- -------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO _________
Commission File Number 0-14323
SPEC'S MUSIC, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-1362127
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1666 N.W. 82nd Avenue
Miami, Florida 33126
(Address of principal executive offices, including zip code)
(305) 592-7288
(Registrant's telephone number, including area code)
SHARES OF COMMON STOCK OUTSTANDING
AS OF MARCH 12, 1997: 5,303,119
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
- -------------------------------------------------------------------
SPEC'S MUSIC, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS. . . . . . . . . . . . 3
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS. . . . . . . . 4
CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . 5
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . 6-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . 8-11
PART II.
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . 13
PART I.
ITEM 1. FINANCIAL STATEMENTS
SPEC'S MUSIC, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
JANUARY 31, JULY 31,
1997 1996
---------- ----------
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and equivalents $ 395,371 $ 405,753
Trade receivables 326,866 293,681
Income tax receivables 1,236,641 1,236,641
Inventories 19,312,257 19,704,076
Prepaid expenses 1,237,330 589,984
Deferred tax asset 2,828,030 2,122,384
---------- ----------
Total current assets $ 25,336,495 $ 24,352,519
Video rental inventory, net 483,319 489,649
Property and equipment, net 15,211,817 16,714,965
Other assets 484,957 567,892
---------- ----------
Total assets $ 41,516,588 $ 42,125,025
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturity of long-term debt $ 8,196,204 --
Accounts payable 10,790,513 8,408,500
Accrued expenses 2,688,713 2,262,378
Store closing reserve 2,106,933 2,859,289
---------- ----------
Total current liabilities 23,782,363 13,530,167
---------- ----------
Long term debt -- 9,654,094
Deferred income taxes 293,663 293,663
STOCKHOLDERS' EQUITY:
Common stock, par value $.01; 10,000,000
shares authorized; 5,302,319 and 5,319,269
shares issued at January, 1997 and
July, 1996, respectively 53,024 53,194
Additional paid-in capital 3,574,288 3,700,043
Retained earnings 14,077,697 15,269,348
Less 52,569 and 74,600 shares in
treasury at January, 1997, and
July 1996, respectively, at cost (264,447) (375,484)
---------- ----------
Total stockholders' equity 17,440,562 18,647,101
---------- ----------
Total Liabilities and Stockholders' equity $ 41,516,588 $ 42,125,025
---------- ----------
See Notes to Consolidated Condensed Financial Statements.
-3-
SPEC'S MUSIC, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
January 31, January 31,
1997 1996 1997 1996
----------- ----------- ----------- -----------
Product sales $ 21,179,412 $ 24,613,671 $ 36,683,370 $ 42,138,767
Video rentals 281,827 365,337 566,869 812,970
----------- ----------- ----------- -----------
TOTAL REVENUES 21,461,239 24,979,008 37,250,239 42,951,737
----------- ----------- ----------- -----------
Cost of goods sold - sales 14,153,713 16,318,631 24,398,021 28,099,229
----------- ----------- ----------- -----------
Cost of goods sold - rental 140,529 176,758 271,473 367,485
----------- ----------- ----------- -----------
TOTAL COST OF SALES 14,294,242 16,495,389 24,669,494 28,466,714
----------- ----------- ----------- -----------
GROSS PROFIT 7,166,997 8,483,619 12,580,745 14,485,023
Store operating, general and
administrative expenses 7,037,436 7,595,324 13,483,700 15,011,395
Restructuring charge 250,000 -- 250,000 --
Store closing expense 269,569 -- 269,569 --
----------- ----------- ----------- -----------
Operating income (390,008) 888,295 (1,422,524) (526,372)
Other income (expense),net (204,041) (206,737) (474,773) (411,678)
----------- ----------- ----------- -----------
Earnings (loss) before
income taxes (594,049) 681,558 (1,897,297) (938,050)
Provision (benefit) for
income taxes (223,646) 258,000 (705,646) (357,000)
----------- ----------- ----------- -----------
NET EARNINGS (LOSS) $ (370,403) $ 423,558 $(1,191,651) $ (581,050)
----------- ----------- ----------- -----------
EARNINGS (LOSS) PER SHARE $ (.07) $ .08 $ (.23) $ (.11)
----------- ----------- ----------- -----------
Weighted average number of
common shares outstanding 5,242,000 5,364,000 5,245,000 5,399,000
----------- ----------- ----------- -----------
See Notes to Consolidated Condensed Financial Statements.
-4-
SPEC'S MUSIC, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JANUARY 31, 1997 AND 1996
(UNAUDITED)
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $(1,191,651) $ (581,050)
ADJUSTMENTS TO RECONCILE NET EARNINGS (LOSS) TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization of property and equipment 1,258,019 1,373,613
Amortization of video rental inventory 269,439 400,333
Gain on disposal of video rental inventory -- (38,799)
Loss on disposal of property and equipment 269,569 --
Deferred compensation expense 42,434 --
Amortization of preopening expenses 28,294 440,917
(Increase) decrease in assets:
Receivables (33,185) 424,186
Inventories 391,819 1,970,526
Prepaid expenses (675,640) (153,598)
Prepaid income taxes -- (341,938)
Other assets (11,170) 328,016
Deferred tax asset (705,646) 74,000
Increase (Decrease) in Liabilities:
Accounts payable 2,382,013 1,762,182
Accrued expenses 455,713 393,775
Restructuring charge -- (219,216)
Store closing reserve (752,356) --
Deferred income taxes -- (66,000)
----------- -----------
Net cash provided by operating activities 1,727,652 5,766,947
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of video rental inventory (263,109) (364,654)
Disposition of video rental inventory -- 167,888
Additions to property and equipment (162,425) (2,763,042)
Disposition of property and equipment 145,390 59,893
----------- -----------
Net cash provided by (used in) investing activities (280,144) (2,899,915)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 44,710,844 13,500,000
Repayment of borrowings (46,168,734) 12,400,000
Repayments of capital lease -- (17,016)
----------- -----------
Net cash provided by financing activities (1,457,890) 1,082,984
----------- -----------
Net (decrease) increase in cash (10,382) 3,950,016
Cash at beginning of period 405,753 552,224
----------- -----------
Cash at end of period $ 395,371 $ 4,502,240
=========== ===========
See Notes to Consolidated Condensed Financial Statements.
-5-
SPEC'S MUSIC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated condensed financial statements should be
read in conjunction with the Company's consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended July 31, 1996.
The consolidated condensed financial statements were prepared from the books
and records of the Company without audit or verification. In the opinion of
management all adjustments, which are of a normal recurring nature and
necessary to present fairly the financial position, results of operations
and cash flows for all the periods presented have been made. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.
The results of operations for the six month period ended January 31, 1997
are not necessarily indicative of the operating results for the full fiscal
year. The accompanying financial statements include the accounts of the
Company and its wholly-owned subsidiary. All significant intercompany
balances and transactions have been eliminated.
2. CURRENT MATURITY OF LONG-TERM DEBT
In May 1996, the Company obtained a new 2 year credit agreement (the
"Revolving Credit Facility"), which includes a $3,000,000 stand-by letter of
credit facility, both of which expire in May 1998. Under the Company's new
Revolving Credit Facility, it may borrow up to the lesser of (a) $15,000,000
or (b) 60% of the Company's eligible inventory (as defined in the "Revolving
Credit Facility"). A commitment fee of 3/8% of the unused portion is
payable monthly. There were no borrowings under the stand-by letter of
credit during the first six months of fiscal 1997.
The Revolving Credit Facility and all of the Company's obligations in
connection therewith are secured by a first-priority security interest in
substantially all of the Company's assets, and the Company may not further
pledge its assets without the prior approval of its lender. The Company is
also required to meet certain monthly financial covenants, including minimum
earnings, current ratio, fixed charge coverage and tangible net worth
levels. In addition, the Company may not exceed certain capital
expenditures and inventory costs levels.
The Revolving Credit Facility bears interest at a floating rate, adjusted
monthly, equal to the Index Rate (as defined below) plus 2.875%. The "Index
Rate" is the last month-end published rate for 30-day dealer-placed
commercial paper sold through dealers by major corporations as published in
the Money Rates section of the Wall Street Journal. Accrued interest is
payable monthly in arrears. The interest rate at January 31, 1997 was
8.325%.
The outstanding principal amount under the Revolving Credit Facility was
approximately $8.2 million as of January 31, 1997.
Presently, the Company is not in compliance with certain of the financial
covenants contained in the Revolving Credit Facility. The lender has
provided the Company with a waiver for the non-compliance as of both the
balance sheet and report filing dates. As a result, the Company has
reclassified all amounts due under the credit agreement as current
liabilities.
-6-
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, Cont'd.
The Company is currently having discussions with the lender to
restructure the terms and conditions of the Revolving Credit Facility
to better meet its working capital needs.
3. STATEMENT OF CASH FLOWS INFORMATION
The following is supplemental disclosure of cash flow information:
Six months ended
January 31,
-----------------------------
1997 1996
----------- -----------
Interest paid $ 405,652 $ 447,000
Income tax paid -0- -0-
Supplemental noncash financing activities information:
During the six months ended January 31, 1997, no Restricted Stock Awards
were granted and awards totaling $81,375 were canceled. During the six
months ended January 31, 1996, no Restricted Stock Awards were granted and
$76,200 were canceled.
The Company contributed $29,378 and $19,474 in common stock to the
Company's 401(k) Plan during the six months ended January 31, 1997 and
1996, respectively.
4. LOSS PER SHARE
Loss per share is computed based on losses for each period, divided by the
weighted average number of common shares and equivalents outstanding during
each period. Stock options have been excluded from the loss per share
computations for both years as they were antidilutive to the calculation.
5. STORE CLOSING RESERVE
In July 1996, the Company adopted a plan as part of its response to
industry conditions to close four unprofitable store locations. As a
result of the planned closing of the store locations, the Company has
recorded a charge of approximately $3,251,000 ($2,045,000 after income tax
benefits) representing lease termination costs, write-down of assets, rent
expense, and other miscellaneous expenses. These store locations are
expected to be closed during fiscal 1997. During the first quarter of
fiscal 1997, the Company closed three of the four stores that were reserved
for. The outstanding reserve balance was $2,107,000 as of January 31, 1997.
6. RESERVE FOR RESTRUCTURING
The Company announced plans to restructure the business which included
closing it's warehouse and distribution center. A provision of $250,000
has been recorded in the second quarter ended January 31, 1997 representing
costs for severance, outplacement and other miscellaneous expenses.
-7-
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is an analysis of the Company's results of operations, liquidity
and capital resources. To the extent that such analysis contains statements
which are not of a historical nature, such statements are forward-looking
statements, which involve risks and uncertainties. These risks include changes
in the competitive environment for the Company's products, including the entry
or exit of non-traditional retailers of the Company's products to or from its
markets; the ability of the Company to refinance its credit line, and the terms
of any such refinanced line; the release by the music industry of an increased
or decreased number of "hit releases"; unfavorable developments with respect to
a lease; general economic factors in markets where the Company's products are
sold; and other factors discussed in the Company's filings with the Securities
and Exchange Commission.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
REVENUES
Total revenues decreased by $3,517,769, or 14.1%, during the second quarter of
fiscal 1997 compared to the second quarter of fiscal 1996. As of the end of the
second fiscal quarter ended January 31, 1997, the Company operated eight fewer
stores than in the second fiscal quarter of 1996. On a same-store basis (stores
open for more than one year), revenues increased by .1% over last year.
Revenues from product sales decreased by 14% for the chain as a whole and
decreased by .8% on a same-store basis. Revenues declined because increased
unit sales of compact discs were more than offset by decreased unit sales of
cassettes and video product. Same-store revenues declined primarily because of
fewer new hit release titles which contribute not only to lower sales but to
lower in-store traffic. In addition, the Company has seen significant
expansion of competitive music retail space by non-traditional music retailers,
which often sell compact discs near or at cost in certain markets, which
contributed to same-store sales declines.
Video rental revenue decreased by 22.9% for the Company as a whole and by 16.1%
on a same-store basis as compared to the second quarter in fiscal 1996. The
Company maintains video rental departments in limited stores based on customer
demand and has not aggressively promoted this business. Since the second
quarter of fiscal 1996, the Company closed one and opened one video rental
department.
The Company plans to continue to review and adjust its prices and focus its
marketing and advertising campaign to differentiate itself from price oriented
mass merchants and discount electronics stores. Nevertheless, the Company is
likely to continue to experience revenue declines due to non-traditional
retailers' price slashing. In addition, revenues are expected to decline after
the closure of the Coconut Grove mega store during the 1997 fiscal year.
GROSS PROFIT
Gross profits from product sales, which are net of product management and
distribution costs, were 33.2% and 33.7% during the second quarters of fiscal
1997 and 1996, respectively. Gross profit, as a percentage of revenue,
decreased because of an increase in promotional markdowns during the holiday
season.
-8-
MANGEMENT'S DISCUSSION
AND ANALYSIS, CONTINUED
Gross profits from video rentals were 50.1% and 51.6% during the second quarters
of fiscal 1997 and 1996, respectively. Some fluctuation in gross profit margins
may be expected due to the fixed nature of the video rental inventory being
amortized on an accelerated method over a three year period.
Total gross profit was 33.4% and 34.0% of revenue during the second quarters of
fiscal 1997 and 1996, respectively. The Company expects total gross profit, as
a percentage of revenues to decline in the foreseeable future because of the
continued shift in the sales mix to compact and laser discs, the continued
decline of video rental revenues and the increased pricing pressures due to a
heightened competitive environment, as described above.
STORE OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
Store operating, general and administrative expenses, as a percentage of
revenue, were 32.8% and 30.4% during the second quarters of fiscal 1997 and
1996, respectively. Store occupancy and general and administrative expenses, as
a percentage of revenue, increased because of the significant deline in total
revenues. Store occupancy costs decreased due to the Company operating eight
fewer stores than in the second fiscal quarter of 1996.
OTHER INCOME (EXPENSE)
The Company incurred interest expenses of $234,000 and $242,000 during the
second quarter of fiscal 1997 and 1996, respectively. The decrease is due to
lower average borrowings for the quarter.
INCOME TAXES
The effective income tax rate, as a percentage of earnings before income taxes,
was 37.6% and 37.9% during the second quarter of fiscal 1997 and 1996,
respectively. The effective income tax rate did not vary significantly from the
second quarter in the prior fiscal year.
NET EARNINGS (LOSS)
During the second quarter of fiscal 1997, the Company incurred a loss of
$(370,000) or $(.07) per share compared to earnings of $424,000 or $.08 per
share during the second quarter of fiscal 1996. Earnings declined significantly
because of lower sales from continued competition resulting in lower gross
margins.
SIX MONTHS ENDED JANUARY 31, 1997 AND 1996
REVENUES
Total revenues decreased by $5,701,000, or 13.3%, in the first six months of
fiscal 1997, compared to the same period in fiscal 1996. On a same-store basis,
revenues decreased by 1.3%, compared to the same period in 1996.
Revenues from product sales decreased by 12.9% for the chain as a whole and by
1.7% on a same-store basis during the first six months of fiscal 1997. This
decrease is due in part to the lack of significant new hit release titles and
increased competition, as described above.
-9-
MANGEMENT'S DISCUSSION
AND ANALYSIS, CONTINUED
Video rental revenues decreased by 30% for the chain as a whole and by 19% on a
same-store basis. The closing of one video rental department since the second
quarter of fiscal 1996 and a lower demand for video rentals contributed to lower
rental revenues.
GROSS PROFIT
Gross profit from product sales, which is net of product management and
distribution costs, was 33.5% and 33.3% during the first six months of fiscal
1997 and 1996, respectively. Gross profit, which is expressed as a percentage
of revenues, increased primarily because of fewer promotional markdowns and an
increase in sales of higher margin accessory items during the first quarter of
fiscal 1997. Gross profit for video rentals was 52.1% and 54.8% during the
first six months of fiscal 1997 and 1996, respectively.
Total gross profit was 33.8% and 33.7% of revenue during the first six months of
fiscal 1997, and 1996, respectively. The increase in gross profit from product
sales was partially offset by a decrease in gross profits from video rentals.
Some fluctuation in gross profit margins may be expected due in part to the many
factors that affect the Company's purchases for sale and in part to the
Company's promotional strategies.
STORE OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
Store operating, general and administrative expenses, as a percentage of
revenue, were 36.2% and 34.9% during the first six months of fiscal 1997 and
1996, respectively. Store operating and general and administrative expenses
increased as a percentage of revenues, due to the significant decline in total
revenues. Store operating expenses decreased due to operating eight fewer
stores compared to the same period in 1996.
OTHER INCOME (EXPENSE)
Other expenses include interest expense of $480,000 and $455,000 during the
first six months of fiscal 1997 and 1996, respectively. The increase is due to
a higher interest rate on the Company's Revolving Credit Facility combined with
the amortization of deferred financing costs which were partially offset by
lower average borrowings for the quarter.
NET EARNINGS (LOSS)
For the six month period ended January 31, 1997, the net loss was $(1,192,000)
or $(.23) per share, compared to a net loss of $(581,000) or $(.11) per share
for the first six months of fiscal 1996. Reduced sales and lower margins due to
continued competition during the first half of the year contributed to lower
earnings for the first six months in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of January 31, 1997, the Company's working capital was $1.6 million compared
to $10.8 million at July 31, 1996. The decrease in working capital during the
first six months of fiscal 1997 was primarily the result of the reclassification
of long-term debt to current debt.
Cash flows from operating activities provided $1.7 million, in the second
quarter of fiscal 1997, compared to providing $5.8 million in fiscal 1996. The
primary reason for the change in cash flows from operating activities relate to
the inventory reductions in the first six months of fiscal 1996, obtained from
just-in-time buying practices.
-10-
MANGEMENT'S DISCUSSION
AND ANALYSIS, CONTINUED
Cash flow used in investing activities decreased from $2.9 million in the first
six months of fiscal 1996 to $280,000 in the first six months of fiscal 1997.
The primary reason for the change in cash flows from investing activities relate
to fewer additions to property and equipment in the first six months of fiscal
1997 compared to the first six months of fiscal 1996.
At January 31, 1997, the Company had a $15 million secured Revolving Credit
Agreement, expiring May 1998, which includes a $3,000,000 stand-by letter of
credit facility. Under the Revolving Credit Agreement, the Company may borrow
up to the lesser of (a) $15,000,000 or (b) 60% of the Company's eligible
inventory (as defined in the credit agreement). At January 31, 1997, the
Company had an outstanding balance of $8,196,204 under the Revolving Credit
Agreement. There were no borrowings under the stand-by letter of credit during
the first six months of fiscal 1997.
Presently, the Company is not in compliance with certain of the financial
covenants contained in the Revolving Credit Facility. The lender has provided
the Company with a waiver for the non-compliance as of both the balance sheet
and report filing dates. As a result, the Company has reclassified all amounts
due under the credit agreement as current liabilities.
The Company is currently having discussions with the lender to obtain waivers
for the non-compliance and to restructure the terms and conditions of the
Revolving Credit Facility to better meet its working capital needs.
The Company is a specialty retailer in Florida and Puerto Rico of prerecorded
music and video products and is also engaged in the rental of video tapes. This
industry has experienced increased competition during the past few years, which
coupled with other business related factors, has negatively impacted the
Company's performance. The Company anticipates the competitive conditions will
continue into the foreseeable future. The Company's return to profitable
operations and continuity into the future is dependent upon various factors
including improving sales and profit margins, reducing expenses, and eliminating
unprofitable stores. Management believes that its cash flow from operations and
availability under its existing credit agreement should be adequate to cover
the Company's projected cash requirements during the year ending July 31, 1997.
Operating results are however, subject to various uncertainties and
contingencies, many of which are beyond the Company's control. The Company's
future profitability or the lack thereof, could have a substantial impact on its
liquidity, its ability to meet its debt covenants, and its availability of
capital resources necessary to conduct its business.
-11-
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on December 10, 1996 at the
Radisson Mart Plaza Hotel, Salon H., 711 N.W. 72nd Avenue, Miami, Florida
33126.
(b) The shareholders voted: (i) to elect six people to the Company's Board of
Directors and, (ii) for the approval of the Adoption of the 1996 Non-
Employee Directors Stock Option Plan. The results of the vote on each
matter follows:
The following individuals were elected directors until the next annual
meeting of shareholders or until their successors are elected and
qualified:
Votes Votes Abstentions and
For Withheld Broker non-votes
Barry J. Gibbons 4,754,092 103,446 -0-
Arthur H. Hertz 4,750,567 106,971 -0-
Ann S. Lieff 4,749,149 108,389 -0-
Martin W. Spector 4,749,942 107,596 -0-
Cynthia Cohen Turk 4,750,492 107,046 -0-
Rosalind S. Zacks 4,750,242 107,296 -0-
All members of the previous Board of Directors were nominees and there has
been no change in the Board of Directors as a result of this election.
The shareholders approved the adoption of the 1996 Non-Employee Director's
Stock Option Plan with votes totaling 3,857,639 shares in the affirmative,
443,588 shares in the negative and 32,563 shares abstained.
-12-
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10.1 First Amendment to Revised Agreement effective January 1, 1996
between the Company and Barry Gibbons d/b/a Festina.
10.2 First Amendment to Revised Agreement effective January 23, 1996
between the Company and Jeffrey J. Fletcher d/b/a Transition
Strategies, Inc. ("TSI").
27 Financial Data Schedule. (Attached to electronic filing only.)
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the
quarter ended January 31, 1997.
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.
SPEC'S MUSIC, INC.
-----------------------------
(Registrant)
March 20, 1997 /s/ Ann S. Lieff
- ---------------------- ------------------------------
Date ANN S. LIEFF
President and Chief Executive
Officer (Principal Executive Officer)
March 20, 1997 /s/ Donald A. Molta
- ---------------------- ------------------------------
Date DONALD A. MOLTA
Vice President and Chief Financial
Officer (Principal Financial and
Accounting Officer)
-14-