SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------


                                    FORM 10-K

       ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D)
       OF THE SECURITIES EXCHANGE ACT OF 1934
       (MARK ONE)

 /x/   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
       ACT OF 1934 For the Fiscal Year Ended December 31, 1998

                                       OR

/ /    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: 0-5860
                          ----------------------------

                               RECOTON CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

       NEW YORK                                             11-1771737
     (STATE OR OTHER                                      (IRS EMPLOYER
      JURISDICTION OF                                     IDENTIFICATION NO.)
      INCORPORATION OR
       ORGANIZATION)


                  2950 LAKE EMMA ROAD, LAKE MARY, FLORIDA 32746
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (407) 333-8900

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                          COMMON SHARES, $.20 PAR VALUE
                                (TITLE OF CLASS)

     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
reporting requirements for the past 90 days. Yes /X/ No / /

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

     State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing:
$144,534,570 based on the closing price on the Nasdaq Stock Market of $14.50 as
of March 23, 1999. For purposes of this computation, all executive officers and
directors of the registrant have been deemed to be affiliates. Such
determination should not be deemed to be an admission that such persons are, in
fact, affiliates of the registrant.

     Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date: 11,701,153 Common
Shares as of March 23, 1999.

                       DOCUMENTS INCORPORATED BY REFERENCE

     The definitive Proxy Statement to be filed with the Securities and Exchange
Commission (the "Commission") with respect to the registrant's Annual Meeting of
Shareholders to be held in 1999 (the "1999 Proxy Statement") is incorporated by
reference into Part III of this Form 10-K.

<PAGE>

                                     PART I

          THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THAT TERM IN THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 (THE ACT)(SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF
THE SECURITIES EXCHANGE ACT OF 1934). ADDITIONAL WRITTEN OR ORAL FORWARD-LOOKING
STATEMENTS MAY BE MADE BY THE COMPANY FROM TIME TO TIME, IN FILINGS WITH THE
SECURITIES EXCHANGE COMMISSION, PRESS RELEASES OR IN OTHER STATEMENTS BY THE
COMPANY. STATEMENTS CONTAINED IN THIS ANNUAL REPORT THAT ARE NOT HISTORICAL
FACTS ARE FORWARD-LOOKING STATEMENTS MADE PURSUANT TO THE SAFE HARBOR PROVISIONS
OF THE ACT. FORWARD-LOOKING STATEMENTS MAY INCLUDE, BUT ARE NOT LIMITED TO,
PROJECTIONS OF REVENUE, INCOME OR LOSS AND CAPITAL EXPENDITURES, STATEMENTS
REGARDING FUTURE OPERATIONS, FINANCING NEEDS, ANTICIPATED COMPLIANCE WITH
FINANCIAL COVENANTS IN LOAN AGREEMENTS, PLANS FOR ACQUISITION OR SALE OF ASSETS
OR BUSINESSES AND CONSOLIDATION OF OPERATIONS OF NEWLY ACQUIRED BUSINESSES,
PLANS RELATING TO PRODUCTS OR SERVICES OF THE COMPANY, ASSESSMENTS OF
MATERIALITY, PREDICTIONS OF FUTURE EVENTS AND THE EFFECTS OF PENDING AND
POSSIBLE LITIGATION, AS WELL AS ASSUMPTIONS RELATING TO THESE STATEMENTS. IN
ADDITION, WHEN USED IN THIS DISCUSSION, THE WORDS "ANTICIPATES," "BELIEVES,"
"ESTIMATES," "EXPECTS," "INTENDS," "PLANS" AND VARIATIONS OF SUCH TERMS AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.

          FORWARD-LOOKING STATEMENTS ARE INHERENTLY SUBJECT TO RISKS AND
UNCERTAINTIES, SOME OF WHICH CANNOT BE PREDICTED OR QUANTIFIED BASED ON CURRENT
EXPECTATIONS. CONSEQUENTLY, FUTURE EVENTS AND ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE SET FORTH IN, CONTEMPLATED BY, OR UNDERLYING THE
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS ANNUAL REPORT, OTHER FILINGS, PRESS
RELEASES OR OTHER STATEMENTS BY THE COMPANY. STATEMENTS IN THIS ANNUAL REPORT,
PARTICULARLY IN "ITEM 1. BUSINESS", "ITEM 3. LEGAL PROCEEDINGS", THE "NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS" AND "ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," DESCRIBE CERTAIN
FACTORS, AMONG OTHERS, THAT COULD CONTRIBUTE TO OR CAUSE SUCH DIFFERENCES. OTHER
FACTORS THAT COULD CONTRIBUTE TO OR CAUSE SUCH DIFFERENCES INCLUDE, BUT ARE NOT
LIMITED TO, UNANTICIPATED DEVELOPMENTS IN ANY ONE OR MORE OF THE FOLLOWING
AREAS: RECEPTIVITY OF CONSUMERS TO NEW CONSUMER ELECTRONICS TECHNOLOGIES,
ABILITY OF THE COMPANY TO INTRODUCE NEW PRODUCTS TO MEET CONSUMER NEEDS AND
CONSUMER ACCEPTANCE OF THE COMPANY'S NEW PRODUCT INTRODUCTIONS; ABILITY TO
SUCCESSFULLY IDENTIFY, ACQUIRE AND INTEGRATE NEW BUSINESS INTO THE COMPANY'S
OPERATION; COMPETITION; NUMBER AND NATURE OF CUSTOMERS AND THEIR PRODUCT ORDERS;
ABILITY TO OBTAIN ADEQUATE FINANCING; ABILITY OF SUPPLIERS TO CONTINUE TO SOURCE
PRODUCTS AND COMPONENTS; FACTORS RELATED TO FOREIGN MANUFACTURING, SOURCING AND
SALES (INCLUDING CHINESE AND OTHER FOREIGN GOVERNMENT REGULATION, TRADE AND
IMPORTATION CONCERNS, FLUCTUATION IN EXCHANGE RATES AND ADOPTION OF A UNIFORM
CURRENCY IN CERTAIN EUROPEAN COUNTRIES); BORROWING COSTS; CHANGES IN TAXES DUE
TO CHANGES IN THE MIX OF U.S. AND NON-U.S. REVENUE; ABILITY TO MAINTAIN
CONFIDENTIAL INFORMATION AND OBTAIN AND MAINTAIN PROPRIETARY RIGHTS; PENDING OR
THREATENED LITIGATION AND INVESTIGATIONS; THE AVAILABILITY OF KEY PERSONNEL; THE
OPERATION OF MANAGEMENT INFORMATION AND COMPUTER SYSTEMS AT THE COMPANY AND AT
THE COMPANY'S CUSTOMERS AND VENDORS, ESPECIALLY AS IT RELATES TO THE YEAR 2000
ISSUE; ENVIRONMENTAL AND OTHER LEGAL REGULATIONS; AND OTHER RISKS FACTORS WHICH
MAY BE DETAILED FROM TIME TO TIME IN THE COMPANY'S SECURITIES AND EXCHANGE
COMMISSION FILINGS.

          READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS ANNUAL REPORT, WHICH SPEAK ONLY AS
OF THE DATE SET FORTH ON THE SIGNATURE PAGE. THE COMPANY UNDERTAKES NO
OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER SUCH DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNEXPECTED EVENTS.

          Aamp(TM), Advent(RM), Ambico(RM), Ampersand(TM), Ar(RM)/acoustic
Research(RM), Discwasher(RM), Heco(RM), Interact(RM), Jensen(RM), Linear
Research(RM), Macaudio(RM), Magnat(RM), Nht(RM) (Now Hear This(TM)), Nitro(RM),
Parsec(RM), Perfectcase(TM), Peripheral(TM), Phase Linear(RM), Recoton(RM),
Rembrandt(RM), Ross(TM), Sole Control(RM), Soundquest(RM), and Stinger(rm) ARE
TRADEMARKS OF RECOTON CORPORATION OR ITS SUBSIDIARIES. Sony Playstation(RM) ,
Nintendo 64(RM), Rolling Stone(RM) and Sprint(RM) ARE MARKS OF OTHER COMPANIES
LICENSED FOR USE ON SPECIFIC PRODUCTS MANUFACTURED BY OR FOR RECOTON CORPORATION
OR ITS SUBSIDIARIES.

ITEM 1.  BUSINESS

THE COMPANY

          Recoton Corporation (with its subsidiaries, Recoton or the
Company) is a leading worldwide marketer, developer and manufacturer of
consumer electronics products for aftermarket use, with over 62 years of
experience. The Company classifies its business into three principal segments:

     o    VIDEO AND COMPUTER GAME BUSINESS. This segment consists of STD Holding
          Limited and its Hong Kong and other Chinese subsidiaries (STD),
          including its manufacturing operations, producing video and computer
          game accessories as well as products for other Recoton segments, and
          InterAct Accessories, Inc. (InterAct), the Company's distributor of
          computer and video game accessories in the United States. Products
          sold under the INTERACT brand include peripherals and other
          accessories to enhance the enjoyment of playing video and computer
          games, including joysticks, controllers, game steering wheels and
          other accessories, including the Company's popular GAME SHARK(R), a
          device which assists the game player, as well as computer, multi-media
          and home office accessories. In fiscal 1998, approximately 35% of the
          Company's revenues were from sales by this segment.

     o    RECOTON AUDIO CORPORATION BUSINESS. This segment consists of Recoton
          Audio Corporation and its United States and European subsidiaries
          (RAC), which primarily sell home and mobile audio products. Home audio
          products, sold under the ADVENT, AR/ACOUSTIC RESEARCH, JENSEN and
          NHT/(NOW HEAR THIS) brand names and, in Europe, under the MAGNAT and
          Heco brand names, include state-of-the-art designed high-fidelity,
          high- performance stereo and home theater loudspeaker systems. Audio
          products for the automobile and marine aftermarket, sold under the
          ADVENT, JENSEN, LINEAR RESEARCH, NITRO, ROAD GEAR and PHASE LINEAR
          brand names in the United States and MAGNAT and MACAUDIO brand names
          in Europe, include speakers, subwoofers, amplifiers, cassette
          receivers, equalizers, electronic crossovers, signal processors, CD
          players, CD changers and installation accessories. In fiscal 1998,
          approximately 33% of the Company's revenues were from sales by this
          segment.

     o    ACCESSORIES BUSINESS. This segment consists of Recoton Corporation;
          Christie Design Corporation, a research and development subsidiary;
          Recoton (Far East) Ltd., a Hong Kong distributor; AAMP of Florida,
          Inc., a distributor of car audio installation products; and Recoton
          Canada Ltd., a Canadian distributor of all Recoton products. Products
          sold include indoor and outdoor TV antennas, storage cases,
          headphones, remote controls and other accessories for home and mobile
          audio, camcorder, cellular and standard telephone, music and video
          products, and 900 MHz and other wireless technology. These products 
          are marketed under numerous brand names including AAMP, ADVENT, 
          AMBICO, DISCWASHER, JENSEN, PARSEC, RECOTON, ROADGEAR, SOLE CONTROL,
          SOUNDQUEST and STINGER and, under licenses, SPRINT for telephone
          accessories and ROLLING STONE for music storage. In fiscal 1998,
          approximately 32% of the Company's revenues were from sales by this
          segment.

          As noted above, Recoton's products are offered under a number of brand
names, many of which are recognized by consumers and all of which the Company
believes are valued by its retail customers. Recoton sells its products through
specialty consumer electronics and video retailers, mass merchants, office and
computer products retailers and direct mail retailers. The Company also sells
certain of its products to original equipment manufacturers (OEMs). As a result
of its broad array of branded product offerings and its value-added marketing
services, such as customized merchandise planogramming, inventory management and
just-in-time delivery, Recoton believes that it is one of the few companies that
can act as a "one-stop shop" to its retailer customers for consumer electronic
accessories. Recoton believes that the combination of its diverse product
offerings, value-added marketing services and multiple brand names has led to
its holding leading market positions in key product areas, which serves as a
significant competitive advantage in the consumer electronic products industry.

          Recoton has grown as the consumer electronics industry has grown.
Starting with its formation in 1936 as a manufacturer of phonograph needles, the
Company has kept pace with the ever-changing needs of the consumer, expanding
its product offerings as the industry has evolved. From supporting the
now-superseded technologies of phonographs, eight track cartridges and citizen
band radios and the fading technologies of cassette tapes, it now provides
products for current core technologies such as compact discs, video cassettes,
and video and PC games and emerging technologies such as digital versatile discs
(DVD) and high definition television (HDTV). It has also benefited from the
emergence of home-based work and the desire to have the benefit of business
technologies such as computers and telecommunications available for home use.
The Company's product offerings have expanded with the introduction of each of
these new technologies. As each new technology has emerged, Recoton has found
that the demand for its products has increased, with its new products usually
being additive to its business, rather than immediately replacing older
products. While consumers who acquire new systems desire additional products to
interconnect, accessorize or maximize their new purchases, many of the older
systems remain operational and consumers still need to maintain or upgrade them.

          Starting in 1989, Recoton realized that it could more easily satisfy
these burgeoning consumer needs through selective acquisitions as well as
internal growth. Since that time it has completed 14 acquisitions as part of its
growth strategy to expand its customer base, enter new geographic markets,
broaden its product offerings and obtain new technologies. Recoton seeks to
maximize the benefit of each acquisition by consolidating overhead expenses and
leveraging sales and marketing expertise, thereby making its products more
competitive. Two recent acquisitions have significantly changed the Company's
focus. In 1995 it acquired STD Holding Limited, a Hong Kong based manufacturer
of video and computer game accessories such as joysticks and controllers
primarily marketed under the brand name INTERACT. As a result of this
acquisition, Recoton believes it is now the world's largest third party supplier
of video game accessories. In 1996 Recoton significantly enhanced its presence
in the international market with the acquisition of International Jensen
Incorporated (IJI), now known as Recoton Audio Corporation, a global developer
and marketer of home and car stereo speakers, car stereos and CD players and car
amplifiers sold under many well recognized brand names including ADVENT,
AR/ACOUSTIC RESEARCH, JENSEN, PHASE LINEAR and NHT/(NOW HEAR THIS) in the United
States and MAGNAT and MACAUDIO, each a recognized brand in Germany. This
acquisition has made Recoton one of the world's largest marketers of home
speakers and mobile audio speakers and electronics.

          The products which Recoton sells, most of which are accessories or
other products purchased after a consumer has purchased an audio or video
system, game platform or information systems, usually carry a higher margin for
the retailer than the hardware which comprises the basic system. Retailers
therefore have an incentive to aggressively market these types of products. For
this and other reasons, Recoton has seen a growth in the floor space which
retailers devote to the sale of accessories. The Company anticipates
continuation of this trend as the consumer electronics industry is entering a
new phase based on digitalization of many of the prevailing technologies.
Recoton believes that DVDs will become the prevailing media for at- home movie
viewing as the superior viewing opportunities of high definition television
becomes prevalent. Recoton also anticipates a growing trend for add-on high
quality speakers as HDTV television monitors, which are often sold without
speakers or only with modest speaker capability, become the core of the home
entertainment system. The Company believes that additional growth opportunities
will emerge through the convergence of consumer electronics and the computer, in
both the home and car environment, and the growth of personal communications
equipment such as cell phones.

INDUSTRY OVERVIEW

          The consumer electronics market is large and diverse. It has evolved
from phonographs, radios, home stereos and televisions to now encompass a wide
variety of innovative technologies and products. These include personal
computers (PCs), compact disc (CD) players, camcorders, video cassette recorders
(VCRs), cellular and cordless telephones, video game systems and home theaters.
Some of these products (such as CD players, camcorders and VCRs) have reached a
plateau of maturity, while others (such as cellular telephones, video game
products, computer products and home theater systems) are still growing in
consumer acceptance.

          Additionally, the consumer electronics market is undergoing rapid and
frequent changes. Advances in certain technologies for mature products such as
televisions, camcorders and telephones are leading to new innovations such as
high definition television, plasma screen televisions, new television delivery
systems such as direct broadcast satellite (DBS) systems, digital versatile disc
systems, which deliver ultra-high quality pictures and stereo sound, and digital
cameras and camcorders. These advances may herald a new growth in consumer
electronics as they are phased in. The Consumer Electronics Manufacturers
Association (CEMA) has stated that sales of consumer electronics have been
growing at an average of three to five percent a year since 1991 and industry
sales in 1999 are projected to be $79 billion, up by approximately five percent
from the estimated record sales for 1998 of $75 billion.

          The broadening and expansion of the consumer electronics market has
been due to a greater awareness of consumer electronics products and changes in
consumer tastes, lifestyles and work habits, including a growing desire to spend
more time at home, whether for relaxation or work. This trend has been seen in
the strong growth in "home theater" listening and viewing environments and
multimedia and video game products and in the increasing popularity of
telecommuting, with the need for more sophisticated home offices. In addition,
many consumer electronic accessories are necessary to maintain and operate
consumer electronics products while others are used to expand, upgrade or
enhance the functionality of particular products.

          The nature of retail marketing for consumer electronics products has
been evolving in recent years. Certain types of retailers, such as traditional
department stores, have withdrawn from the market but other types of retailers,
such as large national consumer electronics superstores and other mass
merchants, have become more prevalent. Simultaneously, more small retailers such
as drug stores and food markets are carrying consumer electronics items for the
convenience of their customers. It is expected that these trends towards both
larger "big box" discount stores and smaller convenience-oriented local
retailers will continue. The Company's distribution channels have similarly
evolved as the market for its products has changed.

          The gross profit margins realized by retailers on accessories are
typically higher than those on electronics components because consumers often
purchase accessories without price comparison. Additionally, inventory costs
and floor space required to display and sell accessories are substantially less
than what is necessary to sell equipment. Retailers also have found that a broad
offering of accessories provides additional services to the consumer, which
allow retailers to differentiate themselves from their competitors. In addition,
retailers recognize that having accessories available can encourage add-on sales
to a consumer electronics purchase, lead to impulse purchases and encourage
repeat visits by customers, all of which provide the opportunity to sell
additional consumer electronics products and accessories.

          Recoton believes that retailers are increasing their efforts to market
accessories, speakers, multimedia products and electronic game products by
increasing floor space devoted to those products, enhancing their in-store
accessory staffing and merchandising and spending more on accessory advertising
and promotion. Recoton believes that in order to achieve greater purchasing and
operating economies and to reduce costs, retailers are consolidating their
relationships with suppliers that offer a broad assortment of consumer
electronics accessories and can provide timely product availability and strong
merchandising support.

PRODUCTS

          Recoton offers a broad line of over 4,000 consumer electronics
products for home, office and mobile aftermarket use in many consumer
electronics categories. Its products are offered under a number of brand names,
many of which are recognized by consumers and all of which the Company believes
are valued by its retail customers. These products are positioned, packaged and
priced to appeal to a broad range of retailers and customers. Recoton's
capabilities enable it to market its products through multiple retail channels
and to competing retailers within specific retailer categories.

          VIDEO AND COMPUTER GAME

          The Company markets video and computer game peripherals under the
INTERACT brand, including joysticks, controllers, game steering wheels
(including the best-selling V-3 and the new force feedback V-4 steering wheels),
and other products to enhance the enjoyment of playing video and computer games.
One of the more unique products offered by the Company is the GAME SHARK(R), a
device for use with Sony PlayStation, Nintendo 64 and PCs which contains
hundreds of codes to give the player tips on how to win many of the most popular
games. Certain of these products are also sold under the Sony and Nintendo brand
names pursuant to licenses granted to the Company. The Company also markets an
extensive computer and multi-media accessory product line, sold under the
INTERACT brand name, including UL-listed surge protection devices, connection
cables, disc and disc drive cleaning products, dust covers, copy holders, and
mouse and wrist pads, as well as shielded computer speakers, sold under the
ADVENT, JENSEN and AR brand names. Recoton believes it is the largest third-
party provider of video and computer game peripherals and that video gaming is
one of the fastest growing sectors of the consumer electronics industry.

          RAC

          Home audio products, sold under the ADVENT, AR/ACOUSTIC RESEARCH,
JENSEN and NHT/(NOW HEAR THIS) brand names and, in Europe, under the HECO and
MAGNAT brand names, include state-of-the-art designed high-fidelity,
high-performance stereo and home theater loudspeaker systems. Each of the
speaker lines is positioned to reach a different target customer. Audio products
for the automobile and marine aftermarket, sold under the Advent, JENSEN, LINEAR
RESEARCH, NITRO, PHASE LINEAR and ROAD GEAR brand names in the United States and
MAGNAT and MACAUDIO brand names in Europe, include speakers, subwoofers,
amplifiers, cassette receivers, equalizers, electronic crossovers, signal
processors, CD players, CD changers and installation accessories. Recoton
believes it is a leading marketer of high-fidelity speakers and other audio
products for the home and automobile audio markets.

          ACCESSORIES

          Recoton offers a wide variety of accessory products to interconnect,
accessorize and maximize the enjoyment of various consumer electronics products
and systems. These include antennas; audio, CD/audio and/or cassette
accessories; camcorder and video accessories; carrying and storage cases;
cellular and other telephone accessories; headphones; mobile audio accessories;
and remote controls. These are sold under the AAMP, AR/ACOUSTIC RESEARCH,
INTERACT, JENSEN, PERFECTCASE, PERIPHERAL, ROAD GEAR, ROLLING STONE, ROSS, SOLE
CONTROL, SOUND QUEST, SPRINT and STINGER brand names, depending on the product.
Recoton also markets a proprietary line of wireless products, sold under the
ADVENT, JENSEN and RECOTON brand names, which includes stereo headphones,
amplified speaker systems, video broadcast systems, and a portable
indoor/outdoor weather-resistant speaker. These products use patented 900 MHz,
863MHz, 433 MHz and 2.45 GHz technology to transmit pictures and sound signals
from a TV, VCR, cable box, satellite box, stereo or sound system through walls,
floors and ceilings to stereo headphones, amplified indoor/outdoor loudspeakers
or other television sets within 150 feet.

CUSTOMERS AND DISTRIBUTION

          Recoton seeks to provide consumers with access to its products on a
global basis in multiple countries through multiple distribution channels and at
multiple price points. The customers for the Company's products for its segments
except as noted include consumer electronics, computer and office supply
superstores, mass merchants, catalog showrooms, direct mail merchants, TV
shopping channels, warehouse clubs and music and video chains (office supply
superstores and music and video chains do not generally purchase home and mobile
audio products) . Recoton has a strong, diverse and growing customer base of
more than 1,000 retailers which the Company believes have more than 30,000
storefronts.

          Recoton also makes significant sales of selected accessories products
to original equipment manufacturers and via private labels to other accessory
vendors which purchase Recoton's audio, video, CD and telephone accessories,
loudspeakers and wireless products. The Company also has two factory outlet
stores (one in Florida and one in Arizona).

          During the past few years, Recoton has expanded its presence in the
global marketplace. The acquisition of IJI (now Recoton Audio Corporation) with
its European subsidiaries in 1996 has led to significant growth in European
sales in all product lines. Through RAC's United Kingdom, German and Italian
subsidiaries and Recoton's Hong Kong distributor subsidiary, Recoton markets and
distributes a growing portion of its product line to European retailers and
distributors. Through Recoton Canada Ltd., the Company markets and distributes
its full product lines to Canadian retailers. Through STD and Recoton's Hong
Kong distributor subsidiary, it sells Asian-sourced products to other Recoton
subsidiaries and OEM customers around the world. Sales in Europe are considered
part of the RAC business and sales in Canada are considered part of the
accessories business. Recoton views its international customer base as an
important source for continued growth. Information with respect to Recoton's
operations by geographic area is set forth in the financial statements (see Note
P of the Notes to Financial Statements).

          Most of Recoton's customers operate on a purchase order basis and
Recoton does not ordinarily have long term contracts with its customers. In
addition, due to the allocation of retail shelf space to suppliers of products
far in advance of the placement and shipment of orders for such products,
Recoton's sales are reliant to a great extent on its ability to influence such
allocations prior to order placement. Because it is the Company's practice to
maintain sufficient inventory of finished goods and components to fill orders
promptly, the level of backlog is not significant nor can it be considered to be
an important predictor of future performance.

          Wal-Mart was a significant customer of the RAC and video and computer
game segments in 1997 and 1998. In 1997 and 1998, sales to Wal-Mart represented
approximately $57.0 million and $120.5 million, or approximately 11% and 17% of
the consolidated revenues for each year, respectively. No other customer
represented greater than 10% of Recoton's consolidated revenues in 1997 or 1998
and no customer represented greater than 10% of the Company's consolidated
revenues in 1996.

SALES, MARKETING AND CUSTOMER SUPPORT

          Recoton's marketing strategy is to develop strong relationships with a
broad array of customers. Recoton seeks to establish "partnership" relationships
with the retailers selling its products. One way this is done is by offering
"one stop shopping" for a wide variety of consumer electronics accessories, so
as to better attract and support retailers who are consolidating their vendor
relationships to achieve greater purchasing and operating economies. Another
strategy used to solidify such relationships is to offer extensive marketing,
inventory management and customer support services. These services include
consumer support programs, distinctive packaging, multiple brand names to choose
from, drop shipping, electronic data interchange, extensive product promotion,
in-store inventory management, pre-ticketing services and in-store product
displays and training.

          Recoton further supports its products by advertising in leading trade
and consumer publications, participating in trade shows and engaging in a wide
variety of regional promotions and sales incentive programs. The Company also
advertises and provides support for both its retail customers and consumers
through several Internet web sites, including WWW.RECOTON.COM, WWW.RCOT.COM and
WWW.INTERACT-ACC.COM among many others.

          The Company's distribution and sales strategy involves the utilization
of a worldwide network of sales executives, regional managers, independent sales
representatives and exclusive distributors. Recoton compensates its independent
sales representatives on a commission basis. Regional sales personnel work in
the field with Recoton's customers and independent sales representative
organizations. The Company also maintains a toll free support center, staffed
five days per week, 12 hours per day, to aid consumers in the U.S. and Canada.

WORKING CAPITAL PRACTICES

          The Company generally carries significant inventory in the products
which it offers in order to meet customer needs for just-in-time delivery. This
increases its capital requirements. Since most of the items held in inventory
are considered staples that can be sold at least at cost, the Company does not
believe that it is at any significant risk of inventory obsolescence for these
items. Customers are generally billed at normal trade terms with payment terms
ranging from 30 to 60 days. With the exception of the Company's inventory and
billing practices, the Company does not have any extraordinary working capital
requirements. Consistent with the needs to supply products to its customers,
inventories are closely controlled and maintained at levels related to product
cycles and responsive to normal delivery requirements of customers.

ACQUISITIONS

          A significant part of Recoton's growth strategy has been to expand its
business through the pursuit of strategic acquisitions. Through 14 acquisitions
since 1989, Recoton has:

     o    OBTAINED NEW PRODUCTS AND TECHNOLOGIES, as it did with stereo
          headphones when it acquired Calibron in 1989, antennas when it
          acquired All Channel Products in 1989, maintenance products when it
          acquired Discwasher in 1991, camcorder and video accessories when it
          acquired Ambico in 1992, remote controls when it acquired Infrared
          Research in 1994, mobile audio installation products when it acquired
          Ampersand in 1995 and video and computer game accessories when it
          acquired STD in 1995;

     o    SIGNIFICANTLY EXPANDED ITS PRESENCE IN SPECIFIC PRODUCT LINES, as it
          did with television antennas when it acquired Parsec in 1991, speaker
          and other audio products when it acquired IJI in 1996 and mobile
          audio installation products when it acquired AAMP in 1997;

     o    INCREASED ITS MANUFACTURING CAPACITY, as it did with the Company's
          original Florida plant (which was subsequently expanded) when it
          acquired Calibron in 1989, the Chinese manufacturing facilities when
          it acquired STD in 1995 and the Benecia, California facilities when it
          acquired IJI in 1996;

     o    ENHANCED OVERSEAS DISTRIBUTION CAPABILITIES, as it did when it
          acquired IJI and HECO in 1996 and Tambalan in 1997;

     o    OBTAINED NEW MARKETING TECHNIQUES, as it did with the direct marketing
          talents when it acquired AAMP in 1997; and

     o    BROADENED ITS CUSTOMER BASE, as it did when it acquired STD in 1995
          and IJI in 1996.

          Recoton seeks to maximize the benefit of each acquisition by
consolidating overhead expenses and leveraging sales and marketing expertise.
While there may be certain duplications of expenses immediately following an
acquisition, Recoton aims to achieve cost savings from the introduction of
efficiencies of scale, thereby making Recoton and its products more competitive.

          Recoton intends to continue to acquire businesses and assets that will
compliment its existing business and are consistent with its financial resources
and existing debt covenants. Recoton regularly evaluates acquisition
opportunities as they are presented to the Company.

RESEARCH AND PRODUCT DEVELOPMENT

          Recoton's research and development efforts are primarily oriented
towards meeting consumers' desires for changing products to accessorize or
supplement existing and new consumer electronics technologies. Recoton seeks to
continuously enhance its products to remain a leader in the consumer electronics
after-market. In conjunction with its agents, customers and contract
manufacturers, the Company continuously reviews its product lines and
identifies, develops and introduces in a timely fashion new accessory products
for growing areas of consumer demand. These efforts focus primarily on improving
existing products and utilizing what the Company knows about these products to
devise similar products in other emergent categories, rather than on conducting
more speculative research.

          Recoton maintains research and development facilities for its
accessories business in Florida and Illinois, for its RAC business in Florida
and California and for its video and computer game business in Hong Kong and
California. In addition it utilizes from time to time selected outside
engineering services. Recoton has been recently expanding its engineering
department to increase its in-house development capabilities. This expansion has
included the establishment of a digital engineering group for its video and
computer game business to take advantage of the expected digital revolution in
consumer electronics.

          Research and development efforts for video and computer game products
include producing new gaming and sound-related products to enhance video game
platforms and entertainment applications for multimedia personal computers. In
development are additions to the Company's line of joysticks and controllers for
use with Nintendo 64-bit consoles, Sony PlayStation, the soon-to-be-introduced
128-bit Sega Dreamcast system and personal computers.

          Significant efforts on producing new and advanced home and audio
loudspeaker systems include the redesigning of the speaker lines sold under the
ADVENT, JENSEN and NHT brands and the addition of models to the AR/ACOUSTIC
RESEARCH line of speakers.

          900 MHz and other wireless technology products in development include
advanced headphones and speakers permitting Recoton to offer its wireless audio
and video products on a worldwide basis, and a spread-spectrum transmission
system for wireless audio and video that provides low-interference,
longer-distance, high-end CD-quality performance for wireless audio, video and
security video products. The Company is also engaged in customer-funded R&D
efforts for certain specific prospective applications of its wireless technology
to products manufactured by other companies.

          Recoton's use of in-house industrial designers, software developers
and engineers and other capabilities have been a major strength in obtaining and
increasing its OEM business.

          Through its continual product development efforts, Recoton believes
that it has been able to establish new retail accounts, enhance existing
customer relationships, attract a growing base of consumer electronics companies
as OEM customers and differentiate itself from its competitors.

          In 1996, 1997 and 1998, Recoton's expenditures for research and
development were approximately $2.9 million, $4.2 million and $6.0 million,
respectively. In addition, the Company's expenditures for product and packaging
design were approximately $1.3 million, $2.5 million and $3.2 million,
respectively. The growth in research and development expenditures from 1996 to
1997 was primarily reflective of a full year of operations of the audio
operations acquired from IJI, and the increase from 1997 to 1998 was primarily
reflective of increased efforts to develop new products.

PRODUCTION AND SUPPLY

          Recoton's manufacturing strategy is to produce high-quality consumer
electronics products for its retailer and OEM customers through a cost-efficient
production process.

          Recoton utilizes its own Chinese manufacturing facilities, as well as
third-party manufacturers or suppliers located primarily in China, for most of
its products or components of such products. SEE "ITEM 2. PROPERTIES." The
Company's vendors are required to manufacture products in accordance with strict
specifications and quality control standards set by Recoton, in either finished
form or as components for assembly at Recoton's Florida, California or China
facilities.

          Most products which Recoton manufactures use standard parts and
components which can be purchased from multiple sources. In a few instances,
however, a business decision has been made to source certain components and
products from one or a small number of suppliers for certain business reasons,
such as attractive pricing. Recoton's wireless products are currently the only
major product which is sourced from one third party vendor, who subcontracts
component manufacturing to other sources. Substantially all of the Company's
video and computer game accessories and, increasingly, other products are
sourced from Recoton's Chinese manufacturing facility. While the Company does
not have guaranteed supply arrangements with any of its suppliers, it has never
experienced an inability to obtain necessary components or other raw materials.
The Company believes that its sources and supply of components and other raw
materials are adequate for its needs. No single third-party vendor or group of
related vendors has provided more than 10% of the Company's raw material and
component purchases in any of the years 1996 through 1998.

          Recoton coordinates most of its offshore sourcing for the North
American market with its buying agents. These agents coordinate information
flows with Recoton's suppliers, provide translation services, facilitate
financing, conduct quality control inspections and oversee shipping. Recoton's
high volume allows it to consolidate shipments and ship frequently, thereby
obtaining preferential shipping rates and lowering costs. It has been necessary,
however, from time to time to utilize more expensive air shipments in order to
meet customers' time sensitive needs. Recoton's Hong Kong subsidiaries
coordinate sourcing and shipping to customers located outside of the United
States.

COMPETITION

          The consumer electronics market is highly fragmented and subject to
intense competition. In each segment, Recoton's competitors include
manufacturers and suppliers of consumer electronics accessories, consumer
electronics equipment manufacturers that market their own lines of accessories,
various companies which offer broad lines of consumer electronics products,
companies which offer certain product lines and manufacturers of brand name
consumer electronics hardware.

          Specific competitors by segments include:

     o    VIDEO AND COMPUTER GAME: Altec-Lansing, Fellows, Labtech, Logitech,
          Microsoft, Nintendo, Sega, Sony and Thrustmaster;

     o    RAC:  Bose, Boston Acoustics, Harmon Industries and Polk for home
          audio products and Kenwood, Pioneer, Audiovox and Sony for mobile
          audio products; and

     o    ACCESSORIES: Allsop, Gemini/Magnavox, Thomson/RCA, Sony and Zenith.

          Shelf space is a key factor in determining sales of consumer
electronics products. The allocation of retail space is influenced primarily on
the basis of company and brand name reputation, product variety and quality,
customer service and support, product reliability, the ability to meet customer
delivery needs, price, product features and the proprietary nature of certain
products. Recoton believes that it competes favorably with respect to these
factors.

TRADEMARKS AND PATENTS

          Recoton believes that it has established a high level of brand name
recognition with its retailers and their customers. SEE "--PRODUCTS" for a
discussion of the various marks used for products.

          As a result of its own product development, acquisitions and exclusive
and non-exclusive licenses, Recoton has many United States and foreign patents,
including patents on its 900 MHz wireless products, speakers, headphones,
amplifiers, non-contact hydrodynamic multimedia compact disc cleaning product,
CD-to-cassette adapter, antennas, connectors and adapters to eliminate tangles
in coiled telephone cords. Additionally, Recoton has various patents pending
including applications relating to speakers, surge protectors, remote controls
and car stereos and routinely applies for other patents on products as they are
developed. The Company does not consider any patents or trademarks essential to
its business.

          Recoton licenses certain of its proprietary rights for use in products
manufactured by others and has licensing agreements with other companies (such
as Sprint, Straight Arrow Publishing Company for Rolling Stone, Nintendo and
Sony) to sell Company-made products under their marks. Neither the annual
royalties received nor the royalties paid under these licensing agreements are
significant to the Company's operations.

          Recoton attempts to protect its proprietary information under domestic
and international patent, copyright and trade secret laws and through the use of
other safeguards. Recoton on occasion receives communications from others
asserting that certain of Recoton's products may be covered by such parties'
patent or intellectual property rights. Recoton believes that its products do
not infringe on the intellectual property rights of any third parties.

EMPLOYEES

          At December 31, 1998, Recoton had approximately 4,800 employees
worldwide, of which approximately 3,270 are employed by the video and computer
game segment, 370 are employed by the RAC segment and 1,160, including corporate
administrative personnel, are employed by the accessories segment. The number of
employees employed at STD's Chinese manufacturing facility fluctuates
significantly on a seasonal basis.

          Approximately 650 employees at Recoton's Lake Mary, Florida premises
are covered by a collective bargaining agreement with the Glass Molders,
Pottery, Plastics & Allied Workers International Union, which expires on August
3, 1999. As Florida is a "right to work" state, only approximately 27 employees
are currently members of the union. Approximately 39 employees in Canada are
covered by a collective bargaining agreement with the National Automobile,
Aerospace, Transportation and General Workers Union, which expires on August 10,
2000. At this time Recoton considers its employee relations to be good.

REGULATORY AND ENVIRONMENTAL MATTERS

          With operations in numerous jurisdictions, the Company is subject to
many national, state and local laws of general business applicability. These
include laws regulating occupational, health and safety and the work place
environment; discrimination and sexual harassment; removal or remediation of
certain hazardous substances; the importation and exportation of products; the
marketing, advertising and sale of goods; customs and foreign trade; and
payments to foreign governments and their officials. In addition, the Company
may be subject from time to time to regulation by certain federal agencies
relating to its products, including the Federal Communications Commission with
respect to its wireless transmitting devices and certain computer and video game
accessories. Additional laws may be enacted from time to time which may
adversely impact the Company. Under various national, state and local
environmental laws and regulations, a current or previous owner or operator
(including a lessee) of real property may become liable for the cost of removal
or remediation of hazardous substances on such property. Such legal requirements
often impose liability without regard to fault. Although the Company has not
been notified of, and is not aware of, any environmental liability in connection
with its leased and owned facilities, there can be no assurance that the Company
will not be required to bear any such costs in the future.

SEASONALITY

          The Company's results of operations are subject to the seasonality of
the consumer electronics industry and, as a result, net sales and net income
have on an historical basis been substantially greater during the third and
fourth quarters of each year, as the Company's retail customers increase their
inventories in anticipation of the year-end selling season, than during the
first two quarters. Historically, the Company's net sales in each quarter have
exceeded net sales in the comparable quarter of the prior year. However, sales
in the first and second quarters in each year have tended to be lower than sales
in the third and fourth quarters of the previous year. A significant reason for
this, in addition to seasonality, is that most of the Company's significant
acquisitions have occurred in the third or fourth quarters. The Company's
results of operations may also fluctuate on a quarterly basis due to product
sales mix and the timing of significant orders, new product introductions and
acquisitions.

DIRECTORS AND EXECUTIVE OFFICERS

          The following table sets forth the name, age and position of each of
the directors and executive officers of the Company as of December 31, 1998. The
executive officers of the Company are appointed by the Board of Directors of the
Company and serve at the discretion of the Board of Directors. The members of
the Board are each elected to three year terms, approximately one-third of which
expire each year.

Name                     Age        Positions (End of Term as Director)
----                     ---        -----------------------------------
Robert L. Borchardt      60          Director (1999); President, Chairman of the
                                     Board and Chief Executive Officer
Stuart Mont              58          Director (1999); Chief Operating Officer,  
                                     Chief Financial Officer, Executive Vice
                                     President-Operations and Secretary
Peter Wish               63          Director (2000); Executive Vice President- 
                                     Administration
Joseph H. Massot         54          Director (2001); Vice President, Treasurer,
                                     Principal Accounting Officer and Assistant
                                     Secretary
Stephen Chu              41          Director (2000); President of STD Holding
                                     Limited
George Calvi             48          Director (1999)
Paul E. Feffer           77          Director (1999)
Irwin S. Friedman        64          Director (2001)
Joseph M. Idy            58          Director (2001)
Ronald E. McPherson      69          Director (2000)
Terrence O' Flynn        54          Senior Vice President-OEM Sales and
                                     Executive Vice President-Sales & Marketing
                                     of the Recoton Accessories Division
Dennis P. Wherry         53          Senior Vice President-Operations
Craig W. Dykes           40          Vice President-Information Systems
Peter M. Ildau           60          Vice President-Corporate Communications
Arnold Kezsbom           46          Vice President-Financial Planning
Richard D. Miller        36          Vice President-Compliance


          The business experience, principal occupations and employment, as well
as period of service, of each of the directors and executive officers of the
Company during at least the last five years are set forth below:

          ROBERT L. BORCHARDT has served as a director of Recoton since 1964, as
President since 1976, as Chief Executive Officer since 1996 and as Chairman
since June 1998. He was Co-Chairman from 1992 until June 1998, Co-Chief
Executive Officer from 1992 until 1996, Executive Vice President from 1969 until
1976, a Vice President from 1964 until 1969 and Treasurer from 1969 until 1975.
Mr. Borchardt began working for the Company in 1961. He is on the Executive
Board of the Consumer Electronic Manufacturing Association (CEMA), a division of
the Electronics Industries Alliance (EIA), is on the Board of Governors of the
Electronic Industries Alliance and is a trustee of the Electronics Industries
Foundation.

          STUART MONT has served as a director of Recoton since 1975, as Chief
Operating Officer since 1993, as Chief Financial Officer since 1992, as
Secretary since 1989 and as Executive Vice President- Operations since 1992. He
was a Vice President from 1978 until 1989, Senior Vice President from 1989 until
1992, and Treasurer from 1975 until 1989. Mr. Mont has also served as President
of Recoton Canada Ltd. since 1992.

          PETER WISH has served as a director of Recoton since 1969 and as
Executive Vice President- Administration since 1992. Mr. Wish was Vice President
from 1969 until 1976 and Executive Vice President from 1976 until 1992.

          JOSEPH H. MASSOT has served as a director of Recoton since 1985, as
Principal Accounting Officer, Vice President and Treasurer since 1989 and as
Assistant Secretary since 1983. He was Recoton's Controller and Assistant
Treasurer from 1978 until 1989.

          STEPHEN CHU has served as a director of Recoton since 1997, as
President and a Managing Director of STD and of its various subsidiaries since
1990, and as President of Recoton Japan Inc. since 1998. STD was acquired by the
Company in 1995.

          GEORGE CALVI has served as a director of Recoton since 1984. Mr. Calvi
was Vice President from 1978 until 1988, Senior Vice President-Sales and
Marketing from 1988 until 1992 and Executive Vice President-Sales and Marketing
of the Company from 1992 until 1996.

          PAUL E. FEFFER has served as a director of Recoton since 1996. He has
been Chairman of Feffer Consulting Co., Inc., an international media consulting
firm, since 1991. Mr. Feffer founded Feffer and Simons Inc. in 1955, which was
sold to Doubleday & Co. in 1962 (where he remained as President of the
subsidiary Feffer and Simons until 1986) and was Chairman of Baker & Taylor
International, a subsidiary of W. R. Grace & Co., from 1987 until 1991. From
1991 to 1996 he was a consultant to Merck & Company's publishing division.
Feffer & Simons and Baker & Taylor specialized in international publishing and
book and magazine distribution and development of overseas markets for U.S.
publishers.

          IRWIN S. FRIEDMAN has served as a director of Recoton since 1982. Mr.
Friedman has been President, Chief Executive Officer and the principal
shareholder of I. Friedman Equities, Inc., a corporate financial consulting
firm, for more than five years. He has also been a director of The Kushner-
Locke Company, a California-based publicly-traded media company, since June
1998.

          JOSEPH M. IDY has served as a director of Recoton since 1990. Mr. Idy
has been a stockbroker and money manager at PaineWebber Inc. for more than
fifteen years and Senior Vice President of PaineWebber Inc. since 1989.

          RONALD E. MCPHERSON has served as a director of Recoton since 1969. He
was Secretary of Recoton from 1964 and a Vice President from 1978, until his
retirement in 1989.

          TERRENCE O'FLYNN has served as Senior Vice President-OEM Sales since
1996 and Executive Vice President-Sales & Marketing of the Recoton Accessories
Division since January 1999. He was Senior Vice President-Marketing from 1994
until 1996. Previously, Mr. O'Flynn was Director of Marketing of the Ladies
Professional Golf Association from 1993 to 1994, President and a member of the
Board of Directors of Mitsubishi Electronics America - Consumer Products Group
from 1990 to 1993 and, prior to 1990, Executive Vice President of Mitsubishi
Electronics America - Consumer Products Group.

          DENNIS P. WHERRY has served as Senior Vice President-Operations since
1993. He was Senior Vice President-Operations of Recoton's Calibron Division
from 1991 until 1993. Between 1989 and 1991, Mr. Wherry was an employee of the
Company responsible for Florida operations. Mr. Wherry was President of
Calibron, Inc. from 1985 until its assets were acquired by the Company in 1989.

          CRAIG W. DYKES has served as Vice President-Information Systems since
1991. He was Director of Information Systems from 1987 until 1989 and an
Assistant Vice President from 1989 until 1991.

          PETER M. ILDAU has served as Vice President-Corporate Communications
since 1993. He was Director of Marketing from 1990 until 1991 and Vice
President-Advertising between 1991 and 1993.

          ARNOLD KEZSBOM has served as Vice President-Financial Planning since
1995 (such position was made an executive office in June 1998) and a Vice
President of Recoton Canada Ltd. since 1994. He was Vice President, Sales and
Marketing of the Ambico and Discwasher Divisions from 1992 until 1995. Mr.
Kezsbom was Vice President/General Manager of Ambico, Inc. from 1991 until it
was acquired by Recoton in 1992.

          RICHARD D. MILLER has served as Vice President-Compliance since 1995.
He was Recoton's Compliance Officer from January 1995 until December 1995.
Previously, he was a Trade Specialist (April 1992-January 1995) and Import
Specialist (January 1989-April 1992) with the U.S. Customs Service.

ITEM 2.  PROPERTIES.

          Recoton considers its facilities to be modern, well maintained and
suitable for their present and intended purposes at the current level of
operations.

          CORPORATE OPERATIONS AND ACCESSORIES BUSINESS

          Recoton's principal executive office and the principal manufacturing,
assembling, packaging, product research and development, warehousing and
distribution operations for the accessories business are located in Lake Mary,
Florida, a suburb of Orlando. Operations at this facility include molding, hot
stamping and packaging. The Lake Mary complex, which is owned by the Company,
consists of two buildings totaling approximately 763,000 square feet, including
a recent warehouse addition of approximately 318,000 square feet, situated on
two nearby parcels totaling approximately 43 acres.

          RAC BUSINESS

          The home audio portion of RAC's business is based in several
contiguous leased buildings aggregating approximately 100,000 square feet in
Benecia, California, which includes office, sales, marketing, research and
development, manufacturing, assembly, warehouse and distribution facilities.
Operations conducted at this facility include the assembly of home speakers. The
leases run through December 31, 2002, with a five year renewal option, at an
aggregate annual rent of approximately $670,000, subject to annual adjustments.
The mobile audio portion of RAC's business is based in the Company's Lake Mary,
Florida facility.

          VIDEO AND COMPUTER GAME BUSINESS

          The administrative, sales, engineering and R&D operations for STD are
located in an approximately 15,800 square foot owned facility in the New
Territories of Hong Kong. The Company's rights on the underlying land runs
through June 2047; if the land grant is not renewed at that time, both the land
and the rights to owned space will revert to the government without any
compensation to the Company. The Company also leases two nearby facilities
aggregating approximately 9,800 square feet under short term leases with rent
aggregating approximately $99,000. The corporate office for InterAct is located
in leased facilities in Baltimore, Maryland. The Company does not anticipate any
difficulty obtaining renewals of these leases or additional nearby space if
necessary.

          The manufacturing facility for STD consists of numerous separate
contiguous or near-by facilities owned or leased by the Company, aggregating
approximately 556,000 square feet, located in Shenzhen, a special economic zone
of the Guanzdong Province of China near Hong Kong. The plant includes 26
production lines, plastics injection facilities and metal works. Video games and
computer accessories, as well as other Recoton products such as multimedia
speaker systems, universal remote controls, television antennas, CD and DVD
cleaners, are manufactured at this facility. In 1997, the facility was certified
as conforming to the requirements of ISO 9001 by the International Standards
Organization. The owned portion consists of five manufacturing floors in an
industrial building aggregating approximately 44,000 square feet. The Chinese
government has granted the Company the right to use the land on which the owned
facility is located until July 2025; if the land grant is not renewed, both the
land and the rights to owned space will revert to the government without any
compensation to the Company. The leased portion consists of additional
manufacturing and warehouse facilities aggregating approximately 385,000 square
feet. These leases are generally short term, and aggregate rentals for the
leased facilities total approximately $890,000 per year. The Company does not
anticipate any difficulty obtaining renewals of these leases or additional
nearby space if necessary.

          ADDITIONAL FACILITIES

          Recoton and its subsidiaries have additional leased facilities
elsewhere in the United States. These include corporate office, sales,
marketing, warehouse and/or research & development facilities in or near New
York, New York; Richmond, Virginia; Bentonville, Arkansas; Ft. Lauderdale,
Florida; Lake Mary, Florida; Clearwater, Florida; Des Plaines, Illinois;
Springfield, Missouri; Scottsdale, Arizona; Lake Tahoe, Nevada; Sparks, Nevada;
Benecia, California; Santa Clara, California; and San Diego, California.
Additional overseas facilities include office, sales, marketing, warehouse
and/or distribution facilities in Pickering, Ontario; Bolton, England; London,
England; Pulheim, Germany; Bologna, Italy; Milan, Italy; and Tokyo, Japan. If
the leases for these facilities could no longer be maintained, alternative
replacement facilities could be obtained without any material financial impact
on Recoton or the applicable subsidiary.

ITEM 3.  LEGAL PROCEEDINGS.

          The Company is the subject of an investigation being conducted by the
United States Customs Service and the United States Attorney's Office in
Orlando, Florida. In July 1994, agents of the United States Customs Service,
working with the United States Attorney's Office in Orlando, Florida, seized
property and business records from the Company's facility pursuant to a search
warrant. The investigation has focused on country of origin marking, duty
undervaluation, duty-free eligibility under the Caribbean Basin Initiative,
duties with respect to dies, molds and tooling used overseas, commissions paid
to agents, importation of merchandise subject to textile quota, other instances
of undervaluation and other miscellaneous matters, during the period 1989
through mid-1995. The Company has held extensive discussions with the U.S.
Customs Service and the U.S. Attorney's Office with a view towards reaching a
settlement of this matter. The Company expects to soon reach agreements with the
U.S. Attorney's Office and the U.S. Customs Service to settle all outstanding
criminal and civil matters involved in the investigation. The Company plans to
enter guilty pleas to a number of counts involving country of origin mismarking
and undervaluation of imports, which will be subject to judicial approval. The
Company is presently negotiating the precise terms of written agreements with
the government. While the Company is optimistic that this matter will be settled
shortly, there can be no assurance that the agreements will be finalized or
approved. The Company has recorded a one-time charge of $14.0 million for this
global settlement, which, together with related fees and costs of approximately
$1.0 million, has been reflected in its financial statements for the fourth
quarter of 1998. Neither the U.S. Attorney's Office nor the U.S. Customs Service
has been asked to approve the description of this matter.

          Although the Company is from time to time involved in ordinary routine
litigation incidental to its business, it is not presently a party to any other
legal proceedings which, if determined adverse to the Company would be expected,
either individually or in the aggregate, to have a material adverse affect on
the Company's business or financial condition.

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

          Not applicable.

<PAGE>

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 
MATTERS.

          The Company's common shares are traded on the Nasdaq Stock Market
National Market System under the symbol "RCOT." The following table sets forth
for the periods indicated the high and low sale prices of such shares as
reported on the Nasdaq Stock Market since January 1, 1997:

         QUARTER ENDED                             HIGH                 LOW

         1997
           March 31............................... $17.125             $13.125
           June 30................................. 14.25               11.00
           September 30............................ 16.50               11.50
           December 31............................. 15.375              12.50

         1998
           March 31................................ 27.50               13.125
           June 30................................. 36.25               23.00
           September 30............................ 39.438              16.625
           December 31............................. 24.00               13.50

         1999
           March 31 (through March 23, 1999)....... 21.75               12.00

          On March 23, 1999, the last reported sale price for the Company's
common shares on the Nasdaq Stock Market was $14.50 per share. As of March 23,
1999, there were 428 record holders of the common shares.

          DIVIDEND POLICY. The Company has never paid cash dividends on its
common shares and does not anticipate paying cash dividends on its common shares
in the foreseeable future. The Company's policy has been to retain all available
earnings for the development and growth of its business. Pursuant to covenants
in certain adjustable rate senior notes issued by Recoton, the Company may not
pay dividends in cash or property unless the aggregate of all dividends, plus
other restricted payments (as defined) and basket investments (as defined) does
not exceed $5 million plus 50% (or minus 100% in the case of a loss) of
consolidated net income for the period commencing on January 1, 1997 and ending
on and including the last day of the fiscal quarter of the Company most recently
ended as of the date such basket investment is made or such dividend or other
restricted payment is declared or made; and the Company is not in default under
such senior notes. In deciding whether to pay dividends in the future, the
Company's Board of Directors will consider factors it deems relevant, including
the Company's earnings and financial condition and its working capital and
capital expenditure requirements.

          SALES OF UNREGISTERED SECURITIES. There were no sales of unregistered
shares by the Company in 1998.

ITEM 6. SELECTED FINANCIAL DATA.

          The selected consolidated financial data presented below as of and for
each of the fiscal years in the five-year period ended December 31, 1998 are
derived from the consolidated financial statements of Recoton Corporation and
its subsidiaries, which financial statements have been audited by Cornick,
Garber & Sandler, LLP, independent public accountants, whose report relating to
the consolidated financial statements for the three years ended December 31,
1998 appears in this report. Due to the significant acquisition activity of the
Company during the periods set forth below, the selected financial data may not
be comparable from year to year. SEE FOOTNOTE (1) BELOW. The selected
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business--Acquisitions" and the consolidated financial statements, notes
thereto and other financial information included elsewhere in this report.
<TABLE>
<CAPTION>


                                                                                 Year Ended December 31,
                                                          ----------------------------------------------------------------------
                                                            1994             1995            1996           1997          1998
                                                                  (In Thousands, except income per share data)
<S>                                                        <C>               <C>             <C>            <C>            <C>     
Statement of Operations Data:(1)
Net sales.........................................         $163,973          $212,677        $331,700       $502,048       $700,408
Cost of sales.....................................         $ 97,317          $129,981        $206,715       $306,725       $429,334
Gross profit......................................         $ 66,656          $ 82,696        $124,985       $195,323       $271,074
Selling, general and
  administrative  expenses........................         $ 49,454          $ 62,747        $109,194       $175,873       $229,452
Provision for expected U.S. 
  customs settlement(2) ..........................         $      -          $      -        $      -       $      -       $ 15,000
Operating income..................................         $ 17,202          $ 19,949        $ 15,791       $ 19,450       $ 26,622
Interest expense..................................         $    608          $    793        $  4,946       $ 12,496       $ 17,920
Investment income.................................         $   (479)         $   (569)       $   (271)      $   (534)      $   (464)
Income before income taxes........................         $ 17,073          $ 19,725        $ 11,116       $  7,488       $  9,166
Income tax provision (credit).....................         $  5,269          $  4,672        $  2,736       $ (6,093)      $  4,836
Net income........................................         $ 11,804          $ 15,053        $  8,380       $ 13,581       $  4,330
Income per share(3)...............................         $   1.13          $   1.34        $    .73       $   1.18       $    .36
Weighted average shares (4).......................           10,421            11,255          11,542         11,546         12,179

BALANCE SHEET DATA (END OF PERIOD):
Working capital...................................                           $ 96,402        $158,807       $222,388       $178,295
                                                           $ 83,223
Total assets......................................         $118,764          $185,054        $334,733       $407,262       $486,670
Short-term debt, including current                                                         
  portion of long-term debt.......................         $    863          $ 18,307        $ 51,628       $ 14,570       $104,885
Long-term debt....................................         $  5,221          $ 20,511        $101,753       $161,427       $114,186
Shareholders' equity..............................         $ 96,634          $119,397        $128,474       $139,283       $147,995

 ---------------

 (1)    Data reflects sales, and any resulting profit and income, resulting from
        acquisitions from the dates of such acquisitions. The following
        acquisitions occurred on the dates set forth below: Infrared Research
        Laboratories, Inc.: January 11, 1994; Sound Quest, Inc.: September 16,
        1994; Ampco Industries, Inc.: February 27, 1995; STD Holding Limited:
        August 31, 1995; International Jensen Incorporated: August 28, 1996;
        Heco GmbH: December 20, 1996; Tambalan Limited: February 28, 1997; Capa
        Industries, Inc.: December 18, 1997; and AAMP of Florida, Inc.: November
        19, 1997.

 (2)    In the fourth quarter of 1998, the Company recorded $14.0 million for
        the expected global settlement of a pending customs investigation and
        related fees and costs of approximately $1.0 million. There can be no
        assurance that agreements to settle these matters will be finalized or
        approved. The classification of the accrual on the 1998 consolidated
        balance sheet is based on the expected periods of payment, subject to
        approval by the government. See Note O to the Notes to Consolidated 
        Financial Statements and Item 3, Legal Proceedings, for further 
        information.

 (3)    Represents income per share on a diluted basis. Basic income per share
        was $1.18, $1.39, $.74, $1.19 and $.37 for 1994, 1995, 1996, 1997 and
        1998 respectively. (4)


 (4)    As adjusted to give effect to share distributions effected in the form
        of stock dividends.

</TABLE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

          THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE
"SELECTED CONSOLIDATED FINANCIAL DATA" APPEARING ABOVE AND THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1997
AND 1998 APPEARING AT PAGES F-1 THROUGH F-32.

GENERAL

          Recoton Corporation (with its subsidiaries, Recoton or the Company) is
a global leader in the development, manufacturing and marketing of video and
computer game accessories, home and mobile accessories and other electronic
accessories for aftermarket use. Recoton's diverse accessory lines include
highly functional accessories for audio, video, car audio, camcorder,
multi-media/computer, home office, cellular and standard telephone, music and
video game products and 900 Megahertz (MHz) wireless technology headphones and
speakers. The Company's diverse product offerings are sold under various brand
names including: AAMP, ADVENT, AMBICO, AMPERSAND, AR/ACOUSTIC RESEARCH,
DISCWASHER, HECO, INTERACT, JENSEN, LINEAR RESEARCH, MACAUDIO, MAGNAT, NHT(NOW
HEAR THIS), NITRO, PARSEC, PERIPHERAL, PHASE LINEAR, RECOTON, REMBRANDT,
ROADGEAR, ROSS, SOLE CONTROL, SOUNDQUEST and STINGER.

          A significant part of Recoton's growth strategy has been to expand
through acquisitions. Prior to 1995, Recoton developed, manufactured and
marketed a broad range of consumer electronic accessories. In 1995 the Company
significantly expanded into the video and computer game accessory business with
the acquisition of STD Holdings Limited, a Hong Kong-based company, and the
business of its U.S. distribution arm now operating under the name InterAct
Accessories, Inc. In August 1996, Recoton acquired the branded products business
of International Jensen Incorporated (now known as Recoton Audio Corporation),
which allowed the Company to enter the market for loudspeakers and other audio
products for home and automotive aftermarket use as well as expand the Company's
foothold for growth worldwide.

          The Company classifies its business into three principal segments.
Each segment's earnings before corporate interest and income taxes are reported
to the Company's chief operating decision-makers. General corporate expenses
other than certain interest costs have been allocated to each segment on the
basis used for internal management decision making purposes.

          Listed below are the Company's three segments:

    o     VIDEO AND COMPUTER GAME BUSINESS: This segment consists of STD Holding
          Limited and its Hong Kong and other Chinese subsidiaries (STD),
          including its manufacturing operations producing video and computer
          game accessories, and InterAct Accessories, Inc. (InterAct), the
          Company's distributor of computer and video game accessories in the
          United States. Products sold under the INTERACT brand name include
          peripherals and other accessories to enhance the enjoyment of playing
          video and computer games, including joysticks, controllers, game
          steering wheels and other accessories as well as computer and
          multi-media accessories. The profit on products produced by STD for
          and sold by the Company's other business segments has been allocated
          to them. In fiscal 1998 approximately 35% of the Company's revenues
          were from sales of this segment.

     o    RECOTON AUDIO CORPORATION BUSINESS: This segment consists of Recoton
          Audio Corporation and its United States and European subsidiaries
          (RAC), which primarily sell home and mobile audio products. Home audio
          products are sold domestically under the ADVENT, AR/ACOUSTIC RESEARCH,
          JENSEN and NHT/(NOW HEAR THIS) brand names and in Europe, under the
          HECO and MAGNAT brand names. Home audio products include
          state-of-the-art designed high-fidelity, high-performance stereo and
          home theater loudspeaker systems. Audio products for the automobile
          and marine aftermarket, sold under the ADVENT, JENSEN, LINEAR
          RESEARCH, NITRO, PHASE LINEAR and ROADGEAR brand names in the United 
          States and the MAGNAT and MAC AUDIO brand names in Europe, include 
          speakers, subwoofers, amplifiers, cassette receivers, equalizers, 
          electronic crossovers, signal processors, CD players, CD changers and
          installation accessories. In fiscal 1998 approximately 33% of the
          Company's revenues were from sales of this segment.

     o    ACCESSORIES BUSINESS: This segment consists of Recoton Corporation;
          Christie Design Corporation, a research and development subsidiary;
          Recoton (Far East) Ltd., a Hong Kong distributor; AAMP of Florida,
          Inc., a distributor of car audio installation products; and Recoton
          Canada Limited, a Canadian distributor of all Recoton products.
          Products sold include indoor and outdoor television antennas, storage
          cases, headphones, remote controls, and other accessories for home and
          mobile audio, camcorder, cellular and standard telephone, music and
          video products and 900 MHz and other wireless technology products
          marketed under numerous brand names including AAMP, ADVENT, AMBICO,
          DISCWASHER, JENSEN, PARSEC, RECOTON, ROADGEAR, SOLE CONTROL,
          SOUNDQUEST and STINGER and, under licenses, SPRINT for telephone
          accessories and ROLLING STONE for music storage. In fiscal 1998,
          approximately 32% of the Company's revenues were from sales of this
          segment.

RESULTS OF OPERATIONS

          The following table sets forth the statement of operations data of the
Company expressed as a percentage of net sales for the periods indicated:

<TABLE>
<CAPTION>

                                                                            YEAR ENDED DECEMBER  31,         
                                                                1994       1995       1996      1997      1998
                                                                ----       ----       ----      ----      ----
<S>                                                            <C>        <C>         <C>       <C>       <C>   
Net sales...................................................   100.0%     100.0%     100.0%    100.0%    100.0%
Cost of sales...............................................     59.3       61.1       62.3      61.1      61.3
                                                                ----       ----       ----      ----      ----
Gross profit................................................    40.7       38.9       37.7      38.9      38.7
Selling, general and administrative expenses................    30.2       29.5       32.9      35.0      32.8
Provision for expected U.S. customs settlement..............                                               2.1
                                                                -----     -----       -----     ----      -----
Operating income............................................    10.5        9.4        4.8       3.9       3.8
Interest expense............................................     0.4        0.4        1.5       2.5       2.6
Investment income...........................................    (0.3)      (0.3)        -       (0.1)     (0.1)
                                                                -----      -----       ----    -------    -----
Income before income taxes..................................    10.4        9.3        3.3       1.5       1.3
Income tax provision (credit)...............................     3.2        2.2        0.8      (1.2)      0.7
                                                                -----      -----       -----   ------     ------
Net income..................................................     7.2 %      7.1%       2.5%      2.7%      0.6%
                                                                 ===        ===        ===       ===       ===
</TABLE>

          The following table presents certain operating segment information for
the indicated years ended December 31 (further described in Note P to the
Consolidated Financial Statements):
<TABLE>
<CAPTION>

                                                                         (IN MILLIONS)
                                              Video and Computer              RAC         Accessories
         1998                                   Game Business               Business        Business
                                              ------------------         -------------    ------------
 <S>                                               <C>                       <C>            <C>   
         Net sales...........................       $243.9                    $234.1         $222.4
         Gross profit........................        110.4                      73.9           86.8
         Income (loss) before
          income taxes, unallocated
          expenses and provision for
          expected U.S. customs settlement...         27.4                      (0.9)          14.3


                                               Video and Computer             RAC         Accessories
         1997                                     Game Business             Business        Business
                                               ------------------         ------------    ------------
         Net sales...........................       $126.3                    $182.0         $193.7
         Gross profit........................         64.5                      65.6           65.2
         Income (loss) before
            income taxes(1)..................          --                       --              --

                                              Video and Computer              RAC         Accessories
        1996                                      Game Business            Business(2)      Business
                                              -------------------         -------------   ------------
         Net sales...........................        $79.0                     $64.6         $188.1
         Gross profit........................         34.7                      21.1           69.2
         Income (loss) before
            income taxes(1)..................          --                       --              --

         -------------
         (1) It is not practicable to provide comparable data for 1996 and 1997
             because the Company did not maintain records of certain shared
             costs and expenses in prior years.

         (2) From date of acquisition on August 28, 1996.
</TABLE>

          The financial results of the reportable segments have been prepared
using a management approach, which is consistent with the basis and manner in
which Recoton management internally aggregates financial information for the
purposes of assisting in making internal operating decisions. In this regard,
certain corporate expenses were allocated among subsidiaries for decision-making
purposes which may be a less precise measure than would be required for
standalone financial information of an entity prepared in accordance with
generally accepted accounting principles.

COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997

          1998 was the most successful sales year in Recoton's history. Net
sales increased from 1997 by $198.4 million, or 39.5%, to $700.4 million. The
record sales performance achieved by Recoton in 1998 is primarily the result of
expanded retail distribution, innovative new product introductions across the
Company's group of brand names, a strong worldwide distribution system and
global market share increases for the Company's consumer electronics, video and
PC gaming products and mobile accessories and loudspeakers. Net sales for the
video and computer game business were $243.9 million in 1998, an increase of
93.1% compared to $126.3 million in 1997. This record sales performance is the
result of the Company's continued R&D commitment and aggressive sales and
marketing strategy. Net sales for the RAC business were $234.1 million in 1998
compared to $182.0 million in 1997, an increase of 28.6%, due mainly to enhanced
offerings and a dynamic sales and marketing program. Net sales in the Company's
accessories business increased by $28.6 million, or 14.8%, to $222.4 million.
This increase is attributable to both the inclusion of AAMP (acquired in
November 1997) and expanded retail distribution of the Company's products.

          Gross profit in 1998 increased $75.8 million to $271.1 million and
decreased as a percentage of net sales to 38.7% from 38.9% in 1997. The dollar
increase in gross profit was primarily reflective of strong growth in the sales
of video game, multimedia and mobile electronic products and the additional
sales due to the inclusion of AAMP. The slight decline in the gross profit
margin for the year was primarily attributable to sales mix and lower than
anticipated sales in home speaker products, resulting in higher factory overhead
per unit sold. In 1998, gross profit for the video and computer game business
increased $45.9 million to $110.4 million mainly due to the growth in sales of
video game and multimedia products, RAC business increased $8.3 million to $73.9
million primarily due to mobile accessories and speaker sales and the
accessories business increased $21.6 million to $86.8 million mainly due to the
inclusion of AAMP. As a percent of net sales, gross profit for the video game
and multimedia products decreased to 45.3% in 1998 from 51.1% in 1997 mainly due
to sales mix from the inclusion of PC products sourced by STD from outside
manufacturers, which sold at a lower margin than products manufactured by STD,
and competitive pricing pressures due to the mature nature of certain products.
RAC's gross margin decreased to 31.6% in 1998 compared to 36.0% in 1997 due
mainly to lower than anticipated gross profit margin in the domestic home
speaker products. Gross margin on the accessories business increased to 39.0% in
1998 compared to 33.7% in 1997 due primarily to the inclusion of AAMP sales for
the full year and the transfer of PC product sales to the video and computer
game business.

          Selling, general and administrative expenses increased in 1998 by
$53.6 million to $229.5 million, and decreased as a percentage of net sales from
35.0% in 1997 to 32.8% in 1998. The dollar increase was attributable to the
variable selling expenses relating to the increased sales volume. There were
also additional expenses for promotional activities and market development. The
percent decrease was attributable to fixed costs being absorbed by the higher
sales volume.

          As further described in Note O of the Notes to Consolidated Financial
Statements, the Company expects to soon reach agreements with the U.S.
Attorney's Office and U.S. Customs Service to settle all outstanding criminal
and civil matters involved in a pending customs investigation. The Company plans
to enter guilty pleas to a number of counts involving country of origin
mismarking and undervaluation of imports, which will be subject to judicial
approval. The Company is presently negotiating the precise terms of written
agreements with the government. While the Company is optimistic that this matter
will be settled shortly, there can be no assurance that the agreements will be
finalized or approved. The Company has recorded $14.0 million for this global
settlement, which together with related fees and costs of approximately $1.0
million, has been separately reflected in the 1998 consolidated statement of
operations. The classification of the accrual on the 1998 consolidated balance
sheet is based on the expected periods of payment, subject to approval by the
government.

          Interest expense (net of investment income) increased by $5.4 million
to $17.9 million in 1998. The increase was attributable to increased borrowings
(interest rates were approximately the same) to support the inventory buildup
required for anticipated record sales in the fourth quarter.

          Income before income taxes for 1998 was $9.2 million ($24.2 million
before the provision for the expected U.S. customs settlement), a 22.4% increase
over the $7.5 million reported in 1997. Net income for 1998 was $4.3 million
($19.1 million before the provision for the expected U.S. customs settlement), a
68.1% decrease over the $13.6 million in 1997. The results of operations for
1998 also include a charge of $881,000 related to a loan repayment extension in
the fourth quarter. In 1998, income before income taxes, unallocated expenses
and the expected U.S. customs settlement was $27.4 million for the video and
computer game business, $14.3 million for the accessories business and a loss of
$884,000 for the RAC business, which includes a loss before income taxes of the
U.S. home audio division of RAC of $8.7 million. The consolidation of the
domestic home audio business under the Recoton Home Audio subsidiary (RHA) and
the formation of the Recoton Mobile Electronics Division allowed this segment to
foster the profitable growth of the car stereo operations, as well as integrate
and reposition the home audio business to take advantage of the forthcoming
digital age. New management teams have been put in place, lead by talented
industry professionals, and investments are being made in RHA.

          In recent years, the Company's income taxes and effective consolidated
income tax rate have been materially affected by changes in the proportion of
domestic and foreign earnings. While earnings from operations in North America
and Western Europe are primarily taxed at or above United States income tax
rates, earnings from the Company's Asian operations are taxed at a current
maximum rate of 16.0% (16.5% in 1997). However, the actual tax rate from Asian
operations is dependent upon the proportion of earnings from mainland China,
which have been subject to a tax holiday. This tax rate is higher in 1998 than
in 1997 because of the expiration of one half of the tax holiday. Recoton's
Chinese subsidiary, being a production-oriented Foreign Investment Enterprise
located in a Special Economic Zone in China, was granted a five year tax holiday
beginning in 1996. This tax holiday allows for full exemption from Chinese
corporate tax for the 1996 and 1997 years, and a 50% exemption for the following
three years. The Company's 1998 pretax income of $9.2 million is comprised of a
combination of foreign earnings and domestic losses. In addition, since no
determination has been made as to what portion of the expected settlement with
the U.S. Customs Service might be deductible for income tax purposes, no
deduction has been made for this item in the computation of income taxes for
1998. This resulted in a net income tax expense of $4.8 million or 52.8% of
pretax income in 1998. In 1997, the Company reported an income tax credit of
$6.1 on pretax income of $7.5 million, primarily because the tax credits
attributable to domestic tax losses were at higher tax rates than the income tax
expense attributable to earnings at foreign subsidiaries. Also, in 1997 the
Company reported the benefit of a $1.3 million nonrecurring tax credit in
Germany relating to the Company's decision to declare dividends from that
subsidiary to its U.S. parent.

          In 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." This statement, effective
for fiscal years beginning after December 15, 1997, requires the Company to
report components of comprehensive income in a financial statement that is
displayed with the same prominence as other financial statements. Comprehensive
income is defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from non-owner
sources. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners. To date, the
Company's comprehensive income has been comprised of the Company's net income
and foreign currency translation adjustments (which adjustments were a positive
$2.2 million in 1998 and a negative $5.3 million in 1997) included in the
consolidated statements of stockholders' equity. As a result of significant
fluctuations in the value of the U.S. dollar in relation to currencies in
Western Europe for the years ended 1998 and 1997, and the related foreign
currency translation adjustments recorded by the Company, in addition to the
changes in net income, comprehensive income for the year ended December 31, 1998
was $6.5 million as compared to $8.3 million for the year ended December 31,
1997. (See Note A of the Notes to the Consolidated Financial Statements.)

          In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information." This statement, effective for financial statements for periods
beginning after December 15, 1997, requires that a public business enterprise
report financial and descriptive information about its reportable operating
segments. Generally, financial information is required to be reported on the
basis that is used internally for evaluating operating performance and deciding
how to allocate resources. The Company's reportable operating business segments
are described in Note P to the Notes to Consolidated Financial Statements

          In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires
capitalization of costs of software developed or purchased for internal use. The
Company elected early adoption of the SOP for 1998 which resulted in the
capitalization of software development costs of approximately $405,000. The
after tax effect on net income in 1998 was approximately $221,000 or $.02 per
diluted share.

          In 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," which establishes revised standards for
computing and presenting earnings per share ("EPS"). In accordance with this
standard, all prior period EPS data was restated. There was no material change
to EPS for the year ended December 31, 1997 as a result of the adoption of this
standard. For the year ended December 31, 1998, basic EPS was $.37/share and
diluted EPS was $.36/share based on average shares of 11,656,000 (basic) and
12,179,000 (diluted). In 1997, basic EPS for the year was $1.19/share and
diluted EPS was $1.18/share based on average shares of 11,414,000 (basic) and
11,546,000 (diluted).

COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996

          Net sales in 1997 increased from 1996 by $170.3 million or 51.4%, to
$502.0 million. The sales increase was primarily attributable to three factors.
The first factor is the inclusion of a full year's sales of the speaker and
related product lines of RAC acquired in late August 1996. The second factor is
growth in the video game and multi-media product lines. The video and multi-
media product lines contributed $126.3 million to gross sales in 1997 as
compared to $79.0 million in 1996. The third factor is the acquisitions of Heco
Audio Produkte GmbH, a German manufacturer and marketer of home loudspeakers
acquired in December 1996, and Tambalan Limited, an English seller of headphones
and other consumer products under the name ROSS in the United Kingdom and to
other European and Asian markets, acquired in February 1997, and AAMP of
America, Inc., a direct marketer of car audio installation products acquired in
November 1997. These increases were partially offset by slight declines in sales
of certain other accessory product lines. In 1997, net sales for the video and
computer game business increased by $47.3 million or 59.9%, to $126.3 million
due mainly to the increase in sales of the video and multi-media products, the
RAC business increased by $117.4 million to $182.0 million due to the inclusion
of a full year's sales of the speaker and related product lines of RAC, acquired
in late August 1996. The accessories business increased by $5.7 million or 3.0%,
to $193.7 million mainly due to the inclusion of sales from AAMP of America,
Inc. acquired in November 1997. These increases were partially offset by slight
declines in sales of certain other accessory product lines.

          Gross profit in 1997 increased $70.3 million to $195.3 million and
increased as a percentage of net sales to 38.9% from 37.7% in 1996. The dollar
increase resulted from increased sales, of which the RAC and video and computer
game businesses were the primary contributors. The increase in gross margin
percentage was attributable primarily to a higher margin product mix. In 1997,
gross margin for the video and computer business increased to 51.1% from 43.9%
in 1996 mainly due to a higher margin product mix on video game products. The
RAC business increased to 36.0% from 32.7% due primarily to certain cost of
goods and purchasing synergies. The accessories business decreased to 33.7% from
36.8% in 1996 due to the inclusion of PC products which sold at lower gross
margin; in 1998 such products were sold by the video and computer game business
segment.

          Selling, general and administrative expenses increased in 1997 by
$66.7 million to $175.9 million, and increased as a percentage of net sales from
32.9% to 35.0% in 1997. The primary portion of the dollar increase was
attributable to the inclusion of a full year of the RAC operations, acquired in
late August 1996, and the other 1996-1997 acquisitions. The percentage increase
was attributable to several factors, including increases in bad debt expense as
a result of the bankruptcy of three customers and increases in market
development expenses.

          Interest expense increased by $7.5 million to $12.5 million in 1997.
This was primarily attributable to the increased debt associated with the RAC
acquisition, which was carried for a full year in 1997 as compared to four
months in 1996. In addition, the Company incurred debt to finance the growth in
sales of the video and computer product lines.

          The Company's income taxes and effective consolidated income tax rate
were affected by changes in the proportion of domestic and foreign earnings and
losses. While earnings from North America and Western Europe were primarily
taxed at or above United States income tax rates, earnings from the Company's
Asian operations were taxed at a maximum rate of 16.5%. The actual tax rate from
Asian operations was dependent on the proportion of earnings from mainland
China. The Company's 1997 pretax income of $7.5 million was comprised of a
combination of foreign earnings and domestic losses. This resulted in a net
income tax credit of $6.1 million, primarily because the tax credits
attributable to domestic tax losses were at higher tax rates than the income tax
expense attributable to earnings at foreign subsidiaries. Also in 1997 the
Company recorded the benefit of a $1.3 million nonrecurring tax credit in
Germany relating to the Company's decision to declare dividends from that
subsidiary to its U.S. parent. Under German law, the German corporate income tax
rate can be reduced by approximately 15% when income is distributed instead of
being transferred to retained earnings. Recoton's decision to declare stock
dividends from its German subsidiary triggered Germany's ability to receive a
refund of taxes previously paid at the higher corporate tax rate. This compares
to 1996 pretax income of $11.1 million and corresponding income tax expense of
$2.7 million. 

          As restated in accordance with Statement of Financial Accounting
Standards No. 128, for 1997 basic EPS was $1.19/share and diluted EPS was
$1.18/share as compared with basic EPS of $0.74/share and diluted EPS of
$0.73/share for 1996. Outstanding shares in 1997 were 11,414,000 (basic) and
11,546,000 (diluted) as compared to 11,300,000 (basic) and 11,542,000 (diluted)
in 1996.

IMPACT OF INFLATION AND CHANGING PRICES

          The impact of inflation and changing prices on the Company's net sales
and revenues and on income from continuing operations in each of the 1996, 1997
and 1998 fiscal years has been negligible.

                         LIQUIDITY AND CAPITAL RESOURCES

          The Company's principal sources of funds have historically been, and
are expected to continue to be, cash flow from operations, borrowings under
credit facilities provided by banks in the United States and abroad and proceeds
from the sale of the Company's securities, including the private placement of
the Company's notes. At December 31, 1998, the Company had cash and cash
equivalents of $21.4 million compared with $17.2 million at December 31, 1997.

          At December 31, 1998, the Company had working capital of approximately
$178.3 million as compared to approximately $222.4 million at December 31, 1997.
The Company's ratio of current assets to current liabilities was 1.8 to 1 at
December 31, 1998 and 3.3 to 1 at December 31, 1997. The decreases in working
capital and the working capital ratio are primarily the result of the
classification of the loans under the Company's revolving line of credit, which
expires in December 1999, as a current liability at December 31, 1998. At
December 31, 1997, these loans were classified as a noncurrent liability as a
result of extension in their terms and the elimination of a provision for an
annual "clean up." Trade receivables increased $53.4 million to $183.2 million
at December 31, 1998 as compared to December 31, 1997 as a result of the
increase in the Company's sales volume. Inventories increased from December 31,
1997 levels by $18.9 million to $161.3 million at December 31, 1998. The
increase in the inventory levels was substantially attributable to the Company's
video and computer game and mobile electronics product lines. Accounts payable
and accrued expenses increased $24.4 million to $104.3 million at December 31,
1998. The increase is primarily attributable to increases in inventories and
certain accrued performance bonuses payable in March 1999, which bonuses were
classified as noncurrent liabilities at December 30, 1997.

          The Company currently has a multibank credit facility (the Credit
Facility), entered into in January 1997 and modified several times with the most
recent modification occurring on March 12, 1999. As of March 29, 1999 the
Company has a $86.5 million revolving credit facility through December 26, 1999,
reduced from $101.5 million, which was in effect on December 31, 1998. The
outstanding borrowings and letters of credit under the revolving facility were
approximately $93.2 million at December 31, 1998 as compared to $65.5 million at
December 31, 1997. The Company also has a $15.0 million term loan, repayable in
12 quarterly installments with the last installment due in May 2001 ($12.5
million balance as of December 31, 1998). The Credit Facility was modified in
March 1999 to accommodate the expected U.S. customs settlement. The revolving
credit loans and term loan bear interest at various rates depending on elections
made by the Company. The applicable rates include rates tied to the London Inter
Bank Offering Rate (LIBOR) and rates tied to the greater of the prime rate or a
federal funds-based rate. As of December 31, 1998 loans tied to the LIBOR rate
bore interest at approximately 9.32% to 9.38% per annum and loans tied to the
prime rate bore interest at approximately 8.25%. The majority of the Company's
borrowings under the revolver and the term loan are at the LIBOR-based rate.
There can be no assurance that the revolving credit facility will be extended or
replaced at the time of its expiration in December 1999.

          In January 1997, the Company issued $75 million in principal amount of
adjustable rate senior notes due January 6, 2007 (the 1997 Notes), which bear
interest at 8.75% per annum. The 1997 Notes require interest-only payments for
the first four years, then seven equal installments of principal on each
anniversary date, beginning January 2001. As noted below, the proceeds of the
1997 Notes were utilized to reduce borrowings under a previous version of the
Credit Facility. In September 1998, the Company issued an additional $25 million
in principal amount of 10-year senior notes due September 1, 2008 (the 1998
Notes), which bear interest at 8.52%, on terms substantially identical to the
Senior Notes. The 1998 Notes require interest-only payments for the first four
years, then seven equal installments of principal on each anniversary date,
beginning September 2002.

          In 1999, both note agreements were amended and the interest rates were
increased effective January 1, 1999 to 9.75% and 9.52% for the $75 million and
$25 million notes, respectively, subject to reduction to 9.25% on the $75
million notes and 9.02% on the $25 million note should the Company receive
certain stipulated minimum proceeds from the public sale of either or both of
its common shares or subordinated debt indentures.

          In February 1999, the Company issued $35 million in aggregate
principal amount of senior subordinated notes due February 4, 2004 (the 1999
Notes) and 310,000 common share purchase warrants. The proceeds were used to
reduce outstanding borrowings under the Company's revolving credit facility. The
1999 Notes are subject to required prepayment from the proceeds received by the
Company from the sale of either high yield indebtedness or common shares.
Interest is payable quarterly at 11.5% a year to November 4, 1999 increasing to
12.5% per annum on November 4, 1999 and by 0.50% per annum on each of the next
five interest payment dates. The common share purchase warrants are exercisable
at $18.26 a share and mature on February 4, 2004. The note agreements also
provide that if any of the notes are not repaid by May 4, 2001, the Company will
issue to the holders of the 1999 Notes additional common share purchase warrants
to purchase such number of shares as equals 310,000 multiplied by a fraction,
the numerator of which is the then-unpaid principal amount of notes and the
denominator of which is $35 million. The pricing of the additional warrants
would be based on market values for the Company's common shares at that time.

          At December 31, 1998 and at various times prior to such date, the
Company was not in compliance with certain financial covenants under the notes
and the Credit Facility. At such times both the note holders and bank lenders
either amended the covenants or waived the Company's non-compliance with such
covenants. At December 31, 1998, the Company was in compliance with the amended
covenants under the notes and the Credit Facility.

          The Company also has outstanding borrowings from one member of the
multibank credit lenders aggregating approximately $10.7 million at December 31,
1998, which are due at various times through July 2001. Covenants similar to
those applicable to the multibank credit facility apply to these loans. The
Company has granted two mortgages on Florida property which it owns to secure
repayment of $2.7 million of such indebtedness. Interest rates on such loans
range between 6.6% and 8.4%.

          Certain of the Company's foreign subsidiaries have lines of credit
aggregating $18.8 million with foreign banks, primarily for import facilities.
The banks have security interests to the extent of merchandise purchased under
these lines. Borrowings under these lines at December 31, 1998 aggregated
approximately $2.3 million. Outstanding letters of credit, which aggregated
approximately $11 million at December 31, 1998, reduce the amounts available
under the domestic and foreign lines.

          In August 1994, the Board of Directors authorized the repurchase by
the Company of up to 500,000 outstanding common shares. In 1995, 42,366 shares
were purchased for approximately $.7 million; no shares were repurchased
pursuant to such authorization in 1996,1997 or 1998. In June 1996, the Board of
Directors authorized, under certain circumstances, the purchase from time to
time of additional shares from certain officers. In July 1996, the Company
purchased 65,000 shares from an officer for approximately $1.2 million. Any
future repurchases may be limited by the terms of the Company's loan and note
purchase agreements.

          In August 1996, Recoton acquired the branded product lines of RAC, a
leading marketer of home and automotive loudspeakers and automotive electronics,
for a total cost of approximately $61.6 million. In connection with the
acquisition, Recoton assumed approximately $34.0 million in notes and loans
payable. In December 1996, the Company acquired selected assets of Heco GmbH and
Heco Electronics GmbH (both in Germany) for a cost of approximately $1.3
million. Heco is a leading brand of home speakers in Germany.

          In February 1997, Recoton acquired the outstanding stock of Recoton UK
(formally known as Tambalan Limited) at a cost of approximately $285,000 plus
closing costs and assumed certain outstanding debt of approximately $2.9
million. Recoton UK markets headphones and other consumer electronics products
in the United Kingdom and other European countries under the trade name ROSS and
has a branch operation in Hong Kong. In November 1997, the Company acquired AAMP
at a cost of approximately $2.4 million paid by the issuance of 169,706 common
shares. In conjunction with the acquisition, the Company assumed approximately
$4.5 million in debt, which was repaid in November 1997 from the proceeds of a
$5 million loan referred to below. AAMP is a leading car audio accessories
company based in Clearwater, Florida whose business includes the STINGER and
PERIPHERAL brands.

          In November 1997, the Company borrowed $5.0 million under a demand
note agreement to finance the acquisition of AAMP. The note was paid in January
1998. In May 1998, the Company borrowed an additional $10 million, under a
demand note agreement due no later than July 31, 1998, to provide additional
working capital. Such demand note was repaid with the proceeds of the increased
Credit Facility.

          In December 1997, the Company acquired, out of bankruptcy, selected
assets of Capa Industries, Inc. at a cost of approximately $1.1 million. The
acquisition provided expanded manufacturing and electronic engineering capacity
to enhance the home and car audio products line.

          In May 1998, the Company completed construction of an approximately
318,000 square foot expansion of its warehouse on its Lake Mary, Florida
property. The cost of the building construction was approximately $5.0 million.

          To date there has been limited exposure to loss due to foreign
currency risks in the Company's Asian subsidiaries, because the Hong Kong dollar
has been pegged to the U.S. dollar at an official exchange rate of HK $7.75 to
US $1.00. Additionally, in recent years there have been no material fluctuations
in the Hong Kong/Chinese exchange rates. Also, the Company maintains the
majority of its currency in Asia in U.S. dollar accounts. However, as a result
of on-going turmoil in the Asian currency markets, there can be no assurance
that these relationships will continue.

          The Company's operations, which are currently being transacted on a
global basis, are exposed to variations in foreign exchange rates. The Company's
shareholders' equity was increased by a foreign currency translation adjustment
of approximately $2.2 million for the year ended December 31, 1998. During the
year ended December 31, 1997, the Company's shareholders' equity was reduced by
a foreign currency translation adjustment of approximately $5.3 million, of
which approximately $3.2 million occurred in the first quarter of 1997. The
changes in the exchange rates of the German and Italian currencies, which were
the principal causes of the foreign translation adjustment, had no material
impact on the Company's results of operations.

          If there are any material adverse changes in the relationships between
the European and/or Canadian currencies with the United States dollar or if the
Hong Kong or Chinese currencies should no longer be tied to the U.S. dollar,
such changes could adversely affect the results of the Company's European,
Canadian and/or Asian operations included in the consolidated financial
statements and could cause further increases in the amount of foreign currency
translation adjustments which are charged directly to shareholder's' equity.

          The Company has leased expanded facilities for sales and warehousing
in Germany and the U.K. and is considering enlarging its manufacturing
facilities in Mainland China. In addition the Company is considering the
acquisition of additional computer hardware and software to be used both in the
United States and in its foreign locations. The Company will also continue to
evaluate possible acquisitions that may be attractive to the growth of the
Company.

                                    YEAR 2000

          The Company is in the process of analyzing and addressing what is
known as the year 2000 (or "Y2K") issue. Based on current information, the
Company believes that it will be year 2000 compliant in a timely manner and the
cost of achieving such compliance will not have a materially adverse effect on
the Company's results of operations or financial condition. As noted in the
following discussion, however, there are multiple variables in determining
whether full Y2K compliance can be achieved, many of which are dependent on
efforts of third parties.

BACKGROUND

          This issue has arisen because many existing computer programs use only
two digits instead of four (e.g., "98" instead of "1998") to identify a year in
the date field. This is a holdover from the days when businesses first started
using computers and electronic memory was limited and storage was expensive.
These programs were designed and developed without considering the impact of the
upcoming change in the century. Accordingly, some computers can not determine if
the reference to the year "02" means 2002 or 1902. The failure of such
applications or systems to properly recognize the dates beginning in the year
2000 could result in miscalculations or even system failures.

          The Company, through a team including its Vice President-Information
Systems and its Vice President-Compliance, is assessing its Y2K compliance
situation.

INTERNAL SYSTEMS

          The Company's Vice President-Information Systems has the
responsibility to have the Company's entire computer and computer-dependent
systems tested and, if necessary, modified or replaced to ensure Y2K compliance.
Based on its analysis to date, including tests run on the Company's backup
computer system and analysis of the in-place systems, the Company believes that
all of its domestic and substantially all of its foreign internal computer
systems (hardware, system software and applications software) and
computer-dependent systems, including technology embedded in the Company's
machinery and other equipment to the extent that it is date sensitive, are
currently Y2K compliant and that the foreign operations which are not currently
compliant will, through the replacement or modification of existing hardware and
software, be made compliant in a timely manner. This process was completed in
the first quarter of 1999. The Company has not retained any outside service
provider to conduct independent verification of the Company's compliance status
and does not at this time intend to hire any such service provider.

          The Company is currently in the process of contacting its key vendors
and service providers, as well as key customers, to ascertain their Y2K
compliance to the extent that their problems could affect the Company's internal
systems or other aspects of the Company's business. Inquiry letters have been
sent to all key United States vendors, service providers and customers and the
Company is in the process of sending similar letters to most key foreign
vendors, service providers and customers. Returns from such persons are being
received. The Company has not yet determined when it will have that process
completed. The Company at this time cannot make any prediction as to the degree
of compliance by such vendors and service providers or the consequence to the
Company of any noncompliance. Any serious Y2K problems which significant vendors
and service providers encounter could materially adversely impact the Company.
If significant customers (especially those which are ordering from the Company
electronically) have Y2K problems, that also could materially adversely impact
the Company by seriously impacting the level of their purchases from the Company
until such problems are resolved.

          While the Company believes that the efforts which it has taken and
plans to take should be sufficient to identify and correct any Y2K problems
before December 31, 1999, there can be no assurance that the Company will be
fully Y2K compliant in a timely manner.

FINANCIAL RAMIFICATIONS

          The expenses incurred to date to achieve year 2000 compliance have not
had a material impact on the Company's results of operations or financial
condition. Based on the Company's current status of internal Y2K compliance
review and other preliminary information, the Company does not anticipate that
any expenses yet to be incurred to achieve year 2000 compliance will have any
material impact on the Company's results of operations or financial condition or
that its business will be adversely affected by the Y2K issue in any material
respect. (The Company preliminarily estimates that the costs of achieving Y2K
compliance, including costs of personnel devoting significant effort on Y2K
matters, will be immaterial). The costs associated with any new computers or
computer programs, which are year 2000 compliant, have been and will be
capitalized and amortized over the computer's and/or software's expected useful
life. Any system modifications or maintenance costs necessary to make the
Company's existing computer programs Y2K compliant have been and will be
expensed as incurred.

          Achieving Y2K compliance, however, is dependent on multiple factors,
many of which are not within the Company's sole control. Accordingly, should one
or more of the internal systems of the Company or key customers or key vendors
exhibit significant Y2K problems, the Company's business and its results of
operations could be materially adversely affected.

          No information technology projects have been deferred due to Y2K
efforts.

RISKS

          Until it has completed its Y2K assessment, and attempted to fix any
problems which such assessment may disclose, the Company can not be in a
position to determine what would be its most reasonably likely worst case Y2K
scenario or any plan for handling such scenario. The Company has not devised any
back-up plans should it suffer any internal Y2K problems or should any of its
vendors' or customers' Y2K problems affect the Company. After completion of its
Y2K assessment, including review of queries sent to such vendors and customers,
the Company will assess the need for any contingency plans.

          The failure to correct a material Y2K problem could result in an
interruption of, or inability to perform on a timely fashion, a necessary
business activity or operation. Such failures could materially adversely affect
the Company's results of operations, liquidity and/or financial condition.
Because of the general uncertainty which companies face regarding the year 2000
issue, in part due to the fact that actions of third-parties could affect the
Company's compliance, it is not possible to determine at this time whether any
actual failures will have any material adverse impact on the Company.

   IMPLICATIONS TO THE COMPANY FROM THE ADOPTION OF A EUROPEAN COMMON CURRENCY

          The Company has extensive operations in certain European countries,
including Germany, Italy and the United Kingdom. It also sells to additional
countries in Europe. For the most recently competed fiscal year, approximately
15% of the Company's net sales were in Europe. With the exception of the United
Kingdom, all of the countries in which the Company has operations have confirmed
their participation in a new 11-country European common currency, the Euro. The
adoption of such common currency is being phased in over a three-year period,
which started in January 1999. During such phase-in period, both the Euro and
the historical currency of a country will be valid, although new
Euro-denominated currency will not be issued until 2002. Each member-country
will decide when its legacy currency will cease to be legal tender, which will
occur during the period January 1 through June 30, 2002. Until the introduction
of Euro-denominated currency, the paying party will have the option to decide
whether to pay in the legacy currency or in Euro converted to the legacy
currency.

          Among other possible economic implications, it is expected that the
adoption of such common currency will lead to greater price transparency and
thereby increased competition within such common currency zone. For instance,
with a single currency applicable to the entire region, consumers may be able to
more easily discern any material price differences for the Company's products
between different countries and modify their buying practices accordingly. This
may require adjustments in the Company's marketing and pricing strategies.
Whether any such price differentials will lead to significant changes in
purchasing practices by the Company's customers depends on factors such as
convenience and language-related matters as well as other factors which may
determine where a consumer will purchase products. The Company is not able at
this time to gauge whether the likelihood of increased competition arising from
the introduction of the Euro would have any significant long-term adverse impact
on the pricing for the Company's products.

          The adoption of a common currency may require a significant
modification to the Company's accounting systems. Among other things, it will be
necessary to operate in each country with dual currencies until the three-year
phase-in period has passed. Management believes, however, that any necessary
changes can be rapidly and inexpensively implemented using "off-the-shelf"
systems if the Company's internal systems are not sufficient.

          The Company does not believe that the adoption of a common currency
will give any parties to material contracts with the Company the right to
terminate or modify such contracts on the grounds of "frustration,"
"impossibility" or "impracticability".

          Other risks associated with such currency conversion include possible
currency exchange and tax risks, neither of which the Company believes will have
a significant affect.

          While the Company does not at this time anticipate that the adoption
of the Euro and any resulting changes in European economic and market conditions
will have any material adverse impact on the Company or its European business,
its analysis of this issue has only commenced recently and the Company has not
yet fully evaluated the implications of the Euro's adoption. The Company has not
adopted, nor is at this time contemplating the adoption of, any contingency
plans regarding this issue.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

          All of the Company's borrowings are denominated in U.S. dollars, its
functional currency. A substantial portion (over 90%) of the Company's
borrowings bear fixed interest rates. However, borrowings under the revolving
credit portion of the Credit Facility are made at rates in effect when the loans
are made and remain in effect until they are "rolled-over " (typically 30 to 60
days later), unless the Company has elected to borrow at the prime rate or other
floating interest rate under one of several interest rate options available to
it when each loan is made. A $15.0 million term loan ($12.5 million balance as
of December 31, 1998), which is due in installments through May 2001, bears
interest which varies on a quarterly basis with changes in the Company's
financial ratios and changes in LIBOR or rates which are tied to the greater of
prime or a Federal Funds based rate (as defined).

          The Company and certain of its subsidiaries have intercompany loans
which are not denominated in their home country currency, which exposes the
Company to exchange rate fluctuations. The Company has not entered into any
foreign currency or derivative contracts to hedge these potential exchange
adjustments, which are initially recorded as cumulative foreign currency
translation adjustments (a component of shareholders' equity and total
comprehensive income), but will ultimately be reflected in operations when the
debt is repaid. Exclusive of intercompany receivables and payables for current
transactions, the principal outstanding exposure at December 31, 1998 (expressed
in U.S. dollars at current exchange rates) for foreign currency loans made by
the Company and its subsidiaries to other subsidiaries in Germany and Italy is
$35.3 million. These loans have no fixed due dates.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

(a)(1)            INDEX TO FINANCIAL STATEMENTS
                                                                      PAGE

                  Independent Auditors' Report                         F-1

                  Recoton Corporation and Subsidiaries --

                    Consolidated Balance Sheets as
                    at December 31, 1997 and 1998                      F-2

                    Consolidated Statements of Operations for
                    the years ended December 31, 1996, 1997
                    and 1998                                           F-3

                    Consolidated Statements of Shareholders'
                    Equity for the years ended December 31, 1996,
                    1997 and 1998                                    F-4 to F-6

                    Consolidated Statements of Cash Flows for
                    the years ended December 31, 1996, 1997
                    and 1998                                         F-7 to F-8

                    Notes to Financial Statements                    F-9 to F-32

(a)(2)            INDEX TO FINANCIAL STATEMENT SCHEDULE

                    Independent Auditor's Report on
                    Supplemental Schedule                              F-33

                    Recoton Corporation and Subsidiaries --

                           Schedule II   -- Valuation and
                               Qualifying Accounts                     F-34

          Other financial statement schedules have not been filed because the
conditions requiring the filing do not exist or the required information is
provided in the consolidated financial statements, including the notes thereto.

          The individual financial statements of the Company have been omitted
because the requirements for omission have been met.

                          INDEPENDENT AUDITORS' REPORT

BOARD OF DIRECTORS
RECOTON CORPORATION

          We have audited the accompanying consolidated balance sheets of
RECOTON CORPORATION AND SUBSIDIARIES as at December 31, 1997 and 1998 and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

          In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Recoton
Corporation and Subsidiaries as at December 31, 1997 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.


                                     /S/ CORNICK, GARBER & SANDLER,  LLP
                                         CERTIFIED PUBLIC ACCOUNTANTS

NEW YORK, NEW YORK
FEBRUARY 26, 1999

<PAGE>
<TABLE>
<CAPTION>

                      RECOTON CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                         (TABULAR AMOUNTS IN THOUSANDS)

                                                                                          ASSETS AS AT DECEMBER 31,
                                                                                           1997              1998     
CURRENT ASSETS:                                                                          ---------        --------- 
<S>                                                                                      <C>               <C>     
   Cash and cash equivalents                                                             $  17,247         $ 21,385
   Accounts receivable (less allowance for doubtful accounts
      of $3,797,000 in 1997 and $4,940,000 in 1998)                                        129,852          183,230
   Inventories                                                                             142,362          161,294
   Prepaid, refundable and deferred income taxes                                            18,220           12,931
   Prepaid expenses and other current assets                                                 9,484           12,629
                                                                                         ---------        ---------
                  TOTAL CURRENT ASSETS                                                     317,165          391,469

PROPERTY AND EQUIPMENT (at cost, less accumulated
   depreciation and amortization)                                                           36,184           40,693
TRADEMARKS AND PATENTS (less accumulated amortization)                                       5,126            4,777
GOODWILL (less accumulated amortization)                                                    38,554           37,233
DEFERRED INCOME TAXES                                                                        6,724            8,070
OTHER ASSETS                                                                                 3,509            4,428
                                                                                         ---------        ---------
                  T O T A L                                                               $407,262         $486,670
                                                                                         =========         ========
                             LIABILITIES

CURRENT LIABILITIES:
   Bank loans and drafts payable                                                          $  5,000         $ 95,526
   Current portion of long-term debt                                                         9,570            9,359
   Accounts payable                                                                         53,231           63,848
   Accrued expenses                                                                         26,588           40,418
   Income taxes payable                                                                        388            4,023
                                                                                          --------         --------

                  TOTAL CURRENT LIABILITIES                                                 94,777          213,174

LONG-TERM DEBT (less current portion above)                                                161,427          114,186
OTHER NONCURRENT LIABILITIES                                                                11,775           11,315
                                                                                           -------         ---------
                  TOTAL LIABILITIES                                                        267,979          338,675
                                                                                          --------         ---------
COMMITMENTS AND CONTINGENCIES (Notes B, N and 0)

                                     SHAREHOLDERS' EQUITY

PREFERRED SHARES - $1.00 par value each - authorized
   10,000,000 shares; none issued                                                             --               --
COMMON SHARES - $.20 par value each - authorized
   40,000,000 shares; issued 12,797,601 shares in
   1997 and 12,933,704 shares in 1998                                                        2,560            2,587
ADDITIONAL PAID-IN CAPITAL                                                                  78,376           80,867
RETAINED EARNINGS                                                                           70,758           75,088
ACCUMULATED OTHER COMPREHENSIVE INCOME                                                      (6,295)          (4,090)
                                                                                          --------         --------- 
                  TOTAL                                                                    145,399          154,452

TREASURY SHARES - 1,225,167 shares in 1997 and
   1,235,367 shares in 1998, at cost                                                        (6,116)          (6,457)
                                                                                           -------          --------
                  TOTAL SHAREHOLDERS' EQUITY                                               139,283          147,995
                                                                                          --------        ---------
                  T O T A L                                                               $407,262         $486,670
                                                                                          ========         ========

            The notes to financial statements are made a part hereof.
</TABLE>

<PAGE>

                      RECOTON CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (IN THOUSANDS, EXCEPT INCOME PER SHARE DATA)

<TABLE>
                                                                                  YEAR ENDED DECEMBER 31,          
                                                                          1996             1997            1998    
                                                                       -----------     -----------        ---------
<S>                                                                    <C>             <C>                 <C>     
NET SALES                                                                 $331,700        $502,048         $700,408

COST OF SALES                                                              206,715         306,725          429,334
                                                                       -----------     -----------      -----------

GROSS PROFIT                                                               124,985         195,323          271,074
                                                                       -----------     -----------      -----------

SELLING, GENERAL AND ADMINISTRATIVE
   EXPENSES                                                                109,194         175,873          229,452
INTEREST EXPENSE                                                             4,946          12,496           17,920
INVESTMENT INCOME                                                             (271)           (534)            (464)
PROVISION FOR EXPECTED U.S. CUSTOMS
    SETTLEMENT (Note O)                                                                                      15,000
                                                                       -----------     -----------      -----------
         T O T A L                                                         113,869         187,835          261,908
                                                                       -----------     -----------      -----------

INCOME BEFORE INCOME TAXES                                                  11,116           7,488            9,166
INCOME TAX PROVISION (CREDIT)                                                2,736          (6,093)           4,836
                                                                       -----------     -----------      -----------

NET INCOME                                                                $  8,380        $ 13,581          $ 4,330
                                                                       ===========      ===========      ==========
INCOME PER SHARE:
   BASIC                                                                      $.74          $1.19              $.37
                                                                              ====          =====              ====
   DILUTED                                                                    $.73          $1.18              $.36
                                                                              ====          =====              ====

NUMBER OF SHARES USED IN COMPUTING
PER SHARE AMOUNTS:
   BASIC                                                                    11,300         11,414            11,656
                                                                            ======         ======            ======
   DILUTED                                                                  11,542         11,546            12,179
                                                                            ======          ======           ======


            The notes to financial statements are made a part hereof.
</TABLE>
<PAGE>

                      RECOTON CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
              (TABULAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>

                                                                                
                                                                                ACCUMULATED
                                                                                  OTHER                                  
                                       COMMON STOCK       ADDITIONAL              COMPRE-     TREASURY STOCK             TOTAL
                                  ---------------------    PAID-IN     RETAINED   HENSIVE   -------------------       SHAREHOLDERS'
                                     SHARES     AMOUNT     CAPITAL     EARNINGS   INCOME     SHARES     AMOUNT           EQUITY
                                  ----------   --------    --------    --------   --------  ---------  --------         ----------
<S>                               <C>          <C>         <C>         <C>        <C>       <C>        <C>               <C>     
BALANCE - JANUARY 1, 1996         12,296,160   $  2,459    $72,926     $48,797    $ (300)   1,132,770  $(4,485)          $119,397
                                                                                                                         --------
COMPREHENSIVE INCOME:
    Net income                                                           8,380                                              8,380
    Foreign currency translation
      adjustments (net of income
      taxes)                                                                        (721)                                    (721)
                                                                                                                        ---------- 

TOTAL COMPREHENSIVE INCOME                                                                                                  7,659
                                                                                                                         ---------
EXERCISE OF STOCK OPTIONS            301,822         61      2,987                             27,297     (476)             2,572
REPURCHASES OF STOCK                                                                           65,000   (1,154)            (1,154)
                                --------------  ---------  ---------- ----------- --------- ---------- ----------      ---------- 

BALANCE - DECEMBER 31, 1996       12,597,982      2,520     75,913      57,177    (1,021)   1,225,067   (6,115)           128,474
                                --------------  ---------  ---------- ----------- -------   ---------- ----------      ----------

COMPREHENSIVE INCOME:
    Net income                                              13,581                                                         13,581
    Foreign currency translation
      adjustments (net of income
      taxes)                                                                      (5,274)                                  (5,274)
                                                                                                                          ----------

TOTAL COMPREHENSIVE INCOME                                                                                                  8,307
                                                                                                                          ----------
EXERCISE OF STOCK OPTIONS             24,602          5        126                                                            131
REPURCHASES OF STOCK                                                                              100       (1)                (1)
STOCK ISSUED AS PAYMENT OF BONUS       5,311          1         80                                                             81
STOCK ISSUED FOR ACQUISITION
   OF AAMP OF FLORIDA, INC.          169,706         34      2,257                                                          2,291
                                   -----------    -------   --------  ----------- -------  -----------  ---------        ----------
BALANCE - DECEMBER 31, 1997       12,797,601      2,560     78,376      70,758    (6,295)   1,225,167   (6,116)           139,283
                                  -----------     -------   -------   ----------- -------  -----------  ---------        ----------
                                                                                                                           --------
COMPREHENSIVE INCOME:
  Net income                                                 4,330                                                          4,330
  Foreign currency translation
    adjustments (net of income
    taxes)                                                                         2,205                                    2,205
                                                                                                                           --------
TOTAL COMPREHENSIVE INCOME                                                                                                  6,535
                                                                                                                           ---------
EXERCISE OF STOCK OPTIONS            136,103         27      2,312                              6,000     (213)             2,126
REPURCHASES OF STOCK                                                                            4,200     (128)              (128)
ISSUANCE OF STOCK OPTIONS AT LESS
   THAN FAIR MARKET VALUE                                      179                                                            179
                                 ------------  ----------- ---------  ---------  --------   ---------  ---------         ----------
BALANCE - DECEMBER 31, 1998       12,933,704     $2,587    $80,867     $75,088   $(4,090)   1,235,367  $(6,457)          $147,995
                                 ============  =========== =========  ========== ========   =========  =========         ==========

             The notes to financial statements are made part hereof.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                      RECOTON CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (TABULAR AMOUNTS IN THOUSANDS)

                                                                                    YEAR ENDED DECEMBER 31,        
INCREASE (DECREASE) IN CASH AND                                               1996           1997          1998    
  CASH EQUIVALENTS                                                        -----------    -----------    -----------
    
<S>                                                                        <C>             <C>            <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                              $    8,380      $  13,581      $   4,330
                                                                           ----------      ---------      ---------
   Adjustments to reconcile results of operations to net cash provided by
   operating activities:
      Depreciation                                                              5,194          7,953          9,122
      Amortization of intangibles                                               3,045          3,002          3,141
      Provision for losses on accounts receivable                               1,259          4,932          2,743
      Deferred income taxes                                                      (312)        (2,578)           833 
      Expense applicable to stock options granted at
         prices less than fair market value                                                                      55
      Change in asset and liability accounts (net
      of effects of acquisitions):
         Accounts receivable                                                  (12,210)       (34,339)       (54,446)
         Inventory                                                             (6,039)       (33,812)       (18,015)
         Prepaid and refundable income taxes                                   (1,242)        (6,061)         3,595
         Prepaid expenses and other current assets                              3,305           (588)        (2,862)
         Other assets                                                            (347)          (625)        (1,296)
         Accounts payable and accrued expenses                                    586         28,890         14,369
         Income taxes payable                                                  (2,124)          (911)         2,012
         Other noncurrent liabilities                                           1,751          7,987          9,038
                                                                          -----------    -----------      ---------
               TOTAL ADJUSTMENTS                                               (7,134)       (26,150)       (31,711)
                                                                          -----------     ----------       -------- 
               NET CASH PROVIDED BY (USED FOR)
                  OPERATING ACTIVITIES                                          1,246        (12,569)       (27,381)
                                                                          -----------     ----------       -------- 

CASH FLOWS FROM INVESTING ACTIVITIES:
   Payments for acquisitions of businesses (net of
      cash acquired of approximately $3,014,000 in
      1996 and $932,000 in 1997)                                              (55,909)          (755)
   Expenditures for trademarks, patents and
      intellectual property                                                      (195)          (216)          (196)
   Expenditures for property and equipment                                     (7,383)       (12,937)       (13,566)
                                                                          -----------      ---------       -------- 

               NET CASH USED FOR INVESTING ACTIVITIES                         (63,487)       (13,908)       (13,762)
                                                                           ----------      ---------       -------- 

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net borrowings (repayments) under credit
      agreements and other bank debt                                         $(10,368)     $  29,639       $ 27,526
   Net proceeds from (repayments of) bridge loans                             129,364        (75,000)
   Net proceeds from sale of senior notes                                                     75,000         25,000
   Repayment of bank loans assumed upon
      acquisitions of businesses                                              (36,173)        (7,336)
   Repayment of long-term bank borrowings                                      (5,206)        (7,456)        (9,438)
   Proceeds from exercise of stock options                                      1,387             39          1,639
   Purchases of treasury stock                                                 (1,154)            (1)          (128)
   Income tax benefit applicable to exercise
      of stock options                                                          1,185             92            487
                                                                            ---------      ---------        -------

           NET CASH PROVIDED BY FINANCING ACTIVITIES                           79,035         14,977         45,086
                                                                            ---------      ---------        -------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES
   ON CASH OF FOREIGN SUBSIDIARIES                                                (57)          (383)           195
                                                                            ---------      ---------        -------
NET INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS                                                           16,737        (11,883)         4,138

CASH AND CASH EQUIVALENTS - JANUARY 1                                          12,393         29,130         17,247
                                                                            ---------      ---------        -------
CASH AND CASH EQUIVALENTS -
    DECEMBER 31                                                             $  29,130       $ 17,247       $ 21,385
                                                                            =========       ========       ========
SUPPLEMENTAL DISCLOSURES:
   Interest paid                                                            $   4,451       $ 10,913       $ 17,995
                                                                            =========       ========       ========

   Net income taxes paid (refunded)                                         $   5,686       $  1,513       $ (2,512)
                                                                            =========      =========       ========

            The notes to financial statements are made a part hereof.
</TABLE>

<PAGE>

                      RECOTON CORPORATION AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

          PRINCIPLES OF CONSOLIDATION:

          The consolidated financial statements include the accounts of Recoton
          Corporation (Company) and its subsidiaries, which are wholly-owned.
          All material intercompany accounts and transactions have been
          eliminated in consolidation.

          USE OF ESTIMATES:

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

          TRANSLATION OF FOREIGN SUBSIDIARY FINANCIAL STATEMENTS:

          The assets and liabilities of the Company's foreign subsidiaries are
          translated into United States dollars at year end rates of exchange.
          Operating accounts are translated at average rates of exchange during
          the year. Gains and losses on translation are reflected as a separate
          component (accumulated other comprehensive income) of stockholders'
          equity on the consolidated balance sheet. Also included in accumulated
          other comprehensive income are the effects of exchange rate changes on
          certain intercompany balances with foreign subsidiaries which are not
          intended to be settled on a current basis.

          CASH AND CASH EQUIVALENTS:

          Cash equivalents on the balance sheet and statement of cash flows are
          comprised of certificates of deposit with a maturity of three months
          or less. Due to the nature and size of the Company and the volume of
          its transactions, it maintains certain domestic cash accounts in
          excess of FDIC insured limits and cash accounts in foreign banks which
          are not insured by the FDIC.

          FAIR VALUE OF FINANCIAL INSTRUMENTS:

          In management's opinion, the carrying value at December 31, 1998 and
          December 31, 1997 of the Company's financial instruments approximates
          their fair values because they either have short maturities, bear
          variable interest rates or for the majority of long- term debt, there
          has been no significant changes in the market rates for such debt
          since it was incurred.

          INVENTORIES:

          Inventories are stated at the lower of cost (first-in, first-out
          method) or market, representing estimated net realizable value.

          DEPRECIATION OF PROPERTY AND EQUIPMENT:

          For financial accounting purposes, depreciation is computed over the
          estimated useful lives of the assets on the straight-line method. For
          income tax purposes, accelerated depreciation methods are utilized for
          certain assets.

          AMORTIZATION OF TRADEMARKS AND PATENTS:

          Trademarks are being amortized over terms of 5 to 40 years. Patents
          are being amortized over the terms of the related patent, or a shorter
          period, based on the estimated commercial life of the related product.

          GOODWILL:

          Goodwill, representing the excess of the purchase price over the fair
          value of the net identifiable assets acquired in business combinations
          treated as purchases, is being charged to operations on a
          straight-line basis over periods of 15 to 30 years. At each balance
          sheet date, the Company reviews for impairment the unamortized
          goodwill balance from each of its acquisitions. If it appears that
          there has been a change in events or circumstances which indicates
          that the unamortized balance may not be fully recoverable, an
          evaluation is made using undiscounted estimated future cash flows and
          estimated current values of the acquired businesses or related assets,
          as appropriate.

          INCOME PER SHARE:

          Basic income per share is computed by dividing the net income by the
          weighted average common shares outstanding for the period, without
          regard to outstanding stock options, warrants or other potentially
          dilutive securities or contingent stock issuances. Diluted earnings
          per share reflects the dilution that would have occurred if potential
          dilutive securities were exercised (after application of the treasury
          stock method) and contingent stock issuances were made.

             A reconciliation of the number of shares used in computing the per
          share amounts is as follows:

                                                      (IN THOUSANDS)
                                                 YEAR ENDED DECEMBER 31,
                                              ------------------------------
                                              1996         1997        1998  
                                             ------       ------      ------
           Weighted average common shares
              outstanding                    11,300       11,414      11,656
           Dilutive effect of stock options     242          132         523
                                             ------       ------     ------- 

           Adjusted common shares used for
              dilutive computation           11,542       11,546      12,179
                                             ======       ======      ======

          The above excludes outstanding options to purchase approximately
          406,000 shares in 1996, 565,000 shares in 1997 and 8,000 shares in
          1998 because these options are considered anti-dilutive based on the
          relationship of their exercise price to the average market prices of
          the Company's common shares.

          COMPREHENSIVE INCOME:

          In 1998, the Company adopted Statement of Financial Accounting
          Standards No. 130, "Reporting Comprehensive Income" and has elected to
          report the components of comprehensive income and total comprehensive
          income in the consolidated statements of shareholders' equity.
          Comprehensive income is defined as the change in equity of a business
          enterprise during a period from transactions and other events and
          circumstances from nonowner sources. It includes all changes in equity
          during a period except those resulting from investments by owners and
          distributions to owners. To date, the Company's comprehensive income
          has been comprised of the Company's net income and foreign currency
          translation adjustments included in the consolidated statements of
          shareholders' equity.

          The (charges) credits to comprehensive income for foreign currency
          translation adjustments and the related tax effects are as follows:

                                                      (IN THOUSANDS)
                                                 YEAR ENDED DECEMBER 31,
                                               -----------------------------
                                               1996         1997        1998  
          Foreign currency translation         -----       -----      ------
           adjustments                        $(807)     $(5,692)     $2,081
          Income tax effect                      86          418         124
                                              ------     --------     ------

          Other comprehensive income (loss)   $(721)     $(5,274)     $2,205
                                              ======     =======      ======

          OTHER RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

          In March 1998, the American Institute of Certified Public Accountants
          issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
          of Computer Software Developed or Obtained for Internal Use." SOP 98-1
          requires capitalization of costs of software developed or purchased
          for internal use. The Company elected early adoption of the SOP for
          1998 which resulted in the capitalization of software development
          costs of approximately $405,000. The after tax effect on net income in
          1998 was approximately $221,000 or $.02 per dilutive share.

          In June 1997, the FASB issued Statement of Financial Accounting
          Standards No. 131, "Disclosures about Segments of an Enterprise and
          Related Information." This statement, effective for financial
          statements for periods beginning after December 15, 1997, requires
          that a public business enterprise report financial and descriptive
          information about its reportable operating segments. Generally,
          financial information is required to be reported on the basis that is
          used internally for evaluating operating performance and deciding how
          to allocate resources. The Company's reportable operating business
          segments are described in Note P.

NOTE B -  ACQUISITIONS:

          The results of operations of the following acquisitions of businesses
          during the three years ended December 31, 1998 are included in the
          attached consolidated statements of operations from their respective
          dates of acquisition.

          On August 28, 1996, the Company acquired for cash, in a purchase
          transaction, all of the outstanding stock of International Jensen
          Incorporated ("Jensen"). The total purchase price, including closing
          costs and estimated income tax liabilities and relocation, severance
          and other costs to eliminate duplicate facilities and consolidate
          certain of Jensen's operations into the Company's Lake Mary, Florida
          facilities, was approximately $61.6 million of which approximately
          $60.2 million was recorded in 1996 and $1.4 million was recorded in
          1997. The $17.8 million excess of the total cost of the Jensen
          purchase over the fair market value of the net identifiable assets
          acquired has been recorded as goodwill, which is being amortized to
          operations over 30 years.

          In December 1996, the Company acquired for approximately $1.3 million
          the Heco brand of home speakers in Germany through a purchase of
          selected assets from the receiver in bankruptcy of Heco GmbH.

          In February 1997, the Company acquired, in a purchase transaction, the
          outstanding stock of Tambalan Limited (Tambalan) at a cost of
          approximately $285,000, plus closing costs and the assumption of
          certain outstanding bank and other loans of approximately $2.9
          million. Tambalan sells headphones and other consumer products in the
          United Kingdom and other European countries trading under the name
          Ross Consumer Products. It also has branch operations in Hong Kong.

          In November 1997, the Company acquired, in a purchase transaction, the
          outstanding stock of AAMP of Florida, Inc.("AAMP"), a manufacturer and
          marketer of automotive audio accessories. The purchase price was
          approximately $2.4 million, which included the issuance of 169,706
          shares of the Company's common shares, with a market value of
          approximately $2.3 million. Goodwill of approximately $4.1 million,
          comprised of the purchase price and the excess of liabilities assumed
          over the fair value of assets acquired, is being amortized to
          operations over 15 years.

          In December 1997, the Company acquired, for approximately $1.1
          million, from the receiver in bankruptcy, substantially all the assets
          of CAPA Industries, Inc. ("CAPA"). CAPA is a designer and manufacturer
          of electronic components which are used in certain home and car audio
          accessories. The excess of the purchase price over the fair value of
          the assets acquired, aggregating approximately $797,000, has been
          recorded as goodwill and is being amortized to operations over 15
          years.

          The operations of Heco, Tambalan and CAPA prior to acquisition were
          immaterial in relation to those of the Company. If the AAMP
          acquisition had occurred on January 1, 1997, the Company's
          consolidated 1997 pro forma net sales and net earnings would have been
          approximately $518,000,000 and $15,070,000 and its pro forma earnings
          per diluted share should have been $1.31.

NOTE C -  INVENTORIES:

          Inventories are summarized as follows:
                                                            (IN THOUSANDS)
                                                               DECEMBER 31,  
                                                          ---------------------
                                                           1997          1998
                                                          ------        -------
          Raw materials and work-in-process             $ 38,188       $ 34,176
          Finished goods                                  93,602        117,606
          Merchandise in-transit                          10,572          9,512
                                                        --------       --------

                        T O T A L                       $142,362       $161,294
                                                        ========       ========

NOTE D -  PROPERTY AND EQUIPMENT:

          Property and equipment are summarized as follows:

                                             (IN THOUSANDS)         ESTIMATED
                                              DECEMBER 31          USEFUL LIFE
                                          1997          1998          (YEARS)  
                                        ------         -----       -----------

          Land                         $ 3,144       $ 3,144
          Buildings, leaseholds
            and improvements *          18,952        21,017          15 - 40
          Machinery and equipment        8,648        13,683           3 - 10
          Furniture, fixtures and
            office equipment            10,790        16,597           2 - 7
          Tools and dies                13,428        18,636           2 - 5
                                      --------       -------

                   TOTALS               54,962        73,077

          Less accumulated depreciation
             and amortization           18,778        32,384
                                       -------      --------

                   BALANCE            $ 36,184      $ 40,693
                                      ========      ========

          *Includes interest costs capitalized of approximately $118,000 during
          1997 and $147,000 during 1998.

NOTE E - BANK LOANS AND DRAFTS PAYABLE:

          In 1996, the Company entered into a multi-bank, $135 million bridge
          loan facility. On January 6, 1997, the Company sold to institutional
          investors in a private placement $75 million of ten-year senior notes,
          the proceeds of which were used to reduce the bridge loan facility,
          which was then converted to a $50 million revolving credit facility
          and a four-year $15 million term loan. The $15 million term loan was
          used to refinance at lower rates certain debt assumed in the Jensen
          acquisition. Interest on borrowings under the revolving credit
          facility is payable at rates negotiated with banks at the time
          borrowings are made. Additionally, the banks require the maintenance
          of various financial ratios (see Note F (3)).

          In September 1997, the credit agreement was amended and the credit
          facility was increased to approximately $71.5 million to January 30,
          1998 at which time it was replaced by a $5 million four year term loan
          and a revolving credit facility of approximately $66.5 million
          expiring in December 1999. The balance sheet at December 31, 1997 gave
          effect to this transaction and, accordingly, the $5 million term loan
          and the $63 million of outstanding borrowings under the revolving
          credit facility were classified as long-term debt (see Note F).

          In June 1998, the credit agreement was further modified to provide a
          revolving loan facility of $101.5 million through November 1998 at
          which time the line was to be reduced to $86.5 million through
          December 1999. In addition, two existing term loans, which were
          payable through January 2001 and January 2002, were converted into a
          single three year $15 million term loan (see Note F). On November 30,
          1998, the loan agreement was again amended to extend the $15 million
          pay down of the revolving credit facility to January 22, 1999, which
          payment was made before the due date. As a result of this amendment,
          the Company paid approximately $881,000 in fees to the bank, which
          were charged to operations in 1998.

          The revolving credit loans and the term loan bear interest at rates
          which vary depending on elections made by the Company. The Company may
          elect rates which are tied to LIBOR or rates which are tied to the
          greater of prime or a federal funds based rate (as defined).
          Additionally, the rates may change based on certain of the companies
          financial ratios. The weighted average interest rate on the $93.2
          million outstanding borrowings under the credit agreement at December
          31, 1998 was approximately 9.3%.

          Certain of the Company's foreign subsidiaries have lines-of-credit
          with banks aggregating approximately $18.8 million for short-term
          borrowings, primarily for import facilities. The banks have security
          interests to the extent of merchandise purchased under these lines.
          Borrowings under these lines at December 31, 1998 aggregated
          approximately $2.3 million.

          Outstanding letters of credit, which aggregated approximately $11
          million at December 31, 1998, reduce the amounts available under the
          domestic and foreign lines.

NOTE F -  LONG-TERM DEBT:

          Long-term debt included in the consolidated balance sheets is
          summarized as follows:

                                                           (IN THOUSANDS)
                                                          AS AT DECEMBER 31, 
                                                       -----------------------
                                                        1997            1998   
                                                        ----            ----
           Senior ten-year notes payable (1)         $ 75,000       $100,000

           Notes and loans payable - banks (2)(3):
            Bank credit facility loans (see Note E)    63,000
            Due in quarterly installments of
             $649,150 through December 2000,
             plus interest at 7.80% a year              7,790          5,193
            Due in monthly installments of
             $116,670 through December 2000,
             plus interest at 6.60% a year              4,200          2,800
            Due in quarterly installments of
             $1,250,000 through May 2001, plus 
             interest at variable rates 
             (8.97% at December 31, 1998)
             (see Note E)                              17,188         12,500

           Mortgages collateralized by certain land 
             and building in Lake Mary, Florida 
             payable in monthly installments of
             $36,368 to June 2001 with a final 
             installment aggregating approximately 
             $2 million due in July 2001. The 
             payments include interest
             at 7.99% to 8.40% a year                 $ 2,868       $  2,659

                 Other debt                               951            393
                                                     --------       --------
                 Total long-term debt                 170,997        123,545
                 Less current portion                   9,570          9,359
                                                     --------       --------

      Noncurrent portion                           $  161,427      $ 114,186
                                                   ==========      =========  

     (1)  Senior notes with a principal balance of $75 million are payable in
          equal annual principal installments of $10,714,286 beginning in
          January 2001. Interest on these notes was payable quarterly at 8.75%
          through December 31, 1998. In September 1998, the Company sold an
          additional $25 million of adjustable rate senior notes to an
          institutional investor. These notes are payable in seven equal annual
          principal installment of $3,571,429 beginning in September 2002.
          Interest was payable quarterly at 8.52% a year through December 31,
          1998.

          In 1999, both note agreements were amended and the interest rates were
          increased effective January 1, 1999 to 9.75% and 9.52% for the $75
          million and $25 million loans, respectively, subject to a 50 basis
          point reduction should the Company receive certain stipulated minimum
          proceeds from the public sale of either or both of its common shares
          and subordinated debt securities.

          The note agreements provide for, among other things, the maintenance
          of various specified financial ratios and minimum tangible net worth
          requirements (as defined), contain limitations and restrictions on
          additional borrowings, the payment of dividends, repurchases of the
          Company's common stock, engaging in business not directly related to
          the consumer electronics industry, investments, mergers and sales of
          the Company's assets, other than in the ordinary course of business
          (as defined). The agreements also provide, under certain
          circumstances, for the acceleration of the payment of all or a portion
          of the notes in the event of a sale of the Company's assets (as
          defined) or in the event the Company should request a waiver of the
          restrictions on mergers or consolidations with other entities.

     (2)  The bank loan agreements contain covenants and restrictions similar to
          the senior notes payable.

     (3)  At December 31, 1997 and 1998, the Company was not in compliance with
          certain financial covenants under the note and bank loan agreements.
          However, both the senior loan holders and the bank lenders have
          modified these covenants to place the Company in compliance with them.

          The noncurrent portion of long-term debt outstanding at December 31,
          1998 is payable as follows:

                YEAR ENDING DECEMBER 31:                (IN THOUSANDS)
                   2000                                     $  9,383
                   2001                                       15,517
                   2002                                       14,286
                   2003                                       14,286
                Subsequent to December 31, 2003               60,714
                                                            --------
                 T O T A L                                  $114,186
                                                            ========

          In February 1999, the Company sold to institutional investors for $35
          million, $35 million face amount of senior subordinated notes and
          310,000 common stock purchase warrants. The proceeds were used to
          reduce outstanding borrowings under the Company's revolving credit
          facility (see Note E). The notes are payable in February 2004 but are
          subject to required prepayment from the proceeds received by the
          Company from the sale of either equity interests or subordinated
          indebtedness. Interest is payable quarterly at 11.5% a year to
          November 4, 1999 increasing to 12.5% a year on November 4, 1999 and by
          .5% a year on each of the next five interest payment dates.

          The common share purchase warrants, which are exercisable at $18.26 a
          share to February 4, 2004, have been valued at approximately
          $2,490,000. The note agreements also provide that if any of the notes
          are outstanding on May 4, 2001 the Company will issue to the
          purchasers additional warrants in the proportion that the principal
          amount of notes outstanding bears to $35 million. The pricing of the
          additional warrants would be based on market values for the Company's
          common shares at that time.

NOTE G -  SHAREHOLDERS' EQUITY:

          The Recoton Corporation Stock Bonus Plan provides for the issuance to
          officers and key employees an aggregate of up to 300,000 shares of
          stock held in treasury, of which 261,396 shares are available for
          future grants at December 31, 1998. Such plan is administered by a
          committee of the Board of Directors. Awards under the plan are charged
          to operations based on the fair market value of the shares at the date
          of issuance.

          In 1994, the Board of Directors authorized the repurchase by the
          Company of up to 500,000 of its outstanding common shares. Through
          December 31, 1998 the Company has repurchased 48,352 shares. Future
          repurchases of shares may be limited under the terms of the Company's
          loan agreements (see Note F).

          The Company's shareholders' rights plan becomes operative in certain
          events involving the acquisition of 20% or more of the Company's
          common shares or the commencement of a tender or exchange offer by any
          person or group in a transaction not approved by the Company's Board
          of Directors. Upon the occurrence of such an event, each right, unless
          redeemed by the Board at a redemption price of $0.01 per right,
          entitles its holder to purchase for $100 an amount of common shares of
          the Company, or in certain circumstances the acquirer, having a market
          value of twice the purchase price. The Company has reserved 250,000
          Series A Junior Participating Preferred Shares in connection with the
          rights plan.

          In connection with the exercise of incentive stock options, in 1996,
          161,368 common shares were issued in exchange for 27,297 previously
          issued common shares with a market value of approximately $475,000 and
          in 1998, 15,500 common shares were issued in exchange for 6,000
          previously issued common shares with a market value of approximately
          $213,000, plus cash of approximately $15,000. Other transactions with
          respect to stock options are described in Note H.

          In 1996, the Company purchased from an officer 65,000 previously
          issued common shares for approximately $1,154,000, representing the
          fair market value of the shares on the date of the purchase.

          In 1997, the Company issued 5,311 common shares with a market value of
          approximately $81,000 to an employee as payment for a bonus which was
          earned and charged to operations in 1996.

          In 1997, the Company issued 169,706 common shares in connection with
          the purchase of AAMP of Florida, Inc. (see Note B).

          In 1998, the amount of authorized common shares was increased to 40
          million shares.

NOTE H -  STOCK OPTIONS:

          At December 31, 1998, the Company has four stock option plans.

          Options are outstanding to purchase 11,200 shares under the Company's
          1982 Incentive Stock Option Plan, 21,334 shares under the Nonqualified
          Plan and 1,726,284 shares under the 1991 Stock Option Plan. No
          additional options are available for grant under these plans.

          The Company's 1998 Stock Option Plan provides for the granting of
          options to purchase up to 1,500,000 common shares, such options may be
          either incentive stock options (as defined in the Internal Revenue
          Code) or nonqualified options. At December 31, 1998, options to
          purchase 1,460,000 shares are available for future grants under this
          plan.

          An employment agreement with Mr. Robert Borchardt, the Company's
          President, Chairman of the Board and Chief Executive Officer, provides
          for the granting of nonqualified options each year for the duration of
          the agreement, based on a formula related to annual increases in
          consolidated net income, as defined. Pursuant to the agreement,
          options to purchase 79,741 shares were granted in 1996 applicable to
          the Company's 1995 operations and options to purchase 130,975 shares
          were granted in 1998 applicable to the Company's 1997 operations. No
          options are to be granted in connection with the Company's 1998
          operations.

          Also, at December 31, 1998 there are non-plan nonqualified options
          outstanding to purchase an aggregate of 35,750 shares of common stock,
          of which options to purchase 7,500 shares at $20.67 a share were
          granted to a director of the Company. The non-plan options also
          include options to purchase 17,500 common shares granted at a price of
          $13.50 a share to certain non-U.S. employees in 1998. The $55,000
          difference between the aggregate option price and the fair market
          value of the Company's shares at the date of issuance of the options
          has been charged to operations and credited to additional paid-in
          capital. Additionally, in 1998 the Company issued to a consulting firm
          a non-plan option to purchase 10,000 common shares for $25.50 a share.
          The $124,000 fair value of the options at the date of grant has been
          credited to additional paid-in capital in 1998 and is being amortized
          to operations over the term of the consulting agreement which expires
          in January 2001.

          The length, vesting schedule, option price and other terms of the
          options are determined at the time each option is granted, although
          the term of plan options cannot exceed 10 years and incentive stock
          option prices may not be less than the fair market value of the stock
          on date of grant. Since all outstanding plan options to officers and
          employees were granted for at least the fair market value of the
          Company's shares at the dates of grant and are considered fixed plan
          options, no charge has been made to operations for these options. No
          income tax benefit is received by the Company upon the granting or
          exercise of incentive stock options but it may receive income tax
          benefits from nonqualified stock options when they are exercised and
          from certain incentive stock options if the shares are resold within
          one year of exercise. Such income tax benefits are credited to
          additional paid-in capital when realized.

          The Company has adopted the disclosure only provisions of Statement of
          Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock
          Based Compensation", for stock options granted to employees, officers
          and directors and, therefore, continues to apply Accounting Principles
          Board Opinion No. 25 and related interpretations in its accounting for
          stock option plans. Accordingly, no compensation cost has been
          recognized for options granted under its stock option plans. If the
          Company had elected to recognize compensation cost for options granted
          under these plans based on their fair values at the grant dates,
          consistent with the method of SFAS No. 123, net income and income per
          share would have been reduced to the pro forma amounts indicated
          below:

                                                  YEAR ENDED DECEMBER 31, 
                                               -----------------------------
                                               1996       1997         1998 
                                               ----       ----         ----
                                                (In thousands, except per
                                                    share information)
          Net income:
             As reported                    $ 8,380      $13,581      $4,330
             Pro forma                        5,539       12,016       1,245
          Income per share:
             Basic:
              As reported                      $.74        $1.19        $.37
              Pro forma                         .49         1.05         .11
             As diluted:
              As reported                      $.73        $1.18        $.36
              Pro forma                         .48         1.04         .10

          The fair values of the Company's stock options used to compute the pro
          forma net income and income per share disclosures are their estimated
          present values at grant date using the Black-Scholes option pricing
          model based on the following assumptions:

                                              1996       1997           1998  
                                             -----      ------         ------ 

           Expected volatility                46.3%      46.9%         47.2%
           Average risk-free interest rate     6.0%       6.5%          5.6%
           Average expected holding period,
              in years                           9          7             7

          A summary of the status of the Company's outstanding stock options as
          of December 31, 1996, 1997 and 1998 and changes during the years then
          ended is presented below:
<TABLE>

                                                                     YEAR ENDED DECEMBER 31,                         
                                            -------------------------------------------------------------------------
                                                       1996                    1997                      1998        
                                            ----------------------     ----------------------   ---------------------
<S>                                           <C>          <C>          <C>          <C>        <C>              <C>
                                                         Weighted                  Weighted                   Weighted
                                                         Average                   Average                    Average
                                                         Exercise                  Exercise                   Exercise
                                             Shares       Price       Shares        Price       Shares          Price
      STOCK OPTIONS                          (000'S)    Per Share     (000'S)      Per Share    (000'S)       Per Share
                                             --------   ---------     --------     ----------    -------     ----------
      Outstanding at beginning
        of year                               1,315      $ 12.23       1,269       $ 14.62       1,346         $ 13.26
      Granted                                   285        17.05         424*        13.55         662           15.92
      Exercised                                (302)        6.17         (25)         1.60        (136)          13.61
      Forfeited/expired                         (29)       18.03        (322)        19.91         (37)          19.75
                                               -----      -------       -----       -------     -------         -------

      Outstanding at end of year              1,269      $ 14.62       1,346       $ 13.26       1,835         $ 14.06
                                              =====      =======       =====       ========       =====         ========

      Exercisable at year end                   848      $ 13.88         929       $ 12.84       1,075         $ 13.25
                                              =====      =======       =====       =======       =====         =======

      Weighted-average fair
        value of options granted
        during the year                                  $ 10.88                   $  7.56                     $  8.95
                                                         =======                   =======                     ========
</TABLE>

          *Excludes options for 130,975 shares at $14.06 a share earned in 1997
          but issued in 1998 pursuant to the terms of the executive employment
          agreement with the Company's President, Chairman of the Board and
          Chief Executive Officer.

          The following table summarizes information about stock options
          outstanding at December 31, 1998:

<TABLE>
                                                    Options Outstanding          Options Exercisable
                                                  ------------------------      ---------------------
                                                  Weighted        Weighted                 Weighted
                                                   Average        Average                  Average
                                                  Remaining       Exercise                 Exercise
                    Range of          Shares      Contractual       Price       Shares       Price
                 Exercise Prices      (000'S)        Life         Per Share     (000'S)   Per Share
                 ---------------      --------    -----------     ----------    --------  ----------
<S>            <C>                     <C>           <C>             <C>          <C>        <C>

              $  1.13 to $  3.33         190       2.6 years        $  2.96       190       $  2.96
                12.25 to   16.75       1,406       7.4 years          14.35       775         14.83
                18.07 to   21.00         239       8.1 years          21.17       110         19.83
                                       -----                                    -----
                        Totals         1,835                                    1,075
                                       =====                                    =====
</TABLE>

NOTE I -  CONCENTRATIONS:

          In 1997 and 1998, sales to one customer represented approximately 11%
          and 17%, respectively, of consolidated net sales. Sales to this
          customer were made by each of the Company's reportable business
          segments (see Note P). No single customer accounted for sales in
          excess of 10% of consolidated net sales in 1996. Revenue from export
          sales from the United States was less than 10% of consolidated net
          sales in each of the three years ended December 31, 1998. The Company
          currently sources certain products from single suppliers. However, to
          lessen the risks of off-shore manufacturing, the Company maintains
          substantial inventories of long-lead-time items and continually
          evaluates alternative supply sources.

NOTE J -  RESEARCH AND DEVELOPMENT:

          Research and development costs for new products aggregated
          approximately $2,897,000 in 1996, $4,245,000 in 1997 and $6,034,000 in
          1998.

NOTE K -  ADVERTISING COSTS:

          Advertising costs aggregated approximately $2,768,000 in 1996,
          $5,141,000 in 1997 and $5,847,000 in 1998.

NOTE L -  INCOME TAXES:

          Income taxes on the statements of operations are comprised of the
          following:

                                                         (IN THOUSANDS)
                                                      YEAR ENDED DECEMBER 31,
                                                   -----------------------------
                                                   1996       1997         1998
          Currently payable (refundable):          ----       ----         ----
              Federal                          $  467     $ (4,163)    $  273
              State and local                     (28)         162        (61)
              Foreign                            2,609         486      3,791
                                                -------    ---------    -------

                  Totals                         3,048       (3,515)     4,003

          Deferred                                (312)      (2,578)       833
                                                -------     --------     ------

                  NET PROVISION (CREDIT)       $ 2,736     $ (6,093)    $4,836
                                               =======     ========     ======
          Pretax income (loss) was derived from foreign and domestic sources as
          follows:

                                                          (IN THOUSANDS)
                                                       YEAR ENDED DECEMBER 31,
                                                   --------------------------- 
                                                   1996       1997       1998
                                                   ----       ----       ----
                Foreign                          $14,598    $ 29,313    $34,344
                Domestic                          (3,482)    (21,825)   (25,178)
                                                 --------    --------   --------

                          TOTALS                 $11,116    $  7,488    $ 9,166
                                                 ========   =========   ========

          The following table reconciles statutory U.S. federal income taxes on
          the Company's income before income taxes to the Company's actual
          income tax provision (credit):

<TABLE>
                                                          (DOLLAR AMOUNTS IN THOUSANDS)
                                                              YEAR ENDED DECEMBER 31,
                                          ----------------------------------------------------------------
                                               1996                 1997                     1998         
                                          ----------------     -----------------       -------------------
                                           RATE     AMOUNT      RATE      AMOUNT         RATE      AMOUNT
<S>                                        <C>       <C>         <C>        <C>           <C>        <C>

  Statutory U.S. federal income
     taxes                                 34.0%   $ 3,779      34.0%    $ 2,546        34.0%     $  3,116
  Effect of:
     State and local income
        tax provision (credit)
        (net of federal effect)             (.9)      (105)     (6.4)       (480)        2.1           187
  Difference between U.S.
     and foreign income tax
     rates on earnings of
     foreign subsidiaries                  (9.6)    (1,080)   (101.2)     (7,591)      (59.6)       (5,463)
  Provision for expected U.S.
     Customs settlement                                                                 53.3         4,889
   Valuation reserves on
     deferred tax assets                                                                15.5         1,419
   German tax benefit
     relating to dividend
     distribution deduction                                    (17.4)     (1,300)
   Other items (net)                        1.1        142      10.0         732         7.5           688
                                           -----     ------   --------    --------      -----      --------
 Actual income tax
   provision (credit)                      24.6%    $2,736     (81.0)%   $(6,093)       52.8%      $ 4,836
                                           =====    ======    ========   ========       =====      ========
</TABLE>

          The earnings from the Company's Asian operations are taxed at a
          current maximum tax rate of 16% (16.5% in 1997 and 1996). Effective
          January 1996, a subsidiary of the Company commenced manufacturing
          operations in mainland China and was granted a five year "tax
          holiday," comprised of a full exemption from income taxes for the
          first two years and a 50% reduction from the statutory 15% tax rate
          for the next three years. During the first three years of the tax
          holiday the Company has saved an aggregate of $7,432,000 in income
          taxes. This savings on a diluted per share basis was $.01, $.42 and
          $.20 for the years 1996, 1997 and 1998, respectively. The effective
          tax rate from Asian operations is dependent on the proportion of
          earnings from mainland China.

          No determination has been made as to what portion of the expected
          settlement with the U.S. Customs Service might be deductible for
          income tax purposes (see Note O). Accordingly, no deduction has been
          made for this item in the computation of income taxes for 1998.

          Through December 31, 1998, the Company has not provided for additional
          U.S. income taxes which would be payable upon the payment of dividends
          from its Hong Kong subsidiaries, because the earnings of these
          subsidiaries are considered indefinitely invested. Such additional
          taxes would aggregate approximately $23 million based on the
          subsidiaries' undistributed earnings which aggregate approximately
          $88.5 million for income tax purposes at December 31, 1998. The
          foregoing amounts are stated net of U.S. Sub-Part F taxes paid, or
          payable, which are considered the equivalent of repatriated earnings.
          The Company's effective income tax rate on future earnings from Hong
          Kong and additional U.S. income taxes on the Hong Kong retained
          earnings at December 31, 1998 are, in part, dependent upon the
          Company's future domestic cash requirements. While the Company
          currently projects that its Hong Kong retained earnings at December
          31, 1998 will remain indefinitely invested, such estimate is subject
          to future revision based upon general economic conditions and market
          conditions in the consumer electronics industry.

          Deferred tax assets and liabilities and the principal temporary
          differences from which they arise are:

                                                           (IN THOUSANDS)
                                                             DECEMBER 31,
                                                           ------------------ 
                                                            1997        1998
                                                            ----        ----
   Deferred tax assets:
     Allowance for estimated doubtful accountsand
       estimated sales returns, allowances and discounts  $ 1,967     $ 2,209
     Tax basis adjustments to inventory                     3,418       6,452
     Deferred compensation accruals                           513         565
     Difference in basis and amortization periods
       of patents, trademarks and package design costs      1,075       1,172
     Cumulative foreign translation adjustment                666         790
     Estimated Jensen consolidation costs                     545         213
     Net operating loss and tax credit carryforwards        9,598       9,647
     Other                                                    885       1,367
                                                           ------      ------

            TOTAL                                          18,667      22,415

     Less valuation allowance                              (2,424)     (3,220)
                                                          --------    ---------
            TOTAL DEFERRED TAX ASSETS                      16,243      19,195
                                                          --------    ---------

   Deferred tax liabilities:
      Accelerated depreciation of property
        and equipment                                       538       1,057
      Tax basis adjustments to prepaid catalog costs        186         257
                                                          --------   --------

            TOTAL DEFERRED TAX LIABILITIES                    724       1,314
                                                          --------    --------
            NET DEFERRED TAX ASSETS                       $15,519     $17,881
                                                          ========    ========

          As a result of the Jensen acquisition in 1996, the Company has
          acquired domestic net operating loss carryforwards of approximately
          $9.1 million and tax credit carryforwards of approximately $1.2
          million, which expire from 1999 through 2011. Utilization of the loss
          carryforwards is subject to an annual limitation of approximately $3
          million as a result of the provisions of Section 382 of the Internal
          Revenue Code. As a result of the Ross acquisition in 1997, the Company
          has available approximately $2,500,000 of net operating loss
          carryforwards in the United Kingdom, which are available to be applied
          against future United Kingdom earnings. Additionally, at December 31,
          1998, the Company has domestic net operating loss carryforwards of
          approximately $1.4 million which expire in 2012 and tax credit
          carryforwards of approximately $1.7 million which primarily expire
          from 2001 through 2003. The Company has recorded a deferred tax asset
          for the tax benefit of the foregoing carryforwards and a valuation
          allowance for the tax benefit of such carryforwards which it estimates
          are not likely to be realized prior to expiration. If the amounts
          subject to the valuation allowance attributable to the Jensen and Ross
          acquisitions are subsequently realized, their income tax benefit will
          be recorded as a reduction of the then unamortized goodwill related to
          the acquisition. In 1997, goodwill was reduced by approximately
          $600,000 from the realization of such benefits.

          The 1998 change in the valuation allowance is analysed as follows:

                                                         INCREASE/(DECREASE)
                                                         ------------------- 
                                                            (IN THOUSANDS)

                 Foreign tax credit carryforwards                $567
                 State net operating loss carryforwards           182
                 Net adjustment of loss carryforwards and
                    other items related to 1996 Jensen
                    acquisition                                   (34)
                 Other                                             81
                                                                 -----
                          TOTAL                                  $796
                                                                 =====

NOTE M -  EMPLOYEE BENEFIT PLANS:

          The Company's profit sharing plans for eligible domestic nonunion
          employees provide for annual contributions as authorized by the Board
          of Directors of up to the maximum allowable as a tax deduction by the
          Treasury Department. Profit sharing expense was approximately $363,000
          in 1996, $562,000 in 1997 and $400,000 in 1998.

NOTE N -  COMMITMENTS:

          The Company leases certain facilities under long-term operating leases
          which expire at various dates through March 2008. Additionally,
          certain warehouse space and sales offices are leased on a
          month-to-month basis.

          Aggregate minimum rental payments under long-term leases for premises
          are as follows:

                YEAR ENDING DECEMBER 31:             (IN THOUSANDS)
                        1999                             $ 5,474
                        2000                               4,410
                        2001                               3,086
                        2002                               2,296
                        2003                               1,759
               Subsequent to December 31, 2003             6,172
                                                         -------
                    T O T A L                            $23,197
                                                         =======

          Rent expense was approximately $1,827,000 in 1996, $5,576,000 in 1997
          and $6,312,000 in 1998.

          The Company's employment agreement with Mr. Robert Borchardt, the
          Company's President, Chairman of the Board and Chief Executive Officer
          provides for a base annual salary ($1,012,000 for 1998) which is to be
          increased annually by the greater of 6% or the change in the consumer
          price index, and annual bonuses and nonqualified stock option grants
          based on formulas related to annual increases in the consolidated net
          income of the Company. Additionally, in connection with the signing of
          the agreement, the Company granted Mr. Borchardt nonqualified options
          for 150,000 shares in 1996. The agreement terminates on December 31,
          2004 and is automatically renewable for successive two year periods.
          If an election is made not to renew the agreement, Mr. Borchardt may
          thereafter be retained as a consultant to the Company for life.

          In connection with certain business acquisitions and the formation of
          new subsidiaries in prior years, the Company entered into employment
          agreements with certain key employees, which expire at various times
          through November 2002. The agreements provide for specified annual
          salaries. Certain agreements include provisions for annual increases
          based on changes in consumer price indexes and provide for performance
          based bonuses relating to the results of operations of the acquired
          entity or newly formed subsidiary, which are payable in either cash,
          stock or a combination thereof at the Company's option.

NOTE O -  EXPECTED U.S. CUSTOMS SETTLEMENT:

          The Company is the subject of an investigation being conducted by the
          United States Customs Service and the United States Attorney's Office
          in Orlando, Florida. In July 1994, agents of the United States Customs
          Service, working with the United States Attorney's Office in Orlando,
          Florida, seized property and business records from the Company's
          facility pursuant to a search warrant. The investigation has focused
          on country of origin marking, duty undervaluation, duty-free
          eligibility under the Caribbean Basin Initiative, duties with respect
          to dies, molds and tooling used overseas, commissions paid to agents,
          importation of merchandise subject to textile quota, other instances
          of undervaluation and other miscellaneous matters, during the period
          1989 through mid-1995. The Company has held extensive discussions with
          the U.S. Customs Service and the U.S. Attorney's Office with a view
          towards reaching a settlement of this matter. The Company expects to
          soon reach agreements with the U.S. Attorney's Office and the U.S.
          Customs Service to settle all outstanding criminal and civil matters
          involved in the investigation. The Company plans to enter guilty pleas
          to a number of counts involving country of origin mismarking and
          undervaluation of imports, which will be subject to judicial approval.
          The Company is presently negotiating the precise terms of written
          agreements with the government. While the Company is optimistic that
          this matter will be settled shortly, there can be no assurance that
          the agreements will be finalized or approved. The Company has recorded
          a provision of $14 million for this global settlement, which, together
          with related fees and costs of approximately $1 million is separately
          reflected in the attached 1998 consolidated statement of operations.
          The classification of the accrual on the 1998 consolidated balance
          sheet is based on the expected periods of payment, subject to approval
          by the government. Neither the U.S. Attorney's office nor the U.S.
          Customs Service has been asked to approve the above description of
          this matter.

NOTE P -  SEGMENT INFORMATION AND GEOGRAPHICAL DATA:

          The Company is a developer, manufacturer and marketer of consumer
          electronic products generally for aftermarket use. The Company's
          products are sold primarily to retailers located in the United States
          and Europe. In addition to its domestic facilities, the Company
          maintains office and warehouse facilities in Asia, Canada, Western
          Europe and manufacturing and assembly facilities in the People's
          Republic of China.

          The Company classifies its business into three principal segments,
          which have been identified on the basis of certain recent business
          acquisitions. Each segment's earnings before corporate interest and
          income taxes are reported to the Company's chief operating
          decision-makers. General corporate expenses other than certain
          interest costs are allocated to each segment on the basis used for
          internal management decision making purposes; certain interest
          expense, the provision for the expected U.S. Customs settlement and
          assets jointly utilized by more than one business segment are
          reflected as "unallocated corporate" in the following presentation.

          The three segments are as follows:

          VIDEO AND COMPUTER GAME BUSINESS - Consists of the manufacturing
          operations of STD Holdings Limited and its Hong Kong and other Chinese
          subsidiaries and the sale and distribution of peripherals and other
          accessories to enhance the enjoyment of playing video and computer
          games. The profit on products produced for and sold by the Company's
          other business segments has been allocated to them.

          RECOTON AUDIO CORPORATION BUSINESS - Consists of the home and mobile
          audio business of Recoton Audio Corporation and its United States and
          European subsidiaries ("RAC"). Products sold include high-performance
          and home theater loudspeaker systems and mobile audio products.

          ACCESSORIES BUSINESS - Consists of the accessories' operations of
          Recoton Corporation and certain other subsidiaries. Products sold
          include 900 MHz and other wireless technology products and other
          consumer electronic accessories.

          The following table presents certain operating segment information:

<TABLE>
                                                      (IN THOUSANDS)

                                     VIDEO AND
                                      COMPUTER
                                        GAME             RAC       ACCESSORIES           UNALLOCATED
                                      BUSINESS         BUSINESS      BUSINESS             CORPORATE           TOTAL
                                     ------------      ----------   ----------           ------------        ------
              <S>                       <C>           <C>          <C>                    <C>                <C>
              1998:
                Net sales:
                  External customers     $243,923      $234,123        $222,362                              $700,408   
                   Intersegment            34,962         1,748             343                                37,053
                Interest expense              303           490             525             $ 16,602           17,920
                Depreciation and
                     amortization           3,687         4,091           4,485                                12,263
                Provision for expected
                     U.S. Customs
                     settlement                                                               15,000           15,000
                Income (loss) before
                     income taxes          27,368          (884)         14,284              (31,602)           9,166
                Identifiable assets       157,476       175,107         104,293               49,794          486,670
                Property and equip-
                    ment additions          4,586         4,200           1,639                3,141           13,566
</TABLE>

          Because each of the above business segments include U.S. operations
          which are reportable in the consolidated U.S. income tax returns of
          the Company, it is not practicable to allocate income taxes between
          segments. Also, because the Company did not maintain records of
          certain shared assets, costs and expenses in prior years, it is not
          practicable to provide comparable data for 1996 and 1997. However,
          external customer sales information by business segment for 1996 and
          1997 is as follows:

                             VIDEO AND
                             COMPUTER
                               GAME           RAC      ACCESSORIES
                             BUSINESS       BUSINESS     BUSINESS        TOTAL
                             --------       --------   -----------      -------
              1996           $ 79,053        $ 64,587*   $188,060      $331,700
              1997            126,251         182,028     193,764       502,048

          *From date of acquisition on August 28, 1996.

          Net sales to external customers and long-lived tangible assets by
          geographic area are as follows:


                                      (IN THOUSANDS) YEAR ENDED DECEMBER 31,
                                       1996              1997            1998
                                       -----             ----           -----
 Net sales to external customers in:
    United States                     $254,947          $375,483       $548,374
    Europe                              36,819            90,177        102,243
    Other                               39,934            36,388         49,791
                                       -------          --------       --------

    TOTALS                            $331,700          $502,048       $700,408
                                      ========          ========       ========

                                         (IN THOUSANDS) AS AT DECEMBER 31,

                                       1996              1997            1998
                                     -------          ----------       -------
 Long-lived tangible assets:
    United States                     $ 27,913          $ 32,488       $ 35,488
    Europe                               2,177             2,470          3,723
    Other                                3,634             4,735          5,910
                                      --------          --------       --------

    TOTALS                            $ 33,724          $ 39,693       $ 45,121
                                      =========         ========       ========

<PAGE>

              INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL SCHEDULE


BOARD OF DIRECTORS
RECOTON CORPORATION

          In connection with our audits of the consolidated financial statements
of RECOTON CORPORATION AND SUBSIDIARIES at December 31, 1997 and 1998 and for
each of the three years in the period ended December 31, 1998, we have also
audited Schedule II for each of the three years ended December 31, 1998,
included in this annual report on Form 10-K. In our opinion, such schedule
presents fairly the information required to be set forth therein.

                                       /s/ CORNICK, GARBER & SANDLER, LLP
                                           --------------------------------
                                           CERTIFIED PUBLIC ACCOUNTANTS

NEW YORK, NEW YORK
FEBRUARY 26, 1999

<PAGE>

                                                                    SCHEDULE II

                      RECOTON CORPORATION AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>

                COLUMN A                 COLUMN B               COLUMN C                 COLUMN D     COLUMN E
               --------                 --------       ----------------------------      --------      -------
                                                                  Additions
                                                       ----------------------------
                                        Balance at      Charged to       Charged to                    Balance
                                        beginning       costs and          other                        at end
              Description               of Period       Expenses          Accounts      Deductions*    of Period
                                        ----------      ----------       ----------     ----------     ---------

Allowance for possible
losses:
<S>                                        <C>              <C>              <C>           <C>             <C> 
   Year ended December 31,
      1996                               $  1,587       $  1,259         $  1,627**       $  1,354       $ 3,119
                                         ========       ========         ========         ========       =======

   Year ended December 31,
      1997                               $  3,119       $  4,932                          $  4,254       $ 3,797
                                         ========       ========                          ========       =======

   YEAR ENDED DECEMBER 31,
      1998                               $  3,797       $  2,743                          $  1,600       $ 4,940
                                         ========       ========                          ========       =======
</TABLE>

*  Represents write-offs of uncollectible accounts, net of recoveries.

** Represents allowance recorded upon acquisition of Jensen.
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE.

         Not applicable.

<PAGE>
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

          That portion of Recoton's definitive 1999 Proxy Statement appearing
under the caption "Election of Directors," is hereby incorporated by reference.
The information regarding the executive officers of Recoton is contained under
"Directors and Executive Officers of Recoton" under Item 1 to this Report.

ITEM 11.  EXECUTIVE COMPENSATION.

          That portion of Recoton's definitive 1999 Proxy Statement appearing
under the caption "Compensation of Executive Officers" is hereby incorporated by
reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

          That portion of Recoton's definitive 1999 Proxy Statement appearing
under the caption "Security Ownership of Certain Beneficial Owners and
Management" is hereby incorporated by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         That portion of Recoton's definitive 1999 Proxy Statement appearing
under the caption "Certain Relationships and Related Transactions" is hereby
incorporated by reference.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

          (a)(1) and (2). FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES:

          See "Index to Financial Statements" set forth in Item 8, "Financial 
          Statements and Supplementary Data" of this Report.

         (a)(3).  EXHIBITS REQUIRED TO BE FILED BY ITEM 601 OF REGULATION S-K:

                  (3)      ARTICLES OF INCORPORATION AND BY-LAWS:

                           3.1A       Restated Certificate of Incorporation of
                                      Recoton Corporation, as filed January 28,
                                      1997 (incorporated by reference to Exhibit
                                      3.1 to the Registrant's Form 10-K for the
                                      year ended December 31, 1996)

                           3.1B       Amendment to Restated Certificate of
                                      Incorporation of Recoton Corporation, as
                                      filed June 25, 1998 (incorporated by
                                      reference to Exhibit 3.3 to the
                                      Registrant's Form 10-Q for the quarter
                                      ended June 30, 1998)

                           3.2        By-Laws of Recoton as amended October 19,
                                      1995 (incorporated by reference to Exhibit
                                      3(ii) to the Registrant's Quarterly Report
                                      on Form 10-Q for the quarter ended
                                      September 30, 1995)

                  (4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
                      INCLUDING INDENTURES:

                           4.1        Form of Common Stock Certificate
                                      (incorporated by reference to Exhibit 4.1
                                      to the Registrant's Form 10-K for the year
                                      ended December 31, 1996)

                           4.2        Rights Agreement, dated as of October 27,
                                      1995, between Recoton  Corporation and
                                      ChaseMellon Shareholder Services, L.L.C.
                                      as  Rights Agent (incorporated by
                                      reference to Exhibit 4 to the
                                      Registrant's Current Report on Form 8-K
                                      dated October 27, 1995)

                  (10) MATERIAL CONTRACTS (an asterisk indicates management 
                       contracts and compensatory plans or arrangements):

                           10.1A      Consulting Agreement, effective as of May
                                      18, 1987, between Recoton and Herbert
                                      Borchardt (incorporated by reference to
                                      Exhibit 10(F) to the Registrant's Form
                                      10-K for the year ended December 31,
                                      1987)*

                           10.1B      Amendment dated March 20, 1997 to
                                      Consulting Agreement between Recoton
                                      Corporation and Herbert Borchardt dated
                                      August 28, 1996 (incorporated by reference
                                      to Exhibit 10.2 to the Registrant's Form
                                      10-K for the year ended December 31,
                                      1996)*

                           10.2       Employment Agreement between Recoton
                                      Corporation and Robert  L. Borchardt,
                                      dated October 25, 1995 (incorporated by
                                      reference to  Exhibit (10)(1) to the
                                      Registrant's Quarterly Report on Form 10-Q
                                      for the quarter ended September 30,
                                      1995)*

                           10.3       Deferred Compensation Agreement, effective
                                      as of July 1, 1982,  between Recoton and
                                      Robert Borchardt (incorporated by
                                      reference  to Exhibit 10(C) to the
                                      Registrant's Registration Statement on
                                      Form  S-2, filed on October 12, 1983, File
                                      No. 2-87097)*

                           10.4       Deferred Compensation Agreement, effective
                                      as of October 1, 1982, between Recoton and
                                      Peter Wish (incorporated by reference to
                                      Exhibit 10(E) to the Registrant's
                                      Registration Statement on Form S- 2, filed
                                      on October 12, 1983, File No. 2-87097)*

                           10.5A      Split Dollar Life Insurance Agreements,
                                      effective as of February 24,  1989, among
                                      Recoton and Trudi Borchardt and Marvin
                                      Schlacter  and Robert Borchardt in the
                                      aggregate face amount of $2,750,000
                                      (incorporated by reference to Exhibit
                                      10(G) to the Registrant's Form  10-K for
                                      the year ended December 31, 1988)*

                           10.5B      Split Dollar Life Insurance Agreements,
                                      effective as of December  17, 1993, among
                                      Recoton, the Robert and Trudi Borchardt
                                      1993  Family Trust and Robert L. Borchardt
                                      in the face amounts of  $6,500,000 ("First
                                      Policy"); $3,500,000 ("Second Policy");
                                      and  $1,300,000 ("Third Policy")
                                      (incorporated by reference to Exhibit
                                      10(G) to the Registrant's Annual Report on
                                      Form 10-K for the year  ended December 31,
                                      1993)*

                           10.5C      Amendment to Split Dollar Life Insurance
                                      Agreements Dated as of December 17, 1993,
                                      dated as of November 6, 1998, to amend
                                      principal amount of First Policy to
                                      $10,000,000 and to terminate Second Policy
                                      (filed herewith) *

                           10.5D      Split Dollar Life Insurance Agreement,
                                      effective as of November 8, 1998, among
                                      Recoton, the Robert and Trudi Borchardt
                                      1993 Family Trust and Robert L. Borchardt
                                      in the face amount of $2,250,000 (filed
                                      herewith) *


                           10.5E      Split Dollar Life Insurance Agreement,
                                      effective as of November 8, 1998, among
                                      Recoton, the Robert and Trudi Borchardt
                                      1993 Family Trust and Robert L. Borchardt
                                      in the face amount of $2,000,000 (filed
                                      herewith) *

                           10.6       Recoton Corporation 1982 Stock Option
                                      Plan, as revised October 23, 1991
                                      (incorporated by reference to Exhibit
                                      10(J) to the Registrant's Quarterly Report
                                      on Form 10-Q for the quarter ended
                                      September 30, 1991)*

                           10.7       Recoton Corporation 1991 Stock Option
                                      Plan, as revised March 23, 1998, and form
                                      of option agreement (incorporated by
                                      reference to Exhibit 10.9 to the
                                      Registrant's Annual Report on Form 10-K
                                      for the year ended December 31, 1997)*

                           10.8       Recoton Corporation Nonqualified Stock
                                      Option Plan, as revised March 23, 1998
                                      (incorporated by reference to Exhibit
                                      10.10 to the Registrant's Annual Report on
                                      Form 10-K for the year ended December
                                      31, 1997)*

                           10.9       Recoton Corporation Stock Bonus Plan, as
                                      revised September 15, 1993 (incorporated
                                      by reference to Exhibit 10(K) to the
                                      Registrant's Annual Report on Form 10-K
                                      for the year ended December 31, 1993)*

                           10.10      Recoton Corporation 1998 Stock Option Plan
                                      and form of option certificate, as adopted
                                      March 23, 1998 (incorporated by reference
                                      to Exhibit 10.29 to the Registrant's
                                      Annual Report on Form 10-K for the year
                                      ended December 31, 1997)*

                           10.11      Recoton Corporation Code Section 401(K)
                                      Profit Sharing Plan and  Trust Agreement,
                                      as amended and restated December 29, 1994
                                      (incorporated by reference to Exhibit
                                      10(K) to the Registrant's  Annual Report
                                      on Form 10-K for the year ended December
                                      31,  1994)*

                           10.12      Option Agreement, dated May 5, 1994, with
                                      I. Friedman Equities, Inc. (incorporated
                                      by reference to Exhibit 10(L) to the
                                      Registrant's  Annual Report on Form 10-K
                                      for the year ended December 31, 1994)

                           10.13      Common Stock Purchase Option, as of April
                                      7, 1998, with the Equity Group, Inc.
                                      (incorporated by reference to Exhibit
                                      10.34 to the Registrant's Quarterly
                                      Report on Form 10-Q for the quarter ended
                                      June 30, 1998)

                           10.14      Stock Purchase Agreement dated as of
                                      August 31, 1995, among Recoton
                                      Corporation, Recoton (Far East) Limited,
                                      STD Holding Limited (STD) and the other
                                      shareholders of STD including, as
                                      exhibits, employment agreements with
                                      Stephen Chu (as President of  STD),* David
                                      Chu (as Vice President of STD)* and
                                      Patrick Ho (as Vice President, Marketing
                                      of STD)* (incorporated by reference to
                                      Exhibit 1 to the Registrant's Current
                                      Report of Form 8-K dated  September 5,
                                      1995)

                           10.15      Asset Purchase Agreement dated as of
                                      August 31, 1995 among  Recoton
                                      Corporation, InterAct Accessories, Inc.,
                                      STD Holding  Limited, Stephen Chu and
                                      others (including, as an exhibit, an
                                      employment agreement with Todd Hays (as
                                      President and Chief  Operating Officer of
                                      InterAct Accessories, Inc.)* (incorporated
                                      by  reference to Exhibit 2 to the
                                      Registrant's Current Report of Form 8- K 
                                      dated September 5, 1995)

                           10.16      Fourth Amended and Restated Agreement and
                                      Plan of Merger  between Recoton
                                      Corporation, RC Acquisition Sub, Inc. and
                                      International Jensen Incorporated dated as
                                      of January 3, 1996 (incorporated by
                                      reference to Exhibit 2.1 to the
                                      Registrant's Current Report on Form 8-K
                                      dated June 23, 1996)

                           10.17      Third Amended and Restated Agreement for
                                      Purchase and Sale of  the Assets of the
                                      OEM Business of International Jensen
                                      Incorporated ("Jensen") (now Recoton
                                      Audio Corporation) by and to IJI
                                      Acquisition Corp. dated as of January 3,
                                      1996 (incorporated by reference to Exhibit
                                      2.2. to Jensen's Current Report on Form
                                      8-K  dated June 23, 1996)

                           10.18A     Second Amended and Restated Credit
                                      Agreement among Recoton  Corporation, The
                                      Chase Manhattan Bank and the lenders made
                                      party  thereto dated as of June 18, 1998
                                      (incorporated by reference to  Exhibit
                                      10.32 to the Registrant's Quarterly Report
                                      on Form 10-Q for  the quarter ended June
                                      30, 1998)

                           10.18B     Amendment and Waiver to Second Amended and
                                      Restated Credit Agreement with The Chase
                                      Manhattan Bank, et. al, dated as of June
                                      18, 1998 (incorporated by reference to
                                      Exhibit 10.33 to the Registrant's
                                      Quarterly Report on Form 10-Q for the
                                      quarter ended June 30, 1998)

                           10.18C     Amendment, dated as of November 30, 1998,
                                      to Second Amended  and Restated Credit
                                      Agreement dated as of June 18, 1998
                                      between   Recoton Corporation and The
                                      Chase Manhattan Bank, et. al
                                      (incorporated by reference to Exhibit 1 to
                                      the Registrant's Current  Report on Form
                                      8-K dated November 30, 1998)

                           10.18D     Amendment dated as of December 31, 1998
                                      (but executed on  February 4, 1999)
                                      between Recoton Corporation and The Chase
                                      Manhattan Bank (for itself and as
                                      Administrative Agent)  amending the Second
                                      Amended and Restated Credit Agreement
                                      dated as of June 18, 1998 (incorporated by
                                      reference to Exhibit 6 to  the
                                      Registrant's Current Report on Form 8-K 
                                      dated February 4,  1999)

                           10.18E     Amendment dated as of December 31, 1998
                                      (but executed in March 1999) between
                                      Recoton Corporation and The Chase
                                      Manhattan Bank (for itself and as
                                      Administrative Agent) amending the Second
                                      Amended and Restated Credit Agreement
                                      dated as of June 18, 1998 (filed herewith)

                           10.19A     Note Purchase Agreement dated January 6,
                                      1997 between Recoton Corporation and the
                                      several purchasers (incorporated by
                                      reference to Exhibit 10.31 to the
                                      Registrant's Form 10-K for the year ended
                                      December 31, 1996)

                           10.19B     Amendment to Note Purchase Agreement dated
                                      January 6, 1997 between Recoton
                                      Corporation and the several purchasers,
                                      dated May 13, 1997 (incorporated by
                                      reference to Exhibit 10.32 to the
                                      Registrant's Form 10-Q for the quarter
                                      ended March 30, 1997)

                           10.19C     Amendment to Note Purchase Agreement dated
                                      January 6, 1997 between Recoton
                                      Corporation and the several purchasers ,
                                      dated August 13, 1997 (incorporated by
                                      reference to Exhibit 10.33 to the
                                      Registrant's Form 10-Q for the quarter
                                      ended June 30, 1997)

                           10.19D     Amendment to Note Purchase Agreement dated
                                      January 6, 1997 between Recoton
                                      Corporation and the several purchasers ,
                                      dated March 25, 1998 (incorporated by
                                      reference to Exhibit 10.28 to the
                                      Registrant's Annual Report on Form 10-K
                                      for the year ended December 31, 1997)*

                           10.19E     Waiver of Certain Terms of the Note
                                      Purchase Agreement dated January 6, 1997
                                      between Recoton Corporation and the
                                      several purchasers, dated June 29, 1998
                                      (incorporated by reference to Exhibit
                                      10.31 to the Registrant's Form 10-Q for
                                      the quarter ended June 30, 1998)

                           10.19F     Amendment Agreement dated as of
                                      December 31, 1998 (but  executed on
                                      February 4, 1999) between Recoton
                                      Corporation and  the Holders of the
                                      Company's Notes Issued January 6, 1997
                                      (incorporated by reference to Exhibit 4 to
                                      the Registrant's Current  Report on Form
                                      8-K dated February 4, 1999)

                           10.19G     Amendment Agreement dated as of December
                                      31, 1998 (but executed in March 1999,
                                      1999) between Recoton Corporation and the
                                      Holders of the Company's Notes Issued
                                      January 6, 1997 (filed herewith)

                           10.20A     Note Purchase Agreement dated as of
                                      September 1, 1998 for $25  million
                                      principal amount of adjustable rate senior
                                      notes due  September 1, 2008 with The
                                      Prudential Insurance Company of  North
                                      America (incorporated by reference to
                                      Exhibit 10.35 to the  Registrant's Form
                                      10-Q for the quarter ended September 30,
                                      1998)

                           10.20B     Amendment Agreement dated as of December
                                      31, 1998 (but  executed on February 4,
                                      1999) between Recoton Corporation and  the
                                      Holder of the Company's Notes Issued
                                      September 1, 1998  (incorporated by
                                      reference to Exhibit 5 to the Registrant's
                                      Current  Report on Form 8-K dated February
                                      4, 1999)

                           10.20C     Amendment Agreement dated as of December
                                      31, 1998 (but executed in March 1999)
                                      between Recoton Corporation and the Holder
                                      of the Company's Notes Issued September 1,
                                      1998 (filed herewith)

                           10.21A     Securities Purchase Agreement between
                                      Recoton Corporation, The Prudential
                                      Insurance Company of America and ING
                                      (U.S.) Capital LLC dated February 4, 1999
                                      (incorporated by reference to Exhibit 5 to
                                      the Registrant's Current Report on Form
                                      8-K dated February 4, 1999)

                           10.21B     Form of warrants issued to The Prudential
                                      Insurance Company of  America and ING
                                      (U.S.) Investments Corporation dated
                                      February  4, 1999 and sheet detailing
                                      variable information (incorporated by
                                      reference to Exhibit 5 to the Registrant's
                                      Current Report on Form 8- K dated February
                                      4, 1999)

                           10.21C     Registration Rights Agreement with The
                                      Prudential Insurance Company of America
                                      and ING (U.S.) Investments Corporation
                                      dated February 4, 1999 (incorporated by
                                      reference to Exhibit 5 to the Registrant's
                                      Current Report on Form 8-K dated February
                                      4, 1999)

                           10.22D     Amendment Agreement dated as of December
                                      31, 1998 (but executed in March 1999)
                                      between Recoton Corporation and The
                                      Prudential Insurance Company of America
                                      and ING (U.S.) Capital regarding the notes
                                      issued February 4, 1999 (filed herewith)

                  (11)  STATEMENT RE COMPUTATION OF PER SHARE EARNINGS:  not 
                        applicable

                  (12)  STATEMENT COMPUTATION OF RATIOS:  not applicable

                  (13)  ANNUAL REPORT TO SECURITY HOLDERS, FORM 10-Q OR
                        QUARTERLY REPORT TO SECURITYHOLDERS: not applicable

                  (16)  LETTER RE CHANGE IN CERTIFYING ACCOUNTANT:  not
                        applicable

                  (18)  LETTER RE CHANGE IN ACCOUNTING PRINCIPLES:  not
                        applicable

                  (21)  SUBSIDIARIES OF THE REGISTRANT [filed herewith]

                  (22)  PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO VOTE OF
                        SECURITY HOLDERS:  not applicable

                  (23)  CONSENT OF EXPERTS AND COUNSEL:  Consent of the
                        Independent Public Accountants [filed herewith]

                  (24)  POWER OF ATTORNEY:  not applicable

                  (27)  FINANCIAL DATA SCHEDULE: [filed herewith]

                  (28)  INFORMATION FROM REPORTS FURNISHED TO STATE 
                        INSURANCE REGULATORY AUTHORITIES:   not applicable

                  (29)  ADDITIONAL EXHIBITS:  not applicable

          (b) REPORTS ON FORM 8-K: The Registrant filed Forms 8-K on November
30, 1998 and December 11, 1998 reporting under Item 5 (Other Events) certain
transactions pursuant to the Company's senior bank credit facility.

<PAGE>
                                   SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                         RECOTON CORPORATION


                                         By: /S/ ROBERT L. BORCHARDT
                                             ----------------------------------
                                             Robert L. Borchardt, Chairman, 
                                             Chief Executive Officer and
                                             President

                                         Date:  March 29, 1999

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

SIGNATURE                        POSITION                       DATE

/S/ ROBERT L. BORCHARDT          President, Chairman,          March 29, 1999
-------------------------        Chief Executive Officer
Robert L. Borchardt              (Principal Executive
                                 Officer) and Director

/S/ STUART MONT                  Chief Operating
-------------------------        Officer,                      March 29, 1999
Stuart Mont                      Chief Financial Officer
                                 (Principal Financial Officer)
                                 and Director

/S/ GEORGE CALVI                 Director                      March 29, 1999
-------------------------
George Calvi

/S/ PETER WISH                   Director                      March 29, 1999
-------------------------
Peter Wish

/S/ JOSEPH H. MASSOT             Treasurer (Principal          March 29, 1999
-------------------------        Accounting Officer)
Joseph H. Massot                 and Director

/S/ IRWIN S. FRIEDMAN            Director                      March 29, 1999
-------------------------
Irwin S. Friedman

/S/ JOSEPH M. IDY                Director                      March 29, 1999
-------------------------
Joseph M. Idy

/S/ RONALD E. MCPHERSON          Director                      March 29, 1999
-------------------------
Ronald E. McPherson

/S/ PAUL FEFFER                  Director                     March 29, 1999
-------------------------
Paul Feffer

/S/ STEPHEN CHU                  Director                     March 29, 1999
-------------------------
Stephen Chu

<PAGE>
                                  EXHIBIT INDEX

EXHIBIT NO.

  10.5C      Amendment to Split Dollar Life Insurance Agreements Dated as
             of December 17, 1993, dated as of November 6, 1998, to amend
             principal amount of First Policy to $10,000,000 and to
             terminate Second Policy

  10.5D      Split Dollar Life Insurance Agreement, effective as of
             November 8, 1998, among Recoton, the Robert and Trudi
             Borchardt 1993 Family Trust and Robert L. Borchardt in the
             face amount of $2,250,000

  10.5E      Split Dollar Life Insurance Agreement, effective as of
             November 8, 1998, among Recoton, the Robert and Trudi
             Borchardt 1993 Family Trust and Robert L. Borchardt in the
             face amount of $2,000,000

  10.18E     Amendment dated as of December 31, 1998 (but executed in
             March 1999) between Recoton Corporation and The Chase
             Manhattan Bank (for itself and as Administrative Agent)
             amending the Second Amended and Restated Credit Agreement
             dated as of June 18,
             1998

  10.19G     Amendment Agreement dated as of December 31, 1998 (but
             executed in March 1999) between Recoton Corporation and the
             Holders of the Company's Notes Issued January 6, 1997

  10.20C     Amendment Agreement dated as of December 31, 1998 (but
             executed in March 1999) between Recoton Corporation and the
             Holder of the Company's Notes Issued September 1, 1998

  10.22D     Amendment Agreement dated as of December 31, 1998 (but
             executed in March 1999) between Recoton Corporation and The
             Prudential Insurance Company of America and ING (U.S.)
             Capital regarding the notes issued February 4, 1999

  21         Subsidiaries of the registrant

  23         Consent of the Independent Public Accountants

  26         Financial Data Schedule