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


                                    FORM 10-Q

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

                   For the quarterly period ended May 31, 2005

                         Commission file number 0-28839


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


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

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

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


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

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

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act)

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

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

           Class                                  Outstanding at July 5,  2005 

           Class A Common Stock                       20,907,938 Shares
           Class B Common Stock                        2,260,954 Shares



                                        1





                                               AUDIOVOX CORPORATION



                                                     I N D E X
                                                                                                                 Page
                                                                                                                Number


                                                                                                               
PART I - FINANCIAL INFORMATION                                                                                    3

           ITEM 1.  FINANCIAL STATEMENTS                                                                          3

                      Consolidated Balance Sheets at November 30,
                           2004 and May 31, 2005 (unaudited)                                                      3


                      Consolidated Statements of Operations (unaudited) for the Three
                           and Six Months Ended May 31, 2004 and 2005                                             5

                      Consolidated Statements of Cash Flows (unaudited) for the Six
                           Months Ended May 31, 2004 and 2005                                                     6

                      Notes to Consolidated Financial Statements                                                  7

           ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS                                                        22

           ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                      RISK                                                                                       37

           ITEM 4.    CONTROLS AND PROCEDURES                                                                    38

PART II - OTHER INFORMATION                                                                                      40

           ITEM 1.    LEGAL PROCEEDINGS                                                                          40

           ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                        41

           ITEM 6.    EXHIBITS                                                                                   42

SIGNATURES                                                                                                       43





                                                         2





                                          PART I - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

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


                                                      November 30,       May 31,
                                                          2004            2005
                                                        --------        --------
                                                                     (unaudited)

Assets

Current assets:

                                                                       
     Cash and cash equivalents                          $ 43,409        $ 17,238
     Restricted cash                                       8,264           1,702
     Short-term investments                              124,237         138,070
     Accounts receivable, net                            118,388         105,077
     Inventory                                           139,307         142,158
     Receivables from vendors                              7,028           7,606
     Prepaid expenses and other current assets            14,057           5,444
     Deferred income taxes                                 6,873           5,066
     Current assets of discontinued operations            20,582           2,840
                                                        --------        --------

         Total current assets                            482,145         425,201

  Investment securities                                    5,988           6,092
  Equity investments                                      12,878          11,502
  Property, plant and equipment, net                      19,707          20,821
  Excess cost over fair value of assets acquired           7,019          18,672
  Intangible assets                                        8,043           8,186
  Deferred income taxes                                    6,220           5,533
  Other assets                                               413             350
  Non-current assets of discontinued operations              925             792
                                                        --------        --------

         Total assets                                   $543,338        $497,149
                                                        ========        ========

















See accompanying notes to consolidated financial statements.


                                                         3





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



                                                                                   November 30,          May 31,
                                                                                       2004                2005
                                                                                     --------            --------
                                                                                                       (unaudited)
Liabilities and Stockholders' Equity

Current liabilities:
                                                                                                       
     Accounts payable                                                                $  26,004         $  24,797
     Accrued expenses and other current liabilities                                     32,814            23,793
     Accrued sales incentives                                                            7,584             5,890
     Income taxes payable                                                               42,790             7,523
     Bank obligations                                                                    5,485             4,647
     Current portion of long-term debt                                                   2,497             1,423
     Current liabilities of discontinued operations                                      2,953             2,468
                                                                                     ---------         ---------

         Total current liabilities                                                     120,127            70,541

  Long-term debt                                                                         7,709             7,326
  Capital lease obligation                                                               6,001             6,060
  Deferred compensation                                                                  4,888             5,695
                                                                                     ---------         ---------

         Total liabilities                                                             138,725            89,622
                                                                                     ---------         ---------

  Minority interest                                                                        426               347
                                                                                     ---------         ---------

  Commitments and contingencies

  Stockholders' equity:
     Preferred stock $50 par value; 50,000 shares authorized and outstanding,
         liquidation preference of $2,500                                                2,500             2,500
     Series preferred stock $.01 par value, 1,500,000 shares authorized; no
         shares issued or outstanding                                                     --                --
     Common stock:
         Class A $.01 par value; 60,000,000 shares authorized; 20,859,846 and
           20,877,046 shares issued at November 30, 2004 and May 31, 2005,
           respectively                                                                    209               209
         Class B $.01 par value; convertible 10,000,000 shares authorized;
           2,260,954 shares issued and outstanding                                          22                22
     Paid-in capital                                                                   253,959           254,177
     Retained earnings                                                                 157,835           162,257
     Accumulated other comprehensive loss                                               (1,841)           (3,488)
     Treasury stock, at cost, 1,070,957 shares of Class A common stock                  (8,497)           (8,497)
                                                                                     ---------         ---------

  Total stockholders' equity                                                           404,187           407,180
                                                                                     ---------         ---------
  Total liabilities and stockholders' equity                                         $ 543,338         $ 497,149
                                                                                     =========         =========





See accompanying notes to consolidated financial statements.

                                                         4






                                       AUDIOVOX CORPORATION AND SUBSIDIARIES
                                       Consolidated Statements of Operations
                             For the Three and Six Months Ended May 31, 2004 and 2005
                                  (In thousands, except share and per share data)
                                                    (unaudited)


                                                                         Three Months Ended               Six Months Ended
                                                                   ----------------------------     ---------------------------
                                                                              May 31,                        May 31,
                                                                   ----------------------------     ---------------------------
                                                                         2004           2005           2004            2005
                                                                   --------------  -------------   -------------   -------------

                                                                                                                
  Net sales                                                        $    146,884    $    144,509    $    282,240    $    260,489
  Cost of sales                                                         125,488         121,710         239,716         221,619
                                                                   ------------    ------------    ------------    ------------
  Gross profit                                                           21,396          22,799          42,524          38,870
                                                                   ------------    ------------    ------------    ------------
  Operating expenses:
     Selling                                                              7,503           8,315          14,644          16,306
     General and administrative                                          10,385          12,129          22,872          24,543
     Warehousing and technical support                                    1,500           1,771           2,469           3,238
                                                                   ------------    ------------    ------------    ------------
         Total operating expenses                                        19,388          22,215          39,985          44,087
                                                                   ------------    ------------    ------------    ------------
  Operating income (loss)                                                 2,008             584           2,539          (5,217)
                                                                   ------------    ------------    ------------    ------------

  Other income (expense):
     Interest expense and bank charges                                     (866)           (738)         (1,829)         (1,371)
     Equity in income of equity investees                                 1,479             743           2,550           1,096
     Other, net                                                             572           3,020           1,196           7,625
                                                                   ------------    ------------    ------------    ------------
         Total other income, net                                          1,185           3,025           1,917           7,350
                                                                   ------------    ------------    ------------    ------------
  Income from continuing operations before income taxes                   3,193           3,609           4,456           2,133
  Income taxes (benefit)                                                  1,608          (2,153)          2,210          (3,077)
  Minority interest                                                           5            --                40            --
                                                                   ------------    ------------    ------------    ------------
  Net income from continuing operations                                   1,590           5,762           2,286           5,210

  Net income (loss) from discontinued operations, net of tax              2,087            (135)          3,261            (788)
                                                                   ------------    ------------    ------------    ------------
  Net income                                                       $      3,677    $      5,627    $      5,547    $      4,422
                                                                   ============    ============    ============    ============

  Net income (loss) per common share (basic):
     From continuing operations                                    $       0.07    $       0.26    $       0.10    $       0.24
     From discontinued operations                                          0.10            --              0.15           (0.04)
                                                                   ------------    ------------    ------------    ------------
  Net income per common share (basic)                              $       0.17    $       0.26    $       0.25    $       0.20
                                                                   ============    ============    ============    ============
  Net income (loss) per common share (diluted):

     From continuing operations                                    $       0.07    $       0.26    $       0.10    $       0.23
     From discontinued operations                                          0.09           (0.01)           0.15           (0.03)
                                                                   ------------    ------------    ------------    ------------
  Net income per common share (diluted)                            $       0.16    $       0.25    $       0.25    $       0.20
                                                                   ============    ============    ============    ============
  Weighted average number of common shares outstanding (basic)       21,950,898      22,058,130      21,936,577      22,054,823
                                                                   ============    ============    ============    ============
  Weighted average number of common shares outstanding (diluted)     22,436,045      22,374,225      22,345,345      22,405,042
                                                                   ============    ============    ============    ============










See accompanying notes to consolidated financial statements.

                                        5






                                       AUDIOVOX CORPORATION AND SUBSIDIARIES
                                       Consolidated Statements of Cash Flows
                                  For the Six Months Ended May 31, 2004 and 2005
                                                  (In thousands)
                                                    (unaudited)

                                                                                             Six Months Ended
                                                                                       ----------------------------
                                                                                                 May 31,
                                                                                       ----------------------------
                                                                                            2004           2005
                                                                                       ------------   -------------
Cash flows from operating activities:
                                                                                                          
     Net income                                                                            $   5,547      $   4,422
     Net (income) loss from discontinued operations                                           (3,261)           788
                                                                                           ---------      ---------
     Net income from continuing operations                                                     2,286          5,210
     Adjustments to reconcile net income to net cash used in continuing operating
        activities:
        Depreciation and amortization                                                          1,636          1,596
        Provision for (recovery of) bad debt expense                                            (521)            40
        Equity in income of equity investees                                                  (2,550)        (1,096)
        Minority interest                                                                        (40)          --
        Deferred income tax expense, net                                                       1,066          2,762
        Tax benefit on stock options exercised                                                   107             33
        Non-cash compensation                                                                    268            412
        Gain on trading security                                                                --           (4,421)
     Changes in operating assets and liabilities, net of assets and liabilities
  acquired:
        Accounts receivable                                                                   32,006         23,173
        Inventory                                                                              5,347          5,588
        Receivables from vendors                                                              (3,339)          (577)
        Prepaid expenses and other                                                             4,458            955
        Investment securities-trading                                                           (904)          (807)
        Accounts payable, accrued expenses, accrued sales incentives and other current
          liabilities                                                                        (20,753)       (24,934)
        Income taxes payable                                                                     (95)       (35,413)
     Change in assets and  liabilities of discontinued operations                            (47,240)        16,388
                                                                                           ---------      ---------
          Net cash used in operating activities                                              (28,268)       (11,091)
                                                                                           ---------      ---------

  Cash flows from investing activities:
     Purchases of property, plant and equipment                                               (1,297)        (1,626)
     Proceeds from sale of property, plant and equipment                                          82             16
     Proceeds from distribution from an equity investee                                        3,017            434
     Purchase of short-term investments                                                         --         (107,075)
     Sale of short-term investments                                                             --           99,680
     Proceeds from sale of Cellular business                                                    --           16,736
     Purchase of patent                                                                         --             (150)
     Escrow payment for minority interest                                                       --           (1,702)
     (Purchase) proceeds of acquired businesses                                                  513        (15,529)
                                                                                           ---------      ---------
          Net cash provided by (used in) investing activities                                  2,315         (9,216)
                                                                                           ---------      ---------

  Cash flows from financing activities:
     Borrowings from bank obligations                                                        557,595           --
     Repayments on bank obligations                                                         (527,960)        (4,574)
     Principal payments on capital lease obligations                                             (32)           (34)
     Proceeds from exercise of stock options                                                     534            185
     Principal payments on debt                                                               (3,810)        (1,189)
                                                                                           ---------      ---------
          Net cash provided by (used in) financing activities                                 26,327         (5,612)
                                                                                            --------      ---------
                                                                                                                  
  Effect of exchange rate changes on cash                                                         76           (252)
                                                                                           ---------      ---------
  Net increase (decrease) in cash and cash equivalents                                           450        (26,171)
  Cash and cash equivalents at beginning of period                                             4,702         43,409
                                                                                           ---------      ---------
  Cash and cash equivalents at end of period                                               $   5,152      $  17,238
                                                                                           =========      =========


See accompanying notes to consolidated financial statements.

                                        6





                      AUDIOVOX CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                Three and Six Months Ended May 31, 2004 and 2005
             (Dollars in thousands, except share and per share data)
                                   (unaudited)


(1)  Basis of Presentation

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

     These  consolidated  financial  statements  do not include all  disclosures
     associated with consolidated  financial  statements  prepared in accordance
     with  accounting  principles  generally  accepted  in the United  States of
     America.  Accordingly,  these statements should be read in conjunction with
     the Company's consolidated financial statements and notes thereto contained
     in the Company's Form 10-K for the year ended November 30, 2004.

     A summary of the Company's significant accounting policies is identified in
     Note 1 of  Notes  to  Consolidated  Financial  Statements  included  in the
     Company's 2004 Annual Report filed on Form 10-K. There have been no changes
     to the Company's significant accounting policies subsequent to November 30,
     2004.

     The  preparation  of financial  statements  in conformity  with  accounting
     principles  generally  accepted  in the United  States of America  requires
     management  to make  estimates and  assumptions  that affect the amounts of
     assets,  liabilities,  revenues  and expenses  reported in those  financial
     statements as well as the disclosure of contingent  assets and  liabilities
     at the date of the consolidated  financial statements.  These judgments can
     be subjective and complex,  and  consequently,  actual results could differ
     from those  estimates and  assumptions.  Significant  estimates made by the
     Company include the allowance for doubtful accounts,  inventory  valuation,
     recoverability  of deferred  tax assets,  valuation of  long-lived  assets,
     accrued sales incentives and warranty reserves.

     The Company has one reportable segment  ("Electronics")  which is organized
     by product class.  The  Electronics  Segment sells mobile  electronics  and
     consumer electronics, primarily to mass merchants, specialty retailers, new
     car  dealers,   original  equipment   manufacturers  ("OEM"),   independent
     installers of automotive accessories and the U.S. military.

     On November 1, 2004, the Company  completed the divestiture of its Cellular
     business (formerly known as "ACC", "Cellular" or "Wireless").  In addition,
     on February  25,  2005,  the  Company  entered  into a plan to  discontinue
     ownership of the Company's  majority-owned  subsidiary,  Audiovox  Malaysia
     ("AVM").  Accordingly,  the Company has presented the financial  results of
     Cellular and AVM as discontinued  operations for all periods presented (see
     Note 3 of Notes to Consolidated Financial Statements). In addition, certain
     reclassifications  have  been  made  to  the  2004  consolidated  financial
     statements in order to conform to the current period presentation.



                                                         7




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


(2)  Accounting for Stock-Based Compensation

     The Company  applies the  intrinsic  value method as outlined in Accounting
     Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
     (APB No. 25), and related  interpretations  in accounting for stock options
     and share units granted  under these  programs.  Under the intrinsic  value
     method, no compensation  expense is recognized if the exercise price of the
     Company's  employee or  independent  director's  stock  options  equals the
     market price of the  underlying  stock on the date of grant.  SFAS No. 123,
     "Accounting  for  Stock-Based  Compensation",  requires  that  the  Company
     provide  pro-forma  information  regarding  net  income  and net income per
     common  share  as if  compensation  cost  for the  Company's  stock  option
     programs  had been  determined  in  accordance  with the fair value  method
     prescribed therein.  The Company adopted the disclosure portion of SFAS No.
     148, "Accounting for Stock-Based  Compensation - Transition and Disclosure"
     requiring  more  prominent  pro-forma  disclosures as described in SFAS No.
     123.  The  following  table  illustrates  the  effect on net income and net
     income per common  share as if the Company had  measured  the  compensation
     cost for the Company's stock option programs under the fair value method in
     each period presented:



                                           For the Three Months Ended    For the Six Months Ended
                                           -------------------------     ------------------------
                                                      May 31,                     May 31,
                                             -----------------------     -----------------------
                                                2004          2005          2004          2005
                                             ---------     ---------     ---------     ---------
Net income:
                                                                                 
     As reported                             $   3,677     $   5,627     $   5,547     $   4,422
     Stock based compensation
        expense                                   --            --            --             (44)
                                             ---------     ---------     ---------     ---------
     Pro-forma                               $   3,677     $   5,627     $   5,547     $   4,378
                                             =========     =========     =========     =========

  Net income per common share (basic):
     As reported                             $    0.17     $    0.26     $    0.25     $    0.20
     Pro-forma                                    0.17          0.26          0.25          0.20

  Net income per common share (diluted):
     As reported                             $    0.16     $    0.25     $    0.25     $    0.20
     Pro-forma                                    0.16          0.25          0.25          0.20


(3)  Discontinued Operations

     On  February  25,  2005  the  Company  entered  into a plan to  discontinue
     ownership of the  Company's  majority  owned  subsidiary,  AVM and sell its
     ownership to the current  minority  interest  shareholder.  The Company has
     planned to discontinue  ownership of AVM due to increased  competition from
     non local OEM's and  deteriorating  credit quality of local customers.  The
     Company plans to sell its remaining equity in AVM for $550 during the third
     quarter of fiscal 2005, at which time the Company will be released from all
     of its Malaysian liabilities including bank obligations. As a result of the

                                                       8




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


     intended  sale of AVM, the Company  compared  the  carrying  value of AVM's
     assets on the Company's consolidated balance sheets to their estimated fair
     value.  As a result of this  review,  the Company  recorded  an  impairment
     charge of $408 within discontinued  operations for the six months ended May
     31, 2005 as the carrying value exceeded their estimated fair value.

     On November 1, 2004, the Company  completed the divestiture of its Cellular
     business  (formerly  known as "ACC" or  "Wireless")  to UTStarcom,  Inc. In
     connection  with the  divestiture  of  Cellular,  the  Company  recorded  a
     receivable for the net working capital adjustment of $8,472, which has been
     included in prepaid  expenses and other current assets on the  accompanying
     consolidated  balance sheet at November 30, 2004. In addition,  the Company
     was required to deposit 5% of the purchase  price for Cellular in an escrow
     amount,  which  was  reflected  as  restricted  cash  on  the  accompanying
     consolidated  balance  sheet at November  30,  2004.  During the six months
     ended May 31, 2005, the Company received the working capital adjustment and
     escrow amount in full.

     In accordance with Financial  Accounting Standards Board ("FASB") Statement
     No. 144,  "Accounting for the Impairment of Long-lived Assets," the Company
     reclassified  all associated  assets and liabilities of AVM and Cellular as
     assets  and  liabilities  of   discontinued   operations  for  all  periods
     presented.  The  following  sets  forth the  carrying  amounts of the major
     classes  of assets  and  liabilities,  which are  classified  as assets and
     liabilities of  discontinued  operations in the  accompanying  consolidated
     balance sheets.



                                                    November 30,    May 31,
                                                        2004         2005
                                                       -------     -------
Assets
    Accounts receivable, net                           $18,534     $   764
    Inventory                                            1,432       1,277
    Prepaid expenses and other current assets              616         799
                                                       -------     -------
    Current assets of discontinued operations          $20,582     $ 2,840
                                                       =======     =======

    Property, plant and equipment, net                 $   711     $   586
    Other assets                                           214         206
                                                       -------     -------
    Non-current assets of discontinued operations      $   925     $   792
                                                       =======     =======

Liabilities
    Accounts payable                                   $   172     $   267
    Accrued expenses and other current liabilities         572         536
    Bank obligations                                     2,209       1,665
                                                       -------     -------
    Current liabilities of discontinued operations     $ 2,953     $ 2,468
                                                       =======     =======


     Included in current assets of discontinued  operations at November 30, 2004
     is  $16,958  of  Cellular   accounts   receivable  which  was  subsequently
     collected.



                                        9




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


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


                                     Three Months Ended    Six Months Ended
                                     ------------------   ------------------
                                           May 31,              May 31,
                                     ------------------   ------------------
                                       2004      2005       2004      2005
                                     --------  --------   --------  --------
Net sales from discontinued
   operations                        $291,315  $    743   $532,843  $  1,457
                                     ========  ========   ========  ========

Income (loss) from discontinued
   operations before income taxes       1,773      (176)     3,145      (870)
Income tax benefit                        314        41        116        82
                                     --------  --------   --------  --------
Net income (loss) from discontinued
   operations, net of tax            $  2,087  $   (135)  $  3,261  $   (788)
                                     ========  ========   ========  ========



     Interest   expense  of  $921  and  $1,382  was  allocated  to  discontinued
     operations  for the three and six months ended May 31, 2004,  respectively.
     This allocation represents  consolidated interest that cannot be attributed
     to other  operations of the Company and such  allocations were based on the
     required working capital needs of the Cellular business.

     Included in income from discontinued  operations are tax recoveries of $314
     and $116 for the three and six months ended May 31, 2004, respectively. The
     Company  had  previously  established  valuation  allowances  for state net
     operating  loss  carryforwards  as well as other  deferred  tax  assets  of
     Cellular.  The net change in the total valuation allowance,  which resulted
     from the  utilization  of  previously  fully  reserved net  operating  loss
     carryforwards of Cellular,  for the three and six months ended May 31, 2004
     was a decrease of $1,110 and $1,639,  respectively.  Such change positively
     impacted the provision for income taxes during the period indicated.

(4)  Net Income Per Common Share

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



                                       10




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


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



                                                    Three Months Ended             Six Months Ended
                                               ----------------------------  -----------------------------
                                                         May 31,                        May 31,
                                               ----------------------------  -----------------------------
                                                   2004           2005           2004            2005
                                               -------------  -------------  -------------   -------------
Weighted average number of common
 shares outstanding (denominator for
                                                                                         
 net income per common share, basic)          21,950,898      22,058,130      21,936,577      22,054,823

Effect of dilutive securities:
 Stock options and warrants                      485,147         316,095         408,768         350,219
                                              ----------      ----------      ----------      ----------
Weighted average number of common
 shares and potential common shares
 outstanding (denominator for net
 income per common share, diluted)            22,436,045      22,374,225      22,345,345      22,405,042
                                              ==========      ==========      ==========      ==========


     Stock options and warrants  totaling  1,442,800 and 2,006,977 for the three
     and six months  ended May 31,  2005,  respectively,  and stock  options and
     warrants  totaling  732,500 for the six months  ended May 31, 2004 were not
     included  in the net income  per  diluted  share  calculation  because  the
     exercise  price of these  options and warrants was greater than the average
     market price of the common stock during the period.

(5)  Accumulated Other Comprehensive Loss

     Accumulated other  comprehensive  loss of $1,841 and $3,488 at November 30,
     2004  and  May  31,  2005,  respectively,   includes  the  net  accumulated
     unrealized loss on the Company's  available-for-sale  investment securities
     of $796 and $1,242 at November 30, 2004 and May 31, 2005, respectively, and
     foreign currency translation loss of $1,045 and $2,246 at November 30, 2004
     and May 31, 2005, respectively.



                                       11




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


     The Company's total comprehensive income was as follows:


                                                       Three Months Ended        Six Months Ended
                                                     --------------------      --------------------
                                                            May 31,                    May 31,
                                                     --------------------      --------------------
                                                        2004        2005         2004         2005
                                                     -------      -------      -------      -------
                                                                                    
Net income                                           $ 3,677      $ 5,627      $ 5,547      $ 4,422

Other comprehensive income (loss):
   Foreign currency translation adjustments             (253)        (938)         292       (1,201)
   Unrealized holding loss on available-for-
       sale investment securities arising during
       period, net of tax                             (1,265)        (312)      (1,472)        (446)
                                                     -------      -------      -------      -------
Other comprehensive loss, net of tax                  (1,518)      (1,250)      (1,180)      (1,647)
                                                     -------      -------      -------      -------
Total comprehensive income                           $ 2,159      $ 4,377      $ 4,367      $ 2,775
                                                     =======      =======      =======      =======



     The change in the net unrealized loss arising during the periods  presented
     above are net of tax  benefits of $775 and $191 for the three  months ended
     May 31, 2004 and 2005,  respectively,  and $902 and $273 for the six months
     ended May 31, 2005, respectively.

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

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


                                                 Six Months Ended
                                           ----------------------------
                                                     May 31,
                                           ----------------------------
                                               2004            2005
                                           -------------    -----------
Cash paid during the period:
     Interest (excluding bank charges)       $ 1,720         $   983
     Income taxes                              3,815          29,899

     Non-Cash Transactions

     During the six months ended May 31, 2004 and 2005, the Company  recorded an
     unrealized   holding  loss   relating  to   available-for-sale   marketable
     investment securities of $1,472 and $446,  respectively,  as a component of
     accumulated other comprehensive loss.

     During the six months ended May 31, 2004 and 2005,  the Company  recorded a
     non-cash compensation charge of $268 and $412, respectively, related to the
     rights under the call/put options  previously  granted to certain employees
     of Audiovox German Holdings GmbH ("Audiovox Germany").



                                       12




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


     Changes in Stockholders' Equity

     During  the six  months  ended May 31,  2005,  17,200  stock  options  were
     exercised into shares of Class A common stock aggregating  proceeds of $185
     to the Company.

(7)  Business Acquisition

     On  January  4,  2005,  the  Company's  wholly-owned  subsidiary,  Audiovox
     Electronics  Corporation,  signed an asset  purchase  agreement to purchase
     certain assets of Terk Technologies Corp.  ("Terk").  The purchase price is
     subject to a working  capital  adjustment  based on the working  capital of
     Terk at the time of  closing,  plus  contingent  debentures  with a maximum
     value of $9,280 based on the  achievement  of future revenue  targets.  The
     total purchase price, which includes a working capital adjustment of $1,730
     and acquisition costs of $516, approximated $15,529.

     The following  summarizes the preliminary  allocation of the purchase price
     to the fair value of the assets  acquired  and  liabilities  assumed at the
     date of acquisition:


     Assets acquired:
          Accounts receivable                                            $11,131
          Inventory                                                        9,591
          Prepaid expenses and other current assets                          293
          Property, plant and equipment and other assets                   1,210
          Goodwill                                                        11,653
                                                                         -------
              Total assets acquired                                      $33,878
                                                                         -------

     Liabilities assumed:
          Accounts payable, accrued expenses and other liabilities        14,250
          Bank obligations                                                 4,099
                                                                         -------
              Total liabilities assumed                                   18,349
                                                                         -------
          Cash paid                                                      $15,529
                                                                         =======

     The excess of the purchase  price over the  estimated  fair value of assets
     and  liabilities  acquired  of  $11,653  was  allocated  to  goodwill.  The
     allocation  of  purchase  price to assets and  liabilities  acquired is not
     final and is subject to the completion of an independent  valuation  study.
     The results of  operations  of this  acquisition  have been included in the
     consolidated financial statements from the date of acquisition. The purpose
     of this acquisition is to increase the Company's market share for satellite
     radio products as well as accessories for antennas and HDTV products.




                                       13




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


     The following unaudited pro-forma financial  information for the six months
     ended  May 31,  2004  and  2005  represents  the  combined  results  of the
     Company's  operations and Terk as if the Terk  acquisition  had occurred at
     the beginning of fiscal 2004. The unaudited pro-forma financial information
     does not  necessarily  reflect  the results of  operations  that would have
     occurred had the Company constituted a single entity during such periods.


                                             For the Six Months Ended
                                      -----------------------------------
                                                     May 31,
                                      -----------------------------------
                                            2004              2005
                                      ----------------- -----------------
                                                (unaudited)
                                             -----------------

     Net sales                            $305,242         $264,323
     Net income                              5,084            4,345
     Net income per share-diluted         $   0.23         $   0.19

(8)  Goodwill and Other Intangible Assets

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


  Balance at November 30, 2004                                           $ 7,019
  Goodwill from purchase of Terk (see Note 7 of Notes to Consolidated
     Financial Statements)                                                11,653
                                                                         -------
  Balance at May 31, 2005                                                $18,672
                                                                         =======


     At November 30, 2004, intangible assets consisted of the following:



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

                                                                                        
  Patents subject to amortization                      $  677               $  677                 --
  Trademarks not subject to amortization                8,043                 --                 $8,043
                                                       ------               ------               ------
       Total                                           $8,720               $  677               $8,043
                                                       ======               ======               ======


     At May 31, 2005, intangible assets consisted of the following:



                                                     Gross
                                                     Carrying             Accumulated           Total Net
                                                      Value              Amortization           Book Value
                                                 ----------------     -------------------    ----------------
                                                                                           
  Patents subject to amortization                      $  827               $  684               $  143
  Trademarks not subject to amortization                8,043                 --                  8,043
                                                       ------               ------               ------
           Total                                       $8,870               $  684               $8,186
                                                       ======               ======               ======



                                       14




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


     During the six months ended May 31,  2005,  the Company  purchased  $150 of
     patents  which  expire  in  February  of  2015.  The  estimated   aggregate
     amortization  expense for each of the succeeding  years ending May 31, 2010
     amounts to $75.

(9)  Equity Investments

     The  Company  has a 50%  non-controlling  ownership  interest  in  Audiovox
     Specialized  Applications,  Inc.  ("ASA")  which acts as a  distributor  to
     specialized  markets  for  specialized  vehicles,  such  as  RV's  and  van
     conversions,  of  televisions  and other  automotive  sound,  security  and
     accessory products.

     The following presents summary financial  information for ASA. Such summary
     financial  information  has been provided  herein based upon the individual
     significance  of ASA  to  the  consolidated  financial  information  of the
     Company.


                                 November 30,        May 31,
                                     2004              2005
                               ----------------   --------------

Current assets                       $22,008           $22,599
Non-current assets                     4,425             4,487
Current liabilities                    4,710             4,082
Members' equity                      $21,723           $23,004


                                           Six Months Ended
                                      --------------------------
                                               May 31,
                                      --------------------------
                                          2004          2005
                                      ------------  ------------

Net sales                                  $29,236       $24,489
Gross profit                                 9,182         7,493
Operating income                             3,331         1,735
Net income                                 $ 4,502      $  2,148

     The  Company's  share of income  from ASA for the six months  ended May 31,
     2004 and 2005,  was $2,251  and  $1,074,  respectively.  In  addition,  the
     Company received distributions from ASA totaling $434 during the six months
     ended May 31, 2005, which was recorded as a reduction to equity investments
     on the accompanying consolidated balance sheet.

(10) Bliss-tel Initial Public Offering

     On December 13, 2004,  one of the  Company's  former  equity  investment's,
     Bliss-tel Public Company Limited  ("Bliss-tel"),  issued 230,000,000 shares
     on the SET (Security  Exchange of Thailand)  for an offering  price of 6.20
     baht per share.  Prior to the issuance of these  shares,  the Company was a
     20% shareholder in Bliss-tel and,  subsequent to the offering,  the Company
     owns 30,000,000  shares (or approximately  13%) of Bliss-tel's  outstanding
     stock.  As such,  beginning in fiscal 2005,  the Company  accounted for the
     Bliss-tel investment as a trading security in accordance with FASB

                                       15




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


     Statement No. 115  "Accounting  for Certain  Investments in Debt and Equity
     Securities"  whereby the  unrealized  holding  gains on losses on Bliss-tel
     stock  are  included  in  earnings.  As a result of this  transaction,  the
     Company  recorded  a net gain of $1,858  and  $4,374  for the three and six
     months ended May 31, 2005, respectively,  which is included in other income
     on the accompanying statement of operations.

     As of May 31, 2005,  the Bliss-tel  investment had a value of $6,390 and is
     reflected within  short-term  investments on the accompanying  consolidated
     balance sheet.

(11) Income Taxes

     Quarterly  tax  provisions  are  generally  based upon an estimated  annual
     effective tax rate per taxable  entity,  including  evaluations of possible
     future events and transactions, and are subject to subsequent refinement or
     revision.  When the  Company  is unable to  estimate  a part of its  annual
     income or loss,  or the related tax expense or benefit,  the tax expense or
     benefit  applicable to that item is reported in the interim period in which
     the income or loss occurs.

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



                                Three Months Ended                           Six Months Ended
                    ------------------------------------------  ------------------------------------------
                                     May 31,                                     May 31,
                    ------------------------------------------  ------------------------------------------
                                 2004                   2005                 2004                 2005
                                 ----                   ----                 ----                 ----


Tax provision at
   Federal statutory
                                                                                  
     rate                  $ 1,118    35.0%     $ 1,263      35.0%     $ 1,560    35.0%     $   746     35.0%
  State income taxes,
     net of Federal
     benefit                   119     3.7          132       3.7          195     4.4           76      3.6
  Foreign tax rate
     differential              141     4.4           75       2.1          176     3.9          (12)    (0.5)
  Reversal of
     accruals due to
     completion of
     audits                     --      --       (3,307)    (91.6)          --      --       (3,307)  (155.1)
  Permanent items              122     3.8         (288)     (8.0)         137     3.1         (481)   (22.6)
  Changes in rates
     and other, net            108     3.4          (28)     (0.9)         142     3.2          (99)    (4.7)
                               ---     ---          ---      ----          ---     ---          ---     ---- 

                           $ 1,608    50.3%     $(2,153)    (59.7)%    $ 2,210    49.6%     $(3,077)  (144.3)%
                           =======    ====      =======      ====      =======    ====       =======  =======


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

                                       16




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005



     The  effective tax benefit for the three and six months ended May 31, 2005,
     was 59.7% and  144.3%,  respectively,  compared  to 50.3% and 49.6% for the
     comparable prior period.  The effective benefit rate for 2005 was primarily
     due to the favorable outcome of $3,307 in tax accrual reductions due to the
     completion of certain tax examinations for the years 1994 through 2000.

(12) Accrued Sales Incentives

     A summary of the activity with respect to the Company's sales incentives is
     provided below:



                                      For the Three Months Ended         For the Six Months Ended
                                  ----------------------------------  -------------------------------
                                               May 31,                            May 31,
                                  ----------------------------------  -------------------------------
                                        2004              2005            2004             2005
                                  ----------------   ---------------  -------------   ---------------

                                                                              
    Opening balance                    $  6,826       $  5,450        $ 14,605       $  7,584
    Accruals                              5,066          5,776*          8,033          9,636*
    Payments                             (4,262)        (4,673)        (12,584)        (9,346)
    Reversals for unearned sales
    incentives                             (448)          --            (1,818)          (733)
    Reversals for unclaimed sales
     incentives                            (198)          (663)         (1,252)        (1,251)
                                           ----           ----          ------         ------ 
    Ending balance                     $  6,984       $  5,890        $  6,984       $  5,890
                                       ========       ========        ========       ========
  

     *Includes $1,255 of accrued sales  incentives  acquired from Terk (See Note
     7).

(13) Product Warranties and Product Repair Costs

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



                                                  Three Months Ended                  Six Months Ended
                                            ----------------------------      -------------------------------
                                                       May 31,                             May 31,
                                            ----------------------------      -------------------------------
                                                    2004          2005           2004            2005
                                                    ----          ----           ----            ----


                                                                                       
  Opening balance                                $ 15,303       $ 11,394       $ 14,695       $ 11,794
  Liabilities accrued for warranties issued
       during the period                              232          1,108          2,555          2,473
  Warranty claims paid during the period           (2,291)        (1,198)        (4,006)        (2,963)
                                                 --------       --------       --------       --------
  Ending balance                                 $ 13,244       $ 11,304       $ 13,244       $ 11,304
                                                 ========       ========       ========       ========




                                       17




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


(14) Financing Arrangements

     The Company has the following financing arrangements:

                                                November 30,   May 31,
                                                    2004        2005
                                                    ----        ----
Bank Obligations

  Domestic bank obligation (a)                        --         --
  Euro asset-based and factoring obligation (b)    $ 5,485    $ 4,647

  Debt

  Euro loan agreement (c)                          $ 9,377    $ 7,589
  Other (d)                                            829      1,160
                                                   -------    -------
  Total debt                                       $10,206    $ 8,749
                                                   =======    =======

     (a)  Domestic Bank Obligations

          At  November  30,  2004  and  May  31,   2005,   the  Company  has  an
          un-guaranteed  credit line to fund the  temporary  short-term  working
          capital needs of the domestic operations.  This line expires on August
          31,  2005 and  allows  aggregate  borrowings  of up to  $25,000  at an
          interest  rate of Prime  (or  similar  designations)  plus  1%.  As of
          November 30, 2004 and May 31, 2005, no direct amounts are  outstanding
          under this agreement.

     (b)  Euro Asset Based Lending Obligation

          The  Company  has  a  16,000  Euro   accounts   receivable   factoring
          arrangement  and a 6,000 Euro Asset Based  Lending  ("ABL") ( finished
          goods inventory and non factored accounts  receivable) credit facility
          for the  Company's  subsidiary,  Audiovox  Germany  which  expires  on
          October  25,  2005  and is  renewable  on an  annual  basis.  Selected
          accounts  receivable  are purchased from the Company on a non-recourse
          basis at 85% of face  value  and  payment  of the  remaining  15% upon
          receipt from the customer of the balance of the receivable  purchased.
          In respect of the ABL credit  facility,  selected  finished  goods are
          advanced  at a 60%  rate and non  factored  accounts  receivables  are
          advanced at a 50% rate.  The rate of interest is three months  Euribor
          plus 2.5%,  and the Company  pays 0.4% of its gross sales as a fee for
          the accounts receivable factoring arrangement. As of November 30, 2004
          and May 31,  2005,  the amount of accounts  receivable  available  for
          factoring exceeded the amounts outstanding under this obligation.

     (c)  Euro Term Loan Agreement

          On September 2, 2003, Audiovox Germany borrowed 12 million Euros under
          a new term loan  agreement.  This agreement was for a 5 year term loan
          with a financial institution consisting of two tranches.  Tranche A is
          for 9 million  Euros and Tranche B is for 3 million  Euros.  Tranche B
          has been fully repaid. Payments are due in monthly installments and

                                       18




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


          interest  accrues at (i) 2.75% over the Euribor rate for the Tranche A
          and (ii) 3.5% over the three  months  Euribor  rate for Tranche B. Any
          amount repaid may not be reborrowed. The term loan becomes immediately
          due and payable if a change of control  occurs  without  permission of
          the financial institution.  As a result of a loan restructuring during
          April 2005, the maturity of the term loan has been prolonged to August
          30, 2010 with a pre-payment option.

          Audiovox Corporation guarantees 3 million Euros of this term loan. The
          term loan is  secured by the  pledge of the stock of  Audiovox  German
          Holdings GmbH and on all brands and trademarks of the Audiovox  German
          Holdings  Group.  The term loan  requires the  maintenance  of certain
          yearly  financial  covenants that are  calculated  according to German
          Accounting  Standards for Audiovox German Holdings.  Should any of the
          financial covenants not be met, the financial institution may charge a
          higher interest rate on any outstanding borrowings. The short and long
          term amounts  outstanding under this agreement were $2,497 and $6,880,
          respectively,   at   November   30,   2004  and  $1,423  and   $6,166,
          respectively, at May 31, 2005.

     (d)  Other Debt

          This amount is the accumulated  compensation obligation resulting from
          the rights under the call put option  granted to certain  employees of
          Audiovox Germany in the amount of $829 and $1,160 at November 30, 2004
          and May 31, 2005, respectively.

(15) Contingencies and Legal Matters

     The  Company is  currently,  and has in the past  been,  a party to various
     routine legal proceedings  incident to the ordinary course of business.  If
     management  determines,  based on the underlying  facts and  circumstances,
     that it is probable a loss will result from a  litigation  contingency  and
     the amount of the loss can be reasonably  estimated,  the estimated loss is
     accrued for. The Company believes the specific litigation matters disclosed
     below will not have a material  adverse  effect on the Company's  financial
     statements, individually or in the aggregate.

     During the fourth quarter of 2004,  several purported  derivative and class
     actions were filed in the Court of Chancery of the State of  Delaware,  New
     Castle  County.  On January 10, 2005,  Vice  Chancellor  Steven Lamb of the
     Court of Chancery of the State of Delaware,  New Castle County,  granted an
     order  permitting  the  filing  of  a  Consolidated  Complaint  by  several
     shareholders  of Audiovox  Corporation  derivatively  on behalf of Audiovox
     Corporation against Audiovox Corporation, ACC and the directors of Audiovox
     Corporation captioned "In Re Audiovox Corporation  Derivative  Litigation".
     The complaint seeks (a) rescission of: agreements;  amendments to long-term
     incentive awards; and severance payments pursuant to which Audiovox and ACC
     executives were paid from the net proceeds of the sale of certain assets of
     ACC to UTStarcom,  Inc., (b)  disgorgement to ACC of $16,000 paid to Philip
     Christopher pursuant to a Personally Held Intangibles Purchase Agreement in
     connection with the UTStarcom transaction,  (c) disgorgement to Audiovox of
     $4,000 paid to Philip  Christopher as  compensation  for termination of his
     Employment  Agreement and Award Agreement with ACC, (d) disgorgement to ACC
     of $1,916 paid  to John Shalam pursuant to an Award Agreement with ACC, and

                                       19




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


     (e) recovery by ACC of $5,000 in severance  payments  distributed by Philip
     Christopher to ACC's former employees. Defendants filed a motion to dismiss
     the  complaint,  which was  withdrawn.  The  Company  understands  that the
     individual defendants intend to vigorously defend this matter;  however, no
     assurances  regarding the outcome of this matter can be given at this point
     in the litigation. The Company anticipates that defense costs, in excess of
     any  applicable  retention,  will be  covered  by the  Company's  insurance
     policies.  Any damages recovered by plaintiffs will be paid to the Company.
     Accordingly,  no estimated  loss has been  recorded for the  aforementioned
     case.

     During the third quarter of 2004, an  arbitration  proceeding was commenced
     by the Company and several of its subsidiaries  against certain  Venezuelan
     employees and two Venezuelan companies  ("Respondents") before the American
     Arbitration  Association,  International  Centre  in New  York,  New  York,
     seeking  recovery  of  monies  alleged  to have  been  wrongfully  taken by
     individual   Respondents  and  damages  for  fraud.   Respondents  asserted
     counterclaims  alleging  that  the  Company  engaged  in  certain  business
     practices  that caused damage to  Respondents.  The matter was submitted to
     mediation  during the fourth quarter of fiscal 2004 and settled  subsequent
     to year end. The agreement  provides,  in pertinent part, for a payment (to
     be made upon  satisfaction  of certain  pre- closing  conditions)  from the
     Company to the Respondents of $1,700 in  consideration of which the Company
     will acquire all of Respondents'  ownership.  In addition,  the Company and
     Respondents  will release all claims.  As of May 31, 2005, the satisfaction
     of the  aforementioned  pre-closing  conditions  were not satisfied and the
     payment for the  Respondents'  ownership is included in restricted  cash on
     the  accompanying  consolidated  balance sheet. The Company recorded a $400
     reduction to general and  administrative  expenses  during the three months
     ended May 31, 2005 as a result of a legal claim  which was  withdrawn  from
     the court.

     On September 17, 2004,  Shintom Co. Ltd.  commenced action against Audiovox
     Corporation  in the  Chancery  Court of the State of  Delaware,  New Castle
     County,  seeking  recovery  of the sum of $2,500  or the value of  Audiovox
     preferred stock  determined as of April 16, 1987 (the date of the merger of
     Audiovox  Corp.,  a New York  corporation,  with  Audiovox  Corporation,  a
     Delaware  corporation)  which preferred stock was purchased by Shintom from
     Audiovox  in April  1981.  In lieu of  answering,  the Company has moved to
     dismiss  the  complaint.  The motion to dismiss was heard on April 5, 2005,
     and the court granted the Company's  motion to dismiss the  complaint,  but
     Plaintiff has filed a Notice of Appeal with  Delaware  Supreme  Court.  The
     Company intends to vigorously  defend this matter;  however,  no assurances
     regarding  the  outcome  of this  matter  can be given at this point in the
     litigation.  Accordingly,  no  estimated  loss  has been  recorded  for the
     aforementioned case.

     The consolidated class actions  transferred to a Multi-District  Litigation
     Panel of the United  States  District  Court of the  District  of  Maryland
     against the Company and other suppliers,  manufacturers and distributors of
     hand-held  wireless  telephones  alleging  damages  relating to exposure to
     radio  frequency  radiation  from  hand-held  wireless  telephones is still
     pending.  On March 16,  2005,  the United  States  Court of Appeals for the
     Fourth  Circuit   reversed  the  District   Court's  order  dismissing  the
     complaints on grounds of federal  pre-emption.  The Fourth Circuit remanded
     the actions to each of their respective state courts, except for the Naquin
     litigation which was remanded to the local Federal Court. Defendants intend
     to  file a  petition  for  certiorari  with  the  U.S.  Supreme  Court.  No
     assurances  regarding  the  outcome  of this  matter  can be given,  as the
     Company is unable to assess

                                       20




                      AUDIOVOX CORPORATION AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued
                Three and Six Months Ended May 31, 2004 and 2005


     the degree of probability of an unfavorable  outcome and estimated loss, if
     any.   Accordingly,   no   estimated   loss  has  been   recorded  for  the
     aforementioned case.

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

(16) New Accounting Pronouncements

     In December 2004, the Financial  Accounting  Standards  Board (FASB) issued
     FASB  Statement  No.  123R  ("Statement  123R"),   "Share  Based  Payment".
     Statement  123R is a revision of FAS Statement 123,  "Accounting  for Stock
     Based  Compensation"  and  supersedes APB Opinion No. 25,  "Accounting  for
     Stock issued to Employees"  (APB No.25).  Statement  123R requires a public
     entity to measure the cost of employee services  recognized in exchange for
     an award of equity  instruments  based on the grant-date  fair value of the
     award (with  limited  exceptions).  Statement  123R is effective  the first
     annual  period  that  begins  after June 15,  2005 or the  Company's  first
     quarter of fiscal 2006.  The  adoption of  Statement  123R will rescind the
     Company's  current  accounting  for  stock  based  compensation  under  the
     intrinsic  method as outlined in APB No. 25. Under APB No. 25, the issuance
     of stock options to employees generally resulted in no compensation expense
     to the Company.  The adoption of Statement 123R will require the Company to
     measure the cost of stock options based on the grant-date fair value of the
     award as discussed in Note 2 of Notes to Consolidated Financial Statements.

     In June 2005,  the FASB issued FASB  Statement No. 154  ("Statement  154"),
     "Accounting  Changes and Error  Corrections - a replacement  of APB Opinion
     No. 20 and FASB Statement No. 3". Opinion 20 previously  required that most
     voluntary changes in accounting principle be recognized by including in net
     income of the period of the change the cumulative effect of changing to the
     new accounting principle.  Statement 154 requires retrospective application
     to prior periods' financial statements of changes in accounting  principle,
     unless it is impracticable to determine either the period-specific  effects
     or the  cumulative  effect of the change.  Statement  154 is effective  for
     accounting changes and corrections of errors made in fiscal years beginning
     after  December 15, 2005 or the Company's  first quarter ended February 28,
     2007.  The Company does not expect the adoption of Statement 154 to have an
     impact on the consolidated financial statements.



                                       21





ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS (Dollars in thousands, except share and per share data)

     We begin  Management's  Discussion and Analysis of Financial  Condition and
Results of Operations (MD&A) with an overview of the business.  This is followed
by a  discussion  of the  Critical  Accounting  Estimates  that we  believe  are
important to  understanding  the assumptions  and judgments  incorporated in our
reported  financial  results.  In the next  section,  we discuss  our Results of
Operations for the three and six months ended May 31, 2004 compared to the three
and six months ended May 31, 2005. We then provide an analysis of changes in our
balance  sheet and cash  flows,  and discuss our  financial  commitments  in the
sections entitled  "Liquidity and Capital Resources,  including  Contractual and
Commercial  Commitments,"  We conclude  this MD&A with a discussion  of "Related
Party  Transactions"  and  "Recent  Accounting  Pronouncements".  All  financial
information, except share and per share data, is presented in thousands.

Business Overview and Strategy

     The  Company   through  its  four   wholly-owned   subsidiaries:   Audiovox
Electronics  Corporation,  American Radio Corp., Code Systems, Inc. ("Code") and
Audiovox German Holdings GmbH and three  majority-owned  subsidiaries:  Audiovox
Communications  (Malaysia)  Sdn.  Bhd.,  Audiovox  Holdings  (M) Sdn.  Bhd.  and
Audiovox  Venezuela,  C.A. markets its products under the Audiovox(R) brand name
and other brand names, such as Jensen(R), Prestige(R),  Pursuit(R), Rampage(TM),
Code-Alarm(R),  Car Link(R), Movies 2 Go(R), Magnate(R), Mac Audio(R),  Heco(R),
Acoustic Research(R),  Advent(R), and Phase Linear(R), as well as private labels
through  a  large  and  diverse   distribution  network  both  domestically  and
internationally.

     On November 1, 2004, the Company  completed the divestiture of its Cellular
business (formerly known as "ACC",  "Cellular" or "Wireless").  In addition,  on
February 25, 2005, the Company  entered into a plan to discontinue  ownership of
the Company's majority-owned subsidiary, Audiovox Malaysia ("AVM"). Accordingly,
the  Company  has  presented  the  financial  results  of  Cellular  and  AVM as
discontinued  operations  for all  periods  presented  (see  Note 3 of  Notes to
Consolidated Financial Statements).  In addition, certain reclassifications have
been made to the 2004 consolidated  financial  statements in order to conform to
the current period presentation.

     On  January  4,  2005,  the  Company's  wholly-owned  subsidiary,  Audiovox
Electronics Corporation,  signed an asset purchase agreement to purchase certain
assets of Terk Technologies Corp.  ("Terk").  The purpose of this acquisition is
to increase the Company's  market share for satellite  radio products as well as
accessories  for antennas and HDTV products.  The purchase price is subject to a
working capital  adjustment  based on the working capital of Terk at the time of
closing,  plus contingent debentures with a maximum value of $9,280 based on the
achievement of future revenue targets.  The total purchase price, which includes
a  working  capital   adjustment  of  $1,730  and  acquisition  costs  of  $516,
approximated  $15,529.  The results of operations of this  acquisition have been
included   in  the   consolidated   financial   statements   from  the  date  of
acquisition.(See Note 7 of Notes to Consolidated Financial Statements.)

     Management  reviews  the  financial  results  of the  Company  based on the
performance of the Electronics Group and  Administrative  Group. The Electronics
Group is comprised of sales operating subsidiaries that sell Mobile and Consumer
Electronics.  The  Administrative  Group  consists  of  treasury,  legal,  human
resources,  Information  Technology  ("IT")  and  accounting  services  that are
provided to the  Electronics  Group. In prior years,  the Electronics  Group had
three  sales  categories  (Mobile,  Consumer  and  Sound).  Based on the current
marketplace  and  management's  overall  assessment  of the  Company,  the sales
categories  have  been  reclassified   into  Mobile   Electronics  and  Consumer
Electronics, therefore eliminating the Sound category.


                                       22





     Mobile Electronics products include:

     o    mobile  video  products,  including  overhead,  headrest  and portable
          mobile video systems,

     o    autosound  products  including mobile  multi-media  products,  radios,
          speakers, amplifiers, CD changers,

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

     o    automotive security and remote start systems,

     o    navigation systems,

     o    rear observation systems, collision avoidance systems and

     o    automotive power accessories, including cruise control systems.

     Consumer Electronics include:

     o    LCD, flat panel and under-cabinet televisions,

     o    portable DVD players,

     o    home and portable stereos,

     o    GMRS radios and

     o    Digital  multi-media  products such as personal video  recorders,  MP3
          players, MPG 4 products

Critical Accounting Policies and Estimates

     As  disclosed  in the Annual  Report on Form 10-K for the fiscal year ended
November 30, 2004, the  discussion  and analysis of our financial  condition and
results of  operations  are based upon our  consolidated  financial  statements,
which have been  prepared  in  conformity  with  general  accounting  principles
generally  accepted in the United States of America.  The  preparation  of these
financial  statements  requires us to make estimates and assumptions that affect
the reported amounts of assets,  liabilities,  revenues and expenses reported in
those financial  statements.  These judgments can be subjective and complex, and
consequently,  actual  results  could  differ  from  those  estimates.  Our most
critical accounting policies and estimates relate to revenue recognition;  sales
incentives;  accounts  receivable;  inventory,  goodwill  and  other  intangible
assets; warranties and income taxes. Since November 30, 2004, there have been no
changes in our critical  accounting policies and no other significant changes to
the assumptions and estimates related to them.

Results of Operations

     In this discussion and analysis, we explain the general financial condition
and the results of operations for Audiovox, including the following:

     o    our earnings and costs in the periods presented,

     o    changes in earnings and costs between periods,

     o    sources of earnings, and

     o    the impact of these factors on our overall financial condition.

     As you  read  this  discussion  and  analysis,  refer  to the  accompanying
consolidated  statements  of  operations,  which  present  the  results  of  our
operations  for the three and six months ended May 31, 2004 and 2005. We analyze
and explain the  differences  between  periods in the specific line items of the
consolidated statements of operations.



                                       23





Management Key Indicators

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

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

     o    Gross profit margin - This indicator  allows  management to assess the
          effectiveness of new product  introductions,  inventory  purchases and
          pricing  indicators within the specific  electronics  markets in which
          the Company competes.

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

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

Three months ended May 31, 2004 compared to three months ended May 31, 2005

Continuing Operations

Net Sales:

     The following table sets forth,  for the periods  indicated,  net sales for
the three months ended May 31, 2004 and 2005:




                           May 31,      May 31,         $           %
                            2004         2005        Change      Change
                        ------------  ---------   ----------    --------

  Mobile Electronics      $121,481    $ 92,953    $(28,528)     (23.5)%
  Consumer Electronics      25,403      51,556      26,153          *
                          --------    --------    --------       ------
       Total Net Sales    $146,884    $144,509    $ (2,375)      (1.6)%
                          ========    ========    ========       ======

     *Greater than 100 percent.

     Mobile  Electronics  sales,  which  represented  64.3% of net  sales,  were
impacted due to significant changes within the mobile video category, such as:

     o    A  decline  in the  aftermarket  business  due to  Original  Equipment
          Manufacturers  (OEM) including  mobile video in many of their standard
          option packages,

     o    A decline in SUV sales, and

     o    Price erosion as a result of discounting  prices in the aftermarket in
          an effort to sell inventory.

     Beginning in the later part of the second  quarter,  the Company  commenced
shipping of Mobile Video Shuttle Systems, which are expected to offset the trend
in the mobile video category. The change in the Mobile Electronics category was

                                       24





partially offset by an increase in satellite radio sales due to additional sales
as a result of the Terk acquisition.

     Consumer   Electronics  sales,  which  represented  35.7%,  of  net  sales,
increased  due to  increased  sales for LCD  flat-panel  TV's as a result of new
product  introductions.  During the  quarter  ended May 31,  2005,  the  Company
introduced  a new and more  diverse  line of LCD TV's to support  the  increased
demand in this  category.  The increase in Consumer  Electronics  was  partially
offset by a decline in portable DVD Player sales due to increased competition.

     Sales incentive expense decreased $562 to $3,858 for the three months ended
May 31,  2005 as a result  of a  decline  in sales  to  large  retailers.  Total
reversals for sales incentives  increased $17 as compared to the prior year. The
decline  in  unearned  reversals  is  due to  increased  achievement  of  Volume
Incentive Rebate programs.  The increase in unclaimed sales incentives is due to
certain  customers  not  claiming  funds  within the claim  period.  The Company
believes that the reversal of earned but  unclaimed  sales  incentives  upon the
expiration  of the  claim  period is a  disciplined,  rational,  consistent  and
systematic method of reversing unclaimed sales incentives. The majority of sales
incentive programs are calendar-year programs.  Accordingly, the program ends on
the month  following  the fiscal year end and the claim period  expires one year
from the end of the  program.  These sales  incentive  programs  are expected to
continue  and will  either  increase  or  decrease  based upon  competition  and
customer demands.

Gross Profit

                            May 31,           May 31,
                             2004               2005
                             ----               ----

  Gross profit           $  21,396         $  22,799
  Gross margins               14.6%             15.8%

     Gross margins increased to 15.8% for the three months ended May 31, 2005 as
compared  to 14.6% for the three  months  ended May  31,2004.  The  increase  in
margins is due to increased margins on existing products and new products,  such
as the Terk  product  line,  increase in LCD TV sales and  decline in  inventory
write-downs.  Inventory  write-downs impacted gross margins by $2,178 (1.5%) and
$1,253 (0.9%) during the three months ended May 31, 2004 and 2005, respectively.
The decrease in  write-downs  was  primarily due to better  inventory  positions
coming out of the holiday  season.  Gross  margins  continue to be impacted by a
decline in mobile video margins due to a reduction in selling  prices within the
mobile  video  category  as a result of  increased  inventory  levels due to the
market slow down.  Furthermore,  reversals of sales incentive  expense favorably
impacted  gross  margins by 0.4% and 0.5% during the three  months ended May 31,
2004 and 2005, respectively.



                                       25





Operating Expenses and Operating Income (Loss)

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



                                                      May 31,       May 31,           $             %
                                                        2004          2005         Change         Change
                                                    ------------   ----------    -----------   ------------

                                                                                        
  Selling                                    $  6,461         $  7,102         $    641            9.9%
  General and administrative                    7,122            9,044            1,922           27.0
  Warehousing and technical support             1,500            1,771              271           18.1
                                             --------         --------         --------           ----
       Electronics operating expenses          15,083           17,917            2,834           18.8

  Electronics operating income                  6,313            4,882           (1,431)         (22.7)
  Electronics other expense                      (210)            (747)            (537)             *
                                             --------         --------         --------           ----
       Electronics pre-tax income               6,103            4,135           (1,968)         (32.2)

  Administrative operating expenses             4,305            4,298               (7)          (0.1)
  Administrative other income                   1,395            3,772            2,377              *
                                             --------         --------         --------           ----
       Consolidated pre-tax  income          $  3,193         $  3,609         $    416           13.0%
                                             ========         ========         ========


     *Greater than 100 percent.

     Consolidated  operating  expenses increased $2,827, or 14.6%, for the three
months ended May 31, 2005,  as compared to 2004.  As a percentage  of net sales,
operating  expenses  increased to 15.4% for the three months ended May 31, 2005,
from 13.2% in 2004.

     Electronics  operating  expenses  increased $2,834, or 18.8%, for the three
months  ended May 31, 2005 as compared to 2004.  As a  percentage  of net sales,
Electronics operating expenses increased to 12.4% for the three months ended May
31, 2005, compared to 10.3% in 2004.

     Electronics  selling  expenses  increased during the three months ended May
31, 2005,  due to a $497 increase in  commissions  and $242 increase in salesmen
salaries. These increases were a result of increased consumer electronics sales,
changes in  compensation  programs  related to  commissionable  sales for Jensen
products  and  incremental  selling  expenses  from the recently  acquired  Terk
product line.

     Electronics  general  and  administrative  expenses  increased  due  to the
following:

     o    $857  increase in bad debt  expense due to  recoveries  of  previously
          reserved  bad  debt in the  prior  year.  The  provision  for bad debt
          expense for the three months ended May 31, 2005 was $324 compared to a
          recovery of $533 in the prior year.

     o    $427  increase  in  professional  fees due to legal  costs  related to
          patent  infringement  cases.  The Company  expects,  as technology for
          electronic  products  become more  complex,  the Company  will have to
          expend more resources on defending patent rights and obtaining patents
          on new products.

     o    $507 increase in occupancy costs due to the use of temporary warehouse
          facilities in Audiovox  Germany,  and the incremental costs to operate
          the Terk facility.

     o    $391 increase in office salaries due to incremental  costs as a result
          of the Terk acquisition.


                                       26





     o    The above  increases  were  partially  offset by a $400  reduction  to
          general and  administrative  expenses as a result of a Venezuela legal
          claim which was withdrawn from the court.

     Electronics  warehousing and technical support increased due to an increase
in direct  labor as a result of the recent Terk  acquisition  and the  continual
increase  in  product  complexity  which  has  resulted  in the  Company  hiring
additional engineers and providing additional customer service.

     The following is a summary of administrative operating expenses:



                                                      May 31,        May 31,            $               %
                                                       2004           2005           Change           Change
                                                    -----------   -------------    -----------     ------------

                                                                                              
  Advertising                                         $ 1,043         $ 1,214         $   171           16.4%
  Professional fees                                     1,377           1,428              51            3.7
  Depreciation                                            279             334              55           19.7
  Insurance                                               244             275              31           12.7
  Officers' and office salaries                         1,679           1,523            (156)          (9.3)
  Other                                                  (317)           (476)           (159)         (50.2)
                                                         ----            ----            ----          ----- 
       Total administrative operating expenses          4,305           4,298              (7)          (0.1)


  Administrative other income                           1,395           3,772           2,377              *
                                                        -----           -----           -----          -----

       Administrative pre-tax loss                    $(2,910)        $  (526)        $ 2,384           81.9%
                                                      =======         =======         =======           ====





     * Greater than 100 percent

     The increase in advertising is due to the timing of media print advertising
to promote the Company's  family of brands.  The decline in salaries is due to a
decline in  compensation as a result of reduced  earnings and staff  reductions.
Other administrative operating expenses, which are mainly comprised of occupancy
costs, employee benefits and allocations, decreased primarily due to the Company
entering into a transition  service  agreement in November 2004 with  UTStarcom.
The fees billed for the  transition  service  agreement  amounted to $335 for IT
services and such fees are included as a reduction to general and administrative
expenses in the  consolidated  statements of  operations.  The Company is in the
process  of  reducing  administrative  expenses  as a result  of the  change  in
business structure.

Other Income (Expense)


                                         May 31,     May 31,        $
                                           2004       2005       Change
                                           ----       ----       ------

  Interest expense and bank charges      $  (866)   $  (738)   $   128
  Equity in income of equity investees     1,479        743       (736)
  Other, net                                 572      3,020      2,448
                                         -------    -------    -------
           Total other income            $ 1,185    $ 3,025    $ 1,840
                                         =======    =======    =======

     Interest expense and bank charges decreased  primarily due to the reduction
in  outstanding  bank  obligations.  The  Company  expects  interest  expense to
decrease in fiscal 2005 as the Company repaid all amounts  outstanding under its
domestic bank obligations on November 1, 2004 and the Company has no outstanding
amounts under its domestic bank  obligations at May 31, 2005.  Interest  expense
and bank charges during the three months ended May 31, 2005 primarily  represent
expenses for debt and bank  obligations  of Audiovox  Germany and interest for a
capital lease.



                                       27





     Equity in income of equity investees  decreased primarily due to a decrease
in the  equity  income of ASA as a result of  decreased  sales due to  increased
competition  for van  conversion  products  and a decline  in sales to one major
customer.

     Other income  increased due to a $1,858  unrealized gain as a result of the
stock  appreciation  of the  Company's  investment  in  Bliss-tel,  an  existing
investment treated as a trading security.  The fluctuation in Bliss-tel stock is
recorded in other income (loss) and the current appreciation in value is subject
to fluctuations in market value. In addition,  interest income increased $461 to
$1,014 due to the returns on the purchase of short-term investments. The Company
expects  other  income to  increase  during  fiscal 2005 as a result of expected
returns on short-term investments purchased in November of fiscal 2004.

Income Taxes (Benefit)

     The  effective  tax rate for the three  months  ended May 31,  2005,  was a
benefit of 59.7%  compared  to a  provision  of 50.3% in the prior  period.  The
effective  tax rate for 2005 was  primarily  due to tax exempt  interest  income
earned on short-term  investments during the three months ended May 31, 2005 and
the favorable outcome of $3,307 in tax accrual  reductions due to the completion
of certain tax examinations.

Income (Loss) from Discontinued Operations

     On February  25,  2005,  the  Company  entered  into a plan to  discontinue
ownership of the Company's majority owned subsidiary,  Audiovox Malaysia ("AVM")
and  sell  its  ownership  to the  current  minority  interest  shareholder.  In
addition,  on November 1, 2004,  the Company  completed the  divestiture  of its
Cellular business (formerly known as "ACC" or "Wireless") to UTStarcom.

     The  following  is  a  summary  of  financial   results   included   within
discontinued operations for the three months ended May 31, 2004 and 2005:


                                                   May 31,
                                        ------------------------------
                                            2004             2005
                                        -------------    -------------

  Net sales from discontinued operations   $ 291,315    $     743

  Income (loss) from operations of
     discontinued operations before
     income taxes                              1,773         (176)
  Recovery of income taxes                       314           41
                                           ---------    ---------
 Income (loss) from discontinued 
     operations, net of tax                $   2,087    $    (135)
                                           =========    =========


     Income (loss) from discontinued operations,  net of tax, provided income of
$2,087  for  the  three  months  ended  May 31,  2004  compared  to a loss  from
discontinued  operations  of $135 for the three months  ended May 31, 2005.  The
operations of AVM are included  within  discontinued  operations for fiscal 2005
whereas AVM and ACC are included in discontinued operations for fiscal 2004. The
decline in income from discontinued  operations for fiscal 2005 is primarily due
to the losses of AVM as well as the sale of ACC on November 1, 2004.

Net Income

     Net income for the three months  ended May 31, 2004 was $3,677  compared to
$5,627 in 2005.  Earnings  per share for the three months ended May 31, 2004 was
$0.17  (basic)  and $0.16  (diluted)  as  compared  to $0.26  (basic)  and $0.25
(diluted)  for 2005.  Net  income  was  favorably  impacted  by sales  incentive
reversals of $836 and $663 (inclusive of amounts from  discontinued  operations)
for the three months ended May 31, 2004 and 2005, respectively, and a tax

                                       28





accrual reversal of $3,307 for the three months ended May 31, 2005.

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

Six months ended May 31, 2004 compared to six months ended May 31, 2005

Continuing Operations

Net sales:

     The  following  table  sets  forth,  for  the  periods  indicated,  certain
statement of operations data for the six months ended May 31, 2004 and 2005:


                          May 31,     May 31,      $           %
                           2004        2005      Change      Change
                         --------   ---------  ----------   -------

  Mobile Electronics     $210,584   $167,632   $(42,952)    (20.4)%
  Consumer Electronics     71,656     92,857     21,201      29.6
                         --------   --------   --------      ----
       Total net sales   $282,240   $260,489   $(21,751)     (7.7)%
                         ========   ========   =========

     Mobile Electronics  sales, which represented 64.4% of net sales,  continues
to be  impacted  by a shift in the  mobile  video  category  brought on by lower
portable  DVD  prices  and   increased   presence  by  original   equipment  car
manufacturers.  Sales were favorably  impacted by the recent acquisition of Terk
in  January  of 2005,  the  Jensen(R)  brands  and  increased  Code sales due to
increased sales to its customer base which includes OEM's.

     Consumer  Electronics  sales,  which represented 35.6%, of net sales showed
growth as a result of  increased  demand for LCD  flat-panel  TV product  lines.
Consumer  Electronics  sales were impacted by lower average  selling  prices for
portable DVD Players due to pricing competition.

     Sales incentive expense increased $1,434 to $6,397 for the six months ended
May 31, 2005 as a result of the Company  offering more sales incentive  programs
to mass merchants and large retailers in an effort to increase sales.  Also, the
increase in sales  incentive  expense is  attributable  to a $1,085  decrease in
unearned  reversals  for the six  months  ended  May 31,  2005 due to  increased
achievement of Volume Incentive Rebate programs as compared to the prior year.

Gross Profit

                                May 31,          May 31,
                                  2004            2005
                              ------------   ---------------

Gross profit                       $42,524           $38,870
Gross margins                        15.1%             14.9%

     Gross  margins  decreased to 14.9% for the six months ended May 31, 2005 as
compared to 15.1% for the six months  ended May 31,  2004.  The decline in gross
margins is primarily  due to gross  margins of 13.9% during the first quarter of
fiscal  2005 due to a  reduction  in selling  prices  within  the  mobile  video
category.  Inventory  write-downs  impacted  gross  margins by $4,808 (1.7%) and
$2,177 (0.8%) during the six months ended May 31, 2004 and 2005, respectively.

                                       29





The decrease in  write-downs  was  primarily due to better  inventory  positions
coming out of the  holiday  season.  In fiscal  2004,  the  Company  experienced
significant  write-downs as a result of new product introductions during the six
months ended May 31, 2004 which resulted in a decline in selling prices of older
models.

     The above  declines  in margins  were  offset by margins  achieved in Code,
satellite  radio, as well as increased  margins from the acquisition of the Terk
product  line.  Furthermore,  reversals  of sales  incentive  expense  favorably
impacted gross margins by 1.1% and 0.8% during the six months ended May 31, 2004
and 2005, respectively.

Operating Expenses and Operating Income (Loss)

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



                                            May 31,       May 31,           $              %
                                             2004          2005           Change         Change
                                           --------      --------       ---------      ---------

                                                                               
  Selling                                  $ 12,576      $ 14,050       $  1,474         11.7%
  General and administrative                 16,792        17,893          1,101          6.6
  Warehousing and technical support           2,469         3,238            769         31.1
                                           --------      --------       --------         ----
       Electronics operating expenses        31,837        35,181          3,344         10.5
  Electronics operating income               10,687         3,689         (6,998)       (65.5)
  Electronics other income (expense)            545        (1,277)        (1,822)           *
                                           --------      --------       --------          ----
       Electronics pre-tax income            11,232         2,412         (8,820)       (78.5)
  Administrative operating expenses           8,148         8,906            758          9.3
  Administrative other income                 1,372         8,627          7,255            *
                                           --------      --------       --------         ----
      Consolidated pre-tax income          $  4,456      $  2,133       $ (2,323)       (52.1)%
                                           ========      ========       ========


     *Greater than 100 percent.

     Consolidated  operating  expenses  increased  $4,102, or 10.3%, for the six
months ended May 31, 2005,  as compared to 2004.  As a percentage  of net sales,
operating  expenses  increased  to 16.9% for the six months  ended May 31, 2005,
from 14.2% in 2004.

     Electronics  operating  expenses  increased  $3,344,  or 10.5%, for the six
months ended May 31, 2005,  as compared to 2004.  As a percentage  of net sales,
Electronics  operating  expenses increased to 13.5% for the six months ended May
31, 2005, compared to 11.3% in 2004.

     Electronics  selling expenses increased during the six months ended May 31,
2005,  due to a $981  increase  in  commissions  and $379  increase  in salesmen
salaries. These increases were a result of increased consumer electronics sales,
changes in  compensation  programs  related to  commissionable  sales for Jensen
products  and  incremental  selling  expenses  from the recently  acquired  Terk
product line.

     Electronics  general  and  administrative  expenses  increased  due  to the
following:

     o    $321 increase in occupancy costs due to the use of temporary warehouse
          facilities in Audiovox  Germany,  and the incremental costs to operate
          the Terk facility.

     o    $561 increase in bad debt expense due to the  recoveries of previously
          reserved  bad  debt in the  prior  year.  The  provision  for bad debt
          expense was $40 for the six months  ended May 31,  2005  compared to a
          recovery of $521 in the prior year.

                                       30






     o    An increase of $551 in professional fees due to legal costs related to
          patent infringement cases.

     o    The  above  increases  were  partially  offset by a $327  decrease  in
          officer  salaries  as a result of a  decline  in  compensation  due to
          reduced earnings.

     o    The above  increases  were  partially  offset by a $400 reduction as a
          result of a Venezuela legal claim which was withdrawn from the court.

     Electronics  warehousing and technical support increased due to an increase
in direct  labor as a result of the recent Terk  acquisition  and the  continual
increase  in  product  complexity  which  has  resulted  in the  Company  hiring
additional engineers and providing additional customer service.

     The following is a summary of administrative operating expenses:



                                                     May 31,       May 31,           $             %
                                                       2004          2005          Change        Change
                                                   ------------  ------------   ------------  ------------

                                                                                      
  Advertising                                       $ 2,068       $ 2,257       $   189          9.1%
  Professional fees                                   2,334         2,613           279         12.0
  Depreciation                                          520           645           125         24.0
  Insurance                                             508           522            14          2.8
  Officers' and office salaries                       3,219         2,954          (265)        (8.2)
  Other                                                (501)          (85)          416        (83.0)
                                                    -------       -------       -------          ----
       Total administrative operating expenses        8,148         8,906           758          9.3

  Administrative other income                         1,372         8,627         7,255            *
                                                    -------       -------       -------          ----
       Administrative pre-tax loss                  $(6,776)      $  (279)      $ 6,497            *
                                                    ========      =======       =======


     * Greater than 100 percent

     The increase in professional fees is due to legal fees incurred to defend a
derivative lawsuit.  Other administrative  operating expenses,  which are mainly
comprised of occupancy costs,  employee benefits and allocations,  increased due
to an  increase  in  occupancy  costs and  decrease  in  allocations  as certain
administrative  expenses were allocated to the Company's  discontinued  Cellular
Group in the prior year.

Other Income (Expense)


                                            May 31,      May 31,         $
                                              2004        2005        Change
                                            -------     --------    ----------

  Interest expense and bank charges        $(1,829)     $(1,371)     $   458
  Equity in income of equity investees       2,550        1,096       (1,454)
  Other, net                                 1,196        7,625        6,429
                                           -------      -------      -------
           Total other income              $ 1,917      $ 7,350      $ 5,433
                                           =======      =======      =======

     Interest expense and bank charges decreased  primarily due to the reduction
in  outstanding  bank  obligations.  The  Company  expects  interest  expense to
decrease in fiscal 2005 as the Company repaid all amounts  outstanding under its
domestic bank obligations on November 1, 2004 and the Company has no outstanding
amounts under its domestic bank  obligations at May 31, 2005.  Interest  expense
and bank charges during the three months ended May 31, 2005 primarily  represent
expenses for debt and bank  obligations  of Audiovox  Germany and interest for a
capital lease.

                                       31





     Equity in income of equity investees  decreased primarily due to a decrease
in the  equity  income of ASA as a result of  decreased  sales due to  increased
competition  for van  conversion  products  and a decline  in sales to one major
customer.

     Other income  increased due to a $4,374  unrealized  gain as a result of an
initial public offering and stock  appreciation of Bliss-tel  stock, an existing
investment treated as a trading security.  The fluctuation in Bliss-tel stock is
recorded in other income (loss) and the current appreciation in value is subject
to fluctuations in market value. In addition,  interest income  increased $1,294
to  $1,877  due to  the  returns  on the  purchase  of  short-term  investments.
Furthermore,  other expense decreased $347 as a result of lower foreign exchange
devaluation  in the  Company's  Venezuelan  subsidiary  as compared to the prior
year.

Income Tax Benefit

     The effective tax rate for the six months ended May 31, 2005, was a benefit
of 144.3% compared to a provision of 49.6% in the prior period.  The decrease in
the effective tax rate for 2005 was primarily due to tax exempt  interest income
earned on short-term  investments during the three months ended May 31, 2005 and
the favorable outcome of $3,307 in tax accrual  reductions due to the completion
of certain tax examinations.

Income (Loss) from Discontinued Operations

     The  following  is  a  summary  of  financial   results   included   within
discontinued operations for the six months ended May 31, 2004 and 2005:


                                                           May 31,      May 31,
                                                            2004          2005
                                                          --------    --------

Net sales from discontinued operations                    $532,843    $  1,457
                                                          ========    ========

Income (loss) from operations of discontinued
   operations before income taxes                            3,145        (870)
Recovery of income taxes                                       116          82
                                                          --------    --------
Income (loss) from discontinued operations, net of tax    $  3,261    $   (788)
                                                          ========    ========


     Income (loss) from discontinued operations,  net of tax, provided income of
$3,261  for  the  six  months  ended  May  31,  2004  compared  to a  loss  from
discontinued  operations of $788 for the six months ended May 31, 2005. Included
in loss from discontinued  operations for the six months ended May 31, 2005 is a
write-  down charge of $408 for AVM assets as a result of the  intended  sale of
AVM. The operations of AVM are now included within  discontinued  operations for
fiscal 2005  whereas AVM and ACC are  included in  discontinued  operations  for
fiscal 2004.

Net Income

     Net income for the six months  ended May 31,  2004 was $5,547  compared  to
$4,422 in 2005.  Earnings  per share for the six months  ended May 31,  2004 was
$0.25 (basic and diluted) as compared to $0.20 (basic and diluted) for 2005. Net
income was favorably impacted by sales incentive  reversals of $3,936 and $1,984
(inclusive of discontinued operations) for the six months ended May 31, 2004 and
2005,  respectively,  and a tax  accrual  reversal  of $3,307 for the six months
ended May 31, 2005.

     The Company  believes that the  Electronics  Group has an expanding  market
with a certain  level of volatility  related to both domestic and  international
new car sales, new product introductions, competition and general economic

                                       32





conditions.  Also, all of its products are subject to price  fluctuations  which
could affect the carrying value of inventories and gross margins in the future.

Liquidity and Capital Resources

Cash Flows, Commitments and Obligations

     As of May 31,  2005,  the Company had working  capital of  $354,660,  which
includes  cash and short- term  investments  of $155,308  compared  with working
capital  of  $362,018  at  November  30,  2004,  which  includes  cash  and cash
equivalents  and  short-term  investments  of  $167,646.  The decline in working
capital is primarily due to the payment of income taxes in  connection  with the
sale of ACC and  acquisition of Terk,  partially  offset by accounts  receivable
collections.  The Company  plans to utilize its current cash position as well as
collections  from  accounts  receivable  to fund the current  operations  of the
business.  However,  the  Company  may  utilize  all or a portion of the current
capital   resources   to  pursue   other   business   opportunities,   including
acquisitions.

     As of November 30, 2004 and May 31, 2005, the Company has a domestic credit
line to fund the temporary short-term working capital needs of the Company. This
line  expires  on August 31,  2005,  and allows  aggregate  borrowings  of up to
$25,000  at an  interest  rate of Prime (or  similar  designations)  plus 1%. In
addition,   the  Company  has  a  16,000  Euro  accounts  receivable   factoring
arrangement  and a 6,000  Euro Asset  Based  Lending  ("ABL") (  finished  goods
inventory  and  non  factored  accounts  receivable)  credit  facility  for  the
Company's subsidiary,  Audiovox Germany which expires on October 25, 2005 and is
renewable on an annual basis.

     Operating  activities used cash of $11,091 for the six months ended May 31,
2005  compared  to  $28,268  in 2004.  The  decrease  in cash used in  operating
activities as compared to the prior year is primarily  due to the  collection of
accounts receivable of discontinued operations,  partially offset by payments of
accrued expenses and income taxes.

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

     o    Cash flows from operating  activities for the six months ended May 31,
          2005 were  favorably  impacted by a decrease  in  accounts  receivable
          primarily from collections.  Accounts receivable turnover approximated
          4.9 during for the six months  ended May 31,  2005  compared to 4.5 in
          the  comparable  period  in the prior  year.  Overall  collections  of
          accounts  receivable  and credit  quality of customers  has  improved,
          however, accounts receivable collections are often impacted by general
          economic conditions.

     o    Cash flow from  operations  were  impacted  by a decline in  inventory
          purchases due to the decline in sales. Inventory turnover approximated
          3.3 during for the six months  ended May 31,  2005  compared to 3.2 in
          the comparable period in the prior year.

     o    In addition,  cash flow from  operating  activities for the six months
          ended May 31, 2005,  was  impacted by a decrease in accrued  expenses,
          primarily from payments made to vendors.

     o    Income taxes payable decreased $35,413 during the six months ended May
          31, 2005,  primarily due to a tax payment made in connection  with the
          gain on the sale of the Cellular business in fiscal 2004.

     Investing  activities used $9,216 during the six months ended May 31, 2005,
primarily  due to the  acquisition  of  Terk  and  purchase  (net of  sales)  of
short-term  investments.  The  usage  of  cash  from  investing  activities  was
partially offset by the collection of a working capital adjustment and escrow in
connection with the sale of the sale of the Cellular business. Investing

                                       33





activities  provided  cash of $2,315  during the six months  ended May 31, 2004,
primarily due to a distribution received from an equity investee.

     Financing  activities used $5,612 during the six months ended May 31, 2005,
primarily from the payment of bank obligations which were acquired in connection
with the Terk acquisition. Financing activities for the six months ended May 31,
2004 provided cash of $26,327 mainly due to net borrowings of bank obligations.

     The Company has certain  contractual  cash obligations and other commercial
commitments  which will  impact its short and  long-term  liquidity.  At May 31,
2005, such obligations and commitments are as follows:



                                                             Payments Due By Period
                                      --------------------------------------------------------------------
                                                         Less than         1-3        4-5           After
Contractual Cash Obligations                Total            1 Year       Years      Years          5 Years
-------------------------------        --------------   ------------    -------    ---------      ---------

                                                                                        
Capital lease obligations (1)               $ 12,971       $   612     $ 1,240      $ 1,155       $ 9,964
Operating leases (2)                           7,617         2,786       4,241          590            -
                                            --------       --------    -------      -------       -------
Total contractual cash                      $ 20,588       $ 3,398     $ 5,481      $ 1,745       $ 9,964
   obligations                              ========       =======     =======      =======       =======





                                                                  Amount of Commitment
                                                                  Expiration per period
                                               -----------------------------------------------------------
                                                   Total
                                                  Amounts     Less than       1-3       4-5       After
        Other Commercial Commitments             Committed      1 Year       Years     Years     5 years
--------------------------------------------   ------------- ------------  --------- --------- -----------
                                                                                        
Lines of credit (3)                               $    4,647   $    4,647
Stand-by letters of credit (4)                         2,003        2,003
Commercial letters of credit (4)                         291          291
Debt (5)                                               8,749        1,423     $4,062    $2,902        $362
Unconditional purchase obligations (6)                93,765       93,765          -         -          -
                                                  ----------   ----------     ------    ------        -----

Total commercial commitments                      $  109,455   $  102,129     $4,062    $2,902        $362
                                                  ==========   ==========     ======    ======        ====


     (1)  Represents total payments due under a capital lease  obligations which
          has a current  and long term  principal  balance  of $132 and  $6,060,
          respectively at May 31, 2005.

     (2)  The  Company  enters  into  operating  leases in the normal  course of
          business.

     (3)  Represents amounts outstanding under the German factoring agreement at
          May 31, 2005.  The German  credit  facility  consists of a 16,000 Euro
          accounts receivable  factoring  arrangement and 6,000 Euro Asset Based
          Lending Credit Facility.

     (4)  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 to secure certain bank obligations and insurance requirements.

     (5)  Represents  amounts  outstanding  under a loan  agreement for Audiovox
          Germany which was acquired in connection with the Recoton Acquisition.
          This  amount also  includes  amounts due under a call- put option with
          certain employees of Audiovox Germany.


                                       34





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

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

     The Company regularly reviews its cash funding requirements and attempts to
meet those requirements  through a combination of cash on hand, cash provided by
operations,  available borrowings under bank lines of credit and possible future
public or private debt and/or equity offerings.  At times, the Company evaluates
possible  acquisitions of, or investments in,  businesses that are complementary
to those of the  Company,  which  transaction  may require the use of cash.  The
Company  believes  that its cash,  other liquid  assets,  operating  cash flows,
credit arrangements,  access to equity capital markets, taken together,  provide
adequate  resources to fund ongoing  operating  expenditures.  In the event that
they do not, the Company may require  additional  funds in the future to support
its working  capital  requirements  or for other  purposes and may seek to raise
such  additional  funds through the sale of public or private equity and/or debt
financings  as well as from  other  sources.  No  assurance  can be  given  that
additional financing will be available in the future or that if available,  such
financing will be obtainable on terms favorable to the Company when required.

Treasury Stock

     The  Company's  Board of  Directors  approved the  repurchase  of 1,563,000
shares of the  Company's  Class A common  stock in the open market under a share
repurchase  program (the Program).  No shares were  purchased  under the Program
during  fiscal 2004 or fiscal  2005.  As of November  30, 2004 and May 31, 2005,
1,070,957 shares were repurchased under the Program at an average price of $7.93
per share for an aggregate amount of $8,497.

Off-Balance Sheet Arrangements

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

Related Party Transactions

     During  1998,  the  Company  entered  into a  30-year  capital  lease for a
building with its principal  stockholder and chief executive officer,  which was
the headquarters of the discontinued Cellular operation. Payments on the capital
lease  were  based  upon  the  construction   costs  of  the  building  and  the
then-current  interest rates.  The effective  interest rate on the capital lease
obligation  is 8%. On November 1, 2004 the Company  entered into an agreement to
sub-lease  the  building to UTSI for monthly  payments of $46 until  November 1,
2009. The Company also leases another  facility from its principal  stockholder.
Total lease payments  required under the leases for the five-year  period ending
May 31, 2010 are $4,641.

Recent Accounting Pronouncements

     In December 2004, the Financial  Accounting  Standards  Board (FASB) issued
FASB Statement No. 123R  ("Statement  123R"),  "Share Based Payment".  Statement
123R is a revision of FAS Statement 123, "Accounting for Stock Based

                                       35





Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock issued to
Employees"  (APB No.25).  Statement 123R requires a public entity to measure the
cost of  employee  services  recognized  in  exchange  for an  award  of  equity
instruments  based on the  grant-date  fair  value of the  award  (with  limited
exceptions).  Statement  123R is effective  the first annual  period that begins
after June 15, 2005 or the  Company's  first  quarter of fiscal  year 2006.  The
adoption of Statement  123R will rescind the Company's  current  accounting  for
stock based  compensation  under the intrinsic method as outlined in APB No. 25.
Under APB No. 25, the issuance of stock options to employees  generally resulted
in no compensation  expense to the Company.  The adoption of Statement 123R will
require the Company to measure the cost of stock options based on the grant-date
fair  value  of the  award  as  discussed  in Note 2 of  Notes  to  Consolidated
Financial Statements.

     In June 2005, the FASB issued FASB Statement No. 154 ("Statement 154"),
"Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20
and FASB Statement No. 3". Opinion 20 previously required that most voluntary
changes in accounting principle be recognized by including in net income of the
period of the change the cumulative effect of changing to the new accounting
principle. Statement 154 requires retrospective application to prior periods'
financial statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or the cumulative
effect of the change. Statement 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005 or
the Company's first quarter ended February 28, 2007. The Company does not expect
the adoption of Statement 154 to have an impact on the consolidated financial
statements.

Forward-Looking Statements

     Except for historical information contained herein, statements made in this
Form 10-Q that would constitute  forward-looking  statements may involve certain
risks such as our ability to keep pace with technological advances,  significant
competition  in the mobile and  consumer  electronics  businesses,  quality  and
consumer  acceptance of  newly-introduced  products,  our relationships with key
suppliers and customers, market volatility,  non-availability of product, excess
inventory,  price  and  product  competition,  new  product  introductions,  the
dependency on key executives,  the uncertain  economic and political  climate in
the United States and  throughout  the rest of the world and the potential  that
such climate may  deteriorate  further and other risks detailed in the Company's
Form 10-K for the fiscal year ended  November 30,  2004.  These  factors,  among
others, may cause actual results to differ materially from the results suggested
in  the  forward-  looking   statements.   Forward-looking   statements  include
statements relating to, among other things:

     o    growth trends in the mobile and consumer electronic businesses

     o    technological  and market  developments  in the  mobile  and  consumer
          electronics businesses

     o    liquidity

     o    availability of key employees

     o    expansion into international markets

     o    the availability of new consumer and mobile electronic products

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

     o    the ability to keep pace with technological advances

     o    impact of future selling prices on Company profitability and inventory
          carrying value

     o    significant   competition  in  the  mobile  and  consumer  electronics
          businesses

     o    quality and consumer acceptance of newly introduced products

     o    possible increases in warranty expense

     o    changes in the Company's business operations

     o    foreign currency risks

                                       36





     o    political instability

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

     o    changes in regulations and tariffs

     o    seasonality and cyclicality

     o    inventory obsolescence and availability

     o    changes in global or local economic conditions

     o    investments and pursuit of acquisitions

     o    diversification of our business

     o    contingent liabilities

     o    fluctuation in market value of short-term investments

     o    litigation from intellectual property rights


ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Sensitive Instruments

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

Marketable Securities

     Marketable  securities  at November  30, 2004 and May 31,  2005,  which are
recorded  at fair  value of  $5,988  and  $12,483,  respectively,  include a net
unrealized loss of $1,284 and $2,003,  respectively,  and have exposure to price
risk.  This risk is estimated as the potential loss in fair value resulting from
a  hypothetical  10%  adverse  change in prices  quoted by stock  exchanges  and
amounts  to  $599  and  $1,248  as of  November  30,  2004  and  May  31,  2005,
respectively. Actual results may differ.

Interest Rate Risk

     The Company's  earnings and cash flows are subject to  fluctuations  due to
changes in interest  rates from its  investment  of available  cash  balances in
money  market  funds  and  investment   grade  corporate  and  U.S.   government
securities.  Under its current policies,  the Company does not use interest rate
derivative instruments to manage exposure to interest rate changes. In addition,
the Company's bank loans expose earnings to changes in short-term interest rates
since interest rates on the underlying  obligations are either variable or fixed
for such a short  period of time as to  effectively  become  variable.  The fair
values of the Company's bank loans are not significantly  affected by changes in
market interest rates.

Foreign Exchange Risk

     In order to reduce the risk of foreign currency exchange rate fluctuations,
the  Company may hedge  transactions  denominated  in a currency  other than the
functional  currencies   applicable  to  each  of  its  various  entities.   The
instruments  which may be used for hedging are forward contracts with banks. The
Company  does not  obtain  collateral  to  support  financial  instruments,  but
monitors the credit standing of the financial institution. The changes in market
value of such contracts have a high correlation to price changes in the currency
of the related  hedged  transactions.  Intercompany  transactions  with  foreign
subsidiaries  and equity  investments  are typically  not hedged.  There were no
hedge transactions at November 30, 2004 or May 31, 2005.

     The Company is subject to risk from changes in foreign  exchange  rates for
its  subsidiaries  and equity  investments  that use a foreign currency as their
functional  currency and are translated into U.S. dollars.  These changes result
in cumulative translation adjustments which are included in accumulated other

                                       37





comprehensive income. On November 30, 2004 and May 31, 2005, the Company had
translation exposure to various foreign currencies with the most significant
being the Euro, Malaysian ringgit, Thailand baht and Canadian dollar. The
potential loss resulting from a hypothetical 10% adverse change in quoted
foreign currency exchange rates, as of November 30, 2004 and May 31, 2005,
amounts to $3,194 and $3,411, respectively. Actual results may differ.

ITEM 4.    CONTROLS AND PROCEDURES

     The Company maintains  disclosure controls and procedures that are designed
to ensure that  information  required to be  disclosed  in the reports  that the
Company  files or  submits  under the  Securities  and  Exchange  Act of 1934 is
recorded, processed,  summarized, and reported within the time periods specified
in the SEC's rules and regulations, and that such information is accumulated and
communicated to the Company's management,  including its Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required financial disclosures.

     As of the end of the period covered by this Quarterly  Report on Form 10-Q,
the  Company  carried  out an  evaluation,  under the  supervision  and with the
participation of the Company's management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the Company's  disclosure controls and procedures pursuant to the Securities and
Exchange Act Rule 13a- 15(e) and 15d-15(e). Based upon this evaluation as of May
31, 2005, the Chief Executive Officer and Chief Financial Officer concluded that
our disclosure  controls and procedures  were not effective for the reasons more
fully  described  below  related to the  weakness in our  internal  control over
financial  reporting  identified  during the fiscal 2004  internal  control over
financial   reporting   evaluation  in  connection   with  Section  404  of  the
Sarbanes-Oxley  Act of 2002.  Although  progress is being made to remediate this
material weakness that was identified at November 30, 2004, additional action is
still required.  To address the control  weakness,  the Company  performed other
procedures to ensure the unaudited quarterly  consolidated  financial statements
are  prepared in  accordance  with  generally  accepted  accounting  principles.
Accordingly,  management  believes that the  consolidated  financial  statements
included in this Quarterly Report on Form 10-Q, fairly presents, in all material
respects our financial  condition,  results of operations and cash flows for the
periods presented.

     Management's  assessment  identified the following material weakness in the
Company's  internal  control over  financial  reporting as of May 31, 2005 (this
section of Item 4. Controls and Procedures,  should be read in conjunction  with
Item 9A.  Controls and  Procedures,  included in the Company's Form 10-K for the
fiscal year ended November 30, 2004, for additional  information on Management's
Report on Internal Controls Over Financial Reporting):

     1.   Deficiencies  in the  general  controls  over  information  technology
          security and user access,  including  segregation of duties (automated
          controls to ensure authorization,  execution, monitoring and review by
          independent  individuals) and unrestricted access to data and business
          applications  existed.  Accordingly,  management  concluded that these
          matters  represent a material  weakness as controls  over  information
          security and access to data and  applications are necessary to have an
          effective control environment.

     The  Company  identified  this  deficiency  in its  internal  control  over
financial  reporting during the fiscal 2004 implementation of Section 404 of the
Sarbanes-Oxley Act of 2002 and;  accordingly,  this control deficiency is in the
process of being  remediated  subsequent to May 31, 2005. The finding  discussed
above was  characterized as a material weakness in accordance with the rules and
regulations  of the Securities  and Exchange  Commission,  as a more than remote
possibility  that a material  misstatement  to the  Company's  interim or annual
financial  statements  could  occur.  However,  the  internal  control  weakness
identified  by  management  did not  cause a  material  misstatement  or have an
adverse  impact to the Company's  financial  position,  results of operations or
control environment as of and for the three and six months ended May 31, 2005.

                                       38





This material weakness impacted the Company's  financial reporting to the extent
that  certain  controls  were put or in the  process  of being put into place in
connection with user access security  conflicts related to certain  applications
and  business  processes  and  access  to data  and  applications.  Refer to the
specific remediation steps identified below.

Planned Remediation Efforts to Address Material Weakness

     The  Company  developed  a  remediation  plan and  initiated  action  steps
designed to address the material weakness in the internal control over financial
reporting identified above and to implement corrective actions that are required
to improve  the design and  operating  effectiveness  of internal  control  over
financial  reporting,  including  the  enhancement  of the  Company's  policies,
systems  and  procedures.  The Company  implemented  the  following  measures to
remediate the material weakness identified above:

     1.   Remediated the information  technology security controls in connection
          with user  access  conflicts  and  segregation  of duties  related  to
          certain  applications  and  business  processes  to  ensure  there  is
          appropriate  authorization,   execution,   monitoring  and  review  by
          independent individuals by implementing a turnover software package to
          manage  the  information  technology  change  management  system and a
          security  software  solution  to  manage  the  Company's  user  access
          security  and  restrict  access  to  data  and   applications.   These
          remediation  efforts are currently being  implemented and are expected
          to be completed and fully implemented before the end of fiscal 2005.

     The Company  believes  that the measures  above have  addressed all matters
identified as a material  weakness by  management.  The Company will continue to
monitor the  effectiveness  of its  disclosure  controls  and  procedures  on an
ongoing basis and will take further actions, as appropriate.

Changes in Internal Control Over Financial Reporting

     To address and remediate the material  weaknesses in the Company's internal
control over financial  reporting at November 30, 2004, the Company made changes
to its internal controls during the most recently completed fiscal quarter ended
May 31, 2005 that has materially affected, or is reasonable likely to materially
affect,  the Company's internal controls over financial  reporting.  The Company
implemented the following measures to change or enhance the design and operating
effectiveness  of its  internal  controls to remediate  all material  weaknesses
identified at November 30, 2004, except for the one material weakness identified
above that existed at November 30, 2004 and requires additional remediation:

     1.   Enhanced the design of the monthly  control at  corporate  relating to
          the  reconciliation of the manual journal entries to the Company's ERP
          system by  segregating  the duties of the  individual  processing  the
          manual   journal   entries   with  the   individual   performing   the
          reconciliation  and to ensure the  individual  performing  this review
          procedure at the operating  division is compliant  with the evidential
          documentation requirements supporting their review;

     2.   Enhanced  the  design  of  the  controls  relating  to  the  Company's
          non-routine  customer  sales order  process by requiring the warehouse
          personnel to check and verify that there is evidence of an  authorized
          signature from the financial department (from the authorized signature
          sheet) before the non-routine sales order is shipped to the customer;

     3.   Increased  the review and  adherence  to the  Company's  policies  and
          procedures in connection with the fiscal 2005 monitoring activities of
          Section  404 of the  Sarbanes-Oxley  Act of 2002  and to  ensure  that
          process  owners  are  compliant  with  the  evidential   documentation
          requirements  and the  rules and  regulations  of the  Securities  and
          Exchange Commission that require the appropriate evidence of review

                                       39





          and approval of significant transactions, account analysis and related
          accounting entries by implementing a documentation and review process.

     The Company  believes that the above  measures  have  addressed all matters
identified as a material  weakness by management and the independent  registered
public  accounting firm at November 30, 2004, except as noted above. The Company
will  continue  to  monitor  the  effectiveness  of its  internal  controls  and
procedures on an ongoing basis and will take further actions, as appropriate.

                           PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

     The  Company is  currently,  and has in the past  been,  a party to various
routine  legal  proceedings  incident to the  ordinary  course of  business.  If
management determines, based on the underlying facts and circumstances,  that it
is probable a loss will result from a litigation  contingency  and the amount of
the loss can be reasonably  estimated,  the  estimated  loss is accrued for. The
Company believes the specific litigation matters disclosed below will not have a
material adverse effect on the Company's financial  statements,  individually or
in the aggregate.

     During the fourth quarter of 2004,  several purported  derivative and class
actions were filed in the Court of Chancery of the State of Delaware, New Castle
County.  On  January  10,  2005,  Vice  Chancellor  Steven  Lamb of the Court of
Chancery  of the  State  of  Delaware,  New  Castle  County,  granted  an  order
permitting the filing of a  Consolidated  Complaint by several  shareholders  of
Audiovox  Corporation  derivatively  on behalf of Audiovox  Corporation  against
Audiovox  Corporation,  ACC and the directors of Audiovox Corporation  captioned
"In Re Audiovox  Corporation  Derivative  Litigation".  The complaint  seeks (a)
rescission  of:  agreements;  amendments  to  long-term  incentive  awards;  and
severance  payments pursuant to which Audiovox and ACC executives were paid from
the net proceeds of the sale of certain  assets of ACC to UTStarcom,  Inc.,  (b)
disgorgement  to ACC  of  $16,000  paid  to  Philip  Christopher  pursuant  to a
Personally Held Intangibles  Purchase Agreement in connection with the UTStarcom
transaction,  (c) disgorgement to Audiovox of $4,000 paid to Philip  Christopher
as compensation for termination of his Employment  Agreement and Award Agreement
with ACC, (d)  disgorgement  to ACC of $1,916 paid to John Shalam pursuant to an
Award  Agreement  with ACC,  and (e)  recovery  by ACC of  $5,000  in  severance
payments distributed by Philip Christopher to ACC's former employees. Defendants
filed a motion to  dismiss  the  complaint,  which was  withdrawn.  The  Company
understands  that the  individual  defendants  intend to vigorously  defend this
matter; however, no assurances regarding the outcome of this matter can be given
at this point in the litigation.  The Company anticipates that defense costs, in
excess of any applicable  retention,  will be covered by the Company's insurance
policies.  Any damages  recovered  by  plaintiffs  will be paid to the  Company.
Accordingly, no estimated loss has been recorded for the aforementioned case.

     During the third quarter of 2004, an  arbitration  proceeding was commenced
by the  Company  and  several of its  subsidiaries  against  certain  Venezuelan
employees  and two  Venezuelan  companies  ("Respondents")  before the  American
Arbitration  Association,  International  Centre in New York, New York,  seeking
recovery  of  monies  alleged  to  have  been  wrongfully  taken  by  individual
Respondents and damages for fraud.  Respondents asserted  counterclaims alleging
that the Company  engaged in certain  business  practices  that caused damage to
Respondents.  The matter was submitted to mediation during the fourth quarter of
fiscal 2004 and settled  subsequent  to year end.  The  agreement  provides,  in
pertinent  part,  for a  payment  (to  be  made  upon  satisfaction  of  certain
pre-closing  conditions)  from the  Company  to the  Respondents  of  $1,700  in
consideration of which the Company will acquire all of Respondents' ownership in
the  Venezuelan  companies  and a release of any and all  claims.  As of May 31,
2005, the  satisfaction of the  aforementioned  pre-closing  conditions were not
satisfied  and the  payment  for  the  Respondents'  ownership  is  included  in
restricted cash on the accompanying consolidated balance sheet.

                                       40





     On September 17, 2004,  Shintom Co. Ltd.  commenced action against Audiovox
Corporation in the Chancery  Court of the State of Delaware,  New Castle County,
seeking  recovery of the sum of $2,500 or the value of Audiovox  preferred stock
determined as of April 16, 1987 (the date of the merger of Audiovox Corp., a New
York  corporation,  with Audiovox  Corporation,  a Delaware  corporation)  which
preferred stock was purchased by Shintom from Audiovox in April 1981. In lieu of
answering, the Company has moved to dismiss the complaint. The motion to dismiss
was  heard on April 5,  2005,  and the court  granted  the  Company's  motion to
dismiss the complaint,  but Plaintiff has filed a Notice of Appeal with Delaware
Supreme Court. The Company intends to vigorously defend this matter; however, no
assurances  regarding  the  outcome of this matter can be given at this point in
the  litigation.  Accordingly,  no  estimated  loss  has been  recorded  for the
aforementioned case.

     The consolidated class actions  transferred to a Multi-District  Litigation
Panel of the United States  District  Court of the District of Maryland  against
the Company and other  suppliers,  manufacturers  and  distributors of hand-held
wireless  telephones  alleging  damages  relating to exposure to radio frequency
radiation from  hand-held  wireless  telephones is still  pending.  On March 16,
2005,  the United  States Court of Appeals for the Fourth  Circuit  reversed the
District   Court's  order  dismissing  the  complaints  on  grounds  of  federal
pre-emption. The Fourth Circuit remanded the actions to each of their respective
state courts,  except for the Naquin  litigation which was remanded to the local
Federal Court. Defendants intend to file a petition for certiorari with the U.S.
Supreme Court. No assurances  regarding the outcome of this matter can be given,
as the Company is unable to assess the degree of  probability  of an unfavorable
outcome and estimated  loss,  if any.  Accordingly,  no estimated  loss has been
recorded for the aforementioned case.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Annual Meeting of Stockholders of the Company was held on May 19, 2005,
at the Sheraton in Smithtown,  New York.  Proxies for the meeting were solicited
pursuant to Regulation 14 of the Act on behalf of the Board of Directors and two
matters were voted on at the Annual Meeting, as follows:

          o    The election of Class A nominee's, Paul C. Kreuch, Jr., Dennis F.
               McManus,  Irving Halevy and Peter A. Lesser,  and the election of
               Class A and Class B nominee's John J. Shalam,  Philip Christopher
               , Charles M. Stoehr , and Patrick M. Lavelle, as Directors of the
               Company until the next annual meeting.

     The votes were cast for this matter as follows:


                                       FOR               AGAINST/ABSTAIN
                                ------------------  -------------------------
Class A
      Paul C. Kreuch, Jr.           18,238,539               489,299
      Dennis F. McManus             18,243,498               484,340
      Irving Halevy                 18,236,567               491,271
      Peter A. Lesser               18,240,848               486,990

Class A and B
      John J. Shalam                35,716,347              4,842,351
      Philip Christopher            35,707,565              4,851,133
      Charles M. Stoehr             35,707,944              4,850,754
      Patrick M. Lavelle            35,710,010              4,848,688

     Each nominee was elected a Director of the Company.

          o    To  ratify  the   appointment   of  Grant  Thornton  LLP  as  our
               independent registered public accounting firm for the fiscal year
               ending November 30, 2005.

                                       41






     The votes were cast for this matter as follows:


                                        FOR                AGAINST/ABSTAIN
                                 ------------------  ---------------------------
                                     40,404,932                153,766


     The selection of Grant Thornton LLP as the Company's  independent  auditors
was ratified.

ITEM 6.    EXHIBITS



Exhibit 
Number                          Description

 31.1   Certification of Principal Executive Officer Pursuant to Section 302 of
        the Sarbanes-Oxley Act of 2002 (furnished herewith)

 31.2   Certification of Principal Financial Officer Pursuant to Section 302 of
        the Sarbanes-Oxley Act of 2002 (furnished herewith)

 32.1   Certification of Principal Executive Officer Pursuant to Section 906 of
        the Sarbanes-Oxley Act of 2002 (furnished herewith)

 32.2   Certification of Principal Financial Officer Pursuant to Section 906 of
        the Sarbanes-Oxley Act of 2002 (furnished herewith



                                       42




                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                   AUDIOVOX CORPORATION




                                   By:/s/Patrick M.  Lavelle                   
                                      -----------------------------------------
                                         Patrick M.  Lavelle
                                         President and Chief
                                            Executive Officer

Dated:  July 11, 2005

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


                                       43