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

                                    FORM 10-K

       FOR 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, 1997

                                       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 JURISDICTION OF                         (IRS EMPLOYER
INCORPORATION OR ORGANIZATION)                         IDENTIFICATION NO.)


                  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 STOCK, $.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. _____

     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:
$226,018,737 based on the closing price on the Nasdaq Stock Market of $23.25 as
of March 16, 1998. 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: 11,581,485 shares of
Common Stock as of March 16, 1998.

                       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 1998 (the "1998 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 OTHERWISE. STATEMENTS
CONTAINED HEREIN 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, AND 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 THE FOREGOING. IN ADDITION, WHEN USED IN THIS
DISCUSSION, THE WORDS "ANTICIPATES," "BELIEVES," "ESTIMATES," "EXPECTS,"
"INTENDS," "PLANS" AND VARIATIONS THEREOF 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 OTHERWISE. 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: THE
RECEPTIVITY OF CONSUMERS TO NEW CONSUMER ELECTRONICS TECHNOLOGIES, THE RATE AND
CONSUMER ACCEPTANCE OF NEW PRODUCT INTRODUCTIONS, COMPETITION, THE NUMBER AND
NATURE OF CUSTOMERS AND THEIR PRODUCT ORDERS, PRICING, PRODUCTION BY EXCLUSIVE
THIRD PARTY VENDORS, FOREIGN MANUFACTURING, SOURCING AND SALES (INCLUDING
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, PENDING OR THREATENED LITIGATION AND INVESTIGATIONS, THE
AVAILABILITY OF KEY PERSONNEL, THE OPERATION OF MANAGEMENT INFORMATION AND
COMPUTER SYSTEMS AT THE COMPANY'S CUSTOMERS AND VENDORS, ESPECIALLY AS IT
RELATES TO THE YEAR 2000 ISSUE, 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 HEREIN, WHICH SPEAK ONLY AS OF THE DATE HEREOF. 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 THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNEXPECTED
EVENTS.

ITEM 1.  BUSINESS

OVERVIEW

     Recoton Corporation was incorporated in New York State in 1936. By itself
and through its subsidiaries (collectively, Recoton or the Company), it is a
worldwide marketer and producer of consumer electronic products for aftermarket
use, primarily sold to retailers and original equipment manufacturers. Recoton's
diverse product line includes high-fidelity loud speakers, home theater speaker
systems, bookshelf speakers, multimedia speakers, a complete line of car audio
products (including in-dash, CD and cassette players, amplifiers, speakers and
installation accessories) and other audio products; 900 Megahertz (MHz) and
various other RF (radio frequency) wireless technology products; and other
highly functional accessories for audio, car audio, camcorder, video game,
cellular and standard telephone, home office, computer, multimedia, music, and
video products. The Recoton family of products are sold under the AAMP(TM),
ADVENT(TM), AMBICO(TM), AMPERSAND(TM), AR(TM)/ACOUSTIC RESEARCH(TM),
DISCWASHER(TM), HECO(TM), INTERACT(TM), JENSEN(TM), MACAUDIO(TM), MAGNAT(TM),
NHT(TM) (NOW HEAR THIS), PARSEC(TM), PERIPHERAL(TM), PHASE LINEAR(TM),
RECOTON(TM), REMBRANDT(TM), ROSS(TM), SOLE CONTROL(TM) SOUND QUEST(TM), and
STINGER(TM) brand names,(TM) among others.

     Recoton has significantly expanded its product lines through selected
acquisitions, research efforts and product development. Recoton's presence in
Europe was enhanced in February 1997 with the acquisition of Tambalan Limited
(Tambalan), a United Kingdom corporation selling headphones and other consumer
electronic accessory products under the name "Ross" in various European Union
countries. The annual sales of Tambalan for the year prior to the acquisition
were approximately $8 million. In November, Recoton acquired AAMP of Florida,
Inc., d/b/a AAMP of America (AAMP), a leading car audio accessories company
whose products are sold under the Stinger, AAMP and Peripheral brand names.
AAMP's annual sales for the previous year were approximately $17 million. In
December, Recoton acquired selected assets of Capa Industries, Inc. (Capa), an
audio electronic design and manufacturing company based in Valencia, California.
Capa's annual sales for the previous year were approximately $1.7 million.

     In August 1996 Recoton acquired International Jensen Incorporated (Jensen),
a leading marketer of home and automotive loudspeakers; it did not acquire the
original equipment manufacturing (OEM) business of Jensen. Sales of Jensen for
its fiscal year ending prior to the acquisition, excluding the OEM business,
were over $150 million. Immediately following the acquisition, Jensen changed
its name to Recoton Audio Corporation (RAC). The Jensen acquisition followed the
Company's entree into hi-fidelity, high-performance loudspeaker manufacturing,
design and marketing with the formation of Recoton's Christie Design Corporation
subsidiary in 1995.

     In 1995, the Company significantly expanded its video and computer game
accessory business with the acquisition of STD Holding Limited (STD), a Hong
Kong-based company, and with the business of its U.S. distribution arm now
operating under the name InterAct Accessories, Inc. Sales of STD and its
subsidiaries for the fiscal year prior to the acquisition were approximately
US$40 million.

     Recoton's research and development activities have led to innovative
products using 900 MHz wireless technology, whose signals transmit through
walls, floors and ceilings up to 150 feet away. The 900 MHz products include
stereo headphones, amplified speakers, a portable weather-resistant
outdoor/indoor loudspeaker, microphones and universal remote controls. Among
other innovative products, Recoton has also developed the "CD20" adapter, which
allows a portable compact disc (CD) player to operate through an automobile
cassette player; the HydroBath(R), a non-contact multimedia CD, CD-ROM and DVD
cleaner; and amplified TV and AM/FM radio antennas.

INDUSTRY BACKGROUND

     The consumer electronics market is large and diverse, having evolved from
phonographs, radios, home stereos and televisions to encompass a wide variety of
innovative technologies and products. These include personal computers, CD
players, camcorders, video cassette recorders (VCRs), cellular and cordless
telephones and video game systems. 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. Advances in certain
technologies for mature products such as televisions, camcorders and telephones
are leading to new innovations such as high definition television (HDTV), plasma
screen televisions, new satellite TV delivery systems such as direct broadcast
satellite (DBS) systems and the new digital versatile disc (DVD) systems, which
deliver ultra-high quality pictures and stereo sound. These advances should
herald a new growth in consumer electronics as they are phased in.

     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 products and in the increasing popularity of telecommuting, with the
need for more sophisticated home offices.

     The growth of consumer electronics over the last decade also has led to the
development of a distinct market for consumer electronics accessories, speakers,
multimedia and electronic game products and other aftermarket enhancements. The
market for these products is broad and highly fragmented, ranging from low-cost
products such as audio and video cables, cassette cleaners and phone cords, to
more sophisticated products such as remote controls, stereo headphones,
amplified antennas, wireless speakers and high-performance loudspeakers. Many of
these products are necessary to maintain and operate consumer electronics
products while others are used to expand, upgrade or enhance the functionality
of particular products.

     The consumer electronics retailing market, which is the primary outlet for
accessory products, is subject to intense competition among a wide variety of
retailers, such as consumer electronics, computer and office supply superstores,
mass merchants, catalog showrooms, drug chains, home centers, department stores,
direct mail merchants, TV shopping channels, warehouse clubs and audio, music
and video retailers. Competitive pressures have lead to shrinking gross margins
on consumer electronics products, leading retailers to increase their emphasis
on accessories. Although accessories typically sell at lower retail prices, the
gross profit margins realized on accessories typically are higher than on more
expensive, price sensitive, consumer electronics equipment. Additionally,
inventory costs and floor space required to display and sell accessories are
substantially less. Home and car speakers and car amplifiers typically sell at
higher profit margins than do televisions and portable audio systems. Game
products manufacturers, such as Sony and Nintendo, sell game platforms (e.g.,
Sony PlayStation(R) and Nintendo 64(R)) as low profit vehicles to increase sales
of accessories (such as joy sticks and other products which both they and the
Company sell) and software (which the Company does not sell).

     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 for selling additional consumer electronics
products and accessories.

     Recoton believes that retailers are devoting more floor space each year to
accessories, speakers, multimedia products and electronic game products,
enhancing their in-store accessory 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 looking
for 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 4000 consumer electronics products for
home and automotive aftermarket use in many consumer electronics categories. The
products are offered under a number of highly recognized brand names and are
positioned, packaged and priced to appeal to virtually every level of retailer
and customer. Suggested retail prices for most of Recoton's products range from
approximately $2 to $500, while some of Recoton's audio speakers and other newer
products have suggested retail prices of up to $5,000.

     Recoton aims to continually expand its product offerings to remain at the
forefront of the consumer electronics after market. The Company frequently
solicits feedback from its retailers on accessories for existing products, as
well as for new consumer electronics categories. Through its research and
development capabilities and its continual efforts to identify acquisition
opportunities, Recoton believes that it is able to respond rapidly to meet new
and changing consumer demands for accessories.

     The following is a detailed description (in alphabetic order) of the
Company's products; there is, however, a large degree of overlap among these
product categories:

     O    ANTENNAS. A complete line of amplified and passive indoor television
          and AM/FM antennas is offered under the RECOTON and PARSEC brand
          names. Recoton believes that it has been and continues to be an
          innovator in the introduction of amplified antennas. Recoton also
          believes that it has one of the leading industry positions in this
          market and that this market is growing due in part to the fact that
          most manufacturers have discontinued supplying antennas with new TV
          sets. Recoton's amplified antennas are ideal for use with the new DBS
          satellite receiver dishes, which dishes cannot receive local TV
          broadcasts.

     O    AUDIO ACCESSORIES. An extensive line of audio accessories designed for
          use with stereo and monaural systems (including home, portable and car
          systems), CD players, cassette tape recorders, phonographs and radios
          is offered under the RECOTON brand name. Products include cables and
          connectors, AC/DC power adapters, inverters, microphones, surge
          protection devices, foreign voltage adapters/converters and blank
          audio cassettes. In addition, the Company offers a complete line of
          high-end accessories for home theater installation under the ACOUSTIC
          RESEARCH brand name. These products include a variety of video, audio,
          speaker and digital cables, connectors, splitters, wall plates and
          hookup kits.

     O    CAMCORDER ACCESSORIES. A comprehensive line of camcorder accessory
          products is offered under the AMBICO brand name. These products
          include tripods, batteries, carry cases for camcorders and cameras,
          chargers/dischargers, cables, lights and microphones.

     O    CAR AUDIO PRODUCTS. Various audio electronic products for the
          automobile and marine aftermarket are sold under the ADVENT
          MOBILE(TM), JENSEN, ROAD GEAR(TM) and PHASE LINEAR brand names in the
          United States and MAGNAT and MACAUDIO (and certain of the U.S.) brand
          names in Europe. These automotive products include speakers,
          subwoofers, amplifiers, cassette receivers, equalizers, electronic
          crossovers, signal processors and CD players and changers. A line of
          high quality car audio accessory products is offered under the
          AAMP/STINGER, ROADGEAR, PERIPHERAL and SOUND QUEST brand names.
          These products include wires anD cables with gold-plated connectors,
          power cables, wiring and installation kits, gold-plated battery
          terminals and rings, capacitors, isolators, and assorted connectors
          and adapters.

     O    CARRYING AND STORAGE CASES. A line of carry cases for CDs and audio
          cassettes is offered under the DISCWASHER and PERFECTCASE(TM) brand
          names. The lines include CD wallets, CD/player cases, CD cases, and
          audio cassette cases. These cases are available in many colors,
          designs and fabrics.

     O    CD/AUDIO CASSETTE ACCESSORIES. A broad line of CD and audio cassette
          accessories is offered under the DISCWASHER and RECOTON brand names.
          These products include cleaning and maintenance items, such as the
          HydroBath non-contact hydrodynamic multimedia cleaner for CDs, CD-ROM
          and DVD, CD laser lens cleaners, storage boxes, connection cables and
          Recoton's proprietary CD20 adapter, which permits a portable CD player
          to be played through a car, portable or home audio cassette players.

     O    CELLULAR AND OTHER TELEPHONE ACCESSORIES. An extensive line of add-on
          and replacement accessories for the expanding cellular telephone
          market and the new personal communication system (PCS) market is
          offered under the RECOTON brand name. Products, including nickel
          cadmium, lithium ion and nickel metal-hydride batteries, battery
          eliminators, travel chargers, desktop chargers, "hands-free" kits,
          extended-life kits and antennas, among other products, compliment the
          cellular phones of virtually all leading manufacturers. Numerous other
          telecommunications accessories are offered under the RECOTON brand
          name. These products include antennas and rechargeable batteries for
          cordless phones, cables, extension cords, coiled handset cords, and
          "do-it-yourself" installation items, such as duplex and triplex
          adapters and wall plates. Recoton's patented TANGLEFREE(TM)adapter
          eliminates the twisting from coiled telephone cords.

     O    COMPUTER/MULTI-MEDIA ACCESSORIES. An extensive computer accessory
          product line is offered under the INTERACT brand name. These products
          include joy sticks, controllers, wheels, shielded computer speakers,
          UL-listed surge protection devices, connection cables, disc and disc
          drive cleaning products, dust covers, copy holders, mouse and wrist
          pads, stands for monitors and printers, storage cabinets, screen
          filters with anti-radiation properties, paper, ribbons and storage
          cases. Shielded computer speakers are sold under the ADVENT, JENSEN
          and AR brand names.

     O    GAME (VIDEO AND COMPUTER) ACCESSORIES. An expanding line of video and
          computer game accessories for use with leading game consoles made by
          Nintendo, Sony and Sega and for personal computers is offered under
          the INTERACT brand name. These products include joysticks,
          controllers, game steering wheels, cleaners, maintenance kits,
          replacement AC power adapters, switches, control pads, lights, surge
          protectors, screen magnifiers and carry bags for hand-held games. Sony
          and Nintendo have granted licenses to the Company to use certain of
          their marks in connection with the sale of certain of the Company's
          products..

     O    HEADPHONES AND SPEAKERS. A full line of stereo headphones and mini-
          and bookshelf-sized stereo speakers is offered under the DISCWASHER
          and RECOTON brand names and, in Europe, under the ROSS name. Some of
          these products also are sold to OEM customers. Headphone models
          include earbud, lightweight, convertible, headband, and open- and
          closed-earcup models, as well as patented noise reaction headphones.
          Mini- and bookshelf-sized stereo speakers, in both amplified and
          nonamplified versions, are offered for use with portable CD and
          cassette players and computers.

     O    LOUDSPEAKERS. Advanced design and technology hi-fidelity,
          hi-performance stereo and home theater loudspeaker systems are offered
          under the ADVENT, AR/ACOUSTIC RESEARCH, JENSEN, NHT (NOW HEAR THIS),
          and RECOTON brand names and, in Europe, under the MAGNAT and HECO
          brand names. Each of the speaker lines is positioned to reach a
          different target market segment. In addition, there are a wide variety
          of wireless 900 MHz amplified speakers for indoor and outdoor use,
          speakers for use with computers and a variety of portable stereo
          speakers for CD listening.

     O    900 MHZ AND OTHER WIRELESS TECHNOLOGIES. A proprietary line of
          wireless products, including patented 900 MHz products, using 900 MHz
          technology and 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 loudspeakers, both indoor and outdoor types, or
          to other television sets within 150 feet is offered under the JENSEN,
          ADVENT and RECOTON brand names. Recoton believes it is the leader in
          developing and marketing a broad range of 900 MHz wireless technology
          products such as stereo headphones, amplified speaker systems and
          video broadcast systems. These products offer performance comparable
          to hard-wired systems and have been expanded to include wireless
          microphones, public address systems, a portable outdoor/indoor
          weather-resistant speaker, computer speakers and home theater
          speakers.

     O    REMOTE CONTROLs. A complete line of advanced-technology, universal
          remote controls for replacement of lost or damaged remotes and to
          program multiple remotes into a single remote is offered under the
          SOLE CONTROL, JENSEN and RECOTON brand names. They allow remote
          operation of televisions, VCRs and other electronic products, and are
          offered with various features at different price levels. Recoton
          believes that its remote controls contain the largest code library in
          today's market and therefore can operate virtually all
          remote-controllable consumer electronic products. In 1996, the Company
          introduced a new patented advanced universal remote control, combining
          RF wireless technology and IR (infrared) technology. This unique
          remote control sends signals through walls, floors and ceilings to
          operate remote control products in other rooms and also functions as a
          standard line-of-sight remote control.

     O    VIDEO ACCESSORIES. A broad line of accessories that are used for the
          installation, maintenance, interconnection and enhancement of VCRs and
          camcorders is offered under the RECOTON brand name. These products
          include Recoton's GOLD CONNECTION(TM)line of hookup anD dubbing
          cables, blank VHS video tapes, video head cleaners, video rewinders,
          dust covers, connectors, splitters and storage products. Recoton also
          offers many switching, dubbing, listening and viewing accessories that
          can enhance the visual and audio performance of televisions and VCRs.
          In addition, a full line of accessories for satellite systems is
          offered under the RECOTON brand name. These include installation kits
          and parts, cables, connectors, splitters, surge protectors and various
          RF products including remote control and video signal
          transmitter/receivers.

CUSTOMERS AND DISTRIBUTION

     Recoton seeks to provide access to its products on a global basis in as
many countries and through as many distribution channels as possible. The
Company's customers include consumer electronics, computer and office supply
superstores, mass merchants, catalog showrooms, drug chains, home centers,
department stores, direct mail merchants, TV shopping channels, warehouse clubs
and audio, music and video retailers. Recoton has a strong and diverse customer
base of more than 1,000 retail customers which the Company believes have more
than 30,000 outlets in the United States and Canada. In addition, Recoton has
over 2,000 customers for its car stereo installation products. The Company's
European customer base is similarly diverse.

     Within the past few years, Recoton has expanded its presence in the global
marketplace. Through its Hong Kong subsidiaries and Recoton Japan, Recoton sells
products to customers in China, Japan and other Asian countries and, through its
Hong Kong subsidiaries, it sells Asian-sourced products to OEM customers around
the world. Through its Canadian subsidiary, Recoton markets and distributes
products to Canadian retailers. Through its German, Italian, U.K. and Hong Kong
subsidiaries, Recoton markets and distributes products to European retailers and
distributors. The STD acquisition in 1995 generated significant growth in terms
of Asian sourcing and sales and the Jensen acquisition in 1996 has led to
significant growth in European sales. Recoton views its OEM and international
customer base as an important source for continued growth.

     Recoton believes that its broad customer franchise provides it with
significant competitive advantages and will continue to be a source of future
growth. While some of Recoton's retail customers carry Recoton's broad product
lines, others carry only certain lines or products and are viewed by Recoton as
prospects for additional sales. The strong customer base provides a distribution
channel for new products, including products acquired through recent
acquisitions. Recoton expects to benefit as its existing retail customers open
new retail locations. As the retail consumer electronics business is highly
competitive, it is normal to expect that various retailers (including chains)
may suffer economic reversals, and may cease operations. While Recoton has lost
some customers due to bankruptcy or merger, such events have not to-date had any
major adverse economic impact on the Company.

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

     Although certain of Recoton's customers have contributed significantly to
Recoton's sales, only one customer represented more than 10% of its sales in any
of the last three years. In 1997, sales to Wal-Mart represented approximately
$57 million, or 11% of the total sales for the year. Historically, the Company's
sales and earnings have been higher in the second half of each year, which
difference has increased in the past two years.

FOREIGN AND DOMESTIC OPERATIONS

     Since 1995, foreign operations have become a more significant portion of
Recoton's business. 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, Item 8 below). Export sales from Recoton
Corporation and its domestic subsidiaries were less than 10% of consolidated
sales in each of the three years ended December 31, 1995, 1996 and 1997.

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 its retail customers by offering "one-stop shopping" for its products, so
as to better attract and support retailers who are consolidating their vendor
relationships to achieve greater purchasing and operating economies, and by
offering extensive marketing, inventory management and customer support
services, including the following:

     O    CONSUMER SUPPORT PROGRAMS. The Company offers toll-free "hot lines"
          staffed by trained, product-knowledgeable people who provide
          instructions and setup and other information for all Recoton products.
          They also handle "repair or replace" warranties on certain products.

     O    DISTINCTIVE PACKAGING. The Company's packaging approach is to offer
          modern, easy to understand, color-coded packages designed to attract
          consumer attention, increase brand awareness and provide detailed
          product information.

     O    DROP SHIPPING. The Company provides retailers "just-in-time" inventory
          management through immediate delivery to multiple retail locations.

     O    ELECTRONIC DATA INTERCHANGE. The Company has established
          computer-based systems to enable customers to send orders, track
          shipping, receive invoices and make payment by computer, thereby
          expediting the ordering and payment process, lessening errors of
          transcription and reducing personnel costs.

     O    EXTENSIVE PRODUCT PROMOTION. Promotional efforts include in-store
          merchandising, advertising and elaborate product displays for all
          product lines.

     O    IN-STORE INVENTORY MANAGEMENT. Through detailing, the Company
          periodically counts, restocks and fills in-store accessory displays.

     O    PRE-TICKETING SERVICES. Recoton places its customers' price stickers
          on items prior to shipment from price lists provided by certain retail
          customers.

     O    PRODUCT DISPLAY DESIGNS. The Company provides retailers with a
          computerized color picture of their individual in-store accessory
          layout, called planograms, to help them maximize display and sales.
          The planograms depict how the actual merchandise will look on-site,
          fully stocked, and are accompanied by a detailed report with each
          item's cost, suggested retail price, anticipated turns and resulting
          projected revenue and profit.

     Retailers can work with Recoton's sales staff or utilize Recoton's modern
color catalogs to choose either a wide assortment of products, a limited number
of "best seller" items or any other combination as desired. Recoton also offers
pre-selected assortments of accessories based on the national movement of its
products. Most of Recoton's smaller accessory products are supplied in
attractive blister packs designed to be displayed in hang-tag fashion on
five-row pegboards or slat boards, typically ranging from 2 to 24 feet wide.

     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. Recoton's
promotional efforts have included television advertisements and Sunday newspaper
advertising supplements devoted exclusively to its products. The Company also
advertises and provides support via a number of Internet web sites, including
the following:

          Acoustic Research                 www.acoustic-research.com
          AAMP                              www.stinger-aamp.com
          Advent                            www.poweredpartners.com
          InterAct                          www.interact-acc.com
                                            www.gameshark.com
          Jensen                            www.jensenaudio.com
          Magnat                            www.magnat.de
          NHT                               www.nhthifi.com
          Phase Linear                      www.phase-linear.com
          Recoton                           www.recoton.com
          Recoton Financial                 www.rcot.com
          Ross                              www.rosscp.com
          Sole Control                      www.solecontrol.com


     Recoton's products are sold worldwide by Recoton's employed sales
executives and regional managers and independent sales representative
organizations and exclusive distributors. Recoton compensates its independent
sales representatives on a commission basis. Regional sales staff personnel work
in the field with Recoton's customers and independent sales representative
organizations.

     The Company has no significant backlog orders.

ACQUISITIONS

     STRATEGY AND OVERVIEW

     A significant part of Recoton's growth strategy has been to expand through
acquisitions. Through 14 acquisitions since 1989, Recoton has obtained new
products and technologies, strengthened its new product offerings, increased its
manufacturing capacity, enhanced overseas distribution capabilities and
broadened its customer base. Recoton seeks to maximize the benefit of each
acquisition by reducing the overhead, manufacturing, sourcing, packaging,
distribution, sales and advertising expenses of the acquired business through
consolidation and coordination. While there may be certain duplications of
expenses immediately following an acquisition, Recoton believes that cost
savings will result from the introduction of efficiencies of scale, thereby
making Recoton and its products more competitive.

     ACQUISITION HISTORY

     Since 1989, Recoton has acquired all or selected assets or product lines
of, or merged with, the following companies:

YEAR   COMPANY                      PRINCIPAL PRODUCT LINES

1997   AAMP of Florida, Inc.,       Car audio accessories marketed under the
       d/b/a AAMP of America,       tradenames STINGER and PERIPHERAL in the
       Inc.                         United States

1997   Capa Industries, Inc.        Audio electronic design and manufacturing

1997   Tambalan Limited             Headphones and other consumer products
                                    sold under the ROSS name in the UK and
                                    other countries in the European Union

1996   Heco GmbH                    A German brand of home audio loudspeakers
                                    sold worldwide

1996   International Jensen         Loudspeakers and other audio products for
       Incorporated and             home and automotive aftermarket use
       subsidiaries                 worldwide

1995   STD Holding Limited          Video and computer game joysticks,
       and subsidiaries             controllers and accessories marketed
                                    primarily under the trade name INTERACT and
                                    other names worldwide

1995   Ampco Industries,            Products for car stereo installation
       Inc., d/b/a Ampersand        operations

1994   Sound Quest, Inc.            Car stereo installation and accessory
                                    products

1994   Infrared Research            Universal remote controls marketed under
       Laboratories, Inc.           the trade name SOLECONTROL

1992   Ambico, Inc.                 Camcorder and video accessories

1991   Discwasher Inc.              Consumer electronics maintenance products

1991   Parsec Delaware Ltd.         AM/FM radio and TV antennas

1989   All Channel Products Inc.    Indoor television antennas marketed under
                                    the trade name REMBRANDT

1989   Calibron, Inc.               Stereo headphones and consumer electronics
                                    accessories


     JENSEN ACQUISITION

     In August 1996, a Recoton subsidiary merged with International Jensen
Incorporated, a Delaware corporation, which was then was renamed Recoton Audio
Corporation (Recoton Audio or RAC). Recoton Audio, directly and through its U.S.
and foreign subsidiaries, is an international designer, assembler and marketer
of home and car stereo loudspeakers, car stereo players and amplifiers sold
under the ADVENT, JENSEN, PHASELINEAR, and NHT (NOW HEAR THIS) and, in Europe,
MACAUDIO and MAGNAT brand names. Its sales for the last fiscal year prior to the
acquisition, excluding the sales by the original equipment manufacturing (OEM)
business (which was not acquired), were approximately $150 million.

     The aggregate merger consideration paid to the Jensen stockholders was
approximately $55.6 million. Jensen had approximately $34 million in notes and
loans payable immediately after the merger.

     Substantially all of RAC's U.S. home audio speaker assembly, warehousing
and research and development operations (carried on through the newly
reorganized subsidiary Recoton Home Audio, Inc.) are in Benicia, California. Its
corporate headquarters and mobile electronics operations were relocated to Lake
Mary, Florida in late 1997. Recoton Audio's subsidiaries have operations in
Germany, Italy, the United Kingdom and Japan.

     The merger was preceded by the sale of Jensen's OEM business, including its
component manufacturing facilities, to IJI Acquisition Corp. (IJI Acquisition)
and the sale of the OEM business receivables to Harris Trust and Savings Bank,
both sales yielding an aggregate of approximately $18.5 million (after final
balance sheet adjustments), with IJI Acquisition also assuming related debt and
liabilities. IJI Acquisition was renamed International Jensen Incorporated after
the acquisition of Jensen by the Company. IJI Acquisition's sole stockholder is
Robert G. Shaw, the former president of Jensen and, between August 1996 and
August, 1997, a director and officer of Recoton.

     Recoton Audio and IJI Acquisition are parties to a number of agreements,
including a Shared Facilities Agreement, a Non-Competition Agreement and a
License Agreement. The Shared Facilities Agreement governs the use of facilities
in Schiller Park leased by Recoton Audio but also used by IJI Acquisition; such
agreement runs through September 30, 2000, although it may be terminated by IJI
Acquisition after October 1, 1999 upon payment of an early termination fee. The
Non-Competition Agreement provides that Recoton Audio and IJI Acquisition each
will not compete in certain areas of each other's business, with certain
exceptions. Pursuant to the August 1996 License Agreement, Recoton Audio granted
IJI Acquisition a ten-year, worldwide royalty-bearing license to use the
trademarks of Recoton Audio in OEM business applications in the automotive,
truck, recreation vehicle, aircraft or other motorized vehicle markets.

     HECO AND TAMBALAN ACQUISITIONS

     A significant component of the business acquired through the merger with
Jensen was its European sales operations. Recoton has expanded the RAC presence
in the European Union through two recent acquisitions. In late 1996 Recoton
acquired the Heco brand of home loudspeakers through a purchase of selected
assets from the receiver in bankruptcy of Heco GmbH. These assets included
trademarks, intellectual property, inventory, tools, office equipment and
selected other assets, as well as the right to use a manufacturing facility in
eastern Germany through June 1997. The purchase price, including closing costs,
was approximately $1.3 million. During its last year of operations prior to the
acquisition, Heco's sales were approximately $12.2 million.

     In February 1997, Recoton acquired the stock of Tambalan Limited, a United
Kingdom corporation trading under the name Ross Consumer Products (Tambalan).
Tambalan sells headphones and other consumer products under the name "ROSS" in
the United Kingdom and other European Union countries and, through its Hong Kong
operations, to various Pacific area markets. The purchase price, exclusive of
closing costs, was approximately $285,000; at the time of the closing, Tambalan
had notes and loans payable of approximately $2.9 million. The annual sales of
Tambalan were approximately US $8 million in its last fiscal year prior to the
acquisition.

     AAMP ACQUISITION

     In November 1997, a Recoton subsidiary merged into AAMP of Florida, Inc., a
Florida corporation. AAMP is a leading car audio accessories company whose
products are sold under the STINGER and PERIPHERAL brands, among others. AAMP's
1996 sales were approximately $17 million (unaudited). In consideration for
their shares in AAMP, the former stockholders of AAMP received 169,706 Recoton
Common Shares, valued at approximately $2.3 million. The Company retained
substantially all of the employees of AAMP, including management. Because of
AAMP's expertise in tele-marketing its products to installation oriented car
audio retailers, Recoton intends to utilize AAMP's telemarketing expertise to
distribute a variety of other product lines.

     CAPA ACQUISITION

     In December 1997, a Recoton subsidiary acquired substantially all of the
assets of Capa Industries, Inc., a debtor in possession. Capa was an audio
electronic design and manufacturing company based in Valencia, California which
was under contract with a Recoton subsidiary to provide certain development
related services. Recoton understands that Capa's annual sales for the prior
fiscal year were approximately $1.7 million, of which approximately $1.1 million
represented transactions with the Company. The $1.1 million cost of the Capa
acquisition is comprised of a nominal cash payment, forgiveness of pre-petition
and debtor-in-possession financing owed by Capa to Recoton aggregating
approximately $873,000, costs related to lease buyouts and consolidation into
the Company's facilities and closing costs. The principals of Capa were engaged
by the Recoton subsidiary after such acquisition. In 1998 Recoton expects to
integrate the Capa operations into its engineering and manufacturing facilities
in Benicia, California to provide the Company with "state of the art" electronic
components.


RESEARCH AND DEVELOPMENT

     Recoton maintains research and development facilities at its Florida,
California, Hong Kong and Illinois locations and in addition utilizes selected
outside engineering arrangements. In conjunction with its agents, customers and
contract manufacturers, Recoton continuously reviews its product line and
identifies, develops and introduces new products for growing areas of consumer
demand. Recoton seeks to develop innovative products to achieve attractive
margins and to expand recognition of the Company's brand names.

     Through its product development efforts, Recoton 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. Recoton has been expanding its engineering department to
increase its in-house development capabilities.

     Recoton has focused much of its R&D efforts on developing new and advanced
home and car audio loudspeaker systems and audio and video products based on
its 900 MHz and various other frequencies of RF wireless technology. Wireless
products which Recoton has brought to market include a home theater speaker
system, stereo headphones, amplified indoor stereo speakers, a portable
weather-resistant outdoor speaker, microphones, a public address system, a
computer speaker system, a combination radio frequency/infrared (RF/IR) remote
control and a wireless monitoring system. In addition, Recoton has established a
digital engineering group to support its product lines so that the Company can
be well positioned to take advantage of the expected digital revolution in
consumer electronics.

     Additional products in development include new advanced 900 MHz headphones
and speakers, a wireless 2.4 GHz transmission system 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 in the process of
redesigning the speaker lines sold under the Jensen and Advent brands and adding
models to the AR/Acoustic Research line of speakers. InterAct will begin
manufacturing a line of surge protectors in the second half of 1998 which
contain unique child safety features. In development are additions to InterAct's
line of joysticks and controllers for use with Nintendo 64 bit consoles, Sony
PlayStation and PCs.

     In 1995, 1996 and 1997, Recoton's expenditures for research and development
were approximately $1,608,000, $2,897,000 and $4,245,000, respectively, and for
product and packaging design were approximately $1,214,000, $1,331,000 and
$2,472,000, respectively. The growth in R&D expenditures from 1995 to 1996 is
primarily reflective of the acquisition and growth of the STD business and, to a
lesser degree, the growth of the speaker business through Christie Design and
Recoton Audio and from 1996 to 1997 is primarily reflective of a full year of
Recoton Audio operations.

PRODUCTION

     Recoton's strategy is to produce high-quality low-cost consumer electronics
products for its retail and OEM customers.

     Recoton utilizes third-party manufacturers, primarily in China and Taiwan,
for a majority of its products or components of such products. This includes
components for loudspeakers and certain other car audio products, acquired with
the Jensen acquisition, some of which were originally sourced in the United
States but which have been re-sourced to Asian vendors. The Company's vendors
are required to produce 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 or California facilities.

     Operations at Recoton's Lake Mary, Florida facilities include molding, hot
stamping, silk screening, packaging and electronics assembly. Operations
conducted at the facilities in California include the assembly of home speakers
sold under the NHT, AR/Acoustic Research, Jensen and Advent brands and speakers
for the Company's OEM customers.

     The Company's facilities in the People's Republic of China are used
primarily to manufacture video game and computer accessories sold under the
InterAct brand but are also used to manufacture other Recoton products such as
computer speakers and remote controls. Recoton's in-house capabilities have been
a major strength in obtaining and increasing its OEM business.

     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.

     Recoton generally uses standard parts and components which can be purchased
from multiple sources, although in certain instances a business decision is made
to source certain products from a single supplier. Recoton's wireless products
are among the products currently sourced from one vendor, which in turn
subcontracts component manufacturing to other sources. While the loss of any
single-source vendor could have a short-term adverse impact on the manufacturing
and shipping of products if inventory levels were depleted, Recoton does not
believe that the loss of any single vendor would have a long-term adverse
effect. Recoton's policy of maintaining substantial inventory helps to lessen
the risks of offshore manufacturing. Recoton also maintains additional inventory
of long-lead-time items and continually evaluates alternative supply sources.


COMPETITION

     The consumer electronics market is highly fragmented and subject to intense
competition. Recoton's competitors include (i) various companies which offer
broad lines of consumer electronics products; (ii) other companies which offer
certain product lines; and (iii) manufacturers of brand name consumer
electronics hardware. Specific competitors include Nintendo and Sony with
respect to video game products; Gemini/Magnavox, Philips, Thomson/RCA and Sony
with respect to various accessories; Bose, Boston Acoustics, Infinity, JBL and
Polk with respect to home speakers; and Kenwood, Pioneer, Audiovox and Sony with
respect to automotive aftermarket audio products. Certain of Recoton's existing
or potential competitors have greater financial, technical, marketing or
manufacturing resources and may develop new products that are superior to those
of Recoton.

     Recoton competes 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. Recoton sells products in
the United States and Canada under the AAMP, ADVENT, AMBICO, AMPERSAND,
AR/ACOUSTIC RESEARCH, DISCWASHER, INTERACT, JENSEN, NHT (NOW HEAR THIS), PARSEC,
PERIPHERAL, PHASE LINEAR, RECOTON, REMBRANDT, SOLE CONTROL, SOUND QUEST, and
STINGER brand names, among others . It sells products overseas under the HECO,
MAGNAT, MACAUDIO and ROSS brand names, in addition to sales under certain of
the other brand names used in the United States. As a result of its own product
development, recent acquisitions and 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, cassette head demagnetizer,
cassette head cleaner, antennas and an adapter to eliminate tangles in coiled
telephone cords. Additionally, Recoton has various patents pending including
applications relating to speakers, surge protectors, remote controls, car
stereos and battery terminals.

     Recoton licenses certain of its proprietary rights for use in products
manufactured by others. 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.

REGULATORY AND ENVIRONMENTAL MATTERS

     With operations in numerous jurisdictions, the Company is subject to the
laws of general business applicability of many national, state and local
governments. 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.

EMPLOYEES

     At December 31, 1997, Recoton had approximately 4,100 employees worldwide,
of which approximately 1,200 resided in the United States or Canada,
approximately 2,800 resided in Hong Kong, the People's Republic of China or
Japan and approximately 120 resided in Germany, Italy or England. The number of
employees in the People's Republic of China fluctuates significantly on a
seasonal basis, between approximately 2,000 and 3,000. Of the U.S. and Canadian
employees, approximately 105 were engaged in sales and marketing, 45 in
engineering, research and development, 750 in operations, manufacturing and
warehousing and 300 in management, support services and administration.

     Approximately 500 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 runs through August 3, 1999
and approximately 34 employees in Canada are covered by a collective bargaining
agreement with the National Automobile, Aerospace, Transportation and General
Workers Union, which was entered into in 1997 and runs through August 10, 2000.
The negotiation and development of the initial Canadian contract went smoothly
and the Company believes it has a positive relationship with both the union and
its members. This unionization did not result in a material impact on wages.
Recoton considers its employee relations to be good.


DIRECTORS AND EXECUTIVE OFFICERS OF RECOTON CORPORATION

     The following table sets forth the names, ages and positions of the
directors and executive officers of Recoton Corporation as of December 31, 1997:

NAME                        AGE     POSITION

Robert L. Borchardt         59      Director; President, Co-Chairman of the
                                    Board, Chief Executive Officer
Herbert H. Borchardt        91      Director; Co-Chairman of the Board
Stuart Mont                 57      Director; Chief Operating Officer, Chief
                                    Financial Officer, Executive Vice
                                    President-Operations, Secretary
Peter Wish                  62      Director; Executive Vice President-
                                    Administration
Peter E. Dayton             61      Senior Vice President-National Sales
Terrence O'Flynn            53      Senior Vice President-OEM Sales
Dennis Wherry               53      Senior Vice President-Operations
Craig W. Dykes              39      Vice President-Information Systems
Peter M. Ildau              60      Vice President-Corporate Communications
Joseph H. Massot            53      Director; Vice President, Treasurer,
                                    Principal Accounting Officer, Assistant
                                    Secretary
William T. McGreevy         54      Vice President-Engineering
Richard D. Miller           36      Vice President-Compliance
Kevin J. Murphy             47      Vice President-Marketing
Stephen Chu                 40      Director; President of STD Holding Limited
George Calvi                47      Director
Paul Feffer                 76      Director
Irwin S. Friedman           64      Director
Joseph M. Idy               57      Director
Ronald E. McPherson         68      Director

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

     HERBERT H. BORCHARDT has served as a director of Recoton since 1945 and as
Co-Chairman since 1992 and as Co-Chief Executive Officer from 1992 until 1996.
He served as Executive Vice President from 1945 until 1952, as President from
1952 until 1976 and as Chairman from 1976 until 1992.

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

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

     PETER E. DAYTON has served as Senior Vice President-National Sales since
1993. He served as Vice President-Sales from 1989 until 1993, as National Sales
Manager from 1987 to 1989 and as National Account Sales Manager from 1982 until
1987.

     TERRENCE O'FLYNN has served as Senior Vice President-OEM Sales since 1996.
He was Senior Vice President-Marketing from 1994 until 1996. Prior thereto, he
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
thereto, Executive Vice President of Mitsubishi Electronics America - Consumer
Products Group.

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

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

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

     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 served as Recoton's Controller and Assistant
Treasurer from 1978 until 1989.

     WILLIAM T. MCGREEVY has served as Vice President-Engineering since 1991.
From 1989 to 1991 he was Director of Engineering.

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

     KEVIN J. MURPHY has served as Vice President-Marketing since 1996. He
served as Vice President- Purchasing from 1991 to 1996, as Director of
Purchasing from 1988 until 1991, as Assistant Vice President from 1989 until
1991 and as Regional Sales Manager from 1980 until 1988.

     STEPHEN CHU has served as a director of Recoton since January 1997. He has
been President and a Managing Director of STD Holding Limited, a Hong Kong
subsidiary of the company, and of its various subsidiaries since 1990. STD was
acquired by the Company in 1995. Mr. Chu was elected President of Recoton Japan
Inc. in 1998.

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

     PAUL 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 and a consultant to Merck & Company's publishing division. He 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. 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. He has
been President, Chief Executive Officer and principal shareholder of I. Friedman
Equities, Inc., a corporate financial consulting firm, for more than five years.

     JOSEPH M. IDY has served as a director of Recoton since 1990. He 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. Until
his retirement in 1989, he served as Secretary of the Company from 1964 and as
Vice President of the Company from 1978.

ITEM 2.  PROPERTIES.

     Recoton's principal domestic manufacturing, assembling, packaging, product
research and development, warehousing and distribution operations are located in
Lake Mary, Florida, a suburb of Orlando. The Lake Mary complex, owned by the
Company, consists of two buildings totaling approximately 763,000 square feet,
including a recent 318,000 square foot warehouse addition, situated on two
near-by parcels aggregating approximately 43 acres, and includes state-of-the
art office, warehouse, manufacturing and distribution facilities.

     Recoton and its subsidiaries leased the following facilities as of December
31, 1997:

<TABLE>
<CAPTION>
      LOCATION                 Description                               Companies Primarily Using
      -------------            -----------                               -------------------------
<S>                            <C>                                       <C>
      New York, NY             Sales and corporate offices               Recoton
      Baltimore, MD            Sales and warehouse facilities            InterAct
      Maitland, FL             Warehouse                                 Recoton (closed February
                                                                            1998)
      Ft. Lauderdale, FL       Sales office                              Interact
      Clearwater, FL           Sales and warehouse facilities            AAMP
      Schiller Park, IL        Sales, R&D, engineering and               Recoton and Recoton Audio
                                  distribution
      Springfield, MO          Warehouse facilities                      AAMP
      Sparks, NV               Warehouse facilities                      AAMP
      Lake Tahoe, NV           Office                                    Christie Design
      Benecia, CA              Loudspeaker manufacturing, assembly,      Recoton Audio
                                R&D, warehouse and office facilities
      Chatsworth, CA           Manufacturing, warehouse and office       Capa
                                facilities
      San Diego, CA            R&D and assembly facility                 AAMP
      Pickering, Ontario,      Office and warehouse facilities           Recoton Canada
        Canada
      Bolton, England          Offices, sales and warehouse              Tambalan/Ross
      London, England          Sales and warehouse                       Recoton (UK)
      Pulheim, Germany         Office and distribution facilities        Magnat, MacAudio and
                                                                             HECO
      Bologna, Italy           Offices and warehouse                     Recoton Italia
      Milan, Italy             Offices                                   Arcona
      Hong Kong, PRC           Offices and R&D                           STD, Recoton (Far East)
                                                                             and Ross HK
      Tokyo, Japan             Offices                                   Recoton Japan
</TABLE>


     In addition to the leased facilities noted above, a Recoton subsidiary owns
and leases manufacturing and warehousing facilities in the Shenzhen Province of
the People's Republic of China.

ITEM 3.  LEGAL PROCEEDINGS.

     CUSTOMS INVESTIGATION. In July 1994, agents of the United States Customs
Service, working in conjunction with the United States Attorney's office in
Orlando, Florida, seized property and business records from the Company's Lake
Mary, Florida facility pursuant to a search warrant and commenced a criminal and
civil investigation. The Company is in communication with the government
regarding such investigation, which the Company has been advised has focused on
country of origin marking, duty-free import status 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. Management is
hopeful of reaching a settlement of this matter. However, based on the current
status of the Company's communication with the government, the Company is unable
to make a realistic estimate of the probable amount or probable range of amounts
for its ultimate outcome, which could be material in relation to the Company's
current operations and/or financial condition.

     STOCKHOLDER SUITS. In connection with the then-proposed merger with Jensen,
certain stockholders of Jensen filed actions in the Court of Chancery of the
State of Delaware against Jensen, its directors, Recoton, RC Acquisition Sub
Inc. (RC Acquisition), IJI Acquisition, William Blair & Company and William
Blair Leveraged Capital Fund seeking to enjoin the Jensen merger and obtain
damages and other equitable relief. The Delaware Chancery Court denied in its
entirety the plaintiff's motion for a preliminary injunction. In April 1997 the
plaintiffs filed a motion to approve the dismissal of such action with
prejudice, which motion is still pending. Plaintiff's counsel is seeking
approximately $340,000 for its fees and expenses, which the Company is
contesting.

     OTHER. Although the Company is also, from time to time, involved in
ordinary, routine litigation incidental to its business, it is not presently a
party to any other legal proceeding, the adverse determination of which, either
individually or in the aggregate, would be expected 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.

                                     PART II

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

     The Company's Common Stock is 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 the Company's Common Shares as
reported on the Nasdaq Stock Market since January 1, 1996:

  QUARTER ENDED                                       HIGH              LOW

  1996
           March 31...........................       $22.50           $16.50
           June 30............................        21.25            16.50
           September 30.......................        18.25            14.25
           December 31........................        17.00            13.00

  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 (through March 26, 1998)          25.625           13.125

     On March 26, 1998, the last reported sale price for the Company's Common
Shares on the Nasdaq Stock Market was $25.375 per share. As of March 26, 1998,
there were 391 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 the
Adjustable Rate Senior Notes due January 6, 2007 (the Senior Notes), 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. Pursuant to a written agreement executed
in the Second Quarter of 1997 but effective February 25, 1997, the Company
issued 5,311 shares of its Common Stock, through certain subsidiaries of the
Company, to Gian Piero Staffa, the Admministratori of the Company's Italian
subsidiary Recoton Italia s.r.l., at $15.25 per share, the fair market value
thereof at February 25, 1997. Such issuance was in satisfaction of the
Admministratori's right under a prior agreement with RAC to be paid a portion of
his annual compensation ($81,000 with respect to calendar 1995) in stock, which
the parties agreed would henceforth be issued in stock of the Company instead of
stock of RAC.

     On November 18, 1997 shares were issued to the former stockholders of AAMP
pursuant to the merger with AAMP, as follows, all of which were issued at an
exchange price of $14.7312 per share (a price computed at the average closing
price over a stated period prior to the closing date of the merger):

                    Micah Ansley                114,383
                    Diane Eberlein               42,426
                    Joyce Ansley                 12,897

     The issuances of the stock noted in the prior two paragraphs was exempt
from registration pursuant to Section (2) of the Securities Act of 1993, as
amended, as not involving a public offering based in part on certain
representations made and undertakings given by the acquiring shareholders

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, 1997 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, 1997
appears in this report. The selected consolidated financial data should be read
in conjunction with the consolidated financial statements and notes thereto of
the Company and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this report.

<PAGE>


<TABLE>
<CAPTION>

                                                                                Year Ended December 31,

                                                                   1993           1994         1995           1996          1997
                                                                   ----           ----         ----           ----          ----

                                                                      (In thousands, except income per share data)

STATEMENT OF OPERATIONS DATA:
<S>                                                             <C>            <C>           <C>            <C>           <C>
      Net sales......................................           $121,364       $163,973      $212,677       $331,700      $502,048
      Cost of sales..................................             72,607         97,317       129,981        206,715       306,725
                                                                  ------        -------      --------       --------      --------
             Gross profit............................             48,757         66,656        82,696        124,985       195,323
      Selling, general and administrative expenses                36,290         49,454        62,747        109,194       175,873
                                                                  ------        -------      --------       --------       -------
           Operating income                                       12,467         17,202        19,949         15,791        19,450

      Interest expense...............................              1,106            608           793          4,946        12,496
      Investment income .............................                (11)          (479)         (569)          (271)          (534)
                                                                    ----        -------       -------    ------------       -------

      Income before income taxes                                  11,372         17,073        19,725         11,116         7,488
      Income tax (provision) credit                               (4,050)        (5,269)       (4,672)        (2,736)        6,093
                                                               --------       ---------      ---------      ---------       -------

             Net income..............................             $7,322        $11,804       $15,053         $8,380       $13,581
                                                                  ======        =======       =======     ==========       =======

      Income per share (1)(3)........................              $0.88          $1.13         $1.34          $0.73         $1.18
                                                                   =====          =====         =====          =====         =====

      Weighted average shares (2)(3)                               8,343         10,421        11,255         11,542        11,546
                                                                   =====         ======        ======         ======        ======




                                                                                      December 31,

                                                                  1993           1994         1995             1996          1997
                                                                  ----           ----         ----             ----          ----

                                                                                     (In thousands)

BALANCE SHEET DATA:
    Working capital..................................            $30,454        $83,223       $96,402       $158,807      $222,388
    Total assets.....................................             75,439        118,764       185,054        334,733       407,262
    Short-term debt, including current portion of
       long-term debt................................             22,101            863        18,307         51,628        14,570
    Long-term debt...................................              6,083          5,221        20,511        101,753       161,427
    Stockholders' equity.............................             37,839         96,634       119,397        128,474       139,283


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

(1)  Represents income per share on an as diluted basis. Basic income per share
     was $0.92, $1.18, $1.39, $0.74 and $1.19 for 1993, 1994, 1995, 1996 and
     1997 respectively. (3)

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

(3)  The income per share amounts and the number of shares used in computing
     income per share amounts in 1993, 1994, 1995 and 1996 have been restated to
     conform to SFAS No. 128.
</TABLE>

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

                              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,

                                                    1993             1994           1995           1996         1997
                                                    ----             ----           ----           ----         ----
<S>                                                 <C>              <C>            <C>            <C>          <C>
Net sales...................................        100.0%           100.0%         100.0%         100.0%       100.0%
Cost of sales...............................         59.8             59.3           61.1           62.3         61.1
                                                    ----             ------         ------         ------       ------
Gross profit................................         40.2             40.7           38.9           37.7         38.9
Selling, general and administrative expenses         29.9             30.2           29.5           32.9         35.0
                                                    -----            ------         ------         ------       ------
Operating income                                     10.3             10.5            9.4            4.8          3.9
Interest expense............................          0.9              0.4            0.4            1.5          2.5
Investment income...........................          --              (0.3)          (0.3)             -         (0.1)
                                                    ------          -------         ------          -----     -------
Income before income taxes                            9.4             10.4            9.3            3.3          1.5
Income tax (provision) credit                        (3.4)            (3.2)          (2.2)          (0.8)         1.2
                                                    -------          ------         -------        -------      -----
Net income..................................          6.0%             7.2%           7.1%           2.5%         2.7%
                                                    ======           ======          ======         ======       ======
</TABLE>


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 for Recoton Audio Corporation (RAC, f/k/a International
Jensen Incorporated), acquired in late August 1996. The second factor is growth
in the STD and InterAct video game and multi-media product lines. The third
factor is the acquisitions of Heco Audio Produkte GmbH, acquired in December
1996, Tambalan Limited, acquired in February 1997, and 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 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 RAC, InterAct and STD were the primary
contributors. The increase in gross margin percentage is attributable primarily
to a higher margin product mix.

     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 the provision for
doubtful accounts 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 has incurred debt to finance the growth
in sales of the video and computer product lines. Interest expense is expected
to increase in 1998 as additional funds are obtained to support anticipated
growth.

     The Company's income taxes and effective consolidated income tax rate have
been affected by changes in the proportion of domestic and foreign earnings and
losses. While earnings from 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 maximum rate of 16.5%. The actual tax rate from Asian
operations is dependent on the proportion of earnings from mainland China. The
Company's 1997 pretax income of $7.5 million is 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 tax credit in Germany relating to the Company's decision to
declare dividends from that subsidiary to its U.S. parent. This compares to 1996
pretax income of $11.1 million and corresponding income tax expense of $2.7
million. Management estimates that this trend will not continue in 1998 because
of projected changes in the proportion of domestic and foreign taxable earnings
and because of the expiration of a portion of a "tax holiday" applicable to
certain earnings from mainland China.

     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 has been restated. There was no material impact from the
adoption of this standard. 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.

     In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." This statement, effective for fiscal years beginning after December 15,
1997, will require 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 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 stockholders' equity. The Company has not yet
determined the manner in which it will display its comprehensive income in its
1998 financial statements.

     Also in June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information." This statement, also 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 segment performance and
deciding how to allocate resources to segments. While management is currently
evaluating the provisions of SFAS No. 131 in the context of its present and
planned operating structure, it does not currently believe the SFAS No. 131 will
result in significantly different financial statement disclosures.

COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995

     Net sales increased from 1995 to 1996 by $119.0 million or 55.9%, to $331.7
million. The sales increase is primarily attributable to sales of the speaker
and related product lines which were procured with the acquisition of the
branded product lines of RAC in late August 1996 and to a full year's sales of
the InterAct and STD video game and multi-media product lines acquired in
September 1995. RAC's net sales were $64.6 million from the date of acquisition,
while InterAct/STD's net sales in 1996 were $79.6 million, an increase of $55.0
million over the 4-month period of 1995.

     Gross profit increased from 1995 to 1996 by $42.3 million to $125.0
million, but decreased as a percentage of net sales from 38.9% in 1995 to 37.7%
in 1996. The dollar increase resulted from increased sales, of which RAC,
InterAct and STD were the primary contributors. The decrease in gross profit
percentage in 1996 was primarily attributable to the following factors: lower
than anticipated gross margins on the Company's speaker products sold by
Christie Design Corporation and RAC; a change in product mix; aggressive pricing
aimed at expanding the Company's market share in a soft consumer electronics
sales environment; and increased airfreight charges due to strong demand for new
video game products.

     Selling, general and administrative expenses increased in 1996 by $46.4
million to $109.2 million, and increased as a percentage of net sales from 29.5%
in 1995 to 32.9% in 1996. The major portions of the dollar increase were
attributable to the acquired RAC operations and also the inclusion of STD
operations for all of 1996. The percentage increase was primarily attributable
to several factors including the continuing earnout expenses related to the
acquisition of STD; higher market development expenses; the costs of Christie
Design Corporation (a subsidiary engaged in the design and marketing of audio
products which began shipments in the first quarter of 1996); increased research
and development expenses; and higher costs related to the expanded Lake Mary,
Florida facility.

     Interest expense increased by approximately $4.2 million to $4.9 million
during 1996. The increase is primarily attributable to the increased debt
associated with the acquisition and operations of RAC (acquired in August 1996),
the acquisition of STD (acquired in September 1995), and the financing of the
Company's new Lake Mary, Florida warehouse facility.

     The effective income tax rate increased to 24.6% of pre-tax income in 1996
from 23.7% in 1995. This increase is due principally to a higher proportion of
income earned in Europe which is taxed at effective rates equal to or higher
than the U.S., but partially offset by the income earned by the Company's
subsidiaries in Hong Kong and China, which are taxed at a maximum rate of 16.5%.

     As restated in accordance with FASB No. 128, basic EPS for 1996 was
$.74/share and diluted EPS was $.73/share as compared with basic EPS of
$1.39/share and diluted EPS of $1.34/share for 1995. Outstanding shares in 1996
were 11,300,000 (basic) and 11,542,000 (diluted) as compared to 10,847,000
(basic) and 11,255,000 (diluted) for 1995.

     The adoption of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" effective January 1, 1996 had no effect on the Company's
operations. Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," also became effective January 1, 1996, but the
Company decided to continue accounting for employee stock-based compensation
under APB 25 rules, as permitted under SFAS No. 123. Footnote H of the Notes to
the Consolidated Financial Statements discloses the pro forma effect on net
income and income per share as if it had adopted SFAS No. 123's alternative
accounting treatment.


                         LIQUIDITY AND CAPITAL RESOURCES

     In August 1996, the Company entered into a multibank $120 million bridge
facility, which was subsequently increased to $135 million, to accommodate the
acquisition of RAC and to finance the Company's on-going operations. In 1997,
the Company completed a $75 million private placement of 10-year senior notes.
The proceeds were utilized to reduce the bridge facility, which facility was
then converted and increased to a four-year $15 million term loan and a
three-year $71.5 million committed revolving line of credit. The four-year term
loan refinanced at more favorable interest rates $15 million of RAC indebtedness
assumed on its acquisition. In January 1998, the $71.5 million committed
revolving line of credit was restructured to a $66.5 million committed revolving
line of credit through December 1999 and a $5.0 million four-year term loan..
The outstanding borrowings and letters of credit under the revolving facility
were approximately $65.5 million at December 31, 1997. At December 31, 1997, the
Company was not in compliance with certain covenants involving the maintenance
of financial ratios and minimum tangible net worth under the note and bank loan
agreements. However, both the senior loan holders and the bank lenders have
agreed to waive these covenants at December 31, 1997 and temporarily relax them
until such time as the loan agreements have been amended to include certain less
restrictive requirements, but not later than June 29, 1998.

     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.

     At December 31, 1997, the Company had working capital of approximately
$222.4 million as compared to approximately $158.8 million at December 31, 1996.
The Company's ratio of current assets to current liabilities increased to 3.3 to
1 at December 31, 1997 as compared with 2.6 to 1 at December 31, 1996. The
increases in working capital and the working capital ratio are primarily the
result of the reclassification of loans under the Company's revolving line of
credit to a noncurrent liability as a result of extensions in their terms and
the elimination of a provision for an annual "clean-up" less the effects of
funding the growth in the video game, computer, home audio and car audio product
lines. While trade receivables increased $28.6 million due to the increased
sales volume and inventories increased $35.4 million in response to the added
sales volume, accounts payable and accrued expenses only increased approximately
$33.4 million to support the increase in inventory. In 1997, cash flows used
for operations were $12.6 million as compared to cash flows provided by
operations of $1.2 million in the prior year. This change was primarily due to
substantial increases in accounts receivable and inventories which are described
above.

     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 $710,000; no shares were repurchased pursuant to
such authorization in 1996 or 1997. In June 1996, the Board of Directors
authorized, under certain circumstances, the purchase from time to time of
additional shares of the Company's stock from certain officers. In July 1996,
the Company purchased 65,000 shares of stock from an officer, for approximately
$1.2 million. Any future repurchases may be limited by the terms of the
Company's loan agreements.

     In April 1995, Recoton formed Christie Design Corporation. This
wholly-owned subsidiary, which develops and markets speaker products, commenced
manufacturing and shipments in March 1996. Through March 1996, the Company
expended approximately $3.9 million for start-up and capital costs for this
subsidiary.

     In September 1995, Recoton acquired STD Holding Limited (STD), a Hong Kong
based international manufacturer and marketer of multimedia and computer
accessories, including video game joysticks, controllers and accessories and
computer speakers sold under the INTERACT and STD brand names. STD's operations
are in the People's Republic of China (including Hong Kong) and Maryland
(U.S.A.) The total cost of the purchase of $22.7 million was paid through a
combination of cash and 406,092 Recoton Common Shares (valued at $8.3 million).
In connection with the acquisition, the Company assumed notes and loans payable
of approximately $6.1 million. The cash portion of the purchase price was
initially borrowed under existing bank lines of credit. In December 1995, the
Company obtained a five-year bank term loan to replace these borrowings.

     In August 1996, Recoton acquired the branded product lines of RAC (then
known as International Jensen Incorporated), a leading marketer of home and
automotive loudspeakers and automotive electronics, for a total cost of
approximately $61.6 million, which includes closing costs and consolidation
costs in 1997. In connection with the acquisition, Recoton assumed approximately
$34 million in notes and loans payable. The transaction occurred by merger with
a Recoton subsidiary, after the sale of Jensen's original equipment
manufacturing business to a third party.

     In December 1996, the Company, through a German subsidiary, 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 Tambalan
Limited (Tambalan) at a cost of approximately $285,000 plus closing costs and
assumed certain outstanding debt of approximately $2.9 million. Tambalan markets
headphones and other consumer electronics products in the United Kingdom and
other European countries under the trade name ROSS CONSUMER PRODUCTS. Tambalan
is located in England and also has a branch operation in Hong Kong.

     In November 1997, the Company acquired AAMP of Florida, Inc. (AAMP), d/b/a.
AAMP of America, Inc., at a cost of approximately $2.4 million paid by the
issuance of 169,706 Recoton 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. AAMP is a leading car
audio accessories company based in Clearwater, Florida whose business includes
the STINGER and PERIPHERAL brands.

     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.

     The Company completed construction, in January 1998, of a 318,000 square
foot expansion of its warehouse on its Lake Mary, Florida property. The cost of
the building construction was approximately $5 million.

     There has been limited exposure to loss due to foreign currency risks in
the Company's Asian subsidiaries, because the Hong Kong dollar in recent years
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
turmoil in the Asian currency markets during 1997, there can be no assurance
that these relationships will continue.

     With the RAC, Heco and Tambalan acquisitions, the Company's operations in
Western Europe are exposed to variations in foreign exchange rates. Due to the
strengthening of the U.S. dollar against the German mark and Italian lira during
1997, the Company's stockholders' equity was reduced by a foreign currency
translation adjustment of approximately $5.3 million of which approximately $3.3
million occurred in the first quarter of 1997. If there are any further material
adverse changes in the relationships between the European and/or Canadian
currencies with the United States dollar, such changes could adversely affect
the results of the Company's European and/or Canadian 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
stockholders' equity.

     As further described in Note O to the Notes to Financial Statements, the
financial impact of the pending criminal and civil customs investigation cannot
be determined at this time, but could be material to the Company.

     The Company has addressed what has become known as the Year 2000 Issue.
This issue has arisen because many existing computer programs use only two
digits to identify a year in the date field. These programs were designed and
developed without considering the impact of the upcoming change in the century.
The Company believes that all of its computer systems are year 2000 compliant.
The Company is contacting its customer and vendor base to ascertain their
compliance to the extent that their problems could affect the Company.

     The Company has no other material commitments for capital expenditures.
However, 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. In addition, the Company is evaluating options for the future growth
of its manufacturing facilities in China. The Company will also continue to
evaluate possible acquisitions that may be attractive to the growth of the
Company.


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

     Not applicable


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, 1996 and 1997                           F-2

            Consolidated Statements of Operations for
            the years ended December 31, 1995, 1996
            and 1997                                                F-3

            Consolidated Statements of Stockholders'
            Equity for the years ended December 31, 1995,
            1996 and 1997                                           F-4 to F-6

            Consolidated Statements of Cash Flows for
            the years ended December 31, 1995, 1996
            and 1997                                                F-7 to F-8

            Notes to Financial Statements                           F-9 to F-30

(a)(2)    INDEX TO FINANCIAL STATEMENT SCHEDULE

            Independent Auditor's Report on
            Supplemental Schedule                                   F-31

            Recoton Corporation and Subsidiaries --

                   Schedule II   -- Valuation and
                       Qualifying Accounts                          F-32

     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.

ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                      RECOTON CORPORATION AND SUBSIDIARIES

                              FINANCIAL STATEMENTS

                                FORM 10-K ITEM 8

                          YEAR ENDED DECEMBER 31, 1997

                          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, 1996 and 1997 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. 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, 1996 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.



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


NEW YORK, NEW YORK
FEBRUARY 27, 1998
<PAGE>
                      RECOTON CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                         (TABULAR AMOUNTS IN THOUSANDS)


<TABLE>
<CAPTION>
                                         ASSETS                                             AS AT DECEMBER 31,
                                                                                           1996           1997
CURRENT ASSETS:
<S>                                                                                    <C>             <C>
   Cash and cash equivalents                                                           $    29,130     $ 17,247
   Accounts receivable (less allowance for doubtful accounts
      of $3,119,000 in 1996 and $3,797,000 in 1997)                                        101,278      129,852
   Inventories                                                                             106,987      142,362
   Prepaid, refundable and deferred income taxes                                            12,182       18,220
   Prepaid expenses and other current assets                                                 8,687        9,484
                                                                                       -----------    ------------

                  TOTAL CURRENT ASSETS                                                     258,264      317,165

PROPERTY AND EQUIPMENT (at cost, less accumulated
   depreciation and amortization)                                                           30,578       36,184
TRADEMARKS AND PATENTS (less accumulated amortization)                                       5,509        5,126
GOODWILL (less accumulated amortization)                                                    31,251       38,554
DEFERRED INCOME TAXES                                                                        5,985        6,724
OTHER ASSETS                                                                                 3,146        3,509
                                                                                          ---------       ------

                  T O T A L                                                            $   334,733    $ 407,262
                                                                                       ===========    =============

                                       LIABILITIES

CURRENT LIABILITIES:
   Bank loans and drafts payable                                                       $    42,945     $  5,000
   Current portion of long-term debt                                                         8,683        9,570
   Accounts payable                                                                         28,634       53,231
   Accrued expenses                                                                         17,834       26,588
   Income taxes payable                                                                      1,361          388
                                                                                       -----------    ------------

                  TOTAL CURRENT LIABILITIES                                                 99,457       94,777

LONG-TERM DEBT (less current portion above)                                                101,753      161,427
OTHER NONCURRENT LIABILITIES                                                                 5,049       11,775
                                                                                         ---------       -------

                  TOTAL LIABILITIES                                                        206,259      267,979
                                                                                       -----------      -------

COMMITMENTS AND CONTINGENCIES (Notes B, N and 0)

                                  STOCKHOLDERS' EQUITY

PREFERRED STOCK - $1.00 par value each - authorized
   10,000,000 shares; none issued                                                          --              --
COMMON STOCK - $.20 par value each - authorized
   25,000,000 shares; issued 12,597,982 shares in
   1996 and 12,797,601 shares in 1997                                                        2,520        2,560
ADDITIONAL PAID-IN CAPITAL                                                                  75,913       78,376
RETAINED EARNINGS                                                                           57,177       70,758
CUMULATIVE FOREIGN TRANSLATION ADJUSTMENT                                                   (1,021)      (6,295)
                                                                                       -----------    ------------

                  TOTAL                                                                    134,589      145,399

TREASURY STOCK - 1,225,067 shares in 1996 and
   1,225,167 shares in 1997, at cost                                                        (6,115)      (6,116)
                                                                                         ----------   ---------------

                  TOTAL STOCKHOLDERS' EQUITY                                               128,474      139,283
                                                                                       -----------    ------------

                  T O T A L                                                            $   334,733    $ 407,262
                                                                                       ===========    =============

            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>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31,
                                                                          1995             1996            1997

<S>                                                                    <C>             <C>              <C>
NET SALES                                                              $   212,677     $   331,700      $   502,048

COST OF SALES                                                              129,981         206,715          306,725
                                                                       -----------     -----------      -----------

GROSS PROFIT                                                                82,696         124,985          195,323
                                                                       -----------     -----------      -----------

SELLING, GENERAL AND ADMINISTRATIVE
   EXPENSES                                                                 62,747         109,194          175,873
INTEREST EXPENSE                                                               793           4,946           12,496
INVESTMENT INCOME                                                             (569)           (271)            (534)
                                                                       -----------     -----------      -----------

         T O T A L                                                          62,971         113,869          187,835
                                                                       -----------     -----------      -----------

INCOME BEFORE INCOME TAXES                                                  19,725          11,116            7,488
INCOME TAX (PROVISION) CREDIT                                               (4,672)         (2,736)           6,093
                                                                       -----------     -----------      -----------

NET INCOME                                                            $     15,053    $      8,380      $    13,581
                                                                       ============    ============     ===============

INCOME PER SHARE:
   BASIC                                                                     $1.39            $.74            $1.19
                                                                             =====            ====            =====

   AS DILUTED                                                                $1.34            $.73            $1.18
                                                                             =====            ====             =====

NUMBER OF SHARES USED IN COMPUTING PER SHARE AMOUNTS:
   BASIC                                                                    10,847          11,300           11,414
                                                                            ======          ======           ======

   AS DILUTED                                                               11,255          11,542           11,546
                                                                            ======          ======           ======



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

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
              (TABULAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)



<TABLE>
<CAPTION>
                                                                                          CUMULATIVE
                                                                                          FOREIGN
                                                             ADDITIONAL                   CURRENCY
                                         COMMON STOCK         PAID-IN      RETAINED      TRANSLATION          TREASURY STOCK
                                    SHARES        AMOUNT      CAPITAL      EARNINGS       ADJUSTMENT     SHARES           AMOUNT
                                 -------------    --------  -------------   ----------   -------------   --------------------------


<S>                                 <C>          <C>         <C>          <C>            <C>            <C>             <C>
BALANCE - JANUARY 1, 1995           11,793,198   $  2,359    $   64,394   $   33,744     $    (381)     1,073,859       $  (3,482)

Net income for the year                                                       15,053
Exercise of stock options               96,870         19           339                                     4,649             (99)
Repurchases of stock                                                                                       42,366            (710)
Stock issued for acquisition
   of STD Holding Limited              406,092         81         8,193
Stock acquired in cancellation
   of $194,000 loan receivable                                                                             11,896            (194)
Foreign currency translation
   adjustment                                                                                   81
                                    ----------    --------    ----------   ----------      ---------   ------------       ---------

BALANCE - DECEMBER 31, 1995         12,296,160      2,459        72,926       48,797          (300)     1,132,770           (4,485)
                                    ----------    --------    ----------   ----------      ---------   ------------       ---------
Net income for the year                                                        8,380
Exercise of stock options              301,822         61         2,987                                     27,297            (476)
Repurchases of stock                                                                                        65,000          (1,154)
Foreign currency translation
   adjustment                                                                                 (721)
                                  -------------   --------    ----------    ----------     ---------   ------------       ---------

BALANCE - DECEMBER 31, 1996         12,597,982      2,520        75,913        57,177       (1,021)      1,225,067          (6,115)
                                  -------------   --------    ----------    ----------     ---------   ------------       ---------
Net income for the year                                                        13,581
Exercise of stock options               24,602          5           126
Repurchases of stock                                                                                          100               (1)
Stock issued as payment
   of bonus                              5,311          1            80
Stock issued for acquisition
   of AAMP of Florida, Inc.            169,706         34         2,257
Foreign currency translation
   adjustment                                                                               (5,274)
                                    ----------    --------    ----------   ----------      ---------   ------------       ---------

BALANCE - DECEMBER 31, 1997         12,797,601   $  2,560    $   78,376    $   70,758    $  (6,295)     1,225,167        $  (6,116)
                                  =============  ========    ==========      ==========  =========      =========        =========

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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (TABULAR AMOUNTS IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31,
                                                                                1995          1996         1997
                                                                            ----------    ----------    -------
INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                         <C>           <C>           <C>
    Net income                                                              $    15,053   $     8,380   $  13,581
                                                                             -----------   -----------  -----------

   Adjustments to reconcile results of operations to net cash provided by
   operating activities:
      Depreciation                                                                2,496        5,194        7,953
      Amortization of intangibles                                                 1,120        3,045        3,002
      Provision for losses on accounts receivable                                   847        1,259        4,932
      Deferred income taxes                                                        (776)        (312)      (2,578)
      Change in asset and liability accounts (net of effects of acquisitions):
         Accounts receivable                                                    (13,242)     (12,210)     (34,339)
         Inventory                                                              (14,195)      (6,039)     (33,812)
         Prepaid and refundable income taxes                                                  (1,242)      (6,061)
         Prepaid expenses and other current assets                               (1,858)       3,305         (588)
         Other assets                                                                95         (347)        (625)
         Accounts payable and accrued expenses                                      923          586       28,890
         Income taxes payable                                                     1,114       (2,124)        (911)
         Other noncurrent liabilities                                                43        1,751        7,987
                                                                            ----------    ----------    -----------

               TOTAL ADJUSTMENTS                                                (23,433)      (7,134)     (26,150)
                                                                            ----------    ----------     ----------

               NET CASH PROVIDED BY (USED FOR)
                  OPERATING ACTIVITIES                                           (8,380)       1,246      (12,569)
                                                                            ----------    ----------      ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Payments for acquisitions of businesses (net of
      cash acquired of approximately $2,340,000 in
      1995, $3,014,000 in 1996 and $932,000 in 1997)                           (12,883)      (55,909)        (755)
   Expenditures for trademarks, patents and
      intellectual property                                                       (771)         (195)        (216)
   Expenditures for property and equipment                                     (10,561)       (7,383)     (12,937)
                                                                            ----------    ----------      ---------

               NET CASH USED FOR INVESTING ACTIVITIES                          (24,215)      (63,487)     (13,908)
                                                                            -----------   ------------     ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net borrowings (repayments) under credit
      agreements and other bank debt                                        $   13,193   $(10,368)      $  29,639
   Net proceeds from (repayments of) bridge loans                                         129,364         (75,000)
   Net proceeds from sale of senior notes                                                                  75,000
   Repayments of bank loans assumed upon
      acquisition of businesses                                                 (2,273)   (36,173)        (7,336)
   Net proceeds from long-term bank borrowings                                  20,000
   Repayment of long-term bank borrowings                                         (943)    (5,206)        (7,456)
   Proceeds from exercise of stock options                                         198      1,387             39
   Purchases of treasury stock                                                    (710)    (1,154)            (1)
   Income tax benefit applicable to exercise
      of stock options                                                              62      1,185             92
                                                                            ----------   -----------   ------------

           NET CASH PROVIDED BY FINANCING ACTIVITIES                            29,527     79,035         14,977
                                                                            ---------    ------------   ---------

EFFECT OF FOREIGN EXCHANGE RATE CHANGES
   ON CASH OF FOREIGN SUBSIDIARIES                                                (14)        (57)          (383)
                                                                            ----------   -----------     ----------

NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                                                            (3,082)     16,737        (11,883)

CASH AND CASH EQUIVALENTS - JANUARY 1                                          15,475      12,393         29,130
                                                                            ----------   -----------      ---------

CASH AND CASH EQUIVALENTS -
   DECEMBER 31                                                             $   12,393   $  29,130     $   17,247
                                                                            ==========   ===========     ==========

SUPPLEMENTAL DISCLOSURES OF CASH PAID
FOR:
   Interest                                                                $      713   $   4,451     $   10,913
                                                                            ==========   ===========     ==========

   Income taxes                                                             $   4,429   $   5,686     $   1,513
                                                                            ==========   ===========     ==========


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

                          NOTES TO FINANCIAL STATEMENTS



NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------   ---------------------------------------------------------------------

         DESCRIPTION OF BUSINESS:

         The Company operates in one line of business, as a producer and
         marketer of a comprehensive line of consumer electronic products
         generally for aftermarket use. The Company's products are sold
         primarily to retailers and original equipment manufacturers located
         principally in the United States, Canada, the Far East and Europe. In
         addition to its domestic facilities, the Company maintains office and
         warehouse facilities in Asia, Canada and Western Europe and
         manufacturing and assembly facilities in the People's Republic of China
         and Germany.

         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 of stockholders' equity on the consolidated balance sheet.
         Also included in the separate component of stockholders' equity 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 money market mutual funds, certificates of deposit with a
         maturity of three months or less and U.S. Treasury bills purchased
         within three months of their maturity. 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, 1997 and
         December 31, 1996 of the Company's financial instruments approximates
         their fair value because of their short maturities or, for the majority
         of long-term debt, because there have 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:

         In 1997, the Company adopted Statement of Financial Accounting
         Standards No. 128 ("SFAS 128"), "Earnings per Share". SFAS 128
         eliminates the presentation of primary and fully diluted earnings per
         share and requires presentation of basic and diluted earnings per
         share. The income per share amounts and the number of shares used in
         computing the income per share amounts in 1995 and 1996 have been
         restated to conform to SFAS No. 128.

         Under SFAS 128, 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,
                                            1995         1996         1997
                                            ----         ----         ----
         Weighted average common shares
            outstanding                    10,847       11,300        11,414
         Dilutive effect of stock options     408          242           132
                                           ------       -------      -------

         Adjusted common shares used for
            dilutive computation           11,255       11,542        11,546
                                           ======       ======        ======

         The above excludes outstanding options to purchase approximately
         100,000 shares in 1995, 406,000 shares in 1996 and 565,000 shares in
         1997 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 stock. Also excluded are contingent stock
         issuances relative to accrued bonuses of approximately $5,650,000 at
         December 31, 1997, which may, solely at the Company's option, be
         settled in common stock beginning on January 1, 1999; the Company
         expects to pay such bonuses in cash.

         RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

         In June 1997, the Financial Accounting Standards Board ("FASB") issued
         Statement of Financial Accounting Standards No. 130, "Reporting
         Comprehensive Income." This statement, effective for fiscal years
         beginning after December 15, 1997, will require 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 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
         stockholders' equity. The Company has not yet determined the manner in
         which it will display its comprehensive income in its 1998 financial
         statements.

         Also in June 1997, the FASB issued Statement of Financial Accounting
         Standards No. 131, "Disclosures about Segments of an Enterprise and
         Related Information." This statement, also 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 segment performance and deciding how to
         allocate resources to segments. While management is currently
         evaluating the provisions of SFAS No. 131 in the context of its present
         and planned operating structure, it does not currently believe that
         SFAS No. 131 will result in significantly different financial statement
         disclosures.

NOTE B - ACQUISITIONS:

         The results of operations of the following acquisitions during the
         three years ended December 31, 1997 are included in the attached
         consolidated statements of operations from their respective dates of
         acquisition.

         In February 1995, the Company purchased, for approximately $722,000,
         selected assets of Ampersand (a division of Ampco Industries, Inc.).
         Ampersand is a manufacturer and supplier of car stereo installation
         accessories.

         Effective August 31, 1995, the Company acquired, in a purchase
         transaction, the outstanding stock of STD Holding Limited ("STD"), as
         well as certain net assets owned by one of STD's subsidiaries. STD is a
         manufacturer and marketer of video game joysticks, controllers and
         computer accessories. The purchase price was approximately $22.7
         million, which included the issuance of 406,092 shares of the Company's
         common stock with a market value of approximately $8.3 million. The $13
         million excess of consideration paid over the fair market value of the
         net assets acquired has been recorded as goodwill, which is being
         amortized to operations over 15 years.

         On August 28, 1996, the Company acquired for cash, in a purchase
         transaction, all of the outstanding stock of International Jensen
         Incorporated ("Jensen"). The purchase price recorded in the 1996
         financial statements was approximately $60.2 million and included
         investment banker fees and other closing costs, Jensen's estimated
         income taxes and estimated relocation, severance and other costs to
         eliminate duplicate facilities and consolidate certain of Jensen's
         operations into the Company's Lake Mary, Florida facilities in 1997.
         Actual costs exceeded estimated costs by approximately $1.4 million,
         which was recorded as additional purchase price of Jensen in 1997. The
         Jensen purchase was preceded by Jensen's sale of its original equipment
         manufacturing business to a member of its management. 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 stock, 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 following presents, on an unaudited pro forma basis, the net sales,
         net earnings and earnings per share of the Company as if the Jensen and
         AAMP acquisitions had each occurred on January 1, 1996. The information
         for Jensen is based on its unaudited financial data for the period from
         January 1, 1996 to August 28, 1996, after eliminating its original
         equipment manufacturing operations and certain costs and expenses
         pertaining to the acquisition which are unrelated to the operations
         acquired. The information for AAMP is based on its unaudited historical
         information for the year ended December 31, 1996 and for the period
         January 1, 1997 to November 18, 1997. The pro forma information does
         not purport to be indicative of the results of operations that would
         have occurred had the transactions taken place at the beginning of the
         periods presented, nor is it indicative of the expected future results
         of operations.

                                          IN THOUSANDS (EXCEPT PER SHARE DATA)
                                               YEAR ENDED DECEMBER 31,
                                                1996              1997
                                                ----              ----

         Net sales                          $   454,589        $   518,131
                                            ===========        ===========

         Net earnings                       $     2,681        $    15,071
                                            ===========        ===========

         Basic earnings per share                  $.23              $1.30
                                                   ====              =====

         The operations of Heco, Tambalan and CAPA prior to acquisition were
         immaterial in relation to those of the Company

NOTE C - INVENTORIES:

         Inventories are summarized as follows:

<TABLE>
<CAPTION>
                                                                     (IN THOUSANDS)
                                                                      DECEMBER 31,
                                                                  1996           1997

<S>                                                          <C>             <C>
                Raw materials and work-in-process            $     28,778    $     38,188
                Finished goods                                     71,031          93,602
                Merchandise in-transit                              7,178          10,572
                                                              -----------    ------------

                        T O T A L                             $   106,987    $    142,362
                                                              ===========    ============
</TABLE>


NOTE D -  PROPERTY AND EQUIPMENT:

          Property and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                                 (IN THOUSANDS)             ESTIMATED
                                                                   DECEMBER 31             USEFUL LIFE
                                                               1996           1997            (YEARS)
                                                            ---------     ----------     ------------

<S>                                                       <C>            <C>                  <C>
                 Land                                     $     3,281    $     3,144
                 Buildings, leaseholds
                    and improvements *                         14,345         18,952          15 - 40
                 Machinery and equipment                        7,806          8,648           3 - 10
                 Furniture, fixtures and
                    office equipment                            7,494         10,790           2 - 7
                 Tools and dies                                 9,777         13,428           2 - 5
                                                            ---------     ----------

                    TOTALS                                     42,703         54,962

                 Less accumulated depreciation
                    and amortization                           12,125         18,778
                                                            ---------     ----------

                    BALANCE                                 $  30,578     $   36,184
                                                            =========     ==========

               * Includes capitalized interest costs of approximately $118,000 in 1997.
</TABLE>

NOTE E - BANK LOANS AND DRAFTS PAYABLE:

         In 1996, the Company entered into a multi-bank, $135 million bridge
         loan facility of which approximately $130.1 million was outstanding at
         December 31, 1996. 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 expiring in August 1999 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. The balance sheet at December
         31, 1996 gave effect to these transactions and, accordingly, the $90
         million aggregate of the ten-year and four-year loans was classified as
         long-term debt (see Note F). The amount due under the revolving credit
         facility was classified as a current liability at December 31, 1996
         because the related agreement required that borrowings be reduced to
         zero for one thirty-day period during each twelve months the facility
         is outstanding. 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 gives effect
         to this transaction and, accordingly, the $5 million term loan and the
         $63 million of outstanding borrowings under the revolving credit
         facility have been classified as long-term debt (see Note F).

         The weighted average interest rate on outstanding borrowings under the
         credit agreement at December 31, 1997 was approximately 8.1%.

         The Company's Hong Kong subsidiaries have lines-of-credit of
         approximately $15 million with three overseas banks. The banks have a
         security interest to the extent of merchandise purchased using trust
         receipt loans. There were no outstanding borrowings under the lines at
         December 31, 1997.

         Outstanding letters of credit, which aggregated approximately $9.4
         million at December 31, 1997, reduce the amounts available under these
         lines.

         In November 1997, the Company borrowed $5 million from a bank, in the
         form of a demand note. The proceeds were used to repay debt which was
         assumed on the acquisition of AAMP. The loan was repaid in January
         1998, with interest at 8.75%.


NOTE F - LONG-TERM DEBT:

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

<TABLE>
<CAPTION>
                                                                                         (IN THOUSANDS)
                                                                                       AS AT DECEMBER 31,
                                                                                      1996            1997

<S>                                                                                <C>            <C>
                Senior ten-year notes payable (1) (3)                              $    75,000    $    75,000

                Notes and loans payable - banks (2) (3):
                   Bank credit facility loans (see Note E)                                             63,000
                   Due in monthly installments of
                      $58,350 through October 1998, plus
                      interest at 6.91% a year                                           1,283            583
                   Due in quarterly installments of
                      $649,150 through December 2000,
                      plus interest at 7.80% a year                                     10,402          7,790
                   Due in monthly installments of
                      $116,670 through December 2000,
                      plus interest at 6.60% a year                                      5,600          4,200
                   Due in quarterly installments of $937,500
                      through January 2001, plus interest which varies with
                      changes in certain of the Company's financial ratios and
                      changes in the LIBOR rate (approxi-
                      mately 5.81% at December 31, 1997)                                15,000         12,188
                   Due in quarterly installments of $312,500
                      through January 2002, plus interest
                      which varies with changes in certain
                      of the Company's financial ratios and
                      changes in the LIBOR rate                                                         5,000

                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                           3,061           2,868

                Other debt                                                                 90             368
                                                                                   -----------    -----------

                Total long-term debt                                                  110,436         170,997
                Less current portion                                                    8,683           9,570
                                                                                   -----------    -----------

                Noncurrent portion                                                 $  101,753     $   161,427
                                                                                   ===========    ===========
</TABLE>


         (1)  In January 1997, the Company sold in a private placement to
              institutional investors $75 million of adjustable rate senior
              notes, the proceeds of which were used to partially repay certain
              bank loans outstanding at December 31, 1996 (see Note E). The
              notes are payable in equal annual principal installments of
              $10,714,286 beginning in January 2001. Interest is payable
              quarterly at 8.75% a year and was adjusted retroactively from
              8.12% a year based on the measurement of certain financial ratios
              at September 30, 1997. The note agreement provides for, among
              other things, the maintenance of various specified financial
              ratios and minimum tangible net worth requirements (as defined),
              contains 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 agreement also provides, 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, but generally less restrictive than, the senior notes
              payable.

         (3)  At December 31, 1997, the Company was not in compliance with
              certain covenants involving the maintenance of financial ratios
              and minimum tangible net worth under the note and bank loan
              agreements. However, both the senior loan holders and the bank
              lenders have agreed to waive these covenants at December 31, 1997
              and temporarily relax them until such time as the loan agreements
              have been amended to include certain less restrictive
              requirements, but not later than June 29, 1998.

         The noncurrent portion of long-term debt at December 31, 1997 is
         payable as follows:

                YEAR ENDING DECEMBER 31:                  (IN THOUSANDS)
                   1999                                    $    72,319
                   2000                                          9,339
                   2001                                         15,172
                   2002                                         11,027
                Subsequent to December 31, 2002                 53,570
                                                         -------------

                   T O T A L                               $   161,427
                                                           ===========

NOTE G - STOCKHOLDERS' EQUITY:

         In 1993, the Board of Directors authorized the Recoton Corporation
         Stock Bonus Plan, which 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, 1997. 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 shares of its outstanding common stock. The
         Company has repurchased 48,352 shares for approximately $835,000, of
         which 42,366 shares were acquired in 1995 for approximately $710,000.
         Future repurchases of shares may be limited under the terms of the
         Company's loan agreements (see Note F).

         In August 1995, the Company issued 406,092 shares of common stock in
         connection with the purchase of STD (see Note B).

         In October 1995, the Company adopted a shareholders' rights plan, which
         becomes operative in certain events involving the acquisition of 20% or
         more of the Company's common stock 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
         stock of the Company, or in certain circumstances the acquirer, having
         a market value of twice the purchase price. 250,000 shares of Series A
         Junior Participating Preferred Shares have been reserved in connection
         with the rights plan.

         In connection with the exercise of incentive stock options, in 1995,
         51,602 shares of common stock were issued in exchange for 4,649 shares
         of previously issued common stock with a market value of approximately
         $99,000 and in 1996, 161,368 shares of common stock were issued in
         exchange for 27,297 shares of previously issued common stock with a
         market value of approximately $475,000; no cash was received in
         connection with these transactions. Other transactions with respect to
         stock options are described in Note H.

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

         In May 1997, the Company issued 5,311 shares of common stock 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 November 1997, the Company issued 169,706 shares of common stock in
         connection with the purchase of AAMP of Florida, Inc. (see Note B).

         The Board of Directors has voted to increase the amount of authorized
         common stock to 40 million shares, subject to stockholder approval.

NOTE H - STOCK OPTIONS:

         At December 31, 1997, the Company has three stock option plans.

         Options to purchase 17,066 shares are outstanding under the Company's
         1982 Incentive Stock Option Plan. No additional options are available
         for grant under this plan.

         The Company's Nonqualified Plan provides for the granting of options to
         purchase up to 346,666 shares of common stock, of which options for
         1,002 shares are available for future grants at December 31, 1997.

         The Company's 1991 Stock Option Plan provides for the granting of
         options to purchase up to 2,500,000 shares of common stock; such
         options may be either incentive stock options (as defined in the
         Internal Revenue Code) or nonqualified options. At December 31, 1997,
         options to purchase 1,007,404 shares are available for future grants
         under this plan. An employment agreement with Mr. Robert Borchardt, the
         Company's President, Co-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 from this
         plan 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.

         Also, at December 31, 1997 there are non-plan nonqualified options
         outstanding to purchase an aggregate of 18,750 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 in 1994 and options to purchase
         10,000 shares at $16.00 a share were granted to a consulting firm in
         1995.

         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 options cannot exceed 10 years and incentive stock option
         prices may not be less than the fair market value of the stock on its
         date of grant. Since all outstanding options to officers and employees
         were granted for at least the fair market value of the Company's stock
         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 for nonqualified
         stock options when they are exercised. 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,
                                           1995         1996        1997
                                           (IN THOUSANDS, EXCEPT PER
                                                SHARE INFORMATION)
          Net income:
             As reported                $   15,053   $    8,380     $13,581
             Pro forma                      13,581        5,539      12,016
          Income per share:
             Basic:
                As reported                  $1.39         $.74       $1.19
                Pro forma                     1.25          .49        1.05
             As diluted:
                As reported                  $1.34         $.73       $1.18
                Pro forma                     1.21          .48        1.04

         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:

<TABLE>
<CAPTION>
                                                                    1995             1996               1997
                                                              --------------    ---------------   ----------

<S>                                                                <C>               <C>               <C>
                Expected volatility                                46.3%             46.3%             46.9%
                Average risk-free interest rate                     7.0%              6.0%              6.5%
                Average expected holding period,
                    in years                                          8                 9                 7

         A summary of the status of the Company's outstanding stock options as
         of December 31, 1995, 1996 and 1997 and changes during the years then
         ended is presented below:
</TABLE>

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                            --------------------------------------------------------------------------
                                                     1995                     1996                     1997
                                            ----------------------    ----------------------   -----------------------
                                                         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
<S>                                            <C>        <C>            <C>       <C>          <C>       <C>
                  of year                      1,005      $  9.00        1,315     $ 12.23      1,269     $ 14.62
                Granted                          414*       17.98          285       17.05        424*      13.55
                Exercised                        (97)        3.06         (302)       6.17        (25)       1.60
                Forfeited/expired                 (7)       14.68          (29)      18.03       (322)      19.91
                                               ------     -------       ------     -------      ------    -------

                Outstanding at end of year     1,315      $ 12.23        1,269     $ 14.62      1,346      $13.26
                                               =====      =======        =====     =======       =====     ======

                Exercisable at year end          667      $  8.09          848     $ 13.88        929      $12.84
                                               =====      =======        =====     =======       =====     ======

                Weighted - average fair
                  value of options granted
                  during the year                         $ 10.89                  $ 10.88                 $ 7.56
                                                          =======                  =======                 =====

*Excludes options for 79,741 shares at $18.75 a share earned in 1995 and 130,975
shares at $14.06 a share earned in 1997 but issued in 1996 and 1998,
respectively, pursuant to the terms of the executive employment agreement with
the Company's President, Co-Chairman of the Board and Chief Executive Officer.
</TABLE>

         The following table summarizes information about stock options
         outstanding at December 31, 1997:

<TABLE>
<CAPTION>
                                                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      212        3.5 years        $  2.89         212        $  2.89
                12.25 to   16.75    1,014        7.3 years          14.71         600          15.07
                18.07 to   21.00      120        6.7 years          19.36         117          19.39
                                    -----                                         ---

                         Totals     1,346                                        929
                                    =====                                        ===
</TABLE>

         Subsequent to December 31, 1997, the Company also issued to officers
         and employees options to purchase 371,100 shares at $13.50 a share and
         100,000 shares at $22.63 a share from the 1991 Stock Option Plan. Also,
         the Board of Directors authorized, subject to stockholder approval, the
         adoption of the 1998 Stock Option Plan which provides for grants of
         either incentive stock options or nonqualified stock options to
         officers, employees or consultants to purchase up to 1,500,000 shares
         of common stock and in connection therewith no further options will be
         granted under the Company's other plans after such new plan is
         approved. After giving effect to the foregoing, option grants in 1998,
         there are 405,429 shares available for future option grants under the
         1991 Stock Option Plan.


NOTE I - CONCENTRATIONS:

         In 1997, sales to one customer represented approximately 11% of
         consolidated net sales. No single customer accounted for sales in
         excess of 10% of consolidated net sales in 1996 and 1995. 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, 1997. 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. Information about the
         Company's domestic operations and foreign subsidiaries is set forth in
         Note P.


NOTE J - RESEARCH AND DEVELOPMENT:

         Research and development costs for new products aggregated
         approximately $1,608,000 in 1995, $2,897,000 in 1996 and $4,245,000 in
         1997.


NOTE K - ADVERTISING COSTS:

         Advertising costs aggregated approximately $1,453,000 in 1995,
         $2,768,000 in 1996 and $5,141,000 in 1997.


NOTE L - INCOME TAXES:

<TABLE>
<CAPTION>
         Income taxes on the statements of operations are comprised of the
         following:

                                                                         (IN THOUSANDS)
                                                                     YEAR ENDED DECEMBER 31,
                                                                1995          1996          1997
                Currently (payable) refundable:
<S>                                                          <C>           <C>          <C>
                    Federal                                  $   (3,071)   $     (467)  $    4,163
                    State and local                                (283)           28         (162)
                    Foreign                                      (2,094)       (2,609)        (486)
                                                             ----------    ----------   ----------

                          Totals                                 (5,448)       (3,048)       3,515

                Deferred                                            776           312        2,578
                                                             ----------    ----------   ----------

                          NET (PROVISION) CREDIT            $    (4,672)   $   (2,736)  $    6,093
                                                             ===========   ==========   ==============

         Pretax income (loss) was derived from foreign and domestic sources as
         follows:

                                                                         (IN THOUSANDS)
                                                                     YEAR ENDED DECEMBER 31,
                                                                1995          1996          1997

                Foreign                                     $    12,431    $   14,598    $  29,313
                Domestic                                          7,294        (3,482)     (21,825)
                                                             ----------    ----------   ----------

                          TOTALS                             $   19,725    $   11,116   $    7,488
                                                             ==========    ==========   ==========

</TABLE>

         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>
<CAPTION>
                                                              (DOLLAR AMOUNTS IN THOUSANDS)
                                                                 YEAR ENDED DECEMBER 31,
                                        ------------------------------------------------------------------
                                                 1995                 1996                   1997
                                        --------------------- ---------------------  ---------------------
                                          RATE      AMOUNT       RATE     AMOUNT      RATE         AMOUNT


<S>                                     <C>         <C>         <C>      <C>         <C>          <C>
     Statutory U.S. federal income
        taxes                           (34.0%)     $(6,707)    (34.0)%  $ (3,779)   (34.0)%      $ (2,546)
     Effect of:
        State and local income
           tax (provision) credit
           (net of federal effect)        (.9)         (170)       .9         105      6.4             480
        Difference between U.S.
           and foreign income tax
           rates on earnings of
           foreign subsidiaries          11.2         2,205       9.6       1,080    101.2           7,591
        German tax benefit
           relating to dividend
           distribution deduction                                                     17.4           1,300
        Other items (net)                                        (1.1)       (142)   (10.0)           (732)
                                        ------      -------      -----       -----    -----         -------
     Actual income tax
        (provision) credit              (23.7)%     $(4,672)    (24.6)%   $(2,736)    81.0%       $  6,093
                                        ======       ======     ======    =======     =====        ========
</TABLE>

         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 $17.8 million based on the subsidiaries' undistributed
         earnings which aggregate approximately $59.6 million for income tax
         purposes at December 31, 1997. The foregoing amounts are stated net of
         U.S. Sub-Part F taxes paid, or payable, which are considered the
         equivalent of repatriated earnings.

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


<TABLE>
<CAPTION>
                                                                                             (IN THOUSANDS)
                                                                                              DECEMBER 31,
                                                                                             1996        1997
         Deferred tax assets:
           Allowance for estimated doubtful
             accounts and estimated sales returns,
<S>                                                                                        <C>         <C>
             allowances and discounts                                                      $ 2,660     $ 1,967
           Tax basis adjustments to inventory                                                2,618       3,418
           Deferred compensation accruals                                                      441         513
           Difference in basis and amortization periods
             of patents, trademarks and package
             design costs                                                                      540       1,075
           Cumulative foreign translation adjustment                                           250         666
           Estimated Jensen consolidation costs                                              1,120         545
           Net operating loss and tax credit carryforwards                                   7,389       9,598
           Other                                                                               946         885
                                                                                           --------       -----

                            TOTAL                                                           15,964       18,667

                   Less valuation allowance                                                 (2,553)      (2,424)
                                                                                          ---------     ----------

                            TOTAL DEFERRED TAX ASSETS                                       13,411       16,243
                                                                                         ---------     ----------

                Deferred tax liabilities:
                   Accelerated depreciation of property
                      and equipment                                                           792           538
                   Tax basis adjustments to prepaid
                      catalog costs                                                           159           186
                                                                                        ---------     ----------

                            TOTAL DEFERRED TAX LIABILITIES                                    951           724
                                                                                         --------       -----

                            NET DEFERRED TAX ASSETS                                     $  12,460     $  15,519
                                                                                        =========     ==========
</TABLE>

         As a result of the Jensen acquisition in 1996, the Company has acquired
         domestic net operating loss carryforwards of approximately $9.8 million
         and tax credit carryforwards of approximately $1.4 million, which
         expire primarily from 2000 through 2009. 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. The Company has recorded a
         deferred tax asset for the tax benefit of such carryforwards considered
         more likely than not to be realized prior to their expiration and a
         valuation allowance for the tax benefit of the balance of such
         carryforwards. If the amounts subject to the valuation allowance are
         subsequently realized, their income tax benefit is 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.


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 $250,000
         in 1995, $363,000 in 1996 and $562,000 in 1997.


NOTE N - COMMITMENTS:

         The Company leases certain facilities under long-term operating leases
         which expire at various times through July 2020. 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)
                   1998                                            $    4,129
                   1999                                                 3,974
                   2000                                                 3,205
                   2001                                                 2,264
                   2002                                                 1,425
                Subsequent to December 31, 2002                         7,498
                                                                    --------

                    T O T A L                                      $   22,495
                                                                   ==========

         Rent expense was approximately $1,335,000 in 1995, $1,827,000 in 1996
         and $5,576,000 in 1997.

         An agreement with Mr. Herbert Borchardt, the Company's Co-Chairman of
         the Board, provides for a current minimum annual compensation of
         approximately $224,000 while he remains Co-Chairman and $187,000
         thereafter, for life, for consulting services. The payments are subject
         to increases based on changes in the consumer price index. The
         foregoing amounts have been adjusted to reflect the current index.

          Effective January 1, 1995, the Company entered into an employment
          agreement with Mr. Robert Borchardt, the Company's President,
          Co-Chairman of the Board and Chief Executive Officer. The agreement
          provides for a base annual salary ($945,000 for 1997), 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 100,000 shares in 1995 and 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 1995 and 1996, 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 - LITIGATION AND U.S. CUSTOMS INQUIRY:

         In connection with the Jensen acquisition, actions were commenced
         against the Company and others in the courts of the State of Delaware
         in 1996 (in Re International Jensen Incorporated Shareholders
         Litigation). Based on representations made by the shareholders' counsel
         to the court, the Company expects that the shareholders' litigation
         will be withdrawn, subject only to a claim by the plaintiffs' counsel
         for fees and expenses totalling $340,000, which the Company is
         contesting.

         In July 1994, the U.S. Customs Service and U.S. Attorney's office
         obtained certain property and business records from the Company's
         Florida facility pursuant to a search warrant and commenced a criminal
         and civil investigation. The Company is in communication with the
         government regarding such investigation, which the Company has been
         advised has focused on country of origin marking requirements,
         duty-free import status 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 quotas, other
         instances of undervaluation and other miscellaneous matters. Management
         is hopeful of reaching a settlement of this matter. However, based on
         the current status of the Company's communication with the government,
         the Company is unable to make a realistic estimate of the probable
         amount or probable range of amounts for the ultimate outcome, which
         could be material in relation to the Company's current operations
         and/or financial condition.


NOTE P - DOMESTIC AND FOREIGN OPERATIONS:

         Information applicable to the Company's domestic operations and foreign
         subsidiaries is summarized as follows:
<TABLE>
<CAPTION>

                                                        (IN THOUSANDS)
                                                 YEAR ENDED DECEMBER 31,
                                           1995          1996           1997
Net sales:
   To unaffiliated customers:
<S>                                       <C>           <C>            <C>
       United States                      $175,774      $257,088       $368,328
       Asia                                 21,869        29,941         37,375
       Canada                               15,034        18,570         18,283
       Europe                                             26,101         78,062
                                          --------   -----------    -----------

             Total                         212,677       331,700        502,048

   Intercompany sales from the
   following geographic areas:
       United States                         5,651         5,988          9,655
       Asia                                 24,379        35,780        115,368
       Europe                                                               110
       Eliminations                        (30,030)      (41,768)      (125,133)
                                         ---------   -----------    -----------

             CONSOLIDATED                 $212,677      $331,700       $502,048
                                          ========      ========       ========



         Intercompany sales between geographic areas are priced to achieve a
         targeted profit based on the relative functions performed by the
         purchaser/distributor.

                                                        (IN THOUSANDS)
                                                    YEAR ENDED DECEMBER 31,
                                               1995          1996           1997

 Pre-tax income (loss):
<S>                                        <C>           <C>            <C>
    United States                          $     7,294   $    (3,482)   $   (21,825)
    Asia                                        14,987        11,171         41,468
    Canada                                         963           845         (1,463)
    Europe                                                     2,312          1,868
    Eliminations                                (3,519)          270        (12,560)
                                           -----------   -----------    -----------

           CONSOLIDATED                    $    19,725   $    11,116    $     7,488
                                           ===========   ===========    ===========

                                                        (IN THOUSANDS)
                                                    YEAR ENDED DECEMBER 31,
                                               1995          1996           1997
 Identifiable assets at year end:
    United States                          $   145,230   $    238,641   $   275,230
    Asia                                        29,844         37,013        44,529
    Canada                                       9,980         11,551        12,681
    Europe                                                     47,528        74,822
                                           -----------   ------------   -----------

           CONSOLIDATED                    $   185,054   $    334,733   $   407,262
                                           ===========   ============   ===========
</TABLE>
<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, 1996 and 1997 and for each
of the three years in the period ended December 31, 1997, we have also audited
Schedule II for each of the three years ended December 31, 1997, 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 27, 1998
<PAGE>
                                   SCHEDULE II

                      RECOTON CORPORATION AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)




<TABLE>
<CAPTION>
               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:

   Year ended December 31,
<S>                                     <C>               <C>               <C>             <C>            <C>
      1995                              $     989         $    847                          $   249        $  1,587
                                        =========         ========                          =======        ========

   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
                                        =========         ========                          =======        ========
</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.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     That portion of Recoton's definitive 1998 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 1998 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 1998 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 1998 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:

                         3.1.   Restated Certificate of Incorporation of Recoton
                                Corporation, as filed January 28, 1998
                                (incorporated by reference to Exhibit 3.1 to the
                                Registrant's Form 10-K for the year ended
                                December 31, 1996)

                         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):

                         10.1.  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)*

                         10.2   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)*

                         10.3.  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)*

                         10.4.  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)*

                         10.5.  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)*

                         10.6.  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) (note: the previously
                                filed agreement relating to insurance in the
                                principal amount of $250,000 has been canceled)*

                         10.7.  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; $3,500,000; and
                                $1,300,000 (incorporated by reference to Exhibit
                                10(G) to the Registrant's Annual Report on Form
                                10-K for the period ended December 31, 1993)*

                         10.8.  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 period
                                ended September 30, 1991)*

                         10.9.  Recoton Corporation 1991 Stock Option Plan, as
                                revised March 23, 1998, and form of option
                                agreement [filed herewith]*

                         10.10. Recoton Corporation Nonqualified Stock Option
                                Plan, as revised March 23, 1998 [filed
                                herewith]*

                         10.11. 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 period ended December 31,
                                1993*

                         10.12. 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 period ended
                                December 31, 1994)*

                         10.13. 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 period ended
                                December 31, 1994)

                         10.14. Common Stock Purchase Option, as of March 1,
                                1995, with the Equity Group, Inc. (incorporated
                                by reference to Exhibit 10.14 to the
                                Registrant's Annual Report on Form 10-K for the
                                year ended December 31, 1995)

                         10.15. 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)

                         10.16. 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)

                         10.17. 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)

                         10.18. Third Amended and Restated Agreement for
                                Purchase and Sale of the Assets of the OEM
                                Business of International Jensen Incorporated
                                (now Recoton Audio Corporation) by and to IJI
                                Acquisition Corp. (now International Jensen
                                Incorporated) 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)

                         10.19. Shared Facilities Agreement between IJI
                                Acquisition Corp. (now International Jensen
                                Incorporated) and International Jensen
                                Incorporated (now Recoton Audio Corporation)
                                dated August 28, 1996 (incorporated by reference
                                to Exhibit 8 to the Registrant's current Report
                                on Form 8-K dated August 28, 1996)

                         10.20. Amendment to Shared Facilities Agreement between
                                IJI Acquisition Corp. (now International Jensen
                                Incorporated) and International Jensen
                                Incorporated (now Recoton Audio Corporation)
                                (Exhibit 10.19), dated March 3, 1998 [filed
                                herewith]

                         10.21. Non-Competition Agreement among IJI Acquisition
                                Corp. (now International Jensen Incorporated)
                                and International Jensen Incorporated (now
                                Recoton Audio Corporation) dated August 28, 1996
                                (incorporated by reference to Exhibit 9 to the
                                Registrant's current Report on Form 8-K dated
                                August 28, 1996)

                         10.22. License Agreement among IJI Acquisition Corp.
                                and International Jensen Incorporated (now
                                Recoton Audio Corporation) dated August 28, 1996
                                (incorporated by reference to Exhibit 10 to the
                                Registrant's current Report on Form 8-K dated
                                August 28, 1996)

                         10.23. Amended and Restated Credit Agreement among
                                Recoton Corporation, The Chase Manhattan Bank
                                and the lenders made party thereto dated as of
                                September 9, 1997 (incorporated by reference to
                                Exhibit 10.34 to the Registrant's Quarterly
                                Report on Form 10-Q for the quarter ended
                                September 30, 1997)

                         10.24. Amendment to Amended and Restated Credit
                                Agreement with The Chase Manhattan Bank, et. al
                                (Exhibit 10.23), dated as of March 4, 1998.

                         10.25. 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)

                         10.26. 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
                                Exhibit 10.25 the Registrant's Form 10-Q for
                                the quarter ended March 30, 1997)

                         10.27. 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
                                Exhibit 10.25 the Registrant's Form 10-Q for
                                the quarter ended June 30, 1997)

                         10.28. Amendment to Note Purchase Agreement dated
                                January 6, 1997 between Recoton Corporation and
                                the several purchasers Exhibit 10.25, dated
                                March 25, 1988 [filed herewith]

                         10.29. Recoton Corporation 1998 Stock Option Plan and
                                form of option certificate, as adopted March 23,
                                1998 (subject to shareholder approval) [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:   not applicable

                                   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, Co-Chairman, Chief
                                       Executive Officer and President

                                Date:  March 27, 1998


     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, Co-Chairman,        March 27, 1998
Robert L. Borchardt               Chief Executive Officer
                                 (Principal Executive
                                 Officer) and Director

/S/ HERBERT H. BORCHARDT         Co-Chairman and                 March 27, 1998
Herbert H. Borchardt             Director


/S/ STUART MONT                 Chief Operating Officer,         March 27, 1998
Stuart Mont                     Chief Financial Officer
                                (Principal Financial Officer)
                                and Director

/S/ GEORGE CALVI                Director                          March 27, 1998
George Calvi


/S/ PETER WISH                  Director                          March 27, 1998
Peter Wish


/S/ JOSEPH H. MASSOT            Treasurer (Principal              March 27, 1998
Joseph H. Massot                Accounting Officer)
                                and Director

/S/ IRWIN S. FRIEDMAN           Director                          March 27, 1998
Irwin S. Friedman

/S/ JOSEPH M. IDY               Director                          March 27, 1998
Joseph M. Idy


/S/ RONALD E. MCPHERSON         Director                          March 27, 1998
Ronald E. McPherson


/S/ PAUL FEFFER                 Director                          March 27, 1998
Paul Feffer


/S/ STEPHEN CHU                 Director                          March 27, 1998
Stephen Chu

<PAGE>
                                  EXHIBIT INDEX


EXHIBIT NO.

     10.9.     Recoton Corporation 1991 Stock Option Plan, as revised March 23,
               1998 and form of option agreement

     10.10.    Recoton Corporation Nonqualified Stock Option Plan, as revised
               March 23, 1998

     10.20.    Amendment to Shared Facilities Agreement between IJI Acquisition
               Corp. (now International Jensen Incorporated) and International
               Jensen Incorporated (now Recoton Audio Corporation), dated March
               3, 1998

     10.24     Amendment to Amended and Restated Credit Agreement with the Chase
               Manhattan Bank, et. al dated as of March 4, 1998

     10.28     Amendment to Note Purchase Agreement dated January 6, 1997
               between Recoton Corporation and the several purchasers, dated
               March 25, 1988

     10.29     Recoton Corporation 1998 Stock Option Plan and form of option
               certificate, as adopted March 23, 1998

     21        Subsidiaries of the registrant

     23        Consent of the Independent Public Accountants

     27        Financial Data Schedule