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 March 31, 1997

[   ]  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 May  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)
<TABLE>
<CAPTION>

                                                              March 31, 1997   June 30, 1996
                                                               ------------    ------------
CURRENT ASSETS:

<S>                                                            <C>             <C>         
         Cash and cash equivalents                             $      7,100    $      6,600
         Accounts receivable, net of allowance
            of $97,700 and $161,100                               2,057,300       3,340,100
         Inventories                                              9,641,400       8,727,400
         Prepaid  income taxes and other                            403,300         341,900
                                                               ------------    ------------

         Total current assets                                    12,109,100      12,416,000
                                                               ------------    ------------

PROPERTY AND EQUIPMENT, at cost:

         Building                                                   960,800         960,800
         Furniture, fixtures, and equipment                       3,315,300       3,690,000
         Leasehold improvements                                   5,135,200       5,494,200
         Accumulated depreciation and amortization               (3,109,700)     (3,094,200)
                                                               ------------    ------------

         Net  property and equipment                              6,301,600       7,050,800
                                                               ------------    ------------


OTHER ASSETS, principally goodwill                                1,374,200       1,413,100
                                                               ------------    ------------


             TOTAL ASSETS                                      $ 19,784,900    $ 20,879,900
                                                               ============    ============

</TABLE>


     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>



                                                                    March 31, 1997 June 30, 1996
                                                                      -----------   -----------
CURRENT LIABILITIES:

<S>                                                                   <C>           <C>        
         Accounts payable                                             $ 3,898,200   $ 4,074,300
         Current portion of long-term obligations                         537,800       536,500
         Accrued liabilities                                            1,679,100     1,355,800
                                                                      -----------   -----------

         Total current liabilities                                      6,115,100     5,966,600

LONG-TERM OBLIGATIONS, less current portion                             6,470,400     7,749,800

OTHER LIABILITIES,
         primarily deferred lease incentives                              683,900       584,800
                                                                      -----------   -----------

         TOTAL LIABILITIES                                             13,269,400    14,301,200
                                                                      -----------   -----------

SHAREHOLDERS' EQUITY:

         Preferred stock, 6,000,000 shares authorized;
             no shares issued and outstanding                                --            --
         Common stock, $.001 par, 6,000,000 shares authorized;
            2,798,613 and 2,774,980 issued and outstanding                  2,800         2,800
         Additional paid-in capital                                     4,581,700     4,559,200
         Retained earnings                                              1,931,000     2,016,700
                                                                      -----------   -----------

         Total shareholders' equity                                     6,515,500     6,578,700
                                                                      -----------   -----------

         TOTAL LIABILITIES AND
             SHAREHOLDERS' EQUITY                                     $19,784,900   $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 March 31,     Nine Months Ended March 31,
                                                1997           1996            1997            1996   .
                                           ------------    ------------   ------------    ------------

<S>                                        <C>             <C>            <C>             <C>         
NET SALES                                  $ 14,950,300    $ 16,220,400   $ 50,298,300    $ 51,216,800
COST OF MERCHANDISE SOLD                      9,166,900      10,115,300     31,781,700      31,900,700
                                           ------------    ------------   ------------    ------------

       Gross Profit                           5,783,400       6,105,100     18,516,600      19,316,100

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                     6,190,400       6,398,600     18,265,400      18,598,900

OTHER INCOME                                          0         575,000              0         575,000
                                           ------------    ------------   ------------    ------------

       Operating Income (Loss)                 (407,000)        281,500        251,200       1,292,200

INTEREST EXPENSE, net                           144,400         152,200        468,900         391,500
                                           ------------    ------------   ------------    ------------

       Income (Loss) before income taxes       (551,400)        129,300       (217,700)        900,700

INCOME TAX PROVISION (BENEFIT)                 (272,000)         54,000       (132,000)        378,000
                                           ------------    ------------   ------------    ------------

NET INCOME (LOSS)                          $   (279,400)   $     75,300   $    (85,700)   $    522,700
                                           ============    ============   ============    ============
NET INCOME (LOSS) PER SHARE                $      (0.10)   $       0.03   $      (0.03)   $       0.19
                                           ============    ============   ============    ============

Weighted average shares of common
         stock and common stock
         equivalents outstanding              2,811,950       2,802,539      2,827,382       2,778,145
                                           ============    ============   ============    ============


</TABLE>







     See accompanying notes to condensed consolidated financial statements.


<PAGE>


                     AUDIO KING CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
                                   (Unaudited)
<TABLE>
<CAPTION>


OPERATING ACTIVITIES:                                                    1997          1996
                                                                    -----------    -----------
<S>                                                                 <C>            <C>        
      Net income (loss)                                             $   (85,700)   $   522,700
      Adjustments required to reconcile net
        income (loss) to net cash (used for)
           provided by operating activities:
                Depreciation and amortization                           846,100        985,700
                Changes in operating assets and liabilities:
                   Accounts receivable                                1,282,800       (600,900)
                   Inventories                                         (914,000)    (1,691,000)
                   Prepaid income taxes and other                       (61,400)      (351,300)
                   Accounts payable                                    (176,100)       531,200
                   Accrued liabilities                                  323,300        531,800
                                                                    -----------    -----------
      Net cash (used for) provided by operating activities            1,215,000        (71,800)
                                                                    -----------    -----------

INVESTING ACTIVITIES:
      Purchases of property and equipment                               (58,000)    (2,910,700)
                                                                    -----------    -----------

FINANCING ACTIVITIES:

      Change in deferred lease incentives                                99,100        140,500
      Net borrowings (repayments) under bank credit agreements       (1,250,000)     2,750,000
      Net borrowings (repayments) under capital lease obligations       (28,100)        65,600
      Sale of common stock and exercise of stock options                 22,500         12,000 
                                                                    -----------    -----------
      Net cash (used for) provided by financing activities           (1,156,500)     2,968,100
                                                                    -----------    -----------

Net Increase (Decrease) in Cash and Cash Equivalents                        500        (14,400)
Cash and Cash Equivalents, beginning of period                            6,600         28,600
                                                                    -----------    -----------
Cash and Cash Equivalents, end of period                            $     7,100    $    14,200
                                                                    ===========    ===========

Additional supplementary cash flow information is as follows:
         Interest paid                                              $   472,900    $   392,000
         Income taxes paid, net of refunds received                    (294,200)       550,000
                                                                    ===========    ===========


</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)    Pending Merger

       On March 4, 1997,  the  Company  announced  the  signing of a  definitive
       merger agreement  pursuant to which Ultimate  Electronics,  Inc. (NASDAQ:
       ULTE) will acquire all the shares of the Company for stock and cash.  The
       merger  is  subject  to  various  conditions  including  approval  by the
       Company's  shareholders,  registration of the Ultimate Electronics shares
       to  be  issued,   final  approval  by  Ultimate   Electronics'  bank  and
       satisfaction  of  obligations  under  the   Hart-Scott-Rodino   Antitrust
       Improvements Act. The merger is expected to be completed by mid June.

(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.

(4)    Accounting Pronouncement

       During March 1997,  the Financial  Accounting  Standards  Board  released
       Statement of Financial  Accounting  Standards No. 128, Earnings per Share
       (SFAS 128) which  requires the disclosure of basic earnings per share and
       diluted  earnings  per share.  The  Company  expects to adopt SFAS 128 in
       fiscal  1998 and  anticipates  it will not have a material  impact on the
       financial position or the results of operations.



<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 March 31, 1997,  were  approximately
$14,950,300,  a decrease of 7.8% from net sales of approximately $16,220,400 for
the same period in the prior year.  Net sales for the  nine-month  period  ended
March 31,  1997,  were  approximately  $50,298,300,  a decrease of 1.8% from net
sales of  approximately  $51,216,800  for the same  period  in the  prior  year.
Comparable  store sales decreased 9% for the third quarter ended March 31, 1997,
and decreased 4% for the nine-month  period ended March 31, 1997,  from the same
periods last year.  Management  believes the decrease in comparable  store sales
was due to the competitive nature of the consumer electronics industry.

Seasonality  is a factor in the  Company's  results of operations on a quarterly
basis.  The  Company's  second  quarter  which ends 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 March 31, 1997,  decreased 5.3% to
approximately  $5,783,400 from  approximately  $6,105,100 for the  corresponding
period of the prior year. Gross profit, as a percent of net sales, was 38.7% for
the  three-month  period  ended  March  31,  1997,  compared  to  37.6%  for the
corresponding  period of the prior year. For the  nine-month  period ended March
31,  1997,  gross  profit  decreased  4.1%  to  approximately  $18,516,600  from
approximately $19,316,100 for the same period in the prior year. Gross profit as
a percent of net sales for the nine-month period ended March 31, 1997, was 36.8%
compared  to 37.7% for the same  period in the prior year.  The  fluctuation  in
gross margin percentage was due primarily to varying levels of promotion pricing
in the  respective  periods  coupled  with  deflation  of prices in the consumer
electronics industry.

Selling,  general, and administrative  expenses for the three-month period ended
March 31, 1997  increased  as a percent of net sales to 41.4% from 39.4% for the
comparable three-month period of the preceding year. This increase was primarily
a result of a  $175,000  settlement  in a dispute  with a former  landlord  over
renovation  expenses at a retail location  vacated by the Company in 1995 and to
professional and other expenses  totaling  approximately  $130,000 in connection
with  the  pending  merger  of  the  Company  with  Ultimate  Electronics,  Inc.
Notwithstanding  the increase as a percentage of sales,  selling,  general,  and
administrative  expenses  for the  three-month  period  ended  March  31,  1997,
decreased  approximately 3.3%, or $208,200, over the comparable prior period due
primarily to a decrease in finance  charges  related to consumer  financing  and
payroll expense.

For  the  nine-month  period  ended  March  31,  1996,  selling,   general,  and
administrative  expenses  as a percent of net sales  remained  constant at 36.3%
compared  to  the  same  period  in  the  prior  year.  Selling,   general,  and
administrative expenses for the nine-month period ended March 31, 1997 decreased
approximately  $333,500  over  the  comparable  period  in the  prior  year  due
primarily to a decrease in finance  charges  related to consumer  financing  and
payroll expense.

In the third quarter ended March 31, 1996, the Company  recorded other income of
$575,000  as a result of  revising an  agreement  related to cellular  telephone
sales  commission to provide for receiving  commissions at the time of the sale.
The previous contract provided for receiving commissions over a period of time.


<PAGE>

Interest  expense  for  the  three  month  period  ended  March  31,  1997,  was
approximately  $144,400  compared to  approximately  $152,200 in the  comparable
period in the prior  year.  For the  nine-month  period  ended  March 31,  1997,
interest expense was approximately  $468,900 compared to approximately  $391,500
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 six months ended  December 31, 1996. In
calculating  the income tax benefit for the three month  period  ended March 31,
1997,  the  Company's  effective  tax rate was 49% as a result  of  recording  a
$40,000  benefit  of a net  operating  loss  carryback  in the state of Iowa not
previously  recorded.  The  Company's  blended  effective  tax rate for the nine
months ended March 31, 1997,  was 60% compared to 42% for the same period in the
prior year.

Financial Condition

During  the  nine-month  period  ended  March 31,  1997,  cash of  approximately
$1,215,000 was provided by operations compared to cash of approximately  $71,800
used by operations in the comparable period the prior year. Capital expenditures
for the nine-month period were  approximately  $67,500 compared to $2,910,700 in
the  comparable  period the prior year which  included  remodeling  costs of two
retail stores.  Cash used for financing  activities during the nine-month period
ended March 31, 1997, was approximately $1,156,500 primarily as a result of bank
debt repayments. During the comparable period in the prior year cash provided by
financing activities was approximately  $2,968,100 primarily as a result of bank
borrowings to finance the cost of remodeling retail stores.

Working capital at March 31, 1997, was  approximately  $5,994,000 as compared to
approximately  $6,449,400 at June 30, 1996. The current ratio was 2.0 to 1 as of
March 31, 1997, and 2.1 to 1 as of June 30, 1996.

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  ($4,500,000  from  March 1 through  June 30) 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 March  31,  1997,  were
$3,350,000.  The second credit  facility is a term loan of $2,625,000  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.  At March 31, 1997, the Company was
not in  compliance  with an earnings  covenant  and a cash flow  coverage  ratio
covenant. The bank has granted waivers of these covenants.

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 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 March 31, 1997.






<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


May 9, 1997                           By: /s/ H. G. Thorne
                                      H. G. Thorne
                                      President and Chief Executive
                                      Officer (principal executive officer)


May 9, 1997                           By: /s/ R. E. Thiner
                                      R. E. Thiner
                                      Sr. Vice President of Finance
                                      (principal financial and
                                      accounting officer)