of total  sales;  sales
between July and  September  were  approximately  22% of total sales;  and sales
between October and December were approximately 32% 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 and computer
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
action taken to attempt 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 1996 fiscal year, PEC employed  approximately 249
persons  in all  capacities.  It is not a  party  to any  collective  bargaining
agreements.  Relations with employees have been satisfactory and there have been
no work stoppages.

Management Agreements Between URT and PEC

     Pursuant to a management agreement, as amended, which was in effect between
URT and PEC through  December 31, 1995, URT was required to provide PEC with the
services of Allan Wolk as  President  and  Chairman of PEC,  PEC was entitled to
payment from URT for certain accounting and administrative services performed by
PEC for URT at the rate of $39,600  per annum  (subject  to  periodic  equitable
adjustment  depending upon the amount of such services),  and so long as URT and
PEC filed consolidated income tax returns, their respective liabilities for such
taxes were required to be equitably  apportioned as provided in such  agreement.
For the above described  services of Allan Wolk, PEC was required to pay URT, in
equal  weekly  installments,  a fee at the rate of  $750,000  per annum for that
portion of the 1996 fiscal year ending on December  31,  1995,  as compared to a
fee at  the  rate  of  $1,000,000  per  annum  with  respect  to  the  preceding
approximately  six month period  commencing  October 2, 1994 and ending April 1,
1995, and a fee during earlier periods based on a percentage of PEC's net sales.




                                       -5-

<PAGE>



     The  management  agreement  described  above was  terminated by URT and PEC
effective as of December 31, 1995,  and replaced by three new  agreements,  each
effective from and after January 1, 1996.  Under the three new  agreements,  two
between  URT and PEC and the third  between URT and Allan  Wolk,  the  following
arrangements  have  been  agreed  to:  URT and PEC will  continue  to  equitably
apportion taxes so long as they continue to file a consolidated  federal return;
for the period from January 1, 1996 through March 31, 2000, URT will continue to
provide to PEC the services of Allan Wolk as PEC's Chairman, President and Chief
Executive  Officer;  PEC, in lieu of paying a management fee to URT, is required
to pay to Mr. Wolk during such  period,  so long as he continues to provide such
services,  a salary at the rate of $500,000 per annum; and the amount so paid by
PEC to Mr. Wolk  pursuant  to such  arrangement  shall be  credited  against the
amount payable by URT to Mr. Wolk pursuant to the employment  agreement  between
them.

     As a result of the above-described arrangements, the amounts required to be
paid by PEC, as  management  fees to URT or as salary to Allan Wolk were reduced
from  $1,024,386  during the fiscal year ended  April 1, 1995 (the "1995  fiscal
year") to  $687,500  during the 1996  fiscal year  (without  accounting  for the
expenses as described  above of  approximately  $39,600 for which URT reimbursed
PEC during the 1995 fiscal  year).  This resulted in a net savings to PEC in the
approximate  amount of  $297,000.  The  $687,500  so paid by PEC during the 1996
fiscal year consisted of management fees to URT of $562,500 (covering the period
through  December 31, 1995 when the prior  management  agreement was in effect),
and  compensation  to Allan Wolk in the amount of $125,000  (covering the period
beginning January 1, 1996 when the three new agreements came into effect).

     During both the 1996 and 1995 fiscal years, Mr. Wolk devoted  approximately
75% of his working time to the business of PEC.


Item 2.  PROPERTIES

     Since April,  1996,  PEC's  headquarters  have been 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.  Prior to April,  1996,  PEC's
headquarters  had been  located  in a  larger  and more  expensive  facility  of
approximately  26,000  square feet in Miramar,  Florida in a building  which was
leased by PEC and included both office and warehouse space. The new headquarters
has no warehouse space, as all merchandise is shipped directly from suppliers to
stores.  The  move to  smaller  facilities  with  no  warehouse  space,  and the
elimination of payroll expenses associated with the old warehouse facility,  has
resulted in savings to PEC in excess of $200,000 per year. The lease for the old
headquarters  was among the leases  which PEC  rejected in  connection  with the
Chapter 11 proceeding. (See "LEGAL PROCEEDINGS").

     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. PEC made all payments on
the first  mortgage  as they became due during the  Chapter 11  proceeding,  and
negotiated  a  longer  payout  of  such  mortgage  during  the  course  of  such
proceeding. The second mortgage secures a debt owed by PEC to URT as a result of
a loan


                                       -6-

<PAGE>



which  was  made by URT to PEC in  January,  1997 in  order  for PEC to  satisfy
certain of its obligations to creditors under the Plan of  Reorganization.  (See
"LEGAL PROCEEDINGS").

     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

     PEC's above-described voluntary petition for relief under Chapter 11 of the
Bankruptcy Code resulted in the above-described Plan of Reorganization. The Plan
of  Reorganization,  as so confirmed by the Bankruptcy  Court,  provided for the
following:

     (a) All unsecured  creditors,  including all of PEC's inventory  suppliers,
but excluding  landlords  under leases  rejected by PEC, are entitled to 100% of
their allowed  claims (the total of which is  approximately  $4,922,000).  PEC's
seven principal suppliers (whose allowed claims total  approximately  $4,372,000
out of such  $4,922,000) are entitled to 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.  The  balance of the
payments to such seven principal suppliers (approximately $1,284,000) is payable
with  interest at the prime rate charged by Chase  Manhattan  Bank,  N.A. over a
period of 24 months commencing in March, 1997. The amounts due to such suppliers
are secured by a perfected  first lien and  security  interest in the  inventory
originally  distributed  by  the  secured  party  which  was  sold  to PEC or is
otherwise  in the  possession  of and  owned  by PEC.  The  remaining  unsecured
creditors (whose allowed claims total  approximately  $550,000) were entitled to
and received the full amount of their allowed claims on the Effective Date.

     (b)  Landlords  under the leases which were  rejected by PEC in  connection
with the bankruptcy  filing were entitled to approximately  $311,000 (30% of the
approximately  $1,000,000 in allowed claims with respect to such leases), all of
which was paid on the Effective Date.

     (c) 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,  will  receive  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 was extended to September, 2002.

     (d) The priority tax claim in the  approximate  amount of $118,000 which is
owed to the Florida  Department  of Revenue will be payable with interest over a
period of two years commencing 30 days from the Effective Date.




                                       -7-

<PAGE>



     (e) The priority administrative claims,  including professional fees in the
approximate  amount of  $200,000  which were  incurred  in  connection  with the
reorganization, were paid on the Effective Date.

     In order for PEC to be able to  effect  the Plan of  Reorganization  on the
terms  described  above,  URT, in exchange for the issuance to it of  20,000,000
shares of PEC's  authorized  common stock (including  218,730 treasury  shares),
agreed that,  subject to the terms of the Plan, it would contribute  $350,000 to
the capital of PEC, waive an aggregate of $75,000 of dividends payable by PEC to
URT,  guarantee  the  approximately  $1,284,000  which  is due to the  principal
suppliers  after the Effective  Date pursuant to the  arrangements  described in
subparagraph (a) above, and lend $700,000 to PEC on the Effective Date. The loan
by URT to PEC is required to be paid back by PEC with  interest 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. ( For additional  information  pertaining to such arrangements between
PEC and URT, see "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").

     During the course of the Chapter 11 proceeding, the Bankruptcy Court issued
orders authorizing the following:

     (a) PEC's  rejection of the unexpired  portion of the leases covering PEC's
former  corporate  headquarters in Miramar,  Florida,  as well as the six stores
closed by PEC during the 1996 fiscal year (See  "PROPERTIES" and  "BUSINESS--The
Peaches Stores").

     (b) PEC's rejection of the unexpired  portion of the lease covering a store
in Charlotte, North Carolina which had been closed by PEC during the 1991 fiscal
year and as to which PEC  remained  responsible  for the  shortfall  between the
amount  payable  under PEC's lease for such store and the amount being paid by a
subtenant of such store.

     (c) PEC's assumption of the unexpired  portion of the leases covering PEC's
new corporate headquarters and the stores which are leased and are to be kept in
operation.

     (d) PEC's execution of a settlement agreement containing a reduction of the
amounts payable by PEC to its former Executive Vice-President under a consulting
arrangement with him (See "EXECUTIVE COMPENSATION--Employment Contracts").

     (e)  PEC's  entry  into  post-petition  agreements  with its  suppliers  of
inventory under which PEC was permitted to return  merchandise to such suppliers
for a credit  against  prepetition  claims,  and under which PEC was entitled to
purchase merchandise on credit from certain of such suppliers.  (See "BUSINESS -
Operation of the Peaches Stores").


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

     None.


                                       -8-

<PAGE>



                                     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  high and  low,  bid and  asked
quotations for PEC's Common Stock for the calendar periods  indicated,  based on
information supplied by the National Quotation Bureau, Incorporated:

<TABLE>
<CAPTION>
                                                           Bid Prices       Asked Prices
                                                           ----------       ------------
                                                          High    Low       High     Low
<S>                                                        <C>    <C>        <C>      <C>
1994

        Quarter ended March 31,                            1/16   1/16       5/16     1/4
        Quarter ended June 30,                             1/16   1/16       5/16     1/4
        Quarter ended Sept. 30,                            1/16    .02       5/16     1/8
        Quarter ended Dec. 31,                             1/32    .02       9/32     .12

1995

        Quarter ended March 31,                            1/32    1/32      9/32     7/32
        Quarter ended June 30,                             1/32    1/32      9/32     7/32
        Quarter ended Sept. 30,                            1/32    1/32      9/32     7/32
        Quarter ended Dec. 31,                             1/32    1/32      9/32     7/32

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 through Feb. 6,                           .005     .001      .05      .05
</TABLE>


     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.



                                       -9-

<PAGE>



Dividends

     There has been no payment of  dividends  on PEC's  Common  Stock  since its
inception  and payment of dividends on such stock in the future will depend upon
its earnings  and needs.  PEC is required to pay  dividends  on its  outstanding
shares of preferred  stock. In connection  with the Chapter 11 proceeding,  URT,
the owner of such preferred  stock,  agreed to waive 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 February 12, 1997,  based
on information supplied by PEC's transfer agent:




                                                      Number of Record
      Title of Class                                      Holders
      --------------                                      -------

     Common Stock, $.01 par value                         1,515





                                      -10-

<PAGE>



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 30,          April 1,           April 2,          April 3,        March 28,
                                                    1996               1995              1994             1993(1)           1992
                                                    ----               ----              ----             -------           ----
<S>                                             <C>                 <C>               <C>               <C>              <C>       
Operating statement data:
Net sales                                       $ 23,626,489        31,960,953        36,303,455        37,861,389       35,565,512

Net income (loss)                                 (2,416,051)       (1,995,408)         (108,456)          296,426         (328,890)

Income (loss) per common share                          (.12)            (0.10)            (0.01)             0.01            (0.02)

Weighted average
number of common   
shares outstanding                                19,781,270        19,781,270        19,781,270        19,781,270       19,781,270

Balance sheet data:
Working capital
excluding liabilities
subject to compromise in 1996                   $  6,083,691         2,058,184         3,550,371         3,514,978        2,679,448

Total assets                                       9,442,616        11,224,889        13,390,533        14,025,154       12,698,325

Current portion of long-
term obligations                                     124,774           110,028           131,173           174,579          188,524

Long-term obligations                                810,367           929,654           705,109           836,282        1,010,861

Liabilities subject to compromise                  5,671,434                --                --                --               --

Shareholders' equity                               1,429,226         3,890,277         5,945,685         6,114,141        5,877,715

Store data:
Weighted average square
feet of selling space                                 88,012           130,157           137,145           139,850          145,279

Weighted average sales
per square foot of selling                      $        268               246               265               271              245
space

Number of stores open at
end of period                                             13                19                20                21               22
</TABLE>

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

(1) Includes 53 weeks of operations.




                                      -11-

<PAGE>



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


From  time to  time,  the  Company  may make  certain  statements  that  contain
"forward-looking"  information (as defined in the Private Securities  Litigation
Reform  Act  of  1995).  Words  such  as  "believe",  "anticipate",  "estimate",
"project" and similar expressions are intended to identify such  forward-looking
statements.  Forward-looking  statements may be made by management  orally or in
writing,  including,  but not  limited  to, in press  releases,  as part of this
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  and as a part of  other  sections  of this  Annual  Report  or other
filings.   Readers  are  cautioned   not  to  place  undue   reliance  on  these
forward-looking  statements,  which speak only as of their respective dates, and
are subject to certain risks, uncertainties and assumptions.  Should one or more
of these risks or  uncertainties  materialize,  or should any of the  underlying
assumptions prove incorrect, actual results of current and future operations may
vary materially from those anticipated, estimated or projected.

Results of Operations

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 and
computer 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 on January 16, 1996.

Recently,  the Company's  primary suppliers have taken steps to help protect the
retail marketplace from certain low cost retailers of music. These steps include
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,  should help the Company to
restore  itself to a  competitive  position in subsequent  fiscal  years.  Other
factors  which,  in  management's  opinion,  should  help the Company to restore
itself to a  competitive  position  in the  future  are the  closing  of the six
unprofitable  stores which were closed  during  1996,  the closing of the former
headquarters  and  warehouse,  the  termination of other  unprofitable  business
arrangements as described  herein and  concentration on advantages which PEC has
over certain of its  competitors,  including large  inventory,  convenient store
locations and a high level of customer service.



                                      -12-

<PAGE>




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 has 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.

Selling,  general,  and  administrative  (SG&A) expenses in 1996 decreased 17.1%
compared to 1995. Such decrease is attributable 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 reflected in the financial
statements for 1995.

FISCAL YEAR ENDED APRIL 1, 1995 (1995) COMPARED TO FISCAL YEAR ENDED APRIL
2, 1994 (1994)

Net sales for 1995 decreased 12.0% compared to 1994. Such decrease is attributed
to an 8.2% decrease in comparable  store sales,  and a 3.8% decrease in sales in
those stores that opened or closed during 1995 versus 1994.

The cost of sales for 1995 was lower than that for 1994 due to the  decrease  in
net sales.  Cost of sales as a percentage of net sales  increased  from 62.7% in
1994 to 63.7% in 1995 due to a reduction in retail  pricing in an effort to meet
the increased competition.

Selling,  general,  and  administrative  (SG&A)  expenses in 1995 decreased 6.3%
compared to 1994.  Such  decrease is  attributable  to a decrease in  comparable
store expenses  (1.1%),  a decrease in store  operating  expenses of stores that
opened or closed  during  1995  versus  1994  (2.9%),  a decrease  in  corporate
overhead  (1.9%),  and a decrease  in the cost of store  openings  (0.4%).  SG&A
expenses, as a percentage of net sales, increased from 33.7% in 1994 to 35.8% in
1995 due to the fixed  nature of certain  expenses and the decrease in net sales
in addition to the aforementioned items.

Store closing costs increased in 1995 over 1994 due to the fact that the cost of
closing  1 store is  included  in  1994,  and the cost of  closing  4 stores  is
included in 1995.

The Company incurred a net loss of approximately $1,995,000 in 1995 versus a net
loss of  approximately  $108,000 in 1994 due to costs of closing four stores,  a
loss on litigation, and the reduction in net sales and gross profit as described
above.




                                      -13-

<PAGE>



FISCAL YEAR ENDED APRIL 2, 1994 (1994) COMPARED TO FISCAL YEAR ENDED APRIL
3, 1993 (1993)

Net sales for 1994 decreased 4.1% compared to 1993.  Such decrease is attributed
to the fact that 1993  included  53 weeks of  operations  (1.7%),  a decrease in
comparable  store sales (1.6%),  store closings due to inclement  weather (0.3%)
and a decrease in sales in those stores that opened or closed during 1994 versus
1993 (0.5%).

The costs of sales for 1994 was lower  than that for 1993 due to  decreased  net
sales.  Cost of sales as a  percentage  of net  sales for both 1994 and 1993 was
62.7%.

Selling,  general and  administrative  (SG&A)  expenses in 1994  increased  1.8%
compared to 1993.  Such  increase is  attributable  to an increase in comparable
store expenses (1.9%), an increase in corporate  overhead (1.6%), an increase in
the cost of store openings  (0.8%),  offset by a decrease in store expenses that
opened or closed during 1994 versus 1993 (1.5%),  and a decrease due to the fact
that 1993 included 53 weeks of operations (1.0%). SG&A expenses, as a percentage
of net  sales,  increased  from  31.8% in 1993 to 33.7% in 1994 due to the fixed
nature of certain  expenses  and the  decrease  in net sales in  addition to the
aforementioned items.

In 1994, the Company adopted the provisions of Financial Standards No. 109 (SFAS
109) Accounting for Income Taxes, which established new financial accounting and
reporting  standards  for income taxes.  Such adoption  resulted in a cumulative
adjustment of  approximately  $74,000 of income which has been  reflected in the
statement of operations for 1994.

The  Company  incurred a net loss of  approximately  $108,000 in 1994 versus net
income of approximately $296,000 in 1993 due to the decrease in net sales and an
increase in certain SG&A expenses as discussed above.  Approximately  $55,000 of
net income in 1993 is due to the fact that 1993 included 53 weeks of operations.

Liquidity and Capital Resources

The Company  had  working  capital of  $6,083,691  at March 30, 1996  (excluding
liabilities  subject to  compromise  in 1996)  compared  to  working  capital of
$2,058,184  at April 1, 1995 and a current  ratio  (the  ratio of total  current
assets to total current  liabilities)  of 5.6 to 1 at March 30, 1996  (excluding
liabilities  subject to compromise in 1996)  compared to a current ratio of 1.35
to 1 at April 1, 1995.  The  amount of the  liabilities  which  were  subject to
compromise is $5,671,434.

At March 30, 1996, the Company had long-term obligations of $810,367 (which does
not  include  liabilities  subject  to  compromise  of  $5,671,434).  Management
anticipates  that  its  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 would attempt to obtain financing for the opening of
any new stores which it may plan to open during the next few years.



                                      -14-

<PAGE>



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 Convertible Preferred Stock and 2,500 shares of $100 par, 13%, Series
B Cumulative  Convertible  Preferred Stock. All of such shares are owned by URT.
During the 1996  fiscal  year,  the  Company  paid  dividends  of $45,000 to its
preferred  shareholder,  based on the  dividends  requirements  relating  to the
outstanding  Series A and Series B Preferred Stock, less the amount agreed to be
waived by such shareholder.  The Company recently agreed to issue to URT certain
shares of Series C preferred stock containing a cumulative preferred dividend of
10% per annum. (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").

For  a  discussion  of  recent  developments  and  uncertainties  affecting  the
Company's liquidity and capital resources, see note 2 (Petition for Relief under
Chapter 11) to the financial statements which are set forth at Item 8 below.

In March,  1995, the Financial  Accounting  Standards Board issued Statement No.
121,  Accounting  for the  Impairment  of  Long-Lived  Assets and for Long Lived
Assets to be Disposed  Of,  which became  effective  for fiscal years  beginning
after December 15 ,1995. This standard establishes  accounting standards for the
impairment of long-lived assets,  certain identifiable  intangibles and goodwill
related to those assets and certain  intangibles  to be disposed of. The Company
believes that  adoption of this standard will not have a material  impact on the
financial condition or operating results of the Company.




                                      -15-

<PAGE>



Item 8.         FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                        PEACHES ENTERTAINMENT CORPORATION

                                Table of Contents
     
Independent Auditors' Report                                               17

Financial Statements:
     Balance  Sheets as of March 30, 1996 and April 1, 1995                18
     Statements of Operations for each of the years in the three 
       year period ended March 30, 1996                                    19
     Statements of Shareholders' Equity for each of the years in 
       the three year period ended March 30, 1996                          20
     Statements of Cash Flows for each of the years in the three
       year period ended March 30, 1996                                    21
     Notes to Financial Statements                                         23






                                      -16-

<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 30,  1996 and April 1, 1995,  and the
related statements of operations,  shareholders'  equity and cash flows for each
of the years in the  three-year  period  ended March 30, 1996.  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 30,  1996 and April 1,  1995,  and the  results  of its
operations  and its cash  flows for each of the years in the  three-year  period
ended  March  30,  1996  in  conformity  with  generally   accepted   accounting
principles.

As  discussed in note 3 to the  financial  statements,  the Company  changed its
method of  accounting  for income taxes in 1994 to adopt the  provisions  of the
Financial Accounting Board's SFAS No. 109, Accounting for Income Taxes.


                                             /s/ KPMG Peat Marwick LLP

June 29, 1996, except as to note 2, 
which is as of February 3, 1997

Ft. Lauderdale, Florida

                                      -17-

<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                                 Balance Sheets

                        March 30, 1996 and April 1, 1995

<TABLE>
<CAPTION>
                    Assets                                   1996            1995
                                                         ------------    ------------
<S>                                                      <C>               <C>     
Current assets:
     Cash and cash equivalents                           $  1,917,566       1,537,293
     Inventories                                            4,954,260       5,578,737
     Prepaid inventory                                        254,249            --
     Pre paid expenses and other current assets               279,346         289,413
     Land held for sale                                          --           300,000
     Refundable income taxes                                    9,136         257,229
                                                         ------------    ------------
          Total current assets                              7,414,557       7,962,672

Property and equipment, net                                 1,843,708       3,072,869
Other assets                                                  184,351         189,348
                                                         ------------    ------------

                                                         $  9,442,616      11,224,889
                                                         ============    ============

               Liabilities and Shareholders' Equity

Liabilities not subject to compromise

Current liabilities:
     Current portion of long-term obligations                 124,774         110,028
     Accounts payable                                         103,038       4,130,530
     Accrued liabilities                                    1,103,054       1,663,930
                                                         ------------    ------------

          Total current liabilities                         1,330,866       5,904,488

Long-term obligations                                         810,367         929,654
Deferred rent                                                 200,723         500,470
                                                         ------------    ------------

          Total liabilities not subject to compromise       2,341,956       7,334,612

Liabilities subject to compromise                           5,671,434            --
                                                         ------------    ------------

          Total liabilities                                 8,013,390       7,334,612
                                                         ------------    ------------

Shareholders' equity:
     Preferred stock, $100 par value; 50,000 shares
       authorized; 5,000 shares issued and outstanding        500,000         500,000
     Common stock, $.01 par value; 40,000,000 shares
       authorized; 20,107,850 shares issued                   201,079         201,079
     Additional paid-in capital                             1,284,471       1,284,471
     Retained (deficit) earnings                             (496,429)      1,964,622
                                                         ------------    ------------

                                                            1,489,121       3,950,172

     Treasury stock, 326,580 common shares, at cost           (59,895)        (59,895)
                                                         ------------    ------------

          Total shareholders' equity                        1,429,226       3,890,277

Commitments and contingencies
                                                         ------------    ------------
                                                         $  9,442,616      11,224,889
                                                         ============    ============
</TABLE>

See accompanying notes to financial statements.

                                      -18-

<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                            Statements of Operations

       For each of the years in the three-year period ended March 30, 1996

<TABLE>
<CAPTION>
                                                         1996            1995            1994
                                                     ------------    ------------    ------------
<S>                                                  <C>               <C>             <C>       
Net sales                                            $ 23,626,489      31,960,953      36,303,455
                                                     ------------    ------------    ------------
Costs and expenses:
     Cost of sales                                     15,316,441      20,347,493      22,762,742
     Selling, general and administrative expenses       9,513,941      11,473,660      12,245,048
     Store closing costs                                  189,623         548,701         278,377
     Loss on litigation                                      --           431,692            --
     Management fees                                      562,500       1,024,386       1,263,010
                                                     ------------    ------------    ------------

                                                       25,582,505     33,825,93 2      36,549,177
                                                     ------------    ------------    ------------

          Loss from operations                         (1,956,016)     (1,864,979)       (245,722)
                                                     ------------    ------------    ------------

Other (expense) income:
     Interest expense                                    (111,451)        (82,332)       (8 8,971
     Interest income                                       22,566          48,891          58,522
                                                     ------------    ------------    ------------

                                                          (88,885)        (33,441)        (30,449)
                                                     ------------    ------------    ------------

          Loss before reorganization costs,
            provision  (benefit) for income
            taxes and cumulative effect of
            change in accounting for income
            taxes                                      (2,044,901)     (1,898,420)       (276,171)

Reorganization costs:
     Professional fees                                    (88,223)           --              --
     Store closing costs                                 (282,927)           --              --
                                                     ------------    ------------    ------------
                                                         (371,150)           --              --

Loss before provision (benefit) for income taxes
     and cumulative effect of change in accounting
     for income taxes                                  (2,416,051)     (1,898,420)       (276,171)

Provision (benefit) for income taxes                         --            96,988         (94,000)
                                                     ------------    ------------    ------------

          Loss before cumulative effect of
            change in accounting for income taxes      (2,416,051)     (1,995,408)       (182,171)

Cumulative effect of change in accounting for
     income taxes                                            --              --            73,715

          Net loss                                   $ (2,416,051)     (1,995,408)       (108,456)
                                                     ============    ============    ============
          Net loss per common share                  $       (.12)           (.10)           (.01)
                                                     ============    ============    ============
</TABLE>

See accompanying notes to financial statements.

                                      -19-

<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                       Statements of Shareholders' Equity

       For each of the years in the three-year period ended March 30, 1996


<TABLE>
<CAPTION>

                              Preferred stock         Common stock          Treasury stock        Capital     Retained 
                             -----------------  ----------------------  ---------------------    in excess   earnings
                             Shares    Amount     Shares      Amount      Shares      Amount       of par    (deficit)     Total
                             ------  ---------  ----------  ----------  ----------  ---------   ----------  ----------   ----------
<S>                           <C>     <C>       <C>           <C>          <C>       <C>         <C>         <C>          <C>      
Balance, April 3, 1993        5,000   $500,000  20,107,850    $201,079     326,580   $(59,895)   1,284,471   4,188,486    6,114,141

 Net loss                      --         --          --          --          --         --           --      (108,456)    (108,456)

 Payment of preferred stock
   dividend to Parent          --         --          --          --          --         --           --       (60,000)     (60,000)
                             ------  ---------  ----------  ----------  ----------  ---------   ----------  ----------   ----------

Balance, April 2, 1994        5,000    500,000  20,107,850     201,079     326,580    (59,895)   1,284,471   4,020,030    5,945,685

 Net loss                      --         --          --          --          --         --           --    (1,995,408)  (1,995,408)

 Payment of preferred stock
   dividend to Parent          --         --          --          --          --         --           --       (60,000)     (60,000)
                             ------  ---------  ----------  ----------  ----------  ---------   ----------  ----------   ----------

Balance, April 1, 1995        5,000    500,000  20,107,850     201,079     326,580    (59,895)   1,284,471   1,964,622    3,890,277

 Net loss                      --         --          --          --          --         --           --    (2,416,051)  (2,416,051)

 Payment of preferred stock
   dividend to Parent          --         --          --          --          --         --           --       (45,000)     (45,000)
                             ------  ---------  ----------  ----------  ----------  ---------   ----------  ----------   ----------

Balance, March 30, 1996       5,000   $500,000  20,107,850    $201,079     326,580   $(59,895)   1,284,471    (496,429)   1,429,226
                             ======  =========  ==========  ==========  ==========  =========   ==========  ==========   ==========
</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 30, 1996

<TABLE>
<CAPTION>
                                                               1996           1995          1994
                                                            -----------   -----------   -----------
<S>                                                         <C>            <C>             <C>      
Cash flows from operating activities:
     Net loss                                               $(2,416,051)   (1,995,408)     (108,456)
                                                            -----------   -----------   -----------

     Adjustments to reconcile net loss to net cash
       provided by (used in) operating activities:
          Depreciation and amortization                         455,156       559,450       518,240
          Loss on abandonment of leasehold
            improvements
                                                                190,601          --         141,828
          Deferred income taxes                                    --         337,321      (133,715)
          Deferred rent                                        (299,747)       15,402        51,134
          Changes in assets and liabilities affecting
            cash flows from operating activities:
               (Increase) decrease in:
                 Inventories                                    624,477       263,579       188,165
                 Prepaid inventory                             (254,249)         --            --
                 Prepaid expenses and other current assets       10,067        27,108        58,223
                 Refundable income taxes                        248,093      (221,229)      (36,000)
                 Other assets                                     4,997        46,980       (65,985)
               Increase (decrease) in:
                 Accounts payable                            (4,027,492)     (484,050)     (402,842)
                 Accrued liabilities                           (420,893)      230,012        30,781
                 Long-term obligations                          (61,022)      334,573          --
                 Income taxes payable                              --            --         (45,659)
                 Liabilities subject to compromise            5,671,434          --            --
          Changes due to reorganization activities:
            Loss on abandonment of leasehold
              improvements                                      296,509          --            --
                                                            -----------   -----------   -----------
                    Net cash provided by (used in)
                      operating activities                       21,880      (886,262)      195,714
                                                            -----------   -----------   -----------

Cash flows from investing activities:
     Purchases of property and equipment                       (168,331)     (920,477)     (176,480)
     Proceeds from land, property and equipment                 615,243          --            --
                                                            -----------   -----------   -----------

                    Net cash provided by (used in)
                      investing activities                      446,912      (920,477)     (176,480)
                                                            -----------   -----------   -----------

Cash flows from financing activities:
     Increase in notes payable                                     --            --          75,000
     Repayment of note payable                                     --         (75,000)         --
     Repayment of long-term obligations                         (43,519)     (131,173)     (174,579)
     Dividends paid                                             (45,000)      (60,000)      (60,000)
                                                            -----------   -----------   -----------

                    Net cash used in financing
                      activities                                (88,519)     (266,173)     (159,579)
                                                            -----------   -----------   -----------
</TABLE>

                                      -21-

<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                       Statements of Cash Flows, Contiued


<TABLE>
<CAPTION>
                                                               1996           1995          1994
                                                            -----------   -----------   -----------
<S>                                                         <C>            <C>             <C>      
                    Net increase (decrease) in cash
                      and cash equivalents
                                                            $   380,273    (2,072,912)     (140,345)

Cash and cash equivalents, beginning of year                  1,537,293     3,610,205     3,750,550
                                                            -----------   -----------   -----------

Cash and cash equivalents, end of year                      $ 1,917,566     1,537,293     3,610,205
                                                            ===========   ===========   ===========


Supplemental disclosures of cash flow information:
     Cash paid (received) during the period for:
       Interest                                             $   111,451        82,332        88,971
                                                            ===========   ===========   ===========

       Income tax payments (refund), net                    $  (248,093)      (19,104)       63,651
                                                            ===========   ===========   ===========
</TABLE>



See accompanying notes to financial statements.


                                      -22-

<PAGE>

  

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

                 March 30, 1996, April 1, 1995 and April 2, 1994


(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 an 87
     percent-owned subsidiary of URT Industries, Inc. (the "Parent").

(2)  Petition for Relief Under Chapter 11

     On  January  16,  1996  (the  "Petition   Date"),   the  Company  commenced
     reorganization proceedings under Chapter 11 of the United States Bankruptcy
     Code.  On January  17,  1997,  the  Company's  plan of  reorganization  was
     confirmed  by the  Bankruptcy  Court for the  Southern  District of Florida
     ("Bankruptcy  Court").  In Chapter 11, the Company  continued to manage its
     affairs and operate its business as debtor-in-possession while it developed
     a plan of  reorganization  to  restructure  and  allow its  emergence  from
     Chapter 11. As  debtor-in-possession  in Chapter 11, the Company  could not
     engage in transactions  outside of the ordinary course of business  without
     approval, after notice and hearing, of the Bankruptcy Court.

     Under  Chapter 11  proceedings,  litigation  and  actions by  creditors  to
     collect  certain  claims in existence at the petition date  ("prepetition")
     are stayed,  absent specific  bankruptcy  court  authorization  to pay such
     claims. The Company believes that appropriate  provisions have been made in
     the accompanying financial statements for the prepetition claims that could
     be estimated  at the date of these  financial  statements.  Such claims are
     reflected  as  "liabilities  subject  to  compromise"  at March  30,  1996.
     Additional claims (liabilities  subject to compromise) may arise subsequent
     to the filing date  resulting  from the  rejection of executory  contracts,
     including  leases and from the  determination of the court (or agreed to by
     parties-in-interest)  of allowed  claims  for  contingencies  and  disputed
     amounts.

     As  debtor-in-possession,  the Company has the right, subject to Bankruptcy
     Court approval and certain other  limitations,  to assume or reject certain
     executory  contracts,  including  unexpired  leases.  Any claim for damages
     resulting  from the  rejection  of an  executory  contr act or an unexpired
     lease  is  treated  as  a  general   unsecured  claim  in  the  Chapter  11
     proceedings.  The Company  affirmed 13 leases (5 of which were  modified on
     terms more favorable to Peaches) and rejected 8 leases.

                                      -23-

                                                                     (Continued)


<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements


     On August 5, 1996,  the Company filed its plan of  reorganization  with the
     Bankruptcy  Court. An amended plan of  reorganization  was filed on October
     23,  1996.  The  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  all
     conditions precedent being satisfied in which all conditions precedent were
     satisfied on February 19, 1997.  Among the principle terms of the confirmed
     plan,  subject to certain changes  contained in the order of approval,  are
     the following:

     o    All  unsecured  creditors,   including  all  the  Company's  inventory
          suppliers,  but  excluding  landlords  under  leases  rejected  by the
          Company,  are  entitled  to 100 percent of their  allowed  claims (the
          total of which  is  approximately  $4,922,000).  The  Company's  seven
          principal   suppliers   (whose  allowed  claims  total   approximately
          $4,372,000  out of  such  $4,922,000)  are  entitled  to  payment  and
          inventory  returns equal to  approximately 70 percent of their allowed
          claims  (80  percent  in  the  case  of  one  such  supplier)   within
          approximately  60 days  after  the  effective  date,  and the  balance
          (approximately  $1,284,000)  is payable with  interest at prime over a
          period of 24 months  commencing  March 1997.  The remaining  unsecured
          creditors  (whose  allowed claims total  approximately  $550,000) were
          entitled to and  received the full amount of their  allowed  claims on
          the  effective  date.  The  principal  suppliers  will be secured by a
          perfected first lien and security interest in the inventory originally
          distributed  by the secured  party which was sold to the Company or is
          otherwise in the possession and owned by the Company.

     o    Landlords  under the leases rejected by the Company in connection with
          the  bankruptcy  filing  will be entitled to 30 percent of the allowed
          claims with  respect to such  leases,  all of which will be payable on
          the effective date.

     o    The  mortgage  holder will  receive 100 percent of the allowed  claim,
          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 was  extended  to
          September 2002. All mortgage payments under the amortization  schedule
          were paid timely during the Chapter 11 proceedings.

     o    The priority tax claim in the approximate amount of $118,000, which is
          owed to the  Florida  Department  of  Revenue,  will be  payable  with
          interest at 8 percent over 2 years from the effective date.

     o    The priority administrative claims, including professional fees in the
          approximate  amount of $200,000 which have been incurred in connection
          with the reorganization, are payable on the effective date.

     In order for the Company to be able to effect the Plan of Reorganization on
     the terms described above,  the Parent,  in exchange for the issuance to it
     of 20 million shares of the Company's authorized common stock,  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,  subordinate  to the amounts  owed to the  principal  suppliers,  and
     secured by inventory and all the assets of the Company.

     In March 1997, the Parent and the Company  agreed that the  above-described
     $700,000 loan would be reduced by an amount equal to the lesser of $200,000
     or the difference between $1,000,000 and the total shareholders'  equity of
     the Company as of the end of its 1997 fiscal year, without taking such debt
     reduction  into  account,  and cause  the  amount  of such  aggregate  debt
     reduction  to be  transferred  to the  capital  account  of the  Company in
     exchange for shares of a new class of cumulative preferred stock,  entitled
     Series C preferred  stock,  in an amount as shall be determined by dividing
     the amount of such aggregate debt reduction by $100. The Series C preferred
     stock to be so  issued  shall  have a par  value  of $100 and a  cumulative
     preferred  dividend  of 10% per annum.  The  approval  of the  holders of a
     majority  of the shares of Series C preferred  stock,  voting as a separate
     class,  shall  be  required  with  respect  to all  matters  on  which  the
     shareholders have a right to vote.


                                      -24-

                                                                     (Continued)


<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements


(3)  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 30,
          1996,  April  1,  1995  and  April  2,  1994  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 $1,082,100 and $89,000 at March
          30,  1996  and  April  1,  1995,  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.

          The Company has an agreement to purchase  securities  overnight  under
          agreements to resell  ("repos").  At March 30, 1996 and April 1, 1995,
          the outstanding  repos,  included above,  approximated $0 and $37,000,
          respectively,  which approximated market. The repos are collateralized
          by U.S. government and agency securities.

     (c)  Inventories

          Inventories,   comprised  of  compact  discs,  cassettes,  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.


                                      -25-

                                                                     (Continued)


<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements


          Effective  April 4,  1993,  the  Company  adopted  the  provisions  of
          Financial  Accounting  Standards Board's ("SFAS") No. 109,  Accounting
          for Income Taxes and has reported the cumulative effect of that change
          in the method of  accounting  for income  taxes in the  statements  of
          operations.  Under  the asset and  liability  method of SFAS No.  109,
          deferred tax assets and  liabilities are recognized for the future tax
          consequences   attributable  to  differences   between  the  financial
          statement  carrying  amounts of existing  assets and  liabilities  and
          their  respective tax bases.  Deferred tax assets and  liabilities are
          measured  using enacted tax rates  expected to apply to taxable income
          in the years in which those  temporary  differences are expected to be
          recovered  or settled.  Under SFAS No. 109, the effect on deferred tax
          assets  and  liabilities  of a change  in tax rates is  recognized  in
          income in the period that includes the enactment date.

     (f)  Loss Per Common Share

          Loss per  common  share was  computed  by  dividing  net  loss,  after
          deducting  preferred  dividend  requirements,  by the weighted average
          number of common  shares  outstanding  during the years.  The weighted
          average  number of common shares  outstanding  was  19,781,270 for the
          years ended March 30, 1996, April 1, 1995 and April 2, 1994.

     (g)  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.

     (h)  Reorganization Costs

          Reorganization costs include: (a) professional fees relating to legal,
          accounting and  consulting  services  provided in connection  with the
          Chapter 11  proceedings,  (b) costs and expenses  associated  with the
          closing of locations,  including an estimated accrual for the expected
          allowed claims related to rejected executory contracts.

     (i)  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.   See   discussion   in  note  2   concerning
          uncertainties due to Chapter 11 proceedings.

                                      -26-

                                                                     (Continued)


<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements


     (j)  New Accounting Standard

          In  March  1995,  the  Financial  Accounting  Standards  Board  issued
          Statement No. 121,  Accounting for the Impairment of Long-Lived Assets
          and for Long Lived Assets to be Disposed  Of,  which became  effective
          for fiscal years  beginning  after  December 15, 1995.  This  standard
          establishes  accounting  standards  for the  impairment  of long-lived
          assets,  certain  identifiable  intangibles,  and goodwill  related to
          those assets to be held and used and for long-lived assets and certain
          intangibles  to be disposed of. The Company  believes that adoption of
          this  standard  will  not  have a  material  impact  on the  financial
          condition or operating results of the Company.

     (k)  Reclassifications

          Certain  amounts in the 1995 and 1994 financial  statements  have been
          reclassified to conform with the 1996 presentation.

(4)  Property and Equipment, net

     Property and equipment consist of the following at March 30, 1996 and April
     1, 1995:

                                                         1996            1995
                                                         ----            ----
     Land                                            $   395,570       395,570
     Building                                            538,093       538,093
     Leasehold improvements                            1,867,903     3,356,279
     Furniture and equipment                           1,602,467     1,587,697
     Building under capitalized lease                    206,964       206,964
                                                     -----------   -----------
                                                       4,610,997     6,084,603
     Less accumulated depreciation and amortization   (2,767,289)   (3,011,734)
                                                     -----------   -----------
                                                     $ 1,843,708     3,072,869
                                                     ===========   ===========

                                      -27-

                                                                     (Continued)


<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

(5)  Long-term Obligations


     Long-term obligations consists of the following at March 30, 1996 and April
     1, 1995:

<TABLE>
<CAPTION>
                                                                       1996         1995
                                                                   -----------   -----------
<S>                                                                <C>               <C>    
     Capital lease obligation, due in monthly installments of
           $3,382, including interest at 17.5%; final payment due
           March 2005                                              $   183,353       191,096


     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
          $819,244; final balloon payment of $284,500 due
          September 2002 (note 2)                                      478,238       514,013


     Lease obligation on closed store, net of sublease
          rentals, including interest at 10%, payable in monthly
          installments until November 2004, subject to
          compromise at March 30, 1996 (note 2)                           --         334,573


     Settlement agreement with former director/shareholder,
          due in monthly installments of $5,699, final
          payment due January 2000                                     273,550          --   
                                                                   -----------   -----------
                                                                       935,141     1,039,682
                                                                      (124,774)     (110,028)
                                                                   -----------   -----------
     Less current portion                                          $   810,367       929,654
                                                                   ===========   ===========

</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 1996 and $99,000 for 1995 and 1994.

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

                            Fiscal year                            Amount
                            -----------                            ------
                               1997                               $40,600
                               1998                                40,600
                               1999                                40,600
                               2000                                40,600
                               2001                                40,600
                            Thereafter                            162,160
                                                                  -------
                   Total minimum lease payments                   365,160
                   Less amount representing interest             (181,807)
                                                                 -------- 
                   Present value of minimum lease
                      payments                                   $183,353
                                                                 ========

                                      -28-

                                                                     (Continued)


<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
                      -----------                              ------
                          1997                               $115,560
                          1998                                104,162
                          1999                                104,163
                          2000                                92,765
                          2001                                35,775
                       Thereafter                             299,363
                                                             --------
                                                             $751,788
                                                             ========

     The  Company  has a standby  letter of credit  of  $64,800  available  to a
     landlord that was not drawn upon as of March 30, 1996. The 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 30, 1996.

(6)  Accrued Liabilities


     Accrued liabilities consist of the following at March 30, 1996 and April 1,
     1995:



                                                             1996        1995
                                                          ----------  ----------
           Gift certificate and credit slip liability     $  371,647     484,501
           Payroll and related benefits                      196,699     141,002
           Taxes payable                                     280,191     134,318
           Other                                             254,517     904,109
                                                          ----------  ----------

                                                          $1,103,054   1,663,930
                                                          ==========  ==========

(7)  Liabilities Subject to Compromise


     Liabilities subject to compromise at March 30, 1996 include the following:
          
          Lease rejection claims                         $   600,000
          Trade and other miscellaneous claims             5,071,434
                                                         -----------
                                                         $ 5,671,434
                                                         ===========


     Liabilities  subject to compromise under the Chapter 11 proceedings include
     substantially  all trade and other  payables as of the  petition  date.  As
     discussed in note 2, payment of these  liabilities,  including the maturity
     of debt obligations,  were stayed while the Company continued to operate as
     a debtor-in-possession.

     On January 17, 1997, the Company's plan of reorganization  was confirmed by
     the  Bankruptcy  Court.   During  fiscal  1997,  the  Company  recorded  an
     extraordinary gain of approximately  $488,000 as a result of the settlement
     of lease rejection claims and vendor liabilities (note 2) (unaudited).

                                      -29-

                                                                     (Continued)


<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements


(8)  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 30,  1996.  Most of the  leases  contain  renewal
          options.  In  connection  with the  Chapter  11  filing,  the  Company
          affirmed 13 leases (5 of which were  modified on terms more  favorable
          to Peaches) and rejected 8 leases.

          The  aggregate  minimum  rental  commitments  under all  noncancelable
          operating leases at March 30, 1996 (including any modifications due to
          leases   rejected  and   affirmed),   which  are  subject  to  further
          modification in the Chapter 11 proceedings, are as follows:


                       Fiscal year                   Amount
                       -----------                   ------
                          1997                    $1,173,515
                          1998                     1,033,769
                          1999                       855,836
                          2000                       646,112
                          2001                       545,822
                       Thereafter                    511,745
                                                  ----------
                                                  $4,766,799
                                                  ==========


          Rental  expense  under  noncancelable  operating  leases,  included in
          selling,  general  and  administrative  expenses  in the  accompanying
          statements  of  operations  amounted  to  $1,853,000,  $2,367,000  and
          $2,531,000,  respectively,  for each of the  years  in the  three-year
          period ended March 30, 1996.

          Rental  expense  on two stores  owned by two  directors  and/or  their
          relatives was $215,417, $251,667 and $245,250,  respectively, for each
          of the years in the three-year period ended March 30, 1996.

     (b)  Legal Matters

          The  Company  has been  party to a  lawsuit  involving  the  Company's
          closing of a store which it had leased in  Charlotte,  North  Carolina
          and its refusal to pay rent with  respect to such store from and after
          February 1991. In February 1995, the court entered a judgment ordering
          the  Company to pay the sum of  $405,460  to  plaintiff.  The  Company
          recorded  a charge  to  operations  for the year  ended  April 1, 1995
          related to the loss on such  litigation  and paid such amount in March
          1995.

          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  unfavorable  disposition  will not have a material
          impact on the  financial  position  or  results of  operations  of the
          Company.

                                      -30-

                                                                     (Continued)


<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements


     (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.  Peaches is to pay an amount of $273,550 over a
          period  of four  years  (note  5).  Under  the  original  terms of the
          employment,  the  officer  would  have been  entitled  to in excess of
          $870,000 in the aggregate.

     (d)  Management Agreement


          On March 29, 1993, as amended,  the Company  entered into a management
          and  intercorporate  agreement (the  "Management  Agreement") with the
          Parent  whereby the  Company was  required to pay the Parent an annual
          fee;  the Parent was required to provide the Company with the services
          of the  person  who is the  president  and  chairman;  the  Parent was
          required to pay the Company for certain  accounting and administrative
          services  performed by the Company;  and so long as the Parent and the
          Company  filed  consolidated  income  tax  returns,  their  respective
          liabilities for such taxes would be equitably  apportioned as provided
          in such  agreement.  Effective as of the close of business on December
          31, 1995,  the  Management  Agreement was terminated and replaced with
          three new agreements which became  effective  January 1, 1996. 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.

(9)  Shareholders' Equity

     For each of the years in the  three-year  period ended March 30, 1996,  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 cer tain 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.

(10) Pension Plan


     Effective  September 15, 1994,  the Company  curtailed its  noncontributory
     defined benefit plan which it had maintained  with its Parent.  As a result
     of this curtailment all future benefit accruals were eliminated and accrued
     benefits  became  fully  vested.  The net  impact of this  curtailment  and
     settlement in plan liabilities is a loss of $24,949,  which is reflected in
     selling, general and administrative expenses in fiscal year 1995.

                                      -31-

                                                                     (Continued)


<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

(11) Income Taxes


     The provision (benefit) for income taxes consists of:

                                            1996           1995          1994
                                          ---------     ---------     ---------
              Current:
                      Federal             $    --        (240,000)      (36,000)
                      State                    --            --            --
                                          ---------     ---------     ---------
                                               --        (240,000)      (36,000)
              Deferred:
                      Federal                  --         292,000       (58,000)
                      State                    --          45,000          --
                                          ---------     ---------     ---------
                                               --         337,000       (58,000)
                                          ---------     ---------     ---------
                                          $    --          97,000       (94,000)
                                          =========     =========     =========

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

<TABLE>
<CAPTION>
                                                               1996        1995        1994
                                                            ---------   ---------   ---------
<S>                                                         <C>          <C>          <C>     
            Income tax benefit at applicable statutory tax
               rate of loss before income taxes             $(821,000)   (645,000)    (94,000)
            Add:
               State income tax benefit, net of federal
                 benefit                                      (81,000)    (79,000)       --   
               Change in valuation allowance                  852,000     811,000        --   
               Other                                           50,000      10,000        --   
                                                            ---------   ---------   ---------
            Income tax provision (benefit) for the year     $    --        97,000     (94,000)
                                                            =========   =========   =========
</TABLE>

     The tax  effects of  temporary  differences  that give rise to  significant
     portions of the deferred tax assets at March 30, 1996 and April 1, 1995 are
     presented below.

<TABLE>
<CAPTION>
                                                                         1996         1995
                                                                     -----------   -----------
<S>                                                                   <C>             <C>      
                Deferred tax assets:
                   Inventories, principally due to additional costs
                      capitalized for tax purposes                   $    87,340        50,051
                   Property and equipment, net, principally due to
                      differences in depreciation                        152,139       187,037
                   Accrued rent, principally due to accrual for
                      financial reporting purposes                        90,780       202,758
                   Provision for store closings                           80,340       208,114
                   NOL carry forward                                   1,099,553       126,026
                   Accrued expenses                                      177,185        62,147
                   Other                                                  28,427        27,125
                                                                     -----------   -----------
                Total gross deferred tax assets                        1,715,764       863,258
                   Less valuation allowance                           (1,715,764)     (863,258)
                                                                     -----------   -----------
                Net deferred tax assets                              $      --            --
                                                                     ===========   ===========
</TABLE>

                                      -32-

                                                                     (Continued)


<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements


     At March 30, 1996,  the Company has a net operating loss  carryforward  for
     federal income tax purposes of approximately  $2,912,000 which is available
     to offset future federal taxable income, if any, through 2011.


     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.


(12) Fair Value of Financial Instruments

     It was  not  practicable  to  estimate  the  fair  value  of the  Company's
     financial instruments due to the Chapter 11 proceedings.  The impact of the
     confirmed  plan  of  reorganization  on the  estimated  fair  value  of the
     Company's financial instruments is disclosed in note 2.

(13) 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.  However, management believes the Company
     has  certain  competitive  advantages,   including  more  convenient  store
     locations, a large selection of inventory and superior customer service.

     The Company  purchased  approximately  81 percent of its  merchandise  from
     seven  principal  suppliers  (BMG,  CEMA,  PGD, Sony,  Uni, WEA and Bassin)
     during the fiscal year ended March 30, 1996. 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.  It
     has numerous  alternate  sources of supply for inventory,  although in some
     cases,  the expenses are or would be greater if such alternate  sources are
     utilized.


                                      -33-
<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                                 58

Brian Wolk        Executive Vice-President and Director                  31

Jason Wolk        Executive Vice-President, Chief Financial Officer
                  (Principal Financial and Accounting Officer),
                  Treasurer and Director                                 29



     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 35  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  of  1995.  He was  appointed
Executive Vice-President of both companies in March, 1996.

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




                                      -34-

<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.  (See   "EXECUTIVE   COMPENSATION--Employment
Contracts").  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 1996 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 were serving as executive officers at the
end of the 1996 fiscal year or for whom  disclosure  would otherwise be provided
but for the fact that such person was no longer serving as an executive  officer
at the end of such 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,       1996        125,000(2)         -0-          -0- (2)            -0-           -0-          -0-        308,222(5)
Chairman          1995         -0-   (2)         -0-          -0- (2)            -0-           -0-          -0-             -0-
  & CEO           1994         -0-   (2)         -0-          -0- (2)            -0-           -0-          -0-             -0-

David Jackowitz,  1996        247,947(1)         -0-              (4)            -0-           -0-          -0-        244,900(5)
Vice-Pres. &      1995        289,897            -0-              (4)            -0-           -0-          -0-             -0-
Treas.(1)         1994        326,889            -0-        33,646(3)            -0-           -0-          -0-             -0-

</TABLE>

                                      -35-

<PAGE>

----------

(1)  Mr.  Jackowitz  is no  longer  employed  by PEC,  and no  longer  holds any
     position  with  PEC  or  URT,  due to the  termination  of his  employment,
     effective as of September  30, 1995.  The salary listed as paid to him with
     respect to 1996 represents  ordinary  salary  payments  through the date of
     termination   ($115,576)  and  consulting  fees  paid  subsequent  to  such
     termination  ($132,371) pursuant to a consulting arrangement with him. Such
     consulting  arrangement has since been terminated by PEC in connection with
     the  Chapter  11  proceeding.   (See  "EXECUTIVE   COMPENSATION--Employment
     Contracts" and "LEGAL PROCEEDINGS").

(2)  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  (See
     'BUSINESS--Management  Agreement  Between  URT and PEC").  Pursuant to such
     agreements,  effective only as of January 1, 1996, PEC became  obligated to
     pay to Mr. Wolk a salary at the rate of  $500,000  per annum 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.

(3)  Includes life insurance premiums and amounts required to be credited to Mr.
     Jackowitz  under his  then-existing  employment  agreement with PEC against
     amounts which were then owed by him to URT.

(4)  Pursuant to applicable  rules,  information is not included with respect to
     other  annual  compensation  which does not exceed the lesser of $50,000 or
     10% of the salary and bonus reported for the named executive officer.

(5)  The  amounts  set forth above  represent  a one-time  distribution  to such
     individuals  as a result of the  termination  of the pension plan described
     below.

Employment Contracts

     When the 1996  fiscal  year  began,  an  Amended  and  Restated  Employment
Agreement dated December 14, 1994 (the "Jackowitz  agreement") had been in place
between PEC and David Jackowitz,  who also served as President,  Treasurer and a
director of URT. Such employment was terminated by PEC effective as of September
30, 1995 pursuant to a provision of the Jackowitz  agreement which so authorized
PEC to terminate Mr. Jackowitz' employment, without cause, at any time beginning
on such date. Pursuant to the provisions of the Jackowitz  agreement  pertaining
to the  termination  of his  employment,  Mr.  Jackowitz was required to provide
consulting services to PEC, up to a maximum of 10 hours per month,  beginning on
the effective date of his  termination  and continuing  until September 3, 2005.
PEC, in consideration for such consulting services, was required


                                      -36-

<PAGE>



to provide a variety  of health and other  benefits  to Mr.  Jackowitz,  and was
further  required to pay to him  compensation  at the rate of $225,000 per annum
during the first year, $125,000 per annum during the second year and $65,000 per
annum during the balance of the consulting period.

     As a result of the  Chapter 11  proceeding,  PEC took  action to reject the
executory portion of the Jackowitz  agreement.  Mr. Jackowitz  contended that he
was entitled to the full amount provided under such agreement.  Such position on
the part of Mr.  Jackowitz was challenged by PEC, and  ultimately  resulted in a
settlement  with  him.  Pursuant  to the  terms of such  settlement,  which  was
approved by the Bankruptcy  Court,  the Jackowitz  agreement is rejected and Mr.
Jackowitz  received  the  sum  of  $9,000,  as  an  administrative  claim,  upon
confirmation of the Plan, and, as reflected in the financial  statements for the
1996 fiscal year, is entitled to payment of the sum of $273,550 over a period of
4 years,  payable  in equal  monthly  installments  commencing  February,  1996.
Pursuant to the terms of such  settlement,  Mr.  Jackowitz also released PEC and
URT from any and all liabilities (except those described  immediately above) and
also executed a confidentiality  agreement and an  indemnification  agreement in
the same form as agreements  previously  signed by him. Under the agreement with
Mr. Jackowitz which had previously been in effect (and which is described in the
preceding  paragraph),  the amount that would have been payable to Mr. Jackowitz
if such agreement had remained in effect would have exceeded $870,000.

Compensation Committee Interlocks and Insider Participation

     PEC  does not  have a  compensation  committee  or  other  board  committee
performing equivalent functions.  During the 1996 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.

Pension Plan

     In March of 1995, PEC and URT decided to terminate the PEC defined  benefit
pension plan and trust (the "Pension Plan"), effective May 12, 1995, and to file
documents  with the Internal  Revenue  Service for such purpose.  On February 7,
1996,  the  Internal  Revenue  Service  issued a  determination  letter that the
termination of the Pension Plan does not adversely affect its  qualification for
federal tax  purposes.  As a result,  the assets of the  Pension  Plan have been
distributed to Pension Plan participants.

     Interests  in the Pension Plan were  computed on the basis of  compensation
and service.  As a result of the  termination of the Pension Plan, the following
executive officers or former executive officers received one-time  distributions
in the amounts set forth below:




                                      -37-

<PAGE>


             Name of Individual                           Amounts
             ------------------                           -------
             Allan Wolk                                   $ 308,222
             David Jackowitz                              $ 244,900



Item 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT

     As of the date of this filing, URT is the beneficial owner of approximately
37,213,370 shares of PEC common stock,  constituting  approximately 93.5% 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.  PEC has also
agreed to issue to URT shares of a new series of preferred stock.  (See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS").

     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
February 12, 1997, 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
--------------                    ----                          ---------                      --------
<S>                               <C>                          <C>                           <C>
Class A Common                    Executive Officers
Stock, par value                  and Directors
$.01 per share
                                  Allan Wolk                   3,194,186(1)                  29.4%


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

                                  Brian Wolk                      12,980(3)                   *

</TABLE>


                                      -38-

<PAGE>

<TABLE>

<S>                               <C>                          <C>                           <C>

                                  Jason Wolk                      17,480(3)                   *


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


                                  Other

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


<TABLE>
<CAPTION>
                                                                      Amount & Nature
                                                                       of Beneficial               Percent
Title of Class                    Name                                  Ownership                  of Class
--------------                    ----                                  ---------                  --------
<S>                               <C>                                    <C>                        <C>
Class B Common                    Executive Officers and Directors
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


                                      -39-

<PAGE>



     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.


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 (See "LEGAL PROCEEDINGS").

     During the first  approximately  nine months of the 1996 fiscal year, there
had been a lease in effect  between PEC, as tenant,  and Allan Wolk,  his sister
and two children of his brother, as landlord,  applicable to a store operated by
PEC in North  Miami  Beach,  Florida.  Because  the North  Miami Beach store had
recently become  unprofitable  for PEC, and remained  unprofitable  for PEC even
after the landlord had  authorized  PEC, in July 1995, to begin paying rent at a
lower amount than that required  under the lease between the parties,  the lease
applicable to such store was among the leases as to which PEC elected,  with the
approval of the Bankruptcy Court, to exercise its right to reject as a result of
the  Chapter  11  proceeding.   Such  lease  had  previously  been  approved  by
disinterested directors (See "LEGAL PROCEEDINGS").



                                      -40-

<PAGE>



     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.

     On or about October 16, 1995, URT loaned to PEC the sum of $250,000 for its
short term holiday  season cash needs.  Such loan was  evidenced by a promissory
note under which PEC was  required  to repay such amount to PEC on November  19,
1995 with interest at the rate of 7% per annum. Such amount was so repaid by PEC
to URT on or about December 13, 1995.

     In order for PEC to be able to  effect  the Plan of  Reorganization  on the
terms  described  above,  URT, in exchange for the issuance to it of  20,000,000
shares of PEC's  authorized  common stock (including  218,730 treasury  shares),
agreed that,  subject to the terms of the Plan, it would contribute  $350,000 to
the capital of PEC, waive 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,
guarantee the approximately $1,284,000 which is due to PEC's principal suppliers
after the  Effective  Date  pursuant  to the  arrangements  described  in "LEGAL
PROCEEDINGS" above and lend $700,000 to PEC. 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 by URT to PEC
was made on the  Effective  Date  and 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 March 25,  1997,  URT and PEC agreed  that the  above-described
$700,000  loan from URT to PEC would be reduced by an amount equal to the lesser
of $200,000 or the difference  between  $1,000,000  and the total  shareholders'
equity of PEC  determined in the audited  financial  statements as of the end of
its 1997 fiscal year, without taking such debt reduction into account, and cause
the amount of such  aggregate  debt  reduction to be  transferred to the capital
account of PEC in  exchange  for shares of a new class of  cumulative  preferred
stock, entitled Series C preferred stock, in an amount as shall be determined by
dividing  the amount of such  aggregate  debt  reduction  by $100.  The Series C
preferred  stock to be so issued will have a par value of $100 and a  cumulative
preferred  dividend of 10% per annum.  The approval of the holders of a majority
of the shares of Series C preferred stock,  voting as a separate class, shall be
required with respect to all matters on which the  shareholders  have a right to
vote.



                                      -41-

<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                                  16

                         Independent Auditors' Report                       17

                         Peaches Entertainment Corporation
                         Financial Statements:

                            Balance sheets as of March 30,
                            1996 and April 1, 1995                          18


                            Statements of operations for each of
                            the years in the three year period
                            ended March 30, 1996                            19

                            Statements of shareholders' equity
                            for each of the years in the three
                            year period ended March 30, 1996                20

                            Statements of cash flows for each
                            of the years in the three year period
                            ended March 30, 1996                            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




                                      -42-

<PAGE>



Exhibit No.
-----------

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

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

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

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

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

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

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

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

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

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

10.57          Management  and  Intercorporate  Agreement  dated as of March 29,
               1993  between URT and PEC,  incorporated  by reference to Exhibit
               10(dddd) to URT's Form 10-K Annual Report dated June 25, 1993.

10.58          Amended and Restated  Employment  Agreement,  dated  December 14,
               1994, between David Jackowitz and PEC,  incorporated by reference
               to Exhibit  10(ffff) to URT's Form 10-K Annual  Report dated June
               29, 1995.


                                      -43-

<PAGE>




10.59          Agreement No. 1 dated as of October 1,  1994  to  Management  and
               Intercorporate  Agreement dated May 29, 1993 between URT and PEC,
               incorporated by reference to Exhibit  10(iiii) to URT's Form 10-K
               Annual Report dated June 29, 1995.

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.

10.63          Indemnification  Agreement dated July 14, 1995 between Jason Wolk
               and PEC.

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.

10.67          Security Agreement dated January 27, 1997 between PEC and URT.

10.68          Mortgage  Agreement with Assignment of Rents,  Security Agreement
               and Fixture Filing dated January 27, 1997 by PEC in favor of URT.

10.69          Reimbursement  Agreement  dated  January 27, 1997 between PEC and
               URT.

10.70          Subordination  Agreement  dated January 27, 1997 between PEC, URT
               and selected creditors.

10.71          Subordination  Agreement  dated January 27, 1997 between PEC, URT
               and creditor.

10.72          Surrender and Waiver Agreement dated January 27, 1997 between PEC
               and URT.

10.73          Waiver Agreement dated March 1, 1997 between PEC and URT.

10.74          Stock  Purchase  Agreement  dated March 24, 1997  between PEC and
               URT.



                                      -44-

<PAGE>




27             Financial Data Schedule

                (b)  Reports on Form 8-K.


                A report on Form 8-K,  dated January 16, 1996,  was filed by PEC
                on or  about  January  26,  1996  to  report  PEC's  filing  for
                protection from its creditors under Chapter 11 of the Bankruptcy
                Code and the closing of three stores.  PEC filed Forms 8-K dated
                July 10, 1996,  August 22, 1996 and  November  22,  1996,  on or
                about such dates, in order to report the effects of such Chapter
                11  proceeding  on PEC's  ability to file this annual report and
                certain quarterly reports.  PEC filed a report on Form 8-K dated
                April 7, 1997,  on or about such date, in order to report on the
                Plan of Reorganization.




                                      -45-

<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:  April 25, 1997

     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                                            April 25, 1997
       --------------------------------
       Allan Wolk,
       Chairman of the Board ,
       President (Principal
       Executive Officer) and Director


By:    s/Brian Wolk                                            April 25, 1997
       --------------------------------
       Brian Wolk, Executive
       Vice President and Director

By:    s/Jason Wolk                                            April 25, 1997
       --------------------------------
       Jason Wolk, Executive
       Vice President, Treasurer
       (Principal Financial and
       Accounting Officer),
       Secretary and Director





                                      -46-

                               
<PAGE>

       Index of Exhibits to Form 10-K of Peaches Entertainment Corporation
           (Commission File No. 0-12375) for year ended March 30, 1996



Exhibit No.                                 Description

10.62          Indemnification  Agreement dated July 14, 1995 between Brian Wolk
               and PEC.

10.63          Indemnification  Agreement dated July 14, 1995 between Jason Wolk
               and PEC

10.66          URT Promissory Note dated January 27, 1997 made by PEC to URT.

10.67          Security Agreement dated January 27, 1997 between URT and PEC.

10.68          Mortgage  Agreement with Assignment of Rents,  Security Agreement
               and Fixture Filing dated January 27, 1997 by PEC in favor of URT.

10.69          Reimbursement  Agreement  dated  January 27, 1997 between URT and
               PEC.

10.70          Subordination  Agreement  dated January 27, 1997 between PEC, URT
               and selected creditors.

10.71          Subordination  Agreement  dated January 27, 1997 between PEC, URT
               and creditor.

10.72          Surrender and Waiver Agreement dated January 27, 1997 between URT
               and PEC.

10.73          Waiver Agreement dated March 1, 1997 between URT and PEC.

10.74          Stock  Purchase  Agreement  dated March 24, 1997  between URT and
               PEC.


27             Financial Data Schedule