UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

For the fiscal year ended                   November 30, 1997
Commission file number                      1-9532

                              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 Number)

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

Registrant's telephone number, including area code            (516) 231-7750
                                                              --------------

Securities registered pursuant to Section 12(b) of the Act:

                              Name of Each Exchange on
     Title of each class:                            Which Registered

Class A Common Stock $.01 par value                  American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
                                                       None

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
requirement for the past 90 days.
                                     Yes       X              No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K (Sec 229.405 of this chapter) is not  contained  herein,  and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
                                                     X

                                        1


<PAGE>



The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant  was  $83,945,514  (based upon closing  price on the  American  Stock
Exchange, Inc. on February 18, 1998).

The number of shares  outstanding of each of the registrant's  classes of common
stock, as of February 18, 1998 was:

Class                                                    Outstanding

Class A Common Stock $.01 par value                         17,253,533
Class B Common Stock $.01 par value                          2,260,954


                                     PART I


Item 1 - Business

General

     Audiovox   Corporation,    together   with   its   operating   subsidiaries
(collectively,  the Company),  markets and supplies, under its own name or trade
names, a diverse line of aftermarket  products which include wireless  products,
both  hand  held  portables  and  vehicle  installed  cellular   telephones  and
accessories,  automotive  sound  equipment  and  automotive  accessories,  which
includes vehicle security  systems,  cruise  controls,  defoggers,  remote start
systems and vehicle tracking  systems,  all of which are designed  primarily for
installation  in cars,  trucks and vans after  they have left the  factory,  and
consumer electronic products.

     The Company's products are sold through a worldwide  distribution  network.
Sales are made  directly and  indirectly  through  independent  distributors  to
cellular telephone accounts, cellular service providers, regional Bell Operating
Companies (BOCs),  new car dealers,  mass  merchandisers,  catalogue  showrooms,
original equipment  manufacturers  (OEMs),  military Army and Air Force Exchange
Systems  (AAFES),  autosound  specialists  and  retailers.  The Company sells to
consumers from Company-owned  retail sales and service locations which generally
operate under the name "Quintex",  and also receives activation  commissions and
residuals from certain cellular service providers.

     The Company's  products may be broadly grouped into three major categories:
wireless, which includes cellular telephone products, activation commissions and
residual fees;  automotive sound equipment;  and automotive  accessories.  These
categories  represent  different  product lines rather than  separate  reporting
segments.  The  Company's  products are  distributed  by two separate  marketing
groups: Communications and Automotive.

     The Company was incorporated in Delaware on April 10, 1987, as successor to
the  business of Audiovox  Corp.,  a New York  corporation  founded in 1960 (the
predecessor company) by John J. Shalam, the Company's President, Chief Executive
Officer and controlling  stockholder.  Unless the context otherwise requires, or
as otherwise  indicated,  references herein to the "Company" include the Company
and its wholly-owned and majority-owned operating subsidiaries.



                                        2


<PAGE>



Trademarks

     The  Company   markets   products  under  several   trademarks,   including
Audiovox(R),  Custom  SPS(R),  Prestige(R),   Pursuit(R),  Minivox(TM),  Minivox
Lite(R),  The  Protector(TM)  and  Rampage(TM).  The Company believes that these
trademarks  are  recognized  by  customers  and  are  therefore  significant  in
marketing its products.  Trademarks are registered for a period of ten years and
such registration is renewable for subsequent ten-year periods.

Distribution and Marketing

Cellular and Non-Cellular Wholesale

     The Company markets products on a wholesale basis to a variety of customers
through its direct sales force and independent sales representatives. During the
fiscal  year  ended  November  30,  1997,  the  Company  sold  its  products  to
approximately  2,500  wholesale  customers,  including the BOCs,  other cellular
carriers and their respective agents,  mass merchandise chain stores,  specialty
installers, distributors, car dealers, OEMs and AAFES.

     The Company's five largest wholesale customers  (excluding joint ventures),
who, in the  aggregate,  accounted  for 30.6% of the Company's net sales for the
fiscal year ended November 30, 1997, are AirTouch Cellular, Bell Atlantic Mobile
Systems, US Cellular,  C.R.M.  Movicom and Vanguard Cellular.  In addition,  the
Company also sells its  non-cellular  products to mass merchants such as Walmart
Stores,  Inc. and OEMs such as Chrysler of Canada,  Proton Corporation Sdn. Bhd.
of  Malaysia,   General  Motors  and  Chrysler  of  Venezuela,   General  Motors
Corporation and BMW of North America.

     The Company  uses several  techniques  to promote its products to wholesale
customers,  including trade and consumer advertising,  attendance at trade shows
and direct personal contact by Company sales  representatives.  In addition, the
Company  typically  assists cellular  carriers in the conduct of their marketing
campaigns  including  the  scripting  of  telemarketing   presentations,   funds
cooperative  advertising campaigns,  develops and prints custom sales literature
and conducts in-house training programs for cellular carriers and their agents.

     The  Company  believes  that  the use of such  techniques,  along  with the
provision of warranty services and other support programs, enhances its strategy
of providing  value-added  marketing and, thus,  permits the Company to increase
Audiovox(R)  brand awareness among wholesale  customers while, at the same time,
promoting sales of the Company's products to end users.

     The Company's wholesale policy is to ship its products within 24 hours of a
requested  shipment date from public  warehouses in Norfolk,  Virginia,  Sparks,
Nevada and Canada and from leased facilities located in Hauppauge,  New York and
Los Angeles, California.

Retail

     As of November  30,  1997,  the Company  operated  approximately  26 retail
outlets and licensed its trade name to 6 additional  retail  outlets in selected
markets in the United States  through which it markets  cellular  telephones and
related  products  to retail  customers  under the names  Audiovox(R),  American
Radio(R) and Quintex(R).  In addition to Audiovox  products,  these outlets sell
competitive products

                                        3


<PAGE>



such as Motorola and Nokia.

     The Company's retail outlets typically generate revenue from three sources:
(i)  sale  of  cellular   telephones  and  related  products,   (ii)  activation
commissions paid to the Company by cellular  telephone  carriers when a customer
initially  subscribes for cellular  service and (iii) monthly residual fees. The
amount of the activation  commissions  paid by a cellular  telephone  carrier is
based upon various service plans and promotional  marketing  programs offered by
the particular cellular telephone carrier. The monthly residual payment is based
upon a percentage of the customer's  usage and is calculated based on the amount
of the cellular phone billings generated by the base of the customers  activated
by the Company on a particular  cellular  carrier's system.  Under the Company's
six licensee relationships, the licensee receives the majority of the activation
commissions,  and the Company  retains the  majority of the residual  fees.  The
Company's  agreements  with  cellular  carriers  provide for a reduction  in, or
elimination of,  activation  commissions in certain  circumstances if a cellular
subscriber  activated  by the  Company  deactivates  service  within a specified
period. The Company records an allowance to provide for the estimated  liability
for return of activation  commissions  associated with such deactivations.  As a
practical  matter,  the  profitability  of the  Company's  retail  operations is
dependent on the Company  maintaining  agency  agreements with cellular carriers
under which it receives activation commissions and residual fees.

     The  Company's  relationships  with the  cellular  carriers are governed by
contracts  that, in the aggregate,  are material to the continued  generation of
revenue  and profit for the  Company.  Pursuant  to  applicable  contracts  with
cellular  carriers,  each  of  the  Company's  retail  outlets  functions  as  a
non-exclusive  agent engaged to solicit and sell cellular  telephone  service in
certain  geographic  areas  and,  while  such  contract  is in effect  and for a
specified  period  thereafter  (which  typically ranges from three months to one
year),  may not act as a  representative  or  agent  for any  other  carrier  or
reseller in those areas or solicit  cellular or wireless  communication  network
services  of the kind  provided by the  cellular  carrier in the areas where the
Company acts as an agent.  The Company's  retail  operation is free, at any time
after the restricted  period,  to pursue an agreement  with another  carrier who
services a particular  geographic  area.  At present,  each  geographic  area is
serviced by several cellular carriers.

     As of  November  30,  1997,  the  Company  was an agent  for the  following
carriers in selected  areas:  Bell  Atlantic  Mobile  Systems,  Inc.,  BellSouth
Mobility, Inc. and GTE Mobilnet of the Southeast,  Inc. Dependant upon the terms
of the specific  carrier  contracts,  which typically range in duration from one
year to five  years,  the  Company's  retail  operation  may  receive a one-time
activation  commission  and periodic  residual  fees.  These  carrier  contracts
provide  the  carrier  with the  right to  unilaterally  restructure  or  revise
activation  commissions  and residual  fees payable to the Company,  and certain
carriers have exercised such right from  time-to-time.  Dependent upon the terms
of the specific carrier contract, either party may terminate the agreement, with
cause,  upon prior notice.  Typically,  the Company's  right to be paid residual
fees ceases upon termination of an agency relationship.

Equity Investments

     The Company has from time-to-time, at both the wholesale and retail levels,
established  joint ventures to market its products to a specific  market segment
or geographic area. In entering into a joint venture,  the Company seeks to join
forces  with an  established  distributor  with an  existing  customer  base and
knowledge of the  Company's  products.  The Company seeks to blend its financial
and product  resources  with these local  operations to expand their  collective
distribution and marketing capabilities.

                                        4


<PAGE>



The Company  believes  that such joint  ventures  provide a more cost  effective
method of focusing on specialized  markets.  The Company does not participate in
the day-to-day management of these joint ventures.

     As of November 30, 1997, the Company had a 30.8% ownership interest in TALK
Corporation  (TALK)  which  holds  world-wide  distribution  rights for  product
manufactured by Shintom Co., Ltd.  (Shintom).  These products  include  cellular
telephones,  video recorders and players and automotive sound products. TALK has
granted  Audiovox  exclusive   distribution  rights  on  all  wireless  personal
communication  products for all countries  except Japan,  China,  Thailand,  and
several  mid-eastern  countries.  The Company's 72%-owned  subsidiary,  Audiovox
Communications  (Malaysia)  Sdn.  Bhd.  (Audiovox  Communications),  had  a  29%
ownership  interest in Avx Posse (Malaysia) Sdn. Bhd. (Posse) which monitors car
security  commands through a satellite based system in Malaysia.  As of November
30,  1997,  the  Company had a 20%  ownership  interest  in  Bliss-Tel  Company,
Limited,  which  distributes  cellular  telephones and  accessories in Thailand.
Additionally,  the Company  had a 50%  non-controlling  ownership  in five other
companies:  Protector  Corporation  (Protector)  which acts as a distributor  of
chemical protection treatments,  Audiovox Specialized  Applications,  LLC (ASA),
which acts as a distributor of televisions and other automotive sound,  security
and accessory products to specialized markets for recreational  vehicles and van
conversions, Audiovox Pacific Pty., Limited (Audiovox Pacific) which distributes
cellular  telephones and automotive sound and security products in Australia and
New Zealand,  G.L.M.  Wireless  Communications,  Inc.  (G.L.M.)  which is in the
cellular telephone, pager and communications business and Quintex Communications
West, LLC, which is in the cellular telephone and communications business.

Customers

     The Company had one customer,  AirTouch  Cellular,  that accounted for more
than 10% of the Company's net sales for fiscal 1997. AirTouch Cellular accounted
for 11.3% of the Company's net sales for fiscal 1997.

Suppliers

     The  Company   purchases  its  cellular  and  non-cellular   products  from
manufacturers located in several Pacific Rim countries,  including Japan, China,
Korea,  Taiwan and  Singapore,  Europe and the United  States.  In selecting its
vendors, the Company considers quality,  price,  service,  market conditions and
reputation.  The  Company  maintains  buying  offices or  inspection  offices in
Taiwan,  Korea and China to provide local  supervision  of supplier  performance
with regard to,  among other  things,  price  negotiation,  delivery and quality
control.  The majority of the products  sourced  through  these  foreign  buying
offices are non-cellular.

     Since 1984,  the  principal  supplier of the Company's  wholesale  cellular
telephones has been Toshiba Corporation (Toshiba),  accounting for approximately
32%,  28% and 44% of the total  dollar  amount of all product  purchases  by the
Company,  during  the fiscal  years  ended  November  30,  1997,  1996 and 1995,
respectively.  Toshiba  continues to sell products to the Company as an original
equipment  customer.  In order to expand its supply  channels and  diversify its
cellular  product  line,  the  Company  sources  cellular  equipment  from other
manufacturers including, but not limited to, TALK. Purchases from TALK accounted
for  approximately  29%, 26% and 20% of total inventory  purchases for the years
ended November 30, 1997, 1996 and 1995, respectively.  Purchases of non-cellular
products

                                        5


<PAGE>



are made primarily from other overseas suppliers  including Hyundai  Electronics
Inc.  (Hyundai),  Namsung Corporation  (Namsung) and Nutek Corporation  (Nutek).
There are no agreements in effect that require  manufacturers  to supply product
to the Company.  The Company  considers its  relations  with its suppliers to be
good. In addition,  the Company believes that alternative  sources of supply are
currently available.

Competition

     The  Company's  wholesale  business  is  highly  competitive  in all of its
product lines, each competing with a number of  well-established  companies that
manufacture and sell products similar to those of the Company. Specifically, the
cellular market place is driven by current  selling  prices,  which also affects
the  carrying  value of  inventory  on hand.  Additionally,  the Custom SPS line
competes  against  factory-supplied  radios.  Service  and  price  are the major
competitive  factors in all product  lines.  The Company  believes  that it is a
leading supplier to the cellular market primarily as a result of the performance
of its  products  and the service  provided  by its  distribution  network.  The
Company's  retail  business is also highly  competitive on a product  basis.  In
addition,  since the Company  acts as an agent for cellular  service  providers,
these  cellular  service  providers  must  also  compete  in  their  own  highly
competitive markets. The Company's retail performance is, therefore,  also based
on the cellular service providers' ability to compete.

Employees

     At November 30, 1997, the Company employed approximately 1,018 people.

Executive Officers of the Registrant

     The executive  officers of the registrant are listed below. All officers of
the Company are elected by the Board of Directors to serve one-year terms. There
are no family relationships among officers,  or any arrangement or understanding
between  any  officer  and any other  person  pursuant  to which the officer was
selected.  Unless otherwise  indicated,  positions listed in the table have been
held for more than five years.


Name                      Age     Current Position

John J. Shalam            64      President and Chief Executive Officer and
                                  Director
Philip Christopher        49      Executive Vice President and Director
Charles M. Stoehr         51      Senior Vice President and Chief Financial
                                  Office and Director
Patrick M. Lavelle        46      Senior Vice President and Director
Chris L. Johnson          46      Vice President, Secretary
Ann M. Boutcher           47      Vice President and Director
Richard Maddia            39      Vice President and Director

                                       6

<PAGE>

     John J. Shalam has served as President and Chief Executive Officer and as a
director of the Company since 1960. Mr. Shalam also serves as president and is a
director of most of the Company's operating subsidiaries.

     Philip Christopher,  Executive Vice President of the Company, has been with
the Company  since 1970 and has held his  current  position  since  1983.  Prior
thereto,  he was Senior Vice President of the Company.  Mr. Christopher also has
been a director of the Company since 1973 and, in addition,  serves as President
of Audiovox Communications Corp. and is an officer and a director of most of the
Company's operating subsidiaries.

     Charles M. Stoehr has been Chief  Financial  Officer of the  Company  since
1979 and was  elected  Senior  Vice  President  in 1990.  Mr.  Stoehr has been a
director of the Company  since 1987.  From 1979 through  1990,  Mr. Stoehr was a
Vice President of the Company.

     Patrick M. Lavelle has been a Vice  President of the Company since 1982. In
1991, Mr. Lavelle was elected Senior Vice  President,  with  responsibility  for
marketing and selling the Company's  automotive  accessory and automotive  sound
line of products. Mr. Lavelle was elected to the Board of Directors in 1993.

     Chris L. Johnson has been a Vice  President  of the Company  since 1986 and
Secretary  since 1980.  Ms.  Johnson has been employed by the Company in various
positions since 1968 and was a director of the Company from 1987 to 1993.

     Ann M. Boutcher has been a Vice  President of the Company  since 1984.  Ms.
Boutcher's  responsibilities  include the development and  implementation of the
Company's  advertising,  sales  promotion  and public  relations  programs.  Ms.
Boutcher was elected to the Board of Directors in 1995.

     Richard  Maddia has been a Vice  President of the Company  since 1991.  Mr.
Maddia is responsible for the Company's Management  Information Systems for both
the  Company's  distribution  network and  financial  reporting.  Mr. Maddia was
elected to the Board of Directors in 1996.


I
tem 2 - Properties

     As of  November  30,  1997,  the  Company  leased  a total  of  thirty-four
operating facilities located in twelve states and two Canadian provinces.  These
facilities  serve  as  offices,  warehouses,   distribution  centers  or  retail
locations.  Additionally, the Company utilizes approximately 117,000 square feet
of public  warehouse  facilities.  Management  believes that it has  sufficient,
suitable operating facilities to meet the Company's requirements.


Item 3 - Legal Proceedings

     The  Company is  currently,  and has in the past  been,  a party to routine
litigation  incidental to its business.  The Company does not expect any pending
litigation  to have a  material  adverse  effect on its  consolidated  financial
position.



                                        7


<PAGE>




Item 4 - Submission of Matters to a Vote of Security Holders

     No matters were  submitted to a vote of security  holders during the fourth
quarter of fiscal 1997.


                                     PART II


Item 5 -     Market for the Registrant's Common Equity and
               Related Stockholder Matters
- ----------------------------------------------------------------------------

Summary of Stock Prices and Dividend Data

     Class A Common Shares of Audiovox are traded on the American Stock Exchange
under the symbol VOX. No dividends have been paid on the Company's common stock.
The Company is restricted by agreements with its financial institutions from the
payment of common stock  dividends  while  certain  loans are  outstanding  (see
Liquidity and Capital Resources of Management's Discussion and Analysis).  There
are approximately 6,300 beneficial holders of Class A Common Stock and 4 holders
of Class B Common Stock.

Class A Common Stock


                                                                    Average
                                                                    Daily
                                                                    Trading
Fiscal Period                     High              Low             Volume
1997
   First Quarter                  $ 8 1/2      $     4   5/8          368,639
   Second Quarter                 7 7/8              4   15/16        171,733
   Third Quarter                  8 13/16            6   5/16         201,653
   Fourth Quarter                 10 3/4             7   5/16         131,779
1996
   First Quarter                $ 6 3/8                $ 43/4          15,924
   Second Quarter                 7 7/16             4   1/16          52,039
   Third Quarter                  6 5/16             4                 16,309
   Fourth Quarter                 6 3/4              4   5/8           95,817
1995
   First Quarter                  $ 8 1/2      $     6   3/8           25,300
   Second Quarter                       7            5   1/16          13,500
   Third Quarter                  7 3/8              4   7/16          30,100
   Fourth Quarter                 6 13/16            4   3/8           21,600




                                        8


<PAGE>




Item 6 - Selected Financial Data

Years ended November 30, 1997, 1996, 1995, 1994 and 1993

<TABLE>


                               1997                    1996                1995                  1994                 1993
                           -------------          ------------         ------------        -------------          ------------
                                                     (Dollars in thousands, except per share data)

<S>                       <C>                     <C>                  <C>                  <C>                   <C>     
Net sales                 $ 639,082               $597,915             $500,740             $486,448              $389,038
Net income (loss)            21,022  (a )         (26,469) (b)         (11,883) (c)           26,028  (e)           12,224 (g)
Net income (loss)
   per common
   share, primary              1.09  (a )           (2.82) (b)           (1.31) (c)             2.86  (e)             1.35 (g)
Net income (loss)
   per common
   share, fully
   diluted                     1.05  (a)                 -                    -                 2.20  (e)             1.25 (g)
Total assets                289,827                265,545              308,428              239,098               169,671
Long-term obli
   gations, less
   current in
   stallments                38,996                 70,413              142,802              110,698  (f)           13,610 (h)
Stockholders'               187,892  (d)           131,499 (d)          114,595 (d)           92,034                65,793
   equity
</TABLE>


(a)      Includes a pre-tax  charge of $12.7 million for costs  associated  with
         the exchange of $21.5 million of subordinated debentures into 2,860,925
         shares of common  stock in addition  to tax expense on the  exchange of
         $158,000. Additionally, includes a net gain of $23.2 million on sale of
         CellStar shares.
(b)      Includes a pre-tax  charge of $26.3 million for costs  associated  with
         the exchange of $41.3 million of subordinated debentures into 6,806,580
         shares of common  stock in addition  to tax expense on the  exchange of
         $2.9 million.
(c)      Includes a pre-tax charge of $2.9 million  associated with the issuance
         of  warrants,   a  pre-tax   charge  of  $11.8  million  for  inventory
         write-downs and the down-sizing of the retail  operations and a pre-tax
         gain on the sale of an equity investment of $8.4 million.
(d)      Includes a $12.2 million unrealized gain on marketable securities, net,
         a $773,000  unrealized gain on equity collar,  net, and a $20.8 million
         increase as a result of the exchange of $21.5  million of  subordinated
         debentures  in 1997 and a $10.3 million  unrealized  gain on marketable
         securities,  net,  and a $34.4  million  increase  as a  result  of the
         exchange  of $41.3  million of  subordinated  debentures  in 1996 and a
         $31.7 million unrealized gain on marketable securities, net, for 1995.
(e)      Includes a cumulative effect change of ($178,000) or ($0.02) per share,
         primary, and ($0.01) per share, fully diluted.  Also includes a pre-tax
         gain on sale of an equity  investment  of $27.8  million  and a gain on
         public offering of equity investment of $10.6 million.
(f)      Long-term debt includes the addition of a $65 million bond offering
         in 1994.
(g)      Includes an extraordinary item of $2.2 million or $0.24 per share,
         primary, and $0.22 per share, fully diluted.
(h)      Long-term debt does not include $38.8 million of bank obligations which
         were classified as current.


                                        9


<PAGE>




Item      7 - Management's  Discussion  and Analysis of Financial  Condition and
          Results of Operations (In thousands, except share and per share data)

     The  Company  markets its  products  under its own brand as well as private
labels  to a large  and  diverse  distribution  network  both  domestically  and
internationally.   The  Company's  products  are  distributed  by  two  separate
marketing  groups:  Communications  and  Automotive.  The  Communications  group
consists  of  Audiovox   Communications  Corp.  (ACC)  and  the  Quintex  retail
operations  (Quintex),  both  of  which  are  wholly-owned  subsidiaries  of the
Company.  The  Communications  group  markets  cellular  telephone  products and
receives  activation  commissions  and residual fees from its retail sales.  The
price at which the Company's  retail  outlets sell cellular  telephones is often
affected by the  activation  commission  the Company will receive in  connection
with such sale. The activation  commission paid by a cellular  telephone carrier
is based upon various service plans and promotional  marketing  programs offered
by the particular  cellular telephone  carrier.  The monthly residual payment is
based upon a percentage of the customer's  usage and is calculated  based on the
amount  of the  cellular  phone  billings  generated  by the  base of  customers
activated  by  the  Company  on a  particular  cellular  carrier's  system.  The
Automotive group consists of Audiovox Automotive  Electronics (AAE) and, through
February  28,  1997,  Heavy Duty  Sound,  which are  divisions  of the  Company,
Audiovox  Communications  (Malaysia) Sdn. Bhd.,  Audiovox Holdings (M) Sdn. Bhd.
and Audiovox Venezuela, C.A., which are majority-owned subsidiaries. Products in
the  Automotive  group  include  automotive  sound and security  equipment,  car
accessories,  home and portable  sound  products and mobile  video.  The Company
allocates  interest and certain  shared  expenses to the marketing  groups based
upon  estimated  usage.  General  expenses  and other income items which are not
readily  allocable  are not  included in the  results of the  various  marketing
groups.

     This Report on Form 10-K contains  forward-looking  statements  relating to
such matters as anticipated financial  performance and business prospects.  When
used in this Report,  the words  "anticipates,"  "expects,"  "may," "intend" and
similar  expressions  are  intended  to be among the  statements  that  identify
forward-looking  statements.  From time to time,  the Company  may also  publish
forward-looking statements. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking  statements.  In order to comply with
the terms of the safe  harbor,  the  Company  notes that a variety  of  factors,
including,  but not limited to, foreign currency risks,  political  instability,
changes  in  foreign  laws,   regulations,   and  tariffs,   new   technologies,
competition,   customer  and  vendor   relationships,   seasonality,   inventory
obsolescence  and  availability,  could cause the Company's  actual  results and
experience  to  differ   materially  from  the  anticipated   results  or  other
expectations expressed in the Company's forward-looking statements.



                                       10


<PAGE>



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


                                              Percentage of Net Sales
                                              Years Ended November 30,
                                              --------------------------------
                                               1997          1996       1995
                                               ----          ----       ----
Net sales:
     Product sales:
        Cellular wholesale                      61.1%        58.6%       52.3%
        Cellular retail                          1.0          1.3         2.8
        Sound                                   14.4         16.4        20.3
        Security and accessories                15.2         14.6        13.5
                                             --------      -------     ------
                                                91.7         90.9        88.9
Activation commissions                           4.9          5.5         7.7
     Residual fees                               0.7          0.8         1.0
     Other                                       2.7          2.8         2.4
                                            ---------     --------    -------
        Total net sales                        100.0        100.0       100.0
Cost of sales                                  (83.3)       (83.9)      (85.9)
                                              -------       ------      ------
Gross profit                                    16.7         16.1        14.1

Warehousing and assembly                        (1.9)        (1.8)       (2.0)
Selling                                         (6.0)        (6.7)       (6.9)
General and administrative expense              (5.8)        (5.4)       (7.2)
                                             --------      -------     -------
     Total operating expenses                  (13.7)       (13.9)      (16.1)
                                              -------       ------      ------
Operating income (loss)                          3.0          2.2        (2.0)

Interest expense                                (0.4)        (1.4)       (1.9)
Income of equity investments                     0.2          0.1           -
Management fees                                    -            -           -
Gain on sale of equity investment                5.9          0.2         1.7
Debt conversion expense                         (2.0)        (4.4)           -
Expenses related to issuance of warrants           -            -        (0.6)
Other income (expense)                             -         (0.1)       (0.2)
Income tax (expense) recovery                   (3.5)        (1.0)        0.6
                                             --------      -------    -------
Net income (loss)                               3.3 %        (4.4)%      (2.4)%
                                            =========      =======     =======


FISCAL 1997 COMPARED TO FISCAL 1996
CONSOLIDATED RESULTS

     Net sales were $639,082 for 1997, an increase of $41,167, or 6.9%, over the
same  period  last  year.  The  increase  in  net  sales  was  accompanied  by a
corresponding  increase in gross  profit  margins to 16.7% from 16.1% last year.
Operating expenses increased to $87,067 from $83,313, a 4.5% increase. Operating
income for 1997 was $19,695,  an increase of $6,620, or 50.6%,  compared to last
year. During 1997, the Company sold 1,835,000 shares of its holdings of CellStar
for a net gain of $23,232.  Also during 1997, the Company  exchanged  $21,479 of
its subordinated debentures for 2,860,925

                                       11


<PAGE>



shares  of Class A Common  Stock.  Costs  associated  with  this  exchange  were
$12,844, including income taxes.

     The net sales and  percentage  of net sales by product  line and  marketing
group for the fiscal years ended November 30, 1997,  1996 and 1995 are reflected
in the following table. Certain reclassifications have been made to the data for
periods prior to fiscal 1996 in order to conform to fiscal 1997 presentation.


<TABLE>

                                                             Years Ended November 30,
                                   ------------------------------------------------------------------------------------------
                                              1997                          1996                           1995
                                      ------------------------        ----------------------         ----------------------
Net sales:
     Communications
<S>                                     <C>              <C>           <C>              <C>           <C>              <C>  
        Cellular wholesale              $390,230         61.1%         $350,299         58.6%         $261,997         52.3%
        Cellular retail                    6,280           1.0            7,665           1.3           14,177           2.8
        Activation commissions            31,061           4.9           33,102           5.5           38,526           7.7
        Residual fees                      4,688           0.7            4,828           0.8            4,781           1.0
        Other                             12,141           1.9           12,785           2.1           11,293           2.3
                                      ----------    ----------       ----------    ----------       ----------       -------
           Total Communications          444,400          69.5          408,679          68.4          330,774          66.1
                                       ---------     ---------        ---------     ---------        ---------        ------
     Automotive
        Sound                             91,763          14.4           98,303          16.4          101,757          20.3
        Security and accessories          97,446          15.2           87,234          14.6           67,560          13.5
        Other                              4,701           0.7            2,879           0.5              649           0.1
                                     -----------    ----------      -----------    ----------     ------------       -------
           Total Automotive              193,910          30.3          188,416          31.5          169,966          33.9
     Other                                   772           0.1              820           0.1               -          -
                                    ------------    ----------     ------------    ----------   --------------      --------
           Total                        $639,082         100.0%        $597,915        100.0%         $500,740        100.0%
                                        ========        ======         ========        ======         ========        ======
</TABLE>



COMMUNICATION RESULTS

     The Communications group is composed of ACC and Quintex,  both wholly-owned
subsidiaries of Audiovox Corporation.  Since principally all of the net sales of
Quintex  are  cellular  in nature,  all  operating  results of Quintex are being
included in the discussion of the Communications group's product line.

     Net sales were  $444,400,  an increase of $35,721,  or 8.7%,  over the same
period last year. Unit sales of cellular telephones  increased 892,000 units, or
43.2%, over 1996. Average unit selling prices decreased  approximately 21.2% but
were  offset by a  corresponding  decrease  of 22.9% in average  unit cost.  The
number of new cellular subscriptions processed by Quintex decreased 9.1%, with a
corresponding  decrease in activation  commissions of approximately  $2,041. The
average  commission  received  by Quintex  per  activation,  however,  increased
approximately  3.2% from last year. Unit gross profit margins increased to 11.1%
from 9.0% last year,  primarily  due to  increased  unit sales and reduced  unit
costs.  Operating expenses decreased to $49,582 from $50,710. As a percentage of
net sales,  operating  expenses decreased to 11.2% during 1997 compared to 12.4%
in 1996.  Selling  expenses  decreased  $3,203  from  last  year,  primarily  in
advertising  and  divisional   marketing,   partially  offset  by  increases  in
commissions and salesmen salaries. General and administrative expenses increased
over

                                       12


<PAGE>



1996 by $572, primarily in office salaries and temporary personnel.  Warehousing
and assembly  expenses  increased over 1996 by $1,503,  primarily in tooling and
direct  labor.  Pre-tax  income  for 1997 was  $11,582,  an  increase  of $8,476
compared to last year.

     Though gross margins have improved over last year, management believes that
the cellular  industry is extremely  competitive and that this competition could
affect gross margins and the carrying value of inventories in the future.

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

<TABLE>

                                 COMMUNICATIONS



                                                       1997                          1996
                                                      ------                        -----
Net sales:
<S>                                               <C>          <C>           <C>          <C>  
     Cellular product - wholesale                 $390,230     87.8%         $350,299     85.7%
     Cellular product - retail                       6,280       1.4            7,665      1.9
     Activation commissions                         31,061       7.0           33,102      8.1
     Residual fees                                   4,688       1.1            4,828      1.2
     Other                                         12,141        2.7           12,785      3.1
                                                ----------  --------         --------   -------
         Total net sales                           444,400     100.0          408,679    100.0
Gross profit                                        66,117      14.9           60,245     14.7
Total operating expenses                           49,582       11.2          50,710      12.4
                                                ----------  --------         --------    ------
Operating income                                    16,535       3.7            9,535      2.3
Other expense                                      (4,953)      (1.1)         (6,429)     (1.6)
                                                ----------  --------         --------    -------
Pre-tax income                                  $  11,582       2.6%         $ 3,106       0.8%
                                                ==========  ========         ========   ========
</TABLE>



AUTOMOTIVE RESULTS

     Net sales increased approximately $5,494 compared to last year, an increase
of 2.9%.  Increases  were  experienced  in  security  and  accessories  and were
partially offset by a decrease in sound products. A majority of the increase was
from the  group's  international  operations,  both from an increase in existing
business and the formation of a new  subsidiary in Venezuela.  Automotive  sound
decreased  6.7%  compared  to last year,  due to the  transfer of the Heavy Duty
Sound division to a new joint venture. Excluding sound sales from the Heavy Duty
Sound division for fiscal 1997 and 1996, sound sales decreased 0.6%.  Automotive
security and accessories increased 11.7% compared to last year, primarily due to
increased sales in Prestige Security,  Protector Hardgoods and alarms and video,
partially  offset by decreases in net sales of AA security and cruise  controls.
Gross  margins  increased  to 20.8%  from 18.9% last  year.  This  increase  was
experienced  in the  AV and  Private  Label  sound  lines  and  cruise  control,
Protector  Hardgoods  and AA  security  accessory  lines,  partially  offset  by
decreases in Prestige  Security.  Operating  expenses  increased to $27,989 from
$25,559.  Selling expenses increased over last year by $1,151,  primarily in our
international   operations,   in  commissions  and   advertising.   General  and
administrative  expenses  increased  over  1996 by  $1,512,  primarily  from our
international operations, in occupancy,

                                       13


<PAGE>



office  expenses  and  bad  debt  expense.  Warehousing  and  assembly  expenses
decreased  from 1996 by $233,  primarily  from the  transfer of Heavy Duty Sound
business  to the new joint  venture.  Pre-tax  income  for 1997 was  $8,002,  an
increase of $2,303 compared to last year. Without the transfer of the Heavy Duty
Sound business, pre-tax income increased $2,796 compared to 1996.

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

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

<TABLE>

                                                    AUTOMOTIVE



                                               1997                 1996
                                              ------                -----
Net sales:
<S>                                       <C>        <C>          <C>          <C>  
     Sound                                $91,763    47.3%        $98,303      52.2%
     Security and accessories              97,446    50.3          87,234      46.3
     Other                                 4,701      2.4           2,879       1.5
                                        ---------   -------      ----------  -------
        Total net sales                   193,910   100.0         188,416     100.0
Gross profit                               40,326    20.8          35,622      18.9
Total operating expenses                  27,989     14.4          25,559      13.6
                                        ---------  -------       ---------   ------
Operating income                           12,337     6.4          10,063       5.3
Other expense                             (4,335)    (2.2)         (4,364)     (2.3)
                                        ---------   -------      ---------   -------
Pre-tax income                          $  8,002      4.1%       $  5,699       3.0%
                                        =========   =======      =========   ========

</TABLE>


OTHER INCOME AND EXPENSE

     Interest expense and bank charges  decreased by $5,938 for 1997 compared to
1996. This was due to reduced interest bearing debt and the decrease in interest
bearing subordinated debentures which were exchanged for shares of common stock.



                                       14


<PAGE>



     Management  fees and  equity  in  income  from  joint  venture  investments
increased  by  approximately  $651 for 1997  compared to 1996 as detailed in the
following table:

<TABLE>


                                              1997                                                 1996
                        -------------------------------------------------     -----------------------------------------------
                                               Equity                                                Equity
                            Management         Income                             Management         Income
                               Fees            (Loss)          Total                 Fees            (Loss)         Total
<S>                             <C>          <C>             <C>                    <C>            <C>        <C>      
ASA                                  -        $1,857          $1,857                       -             -            -
ASMC                                 -             -               -                       -        $  948  $       948
G.L.M.                         $    12             -              12                $    100             -          100
Pacific                              -         (685)           (685)                      22         (334)         (312)
Quintex West                         -            -               -                       18            -            18
Posse                               97          187             284                       46           17            63
                               -------     ---------      ----------                --------       -------    ---------

                                $  109       $1,359          $1,468                 $    186       $  631     $     817
                                ======       =======         =======                ========       =======    =========
</TABLE>


     Audiovox  Pacific has experienced an overall  decline in gross margins,  as
the cellular market in Australia has experienced the same competitive factors as
those in the United States.

     During  January 1997,  the Company  completed an exchange of $21,479 of its
subordinated debentures for 2,860,925 shares of Class A Common Stock (Exchange).
As a result of the  Exchange,  a charge of $12,686 was  recorded.  The charge to
earnings  represents  (i) the  difference in the fair market value of the shares
issued in the  Exchange  and the fair market value of the shares that would have
been  issued  under the terms of the  original  conversion  feature  plus (ii) a
write-off of the debt issuance costs associated with the subordinated debentures
plus (iii) expenses associated with the Exchange offer. The Exchange resulted in
taxable  income due to the  difference in the face value of the bonds  converted
and the fair  market  value of the shares  issued  and,  as such,  a current tax
expense of $158 was  recorded.  An increase in paid in capital was reflected for
the face value of the bonds  converted,  plus the  difference in the fair market
value of the shares  issued in the  Exchange  and the fair  market  value of the
shares that would have been issued  under the terms of the  original  conversion
feature for a total of $33,592.

     During 1997,  the Company sold a total of 1,835,000  shares of CellStar for
net proceeds of $45,937 and a net gain of $23,232.

PROVISION FOR INCOME TAXES

     Income taxes are  provided  for at a blended  federal and state rate of 41%
for profits  from  normal  business  operations.  During  1997,  the Company had
several  non-operating  events which had tax  provisions  calculated at specific
rates,  determined by the nature of the  transaction.  The tax treatment for the
debt conversion  expense of $12,686,  which lowered income before  provision for
income taxes,  did not reduce  taxable  income as it is a  non-deductible  item.
Instead of recording a tax recovery of $5,201,  which would lower the  provision
for income taxes, the Company actually  recorded a tax expense of $158. This and
other  various tax  treatments  resulted in an  effective  tax rate of 51.6% for
1997.



                                       15


<PAGE>



FISCAL 1996 COMPARED TO FISCAL 1995

     Net sales  increased by  approximately  $97,175,  or 19.4% for fiscal 1996,
compared to fiscal 1995. This result was primarily  attributable to increases in
net  sales  from the  cellular  division  of  approximately  $76,413,  or 23.9%,
automotive security and accessory  equipment of approximately  $20,418, or 27.9%
and other  products,  primarily home stereo systems of $3,052.  These  increases
were  partially   offset  by  a  decrease  in  automotive   sound  equipment  of
approximately $2,708, or 2.5%.

     The improvement in net sales of cellular  telephone  products was primarily
attributable  to an  increase  in unit  sales.  Net sales of  cellular  products
increased by  approximately  857,000 units,  or 70.9%,  compared to fiscal 1995,
primarily  resulting  from an increase in sales of hand-held  portable  cellular
telephones and transportable cellular telephones,  partially offset by a decline
in sales of installed mobile cellular telephones. The average unit selling price
declined  approximately  23.7% vs. 1995 as  production  efficiencies  and market
competition  continues to reduce unit selling prices.  The Company believes that
the  shift  from  installed   mobile   cellular   telephones  to  hand-held  and
transportable  cellular  telephones  is  reflective of a desire by consumers for
increased flexibility in their use of cellular telephones.  Toward that end, the
Company  markets an accessory  package that permits its  Minivox(TM) and Minivox
Lite(R)  hand-held  cellular  telephones  to  be  used  in  an  automobile  on a
hands-free basis and to draw power from the automobile's  electrical system like
an installed mobile cellular telephone.

     Activation  commissions  decreased by approximately  $5,424,  or 14.1%, for
fiscal 1996 compared to fiscal 1995. This decrease was primarily attributable to
fewer new cellular  subscriber  activations  and  partially  due to fewer retail
outlets operated by the Company. The number of activation  commissions decreased
21.4% compared to fiscal 1995. This decrease in commission revenue was offset by
a 9.3% increase in average activation commissions paid to the Company.  Residual
revenues on customer usage increased by  approximately  $47, or 1.0%, for fiscal
1996,  compared to fiscal 1995, due primarily to the addition of new subscribers
to the Company's cumulative  subscriber base, despite a decrease in current year
activations.  A majority  of the  residual  income  resides  with the  remaining
operating retail locations.

     Net sales of automotive sound equipment decreased by approximately  $2,708,
or  2.5%,  for  fiscal  1996,   compared  to  fiscal  1995.  This  decrease  was
attributable  primarily  to a  decrease  in  sales  of  products  sold  to  mass
merchandise  chains and auto sound sales to new car dealers.  This  decrease was
partially  offset by  increases  in sales of sound  products  to  private  label
customers.  Net sales of automotive  security and accessory  products  increased
approximately  $20,418,  or 27.9%,  for fiscal  1996,  compared to fiscal  1995,
principally due to increases in sales of vehicle  security  products,  Protector
Hardgoods and cruise controls. This increase was partially offset by a reduction
in net sales of AA security products.

     Gross margins  increased to 16.1% in fiscal 1996 from 14.1% in fiscal 1995.
The 1995 gross margin  included a $9,300  charge for  inventory  written down to
market at August 31, 1995. Cellular gross margins were 13.2% compared to 9.8% in
1995. Despite a 23.7% decrease in average unit selling prices, the average gross
margin  per unit  increased  25.3%.  The  number of new  subscriber  activations
decreased  21.4%  but  was  partially  offset  by a  9.3%  increase  in  average
activation commissions earned by the Company.  Residuals increased 1.0% compared
to 1995.  The Company  believes  that the cellular  market will continue to be a
highly-competitive and price-sensitive environment.  Increased price competition
related to the  Company's  product  could  result in  downward  pressure  on the
Company's

                                       16


<PAGE>



gross margins if the Company is unable to obtain  competitively  priced  product
from its  suppliers  or  result  in  adjustments  to the  carrying  value of the
Company's inventory.

     Automotive  sound margins were 19.9%,  up from 17.5% in 1995.  Most product
lines in the category experienced an increase and there was a marked increase in
the gross margin on international sales.  Automotive accessory margins decreased
from 27.9% in 1995 to 24.5% in 1996. This decrease was primarily in the Prestige
and cruise control lines.

     Total operating expenses increased  approximately $2,837, or 3.5%, compared
to 1995. As a percentage to sales,  total operating  expenses decreased to 13.9%
during 1996 compared to 16.1% for 1995. Selling expenses increased approximately
$5,544,  or  16.1%,  compared  to 1995.  Divisional  marketing  and  advertising
increased  approximately  $8,256  compared  to 1995 in  addition  to travel  and
related  expenses.  These  increases  were  partially  offset  by  decreases  in
salesmen's  commissions,   salesmen's  salaries,   payroll  taxes  and  employee
benefits.  General and administrative  expenses decreased  approximately  $3,708
during 1996.  The  decreases  were in occupancy  costs,  telephone  and overseas
buying  office  expenses  and were  partially  offset  by  increases  in  office
salaries,  travel,  payroll  taxes,  employee  benefits and  professional  fees.
Warehousing,   assembly  and  repair  expenses  increased  approximately  $1,001
compared to1995, predominately in warehousing expenses and direct labor.

     Management  fees and related income and equity in income from joint venture
investments  increased  by  approximately  $463  for  1996  compared  to 1995 as
detailed in the following table:

<TABLE>


                                             1996                                                  1995
                      --------------------------------------------------     -------------------------------------------------
                                                 Equity                                         Equity
                            Management           Income                           Management    Income
                               Fees              (Loss)     Total                Fees           (Loss)        Total
<S>                            <C>               <C>     <C>                    <C>            <C>        <C>      
CellStar                              -               -           -                    -        $ 2,151      $ 2,151
ASMC                                  -          $  948  $     948                     -            819          819
G.L.M.                         $    100               -         100              $    14              -           14
Pacific                              22            (334)       (312)                 186             21          207
TALK                                  -               -           -                    -        (2,837)       (2,837)
Quintex West                         18               -          18                    -              -            -
Posse                                46              17          63                    -             -             -
                               --------         -------    --------              -------      ---------    ---------
                               $    186         $  631     $     817              $  200      $    154      $   354
                               ========         =======    =========              ======      =========     =======
</TABLE>


     This  increase was primarily due to  non-recurring  costs  recorded by TALK
during 1995, their first full year of operations. This was offset by the Company
owning less than 20% of CellStar for the entire fiscal year and, therefore,  not
accounting  for the  investment on the equity  method.  During 1995, the Company
owned  more  than 20% of  CellStar  until  the  third  quarter  and,  therefore,
accounted for CellStar under the equity method until then.  Audiovox Pacific has
experienced  an overall  decline in gross  margins,  as the  cellular  market in
Australia has  experienced the same  competitive  factors as those in the United
States.

     Interest expense and bank charges decreased by $1,214,  or 12.5%,  compared
to 1995 as a result of a decrease  in  interest  bearing  debt.  Other  expenses
decreased  approximately  $412 primarily due to the write-off of fixed assets in
the retail group during 1995 which did not recur in 1996. Costs

                                       17


<PAGE>



associated with the issuance of stock warrants for no monetary  consideration to
certain holders of the Company's  convertible  subordinated  debentures also did
not recur in 1996.

     During the fourth quarter of 1996, the Company  exchanged  $41,252 of its 6
1/4% subordinated  debentures for 6,806,580 shares of Class A Common Stock. This
exchange resulted in a charge to earnings of approximately $26,318 before income
taxes.  This charge  includes the loss on the exchange and the  write-off of the
remaining  debt  issuance  costs  associated  with  the  original  issue  of the
debentures.

Liquidity and Capital Resources

     The Company's cash position at November 30, 1997 was  approximately  $2,905
below the  November  30, 1996 level.  Operating  activities  used  approximately
$36,899,  primarily from  increases in inventory and prepaid  expenses and other
assets,  and a decrease in accounts payable,  accrued expenses and other current
liabilities.  These  events  were  partially  offset by a decrease  in  accounts
receivable  and an  increase  in  income  taxes  payable.  Investing  activities
provided approximately  $37,695,  composed primarily of $45,937 from the sale of
investment securities,  partially offset by the purchase of property,  plant and
equipment  of $3,986 and  purchase of equity  investments  of $4,706.  Financing
activities  used  approximately  $3,458,   principally  from  the  repayment  of
borrowings under line of credit agreements.

     On February 9, 1996,  the  Company's  10.8%  Series AA and 11.0%  Series BB
Convertible Debentures matured. The Company paid $4,362 to holders on that date.
The remaining  $1,100 was  converted  into 206,046  shares of Common  Stock.  On
November  25, 1996,  the Company  concluded an exchange of $41,252 of its 6 1/4%
subordinated  debentures  for 6,806,580  shares of the Company's  Class A Common
Stock.  Accounting  charges  to  earnings  for this  transaction  were  $29,206,
including  income taxes on the gain of the exchange of the bonds. As a result of
the exchange, stockholders' equity was increased by $34,426.

     On October 1, 1996,  business formally  conducted by the Company's cellular
division  was  continued  in  a  newly-formed,  wholly-owned  subsidiary  called
Audiovox Communications Corp. Capitalization of this company was accomplished by
exchanging the assets of the former division, less their respective liabilities,
for all of the common stock.

     On May 5, 1995,  the Company  entered into the Second  Amended and Restated
Credit Agreement (the Credit  Agreement) which superseded the first amendment in
its entirety.  During 1997 and 1996, the Credit  Agreement was amended ten times
providing  for various  changes to the terms.  The terms as of November 30, 1997
are summarized below.

     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  continue  to  be  guaranteed  by  certain  of  the  Company's
subsidiaries and are secured by accounts receivable and inventory of the Company
and those  subsidiaries.  The obligations were secured at November 30, 1996 by a
pledge  agreement  entered into by the Company for 2,125,000  shares of CellStar
Common Stock and 100 shares of ACC.  Subsequent to November 30, 1996, the shares
of CellStar Common Stock were released from the Pledge  Agreement.  Availability
of credit under the Credit  Agreement is a maximum  aggregate amount of $95,000,
subject to certain  conditions,  and is based upon a formula taking into account
the amount and quality of its  accounts  receivable  and  inventory.  The Credit
Agreement expires on February 28, 2000.

                                       18


<PAGE>



     The Credit Agreement  contains  several  covenants  requiring,  among other
things,  minimum  levels of pre-tax  income and  minimum  levels of net worth as
follows:  Pre-tax  income of $4,000 per annum;  pre-tax income of $1,500 for the
two consecutive  fiscal  quarters  ending May 31, 1997,  1998 and 1999;  pre-tax
income of $2,500 for the two  consecutive  fiscal  quarters  ending November 30,
1997,  1998 and 1999; the Company cannot have pre-tax losses of more than $1,000
in any  quarter;  and  the  Company  cannot  have  pre-tax  losses  in  any  two
consecutive quarters. In addition,  the Company must maintain a minimum level of
total net worth of $170,000.  The Credit  Agreement  provides for adjustments to
the  covenants  in the event of  certain  specified  non-operating  transaction.
Additionally, the agreement includes restrictions and limitations on payments of
dividends, stock repurchases and capital expenditures.  During 1997, the Company
received  amendments and waivers to allow the Company to make stock  repurchases
and enter into the equity collar. Subsequent to year end, the Company received a
waiver which allowed for the delay in issuance of its financial statements.

     The Company  granted to an investor in  CellStar,  in  connection  with the
CellStar initial public offering,  two options to purchase up to an aggregate of
1,750,000  shares of CellStar  Common Stock owned by the  Company,  1,500,000 of
which was  exercised in full on June 1, 1995 at an exercise  price of $11.50 per
share. As a result,  the Company  recorded a gain,  before  provision for income
taxes,  of $8,435.  This reduced the Company's  ownership in CellStar  below 20%
and, as such,  the Company will no longer  account for CellStar under the equity
method of  accounting.  Subsequent to November 30, 1996,  the remaining  250,000
shares under the remaining  option  expired.  The remaining  2,375,000  CellStar
shares owned by the Company will be accounted for as an investment in marketable
equity  securities.  During  1997,  the  Company  sold  1,835,000  shares of its
CellStar shares for a gain of $23,232,  net of income tax. The Company continues
to hold 865,000 shares of CellStar  common stock.  Based upon the closing market
price of  CellStar  on  November  30,  1997,  the  unrealized  gain in equity is
$12,194, net of deferred taxes.

     The  Company  believes  that it has  sufficient  liquidity  to satisfy  its
anticipated  working capital and capital  expenditure needs through November 30,
1998 and for the reasonable foreseeable future.

Impact of Inflation and Currency Fluctuation

     Inflation has not had and is not expected to have a  significant  impact on
the Company's  financial position or operating results.  However, as the Company
expands its  operations  into Latin  America and the Pacific Rim, the effects of
inflation and currency  fluctuations  in those areas, if any, could have growing
significance  to the financial  condition  and results of the  operations of the
Company.

     The Company has  operations and conducts local business in Asia. The recent
fluctuations  in the foreign  exchange  rates have not  materially  impacted the
consolidated financial position, results of operations or liquidity.  Management
believes that continued  fluctuations will not have a material adverse effect on
the Company's consolidated financial position, however the impact on the results
of operations or liquidity, particularly our Malaysian subsidiaries, is unknown.

     While the prices that the Company pays for the products  purchased from its
suppliers  are  principally   denominated  in  United  States   dollars,   price
negotiations depend in part on the relationship  between the foreign currency of
the foreign  manufacturers  and the United States dollar.  This  relationship is
dependent upon, among other things, market, trade and political factors.


                                       19


<PAGE>



Seasonality

     The Company typically  experiences some  seasonality.  The Company believes
such  seasonality  could be  attributable  to increased  demand for its products
during the Christmas season,  which commences in October, for both wholesale and
retail operations.

Year 2000 Date Conversion

     Management  believes that a significant portion of its computer systems are
year 2000  compliant  and is in the  process  of  assessing  the  balance of its
systems.  The Company  intends to  communicate  with its  customers,  suppliers,
financial institutions and others with which it does business to ensure that any
year 2000 issue will be resolved  timely.  This issue affects  computer  systems
that have time-sensitive programs that may not properly recognize the year 2000.
If necessary  modifications and conversions by those with which the Company does
business are not  completed  timely or if all of the  Company's  systems are not
year 2000 compliant,  the year 2000 issue may have a material  adverse effect on
the  Company's  consolidated  financial  position,   results  of  operations  or
liquidity.

Recent Accounting Pronouncements

     The Financial  Accounting  Standards Board (FASB) has issued  Statement No.
128,  "Earnings per Share" (Statement 128), on December 1, 1997. Under Statement
128, the Company is required to report basic and diluted  earnings per share. It
will replace the  presentation  of both primary and fully  diluted  earnings per
share. Statement 128 requires restatement of all prior-period earnings per share
data.  The  provisions of Statement  128 are effective for financial  statements
issued for periods ending after December 15, 1997,  including  interim  periods,
and earlier  application is not permitted.  The provisions of Statement 128 must
be implemented  no later than fiscal 1998.  The Company  believes that Statement
128 will not have an impact on the  Company's  financial  position,  results  of
operations,  or liquidity,  however,  the impact on previously reported earnings
per share data is currently unknown.

     In June 1997, the FASB issued Statement No. 130,  "Reporting  Comprehensive
Income",  effective for fiscal years  beginning  after  December 15, 1997.  This
Statement  requires  that all items that are  required  to be  recognized  under
accounting  standards as  components  of  comprehensive  income be reported in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial statements.  This Statement further requires that an entity display an
amount representing total comprehensive  income for the period in that financial
statement.  This Statement also requires that an entity  classify items of other
comprehensive  income by their  nature in a financial  statement.  For  example,
other  comprehensive  income may include  foreign  currency items and unrealized
gains  and  losses on  investments  in equity  securities.  Reclassification  of
financial statements for earlier periods,  provided for comparative purposes, is
required. Based on current accounting standards,  this Statement is not expected
to have a material impact on the Company's  consolidated  financial  statements.
The Company will adopt this accounting  standard  effective December 1, 1999, as
required.

     In June 1997, the FASB issued Statement 131, "Disclosures about Segments of
an Enterprise  and Related  Information",  effective for fiscal years  beginning
after  December 15, 1997.  This  Statement  establishes  standards for reporting
information about operating segments in annual financial statements and requires
selected  information  about  operating  segments in interim  financial  reports
issued to shareholders.  It also establishes  standards for related  disclosures
about products and services, geographic

                                       20


<PAGE>



areas and major  customers.  Operating  segments are defined as components of an
enterprise  about which  separate  financial  information  is available  that is
evaluated  regularly by the chief  operating  decision  maker in deciding how to
allocate  resources  and  in  assessing  performance.  This  Statement  requires
reporting segment profit or loss, ceratin specific revenue and expense items and
segment  assets.  It also requires  reconciliations  of total segment  revenues,
total segment profit or loss, total segment assets,  and other amounts disclosed
for segments to corresponding  amounts  reported in the  consolidated  financial
statements. Restatement of comparative information for earlier periods presented
is required in the  initial  year of  application.  Interim  information  is not
required  until  the  second  year of  application,  at which  time  comparative
information  is  required.  The Company has not  determined  the impact that the
adoption of this new accounting standard will have on its consolidated financial
statements  disclosures.   The  Company  will  adopt  this  accounting  standard
effective December 1, 1999, as required.




                                       21


<PAGE>




I
tem 8-Consolidated Financial Statements and Supplementary Data

     The  consolidated  financial  statements  of the Company as of November 30,
1997 and 1996 and for each of the years in the three-year  period ended November
30, 1997,  together with the independent  auditors'  report thereon of KPMG Peat
Marwick LLP, independent auditors, are filed under this Item 8.

     Selected  unaudited,  quarterly  financial  data of the  Registrant for the
years ended November 30, 1997 and 1996 appears below:

<TABLE>


                                                                               QUARTER ENDED
                                                    --------------------------------------------------------------------
                                                           Feb. 28           May 31          Aug. 31           Nov. 30
                                                           -------           ------          -------           -------
1997
<S>                                                         <C>               <C>             <C>                <C>    
Net sales                                                   $166,614          148,195         153,124            171,149
Gross profit                                                  28,002           25,055          25,634             28,071
Operating expenses                                            23,486           21,243          20,606             21,732
Income  before provision for income taxes                     15,328 (a)       14,032 (c)       5,565 (e)          8,517 (g)
Provision for income taxes                                    11,125 (b)        5,678 (d)       2,467 (f)          3,150 (h)
Net income                                                     4,203            8,354           3,098              5,367
Net income per common share (primary)                           0.24             0.43            0.16               0.27
Net income per share (fully diluted)                            0.23             0.42            0.16               0.26

1996
Net sales                                                   $122,493          141,194         142,828            191,400
Gross profit                                                  19,877           21,586          24,639             30,286
Operating expenses                                            17,519           19,347           2,091             25,536
Income (loss) before provision for income taxes                1,091              426           1,575            (23,727) (i)
Provision for income taxes                                       612              276             808              4,138  (j)
Net income (loss)                                                479              150             767            (27,865)
Net income (loss) per common share (primary)                    0.05             0.02            0.08              (2.83)
Net income (loss) per share (fully diluted)                        -                -               -                  -

NOTE:      The Company does not compute fully diluted earnings per share when the addition of potentially
           dilutive securities would result in anti-dilution.

(a)      Includes a pre-tax  charge of $12.7 million for costs  associated  with
         the exchange of $21.5 million of subordinated debentures into 2,860,925
         shares of Class A Common Stock and a pre-tax  gain of $23.8  million on
         the sale of CellStar shares.
(b)      Includes  $158,000  for income  taxes  associated  with the exchange of
         $21.5 million of subordinated debentures into 2,860,925 shares of Class
         A Common Stock and income taxes of $9.0 million for the gain on sale of
         CellStar shares.
(c)      Includes $10.2 million of pre-tax gain on the sale of CellStar shares.
(d)      Includes $3.9 million of income taxes on the gain on sale of CellStar shares
(e)      Includes $303,000 of pre-tax gain on the sale of CellStar shares
(f)      Includes $115,000 of income taxes on the gain on the sale of CellStar shares
(g)      Includes $3.2 million of pre-tax gain on the sale of CellStar shares
(h)      Includes $1.2 million of income taxes on the gain on sale of CellStar shares
(i)      Includes a pre-tax charge of $26.3 million for costs associated with the exchange of $41.3 million
         of subordinated debentures into 6,806,580 shares of common stock.
(j)      Includes tax expense of $2.9 million associated with the exchange of debentures.

</TABLE>

                                       22


<PAGE>











                          Independent Auditors' Report




The Board of Directors and Stockholders
Audiovox Corporation:

We have  audited  the  accompanying  consolidated  balance  sheets  of  Audiovox
Corporation  and  subsidiaries as of November 30, 1997 and 1996, and the related
consolidated  statements of income (loss),  stockholders'  equity and cash flows
for each of the years in the three-year  period ended  November 30, 1997.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Audiovox Corporation
and  subsidiaries  as of November  30,  1997 and 1996,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  November 30, 1997,  in  conformity  with  generally  accepted  accounting
principles.








                                                     s/KPMG Peat Marwick LLP
                                                     KPMG PEAT MARWICK LLP

Jericho, New York
March 6, 1998


                                       23


<PAGE>



                      AUDIOVOX CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           NOVEMBER 30, 1997 AND 1996
                        (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>

                                                                        1997               1996
                                                                        ----               ----
ASSETS

Current assets:
<S>                                                                   <C>                <C>       
   Cash and cash equivalents                                          $     9,445        $   12,350
   Accounts receivable, net                                               104,698           118,408
   Inventory, net                                                         105,242            72,785
   Receivable from vendor                                                   5,000             4,565
   Prepaid expenses and other current assets                                9,230             7,324
   Deferred income taxes                                                    4,673             5,241
   Equity collar                                                           1,246                  -
                                                                      -----------         ----------
      Total current assets                                                239,534           220,673
Investment securities                                                      22,382            27,758
Equity investments                                                         10,693             5,836
Property, plant and equipment, net                                          8,553             6,756
Debt issuance costs, net                                                        -               269
Excess cost over fair value of assets 
  acquired and other intangible assets, net                                5,557                804
Other assets                                                               3,108              3,449
                                                                      -----------          ---------
                                                                       $ 289,827           $ 265,545
                                                                       ==========          =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                    $   24,237         $   28,192
   Accrued expenses and other current liabilities                          16,538             18,961
   Income taxes payable                                                     9,435              7,818
   Bank obligations                                                         6,132              4,024
   Documentary acceptances                                                  3,914              3,501
                                                                       -----------         ----------
      Total current liabilities                                            60,256             62,496
Bank obligations                                                           24,300             31,700
Deferred income taxes                                                       8,505             10,548
Long-term debt                                                              6,191             28,165
                                                                       -----------        -----------
      Total liabilities                                                    99,252            132,909
                                                                       -----------        ----------
Minority interest                                                           2,683              1,137
                                                                       -----------       ------------

Stockholders' equity:
   Preferred stock                                                          2,500              2,500
   Common stock:
      Class A; 30,000,000 authorized; 17,253,533 issued                       173                141
      Class B; 10,000,000 authorized; 2,260,954 issued                         22                 22
   Paid-in capital                                                        145,155            107,833
   Retained earnings                                                       32,924             11,902
   Cumulative foreign currency translation and adjustment                  (3,428)            (1,176)
   Unrealized gain on marketable securities, net                           12,194             10,277
   Unrealized gain on equity collar, net                                      773                  -
   Treasury stock, 290,000 Class A common stock, at cost                   (2,421)                 -
                                                                       -----------        ----------
      Total stockholders' equity                                          187,892            131,499
                                                                       -----------        ----------
Commitments and contingencies
      Total liabilities and stockholders' equity                        $ 289,827          $ 265,545
                                                                        ==========         =========
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       24


<PAGE>



                      AUDIOVOX CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF INCOME (LOSS)
                  YEARS ENDED NOVEMBER 30, 1997, 1996, AND 1995
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>




                                                                          1997         1996          1995
                                                                          ----         ----          ----
<S>                                                                     <C>          <C>           <C>     
Net sales                                                               $639,082     $597,915      $500,740

Cost of sales (including an inventory write-down to
   market in 1995 of $9,300)                                             532,320      501,527       429,998
                                                                       ----------    ---------    ---------

Gross profit                                                             106,762       96,388        70,742
                                                                       ----------    ---------    ---------

Operating expenses:
   Selling                                                                38,044       40,033        34,489
   General and administrative                                             37,000       32,452        36,160
   Warehousing, assembly and repair                                       12,023       10,828         9,827
                                                                      -----------    ---------    ---------
      Total operating expenses                                            87,067       83,313        80,476
                                                                      -----------    ---------    ---------

Operating income (loss)                                                   19,695       13,075        (9,734)
                                                                      -----------   ----------    ----------

Other income (expense):
   Debt conversion expense                                               (12,686)     (26,318)            -
   Interest and bank charges                                              (2,542)      (8,480)       (9,694)
   Equity in income of equity investments                                  1,359          631           154
   Management fees and related income                                        109          186           200
   Gain on sale of equity investment                                      37,471          985         8,435
   Expense related to issuance of warrants                                     -            -        (2,921)
   Other, net                                                                 36         (714)       (1,126)
                                                                        ---------    ---------    ----------
      Total other income (expense)                                        23,747      (33,710)       (4,952)
                                                                        ---------    ---------    ----------

Income (loss) before provision for (recovery of) income
   taxes                                                                  43,442     (20,635)       (14,686)

Provision for (recovery of) income taxes                                  22,420        5,834        (2,803)
                                                                       ----------    ---------    ----------

Net income (loss)                                                      $  21,022     $(26,469)    $ (11,883)
                                                                       ==========    =========    ==========

Net income (loss) per common share (primary)                         $      1.09     $  (2.82)    $   (1.31)
                                                                     ============    =========    ==========

Net income per common share (fully diluted)                          $      1.05           -             -
                                                                     ============    =========     ========
</TABLE>













SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       25


<PAGE>



                      AUDIOVOX CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED NOVEMBER 30, 1997, 1996, AND 1995
                                 (IN THOUSANDS)


<TABLE>

                                                                                                                    Unreal-
                                                                                                                    ized
                                                                                                                    Gain
                                                                                                                    (Loss)
                                                                               Cumulative                Unreal-     On
                                                                               Foreign                   ized      Market-    Total
                                                      Unearned                Currency                  Gain on     able     Stock-
                          Preferred  Common  Paid-In  Compen-      Retained   Translation   Treasury     Equity     Secur-  holders'
                            Stock     Stock  Capital  sation       Earnings   Adjustment      Stock      Collar     ities     Equity
Balances at
<S>                          <C>        <C>   <C>        <C>        <C>            <C>       <C>         <C>        <C>        <C>
   November 30, 1994         2,500      90    40,338     (623)      50,254         (525)           -          -        -      92,034
Net loss                         -       -         -         -    (11,883)             -           -          -        -    (11,883)
Equity adjustment from
   foreign currency
   translation                   -       -         -         -           -         (438)           -          -        -       (438)
Unearned compensation
   relating to grant of
   options and non-
   performance
   restricted stock              -       -        62      (62)           -             -           -          -        -           -
Compensation expense             -       -        46       194           -             -           -          -        -         240
Options and non-
   performance
   restricted stock
   forfeitures due to
   employee
   terminations                  -       -       (81)        81           -             -           -          -        -         -
Issuance of warrants             -       -     2,921         -           -             -           -          -        -       2,921
Implementation of
   change in accounting          
   for debt and equity
   securities, net of tax
   effect of $24,517             -       -         -         -           -             -           -          -   40,004      40,004
Net unrealized loss on                             -
   marketable                    
   securities, net of tax
   effect of $(5,076)            -       -                  -               -         -            -          -   (8,283)    (8,283)
                                    ------  ------------------  ------------------------ ------------    ------  -------  ----------
Balances at
   November 30, 1995         2,500      90    43,286     (410)      38,371         (963)           -          -   31,721     114,595
Net loss                         -       -         -         -    (26,469)             -           -          -        -    (26,469)
Equity adjustment from
   foreign currency
   translation                   -       -         -         -           -         (213)           -          -        -       (213)
Compensation expense             -       -        39       258           -             -           -          -        -         297
Options and non-
   performance
   restricted stock
   forfeitures due to
   employee
   terminations                  -       -      (27)        27           -             -           -          -        -           -
Issuance of 250,000
   shares of common
   stock                         -       3         -         -           -             -           -          -        -           3
Conversion of
   debentures into
   7,012,626 shares of
   common stock                  -      70    64,660         -           -             -           -          -        -      64,730
Net unrealized loss on                             -
   marketable                    -
   securities, net of tax
   effect of ($13,143)           -       -         -        -               -         -            -          -  (21,444)   (21,444)
                                    ------  ------------------  ------------------------ ------------    ------  -------   ---------
Balance at
   November 30, 1996         2,500     163   107,958     (125)      11,902       (1,176)           -          -   10,277     131,499
Net income                       -       -         -         -      21,022             -           -          -        -      21,022
Equity adjustment from
   foreign currency
   translation                   -       -         -         -           -       (2,252)           -          -        -     (2,252)
Compensation expense             -       -       118        17           -             -           -          -        -         135

</TABLE>


                                       26


<PAGE>


                     AUDIOVOX CORPORATION AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
                 YEARS ENDED NOVEMBER 30, 1997, 1996, AND 5
                                 (IN THOUSANDS)

<TABLE>

                                                                                                                    Unreal-
                                                                                                                    ized
                                                                                                                    Gain
                                                                                                                    (Loss)
                                                                               Cumulative                 Unreal-    On
                                                                               Foreign                    ized     Market-    Total
                                                        Unearned               Currency                  Gain on    able     Stock-
                          Preferred   Common  Paid-In    Compen-    Retained   Translation   Treasury     Equity    Secur-  holders'
                            Stock      Stock  Capital    sation     Earnings   Adjustment      Stock      Collar   ities     Equity
<S>                       <C>        <C>    <C>             <C>    <C>           <C>         <C>            <C>     <C>      <C>    
Options and non-
   performance
   restricted stock
   forfeitures due to
   employee
   terminations               -        -        (23)          23         -             -           -          -           -        -
Issuance of 352,194
   shares of common
   stock                      -        3       3,489           -         -             -           -          -           -    3,492
Conversion of
   debentures into
   2,860,925 shares           -       29      33,592           -         -             -           -          -           -   33,621
Issuance of warrants          -        -         106           -         -             -           -          -           -      106
Acquisition of 290,000
   common shares              -        -           -           -         -             -     (2,421)          -           -  (2,421)
Net unrealized gain on
   marketable                 -
   securities, net of ta
   effect of $1,174           -        -           -           -         -             -           -          -       1,917    1,917
Unrealized gain on                                 -
   equity collar, net of
   tax effect of $473         -       -            -         -             -         -            -         773          -       773
                         ------     ----  -----------  ---------  ---------------------- ------------       --- -----------  -------
Balances at               2,500      195    145,240         (85)   32,924        (3,428)     (2,421)        773     12,194   187,892
                          =====      ===    ========      ======   =======       =======     =======        ===   =========  =======
   November 30, 1997
</TABLE>























SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       27


<PAGE>



                      AUDIOVOX CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
                                 (IN THOUSANDS)

<TABLE>


                                                                                  1997            1996            1995
                                                                                  ----            ----            ----
Cash flows from operating activities:
<S>                                                                            <C>            <C>             <C>      
   Net income (loss)                                                           $  21,022      $ (26,469)      $(11,883)
   Adjustment to reconcile net income (loss) to net cash provided by
      (used in)  operating activities:
      Debt conversion expense                                                     12,386          25,629              -
      Depreciation and amortization                                                1,903           3,298          4,100
      Provision for bad debt expense                                               1,300             429          1,816
      Equity in income of equity investments                                      (1,468)           (614)          (154)
      Minority interest                                                            1,623             767            225
      Gain on sale of equity investment                                          (37,471)           (985)        (8,435)
      Provision for (recovery of ) deferred income taxes                          (3,123)            468         (5,158)
      Provision for unearned compensation                                            135             297            240
      Expense relating to issuance of warrants                                       106               -          2,921
      (Gain) loss on disposal of property, plant and equipment, net                   (9)            (32)           246
   Changes in:
      Accounts receivable                                                          6,853         (21,848)        (4,468)
      Note receivable from equity investment                                           -             532         (5,097)
      Inventory                                                                  (36,823)         27,688        (16,950)
      Accounts payable, accrued expenses and other current liabilities            (2,855)         12,445            488
      Income taxes payable                                                         2,181           5,360          1,623
      Prepaid expenses and other, net                                             (2,659)         (2,954)           250
                                                                              -----------    ------------    ----------
         Net cash provided by (used in) operating activities                     (36,899)         24,011        (40,236)
                                                                               ----------     -----------      ---------

Cash flows from investing activities:
   Purchase of equity investments                                                 (4,706)              -              -
   Purchases of property, plant and equipment, net                                (3,986)         (2,805)        (2,722)
   Net proceeds from sale of investment securities                                45,937           1,000         17,250
   Proceeds from distribution from equity investment                                 450             317            267
                                                                            -------------   -------------    ----------
         Net cash provided by (used in) investing activities                      37,695          (1,488)        14,795
                                                                              -----------    ------------      --------

Cash flows from financing activities:
   Net borrowings (repayments) under line of credit agreements                    (3,765)        (14,040)        19,577
   Net borrowings (repayments) under documentary acceptances                         413         (3,620)          7,120
   Principal payments on long-term debt                                                -         (5,029)            (11)
   Debt issuance costs                                                               (13)           (392)          (714)
   Principal payments on capital lease obligation                                      -            (158)          (233)
   Proceeds from issuance of long-term debt                                            -               -            675
   Proceeds from issuance of Class A Common Stock                                  2,328               -              -
   Repurchase of Class A Common Stock                                             (2,421)              -              -
   Proceeds from release of restricted cash                                            -           5,959            600
                                                                          ---------------   ------------     ----------
         Net cash provided by (used in) financing activities                      (3,458)        (17,280)        27,014
Effect of exchange rate changes on cash                                             (243)             31              8
                                                                             ------------  --------------  ------------
Net increase in cash and cash equivalents                                         (2,905)          5,274          1,581
Cash and cash equivalents at beginning of period                                  12,350           7,076          5,495
                                                                              -----------    ------------     ---------
Cash and cash equivalents at end of period                                    $    9,445      $   12,350       $  7,076
                                                                              ===========     ===========      ========
</TABLE>







SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       28


<PAGE>

                      AUDIOVOX CORPORATION AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        NOVEMBER 30, 1997, 1996 AND 1995

             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


(1)      Summary of Significant Accounting Policies

         (a)      Description of Business

                  Audiovox Corporation and its subsidiaries (the Company) design
                  and market  cellular  telephones and  accessories,  automotive
                  aftermarket  sound and security  equipment,  other  automotive
                  aftermarket   accessories,   and   certain   other   products,
                  principally in the United  States,  Canada,  and overseas.  In
                  addition  to  generating  product  revenue  from  the  sale of
                  cellular telephone products,  the Company's retail outlets, as
                  agents for cellular carriers,  are paid activation commissions
                  and residual fees from such carriers.

                  The  Company's  automotive  sound,   security,  and  accessory
                  products include stereo cassette radios,  compact disc players
                  and  changers,  amplifiers  and  speakers;  key  based  remote
                  control security  systems;  cruise controls and door and trunk
                  locks.  These products are marketed  through mass  merchandise
                  chain  stores,   specialty  automotive  accessory  installers,
                  distributors, and automobile dealers.

         (b)      Principles of Consolidation

                  The consolidated  financial  statements  include the financial
                  statements of Audiovox  Corporation and its  wholly-owned  and
                  majority-owned  subsidiaries.   All  significant  intercompany
                  balances   and   transactions    have   been   eliminated   in
                  consolidation.

         (c)      Cash Equivalents

                  Cash  equivalents  of $1,337 at November 30, 1995 consisted of
                  short-term  investments  with terms of less than three months.
                  For  purposes of the  statements  of cash  flows,  the Company
                  considers investments with original maturities of three months
                  or less to be cash equivalents.

         (d)      Cash Discount and Co-operative Advertising Allowances

                  The Company accrues for estimated cash discounts and trade and
                  promotional co-operative advertising allowances at the time of
                  sale.  These  discounts  and  allowances  are reflected in the
                  accompanying  consolidated financial statements as a reduction
                  of accounts  receivable  as they are  utilized by customers to
                  reduce their trade indebtedness to the Company.



                                                                     (Continued)
                                       29


<PAGE>
                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


         (e)      Inventory

                  Inventory consists principally of finished goods and is stated
                  at the lower of cost  (primarily on a weighted  moving average
                  basis) or market.  The markets in which the  Company  competes
                  are  characterized by declining prices,  intense  competition,
                  rapid   technological   change  and   frequent   new   product
                  introductions.  The Company maintains a significant investment
                  in inventory and, therefore,  is subject to the risk of losses
                  on  write-downs to market and inventory  obsolescence.  During
                  the third  quarter of 1995,  the Company  recorded a charge of
                  approximately  $9,300  to  accurately  reflect  the  Company's
                  inventory  at the lower of cost or market.  No estimate can be
                  made of losses that are reasonably  possible should additional
                  write-downs to market be required in the future.

         (f)      Derivative Financial Instruments

                  The Company,  as a policy,  does not use derivative  financial
                  instruments  for  trading  purposes.   A  description  of  the
                  derivative financial instruments used by the Company follows:

                  (1)      Forward Exchange Contracts

                           The  Company  conducts  business  in several  foreign
                           currencies  and,  as a result,  is subject to foreign
                           currency  exchange  rate risk due to the effects that
                           exchange rate movements of these  currencies  have on
                           the  Company's  costs.  To  minimize  the  effect  of
                           exchange  rate  fluctuations  on costs,  the  Company
                           enters into  forward  exchange  rate  contracts.  The
                           Company,  as a policy,  does not enter  into  forward
                           exchange contracts for trading purposes.  The forward
                           exchange rate contracts are entered into as hedges of
                           inventory   purchase   commitments   and   of   trade
                           receivables due in foreign currencies.

                           Gains and losses on the  forward  exchange  contracts
                           that qualify as hedges are reported as a component of
                           the   underlying   transaction.    Foreign   currency
                           transactions   which   have  not  been   hedged   are
                           marked-to-market  on a current  basis  with gains and
                           losses  recognized  through  income and  reflected in
                           other income (expense).  In addition,  any previously
                           deferred   gains  and  losses  on  hedges  which  are
                           terminated   prior  to  the   transaction   date  are
                           recognized  in  current  income  when  the  hedge  is
                           terminated (Note 16(a)(1)).

                  (2)      Equity Collar

                           The Company  has an equity  collar for 100,000 of its
                           shares in CellStar  Corporation  (CellStar) (Note 6).
                           The equity collar is recorded on the balance sheet at
                           fair value with gains and losses on the equity collar
                           reflected as a separate component

                                                                     (Continued)
                                       30


<PAGE>

                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


                           of stockholders'  equity (Note 16(a)(2)).  The equity
                           collar  acts  as a  hedging  item  for  the  CellStar
                           shares.   Being  that  the  item  being  hedged,  the
                           CellStar shares,  is an  available-for-sale  security
                           carried at fair market  value with  unrealized  gains
                           and  losses  recorded  as  a  separate  component  of
                           stockholders' equity, the unrealized gains and losses
                           on the equity  collar are also recorded as a separate
                           component of stockholders' equity.

         (g)      Investment Securities

                  The Company  classifies its debt and equity  securities in one
                  of   three   categories:   trading,   available-for-sale,   or
                  held-to-maturity.  Trading  securities  are  bought  and  held
                  principally  for the purpose of selling them in the near term.
                  Held-to-maturity  securities are those securities in which the
                  Company has the ability and intent to hold the security  until
                  maturity.  All other  securities  not  included  in trading or
                  held-to-maturity are classified as available-for-sale.

                  Trading and available-for-sale securities are recorded at fair
                  value.  Held-to-maturity  securities are recorded at amortized
                  cost,  adjusted for the  amortization or accretion of premiums
                  or discounts.  Unrealized  holding gains and losses on trading
                  securities are included in earnings.  Unrealized holding gains
                  and   losses,    net   of   the   related   tax   effect,   on
                  available-for-sale  securities  are excluded from earnings and
                  are reported as a separate  component of stockholders'  equity
                  until  realized.  Realized  gains and losses  from the sale of
                  available-for-sale  securities  are  determined  on a specific
                  identification basis.

                  A decline in the  market  value of any  available-for-sale  or
                  held-to-maturity security below cost that is deemed other than
                  temporary  results in a reduction  in carrying  amount to fair
                  value.  The  impairment  is charged to earnings and a new cost
                  basis for the security is established.  Premiums and discounts
                  are  amortized  or  accreted  over  the  life  of the  related
                  held-to-maturity  security as an adjustment to yield using the
                  effective  interest  method.  Dividend and interest income are
                  recognized when earned.

         (h)      Debt Issuance Costs

                  Costs  incurred  in  connection   with  the  issuance  of  the
                  convertible  subordinated  debentures and restructuring of the
                  Series A and Series B convertible subordinated notes (Note 10)
                  and the  restructuring  of bank  obligations  (Note 9(a)) have
                  been  capitalized.  These charges are amortized over the lives
                  of the respective  agreements.  Amortization  expense of these
                  costs amounted to $37, $1,109,  and $1,319 for the years ended
                  November 30, 1997,  1996 and 1995,  respectively.  During 1997
                  and 1996, the Company wrote off $245 and $3,249, respectively,
                  of debt issuance costs (Note 10).


                                                                     (Continued)
                                       31


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


         (i)      Property, Plant, and Equipment

                  Property,  plant, and equipment are stated at cost.  Equipment
                  under  capital lease is stated at the present value of minimum
                  lease   payments.    Depreciation   is   calculated   on   the
                  straight-line  method over the  estimated  useful lives of the
                  assets as follows:


                    Buildings                               20 years
                    Furniture, fixtures and displays      5-10 years
                    Machinery and equipment               5-10 years
                    Computer hardware and software           5 years
                    Automobiles                              3 years

                  Leasehold  improvements  are amortized over the shorter of the
                  lease  term or  estimated  useful  life of the  asset.  Assets
                  acquired  under capital  lease are amortized  over the term of
                  the lease.

         (j)      Intangible Assets

                  Intangible    assets    consist   of   patents,    trademarks,
                  non-competition  agreements,  and the  excess  cost  over fair
                  value of assets acquired for certain subsidiary  companies and
                  equity  investments.  Excess  cost over  fair  value of assets
                  acquired is being amortized over periods not exceeding  twenty
                  years. The costs of other intangible assets are amortized on a
                  straight-line basis over their respective lives.

                  Accumulated  amortization  approximated  $1,759  and $1,413 at
                  November 30, 1997 and 1996, respectively.  Amortization of the
                  excess  cost over  fair  value of  assets  acquired  and other
                  intangible  assets  amounted to $363,  $145,  and $127 for the
                  years ended November 30, 1997,  1996, and 1995,  respectively.
                  During 1997,  the Company made  investments  in two  companies
                  that  resulted  in  additional  excess cost over fair value of
                  assets acquired (Note 8).

                  On an ongoing  basis,  the Company  reviews the  valuation and
                  amortization  of  its  intangible  assets.  As a  part  of its
                  ongoing  review,  the  Company  estimates  the  fair  value of
                  intangible  assets  taking into  consideration  any events and
                  circumstances which may diminish fair value.

                  The  recoverability  of the  excess  cost over  fair  value of
                  assets  acquired  is  assessed  by  determining   whether  the
                  amortization  over its remaining life can be recovered through
                  undiscounted  future  operating  cash  flows  of the  acquired
                  operation. The amount of impairment, if any, is measured based
                  on projected  discounted  future  operating cash flows using a
                  discount rate reflecting the Company's  average cost of funds.
                  The assessment of the  recoverability  of the excess cost over
                  fair value of assets acquired

                                                                     (Continued)
                                       32


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


               will be impacted if estimated future operating cash flows are not
               achieved.

         (k)      Equity Investments

                  The Company has common stock  investments  which are accounted
                  for by the equity method (Note 8).

         (l)      Cellular Telephone Commissions

                  Under various  agreements,  the Company typically  receives an
                  initial  activation  commission for obtaining  subscribers for
                  cellular  telephone  services.  Additionally,  the  agreements
                  typically contain  provisions for commissions based upon usage
                  and length of  continued  subscription.  The  agreements  also
                  typically  provide for the reduction or elimination of initial
                  activation   commissions  if  subscribers  deactivate  service
                  within  stipulated   periods.   The  Company  has  provided  a
                  liability  for  estimated  cellular   deactivations  which  is
                  reflected   in   the   accompanying   consolidated   financial
                  statements as a reduction of accounts receivable.

                  The  Company   recognizes   sales   revenue  for  the  initial
                  activation,   length  of  service  commissions,  and  residual
                  commissions  based  upon  usage  on the  accrual  basis.  Such
                  commissions approximated $35,749, $37,930, and $43,307 for the
                  years ended November 30, 1997,  1996, and 1995,  respectively.
                  Related  commissions  paid to outside selling  representatives
                  for cellular activations are reflected as cost of sales in the
                  accompanying  consolidated  statements  of income  (loss)  and
                  amounted to $19,924,  $20,443, and $15,374 for the years ended
                  November 30, 1997, 1996, and 1995, respectively.

         (m)      Advertising

                  The Company  expenses the  production  costs of advertising as
                  incurred and expenses the costs of  communicating  advertising
                  when the service is received.  During the years ended November
                  30, 1997,  1996, and 1995, the Company had no direct  response
                  advertising.

         (n)      Warranty Expenses

                  Warranty expenses are accrued at the time of sale based on the
                  Company's  estimated  cost  to  repair  expected  returns  for
                  products.  At November 30, 1997 and 1996,  the  liability  for
                  future  warranty   expense  amounted  to  $2,257  and  $2,618,
                  respectively.



                                                                     (Continued)
                                       33


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


         (o)      Foreign Currency

                  Assets  and  liabilities  of  those  subsidiaries  and  equity
                  investments located outside the United States whose cash flows
                  are  primarily in local  currencies  have been  translated  at
                  rates  of  exchange  at the end of the  period.  Revenues  and
                  expenses have been translated at the weighted average rates of
                  exchange  in  effect  during  the  period.  Gains  and  losses
                  resulting from  translation  are accumulated in the cumulative
                  foreign currency translation account in stockholders'  equity.
                  Exchange gains and losses on hedges of foreign net investments
                  and on intercompany  balances of a long-term investment nature
                  are  also  recorded  in  the   cumulative   foreign   currency
                  translation   adjustment   account.   Other  foreign  currency
                  transaction gains and losses are included in net income,  none
                  of which were material for the years ended  November 30, 1997,
                  1996, and 1995.

         (p)      Income Taxes

                  Income taxes are  accounted  for under the asset and liability
                  method. Deferred tax assets and liabilities are recognized for
                  the  future  tax  consequences   attributable  to  differences
                  between the financial  statement  carrying amounts of existing
                  assets  and  liabilities  and their  respective  tax bases and
                  operating  loss and tax  credit  carryforwards.  Deferred  tax
                  assets and  liabilities  are measured  using enacted tax rates
                  expected  to apply to  taxable  income  in the  years in which
                  those  temporary  differences  are expected to be recovered or
                  settled.  The effect on deferred tax assets and liabilities of
                  a change in tax rates is  recognized  in income in the  period
                  that includes the enactment date.

         (q)      Net Income (Loss) Per Common Share

                  Primary  earnings per share are computed based on the weighted
                  average number of common shares  outstanding  and common stock
                  equivalents.   The  Company  did  not  present   fully-diluted
                  earnings  per share for the years ended  November 30, 1996 and
                  1995 as the addition of potentially  dilutive securities would
                  result in anti-dilution.

                  The  following  weighted  average  shares  were  used  for the
                  computation of primary and fully-diluted earnings per share:


                                             For the Years Ended November 30,

                                             1997          1996          1995
                                             ----          ----          ----

                    Primary                19,295,346     9,398,352    9,038,742
                    Fully diluted          20,112,523         -             -



                                                                     (Continued)
                                       34


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


                  The  Company  will  adopt  the   provisions  of  Statement  of
                  Financial  Accounting  Standards (SFAS) No. 128, "Earnings per
                  Share", on December 1, 1997. Adoption of SFAS No. 128 will not
                  have an impact on the Company's financial position, results of
                  operations  or  liquidity,  however,  the impact on previously
                  reported earnings per share data is currently unknown.

         (r)      Supplementary Financial Statement Information

                  Advertising  expenses  approximated   $16,981,   $21,794,  and
                  $13,538 for the years ended November 30, 1997, 1996, and 1995,
                  respectively.

                  Interest income of approximately  $1,525,  $1,097,  and $1,047
                  for the  years  ended  November  30,  1997,  1996,  and  1995,
                  respectively,   is  included  in  other  in  the  accompanying
                  consolidated statements of income (loss).

                  Included in accrued expenses and other current  liabilities is
                  $4,091 and $4,405 of accrued wages and commissions at November
                  30, 1997 and 1996, respectively.

         (s)      Use of Estimates

                  The  preparation  of financial  statements in conformity  with
                  generally accepted  accounting  principles requires management
                  to make  estimates  and  assumptions  that affect the reported
                  amounts  of  assets  and  liabilities  and  disclosure  of the
                  contingent assets and liabilities at the date of the financial
                  statements  and the reported  amounts of revenues and expenses
                  during the reporting period.  Actual results could differ from
                  those estimates.

     (t)          Accounting  for the Impairment of Long-Lived  Assets and for 
                    Long-Lived Assets to be Disposed of

                  On  December  1,  1996,  the  Company  adopted  SFAS No.  121,
                  "Accounting  for the  Impairment of Long-Lived  Assets and for
                  Long-Lived  Assets to be Disposed  of." SFAS No. 121  requires
                  that long-lived assets and certain identifiable intangibles be
                  reviewed  for  impairment   whenever   events  or  changes  in
                  circumstances  indicate  that the carrying  amount of an asset
                  may not be  recoverable.  Recoverability  of assets to be held
                  and used is measured by comparison  of the carrying  amount of
                  an asset to the future net cash flows expected to be generated
                  by the asset.  If such assets are  considered  to be impaired,
                  the  impairment  to be recognized is measured by the amount by
                  which the carrying  amount of the assets exceed the fair value
                  of assets.  Assets to be disposed of are reported at the lower
                  of the  carrying  amount  or fair  value  less  cost to  sell.
                  Adoption of SFAS No. 121 did not have a material impact on the
                  Company's  financial   position,   results  of  operations  or
                  liquidity.


                                                                     (Continued)
                                       35


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


         (u)      Accounting for Stock-Based Compensation

                  Prior to December 1, 1996, the Company accounted for its stock
                  option plan in  accordance  with the  provisions of Accounting
                  Principles  Board (APB) Opinion No. 25,  "Accounting for Stock
                  Issued to Employees",  and related  interpretations.  As such,
                  compensation  expense  would be  recorded on the date of grant
                  only if the  current  market  price  of the  underlying  stock
                  exceeded the exercise  price. On December 1, 1996, the Company
                  adopted   SFAS   No.   123,    "Accounting   for   Stock-Based
                  Compensation", which permits entities to recognize, as expense
                  over the  vesting  period,  the fair value of all  stock-based
                  awards on the date of grant. Alternatively,  SFAS No. 123 also
                  allows  entities to continue  to apply the  provisions  of APB
                  Opinion  No. 25 and provide pro forma net income and pro forma
                  earnings  per share  disclosures  for  employee  stock  option
                  grants  made  in  fiscal  1996  and  future  years  as if  the
                  fair-value-based  method  defined  in SFAS  No.  123 had  been
                  applied.  The  Company  has  elected to  continue to apply the
                  provisions  of APB  Opinion  No. 25 and  provide the pro forma
                  disclosure provisions of SFAS No. 123.

(2)      Business Acquisitions/Dispositions

         During 1997,  the Company  formed  Audiovox  Venezuela  C.A.  (Audiovox
         Venezuela), an 80%- owned subsidiary,  for the purpose of expanding its
         international  business. The Company made an initial investment of $478
         which  was used by  Audiovox  Venezuela  to  obtain  certain  licenses,
         permits and fixed assets.

          In April 1996,  the Company  formed  Audiovox  Holdings (M) Sdn.  Bhd.
          (Audiovox Holdings) and Audiovox  Communications  (Malaysia) Sdn. Bhd.
          (Audiovox  Communications),  which are 80% and 72% -owned subsidiaries
          of Audiovox Asia, Inc. (Audiovox Asia), respectively,  which, in turn,
          is a wholly-owned subsidiary of the Company. In July 1994, the Company
          formed  Audiovox  (Thailand)  Co.,  Ltd., a 100%-owned  subsidiary  of
          Audiovox  Asia.  In  1996,  Audiovox   Communications  formed  Vintage
          Electronics Holdings (Malaysia) Sdn. Bhd., a wholly-owned  subsidiary.
          The  Company  formed  these  subsidiaries  to  assist  in its  planned
          expansion of its international business.

          In  October  1996,  the  Company  contributed  the net  assets  of its
          cellular  division  into  a  newly-  formed,  wholly-owned  subsidiary
          Audiovox Communications Corp. (ACC).



                                                                     (Continued)
                                       36


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(3)      Supplemental Cash Flow Information

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


                                           For the Years Ended November 30,
                                         1997           1996           1995
Cash paid during the years for:
Interest                                $  1,560        $7,666         $9,224
Income taxes                             $23,530       $   272        $   818

         During  1997,  the Company  issued a credit of $1,250 on open  accounts
         receivable  and  issued  250,000  shares of its  Class A Common  Stock,
         valued at five  dollars per share,  in exchange  for a 20%  interest in
         Bliss-Tel Company, Limited (Bliss-Tel) (Note 8).

         During 1997, the Company  contributed  $6,475 in net assets in exchange
         for a 50% ownership interest in Audiovox Specialized Applications,  LLC
         (ASA)  which  resulted  in $5,595 of excess cost over fair value of net
         assets (Note 8).

         As of November 30, 1997,  the Company  recorded an  unrealized  holding
         gain relating to the equity collar,  net of deferred  income taxes,  of
         $773 as a separate component of stockholders' equity (Note 16).

         As of November 30, 1997 and 1996,  the Company  recorded an  unrealized
         holding  gain   relating  to   available-for-sale   marketable   equity
         securities,  net of deferred  income  taxes,  of $12,194  and  $10,277,
         respectively, as a separate component of stockholders' equity (Note 6).

         On February 9, 1996, the Company's  10.8% Series AA and 11.0% Series BB
         convertible  debentures  matured. As of February 9, 1996, $1,100 of the
         Series BB  convertible  debentures  converted  into  206,046  shares of
         Common Stock (Note 10).

         On November 25, 1996,  the Company  completed an exchange of $41,252 of
         its $65,000 6 1/4% convertible  subordinated  debentures into 6,806,580
         shares of Common Stock (Note 10).

         During  1996,  the  Company  contributed  $97 of  property,  plant  and
         equipment in exchange for a 50%  ownership  interest in a  newly-formed
         joint venture (Note 8).

         During  1995,  the Company  contributed  $36 of  property,  plant,  and
         equipment in exchange for a 50%  ownership  interest in a  newly-formed
         joint venture (Note 8).



                                                                     (Continued)
                                       37


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(4)      Transactions With Major Suppliers

         The Company engaged in transactions with Shintom Co., Ltd. (Shintom), a
         stockholder  who owned  approximately  1.7% at November 30, 1996 of the
         outstanding  Class A Common Stock and all of the outstanding  Preferred
         Stock of the Company at November 30, 1997 and 1996.  During  1994,  the
         Company formed TALK Corporation  (TALK), a 30.8%-owned joint venture in
         Japan (Note 8), with Shintom and other companies.

         Transactions with Shintom and TALK included financing  arrangements and
         inventory  purchases which approximated 26% and 20% for the years ended
         November 30, 1996 and 1995, respectively, of total inventory purchases.
         Transactions  with TALK included  financing  arrangements and inventory
         purchases which  approximated  29% for the year ended November 30, 1997
         of total  inventory  purchases.  At  November  30,  1997 and 1996,  the
         Company had recorded  $9,702 and $3,501,  respectively,  of liabilities
         due to TALK for inventory  purchases included in accounts payable.  The
         Company also has documentary  acceptance  obligations  outstanding from
         TALK as of November  30,  1997 and 1996 (Note  9(b)).  At November  30,
         1996, the Company had recorded a receivable  from TALK in the amount of
         $4,565 payable with interest (Note 8).

         Inventory  purchases from a major supplier  approximated  32%, 28%, and
         44% of total inventory purchases for the years ended November 30, 1997,
         1996,  and 1995,  respectively.  Although there are a limited number of
         manufacturers of its products, management believes that other suppliers
         could  provide  similar  products  on  comparable  terms.  A change  in
         suppliers,  however,  could cause a delay in product availability and a
         possible loss of sales, which would affect operating results adversely.

(5)      Accounts Receivable

         Accounts receivable is comprised of the following:

                                                          November 30,
                                                         1997           1996

Trade accounts receivable                              $113,498       $127,854
Receivables from equity investments (Note 8)              1,921          2,626
                                                    -----------    -----------
                                                        115,419        130,480
Less:
   Allowance for doubtful accounts                        3,497          3,115
   Allowance for cellular deactivations                   1,363          1,666
Allowance for co-operative advertising and cash
       discounts                                          5,861          7,291
                                                    -----------    -----------
                                                       $104,698       $118,408
                                                       ========       ========

         See Note 16(c) for concentrations of credit risk.

                                                                     (Continued)
                                       38


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(6)      Investment Securities

         The Company's  investment  securities  consist primarily of 865,000 and
         2,375,000  shares of CellStar  Common Stock,  which were  classified as
         available-for-sale  marketable  equity  securities at November 30, 1997
         and 1996, respectively.  The aggregate fair value of available-for-sale
         marketable  equity  securities were $22,382 and $27,758 at November 30,
         1997 and 1996,  respectively,  which is  comprised  of a cost  basis of
         $2,715 and $11,181 and a gross  unrealized  holding gain of $19,667 and
         $16,577  recorded as a separate  component of  stockholders'  equity at
         November  30,  1997 and  1996,  respectively.  A related  deferred  tax
         liability  of $7,473 and $6,300 was  recorded at November  30, 1997 and
         1996,  respectively,  as a reduction  to the  unrealized  holding  gain
         included as a separate component of stockholders' equity.

         During 1997, the Company sold 1,835,000 shares of CellStar Common Stock
         yielding  net  proceeds of  approximately  $45,937  and a gain,  net of
         taxes, of approximately $23,232.

(7)      Property, Plant, and Equipment

         A summary of property, plant, and equipment, net, is as follows:

<TABLE>


                                                                    November 30,
                                                                  1997          1996

<S>                                                          <C>           <C>       
          Land                                               $      363    $      363
          Buildings                                               2,099         1,782
          Furniture, fixtures and displays                        3,418         3,277
          Machinery and equipment                                 4,341         3,221
          Computer hardware and software                         14,307        12,658
          Automobiles                                               800           954
          Leasehold improvements                                  3,510         3,454
                                                             -----------    ----------
                                                                 28,838        25,709
          Less accumulated depreciation and amortization        (20,285)      (18,953)
                                                               ---------     ---------
                                                              $   8,553     $   6,756
                                                              ==========    =========
</TABLE>


         Computer software includes approximately $1,672 and $690 of unamortized
         costs as of November  30, 1997 and 1996,  respectively,  related to the
         acquisition  and  installation  of management  information  systems for
         internal use which are being amortized over a five-year period.

         Depreciation  and  amortization  of plant  and  equipment  amounted  to
         $1,503, $2,044, and $2,654 for the years ended November 30, 1997, 1996,
         and  1995,  respectively,   which  includes  amortization  of  computer
         software  costs of $19, $364, and $922 for the years ended November 30,
         1997, 1996, and 1995, respectively.


                                                                     (Continued)
                                       39


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(8)      Equity Investments

         As of November 30, 1997, the Company had a 30.8% ownership  interest in
         TALK.  As of November 30, 1997,  the  Company's  72% owned  subsidiary,
         Audiovox  Communications,  had a 29%  ownership  interest  in Avx Posse
         (Malaysia)  Sdn.  Bhd.  (Posse)  which  monitors car security  commands
         through a satellite based system in Malaysia.  As of November 30, 1997,
         the Company had a 20% ownership interest in Bliss-Tel which distributes
         cellular  telephones  and  accessories in Thailand.  Additionally,  the
         Company  had 50%  non-controlling  ownership  interests  in five  other
         entities: Protector Corporation (Protector) which acts as a distributor
         of chemical protection  treatments;  ASA which acts as a distributor to
         specialized  markets for RV's and van  conversions,  of televisions and
         other automotive  sound,  security,  and accessory  products;  Audiovox
         Pacific Pty.,  Limited (Audiovox  Pacific) which  distributes  cellular
         telephones and automotive sound and security  products in Australia and
         New Zealand; 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; and Quintex  Communications  West, LLC (Quintex
         West),  which is in the cellular  telephone  and related  communication
         products  business,  as well  as the  automotive  aftermarket  products
         business on the West Coast of the United States.

         On June 1, 1995, at an exercise price of $11.50 per share, an option to
         purchase up to an  aggregate  of  1,500,000  shares of CellStar  Common
         Stock  owned by the  Company was  exercised.  As a result,  the Company
         recorded a gain,  before  provision for income taxes, of  approximately
         $8,400. This reduced the Company's ownership in CellStar below 20% and,
         as such, the Company  discontinued  the equity method of accounting for
         CellStar.  The  remaining  CellStar  shares  owned by the  Company  are
         accounted for as an investment in marketable  equity  securities  (Note
         6).

         The following table presents financial information relating to CellStar
         for the year ended November 30, 1995:


                                                                    1995

          Current assets                                          $271,156
          Non-current assets                                        43,765
          Current liabilities                                      196,746
          Non-current liabilities                                    6,880
          Net sales                                                811,915
          Gross profit                                             109,841
          Net income                                                22,896

         In  August  1994,  the  Company   invested  600  million  Japanese  Yen
         (approximately  $6,000) into a newly-formed company,  TALK, in exchange
         for 12,000 shares of TALK,  representing a 33% ownership interest. Five
         million dollars of this investment was financed by a non-recourse  note
         with a third party lender, which provides for the repayment of the note
         either in cash or

                                                                     (Continued)
                                       40


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


         by surrendering 10,000 shares in TALK. During 1997 and 1996, additional
         investments  were made by  outside  investors  reducing  the  Company's
         ownership to 30.8%.  The Company  accounts for its  investment  in TALK
         under the equity method of accounting.

         TALK,   which  holds   world-wide   distribution   rights  for  product
         manufactured by Shintom,  has given the Company exclusive  distribution
         rights  on  all  wireless  personal   communication  products  for  all
         countries  except  Japan,  China,  Thailand,  and  several  mid-eastern
         countries.  The Company granted Shintom a license agreement  permitting
         the use of the Audiovox  trademark to be used with TALK video  cassette
         recorders  sold in Japan from  August 29, 1994 to August 28,  1997,  in
         exchange for royalty fees. For the years ended November 30, 1997,  1996
         and 1995, no such royalty fees were earned by the Company.

         On July 31, 1995,  the Company  purchased a 50% equity  investment in a
         newly-formed  company,  G.L.M.,  for  approximately  $36 in contributed
         assets. In addition,  the Company has guaranteed certain obligations of
         G.L.M. (Note 16(b)).

         On December 1, 1995, the Company purchased a 50% equity investment in a
         newly-formed   company,   Quintex  West,  for   approximately   $97  in
         contributed assets.

         During 1997, the Company purchased a 20% equity investment in Bliss-Tel
         in exchange for 250,000  shares of the  Company's  Class A Common Stock
         and a credit for open accounts  receivable  of $1,250.  The issuance of
         the common stock resulted in an increase to additional  paid-in capital
         of approximately  $1,248. The investment in Bliss-Tel will be accounted
         for under the equity method of accounting.

         During  1997,  the  Company  purchased  a 50%  equity  investment  in a
         newly-formed  company,  ASA,  for  approximately  $11,131.  The Company
         contributed  the net assets of its Heavy Duty Sound  division,  its 50%
         interest in Audiovox  Specialty  Markets Co. (ASMC) and $4,656 in cash.
         In connection with this investment,  excess cost over fair value of net
         assets  acquired  of $5,595  resulted,  which is being  amortized  on a
         straight-line  basis  over 20  years.  The  other  investor  (Investor)
         contributed  its 50%  interest  in  ASMC  and  the  net  assets  of ASA
         Electronics  Corporation.  In  connection  with  this  investment,  the
         Company  entered into a stock  purchase  agreement with the Investor in
         ASA. The agreement  provides for the sale of 352,194  shares of Class A
         Common Stock at $6.61 per share  (aggregate  proceeds of  approximately
         $2,328) by the Company to the Investor.  The transaction  resulted in a
         net increase to additional paid-in capital of approximately $2,242. The
         selling  price of the shares are subject to adjustment in the event the
         Investor sells shares at a loss during a 90-day period,  beginning with
         the  effective  date  of the  registration  statement  filed  with  the
         Securities  and  Exchange  Commission  to  register  such  shares.  The
         adjustment  to the  selling  price will equal the loss  incurred by the
         Investor up to a maximum of 50% of the shares. In the event the Company
         does make an  adjustment  to the shares,  additional  goodwill  will be
         recorded as the adjustment represents contingent consideration.

                                                                     (Continued)
                                       41


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


         The Company  received the following  management fees and related income
         from its equity investments:


                                                    November 30,
                                                     -------------
                                           1997         1996          1995
                                           ----         ----          ----
          Pacific                              -       $   22         $ 186
          G.L.M.                           $  12          100            14
          Quintex West                         -           18             -
          Posse                               97           46             -
                                          ------      -------      --------
                                            $109        $ 186         $ 200
                                            ====        =====         =====

         The Company's net sales to the equity  investments  amounted to $6,132,
         $6,483,  and $17,864 for the years ended  November 30, 1997,  1996, and
         1995, respectively. The Company's purchases from the equity investments
         amounted  to  $144,488,  $115,109,  and  $83,858  for the  years  ended
         November 30, 1997, 1996, and 1995,  respectively.  The Company recorded
         $2,027 and $2,130 of outside  representative  commission  expenses  for
         activations and residuals  generated by G.L.M. on the Company's  behalf
         during fiscal year 1997 and 1996, respectively, (Note 1(l)).

         Included in accounts receivable at November 30, 1997 and 1996 are trade
         receivables  due from its  equity  investments  aggregating  $1,921 and
         $2,576, respectively. At November 30, 1996, a management fee receivable
         of $50 was also included in accounts receivable. Receivable from vendor
         is interest bearing and represents  claims on late deliveries,  product
         modifications, and price protection from TALK as well as prepayments on
         product shipments. Interest is payable in monthly installments at rates
         which range from 6.5% to 8%. Amounts representing prepayments of $5,000
         were  repaid via receipt of product  shipments  in  December  1997.  At
         November  30, 1997 and 1996,  other  long-term  assets  include  equity
         investment  advances  outstanding  and  management  fee  receivables of
         $1,496  and  $1,634,  respectively.  At  November  30,  1997 and  1996,
         included  in  accounts   payable  and  other   accrued   expenses  were
         obligations  to  equity  investments  aggregating  $9,783  and  $3,773,
         respectively.  Documentary acceptance obligations were outstanding from
         TALK at November 30, 1997 (Note 9(b)).

         During 1997, the Company recorded interest income from TALK relating to
         the receivable from vendor,  reimbursement of interest expense incurred
         under the subordinated loan to hedge the TALK investment (Note 10), and
         other  short-term  loans made to TALK  during  1997 at market  interest
         rates. For the years ended November 30, 1997, 1996, and 1995,  interest
         income  earned  on  equity   investment  notes  and  other  receivables
         approximated  $653, $725, and $573,  respectively.  Interest expense on
         equity investment documentary acceptances approximated $203 and $198 in
         1997 and 1996, respectively.


                                                                     (Continued)
                                       42


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(9)      Financing Arrangements

         (a)      Bank Obligations

                  During 1993,  the Company had  established a revolving  credit
                  agreement with several financial  institutions which was first
                  amended on March 15, 1994. On May 5, 1995, the Company entered
                  into the Second  Amended and Restated  Credit  Agreement  (the
                  Credit  Agreement) which superseded the first amendment in its
                  entirety.  During 1997, the Credit  Agreement was amended four
                  times providing for various changes to the terms. The terms as
                  of November 30, 1997 are summarized below.

                  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 continue
                  to be guaranteed by certain of the Company's  subsidiaries and
                  is secured by accounts receivable and inventory of the Company
                  and  those  subsidiaries.  The  obligations  were  secured  at
                  November  30, 1997 by a pledge  agreement  entered into by the
                  Company for 100 shares of ACC.  Availability  of credit  under
                  the Credit Agreement is a maximum aggregate amount of $95,000,
                  subject  to  certain  conditions,  and is based upon a formula
                  taking into  account  the amount and  quality of its  accounts
                  receivable  and  inventory.  The Credit  Agreement  expires on
                  February 28, 2000.  As a result,  bank  obligations  under the
                  Credit Agreement have been classified as long-term at November
                  30, 1997.

                  Outstanding obligations under the Credit Agreement at November
                  30, 1997 and 1996 were as follows:


                                                          November 30,
                                                       1997            1996

               Revolving Credit Notes                  $18,300        $11,700
               Eurodollar Notes                          6,000         20,000
                                                     ---------        -------
                                                       $24,300        $31,700
                                                       =======        =======

                  For the year ended  November  30, 1995  through and  including
                  February 8, 1996, interest on revolving credit notes were .25%
                  above the prime rate,  which was 8.75% at November  30,  1995.
                  For the same  period,  interest  on  Eurodollar  Notes were 2%
                  above the Libor rate which was approximately  5.1% at November
                  30, 1995 and  interest on bankers'  acceptances  were 2% above
                  the bankers'  acceptance rate which was approximately 6.25% at
                  November  30,  1995.  Pursuant to an  amendment on February 9,
                  1996,  the interest  rates were  increased  to the  following:
                  revolving credit notes at .50% above the prime rate, which was
                  approximately  8.5% at November 30, 1997 and Eurodollar  Notes
                  at 2.75% above the Libor rate which was approximately 5.97% at
                  November 30, 1997. Interest on bankers'  acceptances  remained
                  at 2% above the bankers' acceptance

                                                                     (Continued)
                                       43


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


                  rate which was  approximately  5.77% at November 30, 1997. The
                  maximum  commitment  fee on the unused  portion of the line of
                  credit is .25% as of November 30, 1997.

                  The Credit  Agreement  contains several  covenants  requiring,
                  among  other  things,  minimum  levels of  pre-tax  income and
                  minimum levels of net worth and working capital. Additionally,
                  the  agreement   includes   restrictions  and  limitations  on
                  payments  of  dividends,   stock   repurchases,   and  capital
                  expenditures. During 1997, the Company received amendments and
                  waivers to allow the Company to make stock  repurchases  (Note
                  12)  and  enter  into  the  equity  collar  (Note   16(a)(2)).
                  Subsequent  to year end,  the Company  received a waiver which
                  allowed for the delay in issuance of its financial statements.

                  The  Company  also  has a  revolving  credit  facility  with a
                  Malaysian  bank  (Malaysian   Credit   Agreement)  to  finance
                  additional  working capital needs. As of November 30, 1997 and
                  1996,  the  available  line of credit  for  direct  borrowing,
                  letters of credit,  bankers'  acceptances  and other  forms of
                  credit  approximated  $8,017  and  $9,320,  respectively.  The
                  credit facility is partially secured by two standby letters of
                  credit totaling  $5,320,  issued under the Credit Agreement by
                  the Company and is payable upon demand or upon  expiration  of
                  the  standby  letters  of  credit  on  August  31,  1998.  The
                  obligations   of  the  Company  under  the  Malaysian   Credit
                  Agreement  are secured by the property  and building  owned by
                  Audiovox  Communications.  Outstanding  obligations  under the
                  Malaysian  Credit Agreement at November 30, 1997 and 1996 were
                  approximately $4,146 and $4,024, respectively. At November 30,
                  1997,  interest  on the credit  facility  ranged from 8.25% to
                  11.10%. At November 30, 1996,  interest on the credit facility
                  ranged from 9.25% to 9.52%.

                  On October 28, 1997,  Audiovox Venezuela issued a note payable
                  to a  Venezuelan  bank in the  amount  of  994,000  Venezuelan
                  Bolivars  (approximately  $1,986  at  November  30,  1997)  to
                  finance   additional   working  capital  needs.  The  note  is
                  scheduled  to be  repaid  within  one  year  and as  such,  is
                  classified as short-term. Interest on the note payable is 20%.
                  The note  payable is secured by a standby  letter of credit in
                  the amount of $2,000, issued under the Credit Agreement by the
                  Company and is payable upon demand or upon  expiration  of the
                  standby letter of credit on August 31, 1998.

                  The maximum  month-end  amounts  outstanding  under the Credit
                  Agreement and Malaysian Credit Agreement borrowing  facilities
                  during the years ended November 30, 1997,  1996, and 1995 were
                  $28,420,   $44,213,   and   $59,315,   respectively.   Average
                  borrowings during the years ended November 30, 1997, 1996, and
                  1995 were $11,478, $33,662, and $43,470, respectively, and the
                  weighted  average  interest rates were 11.3%,  8.9%, and 8.7%,
                  respectively.



                                                                     (Continued)
                                       44


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


         (b)      Documentary Acceptances

                  During  1997,  the Company had various  unsecured  documentary
                  acceptance lines of credit available with suppliers to finance
                  inventory  purchases.   The  Company  does  not  have  written
                  agreements  specifying the terms and amounts  available  under
                  the  lines  of  credit.   At  November  30,  1997,  $3,914  of
                  documentary  acceptances were outstanding of which all was due
                  to TALK.

                  The  maximum  month-end  documentary  acceptances  outstanding
                  during the years ended November 30, 1997,  1996, and 1995 were
                  $4,162, $9,792, and $9,977,  respectively.  Average borrowings
                  during the years ended November 30, 1997,  1996, and 1995 were
                  $3,199,  $5,845,  and $5,876,  respectively,  and the weighted
                  average  interest rates,  including fees, were 6.3%, 5.1%, and
                  4.4%, respectively.

(10)     Long-Term Debt

         A summary of long-term debt follows:


                                                          November 30,
                                                    ---------------------------
                                                    1997              1996
                                                    ----              ----
          Convertible subordinated debentures:
             6 1/4%, due 2001, convertible at 
               $17.70 per share                    $ 2,269           $23,748  
          Subordinated note payable                  3,922             4,417
                                                  --------         ---------
                                                     6,191            28,165
          Less current installments                     -                  -
                                               -----------      ------------
                                                   $ 6,191           $28,165
                                                   =======           =======

         On March 15, 1994,  the Company  completed the sale of $65,000,  6 1/4%
         convertible subordinated debentures (Subordinated  Debentures) due 2001
         and entered into an Indenture  Agreement.  The Subordinated  Debentures
         are convertible  into shares of the Company's Class A Common Stock, par
         value  $.01 per share at an  initial  conversion  price of  $17.70  per
         share, subject to adjustment under certain circumstances. The Indenture
         Agreement  contains  various  covenants.   The  bonds  are  subject  to
         redemption by the Company in whole, or in part, at any time after March
         15, 1997, at certain  specified  amounts.  On May 9, 1995,  the Company
         issued  warrants to certain  beneficial  holders of these  Subordinated
         Debentures (Note 13(d)).

         On November 25, 1996,  the Company  completed an exchange of $41,252 of
         its $65,000  Subordinated  Debentures  for 6,806,580  shares of Class A
         Common  Stock  (Exchange).  As a result  of the  Exchange,  a charge of
         $26,318  was  recorded.  The  charge  to  earnings  represents  (i) the
         difference  in the  fair  market  value  of the  shares  issued  in the
         Exchange  and the fair market  value of the shares that would have been
         issued under the terms of the original conversion feature

                                                                     (Continued)
                                       45


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


         plus (ii) a write-off of the debt issuance  costs  associated  with the
         Subordinated Debentures (Note 1(h)) plus (iii) expenses associated with
         the Exchange offer. The Exchange  resulted in taxable income due to the
         difference in the face value of the bonds converted and the fair market
         value of the shares  issued  and,  as such,  a current  tax  expense of
         $2,888 was  recorded.  An increase to paid in capital was reflected for
         the face value of the bonds converted,  plus the difference in the fair
         market  value of the shares  issued in the Exchange and the fair market
         value of the shares that would have been issued  under the terms of the
         original conversion feature for a total of $63,564.

         During  January  1997,  the  Company  completed   additional  exchanges
         totaling  $21,479 of it $65,000  Subordinated  Debentures for 2,860,925
         shares of Class A Common Stock (Additional  Exchanges).  As a result of
         the  Additional  Exchanges,  similar to that of the Exchange  described
         earlier,  a charge of  $12,686,  tax expense of $158 and an increase to
         paid in capital of $33,592,  was recorded.  As a result of the Exchange
         and Additional  Exchanges,  the remaining  Subordinated  Debentures are
         $2,269.

         On March  8,  1994,  the  Company  entered  into a  Debenture  Exchange
         Agreement and exchanged certain  debentures for Series AA and Series BB
         Convertible Debentures (Debentures). The Debentures were convertible at
         any time at $5.34 per share,  which is subject to adjustment in certain
         circumstances, and were secured by a standby letter of credit. Although
         the  Debenture  Exchange  Agreement  provides for optional  prepayments
         under certain  circumstances,  such  prepayments  are restricted by the
         Credit  Agreement  (Note  9(a)).  On February  9, 1996,  the holders of
         $1,100 of the Series BB Convertible Debentures exercised their right to
         convert  into 206,046  shares of Class A Common  Stock.  The  remaining
         balance  of  the   Debentures   were  repaid   during   1996;   thereby
         extinguishing the remaining conversion features of these Debentures.

         On October  20,  1994,  the Company  issued a note  payable for 500,000
         Japanese Yen (approximately  $3,922 and $4,417 on November 30, 1997 and
         1996,  respectively)  to finance its  investment  in TALK (Note 8). The
         note is scheduled  to be repaid on October 20, 2004 and bears  interest
         at 4.1%.  The note can be repaid by cash  payment  or by giving  10,000
         shares of its TALK  investment to the lender.  The lender has an option
         to acquire  2,000  shares of TALK held by the Company in  exchange  for
         releasing  the  Company  from 20% of the face  value of the note at any
         time after October 20, 1995.  This note and the  investment in TALK are
         both  denominated in Japanese Yen, and, as such,  the foreign  currency
         translation  adjustments  are  accounted  for as a hedge.  Any  foreign
         currency  translation  adjustment  resulting  from  the  note  will  be
         recorded in  stockholders'  equity to the extent that the adjustment is
         less  than or  equal to the  adjustment  from  the  translation  of the
         investment in TALK. Any portion of the adjustment  from the translation
         of the note that exceeds the  adjustment  from the  translation  of the
         investment in TALK is a transaction  gain or loss that will be included
         in earnings.

         During  1995,  Audiovox  Malaysia  entered into a Secured Term Loan for
         1,700 Malaysian  Ringgits  (approximately  $675) to acquire a building.
         The loan was secured by the property acquired

                                                                     (Continued)
                                                        46


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


         and bore interest at 1.5% above the  Malaysian  base lending rate which
         was 9.2% on  November  30,  1996.  The loan was  payable in 120 monthly
         equal installments  commencing October 1995, however,  was fully repaid
         in November 1996.

         Maturities  on long-term  debt for the next five fiscal years are
         as follows:


          1998                                                 -
          1999                                                 -
          2000                                                 -
          2001                                            $2,269
          2002                                                 -
                                                       =========

(11)     Income Taxes

         The  components of income (loss) before the provision for (recovery of)
         income taxes are as follows:


                                               November 30,
                                        -------------------------------
                                         1997          1996        1995
                                         ----          ----        ----
          Domestic Operations           $42,613     $(21,899)   $(12,424)
          Foreign Operations                829        1,264      (2,262)
                                     ----------   -----------  ----------
                                        $43,442     $(20,635)   $(14,686)
                                         =======    =========   =========

         Total income tax expense (recovery) was allocated as follows:


<TABLE>

                                                                 November 30,
                                                                1997        1996

<S>                                                            <C>       <C>     
Income (loss) from continuing operations                       $22,420   $  5,834
Stockholders' equity
   Unrealized holding gain (loss) on investment
        securities recognized for financial reporting
        purposes                                                 1,174    (13,143)
   Unrealized holding gain on equity collar
        recognized for financial reporting purposes               473           -
                                                           -----------   ---------
        Total income tax expense (recovery)                   $24,067     $ (7,309)
                                                            ========    =========
</TABLE>



                                                                     (Continued)
                                       47


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


         The provision for  (recovery  of) income taxes  attributable  to income
         from continuing operations is comprised of:


                       Federal         Foreign           State         Total
1995:
   Current           $   1,455         $   570       $     330    $   2,355
   Deferred            (4,189)              -            (969)       (5,158)
                    ----------      ----------      ----------    ----------
                     $ (2,734)         $   570       $   (639)     $ (2,803)
                     =========         =======       =========     =========

1996:
   Current           $   3,711         $   802       $     853    $   5,366
   Deferred               330               -             138           468
                   -----------      ----------     -----------   ----------
                    $   4,041          $   802      $     991     $   5,834
                    ==========         =======      ==========    =========

1997:
   Current            $ 23,316          $1,159        $  1,068     $ 25,543
   Deferred            (2,845)              -            (278)       (3,123)
                    ----------      ----------      ----------    ----------
                     $ 20,471           $1,159      $     790      $ 22,420
                     =========          ======      ==========     ========

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


<TABLE>

                                  November 30,
                                    ---------------------------------------------------------------------------------------
                                         1997                         1996                          1995
                                        ------                       ------                        -----
Tax provision (recovery) at
<S>                                 <C>        <C>      <C>          <C>           <C>          <C>    
   Federal statutory rates          $15,205    35.0%    $ (7,222)    (35.0)%       $ (5,140)    (35.0)%
Expense relating to exchange 
   of subordinated debentures         4,578    10.5       11,421      55.3                -         -
Undistributed earnings from
   equity investments                   123     0.3          128       0.6            1,330       9.1
State income taxes, net of
   Federal benefit                    1,637     3.8          275       1.3             (415)     (2.8)
(Decrease) increase in
   beginning-of-the-year
   balance of the valuation
   allowance for deferred tax
   assets                              (180)   (0.4)       1,270       6.2              644       4.3
Foreign tax rate differential           323     0.7           30       0.1              (34)     (0.2)
Expense relating to the
   issuance of warrants                   -       -            -         -            1,022       6.9
Other, net                              734     1.7          (68)     (0.2)            (210)     (1.4)
                                  ---------  ------   ----------   --------      -----------    -----
                                    $22,420    51.6%   $   5,834      28.3%        $ (2,803)    (19.1)%
                                    ========   =====   ==========   =======       =========    =======
</TABLE>

           
                                                                     (Continued)
                                       48

<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

         The significant  components of deferred  income tax expense  (recovery)
         for the years ended November 30, 1997 and 1996 are as follows:

<TABLE>


                                                                         November 30,
                                                                        1997           1996
Deferred tax recovery (exclusive of the effect
<S>                                                                    <C>            <C>     
     of other components listed below)                                 $(2,938)       $  (802)
(Decrease) increase in beginning-of-the-year  balance of the
     valuation allowance for deferred tax assets                          (180)         1,270
                                                                     ----------      --------
                                                                       $(3,118)      $    468
                                                                       ========      ========
</TABLE>


         The tax effects of temporary  differences that give rise to significant
         portions  of the  deferred  tax assets  and  deferred  liabilities  are
         presented below:


<TABLE>

                                                                         November 30,
                                                                       1997         1996
Deferred tax assets:
     Accounts receivable, principally due to allowance for
<S>                                                                   <C>        <C>      
        doubtful accounts and cellular deactivations                  $  1,483   $   1,593
     Inventory, principally due to additional costs
        capitalized for tax purposes pursuant to the Tax
        Reform Act of 1986                                                 439         306
     Inventory, principally due to valuation reserve                       941         930
     Accrual for future warranty costs                                     830         978
     Plant, equipment, and certain intangibles, principally
        due to depreciation and amortization                               719         714
     Net operating loss carryforwards, state and foreign                 2,662       2,458
     Accrued liabilities not currently deductible                          405         491
     Other                                                                 381         664
                                                                   -----------   --------
          Total gross deferred tax assets                                7,860       8,134
     Less: valuation allowance                                          (2,713)     (2,893)
                                                                     ---------   ---------
          Net deferred tax assets                                        5,147       5,241
                                                                    ----------   --------

Deferred tax liabilities:
     Equity investments, principally due to undistributed
        earnings                                                        (8,506)    (10,548)
     Equity collar                                                        (473)         -
                                                                     ----------  --------
          Total gross deferred tax liabilities                          (8,979)    (10,548)
                                                                      ---------   ---------
          Net deferred tax liability                                   $(3,832)   $ (5,307)
                                                                       ========   =========
</TABLE>

                                                                     (continued)
                                       49

<PAGE>
                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

         The net  change in the total  valuation  allowance  for the year  ended
         November  30, 1997 was a decrease of $180.  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  primarily  for net  operating  loss
         carryforwards in certain states and foreign  countries as well as other
         deferred  tax  assets  in  foreign  countries.  Based on the  Company's
         ability to carry back future  reversals of deferred tax assets to taxes
         paid in current and prior years and the  Company's  historical  taxable
         income record,  adjusted for unusual items,  management  believes it is
         likely that the Company  will  realize the benefit of the net  deferred
         tax assets existing at November 30, 1997. Further,  management believes
         the existing net deductible  temporary  differences will reverse during
         periods in which the Company generates net taxable income. There can be
         no assurance,  however,  that the Company will generate any earnings or
         any specific level of continuing  earnings in the future. The amount of
         the deferred tax asset considered realizable, however, could be reduced
         in the near term if  estimates  of future  taxable  income  during  the
         carryforward period are reduced.

         At November 30, 1997, the Company had net operating loss  carryforwards
         for state and foreign  income tax  purposes of  approximately  $21,851,
         which are available to offset future state and foreign  taxable income,
         if any, which will expire through the year ended November 30, 2011.

(12)     Capital Structure

         The Company's capital structure is as follows:

<TABLE>


                                                                                                          Voting
                                                                                                          Rights
                        Par                                      Shares Issued              Per        Liquidation
  Security              Value           Shares Authorized        and Outstanding            Share          Rights
                                         November 30,                 November 30,
                                       1997         1996          1997            1996
                                                                                                         
<S>                     <C>            <C>          <C>            <C>             <C>         <S>       <S>
Preferred Stock         $50.00         50,000       50,000         50,000          50,000       -        $50 per share

Series Preferred Stock    0.01       1,500,000    1,500,000             -               -       -        -
                                                                                                        Ratably with
Class A   Common Stock    0.01      30,000,000   30,000,000     16,963,533      14,040,414     One        Class B
Class B   Common Stock    0.01      10,000,000   10,000,000      2,260,954       2,260,954     Ten      Ratably with
                                                                                                          Class A
</TABLE>


    The holders of Class A and Class B Common Stock are entitled to receive cash
    or  property  dividends  declared by the Board of  Directors.  The Board can
    declare  cash  dividends  for Class A Common  Stock in  amounts  equal to or
    greater than the cash  dividends for Class B Common Stock.  Dividends  other
    than cash must be declared equally for both classes. Each share of

                                                                     (Continued)
                                       50


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


    Class B Common Stock may, at any time, be converted  into one share of Class
    A Common Stock.

    The 50,000 shares of non-cumulative Preferred Stock outstanding are owned by
    Shintom and have  preference  over both classes of common stock in the event
    of liquidation or dissolution.

    On May 16, 1997, the Company's Board of Directors approved the repurchase of
    1,000,000  shares of the  Company's  Class A Common Stock in the open market
    under a share  repurchase  program (the  Program).  As of November 30, 1997,
    290,000  shares were  repurchased  under the Program at an average  price of
    $8.35 per share for an aggregate  amount of $2,421.  Subsequent  to November
    30,  1997,  50,000  shares  have been  repurchased  under the  Program at an
    average price of $7.37 per share for an aggregate amount of $368.

    As of November 30, 1997 and 1996,  969,500  shares of the Company's  Class A
    Common Stock are reserved for issuance under the Company's  Stock Option and
    Restricted  Stock Plans and 5,491,192  for all  convertible  securities  and
    warrants outstanding at November 30, 1997 and 1996 (Notes 10 and 13).

    Undistributed earnings from equity investments included in retained earnings
    amounted to $1,564 and $3,728 at November 30, 1997 and 1996, respectively.

(13)         Common Stock and Compensation Plans

             (a) The Company has stock option plans under which employees
                    and  non-employee  directors may be granted  incentive stock
                    options (ISO's) and non-qualified  stock options (NQSO's) to
                    purchase  shares of Class A Common  Stock.  Under the plans,
                    the  exercise  price of the ISO's  will not be less than the
                    market value of the  Company's  Class A Common Stock or 110%
                    of the market value of the Company's Class A Common Stock on
                    the date of grant.  The exercise price of the NQSO's may not
                    be less than 50% of the market value of the Company's  Class
                    A Common  Stock on the date of grant.  The  options  must be
                    exercisable no later than ten years after the date of grant.

                    Compensation expense is recorded with respect to the options
                    based  upon the  quoted  market  value of the shares and the
                    exercise  provisions  at the  date  of  grant.  Compensation
                    expense  for the year ended  November  30, 1996 and 1995 was
                    $97 and $113,  respectively.  No  compensation  expense  was
                    recorded for the year ended November 30, 1997.



                                                                     (Continued)
                                       51


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


     Information regarding the Company's stock option plans is summarized below:


                                                               Weighted
                                                               Average
                                              Number           Exercise
                                             of Shares          Price
Outstanding at
      November 30, 1994                        313,000           11.72
          Granted                              279,000            5.88
          Exercised                                  -               -
          Canceled                            (33,750)           11.76
                                           -----------           ------
Outstanding at
      November 30, 1995                        558,250            8.80
          Granted                                    -               -
          Exercised                                  -               -
          Canceled                             (9,500)           10.17
                                          ------------           -----
Outstanding at
      November 30, 1996                        548,750            8.78
          Granted                            1,260,000            7.09
          Exercised                                  -               -
          Canceled                           (109,000)           10.95
                                            ----------           -----
Outstanding at
      November 30, 1997                     1,699,750             7.38
                                            ==========           =====

Options exercisable,                          166,750            12.10
                                           ===========           =====
      November 30, 1997

                  At  November  30, 1997 and 1996,  190,250 and 341,250  shares,
                  respectively, were available for future grants under the terms
                  of these plans.

                    The Company adopted SFAS No. 123 in fiscal 1997. The Company
                    has  elected  to  disclose  the pro forma net  earnings  and
                    earnings  per  share  as if such  method  had  been  used to
                    account for stock-based  compensation  costs as described in
                    SFAS No. 123.

                  The per share  weighted  average  fair value of stock  options
                  granted  during  1997 was $5.73 on the date of the grant using
                  the  Black-Scholes  option-pricing  model  with the  following
                  weighted  average  assumptions:  risk  free  interest  rate of
                  6.49%,   expected  dividend  yield  of  0.0%,  expected  stock
                  volatility of 70% and an expected  option life of 10 years. No
                  options were granted in 1996.



                                                                     (Continued)
                                       52


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


                  The Company  applies APB Opinion No. 25 in accounting  for its
                  stock option grants and, accordingly, no compensation cost has
                  been  recognized  in the  financial  statements  for its stock
                  options which have an exercise  price equal to or greater than
                  the fair value of the stock on the date of the grant.  Had the
                  Company  determined  compensation cost based on the fair value
                  at the grant date for its stock  options  under SFAS No.  123,
                  the  Company's  net income  (loss)  and net income  (loss) per
                  common share would have been  reduced to the proforma  amounts
                  indicated below:


                                                     1997       1996
                                                     ----       ----
Net income (loss):
   As reported                                        $21,022    $(26,469)
   Pro forma                                           18,786     (26,469)

Net income (loss) per common share (primary):
   As reported                                          $1.09      $(2.82)
   Pro forma                                             0.97       (2.82)

Net income (loss) per common share (fully diluted):
   As reported                                           1.05            -
   Pro forma                                             0.94            -

                  Proforma net earnings reflect only options granted in 1997 and
                  1996. Therefore,  the full impact of calculating  compensation
                  cost for stock  options under SFAS No. 123 is not reflected in
                  the proforma  net earnings  amounts  presented  above  because
                  compensation  cost is  reflected  over  the  options'  vesting
                  period and  compensation  cost for  options  granted  prior to
                  December 1, 1995 was not considered.

                  Summarized  information about stock options  outstanding as of
                  November 30, 1997 is as follows:

<TABLE>


                                       Outstanding             Exercisable
                                 Weighted      Weighted
                                 Average       Average                 Weighted
     Exercise                    Exercise        Life                  Average
      Price        Number          Price       Remaining    Number     Price
      Range        of Shares      of Shares     In Years   of Shares   of Shares
     -------       ---------     -----------   ----------  ---------   ---------
<S>     <C>         <C>           <C>           <C>         <C>         <C>              
$5.50 - $8.00       1,533,000     6.87          9.22              -        -
$8.01 - $13.00        166,750     12.10         6.50        166,750     $ 12.10
                   ----------                               -------
                    1,699,750                               166,750
                    =========                               =======
</TABLE>

                                                                     (continued)
                                       53

<PAGE>

                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

         (b)      Restricted Stock Plan

                  The  Company  has  restricted  stock  plans  under  which  key
                  employees and directors may be awarded restricted stock. Total
                  restricted  stock  outstanding,  granted under these plans, at
                  November   30,   1997  and  1996  was   78,500   and   79,500,
                  respectively.

                  The per share weighted  average fair value of restricted stock
                  awards granted in 1995 was $5.88 on the date of the grant. The
                  fair value was  determined  to be the fair market value of the
                  Company's  Class A Common  Stock on the date of the grant.  No
                  restricted stock awards were granted in 1997 or 1996.

                  Compensation expense for the performance accelerated shares is
                  recorded  based upon the quoted  market value of the shares on
                  the date of grant.  Compensation  expense for the  performance
                  restricted  shares is  recorded  based upon the quoted  market
                  value of the shares on the balance  sheet  date.  Compensation
                  expense  for these  grants for the years  ended  November  30,
                  1997, 1996 and 1995 were $135, $200 and $127, respectively.

         (c)      Employee Stock Purchase Plan

                  In May 1993, the stockholders approved the 1993 Employee Stock
                  Purchase  Plan.  The stock  purchase  plan  provides  eligible
                  employees an opportunity  to purchase  shares of the Company's
                  Class A Common Stock through  payroll  deductions up to 15% of
                  base  salary  compensation.   Amounts  withheld  are  used  to
                  purchase  Class A Common  Stock on or about the last  business
                  day of each month at a price  equal to 85% of the fair  market
                  value.  This Plan  provides  for  purchases of up to 1,000,000
                  shares.

         (d)      Stock Warrants

                  During  the  third  quarter  of  fiscal  1993,  pursuant  to a
                  consulting agreement effective April 1993, the Company granted
                  warrants to purchase  100,000  shares of Class A Common Stock,
                  which have been  reserved,  at $7.50 per share.  The warrants,
                  which are exercisable in whole or in part at the discretion of
                  the  holder,  expire  on  December  31,  1998.  There  were no
                  warrants  exercised as of November 30,  1997.  The  consulting
                  agreement,  valued  at $100,  was  expensed  in 1994  when the
                  services to be provided, pursuant to the consulting agreement,
                  were completed.

                  In December  1993,  the Company  granted  warrants to purchase
                  50,000  shares of Class A Common Stock at a purchase  price of
                  $14.375 per share as part of the  acquisition of H & H Eastern
                  Distributors,  Inc. The per share purchase price and number of
                  shares  purchasable  are each subject to  adjustment  upon the
                  occurrence  of  certain   events   described  in  the  warrant
                  agreement. The warrants are exercisable,  in whole or in part,
                  from  time-to-time,  until September 22, 2003. If the warrants
                  are exercised in whole, the holder thereof

                                                                     (Continued)
                                                        54


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


                  has  the  right  to  require  the  Company  to file  with  the
                  Securities  Exchange   Commission  a  registration   statement
                  relating to the sale by the holder of the Class A Common Stock
                  purchasable pursuant to the warrant.

                  On May 9, 1995,  the Company  issued  1,668,875  warrants in a
                  private placement,  each convertible into one share of Class A
                  Common Stock at $7 1/8,  subject to  adjustment  under certain
                  circumstances.  The  warrants  were  issued to the  beneficial
                  holders as of June 3, 1994,  of  approximately  $57,600 of the
                  Company's Subordinated Debentures in exchange for a release of
                  any claims such  holders may have  against  the  Company,  its
                  agents,  directors  and  employees  in  connection  with their
                  investment in the Subordinated  Debentures.  As a result,  the
                  Company  incurred a warrant  expense of $2,900 and  recorded a
                  corresponding  increase to paid in capital.  The  warrants are
                  not exercisable after March 15, 2001, unless sooner terminated
                  under certain  circumstances.  John J. Shalam, Chief Executive
                  Officer of the  Company,  has granted the Company an option to
                  purchase  1,668,875  shares of Class A Common  Stock  from his
                  personal  holdings.  The  exercise  price of this option is $7
                  1/8, plus the tax impact,  if any, should the exercise of this
                  option be treated as dividend income rather than capital gains
                  to Mr. Shalam.

                  During fiscal 1997, the Company  granted  warrants to purchase
                  100,000  shares  of  Class A Common  Stock,  which  have  been
                  reserved,  at  $6.75  per  share.  The  warrants,   which  are
                  exercisable  in  whole  or in  part at the  discretion  of the
                  holder,  expire on January  29,  2002.  There were no warrants
                  exercised as of November 30, 1997.

         (e)      Profit Sharing Plans

                  The  Company has  established  two  non-contributory  employee
                  profit sharing plans for the benefit of its eligible employees
                  in the United States and Canada. The plans are administered by
                  trustees  appointed by the Company. A contribution of $500 and
                  $150 was made by the  Company  to the  United  States  plan in
                  fiscal 1997 and 1996, respectively. No contributions were made
                  to the plan for fiscal  year 1995.  Contributions  required by
                  law to be made  for  eligible  employees  in  Canada  were not
                  material.

(14)     Export Sales

         Export sales of approximately  $102,659 and $87,334 for the years ended
         November 30, 1997 and 1996, respectively, exceeded 10% of sales. Export
         sales for the year ended November 30, 1995 did not exceed 10% of sales.



                                                                     (Continued)
                                       55


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(15)     Lease Obligations

         At November 30, 1997,  the Company was obligated  under  non-cancelable
         leases for equipment and warehouse facilities for minimum annual rental
         payments as follows:


                                           Operating
                                           Leases

          1998                             $1,377
          1999                                904
          2000                                504
          2001                                217
          2002                                 25
          Thereafter                            2
                                          --------
                 Total                     $3,029
                                          ========

         Rental expense for the  above-mentioned  operating lease agreements and
         other leases on a month-to-month basis approximated $2,516,  $2,292 and
         $4,080  for  the  years  ended  November  30,  1997,   1996  and  1995,
         respectively.

         The Company leases certain  facilities  from its principal  stockholder
         and  several  officers.  Rentals  for such  leases  are  considered  by
         management of the Company to approximate  prevailing  market rates.  At
         November 30, 1997,  minimum  annual  rental  payments on these  related
         party leases, which are included in the above table, are as follows:


               1998                           $162
               1999                             23

(16)     Financial Instruments

         (a)      Derivative Financial Instruments

                  (1)      Forward Exchange Contracts

                           At  November  30,  1997 and  1996,  the  Company  had
                           contracts to exchange foreign  currencies in the form
                           of  forward  exchange  contracts  in  the  amount  of
                           $26,502 and  $5,451,  respectively.  These  contracts
                           have varying  maturities with none exceeding one year
                           as of November 30, 1997. For the years ended November
                           30, 1997, 1996 and 1995,  gains and losses on foreign
                           currency  transactions which were not hedged were not
                           material. For the years ended November 30, 1997, 1996
                           and 1995,  there  were no gains or losses as a result
                           of terminating hedges prior to the transaction date.

                                                                     (Continued)
                                       56


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


                  (2)      Equity Collar

                           The  Company   entered  into  an  equity   collar  on
                           September 26, 1997 to maintain some of the unrealized
                           gains  associated  with its  investment  in  CellStar
                           (Note  6).  The  equity   collar   provides  that  on
                           September  26,  1998,  the  Company  can put  100,000
                           shares of CellStar to the counter party to the equity
                           collar  (the bank) at $38 per share in  exchange  for
                           the bank  being  able to call the  100,000  shares of
                           CellStar at $51 per share. The Company has designated
                           this  equity  collar  as a hedge  of  100,000  of its
                           shares in CellStar being that it provides the Company
                           with protection  against the market value of CellStar
                           shares falling below $38. Given the high  correlation
                           of the changes in the market  value of the item being
                           hedged to the item underlying the equity collar,  the
                           Company  applied  hedge  accounting  for this  equity
                           collar.  The equity collar is recorded on the balance
                           sheet at fair  value  with  gains  and  losses on the
                           equity  collar  reflected as a separate  component of
                           equity.

                           Subsequent  to year end,  the Company sold the equity
                           collar for $1,499 in cash.

                  The  Company  is  exposed  to  credit  losses  in the event of
                  nonperformance  by the counter parties to its forward exchange
                  contracts  and its equity  collar.  The  Company  anticipates,
                  however,  that counter  parties will be able to fully  satisfy
                  their  obligations  under the contracts.  The Company does not
                  obtain  collateral  to  support  financial  instruments,   but
                  monitors the credit standing of the counter parties.

         (b)      Off-Balance Sheet Risk

                  Commercial  letters of credit are issued by the Company during
                  the ordinary  course of business  through major domestic banks
                  as  requested  by certain  suppliers.  The Company also issues
                  standby  letters of credit  principally to secure certain bank
                  obligations of Audiovox  Communications and Audiovox Venezuela
                  (Note 9(a)). The Company had open commercial letters of credit
                  of  approximately  $19,078 and $23,785,  of which  $10,625 and
                  $17,400  were  accrued for as of  November  30, 1997 and 1996,
                  respectively.  The terms of these  letters  of credit  are all
                  less than one year.  No material  loss is  anticipated  due to
                  nonperformance by the counter parties to these agreements. The
                  fair value of these open  commercial  and  standby  letters of
                  credit  is  estimated  to be the same as the  contract  values
                  based on the nature of the fee  arrangements  with the issuing
                  banks.

                  The  Company is a party to a joint and  several  guarantee  on
                  behalf of G.L.M. up to the amount of $200.  There is no market
                  for this  guarantee and it was issued  without  explicit cost.
                  Therefore, it is not practicable to establish its fair value.



                                                                     (Continued)
                                       57


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


         (c)      Concentrations of Credit Risk

                  Financial  instruments,  which potentially subject the Company
                  to concentrations of credit risk, consist principally of trade
                  receivables.  The Company's  customers are located principally
                  in the United  States and Canada and consist of, among others,
                  cellular carriers and service providers, distributors, agents,
                  mass merchandisers, warehouse clubs and independent retailers.

                  At November 30, 1997,  two customers,  a cellular  carrier and
                  service provider and a Bell Operating  Company,  accounted for
                  approximately  8.7%  and  5.3%,   respectively,   of  accounts
                  receivable.  At  November  30,  1996,  two  customers,   which
                  included a cellular  carrier and service  provider  and a Bell
                  Operating  Company  accounted for  approximately  11% and 10%,
                  respectively, of accounts receivable.

                  During the year ended  November 30,  1997,  two  customers,  a
                  cellular  carrier and service  provider  and a Bell  Operating
                  Company,   accounted   for   approximately   11.3%  and  9.0%,
                  respectively,  of the  Company's  1997 sales.  During the year
                  ended  November  30, 1996,  two  customers,  a Bell  Operating
                  Company and a cellular carrier and service provider, accounted
                  for approximately 12% and 9%,  respectively,  of the Company's
                  1996 sales.  During the year ended November 30, 1995, two Bell
                  Operating   Companies  and  a  cellular  carrier  and  service
                  provider   accounted   for   approximately   6%,  7%  and  7%,
                  respectively, of the Company's 1995 sales.

                  The Company generally grants credit based upon analyses of its
                  customers'  financial  position  and  previously   established
                  buying  and  payment   patterns.   The   Company   establishes
                  collateral  rights in accounts  receivable  and  inventory and
                  obtains personal  guarantees from certain customers based upon
                  management's credit evaluation. At November 30, 1997 and 1996,
                  43 and 44 customers, respectively,  representing approximately
                  69% and 70%, of outstanding accounts receivable,  had balances
                  owed greater than $500.

                  A significant  portion of the  Company's  customer base may be
                  susceptible to downturns in the retail  economy,  particularly
                  in the consumer electronics industry. Additionally,  customers
                  specializing  in  certain   automotive  sound,   security  and
                  accessory   products  may  be  impacted  by   fluctuations  in
                  automotive  sales. A relatively  small number of the Company's
                  significant customers are deemed to be highly leveraged.

         (d)      Fair Value

                  The following  methods and  assumptions  were used to estimate
                  the fair  value of each  class of  financial  instruments  for
                  which it is practicable  to estimate that value.  The carrying
                  value of all  financial  instruments  classified  as a current
                  asset or liability is deemed to approximate  fair value,  with
                  the exception of current installments of long-term debt,

                                                                     (Continued)
                                       58


<PAGE>


                     AUDIOVOX CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


                  because of the short maturity of these instruments.

                  Investment Securities

                  The carrying amount represents fair value, which is based upon
                  quoted market prices at the reporting date (Note 6).

                  Equity Collar (Derivative)

                  The carrying amount represents fair value, which is based upon
                  the Black Scholes option-pricing model.

                  Long-Term Debt Including Current Installments

                  The carrying amount of bank debt under the Company's revolving
                  Credit Agreement and Malaysian  Credit Agreement  approximates
                  fair  value  because  of the  short  maturity  of the  related
                  obligations. With respect to the Subordinated Debentures, fair
                  values are based on published statistical data.

                  Forward Exchange Contracts (Derivative)

                  The fair value of the  forward  exchange  contracts  are based
                  upon  exchange  rates  at  November  30,  1997 and 1996 as the
                  contracts are short term.

                  The   estimated   fair  value  of  the   Company's   financial
                    instruments are as follows:


                                  November 30, 1997        November 30, 1996
                                  -----------------        -----------------
                                  Carrying      Fair       Carrying     Fair
                                   Amount      Value        Amount      Value
Equity collar (derivative)        $  1,246    $  1,246            -           -
Long-term obligations
     including current
     installments                  $30,491     $30,910     $ 59,865    $ 56,046
Forward exchange contract                -     $26,125            -       5,316
     obligation (derivative)




                                                                     (Continued)
                                       59


<PAGE>


                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


                  Limitations

                  Fair value  estimates  are made at a  specific  point in time,
                  based on relevant market information and information about the
                  financial instrument. These estimates are subjective in nature
                  and involve  uncertainties and matters of significant judgment
                  and, therefore,  cannot be determined with precision.  Changes
                  in assumptions could significantly affect the estimates.

(17)     Contingencies

         The  Company  is a  defendant  in  litigation  arising  from the normal
         conduct of its  affairs.  The impact of the final  resolution  of these
         matters  on the  Company's  results of  operations  or  liquidity  in a
         particular reporting period is not known. Management is of the opinion,
         however,  that the  litigation  in which the Company is a defendant  is
         either  subject  to product  liability  insurance  coverage  or, to the
         extent not covered by such insurance,  will not have a material adverse
         effect on the Company's consolidated financial position.

         The  Company  has   guaranteed   certain   obligations  of  its  equity
         investments and has established  standby letters of credit to guarantee
         the bank obligations of Audiovox  Communications and Audiovox Venezuela
         (Note 16(b)).



                                       60


<PAGE>




I
tem 9 - Changes in and Disagreements with Accountants on Accounting and 
          Financial Disclosure

                                      None


                                    PART III


Item 10 - Directors and Executive Officers of the Registrant

         Information  regarding  this  item  is set  forth  under  the  captions
"Election of Directors" of the Company's  Proxy  Statement to be dated March 27,
1998,  which  will be filed  pursuant  to  Regulation  14A under the  Securities
Exchange  Act of 1934  (the  Proxy  Statement)  and is  incorporated  herein  by
reference.  Information with regard to Executive Officers is set forth in Item 1
of this Form 10-K.


Item 11 - Executive Compensation

         The  information  regarding  this item is set forth  under the  caption
"Executive  Compensation"  of the Proxy Statement and is incorporated  herein by
reference.


Item 12 - Security Ownership of Certain Beneficial Owners and Management

         The  information  regarding  this item is set forth  under the  caption
"Beneficial   Ownership  of  Common  Stock"  of  the  Proxy   Statement  and  is
incorporated herein by reference.


Item 13 - Certain Relationships and Related Transactions

         Information  regarding  this  item  is  set  forth  under  the  caption
"Beneficial  Ownership of Common Stock",  "Election of Directors" and "Executive
Compensation" of the Proxy Statement.


                                     PART IV


Item 14 - Exhibits, Consolidated Financial Statement Schedules, and Reports on
           Form 8-K

(a) (1)

The following financial statements are included in Item 8 of this Report:

Independent Auditors' Report

Consolidated  Balance  Sheets of Audiovox  Corporation  and  Subsidiaries  as of
November 30, 1997 and 1996.

Consolidated   Statements   of  Income  (Loss)  of  Audiovox   Corporation   and
Subsidiaries for the Years Ended November 30, 1997, 1996 and 1995.

Consolidated  Statements of  Stockholders'  Equity of Audiovox  Corporation  and
Subsidiaries for the Years Ended November 30, 1997, 1996 and 1995.


                                       61


<PAGE>



Consolidated  Statements of Cash Flows of Audiovox  Corporation and Subsidiaries
for the Years Ended November 30, 1997, 1996 and 1995.

Notes to Consolidated Financial Statements.

(a) (2)
Financial Statement Schedules of the Registrant for the Years Ended November 30,
1997, 1996 and 1995.

Independent Auditors' Report on Financial Statement Schedules


   Schedule                                                Page
    Number      Description                               Number
      II        Valuation and Qualifying Accounts           67


All other financial  statement schedules not listed are omitted because they are
either not required or the information is otherwise included.

                                       62


<PAGE>










                          Independent Auditors' Report







The Board of Directors and Stockholders
   Audiovox Corporation:


Under the date of March 6, 1998 we reported on the  consolidated  balance sheets
of Audiovox  Corporation and  subsidiaries as of November 30, 1997 and 1996, and
the related consolidated statements of income (loss),  stockholders' equity, and
cash flows for each of the years in the  three-year  period  ended  November 30,
1997,  which are included in the  Company's  1997 annual report on Form 10-K. In
connection  with  our  audits  of  the  aforementioned   consolidated  financial
statements,  we  also  audited  the  related  consolidated  financial  statement
schedules in the 1997 annual report on Form 10-K. These  consolidated  financial
statement  schedules are the  responsibility  of the Company's  management.  Our
responsibility is to express an opinion on these financial  statement  schedules
based on our audits.

In our opinion, such financial statement schedules,  when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.








                                             s/KPMG Peat Marwick LLP
                                             KPMG PEAT MARWICK LLP



Jericho, New York
March 6, 1998



                                       63


<PAGE>



(3)      Exhibits See Item 14(c) for Index of Exhibits.

(b)      Reports on Form 8-K

         During the fourth quarter, the Registrant filed one report on Form 8-K.
         The Form 8-K,  dated  August  19,  1997 and filed  September  4,  1997,
         reported  that  the  Company  had  executed  a Ninth  Amendment  to the
         Company's Second Amended and Restated Credit Agreement (the Amendment).
         The Amendment,  among other things,  (i) increased the aggregate amount
         of the lenders'  commitments under the Credit Agreement to $95,000,000;
         (ii)  extended  the term of the Credit  Agreement to February 28, 2000;
         and (iii)  decreased the applicable  margin on base rate and Eurodollar
         loans.

(c)      Exhibits



<TABLE>
Exhibit
Number                 Description

<S>                    <C>                                                         
3.1                     Certificate    of    Incorporation    of   the   company
                        (incorporated by reference to the Company's Registration
                        Statement on Form S-1; No. 33-107, filed May 4, 1987).
3.1a                    Amendment to Certificate of Incorporation  (incorporated
                        by reference to the Company's Annual Report on Form 10-K
                        for the year ended November 30, 1993).
3.2                     By-laws of the Company (incorporated by reference to the Company's Registration
                        Statement on Form S-1; No. 33-10726, filed May 4, 1987).
10.1                    Eighth Amendment, dated as of March 7, 1997, to the Second Amended and
                        Restated Credit Agreement among the Registrant and the several banks and financial
                        institutions (filed via EDGAR herewith).
     10.2               Ninth  Amendment,  dated as of August 19,  1997,  to the
                        Second Amended and Restated  Credit  Agreement among the
                        Registrant   and  the   several   banks  and   financial
                        institutions (incorporated by reference to the Company's
                        Form 8-K filed via EDGAR on September 4, 1997).
     10.3               Tenth Amendment, dated as of October 24, 1997, to the Second Amended and
                        Restated Credit Agreement among the Registrant and the several banks and financial
                        institutions (filed via EDGAR herewith)
11                      Statement of Computation of Income (Loss) per Common Share  (filed via EDGAR
                        herewith).
21                      Subsidiaries of the Registrant  (filed via EDGAR herewith).
23                      Independent Auditors Consent  (filed via EDGAR herewith).
27                      Financial Data Schedule (filed via EDGAR herewith).
</TABLE>



(d)      All other  schedules are omitted  because the required  information  is
         shown in the financial  statements or notes thereto or because they are
         not applicable.

                                                        64


<PAGE>








                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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



March 11, 1998                           BY:s/John J. Shalam
                                         John J. Shalam, President
                                         and Chief Executive Officer



                                       65


<PAGE>



     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.


Signature                Title                                 Date
- ---------                -----                                 ----
                         President;                            March 11, 1998
                         Chief Executive Officer
s/John J. Shalam         (Principal Executive Officer
John J. Shalam            and Director
                         Executive Vice President and          March 11, 1998
s/Philip Christopher     Director
Philip Christopher
                         Senior Vice President,                March 11, 1998
                         Chief Financial Officer (Principal
s/Charles M. Stoehr      Financial and Accounting
Charles M. Stoehr        Officer) and Director
                         Director                              March 11, 1998
s/Patrick M. Lavelle
Patrick M. Lavelle
s/Ann Boutcher           Director                              March 11, 1998
- --------------
Ann Boutcher
s/Gordon Tucker          Director                              March 11, 1998
- ---------------
Gordon Tucker
s/Irving Halevy          Director                              March 11, 1998
- ---------------
Irving Halevy
s/Richard Maddia         Director                              March 11, 1998
- ----------------
Richard Maddia
s/Paul C. Kreuch, Jr.    Director                              March 11, 1998
- ---------------------
Paul C. Kreuch, Jr.



                                       66


<PAGE>



                                                                     Schedule II
                      AUDIOVOX CORPORATION AND SUBSIDIARIES

                        Valuation and Qualifying Accounts

                  Years Ended November 30, 1997, 1996 and 1995
                                 (In thousands)


<TABLE>

     Column A                             Column B               Column C               Column D       Column E
     --------                             --------               --------               --------       --------

                                          Balance at      Charged to      Charged                        Balance
                                          Beginning       Costs and       to Other                       At End
     Description                           Of Year         Expenses       Accounts      Deductions       Of Year
1997
<S>                                        <C>              <C>           <C>             <C>            <C>    
Allowance for doubtful accounts            $  3,115        $  1,300              -      $     918        $ 3,497
Cash discount allowances                        314               -              -            125            189
Co-op advertising and volume
   rebate allowances                          6,977          12,283              -         13,588          5,672
Allowance for cellular deactivations          1,666               -              -            303          1,363
Reserve for warranties and product
   repair costs                               4,975           2,316              -          3,223          4,068
                                          ---------       ---------        -------      ---------      ---------
                                            $17,047         $15,899              -        $18,157        $14,789
                                            =======         =======        =======        =======        =======

1996
Allowance for doubtful accounts            $  2,707       $     430              -     $       22       $  3,115
Cash discount allowances                        165             149              -              -            314
Co-op advertising and volume rebate
   allowances                                 3,225          17,629              -         13,877          6,977
Allowance for cellular deactivations          1,725               -              -             59          1,666
Reserve for warranties and product repair
   costs                                      3,948           3,784              -          2,757          4,975
                                          ---------       ---------        -------      ---------      ---------
                                            $11,770         $21,992              -        $16,715        $17,047
                                            =======         =======        =======        =======        =======

1995
Allowance for doubtful accounts            $  1,623        $  1,816              -      $     732       $  2,707
Cash discount allowances                        237               -              -             72            165
Co-op advertising and volume rebate
   allowances                                 2,688           7,621              -          7,084          3,225
Allowance for cellular deactivations          1,234             491              -              -          1,725
Reserve for warranties and product repair
   costs                                      3,207           3,834              -          3,093          3,948
                                          ---------       ---------        -------      ---------      ---------
                                           $  8,989         $13,762              -        $10,981        $11,770
                                           ========         =======        =======        =======        =======
</TABLE>




                                       67






                  EIGHTH   AMENDMENT,   dated  as  of  March   7,   1997   (this
"Amendment"),  to the Second Amended and Restated Credit Agreement,  dated as of
May 5, 1995 (as amended  pursuant  to the First  Amendment  thereto  dated as of
December 22, 1995,  the Second  Amendment  thereto dated as of February 9, 1996,
the Third Amendment  thereto dated as of May 13, 1996, the Fourth  Amendment and
Consent thereto, dated as of July 29, 1996, the Fifth Amendment thereto dated as
of September  10, 1996,  the Sixth  Amendment  thereto  dated as of November 27,
1996, the Seventh  Amendment and Waiver thereto dated as of February 5, 1997 and
this  Amendment,  and as  the  same  may be  further  amended,  supplemented  or
otherwise  modified from time to time, the "Credit  Agreement"),  among AUDIOVOX
CORPORATION,  a Delaware  corporation  (the  "Borrower"),  the several banks and
other financial  institutions  from time to time parties thereto  (collectively,
the "Lenders";  individually,  a "Lender") and THE CHASE  MANHATTAN  BANK, a New
York banking corporation, as administrative and collateral agent for the Lenders
(in such capacity, the "Agent").


                              W I T N E S S E T H :


     WHEREAS, the Borrower,  the Lenders and the Agent are parties to the Credit
Agreement; and

                  WHEREAS,  the Borrower  intends to enter into a joint  venture
with
 ASA  Corporation  ("ASA")  pursuant to which (i) the  Borrower and ASA will
form a Delaware limited liability  company under the name "Audiovox  Specialized
Applications LLC" (the "ASA Joint Venture  Company"),  (ii) each of the Borrower
and ASA will own 50% of the  outstanding  Capital Stock of the ASA Joint Venture
Company,  (iii)  Audiovox  will  contribute or transfer to the ASA Joint Venture
Company approximately  $4,600,000 in cash and approximately $3,000,000 in assets
of its Heavy Duty Sound  Division and (iv) ASA will  contribute to the ASA Joint
Venture  Company  approximately  $10,700,000 in assets  (collectively,  the "ASA
Joint Venture Transactions");

                  WHEREAS,  the Borrower has  requested  that the Lenders  amend
certain  terms in the  Credit  Agreement  in the manner  provided  for herein in
connection with the ASA Joint Venture Transactions; and

     WHEREAS,  the Agent and the Lenders  are willing to agree to the  requested
amendment;

                  NOW,  THEREFORE,  in consideration  of the premises  contained
herein, the parties hereto agree as follows:

                  1. Defined Terms. Unless otherwise defined herein, terms which
are defined in the Credit Agreement and used herein (and in the recitals hereto)
as defined terms are so used as so defined.

                  2. Amendment of Subsection  1.1.  Subsection 1.1 of the Credit
Agreement  is  hereby   amended  by  adding  a  new  definition  in  the  proper
alphabetical order to read in its entirety as follows:

     "Eight  Amendment":  the Eighth  Amendment to this  Agreement,  dated as of
March 7, 1997.

     3. Amendment of Subsection 9.6.  Subsection 9.6 of the Credit  Agreement is
hereby amended --------------------------- as follows:

     (a) by deleting the word "and" at the end of paragraph (g) thereof;


1197X102.WPD
                                  Exhibit 10.2



<PAGE>


                                                                              2



                    (b) by deleting "." at the end of paragraph  (h) thereof and
                    substituting in lieu thereof, "; and"; and

                    (c) by  adding  the  following  new  paragraph  at  the  end
                    thereof:

                  "(i) the sale or  transfer  of the  assets  of the  Borrower's
                  Heavy Duty Sound  Division  in  connection  with the ASA Joint
                  Venture Transactions (as defined in the Eight Amendment)."

                  4. Amendment of Subsection  9.9.  Subsection 9.9 of the Credit
Agreement is hereby amended by (a) inserting  after clause (ii) in paragraph (f)
a new clause to read as follows: "and (iii) Investments not exceeding $7,600,000
in the  aggregate in  connection  with the ASA Joint  Venture  Transactions  (as
defined in the Eighth  Amendment)"  and (b) by inserting the words  "pursuant to
clauses  (i) and (ii) above"  after the phrase  "Investments  and  acquisitions"
appearing in the proviso to such paragraph.

                  5.  Representations  and  Warranties.  On and  as of the  date
hereof, the Borrower hereby confirms, reaffirms and restates the representations
and warranties set forth in Section 6 of the Credit Agreement  mutatis mutandis,
except to the extent that such  representations and warranties  expressly relate
to a specific earlier date in which case the Borrower hereby confirms, reaffirms
and restates such representations and warranties as of such earlier date.

                  6. Effectiveness.  This Amendment shall become effective as of
the date first written above upon receipt by the Agent of  counterparts  of this
Amendment duly executed by the Borrower and the Required Lenders.

                  7. Continuing Effect; No Other Amendments. Except as expressly
provided herein, all of the terms and provisions of the Credit Agreement are and
shall  remain in full force and effect.  The  amendment  provided  for herein is
limited to the specific  subsection of the Credit Agreement specified herein and
shall not constitute a consent,  waiver or amendment of, or an indication of the
Agent's or the Lenders'  willingness to consent to any action requiring  consent
under or to waive or amend,  any other provisions of the Credit Agreement or the
same  subsection  for any other date or time  period  (whether or not such other
provisions or compliance  with such  subsections for another date or time period
are affected by the circumstances addressed in this Amendment).

                  8.  Expenses.  The Borrower  agrees to pay and  reimburse  the
Agent  for all its  reasonable  costs and  out-of-pocket  expenses  incurred  in
connection  with the  preparation  and  delivery of this  Amendment,  including,
without  limitation,  the reasonable  fees and  disbursements  of counsel to the
Agent.

                  9. Counterparts.  This Amendment may be executed in any number
of  counterparts  by the parties hereto  (including by facsimile  transmission),
each of which  counterparts  when so executed shall be an original,  but all the
counterparts shall together constitute one and the same instrument.

     10.  GOVERNING LAW. THIS AMENDMENT  SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.






<PAGE>


                                                                      3



                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Amendment  to be executed  and  delivered by their  respective  duly  authorized
officers as of the date first above written.

                                          AUDIOVOX CORPORATION


                                          By: s/Charles M. Stoehr
                                              Name:  Charles M. Stoehr
                                              Title:    Senior Vice President


                                          THE CHASE MANHATTAN BANK,
                                             as Agent and as a Lender


                                          By: s/Roland F. Driscoll
                                              Name:  Roland F. Driscoll
                                              Title:  Vice President


                                          FLEET BANK, N.A., as a Lender


                                          By: s/ Steven J. Melicharek
                                              Name:  Steven J. Melicharek
                                              Title:  Senior Vice President


                                          BANK OF BOSTON, as a Lender


                                          By: s/Robert J. Brandow
                                              Name:  Robert J. Brandow
                                              Title:   Director


                                          EUROPEAN AMERICAN BANK,
                                            as a Lender


                                          By: s/Stuart N. Berman
                                              Name:   Stuart N. Berman
                                              Title:  Vice President


                                          THE CIT GROUP/BUSINESS CREDIT, INC.
                                            as a Lender


                                          By: s/Edward A. Jesser
                                               Name:  Edward A. Jesser
                                               Title:   Vice President



<PAGE>


                                                                               1




                           ACKNOWLEDGEMENT AND CONSENT

     Each of the undersigned  corporations (i) as a guarantor under that certain
Amended and  Restated  Subsidiaries  Guarantee,  dated as of March 15, 1994 (the
"Guarantee"), made by each of such corporations in favor of the Collateral Agent
and  (ii)  as a  grantor  under  that  certain  Amended  and  Restated  Security
Agreement,  dated as of March 15, 1994 (the "Security Agreement"),  made by each
of such corporations in favor of the Collateral Agent,  confirms and agrees that
the Guarantee and the Security  Agreement are, and shall continue to be, in full
force and effect and are hereby  ratified and  confirmed in all respects and the
Guarantee and the Security Agreement and all of the Subsidiaries  Collateral (as
defined in the Security Agreement) do, and shall continue to, secure the payment
of all  of the  Obligations  (as  defined  in the  Guarantee)  and  the  Secured
Obligations (as defined in the Security Agreement), as the case may be, pursuant
to the terms of the  Guarantee  or the Security  Agreement,  as the case may be.
Capitalized  terms not otherwise defined herein shall have the meanings assigned
to them in the  Credit  Agreement  referred  to in the  Amendment  to which this
Acknowledgement and Consent is attached.


QUINTEX COMMUNICATIONS CORP.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Vice President

QUINTEX MOBILE
COMMUNICATIONS CORP.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Vice President


HERMES TELECOMMUNICATIONS
INC.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title: Secretary/Treasurer

LENEX CORPORATION


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Secretary/Treasurer


AMERICAN RADIO CORP.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title: Vice President


AUDIOVOX INTERNATIONAL CORP.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Senior Vice President


AUDIOVOX HOLDING CORP.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Secretary







<PAGE>


                                                                               2



AUDIOVOX CANADA LIMITED


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Vice President


AUDIOVOX ASIA INC.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Vice President


AUDIOVOX LATIN AMERICA LTD.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title: Vice President


AUDIOVOX COMMUNICATIONS CORP.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title: Secretary


Dated as of March 7, 1997








                                                                  CONFORMED COPY






                  TENTH   AMENDMENT,   dated  as  of  October   24,  1997  (this
"Amendment"),  to the Second Amended and Restated Credit Agreement,  dated as of
May 5, 1995 (as amended  pursuant  to the First  Amendment  thereto  dated as of
December 22, 1995,  the Second  Amendment  thereto dated as of February 9, 1996,
the Third Amendment  thereto dated as of May 13, 1996, the Fourth  Amendment and
Consent thereto, dated as of July 29, 1996, the Fifth Amendment thereto dated as
of September  10, 1996,  the Sixth  Amendment  thereto  dated as of November 27,
1996, the Seventh Amendment and Waiver thereto dated as of February 5, 1997, the
Eighth Amendment  thereto dated as of March 7, 1997, the Ninth Amendment thereto
dated as of August 19, 1997 and this  Amendment,  and as the same may be further
amended,  supplemented  or  otherwise  modified  from time to time,  the "Credit
Agreement"),   among  AUDIOVOX   CORPORATION,   a  Delaware   corporation   (the
"Borrower"),  the several banks and other  financial  institutions  from time to
time parties thereto (collectively, the "Lenders"; individually, a "Lender") and
THE CHASE MANHATTAN BANK, a New York banking corporation,  as administrative and
collateral agent for the Lenders (in such capacity, the "Agent").


                                               W I T N E S S E T H :


     WHEREAS, the Borrower,  the
 Lenders and the Agent are parties to the Credit
Agreement; and

                  WHEREAS,  the Borrower  intends to enter into a joint  venture
with  Namsung  Corporation  ("Namsung")  pursuant to which (i) the  Borrower and
Namsung will form a Delaware limited  liability  company under the name "Rampage
Technologies"  ("Rampage"),  (ii) the Borrower  will own 10% of the  outstanding
Capital  Stock of Rampage and Namsung  will own 90% of the  outstanding  Capital
Stock of  Rampage,  (iii)  Audiovox  will  contribute  to Rampage  approximately
$300,000  in cash and sell to  Rampage  up to  $15,000,000  in  assets of its AV
Division and (iv) Namsung will contribute to Rampage approximately $2,700,000 in
cash (collectively, the "Rampage Joint Venture Transactions");

                  WHEREAS,  the Borrower has  requested  that the Lenders  amend
certain  terms in the  Credit  Agreement  in the manner  provided  for herein in
connection with the Rampage Joint Venture Transactions; and

     WHEREAS,  the Agent and the Lenders  are willing to agree to the  requested
amendment;

                  NOW,  THEREFORE,  in consideration  of the premises  contained
herein, the parties hereto agree as follows:

                  1. Defined Terms. Unless otherwise defined herein, terms which
are defined in the Credit Agreement and used herein (and in the recitals hereto)
as defined terms are so used as so defined.

                                  Exhibit 10.3





<PAGE>


                                                                      2



                  2. Amendment of Subsection  1.1.  Subsection 1.1 of the Credit
Agreement  is  hereby   amended  by  adding  a  new  definition  in  the  proper
alphabetical order to read in its entirety as follows:

     "Tenth  Amendment":  the Tenth  Amendment  to this  Agreement,  dated as of
October 24, 1997.

                  3. Amendment of Subsection  9.6.  Subsection 9.6 of the Credit
Agreement is hereby amended as follows:

                    (a) by deleting the word "and" at the end of  paragraph  (h)
                    thereof;

                    (b) by deleting "." at the end of paragraph  (i) thereof and
                    substituting in lieu thereof, "; and"; and

                  (c)  by adding the following new paragraph at the end thereof:

                  "(j) the sale or transfer of the assets of the  Borrower's  AV
                  Division  in   connection   with  the  Rampage  Joint  Venture
                  Transactions (as defined in the Tenth Amendment)."

                  4.  Representations  and  Warranties.  On and  as of the  date
hereof, the Borrower hereby confirms, reaffirms and restates the representations
and warranties set forth in Section 6 of the Credit Agreement  mutatis mutandis,
except to the extent that such  representations and warranties  expressly relate
to a specific earlier date in which case the Borrower hereby confirms, reaffirms
and restates such representations and warranties as of such earlier date.

                  5. Effectiveness.  This Amendment shall become effective as of
the date first written above upon receipt by the Agent of  counterparts  of this
Amendment duly executed by the Borrower and the Required Lenders.

                  6. Continuing Effect; No Other Amendments. Except as expressly
provided herein, all of the terms and provisions of the Credit Agreement are and
shall  remain in full force and effect.  The  amendment  provided  for herein is
limited to the specific  subsection of the Credit Agreement specified herein and
shall not constitute a consent,  waiver or amendment of, or an indication of the
Agent's or the Lenders'  willingness to consent to any action requiring  consent
under or to waive or amend,  any other provisions of the Credit Agreement or the
same  subsection  for any other date or time  period  (whether or not such other
provisions or compliance  with such  subsections for another date or time period
are affected by the circumstances addressed in this Amendment).

                  7.  Expenses.  The Borrower  agrees to pay and  reimburse  the
Agent  for all its  reasonable  costs and  out-of-pocket  expenses  incurred  in
connection  with the  preparation  and  delivery of this  Amendment,  including,
without  limitation,  the reasonable  fees and  disbursements  of counsel to the
Agent.





<PAGE>


                                                                             3



                  8. Counterparts.  This Amendment may be executed in any number
of  counterparts  by the parties hereto  (including by facsimile  transmission),
each of which  counterparts  when so executed shall be an original,  but all the
counterparts shall together constitute one and the same instrument.

                  9.       GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.







<PAGE>


                                                                           4




                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Amendment  to be executed  and  delivered by their  respective  duly  authorized
officers as of the date first above written.

AUDIOVOX CORPORATION


By: s/Charles M. Stoehr
   Name:  Charles M. Stoehr
    Title:  Sr. Vice Pres. & Chief Executive Officer


THE CHASE MANHATTAN BANK,
   as Agent and as a Lender


By: s/John K. Budzynski
    Name:  John K. Budzynski
    Title: Assistant Treasurer


FLEET BANK, N.A., as a Lender


By: s/Steven J. Melicharek
    Name:  Steven J. Melicharek
    Title:  Sr. Vice President


BANKBOSTON, as a Lender


By: s/Robert Brandow
    Name:  Robert Brandow
    Title:  Director


EUROPEAN AMERICAN BANK,
  as a Lender


By: s/Anthony V. Pantina
    Name:  Anthony V. Pantina
    Title: Assistant Vice President





<PAGE>


                                                              5



THE CIT GROUP/BUSINESS CREDIT, INC.
  as a Lender


By: s/Karen Hoffman
     Name:  Karen Hoffman
     Title: Assistant Vice President

MELLON BANK, N.A.,
  as a Lender


By: s/Morris Danon
     Name:  Morris Danon
     Title: Senior Vice President





<PAGE>


                                                                      1




                           ACKNOWLEDGMENT AND CONSENT

                  Each of the undersigned  corporations (i) as a guarantor under
that certain Amended and Restated Subsidiaries Guarantee,  dated as of March 15,
1994  (the  "Guarantee"),  made by each of such  corporations  in  favor  of the
Collateral  Agent and (ii) as a grantor under that certain  Amended and Restated
Security Agreement, dated as of March 15, 1994 (the "Security Agreement"),  made
by each of such  corporations  in favor of the  Collateral  Agent,  confirms and
agrees that the Guarantee and the Security  Agreement are, and shall continue to
be, in full  force and  effect  and are hereby  ratified  and  confirmed  in all
respects  and  the  Guarantee  and  the  Security   Agreement  and  all  of  the
Subsidiaries  Collateral  (as defined in the Security  Agreement)  do, and shall
continue  to,  secure the payment of all of the  Obligations  (as defined in the
Guarantee) and the Secured  Obligations (as defined in the Security  Agreement),
as the case may be,  pursuant  to the  terms of the  Guarantee  or the  Security
Agreement,  as the case may be.  Capitalized  terms not otherwise defined herein
shall have the meanings assigned to them in the Credit Agreement  referred to in
the Amendment to which this Acknowledgement and Consent is attached.


QUINTEX COMMUNICATIONS CORP.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Vice President

QUINTEX MOBILE
COMMUNICATIONS CORP.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Vice President


HERMES TELECOMMUNICATIONS
INC.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title: Secretary/Treasurer

LENEX CORPORATION


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Secretary/Treasurer

AMERICAN RADIO CORP.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title: Vice President


AUDIOVOX INTERNATIONAL CORP.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Senior Vice President


AUDIOVOX HOLDING CORP.



By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Secretary

AUDIOVOX CANADA LIMITED


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Vice President





<PAGE>


                                                                        2


AUDIOVOX ASIA INC.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title:  Vice President


AUDIOVOX LATIN AMERICA LTD.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title: Vice President


AUDIOVOX COMMUNICATIONS CORP.


By: s/Charles M. Stoehr
     Name:  Charles M. Stoehr
     Title: Secretary



Dated as of October 24, 1997









                              AUDIOVOX CORPORATION
                  COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
                  YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



<TABLE>

                                                               1997    1996        1995
                                                               ----    ----        ----
Primary earnings:
<S>                                                           <C>       <C>         <C>      
   Net income (loss)                                          $21,022   $(26,469)   $(11,883)
                                                              =======   ========    ========
Shares
   Weighted average number of common shares outstanding        18,948      9,398       9,039
   Additional shares assuming conversion of:
      Stock options, performance share awards and warrants        347       --          --
                                                              --------    -------    --------
   Weighted average common shares outstanding, as adjusted     19,295      9,398       9,039
                                                              =======   ========    ========
Primary earnings per common share:
   Net income (loss)                                          $  1.09   $  (2.82)   $  (1.31)
                                                              =======   ========    ========
Fully diluted earnings*:
   Net Income                                                 $21,022       --          --
   Net interest expense related to convertible debt               185       --          --
                                                              -------   --------    --------
   Net income applicable to common stock                      $21,207       --          --
                                                              =======   ========    --------
Shares
   Weighted average number of common shares outstanding        18,948       --          --
   Additional shares assuming conversion of:
      Stock options, performance share awards, and warrants       913       --          --
      Convertible debentures                                      252       --          --
                                                              -------   --------    --------
   Weighted average common shares outstanding, as adjusted     20,113       --          --
                                                               ======   ========    --------
Fully diluted earnings per common share:
   Net income                                                    1.05       --          --
                                                                =====   ========    ========

</TABLE>





















*The Company did not compute fully-diluted earnings per share as the addition of
potentially dilutive securities would result in anti-dilution.

                                   Exhibit 11













                           SUBSIDIARIES OF REGISTRANT



                                                             Jurisdiction of
Subsidiaries                                                 Incorporation
- ------------                                                 -------------
Audiovox Communications Corp.                                Delaware
Quintex Communications Corp.                                 New York
Quintex Mobile Communications Corp.                          Delaware
American Radio Corp.                                         Georgia
Audiovox Holding Corp.                                       New York
Audiovox Canada Limited                                      Ontario
Audiovox Communications (Malaysia) Sdn. Bhd.                 Malaysia
Audiovox Holdings (M) Sdn. Bhd.                              Malaysia




                                   Exhibit 21








                          Independent Auditors' Consent






The Board of Directors and Stockholders
Audiovox Corporation:


We consent to  incorporation  by reference in the  registration  statements (No.
33-18119 and  33-65580) on Form S-8 and (No.  333-00811) on Form S-3 of Audiovox
Corporation and  subsidiaries of our report dated January 26, 1998,  relating to
the consolidated  balance sheets of Audiovox  Corporation and subsidiaries as of
November 30, 1997 and 1996,  and the related  consolidated  statements of income
(loss),  stockholders'  equity  and  cash  flows  for  each of the  years in the
three-year  period ended  November 30, 1997,  and all related  schedules,  which
report  appears in the November 30, 1997 annual  report on Form 10-K of Audiovox
Corporation and subsidiaries.





                                          s/KPMG PEAT MARWICK LLP
                                          KPMG PEAT MARWICK LLP




Jericho, New York
March 11, 1998


                                   Exhibit 23









<TABLE> <S> <C>

<ARTICLE>                                          5
<CIK>                                                   0000807707
<NAME>                                             Audiovox Corp.
<MULTIPLIER>                                                  1000
       
<S>                                                  <C>
<PERIOD-TYPE>                                      12-MOS
<FISCAL-YEAR-END>                                  Nov-30-1997
<PERIOD-END>                                       Nov-30-1997
<CASH>                                                        9445
<SECURITIES>                                                     0
<RECEIVABLES>                                               108195
<ALLOWANCES>                                                  3497
<INVENTORY>                                                 105242
<CURRENT-ASSETS>                                            239534
<PP&E>                                                       28838
<DEPRECIATION>                                               20285
<TOTAL-ASSETS>                                              289827
<CURRENT-LIABILITIES>                                        60256
<BONDS>                                                       6191
<PREFERRED-MANDATORY>                                            0
<PREFERRED>                                                   2500
<COMMON>                                                       195
<OTHER-SE>                                                  187892
<TOTAL-LIABILITY-AND-EQUITY>                                289827
<SALES>                                                     603333
<TOTAL-REVENUES>                                            639082
<CGS>                                                       512396
<TOTAL-COSTS>                                               532320
<OTHER-EXPENSES>                                                 0
<LOSS-PROVISION>                                              1300
<INTEREST-EXPENSE>                                            2542
<INCOME-PRETAX>                                              43442
<INCOME-TAX>                                                 22420
<INCOME-CONTINUING>                                          21022
<DISCONTINUED>                                                   0
<EXTRAORDINARY>                                                  0
<CHANGES>                                                        0
<NET-INCOME>                                                 21022
<EPS-PRIMARY>                                                 1.09
<EPS-DILUTED>                                                 1.05
        

</TABLE>