UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934





For Quarter Ended June 29, 1996                     Commission File No. 0-12375


                        PEACHES ENTERTAINMENT CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)


                  Florida                                    59-2166041
       (State or Other Jurisdiction                   (I.R.S. Employer I.D. No.)
     of Incorporation or Organization)


1180 E Hallandale Beach Blvd., Hallandale, FL                   33009
  (Address of Principal Executive Offices)                   (Zip Code)


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


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

                                                  YES       NO   X
                                                      ----     ----


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of the latest practicable date.

At June 29, 1996, there were outstanding:

19,781,270 shares of common stock



<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                                      Index


PART I. FINANCIAL INFORMATION

  Item 1.  Financial Statements

            Condensed Balance Sheets-June 29, 1996 (Unaudited)
               and March 30, 1996                                              3

            Condensed Statements of Operations and Retained
               Earnings (Deficit) Three  Months Ended June 29, 1996
               and July 1, 1995 (Unaudited)                                    4

            Condensed  Statements of Cash  Flows-Three  Months Ended
               June 29, 1996 and July 1, 1995 (Unaudited)                      5

            Notes to Condensed Financial Statements                            6

  Item 2.  Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                      10

PART II. OTHER INFORMATION

  Item 1.  Legal Proceedings                                                  12

  Item 3.  Default Upon Mortgage Payable                                      14

  Item 6.  Exhibits and Reports on Form 8-K                                   14

SIGNATURES                                                                    15



                                      -2-
<PAGE>



                         PART I - FINANCIAL INFORMATION
                          Item 1. Financial Statements

                        PEACHES ENTERTAINMENT CORPORATION

                            Condensed Balance Sheets

                        June 29, 1996 and March 30, 1996


<TABLE>
<CAPTION>
                                                                   June 29,       March 30,
                                   Assets                            1996           1996
                                                                 -----------    -----------
                                                                  (unaudited)
<S>                                                              <C>              <C>
Current assets:
     Cash and cash equivalents                                   $ 1,433,081      1,917,566
     Inventories                                                   3,830,275      4,954,260
     Prepaid inventory                                               396,981        254,249
     Prepaid expenses and other current assets                       201,647        279,346
     Refundable income taxes                                           9,136          9,136
                                                                 -----------    -----------
         Total current assets                                      5,871,120      7,414,557
Property and equipment, net                                        1,797,778      1,843,708
Other assets                                                         164,594        184,351
                                                                 -----------    -----------
                                                                 $ 7,833,492      9,442,616
                                                                 ===========    ===========

                      Liabilities and Shareholders' Equity

Liabilities not subject to compromise

Current liabilities:
     Current portion of long-term obligations                        113,785        124,774
     Accounts payable                                                428,651        103,038
     Accrued liabilities                                           1,130,849      1,103,054
                                                                 -----------    -----------
         Total current liabilities                                 1,673,285      1,330,866
Long-term obligations                                                781,849        810,367
Deferred rent                                                        199,860        200,723
                                                                 -----------    -----------
         Total liabilities not subject to compromise               2,654,994      2,341,956

Liabilities subject to compromise                                  4,280,167      5,671,434
                                                                 -----------    -----------
         Total liabilities                                         6,935,161      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, $.01 par value;
        40,000,000 shares authorized;
        20,107,850 shares issued                                     201,079        201,079
     Additional paid-in capital                                    1,284,471      1,284,471
     Retained deficit                                             (1,027,324)      (496,429)
                                                                 -----------    -----------
                                                                     958,226      1,489,121
     Treasury stock, 326,580 common shares, at cost                  (59,895)       (59,895)
                                                                 -----------    -----------
         Total shareholders' equity                                  898,331      1,429,226

Commitments and contingencies
                                                                 -----------    -----------
                                                                 $ 7,833,492      9,442,616
                                                                 ===========    ===========
</TABLE>

See accompanying notes to condensed financial statements.



                                      -3-
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION

       Condensed Statements of Operations and Retained Earnings (Deficit)

                Three months ended June 29, 1996 and July 1, 1995
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                                     June 29,              July 1,
                                                                                                       1996                 1995
                                                                                                   -----------          -----------
                                                                                                             (Unaudited)
<S>                                                                                                <C>                    <C>
Net sales                                                                                          $ 4,305,821            6,268,280
                                                                                                   -----------          -----------
Costs and expenses:
     Cost of sales                                                                                   2,824,152            3,997,811
     Selling, general and administrative expenses                                                    1,910,425            2,539,685
     Management fee                                                                                       --                187,500
                                                                                                   -----------          -----------
                                                                                                     4,734,577            6,724,996
                                                                                                   -----------          -----------
         Loss from operations                                                                         (428,756)            (456,716)
                                                                                                   -----------          -----------
Other (expense) income:
     Interest expense                                                                                  (18,613)             (20,732)
     Interest income                                                                                    14,012                1,606
                                                                                                   -----------          -----------
                                                                                                        (4,601)             (19,126)
                                                                                                   -----------          -----------
         Loss before reorganization costs and provision for income taxes                              (433,357)            (475,842)
Reorganization costs:
     Professional fees                                                                                 (97,538)                --
                                                                                                   -----------          -----------
         Loss before provision for income taxes                                                       (530,895)            (475,842)
Provision for income taxes                                                                                --                   --
                                                                                                   -----------          -----------
         Net loss                                                                                     (530,895)            (475,842)
Retained (deficit) earnings, beginning of period                                                      (496,429)           1,964,622
Preferred stock dividend                                                                                  --                (15,000)
                                                                                                   -----------          -----------
Retained (deficit) earnings, end of period                                                         $(1,027,324)           1,473,780
                                                                                                   ===========          ===========

Net loss per common share                                                                          $      (.03)                (.02)
                                                                                                   ===========          ===========
</TABLE>


See accompanying notes to condensed financial statements.



                                      -4-
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION
                       Condensed Statements of Cash Flows

                Three months ended June 29, 1996 and July 1, 1995
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                                       June 29,            July 1,
                                                                                                         1996               1995
                                                                                                     -----------        -----------
                                                                                                               (Unaudited)
<S>                                                                                                  <C>                   <C>
Cash flows from operating activities:
     Net loss                                                                                        $  (530,895)          (475,842)
                                                                                                     -----------        -----------
     Adjustments  to  reconcile  net loss to net cash  used in  operating
        activities:
           Depreciation and amortization                                                                  74,366            135,530
           Deferred rent                                                                                    (863)            15,215
           Changes in assets and liabilities affecting cash flows from operating
               activities:
                  (Increase) decrease in:
                    Inventories                                                                        1,123,985            221,573
                    Prepaid inventory                                                                   (142,732)              --
                    Prepaid expenses and other current assets                                             77,699             12,596
                    Other assets                                                                          19,757             29,621
                  Increase (decrease) in:
                    Accounts payable                                                                     325,613           (400,388)
                    Accrued liabilities                                                                   27,795           (334,938)
                    Long-term obligations                                                                (17,097)              --
                    Liabilities subject to compromise                                                 (1,391,267)              --
                                                                                                     -----------        -----------
                        Net cash used in operating activities                                           (433,639)          (796,633)
                                                                                                     -----------        -----------
Cash flows from investing activities:
     Purchase of property and equipment                                                                  (28,436)           (64,885)
     Proceeds from sale of land                                                                             --              300,000
                                                                                                     -----------        -----------
                        Net cash (used in) provided by investing
                            activities                                                                   (28,436)           235,115
                                                                                                     -----------        -----------
Cash flows from financing activities:
     Repayment of long-term obligations                                                                  (22,410)           (21,776)
     Dividends paid                                                                                         --              (15,000)
                                                                                                     -----------        -----------
                        Net cash used in financing activities                                            (22,410)           (36,776)
                                                                                                     -----------        -----------

                        Net decrease in cash and cash equivalents                                       (484,485)          (598,294)
Cash and cash equivalents, beginning of period                                                         1,917,566          1,537,293
                                                                                                     -----------        -----------
Cash and cash equivalents, end of period                                                             $ 1,433,081            938,999
                                                                                                     ===========        ===========
Supplemental disclosures of cash flow information:
     Cash paid during the period for interest                                                        $    18,613             20,732
                                                                                                     ===========        ===========
</TABLE>


See accompanying notes to condensed financial statements.



                                      -5-
<PAGE>


                        PEACHES ENTERTAINMENT CORPORATION

                    Notes to Condensed Financial Statements

(1) Basis of Financial Statement Presentation

     The  accompanying   unaudited  condensed  financial  statements  have  been
     prepared in accordance with the  instructions to Form 10-Q and,  therefore,
     do  not  include  all  footnotes  and  information  necessary  for  a  fair
     presentation of financial position, results of operations and cash flows in
     conformity with generally accepted accounting  principles.  However, in the
     opinion of management, all adjustments (consisting only of normal recurring
     accruals) necessary for a fair presentation have been made.

     It  is  suggested  that  the  accompanying  unaudited  condensed  financial
     statements be read in conjunction  with the financial  statements and notes
     included in the Peaches  Entertainment  Corporation (the "Company")  annual
     report on Form 10-K for the year ended March 30, 1996.

     As of June 29, 1996, the Company was an 87 percent-owned  subsidiary of URT
     Industries, Inc. (the "Parent").

     The results of operations for the three months ended June 29, 1996, are not
     necessarily indicative of the operating results to be expected for the year
     ending March 29, 1997.  The Company's  business is seasonal.  Historically,
     approximately  23 percent of the Company's sales have occurred in the first
     fiscal quarter.

     Inventories,  which consist of compact discs,  tapes and  accessories,  are
     stated at the lower of cost (principally average) or market.

     Certain  reclassifications  have been made to the (unaudited)  July 1, 1995
     quarterly financial  information to conform to the presentation used in the
     (unaudited) June 29, 1996 financial information.

(2) Reorganization and Emergence From Chapter 11

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

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



                                 -6-                                 (continued)
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION

                    Notes to Condensed Financial Statements


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

     o    All unsecured  creditors,  including  all of the  Company's  inventory
          suppliers,  but  excluding  landlords  under  leases  rejected  by the
          Company,  are  entitled  to 100 percent of their  allowed  claims (the
          total of which  is  approximately  $4,922,000).  The  Company's  seven
          principal   suppliers   (whose  allowed  claims  total   approximately
          $4,372,000  out of such  $4,922,000)  were  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) 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 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 2 years from the effective date.

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



                                 -7-                                 (continued)
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION

                    Notes to Condensed Financial Statements


     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 of the  assets  of the  Company.  As a  result,  the  Parent is the
     beneficial  owner  of  approximately  93.5%  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  pursuant  to such  arrangement  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,  would be required with respect to all matters on which the
     shareholders have a right to vote.

(3) Loss Per Common Share

     Net loss per common share was computed by dividing net loss, less preferred
     stock  dividends,  by the weighted  average  number of total common  shares
     outstanding during the periods.

(4) Income Taxes

     The Company follows Statement of Financial Accounting Standard ("SFAS") No.
     109,  Accounting  for Income Taxes.  The Company files a  consolidated  tax
     return with its Parent.  Any applicable tax charge or credits are allocated
     on a separate return basis. For the three month period ended June 29, 1996,
     there was no  (benefit)  provision  for income taxes as the Company has net
     operating loss carryforwards for federal income tax purposes.

(5) Liabilities Subject to Compromise

     Liabilities subject to compromise include the following:

                                                   June 29,           March 30,
                                                     1996               1996
                                                  ----------         ----------
                                                  (unaudited)
          Lease rejection claims                  $  600,000            600,000
          Trade and other miscellaneous claims     3,680,167          5,071,434
                                                  ----------         ----------
                                                  $4,280,167          5,671,434
                                                  ==========         ==========



                                      -8-                            (continued)
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION

                    Notes to Condensed Financial Statements


     Subsequent to the petition date, the Company negotiated agreements with all
     of its major suppliers,  with the approval of the Bankruptcy  Court,  which
     permitted  the  Company to make  returns of unneeded  inventory  for credit
     against prepetition  indebtedness.  On January 17, 1997, the Company's plan
     of  reorganization  was  confirmed  by the  Bankruptcy  Court.  The Company
     recorded an extraordinary  gain of approximately  $488,000,  primarily as a
     result of the  settlement  of lease  rejection  claims  (note 2) during the
     fourth quarter of fiscal 1997.



                                      -9-                            (continued)
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION


Item 2. Management's   Discussions  and   Analysis of  Financial  Condition  and
        Results of Operations for the Three Months Ended June 29, 1996, Compared
        to the Three Months ended July 1, 1995.

From  time to  time,  the  Company  may make  certain  statements  that  contain
"forward-looking"  information (as defined in the Private Securities  Litigation
Reform  Act  of  1995).  Words  such  as  "believe,"  "anticipate,"  "estimate,"
"project" and similar expressions are intended to identify such  forward-looking
statements.  Forward-looking  statements may be made by management  orally or in
writing,  including,  but not  limited  to, in press  releases,  as part of this
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  and as a part of other  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

Net sales for the three  months  ended June 29, 1996 (such three month period is
hereafter  referred  to as  "1996")  decreased  by  approximately  31.3  percent
compared to the three  months  ended July 1, 1995 (such  three  month  period is
hereafter  referred to as "1995").  Such decrease is attributed to a decrease in
comparable  store sales (12.1 percent),  and a decrease in sales in those stores
that closed during 1996 versus 1995 (19.2 percent).

During the last few years,  nontraditional 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.
Peaches continued to suffer the effect of such competition during 1996 and, as a
result,  filed  its  voluntary  petition  for  relief  under  Chapter  11 of the
Bankruptcy Code on January 16, 1996.

Recently,  the Company's  primary suppliers have taken steps to help protect the
retail marketplace from certain low cost retailers of music. These steps include
not disbursing  cooperative  advertising  funds to retailers which engage in low
cost selling practices in violation of the minimum  advertised  pricing policies
of such suppliers.  Management  believes that such  initiatives,  in combination
with the other factors mentioned  immediately below,  should help the Company to
restore  itself to a  competitive  position in subsequent  fiscal  years.  Other
factors  which,  in  management's  opinion,  should  help the Company to restore
itself to a  competitive  position  in the  future  are the  closing  of the six
unprofitable  stores which were closed  during  1996,  the closing of the former
headquarters  and  warehouse,  the  termination of other  unprofitable  business
arrangements as described  herein and  concentration on advantages which PEC has
over certain of its  competitors,  including large  inventory,  convenient store
locations and a high level of customer service.

The cost of sales for 1996 was lower  than  that for 1995 due  principally  to a
decrease in net sales.  Cost of sales as a percentage of net sales has increased
from 63.8  percent in 1995 to 65.5  percent in 1996 due to a reduction in retail
prices in an effort to meet the  increased  competition,  a change in terms with
the  Company's  principal  suppliers  during the Chapter 11  proceeding  and the
effects of buying a portion of the  Company's  inventory  during the  Chapter 11
proceeding from alternate sources with higher prices.



                                      -10-                           (continued)
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION

                    Notes to Condensed Financial Statements


Selling,  general and  administrative  (SG&A) expenses in 1996 decreased by 24.8
percent  compared  to 1995.  Such  decrease  is  attributable  to a increase  in
comparable store expenses (.3 percent),  a decrease in store operating  expenses
of stores that opened or closed  during  1996 versus 1995 (23.1  percent)  and a
decrease in corporate overhead (2 percent). SG&A expenses as a percentage of net
sales  increased  from 40.5  percent in 1995 to 44.3  percent 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  $531,000 in 1996 versus a net
loss of  approximately  $475,000 in 1995 due to the  reduction  in net sales and
gross  profit  as  described  above,  in  addition  to  reorganization  costs of
approximately $97,000.

Liquidity and Capital Resources

The Company  had  working  capital of  $4,197,835  at June 29,  1996  (excluding
liabilities  subject to  compromise  in 1996)  compared  to  working  capital of
$6,083,691  at March 30,  1996 and a current  ratio (the ratio of total  current
assets to total  current  liabilities)  of 3.5 to 1 at June 29, 1996  (excluding
liabilities subject to compromise in 1996) compared to a current ratio of 5.6 to
1 at March 30, 1996. The amount of the liabilities subject to compromise at June
29, 1996 is $4,280,167.

At June 29, 1996, the Company had long-term  obligations of $781,849  (excluding
liabilities  subject to compromise of $4,280,167).  Management  anticipates that
its  ability to repay its  long-term  obligations  will be  satisfied  primarily
through funds generated from its operations.

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

Inflation trends have not had an impact upon revenue 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.

For  a  discussion  of  recent  developments  and  uncertainties  affecting  the
Company's  liquidity  and  capital  resources,  see  note  2  to  the  financial
statements (Reorganization and Emergence from Chapter 11).



                                      -11-                           (continued)
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION


                                OTHER INFORMATION


PART II

Item 1. Legal Proceedings

     (i) Bankruptcy filings

          On January  16,  1996 (the  "Petition  Date"),  Peaches  Entertainment
          Corporation (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. In Chapter 11, the Company  continued to manage its affairs and
          operate its business as debtor-in-possession while it developed a plan
          of  reorganization to restructure and allow its emergence from Chapter
          11. As  debtor-in-possession  in  Chapter  11, the  Company  could not
          engage in  transactions  outside of the  ordinary  course of  business
          without approval, after notice and hearing, of the Bankruptcy Court.

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

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



                                      -12-                           (continued)
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION


          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.  Among the  principal  terms of the  confirmed  plan are the
          following:

          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) were 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)  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 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  2  years  from  the
               effective date.

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



                                      -13-
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION


          the  effective  date,  is  subordinate  to  the  amounts  owed  to the
          principal suppliers, and is secured by inventory and all of the assets
          of the Company.  As a result,  the Parent is the  beneficial  owner of
          approximately  93.5% 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 pursuant to such  arrangement
          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,  would be
          required with respect to all matters on which the shareholders  have a
          right to vote.

Item 3.   Defaults Upon Mortgage Payable

          As a result of the bankruptcy filing, the Company was in default under
          the indentures  governing the mortgage payable. As discussed in note 2
          of the notes to the  condensed  financial  statements on Form 10-Q for
          the  three-month   period  ended  June  29,  1996,  under  Chapter  11
          proceedings,  litigation  and actions by creditors to collect  certain
          claims in existence at the petition date are stayed,  absent  specific
          Bankruptcy  Court  authorizations  to pay such claims.  On January 17,
          1997, the plan of reorganization was confirmed by the Bankruptcy Court
          and became  effective  February 3, 1997,  subject to  satisfaction  of
          certain  conditions  which were  satisfied by February  19, 1997.  The
          confirmed  plan of  reorganization  provided for the  repayment of the
          mortgage payable under the original note  provisions,  except that the
          balloon payment was extended to September 2002.

Item 6.   Exhibits and Reports on Form 8-K

          (a)    Exhibits

                      27.0 Financial Data Schedule

          (b)    Reports on Form 8-K

                      None.


                                      -14-
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION


                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                    PEACHES ENTERTAINMENT CORPORATION
                                    Registrant


Date: 5/29/97                       /s/ Allan Wolk
      --------------------------    --------------------------------------------
                                    Allan Wolk, Chairman of the Board, President
                                    (Principal Executive Officer)




Date: 5/29/97                       /s/ Jason Wolk
      --------------------------    --------------------------------------------
                                    Jason Wolk, Executive Vice President,
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)



                                      -15-