##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2000

Commission file number: 0-24091

TWEETER HOME ENTERTAINMENT GROUP, INC.

(Exact name of Registrant as specified in its
charter)


|                                                                          |  |                                                 
|------------------------------------------------------------------------- |  | ------------------------------------------------
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|DELAWARE
	(State or other jurisdiction of
	incorporation or organization) |  | 04-3417513
	(I.R.S. Employer Identification No.)

10 PEQUOT WAY

CANTON, MA 02021


(Address of principal executive offices
including zip code)


781-830-3000

(Registrants telephone number including
area code)


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

Yes [X]   No [   ]

Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest
practicable date.

|                             |  |                              
|---------------------------- |  | -----------------------------
|Title of Class               |  | Outstanding at August 4, 2000
|                             |  |                              
|Common Stock, $.01 par value |  | 18,264,372                   



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---

TABLE OF CONTENTS



|                                                                                              |                                                                                                                        |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                                                                              | CONDENSED CONSOLIDATED BALANCE SHEETS                                                                                 
|                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                                       
|                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                       
|                                                                                              | TWEETER HOME ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|PART II. OTHER INFORMATION                                                                   
|EXHIBIT 27.1 FINANCIAL DATA SCHEDULE                                                         



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TWEETER HOME ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

INDEX

|         |  |                                                                                                              |  |      |    | 
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|         |  |                                                                                                              |  | Page
|         |  |                                                                                                              |  |     
|Part I.  |  | FINANCIAL INFORMATION                                                                                        |  |      |    | 
|Item 1   |  | Financial Statements (Unaudited)                                                                             |  |      |    | 
|        
|        
|        
|        
|         |  | Condensed Consolidated Balance Sheets as of September 30,
	1999 and June 30, 2000                            |  |      | 2  | 
|        
|        
|        
|        
|         |  | Condensed Consolidated Statements of Operations For the Three and
	 Nine Months Ended June 30, 1999 and 2000 |  |      | 3  | 
|        
|        
|        
|        
|         |  | Condensed Consolidated Statements of Cash Flows For the Nine
	Months Ended June 30, 1999 and 2000            |  |      | 4  | 
|        
|        
|        
|        
|         |  | Notes to Unaudited Condensed Consolidated Financial Statements                                               |  |      | 5  | 
|        
|        
|        
|        
|Item 2   |  | Managements Discussion and Analysis of Financial Condition
	and Results of Operations                       |  |      | 9  | 
|        
|        
|        
|        
|Item 3   |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  |      | 12 | 
|        
|        
|        
|        
|Part II. |  | OTHER INFORMATION                                                                                            |  |      | 13 | 

1



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##### Table of Contents



TWEETER HOME ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED BALANCE SHEETS

|                                     |                                                                                                                                              |                                   |   |             |             |  |   |             |             | 
|------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | - | ----------- | ----------- |  | - | ----------- | ----------- | 
|                                     |                                                                                                                                              | September 30,                     |   | June 30,   
|                                     |                                                                                                                                              | 1999                              |   | 2000       
|                                     |                                                                                                                                              |                                   |   |            
|                                     |                                                                                                                                              |                                   |   | (Unaudited)
|                                    
|                                    
|                                    
|                                    
|Assets                               |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                    
|                                    
|                                    
|                                    
|Current Assets:                      |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents                                                                                                                    |                                   | $ | 999,495     |             |  | $ | 43,399,198  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts receivable, net of allowance for doubtful accounts of
	$650,000 at September 30, 1999 and $655,000 at June 30,
	 2000               |                                   |   | 9,556,846   |             |  |   | 13,320,792  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Inventory                                                                                                                                    |                                   |   | 62,135,516  |             |  |   | 74,476,006  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred tax assets                                                                                                                          |                                   |   | 1,899,604   |             |  |   | 1,899,604   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Prepaid expenses and other current assets                                                                                                    |                                   |   | 678,804     |             |  |   | 485,921     |            
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                     |                                                                                                                                              | Total current assets              |   |             | 75,270,265  |  |   |             | 133,581,521 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Investment in joint venture                                                                                                                  |                                   |   |            |             |  |   | 3,075,912   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Long-term investments                                                                                                                        |                                   |   | 1,846,366   |             |  |   | 1,822,994   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Property and equipment, net                                                                                                                  |                                   |   | 34,243,241  |             |  |   | 45,772,012  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Other assets, net                                                                                                                            |                                   |   | 191,616     |             |  |   | 122,704     |            
|                                    
|                                    
|                                    
|                                    
|                                     | Goodwill, net                                                                                                                                |                                   |   | 30,067,691  |             |  |   | 38,110,801  |            
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                     |                                                                                                                                              | Total                             |   | $           | 141,619,179 |  |   | $           | 222,485,944 | 
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            
|Liabilities and Stockholders Equity |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                    
|                                    
|                                    
|                                    
|Current Liabilities:                 |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Current portion of long-term debt                                                                                                            |                                   | $ | 35,551      |             |  | $ | 33,384      |            
|                                    
|                                    
|                                    
|                                    
|                                     | Amount due to bank                                                                                                                           |                                   |   | 6,023,056   |             |  |   | 6,069,866   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable                                                                                                                             |                                   |   | 18,377,139  |             |  |   | 12,358,567  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued expenses                                                                                                                             |                                   |   | 16,197,306  |             |  |   | 26,909,543  |            
|                                    
|                                    
|                                    
|                                    
|                                     | Customer deposits                                                                                                                            |                                   |   | 2,440,090   |             |  |   | 3,598,781   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred warranty                                                                                                                            |                                   |   | 673,139     |             |  |   | 461,203     |            
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                     |                                                                                                                                              | Total current liabilities         |   |             | 43,746,281  |  |   |             | 49,431,344  | 
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            
|Long-Term Debt:                      |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Notes payable to bank                                                                                                                        |                                   |   | 5,716,805   |             |  |   | 92,239      |            
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            
|Other Long-Term Liabilities:         |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Rent related accruals                                                                                                                        |                                   |   | 3,197,657   |             |  |   | 3,555,208   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred warranty                                                                                                                            |                                   |   | 338,238     |             |  |   | 13,524      |            
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred tax liabilities                                                                                                                     |                                   |   | 1,095,527   |             |  |   | 1,086,178   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Other long-term liabilities                                                                                                                  |                                   |   | 279,500     |             |  |   |            |            
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                     |                                                                                                                                              | Total other long-term liabilities |   |             | 4,910,922   |  |   |             | 4,654,910   | 
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                     |                                                                                                                                              | Total liabilities                 |   |             | 54,374,008  |  |   |             | 54,178,493  | 
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            
|Stockholders Equity                 |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                    
|                                    
|                                    
|                                    
|                                     | Preferred stock, $.01 par value, 10,000,000 shares authorized, no
	 shares issued and outstanding                                            |                                   |   |            |             |  |   |            |            
|                                    
|                                    
|                                    
|                                    
|                                     | Common stock, $.01 par value, 60,000,000 shares authorized;
	17,129,622 shares issued in September 30, 1999 and
	20,020,895 in June 30, 2000 |                                   |   | 171,296     |             |  |   | 200,209     |            
|                                    
|                                    
|                                    
|                                    
|                                     | Additional paid in capital                                                                                                                   |                                   |   | 73,202,238  |             |  |   | 141,320,142 |            
|                                    
|                                    
|                                    
|                                    
|                                     | Accumulated other comprehensive income                                                                                                       |                                   |   | 301,520     |             |  |   | 287,497     |            
|                                    
|                                    
|                                    
|                                    
|                                     | Retained earnings                                                                                                                            |                                   |   | 15,482,982  |             |  |   | 28,396,627  |            
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                     |                                                                                                                                              | Total                             |   |             | 89,158,036  |  |   |             | 170,204,475 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Less treasury stock: 1,905,586 shares in September 30, 1999
	and 1,882,956 shares in June 30, 2000, at cost                                  |                                   |   | (1,912,865  | )           |  |   | (1,897,024  | )          
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                     |                                                                                                                                              | Total stockholders equity        |   |             | 87,245,171  |  |   |             | 168,307,451 | 
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            
|                                     |                                                                                                                                              | Total                             |   | $           | 141,619,179 |  |   | $           | 222,485,944 | 
|                                     |                                                                                                                                              |                                   |   |             |             |  |   |            

See notes to unaudited condensed consolidated financial
statements.

2



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##### Table of Contents



TWEETER HOME ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES






CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)


|                                                |              |                    |             |                   |  |      |             |            |  |   |              |            |  |   |              |             | 
|----------------------------------------------- | ------------ | ------------------ | ----------- | ----------------- |  | ---- | ----------- | ---------- |  | - | ------------ | ---------- |  | - | ------------ | ----------- | 
|                                                |              |                    |             |                  
|                                                |              | Three Months Ended |             | Nine Months Ended
|                                                |              | June 30,           |             | June 30,         
|                                                |              |                    |             |                  
|                                                |              | 1999               |             | 2000              |  | 1999 |             | 2000      
|                                                |              |                    |             |                   |  |      |             |           
|Total revenue                                   |              | $                  | 59,653,369  |                   |  | $    | 95,264,002  |            |  | $ | 208,673,818  |            |  | $ | 307,569,818  |            
|Cost of sales                                   |              |                    | (38,085,472 | )                 |  |      | (60,724,071 | )          |  |   | (135,218,061 | )          |  |   | (195,145,909 | )          
|                                                |              |                    |             |                   |  |      |             |            |  |   |              |            |  |   |              |            
|                                                | Gross Profit |                    |             | 21,567,897        |  |      |             | 34,539,931 |  |   |              | 73,455,757 |  |   |              | 112,423,909 | 
|                                               
|                                               
|                                               
|                                               
|Selling expenses                                |              |                    | 16,245,895  |                   |  |      | 25,765,427  |            |  |   | 50,168,113   |            |  |   | 75,551,526   |            
|                                               
|                                               
|                                               
|                                               
|Corporate, general and administrative
	expenses |              |                    | 3,451,084   |                   |  |      | 4,979,969   |            |  |   | 10,713,619   |            |  |   | 14,213,467   |            
|                                               
|                                               
|                                               
|                                               
|Amortization of goodwill                        |              |                    | 215,400     |                   |  |      | 433,650     |            |  |   | 686,200      |            |  |   | 1,103,192    |            
|                                                |              |                    |             |                   |  |      |             |            |  |   |              |            |  |   |              |            
|Income from operations                          |              |                    | 1,655,518   |                   |  |      | 3,360,885   |            |  |   | 11,887,825   |            |  |   | 21,555,724   |            
|                                               
|                                               
|                                               
|                                               
|Income from joint venture                       |              |                    |            |                   |  |      | 168,545     |            |  |   |             |            |  |   | 366,879      |            
|                                               
|                                               
|                                               
|                                               
|Interest expense                                |              |                    | 41,125      |                   |  |      | 53,833      |            |  |   | 278,163      |            |  |   | 399,917      |            
|                                                |              |                    |             |                   |  |      |             |            |  |   |              |            |  |   |              |            
|Income before income taxes                      |              |                    | 1,614,393   |                   |  |      | 3,475,597   |            |  |   | 11,609,662   |            |  |   | 21,522,686   |            
|                                               
|                                               
|                                               
|                                               
|Income taxes                                    |              |                    | 645,760     |                   |  |      | 1,390,238   |            |  |   | 4,643,867    |            |  |   | 8,609,041    |            
|                                                |              |                    |             |                   |  |      |             |            |  |   |              |            |  |   |              |            
|NET INCOME                                      |              | $                  | 968,633     |                   |  | $    | 2,085,359   |            |  | $ | 6,965,795    |            |  | $ | 12,913,645   |            
|                                                |              |                    |             |                   |  |      |             |            |  |   |              |            |  |   |              |            
|Basic earnings per share                        |              | $                  | 0.07        |                   |  | $    | 0.12        |            |  | $ | 0.50         |            |  | $ | 0.78         |            
|                                                |              |                    |             |                   |  |      |             |            |  |   |              |            |  |   |              |            
|Diluted earnings per share                      |              | $                  | 0.06        |                   |  | $    | 0.11        |            |  | $ | 0.45         |            |  | $ | 0.71         |            
|                                                |              |                    |             |                   |  |      |             |            |  |   |              |            |  |   |              |            
|Weighted average shares outstanding             |              |                    |             |                   |  |      |             |            |  |   |              |            |  |   |              |            
|                                               
|                                               
|                                               
|                                               
|                                                | Basic        |                    |             | 14,546,954        |  |      |             | 17,862,213 |  |   |              | 13,851,694 |  |   |              | 16,576,536  | 
|                                               
|                                               
|                                               
|                                               
|                                                | Diluted      |                    |             | 16,049,102        |  |      |             | 19,432,720 |  |   |              | 15,468,008 |  |   |              | 18,277,504  | 

See notes to unaudited condensed consolidated financial
statements.

3



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##### Table of Contents



TWEETER HOME ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES






CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


|                                                   |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |             |           |            |             |  
|-------------------------------------------------- | ---------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------------------------------------ | ----------------------------------------- | --------- | ---------- | ----------- | ----------- | --------- | ---------- | ----------- | -
|                                                   |                                                                                    |                                                                                           
|                                                   |                                                                                    | Nine Months Ended June 30,                                                                
|                                                   |                                                                                    |                                                                                           
|                                                   |                                                                                    | 1999                                                                                       |                                                              | 2000                                     
|                                                   |                                                                                    |                                                                                            |                                                              |                                          
|CASH FLOWS FROM OPERATING ACTIVITIES:              |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net income                                                                         |                                                                                            | $                                                            | 6,965,795                                 |           |            | $           | 12,913,645  |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Adjustments to reconcile net income to net cash provided by
	operating activities: |                                                                                            |                                                              |                                           |           |            |             |             |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    | Depreciation and amortization                                                              |                                                              |                                           | 3,728,674 |            |             |             | 5,185,673 |           
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    | Equity earnings in joint venture investment                                                |                                                              |                                           |          |            |             |             | (366,879  | )         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    | Gain on disposal of equipment                                                              |                                                              |                                           | (23,800   | )          |             |             | (25,800   | )         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    | Changes in operating assets and liabilities, net of effects from
	acquisition of business: |                                                              |                                           |           |            |             |             |           |           
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    |                                                                                            | Increase in accounts receivable                              |                                           |           | (1,020,644 | )           |             |           | (3,461,374 | )          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    |                                                                                            | Increase in inventory                                        |                                           |           | (4,823,721 | )           |             |           | (6,039,418 | )          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    |                                                                                            | Decrease in prepaid expenses and other assets                |                                           |           | 6,246      |             |             |           | 453,419    |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    |                                                                                            | Increase (decrease) in accounts payable and accrued expenses |                                           |           | 2,533,155  |             |             |           | (688,712   | )          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    |                                                                                            | Decrease in customer deposits                                |                                           |           | (607,631   | )           |             |           | (778,575   | )          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    |                                                                                            | Increase in deferred rent                                    |                                           |           | 327,487    |             |             |           | 357,551    |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    |                                                                                            | Decrease in deferred warranty                                |                                           |           | (918,962   | )           |             |           | (536,650   | )          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    |                                                                                            | Decrease in other liabilities                                |                                           |           | (92,400    | )           |             |           | (279,500   | )          
|                                                   |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            
|                                                   |                                                                                    |                                                                                            |                                                              | Net cash provided by operating activities |           |            | 6,074,199   |             |           |            | 6,733,380   |  
|                                                   |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            
|CASH FLOWS FROM INVESTING ACTIVITIES:              |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Purchase of property and equipment                                                 |                                                                                            |                                                              | (9,205,101                                | )         |            |             | (12,685,077 | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from sale of property and equipment                                       |                                                                                            |                                                              | 23,800                                    |           |            |             | 25,800      |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Acquisition of businesses                                                          |                                                                                            |                                                              | (9,002,003                                | )         |            |             | (2,435,072  | )        
|                                                   |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            
|                                                   |                                                                                    |                                                                                            |                                                              | Net cash used in investing activities     |           |            | (18,183,304 | )           |           |            | (15,094,349 | )
|                                                   |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            
|CASH FLOWS FROM FINANCING ACTIVITIES:              |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Amount due to bank                                                                 |                                                                                            |                                                              | (213,691                                  | )         |            |             | 46,810      |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Payments of long-term debt                                                         |                                                                                            |                                                              | (5,250,000                                | )         |            |             | (8,126,760  | )        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Issuance of common stock, net of issuance cost                                     |                                                                                            |                                                              | 24,336,376                                |           |            |             | 60,011,256  |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other equity transactions                                                          |                                                                                            |                                                              | 841,494                                   |           |            |             | 1,574,399   |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Investment in joint venture                                                        |                                                                                            |                                                              |                                          |           |            |             | (2,745,033  | )        
|                                                   |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            
|                                                   |                                                                                    |                                                                                            |                                                              | Net cash provided by financing activities |           |            | 19,714,179  |             |           |            | 50,760,672  |  
|                                                   |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            
|INCREASE IN CASH AND CASH EQUIVALENTS              |                                                                                    |                                                                                            | 7,605,074                                                    |                                           |           |            | 42,399,703  |            
|                                                  
|                                                  
|                                                  
|                                                  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     |                                                                                    |                                                                                            | 776,709                                                      |                                           |           |            | 999,495     |            
|                                                   |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            
|CASH AND CASH EQUIVALENTS, END OF PERIOD           |                                                                                    | $                                                                                          | 8,381,783                                                    |                                           |           | $          | 43,399,198  |            
|                                                   |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            
|                                                  
|                                                  
|                                                  
|                                                  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |                                                                                    |                                                                                            |                                                              |                                          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash paid during the period for:                                                   |                                                                                            |                                                              |                                           |           |            |             |             |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                    | Interest                                                                                   |                                                              | $                                         | 669,121   |            |             | $           | 375,944   |           
|                                                   |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            
|                                                   |                                                                                    | Taxes                                                                                      |                                                              | $                                         | 2,628,936 |            |             | $           | 6,831,947 |           
|                                                   |                                                                                    |                                                                                            |                                                              |                                           |           |            |             |            

See notes to unaudited condensed consolidated financial
statements.

4



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##### Table of Contents






TWEETER HOME ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  Basis of Presentation

The unaudited condensed consolidated financial statements of
Tweeter Home Entertainment Group, Inc. and its subsidiaries
(Tweeter or the Company), included
herein, should be read in conjunction with the consolidated
financial statements and notes thereto included in Tweeters
 Annual Report on Form 10-K for the fiscal year ended
September 30, 1999.

2.  Accounting Policies

The unaudited consolidated financial statements of Tweeter have
been prepared in accordance with U.S. generally accepted
accounting principles. In the opinion of management, all
adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation of the interim
consolidated financial statements have been included. Operating
results for the nine-month period ended June 30, 2000 are
not necessarily indicative of the results that may be expected
for the fiscal year ending September 30, 2000. Tweeter
typically records its highest revenue and earnings in the first
fiscal quarter.

3.  Earnings per Share

Tweeter computed earnings per share in accordance with Statement
of Financial Accounting Standards (SFAS)
No. 128, Earnings Per Share. Basic earnings per
share is calculated based on the weighted average number of
common shares outstanding, adjusted, in 1999, for the nominal
issuance of certain warrants. Diluted earnings per share is based
 on the weighted average number of common shares outstanding,
adjusted for the nominal issuance of certain warrants, and
dilutive potential common shares (common stock options and
warrants).

The following is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share:

|                                    |                                            |                    |            |                   |  |      |            |            |  |   |            |            |  |   |            |            | 
|----------------------------------- | ------------------------------------------ | ------------------ | ---------- | ----------------- |  | ---- | ---------- | ---------- |  | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                    |                                            |                    |            |                  
|                                    |                                            | Three Months Ended |            | Nine Months Ended
|                                    |                                            | June 30,           |            | June 30,         
|                                    |                                            |                    |            |                  
|                                    |                                            | 1999               |            | 2000              |  | 1999 |            | 2000      
|                                    |                                            |                    |            |                   |  |      |            |           
|Basic Earnings Per Share:           |                                            |                    |            |                   |  |      |            |            |  |   |            |            |  |   |            |           
|                                   
|                                   
|                                   
|                                   
|Numerator:                          |                                            |                    |            |                   |  |      |            |            |  |   |            |            |  |   |            |           
|                                   
|                                   
|                                   
|                                   
|                                    | Net income                                 |                    | $          | 968,633           |  |      | $          | 2,085,359  |  |   | $          | 6,965,795  |  |   | $          | 12,913,645 | 
|                                   
|                                   
|                                   
|                                   
|Denominator:                        |                                            |                    |            |                   |  |      |            |            |  |   |            |            |  |   |            |           
|                                   
|                                   
|                                   
|                                   
|                                    | Weighted average common shares outstanding |                    |            | 14,540,240        |  |      |            | 17,862,213 |  |   |            | 13,621,150 |  |   |            | 16,576,536 | 
|                                   
|                                   
|                                   
|                                   
|                                    | Nominal issuance of warrants               |                    |            | 6,714             |  |      |            |           |  |   |            | 230,544    |  |   |            |           | 
|                                    |                                            |                    |            |                   |  |      |            |            |  |   |            |            |  |   |            |           
|Weighted average shares outstanding |                                            |                    | 14,546,954 |                   |  |      | 17,862,213 |            |  |   | 13,851,694 |            |  |   | 16,576,536 |           
|                                    |                                            |                    |            |                   |  |      |            |            |  |   |            |            |  |   |            |           
|Basic earnings per share            |                                            | $                  | 0.07       |                   |  | $    | 0.12       |            |  | $ | 0.50       |            |  | $ | 0.78       |           
|                                    |                                            |                    |            |                   |  |      |            |            |  |   |            |            |  |   |            |           
|Diluted Earnings Per Share:         |                                            |                    |            |                   |  |      |            |            |  |   |            |            |  |   |            |           
|                                   
|                                   
|                                   
|                                   
|Numerator                           |                                            | $                  | 968,633    |                   |  | $    | 2,085,359  |            |  | $ | 6,965,795  |            |  | $ | 12,913,645 |           
|                                   
|                                   
|                                   
|                                   
|Denominator:                        |                                            |                    |            |                   |  |      |            |            |  |   |            |            |  |   |            |           
|                                   
|                                   
|                                   
|                                   
|                                    | Weighted average shares outstanding        |                    |            | 14,546,954        |  |      |            | 17,862,213 |  |   |            | 13,851,694 |  |   |            | 16,576,536 | 
|                                   
|                                   
|                                   
|                                   
|                                    | Potential common stock outstanding         |                    |            | 1,502,148         |  |      |            | 1,570,507  |  |   |            | 1,616,314  |  |   |            | 1,700,968  | 
|                                    |                                            |                    |            |                   |  |      |            |            |  |   |            |            |  |   |            |           
|Total                               |                                            |                    | 16,049,102 |                   |  |      | 19,432,720 |            |  |   | 15,468,008 |            |  |   | 18,277,504 |           
|                                    |                                            |                    |            |                   |  |      |            |            |  |   |            |            |  |   |            |           
|Diluted earnings per share          |                                            | $                  | 0.06       |                   |  | $    | 0.11       |            |  | $ | 0.45       |            |  | $ | 0.71       |           
|                                    |                                            |                    |            |                   |  |      |            |            |  |   |            |            |  |   |            |           

5



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##### Table of Contents



TWEETER HOME ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS  (Continued)


4.  Comprehensive Income

Comprehensive income for the three and nine months ended
June 30, 1999 and June 30, 2000 was as follows:

|                                                           |  |                    |         |                   |  |      |           |      |  |   |           |  |  |   |            |  
|---------------------------------------------------------- |  | ------------------ | ------- | ----------------- |  | ---- | --------- | ---- |  | - | --------- |  |  | - | ---------- | -
|                                                           |  |                    |         |                  
|                                                           |  | Three Months Ended |         | Nine Months Ended
|                                                           |  | June 30,           |         | June 30,         
|                                                           |  |                    |         |                  
|                                                           |  | 1999               |         | 2000              |  | 1999 |           | 2000
|                                                           |  |                    |         |                   |  |      |           |     
|Net income                                                 |  | $                  | 968,633 |                   |  | $    | 2,085,359 |      |  | $ | 6,965,795 |  |  | $ | 12,913,645 |  
|                                                          
|                                                          
|                                                          
|                                                          
|Change in fair value of long-term investments (net of tax) |  |                    |        |                   |  |      | (324,901  | )    |  |   |          |  |  |   | (14,023    | )
|                                                           |  |                    |         |                   |  |      |           |      |  |   |           |  |  |   |            |  
|Comprehensive income                                       |  | $                  | 968,633 |                   |  | $    | 1,760,458 |      |  | $ | 6,965,795 |  |  | $ | 12,899,622 |  
|                                                           |  |                    |         |                   |  |      |           |      |  |   |           |  |  |   |            |  

5.  Investment in Joint Venture

On October 4, 1999, Tweeter formed a joint venture with
Outpost.com, organized as Tweeter.Outpost.com, LLC, to jointly
market and sell consumer electronics over the Internet. The joint
 venture is accounted for by the Company under the equity method.
 The investment is presented on the balance sheet as
Investment in joint venture. As of June 30,
2000, total assets and total liabilities of the joint venture
amounted to $6,832,759 and $1,099,001, respectively. For the
three and nine months ended June 30, 2000, the joint venture
 had total revenue of $1,965,281 and $5,045,658, respectively.
Income before income taxes for the joint venture for the three
and nine months ended June 30, 2000 was $337,090 and
$733,758, respectively.

6.  Sound Installations

On November 1, 1999, the Company purchased certain assets
and assumed certain liabilities of Sound Installations, Inc., a
home installation company in the New England region. Total
purchase price and related costs amounted to approximately
$210,000, including the issuance of 5,124 shares of common stock
with a market value at issuance of $110,000. The purchase price
was allocated primarily to goodwill and property and equipment.
This transaction has been accounted for as a purchase. The
results of operations for the acquired entity in this fiscal
quarter were not significant. Accordingly, pro forma information
has not been presented.

7.  United Audio Centers

On April 1, 2000, the Company exchanged 200,000 shares of
its stock, issued under its shelf registration filed on
April 13, 1999, for certain assets and certain liabilities
of United Audio Centers, Inc. The average price of the stock at
the time of the transaction was $31.71. This transaction has been
 accounted for as a purchase and, accordingly, the results of
operations of the Companys business relating to United
Audio Centers have been included in the consolidated statements
of income since the acquisition date. The results of operations
for the acquired entity in this fiscal quarter were not
significant. Accordingly, pro forma information has not been
presented. The allocation of the purchase price resulted in
goodwill to date of approximately

6



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##### Table of Contents



TWEETER HOME ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS  (Continued)


$8,107,000, which is being amortized over twenty-five years using
 the straight-line method. The net assets acquired at fair market
 value on April 1, 2000 were allocated as follows:

|                                       |                         |   |            |           |  
|-------------------------------------- | ----------------------- | - | ---------- | --------- | -
|                                      
|                                      
|                                      
|                                      
|Cash                                   |                         | $ | 847,000    |          
|                                      
|                                      
|                                      
|                                      
|Inventory                              |                         |   | 6,301,000  |          
|                                      
|                                      
|                                      
|                                      
|Property and equipment                 |                         |   | 2,845,000  |          
|                                      
|                                      
|                                      
|                                      
|Accounts receivable/ Notes receivable  |                         |   | 302,000    |          
|                                      
|                                      
|                                      
|                                      
|Other assets                           |                         |   | 213,000    |          
|                                      
|                                      
|                                      
|                                      
|Accrued expenses and customer deposits |                         |   | (7,319,000 | )        
|                                      
|                                      
|                                      
|                                      
|Notes Payable/ Long term debt          |                         |   | (3,324,000 | )        
|                                       |                         |   |            |          
|                                       | Net liabilities assumed |   |            | (135,000  | )
|                                      
|                                      
|                                      
|                                      
|Total purchase price and related costs |                         |   | 7,972,000  |          
|                                       |                         |   |            |          
|                                       | Goodwill                |   | $          | 8,107,000 |  
|                                       |                         |   |            |          

8.  Home Entertainment Connections

On June 1, 2000, the Company purchased certain assets and
assumed certain liabilities of Home Entertainment Connections,
Inc., a home installation company in the Atlanta region. Total
purchase price and related costs amounted to approximately
$250,000, including the issuance of 3,838 shares of common stock
with a market value at issuance of $125,000. The purchase price
was allocated primarily to goodwill and property and equipment.
This transaction has been accounted for as a purchase. The
results of operations for the acquired entity in this fiscal
quarter were not significant. Accordingly, pro forma information
has not been presented.

9.  Follow-on Offering

On February 7, 2000, Tweeter completed a follow-on public
offering of 2,550,000 shares of common stock. The primary purpose
 of the offering was to raise cash for Tweeters working
capital and for potential acquisitions. The Company sold
2,000,000 shares in the offering and selling stockholders sold
550,000 shares. Net proceeds to the Company from the offering
were approximately $60,000,000.

10.  Subsequent Events

On August 3, 2000, Tweeter announced it had reached in
principle an agreement to acquire Douglas TV, Inc., located in
the greater Chicago, Illinois area. Douglas TV is a five-store
specialty consumer electronics retailer with sales of
approximately $30 million, and has been in business in the
Chicago market for over 30 years. The transaction is
expected to be completed on or about October 1, 2000.
Tweeter will pay approximately $5,750,000 in stock and cash for
the company, excluding acquisition costs.

11.  New Accounting Pronouncements

During 1998, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS
No. 133 was not required to be implemented until fiscal year
 2000. In June 1999, the FASB issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging
Activities  Deferral of the Effective Date of FASB
Statement No. 133  an amendment of FASB Statement
 No. 133. SFAS No. 137 delayed the original
implementation date of SFAS No. 133 by one year. This will
require that the Company implement this statement in fiscal year
2001. In June 2000, the FASB issued SFAS 138,
Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an amendment of FASB Statement
No. 133.

7



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##### Table of Contents



TWEETER HOME ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS  (Continued)


Management is currently evaluating the effects that the adoption
of SFAS No. 133 and related amendments will have on the
consolidated financial statements.

On December 3, 1999, the Securities and Exchange Commission
published Staff Accounting Bulletin (SAB)
No. 101, Revenue Recognition in Financial
Statements. This SAB summarizes certain of the staffs
 views in applying generally accepted accounting principles to
revenue recognition in financial statements. This SAB requires,
among other things, that revenues derived from products or
services in which companies typically act as an agent be reported
 on a net basis. This SAB is required to be implemented by the
Company in fiscal year 2001. Had SAB No. 101 been
implemented for all periods presented, total revenue and cost of
sales would have decreased by approximately $1.2 million for the
three months ended June 30, 2000, $0.6 million for the three
 months ended June 30, 1999, $3.5 million for the nine
months ended June 30, 2000 and $2.3 million for the nine
months ended June 30, 1999. The adoption of SAB No. 101
 is not expected to have any other impact on results of
operations.

8



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##### Table of Contents






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

Introduction

Tweeter is a specialty retailer of mid to high-end audio and
video consumer electronics products. Tweeter currently operates
86 stores under the Tweeter, etc., Bryn Mawr Stereo & Video,
HiFi Buys, Home Entertainment, Dow Stereo/ Video and United Audio
 Centers names.

Results of Operations

Three Months Ended June 30, 2000 as Compared
to Three Months Ended June 30, 1999

Total Revenue.Total revenue includes delivered sales,
completed service center work orders, insurance replacement and
corporate sales. Total revenue increased $35.6 million, or 59.7%,
 to $95.3 million for the three months ended June 30, 2000
from $59.7 million for the three months ended June 30, 1999.
 The increase was mainly comprised of $5.1 million from new
stores, comparable store sales increase of $10.9 million, $8.6
million derived by sales from the acquisition of Dow Stereo/
Video, and $9.8 million derived by sales from the acquisition of
United Audio Centers. Comparable store sales, excluding Dow
Stereo/ Video and United Audio Centers, increased by 20.5%. The
DOW Stereo/ Video stores had a comparable store sales decrease of
 11.5%, and the United Audio Centers stores had a comparable
store sales increase of 0.6%. New technology products contributed
 to the sales increase for the third quarter of fiscal 2000.
Digital camcorders accounted for 92.4% of the camcorder sales.
Projection television sales increased 72.8% and digital sets
accounted for 59.1% of all projection sets sold in the fiscal
quarter ended June 30, 2000. Digital tube television sets
accounted for 6.6% of all tube sets sold during the quarter.

Gross Profit.Cost of sales includes merchandise, net
delivery costs, distribution costs, purchase discounts, and
vendor volume rebates. Cost of sales increased $22.6 million, or
59.4%, to $60.7 million for the three months ended June 30,
2000 from $38.1 million for the three months ended June 30,
1999. Gross profit increased $13.0 million, or 60.1%, to $34.5
million for the three months ended June 30, 2000 from $21.6
million for the three months ended June 30, 1999. The gross
margin percentage increased 10 basis points, to 36.3% for the
three months ended June 30, 2000, from 36.2% for the three
months ended June 30, 1999. The increase in margin was
primarily due to increased sales of new digital technology
products, such as DVD players, digital televisions and digital
camcorders. These digital products realize higher gross margin
and higher average ticket than their analog counterparts. This
increase was offset by growth in the video category relative to
other categories that Tweeter sells. Video products generally
realize lower gross margin than audio products. Tweeter expects
sales of digital televisions to accelerate over the next few
years, which will tend to increase video sales as a percentage of
 the Companys overall mix.

Selling Expenses.Selling expenses include the
compensation of store personnel, occupancy costs, store level
depreciation, advertising expenses, pre-opening expenses and
credit card fees and excludes corporate, general and
administrative expenses. Selling expenses increased $9.5 million,
 or 58.6%, to $25.8 million for the three months ended
June 30, 2000 from $16.2 million for the three months ended
June 30, 1999. As a percentage of revenue, selling expenses
decreased to 27.0% for the three months ended June 30, 2000
from 27.2% for the three months ended June 30, 1999. This
decrease was primarily due to lower advertising dollars as a
percent of sales.

Corporate, General and Administrative Expenses. Corporate,
 general and administrative expenses include the costs of
executive officers, finance, merchandising, marketing,
information systems, human resources, training, and related
support functions. Corporate, general and administrative expenses
 increased 44.3% to $5.0 million for the three months ended
June 30, 2000 from $3.5 million for the three months ended
June 30, 1999. As a percentage of total revenue, corporate
general and administrative expenses decreased to 5.2% for the
three months ended June 30, 2000 from 5.8% for the three
months ended June 30, 1999. This decrease was the result of
leveraging the additional sales volume of new stores and the
acquisitions of Dow Stereo/ Video and United Audio Centers.

Amortization of Goodwill. Amortization of goodwill
increased to $434,000 for the three months ended June 30,
2000 from $215,000 for the three months ended June 30, 1999.
 The increase was due to the

9



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##### Table of Contents





Interest Expense.Interest expense increased to $54,000
for the three months ended June 30, 2000 from $41,000 for
the three months ended June 30, 1999. The increase was due
to the additional notes payable and capital leases acquired in
the Dow Stereo/ Video and United Audio Centers acquisitions.

Income Taxes. The effective tax rate for the fiscal
quarters ended June 30, 2000 and June 30, 1999 was
40.0%. Tweeter expects that the income tax rate for the fiscal
year ending September 30, 2000 will remain substantially
unchanged.

Seasonality. Tweeters operations, in common with
other retailers, are subject to seasonal influences.
Historically, Tweeter has realized more of its revenue and net
earnings in the first fiscal quarter, which includes the holiday
season, than in any other fiscal quarter. The net earnings of any
 interim quarter are seasonally disproportionate to net sales
since certain selling expenses and administrative expenses are
relatively fixed during the year. Therefore, interim results
should not be relied upon as necessarily indicative of results
for the entire fiscal year.

Nine Months Ended June 30, 2000 as
Compared to Nine Months Ended June 30, 1999

Total Revenue. Total revenue increased $98.9 million, or
47.4%, to $307.6 million for the nine months ended June 30,
2000 from $208.7 million for the nine months ended June 30,
1999. The increase was mainly comprised of $18.3 million from new
 stores, $28.0 million from comparable store sales growth, $12.2
million derived by sales from the acquisition of Home
Entertainment of Texas, $28.9 million derived by sales from the
acquisition of Dow Stereo/ Video and $9.8 million derived by
sales from the acquisition of United Audio Centers. Comparable
store sales, excluding Dow Stereo/ Video and United Audio
Centers, increased by 15.1%. Digital technology products fueled
sales performance for the first nine months of fiscal 2000.

Gross Profit. Cost of sales increased $59.9 million, or
44.3% to $195.1 million for the nine months ended June 30,
2000 from $135.2 million for the nine months ended June 30,
1999. Gross profit increased $39.0 million, or 53.0% to $112.4
million for the nine months ended June 30, 2000 from $73.5
million for the nine months ended June 30, 1999. The gross
margin increased 140 basis points to 36.6% from 35.2% last year.
The increase in margin is primarily due to increased sales of new
 digital technology products, such as DVD players, digital
televisions and digital camcorders. These digital products
realize higher gross margin and higher average ticket than their
analog counterparts. This increase was offset by growth in the
video category relative to other categories that Tweeter sells.
Video products generally realize lower gross margin than audio
products. The Company expects sales of digital televisions to
accelerate over the next few years, which will tend to increase
video sales as a percentage of the Companys overall mix.

Selling Expenses. Selling expenses increased $25.4
million, or 50.6%, to $75.6 million for the nine months ended
June 30, 2000 from $50.2 million for the nine months ended
June 30, 1999. As a percentage of revenue, selling expenses
increased to 24.6% for the nine months ended June 30, 2000
from 24.0% in the prior year period. This increase was primarily
the result of increased payroll costs associated with higher
gross margin sales, increased bank fees due to extended credit
card financing promotions offset by lower net advertising costs.

Corporate, General and Administrative Expenses. Corporate,
 general and administrative expenses for the nine months ended
June 30, 2000 increased 32.7% to $14.2 million from $10.7
million for the nine months ended June 30, 1999. As a
percentage of total revenue, corporate general and administrative
 expenses decreased to 4.6% for the nine months ended
June 30, 2000 from 5.1% for the prior year period. This
decrease was the result of leveraging the additional sales volume
 of new stores and the acquisitions of Home Entertainment, Dow
Stereo/ Video and United Audio Centers.

Amortization of Goodwill. Amortization of goodwill
increased to $1.1 million for the nine months ended June 30,
 2000 from $686,000 for the nine months ended June 30, 1999.
 The increase was due to the Home Entertainment acquisition on
February 1, 1999, the Dow Stereo/ Video acquisition on
July 1, 1999, the

10



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##### Table of Contents





Interest Expense. Interest expense increased to $400,000
for the nine months ended June 30, 2000 from $278,000 for
the nine months ended June 30, 1999. The increase was due to
 the incurrence of higher debt levels for the fiscal 2000 period
in order to facilitate the building of new stores and the
relocation of existing stores.

Income Taxes. The effective tax rate for the nine months
ended June 30, 2000 and June 30, 1999 was 40.0%.
Tweeter expects that the income tax rate for the year ending
September 30, 2000 will approximate 40.0%.

Liquidity and Capital Resources

Net cash provided by operating activities was $6.7 million for
the nine months ended June 30, 2000 compared to $6.1 million
 in cash provided by operating activities for the nine months
ended June 30, 1999. Cash used by operations in 2000 was
primarily the result of increases in inventory of $6.0 million
and accounts receivable of $3.5 million. Cash generated from
operations included, primarily, $12.9 million in net income. The
adjustments to reconcile net income to cash provided by operating
 activities consist primarily of $5.2 million for depreciation
and amortization, as well as, minor changes in other operating
accounts.

At June 30, 2000, working capital was $84.2 million,
compared to $31.5 million at September 30, 1999. The
increase was primarily due to the follow-on public offering
completed on February 7, 2000. The ratio of current assets
to current liabilities was 2.70 to 1 at June 30, 2000 and
1.72 to 1 at September 30, 1999. Capital expenditures for
the nine months ended June 30, 2000 were $12.7 million,
primarily used for the building of new stores and the relocation
of existing stores.

Net cash provided by financing activities during the nine months
ended June 30, 2000 was $50.8 million, comprised mainly of
proceeds generated from the sale of 2,000,000 shares of common
stock on February 7, 2000. This was offset by payments made
for long-term debt of $8.1 million and an investment in
Tweeter.Outpost.com joint venture of $2.7 million.

The Company had available at June 30, 2000 a $50,000,000
revolving credit facility, and there were no balances outstanding
 at June 30, 2000.

On January 11, 2000, Tweeter filed a registration statement
with the Securities and Exchange Commission for a public offering
 of both primary shares and shares that were sold by certain
selling stockholders. The offering consisted of 2,550,000 shares
of common stock, 550,000 of which were offered by selling
stockholders and 2,000,000 of which were offered by the Company.
The Company raised proceeds of approximately $60.0 million net of
 related expenses.

On April 1, 2000, Tweeter completed the acquisition of
certain assets and liabilities of United Audio Centers, Inc. This
 transaction was accounted for as a purchase and, accordingly,
the results of operations of the Companys business relating
 to United Audio Centers are included in the consolidated
statements of operations from the acquisition date. The total
purchase price, including acquisition costs to date, was
approximately $8.0 million, $6,342,000 of which was paid through
the issuance of 200,000 shares of the Companys common
stock.

On June 1, 2000, Tweeter completed the acquisition of
certain assets and liabilities of Home Entertainment Connections,
 Inc. This transaction was accounted for as a purchase and,
accordingly, the results of operations of the Companys
business relating to Home Entertainment Connections are included
in the consolidated statements of operations from the acquisition
 date. The total purchase price was approximately $250,000,
$125,000 of which was paid through the issuance of 3,838 shares
of the Companys common stock.

On August 3, 2000, Tweeter announced an agreement in
principle to acquire certain assets and liabilities of Douglas
TV, Inc., in Chicago. The Company expects the purchase price to
be approximately $5,750,000 excluding acquisition costs, and has
the option of paying approximately $1,500,000 of the purchase
price in

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Tweeter believes that the net proceeds from the
February 2000 offering, together with cash generated by
operations and available borrowings under its credit facility
will be sufficient to finance its working capital and capital
expenditure requirements for at least the next twelve months. If
management pursues additional acquisitions within this period,
however, such acquisitions could strain Tweeters capital
resources. Furthermore, due to the seasonality of its business,
Tweeters working capital needs are significantly higher the
 fiscal third and fourth quarters and there is the possibility
that this could cause unforeseen capital constraints in the
future.

New Accounting Pronouncements

During 1998, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS
No. 133 was not required to be implemented until fiscal year
 2000. In June 1999, the FASB issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement
No. 133  an amendment of FASB Statement
No. 133. SFAS No. 137 delayed the original
implementation date of SFAS No. 133 by one year. This will
require that the Company implement this statement in fiscal year
2001. In June 2000, the FASB issued SFAS 138,
Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an amendment of FASB Statement
No. 133. Management is currently evaluating the
effects that the adoption of SFAS No. 133 and related
amendments will have on the consolidated financial statements.

On December 3, 1999, the Securities and Exchange Commission
published Staff Accounting Bulletin (SAB)
No. 101, Revenue Recognition in Financial
Statements. This SAB summarizes certain of the staffs
 views in applying generally accepted accounting principles to
revenue recognition in financial statements. This SAB requires,
among other things, that revenues derived from products or
services in which companies typically act as an agent be reported
 on a net basis. This SAB is required to be implemented by the
Company in fiscal year 2001. Had SAB No. 101 been
implemented for all periods presented, total revenue and cost of
sales would have decreased by approximately $1.2 million for
 the three months ended June 30, 2000, $0.6 million for
 the three months ended June 30, 1999, $3.5 million for
 the nine months ended June 30, 2000 and $2.3 million
for the nine months ended June 30, 1999. The adoption of SAB
 No. 101 is not expected to have any other impact on results
 of operations.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on
Form 10-Q, including, without limitation, statements
containing the words expects,
anticipates, believes and words of
similar import, constitute forward-looking statements
 within the meaning of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements are subject to
various risks and uncertainties, including those relating to the
sales of digital televisions, Company growth and acquisitions,
dependence on key personnel, the need for additional financing,
competition and seasonal fluctuations, and those referred to in
Tweeters Registration Statement filed on Form S-3 (SEC
 file number 333-94433) on January 11, 2000 and in the
Companys Annual Report on Form 10-K filed on
December 10, 1999, that could cause actual future results
and events to differ materially from those currently anticipated.
 Readers are cautioned not to place undue reliance on these
forward-looking statements.




Item 3.  Quantitative and Qualitative Disclosures
 about Market Risk

Tweeters credit facility provides for borrowings which bear
 interest at variable rates based on either (i) the higher
of Fleet National Banks Base Rate or the Federal Funds rate
 plus 0.50% or (ii) the London Interbank Offering Rate
(LIBOR) plus an applicable margin varying from 100 to
175 basis points. Tweeter had no borrowings outstanding
pursuant to the credit facility as of June 30, 2000. Tweeter
 believes that the

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At June 30, 2000, the Company had approximately
$1.8 million in marketable equity securities classified as
available-for-sale. Equity market fluctuations can
impact fair values (although not earnings, unless such equity
positions are actually liquidated). A 10% fluctuation in the
value of such securities would either reduce or increase total
assets by approximately $180,000.

Currently, Tweeter does not enter into financial instrument
transactions for speculative purposes or to manage interest rate
exposure.




PART II. OTHER INFORMATION

Item 5.  Other Information

None

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

|        |      |             |  |                        
|------- | ---- | ----------- |  | -----------------------
|Exhibit |      | Description
|        |      |            
|        | 27.1 |             |  | Financial Data Schedule

(b)  Reports on Form 8-K.

On August 3, 2000, Tweeter filed with the Securities and
Exchange Commission a Current Report on form 8-K to announce
 that it had reached an agreement in principle to acquire Douglas
 TV, Inc., located in Chicago, Illinois.

SIGNATURES

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



| |                           
| | --------------------------
| | TWEETER HOME ENTERTAINMENT
| | GROUP, INC.               



| |     |                      
| | --- | ---------------------
| | By: | /s/ JOSEPH G. MCGUIRE

| |                        
| | -----------------------
| |                        
| | JOSEPH G. McGUIRE,     
| | Chief Financial Officer

Date: August 10, 2000

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