SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                                    FORM 10-Q




[X]    Quarterly Report under section 13 or 15 (d) of the Securities
       Exchange Act of 1934 for the quarterly period ended December 31, 1996

[   ]  Transition Report pursuant to Section 13 or 15 (d) of the Securities
       Exchange Act of 1934 for the transition period from         to        .

       Commission File Number 0-16154


                             AUDIO KING CORPORATION
             (Exact name of registrant as specified in its charter)
 
     Minnesota                                            41-1565405
(State or other jurisdiction of                 (I.R.S. Employer Identification
incorporation or organization)                               Number)

                             3501 South Highway 100
                          Minneapolis, Minnesota 55416
                     (Address of principal executive office)

                                 (612) 920-0505
              (Registrant's telephone number, including area code)


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 the number of shares  outstanding  of each of the  issuer's  classes of
Common Stock, as of the last practicable date.


      Class                                Outstanding at February 1, 1997
Common Stock, $.001 par value                          2,798,613

                                        


<PAGE>


                         PART I - FINANCIAL INFORMATION



Item 1.    Financial Statements


                     AUDIO KING CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS
                                   (Unaudited)

                                             December 31, 1996     June 30, 1996
                                              ---------------      -------------
CURRENT ASSETS:

Cash and cash equivalents                        $     11,400      $      6,600

Accounts receivable, net of allowance
of $218,000 and $161,100                            3,790,100         3,340,100

Inventories                                        10,040,800         8,727,400

Prepaid income taxes and other                        627,000           341,900
                                              ---------------      -------------

Total current assets                               14,469,300        12,416,000
                                              ---------------      -------------

PROPERTY AND EQUIPMENT, at cost:

Building                                              960,800           960,800

Furniture, fixtures, and equipment                  3,741,000         3,690,000

Leasehold improvements                              5,495,800         5,494,200

Accumulated depreciation and
 amortization                                      (3,638,700)       (3,094,200)
                                              ---------------      -------------

Net property and equipment                          6,558,900         7,050,800
                                              ---------------      -------------


OTHER ASSETS, principally goodwill                  1,393,500         1,413,100
                                              ---------------      -------------


TOTAL ASSETS                                     $ 22,421,700      $ 20,879,900
                                              ===============      =============





     See accompanying notes to condensed consolidated financial statements.


                                        


<PAGE>



                     AUDIO KING CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                      LIABILITIES AND SHAREHOLDERS' EQUITY
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                   December 31, 1996  June 30, 1996
                                                    ---------------   -------------
CURRENT LIABILITIES:

<S>                                                     <C>           <C>        
Accounts payable                                        $ 6,256,400   $ 4,074,300
Current portion of long-term obligations                    535,500       536,500
Accrued liabilities                                       2,298,100     1,355,800
                                                    ---------------   -------------

Total current liabilities                                 9,090,000     5,966,600

LONG-TERM OBLIGATIONS, less current portion               5,908,400     7,749,800

OTHER LIABILITIES,
primarily deferred lease incentives                         650,100       584,800
                                                    ---------------   -------------

TOTAL LIABILITIES                                        15,648,500    14,301,200
                                                    ---------------   -------------


SHAREHOLDERS' EQUITY:

Preferred stock, 6,000,000 shares authorized;
no shares issued and outstanding -
Common stock, $.001 par, 20,000,000 shares authorized;
2,775,980 and 2,774,980 issued and outstanding                2,800         2,800
Additional paid-in capital                                4,560,100     4,559,200
Retained earnings                                         2,210,300     2,016,700
                                                    ---------------   -------------

Total shareholders' equity                                6,773,200     6,578,700
                                                    ---------------   -------------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY                                    $22,421,700   $20,879,900
                                                    ===============   =============

</TABLE>



     See accompanying notes to condensed consolidated financial statements.


                                                     


<PAGE>



                     AUDIO KING CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                 Three Months Ended December 31,         Six Months Ended December 31,
                                                 -------------------------------         -----------------------------
                                                     1996              1995                    1996              1995
                                                     ----              ----                    ----              ----
<S>                                              <C>               <C>                     <C>              <C>        
NET SALES                                        $ 19,187,300      $ 19,660,700            $ 35,348,000     $ 34,996,400
COST OF MERCHANDISE SOLD                           12,259,500        12,138,700              22,614,800       21,785,400
                                                  -----------       -----------             -----------      -----------
 
   Gross Profit                                     6,927,800         7,522,000              12,733,200       13,211,000

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES                             6,146,300         6,621,500              12,075,100       12,200,300
                                                  -----------       -----------             -----------      -----------
         
   Operating Income                                   781,500           900,500                 658,100        1,010,700

INTEREST EXPENSE, net                                 165,000           137,000                 324,500          239,300
                                                  -----------       -----------             -----------      -----------

   Income before income taxes                         616,500           763,500                 333,600          771,400

INCOME TAX PROVISION                                  259,000           320,700                 140,000          324,000
                                                  -----------       -----------             -----------      -----------

NET INCOME                                          $ 357,500         $ 442,800               $ 193,600        $ 447,400
                                                  ===========       ===========             ===========      ===========

NET INCOME PER SHARE                                    $ .13             $ .16                   $ .07            $ .16
                                                  ===========       ===========             ===========      ===========


Weighted average shares of common
    stock and common stock
    equivalents outstanding                         2,836,067         2,779,678               2,813,411       2,770,649
                                                  ===========       ===========             ===========      ===========

</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                                     


<PAGE>



                     AUDIO KING CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995
                                   (Unaudited)
<TABLE>
<CAPTION>


OPERATING ACTIVITIES:                                                1996                     1995
                                                                     ----                     ---- 
<S>                                                             <C>                       <C>        
  Net income                                                    $   193,600               $   447,400
  Adjustments required to reconcile net income to net
    cash (used for) provided by operating activities:
      Depreciation and amortization                                 564,100                   654,100
      Changes in operating assets and liabilities:
        Accounts receivable                                        (450,000)               (2,583,300)
        Inventories                                              (1,313,400)               (2,203,000)
        Prepaid income taxes and other                             (285,100)                 (130,000)
        Accounts payable                                          2,182,100                 2,037,600
        Accrued liabilities                                         942,300                   767,800
                                                                 ----------                 ---------
  Net cash (used for) provided by operating activities            1,833,600                (1,009,400)
                                                                 ----------                 ---------

INVESTING ACTIVITIES:

  Purchases of property and equipment                               (52,600)               (1,818,800)
                                                                 ----------                 ---------
FINANCING ACTIVITIES:

  Change in deferred lease incentives                                65,300                   176,500
  Net borrowings (repayments) under bank credit agreements       (1,825,000)                2,575,000
  Net borrowings (repayments) under capital lease obligations       (17,400)                   56,300
  Sale of common stock and exercise of stock options                    900                    12,000
                                                                 ----------                 ---------
  Net cash (used for) provided by financing activities           (1,776,200)                2,819,800
                                                                 ----------                 ---------

Net Increase (Decrease) in Cash and Cash Equivalents                  4,800                    (8,400)
Cash and Cash Equivalents, beginning of period                        6,600                    28,600
                                                                 ----------                 ---------
Cash and Cash Equivalents, end of period                        $    11,400               $    20,200
                                                                 ==========                 =========

Additional supplementary cash flow information is as follows:
    Interest paid                                               $   327,900               $   239,000
    Income taxes paid, net of refunds received                         --                     120,000
                                                                 ==========                 =========


</TABLE>





     See accompanying notes to condensed consolidated financial statements.


                                                     


<PAGE>



                     AUDIO KING CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


(1)  Nature of Business

     The condensed consolidated financial statements have been prepared by Audio
     King Corporation,  without audit,  pursuant to the rules and regulations of
     the Securities and Exchange  Commission.  The information  furnished in the
     condensed  consolidated  financial  statements  includes  normal  recurring
     adjustments  and  reflects  all  adjustments  which are,  in the opinion of
     management, necessary for a fair presentation of such financial statements.
     Certain information and footnote disclosures normally included in financial
     statements  prepared  in  accordance  with  generally  accepted  accounting
     principles  have been  condensed  or  omitted  pursuant  to such  rules and
     regulations.  Although  the  Company  believes  that  the  disclosures  are
     adequate to make the information presented not misleading,  it is suggested
     that  these  condensed   consolidated   financial  statements  be  read  in
     conjunction with the consolidated  financial  statements for the year ended
     June 30,  1996 and the related  notes  thereto  included  in the  Company's
     latest Annual Report on Form 10-K.

     Operating results for the interim periods may not be necessarily indicative
     of the operating results to be expected for the full fiscal year, since the
     Company's  business is  seasonal  with  higher net sales  occurring  in the
     Company's second quarter.

(2)  Accounting Pronouncement

     Statement  of  Financial   Accounting   Standards  No.  121  ("SFAS  121"),
     "Accounting  for the  Impairment  of Long-Lived  Assets and for  Long-Lived
     Assets to Be Disposed Of," requires  impairment losses on long-lived assets
     to be  recognized  when an asset's book value  exceeds its expected  future
     cash flows  (undiscounted).  The Company  adopted SFAS 121 on July 1, 1996.
     The adoption did not have a material  impact on the  financial  position or
     results of operations of the Company.

(3)  Reclassifications

     Certain amounts in the financial  statements for fiscal year 1996 have been
     reclassified  to conform  with the  financial  statement  presentation  for
     fiscal year 1997. These  reclassifications  have no effect on net income or
     shareholders' equity as previously reported.





<PAGE>




Item 2.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations

Results of Operations

Net sales for the three-month  period ended December 31, 1996 were approximately
$19,187,300,  a decrease of 2.4% from net sales of approximately $19,660,700 for
the same  period in the prior year.  Net sales for the  six-month  period  ended
December 31, 1996 were approximately  $35,348,000,  an increase of 1.0% from net
sales of  approximately  $34,996,400  for the same  period  in the  prior  year.
Comparable  store sales  decreased 4% for the second  quarter ended December 31,
1996 and decreased 1% for the six-month  period ended December 31, 1996 over the
same periods last year.  Management  believes the decrease in  comparable  store
sales was due to the competitive nature of the consumer electronics industry and
the overall consumer spending levels during the past holiday season.

Seasonality  is a factor in the  Company's  results of operations on a quarterly
basis. Net sales for the Company's first and fourth quarters  historically  have
represented the weakest sales quarters of the year. The Company's second quarter
which ended  December 31 is typically the strongest  quarter,  due to the higher
demand associated with the holiday season.

Gross profit for the three-month period ended December 31, 1996,  decreased 7.9%
to approximately  $6,927,800 from approximately $7,522,000 for the corresponding
period of the prior year. Gross profit, as a percent of net sales, was 36.1% for
the  three-month  period  ended  December  31,  1996  compared  to 38.3% for the
corresponding  period of the prior year. For the six-month period ended December
31,  1996,  gross  profit  decreased  3.6%  to  approximately  $12,733,200  from
approximately $13,211,000 for the same period in the prior year. Gross profit as
a percent of net sales for the  six-month  period ended  December 31, 1996,  was
36.0%  compared to 37.7% for the same period in the prior year.  The decrease in
gross margin  percentage was due primarily to higher levels of promotion pricing
coupled with continued deflation of prices in the consumer electronics industry.

Selling,  general, and administrative  expenses for the three-month period ended
December  31, 1996  decreased  as a percent of net sales to 32.0% from 33.7% for
the comparable  three-month period of the preceding year. Selling,  general, and
administrative  expenses  for the  three-month  period  ended  December 31, 1996
decreased  approximately 7.1%, or $475,000, over the comparable prior period due
primarily to decreases in advertising, depreciation, and salaries and benefits.

For the  six-month  period  ended  December  31,  1996,  selling,  general,  and
administrative  expenses as a percent of net sales decreased to 34.2% from 34.9%
in the same  period in the prior  year.  Selling,  general,  and  administrative
expenses  for  the   six-month   period  ended   December  31,  1996   decreased
approximately 1.0% or $125,000 over the comparable period in the prior year. The
decreases in selling,  general, and administrative expenses are due primarily to
higher  depreciation  expense  in the prior year due to  writing  off  leasehold
improvements  related  to the Edina  remodeling  and a decrease  in  advertising
expense in the current period.

Interest  expense  for the  three-month  period  ended  December  31,  1996  was
approximately  $165,000  compared to  approximately  $137,000 in the  comparable
period in the prior year.  For the  six-month  period  ended  December  31, 1996
interest expense was approximately  $324,500 compared to approximately  $239,300
for the same period in the prior year.

The Company's  effective income tax rate was estimated at 42% for the purpose of
recording the income tax effects for the three and six months ended December 31,
1996 and 1995.


<PAGE>



Financial Condition

During the  six-month  period ended  December 31,  1996,  cash of  approximately
$1,831,400 was provided by operations compared to approximately  $1,009,400 used
by operations in the comparable period the prior year. Capital  expenditures for
the six month period were approximately  $52,600 principally for the purchase of
computers and other equipment.

Working capital at December 31, 1996 was approximately $5,379,300 as compared to
approximately  $6,449,400 at June 30, 1996. The current ratio was 1.6 to 1 as of
December  31,  1996 and 2.1 to 1 as of June 30,  1996.  The  decrease in working
capital  was  attributable  primarily  to an increase  in  inventory  levels and
accounts payable.  Inventories  increased to $10,040,800 at December 31, 1996, a
more typical level at the close of the calendar  year,  from  $8,727,400 at June
30, 1996. Inventory at December 31, 1995, was $10,601,000.

The  Company  maintains  a  credit  agreement  which  provides  for  two  credit
facilities.  The first  facility  is a  working  capital  line of  credit  which
provides for up to  $6,500,000 in  borrowings  and bears  interest at the bank's
reference  rate or at the adjusted  certificate  of deposit rate plus 2%, at the
Company's option.  Outstanding advances on the working capital line of credit as
of December 31, 1996 were $2,650,000.  The second credit facility is a term loan
of $2,750,000 and bears  interest at the bank's  reference rate plus 0.25% or at
the adjusted certificate of deposit rate plus 2.25%, at the Company's option.

Borrowings under the bank agreement are collateralized by inventories,  accounts
receivable,  and fixed assets.  Terms of the agreement  require that the Company
meet certain  financial and other covenants.  The Company was in compliance with
the line of credit agreement covenants as of December 31, 1996.

The  Company  believes  that  cash  generated  from  operations  and  borrowings
available  under its bank line of credit will be  sufficient to fund its working
capital and capital expenditure requirements for at least the next 12 months.


<PAGE>




                          PART II - OTHER INFORMATION



Item 4.  Submission of Matters to a vote of Security Holders

     (a)  The Company held its Annual Meeting on November 13, 1996.

     (b)  Proxies for the Annual Meeting were  solicited  pursuant to Regulation
          14  under  the  Securities   Exchange  Act  of  1934.   There  was  no
          solicitation in opposition to  management's  nominees as listed on the
          proxy statement, and all of such nominees were elected.

     (c)  By a vote of 2,527,760 shares in favor, with 23,500 shares against and
          1,950 shares abstaining,  the shareholders set the number of directors
          to be elected at five (5).

     (d)  The  following  persons  were  elected  to serve as  directors  of the
          Company  until the next Annual  Meeting of  shareholders  by the votes
          indicated:

Nominee                      Number of Votes For       Number of Votes Withheld

Randel S. Carlock                  2,522,510                     30,700
Henry G. Thorne                    2,522,510                     30,700
Sherman A. Swenson                 2,524,610                     28,600
Barry R. Rubin                     2,524,710                     28,500
Gary S. Kohler                     2,524,710                     28,500


Item 6. Exhibits and Reports on Form 8-K:

     (a)  Exhibit No.         Description

           27        Financial Data Schedule(filed with electronic version only)

     (b)  Reports on Form 8-K - The Company  filed no reports on Form 8-K during
          the quarter ended December 31, 1996.








<PAGE>



                                   SIGNATURES



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

                                                 AUDIO KING CORPORATION


February 10, 1997                               By: /s/ H. G. Thorne
                                                 H. G. Thorne      
                                                 President and Chief Executive
                                                 Officer (principal executive
                                                  officer)


February 10, 1997                               By: /s/ R. E. Thiner
                                                 R. E. Thiner
                                                 Sr. Vice President of Finance
                                                 (principal financial and 
                                                 accounting officer)