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 29, 1997             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 [X] NO [  ]

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

                                    YES [  ] NO [X]

The aggregate  market value (based on the average  closing bid and asked prices)
of the voting stock held by  non-affiliates of the registrant was, as of June 2,
1997, approximately $57,000.

As of June 3, 1997 the  registrant's  transfer  agent  reported  as  issued  and
outstanding:
                        39,781,270 Shares of Common Stock


<PAGE>

                                     PART I

Item 1. BUSINESS

     Peaches  Entertainment  Corporation  ("PEC"  or the  "Company"),  a Florida
corporation, 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  owns
approximately 94% of PEC's issued and outstanding shares of common stock and all
of its issued and  outstanding  shares of preferred  stock and controls PEC. The
remaining  approximately  6% of PEC's  issued and  outstanding  shares of common
stock are owned by non-affiliated persons.

Confirmation of Amended Plan of Reorganization

     PEC  emerged  from  bankruptcy  protection  during the last  quarter of the
fiscal year ended March 29, 1997 (the "1997 fiscal year"),  following its filing
of 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") on or about
January 16, 1996 (the "Petition  Date").  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
became effective on February 19, 1997 (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 29, 1997:

                                       1997     1996     1995     1994     1993
                                       ----     ----     ----     ----     ----
 Number of stores:

At beginning of period                   13       19       20       21       22
    Opened during period                  0        0        1        0        0
    Closed during period                 (0)      (6)      (2)      (1)      (1)
                                        ---      ---      ---      ---      ---

At end of period                         13       13       19       20       21


                                      -2-
<PAGE>


     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  implementing  guidelines  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.  The adoption of such guidelines,  relationships  with
landlords, the purchase and allocation of new releases,  advertising and related
other matters 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 1997 fiscal year, PEC purchased  merchandise from
approximately  61 suppliers,  among whom the principal ones were BMG, CEMA, PGD,
SONY,  UNI,  WEA, and Bassin.  Approximately  76% of the  merchandise  purchased
during the 1997 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.


                                      -3-
<PAGE>


     Prior to the Chapter 11  proceeding,  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  was 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  the  Chapter  11  proceeding,   PEC  was  also  able  to  return
merchandise,  without limitation,  to all of its major 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   pre-petition
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 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.

     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  21% of total sales for each
year; sales between April and June were  approximately 25% of total sales; sales
between July and  September  were  approximately  23% of total sales;  and sales
between October and December were approximately 31% of total sales.



                                      -4-
<PAGE>


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 to sell them non-music  related  products,  such as computers.
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 1997 fiscal year, PEC employed  approximately 257
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.

Intercorporate Agreements

     Effective as of January 1, 1996,  there have been three agreements in place
pertaining to the management of PEC. Pursuant to such agreements,  the following
arrangements  are in effect:  for the period from January 1, 1996 through  March
31, 2000,  URT will continue to provide to PEC the services of Mr. Wolk as PEC's
Chairman,  President and Chief Executive Officer;  and PEC is required to pay to
Mr. Wolk during such period, so long as he continues to provide such services, a
salary in the amount described below (see "EXECUTIVE COMPENSATION").




                                      -5-
<PAGE>


     During the 1997 fiscal  year,  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  pursuant to its rights under the  Bankruptcy  Code.  (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 which was made by URT to PEC in  January,  1997 in order to enable 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 below-described Plan of Reorganization. The Plan
of

                                      -6-

<PAGE>


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)  were entitled to, and received,  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 such suppliers or which 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.

     (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 to enable  PEC 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 (For  additional  information
pertaining to such arrangements between PEC and URT, see "CERTAIN

                                      -7-

<PAGE>


RELATIONSHIPS AND RELATED TRANSACTIONS").

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

     (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
unprofitable  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 had been  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 twelve leased stores which PEC had decided to
keep in operation.

     (d) PEC's  execution of a settlement  agreement  with its former  Executive
Vice-President  under which the amounts  payable to him under an employment  and
consulting  agreement  with him were reduced from a sum exceeding  $870,000,  if
such agreement had remained in effect, to the sum of $282,500 (payable over four
years commencing February, 1996), and under which such former officer executed a
confidentiality agreement and an indemnification agreement with PEC.

     (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  pre-petition  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.

                                    PART II

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

Price Range of Common Stock

                                      -8-

<PAGE>


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

                                              Bid Prices        Asked Prices
                                              ----------        ------------
                                              High     Low       High     Low
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 ended March 31                   .005     .001       .05      .05
     Quarter through June 2.                  .001     .001       .05      .05

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

Dividends

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

                                      -9-

<PAGE>


Approximate Number of Equity Security Holders

     The following table  indicates the approximate  number of holders of record
of each class of PEC's common  equity  securities  as of June 3, 1997,  based on
information supplied by PEC's transfer agent:

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

      Common Stock, $.01 par value                           1,509



                                      -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 29,       March 30,       April 1,        April 2,        April 3,
                                                      1997            1996            1995            1994            1993
                                                      ----            ----            ----            ----            ----
<S>                                              <C>               <C>             <C>             <C>             <C>
Operating statement data:
     Net sales                                   $ 18,109,119      23,626,489      31,960,953      36,303,455      37,861,389

     Net (loss) income                               (865,313)     (2,416,051)     (1,995,408)       (108,456)        296,426

     Income (loss) per common share                      (.04)           (.12)          (0.10)          (0.01)           0.01

     Weighted average number of common shares
        outstanding                                20,055,243      19,781,270      19,781,270      19,781,270      19,781,270

Balance sheet data:
     Working capital excluding liabilities
        subject to compromise in 1997            $  1,513,459       6,083,691       2,058,184       3,550,371       3,514,978

     Total assets                                   6,170,065       9,442,616      11,224,889      13,390,533      14,025,154

     Current portion of long-term obligations         730,239         124,774         110,028         131,173         174,579

     Long-term obligations                          1,337,190         810,367         929,654         705,109         836,282

     Shareholders' equity                             913,913       1,429,226       3,890,277       5,945,685       6,114,141

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

     Weighted average sales per square foot of
        selling space                            $        206             268             246             265             271

     Number of stores open at end of period                13              13              19              20              21

</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, PEC (sometimes  referred to herein as the "Company") may make
certain statements that contain "forward-looking" information (as defined in the
Private  Securities  Litigation  Reform Act of 1995).  Words such as  "believe",
"anticipate",  "estimate",  "project"  and similar  expressions  are intended to
identify such forward-looking statements. Forward-looking statements may be made
by  management  orally or in  writing,  including,  but not limited to, in press
releases,  as part of this  Management's  Discussion  and  Analysis of Financial
Condition  and  Results of  Operations  and as a part of other  sections of this
Annual  Report  or other  filings.  Readers  are  cautioned  not to place  undue
reliance  on these  forward-looking  statements,  which  speak  only as of their
respective   dates,  and  are  subject  to  certain  risks,   uncertainties  and
assumptions.  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 29, 1997 (1997)  COMPARED TO FISCAL YEAR ENDED MARCH 30,
1996 (1996)

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

     The cost of sales for 1997 was lower than that for 1996 due  principally to
a decrease in net sales.  Cost of sales as a percentage  of net sales  decreased
from 64.8% in 1996 to 63.2% in 1997 due to increased  purchase discounts in 1997
and the fact that  1996  reflected  the  effects  of  buying a portion  of PEC's
inventory  during the Chapter 11 proceeding  from alternate  sources with higher
prices.  However,  a portion  of 1997  also  included  buying a  portion  of the
inventory from alternate  sources at higher prices.  The Company did not receive
discounts  associated  with normal  trade  terms until the first  quarter of the
fiscal year commencing March 30, 1997 ("fiscal 1998").

Selling,  general,  and  administrative  (SG&A) expenses in 1997 decreased 20.4%
compared to 1996.  Such decrease is attributed to a decrease in store  operating
expenses  of stores that had been open during  1996,  but were closed  during or
near the end of 1996 (15.0%),  a decrease in corporate  overhead  (0.3%),  and a
decrease in comparable store expenses (5.1%). SG&A expenses,  as a percentage of
net sales, increased from 40.2% in 1996 to 41.8% in 1997 due to the fixed nature
of  certain  expenses  and  the  decrease  in  net  sales  in  addition  to  the
aforementioned items.

The Company incurred a net loss of  approximately  $865,000 in 1997 versus a net
loss of approximately  $2,416,000 in 1996. The significant reduction of net loss
is attributed  to the success of the Chapter 11  reorganization.  However,  such
success was offset by professional fees

                                      -12-

<PAGE>


and lost  gross  profit as a result of not  obtaining  similar  terms from trade
creditors  to those  that  existed  prior to the  Chapter  11  proceeding  until
approximately  the  first  quarter  of  fiscal  1998.  Also,   further  overhead
reductions will not be evident until fiscal 1998.

     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  include  the fact  that the
Company's Plan of Reorganization  was confirmed during the last quarter of 1997.
The  benefits  of the  reorganization  include  the  termination  of the  leases
associated with the six  unprofitable  stores which were closed during 1996, the
closing of the Company's  former  headquarters and warehouse and the termination
of other unprofitable business arrangements as described herein.  Another factor
which, in management's  opinion,  should help the Company to restore itself to a
competitive position, is the Company's  concentration on advantages which it has
over certain of its  competitors,  including large  inventory,  convenient store
locations and a high level of customer  service,  which  includes the ability of
the customer to sample  virtually  all product  before  purchasing  and a timely
special-order program.

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 in the early part of the last quarter of 1996.

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

                                      -13-

<PAGE>


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

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

                                      -14-

<PAGE>


Liquidity and Capital Resources

The Company had working  capital of  $1,513,459  at March 29, 1997,  compared to
working  capital of  $412,257 at March 30, 1996  (including  liabilities  in the
amount of $5,671,434 which were subject to compromise on such date). The Company
had a  current  ratio  (the  ratio  of total  current  assets  to total  current
liabilities)  of 1.5 to 1 at March 29, 1997,  compared to a current ratio of 1.6
to 1 at March 30, 1996  (including  the  liabilities so subject to compromise on
such date).

At  March  29,  1997,  the  Company  had  long-term  obligations  of  $1,337,190
(excluding  $704,813  due to URT).  Management  anticipates  that the  Company's
ability to repay its long-term  obligations will be satisfied  primarily through
funds generated from its operations.

Management  anticipates that cash generated from operations and cash equivalents
on hand will provide  sufficient  liquidity to maintain adequate working capital
for operations.  Management would attempt to obtain financing for the opening of
any new stores which it may plan to open during the next few years.

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

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

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

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
adopted  this  standard  in 1997,  and it did 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 29, 1997 and March 30, 1996                18
      Statements of Operations for each of the years in the three
         year period ended March 29, 1997                                    19
      Statements of Shareholders' Equity for each of the years in
         the three year period ended March 29, 1997                          20
      Statements of Cash Flows for each of the years in the three
         year period ended March 29, 1997                                    22
      Notes to Financial Statements                                          24

                                       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 29, 1997 and March 30, 1996,  and the
related statements of operations,  shareholders'  equity and cash flows for each
of the years in the  three-year  period  ended March 29, 1997.  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 29,  1997 and March 30,  1996,  and the  results of its
operations  and its cash  flows for each of the years in the  three-year  period
ended  March  29,  1997  in  conformity  with  generally   accepted   accounting
principles.



                                        KPMG PEAT MARWICK LLP


May 30, 1997, except as to note 2
     which is as of June 9, 1997
Ft. Lauderdale, Florida

                                       17


<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                                 Balance Sheets

                        March 29, 1997 and March 30, 1996
<TABLE>
<CAPTION>

                                    Assets                                                           1997                   1996
                                    ------                                                           ----                   ----

<S>                                                                                              <C>                      <C>
Current assets:
     Cash and cash equivalents                                                                   $ 1,456,070              1,917,566
     Inventories                                                                                   2,855,494              4,954,260
     Prepaid inventory                                                                                39,733                254,249
     Prepaid expenses and other current assets                                                       220,275                279,346
     Refundable income taxes                                                                            --                    9,136
                                                                                                 -----------            -----------
                   Total current assets                                                            4,571,572              7,414,557

Property and equipment, net                                                                        1,439,731              1,843,708
Other assets                                                                                         158,762                184,351
                                                                                                 -----------            -----------
                                                                                                 $ 6,170,065              9,442,616
                                                                                                 ===========            ===========

                      Liabilities and Shareholders' Equity
                      ------------------------------------

Liabilities not subject to compromise

Current liabilities:
     Current portion of long-term obligations                                                        730,239                124,774
     Accounts payable                                                                              1,371,869                103,038
     Accrued liabilities                                                                             956,005              1,103,054
                                                                                                 -----------            -----------

                   Total current liabilities                                                       3,058,113              1,330,866

Long-term obligations                                                                              1,337,190                810,367
Due to Parent                                                                                        704,813                   --
Deferred rent                                                                                        156,036                200,723
                                                                                                 -----------            -----------

                   Total liabilities not subject to compromise                                     5,256,152              2,341,956

Liabilities subject to compromise                                                                       --                5,671,434
                                                                                                 -----------            -----------
                   Total liabilities                                                               5,256,152              8,013,390
                                                                                                 -----------            -----------

Shareholders' equity:
     Preferred stock, $100 par value; 50,000 shares
        authorized; 5,000 shares issued and outstanding                                              500,000                500,000
     Common stock subscribed (20,000,000 shares as of
        March 29, 1997)                                                                              350,000                   --
     Common stock,  $.01 par value; 40,000,000 shares
         authorized;  19,889,120 shares and 20,107,850 shares
         issued as of March 29, 1997 and March 30, 1996                                              198,892                201,079
     Additional paid-in capital                                                                    1,284,471              1,284,471
     Retained deficit                                                                             (1,399,670)              (496,429)
                                                                                                 -----------            -----------
                                                                                                     933,693              1,489,121
                                                                                                 -----------            -----------
     Treasury stock, 107,850 and 326,580 common shares,
         at cost, as of  March 29, 1997 and March 30, 1996                                           (19,780)               (59,895)
                                                                                                 -----------            -----------
                   Total shareholders' equity                                                        913,913              1,429,226
                                                                                                 -----------            -----------

Commitments and contingencies
                                                                                                 -----------            -----------
                                                                                                 $ 6,170,065              9,442,616
                                                                                                 ===========            ===========
</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 29, 1997

<TABLE>
<CAPTION>

                                                                                  1997                 1996                 1995
                                                                                  ----                 ----                 ----

<S>                                                                          <C>                    <C>                  <C>
Net sales                                                                    $ 18,109,119           23,626,489           31,960,953
                                                                             ------------           ----------           ----------
Costs and expenses:
     Cost of sales                                                             11,453,125           15,316,441           20,347,493
     Selling, general and administrative expenses                               7,570,528            9,513,941           11,473,660
     Store closing costs                                                             --                189,623              548,701
     Loss on litigation                                                              --                   --                431,692
     Management fees                                                                 --                562,500            1,024,386
                                                                             ------------           ----------           ----------
                                                                               19,023,653           25,582,505           33,825,932
                                                                             ------------           ----------           ----------
               Loss from operations                                              (914,534)          (1,956,016)          (1,864,979)
                                                                             ------------           ----------           ----------
Other (expense) income:
     Interest expense                                                             (88,345)            (111,451)             (82,332)
     Interest income                                                               30,832               22,566               48,891
                                                                             ------------           ----------           ----------
                                                                                  (57,513)             (88,885)             (33,441)
                                                                             ------------           ----------           ----------
               Loss before reorganization costs, income                          (972,047)          (2,044,901)          (1,898,420)
                  taxes and extraordinary gain

Reorganization costs:
     Professional fees                                                           (379,645)             (88,223)                --
     Store closing costs                                                             --               (282,927)                --
                                                                             ------------           ----------           ----------
                                                                                 (379,645)            (371,150)                --
                                                                             ------------           ----------           ----------

Loss before income taxes and extraordinary gain                                (1,351,692)          (2,416,051)          (1,898,420)

Provision for income taxes                                                           --                   --                 96,988
                                                                             ------------           ----------           ----------
               Loss before extraordinary gain                                  (1,351,692)          (2,416,051)          (1,995,408)

Extraordinary gain due to reorganization (note 9)                                 486,379                 --                   --
                                                                             ------------           ----------           ----------
               Net loss                                                      $   (865,313)          (2,416,051)          (1,995,408)
                                                                             ============           ==========           ==========
               Net loss per common share                                     $       (.04)                (.12)                (.10)
                                                                             ============           ==========           ==========

</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 29, 1997

<TABLE>
<CAPTION>
                                                 Preferred stock              Common stock subscribed           Common stock
                                             -------------------------      ---------------------------  --------------------------
                                                Shares       Amount           Shares        Amount          Shares         Amount
                                                ------       ------           ------        ------          ------         ------
<S>            <C>                               <C>     <C>                            <C>               <C>           <C>
Balance, April 2, 1994                           5,000   $   500,000             --     $      --         20,107,850    $   201,079

     Net loss                                     --            --               --            --               --             --

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

Balance, April 1, 1995                           5,000       500,000             --            --         20,107,850        201,079

     Net loss                                     --            --               --            --               --             --

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

Balance, March 30, 1996                          5,000       500,000             --            --         20,107,850        201,079

     Net loss                                     --            --               --            --               --             --

     Contributed capital                          --            --         20,000,000       350,000         (218,730)        (2,187)
                                           -----------   -----------      -----------   -----------      -----------    -----------

Balance, March 29, 1997                          5,000   $   500,000       20,000,000   $   350,000       19,889,120    $   198,892
                                           ===========   ===========      ===========   ===========      ===========    ===========
</TABLE>

                                       20

<PAGE>

                 Treasury stock            Capital      Retained
            ------------------------      in excess     earnings
              Shares         Amount        of par       (deficit)       Total
            ----------    ----------     ----------    ----------     ----------

             326,580     $  (59,895)     1,284,471     4,020,030      5,945,685

                --             --             --      (1,995,408)    (1,995,408)


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

             326,580        (59,895)     1,284,471     1,964,622      3,890,277

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


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

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

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

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

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


See accompanying notes to financial statements.


                                       21


<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                            Statements of Cash Flows

       For each of the years in the three-year period ended March 29, 1997

<TABLE>
<CAPTION>

                                                                                   1997                 1996                 1995
                                                                                   ----                 ----                 ----

<S>                                                                           <C>                   <C>                  <C>
Cash flows from operating activities:
     Net loss                                                                 $  (865,313)          (2,416,051)          (1,995,408)
                                                                              -----------           ----------           ----------

     Adjustments  to  reconcile  net  loss to net cash  (used  in)  provided  by
       operating activities:
           Extraordinary gain                                                    (486,379)                --                   --
           Depreciation and amortization                                          448,862              455,156              559,450
           Loss on abandonment of leasehold
              improvements                                                           --                190,601                 --
           Deferred income taxes                                                     --                   --                337,321
           Deferred rent                                                          (44,687)            (299,747)              15,402
           Changes in assets and liabilities affecting
              cash flows from operating activities:
                  (Increase) decrease in:
                    Inventories                                                    25,200              624,477              263,579
                    Prepaid inventory                                             214,516             (254,249)                --
                    Prepaid expenses and other current
                       assets                                                      59,071               10,067               27,108
                    Refundable income taxes                                         9,136              248,093             (221,229)
                    Other assets                                                   25,589                4,997               46,980
                  Increase (decrease) in:
                    Accounts payable                                            1,268,831           (4,027,492)            (484,050)
                    Accrued liabilities                                          (147,049)            (420,893)             230,012
                    Long-term obligations                                            --                (61,022)             334,573
                    Liabilities subject to compromise                          (1,854,514)           5,671,434                 --
           Changes due to reorganization activities:
               Loss on abandonment of leasehold
                    improvements                                                     --                296,509                 --
                                                                              -----------           ----------           ----------
                        Net cash (used in) provided by
                            operating activities                               (1,346,737)              21,880             (886,262)
                                                                              -----------           ----------           ----------
Cash flows from investing activities:
     Purchases of property and equipment                                          (44,885)            (168,331)            (920,477)
     Proceeds from disposition of land, property and
        equipment                                                                    --                615,243                 --
                                                                              -----------           ----------           ----------
                        Net cash (used in) provided by
                            investing activities                                  (44,885)             446,912             (920,477)
                                                                              -----------           ----------           ----------
Cash flows from financing activities:
     Due to Parent                                                                704,813                 --                   --
     Capital contribution                                                         350,000                 --                   --
     Repayment of long-term obligations                                          (124,687)             (43,519)            (206,173)
     Dividends paid                                                                  --                (45,000)             (60,000)
                                                                              -----------           ----------           ----------
                        Net cash provided by (used in)
                            financing activities                                  930,126              (88,519)            (266,173)
                                                                              -----------           ----------           ----------


                                       22                                                                                (Continued)
</TABLE>

<PAGE>

                                          PEACHES ENTERTAINMENT CORPORATION

                                         Statements of Cash Flows, Continued

<TABLE>
<CAPTION>
                                                                                               1997           1996           1995
                                                                                               ----           ----           ----
<S>                                                                                       <C>                <C>         <C>
                        Net (decrease) increase in cash and
                            cash equivalents                                              $  (461,496)       380,273     (2,072,912)

Cash and cash equivalents, beginning of year                                                1,917,566      1,537,293      3,610,205
                                                                                          -----------    -----------    -----------

Cash and cash equivalents, end of year                                                    $ 1,456,070      1,917,566      1,537,293
                                                                                          ===========    ===========    ===========


Supplemental  disclosures of cash flow information:  
   Cash paid (received) during the period for:
        Interest                                                                          $    88,345        111,451         82,332
                                                                                          ===========    ===========    ===========
        Income tax payments (refund), net                                                 $      --         (248,093)       (19,104)
                                                                                          ===========    ===========    ===========

<CAPTION>

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

<S>                                                                                                <C>
Liabilities subject to compromise, March 30, 1996                                                    $5,671,434
     Less:  Inventory returns for credit                                                              2,073,566
        Cash paid                                                                                     1,854,514
        Extraordinary gain (primarily as a result of lease
           rejection claims - note 9)                                                                   486,379
                                                                                                     ----------
Long-term obligation, March 28, 1997 (note 6)                                                        $1,256,975
                                                                                                     ==========

</TABLE>

See accompanying notes to financial statements.


                                       23                           (Continued)



<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

                March 29, 1997, March 30, 1996 and April 1, 1995

(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 93.5
     percent-owned subsidiary of URT Industries, Inc. (the "Parent").

(2)  Confirmation of Amended Plan of Reorganization

     On  January  16,  1996  (the  "Petition   Date"),   the  Company  commenced
     reorganization proceedings under Chapter 11 of the United States Bankruptcy
     Code.  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")
     were stayed,  absent specific  bankruptcy  court  authorization to pay such
     claims, which are reflected as "liabilities subject to compromise" at March
     30, 1996.

     As  debtor-in-possession,  the Company had 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 contract or an unexpired lease
     was 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 the Company) and rejected 8 leases.

     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, as modified by the Bankruptcy
     Court's order of January 17, 1997, was confirmed by the Bankruptcy Court on
     such date (the "confirmation  date"), and became effective February 3, 1997
     (the "effective date"), subject to satisfaction of certain conditions which
     were satisfied by February 19, 1997.  The principal  terms of the confirmed
     plan are as follows:

     o    All  unsecured  creditors,  including  all  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 and received 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)

                                       24                            (Continued)

<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements


               were  entitled to and received  the full amount of their  allowed
               claims on the effective  date.  The amounts owed to the principal
               suppliers  are  secured by a  perfected  first lien and  security
               interest in the inventory  originally  distributed by the secured
               parties  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  were  entitled to 30 percent of the
               allowed claims with respect to such leases, all of which was paid
               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 two  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,  were paid 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  (including   218,730   treasury   shares),
          contributed  $350,000  to  the  capital  of  the  Company,  waived  an
          aggregate  of  $75,000  of  dividends  payable  by the  Company to the
          Parent,   guaranteed,   subject   to  the  terms  of  the  Plan,   the
          approximately  $1,284,000  which  is due the  principal  suppliers  in
          accordance with the foregoing, and loaned $700,000 to the Company. The
          loan will be repaid to the Parent with interest at prime over a period
          of four years  beginning  on the third  anniversary  of the  effective
          date, is subordinate  to the amounts owed to the principal  suppliers,
          and is secured by inventory  and all the assets of the  Company.  As a
          result of the above transaction, the Parent is the beneficial owner of
          approximately  93.5 percent of the  Company's  issued and  outstanding
          shares of common stock and all of its issued and outstanding shares of
          preferred stock.

          In March 1997, the Parent and the Company agreed that if the Company's
          financial statements for its 1997 fiscal year show total shareholders'
          equity of less than  $1,000,000,  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. Any
          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.  On June 9,
          1997, the above agreement was rescinded.


                                      25                             (Continued)

<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

(3)  Liquidity

     As discussed in note 2, the Company's  Amended Plan of  Reorganization  was
     confirmed by the bankruptcy court and became effective February 3, 1997.

     The Company  believes that it has benefited from its  reorganization  which
     includes the closing of six  unprofitable  stores which were closed  during
     1996 and the  modification of five store leases,  the closing of the former
     headquarters  and  warehouse,  and the  termination  of other  unprofitable
     business  arrangements.  Also, 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  above,  should help the Company to restore  itself to a
     competitive position in subsequent fiscal years.

(4)  Summary of Significant Accounting Policies

     (a)  Fiscal Year

          The  Company's  fiscal year  consists of 52 or 53 weeks  ending on the
          Saturday closest to the end of March. The fiscal years ended March 29,
          1997,  March  30,  1996  and  April 1,  1995  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  $-0- and $1,082,100 at March
          29,  1997 and  March  30,  1996,  respectively.  The  carrying  amount
          approximates  fair value because of the  short-term  maturity of these
          investments.  The fair  values are  estimated  based on quoted  market
          prices for these or similar instruments.

     (c)  Inventories

          Inventories,   comprised  of  compact  discs,  cassettes,  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.


                                      26                             (Continued)


<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements




     (e)  Income Taxes

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

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

     (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  20,055,243 for the
          year ended March 29, 1997 and 19,781,270 for the years ended March 30,
          1996 and April 1, 1995.

     (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 and (b) costs and expenses  associated with the
          closing of locations.

     (i)  Use of Estimates by Management

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principals 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.


                                        27                           (Continued)

<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements



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

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

     (k)  New Accounting Standard

          Statement  of Financial  Accounting  Standards  No. 128 ("SFAS  128"),
          Earnings per Share,  which supersedes ABP Opinion No. 15, Earnings per
          Share,   was  issued  in  February   1997.   SFAS  128  requires  dual
          presentation of basic and diluted earnings per share (EPS) for complex
          capital  structures on the face of the income statement.  Basic EPS is
          computed by dividing income by the  weighted-average  number of common
          shares outstanding for the period.  Diluted EPS reflects the potential
          dilution from the exercise or  conversion  of  securities  into common
          stock,  such as stock options.  SFAS 128 is required to be adopted for
          year-end 1998; earlier  application is not permitted.  Management does
          not  expect  the basic or diluted  EPS  measured  under SFAS 128 to be
          materially  different than the primary or  fully-diluted  EPS measured
          under APB No. 15.

     (l)  Reclassifications

          Certain  amounts in the 1996 and 1995 financial  statements  have been
          reclassified to conform with the 1997 presentation.

(5)  Property and Equipment, net

     Property and equipment consist of the following at March 29, 1997 and March
     30, 1996:

                                                         1997           1996
                                                         ----           ----

         Land                                       $   395,570        395,570
         Building                                       538,093        538,093
         Leasehold improvements                       1,732,924      1,867,903
         Furniture and equipment                      1,029,642      1,602,467
         Building under capitalized lease               206,964        206,964
                                                    -----------    -----------
                                                      3,903,193      4,610,997
         Less accumulated depreciation
            and amortization                         (2,463,462)    (2,767,289)
                                                    -----------    -----------

                                                    $ 1,439,731      1,843,708
                                                    ===========    ===========


                                      28                             (Continued)


<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

(6)  Long-term Obligations

     Long-term  obligations consist of the following at March 29, 1997 and March
     30, 1996:

<TABLE>
<CAPTION>

                                                                          1997                      1996
                                                                          ----                      ----
<S>                                                                 <C>                           <C>
Capital lease  obligation,  due in monthly
   installments of $3,382, including
   interest at 17.5%; final payment due
   March 2005                                                        $   174,139                   183,353

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 $802,178; final balloon payment of $284,500 due 
   September 2002 (note 2)                                               442,462                   478,238

Settlement  agreement  with  former
   director/shareholder, due in monthly
   installments of $5,699, final payment due
   January 2000                                                          193,853                   273,550

Promissory notes,  due in installments of $26,744 for 21 months 
   and two payments of  $347,675  (due   February  1998  and  1999),   
   plus  interest  at  prime; collateralized by
   inventory and guaranteed by the Parent (note 2)                     1,256,975                      --
                                                                     -----------               -----------
                                                                       2,067,429                   935,141

Less current portion                                                    (730,239)                 (124,774)
                                                                     -----------               -----------

                                                                     $ 1,337,190                   810,367
                                                                     ===========               ===========

</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 1997 and 1996 and $99,000 for 1995.

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

                   Fiscal year                         Amount
                   -----------                       --------
                      1998                           $ 40,600
                      1999                             40,600
                      2000                             40,600
                      2001                             40,600
                      2002                             40,600
                    Thereafter                        121,560
                                                     --------
       Total minimum lease payments                   324,560

       Less amount representing interest             (150,421)
                                                     --------
       Present value of minimum lease
          payments                                   $174,139
                                                     ========


                                      29                             (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
                        -----------          -----------
                           1998              $   719,277
                           1999                  746,023
                           2000                   92,853
                           2001                   35,775
                           2002                   35,775
                        Thereafter               263,587
                                             -----------
                                             $ 1,893,290
                                             ===========

     The  Company  has a standby  letter of credit  of  $64,800  available  to a
     landlord that was not drawn upon as of March 29, 1997. 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 29, 1997.

(7)  Accrued Liabilities

     Accrued  liabilities  consist of the  following at March 29, 1997 and March
     30, 1996:

                                                         1997            1996
                                                         ----            ----

        Gift certificate and credit slip liability   $  184,884        371,647
        Payroll and related benefits                     99,701        196,699
        Sales and real estate taxes payable             188,087        280,191
        Accrued overhead expenses                       267,102        125,231
        Other                                           216,331        129,286
                                                     ----------     ----------

                                                     $  956,005      1,103,054
                                                     ==========     ==========

(8)  Due to Parent

In   order for the  Company  to effect  the plan of  reorganization,  the Parent
     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. The loan is subordinate to the amounts
     owed to principal  suppliers and is secured by inventory and all the assets
     of the Company.

(9)  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
                                                                  ==========


                                      30                             (Continued)


<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

     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 and the Company  recorded an  extraordinary  gain of
     $486,379  primarily as a result of the settlement of lease rejection claims
     (note 2).

(10) Commitments and Contingencies

     (a)  Leases

          The Company is a lessee under  various  operating  leases,  several of
          which  provide  for  percentage  rent.  An  insignificant   amount  of
          percentage  rent was  incurred in each of the years in the  three-year
          period  ended  March 29,  1997.  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 29, 1997 are as follows:

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

                         1998                 $1,195,769
                         1999                  1,038,225
                         2000                    698,232
                         2001                    653,551
                         2002                    334,395
                     Thereafter                2,900,248
                                              ----------
                                              $6,820,420
                                              ==========

          Rental  expense  under  noncancelable  operating  leases,  included in
          selling,  general  and  administrative  expenses  in the  accompanying
          statements  of  operations  amounted  to  $1,217,000,  $1,853,000  and
          $2,367,000,  respectively,  for each of the  years  in the  three-year
          period ended March 29, 1997.

          Rental expense on stores owned by two directors and/or their relatives
          was  $131,250,  $215,417 and $251,667,  respectively,  for each of the
          years in the three-year period ended March 29, 1997.


                                      31                             (Continued)

<PAGE>

                       PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

     (b)  Legal Matters

          The  Company  has been  party to a  lawsuit  involving  the  Company's
          closing of a store which it had based 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.

     (c)  Employment Agreement

          On March  18,  1996,  the  United  States  Bankruptcy  Court  Southern
          District of Florida approved the settlement of an employment agreement
          with a former  officer.  The  Company is to pay an amount of  $273,550
          over a period of four years (note 6). 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.

(11) Shareholders' Equity

     For each of the years in the  three-year  period ended March 29, 1997,  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


                                      32                             (Continued)

<PAGE>

                       PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

     Stock is entitled to one vote and has the same voting  powers as the common
     stock,  except  that all  matters  on which  the  vote of  shareholders  is
     required  must,  in order to be  approved,  receive the  requisite  vote of
     either (i) both the Series A and Series B,  voting as  separate  classes or
     (ii) the  common  stock and  either  the  Series A or  Series B,  voting as
     separate  classes.  The  shares of Series A stock may be  convertible  into
     shares of the  Company's  common  stock upon the holders'  compliance  with
     certain  surrender and notice  provisions.  In March 1997,  the  conversion
     feature was  eliminated.  The  liquidating  value for both the Series A and
     Series B shares is par value plus all accrued and unpaid dividends.

(12) 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.

(13) Income Taxes

     The provision for income taxes consists of:

                              1997            1996              1995
                              ----            ----              ----
        Current:
             Federal        $   --              --            (240,000)
             State              --              --                --
                            -------         --------          --------
                                --              --            (240,000)
        Deferred:
             Federal            --              --             292,000
             State              --              --              45,000
                            -------         --------          --------

                                --              --             337,000
                            -------         --------          --------

                            $   --              --              97,000
                            =======          ========          ========

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

                                                                                       1997               1996               1995
                                                                                       ----               ----                ----
<S>                                                                                 <C>                 <C>                <C>
Income tax benefit at applicable statutory tax rate of
     loss before income taxes                                                       $(294,000)          (821,000)          (645,000)
Add:
     State income tax benefit, net of federal benefit                                 (31,000)           (81,000)           (79,000)
     Change in valuation allowance                                                    185,000            852,000            811,000
     Capitalized reorganization expenses and other
        permanent differences                                                          50,000               --                 --
     Adjustments to net operating loss and other deferred
        tax assets                                                                     76,000               --                 --
     Other                                                                             14,000             50,000             10,000
                                                                                    ---------          ---------          ---------

Income tax provision for the year                                                   $    --                 --               97,000
                                                                                    =========          =========          =========
</TABLE>


                                      33                             (Continued)

<PAGE>

                       PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements

     The tax  effects of  temporary  differences  that give rise to  significant
     portions  of the  deferred  tax assets at March 29, 1997 and March 30, 1996
     are presented below.
<TABLE>
<CAPTION>


                      Deferred tax assets:                                               1997                     1996
                                                                                         ----                     ----
          <S>                                                                      <C>                           <C>
           Inventories, principally due to additional costs
              capitalized for tax purposes                                          $   106,000                   87,000
           Property and equipment, net, principally due to
              differences in depreciation                                               221,000                  152,000
           Accrued rent, principally due to accrual for financial
              reporting purposes                                                         58,000                   91,000
           Provision for store closings                                                    --                     80,000
           NOL carryforward                                                           1,409,000                1,100,000
           Accrued expenses                                                              72,000                  177,000
           Other                                                                         35,000                   29,000
                                                                                    -----------              -----------

                     Total gross deferred tax assets                                  1,901,000                1,716,000

           Less valuation allowance                                                  (1,901,000)              (1,716,000)
                                                                                    -----------              -----------

                     Net deferred tax assets                                        $      --                       --
                                                                                    ===========              ===========
</TABLE>



     At March 29, 1997,  the Company has a net operating loss  carryforward  for
     federal income tax purposes of approximately  $3,796,000 which is available
     to offset future federal taxable income, if any, through 2012.

     A valuation  allowance is provided to reduce deferred tax assets to a level
     which,  more likely than not,  will be realized.  The net  deferred  assets
     reflect  management's  estimate of the amount  which will be realized  from
     future profitability which can be predicted with reasonable certainty.  The
     valuation  allowance for deferred tax assets as of March 29, 1997 and March
     30, 1996 was $1,901,000 and $1,716,000, respectively. The net change in the
     total valuation  allowance for the years ended March 29, 1997 and March 30,
     1996 was an increase of approximately $185,000 and $852,000, respectively.

(14) Fair Value of Financial Instruments

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

(15) 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.


                                      34                             (Continued)


<PAGE>


                       PEACHES ENTERTAINMENT CORPORATION

                          Notes to Financial Statements



     The Company  purchased  approximately  76 percent of its  merchandise  from
     seven  principal  suppliers  during the fiscal year ended  March 29,  1997.
     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. The
     loss of any particular supplier would not have a materially negative effect
     on the Company's  results of  operations;  however,  a combination  of lost
     suppliers may have a materially negative effect on the Company's results of
     operations.  In  addition,  expenses  would be  greater  if such  alternate
     sources were utilized.


                                      35


<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                                     59

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 40  years,  principally  in the  rack  merchandising  and  retail  segments
thereof.

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

     Jason Wolk,  a certified  public  accountant,  has been  employed by PEC in
various  capacities and at various times since 1983 and has been employed by it,
full  time,  since  1994.  He is a son of Allan  Wolk.  Prior  to his full  time
employment  by PEC, he had been  employed as an  accountant by KPMG Peat Marwick
LLP. He has been a director of PEC and URT since 1994 and a  vice-president  and
the secretary of both companies since June, 1995. He was



                                      -36-
<PAGE>


appointed  Treasurer  and  Chief  Financial  Officer  (Principal  Financial  and
Accounting  Officer) of both  companies in  September,  1995,  and was appointed
Executive Vice-President of both companies in March, 1996.

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

Item 11. EXECUTIVE COMPENSATION

     The  following  table  sets forth  compensation  paid or accrued by PEC for
services  rendered in all  capacities  to it during the 1997 fiscal year and the
two prior fiscal  years to (i) PEC's chief  executive  officer  ("CEO") and (ii)
each of the other most highly  compensated  executive officers of PEC whose cash
compensation  exceeded $100,000 and who served as executive  officers during the
1997 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,     1997      491,667(1)     -0-       -0- (1)        -0-           -0-           -0-              -0-
  Chairman,     1996      125,000(1)     -0-       -0- (1)        -0-           -0-           -0-           308,222(2)
  Pres. & CEO   1995         -0- (1)     -0-       -0- (1)        -0-           -0-           -0-              -0-
</TABLE>



                                      -37-
<PAGE>


----------

(1)  Mr. Wolk is employed and compensated under an employment agreement with URT
     which  continues in effect until March 31, 2000.  PEC receives the services
     of Mr. Wolk under the intercorporate  agreements described above.  Pursuant
     to such  agreements,  effective  as of the first day of the last quarter of
     the 1996 fiscal year (January 1, 1996),  PEC is required to pay a salary to
     Mr.  Wolk in the amount of  $500,000  per annum,  except that the salary so
     payable to Mr. Wolk has been  reduced to $400,000  effective  March 1, 1997
     and continuing until February 28, 1999.

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

Employment Contracts

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

Compensation Committee Interlocks and Insider Participation

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

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of the date of this filing, URT owns approximately  37,213,370 shares of
PEC common stock,  constituting  approximately 94% of the issued and outstanding
shares of such common stock,  and all of PEC's issued and outstanding  shares of
Series A and Series B preferred stock. All of such shares of PEC stock are owned
directly with voting and investment power.


                                      -38-
<PAGE>


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

     The following table contains information concerning the number of shares of
each class of URT's  common stock which was owned by each person who, as of June
3, 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)                       *

                                  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>


                                      -39-
<PAGE>


<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 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.


                                      -40-
<PAGE>


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

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

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

     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.



                                      -41-
<PAGE>


     In order to enable  PEC 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),   has:
contributed  $350,000 to the capital of PEC;  waived an  aggregate of $75,000 of
dividends  payable by PEC to URT with respect to the period running from January
1, 1996 to March 31, 1997;  loaned $700,000 to PEC; and agreed that,  subject to
the terms of the Plan of  Reorganization,  it would guarantee the  approximately
$1,284,000  which is due to PEC's  principal  suppliers after the Effective Date
pursuant to the arrangements described in "LEGAL PROCEEDINGS" above. In order to
facilitate  the  issuance  of such  shares to URT,  URT also waived its right to
convert to common  stock the Series A  preferred  stock of PEC which is owned by
URT.  The loan from URT 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  if the  total
shareholders' equity of PEC, as of the end of the 1997 fiscal year, is less than
$1,000,000,  then 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 such total shareholders'  equity as of the end of the 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. Such agreement
between URT and PEC was  terminated  by them on or about June 9, 1997.



                                      -42-
<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 29,
               1997 and March 30, 1996                                     18

               Statements of operations for each of
               the years in the three year period
               ended March 29, 1997                                        19

               Statements of shareholders' equity
               for each of the years in the three 
               year period ended March 29, 1997                            20

               Statements of cash flows for each
               of the years in the three year period 
               ended March 29, 1997                                        22

               Notes to financial statements.                              24

          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


                                      -43-
<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.


                                      -44-
<PAGE>


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.

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,  incorporated  by reference  to Exhibit  10.67 to PEC's
                10-K Annual Report dated April 25, 1997.

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

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

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

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

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



                                      -45-
<PAGE>


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

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

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

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

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

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

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


27              Financial Data Schedule

                (b) Reports on Form 8-K.

                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.  It
                filed an additional  report on Form 8-K,  dated May 29, 1997, on
                or about  such date in order to report the  pro-forma  financial
                data required pursuant to such Plan of Reorganization.


                                      -46-
<PAGE>


                                   SIGNATURES

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

                                        PEACHES ENTERTAINMENT CORPORATION

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

Dated:   June 27, 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

          Title                                                  Date
          -----                                                  ----

By:       s/Allan Wolk                                       June 27, 1997
          ----------------------------
          Allan Wolk,
          Chairman of the Board,
          President (Principal
          Executive Officer) and Director


By:       s/Brian Wolk                                       June 27, 1997
          ----------------------------
          Brian Wolk, Executive
          Vice President and Director

By:       s/Jason Wolk                                       June 27, 1997
          ----------------------------
          Jason Wolk, Executive
          Vice President, Chief Financial
          Officer (Principal Financial and
          Accounting Officer), Treasurer,
          Secretary and Director

                                       47