<PAGE>   1


                UNITED STATES 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 MARCH 27, 1999
                                       OR

---  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

Commission file number: 0-22074

                           NATIONAL RECORD MART, INC.
             (Exact name of Registrant as specified in its charter)

               DELAWARE                                          11-2782687
    (State or other jurisdiction of                           (I.R.S. Employer
     incorporation or organization)                          Identification No.)

507 FOREST AVENUE, CARNEGIE, PENNSYLVANIA                           15106
(Address of principal executive offices)                          (Zip Code)

       Registrant's telephone number, including area code: (412) 276-6200

        Securities registered pursuant to Section 12 (b) of the Act: none

          Securities registered pursuant to Section 12 (g) of the Act:
                         COMMON STOCK, $0.01 PAR VALUE.
                                (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 is not contained herein, and will not be contained herein, to
the best of the 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. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on June 23,
1999 as reported on the NASDAQ National Market System, was approximately
$24,606,889. Shares of Common Stock held by each officer and director and by
each person who owns more than 5% of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. The determination
of affiliate status is not necessarily a conclusive determination for other
purposes.

As of June 25, 1999, Registrant had outstanding 5,047,567 shares of Common
Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held September 23, 1999 (the "Proxy Statement") are
incorporated by reference into Part III.


<PAGE>   2


                                     PART I

ITEM 1. BUSINESS

         National Record Mart, Inc. (the "Company"), a Delaware corporation,
founded in 1937, operates in a single industry segment as a specialty retailer
of prerecorded home entertainment products, including compact discs ("CD"),
audio cassettes, videos and related accessories. According to Billboard
magazine, the Company is the fourth largest specialty retailer of prerecorded
music in the country as measured by number of stores. The Company is a leading
specialty music retailer in its core western Pennsylvania/eastern Ohio market.

         As of March 27, 1999, the Company operated 174 stores in 30 states
primarily in the eastern part of the United States. The Company has five
distinct store concepts: National Record Mart or NRM Music; Waves Music; Music
Oasis; Vibes Music; and the newest concept, Music X. The Music X store format is
a joint marketing effort in combination with a dominant radio station to
co-brand a music destination store. The Company has redesigned the Waves Music
store as a strategic mall-based growth format for the future. The prototype
Waves store ranges from 6,000 to 10,000 square feet with an expanded inventory
capacity of $400,000. The Waves strategy is to intertwine the newest customer
retail technologies with one of the largest offerings of prerecorded music and
other entertainment products available in a traditional specialty retail mall
environment.

         Certain statements in this annual report on Form 10-K are
forward-looking statements concerning the future operations of the Company. Such
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, and there are many important factors
that could cause actual results to differ materially from those in the
forward-looking statements. Such factors include: the pricing and marketing
activities of large diversified retailers within the geographic area of the
Company's operations; the extent to which recording artists release "hit"
recordings; changes in sales and advertising promotion practices by the major
music distributors; weather, especially during the Christmas selling season; and
interest rates, which affect the Company's financing costs.

INDUSTRY AND COMPETITIVE ENVIRONMENT

         The US retail music industry increased by 12% to $13.7 billion from
$12.2 billion in the prior year according to the Recording Industry Association
of America (RIAA). Full length CD's continued to increase, accounting for 74.8%
of the total market sales, while the cassette continued its decade long decline
to 14.8% from 18.2% of total market sales. Retail outlets continue to dominate
as the primary choice for purchasing music by the consumer, representing 86% of
the population according to the RIAA 1998 consumer profile report. Purchases
made at traditional music retail stores represented 51% of the market, consumer
electronic and specialty stores received 34% of the market share while 1.1% of
music purchases were made on-line via the Internet.

         The Company competes with national and regional home entertainment
product chains, mass merchandisers, electronic retail chains, discount stores,
warehouse clubs, music, video and other home entertainment product stores and
mail order clubs. Recently, numerous internet-based music mail order companies
have entered the competitive marketplace. Some of the Company's competitors have
substantially greater resources than the Company. The largest mail order clubs
are affiliated with major manufacturers of prerecorded music and may have
advantageous marketing arrangements with their affiliates. In addition, the
Company's products may compete with other forms of entertainment, such as
movies, concerts, sporting events, cable television and video games.

         The Company believes that its ability to compete successfully depends
on offering broad product selection, securing convenient sites, maintaining
attractive locations, managing merchandise efficiently, establishing and
maintaining name recognition, pricing its products competitively and providing
effective customer service and management.




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<PAGE>   3


SEASONALITY

         The Company's business is seasonal, with its highest sales and net
income levels historically occurring during the third quarter of its fiscal
year, which includes the Christmas selling season.


MERCHANDISING

         The Company's stores offer a full assortment of CDs, prerecorded audio
cassettes and related accessories with a more limited selection of movie and
music videos. The following table shows the percentage of the Company's total
merchandise sales attributable to each product group:

<TABLE>
<CAPTION>
Products                                                Fiscal Years
--------                                         1999       1998       1997
                                                ------     ------     ------
<S>                                             <C>        <C>        <C>
CDs                                              73.9%      70.7%      66.8%
Prerecorded audio cassettes                      11.2       13.6       17.7
Singles                                           3.8        6.3        6.5
Movie and music videos*                           3.6        2.6        2.3
Accessories and other**                           7.5        6.8        6.7
                                                ------     ------     ------
         Total                                  100.0%     100.0%     100.0%
                                                ======     ======     ======
</TABLE>

*  Includes DVD
** Includes apparel, blank tapes, cleaning products, storage cases, posters,
sheet music, LPs, magazines, books and miscellaneous items.

         Prerecorded Music. The Company's stores offer a broad array of CDs and
cassettes in all music categories including rock, pop, alternative, adult
contemporary, country, easy listening, classical, jazz, religious, new age,
rhythm and blues, children's, educational, show tunes, movie soundtracks, world
music and others. The Company maintains a broad inventory base, with individual
store inventory tailored to serve the particular customer demand in each store.
The Company's stores offer from 6,000 to 35,000 titles, with an average of
18,000 titles per store. The Company also offers a selection of over 265,000
SKU's which can be ordered through the Company's special order process. The
selection of prerecorded music offered at the Company's stores includes "hits"
which are best selling newer releases, "catalog" items, which are older but
still popular releases, and seasonal and promotional items such as Christmas
music, developing artist programs, "cut-outs" (low-priced items which have been
deleted from a manufacturer's current catalog) and used CDs.

         Prerecorded Video Cassettes. The Company's stores offer for sale a
varied selection of prerecorded VHS video cassettes and DVD (digital versatile
discs). DVD sales continue to increase while the price of the hardware decreases
and more titles are offered. Titles are offered in all categories with an
emphasis on music and movies.

         Accessories and Other Products. The Company's stores carry a variety of
accessories such as blank video and audio cassette tapes, maintenance and
cleaning products, home and portable storage cases, sheet music, posters,
T-shirts, magazines, and other items.

         Tickets. To increase customer traffic, the Company offers tickets to
entertainment events in many of its stores located in certain states including
Pennsylvania, Ohio, Michigan, Wisconsin, Illinois, West Virginia, Kentucky,
Rhode Island, Kansas, Iowa, North Carolina and South Carolina. The Company's
ticket outlets provide customers with access to tickets offered by Ticketmaster
as well as tickets to other local concerts and sporting events.





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<PAGE>   4


ADVERTISING

         The Company supports its retail sales through its own and various
vendor supported marketing and advertising programs. This support is realized in
the form of price and position subsidies from vendors; store signage point of
purchase displays and print, direct mail and media broadcast. In addition, the
Company exposes its customers to new releases through its "Street Date Sales
impact" program. This program features new releases, in all genre formats, with
special pricing and placement in our stores for the first three weeks of a new
album release.

         More than 850,000 store customers participate in the Passport program.
Passport allows a customer to earn points on every CD, tape or video purchase,
which may be redeemed for a free CD, cassette, or video of choice. The program
combines the standard customer loyalty incentives of frequent buyer programs,
with opportunities for discount on music and video products and other products
sold by other retailers. Passport also provides for database marketing directly
to consumers on a sophisticated, targeted basis. The Company believes that
Passport has the potential to differentiate its stores from the competition,
while creating incremental sales and increasing the average purchase per
transaction.

         The Company supports its Internet sales through various marketing and
advertising programs. This support is realized by vendor supported site
advertising, exclusive premiers and banner ads. The Company also has begun to
sign exclusive music retailer packages with other entertainment related sites
such as Titan Sports, Inc., which does business as the World Wrestling
Federation on the web site, www.wwf.com.

E-COMMERCE

         In December 1998, the Company launched its Internet commerce sites
www.nrmmusic.com and www.wavesmusic.com. These sites offer a wide variety of
music, over 265,000 titles, and movies for purchase. The site also offers the
consumer the ability to create customized CD's from a library of song tracks at
a cost of 99 cents per song and the ability to download music. While on-line
music sales remain a small percentage of total music sales industry wide, the
Company believes that this will gradually increase over time and anticipates
continuing its involvement in this area.


CUSTOMER SERVICE

         Customer service continues to be a primary focus of every employee of
the Company, including the field supervisory team, corporate operations
department and the human resources area.

STORE EXPANSION STRATEGY

         The Company intends to add approximately 16 new stores during fiscal
year 2000. Most of these stores will be of the Waves Music format. The Company
will continue to seek opportunities to improve the operations of under
performing stores or to close those stores.

         The Company also expects to begin a strategic rollout of its Music X
store format. Three incremental mall based locations have been secured and are
scheduled to be opened this year.

         The Company added 33 stores in fiscal 1999, and closed 7 stores, which
were performing under the Company's expectations. During fiscal 1998, the
Company opened 11 locations, and closed 10 stores.





                                       4
<PAGE>   5


INVENTORY MANAGEMENT

         The Company utilizes a proprietary interactive management information
and point of sale system, FOCUS 1000. This combined system permits complete
sales data and customer transactions to interact with the Company's purchasing,
inventory control and accounting functions.

         Inventory Management System. FOCUS 1000 integrates the Company's
purchasing, warehousing, distribution, pricing and sales information, enabling
the Company to set the appropriate quantity and mix of products in each of its
stores, turn over inventory more quickly, minimize returns to suppliers and
limit out-of-stock situations. Individual store sale profiles are utilized to
set overall purchase quantities and store-by-store allocations of new releases,
current hits and catalog products. These parameters are periodically updated
based on sales trends and demand patterns. In addition to utilizing FOCUS 1000,
stock levels are also monitored by the Company's product distribution group to
further assure appropriate store inventory levels. The system segments the
Company's products into over twenty specific music categories and tracks sales
in each store by category, so as to optimize sales/inventory ratios in each
store.

         The Company expects to begin its implementation of a new point of sale
(POS) system this year. The adoption of the new software and equipment along
with greatly enhanced data switching relay equipment will permit the two way
transfer of significantly more information in less time and at a lower cost than
the current POS system.

         Substantially all of the products sold by the Company are bar-coded.
Retail transactions and inventory shipped by vendors directly to stores are
captured through point-of-sale terminals at each store with data transmitted
nightly to the Company's central computer. This perpetual inventory system,
coupled with FOCUS 1000's replenishment system, determines target in-stock
levels for each store.

         Distribution. The Company operates one distribution center from which
store inventories are replenished and items are returned to manufacturers. FOCUS
1000 also permits inter-store transfers of inventory to achieve improved stock
balancing without requiring products to be routed through the Company's
distribution facility.

         Shipments from the distribution center and between stores are normally
made weekly, with more frequent shipments made to stores having very high
inventory turnover and to most stores during the Christmas shopping season.
Shipments are made by Company vehicles and by commercial shipping services such
as United Parcel Service. Certain new releases and other products are shipped
directly by manufacturers to the Company's stores.

         Loss Prevention. In the first quarter of fiscal 1998, the Company
instituted a comprehensive loss prevention program which included: increased
cycle counts, more frequent store audits, more selective recruiting and training
of store employees and the services of an external asset protection firm. Due to
the Company's continuing efforts in this area it has maintained the same level
of shrinkage as a percent of sales in fiscal 1999 as compared to fiscal 1998,
which was a 40% decrease from fiscal 1997.

SUPPLIERS AND PURCHASING

         A substantial portion of the Company's music products are purchased
directly from the five major music distributors. They include: Sony Music;
Warner/Elektra/Atlantic (subsidiary of Time Warner); BMG Music (subsidiary of
Bertelsman); UNI Distribution; and EMD (subsidiary of Thorn-EMI). These five
majors account for a substantial majority of shipments to the Company. As is
typical in its industry, the Company has no material long-term purchase
agreements with its suppliers.

         Vendors generally permit the Company to return and exchange products
for other titles carried by the vendors subject to certain volume limitations
and penalties. Return and exchange privileges apply only as long as a particular
title and format is in the manufacturer's current catalog. Prior to removal of
titles and formats from their current catalog, manufacturers give customers
approximately 60 to 90 days advance notice of such deletion. Upon



                                       5
<PAGE>   6


receipt of such notice, the Company can use the information stored in FOCUS 1000
to determine the number of units to be returned and from which locations.

         Major vendors generally offer some form of price protection in the
event the wholesale price of current stock is reduced. Typically, vendors will
either (i) provide product credit, advertising credit or free goods to cover the
difference between the original price and the reduced price, (ii) provide
additional discounts on new products, (iii) allow the Company to return older
products for the original (higher) cost or (iv) notify the Company in advance of
price reductions and give the Company a period of time to sell the product or
return it for full credit.

         These industry practices of return and exchange privileges, catalog
change notice and price protection permit the Company to carry a wider selection
of music titles and at the same time reduce the risk of carrying inventory. The
exchange privilege practices of manufacturers have been changed in the past and
may change in the future.

         The major music vendors offer retailers a returns incentive/
disincentives plan that has been beneficial for the Company. To encourage
retailers to buy carefully by limiting returns, an incentive payment is issued
on most purchases and a penalty restocking fee is charged on only the product
returned. If the retailer returns-to-purchases ratio with the major vendors is
below a certain point, (generally 14% to 17%) the retailer will benefit. The
Company's return percentages have been lower than the break-even with the
majority of its major vendors allowing the Company to benefit from their returns
policies.

         As part of FOCUS 1000, the Company utilizes electronic data interchange
(EDI) with its major vendors. This direct computer link enables automatic and
immediate transmission of purchase orders and, with certain vendors, return
requests, expediting their execution.

TRADEMARKS AND SERVICE MARKS

         The Company operates its stores under various names and service marks,
including National Record Mart, NRM Music, Waves Music, Music Oasis, Vibes
Music, Waves Music and Gifts, One Stop Entertainment, Music X, House of Music
and Tempo Music. The Company has obtained federal registrations of its
trademarks and service marks for Waves Music, NRM Music, Oasis Music & Video,
Music Oasis, Music X and has applied for registration of its service marks in
Vibes Music. The application for registration of the service mark Vibes Music
has been opposed by one party. This opposition is currently pending before the
Trademark trial and appeal board. The trade name Tempo Music was acquired
through an acquisition in November 1998 and will eventually be changed to Waves
Music.

PERSONNEL

         As of March 27, 1999, the Company employed 1,600 persons, 156 of whom
worked at the Company's headquarters (including 10 part-time employees) or were
area supervisors and 1,444 of whom worked at the Company's stores (including 987
part-time employees). The Company also adds part-time personnel during the
Christmas season. In December 1998, the Company employed approximately 352
seasonal employees. None of the Company's employees are represented by a union.
The Company believes that its employee relations are good.


ITEM 2. PROPERTIES

         Corporate Headquarters and Distribution Facility. The Company's
headquarters and distribution center is located in Carnegie, Pennsylvania, a
suburb of Pittsburgh. This leased facility consists of approximately 60,000
square feet of distribution and warehouse space and 10,000 square feet of office
space on approximately 3.5 acres of land. Management believes that its
distribution center can service up to 350 stores with a minimal increase in
personnel and fixtures. The Company's lease expires on April 30, 2005 and
provides for rental payments of an average of approximately $148,000 per year.





                                       6
<PAGE>   7


         Store Leases. All of the Company's stores are subject to operating
leases with various remaining terms, including renewal options, through the year
2010. The leases have initial terms ranging from 5 to 15 years, with the average
initial term being 8 years. The Company's store leases typically provide for a
fixed minimum rental, payable monthly, plus payment of a percentage of gross
receipts in excess of certain sales levels and common area maintenance, real
estate taxes and other charges. Certain of the Company's mall store leases
contain provisions permitting the landlord to relocate the Company's store or
terminate the lease upon failure to achieve specified minimum sales levels or
upon certain other conditions. In addition, many leases restrict the Company
from opening new stores within a specified mileage radius. The following table
lists the number of leases for the Company's stores due to expire in each
calendar year, including renewal options:

        1999             24              2003                            22
        2000             15              2004                            10
        2001             22              2005                             9
        2002             14              2006 and thereafter             58


ITEM 3. LEGAL PROCEEDINGS

         There are no legal proceedings pending to which the Company is a party
or to which any of its properties is subject, other than routine litigation
incidental to its business which is covered by insurance or which is not
expected to have a material adverse effect on the Company's financial condition
or results of operations. See "Item 1. Business - Trademarks and Service Marks"
for a description of certain litigation relating to one of the Company's service
marks.

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

         No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1999.

SUPPLEMENTARY ITEM.

IDENTIFICATION OF EXECUTIVE OFFICERS OF THE REGISTRANT

                  The following table sets forth certain information with
respect to the executive officers of the Company as of June 23, 1999.

<TABLE>
<CAPTION>
         Name                               Age                        Office with the Company
         ----                               ---                        -----------------------
         <S>                                <C>                        <C>
         William A. Teitelbaum              48                         Chairman, CEO, President and
                                                                       Director
         Theresa Carlise                    40                         Senior Vice President, CFO,
                                                                       Treasurer, Secretary and Director
         Scott Bargerstock                  49                         Vice President of Business Development
         James Benedetti                    36                         Vice President of Information Systems
         John Grandoni                      49                         Vice President of Purchasing
         Charles Michael Stephenson         44                         Vice President of Marketing
         Steven Zimmerman                   43                         Vice President of Store Operations
</TABLE>

William Teitelbaum has served as Chairman of the Company since 1986 and served
as President since 1991. In January of 1997 Mr. Teitelbaum resigned as President
while retaining the position of Chairman and Chief Executive Officer. In January
of 1998, Mr. Teitelbaum resumed the position of President. He also served as
Vice President and Treasurer from 1986 to 1991. From 1980 to 1985, he was a
partner of Bear Stearns & Co. In addition, since 1985, Mr. Teitelbaum has been
the sole shareholder and Chairman of Remsen Funding Corp., a New York investment
firm.


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<PAGE>   8


Theresa Carlise joined the Company in July of 1986 as a financial systems
consultant and subsequently became Controller of the Company in 1987. She served
as Vice President of Finance of the Company from April 1990 to April 1993, when
she became Senior Vice President, Chief Financial Officer and a Director of the
Company. Since January of 1991, she has also served as Treasurer of the Company.

Scott Bargerstock is Vice President of Business Development and has served the
Company since 1971 in various positions including Store Manager, District
Manager and Regional Manager. Mr. Bargerstock was promoted in February of 1998
to his current position.

James Benedetti is Vice President of Information Systems and has been with the
Company for ten years as Manager and Director of Information Systems. In
February of 1998 Mr. Benedetti was promoted to his current position.

John Grandoni is Vice President of Purchasing and has twenty-two years of
specialty music retail experience in various positions. Prior to joining the
Company in 1996 Mr. Grandoni was Vice President of Purchasing for Cavages, a
music specialty retailer based in Buffalo, New York. In February of 1998 Mr.
Grandoni was promoted to his current position.

Charles Michael Stephenson started his career at NRM with a music retail
background of twenty years with Camelot Music in Canton, Ohio. In April of 1996
he joined NRM as Director of Marketing. In February of 1998, Mr. Stephenson
became Vice President of Marketing for the Company.

Steven Zimmerman is Vice President of Store Operations and has been in the store
operations area for over twenty years in various capacities at Camelot Music in
Canton, Ohio. Mr. Zimmerman joined NRM in November of 1995 as Director of Store
Operations and has been in the position of Vice President since February of
1998.


         Officers are elected annually to serve until the ensuing year or until
their successors are duly elected.








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<PAGE>   9


                                     PART II

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

MARKET INFORMATION

         The Company's common stock is traded on the NASDAQ National Market
System under the symbol NRMI. For common stock price information, see Note 9 of
Notes to Consolidated Financial Statements.

         As of June 23, 1999, the approximate number of common stockholders of
record was 90. The approximate number of total stockholders as of that date was
1,600.

DIVIDEND POLICY

         In conjunction with the Company's senior credit facility, the Company
is prohibited from paying cash dividends on its common stock.







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<PAGE>   10


ITEM 6. SELECTED FINANCIAL DATA


                           NATIONAL RECORD MART, INC.
                      SELECTED CONSOLIDATED FINANCIAL DATA
       (IN THOUSANDS, EXCEPT PER SHARE DATA AND SELECTED OPERATING DATA)

<TABLE>
<CAPTION>
                                                                                        FISCAL YEAR ENDED (1)
                                                              ---------------------------------------------------------------------
                                                              March 27,      March 28,      March 29,      March 30,      March 25,
                                                                1999           1998           1997          1996(2)         1995
                                                              ---------      ---------      ---------      ---------      ---------
<S>                                                           <C>            <C>            <C>            <C>            <C>
STATEMENTS OF OPERATIONS DATA:
Net sales                                                     $ 129,902      $ 112,448      $  99,439      $  99,084      $  95,697
Gross profit                                                     48,217         42,963         37,106         36,538         35,847
Selling, general and administrative expenses                     43,743         36,859         34,385         34,542         30,589
Depreciation and amortization                                     3,540          2,801          2,725          3,117          2,683
Impairment of assets write-down                                      --             --             --          2,906             --
Interest expense, net                                             3,082          1,822          1,696          1,597          1,011
Other expense (income), net                                         539            104            (26)           446            450
(Loss) income before income tax (benefit) expense                (2,688)         1,378         (1,674)        (6,069)         1,115
Net (loss) income                                                (1,691)           893         (1,101)        (3,884)           712
Basic net (loss) income per share                             $    (.35)     $     .18      $    (.23)     $    (.79)     $     .14
Diluted net (loss) income per share                           $    (.35)     $     .18      $    (.23)     $    (.79)     $     .14
Basic weighted average number of shares outstanding               4,801          4,845          4,852          4,927          5,205
Weighted average number of common shares and
  common share equivalent shares (warrants and options)
  outstanding                                                     4,801          5,057          4,852          4,927          5,205

SELECTED OPERATING DATA:
Stores open at beginning of year                                    148            147            151            141            118
Stores opened /acquired during year                                  33             11              8             16             32
Stores closed during year                                             7             10             12              6              9
Stores open at end of year                                          174            148            147            151            141
Comparable store net sales increase (decrease) (3)                    4%            13%          (0.4)%           (3)%            3%
BALANCE SHEET DATA:
Working capital                                               $  28,058      $  23,892      $  23,964      $  22,245      $  25,017
Total assets                                                     72,494         52,540         55,020         52,924         53,824
Long-term debt, including current maturities                     35,325         19,413         21,370         19,468         19,853
Stockholders' equity                                             15,843         16,958         16,066         17,178         21,173
</TABLE>


(1)    Each fiscal year consisted of 52 weeks except the fiscal year ended March
       30, 1996, which consisted of 53 weeks. Each fiscal year is hereafter
       referred to by the year in which it ended, e.g., the fiscal year ended
       March 27,1999 is "fiscal 1999"

(2)    The Company adopted Financial Accounting Standards Board Statement No.
       121, "Accounting for the Impairment of Long-Lived Assets to be Disposed
       of," in fiscal 1996. In connection with this adoption, the Company wrote
       down $2,906,481 of assets, which increased its net loss by $1,860,148 or
       $0.38 per share for fiscal year ended March 30, 1996.

(3)    A store is included in comparable store sales calculations at the
       beginning of its 13th full month of operation.








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<PAGE>   11

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

RESULTS OF OPERATIONS

         The following table sets forth for the periods indicated certain items
in the Consolidated Statements of Operations as a percentage of net sales:

<TABLE>
<CAPTION>
                                                                             Fiscal Years
                                                               ---------------------------------------
                                                                1999             1998            1997
                                                               ------           ------          ------
<S>                                                            <C>              <C>             <C>
Net sales                                                      100.0%           100.0%          100.0%
Cost of sales                                                   62.9             61.8            62.7
                                                               ------           ------          ------
  Gross profit                                                  37.1             38.2            37.3
Selling, general and administrative expenses                    33.7             32.7            34.6
Depreciation and amortization                                    2.7              2.5             2.7
Interest expense, net                                            2.3              1.7             1.7
Other expense                                                     .4              0.1             0.0
                                                               ------           ------          ------
(Loss) income before income taxes expense (benefit)             (2.0)             1.2            (1.7)
(Benefit) expense income taxes                                   (.7)              .4            (0.6)
                                                               ------           ------          ------
  Net (loss) income                                             (1.3)%            0.8%           (1.1)%
                                                               ======           ======           =====
</TABLE>

         Net Sales. Net sales increased during fiscal 1999 by $17.4 million or
15.5% compared to fiscal 1998. Factors that contributed to the increase in total
sales are the increase in comparable store sales of 4.2% and the opening of 33
new stores and the closing of 7 under-performing stores. Net sales increased
during fiscal 1998 by 13.1% compared to fiscal 1997, due primarily to the
increase in comparable store sales of 12.8% compared to fiscal 1997. This
increase was primarily due to strong new releases in all genres of music and the
Company's marketing programs.


         Gross Profit. Gross profit expressed as a percentage of net sales,
decreased from 38.2% in fiscal 1998 to 37.1% in fiscal 1999. A portion of the
decrease, expressed as a percentage of sales, is attributable to competitive
pricing factors and the continued shift in consumer preference from higher
profit margin cassettes to lower profit margin CD's. Gross profit increased from
37.3% in fiscal 1997 to 38.2% in fiscal 1998. The increase in margin was largely
attributable to the Company's 40% decrease in overall inventory shrinkage.

         Expenses. Selling, general and administrative expenses, (SG&A)
expressed as a percentage of net sales increased from 32.7% in fiscal 1998 to
33.7% in fiscal 1999. The Company's increase in SGA is related to the added
expenses for 33 new stores and 14 store remodels and expansions of which sales
have not proportionately matured. As a percentage of sales, SG&A decreased in
fiscal 1998 to 32.7% from 34.6% in fiscal 1997. This reduction is attributable
to the increase in comparable store sales of 12.8% and an overall reduction of
operating costs.

         Depreciation and amortization increased from $2.8 million in fiscal
1998 to $3.5 million in fiscal 1999 primarily due to the addition of 33 new
stores and the amortization of the costs associated with the private placement
of its subordinated debt. Depreciation and amortization increased from $2.7
million in fiscal 1997 to $2.8 million in fiscal 1998 due to the addition of 11
new stores.

         Interest Expense. Interest expense expressed as a percentage of net
sales was 2.4% or $3.2 million for fiscal 1999 compared to 1.7% or $1.9 million
for fiscal 1998. The increase in interest expense of approximately $1.3 million
in fiscal 1999 is due to the accretion of approximately $455,000 of the
$1,600,000 of the subordinated debt discount originating in the first month of
the fiscal year and an increase in borrowings relating to the addition of 33 new
stores.


                                       11
<PAGE>   12


         In fiscal 1998 interest expense was 1.7% expressed as a percentage of
sales or $1.9 million as compared to 1.7% in fiscal 1997 or $1.7 million.

         Income Taxes. The Company's effective tax rate in fiscal 1999 and 1998
was 34% and 35%, respectively.

         As of March 27, 1999, the Company had net deferred tax assets of
$2,144,000. The ultimate realization of the deferred tax assets is dependent
upon the generation of future taxable income. See Note 5 of Notes to
Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's primary sources of liquidity are cash generated by
operations, trade credit, and amounts available under its credit facility. Net
cash provided by operating activities was $1.1 million in fiscal 1999 compared
to net cash provided by operating activities of $3.8 million in fiscal 1998 and
$0.8 million in fiscal 1997. During fiscal 1999, the $1.1 million provided by
operating activities was primarily due to increase in depreciation and
amortization and increase in other liabilities and accrued expenses.

         In fiscal 1998 and 1997 the net cash provided by operating activities
was attributable to net income, plus depreciation and amortization and
refundable income taxes of prior years, offset to some extent by a decrease in
accounts payable.

         During fiscal 1999, 1998 and 1997, the Company used $10.3 million, $2.5
million and $2.9 million, respectively, to purchase property and equipment. The
Company opened 33 new stores and closed 7 stores in fiscal 1999 compared to 11
new stores and 10 closed stores in fiscal 1998. Included in the 33 new stores
are two acquisitions. The Company acquired 4 stores from Record Den Inc. and DJK
Records & Video Inc. for approximately $933,000 and 13 stores from Happy Town
and Tempo for approximately $3.6 million. The Company anticipates opening 16
stores in fiscal 2000. Management estimates that the capital cost of opening the
new stores will be approximately $300,000 per store which will be funded through
operating cash flow and its credit facilities, excluding inventory of
approximately $300,000 per store which is obtained through trade credit.

         On February 17, 1998 the Company renewed its revolving line of credit
from an institutional lender through June 10, 2003. Under the line, the Company
is permitted to borrow up to $28 million, subject to a borrowing base
calculation based upon inventory levels. Between the months of October 1 and
December 31 an overadvance of $1.5 million is available to the Company in
addition to its borrowing base calculation, not to exceed $28 million. As of
February 1, 1999 the Company's institutional lender reduced its interest rates.
Borrowings under the amended facility bear interest at a floating rate equal to
the lender's base rate (7.75% at March 27, 1999) or, at the Company's option,
the 30-day LIBOR rate (4.9375 at March 27, 1999) plus 2.0%.

         As of March 27, 1999, the Company's outstanding credit balance on its
revolver was $21.4 million. The Company's borrowing availability at March 27,
1999 was $6.2 million. The revolver balance and the Company's cash requirements
peak in February when the Company's trade payables become due from the Christmas
selling season.

         On April 16, 1998, the Company completed a private placement of
$15,000,000 of senior subordinated notes to a group of institutional lenders.
The notes carry an interest rate of 11.75% payable semi-annually and are due on
April 16, 2001. In consideration of the placement the Company issued warrants to
purchase 400,000 shares of common stock at $.01 per share. The Company is using
the funds to expand its store base, update its point of sale equipment and
general working capital purposes.

         On February 23, 1994, the Board of Directors approved a program for the
Company to purchase up to $1,000,000 in value of its common stock. On September
17, 1998 the Board of Directors approved the company to purchase up to 500,000
additional shares of the Company's common stock. Such purchases will be made
from time to



                                       12
<PAGE>   13
time in the marketplace at the Company's discretion. Since the inception of the
program, the Company had purchased 444,817 shares of its stock.

         Management believes that cash flows from operations, amounts available
under the revolving credit facility and the subordinated debt facility will be
sufficient to meet the Company's current liquidity and capital needs at least
through fiscal 2000.

SEASONALITY

         The Company's business is seasonal in nature, with the highest sales
and earnings occurring in the third quarter of its fiscal year, which includes
the Christmas selling season. Approximately 37% of the Company's net sales for
fiscal 1999 were generated in the third quarter. (See Note 9 of Notes to the
Consolidated Financial Statements for quarterly financial data.) Year-to-year
comparisons of quarterly results and comparable store net sales can be affected
by a variety of factors, including the success and timing of new releases by
manufacturers, the timing and duration of the holiday selling seasons and the
timing of new store openings and sales promotions.

EFFECT OF ECONOMIC PATTERNS AND INFLATION

         While the Company attempts to pass on increases in costs and expenses
from operations, its ability to do so may be limited by competitive factors.
Although the Company's operations are affected by general economic trends, the
Company does not believe that inflation has had a material effect on the results
of its operations in the last three fiscal years.

YEAR 2000 COMPLIANCE

         State of Readiness. The Company has completed evaluation of its
information technology issues relative to computer programs being unable to
distinguish between the year 1900 and the year 2000. As a result of such review,
the Company has concluded that its point of sale information systems will need
to be upgraded. The Company has selected a replacement system, which will be
installed beginning in July 1999 and anticipates completion before the Christmas
selling season Subsequent to such installation, testing will be conducted of
such systems to verify year 2000 compliance. In addition, the Company has
determined that reprogramming of certain of its other proprietary information
systems programs will be required. Such reprogramming has begun and is
approximately 33 % completed. It is anticipated that such reprogramming will be
completed by August 1999, after which time testing of such reprogrammed systems
for year 2000 compliance will be conducted.

         The Company's evaluation of year 2000 issues relating to
non-information technology systems, such as embedded microchips and automatic
processors, is substantially completed. The Company has not yet identified any
material problems in this area.

         The Company is dependent upon music suppliers from whom it purchases
products. Based upon informal inquiries, the Company believes that year 2000
issues will not pose material problems with respect to such suppliers continuing
to do business with the Company on customary terms and conditions. If such
problems arise, the Company has no practical alternatives to dealing with its
existing suppliers, as the five largest suppliers dominate the music
distribution industry. The Company is also dependent on normal
telecommunications and banking systems and is relying upon the providers of such
services not encountering material difficulties with regard to year 2000
compliance.

         Costs to Address Year 2000 Issues. The costs of the required upgrade of
the Company's inventory management and point of sale systems is expected to be
approximately $10,000 per store (currently the Company operates 174 stores) or
$1.7 million. These costs are expected to be incurred in the first and second
quarter of the fiscal year ending March 2000, but will, where appropriate, be
capitalized and amortized over the useful lives of the applicable assets. The
Company to date has incurred capitalized costs of $80,000. The Company does not
expect to incur material costs in internally reprogramming its other information
systems software.





                                       13
<PAGE>   14


         Risks of Year 2000 Issues. The Company believes that the most
reasonably likely worst case scenario with regard to year 2000 matters would
relate to the effect that year 2000 issues would have upon music suppliers to
the Company. If such suppliers were unable to continue to do business with the
Company on comparable terms as conducted in the past, the Company's business
could be materially adversely affected.

     The Company's Contingency Plan. The Company has begun discussions with its
suppliers to provide assurance of business continuation in the event of year
2000 issues, with a view to developing a plan for continuing the Company's
access to music product in the event of the suppliers' year 2000 difficulties.
Such a plan, however, has not yet been developed. We cannot assure you that our
efforts will prevent all consequences and there may be undetermined future costs
due to business disruption that may be caused by suppliers or unforeseen
circumstances.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Consolidated Financial Statements and related notes are included in
Item 14 of this report. See Index to Consolidated Financial Statements contained
in Item 14 herein.


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

         None.

                                    PART III

ITEM 10. (a) AND (b) DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by these items of Part III will be set forth
in the Company's Proxy Statement for its 1999 Annual Meeting of Stockholders to
be filed with the Securities and Exchange Commission within 120 days after March
27, 1999 under similar captions and is incorporated herein by reference, except
that the information required with respect to the executive officers of the
Company under Item 10 (b) is set forth immediately following Item 4.

                                     PART IV

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

(a)      DOCUMENTS FILED AS A PART OF THIS REPORT:

         (1)      CONSOLIDATED FINANCIAL STATEMENTS

                  See Index to Consolidated Financial Statements on Page 17.

         (2)      FINANCIAL STATEMENT SCHEDULES


                                       14
<PAGE>   15


                  None of the schedules for which provision is made in the
                  applicable accounting regulations of the Securities and
                  Exchange Commission are required.

         (3)      EXHIBITS

                  See Exhibit Index on pages 31 through 32.

(b)      REPORTS ON FORM 8-K

         No reports on Form 8-K were filed by the Company during the last
         quarter of the period covered by this Report.


(c)      EXHIBITS:

         See Exhibit Index on pages 31 through 32.

(d)      OTHER FINANCIAL STATEMENTS

         Not applicable.





                                       15
<PAGE>   16


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized.

                                            NATIONAL RECORD MART, INC.


                                            BY: /s/ William A. Teitelbaum
                                                --------------------------------
                                                William A. Teitelbaum
                                                Chairman of the Board, President
                                                and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
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                                   Capacity                                    Date
---------                                   --------                                    ----
<S>                                         <C>                                         <C>
                                            Chairman of the Board, President
/s/ William A. Teitelbaum                   Chief Executive Officer and Director        June 25, 1999
---------------------------
William A. Teitelbaum

                                            Senior Vice President
                                            Chief Financial Officer,
                                            Chief Accounting Officer,
/s/ Theresa Carlise                         Treasurer, Secretary and Director           June 25, 1999
---------------------------
Theresa Carlise


/s/ Samuel S. Zacharias                     Director                                    June 25, 1999
---------------------------
Samuel S. Zacharias


/s/ Irwin B. Goldstein                      Director                                    June 25, 1999
---------------------------
Irwin B. Goldstein
</TABLE>












                                       16
<PAGE>   17


                           NATIONAL RECORD MART, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



<TABLE>
<CAPTION>
                                                                                        Page
                                                                                        ----
<S>                                                                                     <C>
Report of Independent Auditors                                                          18

Consolidated Statements of Operations for the fiscal years
ended March 27, 1999, March 28, 1998, and March 29, 1997                                19

Consolidated Balance Sheets as of March 27, 1999 and March 28, 1998                     20

Consolidated Statements of Cash Flows for the fiscal years
ended March 27, 1999, March 28, 1998, and March 29, 1997                                21

Consolidated Statements of Stockholders' Equity for the fiscal years
ended March 27, 1999, March 28, 1998, and March 29, 1997                                22

Notes to Consolidated Financial Statements                                              23
</TABLE>







                                       17
<PAGE>   18


Report of Independent Auditors



To the Board of Directors and Stockholders
of National Record Mart, Inc. and Subsidiary


We have audited the accompanying consolidated balance sheets of National Record
Mart, Inc. and subsidiary as of March 27, 1999 and March 28, 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended March 27, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of National Record
Mart, Inc. and subsidiary at March 27, 1999 and March 28, 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended March 27, 1999, in conformity with generally
accepted accounting principles.



                                                      ERNST & YOUNG LLP


Pittsburgh, Pennsylvania
June 11, 1999




                                       18
<PAGE>   19


                   NATIONAL RECORD MART, INC. and Subsidiary
                     CONSOLIDATED STATEMENTS OF OPERATIONS
     For the years ended March 27, 1999, March 28, 1998 and March 29, 1997


<TABLE>
<CAPTION>
                                                                        Years Ended
                                                        --------------------------------------------
                                                          March 27,       March 28,      March 29,
                                                            1999            1998           1997
                                                        -------------   -------------  -------------
<S>                                                     <C>             <C>            <C>
Net sales                                               $ 129,902,083   $ 112,488,429  $  99,438,863
Cost of sales                                              81,685,053      69,524,955     62,332,670
                                                        -------------   -------------  -------------
    Gross profit                                           48,217,030      42,963,474     37,106,193

Selling, general and administrative expenses               43,743,424      36,858,670     34,385,354
Depreciation and amortization                               3,540,141       2,801,248      2,725,030
Interest expense                                            3,165,988       1,859,661      1,730,893
Interest income                                               (83,493)        (37,935)       (34,656)
Other expense (income)                                        539,173         104,321        (26,450)
                                                        -------------   -------------  -------------
Total expenses                                             50,905,233      41,585,965     38,780,171
                                                        -------------   -------------  -------------

(Loss) income before income tax expense (benefit)          (2,688,203)      1,377,509     (1,673,978)
(Benefit) provision for income taxes                         (996,862)        484,861       (573,307)
                                                        -------------   -------------    -----------

    Net (loss) income                                   $  (1,691,341)   $    892,648  $  (1,100,671)
                                                        =============   =============  =============

Basic net (loss) income per share                       $       (0.35)   $       0.18  $       (0.23)
Diluted net (loss) income per share                     $       (0.35)   $       0.18  $       (0.23)

Basic weighted average common shares outstanding            4,800,867       4,844,624      4,851,694
Weighted average number of common shares and common
 equivalent shares (warrants and options) outstanding       4,800,867       5,057,323      4,851,694
</TABLE>



           See accompanying notes to consolidated financial statements






                                       19
<PAGE>   20


                    NATIONAL RECORD MART, INC. and Subsidiary
                           CONSOLIDATED BALANCE SHEETS
                     As of March 27, 1999 and March 28, 1998

<TABLE>
<CAPTION>
                                                                                        March 27,              March 28,
                                                                                          1999                   1998
                                                                                      ------------           ------------
<S>                                                                                   <C>                    <C>
Assets
 Current assets:
  Cash and cash equivalents                                                           $    853,222           $    384,304
  Merchandise inventory                                                                 44,137,192             37,000,610
  Due from stockholder                                                                     494,249                399,544
  Deferred income taxes                                                                    417,000                343,000
  Refundable income taxes                                                                  229,860                 63,522
  Other current assets                                                                   3,358,625              1,886,692
                                                                                      ------------           ------------
 Total current assets                                                                   49,490,148             40,077,672

 Property and equipment, at cost                                                        36,014,844             25,108,592
 Accumulated depreciation and amortization                                             (17,771,446)           (15,006,851)
                                                                                      ------------           ------------
 Property and equipment, net                                                            18,243,398             10,101,741

 Other assets:
  Deferred income taxes                                                                  1,726,319                984,000
  Intangibles                                                                            2,534,646              1,001,845
  Other assets                                                                             499,180                374,810
                                                                                      ------------           ------------
 Total other assets                                                                      4,760,145              2,360,655
                                                                                      ------------           ------------
    Total assets                                                                      $ 72,493,691           $ 52,540,068
                                                                                      ============           ============

Liabilities and stockholders' equity
 Current liabilities:
  Accounts payable                                                                    $ 15,537,814           $ 12,327,619
  Deferred income                                                                        1,505,954              1,193,132
  Other liabilities and accrued expenses                                                 4,281,331              2,466,415
  Current maturities of long-term debt                                                     106,695                 17,127
  Income taxes payable                                                                        --                  181,782
                                                                                      ------------           ------------
 Total current liabilities                                                              21,431,794             16,186,075

 Long-term debt:
   Notes payable                                                                        13,845,464                 12,301
   Revolving credit facility                                                            21,373,000             19,383,236
                                                                                      ------------           ------------
 Total long-term debt                                                                   35,218,464             19,395,537

 Commitments and contingencies

 Stockholders' equity:
   Preferred Stock, $.01 par value, 2,000,000 shares authorized, none issued                  --                     --
   Common Stock, $.01 par value, 9,000,000 shares authorized,
    5,494,384 and 5,037,916 shares issued, and 5,049,567 and 4,844,624 shares
    outstanding at March 27, 1999 and March 28, 1998, respectively                          54,944                 50,379
   Additional paid-in capital                                                           15,858,922             14,057,288
   Retained earnings                                                                     1,590,432              3,281,773
                                                                                      ------------           ------------
                                                                                        17,504,298             17,389,440
   Less Treasury Stock, 444,817 and 193,292 shares at
    March 27, 1999 and March 28, 1998, respectively                                     (1,660,865)              (430,984)
                                                                                      ------------           ------------
   Total stockholders' equity                                                           15,843,433             16,958,456
                                                                                      ------------           ------------
    Total liabilities and stockholders' equity                                        $ 72,493,691           $ 52,540,068
                                                                                      ============           ============
</TABLE>

           See accompanying notes to consolidated financial statements



                                       20
<PAGE>   21


                   NATIONAL RECORD MART, INC. and Subsidiary
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
     For the years ended March 27, 1999, March 28, 1998 and March 29, 1997


<TABLE>
<CAPTION>
                                                                                       Years Ended
                                                              -------------------------------------------------------------
                                                                March 27,               March 28,                March 29,
                                                                  1999                    1998                     1997
                                                              -------------           -------------           -------------
<S>                                                           <C>                     <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income                                             $  (1,691,341)          $     892,648           $  (1,100,671)
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating activities:
  Depreciation and amortization                                   3,540,141               2,801,248               2,725,030
  Accretion of notes payable for value assigned
   for warrants                                                     445,464                    --                      --
  Loss from sale of property and equipment                          144,101                 185,475                 116,269
  Deferred income taxes                                            (816,319)                185,000                 546,000
  Other                                                              31,085                    --                  (221,900)
Changes in operating assets and liabilities:
  Merchandise inventory                                          (4,862,139)                466,564              (2,157,839)
  Other assets                                                     (636,789)               (721,147)               (363,945)
  Refundable income taxes                                          (166,338)              1,459,617                    --
  Accounts payable                                                3,210,195              (2,207,512)              1,139,728
  Deferred income                                                   312,822                 214,201                 226,152
  Other liabilities and accrued expenses                          1,805,352                 351,269                 (60,042)
  Income taxes payable                                             (181,782)                181,782                    --
                                                              -------------           -------------           -------------
  Net cash (used in) provided by operating activities            (1,134,452)              3,809,145                 848,782

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                            (10,300,704)             (2,508,714)             (2,942,008)
  Asset purchases (see Note 8)                                   (4,507,275)                   --                      --
  Amounts (loaned to) received from stockholders                    (94,705)                (28,819)                 17,346
  Other long-term investments                                          --                   235,447                 172,669
                                                              -------------           -------------           -------------

    Net cash used in investing activities                       (14,902,689)             (2,302,086)             (2,751,993)

CASH FLOWS FROM FINANCING ACTIVITIES
  Payments on debt                                             (164,655,790)           (130,704,676)           (115,442,498)
  Borrowings on revolving line of credit                        180,122,821             128,747,032             117,620,261
  Purchases of Treasury Stock                                    (1,229,881)                   --                      --
                                                              -------------           -------------           -------------
    Net cash provided (used in) by financing activities          14,237,150              (1,957,644)              2,177,763
                                                              -------------           -------------           -------------

  Net increase (decrease) in cash and cash equivalents              468,918                (450,585)                274,552
  Cash and cash equivalents, beginning of year                      384,304                 834,889                 560,337
                                                              -------------           -------------           -------------
  Cash and cash equivalents, end of year                      $     853,222           $     384,304           $     834,889
                                                              =============           =============           =============
</TABLE>



           See accompanying notes to consolidated financial statements




                                       21
<PAGE>   22


                   NATIONAL RECORD MART, INC. and Subsidiary
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
     For the years ended March 27, 1999, March 28, 1998 and March 29, 1997


<TABLE>
<CAPTION>
                                                         Additional                                                  Total
                                    Common Stock          Paid-in        Retained          Treasury Stock        Stockholders'
                                 Shares      Amount       Capital        Earnings       Shares       Amount         Equity
                                ---------    -------   ------------    ------------    -------   ------------   -------------
<S>                             <C>          <C>       <C>             <C>             <C>       <C>            <C>
Balance at March 30, 1996       5,037,916    $50,379   $ 14,004,188    $  3,489,796    166,200   $   (366,642)  $ 17,177,721
 Net loss                            --         --             --        (1,100,671)      --             --       (1,100,671)
 Shares obtained in exchange
  for notes receivable               --         --             --              --       27,092        (64,342)       (64,342)
 Compensatory stock options          --         --           53,100            --         --             --           53,100
                                ---------    -------   ------------    ------------    -------   ------------   ------------

Balance at March 29, 1997       5,037,916     50,379     14,057,288       2,389,125    193,292       (430,984)    16,065,808
 Net income                          --         --             --           892,648       --             --          892,648
                                ---------    -------   ------------    ------------    -------   ------------   ------------

Balance at March 28, 1998       5,037,916     50,379     14,057,288       3,281,773    193,292       (430,984)    16,958,456
 Warrants issued and exercised    455,968      4,560      1,800,389            --         --             --        1,804,949
 Stock options exercised              500          5          1,245            --         --             --            1,250
 Net loss                            --         --             --        (1,691,341)      --             --       (1,691,341)
 Purchases of treasury stock         --         --             --              --      251,525     (1,229,881)    (1,229,881)
                                ---------    -------   ------------    ------------    -------   ------------   ------------

Balance at March 27, 1999       5,494,384    $54,944   $ 15,858,922    $  1,590,432    444,817   $ (1,660,865)  $ 15,843,433
                                =========    =======   ============    ============    =======   ============   ============
</TABLE>









           See accompanying notes to consolidated financial statements




                                       22
<PAGE>   23


                    NATIONAL RECORD MART, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

National Record Mart, Inc. (the "Company") is a specialty retailer of home
entertainment products, including compact discs, audio and video cassettes, and
related accessories. As of March 27, 1999, the Company operated 174 stores in 30
states primarily in the eastern part of the United States and operates under
five distinct store concepts, National Record Mart or NRM Music, Waves Music,
Vibes Music, Music Oasis and Music X,each of which targets a different customer
base. The Company's fiscal year is the 52 or 53 weeks ending on the Saturday in
March closest to March 31. Fiscal years 1999, 1998 and 1997 ended on March 27
(52 weeks), March 28 (52 weeks) and March 29 (52 weeks), respectively.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, National Record Mart Investments, Inc., a Delaware
holding company. All intercompany accounts and transactions have been eliminated
in consolidation.

CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.

MERCHANDISE INVENTORY

Inventory is comprised of records, cassettes, compact discs, video tapes and
accessories and is stated at the lower of average cost or market. Market is net
realizable value.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Equipment and major improvements to
existing locations are capitalized. Expenditures for repairs and maintenance
which do not extend the useful life of assets are charged to expense as
incurred. Provisions for depreciation are computed using the straight-line
method for book purposes and accelerated methods for tax purposes based upon the
estimated useful lives of the assets. Leasehold improvements are amortized over
the shorter of the useful life of the improvement or the lease term which
includes anticipated renewal periods. Property and equipment of the Company
consist of the following:

<TABLE>
<CAPTION>
                                                                March  27,        March 28,
               Assets                       Asset Lives            1999             1998
               ------                       -----------       -------------     -------------
         <S>                                <C>               <C>               <C>
         Leasehold improvements              10 years         $  15,804,791     $  10,638,275
         Fixtures and equipment               7 years            20,138,334        14,398,598
         Vehicles                             5 years                71,719            71,719
                                                                 ----------     -------------
                  Total                                          36,014,844        25,108,592
         Less accumulated depreciation                          (17,771,446)      (15,006,851)
                                                              -------------     -------------
                  Property and equipment, net                 $  18,243,398     $  10,101,741
                                                              =============     =============
</TABLE>


Depreciation expense for the years ended March 27, 1999, March 28, 1998 and
March 29, 1997 was approximately $3,096,000, $2,562,000 and $2,487,000,
respectively.

INTANGIBLE ASSETS

Intangible assets recorded by the Company are being amortized using the
straight-line method over their estimated useful lives. Goodwill represents the
excess of the purchase price over the fair value of the net assets acquired in
the original acquisition of the Company and the acquisitions of businesses in
fiscal 1994 and fiscal 1999, and is being amortized over periods of 40 and 15
years, respectively. The estimated useful life of other intangible assets is
five years.


                                       23
<PAGE>   24


FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the balance sheets for the Company's financial
instruments approximates their fair value.

STORE OPENING COSTS

The expenses associated with the opening of new stores are charged to expense as
incurred.

ADVERTISING COSTS

Advertising and sales promotional programs are charged to expense during the
period in which they are incurred. Total advertising and sales promotional
expenses for the fiscal years ended March 27, 1999, March 28, 1998 and March 29,
1997 were $2,046,000, $1,900,000, and $2,011,000, respectively.

STOCK OPTION PLANS

In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 123, "Accounting for Stock-Based Compensation", which establishes
financial accounting and reporting standards for stock based employee
compensation plans. The Company continues to account for its stock-based
employee compensation plan under Accounting Principles Board No. 25. See pro
forma disclosures required under FASB Statement No. 123 in Note 4.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results may differ from those estimates.

EARNINGS PER SHARE

In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share", which was effective for the Company for fiscal 1998.
Accordingly, the Company adopted the statement for fiscal 1998, (FASB 128).
Earnings per share amounts for all periods have been restated to give effect to
the application of FASB 128. The effect of the restatement on earnings per share
for the restated periods is immaterial.

The following table shows the amounts used in computing earnings per share and
the effect on income and the weighted average number of shares of dilutive
potential common stock.





                                       24
<PAGE>   25


<TABLE>
<CAPTION>
                                                         March 27,             March 28,             March 29,
                                                           1999                  1998                  1997
                                                        -----------           -----------           -----------
<S>                                                     <C>                   <C>                   <C>
Weighted average common shares outstanding                4,800,867             4,844,624             4,851,694
Dilutive common stock equivalents                              --                 442,429                  --
Treasury stock assumed to be repurchased using
 proceeds from options and warrants                            --                (229,730)                 --
                                                        -----------           -----------           -----------

Weighted average common shares and equivalents
 outstanding                                              4,800,867             5,057,323             4,851,694
                                                        ===========           ===========           ===========
Net (Loss) Income                                       $(1,691,341)          $   892,648           $(1,100,671)
                                                        ===========           ===========           ===========
</TABLE>


RECLASSIFICATION

Certain reclassifications have been made to the Consolidated Financial
Statements for prior periods in order to conform to the March 27, 1999
presentation.

2. REVOLVING CREDIT FACILITY AND TERM DEBT

Long-term debt consisted of the following as of:

<TABLE>
<CAPTION>
                                                                    March 27,       March 28,
                                                                      1999            1998
                                                                 -------------    -------------
       <S>                                                       <C>              <C>
       Revolving Credit Facility-- Bears interest at the
       bank's base rate (7.75% at March 27, 1999) or the
       30-day LIBOR rate (4.9375% at March 27, 1999) plus
       2.0%. Secured by substantially all of the assets
       of the Company.                                           $  21,373,000    $  19,383,236

       Subordinated  Notes -- $15 million notes with
       interest rate of 11.75%.  Notes net of discount of
       $1,154,536 as of March 27, 1999.                             13,845,464           --

       Other                                                           106,695           29,428
                                                                 -------------    -------------
                                                                    35,325,159       19,412,664
       Less current maturities                                         106,695           17,127
                                                                 -------------    -------------
       Long-term debt                                            $  35,218,464    $  19,395,537
                                                                 =============    =============
</TABLE>

The Company has a revolving credit facility (the "Revolver") which expires on
June 10, 2003. The maximum borrowings under the Revolver are $28,000,000 and are
based upon eligible inventory levels as defined therein. During the months of
October through December 31 of each year, an overadvance is available in
addition to the borrowing base as calculated by levels of inventory in the
amount of $1.5 million. In any event the total borrowings under this facility
shall not exceed the limit of $28 million. The Company is required to pay a
monthly commitment fee of .25% per annum on the unused portion of the Revolver
and a monthly collateral monitoring fee of $2,750.

The Revolver also contains various financial and other covenants that place
restrictions or limitations on the Company and its subsidiaries, the more
restrictive of which include: (i) maintenance of a number of financial ratios,
as defined, (ii) a restriction on dividends, and (iii) limitation on capital
expenditures.

On April 16, 1998, the Company secured a private placement of $15,000,000 in
senior subordinated notes. The notes carry an interest rate of 11.75% payable
semi-annually and expire April 16, 2001. In consideration of the placement the
Company issued 400,000 common stock warrants with an exercise price of $0.01.
The Company has allocated $1,600,000 of value for accounting purposes to the
warrants, which has been recorded as a reduction of the $15,000,000. This
reduction will be accreted as additional interest expense over the term of the
note. The Company has issued 39,990 warrants for an additional expense of
$205,000 in the third quarter of fiscal 1999. The additional warrants are a
settlement for the delay in the effective date of registering the 400,000
warrants noted above with the SEC. During the year, both the 400,000 and 39,990
warrants were exercised.






                                       25
<PAGE>   26


Future scheduled maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
                         Year Ended
                           March
                         ----------
                           <S>                          <C>
                           2000                         $   106,695
                           2001                                  --
                           2002                          15,000,000
                           2003                                  --
                           2004                          21,373,000
                           Thereafter                            --
                                                        -----------
                                                         36,479,695

                           Discount to be accreted       (1,154,536)
                                                        -----------
                           Total                        $35,325,159
                                                        ===========
</TABLE>

Interest payments of $2,363,000, $1,860,000, and $1,731,000 were made during the
fiscal years ended March 27, 1999, March 28, 1998 and March 29, 1997,
respectively.

3. EMPLOYEE BENEFIT PLANS

Profit Sharing Plan. The Company has a qualified, noncontributory profit sharing
plan for eligible employees. Contributions to the plan, as determined by the
Board of Directors, are discretionary but generally may not exceed 15% of the
defined annual compensation paid to all participating employees. No
contributions were made to the plan for any of the years presented.

401(k) Plan. During fiscal 1996, the Company adopted a 401(k) plan for eligible
employees. Employees who have attained age 21 and are paid for 1,000 or more
hours of service within the twelve months from the date hired are eligible to
participate. Under provisions of the plan, participants may contribute up to 15%
of their eligible compensation to the plan. These contributions are made through
payroll deductions and are partially matched by the Company. Contributions made
by the Company to its 401(k) plan were $64,000, $50,000 and $49,000 for the
years ended March 27, 1999, March 28, 1998 and March 29, 1997, respectively.

4. STOCK OPTION PLANS

The Company has elected to follow Accounting Principles Board Opinion No. 25
(APB 25), "Accounting for Stock Issued to Employees"and the related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123 (FASB 123), "Accounting for Stock-Based Compensation,"requires
the use of option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options is greater than the market price of the
underlying stock on the date of the grant, no compensation expense is
recognized.

The National Record Mart, Inc. 1993 Stock Option Plan (the "Plan") provides for
the grant of 185,000 incentive or non-statutory stock options to purchase common
stock. Employees who share the responsibility for the management growth or
protection of the business of the Company, are eligible to receive options which
are approved by a committee of the Board of Directors. These options primarily
vest over five years and are exercisable for a ten-year period from the date of
the grant.

Additionally, the Company's Board of Directors adopted the National Record Mart,
Inc. 1993 Non-Employee Director Stock Option Plan (the "Director Plan"). The
Director Plan provides for the grant of 15,000 stock options to purchase common
stock to all independent members (the "Directors") of the Board of Directors who
are not employees of the Company and who are disinterested persons (as used in
Rule 16b-3 promulgated under the Securities Exchange Act of 1934). These options
vest over five years and are exercisable for a ten-year period from the date of
grant.

On June 10, 1996, the Company's Board of Directors granted Mr. William A.
Teitelbaum the option to purchase 200,000 shares of Common Stock par value $.01
per share of the Company at an option exercise price of $2.50 per share. The
right to exercise such option will vest in four equal installments over a period
of four years beginning on June 15, 1997, provided that all options will vest
automatically upon (i) acquisition by a third party or group of a majority of
the Company's outstanding equity securities, or a sale of the Company, or all or
substantially all of its assets, (ii) termination of Mr. Teitelbaum's employment
without proper cause, (iii) a reorganization, merger or consolidation which
results in a change in control of the Company or (iv) Mr. Teitelbaum's death. If
Mr. Teitelbaum ceases to be employed by the Company for any other reason, the
unvested portion of the options will be extinguished. The option expires on June
15, 2007.


                                       26
<PAGE>   27

On June 30, 1997, the Company's Board of Directors approved the 1997
Non-Employee Directors Stock Option Plan. The 1997 Directors' Plan provides for
the grant of 25,000 shares to all independent members of the board who are not
employees. The options are vested as of grant date and are exercisable over a
ten year period from the date of grant at an exercise price of $2.50.

The Company's Board of Directors approved on July 1, 1997 the issuance of
options to purchase 200,000 shares of the Company's common stock to William A.
Teitelbaum. The options vest over twenty years and are exercisable at $0.10,
with an expiration date of July 1, 2024. The options have a vesting event to
automatically vest in full upon termination, death, merger, acquisition or
liquidation.

Pro forma information regarding net income and earnings per share is required by
FASB 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted beginning in the
fiscal year subsequent to December 31, 1994 under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for the year ended March 27, 1999: risk free rate of 5.48%; no
dividend yield; volatility factors of the expected market price of the Company's
common stock of 1.283; and weighted-average expected life of the option of five
years. For the year ended March 28, 1998: risk-free interest rate of 6.38%; no
dividend yield; volatility factors of the expected market price of the Company's
common stock of .805; and weighted-average expected life of the option of five
years. For the year ending March 29, 1997: risk-free interest rate of 6.53%; no
dividend yield; volatility factors of the expected market price of the Company's
common stock of .784; and weighted average expected life of the option of five
years.

The Black -Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option's vesting period. The Company's pro
forma information follows:

<TABLE>
<CAPTION>
                                                   March 27,                 March 28,                     March 29,
                                                     1999                      1998                          1997
                                                 -------------             -------------               --------------
<S>                                              <C>                       <C>                         <C>
Pro forma net income (loss)                      $  (1,744,919)            $     845,579               $   (1,100,671)

Pro forma net income (loss) per share:
  Basic                                          $       (0.36)            $        0.17               $        (0.23)
  Fully diluted                                  $       (0.36)            $        0.17               $        (0.23)
</TABLE>



Stock options granted prior to March 26, 1995 are excluded from the
determination of pro forma net income.








                                       27
<PAGE>   28


A summary of the Company's stock option activity follows:

<TABLE>
<CAPTION>
                                          March 27, 1999                    March 28, 1998                   March 29, 1997
                                    --------------------------        --------------------------       ---------------------------
                                                      Weighted                          Weighted                         Weighted
                                                       Average                           Average                           Average
                                                      Exercise                          Exercise                          Exercise
                                    Options            Price          Options            Price         Options             Price
                                    --------------------------        --------------------------       ---------------------------
<S>                                 <C>               <C>             <C>               <C>             <C>               <C>
Outstanding -
 beginning of year                  503,300           $   1.63        268,500           $   2.72        240,500           $   0.75

Granted                              34,350               5.90        235,900               0.47        228,500               2.50

Exercised                              (500)              2.50           --                --              --                --

Cancelled                           (20,200)              2.50         (1,100)              2.50       (200,500)              0.11
                                    --------------------------        --------------------------       ---------------------------

Outstanding -
 end of year                        516,950           $   1.88        503,300           $   1.63        268,500           $   2.72
                                    ==========================        ==========================       ===========================

Exercisable - end of year           134,600           $   2.77         68,860           $   3.20         58,400           $   3.46
                                    ==========================        ==========================       ===========================
</TABLE>


5. INCOME TAXES

The provision (benefit) for income taxes, as shown in the accompanying
Consolidated Statements of Operations, includes the following components:

<TABLE>
<CAPTION>
                                                              March 27,             March 28,              March 29,
                                                                1999                  1998                   1997
                                                             -----------           -----------           -----------
         <S>                                                 <C>                   <C>                   <C>
         Current provision:
           Federal                                           $  (175,520)          $   294,741           $(1,068,980)
           State                                                  (5,023)                5,120               (50,327)
                                                             -----------           -----------           -----------
                                                                (180,543)              299,861            (1,119,307)
         Deferred                                               (816,319)              185,000               546,000
                                                             -----------           -----------           -----------
         Total provision (benefit) for income taxes          $  (996,862)          $   484,861           $  (573,307)
                                                             ===========           ===========           ===========
</TABLE>

A reconciliation of the Company's effective income tax rate with the federal
statutory rate is as follows:

<TABLE>
<CAPTION>
                                                              March 27,             March 28,              March 29,
                                                                1999                  1998                   1997
                                                             -----------           -----------           -----------
         <S>                                                 <C>                   <C>                   <C>
         Federal statutory rate                                  34%                   34%                   34%
         State income taxes, net of federal tax benefit          --                     1                    --
         Nontaxable amounts                                      --                    --                     1
                                                             -----------           -----------           -----------
             Effective income tax rate                           34%                   35%                   35%
                                                             ===========           ===========           ===========
</TABLE>


Tax refunds of approximately $9,300, $1,324,000 and $1,019,000 were received
during the fiscal years ended March 27, 1999, March 28, 1998 and March 29, 1997,
respectively.







                                       28
<PAGE>   29


Significant components of the Company's deferred tax assets and liabilities as
of March 27, 1999 and March 28, 1998 are as follows:

<TABLE>
<CAPTION>
                                                                      March 27,     March 28,
                                                                        1999          1998
                                                                     ----------   -----------
         <S>                                                         <C>          <C>
         Deferred tax assets:
           Excess tax basis in property and equipment                $1,029,000   $ 1,093,000
           Excess tax basis in inventory                                296,000       247,000
           Other                                                        523,000       388,000
           NOL Carry Forward                                            811,000
                                                                     ----------   -----------
                                                                      2,659,000     1,728,000
         Deferred tax liabilities:
           Excess book basis in other current assets                   (515,000)     (401,000)
                                                                     ----------   -----------
         Net deferred tax assets                                     $2,144,000   $ 1,327,000
                                                                     ==========   ===========
</TABLE>

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. Based on the amount of
current and projected taxable income, management believes it is more likely than
not that the Company will realize the benefits of those deductible differences.
The amount of the deferred tax asset considered realizable could be reduced if
estimates of future taxable income during the carryforward period are reduced.


6. COMMITMENTS AND CONTINGENCIES

The Company leases its retail stores and distribution center under operating
leases. The lease agreements, including renewal options, expire on various dates
through 2007. Most leases provide for additional contingent rents based on a
percentage of sales and increases in real estate taxes. Future minimum annual
lease payments under noncancellable lease agreements in excess of one year at
March 27, 1999 are as follows:

<TABLE>
                  <S>                                       <C>
                  2000                                      $  14,499,789
                  2001                                         13,671,175
                  2002                                         12,715,729
                  2003                                         11,754,301
                  Thereafter                                   47,665,378
                                                            -------------
                  Total future minimum lease payments       $ 100,306,372
                                                            =============
</TABLE>

Rent expense for the years ended March 27, 1999, March 28, 1998 and March 29,
1997 was $13,168,000, $10,981,000 and $10,699,000 respectively, including
contingent rentals of $197,000, $161,000 and $144,000, respectively.

7. CONCENTRATION OF BUSINESS RISKS

The Company purchases inventory for its stores from approximately 500 suppliers,
with approximately 74% of purchases being made from five suppliers. In the past
the Company has not experienced difficulty in obtaining satisfactory sources of
supply, and management believes that it will retain access to adequate sources
of supply. However, a loss of a major supplier could cause a possible loss of
sales, which would have an adverse effect on operating results and result in a
decrease in vendor support for the Company's advertising programs.

8. ASSET PURCHASES

On May 4, 1998, the Company purchased certain of the assets of Record Den Inc.
and DJK Records & Video Inc., totaling four stores. The acquisition was
accounted for using the purchase method of accounting for a purchase price of
approximately $933,000 resulting in $195,000 of goodwill which is being
amortized using the straight line method over 15 years, $708,000 for purchased
assets and a $30,000 consulting and noncompete agreement for a period of three
years. The purchase price was paid in cash upon completion of the agreement.


                                       29
<PAGE>   30


On November 13, 1998, the Company purchased certain of the assets of Happy Town
Inc. and Tempo, totaling twelve stores. The acquisition was accounted for using
the purchase method of accounting for a purchase price of approximately
$3,574,000 resulting in $869,000 of goodwill which is being amortized using the
straight line method over 15 years, $2,648,000 for purchased assets and a
$57,000 consulting and noncompete agreement for a period of three years. The
purchase price was paid in cash upon completion of the agreement.


9. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         BASIC               DILUTED
                                                        NET            NET (LOSS)           NET (LOSS)            COMMON STOCK
                                    GROSS             INCOME            INCOME                INCOME                  PRICE
                  SALES             PROFIT            (LOSS)           PER SHARE            PER SHARE          HIGH           LOW
                  -----             ------            ------           ---------            ---------          ----           ---
<S>              <C>               <C>               <C>                <C>                  <C>             <C>            <C>
1999:
First            $ 24,435          $  9,414          $ (1,218)          $ (0.25)             $ (0.25)        $ 12.875       $ 5.625
Second             26,368            10,015            (1,080)            (0.22)               (0.22)          10.375         3.375
Third              47,716            17,207             2,442              0.51                 0.44           19.125         3.875
Fourth             31,383            11,581            (1,835)            (0.38)               (0.38)           9.875         3.625
                 --------          --------          --------           -------              -------
  Total          $129,902          $ 48,217          $ (1,691)          $ (0.35)*            $ (0.35)*
                 ========          ========          ========           =======              =======

1998:
First            $ 21,013          $  8,038          $   (908)          $ (0.19)             $ (0.19)        $  1.563       $ 1.250
Second             23,691             8,967              (791)            (0.16)               (0.16)           4.625         2.688
Third              41,706            15,394             2,884              0.60                 0.56            4.500         3.500
Fourth             26,078            10,564              (292)            (0.06)               (0.06)           6.500         3.500
                 --------          --------          --------           -------              -------
  Total          $112,488          $ 42,963          $    893           $  0.18 *            $  0.18 *
                 ========          ========          ========           =======              =======
</TABLE>

*  data rounded in quarterly calculations





                                       30
<PAGE>   31


                                INDEX TO EXHIBITS

     The following documents are filed as part of this 10K for the year ended
March 27, 1999

     Exhibit No.  Description
     -----------  -----------
         3.1      Amended and Restated Certificate of Incorporation of the
                  Company, filed as Exhibit 3.2 to the Company's Registration
                  Statement No. 33-62622 on Form S-1 and incorporated by
                  reference herein
         3.2      Amended and Restated By-Laws of the Company, filed as Exhibit
                  3.4 to the Company's Registration Statement No. 33-62622 on
                  Form S-1 and incorporated by reference herein
         3.3      Amendment to Restated Certificate of Incorporation of the
                  Company, filed as Exhibit 3.3 to the Company's Annual Report
                  on Form 10-K for the fiscal year ended March 25, 1995 and
                  incorporated by reference herein
         4.1      Loan and Security Agreement, dated June 11, 1993, between the
                  Company and Barclays Business Credit, Inc., filed as Exhibit
                  10.16 to the Company's Registration Statement No. 33-62622 on
                  Form S-1 and incorporated by reference herein
         4.2      Amendment, dated January 12, 1995, between the Company and
                  Barclays Business Credit, Inc., to the Loan and Security
                  Agreement, dated June 11, 1993, between the Company and
                  Barclays Business Credit, Inc., filed as exhibit 4.2 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  March 28, 1998 and incorporated by reference herein.
         4.3      Amendment, dated September 8, 1995, between the Company and
                  Shawmut Capital Corporation, successor to Barclays Credit,
                  Inc., to the Loan and Security Agreement, dated June 11, 1993,
                  between the Company and Barclays Business Credit, Inc., filed
                  as exhibit 4.3 to the Company's Annual Report on Form 10-K for
                  the fiscal year ended March 28, 1998 and incorporated by
                  reference herein.
         4.4      Amendment, dated July 19, 1996, between the Company and Fleet
                  Capital Corporation, successor to Shawmut Capital Corporation,
                  to the Loan and Security Agreement, dated June 11, 1993,
                  between the Company and Barclays Business Credit, Inc., filed
                  as exhibit 4.4 to the Company's Annual Report on Form 10-K for
                  the fiscal year ended March 28, 1998 and incorporated by
                  reference herein.
         4.5      Amendment, dated October 17, 1996, between the Company and
                  Fleet Capital Corporation, to the Loan and Security Agreement,
                  dated June 11, 1993, between the Company and Barclays Business
                  Credit, Inc., filed as Exhibit 10.10 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended March 28, 1997
                  and incorporated by reference herein
         4.6      Amendment, dated June 25, 1997, between the Company and Fleet
                  Capital Corporation, to the Loan and Security Agreement, dated
                  June 11, 1993, between the Company and Barclays Business
                  Credit, Inc., filed as exhibit 4.6 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended March 28, 1998
                  and incorporated by reference herein.
         4.7      Amendment, dated February 17, 1998, between the Company and
                  Fleet Capital Corporation, to the Loan and Security Agreement,
                  dated June 11, 1993, between the Company and Barclays Business
                  Credit, Inc., filed as exhibit 4.7 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended March 28, 1998
                  and incorporated by reference herein.
         4.8      Amendment, dated April 16, 1998, between the Company and Fleet
                  Capital Corporation, to the Loan and Security Agreement, dated
                  June 11, 1993, between the Company and Barclays Business
                  Credit, Inc., filed as exhibit 4.8 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended March 28, 1998
                  and incorporated by reference herein.
         4.9      Senior Subordinated Secured Note Purchase Agreement, dated as
                  of April 16, 1998, among the Company, the Guarantors from time
                  to time party thereto, the Purchasers from time to time party
                  thereto, and Robert Fleming, Inc., as Agent, filed as exhibit
                  4.9 to the Company's Annual Report on Form 10-K for the fiscal
                  year ended March 28, 1998 and incorporated by reference
                  herein.
         4.10     Senior Subordinated Note Purchase Agreement, dated as of April
                  16, 1998, among the Company, the Guarantors from time to time
                  party thereto, the Purchasers from time to time party thereto,
                  and Robert Fleming, Inc., as Agent, filed as exhibit 4.10 to
                  the Company's Annual Report on Form 10-K for the fiscal year
                  ended March 28, 1998 and incorporated by reference herein.
         4.11     Issuer Security and Pledge Agreement, dated as of April 16,
                  1998, between the Company and Robert Fleming, Inc., as Agent,
                  filed as exhibit 4.11 to the Company's Annual Report on Form
                  10-K for the fiscal year ended March 28, 1998 and incorporated
                  by reference herein.
         4.12     Guarantor Security and Pledge Agreement, dated as of April 16,
                  1998, between NRM Investments, Inc. and Robert Fleming, Inc.,
                  as Agent, filed as exhibit 4.12 to the Company's Annual Report
                  on Form 10-K for the fiscal year ended March 28, 1998 and
                  incorporated by reference herein.
         4.13     Trademark Collateral Security Agreement, dated as of April 16,
                  1998, between the Company and Robert Fleming, Inc., as Agent,
                  filed as exhibit 4.13 to the Company's Annual Report on Form
                  10-K for the fiscal year ended March 28, 1998 and incorporated
                  by reference herein.
         4.14     Subordination Agreement, dated as of April 16, 1998, between
                  Robert Fleming, Inc., as Agent, and Fleet Capital Corporation,
                  acknowledged by the Company and NRM Investments, Inc., filed
                  as exhibit 4.14 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended March 28, 1998 and incorporated by
                  reference herein.
         4.15     Junior Subordination Agreement, dated as of April 16, 1998,
                  between Robert Fleming, Inc., as Agent, and Fleet Capital
                  Corporation, acknowledged by the Company and NRM Investments,
                  Inc., filed as exhibit 4.15 to the Company's Annual Report on
                  Form 10-K for the fiscal year ended March 28, 1998 and
                  incorporated by reference herein.




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<PAGE>   32


     Exhibit No.  Description
     -----------  -----------
         4.16     Collateral Sharing and Agency Agreement, dated as of April 16,
                  1998, among the Company, NRM Investments, Inc., Robert
                  Fleming, Inc., as Agent, and Fleet Capital Corporation, for
                  itself and as Collateral Agent, filed as exhibit 4.16 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  March 28, 1998 and incorporated by reference herein.
         10.1     Sublease dated July 1, 1992 between the Company and General
                  Motors Corporation, filed as Exhibit 10.12 to the Company's
                  Registration Statement No. 33-62622 on Form S-1 and
                  incorporated by reference herein
         10.2     Employment Agreement dated April 1, 1993 between the Company
                  and William A. Teitelbaum, filed as Exhibit 10.11 to the
                  Company's Registration Statement No. 33-62622 on Form S-1 and
                  incorporated by reference herein
         10.3     Stock Option Agreement dated June 10, 1996 between the Company
                  and William A. Teitelbaum, filed as Exhibit 10.9 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  March 28, 1996 and incorporated by reference herein
         10.4     Stock Option Agreement dated July 1, 1997 between the Company
                  and William A. Teitelbaum, filed as exhibit 10.4 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  March 28, 1998 and incorporated by reference herein.
         10.5     Registration Rights Agreement dated July 1, 1997 between the
                  Company and William A. Teitelbaum, filed as exhibit 10.5 to
                  the Company's Annual Report on Form 10-K for the fiscal year
                  ended March 28, 1998 and incorporated by reference herein.
         10.6     Employment Agreement dated as of January 1, 1996 between the
                  Company and Theresa Carlise, filed as Exhibit 10.8 to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  March 28, 1996 and incorporated by reference herein
         10.7     National Record Mart, Inc. 1993 Stock Option Plan, filed as
                  Exhibit 10.14 to the Company's Registration Statement No.
                  33-62622 on Form S-1 and incorporated by reference herein
         10.8     National Record Mart, Inc. Non-Employee Director Stock Option
                  Plan, filed as Exhibit 10.15 to the Company's Registration
                  Statement No. 33-62622 on Form S-1 and incorporated by
                  reference herein
         10.9     National Record Mart, Inc. 1997 Non-Employee Director Stock
                  Option Plan, filed as exhibit 10.9 to the Company's Annual
                  Report on Form 10-K for the fiscal year ended March 28, 1998
                  and incorporated by reference herein.
         10.10    Warrant Agreement, dated as of April 16, 1998, between the
                  Company, Robert Fleming, Inc. and Seneca Capital, L.P., filed
                  as exhibit 10.10 to the Company's Annual Report on Form 10-K
                  for the fiscal year ended March 28, 1998 and incorporated by
                  reference herein.
         10.11    Registration Rights Agreement, dated as of April 16, 1998,
                  between the Company and the holders of registrable securities
                  referred to therein, filed as exhibit 10.11 to the Company's
                  Annual Report on Form 10-K for the fiscal year ended March 28,
                  1998 and incorporated by reference herein.
         10.12    Tag Along Agreement, dated as of April 16, 1998, between the
                  Company, Seneca Capital, L.P., Robert Fleming, Inc. and
                  certain holders of shares of common stock of the Company,
                  filed as exhibit 10.12 to the Company's Annual Report on Form
                  10-K for the fiscal year ended March 28, 1998 and incorporated
                  by reference herein.
         23.1     Consent of Ernst & Young LLP




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