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, 2004


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.


           Class                                     Outstanding at July 9, 2004

           Class A Common Stock                        20,785,186 Shares
           Class B Common Stock                         2,260,954 Shares



                                        2





                              AUDIOVOX CORPORATION


                                    I N D E X

                                                                                              Page
                                                                                             Number

                                                                                            
PART I - FINANCIAL INFORMATION                                                                 4

          ITEM 1 FINANCIAL STATEMENTS                                                          4


                 Consolidated Balance Sheets at November 30,
                   2003 and May 31, 2004 (unaudited)                                           4

                 Consolidated Statements of Earnings (unaudited) for the Three
                   and Six Months Ended May 31, 2003 and May 31, 2004                          5

                 Consolidated Statements of Cash Flows (unaudited) for the Three
                   and Six Months Ended May 31, 2003 and May 31, 2004                          6

                 Notes to Consolidated Financial Statements                                    7

          ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS                                     28

          ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                    MARKET RISK                                                               56

          ITEM 4 CONTROLS AND PROCEDURES                                                      57

PART II - OTHER INFORMATION                                                                   58

          ITEM 1 LEGAL PROCEEDINGS                                                            58

          ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K                                             59

SIGNATURES                                                                                    60





                                                       3



                         PART I - FINANCIAL INFORMATION
ITEM 1       FINANCIAL STATEMENTS

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



                                                                                                      November 30,         May 31,
                                                                                                          2003               2004
                                                                                                      ----------         ----------
                                                                                                                         (unaudited)
Assets
  Current assets:
                                                                                                                   
     Cash                                                                                              $   4,702         $   5,152
     Accounts receivable, net                                                                            266,421           209,603
     Inventory, net                                                                                      219,664           276,526
     Receivables from vendors                                                                              7,830            11,401
     Prepaid expenses and other current assets                                                            12,371            12,991
     Deferred income taxes                                                                                 9,531             7,854
                                                                                                       ---------         ---------
         Total current assets                                                                            520,519           523,527
  Investment securities                                                                                    9,512             8,045
  Equity investments                                                                                      13,142            12,662
  Property, plant and equipment, net                                                                      20,242            19,829
  Excess cost over fair value of assets acquired                                                           7,532             7,019
  Intangible assets                                                                                        8,043             8,043
  Other assets                                                                                               713               573
                                                                                                       ---------         ---------
                                                                                                       $ 579,703         $ 579,698
                                                                                                       =========         =========
Liabilities and Stockholders' Equity
  Current liabilities:
     Accounts payable                                                                                  $  94,864         $  80,261
     Accrued expenses and other current liabilities                                                       42,816            38,037
     Accrued sales incentives                                                                             21,894            11,466
     Income taxes payable                                                                                 13,218            11,277
     Bank obligations                                                                                     39,940            69,643
     Current portion of long-term debt                                                                     3,433             2,747
                                                                                                       ---------         ---------
         Total current liabilities                                                                       216,165           213,431
  Long-term debt                                                                                          18,289            15,719
  Capital lease obligation                                                                                 6,070             6,038
  Deferred income taxes                                                                                    3,178             1,645
  Deferred compensation                                                                                    5,280             6,185
                                                                                                       ---------         ---------
         Total liabilities                                                                               248,982           243,018
                                                                                                       ---------         ---------
  Minority interest                                                                                        4,993             5,922
                                                                                                       ---------         ---------
  Commitments and contingencies
  Stockholders' equity:
     Preferred stock, $50 par value; 50,000 shares authorized and outstanding, liquidation
         preference of $2,500 per share                                                                    2,500             2,500
     Series preferred stock $.01 par value, 1,500,000 shares authorized; no shares issued or
         outstanding                                                                                        --                --
     Common stock:
         Class A $.01 par value; 60,000,000 shares authorized; 20,728,382 and
           20,772,846 shares issued at November 30, 2003 and May 31, 2004,
           respectively; and 19,655,645 and
           19,701,889 shares outstanding at November 30, 2003 and May 31, 2004, respectively                 207               208
         Class B $.01 par value convertible; 10,000,000 shares authorized; 2,260,954 shares issued
           and outstanding                                                                                    22                22
     Paid-in capital                                                                                     252,104           252,752
     Retained earnings                                                                                    80,635            86,182
     Accumulated other comprehensive loss                                                                 (1,229)           (2,409)
     Treasury stock, at cost, 1,072,737 and 1,070,957 shares of Class A common stock at
         November 30, 2003 and May 31, 2004, respectively                                                 (8,511)           (8,497)
                                                                                                       ---------         ---------
         Total stockholders' equity                                                                      325,728           330,758
                                                                                                       ---------         ---------
         Total liabilities and stockholders' equity                                                    $ 579,703         $ 579,698
                                                                                                       =========         =========

See accompanying notes to consolidated financial statements.

                                                       4






                                               AUDIOVOX CORPORATION AND SUBSIDIARIES
                                                Consolidated Statements of Earnings
                                  For the Three and Six Months Ended May 31, 2003 and May 31, 2004
                                           (In thousands, except share and per share data)
                                                            (unaudited)


                                                                       Three Months Ended                 Six Months Ended
                                                                   ---------------------------      ---------------------------
                                                                     May 31,         May 31,            May 31,        May 31,
                                                                       2003           2004               2003           2004
                                                                   ------------   ------------      ------------   ------------

                                                                                                       
Net sales                                                          $    301,010   $    438,199      $    597,828   $    815,083
Cost of sales                                                           275,398        405,751           546,748        751,269
                                                                   ------------   ------------      ------------   ------------
Gross profit                                                             25,612         32,448            51,080         63,814
                                                                   ------------   ------------      ------------   ------------

Operating expenses:
   Selling                                                                8,275          9,979            15,577         19,899
   General and administrative                                            12,889         14,641            25,195         31,747
   Warehousing and technical support                                      1,394          2,319             2,793          4,022
                                                                   ------------   ------------      ------------   ------------
       Total operating expenses                                          22,558         26,939            43,565         55,668
                                                                   ------------   ------------      ------------   ------------

Operating income                                                          3,054          5,509             7,515          8,146
                                                                   ------------   ------------      ------------   ------------

Other income (expense):
   Interest and bank charges                                             (1,013)        (1,961)           (2,118)        (3,397)
   Equity in income of equity investees                                     743          1,520             1,114          2,523
   Other, net                                                               571            447              (527)         1,299
                                                                   ------------   ------------      ------------   ------------
       Total other income (expense), net                                    301              6            (1,531)           425
                                                                   ------------   ------------      ------------   ------------

Income before provision for income taxes and minority interest            3,355          5,515             5,984          8,571
Provision for income taxes                                                  918          1,294             1,958          2,094
Minority interest expense                                                  (363)          (544)             (743)          (930)
                                                                   ------------   ------------      ------------   ------------

Net income                                                         $      2,074   $      3,677      $      3,283   $      5,547
                                                                   ============   ============      ============   ============

Net income per common share (basic)                                $       0.10   $       0.17      $       0.15   $       0.25
                                                                   ============   ============      ============   ============

Net income per common share (diluted)                              $       0.09   $       0.16      $       0.15   $       0.25
                                                                   ============   ============      ============   ============

Weighted average number of common shares outstanding (basic)         21,834,099     21,950,898        21,834,099     21,936,577
                                                                   ============   ============      ============   ============
Weighted average number of common shares outstanding (diluted)       21,873,875     22,436,045        21,949,521     22,345,345
                                                                   ============   ============      ============   ============












See accompanying notes to consolidated financial statements.

                                                       5






                                               AUDIOVOX CORPORATION AND SUBSIDIARIES
                                               Consolidated Statements of Cash Flows
                                       For the Six Months Ended May 31, 2003 and May 31, 2004
                                                           (In thousands)
                                                            (unaudited)


                                                                                                     Six Months Ended
                                                                                               ---------------------------
                                                                                                May 31,        May 31,
                                                                                                 2003           2004
                                                                                               ---------      ---------

Cash flows from operating activities:
                                                                                                        
   Net income                                                                                  $   3,283      $   5,547
   Adjustments to reconcile net income to net cash flows provided by operating activities:
      Depreciation and amortization                                                                2,060          2,210
      Recovery of bad debt expense                                                                  (294)           (37)
      Equity in income of equity investees                                                        (1,114)        (2,523)
      Minority interest expense                                                                      743            930
      Deferred income tax expense, net                                                                45          1,066
      Loss on disposal of property, plant and equipment, net                                         175              2
      Tax benefit on stock options exercised                                                        --              107
      Non-cash stock compensation                                                                   --              268
   Changes in operating assets and liabilities
      Accounts receivable                                                                         27,403         56,330
      Inventory                                                                                  118,894        (57,139)
      Receivables from vendors                                                                     2,730         (3,571)
      Prepaid expenses and other assets                                                           (7,163)         1,230
      Investment securities-trading                                                                 (324)          (904)
      Accounts payable, accrued expenses and other current liabilities and accrued sales
        incentives                                                                               (90,533)       (28,934)
      Income taxes payable                                                                         2,239         (1,923)
                                                                                               ---------      ---------
        Net cash provided by (used in) operating activities                                       58,144        (27,341)
                                                                                               ---------      ---------

Cash flows from investing activities:
   Purchases of property, plant and equipment                                                       (533)        (1,887)
   Proceeds from sale of property, plant and equipment                                               232             82
   Proceeds from distribution from an equity investee                                                530          3,017
   Proceeds from reduction of purchase price of acquired business                                   --              513
                                                                                               ---------      ---------
        Net cash provided by investing activities                                                    229          1,725
                                                                                               ---------      ---------

Cash flows from financing activities:
   Borrowings from bank obligations                                                              150,751        557,595
   Repayments on bank obligations                                                               (187,746)      (528,006)
   Principal payments on capital lease obligation                                                    (30)           (32)
   Proceeds from exercise of stock options and warrants                                             --              534
   Principal payments on debt                                                                       --           (3,810)
   Payment of guarantee                                                                             --             (291)
                                                                                               ---------      ---------
        Net cash (used in) provided by financing activities                                      (37,025)        25,990
                                                                                               ---------      ---------

Effect of exchange rate changes on cash                                                               16             76
                                                                                               ---------      ---------

Net increase in cash                                                                              21,364            450
Cash at beginning of period                                                                        2,758          4,702
                                                                                               ---------      ---------
Cash at end of period                                                                          $  24,122      $   5,152
                                                                                               =========      =========




See accompanying notes to consolidated financial statements.

                                                       6





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


(1)  Basis of Presentation

     The accompanying  consolidated financial statements of Audiovox Corporation
     and subsidiaries (Audiovox or the Company) were prepared in accordance with
     accounting  principles  generally  accepted in the United States of America
     and include all adjustments  (consisting of normal recurring  adjustments),
     which,  in the opinion of  management,  are necessary to present fairly the
     consolidated  financial position,  results of operations and cash flows for
     all  periods  presented.  The  results of  operations  are not  necessarily
     indicative of the results to be expected for the full fiscal year.

     These  consolidated  financial  statements  do not include all  disclosures
     associated with consolidated  financial  statements  prepared in accordance
     with  accounting  principles  generally  accepted  in the United  States of
     America.  Accordingly,  these statements should be read in conjunction with
     the Company's consolidated financial statements and notes thereto contained
     in the Company's Form 10-K for the year ended November 30, 2003.

     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 amounts of
     assets,  liabilities,  revenues  and expenses  reported in those  financial
     statements as well as the disclosure of contingent  assets and  liabilities
     at the date of the consolidated  financial statements.  These judgments can
     be subjective  and complex,  and  consequently  actual results could differ
     from those  estimates and  assumptions.  Significant  estimates made by the
     Company include the allowance for doubtful accounts, allowance for cellular
     deactivations,  inventory valuation, recoverability of deferred tax assets,
     valuation of  long-lived  assets,  accrued  sales  incentives  and warranty
     reserves.

     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 2003 Annual Report filed on Form 10-K. There have been no changes
     to the Company's significant accounting policies subsequent to November 30,
     2003.  Certain  reclassifications  have been made to the 2003  consolidated
     financial statements in order to conform to the 2004 presentation.

(2)  Subsequent Event

     On  June  11,  2004,  the  Company's  majority  owned  subsidiary  Audiovox
     Communications Corporation ("ACC") entered into a definitive asset purchase
     agreement  ("agreement")  to sell selected  assets and certain  liabilities
     (excluding its receivables,  inter-company  accounts payable,  income taxes
     payable,  subordinated  debt and certain accrued  expenses),  to UTStarcom,
     Inc.  ("UTSI")  for a total  purchase  price of $165,100  (purchase  price)


                                        7




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


     subject to a net working capital adjustment.  While the anticipated closing
     date for this  transaction is expected  during the fourth quarter of fiscal
     2004,  there can be no assurances that such  transaction  will close during
     that  period as it is  subject  to certain  closing  conditions,  including
     regulatory and third party  approvals.  The Company's Board of Directors as
     well as the Board of Directors of UTSI has approved the transaction and Mr.
     John Shalam, Chairman and Chief Executive Officer and majority shareholder,
     has agreed to vote his shares in favor of this agreement.

     Audiovox will retain the proceeds of the sale of the Wireless business.  It
     is the  intention  of  Audiovox  to use the  proceeds  to fund and grow its
     consumer electronics business.  However,  Audiovox may use all or a portion
     of the proceeds for other  purposes and Audiovox will consider other market
     opportunities, including acquisitions.

     Pursuant  to the terms of the  agreement,  5% (or  $8,255) of the  $165,100
     purchase  price will be placed in escrow by UTSI for 120 days after closing
     to fund the net working  capital  adjustment.  If the net  working  capital
     adjustment reflected at the closing is less than $40,000, then the purchase
     price will be adjusted  downward in an amount equal to the deficiency,  and
     if the net working capital balance exceeds $40,000, then the purchase price
     will be adjusted upwards in an amount equal to the excess.

     On or after the closing date of the sale to UTSI, the following  additional
     agreements have come or will become effective:

     o    The Company has entered into an agreement with Toshiba, ACC's minority
          interest  shareholder,  to purchase the balance of Toshiba's shares of
          ACC prior to the closing  with UTSI for  $13,590,  which  includes the
          repayment of an $8,107 subordinated note (see Note 17).

     o    Mr. Philip  Christopher (ACC Chief Executive Officer) will sell to ACC
          all of his goodwill relating to or useable by ACC for a purchase price
          not to  exceed  $16,000,  as  determined  by a  qualified  independent
          professional.

     o    ACC will pay Mr.  Christopher an additional $4,000 for the termination
          of his  Employment  and Stock  Appreciation  Rights  Agreement  on the
          closing date of the sale.

     o    ACC will  establish  a  $5,000  severance  pool to be paid to  certain
          employees of ACC and its  subsidiaries  as a severance  payment and in
          exchange  for  which   Audiovox  will  receive  a  release  from  such
          employees.


                                        8




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


     o    Mr.  Shalam  will  receive a payment  of $1,916  from the  Company  in
          connection with his Long-Term  Incentive  Compensation Award as of May
          29, 2002 which was  intended to reward Mr.  Shalam in the event that a
          controlling interest in ACC was acquired by a third party.

     o    For a period of five years after the  closing,  the Company will enter
          into a royalty free  licensing  agreement  permitting  UTSI to use the
          Audiovox brand name on certain products.

     o    The Company will provide certain services, that are currently provided
          to ACC,  for at least six months after the closing as set forth in the
          Transition Services Agreement. As consideration for the performance of
          these services,  UTSI will pay the Company based on the usage of these
          services as set forth in the Transition Services Agreement.

     In addition,  the Company and UTSI have agreed to use reasonable commercial
     efforts  to  negotiate  and agree  upon the form of  sublease  for space at
     Wireless Boulevard in Hauppauge, New York and Marquardt Avenue in Cerritos,
     California, as these locations are ACC's primary locations.

     Based upon review of FASB Statement No. 144, "Accounting for the Impairment
     of Long- lived  Assets," the Company has assessed the  measurement  date in
     accounting for the sale transaction on June 11, 2004 in connection with the
     date of board approval and signing of the agreement. Beginning in the third
     quarter of fiscal  2004,  financial  results  for ACC will be  recorded  as
     discontinued  operations  through the date the sale  transaction is closed.
     The  following  sets forth the  carrying  amounts  of the major  classes of
     assets and  liabilities of ACC, which will be part of the disposal group as
     of May 31, 2004:


                                                             May 31, 2004
                                                             (unaudited)

Assets

   Inventory, net                                                $ 129,158
   Prepaid expenses and other current assets                         5,346
   Property, plant and equipment, net                                1,686
   Other assets                                                         34
                                                                 ---------
        Total Assets                                             $ 136,224
                                                                 =========


                                        9




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


                                                             May 31, 2004

Liabilities

   Accounts payable                                              $   54,554
   Accrued expenses and other current liabilities                    13,158
   Accrued sales incentives                                           4,482
   Long-term debt                                                        38
                                                                 ----------
        Total Liabilities                                        $   72,232
                                                                 ==========

(3)  Net Income Per Common Share

     Basic net income per common share is based upon the weighted average number
     of common  shares  outstanding  during the  period.  Diluted net income per
     common share reflects the potential dilution that would occur if securities
     or other  contracts to issue common stock were  exercised or converted into
     common stock.

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




                                                   Three Months Ended               Six Months Ended
                                               --------------------------      -----------------------------
                                                         May 31,                          May 31,
                                                  2003             2004            2003             2004
                                               -----------     -----------     -----------     -----------

                                                                                   
Net income (numerator)                         $     2,074     $     3,677     $     3,283     $     5,547
                                               ===========     ===========     ===========     ===========
Weighted average number of common
   shares outstanding (denominator for net
   income per common share, basic)              21,834,099      21,950,898      21,834,099      21,936,577
Effect of dilutive securities:
   Stock options and warrants                       39,776         485,147         115,422         408,768
                                               -----------     -----------     -----------     -----------
Weighted average number of common
   shares and potential common shares
   outstanding (denominator for net
   income per common share, diluted)            21,873,875      22,436,045      21,949,521      22,345,345
                                               ===========     ===========     ===========     ===========

Net income per common share (basic)            $      0.10     $      0.17     $      0.15     $      0.25
                                               ===========     ===========     ===========     ===========
Net income per common share (diluted)          $      0.09     $      0.16     $      0.15     $      0.25
                                               ===========     ===========     ===========     ===========


     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 per common share calculation because the exercise price of

                                       10




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


     these  options  were  greater  than the average  market price of the common
     stock during the period.

     Stock  options and warrants  totaling  732,500 for the six months ended May
     31, 2004, were not included in the net income per common share  calculation
     because the exercise  price of these  options were greater than the average
     market price of the common stock during the period.

(4)  Accumulated Other Comprehensive Loss

     Accumulated other  comprehensive  loss of $1,229 and $2,409 at November 30,
     2003  and May 31,  2004,  respectively,  on the  accompanying  consolidated
     balance sheets includes the net  accumulated  unrealized gain (loss) on the
     Company's available-for-sale  investment securities of $1,135 and $(337) at
     November  30, 2003 and May 31,  2004,  respectively,  and foreign  currency
     translation  adjustments  of $(2,364) and $(2,072) at November 30, 2003 and
     May 31, 2004, respectively.

     The Company's total comprehensive income was as follows:



                                                      Three Months Ended       Six Months Ended
                                                    ----------------------    -------------------
                                                            May 31,                 May 31,
                                                     2003         2004         2003        2004
                                                    -------      -------      -------     -------

                                                                              
Net income                                          $ 2,074      $ 3,677      $ 3,283     $ 5,547
Other comprehensive income (loss):
   Foreign currency translation adjustments             835         (253)       1,520         292
   Unrealized holding gain (loss) on
       available-for-sale investment
       securities arising during period, net of
       tax                                              (29)      (1,265)          93      (1,472)
                                                    -------      -------      -------     -------
Other comprehensive income (loss), net of
   tax                                                  806       (1,518)       1,613      (1,180)
                                                    -------      -------      -------     -------
Total comprehensive income                          $ 2,880      $ 2,159      $ 4,896     $ 4,367
                                                    =======      =======      =======     =======


     The change in the net  unrealized  gain (loss)  arising  during the periods
     presented above are net of tax provision  (benefit) of $(18) and $(775) for
     the three months ended May 31, 2003 and May 31, 2004, respectively, and $57
     and  $(902)  for the  six  months  ended  May 31,  2003  and May 31,  2004,
     respectively.



                                       11




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


(5)  Supplemental Cash Flow Information / Changes in Stockholders' Equity

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


                                        Six Months Ended
                                     -----------------------
                                      May 31,      May 31,
                                       2003         2004
                                      ------       -----

Cash paid during the period:
Interest (excluding bank charges)     $ 1,063      $ 1,720
Income taxes (net of refunds)         $  (219)     $ 3,815


     Changes in Stockholders' Equity

     During  the six  months  ended May 31,  2004,  44,464  stock  options  were
     exercised into shares of Class A Common Stock aggregating  proceeds of $534
     to the Company.

     During the six months  ended May 31,  2003 and May 31,  2004,  the  Company
     recorded an unrealized  holding gain (loss) relating to  available-for-sale
     marketable  investment  securities,  net of  deferred  taxes,  of  $93  and
     $(1,472),  respectively,  as a component of accumulated other comprehensive
     income (loss).

     As a result of stock option  exercises,  the Company recorded a tax benefit
     of $107  during the six months  ended May 31,  2004  which is  included  in
     paid-in capital in the accompanying consolidated balance sheet.

     Non-Cash Transactions

     During the six months ended May 31, 2004,  the Company  recorded a non-cash
     stock compensation  charge of $268 related to the rights under the call/put
     options previously granted to certain employees of Audiovox German Holdings
     GmbH (Audiovox Germany) (Note 6).



                                       12




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


(6)  Business Acquisitions

     Code-Alarm, Inc.

     On March 15, 2002, Code Systems, Inc. (Code), a wholly-owned  subsidiary of
     Audiovox Electronics Corp. (AEC), a wholly-owned subsidiary of the Company,
     purchased  certain  assets of  Code-Alarm,  Inc.,  an  automotive  security
     product  company.  The  purpose  of this  acquisition  was to expand  brand
     recognition and improve OEM production with  manufacturers.  The results of
     operations   of   Code-Alarm,   Inc.  are  included  in  the   accompanying
     consolidated  financial statements from the date of purchase.  The purchase
     price consisted of approximately $7,100, paid in cash at the closing, and a
     debenture (CSI  Debenture)  whose value is linked to the future earnings of
     Code.  The payment of any amount  under the terms of the CSI  Debenture  is
     based on  performance  and is  scheduled  to occur  in the  first  calendar
     quarter of 2006.

     The Company  accounted for the  transaction in accordance with the purchase
     method of accounting. An adjustment to the allocation of the purchase price
     was made to certain acquired assets resulting in an increase to goodwill of
     $706  during the year ended  November  30,  2003.  During the three and six
     months ended May 31, 2004, an adjustment to the purchase price was made due
     to the  collection  of  monies  held in  escrow  at the  time  of  closing,
     resulting in a $3 and $513 decrease to goodwill,  respectively. As a result
     of the acquisition, goodwill, as adjusted, of $2,047 was recorded.

     Simultaneous  with this business  acquisition,  the Company  entered into a
     purchase and supply  agreement with a third party.  Under the terms of this
     agreement,  the third  party  will  purchase  or direct  its  suppliers  to
     purchase certain  products from the Company.  In exchange for entering into
     this  agreement,  the Company issued 50 warrants in its  subsidiary,  Code,
     which vest  immediately.  These  warrants were deemed to have minimal value
     based upon the then current value of Code. Furthermore, the agreement calls
     for the issuance of  additional  warrants  based upon the future  operating
     performance of Code.

     Based  upon  the  contingent  nature  of the  debenture  and  warrants,  no
     recognition  was given to the CSI  debenture  or  warrants  as the  related
     contingencies were not considered probable and such warrants had not vested
     at November 30, 2003 or May 31, 2004.

     Recoton Audio Group

     On  July  8,  2003,  the  Company,  through  a  newly-formed,  wholly-owned
     subsidiary, acquired in cash (i) certain accounts receivable, inventory and


                                       13




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


     trademarks from the U.S. audio operations of Recoton Corporation (the "U.S.
     audio  business")  or (Recoton) and (ii) the  outstanding  capital stock of
     Recoton German  Holdings GmbH (the  "international  audio  business"),  the
     parent  holding   company  of  Recoton's   Italian,   German  and  Japanese
     subsidiaries,  for $40,046,  net of cash  acquired,  including  transaction
     costs of $1.9  million.  The  primary  reason for this  transaction  was to
     expand the product  offerings  of AEC and to obtain  certain  long-standing
     trademarks such as Jensen(R),  Acoustic Research(R) and others. The Company
     also acquired an obligation with a German financial institution as a result
     of the purchase of the common stock of Recoton German  Holdings GmbH.  This
     obligation is secured by the acquired  company's  accounts  receivable  and
     inventory.

     The results of  operations  of this  acquisition  have been included in the
     consolidated  financial  statements  from the date of acquisition  (July 8,
     2003).

     The following unaudited  pro-forma financial  information for the three and
     six  months  ended May 31,  2003  represents  the  combined  results of the
     Company's  operations  and  the  Recoton  acquisition  as  if  the  Recoton
     acquisition  had  occurred  at the  beginning  of the  year of  acquisition
     (December 1, 2002). The unaudited pro-forma financial  information does not
     necessarily  reflect the results of operations that would have occurred had
     the Company constituted a single entity during such period.


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

Revenue                                      $316,223                $632,447
Net loss                                      (4,872)                  (9,745)
Net loss per share-basic and diluted           (0.23)                   (0.45)

     On August 29, 2003, the Company  entered into a call/put  option  agreement
     with certain  employees of Audiovox  Germany,  whereby these  employees can
     acquire up to a maximum of 20% of the  Company's  stated  share  capital in
     Audiovox Germany at a call price equal to the same proportion of the actual
     price paid by the Company for Audiovox  Germany.  The put options cannot be
     exercised  until  the  later  of (i)  November  30,  2008 or (ii)  the full
     repayment (including interest) of an inter-company loan granted to Audiovox
     Germany in the amount of 5.3 million  Euros.  Notwithstanding  the lapse of
     these time periods, the put options become immediately exercisable upon (i)
     the sale of Audiovox Germany or (ii) the termination of employment or death
     of the  employee.  The put price to be paid to the employee  upon  exercise
     will  be  the  then  net  asset  value  per  share  of  Audiovox   Germany.
     Accordingly,  the Company recognizes  compensation  expense based on 20% of
     the increase in Audiovox Germany's net assets  representing the incremental


                                       14




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


     change of the put price over the call option  price.  Compensation  expense
     for these options amounted to $268 for the six months ended May 31, 2004.

(7)  Goodwill and Other Intangible Assets

     The change in the carrying amount of goodwill is as follow:



Net beginning balance at November 30, 2003                           $ 7,532
Escrow monies collected in connection with Code-Alarm (Note 6)          (513)
                                                                     -------
Net ending balance at May 31, 2004                                   $ 7,019
                                                                     =======

     At November 30, 2003 and May 31, 2004,  intangible  assets consisted of the
     following:



                                                              November 30, 2003
                                                              and May 31, 2004
                                              ------------------------------------------------

                                                Gross
                                               Carrying        Accumulated      Total Net
                                                Value         Amortization      Book Value
                                               ---------      ------------      -----------

                                                                       
Patents subject to amortization                 $  677          $  677            --
Trademarks subject to amortization                  34              34            --
Trademarks not subject to amortization           8,043            --            $8,043
                                                ------          ------          ------
Total                                           $8,754          $  711          $8,043
                                                ======          ======          ======


     At May 31, 2004, all trademarks and patents  subject to  amortization  have
     been fully amortized.

(8)  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.


                                       15




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


     The Company's  chief decision maker  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.  Certain items are maintained at the Company's
     corporate  headquarters  (Corporate) and are not allocated to the segments.
     Such items primarily  include costs  associated with accounting and certain
     executive   officer  salaries  and  bonuses  and  certain  items  including
     investment   securities,   equity   investments,   deferred  income  taxes,
     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 six  months  ended  May 31,  2003  and  May 31,  2004,  certain
     advertising costs of $1,813 and $2,068, respectively, 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.  In addition,  during the six months ended May 31, 2004,
     the corporate  allocation to the Electronics Segment was reduced by $618 in
     order to offset costs incurred in the Company's Venezuelan  subsidiary that
     were  considered  to  be  a  consolidated  cost  of  the  Company.  Segment
     identifiable  assets are those which are directly  used in or identified to
     segment operations.



                                                                                       Consolidated
                                         Wireless      Electronics     Corporate         Totals
Three  Months Ended
May 31, 2003

                                                                           
Net sales                                $189,107       $111,903       $   --          $301,010
Income before provision for income
   taxes and minority interest              1,486          5,262         (3,393)          3,355

Three  Months Ended
May 31, 2004

Net sales                                $290,181       $148,018           --          $438,199
Income before provision for income
   taxes and minority interest              2,090          6,089       $ (2,664)          5,515



                                       16




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)



                                                                                       Consolidated
                                         Wireless      Electronics     Corporate         Totals

Six Months Ended
May 31, 2003
                                                                           
Net sales                                $405,669       $192,159       $   --          $597,828
Income before provision for income
   taxes and minority interest              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

Six Months Ended
May 31, 2004

Net sales                                $530,516       $284,567       $   --          $815,083
Income before provision for income
   taxes and minority interest              3,610         11,243         (6,282)          8,571
Total assets                              240,220        297,354         42,124         579,698
Goodwill, net                                --            2,417          4,602           7,019


(9)  Equity Investments

     As of  November  30,  2003  and May  31,  2004,  the  Company's  72%  owned
     subsidiary, Audiovox Communications Sdn. Bhd., had a 29% ownership interest
     in Avx Posse  (Malaysia)  Sdn.  Bhd.  (Posse)  which  monitors car security
     commands  through a satellite  based system in Malaysia.  In addition,  the
     Company  had a 20%  ownership  interest  in Bliss-  tel  which  distributes
     cellular telephones and accessories in Thailand,  and the Company had a 50%
     non-controlling  ownership  interests  in  two  other  entities:   Audiovox
     Specialized  Applications,  Inc.  (ASA)  which  acts  as a  distributor  to
     specialized  markets  for  specialized  vehicles,  such  as  RV's  and  van
     conversions,  of  televisions  and other  automotive  sound,  security  and
     accessory products; and G.L.M. Wireless Communications, Inc. (G.L.M.) which
     is in the cellular telephone,  pager and communications business in the New
     York metropolitan area.

     The following presents summary financial  information for ASA. Such summary
     financial  information  has been provided  herein based upon the individual
     significance of this  unconsolidated  equity investment to the consolidated
     financial information of the Company.  Furthermore,  based upon the lack of
     significance to the consolidated  financial  information of the Company, no
     summary financial information for the Company's other equity investments

                                       17




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


     has been provided herein:


                               November 30,       May 31,
                                  2003             2004
                               ------------    -------------

     Current assets              $22,518          $21,664
     Non-current assets            4,803            4,252
     Current liabilities           4,640            4,701
     Members' equity              22,681           21,215


                                  Six Months Ended
                            ----------------------------
                            May 31, 2003   May 31, 2004
                            ------------   -------------

     Net sales              $20,898       $29,236
     Gross profit             5,862         9,182
     Operating income         1,082         3,331
     Net income               2,193         4,502

     The Company's share of income from this  unconsolidated  equity  investment
     for the six  months  ended May 31,  2003 and May 31,  2004 was  $1,097  and
     $2,251, respectively.  In addition, the Company received distributions from
     ASA totaling  $3,017  during the six months  ended May 31,  2004,  and were
     recorded  as  a  reduction  to  equity   investments  on  the  accompanying
     consolidated balance sheet.

(10) 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.



                                       18




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


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



                                            Three Months Ended                 Six Months Ended
                                                May 31,                              May 31,
                                     2003                2004                2003                 2004
                               --------------     ------------------   -----------------    -----------------

                                                                               
Tax provision at Federal
   statutory rate              $ 1,175   35.0%    $ 1,930     35.0%    $ 2,095     35.0%    $ 3,000    35.0%
State income taxes, net of
   Federal benefit                 207    6.2         191      3.5         426      7.1         336     3.9
Decrease in beginning-of-
   the-year balance of the
   valuation allowance for
   deferred tax assets            (566) (16.9)     (1,110)   (20.1)     (1,005)   (16.8)     (1,639)  (19.1)
Foreign tax rate
   differential                    (62)  (1.9)        159      2.9         405      6.8          54     0.6
Non-deductible changes in
   rates and other, net            164    5.0         124      2.2          37      0.6         343     4.0
                               -------   -----    -------    ------    -------    ------    -------   ------
                               $   918   27.4%    $ 1,294     23.5%    $ 1,958     32.7%    $ 2,094    24.4%
                               =======   =====    =======    ======    =======    ======    =======   ======


     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 effective tax rate for the three and six months ended May 31, 2004, was
     23.5%  and  24.4%,  respectively,  compared  to  27.4%  and  32.7%  for the
     comparable periods in the prior year.

     The net change in the total  valuation  allowance,  which resulted from the
     utilization  of fully  reserved net  operating  loss  carryforwards  by the
     Wireless  Segment,  for the three and six months ended May 31, 2004,  was a
     decrease  of $1,110 and a decrease  of $1,639,  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  Segment.  Based on the
     Electronics  Segment's ability to carry back future reversals of deductible
     temporary  differences  to taxes  paid in current  and prior  years and the
     Electronics  Segment's  historical  taxable  income  record,  adjusted  for
     unusual  items,  management  believes  it is more  likely than not that the
     Electronics Segment will realize the benefit of the net deferred tax assets
     existing at May 31, 2004.


                                       19




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


(11) Accrued Sales Incentives

     A summary of the activity  with respect to sales  incentives  for the three
     and six months  ended May 31,  2003 and May 31,  2004,  respectively,  on a
     segment and consolidated basis is provided below:

     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 incentive            (51)         (240)         (291)
     Reversals for unclaimed sales incentives         (104)         --            (104)
                                                  --------      --------      --------
     Ending balance                               $  3,317      $  4,928      $  8,245
                                                  ========      ========      ========



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



         For the three months ended May 31, 2004


                                                  Wireless    Electronics       Total

                                                                     
     Opening Balance                              $  3,655      $  6,826      $ 10,481
     Accruals                                        4,517         5,066         9,583
     Payments                                       (3,500)       (4,262)       (7,762)
     Reversals for unearned sales incentives           (70)         (448)         (518)
     Reversals for unclaimed sales incentives         (120)         (198)         (318)
                                                  --------      --------      --------
     Ending balance                               $  4,482      $  6,984      $ 11,466
                                                  ========      ========      ========



                                       20




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)



         For the six months ended May 31, 2004

                                                  Wireless    Electronics       Total

                                                                     
     Opening Balance                              $  7,289      $ 14,605      $ 21,894
     Accruals                                        8,140         8,033        16,173
     Payments                                      (10,081)      (12,584)      (22,665)
     Reversals for unearned sales incentives          (728)       (1,818)       (2,546)
     Reversals for unclaimed sales incentives         (138)       (1,252)       (1,390)
                                                  --------      --------      --------
     Ending balance                               $  4,482      $  6,984      $ 11,466
                                                  ========      ========      ========


     The majority of the reversals of  previously  established  sales  incentive
     liabilities pertain to sales recorded in prior periods.

(12) Product Warranties and Product Repair Costs

     The following  table provides a summary of the activity with respect to the
     Company's product warranties and product repair costs:



                                                  Three Months Ended         Six Months Ended
                                            -------------------------   ------------------------
                                                     May 31,                     May 31,
                                              2003           2004          2003         2004
                                           ----------     ----------    ---------    ----------

                                                                          
     Opening balance                        $ 16,280      $ 19,691      $ 15,410      $ 18,512
     Liabilities accrued for warranties
          issued during the period             2,926         1,007         4,884         3,941
     Warranty claims paid during the
          period                              (2,316)       (2,507)       (3,404)       (4,262)
                                            --------      --------      --------      --------
     Ending balance                         $ 16,890      $ 18,191      $ 16,890      $ 18,191
                                            ========      ========      ========      ========



(13) Financing Arrangements

     (a)  Bank Obligations

          The Company's  principal  source of liquidity is its revolving  credit
          agreement  which  expires  July 27,  2004.  The  Company is  currently
          negotiating  with  the  bank to  extend  this  agreement,  of which no
          assurance  can be given.  At November 30, 2003 and May 31,  2004,  the
          credit agreement provided for $150,000 of available credit,  including
          $10,000 for foreign currency borrowings.

                                       21




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


          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  are  secured  by  accounts  receivable,
          inventory  and the Company's  shares of ACC common  stock.  The credit
          agreement  also  allows  for  commitments  up to  $50,000  in  forward
          exchange  contracts.  On April 16,  2004,  the Company and its lenders
          executed a Tenth  Amendment to the respective  credit  agreement.  The
          Amendment,  among other things,  amends and restates the definition of
          "Borrowing  Base" to allow the Company to borrow against  inventory at
          any time.

          Outstanding   domestic  obligations  under  the  credit  agreement  at
          November 30, 2003 and May 31, 2004 were as follows:


                              November 30,  May 31,
                                 2003        2004
                              ------------  -------

     Revolving Credit Notes     $11,709     $11,084
     Eurodollar Notes            20,000      50,000
                                -------     -------
                                $31,709     $61,084
                                =======     =======

          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  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.

          The Company was in compliance  with its bank covenants at November 30,
          2003 and May 31, 2004. While the Company has historically been able to
          obtain  waivers for compliance  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
          (Malaysian  Credit  Agreement) to finance  additional  working capital
          needs.  The credit  facilities  are  partially  secured by two standby
          letters  which  approximate  $800 each and  expire in July  2004.  The
          Company is currently negotiating with the bank to extend this agree-

                                       22




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


          ment,  of which no  assurance  can be  given.  In  addition,  the
          obligations  of the  Company  are also  secured  by the  property  and
          building  owned  by  Audiovox  Communications  Sdn.  Bhd.  Outstanding
          obligations  under the Malaysian Credit Agreement at November 30, 2003
          and May 31, 2004 were approximately $2,721 and $2,676, respectively.

          At May 31,  2004,  the  Company  had  additional  outstanding  standby
          letters of credit aggregating $671 which expire in July 2004.

     (b)  Debt/Loan Agreement

          On  September  2, 2003,  the  Company's  subsidiary,  Audiovox  German
          Holdings GmbH,  (Audiovox  Germany)  borrowed 12 million Euros under a
          new term loan  agreement.  This  agreement  was for a 5-year term loan
          with a financial institution consisting of two tranches.  Tranche A is
          for 9 million  Euros and  Tranche B is for 3 million  Euros.  The term
          loan  matures  on August  30,  2008.  Payments  are due in 60  monthly
          installments  and interest  accrues at (i) 2.75% over the Euribor rate
          for  Tranche A and (ii) 3.5% over the three  months  Euribor  rate for
          Tranche B. Any  amount  repaid  may not be  reborrowed.  The term loan
          becomes  immediately  due and  payable if a change of  control  occurs
          without permission of the financial institution.

          Audiovox Corporation guarantees 3 million Euros of this term loan. The
          term loan is  secured by the  pledge of the stock of  Audiovox  German
          Holdings GmbH and on all brands and trademarks of the Audiovox  German
          Holdings  Group.  The term loan  requires the  maintenance  of certain
          yearly  financial  covenants that are  calculated  according to German
          Accounting  Standards for Audiovox German Holdings.  Should any of the
          financial covenants not be met, the financial institution may charge a
          higher interest rate on any outstanding borrowings. The short and long
          term amounts  outstanding under this agreement were $3,226 and $9,736,
          respectively,   at   November   30,   2003  and  $2,747  and   $7,568,
          respectively,  at  May  31,  2004,  and  have  been  included  in  the
          accompanying consolidated balance sheet.

     (c)  Factoring / Working Capital Arrangements

          The Company has  available a 16,000  Euro  factoring  arrangement  and
          5,000  Euro  working  capital  arrangement  with  a  German  financial
          institution for its German  operations.  Selected accounts  receivable
          are purchased from the Company on a non- recourse basis at 80% of face
          value and payment of the  remaining 20% upon receipt from the customer
          of the balance of the receivable purchased. The rate of interest is

                                       23




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


          Euribor  plus 2.5%,  and the Company pays 0.4% of its gross sales as a
          fee for this  arrangement.  The amount  outstanding  under the working
          capital  agreement  was $5,510 and $5,883 at November 30, 2003 and May
          31, 2004,  respectively,  and has been included in bank obligations in
          the accompanying consolidated balance sheet.

(14) Payment of Guarantee

     At November 30, 2003,  the Company had  guaranteed the borrowings of one of
     its 50%- owned equity investees  (G.L.M.) at a maximum of $300. The Company
     guaranteed  the  debt of  G.L.M.  beginning  in  December  1996,  and  this
     guarantee was not modified. During the three months ended May 31, 2004, the
     Company  received a request for payment in connection  with this guarantee.
     As a result of the  payment  request,  the  Company  paid $291 on behalf of
     G.L.M. during the three months ended May 31, 2004.

(15) Contingencies

     The  Company is  currently,  and has in the past  been,  a party to routine
     litigation  incidental  to its  business.  From time to time,  the  Company
     receives  notification of alleged  violations of registered patent holders'
     rights.  The Company has either been  indemnified by its  manufacturers  in
     these  matters,  obtained the benefit of a patent license or has decided to
     vigorously defend such claims.

     The Company and ACC, along with other  manufacturers of wireless phones and
     cellular  service  providers,  were named as defendants in two class action
     lawsuits  alleging  non-  compliance  with FCC ordered  emergency  911 call
     processing  capabilities.  These lawsuits were consolidated and transferred
     to the United States District Court for the Northern  District of Illinois,
     which in turn referred the cases to the Federal  Communications  Commission
     ("FCC") to  determine if the  manufacturers  and service  providers  are in
     compliance   with  the  FCC's  order  on  emergency  911  call   processing
     capabilities.  The Company and ACC intend to vigorously defend this matter.
     However, no assurances regarding the outcome of this matter can be given at
     this point in the litigation.

     During 2001, the Company,  along with other  suppliers,  manufacturers  and
     distributors of hand-held wireless telephones,  was named as a defendant in
     five class action lawsuits  alleging  damages relating to exposure to radio
     frequency radiation from hand-held wireless telephones. These class actions
     have been consolidated and transferred to a Multi-District Litigation Panel
     before the United  States  District  Court of the District of Maryland.  On
     March 5, 2003, Judge Catherine C. Blake of the United States District Court
     for the District of Maryland granted the defendants' consolidated motion to
     dismiss these complaints.

                                       24




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


     Plaintiffs  have  appealed to the United  States  Circuit Court of Appeals,
     Fourth  Circuit.  The appeal pending before the United States Circuit Court
     of  Appeals,  Fourth  Circuit in the  consolidated  class  action  lawsuits
     (Pinney,  Farina,  Gilliam,  Gimpelson  and  Naquin)  against ACC and other
     suppliers,  manufacturers  and distributors as well as wireless carriers of
     hand-  held  wireless  telephones  alleging  damages  relating  to  risk of
     exposure to radio frequency  radiation from the wireless telephones has not
     yet  been  heard.  It is  anticipated  that  the  appeal  will be  heard in
     September 2004.

     During the third quarter of fiscal 2003, a certain Venezuelan employee, who
     is also a minority shareholder in Audiovox Venezuela,  submitted a claim to
     the Venezuela Labor Court for severance compensation of approximately $560.
     The  Court  approved  the claim and it was paid and  expensed  by  Audiovox
     Venezuela in the third quarter of fiscal 2003.  The Company is  challenging
     the payment of this claim and will seek  reimbursement  from the Venezuelan
     shareholders or the Company's insurance carrier.  During the second quarter
     of fiscal 2004, the Company instituted  arbitration  procedures against the
     Venezuelan  shareholders and their affiliated  companies alleging breach of
     contract,  breach of fiduciary duty and fraud. The Venezuelan  shareholders
     and their  affiliated  companies have interposed  affirmative  defenses and
     counterclaims.  This arbitration is pending before the International Centre
     for  Dispute  Resolution  in New York,  New York.  The  Company  intends to
     vigorously pursue and defend this matter.

     During the second quarter of fiscal 2004,  the Company,  AEC and one of its
     distributors  of car  security  products,  were  named as  defendants  in a
     lawsuit  brought by Magnadyne  Corporation  in the United  States  District
     Court,  Central  District of California  alleging patent  infringement  and
     seeking damages and injunctive relief. The Company has answered the amended
     complaint,   asserted   various   affirmative   defenses   and   interposed
     counterclaims alleging non-infringement, invalidity and non-enforceability.
     AEC is due to respond to the amended complaint by July 20, 2004 and intends
     to answer, assert affirmative defenses and interpose counterclaims as well.
     To date,  there  has been no  discovery.  The  Company  and AEC  intend  to
     vigorously defend this matter. However, no assurances regarding the outcome
     of this matter can be given at this point in the litigation.

     The  Company  does  not  expect  the  outcome  of any  pending  litigation,
     separately and in the aggregate,  to have a material  adverse effect on its
     business, consolidated financial position or results of operations.



                                       25




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


(16) New Accounting Pronouncements

     The Financial  Accounting  Standard Board ("FASB") issued an exposure draft
     entitled "Share-Based Payment, an Amendment of FASB Statements Nos. 123 and
     95."  This  exposure  draft  would  require  stock-based   compensation  to
     employees to be recognized as a cost in the financial  statements  and that
     such cost be measured according to the fair value of the stock options.  In
     the absence of an observable  market price for the stock  awards,  the fair
     value of the stock options would be based upon a valuation methodology that
     takes into consideration  various factors,  including the exercise price of
     the  option,  the  expected  term of the option,  the current  price of the
     underlying shares,  the expected  volatility of the underlying share price,
     the expected  dividends on the underlying shares and the risk-free interest
     rate.  The proposed  requirements  in the exposure draft would be effective
     for the first fiscal year  beginning  after  December  15,  2004.  The FASB
     intends to issue a final  Statement in late 2004. The Company will continue
     to  monitor  communications  on this  subject  from  the  FASB in  order to
     determine the impact on the Company's consolidated financial statements.

     In January  2003,  the FASB  issued  FASB  Interpretation  No. 46 (FIN 46),
     "Consolidation of Variable Interest Entities,  an Interpretation of ARB No.
     51",  which  addresses  consolidation  by business  enterprises of variable
     interest  entities (VIEs) either:  (1) that do not have  sufficient  equity
     investment at risk to permit the entity to finance its  activities  without
     additional  subordinated  financial  support,  or (2) in which  the  equity
     investors  lack an  essential  characteristic  of a  controlling  financial
     interest.  In December 2003, the FASB completed  deliberations  of proposed
     modifications  to FIN 46 (Revised  Interpretations)  resulting  in multiple
     effective  dates  based on the nature as well as the  creation  date of the
     VIE.  The  adoption  of FIN 46 did not  have  an  impact  on the  Company's
     consolidated financial statements.

     In December 2003, the SEC issued Staff  Accounting  Bulletin (SAB) No. 104,
     "Revenue  Recognition" (SAB No. 104), which codifies,  revises and rescinds
     certain sections of SAB No. 101,  "Revenue  Recognition",  in order to make
     this interpretive guidance consistent with current authoritative accounting
     and auditing  guidance and SEC rules and regulations.  The changes noted in
     SAB No. 104 did not have a material effect on our  consolidated  results of
     operations, consolidated financial position or consolidated cash flows.

(17) Other Subsequent Events

     On June 8, 2004,  Audiovox  purchased 5% of ACC stock from Toshiba,  an ACC
     minority  shareholder  for $1,410.  As a result of this purchase,  Audiovox


                                       26




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
            Three and Six Months Ended May 31, 2003 and May 31, 2004
             (Dollars in thousands, except share and per share data)


     currently  owns 80% ofACC's  stock.  As discussed  in Note 2,  Audiovox and
     Toshiba  subsequently  entered into an agreement  pursuant to which Toshiba
     would sell its  remaining  20% of ACC's stock to Audiovox at the closing of
     the  transactions  between  Audiovox,  ACC and UTStarcom.  Contingent  upon
     closing with UTStarcom,  Toshiba would receive total cash  consideration of
     $15 million pursuant to its agreements with Audiovox and ACC, including the
     repayment of an $8.1 million  convertible  note from ACC to Toshiba and the
     $1,410 that was paid to Toshiba for its 5% of the ACC shares.

     On June  16,  2004,  the  Company  and its  Lenders  executed  an  Eleventh
     Amendment to the Company's  Fourth Amended and Restated  Credit  Agreement.
     The Amendment allows the Company to sell certain of its accounts receivable
     free of the Bank's security interest.

                                       27





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

     The Company markets its products under the Audiovox(R) brand name and other
brand names,  such as Jensen(R),  Magnate(R),  Mac Audio(R),  Heco(R),  Acoustic
Research(R) and Advent(R), as well as private labels through a large and diverse
distribution network both domestically and internationally. The Company operates
through two primary marketing groups: Wireless and Electronics.

     Wireless consists of Audiovox  Communications Corp. (ACC), a majority-owned
subsidiary of Audiovox  Corporation,  and Quintex  Mobile  Communications  Corp.
(Quintex),  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  primarily  in the CDMA (Code  Division  Multiple
Access)  market.  Quintex is a small  operation for the direct sale of handsets,
accessories  and wireless  telephone  service.  Quintex also  receives  customer
service awards  (residual  fees) and activation  commissions  from the carriers.
Residuals  are paid by the  carriers  based upon the pricing  plan of  customers
activated  by Quintex  for a period of time (1-3  years).  Quintex  also sells a
small  volume  of  electronics  products  not  related  to  wireless  which  are
categorized as "other sales".  As described below, the Company is in the process
of selling the Wireless business.

     The Electronics Group consists of four wholly-owned subsidiaries:  Audiovox
Electronics  Corporation (AEC),  American Radio Corp., Code Systems, Inc. (Code)
and Audiovox  German Holdings GmbH (Audiovox  Germany) 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,  two-way 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 and these sales are
categorized as "other sales".

     The Company  allocates  interest  and certain  shared  expenses,  including
treasury,  legal,  human  resources and  information  systems,  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.

Critical Accounting Policies

     As  disclosed  in the annual  report on Form 10-K for the fiscal year ended
November 30, 2003, 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  statements
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;  sales incentives;  accounts receivable;


                                       28





inventory;  goodwill and other intangible  assets;  warranties and income taxes.
Since November 30, 2003,  there have been no changes in our critical  accounting
policies  and no other  significant  changes to the  assumptions  and  estimates
related to them.

Subsequent Event

     On  June  11,  2004,  the  Company's  majority  owned  subsidiary  Audiovox
Communications  Corporation  ("ACC")  entered into a definitive  asset  purchase
agreement   ("agreement")  to  sell  selected  assets  and  certain  liabilities
(excluding  its  receivables,   inter-company  accounts  payable,  income  taxes
payable,  subordinated  debt and certain accrued  expenses),  to UTStarcom,  Inc
("UTSI") for a total  purchase price of $165,100  (purchase  price) subject to a
net working  capital  adjustment.  While the  anticipated  closing date for this
transaction is expected  during the fourth quarter of fiscal 2004,  there can be
no  assurances  that such  transaction  will close  during  that period as it is
subject to certain  closing  conditions,  including  regulatory  and third party
approvals. The Company's Board of Directors as well as the Board of Directors of
UTSI has  approved  the  transaction  and Mr. John  Shalam,  Chairman  and Chief
Executive  Officer and  majority  shareholder,  has agreed to vote his  Audiovox
shares in favor of this agreement.

     Audiovox will retain the proceeds of the sale of the Wireless business.  It
is the  intention  of Audiovox to use the proceeds to fund and grow its consumer
electronics business. However, Audiovox may use all or a portion of the proceeds
for other  purposes  and Audiovox  will  consider  other  market  opportunities,
including acquisitions.

     Pursuant  to the terms of the  agreement,  5% (or  $8,255) of the  $165,100
purchase  price will be placed in escrow by UTSI for 120 days  after  closing to
fund the net working capital  adjustment.  If the net working capital adjustment
reflected at the closing is less than $40,000,  then the purchase  price will be
adjusted  downward in an amount equal to the deficiency,  and if the net working
capital  balance  exceeds  $40,000,  then the  purchase  price will be  adjusted
upwards in an amount equal to the excess.

     On or after the closing date of the sale to UTSI, the following  additional
agreements have come or will become effective:

     o    The Company has entered into an agreement with Toshiba, ACC's minority
          interest  shareholder,  to purchase the balance of Toshiba's shares of
          ACC prior to the closing  with UTSI for  $13,590,  which  includes the
          repayment of an $8,107 subordinated note (see Note 17).

     o    Mr. Philip  Christopher (ACC Chief Executive Officer) will sell to ACC
          all of his goodwill relating to or useable by ACC for a purchase price
          not to  exceed  $16,000,  as  determined  by a  qualified  independent
          professional.

     o    ACC will pay Mr.  Christopher an additional $4,000 for the termination
          of his  Employment  and Stock  Appreciation  Rights  Agreement  on the
          closing date of the sale.



                                       29





     o    ACC will  establish  a  $5,000  severance  pool to be paid to  certain
          employees of ACC and its  subsidiaries  as a severance  payment and in
          exchange  for  which   Audiovox  will  receive  a  release  from  such
          employees.

     o    Mr.  Shalam  will  receive a payment  of $1,916  from the  Company  in
          connection with his Long-Term  Incentive  Compensation Award as of May
          29, 2002 which was  intended to reward Mr.  Shalam in the event that a
          controlling interest in ACC was acquired by a third party.

     o    For a period of five years after the  closing,  the Company will enter
          into a royalty free  licensing  agreement  permitting  UTSI to use the
          Audiovox brand name on certain products.

     o    The Company will provide certain services, that are currently provided
          to ACC,  for at least six months after the closing as set forth in the
          Transition Services Agreement. As consideration for the performance of
          these services,  UTSI will pay the Company based on the usage of these
          services as set forth in the Transition Services Agreement.

     In addition,  the Company and UTSI have agreed to use reasonable commercial
efforts to  negotiate  and agree upon the form of sublease for space at Wireless
Boulevard in Hauppauge, New York and Marquardt Avenue in Cerritos, California as
these locations are ACC's primary locations.

     Based upon review of FASB Statement No. 144, "Accounting for the Impairment
of Long- lived  Assets,"  the  Company  has  assessed  the  measurement  date in
accounting for the sale transaction on June 11, 2004 in connection with the date
of board approval and signing of the  agreement.  Beginning in the third quarter
of fiscal  2004,  financial  results for ACC will be  recorded  as  discontinued
operations through the date the sale transaction is closed, which is expected in
the fourth quarter of fiscal 2004. The following sets forth the carrying amounts
of the major classes of assets and liabilities of ACC, which will be part of the
disposal group as of May 31, 2004:


                                                             May 31, 2004
                                                            --------------
                                                             (unaudited)
Assets
   Inventory, net                                                $ 129,158
   Prepaid expenses and other current assets                         5,346
   Property, plant and equipment, net                                1,686
   Other assets                                                         34
                                                                 ---------
        Total Assets                                             $ 136,224
                                                                 =========

Liabilities
   Accounts payable                                             $   54,554
   Accrued expenses and other current liabilities                   13,158
   Accrued sales incentives                                          4,482
   Long-term debt                                                       38
                                                                ----------
        Total Liabilities                                       $   72,232
                                                                ==========



                                       30





Results of Operations

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



                                                     Three Months Ended                  Six Months Ended
                                               ---------------------------       ----------------------------
                                                        May 31,                            May 31,
                                                 2003             2004             2003             2004
                                                ------           ------           ------           ------
  Net sales:
     Wireless
                                                                                        
        Wireless products                        61.5%            65.1%            66.2%            63.8%
        Activation commissions                    1.2              1.0              1.5              1.2
        Residual fees                             0.2              0.1              0.2              0.1
        Other                                     --               --               --               --
                                                ------           ------           ------           ------
           Total Wireless                        62.9             66.2             67.9             65.1
                                                ------           ------           ------           ------
     Electronics
        Mobile electronics                       24.6             19.3             20.9             16.4
        Consumer electronics                      9.2              4.3              7.4              6.8
        Sound                                     3.3             10.2              3.8             11.7
        Other                                     --               --               --               --
                                                ------           ------           ------           ------
           Total Electronics                     37.1             33.8             32.1             34.9
                                                ------           ------           ------           ------
           Total net sales                      100.0            100.0            100.0            100.0
                                                ------           ------           ------           ------
Cost of sales                                    91.5             92.6             91.5             92.2
                                                ------           ------           ------           ------
Gross profit                                      8.5              7.4              8.5              7.8
Selling                                           2.7              2.3              2.6              2.4
General and administrative                        4.3              3.3              4.2              3.9
Warehousing and technical support                 0.5              0.5              0.5              0.5
                                                ------           ------           ------           ------
        Total operating expenses                  7.5              6.1              7.3              6.8
                                                ------           ------           ------           ------
Operating income                                  1.0              1.3              1.3              1.0
Interest and bank charges                        (0.3)            (0.4)            (0.4)            (0.4)
Equity in income in equity investees              0.2              0.3              0.2              0.3
Other, net                                        0.2              0.1             (0.1)             0.2
                                                ------           ------           ------           ------
Income before provision for income
     taxes and minority interest                  1.1              1.3              1.0              1.1
Provision for income taxes                        0.3              0.3              0.3              0.3
Minority interest expense                        (0.1)            (0.1)            (0.1)            (0.1)
                                                ------           ------           ------           ------
Net income                                        0.7%             0.9%             0.6%             0.7%
                                                ======           ======           ======           ======


Management Key Indicators

     Management reviews the following financial and non-financial  indicators to
assess the performance of the Company's operating results:

     o    Net sales by product  class -  Management  reviews  this  indicator in
          order to determine  sales trends for certain  product  classes as this
          indicator  is  directly   impacted  by  unit  sales  and  new  product
          introductions.

                                       31






     o    Gross profit margin - This indicator  allows  management to assess the
          effectiveness of product introductions,  timing of product acceptances
          and significance of inventory write- downs.

     o    Operating  expenses as a percentage  of net sales - This  indicator is
          reviewed to determine the efficiency of operating expenses in relation
          to the Company's operations and identify  significant  fluctuations or
          possible future trends.

     o    Inventory and accounts  receivable  turnover - Inventory purchases and
          accounts receivable  collections are two significant liquidity factors
          that  determine the Company's  ability to fund current  operations and
          determine if additional borrowings may be necessary for future capital
          outlays.

     o    Major acquisitions and transactions-  Management consistently monitors
          the  aforementioned  key  indicators  as well as economic and industry
          conditions   during    consideration   of   major   acquisitions   and
          transactions.

Consolidated Results
Three months ended May 31, 2003 compared to three months ended May 31, 2004

     The net sales and  percentage  of net sales by marketing  group and product
line for the three months  ended May 31, 2003 and May 31, 2004 are  reflected in
the following table:



                                                           Three Months Ended
                                        -------------------------------------------------
                                            May 31, 2003                 May 31, 2004
                                        ----------------------      --------------------
Net sales:

     Wireless
                                                                        
         Wireless products               $185,174       61.5 %       $285,228       65.1 %
         Activation commissions             3,444        1.2            4,441        1.0
         Residual fees                        489        0.2              512        0.1
                                         --------      ------        --------      ------
           Total Wireless                 189,107       62.9          290,181       66.2
                                         --------      ------        --------      ------

       Electronics
          Mobile electronics               74,108       24.6           84,438       19.3
          Consumer electronics             27,762        9.2           18,978        4.3
          Sound                             9,928        3.3           44,602       10.2
          Other                               105     --                 --       --
                                         --------      ------        --------      ------
             Total Electronics            111,903       37.1          148,018       33.8
                                         --------      ------        --------      ------
             Total                       $301,010      100.0%        $438,199      100.0%
                                         ========      ======        ========      ======
  



                                       32





Net Sales

     Net sales for the three months ended May 31, 2004 increased $137,189,
or 45.6% to $438,199 as compared with $301,010 in 2003.

     Wireless Group sales were $290,181 for the three months ended May 31, 2004,
a 53.4% increase from sales of $189,107 in 2003. Unit sales of wireless handsets
increased 43.9% to approximately  1,596,000 units for the three months ended May
31, 2004 from approximately 1,109,000 units in 2003. This increase was primarily
due to  increased  sales of  products  introduced  during the fourth  quarter of
fiscal 2003,  such as camera and color display  phones with CDMA 1x  technology.
The average selling price of the Company's  handsets  increased to $170 per unit
for the three months ended May 31, 2004 from $161 per unit in 2003 due to higher
selling prices of new product introductions.

     Electronics  Group sales  increased in all product lines,  except  consumer
electronics,  as sales for the three months ended May 31, 2004, were $148,018, a
32.3% increase from sales of $111,903 in 2003.  This increase was largely due to
increased sales in the sound and mobile electronics product lines as a result of
new  product  introductions  and the  addition  of $12,728 in sales by  Audiovox
Germany, which was formed in July 2003 as a result of the acquisition of Recoton
(see  Note 6 to  the  consolidated  financial  statements).  Excluding  Audiovox
Germany,  sales by the Company's  international  subsidiaries  decreased $155 or
7.0%  during  the three  months  ended  May 31,  2004,  primarily  due to a $542
decrease in Malaysia as a result of lower OEM sales. This decrease was partially
offset by a $382 increase in Venezuela due to economic  growth in Venezuela as a
result of improved political stability.

     Sales were also  impacted  by a $988  increase in sales  incentive  expense
primarily in the Electronics  Group,  offset by a decline in the Wireless Group.
Trends will be discussed in further detail in each  individual  marketing  group
MD&A discussion.

Gross Profit

     The  consolidated  gross  profit  margin for the three months ended May 31,
2004 was 7.4%, compared to 8.5% in 2003. Margins in the Wireless Group were 3.7%
compared to 5.0% in 2003.  Margins in the  Electronics  Group remained steady at
14.5%.  Consolidated  gross margins were  adversely  impacted by the increase in
sales of the Wireless  Group as compared to the prior year.  The Wireless  Group
represented  a larger  percentage  of sales during the second  quarter of fiscal
2004  then  2003 and  since  wireless  products  carry  lower  margins  than the
Electronics  Group, it caused  consolidated  margins to decline.  Trends will be
discussed in further detail in each individual marketing group MD&A discussion.

Operating Expenses

     Operating  expenses  increased $4,381 to $26,939 for the three months ended
May 31, 2004,  as compared to $22,558 in 2003.  Audiovox  Germany  accounted for
$3,061, or 69.9%, of the increase in operating  expenses for the quarter.  Major
components  of  the  increase  in  operating  expenses  were  in  direct  labor,
advertising, insurance and office salaries, primarily in the Electronics Group

                                       33





as a result  of  recent  acquisitions  and  general  growth  in  business.  As a
percentage  of net sales,  operating  expenses  decreased  to 6.1% for the three
months ended May 31, 2004 from 7.5% in 2003. Trends will be discussed in further
detail in each individual marketing group MD&A discussion.

     Operating  income  for the  three  months  ended  May 31,  2004 was  $5,509
compared to $3,054 for the prior year.

Other Income and Expense

     Interest  expense and bank charges  increased  $948 during the three months
ended May 31, 2004,  primarily due to interest  incurred on German debt acquired
as a result of the Recoton acquisition and increased average borrowings from the
Company's  primary credit  facility  during the second quarter of fiscal 2004 as
compared to the second  quarter of fiscal  2003 due to  increased  purchases  of
wireless inventory.

     Equity in income of equity  investees  increased  $777 for the three months
ended May 31, 2004 as  compared  to the three  months  ended May 31,  2003.  The
increase  in  equity  in income of  equity  investees  was  primarily  due to an
increase  in the  equity  income  of ASA as a  result  of  increased  sales  and
improvement  in gross margins in  specialized  markets.  In addition,  increased
sales and net income of  Bliss-tel  contributed  towards the  increase in equity
income.

     Other income  decreased  $124 during the second quarter of 2004 as compared
to 2003. The decline in the fair market value of investment securities under the
Company's deferred compensation plan resulted in a $321 decrease to other income
as compared to the prior year,  which is offset by a  corresponding  decrease to
general and administrative  expenses. The above decrease was partially offset by
an increase in royalty income as a result of royalty rights  received during the
Recoton acquisition.

     Minority interest expense increased $181 for the three months ended May 31,
2004  compared to the three  months  ended May 31,  2003,  primarily  due to the
increased earnings of ACC.

Provision for Income Taxes

     The  effective  tax rate for the three  months ended May 31, 2004 was 23.5%
compared to 27.4% for the  comparable  period in the prior year. The decrease in
the  effective  tax rate was  primarily  due to the  reduction  of the  Wireless
segment's  valuation  allowance,  and the  Company's mix of foreign and domestic
earnings.

Net Income

     As a result  of strong  sales in both  divisions  offset  by a  decline  in
Wireless  gross margins and  increased  operating  expenses,  net income for the
three months ended May 31, 2004 was $3,677 compared to $2,074 in 2003.  Earnings
per share for the three  months  ended May 31, 2004 was $0.17  (basic) and $0.16
(diluted) as compared to $0.10 (basic) and $0.09 (diluted) for 2003.



                                       34





Six months ended May 31, 2003 compared to six months ended May 31, 2004

     The net sales and  percentage  of net sales by marketing  group and product
line for the six months ended May 31, 2003 and May 31, 2004 are reflected in the
following table:



                                                       Six Months Ended
                                      ----------------------------------------------
                                          May 31, 2003               May 31, 2004
                                      ----------------------    --------------------
Net sales:

  Wireless
                                                                 
      Wireless products               $395,885     66.2%        $519,638     63.8%
      Activation commissions             8,612      1.5            9,756      1.2
      Residual fees                      1,024      0.2            1,122      0.1
      Other                                148      --               --       --
                                      --------    ------        --------    ------
        Total Wireless                 405,669     67.9          530,516     65.1
                                      --------    ------        --------    ------

    Electronics
       Mobile electronics              125,198     20.9          133,987     16.4
       Consumer electronics             44,257      7.4           55,449      6.8
       Sound                            22,472      3.8           95,131     11.7
       Other                               232      --               --       --
                                      --------    ------        --------    ------
          Total Electronics            192,159     32.1          284,567     34.9
                                      --------    ------        --------    ------
          Total                       $597,828    100.0%        $815,083    100.0%
                                      ========    ======        ========    ======


Net Sales

     Net sales for the six months ended May 31, 2004 increased $217,255 or 36.3%
to $815,083 as compared with $597,828 in 2003.

     Wireless  Group sales were $530,516 for the six months ended May 31, 2004,
a 30.8% increase from sales of $405,669 in 2003. Unit sales of wireless handsets
increased  24.1% to  approximately  2,854,000 units for the six months ended May
31, 2004 from approximately 2,300,000 units in 2003. This increase was primarily
due to  increased  sales of  products  introduced  during the fourth  quarter of
fiscal 2003,  such as camera and color display  phones with CDMA 1x  technology.
The average selling price of the Company's  handsets  increased to $174 per unit
for the six months  ended May 31,  2004 from $166 per unit in 2003 due to higher
selling prices of new product introductions.

     Electronics Group sales increased in all product lines as sales for the six
months  ended May 31,  2004,  were  $284,567,  a 48.1%  increase  from  sales of
$192,159 in 2003.  This increase was largely due to increased sales in the sound
and consumer electronics product lines as a result of new product  introductions
and the  addition of $28,461 in sales by Audiovox  Germany,  which was formed in
July  2003  as a  result  of the  acquisition  of  Recoton.  (See  Note 6 to the
consolidated  financial  statements.)  Excluding Audiovox Germany,  sales by the
Company's  international  subsidiaries  decreased  $536 or 11.6%  during the six
months ended May 31, 2004, primarily due to a $1,493 decrease in Malaysia as a

                                       35





result  of lower OEM  sales.  This  decrease  was  partially  offset by a $1,063
increase  in  Venezuela  due to  economic  growth  in  Venezuela  as a result of
improved political stability.

     Sales were also impacted by a $2,145  decrease in sales  incentive  expense
primarily in the Wireless Group offset by an increase in the Electronics  Group.
Trends will be discussed in further detail in each  individual  marketing  group
MD&A discussion.

Gross Profit

     Both the Wireless Group and the Electronics  Group experienced a decline in
margins,  as the  consolidated  gross profit margin for the six months ended May
31, 2004 was 7.8%,  compared to 8.5% in 2003. Margins in the Wireless Group were
3.9%  compared  to 5.2% in 2003.  Margins  in the  Electronics  Group were 15.1%
compared to 15.5% in 2003.  Even though  margins  are down in both  Groups,  the
change in the mix of sales  between  Wireless and  Electronics  has affected the
consolidated  margins in a favorable way. The  Electronics  Group  represented a
larger  percentage of sales for the six months ended May 31, 2004 as compared to
2003 and, since Electronics'  products carry higher margins, it partially offset
the decline in  Wireless.  Trends will be  discussed  in further  detail in each
individual marketing group MD&A discussion.

Operating Expenses

     Operating  expenses  increased  $12,103 to $55,668 for the six months ended
May 31, 2004,  as compared to $43,565 in 2003.  Audiovox  Germany  accounted for
$7,266, or 60.0%, of the increase in operating expenses for the six months ended
May 31, 2004.  Major  components  of the increase in operating  expenses were in
direct labor, commissions,  advertising,  office salaries and professional fees,
primarily  in the  Electronics  Group as a result  of  recent  acquisitions  and
general  growth in business.  As a percentage of net sales,  operating  expenses
decreased  to 6.8% for the six  months  ended  May 31,  2004  from 7.3% in 2003.
Trends will be discussed in further detail in each  individual  marketing  group
MD&A discussion.

     Operating  income for the six months ended May 31, 2004 was $8,146 compared
to $7,515 for the prior year.

Other Income and Expense

     Interest  expense and bank charges  increased  $1,279 during the six months
ended May 31, 2004,  primarily due to interest  incurred on German debt acquired
as a result of the Recoton  acquisition,  and increased average  borrowings from
the  Company's  primary  credit  facility  during fiscal 2004 as compared to the
prior period in fiscal 2003 due to increased purchases of wireless inventory.

     Equity in income of equity  investees  increased  $1,409 for the six months
ended  May 31,  2004 as  compared  to the six  months  ended May 31,  2003.  The
increase  in  equity  in income of  equity  investees  was  primarily  due to an
increase  in the  equity  income  of ASA as a  result  of  increased  sales  and
improvement in gross  margins.  In addition,  increased  sales and net income of


                                       36





Bliss-tel contributed towards the increase in equity income.

     Other income  increased  $1,826 during the six months ended May 31, 2004 as
compared to the similar period in 2003.  Increased royalty income of $599 during
fiscal 2004  contributed  to the increase in other income as a result of royalty
rights received during the Recoton acquisition. In addition, the appreciation in
the fair market value of  investment  securities  under the  Company's  deferred
compensation plan resulted in a $192 increase to other income as compared to the
prior  period,  which is offset  by a  corresponding  increase  to  general  and
administrative expenses.  Furthermore,  other expense decreased $250 as a result
of lower foreign exchange  devaluation in our Venezuelan  subsidiary as compared
to fiscal  2003.  During the six months ended May 31,  2003,  other  expense was
impacted by a $757 loss on foreign  exchange  translation  due to devaluation of
the Venezuela currency.

     Minority  interest expense  increased $187 for the six months ended May 31,
2004  compared  to the six  months  ended  May 31,  2003,  primarily  due to the
increased earnings of Venezuela.

Provision for Income Taxes

     The  effective  tax rate for the six  months  ended May 31,  2004 was 24.4%
compared to last year's  32.7% for the  comparable  period.  The decrease in the
effective tax rate was primarily due to the reduction of the Wireless  Segment's
valuation allowance and the Company's mix of foreign and domestic earnings.

Net Income

     As a result of strong sales in both  divisions and  increased  other income
offset by decreased gross margins and increased operating  expenses,  net income
for the six months  ended May 31,  2004 was $5,547  compared  to $3,283 in 2003.
Earnings  per share for the six months  ended May 31, 2004 was $0.25  (basic and
diluted) as compared to $0.15 (basic and diluted) for 2003.



                                       37





Wireless Results
Three months ended May 31, 2003 compared to three months ended May 31, 2004

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



                                                                Three Months Ended
                                                -----------------------------------------------
                                                    May 31, 2003                May 31, 2004
                                                -------------------        -------------------
Net sales:
                                                                           
     Wireless products                          $ 185,174    97.9%         $ 285,228   98.3%
     Activation commissions                         3,444     1.9              4,441    1.5
     Residual fees                                    489     0.2                512    0.2
                                                ---------   ------         ---------  ------
         Total net sales                          189,107   100.0            290,181  100.0

Gross profit                                        9,382     5.0             10,865    3.7

Operating expenses
     Selling                                        2,706     1.4              2,419    0.8
     General and administrative                     3,915     2.1              4,476    1.5
     Warehousing and technical support                699     0.4                819    0.3
                                                ---------   ------         ---------  ------
         Total operating expenses                   7,320     3.9              7,714    2.6
                                                ---------   ------         ---------  ------

Operating income                                    2,062     1.1              3,151    1.1
Other expense                                        (576)   (0.3)            (1,061)  (0.4)
                                                ---------   ------         ---------  ------
Pre-tax income                                  $   1,486     0.8%         $   2,090    0.7%
                                                =========   ======         =========  ======


Net Sales

     Net sales  increased  $101,074,  or 53.4% to $290,181  for the three months
ended May 31,  2004 from 2003.  Unit sales of  wireless  handsets  increased  by
approximately  487,000  units for the three months ended May 31, 2004, or 43.9%,
to approximately 1,596,000 units from 1,109,000 units in 2003. This increase was
primarily  due to  increased  sales of  products  introduced  during  the fourth
quarter of fiscal  2003,  such as camera and color  display  phones with CDMA 1x
technology.  The average  selling price of the Company's  handsets  increased to
$170 per unit for the  three  months  ended  May 31,  2004 from $161 per unit in
2003. This increase was due to higher selling prices of newly-introduced models,
such as the camera phone.  The Company expects selling prices for digital phones
to increase as enhancements in digital technology expand digital capabilities.

     Net sales were also impacted by a decrease in sales  incentives  expense of
$1,302 net of reversals of $190. This decrease was primarily due to a decline in
sales incentive  programs with large wireless  carriers as compared to the prior
year.  Sales  incentive  programs  are  expected  to  continue  as  the  Company
introduces  new  technology  and products.  The Company  expects,  due to market
conditions, customer consolidation and planned introductions of new products, it
could experience higher sales incentives expense in the future.



                                       38





Gross Profit

     Gross profit  margins  decreased to 3.7% for the three months ended May 31,
2004 from 5.0% in 2003,  primarily due to increased price competition within the
wireless  industry.  As a result of  increased  price  competition,  older phone
models  are sold at  lower  prices  due to short  product  life  cycles  and are
negatively impacted by introductions of new phones with enhanced technology. The
declining margins achieved on older phone models was partially offset by margins
achieved on new product  introductions with enhanced  technologies,  such as the
camera  phone.  In addition,  the decline in gross margin was offset by a $1,302
decrease in sales incentive expense, net of reversals of $190.

     No inventory  write-downs  were  recorded by the Company  during the second
quarter  of  fiscal  2004 or 2003.  At May 31,  2004,  the  Company  had on hand
approximately  12,500 units of previously  written-down  inventory which,  after
write-down, had an approximate extended value of $400. The Company plans to sell
these items to its existing  customers during the year. The Company expects that
as new products are  introduced,  existing  models on hand are effected by price
competition  from  our  competitors  and  demand  by  our  customers,  it  could
experience write-downs in the future.

     Gross margins included  reimbursements  from a vendor for software upgrades
on sold  inventory  of $74 and $136 for the three  months ended May 31, 2003 and
May 31, 2004, respectively. The increase in upgrade reimbursements is due to the
timing of product enhancements,  and these reimbursements could fluctuate in the
future depending on the amount of technology upgraded into each product. Without
these reimbursements, gross margins would have been lower by 0.04% and 0.05% for
the three months ended May 31, 2003 and May 31, 2004, respectively. On occasion,
the Company  negotiates  to receive  price  protection  in the event the selling
price to its customers is less than the purchase price from the vendor.  No such
price protection was recorded by the Company during the second quarter of fiscal
2003 or 2004.

Operating Expenses

     Operating  expenses  increased $394 for the three months ended May 31, 2004
as compared to 2003. However,  as a percentage of net sales,  operating expenses
decreased to 2.6% during  three  months ended May 31, 2004,  compared to 3.9% in
2003.

     Selling  expenses  decreased  $287 for the three  months ended May 31, 2004
compared to 2003, primarily as a result of:

     o    $261 decrease in commissions as a result of a decline in international
          sales to South  America and  Mexico.  Generally,  commissions  paid in
          connection with international sales are higher than domestic sales. In
          addition,  two Quintex  branches were closed during the second quarter
          of fiscal 2004 which caused commissions to decline for the period.

     o    $131  decrease in salesmen  salaries due to the closing of two Quintex
          branches during fiscal 2004.


                                       39





     o    As a result of the increase in sales growth,  the above decreases were
          partially  offset by a $120  increase  in travel  and  lodging,  which
          requires  more  travel to  suppliers  in the Far East to  support  the
          increased product volume.

     General and  administrative  expenses  increased  $561 for the three months
ended May 31, 2004 compared to 2003 primarily as a result of:

     o    $632  increase in bad debt  expense  primarily  due to the fiscal 2003
          recovery  of a bad debt  previously  written off which did not reoccur
          during the three  months ended May 31,  2004.  In  addition,  bad debt
          expense  increased for the three months ended May 31, 2004 as a result
          of a  guarantee  payment  on  behalf  of one of the  Company's  equity
          investees (See Note 14 of Notes to Consolidated Financial Statements).
          The Company does not consider  this  increase to be a trend in overall
          accounts receivable.

     o    Corporate  allocations which increased $53 due to additional corporate
          services for MIS costs in connection with the Company's web-site.

     o    Numerous  insurance policy premiums paid by the Company are calculated
          based on sales and inventory positions. As such, the increase in sales
          activity and increased  inventory on hand caused insurance  expense to
          increase $50.

     o    The above  increases  were offset by a $232  decrease in  professional
          fees as a result of legal  expenses  incurred  in the prior  period to
          defend a class  action  law suit  relating  to  alleged  damages  from
          exposure  to radio  frequency  radiation.  Such  legal  costs were not
          incurred during the quarter ended May 31, 2004, as the  aforementioned
          complaint was dismissed in March 2003 and an appeal is not expected to
          be  heard  until   September  2004  (See  Note  15  of  the  Notes  to
          Consolidated Financial Statements).

     Warehousing  and technical  support  expense  increased  $120 for the three
months  ended May 31, 2004 as compared to the similar  period in the prior year.
The increase in warehouse and technical  support expense was primarily due to an
increase  in  direct  labor and  technical  support  as a result  of  additional
engineering  and  customer  service  costs  necessary to support the increase in
sales and technological complexity of wireless products.

Pre-Tax Income

     As a result of increased sales and improved  operating expense  efficiency,
partially  offset by  decline  in gross  margins,  pre-tax  income for the three
months ended May 31, 2004 was $2,090, compared to $1,486 for 2003.

     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.  The Company
competes against suppliers with  significantly  greater financial  resources and
who are able to offer more extensive advertising and greater promotions than the
Company does.  This pressure from increased  competition is further  enhanced by
the consolidation of many of Wireless' customers into a smaller group, dominated


                                       40





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, 2003 compared to six months ended May 31, 2004

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



                                                              Six Months Ended
                                                --------------------------------------------------
                                                     May 31, 2003                 May 31, 2004
                                                ---------------------        --------------------
Net sales:
                                                                                
     Wireless products                          $ 395,885      97.6%         $ 519,638      98.0%
     Activation commissions                         8,612       2.1              9,756       1.8
     Residual fees                                  1,024       0.3              1,122       0.2
     Other                                            148       --                 --        --
                                                ---------     ------          ---------    ------
         Total net sales                          405,669     100.0            530,516     100.0
Gross profit                                       21,199       5.2             20,906       3.9

Operating expenses
     Selling                                        5,369       1.3              5,126       0.9
     General and administrative                     8,247       2.0              8,972       1.7
     Warehousing and technical support              1,412       0.4              1,553       0.3
                                                ---------     ------          ---------    ------
         Total operating expenses                  15,028       3.7             15,651       2.9
                                                ---------     ------          ---------    ------

Operating income                                    6,171       1.5              5,255       1.0
Other expense                                      (1,436)     (0.4)            (1,645)     (0.3)
                                                ---------     ------          ---------    ------
Pre-tax income                                  $   4,735       1.1%         $   3,610       0.7%
                                                =========     ======         =========     ======



Net Sales

     Net sales increased $124,847, or 30.8% to $530,516 for the six months ended
May  31,  2004  from  2003.  Unit  sales  of  wireless  handsets   increased  by
approximately  554,000 units for the six months ended May 31, 2004, or 24.1%, to
approximately  2,854,000  units from 2,300,000  units in 2003. This increase was
primarily  due to  increased  sales of  products  introduced  during  the fourth
quarter of fiscal  2003,  such as camera and color  display  phones with CDMA 1x
technology.  The average  selling price of the Company's  handsets  increased to
$174 per unit for the six months  ended May 31, 2004 from $166 per unit in 2003.
This increase was due to higher selling prices of newly- introduced models, such
as the camera phone.  The Company  expects  selling prices for digital phones to
increase as enhancements in digital technology expand digital capabilities.



                                       41





     Net sales were also impacted by a decrease in sales  incentives  expense of
$3,744 net of reversals of $866. This decrease was primarily due to a decline in
sales incentive  programs with large wireless  carriers as compared to the prior
year.  Sales  incentive  programs  are  expected  to  continue  as  the  Company
introduces  new  technology  and products.  The Company  expects,  due to market
conditions, customer consolidation and planned introductions of new products, it
could experience higher sales incentives expense in the future.

Gross Profit

     Gross  profit  margins  decreased  to 3.9% for the six months ended May 31,
2004 from 5.2% in 2003,  primarily due to increased price competition within the
wireless  industry.  As a result of  increased  price  competition,  older phone
models  are sold at  lower  prices  due to short  product  life  cycles  and are
negatively impacted by introductions of new phones with enhanced technology. The
declining  margins achieved on older phone models was offset by margins achieved
on new product  introductions  with  enhanced  technologies,  such as the camera
phone. In addition,  the decline in gross margin was offset by a $3,744 decrease
in sales incentive expense, net of reversals of $866.

     No inventory write-downs were recorded by the Company during the six months
ended  May 31,  2004 or 2003.  The  Company  expects  that as new  products  are
introduced,  existing models on hand are effected by price  competition from our
competitors and demand by our customers,  it could experience write-downs in the
future.

     Gross margins included  reimbursements  from a vendor for software upgrades
on sold inventory of $123 and $948 for the six months ended May 31, 2003 and May
31, 2004,  respectively.  The increase in upgrade  reimbursements  is due to the
timing of product enhancements,  and these reimbursements could fluctuate in the
future depending on the amount of technology upgraded into each product. Without
these reimbursements, gross margins would have been lower by 0.03% and 0.18% for
the six months ended May 31, 2003 and May 31, 2004,  respectively.  On occasion,
the Company  negotiates  to receive  price  protection  in the event the selling
price to its customers is less than the purchase price from the vendor.  No such
price protection was recorded by the Company during the six months ended May 31,
2003 or 2004.

Operating Expenses

     Operating  expenses increased $623 for the six months ended May 31, 2004 as
compared to 2003.  However,  as a percentage  of net sales,  operating  expenses
decreased  to 2.9%  during six months  ended May 31,  2004,  compared to 3.7% in
2003.

     Selling  expenses  decreased  $243 for the six  months  ended May 31,  2004
compared to 2003, primarily as a result of:

     o    $210 decrease in commissions as a result of a decline in international
          sales to South  America and  Mexico.  Generally,  commissions  paid in
          connection with international sales are higher than domestic sales. In
          addition,  two Quintex  branches were closed during the second quarter
          of fiscal 2004 which caused commissions to decline for the period.


                                       42





     o    $204  decrease  in  salesmen  salaries  due to  the  winding  down  of
          operations and closing of two Quintex branches during fiscal 2004.

     o    As a result of the increase in sales growth,  the above decreases were
          partially  offset by a $122  increase  in travel  and  lodging,  which
          requires  more  travel to  suppliers  in the Far East to  support  the
          increased product volume.

     General and administrative expenses increased $725 for the six months ended
May 31, 2004 compared to 2003 primarily as a result of:

     o    $552  increase in bad debt  expense  primarily  due to the fiscal 2003
          recovery  of a bad debt  previously  written off which did not reoccur
          during  the six  months  ended May 31,  2004.  In  addition,  bad debt
          expense  increased for the three months ended May 31, 2004 as a result
          of a  guarantee  payment  on  behalf  of one of the  Company's  equity
          investees (See Note 14 of Notes to Consolidated Financial Statements).

     o    Corporate allocations which increased $193 due to additional corporate
          services for MIS costs in connection with the Company's web-site.

     o    Numerous  insurance policy premiums paid by the Company are calculated
          based on sales and inventory positions. As such, the increase in sales
          activity and increased  inventory on hand caused insurance  expense to
          increase $96.

     o    The above  increases  were offset by a $215  decrease in  professional
          fees as a result of legal  expenses  incurred  in the prior  period to
          defend a class  action  law suit  relating  to  alleged  damages  from
          exposure  to radio  frequency  radiation.  Such  legal  costs were not
          incurred   during  the  six  months  ended  May  31,   2004,   as  the
          aforementioned  complaint was dismissed in March 2003 and an appeal is
          not  expected  to be heard  until  September  2004 (See Note 15 of the
          Notes to Consolidated Financial Statements).

     Warehousing and technical support expense increased $141 for the six months
ended May 31,  2004 as compared  to the  similar  period in the prior year.  The
increase in warehouse  and  technical  support  expense was  primarily due to an
increase  in  direct  labor and  technical  support  as a result  of  additional
engineering  and  customer  service  costs  necessary to support the increase in
sales and technological complexity of wireless products.

Pre-Tax Income

     As a result of the decline in gross margins  partially  offset by increased
sales and improved  operating  expense  efficiency,  pre-tax  income for the six
months ended May 31, 2004 was $3,610, compared to $4,735 for 2003.

     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.  The Company
competes against suppliers with  significantly  greater financial  resources and


                                       43





who are able to offer more extensive advertising and greater promotions than the
Company does.  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, 2003 compared to three months ended May 31, 2004

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



                                                                          Three Months Ended
                                                   -----------------------------------------------------------------
                                                            May 31, 2003                      May 31, 2004
                                                   ------------------------------   --------------------------------
Net sales:
                                                                               
     Mobile electronics                         $  74,108      66.2%        $  84,438      57.1%
     Consumer electronics                          27,762      24.8            18,978      12.8
     Sound                                          9,928       8.9            44,602      30.1
     Other                                            105       0.1              --         --
                                                ---------     ------        ---------    ------
        Total net sales                           111,903     100.0           148,018     100.0
Gross profit                                       16,175      14.5            21,526      14.5

Operating expenses
     Selling                                        4,596       4.1             6,518       4.4
     General and administrative                     6,054       5.4             7,242       4.9
     Warehousing and technical support                656       0.6             1,440       1.0
                                                ---------     ------        ---------    ------
Total operating expenses                           11,306      10.1            15,200      10.3
                                                ---------     ------        ---------    ------
Operating income                                    4,869       4.4             6,326       4.2
Other income (expense)                                393       0.3              (237)     (0.1)
                                                ---------     ------        ---------    ------
Pre-tax income                                  $   5,262       4.7%       $   6,089       4.1%
                                                =========     ======        =========    ======


Net Sales

     Net sales  increased  $36,115,  or 32.3%,  to $148,018 for the three months
ended  May 31,  2004,  from net sales of  $111,903  in 2003.  Sales of  Audiovox
Germany  accounted  for $12,728,  or 35.2%,  of this increase as a result of the
Recoton acquisition in July 2003.

     Sales for Mobile Electronics increased $10,330 (13.9%) for the three months
ended May 31, 2004 from 2003,  primarily  from sales of mobile  video  products.
Sound sales increased $34,674 (349.3%) as a result of the Jensen(R), Magnate(R),
Mac Audio(R),  Heco(R),  Acoustic  Research(R) and Advent(R),  trademarks  which
usage right was acquired  during the Recoton  acquisition.  In  addition,  sound
sales were  positively  impacted by increased  sales of $10,388 in the satellite


                                       44





radio product line and $12,728 of Audiovox  Germany sales. The increase in Sound
sales has caused a shift in the sales  allocation  between  Mobile and  Consumer
Electronics.  Consumer  Electronics sales decreased $8,784 (31.6%) for the three
months ended May 31, 2004 from 2003. The decline in Consumer Electronics was due
to a  decrease  in  sales of  consumer  home  products,  DVD's  and FRS  radios,
partially offset by an increase in flat panel TV's. Increased competition,  most
notably in the DVD category,  caused Consumer  Electronics sales to decline. The
Company  does not expect the  decrease  in  Consumer  Electronics  sales to be a
future trend.

     Net sales of the Company's Malaysian subsidiary decreased from last year by
approximately $542 primarily from a shift in the Malaysia business  environment.
Specifically,  the OEM market in Malaysia  has declined as more  automakers  are
incorporating electronic products into vehicles at the factory rather than being
sold in the aftermarket.  In addition,  importing of foreign products has become
more prevalent,  therefore reducing domestic distribution within Malaysia.  This
decrease was offset by a $382  increase in the Company's  Venezuelan  subsidiary
due to economic growth in Venezuela as a result of improved political stability.

     Sales incentives  expense  increased  $2,290,  net of reversals of $646, to
$4,420,  due to increased  sales, as the majority of programs are based on sales
volume.  The  increase  in sales  incentive  expense  was  partially  offset  by
increased reversals.  Specifically,  reversals for unearned sales incentives for
the three  months ended May 31, 2004  increased  $208 as compared to 2003 due to
customers not purchasing the minimum  quantities of product  required during the
program  time  period as a result of lower than  expected  sales.  In  addition,
reversals for unclaimed sales incentives increased $198 as compared to the prior
year  quarter.  The Company  believes  that the reversal of earned but unclaimed
sales  incentives  upon the  expiration  of the claim  period is a  disciplined,
rational,   consistent  and  systematic  method  of  reversing  unclaimed  sales
incentives.  These sales  incentive  programs  are expected to continue and will
either increase or decrease based upon competition and customer demands.

Gross Profit

     Gross profit  margins  remained  steady at 14.5% for the three months ended
May 31,  2004 and  2003.  In  addition,  there  was a $2,290  increase  in sales
incentive expense, net of reversals of $646, primarily due to increased sales.

Operating Expenses

     Operating expenses increased $3,894 for the three months ended May 31, 2004
from 2003, a 34.4% increase compared to 2003. The domestic group (AEC , Code and
American  Radio Corp.)  accounted  for $623 or 16.0% of the 2004  increase.  The
international  group (Audiovox  Germany,  Malaysia and Venezuela)  accounted for
$3,271 or 84.0% of the 2004 increase  which was primarily due to the  operations
of Audiovox Germany, which commenced as a result of the Recoton acquisition.  As
a percentage of net sales,  operating  expenses increased to 10.3% for the three
months ended May 31, 2004 compared to 10.1% in 2003.



                                       45





     Selling  expenses  increased  $1,922  during the second  quarter of 2004 of
which $538 (28.0%) and $1,384 (72.0%) was attributable to the domestic group and
international group, respectively.

     o    The increase for the domestic  group was  primarily due to an increase
          in salesmen  salaries,  payroll taxes and benefits of $314 as a result
          of higher  employee  wages and the hiring of  additional  employees to
          support  the  growing  business.  In  addition,   advertising  expense
          increased $188 as a result of an increased product line and promotions
          during  fiscal 2004 as compared to the prior year due to the  increase
          in sales.

     o    The  increase  for the  international  group was due to  approximately
          $1,401  of  Audiovox  Germany  expenses  offset by a $17  decrease  in
          Malaysia and Venezuela.  Due to the  operations of Recoton,  which was
          acquired  during the third  quarter of fiscal 2003,  Audiovox  Germany
          expenses  were  primarily  comprised of $631 in  commissions,  $103 of
          salesmen salaries and $354 of advertising. Advertising costs consisted
          primarily of product brochures and informative  advertising  materials
          regarding the Company's product line.

     General and  administrative  expenses  increased $1,188 of which $42 (3.5%)
and $1,146  (96.5%) was  attributable  to the domestic  group and  international
group, respectively.

     o    The increase  for the domestic  group was  primarily  attributable  to
          corporate   allocations,   insurance  expense,   occupancy  costs  and
          salaries/payroll  taxes which  increased  $295,  $132,  $157 and $139,
          respectively,  as compared to the prior year. These increases were due
          to the hiring of additional  employees,  increased wages and MIS costs
          as a result of the  additional  resources  necessary  to  support  the
          increased  product  lines  and sales  activity.  In  addition,  higher
          inventory  levels  as a result  of  increased  sales  activity  caused
          insurance expense and occupancy costs to increase. The above increases
          were  partially  offset by a $707  decrease in bad debt expense due to
          the recovery of a previously  reserved bad debt.  The Company does not
          consider  this  decrease  in bad  debt  expense  to be a trend  in the
          overall accounts receivable.

     o    The increase for the international group was due to $1,118 of Audiovox
          Germany  expenses  and  a  $28  increase  in  Malaysia  and  Venezuela
          expenses.  As a result of the Recoton  acquisition,  Audiovox  Germany
          expenses  were  primarily  comprised  of $711 in salaries  and related
          payroll taxes, $211 of office expenses, and $209 of depreciation.  The
          increase in Malaysia and  Venezuela  expenses was  primarily due to an
          increase in Venezuela professional fees due to legal costs incurred in
          the  winding up of  operations  in  Audiovox  Brazil  and other  legal
          matters in connection with Audiovox Venezuela.

     Warehousing and technical support increased $784, or 119.5%.  This increase
was  primarily  due to a $731  increase in direct labor and payroll taxes due to
the hiring of additional  employees and this increase  includes $542 of Audiovox
Germany expenses.  In addition,  the increase in warehouse and technical support
is due to the hiring of additional engineers as the increase in sales volume and
product complexity has resulted in the Company providing added customer service.



                                       46





Pre-Tax Income

     As a result of  increased  sales due to new product  introductions  and the
Recoton acquisition,  offset by decreased operating expense efficiency,  pre-tax
income for the three months ended May 31, 2004 was $6,089 compared to $5,262 for
2003.

     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, 2003 compared to six months ended May 31, 2004

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



                                                                           Six Months Ended
                                                   -----------------------------------------------------------------
                                                            May 31, 2003                      May 31, 2004
                                                   ------------------------------   --------------------------------
Net sales:
                                                                                
     Mobile electronics                         $ 125,198      65.2%         $ 133,987      47.1%
     Consumer electronics                          44,257      23.0             55,449      19.5
     Sound                                         22,472      11.7             95,131      33.4
     Other                                            232       0.1               --         --
                                                ---------     ------         ---------     ------
        Total net sales                           192,159     100.0            284,567     100.0
Gross profit                                       29,774      15.5             42,846      15.1

Operating expenses
     Selling                                        8,395       4.3             12,705       4.5
     General and administrative                    11,850       6.2             17,049       6.0
     Warehousing and technical support              1,298       0.7              2,345       0.8
                                                ---------     ------         ---------     ------
Total operating expenses                           21,543      11.2             32,099      11.3
                                                ---------     ------         ---------     ------
Operating income                                    8,231       4.3             10,747       3.8
Other income (expense)                               (479)     (0.2)               496       0.2
                                                ---------     ------         ---------     ------
Pre-tax income                                  $   7,752       4.1%         $  11,243       4.0%
                                                =========     ======         =========     ======


Net Sales

     Net sales increased $92,408, or 48.1%, to $284,567 for the six months ended
May 31,  2004,  from net sales of  $192,159 in 2003.  Sales of Audiovox  Germany
accounted  for $28,461,  or 30.8%,  of this  increase as a result of the Recoton
acquisition in July 2003.

     Sound  sales  increased  $72,659  (323.3%)  as a result  of the  Jensen(R),
Magnate(R),   Mac  Audio(R),   Heco(R),   Acoustic  Research(R)  and  Advent(R),
trademarks  which usage right was acquired  during the Recoton  acquisition.  In
addition,  sound sales were positively impacted by increased sales of $21,075 in
the satellite  radio product line and $28,461 of Audiovox  Germany sales.  Sales
for Consumer electronics  increased $11,192 (25.3%) for the six months ended May


                                       47





31,  2004 from 2003,  primarily  from sales of DVD  players and flat panel TV's.
These products were introduced during fiscal 2003 and strong customer demand has
caused sales activity to increase during fiscal 2004.  Mobile  electronics sales
increased  $8,789  (7.0%) for the six months ended May 31, 2004 from 2003 due to
strong sales in mobile video.  The increase in Sound sales has caused a shift in
the sales allocation between Mobile and Consumer Electronics.

     Net sales of the Company's Malaysian subsidiary decreased from last year by
approximately   $1,493   primarily  from  a  shift  in  the  Malaysia   business
environment.  Specifically,  the OEM market in  Malaysia  has  declined  as more
automakers are  incorporating  electronic  products into vehicles at the factory
rather than being sold in the  aftermarket.  In  addition,  importing of foreign
products has become more prevalent,  therefore  reducing  domestic  distribution
within Malaysia.  This decrease was offset by a $1,063 increase in the Company's
Venezuela subsidiary due to economic growth in Venezuela as a result of improved
political stability.

     Sales incentives  expense increased $1,599,  net of reversals of $3,070, to
$4,963,  due to increased sales, as the majority of the Electronics  Group sales
incentives are based on sales volume.  The increase in sales  incentive  expense
was  partially  offset  by  increased  reversals.  Specifically,  reversals  for
unearned sales incentives for the six months ended May 31, 2004 increased $1,578
as compared to 2003 due to customers not  purchasing  the minimum  quantities of
product  required  during  the  program  time  period as a result of lower  than
expected post holiday season sales.  In addition,  reversals for unclaimed sales
incentives  for 2004  increased  $521 to $1,252 as compared to 2003. The Company
believes that the reversal of earned but  unclaimed  sales  incentives  upon the
expiration  of the  claim  period is a  disciplined,  rational,  consistent  and
systematic method of reversing unclaimed sales incentives. The majority of sales
incentive programs are calendar-year programs.  Accordingly, the program ends on
the month  following  the fiscal year end and the claim period  expires one year
from the end of the program.  The above  reversals were  partially  offset by an
increase in sales as many sales incentive  programs are based on a percentage of
sales.  These sales incentive  programs are expected to continue and will either
increase or decrease based upon competition and customer demands.

Gross Profit

     Gross  profit  margins  decreased to 15.1% for the six months ended May 31,
2004  compared  to 15.5% in  2003.  This  decrease  was due to  increased  price
compression  of consumer  electronic  products sold through  consumer  channels,
which  carry  a  lower  gross  margin  as  opposed  to  other   product   lines.
Specifically,  gross  margins were  adversely  impacted by the sale of older DVD
players  and flat  panel TV's as the  selling  price for these  older  items has
declined as a result of new product  introductions  within these categories.  In
addition,  there  was a $1,599  increase  in  sales  incentive  expense,  net of
reversals of $3,070,  primarily due to increased sales. This decrease was offset
by  margins  achieved  in  Audiovox  Germany  from  Jensen(R),  Magnate(R),  Mac
Audio(R),  Heco(R),  Acoustic  Research(R) and Advent(R)  products as well as an
increase in  Code-Alarm  margins  due to a decline in  production  and  warranty
costs.



                                       48





Operating Expenses

     Operating  expenses increased $10,556 for the six months ended May 31, 2004
from 2003, a 49.0% increase  compared to 2003. The domestic group  accounted for
$3,248 or 30.8% of the 2004 increase. The international group (Audiovox Germany,
Malaysia and Venezuela) accounted for $7,308 or 69.2% of the 2004 increase which
was primarily due to the operations of Audiovox  Germany,  which  commenced as a
result of the  Recoton  acquisition.  As a  percentage  of net sales,  operating
expenses  increased to 11.3% for the six months  ended May 31, 2004  compared to
11.2% in 2003.

     Selling  expenses  increased  $4,310  during the second  quarter of 2004 of
which $1,649 (38.3%) and $2,661 (61.7%) was  attributable  to the domestic group
and international group, respectively.

     o    The increase for the domestic  group was primarily due to increases of
          $252 in  commissions  due to an increase in  commissionable  sales and
          salesmen  salaries,  payroll taxes and benefits of $670 as a result of
          higher  employee  wages and the  hiring of  additional  employees.  In
          addition,  advertising  expense and trade show expense  increased $385
          and $224,  respectively,  as a result of an increased product line and
          increased  promotions  during the annual consumer  electronics show as
          compared to the prior year.

     o    The  increase  for the  international  group was due to  approximately
          $2,703  of  Audiovox  Germany  expenses  offset by a $42  decrease  in
          Malaysia and Venezuela.  Due to the  operations of Recoton,  which was
          acquired  during the third  quarter of fiscal 2003,  Audiovox  Germany
          expenses were primarily  comprised of $1,197 in  commissions,  $217 of
          salesmen salaries and $906 of advertising. Advertising costs consisted
          primarily of product brochures and informative  advertising  materials
          regarding the Company's product line.

     General  and  administrative  expenses  increased  $5,199  of which  $1,315
(25.3%)  and  $3,884  (74.7%)  was   attributable  to  the  domestic  group  and
international group, respectively.

     o    The increase for the domestic group was primarily  attributable  to an
          increase of $291 in professional fees due to the increasing complexity
          of patent validity and rights as a result of product  complexity.  The
          Company  expects,  as technology for electronic  products  become more
          complex,  the Company will have to expend more  resources on defending
          patent  rights and  obtaining  patents on new  products.  In addition,
          corporate allocations,  insurance expense, office expenses,  occupancy
          costs and  salaries/payroll  taxes increased $594, $220, $97, $261 and
          $324,  respectively,  as compared to the prior year.  These  increases
          were due to the hiring of additional  employees,  increased  wages and
          MIS costs as a result of the additional resources necessary to support
          the increased  product lines and sales activity.  In addition,  higher
          inventory  levels  as a result  of  increased  sales  activity  caused
          insurance expense and occupancy costs to increase. The above increases
          were  partially  offset by a $693  decrease in bad debt expense due to
          the recovery of a previously  reserved bad debt.  The Company does not
          consider  this  decrease  in bad  debt  expense  to be a trend  in the
          overall accounts receivable.

                                       49






     o    The increase for the international group was due to $3,948 of Audiovox
          Germany  expenses  offset by a $64 decline in Malaysia  and  Venezuela
          expenses.  As a result of the Recoton  acquisition,  Audiovox  Germany
          expenses  were  primarily  comprised of $2,024 in salaries and related
          payroll taxes,  $226 of professional  fees,  $407 of office  expenses,
          $356 of  occupancy  costs and $438 of  depreciation.  The  decline  in
          Malaysia and  Venezuela  expenses was  primarily  due to a decrease in
          Venezuela's  employee  benefits  because  of a 2003  payment  made  to
          certain Venezuela employees, which did not recur in fiscal 2004.

     Warehousing and technical support increased $1,047, or 80.7%. This increase
was  primarily  due to a $958  increase in direct labor and payroll taxes due to
the  hiring of  additional  employees  and  includes  $615 of  Audiovox  Germany
expenses. In addition, the increase in warehouse and technical support is due to
the hiring of  additional  engineers as the increase in sales volume and product
complexity has resulted in the Company providing added customer service.

Pre-Tax Income

     As a result of  increased  sales due to new product  introductions  and the
Recoton acquisition and increased other income due to royalties received for the
Jensen trademarks  offset by a decline in gross margins,  pre-tax income for the
six months  ended May 31, 2004 was $11,243  compared to $7,752 for 2003.  During
the six months ended May 31, 2004, the corporate  allocation to the  Electronics
Segment was reduced by $618 in order to offset costs  incurred in the  Company's
Venezuelan  subsidiary  that were  considered to be a  consolidated  cost of the
Company.

     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.

Liquidity and Capital Resources
Cash Flows, Commitments and Obligations

     The Company has historically  financed its operations  primarily  through a
combination  of  available  borrowings  under  bank lines of credit and debt and
equity  offerings.  The  amount  of  financing  is  dependent  primarily  on the
collection of accounts receivable and purchase of inventory. As of May 31, 2004,
the Company had working  capital of $310,096  which  includes  cash of $5,152 as
compared  with  working  capital of $304,354  and cash of $4,702 at November 30,
2003.

     Operating  activities used cash of $27,341 for the six months ended May 31,
2004 compared to cash provided of $58,144 in 2003. The decrease in cash provided
by operating  activities  as compared to the prior year is primarily  due to the
increase in inventory.  Net income provided $5,547 for operating  activities for
the six months ended May 31, 2004 compared to $3,283 in 2003.



                                       50





     The following  significant  fluctuations in the balance sheet impacted cash
flow from operations:

     o    The overall  decrease in cash flow from  operations for the six months
          ended  May  31,  2004 as  compared  to 2003  was  primarily  due to an
          increase  in  purchases  of  wireless  inventory  as a  result  of the
          increase in sales  activity  for the Wireless  Group.  The increase in
          cash used for inventory  purchases  was partially  offset by increased
          inventory  turnover which  approximated  6.3 during for the six months
          ended May 31,  2004  compared to 5.1 in the  comparable  period in the
          prior year. The increased  turnover is a result of increased sales and
          improved  management  of  Wireless  inventory  which  consists of more
          products  at the  beginning  of their  life  cycle  during  the second
          quarter of fiscal  2004 as  compared  to the second  quarter of fiscal
          2003,  which  consisted of products  near the end of their life cycle.
          Although this is a favorable  condition,  the Company cannot guarantee
          this to be a trend in the future.

     o    In addition,  cash flow from  operating  activities for the six months
          ended May 31, 2004,  was  impacted by a decrease in accounts  payable,
          primarily  from  payments  made to  inventory  vendors.  Payments  for
          accounts  payable during the six months ended May 31, 2004 were not as
          significant as compared to the  comparable  period based on the timing
          of payments  made.  The timing of payments  made can fluctuate and are
          often  impacted  by the timing of  inventory  purchases  and amount of
          inventory on hand.

     o    Cash flows from operating  activities for the six months ended May 31,
          2004 were  favorably  impacted by a decrease  in  accounts  receivable
          primarily from collections.  Accounts receivable turnover approximated
          8.3 during for the six months  ended May 31,  2004  compared to 6.5 in
          the  comparable  period  in the prior  year.  Overall  collections  of
          accounts  receivable  and credit  quality of customers  has  improved,
          however, accounts receivable collections are often impacted by general
          economic conditions.

     Investing  activities  provided  $1,725 during the six months ended May 31,
2004, primarily from the distribution from an equity investee, proceeds from the
reduction  of  purchase  price of  acquired  business,  partially  offset by the
purchases of property, plant and equipment.

     Financing  activities  provided $25,990 during the six months ended May 31,
2004,  primarily from net borrowings of bank  obligations,  partially  offset by
payments of debt.

     The  Company's  principal  source  of  liquidity  is its  revolving  credit
agreement,  which  expires July 27, 2004.  The Company is currently  negotiating
with the bank to extend this  agreement,  of which no assurance can be given. At
November 30, 2003 and May 31, 2004, the credit  agreement  provided for $150,000
of available credit,  including $10,000 for foreign currency  borrowings.  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 common stock. 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.


                                       51





The  credit  agreement  also  allows  for  commitments  up to $50,000 in forward
exchange contracts.

     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.

     The Company was in  compliance  with all of its bank  covenants at November
30, 2003 and May 31, 2004.  There can be no assurance  that the Company will not
violate covenants in the future, therefore,  resulting in amounts outstanding to
be payable upon demand.  While the Company has historically  been able to obtain
waivers for violations,  there can be no assurance that future negotiations with
its lenders would be successful.  This credit  agreement has no cross  covenants
with other credit facilities.

     The Company also has revolving credit facilities in Malaysia and Germany to
finance  additional  working  capital needs.  The Malaysian  credit  facility is
partially  secured by the Company  under two  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.
The German  credit  facility  consists of accounts  receivable  factoring  up to
16,000 Euros and a working capital facility,  secured by accounts receivable and
inventory,  up to 5,000 Euros. The German and Malaysia  facilities are renewable
on an annual basis.

     At November 30, 2003,  the Company had  guaranteed the borrowings of one of
its 50%- owned  equity  investees  (G.L.M.)  at a maximum of $300.  The  Company
guaranteed the debt of G.L.M. beginning in December 1996, and this guarantee was
not modified. During the three months ended May 31, 2004, the Company received a
request  for  payment  in  connection  with this  guarantee.  As a result of the
payment  request,  the  Company  paid $291 on behalf of G.L.M.  during the three
months ended May 31, 2004.

     The Company has certain  contractual  cash obligations and other commercial
commitments  which will  impact its short and  long-term  liquidity.  At May 31,
2004, 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 obligation          $13,376          $   553          $ 1,125          $ 1,157          $10,541
Operating leases                   12,263            3,609            5,528            3,070               56
                                  -------          -------          -------          -------          -------
Total contractual cash
   obligations                    $25,639          $ 4,162          $ 6,653          $ 4,227          $10,597
                                  =======          =======          =======          =======          =======




                                       52








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

                                                                  
Lines of credit (1)        $ 69,643      $ 69,643          --            --        --
Standby letters of
   credit (1)                 2,271         2,271          --            --        --
Commercial letters of
   credit (1)                14,627        14,627          --            --        --
Debt (1)                     18,466         2,747      $ 12,401      $  3,318      --
                           --------      --------      --------      --------     -----
Total commercial           $105,007      $ 89,288      $ 12,401      $  3,318      --
                           ========      ========      ========      ========     =====
   commitments


(1) Refer to footnote 13 of the notes to the consolidated financial statements.

     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  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.

Treasury Stock

     The  Company's  Board of  Directors  approved the  repurchase  of 1,563,000
shares of the  Company's  Class A common  stock in the open market under a share
repurchase  program (the Program).  No shares were  purchased  under the Program
during  fiscal 2003 or fiscal  2004.  As of November  30, 2003 and May 31, 2004,
1,072,737 and 1,070,957 shares were repurchased  under the Program at an average
price of  $7.93  per  share  for an  aggregate  amount  of  $8,511  and  $8,497,
respectively.

Off-Balance Sheet Arrangements

     The  Company  does  not  maintain  any  off-balance   sheet   arrangements,
transactions,  obligations or other relationships with  unconsolidated  entities


                                       53





that would be  expected  to have a material  current or future  effect  upon our
financial condition or results of operations.

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%.

     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 has monthly payments of $34
and expires on March 31, 2005.  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, 2009 and thereafter are $4,426.

Transactions with Toshiba Corporation

     Toshiba Corporation  (Toshiba),  a minority  shareholder of ACC, is a major
supplier of ACC products.  On June 8, 2004,  Audiovox  purchased 5% of ACC stock
from Toshiba (see Note 17 of the Notes to  Consolidated  Financial  Statements).
Inventory on hand at November 30, 2003 and May 31, 2004  purchased  from Toshiba
approximated $22,405 and $41,439, respectively. At November 30, 2003 and May 31,
2004, the Company recorded  receivables from Toshiba  aggregating  approximately
$709 and $58, respectively, primarily for software upgrades.

     At November 30, 2003 and May 31, 2004, the Company had outstanding payables
in the amount of $18,841 and $86,  respectively,  for inventory  purchases  from
Toshiba. The payment terms are such that the payable is non-interest bearing and
is  payable  in  accordance  with  the  terms  established  in the  distribution
agreement between the parties, which is 30 days.

     On occasion,  the Company  negotiates  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.

Recent Accounting Pronouncements

     The Financial  Accounting  Standard Board ("FASB") issued an exposure draft
entitled  "Share- Based Payment,  an Amendment of FASB  Statements  Nos. 123 and


                                       54





95." This exposure draft would require stock-based  compensation to employees to
be  recognized  as a cost in the  financial  statements  and that  such  cost be
measured according to the fair value of the stock options.  In the absence of an
observable  market  price  for the  stock  awards,  the fair  value of the stock
options   would  be  based  upon  a  valuation   methodology   that  takes  into
consideration  various factors,  including the exercise price of the option, the
expected term of the option,  the current price of the  underlying  shares,  the
expected volatility of the underlying share price, the expected dividends on the
underlying shares and the risk- free interest rate. The proposed requirements in
the exposure draft would be effective for the first fiscal year beginning  after
December 15, 2004. The FASB intends to issue a final Statement in late 2004. The
Company will continue to monitor communications on this subject from the FASB in
order  to  determine  the  impact  on  the  Company's   consolidated   financial
statements.

     In January  2003,  the FASB  issued  FASB  Interpretation  No. 46 (FIN 46),
"Consolidation of Variable Interest Entities,  an Interpretation of ARB No. 51",
which  addresses  consolidation  by business  enterprises  of variable  interest
entities  (VIEs) either:  (1) that do not have sufficient  equity  investment at
risk  to  permit  the  entity  to  finance  its  activities  without  additional
subordinated  financial  support,  or (2) in which the equity  investors lack an
essential  characteristic of a controlling financial interest. In December 2003,
the FASB completed  deliberations  of proposed  modifications to FIN 46 (Revised
Interpretations)  resulting in multiple  effective  dates based on the nature as
well as the  creation  date of the VIE.  The  adoption of FIN 46 did not have an
impact on the Company's consolidated financial statements.

     In December 2003, the SEC issued Staff  Accounting  Bulletin (SAB) No. 104,
"Revenue  Recognition"  (SAB No.  104),  which  codifies,  revises and  rescinds
certain sections of SAB No. 101,  "Revenue  Recognition",  in order to make this
interpretive  guidance  consistent  with current  authoritative  accounting  and
auditing  guidance and SEC rules and  regulations.  The changes noted in SAB No.
104 did not have a material  effect on our  consolidated  results of operations,
consolidated financial position or consolidated cash flows.

Forward-Looking Statements

     Except for historical information contained herein, statements made in this
Form 10-Q 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, 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,   mobile  and  consumer  electronic
          businesses

     o    technological and market developments in the wireless,  automotive and
          consumer electronics businesses

     o    liquidity

                                       55





     o    availability of key employees

     o    expansion into international markets

     o    the availability of new consumer electronic products

     o    the availability of new wireless 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    impact of future selling prices on Company profitability and inventory
          carrying value
     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    changes in the Company's business operations
     o    the loss of key employees
     o    foreign currency risks
     o    political instability
     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 and availability
     o    consolidations  in the  wireless  and  retail  industries,  causing  a
          decrease  in the number of carriers  and retail  stores that carry our
          products
     o    changes in global or local economic conditions

ITEM 3     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Sensitive Instruments

     The market risk inherent in the Company's market risk sensitive instruments
and positions is the potential  loss arising from adverse  changes in marketable
equity security prices, foreign currency exchange rates and interest rates.

Marketable Securities

     Marketable  securities  at November  30, 2003 and May 31,  2004,  which are
recorded at fair value of $9,512 and $8,045, respectively, include an unrealized
gain (loss) of $1,831 and ($544), respectively, and have exposure to price risk.
This risk is  estimated as the  potential  loss in fair value  resulting  from a
hypothetical  10% adverse change in prices quoted by stock exchanges and amounts
to $951 and $805 as of November 30, 2003 and May 31, 2004, respectively.  Actual
results may differ.



                                       56





Interest Rate Risk

     The Company's bank loans expose earnings to changes in short-term  interest
rates since interest rates on the underlying  obligations are either variable or
fixed for such a short period of time as to  effectively  become  variable.  The
fair  values of the  Company's  bank  loans are not  significantly  affected  by
changes in market interest rates.

Foreign Exchange Risk

     In order to reduce the risk of foreign currency exchange rate fluctuations,
the  Company  hedges  transactions  denominated  in a  currency  other  than the
functional  currencies   applicable  to  each  of  its  various  entities.   The
instruments used for hedging are forward  contracts with banks. The Company does
not obtain collateral to support financial instruments,  but monitors the credit
standing  of the  financial  institution.  The  changes in market  value of such
contracts  have a high  correlation  to price  changes  in the  currency  of the
related hedged transactions. Intercompany transactions with foreign subsidiaries
and  equity   investments  are  typically  not  hedged.   There  were  no  hedge
transactions at November 30, 2003 or May 31, 2004. Therefore, the potential loss
in fair value for a net currency position resulting from a 10% adverse change in
quoted foreign currency  exchange rates as of November 30, 2003 and May 31, 2004
is not applicable.

     The Company is subject to risk from changes in foreign  exchange  rates for
its  subsidiaries  and equity  investments  that use a foreign currency as their
functional  currency and are translated into U.S. dollars.  These changes result
in cumulative  translation  adjustments  which are included in accumulated other
comprehensive  income.  On November 30, 2003 and May 31,  2004,  the Company had
translation  exposure to various foreign  currencies  with the most  significant
being the Euro,  Malaysian  ringgit,  Thailand  baht and  Canadian  dollar.  The
potential  loss  resulting  from a  hypothetical  10%  adverse  change in quoted
foreign  currency  exchange  rates,  as of November  30, 2003 and May 31,  2004,
amounts to $1,195 and $951, respectively. Actual results may differ.

ITEM 4     CONTROLS AND PROCEDURES

     As of the end of the period covered by this Quarterly  Report on Form 10-Q,
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


                                       57





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.

                           PART II - OTHER INFORMATION

ITEM 1            LEGAL PROCEEDINGS

     The  Company is  currently,  and has in the past  been,  a party to routine
litigation  incidental to its business.  From time to time, the Company receives
notification of alleged  violations of registered  patent holders'  rights.  The
Company has either  been  indemnified  by its  manufacturers  in these  matters,
obtained  the benefit of a patent  license or has decided to  vigorously  defend
such claims.

     The Company and ACC, along with other  manufacturers of wireless phones and
cellular  service  providers,  were  named as  defendants  in two  class  action
lawsuits alleging  non-compliance with FCC ordered emergency 911 call processing
capabilities.  These lawsuits were  consolidated  and  transferred to the United
States  District  Court for the  Northern  District of  Illinois,  which in turn
referred the cases to the Federal Communications Commission ("FCC") to determine
if the  manufacturers  and service  providers are in  compliance  with the FCC's
order on emergency 911 call processing capabilities.  The Company and ACC intend
to vigorously defend this matter.  However, no assurances  regarding the outcome
of this matter can be given at this point in the litigation.

     During 2001, the Company,  along with other  suppliers,  manufacturers  and
distributors of hand-held wireless telephones,  was named as a defendant in five
class action lawsuits  alleging  damages relating to exposure to radio frequency
radiation  from  hand-held  wireless  telephones.  These class actions have been
consolidated  and transferred to a  Multi-District  Litigation  Panel before the
United  States  District  Court of the District of  Maryland.  On March 5, 2003,
Judge Catherine C. Blake of the United States District Court for the District of
Maryland   granted  the  defendants'   consolidated   motion  to  dismiss  these
complaints.  Plaintiffs  have  appealed to the United  States  Circuit  Court of
Appeals,  Fourth  Circuit.  The appeal  pending before the United States Circuit
Court of Appeals,  Fourth  Circuit in the  consolidated  class  action  lawsuits
(Pinney, Farina, Gilliam, Gimpelson and Naquin) against ACC and other suppliers,
manufacturers  and  distributors  as  well as  wireless  carriers  of  hand-held
wireless  telephones  alleging  damages  relating  to risk of  exposure to radio
frequency  radiation from the wireless  telephones has not yet been heard. It is
anticipated that the appeal will be heard in September 2004.

     During the third quarter of fiscal 2003, a certain Venezuelan employee, who
is also a minority  shareholder in Audiovox Venezuela,  submitted a claim to the
Venezuela  Labor Court for severance  compensation  of  approximately  $560. The
Court  approved the claim and it was paid and expensed by Audiovox  Venezuela in
the third quarter of fiscal 2003. The Company is challenging the payment of this
claim  and will  seek  reimbursement  from  the  Venezuelan  shareholder  or the
Company's insurance carrier.

     During the second quarter of fiscal 2004,  the Company,  AEC and one of its
distributors  of car security  products,  were named as  defendants in a lawsuit
brought by Magnadyne  Corporation in the United States District  Court,  Central
District of California alleging patent infringement and seeking damages and

                                       58





injunctive  relief.  The Company has  answered the amended  complaint,  asserted
various   affirmative   defenses   and   interposed    counterclaims    alleging
non-infringement,  invalidity and non- enforceability.  AEC is due to respond to
the amended complaint by July 20, 2004 and intends to answer, assert affirmative
defenses  and  interpose  counterclaims  as  well.  To date,  there  has been no
discovery. The Company and AEC intend to vigorously defend this matter. However,
no assurances regarding the outcome of this matter can be given at this point in
the litigation.

     The  Company  does  not  expect  the  outcome  of any  pending  litigation,
separately  and in the  aggregate,  to have a  material  adverse  effect  on its
business, consolidated financial position or results of operations.

ITEM 6     EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits


       Exhibit Number            Description

            31.1      Certification Pursuant to Rule 13a-14(a) of the Securities
                      Exchange Act of 1934 (furnished herewith)
            31.2      Certification Pursuant to Rule 13a-14(a) of the Securities
                      Exchange Act of 1934 (furnished herewith)
            32.1      Certification Pursuant to Rule
                      13a-14(a) And Rule 15d- 14(a)
                      Section 1350, Chapter 63 of Title 18
                      of The United States Code, As
                      Adopted Pursuant to Section 906 of
                      The Sarbanes-Oxley Act of 2002
                      (furnished herewith)
           32.2       Certification Pursuant to Rule
                      13a-14(a) And Rule 15d- 14(a)
                      Section 1350, Chapter 63 of Title 18
                      of The United States Code, As
                      Adopted Pursuant to Section 906 of
                      The Sarbanes-Oxley Act of 2002
                      (furnished herewith)

     (b)  Reports on Form 8-K

     During the second quarter ended May 31, 2004, the Company filed two reports
on Form 8-K:

     The first  report  filed on Form 8-K,  dated April 14, 2004 and filed April
16, 2004,  stated that the Company had issued a press  release  reporting on the
Company's  results for the fiscal first quarter ended  February 29, 2004. A copy
of the press release was attached to the Form 8-K as Exhibit 99.1.

     The second  report filed on Form 8-K,  dated April 16, 2004 and filed April
22,  2004,  reported  that the  Company  and its  Lenders  had  executed a Tenth
Amendment to the Fourth  Amended and Restated  Credit  Agreement,  which,  among
other things,  amends and restates the  definition of "Borrowing  Base" to allow
the Company to borrow  against its inventory at any time during the year. A copy
of the Tenth Amendment was attached to the Form 8-K as Exhibit 99.1.

                                       59




                                   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: July 15, 2004

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


                                       60