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 September 30, 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 November 1, 1996
Common Stock, $.001 par value                                   2,775,980


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<PAGE>





                                              PART I - FINANCIAL INFORMATION




Item 1.    Financial Statements


                      AUDIO KING CORPORATION AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                     ASSETS
                                   (Unaudited)

                                          September 30, 1996   June 30, 1996

<S>                                           <C>               <C>
CURRENT ASSETS:

  Cash and cash equivalents                   $     32,500      $    6,600
  Accounts receivable, net of allowance
       of $172,700 and $161,100                  2,436,300       3,340,100
  Inventories                                    9,163,400       8,727,400
  Prepaid  income taxes and other                  408,000         341,900
                                              ------------       ---------

  Total current assets                          12,040,200      12,416,000
                                              ------------       ---------

PROPERTY AND EQUIPMENT, at cost:

  Building                                         960,800         960,800
  Furniture, fixtures, and equipment             3,707,800       3,690,000
  Leasehold improvements                         5,494,200       5,494,200
  Accumulated depreciation and amortization     (3,370,000)     (3,094,200)
                                              ------------       ---------

  Net  property and equipment                    6,792,800       7,050,800
                                              ------------       ---------

OTHER ASSETS, principally goodwill               1,403,300       1,413,100
                                              ------------       ---------

             TOTAL ASSETS                     $ 20,236,300    $ 20,879,900
                                              ============    ============


</TABLE>









     See accompanying notes to condensed consolidated financial statements.


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<PAGE>



                      AUDIO KING CORPORATION AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                      LIABILITIES AND SHAREHOLDERS' EQUITY
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                   September 30, 1996   June 30, 1996 
<S>                                                      <C>           <C>
CURRENT LIABILITIES:

   Accounts payable                                      $ 5,042,900   $ 4,074,300
   Current portion of long-term obligations                  536,700       536,500
   Accrued liabilities                                     1,256,300     1,355,800
                                                         -----------   -----------
   Total current liabilities                               6,835,900     5,966,600

LONG-TERM OBLIGATIONS, less current portion                6,367,300     7,749,800

OTHER LIABILITIES,
   primarily deferred lease incentives                       617,400       584,800
                                                         -----------   -----------

TOTAL LIABILITIES                                         13,820,600    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                                          1,852,800     2,016,700
                                                         -----------   -----------

Total shareholders' equity                                 6,415,700     6,578,700
                                                         -----------   -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY               $20,236,300   $20,879,900
                                                         ===========   ===========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

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<PAGE>

                      AUDIO KING CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                   1996           1995
                                                   ----           ----                                    
<S>                                           <C>              <C>          
NET SALES                                     $ 16,160,700    $ 15,335,700

COST OF MERCHANDISE SOLD                        10,355,300       9,646,700
                                               -----------     -----------

   Gross profit                                  5,805,400       5,689,000

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                        5,928,800       5,578,800
                                               -----------     -----------

   Operating income (loss)                        (123,400)        110,200

INTEREST EXPENSE, net                              159,500         102,300
                                               -----------     -----------

   Income (loss) before income taxes              (282,900)          7,900

INCOME TAX PROVISION (BENEFIT)                    (119,000)          3,300
                                               -----------     -----------

NET INCOME (LOSS)                             $   (163,900)   $      4,600
                                               ===========     ===========

NET INCOME (LOSS) PER SHARE                   $      (0.06)   $       0.00
                                               ===========     ===========

 Weighted average shares of common and
 common stock equivalent shares outstanding      2,775,313       2,864,948
                                               ===========     ===========

</TABLE>


     See accompanying notes to condensed consolidated financial statements.




                                       4 



<PAGE>



                      AUDIO KING CORPORATION AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
                                   (Unaudited)

<TABLE>
<CAPTION>

OPERATING ACTIVITIES:                                               1996                   1995
<S>                                                             <C>                     <C>
    Net income (loss)                                           $  (163,900)            $     4,600
    Adjustments required to reconcile net income (loss)
      to net cash provided by operating activities:
        Depreciation and amortization                               286,100                 220,000
        Changes in operating assets and liabilities:
           Accounts receivable                                      903,800                (571,000)
           Inventories                                             (436,000)               (391,800)
           Prepaid income taxes and other                           (66,100)
           Accounts payable                                         968,600               2,387,700
           Accrued liabilities                                     (100,200)                449,000
           Net cash provided by operating activities              1,392,300               1,770,500

INVESTING ACTIVITIES:
    Purchases of property and equipment                             (17,800)               (777,600)

FINANCING ACTIVITIES:

    Change in deferred lease incentives                              32,600                  20,200
    Net repayments under line-of-credit agreement                (1,375,000)             (1,175,000)
    Net borrowings (repayments)
       under capital lease obligations                               (6,200)                156,600
    Sale of common stock and exercise of stock options                  900                  16,100
    Net cash used for financing activities                       (1,348,600)               (982,100)

NET  INCREASE IN CASH                                                25,900                  10,800

CASH, beginning of period                                             6,600                  28,600

CASH, end of period                                             $    32,500             $    39,400


Additional supplementary cash flow information is as follows:
     Interest paid                                              $   159,500             $   102,000
     Income taxes paid, net of refunds received                        --                   110,000

</TABLE>


     See accompanying notes to condensed consolidated financial statements.


                                        5


<PAGE>



                      AUDIO KING CORPORATION AND SUBSIDIARY
              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 s tatements  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
     fourth calendar 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.









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<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 September 30, 1996 were approximately
$16,160,700, an increase of 5.3% from net sales of approximately $15,335,700 for
the same period in the prior year.  Comparable  store sales increased 3% for the
first  quarter  ended  September  30,  1996  over the  same  period  last  year.
Management  believes the sales  increase was a result of promoting the Company's
specialist retail strategy which utilizes increased  advertising,  larger stores
with wider product  assortment,  extended  consumer  credit  offers,  and better
trained salespeople to produce increased sales.

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 ends  December 31 is  typically  the  strongest  quarter,  due to the high
demand associated with the holiday season.

Gross profit for the three-month period ended September 30, 1996, increased 2.0%
to approximately  $5,805,400 from approximately $5,689,000 for the corresponding
period of the prior year. Gross profit, as a percent of net sales, was 35.9% for
the  three-month  period  ended  September  30,  1996  compared to 37.1% for the
corresponding  period of the prior year. The decrease in gross margin percentage
was due to a growth  in sales of video  products  as a percent  of total  sales,
which  typically  carry a lower gross margin,  and to the increased  competitive
nature of the consumer electronics industry.

Selling,  general, and administrative  expenses for the three-month period ended
September  30, 1996  increased as a percent of net sales to 36.7% from 36.4% for
the comparable  three-month period of the preceding year. Selling,  general, and
administrative  expenses for the  three-month  period ended  September  30, 1996
increased  approximately 6.3%, or $350,000, over the comparable prior period due
primarily to increases in employee  salaries and benefits,  promotional  expense
and occupancy and depreciation costs.

Interest  expense  for the  three-month  period  ended  September  30,  1996 was
approximately  $159,500 compared to approximately  $102,300 in the first quarter
of fiscal year 1996.

The Company's  effective income tax rate was estimated at 42% for the purpose of
recording  the income tax effects for the three months ended  September 30, 1996
and 1995.


Financial Condition

During the three-month  period ended  September 30, 1996, cash of  approximately
$1,392,300  was  provided by  operations  compared to  approximately  $1,770,500
provided  by  operations  in the  comparable  period  the  prior  year.  Capital
expenditures for the three month period were approximately  $17,800  principally
for the purchase of computers and other equipment.

Working  capital at September 30, 1996 was  $5,204,300 as compared to $6,449,400
at June 30, 1996.  The current  ratio was 1.8 to 1 as of September  30, 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 $9,163,400  at September  30, 1996 from  $8,727,400 at
June  30,  1996  in  order  to  support  overall  increased  sales  and  display
requirements. Concurrently, accounts payable increased as a result of purchasing
additional inventory, as well as an increase in advertising.


                                        7


<PAGE>




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 September 30, 1996 were $2,850,000. The second credit facility is a term loan
of $3,000,000 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,
or had obtained a waiver of, all of its line of credit agreement covenants as of
September 30, 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.





                                        8


<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 September 30, 1996.




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<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


November 11, 1996                               By:   /s/ H. G. Thorne
                                                H. G. Thorne
                                                President and Chief Executive
                                                Officer (principal executive
                                                officer)


November 11, 1996                               By: /s/ R. E. Thiner
                                                R. E. Thiner
                                                Sr. Vice President of Finance
                                                (principal financial and
                                                accounting officer)












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