SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                         ----------------------------

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
              For the quarterly period ended DECEMBER 31, 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)
             
                                 (954) 922-4434
             ----------------------------------------------------
             (Registrant's telephone number, including area code)
             
                                 NOT APPLICABLE
             -----------------------------------------------------
             (Former name, former address and former fiscal year,
                         if changed since last report)

      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 THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICAL DATE.

      COMMON STOCK, PAR VALUE $.01 PER SHARE - 3,728,894 SHARES OUTSTANDING AS
OF FEBRUARY 6, 1998.


<PAGE>


                        SOUND ADVICE, INC. AND SUBSIDIARY

                                      INDEX

                                                                            PAGE
                                                                            ----

PART I - FINANCIAL INFORMATION

Item 1.     Condensed Consolidated Financial Statements.

            Condensed Consolidated Balance Sheets (Unaudited)
            December 31, 1997 and June 30, 1997                             3-4

            Condensed Consolidated Statements of Operations (Unaudited)
            for the Three and Six Months Ended December 31, 1997 and 1996   5

            Condensed Consolidated Statements of Cash Flows (Unaudited)
            for the Six Months Ended December 31, 1997 and 1996             6

            Notes to Condensed Consolidated Financial Statements            7-10

Item 2.     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations.           11-14

PART II - OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K                               15

SIGNATURES                                                                 16

                                     Page 2

<PAGE>

                         PART 1 - FINANCIAL INFORMATION

ITEM 1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                        SOUND ADVICE, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       DECEMBER 31, 1997 AND JUNE 30, 1997

                                              DECEMBER 31, 1997    JUNE 30, 1997
                                              -----------------    -------------
ASSETS                                           (Unaudited)
CURRENT ASSETS:
  Cash                                          $    282,620       $     81,280
  Receivables:
   Vendors                                         4,544,445          2,864,121
   Trade                                             949,092            674,848
   Employees                                         213,040            300,586
                                                ------------       ------------
                                                   5,706,577          3,839,555
  Less allowance for doubtful accounts              (390,800)          (286,400)
                                                ------------       ------------
                                                   5,315,777          3,553,155

  Inventories, net                                29,703,456         27,789,250
  Prepaid and other current assets                   360,192            670,818
  Deferred tax assets                                   --               92,930
  Income taxes receivable                             55,000            328,000
                                                ------------       ------------
         Total current assets                     35,717,045         32,515,433

Property and equipment, net                       14,057,293         13,667,085

Deferred tax assets, net                                --               96,098

Other assets                                         130,323            125,069

Goodwill, net                                        134,216            146,441
                                                ------------       ------------

                                                $ 50,038,877       $ 46,550,126
                                                ============       ============

     See accompanying notes to condensed consolidated financial statements.

                                     Page 3

<PAGE>
<TABLE>
<CAPTION>


                        SOUND ADVICE, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       DECEMBER 31, 1997 AND JUNE 30, 1997

                                                  DECEMBER 31, 1997     JUNE 30, 1997
                                                  -----------------     -------------
<S>                                               <C>                   <C>
LIABILITIES AND SHAREHOLDERS' EQUITY                (Unaudited)
CURRENT LIABILITIES:
  Borrowings under revolving credit facility         $ 7,537,809         $11,874,533
  Accounts payable                                    12,652,296           7,627,791
  Cash overdraft                                       1,604,922                --   
  Accrued liabilities                                  7,210,567           5,050,445
  Current maturities of long-term debt                   593,902             171,478
                                                     -----------         -----------
         Total current liabilities                    29,599,496          24,724,247

Long-term debt, excluding current maturities              66,879             574,524

Capital lease obligation                                 806,413             809,486

Other liabilities and deferred credits                 3,702,254           4,144,028
                                                     -----------         -----------
                                                      34,175,042          30,252,285
                                                     -----------         -----------
Shareholders' Equity:
  Common stock, $.01 par value; authorized
   10,000,000 shares; issued and outstanding
    3,728,894 shares at December 31, 1997
    and June 30, 1997                                     37,289              37,289
  Additional paid-in capital                          11,058,655          11,058,655
  Retained earnings                                    4,767,891           5,201,897
                                                     -----------         -----------
         Total shareholders' equity                   15,863,835          16,297,841

Commitments and contingencies
                                                     -----------         -----------

                                                     $50,038,877         $46,550,126
                                                     ===========         ===========
</TABLE>


   See accompanying notes to condensed consolidated financial statements.

                                     Page 4


<PAGE>
<TABLE>
<CAPTION>

                        SOUND ADVICE, INC. AND SUBSIDIARY
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
          FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996


                                            THREE MONTHS ENDED              SIX MONTHS ENDED
                                               DECEMBER 31,                    DECEMBER 31,
                                      ----------------------------    ----------------------------
                                           1997            1996            1997           1996
                                      ------------    ------------    ------------    ------------

<S>                                   <C>             <C>             <C>             <C>         
Net sales                             $ 47,383,754    $ 47,724,208    $ 83,855,241    $ 88,074,972

Cost of goods sold                      32,162,953      32,720,986      57,277,407      60,772,656
                                      ------------    ------------    ------------    ------------

  Gross profit                          15,220,801      15,003,222      26,577,834      27,302,316

Selling, general and administrative
     expenses                           13,815,187      13,578,452      25,438,314      25,540,818
                                      ------------    ------------    ------------    ------------

  Income from operations                 1,405,614       1,424,770       1,139,520       1,761,498

Other income (expense):
  Interest expense                        (412,939)       (442,595)       (779,530)       (777,962)
  Other, net                                23,949          18,034          42,805          20,858
                                      ------------    ------------    ------------    ------------

Income before income taxes               1,016,624       1,000,209         402,795       1,004,394

Income taxes                               676,800         475,000         836,800         475,000
                                      ------------    ------------    ------------    ------------

    Net income (loss)                 $    339,824    $    525,209    $   (434,005)   $    529,394
                                      ============    ============    ============    ============


BASIC EARNINGS (LOSS) PER SHARE       $       0.09    $       0.14    $      (0.12)   $       0.14
                                      ============    ============    ============    ============


WEIGHTED AVERAGE NUMBER
 OF SHARES OUTSTANDING                   3,728,894       3,728,894       3,728,894       3,728,894
                                      ============    ============    ============    ============
</TABLE>


      See accompanying notes to condensed consolidated financial statements.

                                     Page 5

<PAGE>
<TABLE>
<CAPTION>


                        SOUND ADVICE, INC. AND SUBSIDIARY
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
               FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996


                                                               1997            1996
                                                           -------------   ------------
<S>                                                        <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income                                        $   (434,005)   $    529,394
  Adjustments to reconcile net (loss) income to net cash
    provided by operating activities:
      Depreciation and amortization                           1,564,785       1,536,792
      Loss on sale of assets                                       --               876
      Changes in operating assets and liabilities:
         Decrease (increase) in:
           Receivables                                       (1,762,622)     (1,592,534)
           Inventories                                       (1,914,206)         14,191
           Prepaid and other current assets                     310,626         (99,838)
           Deferred tax asset                                   189,028         103,000
           Income taxes receivable                              273,000        (103,000)
           Other assets                                         (31,754)        (35,015)
         Increase (decrease) in:
           Accounts payable                                   5,024,505         925,564
           Accrued liabilities                                2,160,122       2,097,028
           Other liabilities and deferred credits              (441,774)        (50,927)
                                                           ------------    ------------
 NET CASH PROVIDED BY OPERATING ACTIVITIES                    4,937,705       3,325,531
                                                           ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                       (1,916,268)     (2,043,973)
                                                           ------------    ------------
 NET CASH USED IN INVESTING ACTIVITIES                       (1,916,268)     (2,043,973)
                                                           ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings on revolving credit facility                    85,035,273      92,272,658
  Repayments on revolving credit facility                   (89,371,998)    (95,188,912)
  Net repayments of long-term debt                              (85,221)        (80,643)
  Increase in cash overdraft                                  1,604,922         892,876
  Reductions in capital lease obligation                         (3,073)         (2,542)
                                                           ------------    ------------
 NET CASH USED IN FINANCING ACTIVITIES                       (2,820,097)     (2,106,563)
                                                           ------------    ------------

Increase (decrease) in cash                                     201,340        (825,005)
Cash, beginning of period                                        81,280       1,007,231
                                                           ------------    ------------

CASH, END OF PERIOD                                        $    282,620    $    182,226
                                                           ============    ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Interest paid                                          $    705,797    $    559,734
                                                           ============    ============

    Income taxes paid, net of refunds                      $     69,773    $       --
                                                           ============    ============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                     Page 6




<PAGE>


                        SOUND ADVICE, INC. AND SUBSIDIARY
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.)   BASIS OF PRESENTATION
      The accompanying unaudited condensed consolidated financial statements
have been prepared in conformity with instructions to Form 10-Q and, therefore,
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. Certain items
included in these statements are based on management estimates. In the opinion
of management, the accompanying financial statements contain all adjustments,
consisting of normal, recurring accruals, necessary to present fairly the
financial position of the Company at December 31, 1997 and June 30, 1997 and the
statements of operations for the three and six month periods ended December 31,
1997 and 1996 and statements of cash flows for the six month periods ended
December 31, 1997 and 1996. The results of operations for the three and six
months ended December 31, 1997 are not necessarily indicative of the operating
results expected for the fiscal year ending June 30, 1998. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Company's annual report on Form
10-K for the fiscal year ended June 30, 1997.

2.)   EARNINGS PER SHARE
      In December 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No.128, "Earnings per Share" ("Statement 128")
which establishes new standards for computing and presenting earnings per share
("EPS"). Earnings per share for all prior periods have been restated to reflect
the provisions of this statement.

      Basic earnings per share is computed by dividing net income (loss) by the
weighted average number of shares outstanding during the period. Diluted
earnings per share is computed assuming the exercise of stock options, as well
as their related income tax effects, unless their effect was antidilutive. For
loss periods, weighted average common share equivalents are excluded from the
calculation as their effect would be antidilutive.

      Options to purchase 437,500 shares of common stock at $1.89 per share and
warrants to purchase 15,000 shares of common stock at $1.89 per share were
outstanding for the six months ended December 31, 1997, but were not included in
the computation of diluted earnings per share because the exercise price of the
options and warrants was greater than the average market price of the common
shares during the three and six months ended December 31, 1997. Similarly,
shareholder warrants to purchase 306,335 shares of common stock at $8.70 per
share were outstanding at December 31, 1997 and were also excluded from the
diluted EPS calculation for both periods in 1997. In addition, options to
purchase 213,500 shares of common stock at a range from $1.69 to $1.77 per share
were not included in the diluted EPS calculation for the three month period
ended December 31, 1997 because the exercise price of the options was greater
than the average market price of the common shares. The average market price of
the common shares for the six months ended December 31, 1997 exceeded the
exercise price of the options to purchase 213,500 shares, however, due to the
net loss reported by the Company for this period, these options were excluded
from the calculation. The options and the 15,000 warrants expire between
February 21, 2001 and April 28, 2002 and the 306,335 shareholder warrants expire
June 14, 1999.

                                     Page 7


<PAGE>


      Options to purchase 181,500 shares of common stock, at prices ranging from
$1.70 to $6.29 per share, were outstanding for the six months ended December 31,
1996, but were not included in the computation of diluted earnings per share
because the exercise price of the options was greater than the average market
price of the common shares during the three and six months ended December 31,
1996. Similarly, shareholder warrants to purchase 306,335 shares of common stock
at $8.70 per share were outstanding at December 31, 1996 and were also excluded
from the diluted EPS calculation. The options expire between and May 24, 1998
and March 29, 2001 and the shareholder warrants expire June 14, 1999.

3.)   SEASONALITY
      Historically, the Company's net sales are greater during the holiday
season than during other periods of the year. Net sales by fiscal quarters and
their related percentages for the trailing four quarters ended December 31, 1997
and 1996 are as follows:

                    TRAILING FOUR QUARTERS ENDED DECEMBER 31,
                    -----------------------------------------
                             (Dollars in Thousands)

QUARTERLY SALES

                                            1997                1996
                                    -------------------  ------------------

                                     AMOUNT         %     AMOUNT        %
                                    --------      -----  --------     -----
Second  Quarter                     $ 47,384      31.3%  $ 47,724     29.9%
  (October - December)

First  Quarter                        36,471      24.1     40,351     25.3
  (July - September)

Fourth Quarter                        32,117      21.2     32,481     20.3
  (April - June)

Third  Quarter                        35,431      23.4     39,079     24.5
  (January  - March)


SALES FOR TRAILING TWELVE           $151,403       100%  $159,635      100%
MONTHS ENDED DECEMBER 31,           ========     =====   ========     =====
1997 AND 1996, RESPECTIVELY

                                     Page 8


<PAGE>



4.)   PROPERTY AND EQUIPMENT, NET
      Property and equipment, net, consists of the following:

                                            DECEMBER 31, 1997      JUNE 30, 1997
                                            -----------------      -------------

Land                                          $    521,465         $    521,465
Building                                         1,119,605            1,119,605
Furniture and equipment                          8,594,113            8,222,690
Leasehold improvements                          16,259,385           15,363,402
Display fixtures                                 5,995,593            5,358,234
Vehicles                                           932,088              920,585
                                              ------------         ------------
      Total                                     33,422,249           31,505,981
Less accumulated depreciation                  (19,364,956)         (17,838,896)
                                              ------------         ------------ 
Property and equipment, net                   $ 14,057,293         $ 13,667,085
                                              ============         ============


5.)   REVOLVING CREDIT FACILITY
      Effective as of December 8, 1997, the Company amended and extended its
revolving credit facility with its existing lender through July 31, 2001. The
terms of the $25,000,000 facility were amended to allow the Company to borrow,
repay and reborrow based upon a borrowing base equal to the lesser of 70% of
eligible inventory (as defined) at cost or 55% of eligible inventory at retail
selling price. The availability under the facility is reduced by outstanding
letters of credit. The revolving credit facility bears interest on the
outstanding balance at prime plus 1% and allows for a Libor pricing option for
one, two, three or six month periods at 2.5% over the corresponding libor rate
for the respective period. The interest rate is eligible for a .25% reduction in
1998 and 1999 provided certain conditions are met. The Company pays a monthly
fee based upon the unused portion of the commitment less $5,000,000 at .375% per
annum. The Company paid a closing fee of $45,000 and is obligated to an
additional commitment fee of $50,000 per annum beginning December 8, 1998.

      The amended revolving credit facility contains various affirmative and
negative covenants including those requiring the Company to maintain a quarterly
ratio of current assets to current liabilities of not less than 1.05 to 1 and
maintain working capital at the end of each quarter of at least $3,500,000. In
addition, cumulative net losses after October 1, 1997 may not exceed $4,000,000.
The revolving credit facility limits the incurrence of additional debt, capital
expenditures, acquisitions and investments and prohibits cash dividends.

      Borrowings under the revolving credit facility are collateralized by the
Company's assets including depository accounts, receivables, inventory, property
and equipment and intangible assets.

6.)   STOCK OPTIONS
      During the quarter ended December 31, 1997, incentive stock options
covering 5,000 shares of common stock having an exercise price of $1.77 per
share and 3,000

                                     Page 9


<PAGE>


shares of common stock having an exercise price of $4.76 per share expired. In
addition, stock options covering 10,000 shares of common stock having an
exercise price of $1.89 also expired.

7.)   PROVISION (BENEFIT) FOR INCOME TAXES
      The provision for income taxes includes an amount for taxes payable based
on pretax operating income and an increase in the valuation reserve on deferred
tax assets. The adjustment of the valuation reserve results from the refund of
taxes paid in prior periods which are no longer available to support the
recognition of deferred tax assets. As a result, the provision for income taxes
for the second quarter totals $676,800 or 67% of the pretax income and $836,800
or 208% of pretax income for the six months ended December 31, 1997.

8.)   PUBLIC LISTING OF SHARES
      The Company's common stock is currently traded on the NASDAQ Stock Market.
The NASDAQ recently changed its listing requirements which were approved by the
Securities and Exchange Commission. The Company has been notified by the NASDAQ
that the Company is not in compliance with the requirements for continued
listing on the exchange. The Company does not expect to be able to correct the
non-compliance condition in the near future and is exploring moving its listing
to the NASDAQ Small Cap Market or other public markets for which the Company is
currently able to meet the listing requirements.

                                     Page 10


<PAGE>


ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

      The Company's net sales for the quarter ended December 31,1997, decreased
$340,000 or .7% to $47,384,000 compared to $47,724,000 in the corresponding
period in the prior fiscal year. The overall net decrease in sales is the result
of reduced sales of extended warranties, mobile electronics and personal and
portable electronics which were partially offset by increased audio sales. Total
video sales remain constant to the prior year. Comparable store net sales
decreased 2.6% in the quarter ended December 31, 1997 over the corresponding
quarter in the prior year. The comparable store sales were adjusted to exclude
the new store opened in November 1997 and another store relocated to a larger
showroom in November 1996. The Company's operations, in common with other
retailers in general, are subject to seasonal influences. Historically, the
Company has realized more of its net sales and operating income in the second
quarter ending in December.

      Net sales for the six months ended December 31, 1997, decreased by
$4,220,000 or 4.8% to $83,855,000 over the corresponding period in the prior
fiscal year. The overall decrease in net sales for the six month period is
primarily attributable to reduced video sales primarily in the category of
projection and large direct view televisions. Audio sales increased for the six
months and were more than offset by reduced sales in extended warranties, mobile
electronics and personal and portable electronics. Comparable store net sales as
adjusted for the new store and the relocated store decreased 6.0% in the six
months ended December 31, 1997 compared to the corresponding six month period in
the prior fiscal year.

      Gross profit increased by $218,000 or 1.5% in the quarter ended December
31, 1997 compared to the corresponding quarter in fiscal 1997. The gross profit
percentage was 32.1% in the quarter ended December 31, 1997 as compared to 31.4%
in the quarter ended December 31, 1996. The increase in gross profit and gross
profit percentage is directly related to the Company's sales mix of higher
margin categories.

      Gross profit decreased by $724,000 or 2.7% in the six months ended
December 31, 1997 compared to the corresponding period in the prior year. The
reduction in gross profit is primarily related to the reduction in net sales,
net of the increase in gross profit percentage. The gross profit percentage was
31.7% in the six months ended December 31, 1997. The gross profit percentage for
the six months ended December 31, 1996 was 31.0%. As stated above, the increase
in gross profit percentage is directly related to the Company's sales mix of
higher margin categories.

      Selling, general and administrative expenses ("SG&A") increased by
$237,000 in the quarter ended December 31, 1997 over the corresponding period in
the prior year. The increase is primarily attributable to increased holiday
advertising expenses in the 1997 quarter. SG&A decreased by $103,000 in the six
months ended December 31, 1997 over the corresponding period in the prior year.
The Company continues to monitor and

                                     Page 11


<PAGE>


attempt to control expenses in its effort to reduce the overall level of SG&A
expense. SG&A as a percentage of net sales increased to 29.2% and 30.3% in the
quarter and six months ended December 31, 1997 from 28.5% and 29.0%,
respectively, in the comparable periods of the previous fiscal year. The
percentage increase is directly attributable to the reduction in net sales from
the previous comparable periods.

      Interest expense decreased by $30,000 for the quarter ended December 31,
1997 compared to the same period in the prior year. The decrease was primarily
reflective of a decreased level of average outstanding borrowings, net of a
slightly higher average interest rate based on its prime rate, under the
Company's revolving credit facility during the first and second quarters of
fiscal 1998 as compared to the first and second quarters of fiscal year 1997.
Interest expense increased slightly by $2,000 for the six months ended December
31, 1997 compared to the same period in the prior year.

      In the quarter ended December 31, 1997, the Company recorded an income tax
provision of $677,000, which included an amount for taxes payable based on
pretax operating income and an increase in the valuation reserve on deferred tax
assets. As a result, the Company had an effective income tax rate of
approximately 66.7% for the quarter and 207.7% for the six months ended December
31, 1997. The Company had an income tax rate of approximately 47.5% for the
quarter and 47.3% for the six months ended December 31, 1996.

      Net income for the quarter ended December 31, 1997 was $340,000 or $.09
per share compared to net income of $525,000 or $.14 per share for the same
quarter in the previous fiscal year. Net loss for the six months ended December
31, 1997 was $434,000 or $.12 per share compared to net income of $529,000 or
$.14 per share in the same period of the prior fiscal year. The net loss in the
1998 fiscal year was primarily attributable to the provision for income taxes
based upon pretax income, along with the increase in the valuation reserve on
deferred tax assets.

FINANCIAL CONDITION

      Net cash provided by operating activities was approximately $4,938,000 for
the six months ended December 31, 1997 primarily due to the increase in the
Company's accounts payable since June 30, 1997. The Company had working capital
of approximately $6,118,000 at December 31, 1997, as compared to the $7,791,000
in working capital at June 30, 1997 for an overall decrease of $1,673,000. The
increase in current assets of $3,202,000 during the six month period was
primarily related to the $1,914,000 increase in inventory and the increase in
accounts receivable of $1,763,000. The net increase in current assets was offset
by an overall increase of $4,875,000 in current liabilities. The net increase in
current liabilities resulted primarily from an increase in accounts payable of
$5,025,000, and increases in cash overdraft and accrued liabilities of
$1,605,000 and $2,160,000 respectively, which was substantially offset by the
decrease in borrowings under the revolving credit facility of $4,337,000.

      The Company's existing $25,000,000 revolving credit facility was amended
and extended with its existing lender through July 31, 2001. The terms of the
facility were

                                     Page 12


<PAGE>


amended to allow the Company to borrow, repay, and reborrow based upon a
borrowing base equal to the lesser of 70% of eligible inventory (as defined) at
cost or 55% of eligible inventory at retail selling price. The availability
under the facility is reduced by outstanding letters of credit. The revolving
credit facility bears interest on the outstanding balance at prime plus 1% and
allows for a Libor pricing option for one, two, three or six month periods at
2.5% over the corresponding libor rate for the respective period. The interest
rate is eligible for a .25% reduction in 1998 and 1999 provided certain
conditions are met. The Company pays a monthly fee based upon the unused portion
of the commitment less $5,000,000 at .375% per annum. The Company paid a closing
fee of $45,000 and is obligated to an additional commitment fee of $50,000 per
annum beginning December 8, 1998.

      The amended revolving credit facility contains various affirmative and
negative covenants including those requiring the Company to maintain a quarterly
ratio of current assets to current liabilities of not less than 1.05 to 1 and
maintain working capital at the end of each quarter of at least $3.500,000. In
addition, cumulative net losses after October 1, 1997 may not exceed $4,000,000.
The revolving credit facility limits the incurrence of additional debt, capital
expenditures, acquisitions and investments and prohibits cash dividends.

      Borrowings under the revolving credit facility are collateralized by the
Company's assets including depository accounts, receivables, inventory, property
and equipment and intangible assets.

      The Company currently believes that funds from the Company's operations
combined with borrowings available under its revolving credit facility and
vendor credit programs will be sufficient to satisfy its currently projected
operating cash requirements for fiscal 1998, including any capital expenditures
required in connection with store improvements, additional stores or store
relocations during the remainder of fiscal 1998. The Company is currently
seeking suitable sites for two new stores and one store relocation. It cannot be
determined at this time as to the timing of expenditures associated with this
expansion. The Company 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 1998.

      The principal balance of approximately $428,000 of the mortgage loan
encumbering the Company's former Fort Lauderdale store is due in July. This
obligation will be repaid through funds available under the revolving credit
facility, refinancing of the mortgage or sale of the property.

      The Company recognizes the potential problems for many computer systems
relating to the Year 2000. The preponderance of the Company's systems are
purchased from outside vendors. Those installed systems which are not currently
able to fully function in the Year 2000 either have new versions which are Year
2000 compliant and which the Company is preparing to install on the system, or
the vendor has committed to a Year 2000 compliant release in sufficient time to
allow installation and testing prior to

                                     Page 13


<PAGE>


critical cutover dates. Consequently, the Company presently does not anticipate
either a significant amount of incremental expense or a disruption in service
associated with the Year 2000 and its impact on the Company's computer system.
In addition, the Company is assessing the impact of vendors' compliance to Year
2000 and what the impact will be on the Company's ongoing results of operations.

FORWARD-LOOKING STATEMENTS

      This Form 10-Q contains forward-looking statements (within the meaning of
Section 21E. of the Securities Exchange Act of 1934, as amended) representing
the Company's current expectations, beliefs, estimates or intentions concerning
the Company's future performance and operating results, its products, services,
markets and industry, and/or future events relating to or effecting the Company
and its business and operations. When used in this Form 10-Q, the words
"believes," "estimates," "plans," "expects," "intends," "anticipates," "Year
2000" and similar expressions as they relate to the Company or its management
are intended to identify forward-looking statements. The actual results or
achievements of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties related to
and including, without limitation, the effectiveness of the Company's business
and marketing strategies, the product mix sold by the Company, 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 Company, 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 Company's business and the other risks and factors
detailed in this Form 10-Q and in the Company's other filings with the
Securities and Exchange Commission. These risks and uncertainties are beyond the
ability of the Company to control. In many cases, the Company cannot predict the
risks and uncertainties that could cause actual results to differ materially
from those indicated by the forward-looking statements.

                                     Page 14


<PAGE>


                        PART II - OTHER INFORMATION

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

      (a) Exhibits. The following exhibits are filed with this report:

            EXHIBIT NO.   DESCRIPTION
            -----------   -----------

            10.1          Amendment Number One to Loan and Security Agreement
                          dated as of December 8, 1997 between Registrant and
                          Foothill Capital Corporation.

            27.           Financial Data Schedule (filed herewith).

      (b)   Reports on Form 8-K. No reports on Form 8-K have been filed during
            the quarter ended December 31, 1997.

                                     Page 15

<PAGE>

                                   SIGNATURES

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

                                          SOUND ADVICE, INC.
                                          (Registrant)

Date FEBRUARY 12, 1998                    /s/ PETER BESHOURI
                                          -------------------------
                                          Peter Beshouri, Chairman of the
                                          Board, President and Chief
                                          Executive Officer


Date FEBRUARY 12, 1998                    /s/ KENNETH L. DANIELSON
                                          -------------------------
                                          Kenneth L. Danielson, Chief
                                          Financial and Accounting Officer


                                     Page 16

<PAGE>

                                  EXHIBIT INDEX

Exhibit

NO.         DESCRIPTION

10.1        Amendment Number One to Loan and Security Agreement.

27.         Financial Data Schedule (filed herewith).


<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    EXHIBITS

                                       TO

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                                FOR QUARTER ENDED
                                DECEMBER 31, 1997

                             COMMISSION FILE NUMBER
                                     0-15194


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

                               SOUND ADVICE, INC.

              -----------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)