SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]      Annual report pursuant to Section 13 or 15(d) of the
         Securities Exchange Act of 1934

         For the fiscal year ended JUNE 30, 1997 or
                                   -------

[ ]      Transition report pursuant to Section 13 or 15(d) of the
         Securities Exchange Act of 1934

         For the transition period from __________ to ________

         Commission file number 0-15194
                                -------

                               SOUND ADVICE, INC.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

            FLORIDA                                       59-1520531
-------------------------------                      -------------------
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                       Identification No.)

1901 TIGERTAIL BOULEVARD, DANIA, FLORIDA                    33004
----------------------------------------                 ----------
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code: (954) 922-4434

                         ------------------------------

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

                                      NONE

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

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                     --------------------------------------
                                 Title of class

                         ------------------------------

                          COMMON STOCK PURCHASE RIGHTS
                          ----------------------------
                                 Title of class

                         ------------------------------

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X   No ___

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (17 CFR 229.405) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [X]

         THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT ON SEPTEMBER 19, 1997, BASED UPON THE CLOSING
MARKET PRICE OF THE REGISTRANT'S VOTING STOCK ON THE NASDAQ NATIONAL MARKET ON
SEPTEMBER 19, 1997, AS REPORTED IN THE WALL STREET JOURNAL, WAS APPROXIMATELY
$6,690,000.

         THE REGISTRANT HAD 3,728,894 SHARES OF COMMON STOCK, $.01 PAR VALUE,
OUTSTANDING AS OF SEPTEMBER 19, 1997.

                       DOCUMENTS INCORPORATED BY REFERENCE

(SPECIFIC SECTIONS INCORPORATED ARE IDENTIFIED UNDER APPLICABLE ITEMS HEREIN)

         CERTAIN PORTIONS OF THE REGISTRANT'S PROXY STATEMENT TO BE FILED IN
CONNECTION WITH ITS 1997 ANNUAL MEETING OF SHAREHOLDERS ARE INCORPORATED BY
REFERENCE IN PART III OF THIS REPORT.


<PAGE>
<TABLE>
<CAPTION>
                                                   TABLE OF CONTENTS

                                                                                                           PAGE NO.
                                                                                                           -------
<S>               <C>                                                                                      <C>    
PART I
------

ITEM 1.           BUSINESS........................................................................................1
                           General................................................................................1
                           Products...............................................................................2
                           Marketing Strategy.....................................................................3
                           Advertising............................................................................4
                           Operations.............................................................................5
                           Expansion..............................................................................8
                           Seasonality............................................................................9
                           Servicemarks..........................................................................10
                           Competition...........................................................................10
                           Employees.............................................................................10

ITEM 2.           PROPERTIES.....................................................................................11

ITEM 3.           LEGAL PROCEEDINGS..............................................................................12

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF
                  SECURITY HOLDERS...............................................................................12

ITEM 4.1.         EXECUTIVE OFFICERS OF THE REGISTRANT...........................................................13

PART II
-------

ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY
                  AND RELATED STOCKHOLDER MATTERS................................................................15
                           Common Stock Information..............................................................15
                           Dividend Policy.......................................................................15
                           Recent Sales of Unregistered Securities...............................................16

ITEM 6.           SELECTED FINANCIAL DATA........................................................................18

ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................................20
                           Results of Operations.................................................................20
                           Liquidity and Capital Resources.......................................................23
                           Impact of Inflation and Foreign
                             Currency Fluctuations...............................................................25
                           Recent Accounting Pronouncement.......................................................25
                           Forward-Looking Statements............................................................26

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................................26


ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                  ON ACCOUNTING AND FINANCIAL DISCLOSURE.........................................................26

PART III
--------

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS
                  OF THE REGISTRANT..............................................................................27

ITEM 11.          EXECUTIVE COMPENSATION.........................................................................27

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                  OWNERS AND MANAGEMENT..........................................................................27

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................................27

PART IV
-------

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
                  AND REPORTS ON FORM 8-K........................................................................27

SIGNATURES.......................................................................................................28
</TABLE>

                                        i


<PAGE>

                                     PART I

ITEM 1.  BUSINESS.

GENERAL

         Sound Advice, Inc. (the "Registrant"), incorporated in Florida on March
12, 1974, is a full service specialty retailer of a broad range of high-quality,
upscale entertainment and consumer electronic products. As of June 30, 1997, the
Registrant operated 21 stores in Florida which sell home and car audio systems,
large screen televisions, video products, cellular telephones and other personal
electronics, such as home telephones, answering machines and hand held audio
systems, car security systems, home entertainment furniture and related
customized services and accessories. In contrast to mass merchandisers and
discounters of consumer electronic products, the Registrant targets customers
seeking informed advice concerning product selection and system integration as
well as a broad selection of products incorporating the latest technology.

         The Registrant's marketing strategy is to build customer satisfaction
and loyalty through its customer support program which includes a technically
proficient sales force and custom design, installation and repair services. The
Registrant's showrooms provide comfortable surroundings and contain audition
rooms and demonstration areas in its stores where customers are encouraged to
test and compare the products. In its stores, the Registrant emphasizes a broad
selection of upscale and specialty brand consumer electronic products.

         The Registrant's operating strategy is to cluster its stores in larger
markets and maximize selling space per store in order to achieve economies of
scale, as well as provide convenient locations for its customers. The
Registrant's stores are currently clustered in four areas in Florida, including
the Miami/Ft. Lauderdale/West Palm Beach area (the "East Coast Stores"), the
Tampa/St. Petersburg/Clearwater/Sarasota/Fort Myers area (the "West Coast
Stores"), the Orlando area (the "Central Florida Stores") and Jacksonville (the
"Jacksonville Stores"). In fiscal year 1997 the Registrant did not add or close
any stores, but relocated one East Coast Store to a larger facility. As of this
date, the Registrant operates 21 stores, which, except for one smaller store, on
average contain approximately 15,000 to 17,000 gross square feet. It currently
plans during fiscal year 1998 to add one additional West Coast Store and to
relocate the remaining smaller West Coast Store to a larger facility containing
approximately 15,000 gross square feet. The Registrant is also exploring
potential sites for the combination of its central warehouse and distribution
facility in Deerfield Beach and its corporate headquarters in Dania upon the
expiration of those leases in 1998 and 1999, respectively. See "Expansion" in
this ITEM 1.

         In fiscal year 1997, the Registrant's net sales were approximately $156
million which was a decrease from its net sales of approximately $169 million in
fiscal year 1996. This was primarily due to the elimination from its product mix
in January 1996 of personal computers, peripherals and multimedia products,

                                        1


<PAGE>

which had been added in the fall of 1994, and the reduction or elimination
during fiscal years 1996 and 1997 from its product mix of certain nonperforming
low margin products. The products were eliminated or reduced as a result of
reduced margin created in certain products arising from increased competition
and, in the case of the personal computers and related products, their rapid
obsolescence. In addition, this action was part of the Registrant's renewed
specialty retailing focus on value added selling in its core categories of high
end audio, video (including home theater and large screen televisions) and
mobile electronics and on custom design and installation and repair services.
See "Results of Operations - Fiscal 1997 Compared to Fiscal 1996" and "Fiscal
1996 Compared to Fiscal 1995" in ITEM 7.

         In April 1996, the Registrant's then existing $16,000,000 senior credit
facility was replaced with a $25,000,000 revolving credit facility from a new
lender. See "Liquidity and Capital Resources" in ITEM 7. Commensurate with the
elimination of personal computers, the Registrant initiated an expense reduction
program in the third quarter of fiscal year 1996. This program included a
reduction in the Registrant's employees, primarily in the areas of on-site
technicians known as "quicktechs" and store cashiers, associated with the
elimination of personal computers and other low margin products and a reduction
in store support personnel by having showroom managers directly supervise store
salespersons and conduct product training at the store level. During fiscal
1997, the Registrant focused its cost reduction efforts primarily in the area of
advertising and general corporate expenses. See "Results of Operations - Fiscal
1997 Compared to Fiscal 1996" and "Results of Operations - Fiscal 1996 Compared
to Fiscal 1995" in ITEM 7 and "Advertising" in this ITEM 1.

PRODUCTS

         The Registrant offers its customers an extensive selection of
high-quality, brand-name entertainment and consumer electronic products,
including products incorporating the latest technology and not generally carried
by most of its competitors. In a typical store a customer can choose from more
than 2,100 products from approximately 150 manufacturers.

         For the 1997 fiscal year, the Registrant's products and services may be
grouped into home and car audio, television and video, service, installation and
product warranty and miscellaneous products.

         The home and car audio product group includes receivers, speakers,
audio compact disc players, cassette decks, turntables, tuners, equalizers,
signal processors, mini and normal sized pre-packaged audio systems, amplifiers,
car AM-FM radios, car antennas, security systems, radar detectors and audio
accessories.

         The television and video product group includes stereo televisions,
large screen televisions, standard televisions, video tape players/recorders,
video camcorders, digital video disk (DVD) players, video enhancement devices,
home theater systems, direct broadcast satellite dishes and video accessories.

                                        2


<PAGE>

         The service, installation and product warranty group includes car
stereo installation, custom home installation, repair services, delivery and
extended warranty contracts offered by the Registrant on behalf of a third party
provider for most of its audio, video, car stereo and personal electronics
merchandise.

         The miscellaneous product group includes personal and portable stereos,
answering machines, home telephones, hand held audio systems, equipment and
activation fees for cellular telephone service and home entertainment furniture.

         In fiscal 1995 and 1996, the Registrant also had a separate personal
computer product group which included personal computers, peripherals and
multi-media products.

         The table below shows the approximate percentage of the Registrant's
sales for the fiscal years ended June 30, 1997, 1996 and 1995 attributable to
each of the foregoing product groups. The personal computer product group, which
was added in fiscal year 1995, was discontinued in January 1996.

                                                 YEARS ENDED JUNE 30,
                                        ------------------------------------
PRODUCT GROUP                           1997              1996          1995
-------------                           ----              ----          ----

Home and Car Audio . . . . . .            48%              44%           39%
Television and Video   . . . .            37               35            33
Service, Installation and
 Product Warranty  . . . . . .            12               11            10
Miscellaneous Products . . . .             3                5            12
Personal Computer  . . . . . .             -                5             6
                                         ---              ---           ---

Total  . . . . . . . . . . . .           100%             100%          100%
                                         ===              ===           ===

         The percentage of sales by each product group is affected by
promotional activities, consumer trends, store displays, the development of new
products and elimination or reduction of existing products and, thus, the
current mix may not be indicative of the mix in future years.

MARKETING STRATEGY

         The Registrant views itself as being in a service business and
emphasizes to its sales personnel the need to provide personal attention and
assistance to each customer. The Registrant trains its sales personnel to assist
customers in their purchases by demonstrating products and providing information
with respect to features, price, quality and system integration. At each store,
audition rooms and segregated demonstration areas and displays of systems and
products promote sales by enabling sales personnel to demonstrate the use of
systems and products and by permitting customers to compare and test the
performance and features of similar products and systems (particularly higher
quality systems and products incorporating the latest technology and fully-
integrated audio/video systems). Consistent with this approach to marketing, the
Registrant commencing during fiscal year 1996 and continuing in fiscal year 1997
has incorporated audio, video and furniture combinations to demonstrate the
technology of home entertainment systems including home theater in a realistic

                                        3


<PAGE>

setting. The Registrant also has a full-service personal and mobile electronics
center in most of its stores.

         The Registrant has pursued a strategy of building customer satisfaction
and loyalty by having (i) a broad range of top-quality products including
products incorporating the latest technology and not generally sold by most of
its competitors; (ii) technically proficient sales personnel providing extensive
customer service; (iii) customer oriented showrooms where products can be
demonstrated to and tested by customers; and (iv) a support program including
custom design and installation and repair services.

         The Registrant builds customer satisfaction by offering a comprehensive
customer support program. This program seeks to assure that each customer has
the product or system best suited for that individual. Any merchandise sold by
the Registrant may be auditioned on the customer's premises and, if a customer
is not satisfied, may be returned within 30 days for a refund or exchanged for
credit toward the purchase of another product or system. Customers are
encouraged to upgrade speakers originally purchased from the Registrant by
trading in such speakers within the first year for credit at the original
purchase price toward the purchase of new speakers. Car audio products (if
installed by the Registrant) carry a one year "defective replacement guaranty"
and, once the Registrant installs car stereo equipment, a customer will not be
charged for reinstallation into another car, for installing component upgrades
or reinstalling after repair service. The Registrant's custom department will
visit a customer's home to design and install audio and video products and
systems. The Registrant believes that the costs of its customer support program
is warranted in light of the additional sales and customer satisfaction created
by such ongoing program.

ADVERTISING

         To support its marketing strategy, the Registrant promotes its
merchandise through an advertising program which emphasizes the print media
(consisting of newspaper advertising, catalogs and other customer mailings) and,
to a lesser extent, television and radio advertising. Such advertising program
consists of name recognition advertising emphasizing the Sound Advice name and
its competitive prices, its broad and high-quality name brand product selection,
available financing arrangements, its technically proficient sales force, its
support program, its customer oriented showrooms and its customer service and
repair program. In addition, newspaper and catalog advertisements and customer
mailings are directed towards specific products and their prices and specific
financing plans in connection with specific sales events and promotions. The
Registrant has an extensive customer database which is used for targeting its
mailings of catalogs and other promotional advertisements and materials.

         The following table shows the Registrant's net advertising expense as a
percentage of net sales for the fiscal years ended June 30, 1997, 1996 and 1995.
Net advertising expense represents gross advertising expense less market
development funds, cooperative advertising and other promotional amounts
received from vendors for incentive and promotional programs.

                                        4


<PAGE>



                                                  YEARS ENDED JUNE 30,
                                            ----------------------------------
                                            1997            1996          1995
                                            ----            ----          ----
                                                    (Dollars in Thousands)

Net advertising expense . . . . .          $4,086          $6,476       $4,745
Percentage of net sales . . . . .             2.6%            3.8%         2.5%


         During fiscal year 1997, net advertising expense was substantially
decreased as compared to fiscal 1996 primarily as a result of a reduction in
advertising expenditures associated with the cost reduction program initiated
during the latter part of fiscal 1996. A portion of the advertising expense
reduction is directly attributable to the elimination of personal computers from
the product mix. In addition, market development and other promotional amounts
received by the Registrant from vendors which offset advertising costs increased
slightly in fiscal 1997 as compared to the prior fiscal year. The primary reason
for the increase in market development funds is additional vendor funds received
in connection with the store relocation in November 1996.

         In fiscal year 1996, net advertising expense substantially increased as
compared to fiscal 1995 primarily as a result of a decrease in market
development funds and other promotional amounts received from vendors and
increased advertising expense incurred primarily during the first half of fiscal
year 1996 in connection with increased competition for customers. The increase
in net advertising expense as a percentage of net sales between fiscal years
1996 and 1995 was the result of the increase in total net advertising expense in
fiscal year 1996 for the reasons discussed above combined with the decrease in
net sales in fiscal year 1996.

         The Registrant handles the majority of its advertising through its
in-house advertising staff. The Registrant's use of an in-house staff allows it
to be more flexible in decisions regarding advertising, to make changes to
advertising copy on short notice, to publicize special product promotions and to
take advantage of new products and unexpected market developments on a timely
basis. During 1997, the Registrant utilized the services of marketing
consultants to assist in certain advertising campaigns and image development
programs.

OPERATIONS

         SUPPLIERS, PURCHASING AND DISTRIBUTION:

         The Registrant has no long-term merchandise purchase contracts or
commitments. The Registrant acquires its products from approximately 150
manufacturers, five of which manufacturers accounted for approximately 54% of
the Company's total product purchases during fiscal year 1997. Such five
manufacturers were Alpine, Mitsubishi, Panasonic, Sony and Yamaha. Management
believes that competitive sources of supply would be available for most of the
Registrant's products in the event that one or more of its sources were no
longer available. However, a loss of a primary source of supply could have an
adverse impact on the Registrant and, to the extent that the unavailable source
was for a product line for which the Registrant was the primary distributor in
its

                                        5


<PAGE>

markets, the Registrant most likely would only be able to replace these products
with products that were widely available in its markets.

         The Registrant's policy is to take advantage of cash or payment
discounts offered by manufacturers. The Registrant has also been able to obtain
substantial levels of manufacturers' rebates based on volume buying levels and
on occasion has been able to negotiate favorable terms on very large volume
purchases. Since March 1986, the Registrant has been a member of Progressive
Retailers Organization, Inc., a buying group comprised of 14 retailers of home
entertainment and consumer electronic products located throughout the country
("Progressive Retailers Organization").

         Substantially all inventory purchased by the Registrant is shipped
directly to its central distribution facility located in Deerfield Beach,
Florida. Such facility is currently the central distribution facility for its
stores. Inventory is also shipped to and distributed from the Registrant's
support warehouses located in Tampa and Orlando (Winter Park), Florida, which
service the West Coast Stores and Central Florida Stores, respectively. Each
store receives shipments of inventory from the central distribution and/or
support warehouse facilities, at least three times a week, and sometimes on a
daily basis, thereby increasing availability to customers by enabling each store
to maintain reasonable inventories of all products and promptly to replenish
inventories of fast moving products. The Registrant believes that its
distribution system allows it to support a broad selection of merchandise within
the stores, while minimizing store level inventory requirements. Inventory turn
was approximately 4.1, 4.3, and 4.2 times during the fiscal years ended June 30,
1997, 1996 and 1995, respectively.

         The Registrant's management information system tracks current levels of
sales, inventory, purchasing and other key information and provides management
with information which facilitates merchandising, pricing, sales management and
the management of warehouse and store inventories. This system enables
management to review and analyze the performance of each of its stores and sales
personnel on a periodic basis. The central purchasing department of the
Registrant monitors current sales and inventory at the stores on a daily basis.
In addition, the Registrant currently completes a physical inventory
approximately 4 times a year and in between such physical inventories it
periodically conducts a cycle count on selected types of inventory. The
purchasing department also establishes the level of inventory required at each
store and handles the replenishment of store inventory based on the current
delivery or replenishment schedule.

         During the first quarter of fiscal 1997, the Registrant upgraded its
computer hardware platform. In addition, the functionality of its management
information system ("MIS system") was upgraded to an enhanced version of the MIS
system from the same vendor designed for the new hardware platform. The cost to
upgrade the hardware, software and certain communications features was
approximately $670,000. This upgrade gives the Registrant the ability to add new
stores and increase its reporting and processing capabilities with only
incremental upgrades of certain components of the MIS system.

                                        6


<PAGE>

         SALES AND STORE OPERATIONS:

         Sales to customers are primarily made on a cash and bank credit card
basis. In addition, customers who qualify can obtain longer term financing by
obtaining a Sound Advice credit card, which the Registrant makes available to
its customers, without an annual fee, through a private label credit card
arrangement with an unrelated finance company without recourse to the
Registrant. The Registrant also periodically, as part of its promotional
activities, makes special financing programs available to its customers, some of
which programs utilize a vendor issued credit card. A part of the cost of such
special financing programs is at times borne by the Registrant. In addition,
certain of the Registrant's vendors periodically participate with and support
the Registrant in financing promotions.

         Each store has its own management structure consisting of a full time
general showroom manager having overall responsibility at each location and a
full time operations manager under such general showroom manager. Most of the
Registrant's stores also have an individual in charge of the mobile electronics
department. Each general showroom manager's and operations manager's
compensation is dependent in part on the store's gross profit. As of September
11, 1997, approximately 288 sales personnel working at the stores were
compensated on a commission basis. Commission payment plans vary depending upon
the type, price and/or gross margin of the product.

         As a continuation of a restructuring commenced during fiscal year 1996
of its sales management group to improve decision-making and communication
throughout its corporate structure, the Registrant now has a company wide sales
executive and two regional sales vice presidents, each overseeing approximately
one-half of the stores, all of whom report to the Chief Executive Officer.
Historically, the Registrant has generally experienced employee stability with
many sales persons moving up to positions of greater responsibility, although
the Registrant does experience some turn-over of employees particularly during
the early term of their employment. See "Employees" in this ITEM 1.

         Merchandise sold at a store is generally delivered to the customer at
the store at the time of sale, with the exception of certain large screen
televisions, home entertainment furniture and integrated systems for which the
Registrant offers home delivery and installation service. In addition, the
Registrant offers custom home audio and video installation service. The
Registrant also installs car stereo systems, cellular telephones and car
security systems at all but one of its stores.

         SERVICE AND REPAIR:

         The Registrant has its repair facility at its corporate headquarters in
South Florida. The Registrant is an authorized manufacturer's service
representative for substantially all of its products and is reimbursed by the
manufacturer for the service or repair it performs on products still covered by
a manufacturer's warranty. Products brought to the stores by customers for
service or repair are shipped to the Registrant's repair facility.

                                        7


<PAGE>

         The Registrant offers, through an unrelated insurance company on a
nonrecourse basis, an extended warranty contract for most of the audio, video
and other merchandise it sells, whereby a customer is provided coverage beyond
the warranty period covered by the manufacturer. The Registrant collects the
retail sales price of the extended warranty contract from the customer and
remits the customer information and the Registrant's cost for the contract to
the insurance company. The warranty obligation is solely the responsibility of
the insurance company, since the contract is between the customer and the
insurance company. As an authorized service center for the insurance company,
the Registrant may also perform the services required under the extended
warranty contracts for which it is separately paid by the insurer. Gross margins
from the sale of extended warranty contracts are higher than gross margins from
the sale of the Registrant's other products. Revenues from the sale of extended
warranty contracts have historically averaged 5% to 6% of sales. See note (1)(i)
of Notes to Consolidated Financial Statements.

         In connection with the promotion of the sale of extended warranty
contracts, the Registrant had offered prior to March 1, 1993, and again from
July 1994 through May 1997, the purchasers of such contracts the right to apply
the amount of the sales price for an extended warranty contract, which has
expired and has not been used for any repair or maintenance procedure, toward
the purchase of merchandise, subject to such purchaser providing appropriate
documentation verifying the purchase of such contract. Contracts issued between
July 1, 1994 and May 31, 1997, which are unused must be redeemed within a
certain time period from the date of contract expiration. The Registrant
recorded a liability at the time of sale for the estimated amount of redemptions
under this incentive program. See the Consolidated Financial Statements and
related notes appearing elsewhere in this report (in particular, note (1)(i)
thereto).

EXPANSION

         During fiscal year 1997, the Registrant did not add or close any
stores, but did relocate one of its East Coast Stores to a larger 15,000 square
foot facility in November 1996. Accordingly, during the past fiscal year and as
of the date of this report, it operates 21 stores.

         During fiscal year 1998, the Registrant currently plans to open an
additional West Coast Store in the Fall of 1997 and to relocate the remaining
smaller West Coast Store in order to increase the size of that showroom to its
current format. The opening of the relocated West Coast Store is currently
targeted for late fiscal 1998. Each of the new facilities will contain
approximately 15,000 gross square feet. In addition, the Registrant is currently
in negotiations for a potential Fall 1997 opening of a mall based concept store.
This concept store would sell a single vendor's high-end electronics primarily
on an inventory consignment basis. The Registrant continues to explore the
opening of new stores in geographic areas within its existing Florida
distribution network and/or advertising radius in order to realize efficiencies
and cost benefits as a result of the Registrant's clustering of stores.

                                        8


<PAGE>

         The Registrant is also exploring potential sites for a new central
warehouse and distribution facility to replace the current facility which has a
lease expiration date of May 1998. If an acceptable site can be found, the
Registrant is planning to combine its central warehouse and distribution
facility, service center and corporate offices into a single facility upon the
expiration of the current corporate headquarters lease in March 1999.

         Management estimates that as of this time the cost (other than initial
inventory) of opening an additional store or relocating a store built to suit
for the Registrant by an owner or landlord is approximately $750,000 to
$950,000. Management also currently estimates that, if the Registrant acquires
an existing store location, it will cost between $900,000 and $1,200,000 to
retrofit such property. Management estimates initial inventory cost for a new
store to be approximately $1,000,000.

         The extent of any future expansion within or outside Florida is
dependent on the Registrant's operating performance and the availability of
sufficient financing, together with future general economic and business
conditions. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. - Liquidity and Capital Resources".

SEASONALITY

         Historically, due to the holiday season, the Registrant has realized
greater sales and profits during its second fiscal quarter. The Registrant's
marketing strategy and, in particular, its year round use of newspaper,
television and radio advertising, catalogs and promotions (including, without
limitation, vendor specific promotional sales in selected months), attempts to
minimize the seasonality of the Registrant's business.

         The following table sets forth the Registrant's quarterly net sales in
dollars and as a percentage of annual net sales for the three fiscal years ended
June 30, 1997:
<TABLE>
<CAPTION>

                                                          NET SALES
                           ------------------------------------------------------------------------------                           
                           1ST              2ND               3RD               4TH
                           QUARTER          QUARTER           QUARTER           QUARTER            TOTAL
YEAR ENDED                 (JULY-           (OCTOBER-         (JANUARY-         (APRIL-            FOR
 JUNE 30,                  SEPTEMBER)       DECEMBER)         MARCH)            JUNE)              YEAR
----------                 ----------       ---------         ---------         --------           ------
                                                      (Dollars in Thousands)
<S>                        <C>              <C>               <C>               <C>            <C>   
1997. . . . . . . . .        $40,351          $47,724           $35,431         $32,117        $155,623
      . . . . . . . .          25.9%            30.7%             22.8%           20.6%            100%

1996. . . . . . . . .        $44,165          $53,260           $39,079         $32,481        $168,985
      . . . . . . . .          26.1%            31.5%             23.1%           19.3%            100%

1995. . . . . . . . .        $46,721          $60,854           $43,781         $39,148        $190,504
      . . . . . . . .          24.5%            31.9%             23.0%           20.6%            100%
</TABLE>

                                        9


<PAGE>

SERVICEMARKS

         The Registrant has registered the "Sound Advice" name in Florida. It
has not registered the "Sound Advice" name with the United States Patent and
Trademark Office. The Registrant is not aware of any adverse claims concerning
the Registrant's use of the "Sound Advice" name.

COMPETITION

         The brand-name home entertainment and consumer electronics business is,
and can be expected to remain, highly competitive, with price, customer service
and financing plans or programs being the main competitive factors. The
Registrant believes that it competes effectively on the basis of such factors
and its product mix has been selected to include higher-end audio and video
products not generally offered by many of its competitors. During fiscal years
1996 and 1997 the Registrant reduced its offering of certain widely available
low margin products in order to focus on more fully-featured products in those
categories where the Registrant believes there is less competition. The
Registrant's principal competitors include other retailers specializing in
similar products, department stores, discount stores, mass merchandisers,
catalog showrooms and specialty stores. Many of the Registrant's competitors are
national in scope and have greater financial resources than the Registrant.

EMPLOYEES

         As of September 11, 1997, the Registrant employed approximately 633
persons, of whom approximately 449 were commissioned persons, including
approximately 72 car stereo and mobile installers, 33 service department
technicians and 56 delivery and custom installers. Substantially all of the
Registrant's employees are full-time. The Registrant's employees are not
unionized and it has never experienced a strike or work stoppage. Management
believes that its employee relations are good.

                                       10


<PAGE>

ITEM 2.  PROPERTIES.

         The Registrant's 21 stores are located in four geographic areas on the
east and west coasts of Florida, in north central Florida and in Jacksonville,
Florida. Most of the Registrant's stores are between 15,000 and 17,000 gross
square feet. Retail selling area represents the substantial square footage of
each store, with the balance used for merchandise storage and, in all but one
store, car audio and accessory installation. The stores are generally located
either in free standing buildings or in multi-store shopping centers. The stores
are generally close to regional malls or in shopping districts. The following
map displays the locations of the Registrant's 21 stores.

                                 STORE LOCATIONS

A map of Florida indicates the general location of the Registrant's 21 stores in
the four geographic areas.

JACKSONVILLE STORES                        EAST COAST STORES    
Jacksonville (Regency)                     West Palm Beach      
Jacksonville (Orange Park)                 Boca Raton           
                                           Ft. Lauderdale       
CENTRAL FLORIDA STORES                     Plantation           
Orlando (East Colonial)                    Hollywood            
Orlando (Sandlake)                         Aventura             
Altamonte Springs                          Hialeah Gardens      
                                           Coral Gables         
WEST COAST STORES                          West Kendall         
St. Petersburg                             South Kendall        
Tampa (2)                                  
Clearwater      
Sarasota        
Fort Myers      
                
                                       11


<PAGE>

         All of the Registrant's 21 stores are currently leased, one of which is
accounted for as a capital lease. Leases expire on various dates between 1998
and 2014, without giving effect to renewal options. The average unexpired lease
term of the Registrant's stores including renewal options is approximately 18
years.

         Generally, the store leases provide for a base rental with cost of
living adjustments or stipulated annual percentage increases (or a combination
thereof) and do not provide for a percentage of sales in addition to the fixed
rent. In addition, the leases generally require the Registrant to pay all or a
portion of the real estate taxes and assessments, utilities, insurance and/or
common area and interior maintenance and repairs. See notes (9) and (10) of
Notes to Consolidated Financial Statements.

         The Registrant's headquarters are located in a 53,850 square foot
facility which contains its executive offices, accounting, data processing,
purchasing and advertising operations, service and repair center. The lease
expires in March 1999 (exclusive of one ten-year renewal option). The
Registrant's 56,320 square foot central warehouse and distribution facility is
located in Deerfield Beach, Florida, approximately 15 miles north of its
corporate headquarters. The lease for such facility expires in May 1998
(exclusive of two five-year renewal options). A sales training center and the
Registrant's custom sales department are located in the Hollywood store
facility.

         The Registrant occupies an approximate 12,500 square foot leased
facility in Tampa, Florida area which is used as a warehouse and support
facility for the West Coast Stores. The lease for such facility expires in
January 1998 (exclusive of one 3-year renewal option). The Registrant also
occupies an approximate 10,000 square foot leased facility in Orlando (Winter
Park), Florida which is used as a warehouse and support facility for the Central
Florida Stores. The lease for such facility expires in May 2000.

         A portion of the Registrant's former Ft. Lauderdale store is currently
being used for car installations, with the balance of such building having been
leased to a nonaffiliated company for a term of five years (exclusive of one
five-year renewal option).

ITEM 3.           LEGAL PROCEEDINGS.

         The Registrant is from time to time involved in litigation relating to
claims arising out of its operations in the normal course of business. Such
claims against the Registrant are generally covered by insurance. The Registrant
believes that none of these claims will have a material adverse impact on its
financial condition or results of operations.

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

         Not applicable.

                                       12

<PAGE>

ITEM 4.1.  EXECUTIVE OFFICERS OF THE REGISTRANT.

          Pursuant to General Instruction G(3) of Form 10-K, the information
regarding executive officers of the Registrant called for by Item 401 of
Regulation S-K is hereby included in Part I of this report.

          The following table sets forth the name, age (as of September 15,
1997) and position(s) held by each executive officer of the Registrant:

                                        POSITION(S) WITH
NAME                        AGE         REGISTRANT
----                        ---         ----------------

Peter Beshouri               43         Director, Chairman of the
                                        Board, President and
                                        Chief Executive Officer

Michael Blumberg             49         Director, Senior Vice
                                        President and Secretary

Christopher O'Neil           44         Executive Vice President,
                                        Chief Operating Officer
                                        and Assistant Secretary

Kenneth L. Danielson         47         Chief Financial and
                                        Accounting Officer and
                                        Treasurer

          The Registrant's officers are elected annually by the Board of
Directors and hold office at the pleasure of the Board.

          PETER BESHOURI, who has been an employee of the Registrant since 1974,
has served as Chairman of the Board and Chief Executive Officer of the
Registrant since August 1982. Prior thereto he was the general sales manager of
the Registrant, as well as having served as a showroom manager and district
manager. He was elected President of the Registrant in May 1985. Mr. Beshouri
currently serves as a director of Progressive Retailers Organization. In August
1995, Mr. Beshouri, together with the Registrant and a former chief financial
officer of the Registrant, voluntarily agreed with the Securities and Exchange
Commission ("SEC"), without admitting or denying any wrongdoing, to the entry of
a cease and desist order by the SEC concerning the Registrant's Form 10-K for
fiscal year 1991 and Forms 10-Q for the quarters ended September 30 and December
31, 1991, which the SEC found in such order had been materially misstated. The
cease and desist order with respect to Mr. Beshouri related to his supervisory
responsibility in connection with the Registrant violating certain provisions of
the securities laws that require public companies to keep accurate books and
records, to maintain appropriate internal accounting controls and to file
accurate annual and quarterly reports. No censure, fine or penalty was imposed
by the SEC on Mr. Beshouri.

          MICHAEL BLUMBERG, a founder and a director of the Registrant,
was elected a Vice President in August 1982, Vice President -
Purchasing and Finance in May 1986, Vice President - Purchasing and
Marketing in December 1987, and Senior Vice President in May 1989.
From the Registrant's inception until February 1995, Mr. Blumberg

                                       13

<PAGE>

served as Treasurer of the Registrant and, since October 13, 1989, he has also
been serving as Secretary of the Registrant. His responsibilities include
overall supervision of all purchasing and selecting new product categories and
lines for the Registrant, as well as consulting with certain of the Registrant's
manufacturers in connection with product design.

         CHRISTOPHER O'NEIL joined the Registrant in 1979 as a car audio buyer.
He was elected Vice President - Purchasing of the Registrant in May 1986, Vice
President - Car Audio Purchasing in May 1989 and his title was changed to Vice
President/Purchasing in May 1990. Effective February 1992, Mr. O'Neil was
elected Executive Vice President and Chief Operating Officer of the Registrant.
In his current position, his principal responsibilities are the supervision of
service, warehouse, distribution, security and product support functions for the
Registrant's stores. Since December 1990, Mr. O'Neil has also served as an
Assistant Secretary of the Registrant.

          KENNETH L. DANIELSON joined the Registrant in September 1993 and
effective October 1993 assumed the responsibilities of and became Chief
Financial Officer of the Registrant. In February 1995, he was also elected
Treasurer. Prior to joining the Registrant, Mr. Danielson was employed by Storer
Communications, Inc. ("Storer"), a large television broadcasting and cable
company based in Miami, Florida, for approximately 15 years. During his
employment with Storer, Mr. Danielson held various positions, including Director
of Accounting, Assistant Treasurer, Vice President, Treasurer and Chief
Financial Officer, with his positions as Vice President, Treasurer and Chief
Financial Officer being held concurrently from November 1988 through August
1993. Prior to Mr. Danielson's employment by Storer, he was employed by Coopers
& Lybrand LLP from 1971 to 1978. Mr. Danielson is a certified public accountant.

                                       14

<PAGE>

                                     PART II

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

COMMON STOCK INFORMATION

          The Registrant's Common Stock, par value $.01 per share ("Common
Stock"), is quoted under the symbol "SUND" on the NASDAQ Stock Market (NASDAQ
National Market).

          The following table sets forth, for the fiscal quarters indicated, the
high and low sales prices for the Registrant's Common Stock on the NASDAQ Stock
Market. NASDAQ Stock Market quotations are based on actual transactions and not
bid prices.

                                                               PRICES
                                                               ------
                                                          HIGH        LOW
                                                          ----        ---
1996
----

First Quarter (7/1/95 to 9/30/95)                      $ 3-1/2     $ 2-3/8
Second Quarter (10/1/95 to 12/31/95)                     2-5/8       1-1/8
Third Quarter (1/1/96 to 3/31/96)                        2-1/4       1-3/8
Fourth Quarter (4/1/96 to 6/30/96)                       2-7/8       1-1/2

1997
----

First Quarter (7/1/96 to 9/30/96)                      $ 2-1/4     $ 1-1/4
Second Quarter (10/1/96 to 12/31/96)                     2           1-3/16
Third Quarter (1/1/97 to 3/31/97)                        2-5/8       1-3/8
Fourth Quarter (4/1/97 to 6/30/97)                       2-3/8       1-1/4

          As of September 19, 1997, there were 196 holders of record of the
Common Stock, and, based upon information previously provided to the Registrant
by depositories and brokers, the Registrant believes it has in excess of 1,000
beneficial owners.

DIVIDEND POLICY

          The Registrant has never paid cash dividends on its Common Stock and
does not plan to pay cash dividends in the foreseeable future. The Registrant
has been and continues to be prohibited under its revolving credit facility from
paying cash dividends. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION. - Liquidity and Capital
Resources."

                                       15

<PAGE>

RECENT SALES OF UNREGISTERED SECURITIES

          The Registrant has not issued or sold any unregistered securities
during the fiscal year 1997, except as follows:

               (i)     Pursuant to the Second Amended and Restated Sound
Advice, Inc. 1986 Stock Option Plan, as amended:

                       (A)     On March 10, 1997, (1) the Registrant granted
incentive stock options to purchase an aggregate of 75,000 shares of Common
Stock to four executive officers of the Registrant at an exercise price of $1.69
per share, which stock options were immediately exercisable through March 9,
2002, and (2) incentive stock options to purchase 31,000 shares of Common Stock
previously granted to two of such executive officers at an exercise price of
$6.29 per share were cancelled and reissued by the Company at an exercise price
of $1.69 per share and are immediately exercisable through March 9, 2002;

                       (B)     The Registrant granted on April 29, 1997, stock
options covering 407,500 shares of Common Stock to certain executive officers
and senior managers of the Registrant at an exercise price of $1.89 per share,
which stock options vest (the "Vesting Terms") to the extent that after the date
of grant the market price (as defined) of a share of Common Stock increases to
$4.00 per share (one-third vest), $5.00 per share (two-thirds vest) and $6.50
per share (all vest), subject to vesting in full in all events on the earlier to
occur of April 29, 2001 or a change in control (as defined), and have a term of
five years expiring on April 28, 2002;

                       (C)     On April 29, 1997, stock options to purchase
35,000 shares of Common Stock previously granted to a director of the Registrant
at exercise prices of $5.96 per share (15,000 shares) and $6.29 per share
(20,000 shares) were cancelled and reissued by the Registrant at an exercise
price of $1.89 per share having the Vesting Terms and a term of five years
expiring on April 28, 2002; and

                       (D)     The Registrant granted as of April 29, 1997, an
additional stock option covering 5,000 shares of Common Stock to the same
director it reissued the stock options covering the 35,000 shares described in
subparagraph (C) above at an exercise price of $1.89 per share having the
Vesting Terms and a term of five years expiring on April 28, 2002.

               (ii) A warrant to purchase 5,000 shares of Common Stock was
granted on April 29, 1997, to each of three non-employee directors of the
Registrant at an exercise price of $1.89 per share, which warrants vest on the
Vesting Terms and have a five year term expiring on April 28, 2002.

          All of the foregoing stock options and warrants were granted by the
Registrant in reliance upon the exemption from registration available under
Section 4(2) of the Securities Act of 1933, as amended.

               (iii) On May 5, 1997, Board of Directors of the Registrant
adopted a Common Stock Purchase Rights Plan and subsequently

                                       16

<PAGE>

declared a dividend distribution of one Common Stock Purchase Right (a "Right")
on each outstanding share of Common Stock to holders of record on May 16, 1997.
Each Right has an initial exercise price of $12.00 for one share of Common
Stock. The Rights will be exercisable only if a person or group acquires 15% or
more of the Common Stock (or 10% of such Common Stock under certain
circumstances) or announces a tender offer, the consummation of which would
result in ownership by a person or group of 15% or more of the Common Stock (or
10% of such Common Stock under certain circumstances). Upon such occurrence,
each Right (other than Rights owned by such person or group) will entitle the
holder to purchase from the Registrant the number of shares of Common Stock
having a market value equal to twice the exercise price of the Right.

          If the Registrant is acquired in a merger or other business
combination transaction, or sells more than 50% of its assets or earning power,
after a person or group has acquired 15% of more of the outstanding Common Stock
(or 10% of such Common Stock under certain circumstances), each Right (other
than Rights owned by such person or group) will entitle its holder to purchase,
at the Right's then-current exercise price, a number of the acquiring company's
common shares having a market value of twice such price. Following the
acquisition by a person or group of 15% or more of the Common Stock (or 10% of
such Common Stock under certain circumstances) and prior to an acquisition of
50% or more of the Common Stock, the Board of Directors may exchange the Rights
(other than Rights owned by such person or group) at an exchange ratio of one
share of Common Stock per Right.

          Prior to the acquisition by a person or group of beneficial ownership
of 15% or more of the Common Stock (or 10% of such Common Stock under certain
circumstances), the Rights are redeemable for $.001 per Right at the option of
the Board of Directors of the Registrant. The Rights will expire on May 4, 2007.
There are currently 3,728,894 Rights outstanding. See note (6) of Notes to
Consolidated Financial Statements.

                                       17

<PAGE>

ITEM 6.        SELECTED FINANCIAL DATA.

          The selected financial data for fiscal years 1997, 1996, 1995, 1994
and 1993 should be read in conjunction with the Consolidated Financial
Statements and related notes and independent auditors report appearing elsewhere
in this report and "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
<TABLE>
<CAPTION>

                                                                        YEARS ENDED JUNE 30,
                                                 -----------------------------------------------------------
                                                   1997         1996         1995         1994         1993
                                                   ----         ----         ----         ----         ----
                                                          (Amounts in thousands except per share data)
<S>                                                <C>          <C>          <C>          <C>          <C>
OPERATING STATEMENT DATA:
Net Sales ...................................    $155,623     $168,985     $190,504     $174,761     $158,089
Cost of Goods Sold ..........................     105,605      119,775      134,800      119,373      107,726
                                                 --------     --------     --------     --------     --------
Gross Profit ................................      50,018       49,210       55,704       55,388       50,363
Selling, General, and
   Administrative Expense ...................      49,045       52,393       54,502       50,891       49,150
Loss Due to Impairment
   of Asset (1) .............................          --           --          400           --           --
                                                 --------     --------     --------     --------     --------
Income (Loss)  From
   Operations ...............................         973       (3,183)         802        4,497        1,213
Other Income (Expense):
    Interest Expense ........................      (1,556)      (1,526)      (1,425)        (503)        (584)
    Provision for Shareholder
      Settlement(2) .........................          --           --           56       (1,252)          --
    Other Income (Expense) ..................         101           (4)         (66)          (7)       1,060
                                                 --------     --------     --------     --------     --------
(Loss) Income Before
   Income Taxes (Benefit) ...................        (482)      (4,713)        (633)       2,735        1,689
Income Taxes (Benefit) ......................         389         (486)        (152)       1,008          561
                                                 --------     --------     --------     --------     --------

Net (Loss) Income ...........................    $   (871)    $ (4,227)    $   (481)    $  1,727(2)  $  1,128
                                                 ========     ========     ========     ========     ========
Net Loss (Income) Per Common
   and Common Equivalent Share ..............    $   (.23)    $  (1.13)    $   (.13)    $    .46(2)  $    .30
                                                 ========     ========     ========     ========     ========
Weighted Average Number
   of Shares Outstanding ....................       3,729        3,729        3,729        3,743        3,722
                                                 ========     ========     ========     ========     ========

</TABLE>
-------------------------
     Footnotes on next page.

                                       18

<PAGE>
<TABLE>
<CAPTION>

                                                                        YEARS ENDED JUNE 30,
                                                 -----------------------------------------------------------
                                                   1997         1996         1995         1994         1993
                                                   ----         ----         ----         ----         ----
                                                                    (Dollars in Thousands)
<S>                                                <C>          <C>          <C>          <C>          <C>
BALANCE SHEET DATA:
Current Assets .................................   $32,515    $34,645      $39,191       $41,642      $31,574
Current Liabilities ............................    24,724     26,019       29,107        27,997       19,858
Working Capital ................................     7,791      8,625       10,084        13,645       11,717
Total Assets ...................................    46,550     49,056       56,702        57,537       46,384
Borrowings Under Revolving
  Credit Facility ..............................    11,875      9,100        8,677         9,730        4,810
Current Maturities of Long-Term
  Debt (included in Current
  Liabilities) .................................       171        161        2,674         1,238          682
Long-Term Debt (excluding
   current maturities) .........................       575        746          908         3,575        3,273
Shareholders' Equity ...........................    16,298     17,169       21,396        21,933       19,181

STORE DATA:
Number of Stores Open
  at End of Period .............................        21         21           21            20           20
Weighted Average Net
  Sales Per Store(3) ...........................   $ 7,411    $ 8,047      $ 9,261       $ 8,738      $ 8,038
</TABLE>

--------------
(1)     The Loss Due to Impairment of Asset in the amount of $400,000 in fiscal
        year 1995 relates to the return of a new management information system
        to, and settlement with, the vendor thereof as a result of the
        unsuccessful installation and implementation of such system. See note
        (8) of Notes to Consolidated Financial Statements.

(2)     The Provision for Shareholder Settlement relates to the global
        settlement in fiscal 1994 of the consolidated class action
        against the Registrant.  In such settlement the Registrant (i)
        paid a cash amount totaling approximately $141,000 and (ii)
        issued 306,335 warrants to purchase its common stock, which
        warrants were valued at $3.00 per warrant, as its portion of
        the total maximum settlement amount of approximately
        $2,765,000.  Excluding the Provision for Shareholder
        Settlement, which was equivalent to approximately $788,000 or
        $.21 per share after taxes, Net Income would have been
        $2,515,000 or $.67 per share for fiscal year 1994.  Based on
        the actual aggregate amount of claims made, the Registrant
        only issued 306,335 warrants to purchase its common stock out
        of a maximum number of 325,000 warrants available as part of
        the shareholder settlement.  Accordingly, the Provision for
        Shareholder Settlement was adjusted in fiscal 1995 by a credit
        to income of $56,000.

(3)     Weighted average net sales per store represents net sales for the
        period divided by the number of stores open during the period, weighted
        to account for stores open for only a portion of the period.

                                       19

<PAGE>

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

RESULTS OF OPERATIONS

OVERVIEW

         The following tables set forth for fiscal years ended June 30, 1997,
1996 and 1995 (i) certain items in the Registrant's statements of operations
expressed as a percentage of net sales and (ii) the percentage change in dollar
amounts of such items as compared to the indicated prior fiscal year.
<TABLE>
<CAPTION>

                                                                                                PERIOD TO PERIOD
                                                 ITEMS AS A PERCENTAGE                        PERCENTAGE INCREASE
                                                     OF NET SALES                                / (DECREASE)
                                         -----------------------------------------------     -----------------------------
                                                     YEARS ENDED                                     YEARS ENDED
                                                       JUNE 30,                                         JUNE 30,
                                                       --------                                         --------
                                             1997            1996          1995                 1996-97         1995-96
                                             ----            ----          ----                 -------         -------
<S>                                        <C>             <C>             <C>                  <C>             <C>    
Net Sales...........................        100.0%          100.0%         100.0%                (7.9)%         (11.3)%
Cost of Goods Sold..................         67.9            70.9           70.8                (11.8)          (11.1)
                                           ------          ------          -----
Gross Profit........................         32.1            29.1           29.2                  1.6           (11.7)
Selling, General and Admini-
  strative Expense..................         31.5            31.0           28.6                 (6.4)           (3.9)
Loss Due to Impairment of
 Asset..............................            -               -            0.2                    -              **
                                           ------         -------          -----
Income (Loss) from
  Operations........................          0.6            (1.9)           0.4                130.6          (497.2)
Other Income (Expense):
  Interest Expense..................         (1.0)           (0.9)          (0.7)                 2.0             7.1
  Other Expense, Net................           .1               *              *              2,937.1           (62.5)
                                           ------         -------          -----
(Loss) Income Before Income
  Taxes (Benefit)...................         (0.3)           (2.8)          (0.3)               (89.8)          645.0
                                           ======         =======          =====
Net Loss ...........................         (0.6)%          (2.5)%         (0.3)%              (79.4)%         779.1%
                                           ======         =======          =====
</TABLE>
----------------
*    Negligible
**   Not meaningful

FISCAL 1997 COMPARED TO FISCAL 1996

         Net sales for the fiscal year ended June 30, 1997, were approximately
$155,623,000, a decrease of approximately $13,362,000 or 7.9% over the prior
fiscal year. The decrease in net sales overall is primarily attributable to the
Registrant's decision to eliminate personal computers and other non-performing
low margin products from the product mix along with reduced sales of cellular
telephones, personal electronics and VCRs. Comparable store net sales decreased
8.6% in fiscal year 1997 compared to fiscal year 1996. The comparable store net
sales were adjusted to exclude the store relocated to a larger showroom in
November 1996. The Registrant's operations, in common with other retailers in
general, are subject to seasonal influences. Historically, the Registrant has
realized more of its net sales and operating income in the second quarter ending
in December.

         Gross profit increased by approximately $808,000 or 1.6% in the fiscal
year ended June 30, 1997 compared to the prior fiscal year. The gross profit
percentage was 32.1% in the fiscal year ended June 30, 1997. Exclusive of the
provision for loss on

                                       20

<PAGE>

personal computers and accessories, the gross profit percentage for the fiscal
year ended June 30, 1996 was 30.0%. The increase in gross profit and gross
profit percentage is directly related to the Registrant's renewed focus on value
added selling in the core categories of high end audio, video and mobile
electronics and the elimination of computers and other non-performing low margin
products from the product mix. The gross profit for the prior fiscal year was
impacted by a $1,500,000 provision for loss on personal computers and related
accessories recorded in the second quarter of fiscal 1996 in connection with
such product category's elimination from the Company's product mix.

         Selling, general and administrative expense ("SG&A") for the fiscal
year ended June 30, 1997, was approximately $49,045,000, a decrease of
approximately $3,349,000 or 6.4% over the prior fiscal year. The overall
decrease is primarily attributable to cost reduction programs initiated by the
Registrant primarily in the areas of advertising and personnel expense and the
elimination of personal computers from the product mix in fiscal 1996. Since a
sizeable amount of these reductions were associated with the elimination of
expenses associated with sales of personal computers, it is anticipated that
future expense reductions in this area will not be as significant. However, the
Registrant continues to monitor and control expenses in its effort to reduce the
overall level of SG&A. The Registrant's efforts are now being directed at the
improvement of operational processes to attempt to generate reduced costs. In
addition, costs which are relatively fixed in nature are being reviewed and
analyzed for potential reduction or elimination. SG&A as a percentage of net
sales increased slightly to 31.5% from 31.0% in the prior fiscal year. The
percentage increase is directly attributable to the reduction in net sales from
the previous fiscal year.

         Interest expense for the fiscal year ended June 30, 1997, was
$1,556,000, an increase of $30,000 from the prior fiscal year. The increase was
primarily reflective of increased borrowings under the Registrant's revolving
credit facility during fiscal 1997.

         In fiscal 1997 the Registrant recorded a net income tax provision in
the amount of $389,000 on the pre-tax operating loss. This provision is due to
the increase of the valuation allowance on the deferred tax assets, net of
income taxes recoverable as a result of the carryback of the fiscal 1997 net
operating loss.

         Net loss for the fiscal year ended June 30, 1997 was approximately
$871,000 or $.23 per share compared to net loss of approximately $4,227,000 or
$1.13 per share for the prior fiscal year. The significant reduction in net loss
for fiscal year 1997 was primarily due to improved gross profit margins on the
Registrant's product mix, the Registrant's continuing efforts to reduce SG&A and
the impact in fiscal year 1996 of the $1.5 million provision for loss on
personal computers and related accessories.

FISCAL 1996 COMPARED TO FISCAL 1995

                  Net sales for the fiscal year ended June 30, 1996, were
approximately $168,985,000, a decrease of approximately $21,519,000 or 11.3%
over the prior fiscal year. The decrease in net sales

                                       21

<PAGE>

overall is primarily attributable to the Registrant's decision to eliminate
personal computers and other nonperforming low margin products from the product
mix and increased competition on widely available lower end electronic products.
In addition, net sales declined during the first three months of fiscal year
1996 primarily as a result of weather related effects of Hurricane Erin during
the Registrant's annual August scratch and dent sale. The Registrant believes
that part of the reduction was also attributable to consumer concerns over the
general economy and increased levels of consumer debt. Comparable store net
sales decreased 14% in fiscal year 1996 compared to fiscal year 1995. The
comparable store net sales were adjusted to exclude the new store opened in
November 1994 and another relocated to a larger showroom in December 1994.

         Gross profit for fiscal year 1996 was approximately $49,210,000, a
decrease of approximately $6,494,000 or 11.7% over the prior fiscal year. Gross
profit as a percentage of net sales decreased slightly to 29.1% for the fiscal
year ended June 30, 1996, as compared to 29.2% for the prior fiscal year. The
overall reduction in gross profit is related to the reduction in net sales and
includes a $1,500,000 provision in the second quarter of fiscal 1996 for loss on
personal computer inventory and related accessories in connection with such
product category's elimination from the Registrant's product mix through
subsequent sale and disposal. See note (8) of Notes to Consolidated Financial
Statements. Exclusive of this loss provision, the gross profit percentage was
30.0% in fiscal year 1996. This increase from the prior fiscal year is directly
related to the Company's renewed specialty retailing focus on value added
selling in the core product categories of high end audio, video and mobile
electronics during the second half of fiscal year 1996.

         SG&A for the fiscal year ended June 30, 1996, was approximately
$52,393,000, a decrease of approximately $2,109,000 or 3.9% over the prior
fiscal year. The overall decrease is primarily attributable to cost reduction
programs initiated by the Registrant during the second half of the fiscal year
which were partially offset by increased selling expenses during the first half
of the fiscal year. See "ITEM 1. BUSINESS - General." The increased selling
expenses reflected the net effect of increased advertising expenditures over
reduced salesmen's commissions on lower sales volume. In addition, in fiscal
year 1995 the Registrant's operations were impacted by a $400,000 provision for
asset impairment. See note (8) of Notes to Consolidated Financial Statements.
SG&A as a percentage of net sales increased to 31.0% from 28.8% (inclusive of
the provision for asset impairment) in the prior fiscal year. The percentage
increase is directly attributable to the reduction in net sales from the
previous fiscal year.

         Interest expense for the fiscal year ended June 30, 1996, was
$1,526,000, an increase of $102,000 from the prior fiscal year. The increase was
primarily reflective of interest rate increases and fees paid under the
Registrant's prior and new revolving credit facilities during fiscal year 1996.

                                       22

<PAGE>

         For the fiscal year ended June 30, 1996, the effective income tax
benefit was 10.3% and for fiscal year 1995 the effective income tax benefit was
24.0%. The recorded tax benefit in fiscal year 1996 excludes the recognition of
temporary differences which cannot be recovered from federal income taxes paid
during the loss carryback period. See note (5) of Notes to Consolidated
Financial Statements.

         Net loss for the fiscal year ended June 30, 1996, was approximately
$4,227,000, or $1.13 per share, compared to net loss of approximately $481,000,
or $.13 per share, for the prior fiscal year. The net loss in fiscal year 1996
was primarily attributable to the reduction in net sales and the corresponding
reduction in gross profit (of which $1,500,000 is attributable to the provision
for loss on personal computers). The overall reduction in gross profit was only
partially offset by the net reduction in SG&A.

LIQUIDITY AND CAPITAL RESOURCES

         In April 1996, the Registrant replaced its then existing $16,000,000
revolving credit and term loan facility with a new $25,000,000 revolving credit
facility from a new lender, Foothill Capital Corporation ("Foothill"). Under the
Foothill revolving credit facility, the Registrant is able to borrow, repay and
reborrow based upon a borrowing base equal to the lesser of 65% of eligible
inventory (as defined) at cost or 50% of eligible inventory at retail selling
price. The availability is reduced by outstanding letters of credit which are
limited to $3,000,000. The revolving credit facility matures on July 31, 1998,
and bears interest on the outstanding balance at prime plus 1%. The Registrant
paid a .625% commitment fee in connection with the closing of such financing and
is obligated to pay additional commitment fees of .5% annually on the total
facility and a monthly fee on the unused portion of the commitment of .375% per
annum. The Foothill loan and security agreement contains various affirmative and
negative covenants including those requiring the Registrant to (i) maintain a
quarterly ratio of current assets to current liabilities of not less than 1.05
to 1.0, (ii) maintain a quarterly ratio of total liabilities to tangible net
worth of not more than 2.75 to 1.0, (iii) maintain tangible net worth at the end
of each quarter of at least $14,000,000 and (iv) maintain working capital at the
end of each quarter of at least $3,500,000. In addition, cumulative net losses
from and after April 1, 1996, may not exceed $4,000,000. The loan and security
agreement also limits the incurrence of additional debt, liens, capital
expenditures, acquisitions and investments and prohibits cash dividends and the
repurchase of capital stock. Borrowings under the revolving credit facility are
collateralized by all of the Registrant's assets including depository accounts,
receivables, inventory, property and equipment and intangible assets. See note
(4) of Notes to Consolidated Financial Statements for a further discussion of
the Foothill revolving credit facility.

         In May 1994, the Registrant obtained a five year term loan of
approximately $1,608,000 from General Electric Capital Corporation

                                       23

<PAGE>

("GECC") for the purpose of financing a new management information system and
related communications equipment. The interest rate under the GECC financing is
based upon a short term commercial paper rate plus 259 basis points. The
Registrant has the option to convert to a fixed interest rate loan based on
certain Treasury Note rates tied to the then remaining term of the loan plus 310
basis points. The repayment of such financing was collateralized by the
management information system and related communications equipment. The
outstanding principal amount of the GECC financing was reduced to approximately
$575,000 in July 1995 as a result of the return of such management information
system and the settlement with the vendor thereof and, as a result, is now
repayable in consecutive monthly installments of principal and interest in the
approximate amount of $13,800 each and a final installment of unpaid principal
and interest due on May 1, 1999. The remaining unpaid balance of such financing
remains collateralized by certain computer equipment. See note (4)(b) of Notes
to Consolidated Financial Statements.

         The Registrant's ownership of its former Fort Lauderdale store is
encumbered by a first mortgage loan from a bank in the amount of $640,000, with
a balance of approximately $449,000 at June 30, 1997. See "ITEM 2. PROPERTIES."
Such loan bears interest at the rate of 1/2 of 1% above the prime rate of such
lender (such lender's prime rate was 8.50% at June 30, 1997) and is payable in
one hundred ninety consecutive monthly installments of principal in the amount
of $1,779 each, together with accrued interest, and in one balloon principal
payment of approximately $428,300, together with any accrued and unpaid
interest, due on July 12, 1998. See note (4)(b) of Notes to Consolidated
Financial Statements.

         The Registrant had working capital of approximately $7,791,000 as of
June 30, 1997, a decrease of approximately $834,000 from June 30, 1996. The
decrease in working capital between fiscal years results primarily from the
decrease in accounts payable of approximately $3,978,000, which was partially
offset by the increase of approximately $2,774,000 in borrowings under the
Registrant's revolving credit facility, the collection of approximately $843,000
of income taxes receivable and a $926,000 reduction in the Registrant's cash
balances. The decrease in accounts payable is directly related to the reduced
inventory turn in the last quarter of fiscal year 1997 together with reduced
vendor payment terms.

         The interest rate under the Registrant's revolving credit facility
fluctuated between 9.25% and 9.50% during fiscal year 1997. As of June 30, 1997,
the outstanding borrowings under the Registrant's revolving credit facility were
$11,875,000. The increase of approximately $2,774,000 in outstanding borrowing
in fiscal year 1997 as compared to the prior fiscal year is primarily related to
the installation of a new computer system and the store relocation in November
1996, which in the aggregate represented approximately $1,582,000 of the
Registrant's capital expenditures of approximately $2,724,000 during fiscal year
1997. Over the past year, certain trade creditors have reduced the time period
for eligibility for cash or payment discounts. This reduction coupled

                                       24

<PAGE>

with the reduction in inventory turn ratio are the primary reasons for the
reduction in accounts payable. Accordingly, the Registrant utilized its
revolving credit facility in part to take advantage of such discount terms.

         The Registrant currently believes that funds from the Registrant's
operations combined with borrowings available under its revolving credit
facility with Foothill and vendor credit programs will be sufficient to satisfy
its currently projected operating cash requirements during fiscal year 1998,
including those capital expenditures required in connection with the store
expansion and store relocation currently planned in fiscal 1998. In that regard,
the Registrant is also considering use of sale-leaseback or other financing
techniques in connection with financing such expansion and store relocation
provided that such financing techniques can be utilized with respect to the
store locations chosen. See "Expansion" in ITEM 1. The Registrant may need to
seek additional sources of financing (debt and/or equity or a combination
thereof) in order to proceed with any expansion program beyond fiscal year 1998.

         The Foothill revolving credit facility matures in July 1998 together
with the principal balance in the approximate amount of $428,300 of the mortgage
loan encumbering the Registrant's former Fort Lauderdale store. The Registrant
has held preliminary discussions with Foothill in connection with the extension
of its facility and has received interest from other lenders to refinance the
Foothill facility. Management believes, although there is no assurance they will
be successful in doing so, that the extension or refinancing of the Foothill
facility will be accomplished prior to July 1998, as well as the refinancing or
other repayment of the above-described mortgage loan.

IMPACT OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS

         The Registrant does not believe that either inflation or foreign
currency fluctuations has had a material impact upon its operating results
because technological advances in the products sold by the Registrant and
changes in the components of products, together with increased competition among
the Registrant's vendors, have kept the product prices stable. Where the prices
of products have increased, the Registrant has generally been able to pass on
such increases to its customers.

RECENT ACCOUNTING PRONOUNCEMENT

         In February 1997 Statement of Financial Accounting Standards No. 128
("SFAS 128"), EARNINGS PER SHARE, which supersedes Accounting Principles Board
("APB") Opinion No. 15, EARNINGS PER SHARE, was issued. SFAS 128 requires dual
presentation of basic and diluted earnings per share ("EPS") for complex capital
structures on the face of the income statement. Basic EPS is computed by
dividing income by the weighted-average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution from the exercise of
stock options or conversion of securities into common stock. SFAS 128 is
effective for annual and interim reporting after December 15, 1997; earlier
application is not permitted. The Registrant's management does not currently
expect the basic or diluted EPS measured under SFAS 128 to be

                                       25

<PAGE>

materially different than the primary or fully-diluted EPS measured
under APB No. 15.

FORWARD-LOOKING STATEMENTS

         This report contains forward-looking statements (within the meaning of
Section 21E. of the Securities Exchange Act of 1934, as amended) representing
the Registrant's current expectations, beliefs, estimates or intentions
concerning the Registrant's future performance and operating results, its
products, services, markets and industry, and/or future events relating to or
effecting the Registrant and its business and operations. When used in this
report, the words "believes," "estimates," "plans," "expects," "intends,"
"anticipates," and similar expressions as they relate to the Registrant are
intended to identify forward-looking statements. The actual results or
achievements of the Registrant could differ materially from those indicated by
the forward-looking statements because of various risks, factors and
uncertainties related to and including, without limitation, the effectiveness of
the Registrant's business and marketing strategies, the product mix sold by the
Registrant, customer demand, availability of existing and new merchandise from
and the establishment and maintenance of relationships with suppliers, price
competition for products and services sold by the Registrant, management of
expenses, gross profit margins, the opening of additional stores, availability
and terms of financing to refinance or repay existing financings or to fund
capital and expansion needs, the continued and anticipated growth of the retail
home entertainment and consumer electronics industry, a change in interest
rates, exchange rate fluctuations, the seasonality of the Registrant's business
and the other risks and factors detailed in this report and in the Registrant's
other filings with the SEC. These risks and uncertainties are beyond the ability
of the Registrant to control. In many cases, the Registrant cannot predict the
risks and uncertainties that could cause actual results to differ materially
from those indicated by the forward-looking statements.

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The Consolidated Financial Statements and notes thereto and the
Consolidated Financial Statement Schedule and the report of the independent
auditors thereon set forth on pages F-1 to F-22 and S-1 herein are filed as part
of this report and incorporated herein by reference.

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

         Not applicable.

                                       26

<PAGE>

                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         Incorporated by reference from the Registrant's 1997 definitive proxy
statement to be filed, pursuant to General Instruction G(3) to the Form 10-K,
except that the information regarding the Registrant's executive officers called
for by Item 401 of Regulation S-K has been included in Item 4.1 in PART I of
this report.

ITEM 11.          EXECUTIVE COMPENSATION.

         Incorporated by reference from the Registrant's 1997 definitive proxy
statement to be filed, pursuant to General Instruction G(3) to the Form 10-K.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT.

         Incorporated by reference from the Registrant's 1997 definitive proxy
statement to be filed, pursuant to General Instruction G(3) to the Form 10-K.

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Incorporated by reference from the Registrant's 1997 definitive proxy
statement to be filed, pursuant to General Instruction G(3) to the Form 10-K.

                                     PART IV

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

         (a)      1. and 2.  The financial statements and the required
         financial statement schedule listed in the accompanying Table
         of Contents to Consolidated Financial Statements and Financial
         Statement Schedule at page F-1 herein are filed as part of
         this report.

         (a) 3. The exhibits listed in the Exhibit Index to the Exhibit Volume
         accompanying this report are filed with or incorporated by reference as
         part of this report.

         (b) Reports on Form 8-K. A Report on Form 8-K was filed by the
         Registrant on May 13, 1997, in Item 5 (Other Events) of which the
         Registrant disclosed the adoption by its Board of Directors of the 1997
         Common Stock Purchase Rights Plan and the declaration of a dividend
         distribution of one Common Stock Purchase Right on each outstanding
         share of Common Stock.

                                       27

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
September, 1997.

                                          Sound Advice, Inc.

                                          By:  \S\ PETER BESHOURI
                                             ----------------------------------
                                             Peter Beshouri, Chairman of
                                             the Board, President and
                                             Chief Executive Officer

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

           SIGNATURE                                        TITLE                                        DATE
           ---------                                        -----                                        ----
           <S>                                              <C>                                          <C>
                                                   Chairman of the Board,
 \S\ PETER BESHOURI                         President and Chief Executive Officer
-------------------------------                 (Principal Executive Officer)                    September 29, 1997
Peter Beshouri

                                                          Director,
                                                    Senior Vice President
 \S\ MICHAEL BLUMBERG                                        and
-------------------------------                           Secretary                              September 29, 1997
Michael Blumberg

 \S\ G. KAY GRIFFITH
-------------------------------
G. Kay Griffith                                           Director                               September 29, 1997

 \S\ HERBERT A. LEEDS
-------------------------------
Herbert A. Leeds                                          Director                               September 29, 1997

 \S\ RICHARD W. MCEWEN
-------------------------------
Richard W. McEwen                                         Director                               September 29, 1997

 \S\ GREGORY STURGIS
-------------------------------
Gregory Sturgis                                           Director                               September 29, 1997

                                                     Chief Financial Officer
                                                          and Treasurer
 \S\ KENNETH L. DANIELSON                           (Principal Financial and
-------------------------------                       Accounting Officer)                        September 29, 1997
Kenneth L. Danielson
</TABLE>

                                       28


<PAGE>

                       SOUND ADVICE, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

                                                                    PAGE
                                                                    ----
Independent Auditors' Report                                        F-2

Consolidated Financial Statements:
      Consolidated Balance Sheets                                   F-3 to F-4
      Consolidated Statements of Operations                         F-5
      Consolidated Statements of Changes in Shareholders' Equity    F-6
      Consolidated Statements of Cash Flows                         F-7 to F-8
      Notes to Consolidated Financial Statements                    F-9 to F-22

Financial Statement Schedule:
      Schedule II - Valuation and Qualifying Accounts               S-1

                                       F-1

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Sound Advice, Inc.:

We have audited the accompanying consolidated balance sheets of Sound Advice,
Inc. and subsidiaries as of June 30, 1997 and 1996, and the related consolidated
statements of operations, changes in shareholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1997. In connection
with our audits of the consolidated financial statements, we also have audited
the accompanying financial statement schedule. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sound Advice, Inc.
and subsidiaries as of June 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.



/s/ KPMG PEAT MARWICK LLP


Fort Lauderdale, Florida
September 12, 1997

                                       F-2

<PAGE>

                       SOUND ADVICE, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                             June 30, 1997 and 1996

                  ASSETS                          1997            1996
                  ------                  ------------    ------------
Current assets:
     Cash                                 $     81,280       1,007,231
     Receivables:
          Vendors                            2,864,121       3,259,226
          Trade                                674,848         623,840
          Employees                            300,586         217,742
                                          ------------    ------------
                                             3,839,555       4,100,808

Less allowance for doubtful accounts          (286,400)       (572,000)
                                          ------------    ------------
                                             3,553,155       3,528,808

     Inventories, net                       27,789,250      27,587,101
     Prepaid and other current assets          670,818         638,113
     Deferred tax assets                        92,930         712,930
     Income taxes receivable                   328,000       1,170,571
                                          ------------    ------------
                   Total current assets     32,515,433      34,644,754

Property and equipment, net                 13,667,085      13,947,974

Deferred tax asset, net                         96,098          96,098

Other assets                                   125,069         196,035

Goodwill, net                                  146,441         170,891
                                          ------------    ------------
                                          $ 46,550,126      49,055,752
                                          ============    ============

See accompanying notes to consolidated financial statements.

                                       F-3

<PAGE>

     LIABILITIES AND SHAREHOLDERS' EQUITY                    1997          1996
     ------------------------------------             -----------   -----------
Current liabilities:
     Borrowings under revolving credit facility       $11,874,533     9,100,115
     Accounts payable                                   7,627,791    11,605,540
     Accrued liabilities                                5,050,445     5,152,353
     Current maturities of long-term debt                 171,478       161,406
                                                      -----------   -----------
               Total current liabilities               24,724,247    26,019,414

Long-term debt, excluding current maturities              574,524       745,564
Capital lease obligation                                  809,486       815,940
Other liabilities and deferred credits                  4,144,028     4,305,995
                                                      -----------   -----------
                                                       30,252,285    31,886,913
                                                      -----------   -----------
Shareholders' equity:
     Common stock; $.01 par value. Authorized
          10,000,000 shares; issued and outstanding
          3,728,894 shares in 1997 and 1996                37,289        37,289
     Additional paid-in capital                        11,058,655    11,058,655
     Retained earnings                                  5,201,897     6,072,895
                                                      -----------   -----------
                                                       16,297,841    17,168,839
     Commitments and contingencies    
                                                      -----------   -----------
                                                      $46,550,126    49,055,752
                                                      ===========    ==========



See accompanying notes to consolidated financial statements.



                                      F-4

<PAGE>

<TABLE>
<CAPTION>
                       SOUND ADVICE, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                    For each of the years in the three-year
                           period ended June 30, 1997


                                                         1997             1996             1995
                                                -------------    -------------    -------------
<S>                                             <C>              <C>              <C>
Net sales                                       $ 155,623,213      168,984,777      190,503,745
Cost of goods sold                                105,605,396      119,774,833      134,800,287
                                                -------------    -------------    -------------
          Gross profit                             50,017,817       49,209,944       55,703,458

Selling, general and administrative expense        49,044,756       52,393,352       54,501,903
Loss due to impairment of asset                          --               --            400,000
                                                -------------    -------------    -------------
          Income (loss) from operations               973,061       (3,183,408)         801,555

Other income (expense):
     Interest expense                              (1,556,314)      (1,526,199)      (1,424,693)
     Provision for shareholder settlement                --               --             56,000
     Other income (expense)                           101,255           (3,569)         (65,529)
                                                -------------    -------------    -------------
          Loss before income taxes (benefit)         (481,998)      (4,713,176)        (632,667)

Income taxes (benefit)                                389,000         (486,000)        (151,840)
                                                -------------    -------------    -------------
          Net loss                              $    (870,998)      (4,227,176)        (480,827)
                                                =============    =============    =============
Common and common equivalent per share
     amounts:

          Net loss per share                    $        (.23)           (1.13)   $        (.13)
                                                =============    =============    =============
Weighted average number of shares outstanding       3,728,894        3,728,894        3,728,894
                                                =============    =============    =============

</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-5

<PAGE>

<TABLE>
<CAPTION>
                       SOUND ADVICE, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                     For each of the years in the three-year
                           period ended June 30, 1997

                                                  COMMON STOCK
                                             -----------------------
                                              NO. OF                     ADDITIONAL     RETAINED
                                              SHARES        AMOUNT    PAID-IN CAPITAL   EARNINGS        TOTAL
                                             ---------   -----------  --------------- -----------    -----------
<S>                                          <C>         <C>            <C>           <C>            <C>
Balance, June 30, 1994                       3,728,894   $    37,289    11,114,655     10,780,898     21,932,842

     Net loss                                     --            --            --         (480,827)      (480,827)

     Adjustment to common stock warrant
          valuation                               --            --         (56,000)          --          (56,000)
                                             ---------   -----------    ----------    -----------    -----------
Balance, June 30, 1995                       3,728,894        37,289    11,058,655     10,300,071     21,396,015

     Net loss                                     --            --            --       (4,227,176)    (4,227,176)
                                             ---------   -----------    ----------    -----------    -----------
Balance, June 30, 1996                       3,728,894        37,289    11,058,655      6,072,895     17,168,839

     Net loss                                     --            --            --         (870,998)      (870,998)
                                             ---------   -----------    ----------    -----------    -----------
Balance, June 30, 1997                       3,728,894   $    37,289    11,058,655      5,201,897     16,297,841
                                             =========   ===========    ==========    ===========    ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-6

<PAGE>

<TABLE>
<CAPTION>
                      SOUND ADVICE, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                     For each of the years in the three-year
                           period ended June 30, 1997

                                                                    1997             1996             1995
                                                           -------------     ------------     ------------
<S>                                                        <C>               <C>              <C>
Cash flows from operating activities:
     Net loss                                              $    (870,998)      (4,227,176)        (480,827)
     Adjustments to reconcile net loss to net cash
       (used in) provided by operating activities:
          Depreciation and amortization                        3,090,078        3,273,013        3,322,041
          Deferred income taxes                                  620,000          731,437         (285,157)
          Loss on sale of assets                                     876           11,386           65,529
          Provision for asset impairment                            --               --            400,000
          Common stock warrant valuation                            --               --            (56,000)
          Changes in operating assets and liabilities:
               Decrease (increase) in:
                 Receivables                                     (24,347)       1,524,828         (608,326)
                 Inventories                                    (202,149)       4,171,643        3,370,921
                 Prepaid and other current assets                (32,705)         604,456          684,391
                 Income taxes receivable                         842,571         (618,888)        (183,683)
                 Other assets                                      9,038           72,961           15,096
               Increase (decrease) in:
                 Accounts payable                             (3,977,749)         514,285        1,282,108
                 Accrued liabilities                            (101,908)        (278,168)          28,824
                 Other liabilities and deferred credits         (161,967)        (163,974)         437,672
                                                           -------------     ------------     ------------
                 Net cash (used in) provided by
                   operating activities                         (809,260)       5,615,803        7,992,589
                                                           -------------     ------------     ------------
Cash flows from investing activities:
     Capital expenditures                                     (2,723,687)      (1,164,308)      (5,115,790)
                                                           -------------     ------------     ------------
                Net cash used in investing activities         (2,723,687)      (1,164,308)      (5,115,790)
                                                           -------------     ------------     ------------
Cash flows from financing activities:
     Borrowings on revolving credit facility                 171,896,950      138,785,743       66,119,893
     Repayments on revolving credit facility                (169,122,532)    (138,363,041)     (67,172,165)
     Net repayments of long-term debt                           (160,968)      (2,674,513)      (1,231,170)
     Increase/(decrease) in cash overdraft                          --         (1,234,066)        (589,190)
     Reduction in capital lease obligation                        (6,454)          (5,337)          (2,209)
                                                           -------------     ------------     ------------
                Net cash provided by (used in) financing
                  activities                                   2,606,996       (3,491,214)      (2,874,841)
                                                           -------------     ------------     ------------
</TABLE>

                                      F-7

<PAGE>

<TABLE>
<CAPTION>
                      SOUND ADVICE, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

                                                                    1997             1996             1995
                                                           -------------     ------------     ------------
<S>                                                        <C>               <C>              <C>
(Decrease) increase in cash                                $    (925,951)         960,281            1,958

Cash, beginning of year                                        1,007,231           46,950           44,992
                                                           -------------     ------------     ------------
Cash, end of year                                          $      81,280        1,007,231           46,950
                                                           =============     ============     ============

Supplemental disclosures of cash flow information:
     Interest paid                                         $   1,380,742        1,371,736        1,281,687
                                                           =============     ============     ============
     Income taxes paid, net of refunds                     $  (1,273,571)        (598,549)         317,000
                                                           =============     ============     ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-8


<PAGE>
                     

                       SOUND ADVICE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          June 30, 1997, 1996 and 1995

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                     
    (A) DESCRIPTION OF BUSINESS
                
        Sound Advice, Inc. and subsidiaries (the "Company") operate in a single
        business segment, which is the retailing and servicing of home and car
        audio systems, video products, cellular telephones, personal
        electronics, home entertainment furniture and related customized
        services and accessories. Its operations are conducted in Florida
        through 21 stores and three support centers.
                   
    (B) PRINCIPLES OF CONSOLIDATION
               
        The accompanying consolidated financial statements include the accounts
        of the Company and its wholly owned subsidiaries. All significant
        intercompany balances and transactions have been eliminated in
        consolidation.
                   
    (C) RECEIVABLES
               
        Receivables from vendors consist of cooperative advertising and other
        amounts earned based on annual promotional and market development
        agreements under various incentive programs. The funds received under
        these programs are determined based upon the Company's level of
        purchases and/or the inclusion of the vendors' products in the Company's
        advertising and promotional programs. Once earned, the funds are applied
        against product cost or recorded as a reduction of advertising expense.
        Advertising expense, net, approximated $4,086,000, $6,476,000 and
        $4,745,000 for the years ended June 30, 1997, 1996, and 1995,
        respectively. Also included in receivables from vendors are amounts due
        for warranty repairs. Trade receivables consist primarily of amounts due
        from cellular activation providers and credit card and finance companies
        resulting from customer purchases.
                   
    (D) INVENTORIES
               
        Merchandise and service parts inventories are stated at the lower of
        cost or market. Cost is determined using a moving average which
        approximates the first-in, first-out method and is recorded net of
        volume and purchase discounts and rebates.
                   
        The Company allocates to inventory certain costs associated with
        purchasing, pricing and preparation of inventories for sale. For the
        years ended June 30, 1997 and 1996, allocated costs were $2,314,000 and
        $3,487,000, respectively, with $593,000 and $882,000 remaining in
        inventory at June 30, 1997 and 1996, respectively.
                   
                                F - 9                                (Continued)

                                                                   
<PAGE>

                                                     
                       SOUND ADVICE, INC. AND SUBSIDIARIES
         
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    (E) PROPERTY AND EQUIPMENT
               
        Property and equipment are stated at cost. Depreciation and amortization
        are provided over the following estimated useful lives using the
        straight-line method.
               
                  DESCRIPTION                         YEARS
                  -----------                         -----

                  Building                               30
                  Furniture and equipment              5 to 7
                  Leasehold improvements     15 or term of lease, if shorter
                  Display fixtures                        7
                  Vehicles                                5
               
    (F) GOODWILL
               
        Goodwill is amortized on a straight-line basis over 15 years. Goodwill
        is presented net of accumulated amortization of $220,000 and $196,000 at
        June 30, 1997 and 1996, respectively.
               
    (G) INCOME TAXES
               
        The Company accounts for income taxes under the provisions of Financial
        Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes,
        which generally requires recognition of deferred tax liabilities and
        assets for the expected future tax consequences of events that have been
        included in the financial statements or tax returns. Under this method,
        deferred tax assets and liabilities are determined based on differences
        between the financial reporting and tax bases of assets and liabilities
        and are measured by applying enacted tax rates and laws for the taxable
        years in which those differences are expected to reverse. In addition,
        SFAS No. 109 requires adjustment of previously deferred income taxes for
        changes in tax rates under the liability method.
               
    (H) SELF-INSURANCE ACCRUALS

        The Company was self-insured through December 31, 1996, up to certain
        limits, for workers' compensation benefits and, accordingly, has accrued
        unpaid claims and associated expenses, including incurred but not
        reported losses.
               
    (I) EXTENDED WARRANTY SERVICE CONTRACTS AND SALES INCENTIVE PROGRAM
               
        The Company offers extended warranty service contracts on behalf of an
        unrelated third party on most of its products. These contracts are on a
        nonrecourse basis to the Company. The Company includes revenues from the
        sale of extended warranty contracts in net sales and records as cost of
        goods sold the amounts due to the third party for the cost for such
        contracts at the time of sale as the earnings process has been
        completed. Revenues from the sale of such contracts represented
        approximately five percent to six percent of consolidated net sales in
        1995 through 1997. Gross margins from the sale of extended warranty
        contracts are higher than gross margins from the sale of the Company's
        other products.
               
                                     F - 10                          (Continued)


<PAGE>

                       SOUND ADVICE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               
        From 1986 through February 1993 and from July 1994 through May 1997, the
        Company, subject to certain conditions, offered the purchasers of
        extended warranty service contracts the right to apply the sales price
        of the contract towards future purchases of merchandise if the purchaser
        did not utilize the contract during its term. Non-utilized warranty
        contracts are generally redeemable for a 60 day period after expiration
        of the contract. The term of the warranty contract is for one to five
        years. Effective June 1, 1997, the Company discontinued offering this
        program on future purchases. The total amount of extended warranty
        contracts sold from July 1990 through February 1993 and July 1994
        through May 1997 was approximately $21 million and $27 million,
        respectively. The Company records a liability at the time of sale for
        the estimated amount of future redemptions under this program.
        Historically, the overall redemption rate has ranged from nine percent
        to 11 percent of the value of contracts issued. Such liability is based
        on estimates and, while management believes that such amounts are
        adequate, there can be no assurance that changes to management's
        estimates may not occur due to limitations inherent in the estimation
        process. Changes in the estimates are charged or credited to income in
        the period determined. Amounts estimated to be paid within one year have
        been classified as accrued liabilities with the remainder included in
        other liabilities and deferred credits. At June 30, 1997 and 1996, the
        liability for estimated redemptions was approximately $1,772,000 and
        $1,892,000, respectively. Amounts charged against the liability recorded
        for future redemptions were $926,000, $833,000 and $628,000 for fiscal
        years 1997, 1996 and 1995, respectively.
               
    (J) NET LOSS PER SHARE
               
        Net loss per share is computed by dividing net loss by the weighted
        average number of shares of common stock and common stock equivalents
        outstanding during each year. Common stock equivalents represent the
        dilutive effect of the assumed exercise of certain outstanding stock
        options and warrants. Common stock equivalents are not included in net
        loss per share in 1997, 1996 and 1995 because their effect would be
        anti-dilutive.
               
    (K) USE OF ESTIMATES
               
        Management of the Company has made a number of estimates and assumptions
        relating to the reporting of assets and liabilities and the disclosure
        of contingent assets and liabilities to prepare these financial
        statements in conformity with generally accepted accounting principles.
        Actual results could differ from those estimates.
               
    (1) FINANCIAL INSTRUMENTS AND CONCENTRATION OF RISK
               
        The carrying amount of cash, receivables, revolving credit facility and
        trade accounts payable approximates fair value because of the short
        maturity of these instruments. The fair value of the Company's long-term
        debt is estimated by discounting the future cash flows for each
        instrument at rates currently offered to the Company for similar debt
        instruments of comparable maturities, which approximates the carrying
        value.
               
               
                                           F - ll                    (Continued)

<PAGE>
               
                            SOUND ADVICE, INC. AND SUBSIDIARIES

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

        Financial instruments which potentially expose the Company to
        concentrations of credit risk consist principally of vendor receivables.
        Although credit risk is affected by conditions and occurrences in the
        industry, the Company reviews the credit risk of specific vendors,
        historical trends and other information. Two vendors accounted for 38
        percent and 16 percent, respectively, of the Company's vendor
        receivables at June 30, 1997 and 34 percent and 13 percent,
        respectively, at June 30, 1996.

        The Company is a specialty retailer with a focus on upscale electronics
        and is a primary distributor in its markets for certain products.
        Although competitive sources of supply are available for most of its
        products, the loss of a source for which the Company is a primary
        distributor could have an adverse impact on the Company. The Company
        would most likely be able to replace these products, but such
        replacement products may be widely available in its markets. The
        Company's principal competitors include other retailers, department and
        discount stores, mass merchandises, catalog and specialty stores. Many
        of the Company's competitors are national in scope and have greater
        financial resources than the Company.

    (M) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

        The Company adopted the provisions of SFAS No. 121, ACCOUNTING FOR THE
        IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
        OF, on July 1, 1996. This Statement requires that long-lived assets and
        certain identifiable intangibles be reviewed for impairment whenever
        events or changes in circumstances indicate that the carrying amount of
        an asset may not be recoverable. Recoverability of assets to be held and
        used is measured by a comparison of the carrying amount of an asset to
        future net cash flows expected to be generated by the asset. If such
        assets are considered to be impaired, the impairment to be recognized is
        measured by the amount by which the carrying amount of the assets
        exceeds the fair value of the assets. Assets to be disposed of are
        reported at the lower of the carrying amount or fair value less costs to
        sell. Adoption of this statement did not have a material impact on the
        Company's financial position, results of operations or liquidity.

    (N) STOCK-BASED COMPENSATION PLAN

        Prior to July 1, 1996, the Company accounted for its stock-based
        compensation plan in accordance with the provisions of Accounting
        Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
        EMPLOYEES, and related interpretations. As such, compensation expense
        would be recorded on the date of grant only if the current market price
        of the underlying stock exceeded the exercise price. On July 1, 1996,
        the Company adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED
        COMPENSATION, which permits entities to recognize as expense over the
        vesting period the fair value of all stock-based awards on the date of
        grant. Alternatively, SFAS No. 123 also allows entities to continue to
        apply the provisions of APB Opinion No. 25 and provide pro forma net
        income and pro forma earnings per share disclosures for employee stock
        option grants made in 1996 and future years as if the fair-value-based
        method defined in SFAS No. 123 had been applied. The Company has elected
        to continue to apply the provisions of APB Opinion No.25 and provide the
        pro forma disclosure provisions of SFAS No. 123.

                                          F- 12                      (Continued)

<PAGE>



                           SOUND ADVICE, INC. AND SUBSIDIARIES
         
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         
    (O) NEW ACCOUNTING STANDARD
         
        Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
        EARNINGS PER SHARE, which supersedes APB Opinion No. 15, EARNINGS PER
        SHARE, was issued in February 1997. SFAS 128 requires dual presentation
        of basic and diluted earnings per share (EPS) for complex capital
        structures on the face of the income statement. Basic EPS is computed by
        dividing income by the weighted-average number of common shares
        outstanding for the period. Diluted EPS reflects the potential dilution
        from the exercise of stock options or conversion of securities into
        common stock. SFAS 128 is effective for annual and interim reporting
        after December 15, 1997; earlier application is not permitted.
        Management does not expect the basic or diluted EPS measured under SFAS
        128 to be materially different than the primary or fully-diluted EPS
        measured under APB No. 15.
         
    (P) RECLASSIFICATIONS
         
        Certain amounts in the 1996 and 1995 consolidated financial statements
        have been reclassified to conform to the 1997 presentation.
         
    (2) Liquidity
         
        As discussed in note 4, the Company's revolving facility and mortgage
        mature in July 1998. Management of the Company has held preliminary
        negotiations with its current lender and has received interest from
        other lenders to refinance the current facility. Management of the
        Company believes, although there is no assurance they will be successful
        in doing so, that they will be able to refinance this facility prior to
        July 1998. Management of the Company also believes that operating cash
        flows, combined with currently available borrowings under the current
        facility and existing vendor credit programs, will be sufficient for the
        Company to meet its operating cash requirements during fiscal 1998.
         
    (3) Property and Equipment, net
         
        Property and equipment, net, consists of the following:
         
                                                   1997             1996
                                                   ----             ----

               Land                          $    521,465          521,465
               Building                         1,119,605        1,119,605
               Furniture and equipment          8,222,690        8,545,945
               Leasehold improvements          15,363,402       14,494,852
               Display fixtures                 5,358,234        5,049,940
               Vehicles                           920,585          949,168
                                             ------------     ------------
                                               31,505,981       30,680,975

               Less accumulated depreciation  (17,838,896)     (16,733,001)
                                             ------------     ------------
               Property and equipment, net   $ 13,667,085       13,947,974
                                             ============     ============

        Depreciation expense approximated $3,004,000, $3,064,000, and $3,161,000
        for the years ended June 30, 1997, 1996 and 1995, respectively.
         
                                          F - 13                     (Continued)

<PAGE>
                       SOUND ADVICE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(4) DEBT

    (A) REVOLVING CREDIT FACILITY
          
        On April 12, 1996, the Company replaced its then existing revolving
        credit and term loan facility with a $25,000,000 revolving credit
        facility from a new lender. The revolving credit facility matures on
        July 31, 1998, and bears interest on the outstanding balance at prime
        plus one percent. Borrowings under the revolving credit facility are
        collateralized by all of the Company's assets including depository
        accounts, receivables, inventory, property and equipment and intangible
        assets. Under the revolving credit facility, borrowings are repaid from
        sales proceeds which are deposited and automatically transferred and
        applied against the outstanding loan balance. Funds are reborrowed as
        required based on a borrowing base equal to the lesser of 65 percent of
        eligible inventory at cost or 50 percent of eligible inventory at retail
        selling price. The availability under the borrowing base is reduced by
        borrowings and outstanding letters of credit which are limited to
        $3,000,000. In connection with the financing, the Company paid a .625
        percent commitment fee and is obligated to pay additional commitment
        fees of .5 percent annually on the total facility and a monthly fee on
        the unused portion of the commitment of .375 percent per annum.
          
        The loan and security agreement contains various affirmative and
        negative covenants requiring the Company to quarterly (i) maintain a
        ratio of current assets to current liabilities of not less than 1.05 to
        1.0, (ii) maintain a ratio of total liabilities to tangible net worth of
        not more than 2.75 to 1.0, (iii) maintain tangible net worth of at least
        $14,000,000 and (iv) maintain working capital of at least $3,500,000. In
        addition, cumulative net losses from and after April 1, 1996 may not
        exceed $4,000,000. The loan and security agreement also limits the
        incurrence of additional debt, liens, capital expenditures, acquisitions
        and investments and prohibits cash dividends and the repurchase of
        capital stock.
          
        The effective interest rate on the outstanding loan balance under the
        financing arrangement in effect at June 30, 1997, 1996 and 1995 was 11.5
        percent, 12.6 percent, and 9.25 percent, respectively.
          
    (B) LONG-TERM DEBT
          
        Long-term debt consists of the following:
        
                                                              1997     1996
                                                              ----     ----

        Promissory note                                 $ 296,919    436,539
        Mortgage note                                     449,083    470,431
                                                        ---------   --------   
          Total                                           746,002    906,970
        Less current maturities                           171,478    161,406
                                                        ---------   --------
        Long-term debt, excluding current maturities    $ 574,524    745,564
                                                        =========   ========
                                                       
          
                                          F - 14                     (Continued)
          
<PAGE>

                       SOUND ADVICE, INC. AND SUBSIDIARES
         
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         
        The promissory note is payable in 60 equal monthly installments based
        upon a short-term commercial paper rate plus 2.6 percent. The Company
        has the option to convert to a fixed interest rate loan based on certain
        Treasury note rates tied to the then-remaining term of the loan plus 3.1
        percent. The promissory note is secured by certain computer equipment
        with a net book value of approximately $50,000 at June 30, 1997.
         
        The mortgage note is payable in monthly installments of $1,779,
        including interest at the lender's prime rate plus .5 percent with a
        balloon payment due July 12, 1998. The loan is secured by land, building
        and improvements with a net book value of approximately $833,000 at June
        30, 1997.
         
        The aggregate maturities of long-term debt for each of the years
        subsequent to June 30, 1997 are as follows:

                        YEARS ENDED          AMOUNT
                        -----------          ------

                           1998           $ 171,478
                           1999             574,524
                                          ---------
                           Total          $ 746,002
                                          =========

        (C) LETTERS OF CREDIT
         
        The Company has standby letters of credit, in the aggregate of
        approximately $885,000, maturing at various dates through April, 1998,
        primarily supporting self-insurance reserves. The letters of credit were
        not drawn upon as of June 30, 1997.
         
    (5) INCOME TAXES
         
        The components of the provision for income taxes (benefit) are as
        follows:
         
                                               Years ended June 30,
                                        -----------------------------------
                                          1997          1996           1995
                                          ----          ----           ----
                  Current:
                      Federal           $ (231,000)  (1,217,437)      89,702
                      State                      -            -       43,615
                                        ----------   ----------     --------
                                          (231,000)  (1,217,437)     133,317
                  Deferred                 620,000      731,437     (285,157)
                                        ----------   ----------     --------
                      Total             $  389,000     (486,000)    (151,840)
                                        ==========   ==========     ========



                                F- 15                                (Continued)

         
<PAGE>

                           SOUND ADVICE, INC. AND SUBSIDIARIES
              
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              
        The provision for deferred income taxes (benefit) consists of the
        following:
<TABLE>
<CAPTION>
                                                                     June 30,
                                                   ------------------------------------
                                                     1997          1996          1995
                                                     ----          ----          ----
<S>                                                <C>          <C>            <C>    
          Allowance for doubtful accounts           $ 90,304      (33,546)       (5,682)
          Inventory adjustments                      155,618     (101,424)      (47,414)
          Preopening expenses                              -      (54,814)       60,667
          Prepaid expenses                            60,601       44,373      (196,849)
          Accelerated depreciation                  (204,601)    (222,001)     (246,477)
          Accrued rent expense                        (8,433)      54,733      (106,449)
          Provision for warranty redemption           40,836      (20,902)       26,049
          Deferred tax valuation allowance           349,000    1,080,426        20,000
          Other                                      136,675      (15,408)      210,998
                                                   ---------    ---------     ---------
              Total                                $ 62O,000      731,437      (285,157)
                                                   =========    =========     =========
</TABLE>

        The reconciliation of the Federal statutory rate and the Company's
        effective tax rate is as follows:
<TABLE>
<CAPTION>


                                                              Years Ended June 30,
                                                   ------------------------------------
                                                     1997            1996          1995
                                                     ----            ----          ----
<S>       <C>                                        <C>             <C>          <C>    
          Statutory income tax rate                  (34.0)%         (34.0)       (34.0)
          Effect of state taxes                          -               -          (.2)
          Reserve for tax examination                 41.5               -            -
          Provision for valuation allowance           72.6            22.9          1.4
          Nondeductible expenses                        .7              .8          8.8
                                                     -----           -----        -----
              Effective income tax rate               80.8%          (10.3)       (24.0)
                                                     =====           =====        =====
</TABLE>

        The tax effects of temporary differences that give rise to significant
        portions of deferred tax assets and deferred tax liabilities at June 30,
        1997 and 1996 are as follows:

                                                          1997          1996
                                                          ----          ----
          Allowance for doubtful accounts              $ 121,950     212,261
          Inventory adjustments                          (78,559)     77,052
          Prepaid advertising                            (69,467)    (48,003)
          Prepaid insurance                              (74,104)    (34,972)
          Accelerated depreciation                       232,240      93,845
          Deferred gain on sale                           49,260      51,790
          Accrued rent expense                           825,368     816,934
          Accrued insurance                               62,079      81,593
          Legal settlement expense                        28,064      29,755
          Provision for warranty redemption              668,835     709,671
          Other                                           60,068     106,808
          Deferred tax valuation allowance            (1,636,706) (1,287,706)
                                                     -----------  ----------
              Total                                    $ 189,028     809,028
                                                     ===========  ==========

                             
                                           F- 16                     (Continued)

              

<PAGE>

                           SOUND ADVICE, INC. AND SUBSIDIARIES
         
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         
        SFAS No. 109 requires that the tax benefit of deductible temporary
        differences be recorded as an asset to the extent that management
        assesses the utilization of such temporary differences to be "more
        likely than not." The Company has sufficient taxable income in the three
        year carryback period to support the recognition of its deferred tax
        assets. A valuation allowance has been established to the extent future
        deductible amounts cannot be recovered through federal income taxes paid
        within the statutory carryback period.
         
        The valuation allowance for deferred tax assets as of June 30, 1997 and
        1996 was $1,636,706 and $1,287,706, respectively. The net change in the
        total valuation allowance for the years ended June 30, 1997 and 1996 was
        an increase of $349,000 and $1,080,426, respectively. 
         
        The Internal Revenue Service (IRS) is in the process of completing its
        examination of the Company's income tax returns for the years 1993
        through 1996. The Company has received a notice of proposed adjustments
        for the 1993 through 1996 years. The Company believes that the accruals
        provided in connection with this matter are adequate and that the
        resolution of this matter will not have a material adverse effect on the
        Company's financial condition or results of operations. 

(6)     SHAREHOLDERS' EQUITY 

        (A) SHAREHOLDER RIGHTS PLAN

            In May 1997, the Board of Directors adopted a Common Stock Purchase
            Rights Plan and subsequently declared a dividend distribution of one
            Common Stock Purchase Right ("Right") on each outstanding share of
            common stock. Each Right has an initial exercise price of $12 for
            one share of common stock. Generally, the Rights will be exercisable
            only if a person or group acquires 15 percent or more of the common
            stock or announces a tender offer, the consummation of which would
            result in ownership by a person or group of 15 percent or more of
            the common stock. Upon such occurrence, each Right (other than
            Rights owned by such person or group) will entitle the holder to
            purchase from the Company the number of shares of common stock
            having a market value equal to twice the exercise price of the
            Right. Generally, prior to the acquisition by a person or group of
            beneficial ownership of 15 percent or more of the common stock, the
            Rights are redeemable for $.001 per Right at the option of the Board
            of Directors. The Rights will expire on May 4, 2007. As of June 30,
            1997, approximately 3,728,894 rights were outstanding.

        (B) STOCK OPTION PLAN

            The Company has a stock option plan (the "Plan") which provides for
            the issuance of either incentive stock options or non-qualified
            stock options. Under the Plan, as amended, the Company has reserved
            up to 750,000 shares of common stock for future issuance. The
            exercise price of incentive stock options shall not be less than the
            fair market value per share on the date of grant. The exercise price
            of any non-qualified stock option shall not be less than 85 percent
            of the fair market value per share on the date of grant. For each of
            the years ended June 30, 1997, 1996 and 1995, the option price
            represents the fair market value of each underlying share of common
            stock at the date of grant established by the Company's board of
            directors. The option term may not be longer than ten years. No
            options may be granted under the stock option plan after November
            10, 2001.
         
                                      F - 17                         (Continued)
<PAGE>

         
                       SOUND ADVICE, INC. AND SUBSIDIARES
         
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           
        On March 10, 1997, the Company issued 75,000 stock options at an
        exercise price of $1.69 per share. In addition, incentive stock options
        to purchase 31,000 shares of common stock, previously granted to two
        officers at an exercise price of $6.29 per share, were canceled and
        reissued by the Company at an exercise price of $1.69 per share. These
        options are immediately exercisable through March 9, 2002.
           
        On April 29, 1997, the Company issued 412,500 stock options at an
        exercise price of $1.89 per share. These options vest in increments of
        one third upon attainment of a market price of the Company's common
        stock at $4.00, $5.00 and $6.50, respectively. These options are also
        subject to full vesting on the earlier to occur of April 29, 2001 or a
        change in control (as defined) of the Company. These options have a term
        of five years expiring April 28, 2002. In addition, the Company granted
        5,000 warrants to purchase common stock to each of three non-employee
        directors of the Company subject to the same exercise price and vesting
        terms as the options issued on April 29, 1997. In addition, stock
        options to purchase 35,000 shares of common stock, previously granted to
        a director at an exercise price of $5.96 per share for 15,000 shares and
        $6.29 per share for 20,000 shares, were canceled and reissued by the
        Company and subject to the same exercise price and vesting terms as the
        options issued on April 29, 1997.
           
        Changes in stock options outstanding are as follows:
           
                                                     Number of
                                                      Shares             Price
                                                     ---------           -----

             Outstanding, June 30, 1994               155,000       $ 4.20-10.48
               Granted                                 45,000         5.96
               Exercised                                    -        
               Canceled                               (58,500)        4.20-10.48
                                                    ---------

             Outstanding, June 30, 1995               141,500          5.45-9.27
               Granted                                147,500          1.70-6.29
               Exercised                                    -
               Canceled                               (69,000)         5.45-9.27
                                                    ---------

             Outstanding, June 30, 1996               220,000          1.70-7.27
               Granted                                553,500          1.69-1.89
               Exercised                                    -
               Canceled                              (104,500)         5.45-7.27
                                                    ---------

             Outstanding, June 30, 1997               669,000         $1.69-4.76
                                                    =========

               Exercisable                            221,500
                                                    =========

               Available for future grants             20,000
                                                    =========
           
           
                                      F - 18                         (Continued)
           
<PAGE>

                       SOUND ADVICE, INC. AND SUBSIDIARES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

        The Company applies APB Opinion No. 25 in accounting for its Plan and,
        accordingly, no compensation cost has been recognized for its stock
        options in the consolidated financial statements. Had the Company
        determined compensation cost based on the fair value at the grant date
        for its stock options under SFAS No. 123, the Company's net loss would
        have been reduced to the pro forma amounts indicated below:

                                                         1997           1996
                                                         ----           ----
                                                      (in thousands, except per
                                                           share amounts)
                                                      -------------------------

          Net loss              As reported            $ (871)         (4,227)
                                                         ====           =====

                                Pro forma              $ (891)         (4,227)
                                                         ====           =====

          Loss per share        As reported            $ (.23)          (1.13)
                                                         ====           =====

                                Pro forma              $ (.24)          (1.13)
                                                         ====           =====

        Pro forma net income reflects only options granted in 1997 and 1996.
        Therefore, the full impact of calculating compensation cost for stock
        options under SFAS No. 123 is not reflected in the pro forma net income
        amounts presented above because compensation cost is reflected over the
        options' vesting period of 5 years and compensation cost for options
        granted prior to July 1, 1995 is not considered.

        The fair value of each options' grant is estimated on the date of grant
        using the Black-Scholes option pricing model with the following
        assumptions:

                                                     1997            1996
                                                     ----            ----

          Expected dividend yield                     -              -
          Expected stock price volatility              1.01           1.01
          Risk-free interest rate                   5.9-6.1 %      5.1-5.8%
          Expected life of options                  3 years        3 years

        Stock option activity during the periods indicated is as follows:

                                             Number of    Weighted-average
                                              Shares       Exercise Price
                                             ---------    ----------------

          Balance at June 30, 1995            141,500         $ 6.07
            Granted                           147,500           2.79
            Exercised                               -              -
            Canceled                          (69,000)          6.08
                                              -------

          Balance at June 30, 1996            220,000           3.87
            Granted                           553,500           1.85
            Exercised                               -              -  
            Canceled                         (104,500)          6.12
                                              -------

          Balance at June 30, 1997            669,000         $ 2.04
                                              =======


                                    F - 19                           (Continued)

<PAGE>

                           SOUND ADVICE, INC. AND SUBSIDIARIES
         
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         
            As of June 30, 1997, the range of exercise prices and
            weighted-average remaining contractual life of outstanding options
            was $1.69 to $4.76 and 4.5 years, respectively.
         
            At June 30, 1997 and 1996, the number of options exercisable was
            221,500 and 220,000, respectively, and the weighted-average exercise
            price of those options was $3.86 and $3.87, respectively.
         
        (C) SHAREHOLDERS' EQUITY
         
            During fiscal 1995, the Company issued 306,335 warrants to purchase
            common stock of the Company in connection with the settlement of two
            shareholder class actions filed in 1992. The warrants are
            exercisable through June 14, 1999 and each warrant is exercisable
            into one share of common stock at an exercise price of $8.70 per
            share.
         
    (7) EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
         
        Effective as of July 1, 1989, the Company established and adopted an
        Employee Stock Ownership Plan and Trust (the "ESOP") for all of its
        employees. Contributions to the ESOP are made at the discretion of the
        board of directors. No contributions were made in 1997, 1996 or 1995.
         
    (8) PROVISIONS FOR DISPOSAL OF INVENTORY AND ASSET IMPAIRMENT
         
        During 1996, the Company eliminated personal computers and related
        accessories from its product line. In December 1995, the Company
        recorded a $1,500,000 provision to write down its remaining personal
        computer and related accessories inventory to estimated net realizable
        value and to recognize expenses associated with the sale and disposal.
        The provision for loss was included in cost of goods sold.
         
        During fiscal 1995, the Company was unable to successfully complete the
        implementation of a new management information system and recorded a
        provision of $400,000 for loss on impairment of these assets.
         
    (9) LEASES
         
        The Company is obligated under a number of operating leases for retail
        store space, distribution and installation centers, and certain property
        and equipment, which expire at various dates through 2014. The retail
        store leases generally contain provisions for increases based on the
        Consumer Price Index and contain options for periods of up to 15 years
        to renew at the then fair rental value. 
         
        In June 1994, the Company entered into a limited partnership agreement
        with a development company in connection with the acquisition and
        development of a parcel of land in Fort Myers, Florida. The Company was
        a 40 percent limited partner and made capital contributions of
        approximately $250,000. The Company agreed to lease this building for a
        period of 20 years and has recorded a portion of the Fort Myers lease as
        a capital lease. In April 1995, the land and building were sold by the
        limited partnership. The Company's portion of the gain on sale is being
        amortized over the life of the lease.
         
                                      F - 20                         (Continued)
<PAGE>

         
                       SOUND ADVICE, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              
        Property under capital lease includes the following amounts in the
        accompanying consolidated financial statements:
              
                                                  1997        1996
                                                  ----        ----

          Building                             $ 685,000     685,000
          Furniture and equipment                142,900     142,900
                                               ---------    --------
                                                 827,900     827,900
          Less accumulated depreciation         (142,910)    (87,590)
                                               ---------    --------

                                               $ 684,990     740,310
                                               =========    ========
              
        Future minimum annual rental payments required under operating leases
        that have initial or remaining noncancelable lease terms in excess of
        one year (including option periods) as of June 30, 1997 and the capital
        lease payments are as follows:
<TABLE>
<CAPTION>
                                                               Capital     Operating
          Year ended                                            lease       leases
          ----------                                           -------     ---------
          <S>                                                 <C>         <C>
           1998                                               $ 162,396    5,990,441
           1999                                                 162,396    5,310,395
           2000                                                 162,396    5,015,390
           2001                                                 162,396    4,872,731
           2002                                                 162,396    4,643,491
           Thereafter                                         2,016,417   21,837,303
                                                             ----------  -----------

                 Total minimum lease payments                 2,828,397  $47,669,751
                                                                         ===========
           Less amounts representing interest (at an
             effective interest rate of approximately 19%)   (2,012,457)
                                                             ----------
                 Present value of minimum capital lease
                   payments                                     815,940
           Less current installments of obligations under
             capital lease                                       (6,454)
                                                             ----------
                 Obligations under capital lease,    
                   excluding current installments             $ 809,486
                                                             ==========
</TABLE>

        Total rental expense under the noncancelable operating leases was
        approximately $6,542,000, $6,058,000, and $6,123,000 for the years ended
        June 30, 1997, 1996 and 1995, respectively.
              
              
              
                                      F - 21                         (Continued)
<PAGE>

                       SOUND ADVICE, INC. AND SUBSIDIARES
     
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     

   (10) ACCRUED LIABILITIES
         
        Certain store lease agreements provide for scheduled base rental
        increases over the lease term or provide free rent periods. The Company
        recognizes the aggregate rent expense on a straight-line basis over the
        lease term, and the difference between rent expense on a straight-line
        basis and the base rental is accrued and included in other liabilities
        and deferred credits in the consolidated balance sheet. At June 30, 1997
        and 1996, the recorded liability for accrued rent was approximately
        $2,174,000 and $2,148,000, respectively.
         
        Included in accrued liabilities at June 30, 1997 and 1996 are
        approximately $2,159,000 and $2,637,000, respectively, of customer
        deposits on future sales orders.
         
   (11) COMMITMENT AND CONTINGENCIES
         
        (A) EMPLOYMENT AGREEMENTS
         
            Two of the Company's officers have employment agreements, which
            provided for aggregate annual base salaries of $611,050 for each of
            the fiscal years ending June 30, 1997, 1996, and 1995. These
            agreements have been extended through June 30, 1998.
         
        (B) SEVERANCE AGREEMENTS
         
            The Company has entered into agreements with corporate officers and
            certain other key employees that provide severance pay benefits
            under certain conditions if there is a change in control (as
            defined) of the Company.
         
        (C) BONUS PLAN
         
            During 1995, the Company implemented a bonus plan for certain
            managerial positions based upon the annual operating performance of
            the Company. Under the terms of the bonus plan, bonuses ranging
            between 10 percent and 25 percent of annual compensation may be
            earned for achievement of various levels of targeted operating
            performance as approved by the Board of Directors. For the three
            years ended June 30, 1997, no bonus amounts were earned under the
            plan.
         
        (D) OTHER
         
            The Company is a party to various legal actions arising in the
            normal course of business. It is the opinion of management that the
            ultimate disposition of these matters will not have a material
            adverse effect on the Company's financial position or results of
            operations.
         
         
                                      F-22


<PAGE>

<TABLE>
<CAPTION>
                       SOUND ADVICE, INC. AND SUBSIDIARIES

                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS

                                          BALANCE AT      CHARGED TO COSTS   OTHER CHANGES   BALANCE AT END
       DESCRIPTION                     BEGINNING OF YEAR    AND EXPENSES      ADD (DEDUCT)      OF YEAR
       -----------                     -----------------  ----------------   -------------   --------------
<S>                                       <C>                 <C>              <C>             <C>
Allowance for doubtful accounts:

     June 30, 1997                        $  572,000          410,152          (695,752)(A)      286,400
                                          ==========          =======          =========       =========
     June 30, 1996                        $  470,000          722,000          (620,000)(A)      572,000
                                          ==========          =======          =========       =========
     June 30, 1995                        $  460,000          380,474          (370,474)(A)      470,000
                                          ==========          =======          =========       =========
Allowance for redemption of extended
  service warranty contracts:

     June 30, 1997                        $1,891,920              --           (120,105)(B)    1,771,815
                                          ==========          =======          =========       =========
     June 30, 1996                        $1,830,445           61,475(B)            --         1,891,920
                                          ==========          =======          =========       =========
     June 30, 1995                        $1,761,222           69,223(B)            --         1,830,445
                                          ==========          =======          =========       =========
Allowance for inventory obsolescence:

     June 30, 1997                        $  830,000              --           (130,000)(C)      700,000
                                          ==========          =======          =========       =========
     June 30, 1996                        $  600,000          230,000(C)(D)         --           830,000
                                          ==========          =======          =========       =========
     June 30, 1995                        $  273,000          327,000(D)            --           600,000
                                          ==========          =======          =========       =========

<FN>
(A) Amounts represent write-off of uncollectible receivables.

(B) Amounts represent net change between beginning of period and end of period
    balances.

(C) Amounts represent provision and disposition of personal computer and related
    accessory inventories.

(D) General obsolescence.
</FN>
</TABLE>

                                      S-1



<PAGE>

                                  EXHIBIT INDEX

Exhibit                                                              Sequential
  No.                                                                 Page No.
-------                                                              ----------
3.1           Articles of Incorporation, as
              amended, of the Registrant
              (incorporated by reference from
              Registration Statement No. 33-5942,
              Exhibit 3.1, filed May 23, 1986)

3.2           By-laws of the Registrant
              (incorporated by reference from
              Registration Statement No. 33-5942,
              Exhibit 3.2, filed May 23, 1986)

4.1           Form of 1997 Common Stock Purchase
              Rights Agreement, dated as of May
              5, 1997, between the Registrant and
              American Stock Transfer & Trust
              Company (incorporated by reference
              from the Registrant's Registration
              Statement on Form 8-A, Exhibit 4.1,
              filed on May 13, 1997)

9.            Right of First Refusal and Voting
              Trust Agreement, dated June 30,
              1986, among Peter Beshouri, Gregory
              Sturgis, Michael Blumberg and
              Joseph Piccirilli (incorporated by
              reference from the Registrant's
              Annual Report on Form 10-K for the
              fiscal year ended June 30, 1986,
              Exhibit 9, File No. 33-5942)

10.1          Loan and Security Agreement
              (without schedules), dated as of
              April 11, 1996, between the
              Registrant and Foothill Capital
              Corporation (incorporated by
              reference from the Registrant's
              Quarterly Report on Form 10-Q for
              the quarter ended March 31, 1996,
              Exhibit 10.2, File No. 0-15194)

10.2          Mortgage Note, dated July 12, 1988,
              from the Registrant payable to Bank
              Atlantic in the principal amount of
              $640,000, together with Mortgage
              and Security Agreement, dated July

                                        i

<PAGE>

Exhibit                                                              Sequential
  No.                                                                 Page No.
-------                                                              ----------

              12, 1988, between the Registrant
              and BankAtlantic and Assignment of
              Leases, Rents and Profits, dated
              July 12, 1988, between the
              Registrant and BankAtlantic
              (incorporated by reference from the
              Registrant's Annual Report on Form
              10-K for the fiscal year ended June
              30, 1988, Exhibit 10.42, File No.
              0-15194)

10.3*         Second Amended and Restated Sound
              Advice, Inc. 1986 Stock Option Plan
              (incorporated by reference from the
              Registrant's Registration Statement
              No. 333-27051 on Form S-8, Exhibit
              4.3, filed on May 14, 1997)

10.4*         Sound Advice, Inc. Employee Stock
              Ownership Plan and Trust, made
              January 15, 1990, between the
              Registrant and Peter Beshouri,
              Michael Blumberg, Gregory Sturgis,
              Joseph Piccirilli and Jacob E.
              Farkas, the trustees (incorporated
              by reference from the Registrant's
              Quarterly Report on Form 10-Q for
              the quarter ended March 31, 1990,
              Exhibit 10.2, File No. 0-15194),
              First Amendment to the Sound
              Advice, Inc. Employee Stock
              Ownership Plan and Trust, dated as
              of December 23, 1992 (incorporated
              by reference from the Registrant's
              Quarterly Report on Form 10-Q for
              the quarter ended December 31,
              1992, Exhibit 10.2, File No. 0-
              15194), Second Amendment to the
              Sound Advice, Inc. Employee Stock
              Ownership Plan and Trust, dated as
              of July 9, 1993 (incorporated by
              reference from the Registrant's
--------
     *        Management contract or compensation plan or arrangement required
              to be filed as an exhibit to this report pursuant to Item 14(c) of
              Form 10-K.

                                       ii

<PAGE>

Exhibit                                                              Sequential
  No.                                                                 Page No.
-------                                                              ----------

              Annual Report on Form 10-K for the
              fiscal year ended June 30, 1993,
              Exhibit 10.15, File No. 0-15194)
              and Third Amendment to the Sound
              Advice, Inc. Employee Stock
              Ownership Plan and Trust, dated as
              of December 30, 1994 (incorporated
              by reference from the Registrant's
              Annual Report on Form 10-K for the
              fiscal year ended June 30, 1995,
              Exhibit 10.9, File No. 0-15194)

10.5*         Employment Agreements, dated June
              30, 1986, between Registrant and
              each of Peter Beshouri and Michael
              Blumberg (incorporated by reference
              from the Registrant's Annual Report
              on Form 10-K for the fiscal year
              ended June 30, 1986, Exhibit 10.26,
              File No. 33-5942), First Amendments
              to Employment Agreements, both
              dated as of May 20, 1989, between
              the Registrant and each of Peter
              Beshouri and Michael Blumberg
              (incorporated by reference from
              Registration Statement No. 33-
              28745, Exhibit 10.20, filed May 16,
              1989), Second Amendments to
              Employment Agreements, both dated
              as of October 27, 1989, between the
              Registrant and each of Peter
              Beshouri and Michael Blumberg
              (incorporated by reference from the
              Registrant's Quarterly Report on
              Form 10-Q for the quarter ended
              December 31, 1989, Exhibit 10.2,
              File No. 0-15194), Third Amendments
              to Employment Agreements, both
              dated as of July 1, 1992, between
              the Registrant and each of Peter
              Beshouri and Michael Blumberg
              (incorporated by reference from the
              Registrant's Annual Report on Form
              10-K for the fiscal year ended June
              30, 1992, Exhibit 10.15, File No.
--------
     *        Management contract or compensation plan or arrangement required
              to be filed as an exhibit to this report pursuant to Item 14(c) of
              Form 10-K.

                                       iii

<PAGE>

Exhibit                                                              Sequential
  No.                                                                 Page No.
-------                                                              ----------

              0-15194), Fourth Amendments to
              Employment Agreements, both dated
              as of July 1, 1993, between the
              Registrant and each of Peter
              Beshouri and Michael Blumberg
              (incorporated by reference from the
              Registrant's Annual Report on Form
              10-K for the fiscal year ended June
              30, 1993, Exhibit 10.16, File No.
              0-15194), Fifth Amendments to
              Employment Agreements, both
              effective as of July 1, 1994,
              between the Registrant and each of
              Peter Beshouri and Michael Blumberg
              (incorporated by reference from the
              Registrant's Quarterly Report on
              Form 10-Q for the quarter ended
              December 31, 1994, Exhibit 10.2,
              File No. 0-15194), Sixth Amendments
              to Employment Agreements, both
              effective as of July 1, 1995,
              between the Registrant and each of
              Peter Beshouri and Michael Blumberg
              (incorporated by reference from the
              Registrant's Quarterly Report on
              Form 10-Q for the quarter ended
              September 30, 1995, Exhibit 10.1,
              File No. 0-15194), Seventh
              Amendments to Employment
              Agreements, both effective as of
              July 1, 1996, between the
              Registrant and each of Peter
              Beshouri and Michael Blumberg
              (incorporated by reference from the
              Registrant's Annual Report on Form
              10-K for the fiscal year ended June
              30, 1996, Exhibit 10.8, File No. 0-
              15194), and Eighth Amendment(s) to
              Employment Agreements, both dated
              as of May 24, 1997, between the
              Registrant and each of Peter
              Beshouri and Michael Blumberg
              (incorporated by reference from the
              Registrant's Quarterly Report on
              Form 10-Q for the quarter ended
              March 31, 1997, Exhibit 10.2, File
              No. 0-15194)

                                       iv

<PAGE>

Exhibit                                                              Sequential
  No.                                                                 Page No.
-------                                                              ----------

10.6 *        Form of Agreement entered into as
              of May 1, 1997, between the
              Registrant and each of two
              executive officers of the
              Registrant (Kenneth L. Danielson
              and Christopher P. O'Neil) and
              twelve other employees of the
              Registrant relating to the making
              of a severance payment (two years
              gross wages for the executive
              officers and six months gross wages
              for the other employees) under
              certain circumstances upon a change
              of control (as defined) (filed
              herewith)

10.7          Associate Agreement, dated March 1,
              1986 between the Registrant and
              Progressive Retailers Organization,
              Inc. ("PRO"), together with PRO
              Policy and Procedure Manual
              (incorporated by reference from
              Amendment No. 1 to Registration
              Statement No. 33-5942, Exhibit
              10.28, filed June 24, 1986)

10.8          Lease, dated September 23, 1987,
              between Designer's Place at Dania,
              a Florida general partnership
              consisting of Marvin Mandel, Philip
              Mandel and G&E Investment Company,
              and the Registrant (incorporated by
              reference from the Registrant's
              Quarterly Report on Form 10-Q for
              the quarter ended September 30,
              1987, Exhibit 10.1, File No.
              0-15194)

10.9          Amended and Restated Lease, dated
              as of December 1, 1991, between
              Chase, Gunsaullus, Scherer and the
              Registrant (incorporated by
              reference from the Registrant's
              Annual Report on Form 10-K for the
--------
     *        Management contract or compensation plan or arrangement required
              to be filed as an exhibit to this report pursuant to Item 14(c) of
              Form 10-K.

                                        v

<PAGE>

Exhibit                                                              Sequential
  No.                                                                 Page No.
-------                                                              ----------

              fiscal year ended June 30, 1992,
              Exhibit 10.19, File No. 015194)

10.10         Dealer Agreement, dated January 1,
              1995, between McCaw Communications
              of Florida, Inc. d/b/a Cellular One
              ("McCaw") and the Registrant, as
              amended by that certain Amendment
              to Dealer Agreement, dated January
              1, 1995, between McCaw and the
              Registrant (incorporated by
              reference from the Registrant's
              Annual Report on Form 10-K for the
              fiscal year ended June 30, 1995,
              Exhibit 10.14, File No. 0-15194)

10.11         Form of Warrant to Purchase 5,000
              Shares of Common Stock of Sound
              Advice, Inc. entered into as of
              April 29, 1997, by the Registrant
              with and in favor of each of
              Gregory Sturgis, Richard W. McEwen
              and Herbert A. Leeds, who are
              directors of the Registrant (filed
              herewith)

10.12         Credit Card Program Agreement,
              dated August 12, 1992, between
              Monogram Credit Card Bank of
              Georgia ("Monogram") and the
              Registrant (incorporated by
              reference from the Registrant's
              Annual Report on Form 10-K for the
              fiscal year ended June 30, 1992,
              Exhibit 10.29, File No. 0-15194),
              together with Amendment thereto,
              dated June 14, 1996, between
              Monogram and Registrant
              (incorporated by reference from the
              Registrant's Annual Report on Form
              10-K for the fiscal year ended June
              30, 1996, Exhibit 10.14, File No.
              0-15194)

10.13         Sales Agreement, dated August 10,
              1989, between Progressive Casualty
              Insurance Company and the
              Registrant (incorporated by
              reference from the Registrant's
              Annual Report on Form 10-K for the

                                       vi

<PAGE>

Exhibit                                                              Sequential
  No.                                                                 Page No.
-------                                                              ----------

              fiscal year ended June 30, 1992,
              Exhibit 10.32, File No. 0-15194)

10.14         Lease, dated as of May 22, 1993,
              between L&T Limited Partnership, as
              landlord, and the Registrant, as
              tenant (incorporated by reference
              from the Registrant's Annual Report
              on Form 10-K for the fiscal year
              ended June 30, 1993, Exhibit 10.34,
              File No. 0-15194)

10.15         Promissory Note, dated May 4, 1994,
              from the Registrant payable to
              General Electric Capital
              Corporation ("GECC") in the
              original principal amount of
              $1,607,661.17, as amended, together
              with Master Security Agreement,
              dated as of May 4, 1994, between
              the Registrant and GECC
              (incorporated by reference from the
              Registrant's Annual Report on Form
              10-K for the fiscal year ended June
              30, 1994, Exhibit 10.28, File No.
              0-15194)

10.16         Stipulation of Settlement, dated as
              of January 26, 1994, regarding IN
              RE: SOUND ADVICE, INC. SECURITIES
              LITIGATION, which has annexed as
              one of the exhibits thereto, among
              other documents, the Form of
              Warrant Agreement between the
              Registrant and American Stock
              Transfer & Trust Company, as
              warrant agent, covering the 306,335
              warrants issued in connection with
              the settlement of the class action
              (incorporated by reference from the
              Registrant's current report on Form
              8-K, dated January 31, 1994,
              reporting an event on January 28,
              1994, Exhibit 2, File No. 0-15194)

21            Subsidiaries of the Registrant
              (filed herewith)

23            Consent of Independent Public
              Accountants of KPMG Peat Marwick
              LLP (filed herewith)

27            Financial Data Schedule (filed
              herewith)

                                       vii