UNITED STATES
                       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 Quarter Ended                   May 31, 2003




Commission file number              0-28839


                              AUDIOVOX CORPORATION
             (Exact name of registrant as specified in its charter)


           Delaware                                         13-1964841
 (State or other jurisdiction of                           (I.R.S. Employer
  incorporation or organization)                           Identification No.)

150 Marcus Blvd., Hauppauge, New York                           11788
 (Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code                (631) 231-7750

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

                    Yes  X                                       No
                       ------                                      ------

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in rule 126 of the Exchange Act)

                    Yes  X                                       No
                       ------                                      ------



                                        1





           Number of shares of each class of the registrant's Common Stock
outstanding as of the latest practicable date.

[GRAPHIC OMITTED]

           Class                                    Outstanding at June 23, 2003

           Class A Common Stock                         20,651,374 Shares
           Class B Common Stock                          2,260,954 Shares

                                        2





                              AUDIOVOX CORPORATION


                                    I N D E X

                                                                                                         Page
                                                                                                        Number


PART I            FINANCIAL INFORMATION

ITEM 1            Financial Statements:

                                                                                                      
                  Consolidated Balance Sheets at November 30,
                  2002 and May 31, 2003 (unaudited)                                                          3

                  Consolidated Statements of Operations for the
                  Three and Six Months Ended May 31, 2002 (unaudited),
                  as restated, and May 31, 2003 (unaudited)                                                  4

                  Consolidated Statements of Cash Flows for the Six Months Ended
                  May 31, 2002 (unaudited), as restated, and May 31, 2003
                  (unaudited) 5

                  Notes to Consolidated Financial Statements                                              6 - 28


ITEM 2            Management's Discussion and Analysis of
                  Financial Conditions and Results of
                  Operations                                                                              29 - 57

ITEM 4            Controls and Procedures                                                                   57


PART II           OTHER INFORMATION

ITEM 6            Exhibits and Reports on Form 8-K                                                          58

                  SIGNATURES                                                                                59

                  Certifications Pursuant to Section 302 of the Sarbanes Oxley                            60 - 63


                                        3





                      AUDIOVOX CORPORATION AND SUBSIDIARIES
                           Consolidated Balance Sheets
                        (In thousands, except share data)



                                                                                      November 30,    May 31,
                                                                                          2002          2003
                                                                                      -----------    ----------
                                                                                                     (unaudited)
Assets
Current assets:
                                                                                               
     Cash and cash equivalents                                                          $   2,758    $  24,122
     Accounts receivable, net                                                             186,564      160,735
     Inventory, net                                                                       290,064      172,684
     Receivable from vendor                                                                14,174       11,446
     Prepaid expenses and other current assets                                              7,626       10,843
     Deferred income taxes, net                                                             7,653        6,823
                                                                                        ---------    ---------
           Total current assets                                                           508,839      386,653
  Investment securities                                                                     5,405        5,898
  Equity investments                                                                       11,097       11,665
  Property, plant and equipment, net                                                       18,381       15,616
  Excess cost over fair value of assets acquired and other intangible assets, net           6,826        7,512
  Other assets, net                                                                           687        3,307
                                                                                        ---------    ---------
                                                                                        $ 551,235    $ 430,651
                                                                                        =========    =========
  Liabilities and Stockholders' Equity
  Current liabilities:
     Accounts payable                                                                   $ 121,127    $  34,033
     Accrued expenses and other current liabilities                                        34,983       34,628
     Accrued sales incentives                                                              12,151        8,245
     Income taxes payable                                                                   7,643       10,099
     Bank obligations                                                                      40,248        3,245
                                                                                        ---------    ---------
           Total current liabilities                                                      216,152       90,250
  Long-term debt                                                                            8,140        8,132
  Capital lease obligation                                                                  6,141        6,111
  Deferred income tax payable, net                                                          2,704        1,983
  Deferred compensation                                                                     3,969        4,293
                                                                                        ---------    ---------
           Total liabilities                                                              237,106      110,769
                                                                                        ---------    ---------
  Minority interest                                                                         4,616        5,359
                                                                                        ---------    ---------
  Commitments and contingencies
  Stockholders' equity:
     Preferred stock, liquidation preference of $2,500                                      2,500        2,500
     Common stock:
         Class A; 60,000,000 authorized; 20,632,182 and 20,645,882 issued at
           November 30, 2002 and May 31, 2003, respectively; 19,559,445
           outstanding at November
           30, 2002 and 19,573,145 outstanding at May 31, 2003, respectively                  207          207
         Class B convertible; 10,000,000 authorized; 2,260,954 issued and outstanding          22           22
     Paid-in capital                                                                      250,917      251,031
     Retained earnings                                                                     69,396       72,679
     Accumulated other comprehensive loss                                                  (5,018)      (3,405)
     Treasury stock, at cost, 1,072,737 Class A common stock at November 30, 2002 and
         May 31, 2003, respectively                                                        (8,511)      (8,511)
                                                                                        ---------    ---------
           Total stockholders' equity                                                     309,513      314,523
                                                                                        ---------    ---------
           Total liabilities and stockholders' equity                                   $ 551,235    $ 430,651
                                                                                        =========    =========




See accompanying notes to consolidated financial statements.

                                        4





                      AUDIOVOX CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Operations
        For the Three and Six Months Ended May 31, 2002 and May 31, 2003
                 (In thousands, except share and per share data)
                                   (unaudited)


                                                                             Three Months Ended             Six Months Ended
                                                                          May 31,         May 31,         May 31,         May 31,
                                                                            2002            2003           2002            2003
                                                                        ------------    ------------   ------------   ------------
                                                                        As Restated                     As Restated
                                                                         See Note 2                      See Note 2

                                                                                                          
  Net sales                                                             $    297,267    $    301,010   $    481,536   $    597,828
  Cost of sales                                                              278,614         275,398        449,160        546,748
                                                                        ------------    ------------   ------------   ------------
  Gross profit                                                                18,653          25,612         32,376         51,080
                                                                        ------------    ------------   ------------   ------------

  Operating expenses:
     Selling                                                                   7,621           8,275         14,372         15,577
     General and administrative                                               15,953          12,889         27,006         25,195
     Warehousing and technical support                                           515           1,394          1,657          2,793
                                                                        ------------    ------------   ------------   ------------
         Total operating expenses                                             24,089          22,558         43,035         43,565
                                                                        ------------    ------------   ------------   ------------
  Operating income (loss)                                                     (5,436)          3,054        (10,659)         7,515
                                                                        ------------    ------------   ------------   ------------

  Other income (expense), net:
     Interest and bank charges                                                (1,038)         (1,013)        (2,001)        (2,118)
     Equity in income of equity investments                                      557             743            861          1,114
     Gain on issuance of subsidiary shares, net                               14,269            --           14,269           --
     Other, net                                                                 (572)            571         (2,244)          (527)
                                                                        ------------    ------------   ------------   ------------
         Total other income (expense), net                                    13,216             301         10,885         (1,531)
                                                                        ------------    ------------   ------------   ------------

  Income (loss) before provision for (recovery of) income
     taxes, minority interest and cumulative effect of a
     change in accounting for negative goodwill                                7,780           3,355            226          5,984
  Provision for income taxes                                                   4,320             918          2,820          1,958
  Minority interest                                                              213            (363)           770           (743)
                                                                        ------------    ------------   ------------   ------------
  Income (loss) before cumulative effect of a change in
     accounting fornegative goodwill                                           3,673           2,074         (1,824)         3,283
  Cumulative effect of a change in accounting for negative goodwill             --              --              240           --
                                                                        ------------    ------------   ------------   ------------
  Net income (loss)                                                     $      3,673    $      2,074   $     (1,584)  $      3,283
                                                                        ============    ============   ============   ============

  Net income (loss) per common share (basic):
      Income (loss) before cumulative effect of a change in accounting
         for negative goodwill                                          $       0.17    $       0.10   $      (0.08)  $       0.15
     Cumulative effect of a change in accounting for negative goodwill          --              --             0.01           --
                                                                        ------------    ------------   ------------   ------------
  Net income (loss) per common share                                    $       0.17    $       0.10   $      (0.07)  $       0.15
                                                                        ============    ============   ============   ============

  Net income (loss) per common share (diluted):
     Income (loss) before cumulative effect of a change in accounting
         for negative goodwill                                          $       0.17    $       0.09   $      (0.08)  $       0.15
     Cumulative effect of a change in accounting for negative goodwill          --              --             0.01           --
                                                                        ------------    ------------   ------------   ------------
  Net income (loss) per common share                                    $       0.17    $       0.09   $      (0.07)  $       0.15
                                                                        ============    ============   ============   ============

  Weighted average number of common shares outstanding:
       Basic                                                              21,967,263      21,834,089     21,967,263     21,834,099
                                                                        ============    ============   ============   ============
       Diluted                                                            22,007,598      21,873,875     22,005,508     21,949,521
                                                                        ============    ============   ============   ============



See accompanying notes to consolidated financial statements.

                                        5





                      AUDIOVOX CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                 Six Months Ended May 31, 2002 and May 31, 2003
                                 (In thousands)
                                   (unaudited)



                                                                                                            May 31,
                                                                                                       2002         2003
                                                                                                     ---------    ---------
                                                                                                    As Restated

Cash flows from operating activities:

                                                                                                            
     Net income (loss)                                                                               $  (1,584)   $   3,283
     Adjustments to reconcile net income (loss) to net cash flows provided by operating activities
        Depreciation and amortization                                                                    2,277        2,060
        Provision for (recovery of) bad debt expense                                                     1,269         (294)
        Equity in income of equity investments                                                            (861)      (1,114)
        Minority interest                                                                                 (770)         743
        Gain on issuance of subsidiary shares                                                          (14,269)        --
        Deferred income tax expense, net                                                                 5,158           45
        (Gain) loss on disposal of property, plant and equipment, net                                      (12)         175
        Cumulative effect of a change in accounting for goodwill                                          (240)        --

     Changes in operating assets and liabilities:
        Accounts receivable                                                                             20,174       27,403
        Receivable from vendor                                                                         (11,520)       2,730
        Inventory                                                                                      (51,201)     118,894
        Accounts payable, accrued expenses and other current liabilities                               109,242      (90,533)
        Income taxes payable                                                                            (1,066)       2,239
        Investment securities-trading                                                                     (380)        (324)
        Prepaid expenses and other, net                                                                 (1,919)      (7,163)
                                                                                                     ---------    ---------

          Net cash provided by operating activities                                                     54,298       58,144
                                                                                                     ---------    ---------

  Cash flows from investing activities:

     Purchases of property, plant and equipment                                                         (1,434)        (533)
     Proceeds from the sale of property, plant and equipment                                               243          232
     Proceeds from distribution from an equity investee                                                    359          530
     Net proceeds from issuance of subsidiary shares                                                    22,399         --
     Purchase of acquired business, net of acquired cash                                                (7,107)        --
                                                                                                     ---------    ---------

          Net cash provided by investing activities                                                     14,460          229
                                                                                                     ---------    ---------



                                        6




                              Audiovox Corporation
                Consolidated Statements of Cash Flows (continued)
                  Years Ended November 30, 2000, 2001 and 2002
                                 (In thousands)



                                                                                                            May 31,
                                                                                                       2002         2003
                                                                                                     ---------    ---------
                                                                                                    As Restated

Cash flows from financing activities:

                                                                                                             
     Borrowings of bank obligations                                                                   192,501      150,751
     Repayments on bank obligations                                                                  (271,357)    (187,746)
     Proceeds from issuance of convertible subordinated debentures                                      8,107         --
     Principal payments on capital lease obligation                                                       (26)         (30)
                                                                                                     ---------    ---------

          Net cash used in financing activities                                                       (70,775)     (37,025)
                                                                                                     ---------    ---------

  Effect of exchange rate changes on cash                                                                (205)          16
                                                                                                     ---------    ---------

  Net increase (decrease) in cash                                                                      (2,222)      21,364

  Cash at beginning of period                                                                           3,025        2,758
                                                                                                     ---------    ---------
  Cash at end of period                                                                              $    803     $ 24,122
                                                                                                     =========    =========



































See accompanying notes to consolidated financial statements.

                                        7





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
            Three and Six Months Ended May 31, 2002 and May 31, 2003
             (Dollars in thousands, except share and per share data)


(1)  Basis of Presentation

     The  accompanying   consolidated  financial  statements  were  prepared  in
     accordance  with  accounting  principles  generally  accepted in the United
     States of America and include all  adjustments,  which  include only normal
     recurring adjustments,  which, in the opinion of management,  are necessary
     to  present  fairly  the  consolidated   financial   position  of  Audiovox
     Corporation and subsidiaries  (the Company) as of November 30, 2002 and May
     31, 2003, the  consolidated  statements of operations for the three and six
     month periods  ended May 31, 2002 (as  restated) and May 31, 2003,  and the
     consolidated  statements  of cash flows for the six month periods ended May
     31,  2002 (as  restated)  and May 31,  2003.  The  interim  figures are not
     necessarily indicative of the results for the year.

     The  preparation  of financial  statements  in conformity  with  accounting
     principles  generally  accepted  in the United  States of America  requires
     management  to make  estimates  and  assumptions  that affect the  reported
     amounts of assets and  liabilities,  including  the  allowance for doubtful
     accounts,  allowance  for  cellular  deactivations,   inventory  valuation,
     recoverability  of deferred tax and other  assets,  valuation of long-lived
     assets and accrued sales  incentives,  warranty  reserves and disclosure of
     the  contingent  assets  and  liabilities  at the date of the  consolidated
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reporting  period.  Actual  results  could  differ  from those
     estimates.

     A summary of the Company's significant accounting policies is identified in
     Note 1 of the Notes to Consolidated  Financial  Statements  included in the
     Company's 2002 Annual Report filed on Form 10-K. There have been no changes
     to the Company's significant accounting policies subsequent to November 30,
     2002.  Certain  reclassifications  have been made to the 2002  consolidated
     financial statements in order to conform to the 2003 presentation.

(2)  Restatement of Prior Period Consolidated Financial Statements

     As discussed in Note 2 of the Notes to  Consolidated  Financial  Statements
     included  in the  Company's  2002  Annual  Report  filed on Form 10-K,  the
     Company has restated its consolidated financial statements for fiscal 2000,
     2001 and for the first three  quarters of fiscal  2002.  These  restatement
     adjustments  were the result of the  misapplication  of generally  accepted
     accounting  principles.  In addition,  the Company has reclassified certain
     expenses  from  operating  expenses  to cost of sales for the three and six
     months ended May 31, 2002.


                                        8





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


     The net effect of the restatement  adjustments on net income (loss) for the
     three and six months ended May 31, 2002 is as follows:



                                                                        May 31, 2002
                                                                -------------------------------
                                                                   Three Months      Six Months
                                                                                 
Decrease income before cumulative effect of a change in
   accounting for negative goodwill                                    $  (782)        $(2,090)
Decrease net income                                                       (782)         (2,090)
Decrease net income per common share - diluted                         $ (0.03)        $ (0.09)


     The following table provides additional  information  regarding the effects
     of restatement adjustments on the Company's net income (loss) for the three
     and six months ended May 31, 2002: (in thousands)


                                                        Increase
                                                        (Decrease)
                                                        May 31, 2002
                                                -------------------------
                                                 Three Months Six Months

Restatement adjustments:
                                                       
  Timing of revenue                               $  (426)   $  (508)
  Litigation                                           69       (330)
  Foreign currency translation                        (17)    (1,334)
  Inventory pricing                                    (2)       385
  Sales incentives                                    420        693
  Gain on the issuance of subsidiary shares        (1,556)    (1,556)
  Operating expense reclassification to cost of
     sales (1)                                       --         --
                                                  -------    -------
     Total adjustment to decrease pre-tax
           income                                  (1,512)    (2,650)
  Provision for income taxes                         (772)      (602)
  Minority interest (2)                               (42)       (42)
                                                  -------    -------
  Total decrease on net income                    $  (782)   $(2,090)
                                                  =======    =======


     (1)  This  adjustment  represents a  reclassification  of  warehousing  and
          technical  support  and general and  administrative  costs  (which are
          components   of   operating   expenses)   to  cost  of   sales.   This
          reclassification  did not have any effect on  previously  reported net
          income for the three and six months of fiscal 2002.

     (2)  The adjustment  reflects the impact of the restatement  adjustments on
          minority

                                        9





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


          interest.

          The following discussion addresses each of the restatement adjustments
          for the  corrections  of  accounting  errors and the  reclassification
          adjustment.

          (a)  Timing of revenue.  During the three and six months ended May 31,
               2002,  the Company  overstated  net sales by $7,757 and  $12,358,
               respectively,  as the  timing of revenue  recognition  was not in
               accordance  with the  established  shipping  terms  with  certain
               customers. SAB 101 specifically states that delivery generally is
               not  considered  to have  occurred  unless the customer has taken
               title (which is in this  situation when the product was delivered
               to the  customer's  site).  Accordingly,  the Company should have
               deferred  revenue  recognition  until  delivery  was  made to the
               customer's  site.  In  addition,  during the three and six months
               ended May 31, 2002, gross profit was overstated by $562 and $661,
               respectively,  and operating expenses were overstated by $136 and
               $153, respectively.

          (b)  Litigation.  During the three and six months  ended May 31, 2002,
               the Company  overestimated its provisions for certain  litigation
               matters,  thereby  overstating  cost of sales  by $345 and  $521,
               respectively. Also, the Company understated operating expenses by
               $0 and $497 for the three  and six  months  ended  May 31,  2002,
               respectively  as a result of not recording a settlement  offer in
               the period the Company offered it.

               During the three and six months ended May 31,  2002,  the Company
               understated operating expenses by $276 and $354,  respectively as
               a  result  of  inappropriately  deferring  costs  related  to  an
               insurance  claim.  The  Company's  insurance  company  refused to
               defend  the  Company  against  a legal  claim  made  against  the
               Company.  The Company  took legal  action  against the  insurance
               company  and  was   unsuccessful.   The  Company  was  improperly
               capitalizing costs that were not probable of recovery.

          (c)  Foreign  currency  translation.  During  the three and six months
               ended May 31, 2002,  the Company did not  properly  account for a
               change in accounting for its  Venezuelan  subsidiary as operating
               in a non-highly inflationary economy. In prior periods, Venezuela
               was deemed to be a highly-inflationary economy in accordance with
               certain technical accounting pronouncements. Effective January 1,
               2002, it was deemed that Venezuela  should cease to be considered
               a  highly-inflationary  economy,  however,  the  Company  did not
               account for this  change.  The Company  incorrectly  recorded the
               foreign  currency  translation  adjustment in other income rather
               than as other  comprehensive  income.  As a result,  the  Company
               understated other expenses,  net, by $69 and $1,429 for the three
               and six months ended May 31, 2002,

                                       10





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


               respectively.  Also, the Company overstated operating expenses by
               $52 and $95 for the three  and six  months  ended  May 31,  2002,
               respectively.

          (d)  Inventory  pricing.  For the three and six  months  ended May 31,
               2002,  the  Company  overstated  cost  of  sales  related  to  an
               inventory   pricing  error  that   occurred  at  its   Venezuelan
               subsidiary. The Company was not properly pricing its inventory at
               the lower of cost or market in accordance with generally accepted
               accounting  principles.  As  a  result,  the  Company  overstated
               (understated)  cost of sales by $(2) and $385 for the  three  and
               six months ended May 31, 2002, respectively.

          (e)  Sales  incentives.  During the three and six months ended May 31,
               2002,  the  Electronics  segment   underestimated   accruals  for
               additional  sales incentives  (other trade  allowances) that were
               not yet offered to its customers.  As a result, for the three and
               six months ended May 31, 2002, the Company  understated net sales
               by $446 and $4, respectively.

               Furthermore,  during the three and six months ended May 31, 2002,
               the  Electronics  segment  was  also  not  reversing  earned  and
               unclaimed sales incentives (i.e., cooperative advertising, market
               development   and  volume   incentive   rebate  funds)  upon  the
               expiration of the established claim period. As a result,  for the
               three and six months ended May 31, 2002, the Company  understated
               (overstated) net sales by $(26) and $689, respectively.

          (f)  Income  taxes.  Income taxes were  adjusted  for the  restatement
               adjustments discussed above for each period presented.

               The  Company  also  applied  income  taxes to  minority  interest
               amounts  during the three and six months ended May 31, 2002. As a
               result of these adjustments, the Company overstated the provision
               for  income  taxes by $772 and $602 for the three and six  months
               ended May 31, 2002, respectively.

          (g)  Operating  expense  reclassification.  The  Company  reclassified
               certain  costs as operating  expenses,  which were  included as a
               component of  warehousing  and technical  support and general and
               administrative  costs,  which  should have been  classified  as a
               component of cost of sales.  The effect of this  reclassification
               for the three and six months ended May 31, 2002 was to understate
               cost of sales and  overstate  operating  expenses  by $5,373  and
               $10,196,  respectively.  This  reclassification  did not have any
               effect on  previously  reported net income or loss for any period
               presented herein. This  reclassification  reduced gross margin by
               1.8 and 2.1 percentage  points for the three and six months ended
               May 31, 2002, respectively.

                                       11





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


          (h)  Gain on the  issuance  of  subsidiary  shares.  During the second
               quarter  of  fiscal  2002,  the  Company  overstated  the gain on
               issuance of subsidiary  shares by $1,735 due to expenses  related
               to this issuance  being  charged to  additional  paid in capital.
               This adjustment also reflects the impact of the other restatement
               adjustments  on the  calculation  of the gain on the  issuance of
               subsidiary  shares of $179 that was  originally  recorded  by the
               Company  in the  quarter  ended May 31,  2002.  As a result,  the
               Company  decreased the gain on issuance of subsidiary  shares and
               increased the additional paid in capital by $1,556.



                                       12





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


     The following represents the effect of the restatement and reclassification
     adjustments  in the  consolidated  statements of  operations  for the three
     months ended May 31, 2002:



                                                                                  Fiscal 2002
                                                                         For the Quarter Ended May 31,
                                                     ----------------------------------------------------------------------
                                                                          Restatement       Reclassification
                                                      As Reported         Adjustments         Adjustments     As Restated

                                                                                              
  Net sales                                      $    304,603    $     (7,336)(1)(7)              --         $    297,267
  Cost of sales                                       280,778          (7,537)(1)(5)(6)   $      5,373            278,614
                                                 ------------    ------------             ------------       ------------
  Gross profit                                         23,825             201                   (5,373)            18,653
                                                 ------------    ------------             ------------       ------------

  Operating expenses:
     Selling                                            7,631             (10)(1)                 --                7,621
     General and administrative                        15,856             245(1)(4)(5)            (148)(2)         15,953
     Warehousing and technical support                  5,889            (149)(1)(4)            (5,225)(2)            515
                                                 ------------    ------------             ------------       ------------
          Total operating expenses                     29,376              86                    (5,373)            24,089
                                                 ------------    ------------             ------------       ------------
  Operating income (loss)                              (5,551)            115                     --               (5,436)

  Total other income (expense), net                    14,843          (1,627)(4)(8)              --               13,216
                                                 ------------    ------------             ------------       ------------
  Income before provision for income taxes and
     minority interest                                  9,292          (1,512)                    --                7,780
  Provision for income taxes                            5,092            (772)(3)                 --                4,320
  Minority interest                                       255             (42)(9)                 --                  213
                                                 ------------    ------------             ------------       ------------
  Net income                                     $      4,455    $       (782)                    --         $      3,673
                                                 ============    ============             ============       ============

  Net income per common share (basic)            $       0.20    $      (0.03)                   --          $       0.17
                                                 ============    ============             ============       ============
  Net income per common share (diluted)          $       0.20    $      (0.03)                   --          $       0.17
                                                 ============    ============             ============       ============

  Weighted average number of common shares
     outstanding (basic)                           21,967,263                                                 21,967,263
                                                 ============                                                ============
  Weighted average number of common shares
     outstanding (diluted)                         22,007,598                                                 22,007,598
                                                 ============                                                ============




(1)  Amounts reflect adjustments for (a) timing of revenue.
(2)  Amounts reflect for (g) operating expense reclassification.
(3)  Amounts reflect adjustments for (f) income taxes.
(4)  Amounts reflect adjustments for (c) foreign currency translation.
(5)  Amounts reflect adjustments for (b)litigation.
(6)  Amounts reflect adjustments for (d) inventory pricing.
(7)  Amounts reflect adjustments for (e) sales incentives.
(8)  Amounts  reflect  adjustments  for (h) gain on the  issuance of  subsidiary
     shares.
(9)  Amounts reflect impact of restatement adjustments on minority interest.



                                       13





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


     The following represents the effect of the restatement and reclassification
     adjustments in the consolidated statements of operations for the six months
     ended May 31, 2002:



                                                                           Fiscal 2002
                                                                 For the Six Months Ended May 31,
                                            --------------------------------------------------------------------------
                                                                     Restatement       Reclassification
                                              As Reported (a)        Adjustments         Adjustments     As Restated
                                              -----------            -----------         -----------     -----------

                                                                                               
  Net sales                                  $ 493,200               $ (11,664)(1)(7)           --         $ 481,536
  Cost of sales                                451,559                 (12,595)(1)(5)(6)   $ 10,196 (2)      449,160
                                             ---------               ---------             ---------       ---------

  Gross profit                                  41,641                     931              (10,196)         32,376
                                             ---------               ---------             ---------       ---------

  Operating expenses:
     Selling                                    14,385                    (13)(1)              --            14,372
     General and administrative                 26,507                    787(1)(4)(5)         (288)(2)      27,006
     Warehousing and technical support          11,735                   (170)(1)(4)         (9,908)(2)       1,657
                                             ---------               ---------             ---------       ---------
        Total operating expenses               52,627                     604               (10,196)         43,035
                                             ---------               ---------             ---------       ---------
  Operating income (loss)                     (10,986)                    327                  --           (10,659)
                                             ---------               ---------             ---------       ---------

  Total other income (expense), net             13,862                 (2,977)(4)(8)           --            10,885
                                             ---------               ---------             ---------       ---------

  Income (loss) before provision for
     (recovery of) income taxes, minority
     interest and before cumulative effect
     of a change in accounting for negative
     goodwill                                   2,876                  (2,650)                 --               226
  Provision for (recovery of) income taxes      3,422                    (602)(3)              --             2,820
  Minority interest                               812                     (42)(9)              --               770
                                             ---------               ---------             ---------       ---------

  Income (loss) before cumulative effect of a
     change in accounting for negative
     goodwill                                     266                  (2,090)                 --            (1,824)
  Cumulative effect of a change in
     accounting for negative goodwill             240                    --                    --               240
                                             ---------               ---------             ---------       ---------

  Net income (loss)                          $     506               $  (2,090)                --          $  (1,584)
                                             =========               =========             =========       =========

  Net income (loss) per common share
     (basic) before cumulative effect of
      a change in accounting for negative
     goodwill                                $    0.01               $   (0.09)                 --          $ (0.08)
     Cumulative effect of a change in
       accounting for negative goodwill           0.01                    --                    --             0.01
                                             ---------               ---------             ---------       ---------
  Net income (loss) per common share
     (basic)                                 $    0.02               $   (0.09)                   --        $  (0.07)
                                             =========               ==========            =========       ==========



                                                       14





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued



                                                                           Fiscal 2002
                                                                 For the Six Months Ended May 31,
                                            --------------------------------------------------------------------------
                                                                     Restatement       Reclassification
                                              As Reported (a)        Adjustments         Adjustments     As Restated
                                              -----------            -----------         -----------     -----------
                                                                                               
Netincome (loss) per common share
     (diluted) before cumulative effect
     of a change in accounting for negative
     goodwill                                $    0.01               $   (0.09)                 --          $ (0.08)
     Cumulative effect of a change in
       accounting for negative goodwill           0.01                    --                    --             0.01
                                             ---------               ---------             ---------       ---------
  Net income (loss) per common share
     (diluted)                               $    0.02               $   (0.09)                   --        $  (0.07)
                                             =========               ==========            =========       ==========


Weighted average number of common
   shares outstanding (basic)                21,967,263                                                    21,967,263
                                             ===========                                                   ===========


Weighted average number of common
   shares outstanding (diluted)              22,005,508                                                    22,005,508
                                             ===========                                                   ===========


(a)  Includes  reclassification  of sales  incentives  (previously  reported  in
     operating  expenses)  pursuant to EITF 01-9,  "Accounting for Consideration
     Given by a Vendor to a  Customer  (Including  a  Reseller  of the  Vendor's
     Products)".
(1)  Amounts reflect adjustments for (a) timing of revenue.
(2)  Amounts reflect adjustments for (g) operating expense reclassification.
(3)  Amounts reflect adjustments for (f) income taxes.
(4)  Amounts reflect adjustments for (c) foreign currency translation.
(5)  Amounts reflect adjustments for (b)litigation.
(6)  Amounts reflect adjustments for (d) inventory pricing.
(7)  Amounts reflect adjustments for (e) sales incentives.
(8)  Amounts  reflect  adjustments  for (h) gain on the  issuance of  subsidiary
     shares.
(9)  Amounts reflect impact of restatement adjustments on minority interest.

As a result of the restatement for the quarter ended May 31, 2002, cash provided
by  operating  activities  was  decreased  $439 and cash  provided by  investing
activities  was  increased  $439.  There has not been any change to cash used in
financing activities.

(3)  Accrued Sales Incentives

     During the prior year,  the Company  adopted  the  provisions  of EITF 01-9
     "Accounting  for  Consideration  Given by a  Vendor  to a  Customer".  As a
     result,  the  Company has  reclassified  co-operative  advertising,  market
     development  funds and volume  incentive rebate costs  (collectively  sales
     incentives),  which were previously  included in selling  expenses,  to net
     sales as the Company does not receive an identifiable benefit in connection
     with  these  costs.  As a result  of this  reclassification,  net sales and
     selling expenses,  after  restatement,  were reduced by $11,819 for the six
     months ended May 31, 2002. The Company  adopted EITF 01-9 during the second
     quarter of 2002. As such, no reclassification was necessary for the

                                       15





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


     three  months  ended  May 31,  2002.  There  was no  further  impact on the
     Company's  consolidated financial statements as a result of the adoption of
     EITF 01-9 as the Company's historical accounting policy with respect to the
     recognition  and  measurement of sales  incentives is consistent  with EITF
     01-9.

     A summary of the activity with respect to sales incentives for the quarters
     ended May 31, 2002 and 2003 on a segment and consolidated basis is provided
     below:

For the three months ended May 31, 2002


                                             Wireless   Electronics  Total

  Opening balance                            $  4,315    $  2,882    $  7,197
  Accruals                                     11,649       1,706      13,355
  Payments                                     (1,898)       (836)     (2,734)
  Reversals for unearned sales incentives        (105)       --          (105)
  Reversals for unclaimed sales incentives     (1,431)       --        (1,431)
                                             --------    --------    --------
  Ending balance                             $ 12,530    $  3,752    $ 16,282
                                             ========    ========    ========

For the six months ended May 31, 2002


                                             Wireless   Electronics  Total

  Opening Balance                            $  5,209    $  3,265    $  8,474
  Accruals                                     13,206       2,992      16,198
  Payments                                     (4,319)     (1,834)     (6,153)
  Reversals for unearned sales incentives        (105)       --          (105)
  Reversals for unclaimed sales incentives     (1,461)       (671)     (2,132)
                                             --------    --------    --------
  Ending balance                             $ 12,530    $  3,752    $ 16,282
                                             ========    ========    ========

For the three months ended May 31, 2003


                                             Wireless   Electronics  Total

  Opening balance                            $  8,641    $  4,561    $ 13,202
  Accruals                                      5,784       2,370       8,154
  Payments                                    (10,953)     (1,763)    (12,716)
  Reversals for unearned sales incentives         (51)       (240)       (291)
  Reversals for unclaimed sales incentives       (104)       --          (104)
                                             --------    --------    --------
  Ending balance                             $  3,317    $  4,928    $  8,245
                                             ========    ========    ========


                                       16

                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


For the six months ended May 31, 2003
                                             Wireless   Electronics  Total

  Opening balance                            $  7,525    $  4,626    $ 12,151
  Accruals                                     11,336       4,335      15,671
  Payments                                    (15,226)     (3,062)    (18,288)

  Reversals for unearned sales incentives         (51)       (240)       (291)
  Reversals for unclaimed sales incentives       (267)       (731)       (998)
                                             --------    --------    --------
  Ending balance                             $  3,317    $  4,928    $  8,245
                                             ========    ========    ========

(4)  Supplemental Cash Flow Information

     The  following is  supplemental  information  relating to the  consolidated
     statements of cash flows:


                                       Six Months Ended
                              ----------------------------------------
                                      May 31,   May 31,
                                       2002       2003
                                     --------   ---------

Cash paid during the period:
  Interest (excluding bank charges)   $ 1,152   $ 1,063
  Income taxes (net of refunds)       $   500   $  (219)

     During the six months  ended May 31,  2002 and May 31,  2003,  the  Company
     recorded   a   net   unrealized    holding   gain   (loss)    relating   to
     available-for-sale  marketable securities, net of deferred taxes, of $(414)
     and $93,  respectively,  as a component of accumulated other  comprehensive
     loss.



                                       17





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(5)  Net Income (Loss) Per Common Share

     A  reconciliation  between the numerators and denominators of the basic and
     diluted income (loss) per common share is as follows:



                                                                  Three Months Ended             Six Months Ended
                                                                           May 31,                    May 31,
                                                                  2002             2003           2002                 2003
                                                              --------------   ------------   --------------    --------------
                                                              (As Restated)                    (As Restated)
                                                                                                    
Net income (loss) (numerator for basic
     income per share)                                        $        3,673   $      2,074   $       (1,584)   $        3,283
                                                              ==============   ============   ==============    ==============
  Weighted average common shares
     (denominator for basic income per
     share)                                                       21,967,263     21,834,099       21,967,263        21,834,099
  Effect of dilutive securities:
     Employee stock options and stock
           warrants                                                   40,335         39,776           38,245           115,422
                                                              --------------   ------------   --------------    --------------

  Weighted average common and
     potential common shares
     outstanding (denominator for
     diluted income per share)                                    22,007,598     21,873,875       22,005,508        21,949,521
                                                              ==============   ============   ==============    ==============

  Net income (loss) per common share
     (basic):
     Income (loss) before cumulative
         effect of a change in  accounting
         for  negative goodwill                               $        0.17    $      0.10   $       (0.08)    $        0.15
     Cumulative effect of a change in
         accounting for negative goodwill                              --              --              0.01             --
                                                              --------------   ------------   --------------    --------------
  Net income (loss) per common share                          $        0.17    $      0.10    $       (0.07)    $       0.15
                                                              ==============   ============   ==============    ==============

  Net income (loss) per common share
     (diluted):
     Income (loss) before cumulative
         effect of a change in accounting
         for  negative goodwill                               $        0.17    $      0.09   $       (0.08)    $        0.15
     Cumulative effect of a change in
         accounting for negative goodwill                              --              --              0.01             --
                                                              --------------   ------------   --------------    --------------
  Net income (loss) per common share                          $        0.17    $      0.09    $       (0.07)    $       0.15
                                                              ==============   ============   ==============    ==============


     Stock options and warrants  totaling  2,457,200 and 2,598,450 for the three
     and six months ended May 31, 2002,  respectively,  were not included in the
     net income (loss) per common share  calculation  because their effect would
     have been anti-dilutive.

                                       18





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


     Stock options and warrants  totaling  2,416,164 and 2,002,182 for the three
     and six months ended May 31, 2003,  respectively,  were not included in the
     net income (loss) per common share  calculation  because their effect would
     have been anti-dilutive.

(6)  Comprehensive Income (Loss)

     The accumulated other  comprehensive  loss of $5,018 and $3,405 at November
     30, 2002 and May 31, 2003, respectively,  on the accompanying  consolidated
     balance  sheets is the net  accumulated  unrealized  loss on the  Company's
     available-for-sale  investment  securities of $599 and $506 at November 30,
     2002 and May 31, 2003,  respectively,  and the accumulated foreign currency
     translation  adjustment  of $4,419 and $2,899 at November  30, 2002 and May
     31, 2003, respectively.

     The Company's total comprehensive income (loss) was as follows:



                                             Three Months Ended     Six Months Ended
                                                 May 31,              May 31,
                                              2002         2003     2002       2003
                                             -------    -------    -------    -------

                                         (As Restated)         (As Restated)

                                                                  
  Net income (loss)                          $ 3,673    $ 2,074    $(1,584)   $ 3,283
  Other comprehensive income (loss):
     Foreign currency translation
         adjustments                             807        835        397      1,520
     Unrealized gain (loss) on securities:
         Unrealized holding gain (loss)
             arising during period, net of
             tax                                 (65)       (29)      (414)        93
                                             -------    -------    -------    -------
  Other comprehensive loss, net of tax           742        806        (17)     1,613
                                             -------    -------    -------    -------
  Total comprehensive income (loss)          $ 4,415    $ 2,880    $(1,601)   $ 4,896
                                             =======    =======    =======    =======


     The change in the net  unrealized  gain (loss)  arising  during the periods
     presented  above are net of tax provision  (benefit) of ($40) and $(18) for
     the three  months ended May 31, 2002 and May 31,  2003,  respectively,  and
     $(254)  and  $57  for  the  six  months   ended  May  31,  2002  and  2003,
     respectively.

     Included in foreign currency translation  adjustments for the three and six
     months  ended May 31, 2002 are  translation  adjustments  of $171 and $178,
     respectively, related to the translation Company's operations in Venezuela.
     Included in foreign currency translation  adjustments for the three and six
     months  ended  May 31,  2003  are  translation  adjustments  of $7 and $13,
     respectively,  related to the  translation  of the Company's  operations in
     Venezuela.  On January  22,  2003,  and as a result of the  National  Civil
     Strike, the Venezuelan

                                       19





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


     government suspended trading of the Venezuelan Bolivar and set the currency
     at a stated government rate. Accordingly, until further guidance is issued,
     the Company's 80%-owned Venezuelan  subsidiary will translate its financial
     statements utilizing the stated government rate.

(7)  Segment Information

     The Company has two  reportable  segments  which are organized by products:
     Wireless and Electronics.  The Wireless  segment markets wireless  handsets
     and accessories  through domestic and  international  wireless carriers and
     their agents,  independent  distributors  and  retailers.  The  Electronics
     segment  sells  autosound,  mobile  electronics  and consumer  electronics,
     primarily to mass merchants, specialty retailers, new car dealers, original
     equipment   manufacturers  (OEM),   independent  installers  of  automotive
     accessories and the U.S. military.

     The Company evaluates  performance of the segments based upon income before
     provision for income taxes and minority interest.  The accounting  policies
     of the  segments  are the same as those  for the  Company  as a whole.  The
     Company allocates interest and certain shared expenses, including treasury,
     legal and human  resources,  to the segments  based upon  estimated  usage.
     Intersegment  sales  are  reflected  at cost and have  been  eliminated  in
     consolidation. A royalty fee on the intersegment sales, which is eliminated
     in consolidation,  is recorded by the segments and included in other income
     (expense).   Certain  items  are  maintained  at  the  Company's  corporate
     headquarters  (Corporate)  and  are not  allocated  to the  segments.  They
     primarily  include costs  associated with accounting and certain  executive
     officer  salaries  and  bonuses  and  certain  items  including  investment
     securities, equity investments,  deferred income taxes, certain portions of
     excess cost over fair value of assets acquired,  jointly-used  fixed assets
     and debt.  The  jointly-used  fixed  assets  are the  Company's  management
     information  systems,  which  are  used  by the  Wireless  and  Electronics
     segments and  Corporate.  A portion of the management  information  systems
     costs,  including  depreciation and amortization  expense, are allocated to
     the segments based upon estimates made by management.  During the three and
     six months ended May 31, 2002 and May 31, 2003,  certain  advertising costs
     were not allocated to the segments. These costs pertained to an advertising
     campaign that was intended to promote  overall  Company  awareness,  rather
     than individual  segment products.  Segment  identifiable  assets are those
     which are directly used in or identified to segment operations.

                                       20





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued





                                                                           Consolidated
                                   Wireless    Electronics   Corporate     Totals
Three  Months Ended
May 31, 2002 - As Restated

                                                                 
  Net sales                        $ 206,300    $  90,967         --      $ 297,267
  Intersegment sales (purchases)         (98)          98         --           --
  Pre-tax income (loss)               (8,931)       5,333    $  11,378        7,780

  Three  Months Ended
  May 31, 2003

  Net sales                        $ 189,107    $ 111,903         --      $ 301,010
  Intersegment sales (purchases)          57          (57)        --           --
  Pre-tax income (loss)                1,486        5,262    $  (3,393)       3,355

  Six  Months Ended
  May 31, 2002 - As Restated

  Net sales                        $ 319,291    $ 162,245         --      $ 481,536
  Intersegment sales (purchases)          16           16         --           --
  Pre-tax income (loss)              (15,638)       6,677    $   9,187          226
  Total assets                       383,240      148,081       52,047      583,368
  Goodwill, net                         --            636        4,602        5,238

  Six  Months Ended
  May 31, 2003

  Net sales                        $ 405,669    $ 192,159         --      $ 597,828
  Intersegment sales (purchases)        (118)         118         --           --
  Pre-tax income (loss)                4,735        7,752    $  (6,503)       5,984
  Total assets                       175,637      195,337       59,677      430,651
  Goodwill, net                         --          2,910        4,602        7,512


(8)  Income Taxes

     Quarterly  tax  provisions  are  generally  based upon an estimated  annual
     effective tax rate per taxable  entity,  including  evaluations of possible
     future events and transactions, and are subject to subsequent refinement or
     revision.  When the  Company  is unable to  estimate  a part of its  annual
     income or loss,  or the related tax expense or benefit,  the tax expense or
     benefit  applicable to that item is reported in the interim period in which
     the income or loss  occurs.  During the three and six months  ended May 31,
     2003, the Wireless Group utilized  certain of its gross deferred tax assets
     (including net operating losses and other deferred assets),  therefore, the
     valuation  allowance related to those utilized deferred tax assets has been
     removed,  which resulted in a decrease in the Company's  effective tax rate
     for the period.

                                       21





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


     A reconciliation  of the provision for income taxes computed at the Federal
     statutory rate to the reported  provision for (recovery of) income taxes is
     as follows:



                                            Three Months Ended                      Six Months Ended
                                                  May 31,                                 May 31,
                                       2002            2003                        2002               2003
                                ----------------   ---------------------  -------------------  ---------------------
                                   (As Restated)                                   (As Restated)

                                                                                     
Tax provision at Federal
     statutory rate             $ 2,723    35.0 % $ 1,175        35.0%  $    79         35.0%  $ 2,095       35.0%
  State income taxes, net of
     Federal benefit                680      8.7      207         6.2       621        274.8       426        7.1
  Increase (decrease) in
     beginning-of-the-year
     balance of the valuation
     allowance for deferred
     tax assets                     221      2.8     (566)      (16.9)      398        176.1    (1,005)     (16.8)
  Foreign tax rate
     differential                   (87)    (1.1)     (62)              (1.9) 655      289.8       405        6.8
  Non-deductible items              614      7.9       23         0.7     1,227        542.9        80        1.3
  Other, net                        169      2.2      142         4.3      (160)       (70.8)      (42)      (0.7)
                                -------    ---    -------     -----     -------     ------     -------     ----
                                $ 4,320    55.5 % $   919        27.4%  $ 2,820     1247.8%    $ 1,959       32.7%
                                =======    ===    =======     =====     =======     ======     =======     ====


     Other is a combination of various factors, including changes in the taxable
     income or loss between  various tax entities with  differing  effective tax
     rates, changes in the allocation and apportionment  factors between taxable
     jurisdictions  with differing tax rates of each tax entity,  changes in tax
     rates and other legislation in the various jurisdictions, and other items.

     The net  change  in the  total  valuation  allowance  for the three and six
     months ended May 31, 2003, was a decrease of $566 and a decrease of $1,005,
     respectively. A valuation allowance is provided when it is more likely than
     not that some  portion,  or all,  of the  deferred  tax assets  will not be
     realized.   The  Company  has  established  valuation  allowances  for  net
     operating  loss  carryforwards  as well as other deferred tax assets of the
     Wireless  Group.  Based  on the  Company's  ability  to carry  back  future
     reversals of deductible temporary  differences to taxes paid in current and
     prior years and the Company's  historical  taxable income record,  adjusted
     for unusual items,  management believes it is more likely than not that the
     Company will realize the benefit of the net deferred tax assets existing at
     May 31, 2003.

(9)  Product Warranties and Product Repair Costs

     The Company generally  warrants its products against certain  manufacturing
     and other defects.  The Company provides warranties for all of its products
     ranging from 90 days to the lifetime of the product.  Warranty expenses are
     accrued at the time of sale based on the

                                       22





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


     Company's  estimated  cost to repair  expected  returns for products.  This
     liability is based  primarily on historical  experiences of actual warranty
     claims  as well as  current  information  on  repair  costs.  The  warranty
     liability  of $9,143 and $9,615,  is  recorded  in accrued  expenses in the
     accompanying consolidated balance sheet as of November 30, 2002 and May 31,
     2003, respectively.  In addition, the Company records a reserve for product
     repair  costs.  This  reserve is based  upon the  quantities  of  defective
     inventory  on hand and an  estimate  of the cost to repair  such  defective
     inventory.  The reserve for product  repair  costs of $6,267 and $7,274 are
     recorded as a  reduction  to  inventory  in the  accompanying  consolidated
     balance  sheet as of  November  30,  2002 and May 31,  2003,  respectively.
     Warranty claims and product repair costs expense for the three months ended
     May 31, 2002 and 2003 were $2,288 and $2,316, and $4,029 and $4,884 for the
     six months ended May 31, 2002 and 2003, respectively.

     The  following  table  provides  the  changes  in  the  Company's   product
     warranties and product repair costs for 2003:


                                                 May 31, 2003
                                   Three Months Ended    Six Months Ended

  Opening balance                      $ 16,280             $ 15,410
  Liabilities accrued for warranties
       issued during the period           2,926                4,884
  Warranty claims paid during the
       period                            (2,316)              (3,404)
                                       --------              --------
  Ending balance at May 31, 2003       $ 16,890              $ 16,890
                                       ========              ========

(10) New Accounting Pronouncements

     In July  2001,  the  FASB  issued  SFAS  No.  143,  "Accounting  for  Asset
     Retirement  Obligations"  (Statement  143).  Statement 143 is effective for
     fiscal years  beginning after June 15, 2002, and thus was be adopted by the
     Company on December 1, 2002 (fiscal  2003) and  establishes  an  accounting
     standard   requiring  the  recording  of  the  fair  value  of  liabilities
     associated with the retirement of long-lived  assets in the period in which
     they are incurred. The adoption of Statement 143 did not have any impact on
     its results of operations  or its financial  position as the Company had no
     asset retirement obligations.

     In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
     Impairment  of  Long-  Lived  Assets"   (Statement  144),  which  addresses
     financial  accounting  and  reporting  for the  impairment  or  disposal of
     long-lived assets. This statement  supersedes Statement 121 while retaining
     the fundamental recognition and measurement provisions of that statement.

                                       23





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


     Statement 144 requires that a long-lived  asset to be abandoned,  exchanged
     for a similar productive asset or distributed to owners in a spin-off to be
     considered  held and used until it is disposed of.  However,  Statement 144
     requires that management  consider  revising the  depreciable  life of such
     long-lived  asset.  With respect to long-lived  assets to be disposed of by
     sale, Statement 144 retains the provisions of Statement 121 and, therefore,
     requires  that  discontinued  operations  no  longer be  measured  on a net
     realizable  value basis and that future  operating  losses  associated with
     such  discontinued  operations no longer be  recognized  before they occur.
     Statement  144 is  effective  for  all  fiscal  quarters  of  fiscal  years
     beginning  after  December 15, 2001.  The adoption of Statement 144 did not
     have any impact on the Company's consolidated financial statements.

     In April 2002, the FASB issued SFAS 145  "Rescission of SFAS Statements No.
     4,  44,  and  64,  Amendment  of SFAS  No.  13 and  Technical  Corrections"
     (Statement  145).  Statement  145,  as it  pertains  to  the  recission  of
     Statement 4, is effective for fiscal years beginning after May 15, 2002 and
     is effective for transactions occurring after May 15, 2002 as it relates to
     Statement 13. This Statement  updates,  clarifies and  simplifies  existing
     accounting  pronouncements  by rescinding  Statement 4, which  required all
     gains and losses  from  extinguishment  of debt to be  aggregated  and,  if
     material,  classified as an  extraordinary  item, net of related income tax
     effect.  As a  result,  the  criteria  in  Opinion  30 will  now be used to
     classify those gains and losses. Adoption of this statement had no material
     impact on the Company's financial statements.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
     Compensation Transition and Disclosure". Statement 148 provides alternative
     methods of  transition  for a voluntary  change to the fair value method of
     accounting for stock-based employee  compensation as originally provided by
     Statement 123,  "Accounting for Stock- Based  Compensation".  Additionally,
     Statement 148 amends the disclosure requirements of SFAS No. 123 to require
     prominent  disclosure in both annual and interim financial statements about
     the method of accounting for stock-based compensation and the effect of the
     method used on reported results. The transitional requirements of Statement
     148 will be effective for all financial  statements for fiscal years ending
     after December 15, 2002. The disclosure requirements shall be effective for
     financial reports  containing  condensed  financial  statements for interim
     periods  beginning  after  December 31,  2002.  The Company has adopted the
     disclosure  portion of this statement for the fiscal quarter ending May 31,
     2003, as required.  The application of this standard will have no impact on
     the Company's consolidated financial position or results of operations.

     In  February  2003,  the EITF  issued EITF Issue  02-16,  "Accounting  by a
     Customer (Including a Reseller) for Certain  Consideration  Received from a
     Vendor",  which was adopted by the Company during the quarter ended May 31,
     2003. This EITF provides guidance on the

                                       24





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


     income  statement   classification  of  amounts  received  by  a  customer,
     including a reseller  and  guidance  regarding  timing of  recognition  for
     volume  rebates.   Adoption  of  this  new  standard,   which  was  applied
     prospectively by the Company for new arrangements,  including modifications
     of existing  arrangements,  entered into after  December 31, 2002,  did not
     have a material impact on the Company's  consolidated financial position or
     results of operations.

     In  November  2002,  the  FASB  issued  Interpretation  No.  45  (FIN  45),
     "Guarantor's   Accounting  and  Disclosure   Requirements  for  Guarantors,
     Including  Guarantees of Indebtedness of Others".  FIN 45 elaborates on the
     disclosures  to be made by a guarantor in its interim and annual  financial
     statements  about its  obligations  under  certain  guarantees  that it has
     issued. It also clarifies that a guarantor is required to recognize, at the
     inception of a guarantee,  a liability for the fair value of the obligation
     undertaken in issuing the guarantee.  The initial  recognition  and initial
     measurement  provisions of FIN 45 are applicable on a prospective  basis to
     guarantees issued or modified after December 31, 2002,  irrespective of the
     guarantor's  fiscal  year-end.  The disclosure  requirements  of FIN 45 are
     effective for  financial  statements  of interim or annual  periods  ending
     after  December  15,  2002.  The Company  adopted FIN 45 during the quarter
     ended May 31, 2003.  The adoption of FIN 45 did not have a material  effect
     on the Company's consolidated financial position or results of operations.

     In  January  2003,  the  FASB  issued   Interpretation  No.  46  (FIN  46),
     "Consolidation of Variable Interest Entities,  an interpretation of ARB No.
     51". FIN 46 addresses the consolidation by business enterprises of variable
     interest entities as defined in the Interpretation. FIN 46 is effective for
     all new variable  interest  entities  created or acquired after January 31,
     2003. For variable  interest entities created or acquired prior to February
     1, 2003,  the  provisions  of FIN 46 must be applied for the first  interim
     period beginning after June 15, 2003.  Accordingly,  the Company will adopt
     this  provision of FIN 46 during the quarter ended  November 30, 2003.  The
     adoption of FIN 46 is being evaluated to determine what impact, if any, the
     adoption of the provisions will have on the Company's  financial  condition
     or results of operations.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
     Derivative  Instruments  and Hedging  Activities."  SFAS No. 149 amends and
     clarifies  the  accounting  guidance on derivative  instruments  (including
     certain  derivative  instruments  embedded in other  contracts) and hedging
     activities  that fall  within the scope of SFAS No.  133,  "Accounting  for
     Derivative  Instruments and Hedging  Activities." SFAS No. 149 is effective
     for all  contracts  entered  into or  modified  after June 30,  2003,  with
     certain exceptions, and for hedging relationships designated after June 30,
     2003. The guidance is to be applied prospectively. The adoption of SFAS No.
     149 is being  evaluated to determine  what impact,  if any, the adoption of
     the provisions will have on the Company's financial

                                       25





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


     condition or results of operations.

     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
     Financial Instruments with Characteristics of both Liabilities and Equity."
     SFAS  No.  150  changes  the  accounting  guidance  for  certain  financial
     instruments that, under previous guidance, could be classified as equity or
     "mezzanine"  equity by now requiring those  instruments to be classified as
     liabilities (or assets in some circumstances) in the statement of financial
     position.  Further, SFAS No. 150 requires disclosure regarding the terms of
     those  instruments and settlement  alternatives.  SFAS No. 150 is generally
     effective for all financial  instruments entered into or modified after May
     31, 2003, and is otherwise  effective at the beginning of the first interim
     period beginning after June 15, 2003. The adoption of SFAS No. 150 is being
     evaluated to determine what impact,  if any, the adoption of the provisions
     will have on the Company's financial condition or results of operations.

(11) Financing Arrangements

     The credit agreement  contains  several  covenants  requiring,  among other
     things,  minimum  levels of pre-tax income and minimum levels of net worth.
     Additionally,  the  agreement  includes  restrictions  and  limitations  on
     payments of dividends, stock repurchases and capital expenditures.

     At November 30, 2002, the Company was not in compliance with certain of its
     pre-tax income covenants. Furthermore, as of November 30, 2002, the Company
     was  also  not in  compliance  with  the  requirement  to  deliver  audited
     financial statements 90 days after the Company's fiscal year-end, and as of
     February 28, 2003, the requirement to deliver unaudited quarterly financial
     statements 45 days after the  Company's  quarter end and had not received a
     waiver.  Accordingly,  the Company  recorded its outstanding  domestic bank
     obligations of $36,883 in current liabilities at November 30, 2002.

     Subsequent  to November  30, 2002,  the Company  repaid its  obligation  of
     $36,883 in full resulting in domestic bank  obligations  outstanding at May
     31, 2003 of $0. The Company subsequently obtained a waiver for the November
     30, 2002 and February 28, 2003  violations.  The Company was in  compliance
     with  all its  bank  covenants  at May 31,  2003.  While  the  Company  has
     historically been able to obtain waivers for such violations,  there can be
     no assurance that future  negotiations with its lenders would be successful
     or that the Company will not violate  covenants  in the future,  therefore,
     resulting in amounts  outstanding  to be payable  upon demand.  This credit
     agreement has no cross covenants with other credit facilities.



                                       26





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(12) Business Acquisitions

     (a)  Code Systems

          On  March  15,  2002,  Code  Systems,   Inc.  (Code),  a  wholly-owned
          subsidiary of Audiovox Electronics Corp.,  purchased certain assets of
          Code-Alarm,  Inc., an automotive security product company. The Company
          accounted for the  transaction in accordance  with the purchase method
          of accounting. As a result of the transaction,  goodwill of $1,854 was
          recorded.  An adjustment to the  allocation of the purchase  price was
          made  to a  certain  acquired  balance  resulting  in an  increase  to
          goodwill of $686 during the six months ended May 31, 2003.

     (b)  Recoton

          In May 2003, the U.S.  Bankruptcy Court accepted the Company's bid for
          certain  assets of  Recoton  Corporation.  This bid  includes  certain
          defined assets of Recoton's U.S. audio operations including brands and
          trademarks  and the  outstanding  common  stock of  Recoton's  German,
          Italian,  and Japanese  operations.  In accordance  with this bid, the
          Company  made a deposit of $2,000,  which is  currently  being held in
          escrow.   The  purchase  price  will  approximate   $40,000  plus  the
          assumption of $5,000 in debt, not including related acquisition costs.
          The closing is  anticipated to be in early July 2003 and is subject to
          completion of final documentation and regulatory approval.

(13) Guarantee of Debt

     During the six months ended May 31, 2003,  the Company  adopted FIN 45. The
     Company has  guaranteed,  through August 31, 2003, the borrowings of one of
     its  50%-owned  equity  investees  (GLM) at a maximum of $300.  The Company
     guaranteed  the debt of GLM beginning in December 1996. The Company has not
     issued or modified this  guarantee  after  December 31, 2002. In accordance
     with FIN 45, this  guarantee  has not been  reflected  on the  accompanying
     consolidated   financial   statements.   The  Company  does  not  have  any
     contractual  recourse  provisions  that would enable the Company to recover
     any amounts paid under the guarantee.  No assets are held by the Company as
     collateral or by the guarantor  that the Company could obtain and liquidate
     to recover all or a portion of the amounts paid under the guarantee.

(14) Employee Stock-Based Compensation

     The Company  applies the  intrinsic  value method as outlined in Accounting
     Principles   Board  Opinion  No.  25,   "Accounting  for  Stock  Issued  to
     Employees", and related interpretations in

                                       27





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


     accounting for stock options and share units granted under these  programs.
     Under the intrinsic value method, no compensation  expense is recognized if
     the exercise  price of the  Company's  employee  stock  options  equals the
     market price of the underlying stock on the date of the grant. Accordingly,
     no compensation cost has been recognized. Statement of Financial Accounting
     Standard  ("SFAS")  No. 123,  "Accounting  for  Stock-Based  Compensation",
     requires  that the Company  provide  pro forma  information  regarding  net
     income  and net income per  common  share as if  compensation  cost for the
     Company's  stock option programs had been determined in accordance with the
     fair value method  prescribed  therein.  The Company adopted the disclosure
     portion    of    SFAS    No.    148,     "Accounting     for    Stock-Based
     Compensation-Transition  and Disclosure"  requiring  quarterly SFAS No. 123
     pro forma  disclosure.  The following  table  illustrates the effect on net
     income and  income per common  share as if the  Company  had  measured  the
     compensation  cost for the Company's  stock option  programs under the fair
     value method in each period presented.



                                  Three Months Ended             Six Months Ended
                                        May 31,                      May 31,
                               ---------------------------    --------------------------
                                 2002           2003             2002          2003
                               -------------   --------       -----------    ---------
                               (As Restated)                  (As Restated)

  Net income (loss), as
                                                                 
     reported                  $ 3,673         $ 2,074        $(1,584)       $ 3,283
  Deduct: Total stock-based
     employee compensation
     expense determined
     under fair value method
     for all awards, net of
     related tax effects          (303)         --             (976)         --
                               -------        -------        -------        -------
  Pro forma net income
     (loss)                    $ 3,370        $ 2,074        $(2,560)       $ 3,283
                               =======        =======        =======        =======
Income per common share:
   Basic - as reported         $  0.17        $  0.10        $  (0.07)      $   0.15
   Basic - pro forma           $  0.15        $  0.10        $  (0.12)      $   0.15
   Diluted - as reported       $  0.17        $  0.09        $  (0.07)      $   0.15
   Diluted - pro forma         $  0.15        $  0.09        $  (0.12)      $   0.15


(15) Subsequent Event

     Subsequent to May 31, 2003, the Company has canceled its arrangement with a
     certain  customer that utilized  navigation  systems.  The Company does not
     anticipate a material  loss  associated  with this  cancellation;  however,
     there can be no assurances of this.

                                       28





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

     The Company  markets its products  under the Audiovox brand name as well as
private   labels  through  a  large  and  diverse   distribution   network  both
domestically  and  internationally.  The Company  operates through two marketing
groups:  Wireless and Electronics.  Wireless consists of Audiovox Communications
Corp.  (ACC),  a 75%-owned  subsidiary  of  Audiovox,  and  Quintex,  which is a
wholly-owned  subsidiary of ACC. ACC markets  wireless  handsets and accessories
primarily  on a wholesale  basis to wireless  carriers in the United  States and
carriers overseas. Quintex is a small operation for the direct sale of handsets,
accessories and wireless telephone service.  Quintex also receives residual fees
and activation commissions from the carriers. Residuals are paid by the carriers
based upon a percentage of usage of customers  activated by Quintex for a period
of time (1-5 years).  Quintex also sells a small volume of electronics  products
not related to wireless which are categorized as "other".

     The Electronics Group consists of three wholly-owned subsidiaries: Audiovox
Electronics  Corporation  (AEC),  American  Radio Corp.  and Code Systems,  Inc.
(Code)  and  three  majority-  owned   subsidiaries,   Audiovox   Communications
(Malaysia) Sdn. Bhd.,  Audiovox  Holdings (M) Sdn. Bhd. and Audiovox  Venezuela,
C.A. The  Electronics  Group markets,  both  domestically  and  internationally,
automotive  sound and security  systems,  electronic car  accessories,  home and
portable sound  products,  FRS radios,  in-vehicle  video  systems,  flat-screen
televisions,  DVD  players and  navigation  systems.  Sales are made  through an
extensive  distribution  network of mass  merchandisers and others. In addition,
the Company sells some of its products  directly to automobile  manufacturers on
an OEM basis.  American  Radio Corp.  is also involved on a limited basis in the
wireless marketplace. Wireless related sales are categorized as "other".

     The Company allocates interest and certain shared expenses to the marketing
groups based upon both actual and estimated  usage.  General  expenses and other
income items that are not readily  allocable  are not included in the results of
the two marketing groups.


Restatement of Consolidated Financial Statements

     As discussed in Note 2 of the Notes to Consolidated  Financial  Statements,
the Company has restated its consolidated  financial statements for fiscal 2000,
2001 and the first three quarters of fiscal 2002. These restatement  adjustments
are  the  result  of  the  misapplication  of  generally   accepted   accounting
principles.  In addition,  the Company has  reclassified  certain  expenses from
operating  expenses to cost of sales for the three and six months  ended May 31,
2002.



                                       29





     The net effect of the restatement adjustments on net loss for the three and
six months ended May 31, 2002 is as follows:


                                                                        May 31, 2002
                                                                -------------------------------
                                                                   Three Months      Six Months
                                                                                 
Decrease income before cumulative effect of a change in
   accounting for negative goodwill                                    $  (782)        $(2,090)
Decrease net income                                                       (782)         (2,090)
Decrease net income per common share - diluted                         $ (0.03)        $ (0.09)


     The following table provides additional  information  regarding the effects
of restatement  adjustments on the Company's net income (loss) for the three and
six months ended May 31, 2002: (in thousands)



                                                        Increase
                                                        (Decrease)
                                                        May 31, 2002
                                                -------------------------
                                                 Three Months Six Months

Restatement adjustments:
                                                       
  Timing of revenue                               $  (426)   $  (508)
  Litigation                                           69       (330)
  Foreign currency translation                        (17)    (1,334)
  Inventory pricing                                    (2)       385
  Sales incentives                                    420        693
  Gain on the issuance of subsidiary shares        (1,556)    (1,556)
  Operating expense reclassification to cost of
     sales (1)                                       --         --
                                                  -------    -------
     Total adjustment to decrease pre-tax
           income                                  (1,512)    (2,650)
  Provision for income taxes                         (772)      (602)
  Minority interest (2)                               (42)       (42)
                                                  -------    -------
  Total decrease on net income                    $  (782)   $(2,090)
                                                  =======    =======


(1)  This adjustment  represents a reclassification of warehousing and technical
     support and general  and  administrative  costs  (which are  components  of
     operating  expenses) to cost of sales. This  reclassification  did not have
     any effect on  previously  reported net income for the three and six months
     of fiscal 2002.

(2)  The  adjustment  reflects  the  impact of the  restatement  adjustments  on
     minority interest.

     The following discussion addresses each of the restatement  adjustments for
the corrections of accounting errors and the reclassification adjustment.

(a)  Timing of revenue. During the three and six months ended May 31, 2002, the

                                       30





     Company  overstated net sales by $7,757 and $12,358,  respectively,  as the
     timing of revenue  recognition  was not in accordance  with the established
     shipping terms with certain  customers.  SAB 101  specifically  states that
     delivery  generally is not considered to have occurred  unless the customer
     has taken title (which is in this  situation when the product was delivered
     to the  customer's  site).  Accordingly,  the Company  should have deferred
     revenue  recognition  until  delivery was made to the  customer's  site. In
     addition,  during the three and six months ended May 31, 2002, gross profit
     was overstated by $562 and $661, respectively,  and operating expenses were
     overstated by $136 and $153, respectively.

(b)  Litigation. During the three and six months ended May 31, 2002, the Company
     overestimated  its  provisions  for  certain  litigation  matters,  thereby
     overstating cost of sales by $345 and $521, respectively. Also, the Company
     understated  operating expenses by $0 and $497 for the three and six months
     ended May 31, 2002,  respectively as a result of not recording a settlement
     offer in the period the Company offered it.

     During the three and six months ended May 31, 2002, the Company understated
     operating  expenses  by  $276  and  $354,   respectively  as  a  result  of
     inappropriately   deferring  costs  related  to  an  insurance  claim.  The
     Company's  insurance  company refused to defend the Company against a legal
     claim made against the Company.  The Company took legal action  against the
     insurance  company  and  was  unsuccessful.   The  Company  was  improperly
     capitalizing costs that were not probable of recovery.

(c)  Foreign currency translation. During the three and six months ended May 31,
     2002,  the Company did not properly  account for a change in accounting for
     its  Venezuelan  subsidiary  as  operating  in  a  non-highly  inflationary
     economy. In prior periods, Venezuela was deemed to be a highly-inflationary
     economy in accordance  with certain  technical  accounting  pronouncements.
     Effective  January 1, 2002, it was deemed that Venezuela should cease to be
     considered  a  highly-inflationary  economy,  however,  the Company did not
     account for this  change.  The  Company  incorrectly  recorded  the foreign
     currency  translation  adjustment  in  other  income  rather  than as other
     comprehensive  income. As a result, the Company understated other expenses,
     net,  by $69 and $1,429 for the three and six  months  ended May 31,  2002,
     respectively.  Also, the Company  overstated  operating expenses by $52 and
     $95 for the three and six months ended May 31, 2002, respectively.

(d)  Inventory  pricing.  For the three and six months ended May 31,  2002,  the
     Company overstated cost of sales related to an inventory pricing error that
     occurred at its Venezuelan subsidiary. The Company was not properly pricing
     its inventory at the lower of cost or market in accordance  with  generally
     accepted  accounting  principles.  As  a  result,  the  Company  overstated
     (understated)  cost of sales by $(2) and $385 for the three and six  months
     ended May 31, 2002, respectively.

(e)  Sales  incentives.  During the three and six months ended May 31, 2002, the
     Electronics segment underestimated accruals for additional sales incentives
     (other

                                       31





     trade allowances) that were not yet offered to its customers.  As a result,
     for the three and six months  ended May 31, 2002,  the Company  understated
     net sales by $446 and $4, respectively.

     Furthermore,  during  the three and six  months  ended  May 31,  2002,  the
     Electronics  segment  was also not  reversing  earned and  unclaimed  sales
     incentives (i.e.,  cooperative  advertising,  market development and volume
     incentive  rebate  funds)  upon the  expiration  of the  established  claim
     period.  As a result,  for the three and six months ended May 31, 2002, the
     Company understated (overstated) net sales by $(26) and $689, respectively.

(f)  Income taxes.  Income taxes were adjusted for the  restatement  adjustments
     discussed above for each period presented.

     The Company also applied income taxes to minority  interest  amounts during
     the  three  and six  months  ended  May 31,  2002.  As a  result  of  these
     adjustments,  the Company understated the provision  for/recovery of income
     taxes by $772 and $602 for the three  and six  months  ended May 31,  2002,
     respectively.

(g)  Operating expense reclassification.  The Company reclassified certain costs
     as operating  expenses,  which were included as a component of  warehousing
     and technical support and general and  administrative  costs,  which should
     have been  classified  as a component of cost of sales.  The effect of this
     reclassification  for the three and six  months  ended May 31,  2002 was to
     understate  cost of sales and  overstate  operating  expenses by $5,373 and
     $10,196,  respectively.  This  reclassification  did not have any effect on
     previously  reported  net  income  or loss for any  fiscal  year or  period
     presented herein. This reclassification reduced gross margin by 1.8 and 2.1
     percentage  points  for  the  three  and six  months  ended  May 31,  2002,
     respectively.

(h)  Gain on the issuance of  subsidiary  shares.  During the second  quarter of
     fiscal  2002,  the Company  overstated  the gain on issuance of  subsidiary
     shares by $1,735 due to expenses  related to this issuance being charged to
     additional paid in capital. This adjustment also reflects the impact of the
     other  restatement  adjustments  on  the  calculation  of the  gain  on the
     issuance of subsidiary  shares of $179 that was originally  recorded by the
     Company  in the  quarter  ended  May 31,  2002.  As a result,  the  Company
     decreased  the gain on  issuance of  subsidiary  shares and  increased  the
     additional paid in capital by $1,556.



                                       32





     The following represents the effect of the restatement and reclassification
adjustments  in the  consolidated  statements of operations for the three months
ended May 31, 2002:



                                                                                  Fiscal 2002
                                                                         For the Quarter Ended May 31,
                                                     ----------------------------------------------------------------------
                                                                          Restatement       Reclassification
                                                      As Reported         Adjustments         Adjustments     As Restated

                                                                                              
  Net sales                                      $    304,603    $     (7,336)(1)(7)              --         $    297,267
  Cost of sales                                       280,778          (7,537)(1)(5)(6)   $      5,373            278,614
                                                 ------------    ------------             ------------       ------------
  Gross profit                                         23,825             201                   (5,373)            18,653
                                                 ------------    ------------             ------------       ------------

  Operating expenses:
     Selling                                            7,631             (10)(1)                 --                7,621
     General and administrative                        15,856             245(1)(4)(5)            (148)(2)         15,953
     Warehousing and technical support                  5,889            (149)(1)(4)            (5,225)(2)            515
                                                 ------------    ------------             ------------       ------------
          Total operating expenses                     29,376              86                    (5,373)            24,089
                                                 ------------    ------------             ------------       ------------
  Operating income (loss)                              (5,551)            115                     --               (5,436)

  Total other income (expense), net                    14,843          (1,627)(4)(8)              --               13,216
                                                 ------------    ------------             ------------       ------------
  Income before provision for income taxes and
     minority interest                                  9,292          (1,512)                    --                7,780
  Provision for income taxes                            5,092            (772)(3)                 --                4,320
  Minority interest                                       255             (42)(9)                 --                  213
                                                 ------------    ------------             ------------       ------------
  Net income                                     $      4,455    $       (782)                    --         $      3,673
                                                 ============    ============             ============       ============

  Net income per common share (basic)            $       0.20    $      (0.03)                   --          $       0.17
                                                 ============    ============             ============       ============
  Net income per common share (diluted)          $       0.20    $      (0.03)                   --          $       0.17
                                                 ============    ============             ============       ============

  Weighted average number of common shares
     outstanding (basic)                           21,967,263                                                 21,967,263
                                                 ============                                                ============
  Weighted average number of common shares
     outstanding (diluted)                         22,007,598                                                 22,007,598
                                                 ============                                                ============


(1)  Amounts reflect adjustments for (a) timing of revenue.
(2)  Amounts reflect for (g) operating expense reclassification.
(3)  Amounts reflect adjustments for (f) income taxes.
(4)  Amounts reflect adjustments for (c) foreign currency translation.
(5)  Amounts reflect adjustments for (b)litigation.
(6)  Amounts reflect adjustments for (d) inventory pricing.
(7)  Amounts reflect adjustments for (e) sales incentives.
(8)  Amounts  reflect  adjustments  for (h) gain on the  issuance of  subsidiary
     shares.
(9)  Amounts reflect impact of restatement adjustments on minority interest.




                                       33





         The following represents the effect of the restatement and
reclassification adjustments in the consolidated statements of operations for
the six months ended May 31, 2002:

                                                                           Fiscal 2002
                                                                 For the Six Months Ended May 31,
                                            --------------------------------------------------------------------------
                                                                     Restatement       Reclassification
                                              As Reported (a)        Adjustments         Adjustments     As Restated
                                              -----------            -----------         -----------     -----------

                                                                                               
  Net sales                                  $ 493,200               $ (11,664)(1)(7)           --         $ 481,536
  Cost of sales                                451,559                 (12,595)(1)(5)(6)   $ 10,196 (2)      449,160
                                             ---------               ---------             ---------       ---------
  Gross profit                                  41,641                     931              (10,196)         32,376
                                             ---------               ---------             ---------       ---------
  Operating expenses:
     Selling                                    14,385                    (13)(1)              --            14,372
     General and administrative                 26,507                    787(1)(4)(5)         (288)(2)      27,006
     Warehousing and technical support          11,735                   (170)(1)(4)         (9,908)(2)       1,657
                                             ---------               ---------             ---------       ---------
        Total operating expenses               52,627                     604               (10,196)         43,035
                                             ---------               ---------             ---------       ---------
  Operating income (loss)                     (10,986)                    327                  --           (10,659)
                                             ---------               ---------             ---------       ---------
  Total other income (expense), net             13,862                 (2,977)(4)(8)           --            10,885
                                             ---------               ---------             ---------       ---------
  Income (loss) before provision for
     (recovery of) income taxes, minority
     interest and before cumulative effect
     of a change in accounting for negative
     goodwill                                   2,876                  (2,650)                 --               226
  Provision for (recovery of) income taxes      3,422                    (602)(3)              --             2,820
  Minority interest                               812                     (42)(9)              --               770
                                             ---------               ---------             ---------       ---------
  Income (loss) before cumulative effect of a
     change in accounting for negative
     goodwill                                     266                  (2,090)                 --            (1,824)
  Cumulative effect of a change in
     accounting for negative goodwill             240                    --                    --               240
                                             ---------               ---------             ---------       ---------
  Net income (loss)                          $     506               $  (2,090)                --          $  (1,584)
                                             =========               =========             =========       =========
  Net income (loss) per common share
     (basic) before cumulative effect of
      a change in accounting for negative
     goodwill                                $    0.01               $   (0.09)                 --          $ (0.08)
     Cumulative effect of a change in
       accounting for negative goodwill           0.01                    --                    --             0.01
                                             ---------               ---------             ---------       ---------
  Net income (loss) per common share
     (basic)                                 $    0.02               $   (0.09)                   --        $  (0.07)
                                             =========               ==========            =========       ==========
Netincome (loss) per common share
     (diluted) before cumulative effect
     of a change in accounting for negative
     goodwill                                $    0.01               $   (0.09)                 --          $ (0.08)
     Cumulative effect of a change in
       accounting for negative goodwill           0.01                    --                    --             0.01
                                             ---------               ---------             ---------       ---------
  Net income (loss) per common share
     (diluted)                               $    0.02               $   (0.09)                   --        $  (0.07)
                                             =========               ==========            =========       ==========
Weighted average number of common
   shares outstanding (basic)                21,967,263                                                    21,967,263
                                             ===========                                                   ===========
Weighted average number of common
   shares outstanding (diluted)              22,005,508                                                    22,005,508
                                             ===========                                                   ===========


(a)  Includes  reclassification  of sales  incentives  (previously  reported  in
     operating  expenses)  pursuant to EITF 01-9,  "Accounting for Consideration
     Given by a Vendor to a  Customer  (Including  a  Reseller  of the  Vendor's
     Products)".
(1)  Amounts reflect adjustments for (a) timing of revenue.
(2)  Amounts reflect adjustments for (g) operating expense reclassification.

                                       34

(3)  Amounts reflect adjustments for (f) income taxes.
(4)  Amounts reflect adjustments for (c) foreign currency translation.
(5)  Amounts reflect adjustments for (b)litigation.
(6)  Amounts reflect adjustments for (d) inventory pricing.
(7)  Amounts reflect adjustments for (e) sales incentives.
(8)  Amounts  reflect  adjustments  for (h) gain on the  issuance of  subsidiary
     shares.
(9)  Amounts reflect impact of restatement adjustments on minority interest.


As a result of the restatement for the quarter ended May 31, 2002, cash provided
by  operating  activities  was  decreased  $439 and cash  provided by  investing
activities  was  increased  $439.  There has not been any change to cash used in
financing activities.


Critical Accounting Policies

     As  disclosed  in the annual  report on Form 10-K for the fiscal year ended
November 30, 2002, the  discussion  and analysis of our financial  condition and
results of  operations  are based upon our  consolidated  financial  statements,
which have been  prepared in conformity  with  accounting  principles  generally
accepted in the United  States.  The  preparation of these  financial  statement
requires us to make estimates and assumptions  that affect the reported  amounts
of assets,  liabilities,  revenues  and  expenses  reported  in those  financial
statements.  These  judgments can be subjective and complex,  and  consequently,
actual results could differ from those estimates.  Our most critical  accounting
policies relate to revenue recognition;  accounts receivable;  sales incentives;
inventory; warranties and income taxes. Since November 30, 2002, there have been
no changes in our critical  accounting policies and no other significant changes
to the assumptions and estimates related to them.



                                       35





Results of Operations

     The following table sets forth for the periods indicated certain statements
of operations data for the Company expressed as a percentage of net sales:


                                             Percentage of Net Sales
                                      Three Months Ended   Six Months Ended
                                        May 31,   May 31,  May 31,   May 31,
                                         2002      2003      2002      2003
                                         -----     -----     -----     -----
                                    (As Restated)         (As Restated)
  Net sales:
     Wireless
                                                            
          Wireless products               67.1%     61.5%     63.3%     66.2%
          Activation commissions           2.1       1.2       2.8       1.4
          Residual fees                    0.2       0.2       0.2       0.2
          Other                            0.0       0.0       0.0       0.0
                                         -----     -----     -----     -----
             Total Wireless               69.4      62.9      66.3      67.8
                                         -----     -----     -----     -----
       Electronics
          Mobile electronics              19.5%     24.6      20.3      20.9
          Consumer electronics             6.4       9.2       7.3       7.4
          Sound                            4.6       3.3       6.0       3.8
          Other                            0.1       0.0       0.1       0.0
                                         -----     -----     -----     -----
             Total Electronics            30.6      37.1      33.7      32.1
                                         -----     -----     -----     -----
             Total net sales             100.0     100.0     100.0     100.0
                                         -----     -----     -----     -----
  Cost of sales                           93.7      91.5      93.3      89.3
                                         -----     -----     -----     -----
  Gross profit                             6.3       8.5       6.7      10.7
  Selling                                  2.6       2.7       3.0       2.6
  General and administrative               5.4       4.4       5.6       4.2
  Warehousing and technical support        0.2       0.5       0.3       0.5
                                         -----     -----     -----     -----
          Total operating expenses         8.2       7.6       8.9       7.3
                                         -----     -----     -----     -----
  Operating income (loss)                 (1.8)      1.0      (2.2)      1.3
  Interest and bank charges               (0.3)     (0.2)     (0.4)     (0.4)
  Equity in income in equity
       investments                         0.2       0.2       0.2       0.2
  Gain on issuance of subsidiary
       shares                              4.8       0.0       3.0       0.0
  Other, net                              (0.3)     (0.1)     (0.5)     (0.1)
                                         -----     -----     -----     -----
  Income (loss) before provision for
       (recovery of) income taxes          2.6       1.1       0.1       1.0
  Provision for (recovery of) income
       taxes                               1.5       0.3       0.6       0.3
  Minority interest                        0.1      (0.1)      0.2       0.1
  Change in accounting principle            --        --       0.0       0.0
                                         -----     -----     -----     -----
  Net income (loss)                        1.2 %    0.7 %     (0.3)%     0.6 %
                                         =====     =====     ======    =====



                                       36





Consolidated Results
Three months ended May 31, 2002 compared to three months ended May 31, 2003

     The net sales and  percentage  of net sales by marketing  group and product
line for the three months  ended May 31, 2002 and May 31, 2003 are  reflected in
the following table:



                                            Three Months Ended
                             ----------------------------------------------
                             May 31, 2002                May 31, 2003
                             ------------             ---------------------
                             (As Restated)
Net sales:

   Wireless
                                                        
    Wireless products        $ 199,495       67.1% $ 185,174        61.5%
    Activation commissions       6,200        2.1      3,516         1.2
    Residual fees                  482        0.2        489         0.2
    Other                          123        --         (72)        --
                             ---------      -----  ---------       -----
      Total Wireless           206,300       69.4    189,107        62.8
                             ---------      -----  ---------       -----

  Electronics
     Mobile electronics         57,894       19.5     74,108        24.6
     Consumer electronics       19,164        6.4     27,762         9.2
     Sound                      13,646        4.6      9,928         3.3
     Other                         263        0.1        105      --
                             ---------      -----  ---------       -----
        Total Electronics       90,967       30.6    111,903        37.2
                             ---------      -----  ---------       -----
          Total              $ 297,267      100.0% $ 301,010       100.0%
                             =========      =====  =========       =====


     Net sales for the three  months  ended May 31, 2003 were  $301,010,  a 1.3%
increase from net sales of $297,267 from 2002.

     Wireless Group sales were $189,107 for the three months ended May 31, 2003,
an 8.3% decrease from sales of $206,300 in 2002. Unit sales of wireless handsets
decreased 22.9% to approximately  1,109,000 units for the three months ended May
31,  2003  from  approximately  1,437,000  units  in  2002.  This  decrease  was
attributable  to a new product  launch in 2002 that did not repeat in 2003 and a
closeout of certain models in Canada in 2002 that were not replaced in 2003. The
average selling price of the Company's  handsets  increased to $161 per unit for
the three  months  ended May 31,  2003 from $135 per unit in 2002 as a result of
new products.

     Electronics  Group sales were  $111,903  for the three months ended May 31,
2003, a 23.0% increase from sales of $90,967 in 2002.  This increase was largely
due to  increased  sales in the mobile video and  consumer  electronics  product
lines.  Offsetting  some of this  increase was a decline in sound  sales,  which
continue to decline given the change in the marketplace as fully-featured  sound
systems are being  incorporated  into vehicles at the factory  rather than being
sold in the  aftermarket.  This declining  trend in sound systems is expected to
continue  except in the satellite  radio  product  line.  Sales by the Company's
international  subsidiaries  decreased  62.3% for the three months ended May 31,
2003 to approximately $2,223 due to a 80.6% decrease in Venezuela due to

                                       37





the temporary shut-down of the operations attributable to political and economic
instability and a 44.9% decrease in Malaysia as a result of lower OEM sales.

     Gross  profit  margin  for the three  months  ended May 31,  2003 was 8.5%,
compared to 6.3% in 2002. This increase in profit margin resulted primarily from
an increase in margins in Wireless.  Gross profit  margins in Wireless were 5.0%
in 2003  compared  to 1.7% in 2002.  There was a change  in the mix in  Wireless
product  sales to newer models,  which carry a higher gross margin.  New product
historically  is sold at a higher gross margin.  This trend  continues to have a
major effect on the gross  margins of the  Wireless  Group.  In addition,  lower
inventory  write-downs  to market  for the  three  months  ended  May 31,  2003.
Specifically,  inventory write-downs were $0 in 2003 compared to $2,859 in 2002.
Consolidated  gross  margins were also  favorably  impacted by  decreased  sales
incentives in the Wireless Group.  Trends will be discussed in further detail in
each  individual  marketing group MD&A  discussion.  Margins for the Electronics
Group  decreased to 14.5% from 16.7% in 2002,  primarily due to lower margins in
the consumer goods category and an increase in video sales to consumer  channels
that carry lower margins.

     Operating  expenses  decreased $1,531 to $22,558 for the three months ended
May 31,  2003,  compared  to  $24,089  in 2002.  As a  percentage  of net sales,
operating  expenses  decreased  to 7.6% for the three  months ended May 31, 2003
from 8.2% in 2002. Major  components of the decrease in operating  expenses were
in salaries  due to a  non-recurring  bonus in 2002  related to the  issuance of
subsidiary  shares and a decrease in bad debt  expenses due to the recovery of a
previously  charged  customer bad debt,  partially offset by increases in direct
labor, office salaries, and professional fees.

     Net income for the three months  ended May 31, 2003 was $2,074  compared to
$3,673 in 2002.  Earnings  per share for the three months ended May 31, 2003 was
$0.10,  basic and 0.09  diluted  compared  to$0.17  for fiscal  2002,  basic and
diluted (as restated).


                                       38





Six months ended May 31, 2002 compared to six months ended May 31, 2003

         The net sales and percentage of net sales by marketing group and
product line for the six months ended May 31, 2002 and May 31, 2003 are
reflected in the following table:



                                           Six Months Ended
                             ----------------------------------------------
                             May 31, 2002                May 31, 2003
                             ------------             ---------------------
                             (As Restated)
Net sales:
                                                      
     Wireless
     Wireless products        $304,663       63.3% $395,885       66.2%
     Activation commissions     13,468        2.8     8,612        1.4
     Residual fees               1,140        0.2     1,024        0.2
     Other                          20        --        148        --
                              --------      -----  --------      -----
        Total Wireless         319,291       66.3   405,669       67.9
                              --------      -----  --------      -----
  Electronics
     Mobile electronics         97,588       20.3   125,198       20.9
     Consumer electronics       35,156        7.3    44,257        7.4
     Sound                      28,855        6.0    22,472        3.8
     Other                         646        0.1       233     --
                              --------      -----  --------      -----
        Total Electronics      162,245       33.7   192,159       32.1
                              --------      -----  --------      -----
                              $481,536      100.0% $597,828      100.0%
                              ========      ====== ========      =====



     Net sales for the six  months  ended May 31,  2003 were  $597,828,  a 24.2%
increase from net sales of $481,536 from 2002.

     Wireless Group sales were $405,669 for the six months ended May 31, 2003, a
27.1% increase from sales of $319,291 in 2002.  Unit sales of wireless  handsets
increased 1.7% to approximately 2,300,000 units for the six months ended May 31,
2003 from  approximately  2,261,000  units in 2002.  In  addition,  the  average
selling price of the Company's  handsets  increased to $166 per unit for the six
months  ended May 31, 2003 from $129 per unit in 2002 as a result of new product
introductions. Wireless sales were impacted in 2002 by late introductions of new
products by its  vendor,  delays in  acceptances  testing by our  customers  and
slower growth in the wireless industry.

     Electronics  Group  sales were  $192,159  for the six months  ended May 31,
2003,  an 18.4%  increase  from sales of $162,245  in 2002.  This  increase  was
largely due to  increased  sales in the mobile  video and  consumer  electronics
product  lines.  Offsetting  some of this increase was a decline in sound sales,
which continue to decline given the change in the marketplace as  fully-featured
sound systems are being  incorporated  into vehicles at the factory  rather than
being sold in the aftermarket. This declining trend in sound systems is expected
to continue except in the satellite  radio product line.  Sales by the Company's
international subsidiaries decreased 60.4% for the six months ended May 31, 2003
to approximately $4,619 due to an 89.1% decrease in Venezuela due

                                       39





to the temporary shut-down of the operations attributable to political and
economic instability and a 35.3% decrease in Malaysia as a result of lower OEM
sales.

     Gross  profit  margin  for the six  months  ended  May 31,  2003 was  8.5%,
compared to 6.7% in 2002. This increase in profit margin resulted primarily from
an increase in margins in Wireless.  Wireless margins were 5.2% compared to 1.6%
in  2002.  There  was a change  in the mix in  Wireless  product  sales to newer
models,  which carry a higher gross  margin.  Wireless  margins were impacted by
late product  introductions  by its suppliers in 2002, a situation  that did not
repeat in 2003. New product  historically is sold at a higher gross margin. This
trend  continues  to have a major  effect on the gross  margins of the  Wireless
Group.  In addition,  lower  inventory  write-downs to market for the six months
ended May 31, 2003. Specifically, inventory write-downs were $0 in 2003 compared
to $3,899 in 2002.  Margins for the  Electronics  Group  decreased to 15.5% from
16.7% in 2002 due to lower margins in the consumer goods category.

     Operating  expenses  increased $530 to $43,565 for the six months ended May
31, 2003,  compared to $43,035 in 2002. As a percentage of net sales,  operating
expenses  decreased  to 7.3% for the six months  ended May 31, 2003 from 8.9% in
2002. Major components of the increase in operating  expenses were direct labor,
salaries and employee benefits.

     Net income for the six months ended May 31, 2003 was $3,283 compared to net
loss of $1,584 in 2002. Earnings per share for the six months ended May 31, 2003
was  $0.15,  basic and  diluted  compared  to loss per share of $0.07 for fiscal
2002, basic and diluted (as restated).




                                       40





Wireless Results
Three months ended May 31, 2002 compared to three months ended May 31, 2003

     The following table sets forth for the periods indicated certain statements
of operations data for Wireless expressed as a percentage of net sales:



                                                           Three Months Ended
                                        -----------------------------------------------
                                              May 31, 2002         May 31, 2003
                                              (As Restated)
Net sales:
                                                                      
       Wireless products                   $ 199,495       96.7%  $ 185,174       97.9%
       Activation commissions                  6,200        3.0       3,516        1.9
       Residual fees                             482        0.2         489        0.2
       Other                                     123        0.1         (72)        --
                                           ---------      -----   ---------       -----
           Total net sales                   206,300      100.0     189,107      100.0

  Gross profit                                 3,425        1.7       9,382        5.0

  Operating expenses
       Selling                                 2,873        1.4       2,706        1.4
       General and administrative              7,988        3.9       3,915        2.1
       Warehousing and technical support         492        0.2         699        0.4
                                           ---------      -----   ---------       -----

  Total operating expenses                    11,353        5.5       7,320        3.9
                                           ---------      -----   ---------       -----

  Operating income (loss)                     (7,928)      (3.8)      2,062        1.1
  Other expense                               (1,003)      (0.5)       (576)      (0.3)
                                           ---------      -----   ---------       -----
  Pre-tax income (loss)                    $  (8,931)      (4.3)% $   1,486        0.8 %
                                           =========      =====   =========       =====



     Net sales were $189,107 for the three months ended May 31, 2003, a decrease
of $17,193,  or 8.3%,  from 2002. Unit sales of wireless  handsets  decreased by
328,000  units  for  the  three  months  ended  May  31,  2003,  or  22.8%,   to
approximately  1,109,000  units from 1,437,000  units in 2002. This decrease was
attributable  to a new product  launch in 2002 that did not repeat in 2003 and a
closeout of certain  models in Canada in 2002 that were not replaced in 2003. In
addition,  there was a $4,484 decrease in sales  incentives  compared to 2002 as
there was not a major 2003 product  launch as occurred in 2002.  These  programs
are  expected to  continue  and will  either  increase  or  decrease  based upon
competition and customer and market requirements. Further offsetting the decline
in revenue was the average  selling price of handsets,  which  increased to $161
per unit for the three months  ended May 31,  2003,  from $135 per unit in 2002.
This increase was due to higher selling prices of the  newly-introduced  digital
products, including products with color LCD's which have a higher selling price.
Gross profit  margins  increased to 5.0% for the three months ended May 31, 2003
from 1.7% in 2002, primarily due to the sales of new, higher margin products and
lower inventory  write-downs.  There were no inventory write-downs for the three
months ended May 31, 2003  compared to $2,859 in 2002.  These  write-downs  were
based upon open purchase orders from customers and selling prices  subsequent to
the balance sheet date as well as indications from our

                                       41





customers  based  upon  current  negotiations.  As of May  31,  2003,  1,932  of
previously  written-down  units remained in inventory which were valued at $398.
The Company plans to sell these items to its existing  customers during the next
year. None of the written down inventory was scrapped. The Company expects that,
due to  market  conditions  and  customer  consolidation,  it  could  experience
additional  write-downs in the future.  Gross margins were favorably impacted by
reimbursement from a vendor for software upgrades performed on inventory sold of
$623 and $74 for the three  months  ended May 31,  2002 and 2003,  respectively.
Without  this  reimbursement,  gross  margins  would have been lower by 0.3% and
0.03%  for the three  months  ended May 31,  2002 and  2003,  respectively.  The
Company  has  received  price  protection  of $17,000  and $11,850 for the three
months  ended May 31,  2002 and 2003,  respectively,  from a vendor for  certain
inventory,  of which  $9,348 and $11,598 was  recorded as a reduction to cost of
sales,  as related  inventory was sold.  The other $252 in price  protection has
been  reflected as a reduction to the remaining  inventory cost at May 31, 2003.
Without this price  protection,  gross profit  margins  would have been lower by
4.5% and 6.1% for the three  months  ended May 31, 2002 and 2003,  respectively.
The  Company  has an  agreement  with its vendor  for  additional  future  price
protection  with  respect to specific  inventory  items if needed.  During three
months  ended May 31, 2003,  there was a decrease of $4,484 in sales  incentives
expense due to a non-recurring product launch in 2002, net of reversals of $155.

     The Company expects,  due to market conditions and customer  consolidation,
it could experience additional sales incentives expense in the future.

     Operating expenses decreased $4,033 for the three months ended May 31, 2003
from 2002. As a percentage of net sales,  operating  expenses  decreased to 3.9%
during  three  months  ended May 31,  2003,  compared  to 5.5% in 2002.  Selling
expenses  decreased  $167 for the three  months  ended May 31, 2003  compared to
2002,  primarily in commissions of $270, due to a reduction of commissions  paid
to distributors  in Mexico compared to last year and lower sales.  This decrease
was partially offset by an increase of $126 in salesmen salaries from the hiring
of additional salesmen in Quintex to support additional sales programs. Numerous
other  individually  insignificant  fluctuations  account for the  remaining net
change in selling expenses. General and administrative expenses decreased $4,073
for the three  months  ended May 31,  2003 from 2002,  primarily  in salaries of
$2,968 due to a  non-recurring  bonus  provision and new executive  compensation
contract  in 2002 and bad debt  expense of $1,389 due to the  recovery  of a bad
debt previously written off and a non- recurring bankruptcy in 2002. The Company
does not consider this a trend in the overall accounts receivable. This decrease
was  offset  by an  increase  in  insurance  expense  of $143  due to  increased
insurance premiums for general liability and umbrella  coverage.  Numerous other
individually  insignificant fluctuations account for the remaining net change in
general and administrative expenses.  Warehousing and technical support expenses
increased  $207 for the three months ended May 31, 2003 from 2002,  primarily in
direct labor, payroll taxes and benefits of $280 due to additional employees for
product  testing.  This increase was partially offset by a decrease in the costs
of buying offices of $62 as a result of eliminating the use of the buying office
in Korea.  Numerous  individually  insignificant  fluctuations  account  for the
remaining net change in  warehousing  and technical  support  expenses.  Pre-tax
income for the three months  ended May 31, 2003 was $1,486,  compared to pre-tax
loss of $8,931 for fiscal 2002.

     Management believes that the wireless industry is extremely competitive and
that this  competition  could  affect gross  margins and the  carrying  value of
inventories in the future as new

                                       42





competitors enter the marketplace.  This pressure from increased  competition is
further  enhanced by the  consolidation  of many of Wireless'  customers  into a
smaller group,  dominated by only a few, large customers.  Also, timely delivery
and carrier  acceptance of new product  could affect our quarterly  performance.
Our  suppliers  have to  continually  add new  products in order for Wireless to
improve its margins and gain market share.  These new products require extensive
testing  and  software  development  which could delay entry into the market and
affect our sales in the future. In addition,  given the anticipated emergence of
new  technologies  in the  wireless  industry,  the  Company  will  need to sell
existing  inventory   quantities  of  current   technologies  to  avoid  further
write-downs to market.


Six months ended May 31, 2002 compared to six months ended May 31, 2003

     The following table sets forth for the periods indicated certain statements
of operations data for Wireless expressed as a percentage of net sales:



                                                          Six Months Ended
                                          ---------------------------------------------
                                               May 31, 2002            May 31, 2003
                                          ----------------------  ---------------------
                                             (As Restated)
Net sales:
                                                                      
       Wireless products                   $ 304,663       95.4%  $ 395,885       97.6%
       Activation commissions                 13,468        4.2       8,612        2.1
       Residual fees                           1,140        0.4       1,024        0.3
       Other                                      20        --          148        --
                                           ---------       -----  ---------        -----
           Total net sales                   319,291      100.0     405,669      100.0
  Gross profit                                 5,038        1.6      21,199        5.2

  Operating expenses
       Selling                                 5,613        1.8       5,369        1.3
       General and administrative             11,389        3.6       8,247        2.0
       Warehousing and technical support       1,108        0.3       1,412        0.4
                                           ---------       -----  ---------        -----
           Total operating expenses           18,110        5.7      15,028        3.7
                                           ---------       -----  ---------        -----

  Operating income (loss)                    (13,072)      (4.1)      6,171        1.5
  Other expense                               (2,566)      (0.8)     (1,436)      (0.4)
                                           ---------       -----  ---------        -----
  Pre-tax income (loss)                    $ (15,638)      (4.9)% $   4,735        1.1 %
                                           =========       =====  =========        =====



     Net sales were  $405,669 for the six months ended May 31, 2003, an increase
of $86,378,  or 27.1%, from 2002. Unit sales of wireless  handsets  increased by
39,000 units for the six months ended May 31, 2003,  or 1.7%,  to  approximately
2,300,000 units from 2,261,000 units in 2002. This increase was  attributable to
increased  sales of digital  handsets for new product  introductions  which were
delayed in 2002, in addition to 2002 late acceptances by our customers and lower
demand for  wireless  products,  a  situation  that did not  repeat in 2003.  In
addition,  there was a $622 decrease in sales incentives compared to 2002. These
programs  are expected to continue  and will either  increase or decrease  based
upon competition and customer and market requirements. The average selling

                                       43





price of handsets  increased  to $166 per unit for the six months  ended May 31,
2003, from $129 per unit in 2002. This increase was due to higher selling prices
of the newly-introduced  digital products,  including products with color LCD's,
which have a higher  selling price.  Gross profit margins  increased to 5.2% for
the six months ended May 31, 2003 from 1.6% in 2002,  primarily due to the sales
of new, higher margin products and lower  inventory  write-downs.  There were no
inventory  write-downs for the six months ended May 31, 2003, compared to $3,899
in 2002.  These write- downs were based upon open purchase orders from customers
and selling  prices  subsequent to the balance sheet date as well as indications
from our customers based upon current negotiations. As of May 31, 2003, 1,932 of
previously  written-down  units remained in inventory which were valued at $398.
The Company plans to sell these items to its existing  customers during the next
year. None of the written down inventory was scrapped. The Company expects that,
due to  market  conditions  and  customer  consolidation,  it  could  experience
additional  write-downs in the future.  Gross margins were favorably impacted by
reimbursement from a vendor for software upgrades performed on inventory sold of
$817 and $123 for the six  months  ended May 31,  2002 and  2003,  respectively.
Without this reimbursement,  gross margins would have been lower by .2% and .03%
for the six months  ended May 31, 2002 and 2003,  respectively.  The Company has
received  price  protection  of 0.2% and 0.03% for the six months  ended May 31,
2002 and 2003,  respectively,  from a vendor  for  certain  inventory,  of which
$9,348 and $15,158 was  recorded  as a  reduction  to cost of sales,  as related
inventory was sold.  The other $252 in price  protection has been reflected as a
reduction to the remaining  inventory  cost at May 31, 2003.  Without this price
protection,  gross profit margins would have been lower by 2.9% and 3.7% for the
six  months  ended  May 31,  2002 and 2003,  respectively.  The  Company  has an
agreement with its vendor for additional future price protection with respect to
specific  inventory  items if needed.  During the six months ended May 31, 2002,
there was a decrease of $886 in sales incentive expense as a result of fewer new
product introductions, net of reversals of $318.

     The Company expects,  due to market conditions and customer  consolidation,
it could experience additional sales incentives expense in the future.

     Operating  expenses  decreased $3,082 for the six months ended May 31, 2003
from 2002. As a percentage of net sales,  operating  expenses  decreased to 3.7%
during six months ended May 31, 2003, compared to 5.7% in 2002. Selling expenses
decreased $244 for the six months ended May 31, 2003 compared to 2002, primarily
in commissions of $440, due to a reduction of commissions  paid to  distributors
in Mexico compared to last year. Travel and  entertainment  decreased $77 due to
fewer trade shows during the quarter.  These decreases were partially  offset by
an increase of $191 in salesmen salaries from the hiring of additional  salesmen
in Quintex to support  additional  sales programs.  Numerous other  individually
insignificant  fluctuations  account  for the  remaining  net  change in selling
expenses.  General  and  administrative  expenses  decreased  $3,142 for the six
months  ended May 31, 2003 from 2002,  primarily  in salaries of $2,783 due to a
non- recurring bonus provision and new executive  compensation  contract in 2002
and bad debt  expense of $1,248  primarily  due to the  recovery of a previously
charged bad debt and a customer who filed for  bankruptcy  in 2003.  The Company
does not  consider  this a trend in the overall  accounts  receivable.  Employee
benefits  increased  $199 due to increased  costs under the health care plan and
battery  recycling  charges,  due to a 2002 refund of $84 that did not repeat in
2003.  Numerous other individually  insignificant  fluctuations  account for the
remaining net change in general and  administrative  expenses.  Warehousing  and
technical support expenses increased $304 for the six

                                       44





months ended May 31, 2003 from 2002,  primarily in direct  labor,  payroll taxes
and benefits of $484 due to additional  employees for product  testing and bonus
accruals.  This increase was partially  offset by decreases in travel of $53 due
to less travel by  engineers  and a decrease  in the costs of buying  offices of
$128 as a result of less  activity  in the  Korean  buying  office  due to lower
purchases.  Numerous other individually  insignificant  fluctuations account for
the remaining net change in warehousing and technical support expenses.  Pre-tax
income for the six months  ended May 31,  2003 was  $4,735,  compared to pre-tax
loss of $15,638 for fiscal 2002.

     Management believes that the wireless industry is extremely competitive and
that this  competition  could  affect gross  margins and the  carrying  value of
inventories  in the  future  as new  competitors  enter  the  marketplace.  This
pressure from increased  competition is further enhanced by the consolidation of
many of Wireless' customers into a smaller group, dominated by only a few, large
customers.  Also,  timely  delivery and carrier  acceptance of new product could
affect our quarterly  performance.  Our suppliers  have to  continually  add new
products in order for  Wireless  to improve  its margins and gain market  share.
These new products  require  extensive  testing and software  development  which
could  delay  entry  into the market  and  affect  our sales in the  future.  In
addition,  given the anticipated  emergence of new  technologies in the wireless
industry, the Company will need to sell existing inventory quantities of current
technologies to avoid further write-downs to market.

Electronics Results
Three months ended May 31, 2002 compared to three months ended May 31, 2003

     The following table sets forth for the periods indicated certain statements
of income data for the Electronics Group expressed as a percentage of net sales:



                                                     Three Months Ended
                                             May 31, 2002             May 31, 2003
                                           --------------------- ---------------------
                                               (As Restated)
Net sales:
                                                                   
       Mobile electronics                  $ 57,894       63.6%  $ 74,108      66.2%
       Consumer electronics                  19,164       21.1     27,762      24.8
       Sound                                 13,646       15.0      9,928       8.9
       Other                                    263        0.3        105       0.1
                                           --------      -----     --------   -----
          Total net sales                    90,967      100.0    111,903     100.0
  Gross profit                               15,158       16.7     16,175      14.5

  Operating expenses
       Selling                                4,057        4.5      4,596       4.1
       General and administrative             5,670        6.2      6,054       5.4
       Warehousing and technical support         (9)       --         656       0.6
                                           --------      -----     --------   -----
  Total operating expenses                    9,718       10.7     11,306      10.1
                                           --------      -----     --------   -----
  Operating income                            5,440        6.0      4,869       4.4
  Other income (expense)                       (107)      (0.1)       393       0.4
                                           --------      -----     --------   -----
  Pre-tax income                           $  5,333        5.9 %     $  5,262   4.7 %
                                           ========       =====     ========   =====



                                     45

     Net sales were  $111,903  for the three  months ended May 31, 2003, a 23.0%
increase  from net sales of $90,967 in 2002.  Mobile and  consumer  electronics'
sales  increased  over last year,  partially  offset by a decrease  in sound and
other. Mobile electronics increased $16,214 (28.0%) during 2003 from 2002. Sales
of mobile video within the mobile  electronics  category increased 59.8% for the
three months  ended May 31,  2003,  from 2002.  Consumer  electronics  increased
$8,598 (44.9%) for the three months ended May 31, 2003, from 2002,  primarily in
sales of video-in-a-bag and portable DVD players. These increases were partially
offset by a decrease in the sound category of $3,718  (27.2%).  Given the change
in the marketplace,  fully-featured  sound systems are being  incorporated  into
vehicles  at the  factory  rather  than  being  sold  in the  aftermarket.  This
declining trend in sound systems is expected to continue except in the satellite
radio product line.  There was also an increase in sales incentives of $424. Net
sales  in the  Company's  Malaysian  subsidiary  decreased  from  last  year  by
approximately $1,364 primarily from lower OEM business. The Company's Venezuelan
subsidiary  experienced a decrease of $2,189 in sales from last year, due to the
temporary  closing of the offices due to the impact of  economic  and  political
instability in the country.

     Gross profit margins  decreased to 14.5% for the three months ended May 31,
2003 compared to 16.7% in 2002, primarily in the consumer electronics  category.
This  decline  was due to  sales  of  older  FRS  radios  at  lower  margins  in
anticipation of newer,  higher margined products.  There also was an increase in
the sales of video products sold through consumer channels,  which carry a lower
gross margin as opposed to other  product  lines.  During the three months ended
May 31, 2003, there was an increase in sales incentives  expense of $424, net of
reversals of $240, as a result of increased sales.

     Operating  expenses  increased  $1,588 for the three  months  ended May 31,
2003, an 16.3% increase from operating  expenses in 2002. As a percentage of net
sales,  operating  expenses decreased to 10.1% during the three months ended May
31, 2003 compared to 10.7% in 2002.  Selling expenses  increased $539 during the
three  months ended May 31, 2003,  partially  in  commissions  of $233 due to an
increase of $203 from an increase in commissionable  sales in video and consumer
goods,  which  was  offset  by  a  $96  decrease  in  commissionable   sales  in
international  and  American  Radio,  which  have a  different  commission  rate
structure.  In  addition,  selling  expenses  increased  in,  salaries  of  $113
primarily due to increased  head count to support the growing  business,  travel
and  entertainment  of  $50 to  support  increased  sales  and  an  increase  in
advertising  and trade show  expense  of $124 due to  additional  promotions  to
support the sales increase.  General and administrative  expenses increased $384
from 2002, mostly in salaries of $135,  professional fees of $229 for a study of
optimizing  the use of public  warehouses,  and an increase of $163 in corporate
allocations for additional  corporate  services.  These increases were partially
offset by  decreases  in  employee  benefits  of $69 due to better  dental  care
experience.  Numerous other individually  insignificant fluctuations account for
the remaining net change in general and administrative expenses. Warehousing and
technical  support  increased  $665 for the three months ended May 31, 2003 from
2002,  primarily in direct  labor,  payroll taxes and benefits of $656 due to an
increased  headcount.  There was also an  increase  in  overseas  buying  office
expenses of $60 as a result of increased purchases.  Numerous other individually
insignificant  fluctuations  account for the remaining net change in warehousing
and technical  support  expenses.  Pre-tax income for the three months ended May
31, 2003 was $5,262, compared to $5,333 for 2002.

                                       46





     The Company  believes that the  Electronics  Group has an expanding  market
with a certain  level of volatility  related to both domestic and  international
new car sales and general  economic  conditions.  Also,  all of its products are
subject  to  price  fluctuations  which  could  affect  the  carrying  value  of
inventories and gross margins in the future.

Six months ended May 31, 2002 compared to six months ended May 31, 2003

     The following table sets forth for the periods indicated certain statements
of income data for the Electronics Group expressed as a percentage of net sales:



                                                          Six Months Ended
                                                 May 31, 2002                May 31, 2003
                                          -----------------------  ------------------------
                                              (As Restated)

Net sales:
                                                                      
       Mobile electronics                  $  97,588       60.1%  $ 125,198       65.2%
       Consumer electronics                   35,156       21.7      44,257       23.0
       Sound                                  28,855       17.8      22,472       11.7
       Other                                     646        0.4         233        0.1
                                           ---------       -----  ---------      ------
          Total net sales                    162,245      100.0     192,159      100.0

  Gross profit                                27,175       16.7      29,774       15.5
  Operating expenses
       Selling                                 7,406        4.6       8,395        4.3
       General and administrative             10,992        6.7      11,850        6.2
       Warehousing and technical support         474        0.3       1,298        0.7
                                           ---------       -----  ---------      ------

  Total operating expenses                    18,872       11.6      21,543       11.2
                                           ---------       -----  ---------      ------

  Operating income                             8,303        5.1       8,231        4.3
  Other income (expense)                      (1,626)      (1.0)       (479)      (0.2)
                                           ---------       -----  ---------      ------
  Pre-tax income                           $   6,677        4.1 % $   7,752        4.1 %
                                           =========       =====  =========       =====



     Net sales were  $192,159 for the six months  ended May 31,  2003,  an 18.4%
increase  from net sales of $162,245 in 2002.  Mobile and consumer  electronics'
sales  increased  over last year,  partially  offset by a decrease  in sound and
other. Mobile electronics increased $27,610 (28.3%) during 2003 from 2002. Sales
of mobile video within the mobile  electronics  category increased 49.4% for the
six months ended May 31, 2003, from 2002. Consumer electronics  increased $9,101
(25.9%) for the six months  ended May 31, 2003 from 2002,  primarily in sales of
video-in-a-bag  and portable DVD players.  These increases were partially offset
by a decrease in the sound category of $6,383  (22.1%).  Given the change in the
marketplace,  fully-featured  sound systems are being incorporated into vehicles
at the factory rather than being sold in the  aftermarket.  This declining trend
in sound systems is expected to continue  except in the satellite  radio product
line. There was also an increase in sales incentives of $1,043. Net sales in the
Company's Malaysian  subsidiary decreased from last year by approximately $2,080
primarily from lower OEM business. The Company's Venezuelan

                                       47





subsidiary  experienced a decrease of $4,575 in sales from last year, due to the
temporary  closing of the offices due to the impact of  economic  and  political
instability in the country.

     Gross  profit  margins  decreased to 15.5% for the six months ended May 31,
2003,  compared  to 16.7% for 2002.  This  decline was due to sales of older FRS
radios at lower margins in  anticipation  of newer,  higher  margined  products.
There also was an increase in the sales of video products sold through  consumer
channels,  which carry a lower gross margin as opposed to other  product  lines.
During  the six  months  ended  May 31,  2003,  there was an  increase  in sales
incentives expense of $1,043, net of reversals of $971.

     Operating  expenses increased $2,671 for the six months ended May 31, 2003,
a 14.2% increase from operating  expenses in 2002. As a percentage of net sales,
operating  expenses  decreased to 11.6% during the six months ended May 31, 2003
compared to 11.7% in 2002. Selling expenses increased $989 during the six months
ended May 31,  2003,  partially  in  commissions  of $260 due to an  increase of
commissionable  sales  and  from  Code,  which  was  offset  by  a  decrease  in
commissionable  sales in American Radio,  which has a different  commission rate
structure. In addition, selling expenses increased in salaries of $367 primarily
due to $234  from  Code  and  general  increases  in  other  areas,  travel  and
entertainment  of $99 due to an  increase  of $85 from Code and an  increase  in
advertising  and trade shows of $262 due to increased  promotions to support the
growing business. Numerous other individually insignificant fluctuations account
for the remaining  net change in selling  expenses.  General and  administrative
expenses  increased  $858 from  2002,  mostly in  salaries  of $599 ($237 due to
Code), travel and entertainment of $117 ($67 due to Code),  insurance expense of
$152 due to higher  premiums on general  liability  and Ocean Cargo as shipments
and sales have increased.  These increases were partially offset by decreases in
professional  fees of $241 due to a patent  infringement fee of $497 during 2002
that did not recur in 2003 and a reduction in bad debt expense of $314 primarily
due to a 2002 customer write-off due to bankruptcy that did not recur. There was
also an increase in the corporate  allocation of $328 for  additional  corporate
services. Numerous other individually insignificant fluctuations account for the
remaining net change in general and  administrative  expenses.  Warehousing  and
technical  support  increased  $824 for the six months  ended May 31,  2003 from
2002,  primarily  in direct  labor,  payroll  taxes and  benefits of $714 due to
increased  headcount.  There was also an  increase  in  overseas  buying  office
expenses of $123 as a result of increased purchases. Numerous other individually
insignificant  fluctuations  account for the remaining net change in warehousing
and technical  support  expenses Pre-tax income for the six months ended May 31,
2003 was $7,752, compared to $6,677 for 2002.

     The Company  believes that the  Electronics  Group has an expanding  market
with a certain  level of volatility  related to both domestic and  international
new car sales and general  economic  conditions.  Also,  all of its products are
subject  to  price  fluctuations  which  could  affect  the  carrying  value  of
inventories and gross margins in the future.


Other Income and Expense

     Interest  expense and bank charges  increased  (decreased)  $(25) and $117,
during  the three and six  months  ended May 31,  2003 from three and six months
ended May 31, 2002, respectively,

                                       48





primarily  due to lower  interest  bearing  debt during the  quarter,  offset by
interest paid on a state tax settlement.

     Equity in income of equity investees  increased by  approximately  $186 and
$253,  for the three and six months ended May 31, 2003 compared to three and six
months ended May 31, 2002, respectively. The majority of the increase was due to
an increase in the equity income of ASA due to increased  sales and  improvement
in gross  margins.  Other expenses  decreased  during 2003 compared to 2002. The
foreign exchange gain (losses) were $32 and $(763), respectively,  for the three
and six months ended May 31, 2003 and $(250) and $(2,168),  respectively,  three
and six months ended May 31, 2002.  This decrease was due to the  devaluation of
14% in  2003  versus  40% in  2002.  This  decrease  in  devaluation  was due to
Venezuela  fixing the exchange  rate of the Bolivar with the U.S.  Dollar during
the first quarter of 2003. We also had an increase in minority  interest expense
of $576 and $1,513 for the three and six months  ended May 31, 2003  compared to
three and six months  ended May 31,  2002,  respectively,  primarily  due to the
effect of Toshiba's increased ownership in ACC and profitable operations.


Provision for Income Taxes

     The  effective tax  (recovery)  rate for the three and six months ended May
31, 2003, was 27.4% and 32.7%,  respectively,  compared to last year's 55.5% and
1247.8% for the  comparable  periods.  During the three and six months ended May
31, 2002, the Company experienced a high effective tax rate due to the impact of
certain  non-deductible  items  including a bonus payment and the mix of foreign
and domestic  earnings.  During the three and six months ended May 31, 2003, the
reduction in the Company's  valuation allowance relating to the Wireless segment
resulted in a decrease to the Company's effective tax rate. In addition, the mix
of  foreign  and  domestic  earnings  resulted  in a increase  in the  Company's
effective tax rate for the six months ended May 31, 2003.


Liquidity and Capital Resources

     The Company has historically  financed its operations  primarily  through a
combination  of  available  borrowings  under  bank lines of credit and debt and
equity  offerings.  As of May 31, 2003, the Company had working capital (defined
as current assets less current liabilities) of $296,403,  which includes cash of
$24,122  compared with working  capital of $292,687 at November 30, 2002,  which
included cash of $2,758.  Operating activities provided  approximately  $58,144,
primarily from  collections  of accounts  receivable and decreases in inventory,
partially  offset  by  decreases  in  accounts  payable  and  accrued  expenses.
Investing   activities   provided   approximately   $229,   primarily  from  the
distribution from an equity investee, partially offset by purchases of property,
plant and equipment.  Financing activities used approximately $37,025, primarily
from repayments of bank obligations.

     The  Company's  principal  source  of  liquidity  is its  revolving  credit
agreement  which  expires July 27, 2004. At May 31, 2003,  the credit  agreement
provided  for  $200,000  of  available  credit,  including  $15,000  for foreign
currency borrowings.  The continued  availability of this financing is dependent
upon the Company's  operating  results  which would be negatively  impacted by a
decrease in demand for the Company's  products.  The Company  reduced its credit
availability from $200,000 to $150,000 during

                                       49





the third quarter of 2003 as a result of the Company's working capital position
and current anticipated borrowing requirements.

     Under the credit  agreement,  the Company may obtain credit  through direct
borrowings  and letters of credit.  The  obligations  of the  Company  under the
credit agreement are guaranteed by certain of the Company's  subsidiaries and is
secured by accounts  receivable,  inventory and the Company's shares of ACC. The
Company's  ability to borrow  under its credit  facility is a maximum  aggregate
amount of $150,000,  subject to certain conditions,  based upon a formula taking
into account the amount and quality of its accounts  receivable  and  inventory.
The  credit  agreement  also  allows  for  commitments  up to $50,000 in forward
exchange contracts. In addition, the Company guarantees the borrowings of one of
its equity investees at a maximum of $300.

     The credit agreement  contains  several  covenants  requiring,  among other
things,  minimum  levels of  pre-tax  income  and  minimum  levels of net worth.
Additionally, the agreement includes restrictions and limitations on payments of
dividends, stock repurchases and capital expenditures.

     At November 30, 2002, the Company was not in compliance with certain of its
pre-tax income covenants.  Furthermore, as of November 30, 2002, the Company was
also not in  compliance  with  the  requirement  to  deliver  audited  financial
statements 90 days after the Company's fiscal  year-end,  and as of February 28,
2003, the requirement to deliver  unaudited  quarterly  financial  statements 45
days after the Company's quarter end and had not received a waiver. Accordingly,
the Company  recorded its  outstanding  domestic bank  obligations of $36,883 in
current liabilities at November 30, 2002.

     Subsequent  to November  30, 2002,  the Company  repaid its  obligation  of
$36,883 in full  resulting in domestic bank  obligations  outstanding at May 31,
2003 of $0. The Company subsequently obtained a waiver for the November 30, 2002
and February 28, 2003  violations.  The Company was in  compliance  with all its
bank covenants at May 31, 2003. While the Company has historically  been able to
obtain  waivers  for such  violations,  there can be no  assurance  that  future
negotiations  with its lenders  would be successful or that the Company will not
violate covenants in the future, therefore,  resulting in amounts outstanding to
be payable upon demand.  This credit agreement has no cross covenants with other
credit facilities.

     The Company also has  revolving  credit  facilities  in Malaysia to finance
additional  working  capital needs.  The Malaysian  credit facility is partially
secured by the  Company  under three  standby  letters of credit and are payable
upon demand or upon expiration of the standby letters of credit. The obligations
of the Company under the Malaysian credit facilities are secured by the property
and building in Malaysia owned by Audiovox Communications Sdn. Bhd.



                                       50





     The Company has certain  contractual  cash obligations and other commercial
commitments  which will  impact its short and  long-term  liquidity.  At May 31,
2003, such obligations and commitments are as follows:


                             Payments Due By Period
                 ---------------------------------------------------------------

Contractual Cash                       Less than   1-3       4-5       After
   Obligations                Total     1 Year    Years     Years      5 years
------------------------      -------   -------   -------   -------   -------

  Capital lease obligations   $13,929   $   554   $ 1,677   $ 1,157   $10,541
  Operating leases              8,464     2,168     4,544     1,488       264
                              -------   -------   -------   -------   -------
  Total contractual cash
     obligations              $22,393   $ 2,722   $ 6,221   $ 2,645   $10,805
                              =======   =======   =======   =======   =======




                                            Amount of Commitment
                                            Expiration per period
                             ---------------------------------------------------------
                                Total
Other Commercial               Amounts    Less than    1-3                   Over
  Commitments                 Committed   1 Year      Years    4-5 Years    5 years
-----------------             ---------   --------    -----    ---------    -------

                                                            
  Lines of credit             $ 3,246     $ 3,246       --        --          --
  Standby letters of credit     2,834       2,834       --        --          --
  Guarantees                      300         300       --        --          --
  Commercial letters of
     credit                     4,496       4,496       --        --          --
                              -------     -------      ----      ----        ----
  Total commercial
    commitments               $10,876     $10,876      $ --      $ --       $ --
                              =======     =======      =====     ====       =====


     The Company has guaranteed,  through August 31, 2003, the borrowings of one
of its 50%-  owned  equity  investees  (GLM) at a maximum  of $300.  During  the
quarter ended May 31, 2003, the Company adopted FIN 45,  "Guarantors  Accounting
and Disclosure Requirements for Guarantors, Including Guarantees of Indebtedness
of Others"  (FIN 45). In  accordance  with FIN 45, the Company has not issued or
modified this guarantee after December 31, 2002. Accordingly, this guarantee has
not been reflected on the accompanying  consolidated  financial  statements (See
Note 13).

     The Company regularly reviews its cash funding requirements and attempts to
meet those requirements  through a combination of cash on hand, cash provided by
operations,  available borrowings under bank lines of credit and possible future
public or private debt and/or equity offerings.  At times, the Company evaluates
possible  acquisitions of, or investments in,  businesses that are complementary
to those of the Company,  which  transaction  may requires the use of cash.  The
Company  believes  that its cash,  other liquid  assets,  operating  cash flows,
credit arrangements,  access to equity capital markets, taken together,  provide
adequate resources to fund ongoing

                                       51





operating  expenditures.  In the event that they do not, the Company may require
additional  funds in the future to support its working  capital  requirements or
for other purposes and may seek to raise such additional  funds through the sale
of public  or  private  equity  and/or  debt  financings  as well as from  other
sources.  No assurance can be given that additional  financing will be available
in the future or that if available,  such  financing will be obtainable on terms
favorable to the Company when required.

     In June 2003 the Company  purchased a building for  expansion  purposes for
$3,509, which includes closing costs.

     In May 2003,  the U.S.  Bankruptcy  Court  accepted the  Company's  bid for
certain assets of Recoton Corporation.  This bid includes certain defined assets
of Recoton's  U.S.  audio  operations  including  brands and  trademarks and the
outstanding common stock of Recoton's German,  Italian, and Japanese operations.
In  accordance  with this bid,  the Company  made a deposit of $2,000,  which is
currently being held in escrow. The purchase price will approximate $40,000 plus
the assumption of $5,000 in debt, not including related  acquisition  costs. The
closing is  anticipated to be in early July 2003 and is subject to completion of
final documentation and regulatory approval.


Related Party Transactions

     The Company has entered into several related party  transactions  which are
described below.


Leasing Transactions

     During  1998,  the  Company  entered  into a  30-year  capital  lease for a
building with its principal  stockholder and chief executive  officer,  which is
the  headquarters  of the Wireless  operation.  Payments on the lease were based
upon the construction costs of the building and the then-current interest rates.
The effective interest rate on the capital lease obligation is 8%. In connection
with the  capital  lease,  the  Company  paid  certain  costs on  behalf  of its
principal  stockholder and chief executive officer in the amount of $1,301.  The
advance  does not have a specified  due date or interest  rate.  During 2001 and
2002, the entire balance of $1,301 was repaid to the Company.

     During 1998, the Company entered into a sale/leaseback transaction with its
principal stockholder and chief executive officer for $2,100 of equipment, which
has been classified as an operating  lease.  The lease is a five-year lease with
monthly  payments of $34. No gain or loss was recorded on the transaction as the
book value of the equipment equaled the fair market value.

     The Company also leases certain facilities from its principal  stockholder.
Rentals  for  such  leases  are  considered  by  management  of the  Company  to
approximate  prevailing  market rates.  Total lease payments  required under the
leases for the five-year period ending May 31, 2008 are $2,793.




                                       52





Amounts Due from Officers

     A note due from an officer/director of the Company,  which bore interest at
the LIBOR rate, to be adjusted quarterly, plus 1.25% per annum, was paid in full
during  fiscal 2002.  In addition,  the Company has  outstanding  notes due from
various officers of the Company  aggregating $235 as of May 31, 2003, which have
been included in prepaid  expenses and other current assets on the  accompanying
consolidated  balance sheet. The notes bear interest at the LIBOR rate plus 0.5%
per annum.  Principal  and  interest  are payable in equal  annual  installments
beginning   July  1,  1999  through  July  1,  2003.  In  accordance   with  the
Sarbanes-Oxley  Act of 2002,  the Company  will not alter the terms of the notes
and all amounts will be repaid in full in July 2003.  In addition,  no new notes
with officers or directors of the Company will be entered into.


Transactions with Toshiba

     At November 30, 2002,  the Company had on hand 504,020  units in the amount
of  $91,226,  which  were  purchased  from  Toshiba  and have been  recorded  in
inventory and accounts payable on the accompanying  consolidated  balance sheet.
Of this accounts  payable  $56,417 was subject to an  arrangement  with Toshiba,
which provides for, among other things, extended payment terms. This arrangement
has since been  modified  such that payment  terms are no longer  extended.  The
payment terms are such that the payable is non-interest  bearing. The balance of
$91,226 accounts payable is payable in accordance with the terms  established in
the distribution agreement,  which is 30 days. During the first quarter of 2003,
the Company paid this amount in full. At May 31, 2003, the Company had $2,958 of
inventory  which was  purchased  from Toshiba and has been recorded in inventory
and accounts payable on the accompanying  consolidated  balance sheet. Under the
above  arrangement,  the Company is entitled to receive price  protection in the
event the selling  price to its  customers is less than the purchase  price from
Toshiba.  The Company will record such price  protection,  if necessary,  at the
time of the sale of the units.

     Inventory  on hand at November  30, 2002 and May 31,  2003  purchased  from
Toshiba  Corporation  (Toshiba),  the 25% minority  shareholder of ACC and major
supplier to ACC, approximated $138,467 and $48,500 respectively.  As of November
30,  2002,   the  Company   recorded   receivables   from  Toshiba   aggregating
approximately $12,219 for price protection and software upgrades.  These amounts
were paid in full  during the first  quarter of 2003.  As of May 31,  2003,  the
Company recorded receivables from Toshiba aggregating  approximately $10,450 for
price protection.

     The Company has also received price protection (a reduction in our purchase
price) for  inventory  on hand in addition to goods sold.  During the six months
ended May 31, 2003,  $15,158 of price  protection from Toshiba was recorded as a
reduction to cost of sales as related  inventory was sold. In addition,  $252 of
price protection from Toshiba has been reflected as a reduction to the remaining
inventory cost at May 31, 2003.




                                       53





Recent Accounting Pronouncements

     In July  2001,  the  FASB  issued  SFAS  No.  143,  "Accounting  for  Asset
Retirement  Obligations"  (Statement 143). Statement 143 is effective for fiscal
years  beginning after June 15, 2002, and this will be adopted by the Company on
December 1, 2002 (fiscal 2003) and establishes an accounting  standard requiring
the recording of the fair value of liabilities associated with the retirement of
long- lived  assets in the period in which they are  incurred.  The  adoption of
Statement  143 did not have any  impact  on its  results  of  operations  or its
financial position as the Company had no asset retirement obligations.

     In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment of Long- Lived Assets"  (Statement  144),  which addresses  financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
This  statement  supersedes  Statement  121,  "Accounting  for the Impairment of
Long-Lived  Assets and for Long-Lived Assets to Be Disposed Of", while retaining
the  fundamental  recognition  and  measurement  provisions  of that  statement.
Statement 144 requires that a long-lived asset to be abandoned,  exchanged for a
similar productive asset or distributed to owners in a spin-off to be considered
held and used until it is disposed of.  However,  Statement  144  requires  that
management consider revising the depreciable life of such long-lived asset. With
respect to  long-lived  assets to be disposed of by sale,  Statement 144 retains
the  provisions of Statement  121 and,  therefore,  requires  that  discontinued
operations no longer be measured on a net realizable value basis and that future
operating  losses  associated  with such  discontinued  operations  no longer be
recognized before they occur. Statement 144 is effective for all fiscal quarters
of fiscal years beginning after December 15, 2001. The adoption of Statement 144
did  not  have  a  material  effect  on  the  Company's  consolidated  financial
statements.

     In April 2002, the FASB issued SFAS 145  "Rescission of SFAS Statements No.
4, 44, and 64,  Amendment of SFAS No. 13 and Technical  Corrections"  (Statement
145).  Statement  145,  as it  pertains  to the  recission  of  Statement  4, is
effective  for fiscal years  beginning  after May 15, 2002 and is effective  for
transactions  occurring  after May 15, 2002 as it relates to Statement  13. This
Statement updates,  clarifies and simplifies existing accounting  pronouncements
by   rescinding   Statement  4,  which   required  all  gains  and  losses  from
extinguishment  of debt to be  aggregated  and, if  material,  classified  as an
extraordinary  item, net of related income tax effect. As a result, the criteria
in Opinion 30 will now be used to classify  those gains and losses.  Adoption of
this statement had no material impact on the Company's financial statements.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition  and  Disclosure".  SFAS No. 148 provides  alternative
methods  of  transition  for a  voluntary  change  to the fair  value  method of
accounting for stock-based employee  compensation as originally provided by SFAS
No. 123, "Accounting for Stock-Based Compensation".  Additionally,  SFAS No. 148
amends  the  disclosure  requirements  of  SFAS  No.  123 to  require  prominent
disclosure in both annual and interim  financial  statements about the method of
accounting  for  stock-based  compensation  and the effect of the method used on
reported  results.  The  transitional  requirements  of  SFAS  No.  148  will be
effective for all financial  statements  for fiscal years ending after  December
15, 2002. The disclosure  requirements  shall be effective for financial reports
containing  condensed  financial  statements for interim periods beginning after
December  31,  2002.  The Company has  adopted  the  disclosure  portion of this
statement for the fiscal quarter ending May 31, 2003, as

                                       54





required.  The application of this standard will have no impact on the Company's
consolidated financial position or results of operations.

     In  February  2003,  the EITF  issued EITF Issue  02-16,  "Accounting  by a
Customer  (Including  a Reseller)  for  Certain  Consideration  Received  from a
Vendor", which was adopted by the Company during the quarter ended May 31, 2003.
This EITF provides  guidance on the income statement  classification  of amounts
received by a customer,  including a reseller and guidance  regarding  timing of
recognition for volume rebates. Adoption of this new standard, which was applied
prospectively by the Company for new  arrangements,  including  modifications of
existing  arrangements,  entered into after  December  31, 2002,  did not have a
material impact on the Company's  consolidated  financial position or results of
operations.

     In  November  2002,  the  FASB  issued  Interpretation  No.  45  (FIN  45),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantors,  Including
Guarantees of Indebtedness  of Others".  FIN 45 elaborates on the disclosures to
be made by a guarantor in its interim and annual financial  statements about its
obligations under certain  guarantees that it has issued. It also clarifies that
a  guarantor  is required to  recognize,  at the  inception  of a  guarantee,  a
liability  for the fair  value  of the  obligation  undertaken  in  issuing  the
guarantee.  The initial recognition and initial measurement provisions of FIN 45
are  applicable on a prospective  basis to guarantees  issued or modified  after
December  31,  2002,  irrespective  of  the  guarantor's  fiscal  year-end.  The
disclosure  requirements  of FIN 45 are effective  for  financial  statements of
interim or annual periods  ending after  December 15, 2002. The Company  adopted
FIN 45 during the quarter  ended May 31,  2003.  The  adoption of FIN 45 did not
have a material  effect on the  Company's  consolidated  financial  position  or
results of operations.

     In  January  2003,  the  FASB  issued   Interpretation  No.  46  (FIN  46),
"Consolidation of Variable Interest Entities,  an interpretation of ARB No. 51".
FIN 46 addresses the consolidation by business  enterprises of variable interest
entities  as  defined in the  Interpretation.  FIN 46 is  effective  for all new
variable  interest  entities  created or acquired  after  January 31, 2003.  For
variable  interest  entities  created or acquired prior to February 1, 2003, the
provisions  of FIN 46 must be applied  for the first  interim  period  beginning
after June 15, 2003.  Accordingly,  the Company will adopt this provision of FIN
46 during the quarter  ended  November 30, 2003.  The adoption of FIN46 is being
evaluated to determine what impact,  if any, the adoption of the provisions will
have on the Company's financial condition or results of operations.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities."  SFAS  No.  149  amends  and
clarifies the accounting guidance on derivative  instruments  (including certain
derivative  instruments embedded in other contracts) and hedging activities that
fall within the scope of SFAS No. 133,  "Accounting  for Derivative  Instruments
and Hedging  Activities."  SFAS No. 149 is effective for all  contracts  entered
into or modified after June 30, 2003, with certain  exceptions,  and for helping
relationships  designated  after June 30,  2003.  The  guidance is to be applied
prospectively. The adoption of SFAS No. 149 is being evaluated to determine what
impact,  if any,  the  adoption  of the  provisions  will have on the  Company's
financial condition or results of operations.

     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
Financial Instruments

                                       55





with  Characteristics  of both Liabilities and Equity." SFAS No. 150 changes the
accounting  guidance for certain  financial  instruments  that,  under  previous
guidance,  could be classified as equity or "mezzanine"  equity by now requiring
those   instruments  to  be  classified  as  liabilities   (or  assets  in  some
circumstances)  in the statement of financial  position.  Further,  SFAS No. 150
requires  disclosure  regarding the terms of those  instruments  and  settlement
alternatives.  SFAS No. 150 is generally effective for all financial instruments
entered into or modified after May 31, 2003,  and is otherwise  effective at the
beginning  of the first  interim  period  beginning  after  June 15,  2003.  The
adoption of SFAS No. 150 is being  evaluated to determine  what impact,  if any,
the adoption of the provisions will have on the Company's financial condition or
results of operations.


Forward-Looking Statements

     Except for historical information contained herein, statements made in this
release that would  constitute  forward-looking  statements may involve  certain
risks such as our ability to keep pace with technological advances,  significant
competition in the wireless, mobile and consumer electronics businesses, quality
and consumer acceptance of newly-introduced products, our relationships with key
suppliers and customers, market volatility,  non-availability of product, excess
inventory,  price  and  product  competition,  new  product  introductions,  the
uncertain economic and political climate in the United States and throughout the
rest of the world and the potential  that such climate may  deteriorate  further
and other risks  detailed in the  Company's  Form 10-K for the fiscal year ended
November  30, 2002 and the Form 10-Q for the first  quarter  ended  February 28,
2003. These factors, among others, may cause actual results to differ materially
from the results suggested in the forward- looking  statements.  Forward-looking
statements include statements relating to, among other things:

     o    growth  trends in the  wireless,  automotive  and consumer  electronic
          businesses
     o    technological and market developments in the wireless,  automotive and
          consumer electronics businesses
     o    liquidity
     o    availability of key employees
     o    expansion into international markets
     o    the availability of new consumer electronic products

     These   forward-looking   statements   are  subject  to   numerous   risks,
uncertainties and assumptions about the Company including, among other things:

     o    the ability to keep pace with technological advances
     o    significant  competition  in the  wireless,  automotive  and  consumer
          electronics businesses
     o    quality and consumer acceptance of newly introduced products
     o    the relationships with key suppliers
     o    the relationships with key customers
     o    possible increases in warranty expense
     o    the loss of key employees
     o    foreign currency risks
     o    political instability

                                       56





     o    changes in U.S. federal, state and local and foreign laws
     o    changes in regulations and tariffs
     o    seasonality and cyclicality
     o    inventory  obsolescence,  availability  and  price  volatility  due to
          market conditions


ITEM 4            CONTROLS AND PROCEDURES

     Within the 90-day period  immediately  preceding the filing of this Report,
the Company's Chief Executive  Officer and Principal  Financial Officer has each
evaluated  the   effectiveness  of  the  Company's   "Disclosure   Controls  and
Procedures"  and has concluded  that they were  effective.  As such term is used
above,  the Company's  Controls and Procedures are controls and other procedures
of the  Company  that are  designed to ensure  that  information  required to be
disclosed  by the  Company in the  reports  that it files or  submits  under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported,
within the time periods  specified in the Security Exchange  Commission's  rules
and forms.  Disclosure  Controls and  Procedures  include,  without  limitation,
controls  and  procedures  designed  to ensure that  information  required to be
disclosed by the Company in such reports is accumulated and  communicated to the
Company's management,  including its principal executive officer or officers and
principal   financial  officer  or  officers,   or  persons  performing  similar
functions,   as  appropriate  to  allow  timely  decisions   regarding  required
disclosure.

     There were no significant  changes in the Company's internal controls or in
other factors that could  significantly  affect such controls  subsequent to the
date that the Company's Chief Executive Officer and Principal  Financial Officer
conducted their evaluations of the Disclosure Controls and Procedures, including
any  corrective  actions with regard to  significant  deficiencies  and material
weaknesses.

                                       57





                          PART II - OTHER INFORMATION

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits


   Exhibit Number         Description
   --------------         ---------------------------------------------
     99.1                 Certifications pursuant to 18 U.S.C. Section 1350, as
                          adopted pursuant to Section 906 of the Sarbanes-Oxley
                          Act of 2002 (filed herewith)

         (b)      Reports on Form 8-K

                  For the second quarter ended May 31, 2003, the Company filed
                  four reports on Form 8-K.

                  The first report on Form 8-K, dated and filed March 14, 2003,
                  reported the Company's unaudited financial results as of
                  November 30, 2002 and a Waiver to the Company's Fourth Amended
                  & Restated Credit Agreement

                  The second report on Form 8-K, dated March 21, 2002 and filed
                  March 27, 2003, reported that two press releases were issued
                  announcing that the Company had received a Nasdaq Staff
                  Determination and had requested a hearing to review the Staff
                  Determination, respectively.

                  The third report on Form 8-K, dated April 15, 2003 and filed
                  April 16, 2003, reported that a press release was issued
                  regarding the Company's inability to timely file a Form 10-Q
                  for the quarter ended February 28, 2003.

                  The fourth report on Form 8-K, dated and filed May 29, 2003,
                  reported that a press release was issued announcing that the
                  Company would restate results for fiscal years 2000, 2001, and
                  the first three quarters of fiscal 2002.


                                       58





                                   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.

                                        AUDIOVOX CORPORATION




                                        By:s/John J. Shalam
                                           ------------------------------------
                                              John J. Shalam
                                              President and Chief
                                              Executive Officer

Dated: June 30, 2003

                                        By:s/Charles M. Stoehr
                                           ------------------------------------
                                              Charles M. Stoehr
                                              Senior Vice President and
                                              Chief Financial Officer

                                       59





                    CERTIFICATION PURSUANT TO SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002




I, John J. Shalam, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Audiovox Corporation;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report; and

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this quarterly report is being prepared;

     (b) evaluated the effectiveness of the registrant's disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and,

     (c)  presented  in  this  quarterly   report  our  conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors:

     (a) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  date  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     (b) any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent evaluation, including any corrective

                                       60





actions with regard to significant deficiencies and material weaknesses.

Date: June 30, 2003


s/John J.  Shalam
--------------------------------------------
John J. Shalam,
Chief Executive Officer


                                       61





                    CERTIFICATION PURSUANT TO SECTION 302 OF
                         THE SARBANES-OXLEY ACT OF 2002




I, Charles M. Stoehr, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Audiovox Corporation;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report; and

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this quarterly report is being prepared;

     (b) evaluated the effectiveness of the registrant's disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and,

     (c)  presented  in  this  quarterly   report  our  conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors:

     (a) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  date  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     (b) any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent evaluation, including any corrective

                                       62




actions with regard to significant deficiencies and material weaknesses.

Date: June 30, 2003


s/Charles M.  Stoehr
---------------------------------------
Charles M. Stoehr
Chief Financial Officer


                                       63