Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 28, 2005 and 2006

During fiscal 2005, several purported derivative and class actions were filed in the Court of Chancery of the State of Delaware, New Castle County. The complaint seeks (a) rescission of: agreements; amendments to long-term incentive awards; and severance payments pursuant to which Audiovox and Audiovox Communications Corp. (‘‘ACC’’) executives were paid from the net proceeds of the fiscal 2004 sale of certain assets of ACC to UTStarcom, Inc. ("UTSI") (b) disgorgement to ACC of $16,000 paid to Philip Christopher (ACC's former Chief Executive Officer) pursuant to a Personally Held Intangibles Purchase Agreement in connection with the UTStarcom transaction, (c) disgorgement to Audiovox of $4,000 paid to Philip Christopher as compensation for termnation of his Employment Agreement and Award Agreement with ACC, d) disgorgement to ACC of $1,916 paid to John Shalam pursuant to an Award Agreement with ACC, and (e) recovery by ACC of $5,000 in severance payments distributed by Philip Christopher to ACC's former employees. Defendants filed a motion to dismiss the complaint, which was withdrawn. The Company understands that the individual defendants 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 anticipates that defense costs, in excess of any applicable retention, will be covered by the Company's insurance policies. Any damages recovered by plaintiffs will be paid to the Company. Accordingly, no estimated loss has been recorded for the aforementioned case.

Certain consolidated class actions transferred to a Multi-District Litigation Panel of the United States District Court of the District of Maryland against the Company and other suppliers, manufacturers and distributors of hand-held wireless telephones alleging damages relating to exposure to radio frequency radiation from hand-held wireless telephones is still pending. No assurances regarding the outcome of this matter can be given, as the Company is unable to assess the degree of probability of an unfavorable outcome or estimated loss or liability, if any. Accordingly, no estimated loss has been recorded for the aforementioned case.

During fiscal 2004, an arbitration proceeding was commenced by the Company and several of its subsidiaries against certain Venezuelan employees and two Venezuelan companies (‘‘Respondents’’) before the American Arbitration Association. The matter was submitted to mediation and settled in fiscal 2005. The agreement provides for a payment (to be made upon satisfaction of certain pre-closing conditions) from the Company to the Respondents of $1,700 in consideration of which the Company will acquire all of Respondents' ownership. In addition, the Company and Respondents will release all claims. As of November 30, 2005, $250 was paid to the Respondents and the remaining balance (which includes accrued interest), is included in restricted cash on the accompanying consolidated balance sheets. In April 2006, all pre-closing conditions were satisfied and the remaining balance in restricted cash was released. As such, this matter has been completed and the Company has full ownership of Audiovox Venezuela.

The products the Company sells are continually changing as a result of improved technology. As a result, although the Company and its suppliers attempt to avoid infringing known proprietary rights, the Company may be subject to legal proceedings and claims for alleged infringement by its suppliers or distributors, of third parties patents, trade secrets, trademarks or copyrights. Any claims relating to the infringement of third-party proprietary rights, even if not meritorious, could result in costly litigation, divert managements attention and resources, or require the Company to either enter into royalty or license agreements which are not advantageous to the Company or pay material amounts of damages.

Under the asset purchase agreement for the sale of the Company’s Cellular business to UTSI, the Company agreed to indemnify UTSI for any breach or violation by ACC and its representations, warranties and covenants contained in the asset purchase agreement and for other matters, subject to certain limitations. Significant indemnification claims by UTSI could have a material adverse effect on the Company's financial condition and results of operation. The Company is not aware of any such claim(s) for indemnification.

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Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 28, 2005 and 2006

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

We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) with an overview of the business. This is followed by a discussion of the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. In the next section, we discuss our Results of Operations for the three months ended February 28, 2005 compared to the three months ended February 28, 2006. We then provide an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the sections entitled ‘‘Liquidity and Capital Resources. We conclude this MD&A with a discussion of ‘‘Related Party Transactions’’ and ‘‘Recent Accounting Pronouncements’’.

In February 2006, we changed our fiscal year end from November 30^th to February 28^th. Accordingly, we are reporting unaudited operating results for the three month period from December 1 2005 through February 28, 2006 as part of this transition report. Our subsequent fiscal year begins March 1, 2006 and ends on February 28, 2007.

Business Overview

We operate through one reportable segment, the Electronics Group, which consists of four wholly-owned subsidiaries: Audiovox Electronics Corporation, American Radio Corp., Code Systems, Inc. and Audiovox German Holdings GmbH and one majority-owned subsidiary: Audiovox Venezuela, C.A. and market our products under the Audiovox^® brand name and other brand names, such as Jensen^®, Pursuit^®, Code-Alarm^®, Car Link^®, Movies 2 Go^®, Magnate^®, Mac Audio^®, Heco^®, Acoustic Research^®, Advent^®, Terk^® and Phase Linear^®, as well as private labels through a large domestic and international distribution network. Our products are broken down into two major categories: Mobile Electronics and Consumer Electronics.

Mobile Electronics products include:

	•	mobile multi-media products, including in-dash, overhead, headrest and portable mobile video systems,

	•	autosound products including radios, speakers, amplifiers and CD changers,

	•	satellite radios including plug and play and direct connect models,

	•	automotive security and remote start systems,

	•	navigation systems,

	•	rear observation and collision avoidance systems, and

	•	automotive power accessories, including cruise control systems.

Consumer Electronics products include:

	•	LCD and Plasma flat panel televisions,

	•	home and portable stereos,

	•	HDTV Antennas,

	•	Two-way (GMRS) radios, digital multi-media product such as personal video recorders and MP3 products,

	•	home speaker systems and home theater in a box,

	•	portable DVD players,

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	•	hand-held portable GPS,

	•	flat panel TV mounting systems, and

	•	home electronic accessories such as cabling and performance enhancing electronics.

The Electronics Group is supported by the Administrative Services Group, which provides treasury, legal, human resources, management information, and corporate financial and accounting services to the Electronics Group, as well as management information services (‘‘MIS’’) to certain related and third party companies.

Critical Accounting Policies and Estimates

As disclosed in the Annual Report on Form 10-K for the fiscal year ended November 30, 2005, 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 of America. 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 and estimates relate to revenue recognition; sales incentives; accounts receivable; inventory, goodwill and other intangible assets; warranties and income taxes. Since November 30, 2005, there have been no changes in our critical accounting policies and no other significant changes to the assumptions and estimates related to them, except for the adoption of FAS 123(R), Share-Based Payment.

Results of Operations

As you read this discussion and analysis, refer to the accompanying consolidated statements of operations, which present the results of our operations for the three months ended February 28, 2005 and 2006. We analyze and explain the differences between periods in the specific line items of the consolidated statements of operations.

Three Months Ended February 28, 2005 Compared to Three Months Ended February 28, 2006

Continuing Operations

The following tables set forth, for the periods indicated, certain statement of operations data for the three months ended February 28, 2005 and 2006.

Net Sales

					2005				2006				$ Change				% Change
	Mobile Electronics				$	74,678			$	70,814			$	(3,864	)			(5.2	)%
	Consumer Electronics					41,302				32,236				(9,066	)			(22.0	)%
	Total net sales				$	115,980			$	103,050			$	(12,930	)			(11.1	)%

Mobile Electronics sales, which represented 68.7% of net sales, decreased primarily due to a decline in private label and select satellite radio product sales as a result of declining sales prices for satellite radio products as compared to the prior year. The decline in Mobile Electronics was partially offset by an increase in Jensen sales and sales generated from the Terk product line, which was acquired in January of 2005.

Consumer Electronics sales, which represented 31.3% of net sales, decreased as a result of a decline in DVD and LCD flat panel TV sales as a result of not entering into retail promotions, that were offered in fiscal 2005, because these promotions were not advantageous for overall profitability.

Sales incentive expense increased $507 to $3,046 for the three months ended February 28, 2006 as a result of a decline in reversals partially offset by a decline in sales. The decline in reversals is

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primarily due to a $732 decrease in reversals of unearned sales incentives as a result of offering less volume incentive rebate programs to large retailers during the three months ended February 28, 2006 as compared to the prior year. We believe 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

				2005				2006
Gross profit				$	16,071			$	15,650
Gross margins					13.9	%			15.2	%

Gross margins increased to 15.2% for the three months ended February 28, 2006 as compared to 13.9% for the prior period. The increase in gross margins is primarily due to increased margins in the Jensen product line and mobile video category as a result of new product introductions. Gross margins were adversely impacted by increased freight costs as a result of higher energy prices and inventory provisions of $924 (0.8%) and $689 (0.7%) during the three months ended February 28, 2005 and 2006, respectively.

Furthermore, reversals of sales incentive expense favorably impacted gross margins by 1.1% and 0.5% during the three months ended February 28, 2005 and 2006, respectively.

Operating Expenses and Operating Income (Loss)

The following table presents the results of the Company separated by the Electronics and Corporate Administrative Groups.

					2005				2006				$ Change				% Change
	Electronics: Selling				$	6,949			$	6,070			$	(879	)			(12.6	)%
	General and administrative					8,847				8,040				(807	)			(9.1	)
	Engineering and technical support					1,468				1,468				—				—
	Electronics operating expenses					17,264				15,578				(1,686	)			(9.8	)
	Electronics operating (loss) income					(1,193	)			72				1,265				106.0
	Electronics other expense					(530	)			(975	)			445				84.0
	Electronics pre-tax loss					(1,723	)			(903	)			(820	)			(47.6	)
	Corporate: Administrative operating expenses					4,608				3,231				(1,377	)			(30.0	)
	Administrative other income					4,855				2,658				(2,197	)			(45.3	)
	Loss from continuing operations before income taxes				$	(1,476	)		$	(1,476	)		$	—				—	%

Consolidated operating expenses decreased $3,063, or 14.0%, for the three months ended February 28, 2006, as compared to 2005. As a percentage of net sales, operating expenses decreased to 18.3% for the three months ended February 28, 2006, from 18.9% in 2005.

Electronics selling expenses decreased during the three months ended February 28, 2006, due to a $722 decrease in commissions as a result of the decline in sales and changes in compensation programs related to commissionable sales.

Electronics general and administrative expenses decreased due to the following:

	•	$418 decrease in office salaries as a result of a decline in headcount due to cost cutting initiatives.

	•	$101 decrease in professional fees due to reduced legal costs necessary to protect patent rights.

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	•	$311 decrease in bad debt expense due to a decline in the accounts receivable balance and improved collectibility. The Company does not consider this to be trend in the overall accounts receivable.

The above decreases were partially offset by a $156 increase in depreciation due to renovations at a leased office building completed in the prior year.

The following is a summary of administrative operating expenses:

				2005				2006				$ Change				% Change
Advertising				$	1,043			$	734			$	(289	)			(27.7	)%
Professional fees					1,185				1,001				(184	)			(15.5	)
Depreciation					311				347				36				11.6
Insurance					248				227				(21	)			(8.5	)
Officers’ salaries					242				236				( 6	)			(2.5	)
Office salaries					1,189				947				(242	)			(20.4	)
Other					390				(281	)			(671	)			(172.1	)
Total administrative operating expenses				$	4,608			$	3,231			$	(1,377	)			(29.9	)%

The decrease in administrative operating expenses is primarily due to the following:

	•	a decline in advertising as a result of reduced budgeted amounts for media print advertising.

	•	professional fees decreased due to a decline in compliance costs for Sarbanes-Oxley Section 404.

	•	a decline in officers and office salaries due to a decline in headcount and bonuses as a result of decreased earnings.

Other administrative operating expenses, which are mainly comprised of occupancy costs, employee benefits and allocations, decreased due to a decline in headcount and increased MIS billings for services performed in connection with a transition service agreement with UTSI.

Other Income (Expense)

				2005				2006				$ Change
Interest and bank charges				$	(633	)		$	(560	)		$	73
Equity in income of equity investees					353				474				121
Other, net					4,605				1,769				(2,836	)
Total other income, net				$	4,325			$	1,683			$	(2,642	)

Interest and bank charges decreased due to reductions in outstanding bank obligations and long term debt. Interest and bank charges represent expenses for debt and bank obligations of Audiovox Germany and Venezuela and interest for a capital lease.

Equity in income of equity investees increased due to increased equity income of ASA as a result of increased sales and gross margins in the Jensen Audio and Voyager product lines.

Other income declined due to a $2,516 unrealized gain recorded during the three months ended February 28, 2005 as a result of an initial public offering of Bliss-tel (a former equity investment) and decreased royalty income as a result of the decline in sales. This decline was partially offset by increased interest income of $244 due to increased short-term investment holdings and higher interest rates as compared to the prior year.

Benefit for Income Taxes

The effective tax rate for the three months ended February 28, 2006, was a tax benefit of 124.9% compared to 62.6% in the prior period. The increase in the effective tax benefit rate for 2006 was primarily due to a $706 accrual reversal related to the expiration of certain state statutory limits and an increase in tax exempt interest income earned on short-term investments during the three months ended February 28, 2006.

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Loss from Discontinued Operations

The following is a summary of financial results included within discontinued operations:

					2005				2006
	Net sales from discontinued operations				$	714			$	—
	Loss from discontinued operations before income taxes					(694	)			(281	)
	Recovery of income taxes					41				97
	Loss from discontinued operations				$	(653	)		$	(184	)

Included in loss from discontinued operations for the three months ended February 28, 2005 is an impairment charge of $408 for Audiovox Malaysia, which was sold on November 7, 2005. The loss from discontinued operations for the three months ended February 28, 2006 is primarily due to legal and related costs associated with contingencies pertaining to the Company’s discontinued Cellular business.

Net (Loss) Income

Net loss for the three months ended February 28, 2005 was $1,205 compared to net income of $183 in 2006. Loss per share for the three months ended February 28, 2005 was $0.05 (basic and diluted) as compared to income per share of 0.01 (basic and diluted) for 2006. Net (loss) income was favorably impacted by sales incentive reversals of $1,321 and $480 for the three months ended February 28, 2005 and 2006, respectively.

We believe the Electronics Group has an expanding market with a certain level of volatility related to both domestic and international new car sales, discretionary consumer spending and general economic conditions. Also, all of our 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

As of February 28, 2006, we had working capital of $340,564, which includes cash and short-term investments of $177,079 compared with working capital of $340,088 at November 30, 2005, which includes cash and cash equivalents and short-term investments of $122,930. The increase in short-term investments is primarily due to the collection of accounts receivable and reduction in inventory purchases. We plan to utilize our current cash position as well as collections from accounts receivable to fund the current operations of the business. However, we may utilize all or a portion of current capital resources to pursue other business opportunities, including acquisitions.

As of February 28, 2006, we have a credit line to fund the temporary short-term working capital needs of the Company. This line expires on May 31, 2006 and allows aggregate borrowings of up to $25,000 at an interest rate of Prime (or similar designations) plus 1%. In addition, Audiovox Germany has a 16,000 Euro accounts receivable factoring arrangement and a 6,000 Euro Asset-Based Lending (‘‘ABL’’) credit facility which expires on October 25, 2006 and is renewable on an annual basis.

Operating activities provided cash of $55,298 for the three months ended February 28, 2006 compared to cash provided of $3,834 in 2005. The increase in cash provided by operating activities as compared to the prior year is primarily due to the collection of accounts receivable, decreased inventory purchases and a decline in income tax payments.

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

	•	Cash flows from operating activities for the three months ended February 28, 2006 were favorably impacted by a decrease in accounts receivable primarily from collections. Accounts receivable turnover approximated 4.8 during for the three months ended February 28, 2006 compared to 4.6 in the the prior year.

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	•	Cash flow from operations were favorably impacted by a decrease in inventory due to a decline in purchasing and improved buying programs. Inventory turnover approximated 3.1 during the three months ended February 28, 2006 compared to 3.0 in the prior year.

	•	In addition, cash flow from operating activities for the three months ended February 28, 2006 was impacted by a decrease in accounts payable and accrued expenses, primarily from payments made to inventory vendors. The timing of payments made can fluctuate and are often impacted by the timing of inventory purchases and amount of inventory on hand.

Investing activities used $51,018 during the three months ended February 28, 2006, primarily due to the purchase of short-term investments. The usage of cash from investing activities was partially offset by a distribution received from an equity investee. Investing activities used cash of $24,282 during the three months ended February 28, 2005, primarily due to the acquisition of Terk and purchase (net of sales) of short-term investments.

Financing activities used $2,188 during the three months ended February 28, 2006, primarily from the purchase of treasury stock and payment of debt. Financing activities for the three months ended February 28, 2005 used cash of $4,311 mainly due to payments of bank obligations, which were acquired in connection with the Terk acquisition.

Certain contractual cash obligations and other commercial commitments which will impact our short and long-term liquidity. At February 28, 2006, such obligations and commitments are as follows:

				Payments Due By Period
Contractual Cash Obligations				Total				Less than 1 Year				1-3 Years				4-5 Years				After 5 Years
Capital lease obligation (1)				$	12,388			$	563			$	1,154			$	1,148			$	9,523
Operating leases (2)					10,222				3,147				4,911				2,130				34
Total contractual cash obligations				$	22,610			$	3,710			$	6,065			$	3,278			$	9,557

				Amount of Commitment Expiration per period
Other Commercial Commitments				Total Amounts Committed				Less than 1 Year				1-3 Years				4-5 Years				After 5 years
Lines of credit (3)				$	5,329			$	5,329				—				—				—
Stand-by letters of credit (4)					2,035				2,035
Commercial letters of credit (4)					6,795				6,795
Debt (5)					7,295				1,371				3,819				2,105				—
Unconditional purchase obligations (6)					48,967				48,967				—				—				—
Total commercial commitments				$	70,421			$	64,497			$	3,819			$	2,105				—

(1)	Represents total payments due under a capital lease obligation which has a current and long term principal balance of $72 and $5,892, respectively at February 28, 2006.

(2)	We enter into operating leases in the normal course of business.

(3)	Represents amounts outstanding under the German factoring agreement and Venezuela bank obligation at February 28, 2006.

(4)	Commercial letters of credit are issued during the ordinary course of business through major domestic banks as requested by certain suppliers. We also issue standby letters of credit to secure certain bank obligations and insurance requirements.

(5)	Represents amounts outstanding under a loan agreement for Audiovox Germany. This amount also includes amounts due under a call-put option with certain employees of Audiovox Germany.

(6)	Open purchase obligations represent inventory commitments. These obligations are not recorded in the consolidated financial statements until commitments are fulfilled and such obligations are subject to change based on negotiations with manufacturers.

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We regularly review our 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, we evaluate possible acquisitions of, or investments in, businesses that are complementary to ours, which transaction may require the use of cash. We believe that our 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, we may require additional funds in the future to support our 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 when required.

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.

Related Party Transactions

During 1998, we entered into a 30-year capital lease for a building with our principal stockholder and chairman, which was the headquarters of the discontinued Cellular operation. Payments on the capital 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%. On November 1, 2004, we entered into an agreement to sub-lease the building to UTSI for monthly payments of $46 until November 1, 2009. We also lease another facility from our principal stockholder. Total lease payments required under the leases for the five-year period ending February 28, 2011 are $4,510.

Recent Accounting Pronouncements

Prior to December 1, 2005, the Company accounted for stock-based employee compensation under the intrinsic value method as outlined in the provisions of APB Opinion No. 25, ‘‘Accounting for Stock Issued to Employees,’’ and related interpretations while disclosing pro-forma net income and pro-forma net income per share as if the fair value method had been applied in accordance with Statement of Financial Accounting Standards (‘‘SFAS 123R’’) No. 123, ‘‘Accounting for Stock-Based Compensation.’’ Under the intrinsic value method, no compensation expense was recognized if the exercise price of the Company's employee stock options equaled or exceeded the market price of the underlying stock on the date of grant. The Company issued all stock option grants with exercise prices equal to, or greater than, the market value of the common stock on the date of grant, no compensation expense was recognized in the consolidated statements of operations through November 30, 2005.

Effective December 1, 2005, the Company adopted SFAS No. 123(R), ‘‘Share-Based Payment (‘‘SFAS 123R’’).’’ SFAS No. 123(R) replaces SFAS No. 123 and supersedes APB Opinion No. 25. SFAS 123(R) requires that all stock-based compensation be recognized as an expense in the financial statements and that such costs be measured at the fair value of the award. This statement was adopted using the modified prospective method, which requires the Company to recognize compensation expense on a prospective basis. Therefore, prior period financial statements have not been restated. Under this method, in addition to reflecting compensation expense for new share-based payment awards, expense is also recognized to reflect the remaining vesting period of awards that had been included in pro-forma disclosures in prior periods. Since all options outstanding as of December 1, 2005 were fully vested, there was no compensation expense recognized for those options in the consolidated statement of operations for the three months ended February 28, 2006. The Company plans to estimate the valuation of future stock based compensation using a Black-Scholes option pricing formula SFAS 123(R) also requires that tax benefits related to stock option exercises be reflected as financing cash inflows instead of operating cash inflows. For the three months ended

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February 28, 2005, this new treatment resulted in increased cash flows from financing activities of $4, which reduced cash flows from operating activities by the same amount.

The following table illustrates the effect on net loss per common share for the three months ended February 28, 2005 as if the Company had consistently measured the compensation cost for stock option programs under the fair value method adopted on December 1, 2005:

					Three Months Ended February 28, 2005
	Net loss:
	As reported				$	(1,205	)
	Stock based compensation expense					(44	)
	Pro-forma				$	(1,249	)
	Net loss per common share (basic):
	As reported				$	(0.05	)
	Pro-forma				$	(0.06	)
	Net loss per common share (diluted):
	As reported				$	(0.05	)
	Pro-forma				$	(0.06	)

Forward-Looking Statements

Except for historical information contained herein, statements made in this Transition Report on 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 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 dependency on key executives, 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 our Form 10-K for the fiscal year ended November 30, 2005. 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:

	•	growth trends in the mobile and consumer electronic businesses

	•	technological and market developments in the mobile and consumer electronics businesses liquidity

	•	availability of key employees

	•	expansion into international markets

	•	the availability of new mobile and consumer and mobile electronic products

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

	•	the ability to keep pace with technological advances

	•	impact of future selling prices on profitability and inventory carrying value

	•	significant competition in the mobile and consumer electronics businesses

	•	quality and consumer acceptance of newly introduced products

	•	relationships with key suppliers

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	•	relationships with key customers

	•	possible increases in warranty expense

	•	changes in the business operations

	•	foreign currency risks

	•	political instability

	•	changes in U.S. federal, state and local and foreign laws

	•	changes in regulations and tariffs

	•	seasonality and cyclicality

	•	inventory obsolescence and availability

	•	changes in global or local economic conditions

	•	investments and pursuit of acquisitions

	•	diversification of our business

	•	contingent liabilities

	•	litigation from intellectual property rights

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Sensitive Instruments

The market risk inherent in our 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 February 28, 2006, which are recorded at fair value of $14,709, include an unrealized gain of $331, 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 $1,471 as of February 28, 2006. Actual results may differ.

Interest Rate Risk

Our earnings and cash flows are subject to fluctuations due to changes in interest rates from investment of available cash balances in money market funds and investment grade corporate and U.S. government securities. Under our current policy, we do not use interest rate derivative instruments to manage exposure to interest rate changes. In addition, our 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 our bank loans are not significantly affected by changes in market interest rates.

Foreign Exchange Risk

We are subject to risk from changes in foreign exchange rates for our subsidiaries and marketable securities 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 loss. At February 28, 2006, we had translation exposure to various foreign currencies with the most significant being the Euro, Thailand baht and Canadian dollar. The potential loss resulting from a hypothetical 10% adverse change in quoted foreign currency exchange rates as of February 28, 2006 amounts to $3,055. Actual results may differ.

ITEM 4.    CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and

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operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, these disclosure controls and procedures are effective at the ‘‘reasonable assurance’’ level.

There were no material changes in our internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the three month transition period ended February 28, 2006 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

.

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PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

See Note 16 of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for information regarding legal proceedings.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Treasury Stock/Share Repurchase Program

In September 2000, we were authorized by the Board of Directors to repurchase up to 1,563,000 shares of Class A Common Stock in the open market under a share repurchase program (the "Program"). As of February 28, 2006, the cumulative total of acquired shares pursuant to the program was 1,388,552 reducing the remaining authorized share repurchase balance to 174,448. During the three months ended February 28, 2006, we purchased 168,800 shares for $2,308 as outlined in the following table:

Period				Total Number of Shares Purchased				Average Price Paid Per Share				Total Number of Shares Purchased as Part of Announced Under the Program				Maximum Number of Shares that May Yet Be Purchased Under the Program (1)
As of November 30, 2005					—			$	8.63				1,219,752				343,248
December 2005 purchases					26,600			$	13.81				1,246,352				316,648
January 2006 purchases					—				—				—				—
February 2006 purchases					142,200			$	13.65				1,388,552				174,448
Total purchases					168,800

(1)	Prior to the purchases during the three months ended February 28, 2006, we had 1,219,752 shares of treasury stock purchased as part of a publicly announced program. As of February 28, 2006, we had 1,388,552 shares of treasury stock with an average paid price per share of $9.24.

ITEM 6.    EXHIBITS

Exhibit Number				Description
31.1				Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act of 1934 (filed herewith).
31.2				Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act of 1934 (filed herewith).
32.1				Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.2				Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

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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/ Patrick M. Lavelle
								Patrick M. Lavelle President and Chief Executive Officer
Dated: April 10, 2006
				By:				/s/ Charles M. Stoehr
								Charles M. Stoehr Senior Vice President and Chief Financial Officer

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CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

I, Patrick M. Lavelle, President and Chief Executivel Officer of Audiovox Corporation, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Audiovox Corporation (the "Company");

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

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

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.	Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materiality affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.	Any fraud, weather or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

April 10, 2006

/s/ Patrick M. Lavelle                              Patrick M. Lavelle President and Chief Executive Officer

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CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

I, C. Michael Stoehr, Senior Vice President and Chief Financial Officer of Audiovox Corporation, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Audiovox Corporation (the "Company");

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

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

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.	Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materiality affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.	Any fraud, weather or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

April 10, 2006

/s/ C. Michael Stoehr                                     C. Michael Stoehr Senor Vice President and Chief Financial Officer

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CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Audiovox Corporation (the "Company") on Form 10-Q for the three months ended February 28, 2006 (the "Report") as filed with the Securities and Exchange Commission on the date hereof, I, Patrick M. Lavelle, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

	(1)	The Report fully complies with Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

April 10, 2006

/s/ Patrick M. Lavelle                             Patrick M. Lavelle President and Chief Executive Officer

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CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Audiovox Corporation (the "Company") on Form 10-Q for the three months ended February 28, 2006 (the "Report") as filed with the Securities and Exchange Commission on the date hereof, I, C. Michael Stoehr, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

	(1)	The Report fully complies with Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

April 10, 2006

/s/ C. Michael Stoehr                                         C. Michael Stoehr Senior Vice President and Chief Financial Officer

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