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 September 28, 1996                 Commission File No. 0-12375


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


                     Florida                                   59-2166041
(State or Other Jurisdiction of Incorporation or      (I.R.S. Employer I.D. No.)
                  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 September 28, 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-September 28, 1996 (Unaudited)
                 and March 30, 1996                                          3

               Condensed  Statements of Operations and Retained Earnings
                 (Deficit)-Three Months Ended September 28, 1996 and
                 September 30, 1995 (Unaudited)                              4

               Condensed  Statements of Operations  and Retained  Earnings
                (Deficit)-Six Months Ended September 28, 1996 and
                 September 30, 1995 (Unaudited)                              5

               Condensed  Statements of Cash Flows-Six  Months Ended
                 September 28,  1996 and September 30, 1995 (Unaudited)      6

               Notes to Condensed Financial Statements                       8

     Item 2.   Management's Discussion and Analysis of Financial Condition
                 and Results of Operations                                  12

PART II. OTHER INFORMATION

     Item 1.  Legal Proceedings                                             14

     Item 3.  Default Upon Mortgage Payable                                 16

     Item 6.  Exhibits and Reports on Form 8-K                              16

SIGNATURES                                                                  17







                                      - 2 -
<PAGE>

                                                            
                         PART I - FINANCIAL INFORMATION
                          Item 1. Financial Statements

                        PEACHES ENTERTAINMENT CORPORATION

                            Condensed Balance Sheets

                      September 28, 1996 and March 30, 1996

<TABLE>
<CAPTION>
                               Assets                  September 28,   March 30,
                                                            1996         1996
                                                           ------       ------
                                                        (Unaudited)
<S>                                                     <C>           <C>        
Current assets:
     Cash and cash equivalents                          $ 1,185,010   $ 1,917,566
     Inventories                                          3,423,745     4,954,260
     Prepaid inventory                                      601,886       254,249
     Prepaid expenses and other current assets              280,847       279,346
     Refundable income taxes                                  9,838         9,136
                                                        -----------   -----------
                   Total current assets                   5,501,326     7,414,557

Property and equipment, net                               1,723,371     1,843,708
Other assets                                                156,644       184,351
                                                        -----------   -----------
                                                        $ 7,381,341   $ 9,442,616
                                                        ===========   ===========
                Liabilities and Shareholders' Equity

Liabilities not subject to compromise

Current liabilities:
Current portion of long-term obligations                    114,212       124,774
Accounts payable                                            658,501       103,038
Accrued liabilities                                       1,350,101     1,103,054
                                                        -----------   -----------
     Total current liabilities                            2,122,814     1,330,866

Long-term obligations                                       753,130       810,367
Deferred rent                                               192,050       200,723
                                                        -----------   -----------
          Total liabilities not subject to compromise     3,067,994     2,341,956

Liabilities subject to compromise                         3,977,622     5,671,434
                                                        -----------   -----------
          Total liabilities                               7,045,616     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                                    (1,589,930)     (496,429)
                                                        -----------   -----------
                                                            395,620     1,489,121

     Treasury stock, 326,580 common shares, at cost         (59,895)      (59,895)
                                                        -----------   -----------
                   Total shareholders' equity               335,725     1,429,226
Commitments and contingencies
                                                        -----------   -----------
                                                        $ 7,381,341   $ 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 September 28, 1996 and September 30, 1995
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                               September 28,   September 30,
                                                                    1996           1995
                                                                    ----           ----
                                                                       (Unaudited)
<S>                                                              <C>             <C>      
Net sales                                                        $ 3,888,049     5,326,936
                                                                 -----------   -----------
Costs and expenses:
     Cost of sales                                                 2,479,044     3,384,239
     Selling, general and administrative expenses                  1,861,029     2,448,843
     Management fees                                                    --         187,500
                                                                 -----------   -----------
                                                                   4,340,073     6,020,582
                                                                 -----------   -----------
               Loss from operations                                 (452,024)     (693,646)
                                                                 -----------   -----------
Other (expense) income:
     Interest expense                                                (18,318)      (36,685)
     Interest income                                                   5,274         7,788
                                                                 -----------   -----------
                                                                     (13,044)      (28,897)
                                                                 -----------   -----------
               Loss before reorganization costs and
                  provision for income taxes                        (465,068)     (722,543)

Reorganization costs:
     Professional fees                                               (97,538)         --
                                                                 -----------   -----------
               Loss before provision for income taxes               (562,606)     (722,543)
Provision for income taxes                                              --            --
                                                                 -----------   -----------
               Net loss                                             (562,606)     (722,543)

Retained (deficit) earnings, beginning of period                  (1,027,324)    1,473,780

Preferred stock dividend                                                --         (15,000)
                                                                 -----------   -----------
Retained (deficit) earnings, end of period                       $(1,589,930)      736,237
                                                                 ===========   ===========
Net loss per common share                                        $      (.03)         (.04)
                                                                 ===========   ===========
</TABLE>

See accompanying notes to condensed financial statements 



                                       4
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION

       Condensed Statements of Operations and Retained Earnings (Deficit)

           Six months ended September 28, 1996 and September 30, 1995
                                   (Unaudited)

                                                    September 28,  September 30,
                                                         1996            1995
                                                         ----            ---- 
                                                             (Unaudited)

Net sales                                           $  8,193,870   $ 11,595,216
                                                    ------------   ------------
Costs and expenses:
     Cost of sales                                     5,303,196      7,382,051
     Selling, general and administrative expenses      3,771,454      4,988,530
     Management fees                                        --          375,000
                                                    ------------   ------------
                                                       9,074,650     12,745,581
                                                    ------------   ------------
               Loss from operations                     (880,780)    (1,150,365)
                                                    ------------   ------------
Other (expense) income:
     Interest expense                                    (36,931)       (57,417)
     Interest income                                      19,286          9,397
                                                    ------------   ------------
                                                         (17,645)       (48,020)
                                                    ------------   ------------
             Loss before reorganization costs and
               provision for income taxes               (898,425)    (1,198,385)
Reorganization costs:
     Professional fees                                  (195,076)          --
                                                    ------------   ------------

             Loss before provision for income taxes   (1,093,501)    (1,198,385)
Provision for income taxes                                  --             --
                                                    ------------   ------------
             Net loss                                 (1,093,501)    (1,198,385)

Retained (deficit) earnings, beginning of period        (496,429)     1,964,622

Preferred stock dividend                                    --          (30,000)
                                                    ------------   ------------
Retained (deficit) earnings, end of period          $ (1,589,930)  $    736,237
                                                    ============   ============
Net loss per common share                           $       (.06)  $       (.06)
                                                    ============   ============

See accompanying notes to condensed financial statements.



                                       5
<PAGE>



                                                        

(Continued)
                        PEACHES ENTERTAINMENT CORPORATION

                       Condensed Statements of Cash Flows

           Six months ended September 28, 1996 and September 30, 1995
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                September 28,          September 30,
                                                                                     1996                   1995
                                                                                     ----                   ---- 
                                                                                           (Unaudited)
<S>                                                                         <C>                          <C>        
Cash flows from operating activities:
     Net loss                                                                    $(1,093,501)           $(1,198,385)
                                                                                 -----------            -----------
     Adjustments to reconcile net loss to net cash used in
       operating activities:
           Depreciation and amortization                                             151,884                244,898
           Deferred rent                                                              (8,673)                29,027
           Changes in assets and liabilities affecting cash flows
             from operating activities:
                  (Increase) decrease in:
                    Inventories                                                    1,530,515                625,601
                    Prepaid inventory                                               (347,637)                  -
                    Prepaid expenses and other current assets                         (1,501)                61,731
                    Refundable income taxes                                             (702)                  (631)
                    Other assets                                                      27,707                 42,951
                  Increase (decrease) in:
                    Accounts payable                                                 555,463               (878,926)
                    Accrued liabilities                                              247,047               (298,292)
                    Long-term obligations                                            (34,194)                  -
                    Liabilities subject to compromise                             (1,693,812)                  -
                                                                                 -----------            -----------   
                        Net cash used in operating activities                    $  (667,404)           $(1,372,026)
                                                                                 -----------            ----------- 
Cash flows from investing activities:
     Purchases of property and equipment                                             (31,547)              (133,242)
     Proceeds from sale of property and equipment                                       -                   615,243
                                                                                 ------------           -----------
                        Net cash (used in) provided by investing
                            activities                                               (31,547)               482,001
                                                                                 -----------            -----------   
Cash flows from financing activities:
     Repayment of long-term obligations                                              (33,605)               (36,180)
     Dividends paid                                                                     -                   (30,000)
                                                                                 -----------            -----------
                        Net cash used in financing activities                    $   (33,605)           $   (66,180)
                                                                                 -----------            -----------

                                                                                                         (continued)
</TABLE>


                                       6
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION

                  Condensed Statements of Cash Flows, Continued
<TABLE>
<CAPTION>




                                                                                   September 28,          September 30,
                                                                                      1996                   1995
                                                                                      ----                   ----
                                                                                            (unaudited)

<S>                                                                              <C>                       <C>      
                        Net decrease in cash and cash equivalents                $  (732,556)           $  (956,205)
Cash and cash equivalents, beginning of year                                       1,917,566              1,537,293
                                                                                 -----------            -----------
Cash and cash equivalents, end of year                                           $ 1,185,010            $   581,088
                                                                                 -----------            ----------- 
Supplemental disclosures of cash flow information:
     Cash paid during the period for interest                                    $    36,931            $    48,020
                                                                                 ===========            ===========
</TABLE>


See accompanying notes to condensed financial statements.



                                       7
<PAGE>



                        PEACHES ENTERTAINMENT CORPORATION
                     Notes to Condensed Financial Statements
                    September 28, 1996 and September 30, 1995
                                   (Unaudited)


                                             
(1)  Basis of Financial Statement Presentation

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

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

     As of September 28, 1996, the Company was an 87 percent-owned subsidiary of
     URT Industries, Inc. (the "Parent").

     The results of operations for the six months ended  September 28, 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 24 percent of the Company's sales have occurred
     in the second 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) September 30,
     1995 quarterly financial information to conform to the presentation used in
     the (unaudited) September 28, 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

                                                                     (continued)
                                       8
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                     Notes to Condensed Financial Statements

     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.

     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 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.

                                                                     (continued)

                                       9

<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  of  the  above
     transactions,  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  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 six month period ended  September 28,
     1996, there was no (benefit)  provision for income taxes as the Company has
     net operating loss carryforwards for federal income tax purposes.

                                       10

<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

                     Notes to Condensed Financial Statements

(5)  Liabilities Subject to Compromise

     Liabilities subject to compromise include the following:

                                                       September 28,   March 30,
                                                            1996         1996
                                                            ----         ----
                                                                (Unaudited)

       Lease rejection claims                          $  600,000      600,000
       Trade and other miscellaneous claims             3,377,622    5,071,434
                                                        ---------    ---------
                                                       $3,977,622    5,671,434
                                                        =========    =========
     
     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.





                                       11
<PAGE>





                       PEACHES ENTERTAINMENT CORPORATION


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations for the Six Months Ended September 28, 1996,  Compared  to
        the Six Months ended September 30, 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 six months ended  September 28, 1996 (such six month period is
hereafter  referred  to as  "1996")  decreased  by  approximately  29.3  percent
compared to the six months  ended  September  30, 1995 (such six month period is
hereafter  referred to as "1995").  Such decrease is attributed to a decrease in
comparable  store sales (11.8 percent),  and a decrease in sales in those stores
that closed during 1996 versus 1995 (17.5 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.
The Company continued to suffer the effect of such competition  during 1996 and,
as a result,  filed its  voluntary  petition for relief under  Chapter 11 of the
Bankruptcy Code on January 16, 1996.

Recently,  the Company's  primary suppliers have taken steps to help protect the
retail marketplace from certain low cost retailers of music. These steps include
not disbursing  cooperative  advertising  funds to retailers which engage in low
cost selling practices in violation of the minimum  advertised  pricing policies
of such suppliers.  Management  believes that such  initiatives,  in combination
with the other factors mentioned  immediately below,  should help the Company to
restore  itself to a  competitive  position in subsequent  fiscal  years.  Other
factors  which,  in  management's  opinion,  should  help the Company to restore
itself to a  competitive  position  in the  future  are the  closing  of the six
unprofitable  stores which were closed  during  1996,  the closing of the former
headquarters  and  warehouse,  the  termination of other  unprofitable  business
arrangements as described  herein and  concentration on advantages which Peaches
Entertainment  Corporation 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 63.7  percent in 1995 to 64.7  percent in 1996 due to a reduction in retail
prices in an effort to meet the increase 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.





                                  12                                 (Continued)
<PAGE>

                       PEACHES ENTERTAINMENT CORPORATION


Selling,  general and  administrative  (SG&A) expenses in 1996 decreased by 24.4
percent  compared  to 1995.  Such  decrease  is  attributable  to a decrease  in
comparable store expenses (1.3 percent),  a decrease in store operating expenses
of stores that opened or closed  during  1996 versus 1995 (19.9  percent)  and a
decrease in corporate  overhead (3.2 percent).  SG&A expenses as a percentage of
net sales increased from 43.0 percent in 1995 to 46.0 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 $1,093,000 in 1996 versus a net
loss of  approximately  $1,198,000 in 1995 due to the reduction in net sales and
gross  profit  as  described  above,  in  addition  to  reorganization  costs of
approximately $195,000.

Liquidity and Capital Resources

The Company had working  capital of $3,378,512 at September 28, 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  2.6  to 1 at  September  28,  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 September 28, 1996 is $3,977,622.

At  September  28,  1996,  the Company  had  long-term  obligations  of $753,130
(excluding   liabilities  subject  to  compromise  of  $3,977,622).   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).




                                       13                            (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 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.

          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  was confirmed by
          the Bankruptcy  Court on January 17, 1997 (the  "confirmation  date"),
          and became effective  February 3, 1997 (the "effective  date") subject
          to all conditions  precedent  being  satisfied in which all conditions
          precedent  were  satisfied on February 19, 1997.  Among the  principle
          terms of the confirmed plan,  subject to certain changes  contained in
          the order of approval, are the following:

          o    All unsecured  creditors,  including all the Company's  inventory
               suppliers,  but excluding  landlords under leases rejected by the
               Company, are entitled to 100 percent of their allowed claims (the
               total of which is approximately $4,922,000).  The Company's seven
               principal  suppliers  (whose allowed  claims total  approximately
               $4,372,000 out of such  $4,922,000) were entitled to and received
               payment and inventory  returns equal to  approximately 70 percent
               of their allowed claims (80


                                       14                            (Continued)
<PAGE>

                        PEACHES ENTERTAINMENT CORPORATION

               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 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 of the assets of the Company. As a
          result of the above  transactions,  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 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.



                                       15                            (Continued)
<PAGE>





                        PEACHES ENTERTAINMENT CORPORATION





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 six-month
     period ended September 28, 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  satisified on
     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

     Reports on Form 8-K dated July 12,  1996 and August 23,  1996 were filed by
     the  Company on or about such dates to report that the Company did not file
     its Form 10-K for the year ended  March 30,  1996 and its Form 10-Q for the
     quarter ended June 29, 1996 by the dates by which they were scheduled to be
     filed due to the Company's petition for relief under Chapter 11 of the U.S.
     Bankruptcy Code and delays in finalizing the plan of reorganization.




                                       16
<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)



                                       17