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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission File Number 0-511

COBRA ELECTRONICS CORPORATION

(Exact name of Registrant as specified in its Charter)



|                                            |  |                                     
|------------------------------------------- |  | ------------------------------------
|DELAWARE                                    |  | 36-2479991                          
|(State of Incorporation)                    |  | (I.R.S. Employer Identification No.)
|                                            | 
|6500 WEST CORTLAND STREET CHICAGO, ILLINOIS |  | 60707                               
|(Address of principal executive offices)    |  | (Zip Code)                          

Registrants telephone number, including area code: (773) 889-8870

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO ̈

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).

YES ̈NO x

Number of shares of Common Stock of Registrant outstanding as of August 4,
2006: 6,489,247



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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

Cobra Electronics Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)



|                                            |  |                                |        |   |                              |   |        |              |  |   |              |   |  |   |        |  
|------------------------------------------- |  | ------------------------------ | ------ | - | ---------------------------- | - | ------ | ------------ |  | - | ------------ | - |  | - | ------ | -
|                                            |  | Three Months Ended(Unaudited ) |        |   | Six Months Ended(Unaudited ) |  
|                                            |  | June 30,2006                   |        |   | June 30,2005                 |   |        | June 30,2006 |  |   | June 30,2005 |  
|Net sales                                   |  | $                              | 39,586 |   |                              | $ | 33,672 |              |  | $ | 64,893       |   |  | $ | 52,963 |  
|Cost of sales                               |  |                                | 35,413 |   |                              |   | 25,064 |              |  |   | 55,698       |   |  |   | 40,171 |  
|                                            |  |                                |        |   |                              |   |        |              |  |   |              |   |  |   |        |  
|Gross profit                                |  |                                | 4,173  |   |                              |   | 8,608  |              |  |   | 9,195        |   |  |   | 12,792 |  
|Selling, general and administrative expense |  |                                | 8,117  |   |                              |   | 7,730  |              |  |   | 14,705       |   |  |   | 14,062 |  
|                                            |  |                                |        |   |                              |   |        |              |  |   |              |   |  |   |        |  
|(Loss) earnings from operations             |  |                                | (3,944 | ) |                              |   | 878    |              |  |   | (5,510       | ) |  |   | (1,270 | )
|                                            |  |                                |        |  
|Other (expense) income                      |  |                                | (100   | ) |                              |   | (20    | )            |  |   | (196         | ) |  |   | 9,075  |  
|                                            |  |                                |        |   |                              |   |        |              |  |   |              |   |  |   |        |  
|(Loss) earnings before income taxes         |  |                                | (4,044 | ) |                              |   | 858    |              |  |   | (5,706       | ) |  |   | 7,805  |  
|Tax (benefit) provision                     |  |                                | (1,358 | ) |                              |   | 135    |              |  |   | (1,892       | ) |  |   | 1,415  |  
|                                            |  |                                |        |   |                              |   |        |              |  |   |              |   |  |   |        |  
|Net (loss) earnings                         |  | $                              | (2,686 | ) |                              | $ | 723    |              |  | $ | (3,814       | ) |  | $ | 6,390  |  
|                                            |  |                                |        |   |                              |   |        |              |  |   |              |   |  |   |        |  
|Net (loss) earnings per common share:       |  |                                |        |   |                              |   |        |              |  |   |              |   |  |   |        |  
|Basic                                       |  | $                              | (0.41  | ) |                              | $ | 0.11   |              |  | $ | (0.59        | ) |  | $ | 0.99   |  
|Diluted                                     |  | $                              | (0.40  | ) |                              | $ | 0.11   |              |  | $ | (0.56        | ) |  | $ | 0.97   |  
|                                            |  |                                |        |  
|Weighted average shares outstanding:        |  |                                |        |   |                              |   |        |              |  |   |              |   |  |   |        |  
|Basic                                       |  |                                | 6,489  |   |                              |   | 6,445  |              |  |   | 6,489        |   |  |   | 6,445  |  
|Diluted                                     |  |                                | 6,753  |   |                              |   | 6,583  |              |  |   | 6,766        |   |  |   | 6,576  |  
|Dividends declared per common share         |  | $                              |       |   |                              | $ |       |              |  | $ | 0.16         |   |  | $ |       |  

The accompanying notes are an integral part of these condensed consolidated
financial statements.



2



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Cobra Electronics Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)



|                                                                                                                    |  |              |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                                    |  | (Unaudited)  |        
|                                                                                                                    |  | June 30,2006 |         |   | December 31,2005 |  
|ASSETS                                                                                                              |  |              |         |   |                  |   |         |  
|Current assets:                                                                                                     |  |              |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                           |  | $            | 9,013   |   |                  | $ | 6,704   |  
|Receivables, less allowance for claims and doubtful accounts of $271 at June 30, 2006 and $275 at December 31, 2005 |  |              | 21,698  |   |                  |   | 28,710  |  
|Inventories, primarily finished goods                                                                               |  |              | 25,420  |   |                  |   | 21,837  |  
|Deferred income taxes                                                                                               |  |              | 5,749   |   |                  |   | 5,237   |  
|Loan receivable                                                                                                     |  |              |        |   |                  |   | 3,374   |  
|Other current assets                                                                                                |  |              | 6,017   |   |                  |   | 5,614   |  
|                                                                                                                    |  |              |         |   |                  |   |         |  
|Total current assets                                                                                                |  |              | 67,897  |   |                  |   | 71,476  |  
|                                                                                                                    |  |             
|Property, plant and equipment, at cost:                                                                             |  |              |         |   |                  |   |         |  
|Buildings and improvements                                                                                          |  |              | 5,406   |   |                  |   | 5,398   |  
|Tooling and equipment                                                                                               |  |              | 18,258  |   |                  |   | 17,612  |  
|                                                                                                                    |  |              |         |   |                  |   |         |  
|                                                                                                                    |  |              | 23,664  |   |                  |   | 23,010  |  
|Accumulated depreciation                                                                                            |  |              | (17,278 | ) |                  |   | (16,342 | )
|Land                                                                                                                |  |              | 230     |   |                  |   | 230     |  
|                                                                                                                    |  |              |         |   |                  |   |         |  
|Net property, plant and equipment                                                                                   |  |              | 6,616   |   |                  |   | 6,898   |  
|                                                                                                                    |  |             
|Other assets:                                                                                                       |  |              |         |   |                  |   |         |  
|Cash surrender value of officers life insurance policies                                                           |  |              | 3,634   |   |                  |   | 3,672   |  
|Intangible assets                                                                                                   |  |              | 7,907   |   |                  |   | 10,084  |  
|Other assets                                                                                                        |  |              | 554     |   |                  |   | 792     |  
|                                                                                                                    |  |              |         |   |                  |   |         |  
|Total other assets                                                                                                  |  |              | 12,095  |   |                  |   | 14,548  |  
|                                                                                                                    |  |              |         |   |                  |   |         |  
|Total assets                                                                                                        |  | $            | 86,608  |   |                  | $ | 92,922  |  
|                                                                                                                    |  |              |         |   |                  |   |         |  

The accompanying notes are an integral part of these condensed consolidated
financial statements.



3



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Cobra Electronics Corporation and Subsidiaries

Condensed Consolidated Balance Sheets-Continued

(in thousands, except share data)



|                                                                                                   |  |              |        |   |                  |   |        |  
|-------------------------------------------------------------------------------------------------- |  | ------------ | ------ | - | ---------------- | - | ------ | -
|                                                                                                   |  | (Unaudited)  |       
|                                                                                                   |  | June 30,2006 |        |   | December 31,2005 |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                               |  |              |        |   |                  |   |        |  
|Current liabilities:                                                                               |  |              |        |   |                  |   |        |  
|Accounts payable                                                                                   |  | $            | 7,096  |   |                  | $ | 5,292  |  
|Accrued salaries and commissions                                                                   |  |              | 523    |   |                  |   | 1,315  |  
|Accrued advertising and sales promotion costs                                                      |  |              | 2,077  |   |                  |   | 2,935  |  
|Accrued product warranty costs                                                                     |  |              | 1,408  |   |                  |   | 1,618  |  
|Accrued income taxes                                                                               |  |              |       |   |                  |   | 646    |  
|Other accrued liabilities                                                                          |  |              | 1,424  |   |                  |   | 1,725  |  
|                                                                                                   |  |              |        |   |                  |   |        |  
|Total current liabilities                                                                          |  |              | 12,528 |   |                  |   | 13,531 |  
|                                                                                                   |  |              |        |   |                  |   |        |  
|Non-current liabilities:                                                                           |  |              |        |   |                  |   |        |  
|Deferred compensation                                                                              |  |              | 5,469  |   |                  |   | 5,062  |  
|Deferred income taxes                                                                              |  |              | 699    |   |                  |   | 1,691  |  
|Other long term liabilities                                                                        |  |              | 378    |   |                  |   | 386    |  
|                                                                                                   |  |              |        |   |                  |   |        |  
|Total non-current liabilities                                                                      |  |              | 6,546  |   |                  |   | 7,139  |  
|                                                                                                   |  |              |        |   |                  |   |        |  
|Total liabilities                                                                                  |  |              | 19,074 |   |                  |   | 20,670 |  
|                                                                                                   |  |             
|Shareholders equity:                                                                              |  |              |        |   |                  |   |        |  
|Preferred stock, $1 par value, shares authorized - 1,000,000; none issued                          |  |              |       |   |                  |   |       |  
|Common stock, $.33 1/3 par value, 12,000,000 shares authorized, 7,039,100 issued for 2006 and 2005 |  |              | 2,345  |   |                  |   | 2,345  |  
|Paid-in capital                                                                                    |  |              | 19,787 |   |                  |   | 19,761 |  
|Retained earnings                                                                                  |  |              | 49,402 |   |                  |   | 54,255 |  
|Accumulated comprehensive loss                                                                     |  |              | (142   | ) |                  |   | (251   | )
|                                                                                                   |  |              |        |   |                  |   |        |  
|                                                                                                   |  |              | 71,392 |   |                  |   | 76,110 |  
|Treasury stock, at cost (549,853 shares for 2006 and 2005)                                         |  |              | (3,458 | ) |                  |   | (3,458 | )
|Officers note receivable                                                                          |  |              | (400   | ) |                  |   | (400   | )
|                                                                                                   |  |              |        |   |                  |   |        |  
|Total shareholders equity                                                                         |  |              | 67,534 |   |                  |   | 72,252 |  
|                                                                                                   |  |              |        |   |                  |   |        |  
|Total liabilities and shareholders equity                                                         |  | $            | 86,608 |   |                  | $ | 92,922 |  
|                                                                                                   |  |              |        |   |                  |   |        |  

The accompanying notes are an integral part of these condensed consolidated
financial statements.



4



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Cobra Electronics Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)



|                                                                                          |  |                             |        |   |              |   |        |  
|----------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------ | - | ------ | -
|                                                                                          |  | Six Months Ended(Unaudited) |       
|                                                                                          |  | June 30,2006                |        |   | June 30,2005 |  
|Cash flows from operating activities:                                                     |  |                             |        |   |              |   |        |  
|Net (loss) earnings                                                                       |  | $                           | (3,814 | ) |              | $ | 6,390  |  
|Adjustments to reconcile net (loss) earnings to net cash flows from operating activities: |  |                             |        |   |              |   |        |  
|Equity loss in Horizon                                                                    |  |                             |       |   |              |   | 111    |  
|Depreciation and amortization                                                             |  |                             | 2,648  |   |              |   | 1,510  |  
|Impairment of product software                                                            |  |                             | 2,757  |   |              |   |       |  
|Deferred income taxes                                                                     |  |                             | (1,504 | ) |              |   | (266   | )
|Loss on cash surrender value (CSV) life insurance                                       |  |                             | 346    |   |              |   | 47     |  
|Stock-based compensation                                                                  |  |                             | 26     |   |              |   |       |  
|Gain on ex-officers life insurance                                                       |  |                             |       |   |              |   | (7,244 | )
|Gain on sale of fixed assets                                                              |  |                             |       |   |              |   | (1,925 | )
|                                                                                          |  |                            
|Changes in assets and liabilities:                                                        |  |                             |        |   |              |   |        |  
|Receivables                                                                               |  |                             | 7,056  |   |              |   | 6,937  |  
|Inventories                                                                               |  |                             | (3,515 | ) |              |   | (1,247 | )
|Other current assets                                                                      |  |                             | (896   | ) |              |   | (4,037 | )
|Accounts payable                                                                          |  |                             | 1,763  |   |              |   | 1,550  |  
|Accrued income taxes                                                                      |  |                             | (646   | ) |              |   | (952   | )
|Accrued liabilities                                                                       |  |                             | (2,173 | ) |              |   | (1,848 | )
|Deferred compensation                                                                     |  |                             | 407    |   |              |   | 373    |  
|Other long term liabilities                                                               |  |                             | (8     | ) |              |   | (5     | )
|                                                                                          |  |                             |        |   |              |   |        |  
|Net cash flows provided by (used in) operating activities                                 |  |                             | 2,447  |   |              |   | (606   | )
|                                                                                          |  |                             |        |   |              |   |        |  
|                                                                                          |  |                            
|Cash flows from investing activities:                                                     |  |                             |        |   |              |   |        |  
|Capital expenditures                                                                      |  |                             | (916   | ) |              |   | (1,031 | )
|Loan receivable                                                                           |  |                             | 3,374  |   |              |   | (96    | )
|Premiums on CSV life insurance                                                            |  |                             | (308   | ) |              |   | (288   | )
|Intangible assets                                                                         |  |                             | (1,181 | ) |              |   | (1,444 | )
|Life insurance proceeds                                                                   |  |                             |       |   |              |   | 11,204 |  
|Proceeds on sale of land                                                                  |  |                             |       |   |              |   | 2,015  |  
|                                                                                          |  |                             |        |   |              |   |        |  
|Net cash flows provided by investing activities                                           |  |                             | 969    |   |              |   | 10,360 |  
|                                                                                          |  |                             |        |   |              |   |        |  
|                                                                                          |  |                            
|Cash flows from financing activities :                                                    |  |                             |        |   |              |   |        |  
|Dividends paid to shareholders                                                            |  |                             | (1,038 | ) |              |   |       |  
|                                                                                          |  |                             |        |   |              |   |        |  
|Net cash flows used in financing activities                                               |  |                             | (1,038 | ) |              |   |       |  
|                                                                                          |  |                             |        |   |              |   |        |  
|                                                                                          |  |                            
|Effect of exchange rate changes on cash and cash equivalents                              |  |                             | (69    | ) |              |   | (200   | )
|                                                                                          |  |                             |        |   |              |   |        |  
|Net increase in cash                                                                      |  |                             | 2,309  |   |              |   | 9,554  |  
|Cash at beginning of period                                                               |  |                             | 6,704  |   |              |   | 2,600  |  
|                                                                                          |  |                             |        |   |              |   |        |  
|Cash at end of period                                                                     |  | $                           | 9,013  |   |              | $ | 12,154 |  
|                                                                                          |  |                             |        |   |              |   |        |  
|Supplemental disclosure of cash flow information:                                         |  |                             |        |   |              |   |        |  
|Cash paid during the period for:                                                          |  |                             |        |   |              |   |        |  
|Interest                                                                                  |  | $                           | 59     |   |              | $ | 49     |  
|Income taxes, net of refunds                                                              |  | $                           | 332    |   |              | $ | 2,558  |  

The accompanying notes are an integral part of these condensed consolidated
financial statements.



5



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Cobra Electronics Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2006 and 2005

(Unaudited)

The condensed consolidated financial statements included herein have been prepared by Cobra Electronics Corporation (the Company or Cobra),
without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The Condensed
Consolidated Balance Sheet as of December 31, 2005 has been derived from the audited consolidated balance sheet as of that date. These condensed consolidated financial statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Companys latest annual report on Form 10-K for the year ended December 31, 2005. In the opinion of management, the information contained herein reflects all adjustments necessary to make
the results of operations for the interim periods a fair statement of such operations. Due to the seasonality of the Companys business, the results of operations of any interim period are not necessarily indicative of the results that may be
expected for a fiscal year.



|(1) | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|--- | ------------------------------------------

BUSINESS  The Company
designs and markets consumer electronics products, which it sells primarily under the Cobra brand name principally in the United States, Canada and Europe. A majority of the Companys products are purchased from overseas suppliers, primarily in
China, Hong Kong, Italy and the Philippines. The consumer electronics market is characterized by rapidly changing technology and certain products may have limited life cycles. Management believes that it maintains strong relationships with its
current suppliers and that, if necessary, other suppliers could be found. The extent to which a change in a supplier would have an adverse effect on the Companys business depends on the timing of the change, the product or products that the
supplier produces for the Company and the volume of that production. The Company also maintains insurance coverage that would, in certain limited circumstances, reimburse the Company for lost profits resulting from a suppliers inability to
fulfill its commitments to the Company.

PRINCIPLES OF CONSOLIDATION  The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

TRANSLATION OF FOREIGN
CURRENCY  Assets and liabilities of consolidated foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at quarter end. Revenues and expenses are translated at average exchange rates prevailing during the quarter.
Gains or losses on foreign currency transactions and the related tax effects are reflected in net earnings. The resulting translation adjustments are included in stockholders equity as accumulated comprehensive income or loss.



6



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USE OF ESTIMATES  The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America 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 that are largely based on current business conditions, including economic climate, revenue growth, sales return rates, net realizable value of returned products and changes in
certain working capital amounts. The Company believes its estimates and assumptions are reasonable. However, actual results and the timing of the recognition of such amounts could differ from those estimates.

ACCOUNTS RECEIVABLE  The majority of the Companys accounts receivable are due from retailers and two-step distributors. Credit is extended based on an
evaluation of a customers financial condition, including the availability of credit insurance, and, generally, collateral is not required. Accounts receivable are due within various time periods specified in the terms applicable to the
specific customer and are stated at amounts due from customers net of an allowance for claims and doubtful accounts.

The Company determines its allowance
for claims and doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, the Companys previous loss history and the customers current ability to pay its obligation to the
Company. The Company writes off accounts receivable against the allowance for claims and doubtful accounts when they are judged to be uncollectible, and payments subsequently received on such receivables are credited to customer claims or bad debt
expense.

INVENTORIES  Inventories are recorded at the lower of cost, on a first-in, first-out basis, or market.

ADVERTISING AND SALES PROMOTION EXPENSES  These costs reflect amounts provided to retailers and distributors for advertising and sales promotions
and are expensed as incurred. Customer programs, generally agreed to at the beginning of each year, are mainly variable programs dependent on sales and special promotional events and may be revised during the course of the year, based upon a
customers projected sales and other factors, such as new, or changes to existing, promotional programs. Advertising and sales promotion expenses for the three months ended June 30, 2006 and 2005 totaled $1.7 million and $1.5 million,
respectively and totaled $2.8 million and $2.5 million, respectively for the six months ended June 30, 2006 and 2005.

COMPREHENSIVE INCOME (LOSS)
 The Company reports comprehensive income under the provisions of Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income. Comprehensive income is defined as the
change in equity of a business enterprise from transactions and other events from non-owner sources. Comprehensive income includes net earnings and other non-owner changes in equity that are not included in the statement of operations, but instead
reported as a separate component of equity. For the three-month and six-month periods ended June, 2006 and 2005, other comprehensive income includes only one component, which is the change in the foreign currency translation adjustment.

CONCENTRATION OF CREDIT RISK  The Company has evaluated its concentration of credit risk as it applies both to customers and to the institutions with which it
places cash investments.

The Company believes that its concentration of credit risk as it applies to customers is low due to its broad customer base in
all regions of the United States, as well as other areas in North America and Europe. Currently, the company is not using credit insurance for any of its accounts although such coverage is evaluated regularly in light of managements judgment
of credit risk and the expense to acquire such insurance.



7



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The Company places temporary cash investments with institutions of high credit quality. At June 30, 2006 and
December 31, 2005, the Company had approximately $9.0 million and $6.7 million, respectively, on deposit with such financial institutions, of which $8.9 million and $6.6 million, respectively, were in excess of amounts insured by the Federal
Deposit Insurance Corporation. The Company performs periodic evaluations of these institutions for relative credit standing and has not experienced any losses as a result of this concentration. Consequently, no significant concentration of credit
risk is considered to exist.

DEPRECIATION  Depreciation of buildings, improvements, tooling and equipment is computed using the straight-line method
over the following estimated useful lives. Depreciation expense totaled $477,000 and $933,000 for the three and six months ending June 30, 2006, respectively and totaled $477,000 and $930,000 for the three and six months ended June 30,
2005, respectively.



|                      |  |              
|--------------------- |  | -------------
|Classification        |  | Life         
|Buildings             |  | 30 years     
|Building improvements |  | 20 years     
|Motor vehicles        |  | 3 - 5 years  
|Equipment             |  | 5 - 10 years 
|Tools, dies and molds |  | 1.5 - 3 years

LONG-LIVED ASSETS  Long-lived assets are reviewed for possible impairment whenever events indicate that the
carrying amount of such assets may not be recoverable. If such a review indicates impairment, the carrying amount of such assets are reduced to the estimated fair value of such assets.

LOAN RECEIVABLE  On January 8, 2003, the Company entered into a loan agreement with Horizon Navigation, Inc. (Horizon) a California corporation and vendor to the Company, that was subsequently
modified on February 6, 2003. Horizon was permitted to borrow up to $2 million per annum, at Cobras discretion, up to an aggregate amount of $6 million at December 31, 2005. The loan accrued interest at a variable rate at a fixed
margin above the prime rate. The loan agreement provided that the interest will be added to the principal amount of the loan. The principal amount of the loan and all accrued interest were paid in full at maturity as of January 3, 2006.

In connection with the repayment of the loan, Cobra and Horizon agreed to terminate their development and license agreement. As part of the agreement,
Horizon refunded a portion of previously paid development fees and released Cobra from the obligation to pay royalties on the sale of products using the Horizon Navigation platform. The termination of the Horizon Navigation agreement resulted in a
net benefit of $724,000 that was recorded as a reduction to cost of sales in the fourth quarter of 2005.



8



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Certain amounts of callable and non-callable warrants to purchase shares of common stock of Horizon were issued to the
Company each time the Company made a loan to Horizon in excess of specified amounts. Based on Horizons financial performance, the Company assigned no value to these warrants. During the first nine months of 2005, the Company adopted the equity
method of accounting to recognize its pro-rata share of Horizons pre-tax losses. The termination of the Horizon Navigation agreement and the repayment in full of the loan from Cobra resulted in a gain in the fourth quarter 2005 as losses
previously recognized under the equity method of accounting were offset.

RESEARCH, ENGINEERING AND PRODUCT DEVELOPMENT EXPENDITURES  Research and
product development expenditures, as well as non-capitalized engineering costs, are expensed as incurred. For the three and six months ended June 30, 2006 these expenditures amounted to $424,000 and $846,000, respectively and for the three and
six months ended June 30, 2005 these expenditures amounted to $627,000 and $1.2 million, respectively. Certain engineering costs associated with the development of mobile navigation products were capitalized in accordance with SFAS No. 86,
Accounting for Costs of Computer Software to be Sold, Leased or Otherwise Marketed (SFAS No. 86).

SHIPPING &
HANDLING  Shipping and handling costs are included in cost of goods sold, and the amounts invoiced to customers relating to shipping and handling are included in net sales.

SOFTWARE RELATED TO PRODUCTS SOLD  The Company purchases and/or incurs costs in connection with the development of software to be used in products that the Company intends to sell, mainly Mobile Navigation
products. Such costs are capitalized and deferred as intangible assets in accordance with SFAS No. 86. Such costs consist of expenditures incurred after technological feasibility of the software has been established either from a working model
of the product developed, a detail design, or the purchase of computer software that has an alternative future use. Such costs which consist principally of coding and related costs are charged to earnings based on the ratio of actual product sales
during the reporting period to expected product sales over the estimated product life cycle. Software related intangible assets are reviewed at each balance sheet date for possible impairment as required by paragraph 10 of SFAS No. 86, and,
accordingly, if such review indicates that the carrying amount of these assets may not be recoverable, the carrying amount is reduced to the estimated fair value. The impairment charges for the three and six months ended June 30, 2006 totaled
$2.3 million and $2.8 million, respectively.

ERP SYSTEM COSTS  The Company capitalizes certain costs associated with ERP software developed or
obtained for internal use in accordance with Statement of Position No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The Companys policy provides for the capitalization of external
direct costs of materials and services associated with developing or obtaining internal use ERP software. Capitalized costs are classified as intangible assets. Costs associated with preliminary project activities and training are expensed as
incurred. Capitalized costs related to ERP software developed or obtained for internal use are amortized over a seven year period on a straight-line basis when the relevant ERP software is placed in service.



9



---

STOCK-BASED COMPENSATION  At June 30, 2006, the Company has equity-based compensation plans from which
stock-based compensation awards can be granted to eligible employees, officers or directors.

Prior to January 1, 2006, the Company accounted for its
equity-based awards in accordance with the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations, as permitted by SFAS No. 123,
Accounting for Stock-Based Compensation (SFAS No. 123). The Company did not recognize stock-based compensation cost in its Consolidated Statement of Operations prior to January 1, 2006, since the options granted had
an exercise price equal to the market value of the common stock on the grant date.

Effective January 1, 2006, the Company adopted the fair value
recognition provision of SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123R) using the modified-prospective-transition method. Under this transition method, compensation cost recognized includes compensation
costs for all share-based payments granted prior to, but not vested as of January 1, 2006 based on the fair value at grant date estimated in accordance with SFAS 123. The Company has not awarded stock-based compensation to employees, officers
or directors during the six-month period ended June 30, 2006. The stock-based compensation expense for the three and six months ended June 30, 2006 totaled $6,000 and $26,000, respectively. In accordance with SFAS 123R, results for prior
periods have not been restated.

The fair value of each option award is estimated on the grant date using the Black-Scholes-Merton option pricing model and
the assumptions at June 30, 2006 and 2005 as shown in the following table:



|                        |  |           |   |  |           |  
|----------------------- |  | --------- | - |  | --------- | -
|                        |  | 2006      |   |  | 2005      |  
|Risk-free interest rate |  | 4.0  4.3 | % |  | 4.0  4.7 | %
|Expected life           |  | 10 years  |   |  | 10 years  |  
|Expected volatility     |  | 42-43     | % |  | 42-43     | %



10



---

The effect on earnings and earnings per share if the fair value recognition provisions of SFAS 123R were applied to the
three and six months ending June 30, 2005 is shown in the following table:



|                                                                                                                                            |  |                         |     |   |            |   |       |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --- | - | ---------- | - | ----- | -
|                                                                                                                                            |  | Pro forma June 30, 2005 |    
|                                                                                                                                            |  | Three Months            |     |   | Six Months |  
|Net earnings, as reported                                                                                                                   |  | $                       | 723 |   |            | $ | 6,390 |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                         | (16 | ) |            |   | (37   | )
|                                                                                                                                            |  |                         |     |   |            |   |       |  
|Pro forma net earnings                                                                                                                      |  | $                       | 707 |   |            | $ | 6,353 |  
|                                                                                                                                            |  |                         |     |   |            |   |       |  
|Net earnings per common share:                                                                                                              |  |                         |     |   |            |   |       |  
|Basic  as reported                                                                                                                         |  | $                       | .11 |   |            | $ | .99   |  
|Basic  pro forma                                                                                                                           |  | $                       | .11 |   |            | $ | .99   |  
|Diluted  as reported                                                                                                                       |  | $                       | .11 |   |            | $ | .97   |  
|Diluted  pro forma                                                                                                                         |  | $                       | .11 |   |            | $ | .97   |  

INCOME TAXES  The Company provides for income taxes under the asset and liability method of accounting for
deferred income taxes. Deferred tax assets and liabilities are recorded based on the expected tax effects of future taxable income or deductions resulting from differences in the financial statement and tax bases of assets and liabilities. A
valuation allowance is recorded when necessary to reduce net deferred tax assets to the amount considered more likely than not to be realized. For the three and six months ending June 30, 2006, the Company recorded a tax benefit of $1.4 million
and $1.9 million, respectively, versus a tax expense of $135,000 and $1.4 million, respectively, for the same periods in 2005. The effective tax rate for the second quarter was 33.6 percent for 2006 as compared to 15.7 percent for the same period in
2005. On a year to date basis, the effective tax rate was 33.2 percent for 2006 and 18.1 percent for 2005. The lower effective tax rate for 2005 reflects the non-taxable life insurance proceeds received in 2005.

REVENUE RECOGNITION  Revenue from the sale of goods is recognized at the time of shipment, except for revenue from sales of products to certain customers whose
contractual terms specify FOB destination. Revenue from sales of products to these customers is recognized at the estimated time of receipt by the customer (estimated based on the average shipping time for all such customers), when title and risk of
loss would pass to the customer. Obligations for sales returns and allowances and product warranties are recognized at the time of sale on an accrual basis.



11



---

NEW ACCOUNTING PRONOUNCEMENT  The Financial Accounting Standards Board (FASB) issued FASB
Interpretation 48 Accounting for Uncertainty in Income Taxes (FIN 48) on July 13, 2006. FIN 48 clarifies FAS No. 109, Accounting for Income Taxes by providing the criterion a tax position must satisfy
for some or all of the tax benefit to be recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is reviewing the requirements and impact of FIN 48 prior to implementation on
January 1, 2007.



|(2) | PURCHASE ORDERS AND COMMITMENTS
|--- | -------------------------------

At June 30, 2006 and 2005, the
Company had outstanding inventory purchase orders with suppliers totaling approximately $35.5 million and $31.3 million, respectively.



12



---

|(3) | (LOSS) EARNINGS PER SHARE
|--- | -------------------------



|                                                                    |  |                               |           |   |                             |   |           |              |  |   |              |   |  |   |           |  
|------------------------------------------------------------------- |  | ----------------------------- | --------- | - | --------------------------- | - | --------- | ------------ |  | - | ------------ | - |  | - | --------- | -
|                                                                    |  | Three Months Ended(Unaudited) |           |   | Six Months Ended(Unaudited) |  
|                                                                    |  | June 30,2006                  |           |   | June 30,2005                |   |           | June 30,2006 |  |   | June 30,2005 |  
|Basic (loss) earnings per share:                                    |  |                               |           |   |                             |   |           |              |  |   |              |   |  |   |           |  
|Net (loss) earnings available to common shareholders (in thousands) |  | $                             | (2,686    | ) |                             | $ | 723       |              |  | $ | (3,814       | ) |  | $ | 6,390     |  
|Weighted-average shares outstanding                                 |  |                               | 6,489,247 |   |                             |   | 6,444,815 |              |  |   | 6,489,247    |   |  |   | 6,444,815 |  
|                                                                    |  |                               |           |   |                             |   |           |              |  |   |              |   |  |   |           |  
|Basic (loss) earnings per share                                     |  | $                             | (0.41     | ) |                             | $ | 0.11      |              |  | $ | (0.59        | ) |  | $ | 0.99      |  
|                                                                    |  |                               |           |   |                             |   |           |              |  |   |              |   |  |   |           |  
|Diluted (loss) earnings per share:                                  |  |                               |           |   |                             |   |           |              |  |   |              |   |  |   |           |  
|Weighted-average shares outstanding                                 |  |                               | 6,489,247 |   |                             |   | 6,444,815 |              |  |   | 6,489,247    |   |  |   | 6,444,815 |  
|Dilutive shares issuable in connection with stock option plans      |  |                               | 601,166   |   |                             |   | 611,348   |              |  |   | 601,166      |   |  |   | 611,348   |  
|Less: shares purchasable with proceeds                              |  |                               | (337,376  | ) |                             |   | (473,447  | )            |  |   | (324,077     | ) |  |   | (480,582  | )
|                                                                    |  |                               |           |   |                             |   |           |              |  |   |              |   |  |   |           |  
|Total                                                               |  |                               | 6,753,037 |   |                             |   | 6,582,716 |              |  |   | 6,766,336    |   |  |   | 6,575,581 |  
|                                                                    |  |                               |           |   |                             |   |           |              |  |   |              |   |  |   |           |  
|Diluted (loss) earnings per share                                   |  | $                             | (0.40     | ) |                             | $ | 0.11      |              |  | $ | (0.56        | ) |  | $ | 0.97      |  
|                                                                    |  |                               |           |   |                             |   |           |              |  |   |              |   |  |   |           |  



|(4) | COMPREHENSIVE (LOSS) INCOME
|--- | ---------------------------



|                                                        |  |                                |        |   |                              |   |     |              |  |   |              |   |  |   |       |  
|------------------------------------------------------- |  | ------------------------------ | ------ | - | ---------------------------- | - | --- | ------------ |  | - | ------------ | - |  | - | ----- | -
|                                                        |  | Three Months Ended (Unaudited) |        |   | Six Months Ended (Unaudited) |  
|                                                        |  | June 30,2006                   |        |   | June 30,2005                 |   |     | June 30,2006 |  |   | June 30,2005 |  
|                                                        |  | (in thousands)                 |        |   | (in thousands)               |  
|Net (loss) earnings                                     |  | $                              | (2,686 | ) |                              | $ | 723 |              |  | $ | (3,814       | ) |  | $ | 6,390 |  
|Accumulated other comprehensive (loss) income :         |  |                                |        |   |                              |   |     |              |  |   |              |   |  |   |       |  
|Foreign currency translation adjustment (no tax effect) |  |                                | 61     |   |                              |   | (54 | )            |  |   | 109          |   |  |   | (163  | )
|                                                        |  |                                |        |   |                              |   |     |              |  |   |              |   |  |   |       |  
|Total comprehensive (loss) income                       |  | $                              | (2,625 | ) |                              | $ | 669 |              |  | $ | (3,705       | ) |  | $ | 6,227 |  
|                                                        |  |                                |        |   |                              |   |     |              |  |   |              |   |  |   |       |  



13



---

|(5) | FINANCIAL INSTRUMENTS
|--- | ---------------------

The Company conducts business with various
manufacturing and distribution facilities and product sourcing locations around the world. The Company reduces its exposure to fluctuations in foreign exchange rates by creating offsetting positions through derivative financial instruments. The
Company currently does not use derivative financial instruments for trading or speculative purposes. The Company regularly monitors foreign exchange exposures and attempts to minimize such exposure with the use of hedge contracts.

The Companys current hedging activity is limited to foreign currency purchases. The purpose of the Companys foreign currency hedging activities is to protect
the Company from the risk that eventual settlements of foreign currency transactions will be adversely affected by changes in exchange rates. The Company hedges these exposures by entering into various short-term foreign exchange forward contracts.
Under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133), the instruments are carried at fair value in the Condensed Consolidated Balance Sheets as a component of current
liabilities. Changes in the fair value of foreign exchange forward contracts that meet the applicable hedging criteria of SFAS No. 133 are recorded as a component of accumulated other comprehensive income and reclassified into earnings in the
same period during which the hedged transaction affects earnings. Changes in the fair value of foreign exchange forward contracts that do not meet the applicable hedging criteria of SFAS No. 133 are recorded currently in earnings as cost of
sales. Foreign exchange loss totaled $45,000 and $236,000, respectively for the three and six months ended June 30, 2006 and foreign exchange gain totaled $344,000 and $697,000, respectively, for the three and six months ended June 30,
2005.



14



---

|(6) | INTANGIBLE ASSETS
|--- | -----------------

Intangible assets consist of the following at
June 30, 2006 and December 31, 2005 (in thousands):



|                              |  |              |        |   |                  |   |        |  
|----------------------------- |  | ------------ | ------ | - | ---------------- | - | ------ | -
|                              |  | (Unaudited)  |       
|                              |  | June 30,2006 |        |   | December 31,2005 |  
|Internal use software         |  | $            | 1,783  |   |                  | $ | 1,771  |  
|Less accumulated amortization |  |              | (1,643 | ) |                  |   | (1,605 | )
|                              |  |              |        |   |                  |   |        |  
|                              |  |              | 140    |   |                  |   | 166    |  
|                              |  |             
|ERP internal software system  |  |              | 3,826  |   |                  |   | 3,599  |  
|Less accumulated amortization |  |              | (513   | ) |                  |   | (257   | )
|                              |  |              |        |   |                  |   |        |  
|                              |  |              | 3,313  |   |                  |   | 3,342  |  
|                              |  |             
|Trademarks and patents        |  |              | 1,587  |   |                  |   | 1,566  |  
|Less accumulated amortization |  |              | (572   | ) |                  |   | (520   | )
|                              |  |              |        |   |                  |   |        |  
|                              |  |              | 1,015  |   |                  |   | 1,046  |  
|                              |  |             
|Product software              |  |              | 3,689  |   |                  |   | 8,004  |  
|Less accumulated amortization |  |              | (250   | ) |                  |   | (2,474 | )
|                              |  |              |        |   |                  |   |        |  
|                              |  |              | 3,439  |   |                  |   | 5,530  |  
|                              |  |              |        |   |                  |   |        |  
|Total                         |  | $            | 7,907  |   |                  | $ | 10,084 |  
|                              |  |              |        |   |                  |   |        |  

Internal use software is generally amortized over its average estimated life, which is three years. The
Companys ERP internal software system is being amortized over its average estimated life of seven years. Trademarks are generally amortized over their average estimated life of 20 years and patents are amortized over their average estimated
life of 17 years. Product software assets are amortized based on the percentage of revenues generated in each reporting period to the total revenues expected over the weighted average estimated product life cycle.

Amortization expense for intangible assets for the three and six months ended June 30, 2006 was $772,000 and $1.1 million, respectively. Impairment charges (as
discussed below) for the three and six month periods ended June 30, 2006 was $2.3 million and $2.8 million, respectively. Amortization expense for the three and six months ended June 30, 2005 was $183,000 and $584,000, respectively.
Product software assets are reviewed for possible impairment at each balance sheet date as required by paragraph 10 of SFAS No. 86 or SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142) and,
accordingly, if such review indicates that the carrying amount of these assets may not be recoverable, the carrying amount is reduced to the estimated fair value of such assets.



15



---

In connection with its second quarter review, management determined that the intellectual property (product software) for
its first generation handheld GPS and mobile navigation products was impaired. Accordingly, the carrying value of certain product software was reduced by $2.3 million during the three months ended June 30, 2006. During the first six months of
2006, the Company reduced the carrying value of product software for first generation handheld GPS and mobile navigation products by $2.8 million. Management believes that the values of other intangible assets are without impairment and all
intangible assets are reflected at their fair values as of June 30, 2006.



|(7) | CONTINGENCIES
|--- | -------------

The Company is subject to various unresolved legal actions,
which arise in the normal course of its business. None of these matters is expected to have a material adverse effect on the Companys financial position or results of operations. However, the ultimate resolution of these matters could result
in a change in the Companys estimate of its liability for these matters.

The Company warrants to the consumer who purchases its products that it
will repair or replace, without charge, defective products within a specified time period, generally one year. The Company also has a return policy for its customers that allows them to return to the Company products returned to them by their
customers for full or partial credit based on when the Companys customer last purchased these products. Consequently, it maintains a warranty reserve, which reflects historical warranty returns rates by product category multiplied by the most
recent six months of unit sales of that model and the unit standard cost of the model. A roll-forward of the warranty reserve is as follows (in thousands):



|                                                    |  |                               |        |   |                             |   |        |  
|--------------------------------------------------- |  | ----------------------------- | ------ | - | --------------------------- | - | ------ | -
|                                                    |  | Six Months EndedJune 30, 2006 |        |   | Year EndedDecember 31, 2005 |  
|Accrued product warranty costs, beginning of period |  | $                             | 1,618  |   |                             | $ | 1,277  |  
|Warranty provision                                  |  |                               | 1,496  |   |                             |   | 2,914  |  
|Warranty expenditures                               |  |                               | (1,706 | ) |                             |   | (2,573 | )
|                                                    |  |                               |        |   |                             |   |        |  
|Accrued product warranty costs, end of period       |  | $                             | 1,408  |   |                             | $ | 1,618  |  
|                                                    |  |                               |        |   |                             |   |        |  



16



---

|(8) | INVENTORY VALUATION RESERVES
|--- | ----------------------------

The Company maintains a liquidation reserve
representing the write-down of returned product from its customers to its net realizable value. Returned inventory is either sold to various liquidators or returned to vendors for partial credit against similar, new models. The decision to sell or
return products to vendors depends upon the estimated future demand for the models. Judgments are made as to whether various models are to be liquidated or returned to the vendor, taking into consideration the liquidation prices expected to be
received and the amount of the vendor credit. The amount of the reserve is determined by comparing the cost of each unit returned to the estimated amount to be realized upon each units disposition, either from returning the unit to the vendor
for partial credit towards the cost of new, similar product or liquidating the unit. This reserve can fluctuate significantly from quarter to quarter depending upon quantities of returned inventory on hand and the estimated liquidation price or
vendor credit per unit. A roll-forward of the liquidation reserve is as follows (in thousands):



|                                         |  |                               |        |   |                             |   |        |  
|---------------------------------------- |  | ----------------------------- | ------ | - | --------------------------- | - | ------ | -
|                                         |  | Six Months EndedJune 30, 2006 |        |   | Year EndedDecember 31, 2005 |  
|Liquidation reserve, beginning of period |  | $                             | 874    |   |                             | $ | 715    |  
|Liquidation provision                    |  |                               | 1,599  |   |                             |   | 5,776  |  
|Liquidation of models                    |  |                               | (1,576 | ) |                             |   | (5,617 | )
|                                         |  |                               |        |   |                             |   |        |  
|Liquidation reserve, end of period       |  | $                             | 897    |   |                             | $ | 874    |  
|                                         |  |                               |        |   |                             |   |        |  



17



---

The Company maintains a net realizable value (NRV) reserve to write-down, as necessary, certain inventory not
previously sold to customers, except for that covered by the liquidation reserve discussed above, below cost. The reserve includes models where it is determined that the estimated realizable value is less than cost. Thus, judgments must be made
about which slow-moving, excess or non-current models are to be included in the reserve and the NRV of such models. The estimated NRV of each model is the per unit price that is estimated to be received if the model was sold in the marketplace. This
reserve will vary depending upon the specific models selected, the estimated NRV for each model and quantities of each model that are determined will be sold below cost from quarter to quarter. A roll-forward of the NRV reserve is as follows (in
thousands):



|                                 |  |                               |       |   |                              |   |        |  
|-------------------------------- |  | ----------------------------- | ----- | - | ---------------------------- | - | ------ | -
|                                 |  | Six Months EndedJune 30, 2006 |       |   | Year Ended December 31, 2005 |  
|NRV reserve, beginning of period |  | $                             | 509   |   |                              | $ | 506    |  
|NRV provision                    |  |                               | 1,776 |   |                              |   | 1,660  |  
|NRV write-offs                   |  |                               | (341  | ) |                              |   | (1,657 | )
|                                 |  |                               |       |   |                              |   |        |  
|NRV reserve, end of period       |  | $                             | 1,944 |   |                              | $ | 509    |  
|                                 |  |                               |       |   |                              |   |        |  

The $1.8 million NRV provision for the first half of 2006 includes a second quarter charge of $1.5 million to
write down the inventory of the first generation handheld GPS and mobile navigation products to the estimated realizable sales value.



|(9) | LOAN RECEIVABLE
|--- | ---------------

On January 8, 2003, the Company entered into a loan
agreement with Horizon Navigation, Inc. (Horizon) a California corporation and vendor to the Company, that was subsequently modified on February 6, 2003. Horizon was permitted to borrow up to $2 million per annum, at Cobras
discretion, up to an aggregate amount of $6 million at December 31, 2005. The loan accrued interest at a variable rate at a fixed margin above the prime rate. The loan agreement provided that the interest will be added to the principal amount
of the loan. The principal amount of the loan and all accrued interest were paid in full at maturity as of January 3, 2006.

In connection with the
repayment of the loan, Cobra and Horizon agreed to terminate their development and license agreement. As part of the agreement, Horizon refunded a portion of previously paid development fees and released Cobra from the obligation to pay royalties on
the sale of products using the Horizon Navigation platform. The termination of the Horizon Navigation agreement resulted in a net benefit of $724,000 that was recorded as a reduction to cost of sales in the fourth quarter of 2005.



18



---

Certain amounts of callable and non-callable warrants to purchase shares of common stock of Horizon were issued to the
Company each time the Company made a loan to Horizon in excess of specified amounts. Based on Horizons financial performance, the Company assigned no value to these warrants. During the first nine months of 2005, the Company adopted the equity
method of accounting to recognize its pro-rata share of Horizons pre-tax losses. The termination of the Horizon Navigation agreement and the repayment in full of the loan from Cobra resulted in a gain in the fourth quarter 2005 as losses
previously recognized under the equity method of accounting were offset.



|(10) | OTHER CURRENT ASSETS
|---- | --------------------

Other current
assets consisted of the following at June 30, 2006 and December 31, 2005 (in thousands):



|                             |  |               |       |                   |   |      
|---------------------------- |  | ------------- | ----- | ----------------- | - | -----
|                             |  | June 30, 2006 |       | December 31, 2005
|Receivable from vendors      |  | $             | 1,423 |                   | $ | 2,365
|Prepaid assets               |  |               | 3,169 |                   |   | 1,984
|Income tax refund/receivable |  |               | 694   |                   |   | 597  
|Prepaid packaging & design   |  |               | 731   |                   |   | 668  
|                             |  |               |       |                   |   |      
|Total                        |  | $             | 6,017 |                   | $ | 5,614
|                             |  |               |       |                   |   |      



|(11) | OTHER INCOME/EXPENSE
|---- | --------------------

The following table
shows the components of other (expense) income (in thousands):



|                                                      |  |                    |      |   |                  |   |     |              |  |   |              |   |  |   |       |  
|----------------------------------------------------- |  | ------------------ | ---- | - | ---------------- | - | --- | ------------ |  | - | ------------ | - |  | - | ----- | -
|                                                      |  | Three Months Ended |      |   | Six Months Ended |  
|                                                      |  | June 30,2006       |      |   | June 30,2005     |   |     | June 30,2006 |  |   | June 30,2005 |  
|Gain on ex-officers life insurance                   |  | $                  |     |   |                  | $ |    |              |  | $ |             |   |  | $ | 7,244 |  
|Gain on sale of land                                  |  |                    |     |   |                  |   |    |              |  |   |             |   |  |   | 1,916 |  
|Interest expense                                      |  |                    | (25  | ) |                  |   | (24 | )            |  |   | (59          | ) |  |   | (49   | )
|Interest income                                       |  |                    | 70   |   |                  |   | 86  |              |  |   | 182          |   |  |   | 151   |  
|Gain (loss) on cash surrender value of life insurance |  |                    | (142 | ) |                  |   | 10  |              |  |   | (346         | ) |  |   | (47   | )
|Horizon equity loss                                   |  |                    |     |   |                  |   | (86 | )            |  |   |             |   |  |   | (111  | )
|Other  net                                           |  |                    | (3   | ) |                  |   | (6  | )            |  |   | 27           |   |  |   | (29   | )
|                                                      |  |                    |      |   |                  |   |     |              |  |   |              |   |  |   |       |  
|Total                                                 |  | $                  | (100 | ) |                  | $ | (20 | )            |  | $ | (196         | ) |  | $ | 9,075 |  
|                                                      |  |                    |      |   |                  |   |     |              |  |   |              |   |  |   |       |  



19



---

|(12) | SUBSEQUENT EVENT
|---- | ----------------

The Companys $400,000 loan to James R. Bazet,
President and Chief Executive Officer was scheduled for repayment on July 18, 2006. Mr. Bazet repaid the loan on July 14, 2006. The payment including accrued interest, amounted to $490,000.

On August 10, 2006, the Company entered into Waiver and Amendment No. 8 to the revolving credit agreement pursuant to which its lenders waived certain covenant
violations that would have otherwise occurred with respect to the quarter ended June 30, 2006 due to the asset write-down charges of $4.6 million. The amendment also amends the financial covenants contained in the revolving credit agreement
through the term of the credit agreement.



20



---

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

ANALYSIS OF RESULTS OF OPERATIONS

Executive Summary

The Company had a
net loss of $2.7 million, or $.40 per diluted share, in the second quarter of 2006 compared to net earnings of $723,000, or $.11 per diluted share, in the second quarter of 2005. The net earnings decrease from 2005 reflects the reduction in the
value of certain intellectual property and inventory pertaining to the Companys first generation handheld GPS and mobile navigation products.

Net
sales increased by $5.9 million, or 17.6 percent, to $39.6 million, from $33.7 million in the second quarter of 2005. This increase reflected improved sales of both Mobile Navigation and Detection products. Gross margin for 2006 decreased to 10.5
percent from 25.6 percent in the second quarter of 2005 reflecting the write down of certain intellectual property and inventory related to the first generation handheld GPS and mobile navigation products. Primarily as a result of the increase in
sales and associated variable selling expenses, selling, general and administrative expenses increased to $8.1 million, as compared to $7.7 million in the second quarter of 2005, but declined as a percent of net sales to 20.5 percent in the second
quarter of 2006 from 23.0 percent in the second quarter of 2005.

The Company anticipates that net sales in 2006 will exceed those of 2005. However, the
Company expects a loss for 2006 compared to earnings in 2005 because of the asset write-downs taken in the second quarter. For the third quarter of 2006, the Company anticipates that sales will be approximately equal to those of last year and that
net income will decline as compared to last year.

Second Quarter 2006 vs. Second Quarter 2005

For the second quarter ended June 30, 2006, the Company reported a net loss of $2.7 million, or $0.40 net loss per diluted share, compared to net earnings of
$723,000, or $0.11 per diluted share, in the second quarter of 2005. The net earnings decrease reflects the write down in value of certain intellectual property and inventory of first generation handheld GPS and mobile navigation products.



21



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Net sales increased $5.9 million, or 17.6 percent, to $39.6 million in the second quarter of 2006 from net sales of $33.7
million in the second quarter of 2005. This increase reflected improved sales in nearly all of the Companys domestic product lines, especially sales of Mobile Navigation and Detection products. Sales of Mobile Navigation were up $3.8 million
in the second quarter of 2006 from the prior years second quarter due primarily to sales of the NAV ONE 4500 and NAV ONE 4000, which were introduced in the fourth quarter of 2005. Additionally, sales in this category increased as a
result of sales of the NAV ONE 2950 to a major customer. Sales of Detection products, which increased 25.7% from the prior years second quarter, benefited from the introduction of the Companys new 12 Band models. These increases
were offset, in part, by a decline in two-way radio sales due to the continuing impact of the production delays of the new lithium ion battery powered models.

Gross margin decreased in the second quarter of 2006 to 10.5 percent from 25.6 percent in the second quarter of 2005, primarily due to a $2.3 million impairment charge for certain intellectual property pertaining to first generation
handheld GPS and mobile navigation products and a $2.3 million inventory write down attributable to lower selling prices on these products. Both of these items combined represented a decrease of 11.7 gross margin points. In addition, margins were
negatively impacted by lower than anticipated sales of the lithium ion two-way radios as the Company experienced production delays and incurred substantial airfreight expenses to ensure that customers remained in stock on these items, as well as
selling a higher proportion of the older reduced margin products compared to 2005.

Selling, general and administrative expenses increased to $8.1 million
in the second quarter of 2006 as compared to $7.7 million in the second quarter of 2005, but declined as a percent of net sales to 20.5 percent in the second quarter of 2006 from 23.0 percent in the second quarter of 2005. The $387,000 increase from
2005 was attributed to higher variable selling expenses of $333,000, higher general and administrative expenses of $258,000 and lower engineering expenditures of $203,000. The increased variable selling expenses reflected higher sales for the second
quarter of 2006 compared to 2005, but were partially offset by a $443,000 increase in reversal of unused promotional funds from prior periods compared to the second quarter of 2005. Two factors contributed to the increase in the amount of unused
promotional funds reversed in 2006 compared to 2005. First, in 2005, there was a higher amount reversed for unused customer funds for price related programs, the costs of which are initially recorded as a reduction in revenue instead of as a selling
expense in selling, general and administrative expenses. Secondly, a substantial portion of selling expenses accrued for retailers and distributors is ultimately paid upon proof of performance, some of which can only be resolved over the passage of
time. The increased general and administrative expenses in the second quarter of 2006 were due to higher compensation expense for several previously open positions that have since been filled and for expenses associated with the Companys ERP
system placed in service on January 1, 2005. The lower engineering expenses reflect the capitalization of certain salary and related expenses for mobile navigation software development activities that began in the third quarter of 2005.

Other expense increased $80,000 in the second quarter of 2006 compared to the three months ended June 30, 2005 due to a loss on the cash surrender
value of life insurance policies compared to a small gain in 2005.

For the second quarter of 2006, an income tax benefit of $1.4 million was recorded
compared to an income tax expense of $135,000 in the second quarter of 2005. The overall effective tax rate for the second quarter of 2006 was 33.6 percent compared to 15.7 percent for second quarter of 2005. The lower effective tax rate for 2005
was due to the non-taxable nature of the life insurance gain received by the Company in 2005 for which the impact was spread equally over the four quarters of 2005.



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Effective January 1, 2006, the Company adopted the fair value recognition provision of SFAS No. 123R using the
modified-prospective-transition method. Under this transition method, compensation cost recognized includes compensation costs for all share-based payments granted prior to, but not vested as of January 1, 2006 based on the fair value at grant
date estimated in accordance with SFAS 123. Results for prior periods have not been restated. The stock-based compensation expense recognized for the second quarter of 2006 totaled $6,000.



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Six Months Ended June 30, 2006 vs. Six Months Ended June 30, 2005

For the six months ended June 30, 2006, the Company reported a net loss of $3.8 million, or a net loss of $0.56 per diluted share, compared to net earnings of $6.4
million, or $.97 per diluted share, in the first half of 2005. The net earnings decrease reflects the second quarter 2006 charges associated with the reduction in the value of certain intellectual property and inventory for first generation handheld
GPS and mobile navigation products as well as the non-recurring life insurance and land sale gains recorded in the first quarter of 2005.

Net sales for
the first half of 2006 increased $11.9 million, or 22.5 percent, to $64.9 million from net sales of $53.0 million in the first half of 2005. This increase reflected improved sales in nearly all of the Companys domestic product lines,
particularly sales of Mobile Navigation and Detection products. Sales of Mobile Navigation were up $7.3 million in the first half of 2006 due primarily to sales of the NAV ONE 4500 and NAV ONE 4000, which were introduced in the fourth quarter
of 2005, as well as sales of the NAV ONE 2950 to a major customer. Sales of Detection products, which increased 19.9 percent in the first half of 2006 from the same period in the prior year, benefited from the introduction of the Companys new
12 Band models.

Gross margin decreased in the first six months of 2006 to 14.2 percent from 24.2 percent in the first six months of 2005 primarily
due to a $2.8 million of impairment charges in the first and second quarters of 2006 for certain intellectual property pertaining to first generation handheld GPS and mobile navigation products and a $2.3 million inventory write down attributable to
lower selling prices on these products. Both of these items combined represented a decrease of 7.8 gross margin points. In addition, margins were negatively impacted by lower than anticipated sales of the new lithium ion two-way radios as the
Company experienced production delays and incurred substantial airfreight expenses to ensure that customers remained in stock on these items, as well as selling a higher proportion of the older reduced margin products compared to 2005. Partially
offsetting these decreases were increases in the first six months of 2006 in the Detection products because of the impact of the new 12 band line and in Citizens Band radios gross margin because of lower pricing incentives than in 2005.

Selling, general and administrative expenses increased to $14.7 million in the first half of 2006 as compared to $14.1 million in the first half of 2005, but declined
as a percent of net sales to 22.7 percent in the first half of 2006 from 26.6 percent in the first half of 2005. The $643,000 increase from 2005 was attributed to higher variable selling expenses of $604,000, higher general and administrative
expenses of $442,000 and lower engineering expenditures of $396,000. The increased variable selling expenses reflected higher sales for the first half of 2006, which were partially offset by a $624,000 reversal of unused promotional funds from prior
periods compared to the $73,000 reversal for the first half of 2005. Two factors contributed to the increase in the amount of unused promotional funds reversed in 2006 compared to 2005. First, in 2005, there was a higher amount reversed for unused
customer funds for price related programs, the costs of which are initially recorded as a reduction in revenue instead of as a selling expense in selling, general and administrative expenses. Secondly, a substantial portion of selling expenses
accrued for retailers and distributors is ultimately paid upon proof of performance, some of which can only be resolved over the passage of time. The higher general and administrative expenses resulted from increased professional service fees mainly
for Sarbanes-Oxley compliance work, higher legal fees for trademark and patent matters, and expenses associated with the ERP System that was placed in service on January 1, 2005. The lower engineering expenses reflect the capitalization of
certain salary expense for mobile navigation software development activities that began in the third quarter of 2005.



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Other income decreased $9.3 million for the six months ended June 30, 2006 compared to the six months ended
June 30, 2005 due to the non-recurring gains recorded in the first quarter of 2005, which consisted of a $7.2 million gain associated with the payment of a death benefit from life insurance maintained to fund a deferred compensation program for
the former president of the Company and a $1.9 million gain on the sale of unimproved property located adjacent to the Companys office and warehouse facility in Chicago.

For the six-month period ended June 30, 2006, an income tax benefit of $1.9 million was recorded compared to an income tax expense of $1.4 million in the same period of 2005. The overall effective tax rate for
the six month period of 2006 was 33.2 percent, compared to 18.1 percent for six-month period of 2005. The lower effective tax rate for 2005 was due to the non-taxable nature of the life insurance gain received by the Company for which the impact was
equally spread over the four quarters of 2005.

Effective January 1, 2006, the Company adopted the fair value recognition provision of SFAS
No. 123R using the modified-prospective-transition method. Under this transition method, compensation cost recognized includes compensation costs for all share-based payments granted prior to, but not vested as of January 1, 2006 based on
the fair value at grant date estimated in accordance with SFAS 123. Results for prior periods have not been restated. The stock-based compensation expense recognized for the first half of 2006 totaled $26,000.

LIQUIDITY AND CAPITAL RESOURCES

The
Company is party to a revolving credit agreement for $45 million with three financial institutions, which extends until January 31, 2007. Borrowings and letters of credit issued under the agreement are secured by substantially all of the assets
of the Company, with the exception of real property and the cash surrender value of certain life insurance policies owned by the Company. Loans outstanding under the credit agreement, as amended, bear interest, at the Companys option, at 25
basis points below the prime rate or at LIBOR plus 175 basis points. The credit agreement allows the payment of cash dividends and contains certain financial and other covenants, including a requirement that James R. Bazet continue to serve as CEO
of the Company. As of June 30, 2006, the Company had no interest bearing debt outstanding and approximately $22.8 million available under this credit line based on asset advance formulas. On August 10, 2006, the Company entered into Waiver
and Amendment No. 8 to the revolving credit agreement pursuant to which its lenders waived certain covenant violations that would have otherwise occurred with respect to the quarter ended June 30, 2006 due to the asset write-down charges
of $4.6 million. The amendment also amends the financial covenants through the tern of the credit agreement.

Net cash flows provided by operating
activities were $2.4 million during the first six months of 2006. Significant net cash inflows from operations included a reduction in accounts receivable of $7.1 million, an increase in accounts payable of $1.8 million, non-cash depreciation and
amortization of $2.6 million, and impairment charges of $2.8 million. The decrease in accounts receivable resulted from collections on increased fourth quarter of 2005 sales. The increase in accounts payable was due to higher purchases of inventory
in the first six months of 2006.



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Offsetting the inflows were an increase in inventory of $3.5 million, a decrease in accrued liabilities of $2.2 million,
an increase in deferred taxes of $1.5 million, and a decrease in accrued taxes of $0.6 million. The increase in inventory represented a build-up resulting from normal seasonal requirements and forecasted sales for the third and fourth quarters. The
decrease in accrued liabilities was due to payments of year-end accruals for bonuses, advertising and promotional funds.

Working capital requirements are
seasonal, with demand for working capital being higher later in the year as customers begin purchasing for the holiday selling season. The Company believes that cash generated from operations and from borrowings under its credit agreement will be
sufficient in 2006 to fund its working capital needs.

Investing activities generated cash of $1.0 million in the first half of 2006 due to the payment of
$3.4 million relating to the Horizon receivable paid on January 3, 2006, partially offset by a $1.2 million increase in intangible assets, primarily for mobile navigation product software and $0.9 million for capital expenditures, primarily for
purchases of tooling.

The Company declared an annual dividend of $0.16 per share, payable on April 28, 2006 to shareholders of record as of
April 14, 2006, which utilized $1 million during the first six months of 2006 for financing activities.

At June 30, 2006 and 2005, the Company
had outstanding inventory purchase orders with suppliers totaling approximately $35.5 million and $31.3 million, respectively.

On July 14, 2006,
James R. Bazet, President and Chief Executive Officer, repaid a $400,000 loan to the Company due on July 18, 2006. The payment, including accrued interest, amounted to $490,000.



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CRITICAL ACCOUNTING POLICIES

The Companys significant accounting policies are discussed in the notes to the condensed consolidated financial statements. The application of certain of these
policies requires significant judgments or a historical based estimation process that can affect the results of operations and financial position of the Company as well as the related footnote disclosures. The Company bases its estimates on
historical experience and other assumptions that it believes are reasonable. If actual amounts ultimately differ from previous estimates, the revisions are included in the Companys results of operations for the period in which the actual
amounts become known.

Critical accounting policies generally consist of those that are reflective of significant judgments and uncertainties and could
potentially result in materially different results under different assumptions. The accounting policies and estimates that may have a significant impact upon the operating results, financial position and footnote disclosures of the Company are as
follows:

Revenue Recognition: Revenue from the sale of goods is recognized at the time of shipment, except for revenue from sales of products to
certain customers whose contractual terms specify FOB destination. Revenue from sales of products to these customers is recognized at the estimated time of receipt by the customer (estimated based on the average shipping time for all such
customers), when title and risk of loss would pass to the customer. Obligations for sales returns and allowances and product warranties are recognized at the time of sale on an accrual basis as described below.

Sales Returns Reserve: The Company has a policy that allows its customers to return product that was returned to them by their customers. The reserve reflects the
sales, cost of sales and gross profit impact of expected returns and related stock adjustments, as well as reduction in accounts receivable and increases in inventory for the amount of expected returns. The amount of the reserve is determined by
multiplying the sales and cost of sales by product category for the current quarter by historical return rates adjusted for any known changes in key variables affecting these return rates. Thus, judgments must be made regarding whether current
return rates will approximate anticipated return rates. This reserve will vary based on the changes in sales, gross margin and historical, as well as anticipated, return rates from quarter to quarter.

Warranty Reserve: The Company generally provides a one year consumer warranty for its products and also allows its customers to return product that has been
returned by their customers. Consequently, the Company maintains a warranty reserve, which reflects historical return rates by product category multiplied by the most recent six months of unit sales and the unit standard cost of each model. The
Company uses the most recent six months of unit sales in its estimate, as historical experience indicates that most returns will occur within six months of the Companys original sale date. Therefore, judgments must be made based on historical
return rates and how the returned product will be disposed of, either by liquidation or return to vendors for credit on new purchases. This reserve may vary based upon the level of sales and changes in historical return rates from quarter to quarter
as well as estimated costs of disposal, either liquidation prices or credit given by vendors.



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Liquidation Reserve: The Company maintains a liquidation reserve representing the write-down of returned product
from our customers to its net realizable value. Returned inventory is either sold to various liquidators or returned to vendors for partial credit against similar, new models; this decision depends upon the estimated future demand for the models.
Judgments are made as to whether various models are to be liquidated or returned to the vendor, taking into consideration the liquidation prices expected to be received and the amount of vendor credit. The amount of the reserve is determined by
comparing the cost of each unit returned to the estimated amount to be realized upon each units disposition, either from returning the unit to the vendor for credit towards the cost of a new, similar product or liquidating the unit. This
reserve can fluctuate significantly from quarter to quarter depending upon quantities of returned inventory on hand and the estimated liquidation price or vendor credit per unit.

Net Realizable Value Reserve: The Company maintains a net realizable value reserve to write-down, as necessary, certain inventory not previously sold to customers, except for inventory covered by the
liquidation reserve discussed above, below cost. The reserve includes models where it is determined that net realizable value is less than cost. Thus, judgments must be made about which slow-moving, excess or non-current models are to be included in
the reserve and the estimated net realizable value of such model (i.e., the per unit price that it is estimated can be received in the marketplace if the model was sold). This reserve will vary depending upon the specific models selected, the
estimated net realizable value for each model and quantities of each model that are determined will be sold below cost from quarter to quarter.

Advertising and Sales Promotion Accrual: The advertising and sales promotion accrual reflects amounts provided to retailers and distributors for advertising and sales promotions. Customer programs, generally agreed to at the
beginning of each year, are mainly variable programs dependent on sales and may be revised during the course of the year based upon a customers projected sales and other factors, such as new promotional opportunities. Accruals are made monthly
for each customer by multiplying the customers estimated program accrual percentage by the customers actual sales. Therefore, this accrual will vary quarter to quarter depending on a given quarters sales and the sales mix of
customers. In addition, should a customer significantly exceed or fall short of its planned program sales, negotiate changes to the term of the existing programs or add new programs, adjustments may need to be made to the customers estimated
program accrual percentage due to certain minimum and/or maximum sales thresholds in such customers programs. Periodic adjustments may also be necessary.



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Deferred Compensation: Obligations under the deferred compensation plans (most of which are non-qualified defined
benefit plans) and annual deferred compensation expense are determined by a number of assumptions. Key assumptions in the determination of obligations under the deferred compensation plans and annual deferred compensation expense include the
discount rate and anticipated compensation for each individual covered by the plans, which in part is dependent upon the anticipated future profitability of the Company. The discount rate for 2006 and 2005 was 7 percent. The compensation increase
assumptions are based on historical experience and anticipated future performance. The Company maintains life insurance policies for certain current and former executives to provide funding for future deferred compensation obligations. As of
June 30, 2006, the cash surrender value of the insurance policies in force for the Companys president and chief executive officer was $874,000.

Software Related to Products to be Sold: The Company purchases and/or incurs costs in connection with the development of software to be used in products that the Company intends to sell, mainly Mobile Navigation products. Such costs
are capitalized and deferred as intangible assets in accordance with SFAS No. 86. Such costs consist of expenditures incurred after technological feasibility of the software has been established either from a working model of the product
developed, a detail design, or the purchase of computer software that has an alternative future use. Such costs which consist principally of coding and related costs are charged to earnings based on the ratio of actual product sales during the
reporting period to expected product sales over the estimated product life cycle. Software related intangible assets are reviewed at each balance sheet date for possible impairment as required by paragraph 10 of SFAS No. 86, and, accordingly,
if such review indicates that the carrying amount of these assets may not be recoverable, the carrying amount is reduced to the estimated fair value.

The
above listing is not intended to be a comprehensive list of all of the Companys accounting policies. In most cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in
the United States. See Note 1 to Cobras condensed consolidated financial statements included under Item 1, which is incorporated herein by reference, for a description of the Companys significant accounting policies.



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Item 3. Qualitative and Quantitative Disclosures About Market Risk

The Company is subject to market risk associated principally with changes in interest rates and foreign exchange rates. The Company does not have any interest rate
exposure at June 30, 2006, as there was no outstanding debt as of that date. Debt incurred is priced at interest rates that float with the market and therefore the fair value of the Companys debt is not significantly affected by changes
in market interest rates.

The Companys suppliers are located in China, Hong Kong, Italy and the Philippines. In the second quarter of 2006,
approximately 10.8 percent of the Companys sales were outside the United States, principally in Europe and Canada, compared to 14.4 percent in the second quarter of 2005. The Company minimizes its foreign currency exchange rate risk by
conducting all of its transactions in U.S. dollars, except for some of the billings of its European business, which are conducted in Euros. The Company does not use derivative financial or commodity instruments for trading or speculative purposes;
however, forward contracts are occasionally used for hedging some Euro denominated transactions for the Companys European business. Please refer to Note 5 to the Companys condensed consolidated financial statements, included under
Item 1, which is incorporated herein by reference. A 10 percent movement in the U.S. dollar/Euro exchange rate on the forward contracts outstanding at June 30, 2006 would result in approximately a $102,000 increase or decrease in the
market value of the Companys forward contracts held at June 30, 2006.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of that term in the Private Securities Litigation Reform Act of 1995 found at Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Additional written or oral forward-looking statements may be made by the Company from time to time in filings with the
SEC, press releases, or otherwise. Statements contained in this report that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. Forward-looking
statements may include, but are not limited to, projections of revenue, earnings or loss and capital expenditures, statements regarding future operations, anticipated financing needs, compliance with financial covenants in loan agreements,
liquidity, plans for acquisitions or sales of assets or businesses, plans relating to products or services, assessments of materiality, expansion into international markets, growth trends in the consumer electronics business, technological and
market developments in the consumer electronics business, the availability of new consumer electronics products and predictions of future events, as well as assumptions relating to these statements. In addition, when used in this report, the words
anticipates, believes, should, estimates, expects, intends, plans and variations thereof and similar expressions are intended to identify forward-looking statements.



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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 report or in other Company
filings, press releases, or otherwise. 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:



| |  |  | global economic and market conditions, including continuation of or changes in the current economic environment;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | ability of the Company to introduce new products to meet consumer needs, including timely introductions as new consumer technologies are introduced, and customer and consumer
acceptance of these new product introductions;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | pressure for the Company to reduce prices for older products as newer technologies are introduced;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | significant competition in the consumer electronics business, including introduction of new products and changes in pricing;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | factors related to foreign manufacturing, sourcing and sales (including foreign government regulation, trade and importation, health and safety concerns and effects of fluctuation
in exchange rates);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ability of the Company to maintain adequate financing, to bear the interest cost of such financing and to remain in compliance with financing covenants;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in law; and
| | - |  | -------------------



| |  |  | other risk factors, which may be detailed from time to time in the Companys SEC filings.
| | - |  | -----------------------------------------------------------------------------------------

Readers are cautioned not to place undue reliance on any forward-looking statements contained in this report, which speak only as of the date set forth on the signature page hereto. The Company undertakes no
obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after such date or to reflect the occurrence of anticipated or unanticipated events.



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Item 4. Controls and Procedures

The Company has established disclosure controls and procedures to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms. The Companys disclosure controls and procedures have also been designed to ensure that information required to be disclosed in the reports that the Company files
or submits under the Exchange Act is accumulated and communicated to the Companys management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

As of June 30, 2006, the Company carried out an evaluation, under the supervision and with the participation of the Companys management, including the
Companys principal executive officer and principal financial officer, of the effectiveness of the Companys disclosure controls and procedures. Based on this evaluation, the principal executive officer and principal financial officer of
the Company have concluded that the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective as of June 30, 2006.

There has been no change in the Companys internal control over financial reporting that occurred during the second quarter of 2006 that has materially affected, or
is reasonably likely to materially affect, the Companys internal control over financial reporting.



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PART II

OTHER INFORMATION

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

The 2006 Annual Meeting of Shareholders was held on May 9, 2006. The election of three directors was submitted to the shareholders for vote. The following persons
were elected Directors of the Company to serve until the annual meeting of the term specified below:



|                      |  |       |  |           |  |                |  |     
|--------------------- |  | ----- |  | --------- |  | -------------- |  | ----
|Name                  |  | Class |  | Votes For |  | Votes Withheld |  | Term
|Henry G. Chiarelli    |  | II    |  | 5,294,420 |  | 577,632        |  | 2009
|Robert P. Rohleder    |  | II    |  | 5,401,617 |  | 470,435        |  | 2009
|William P. Carmichael |  | I     |  | 5,295,392 |  | 576,660        |  | 2008

The Class III Directors continuing in office until the 2007 Annual Meeting of Shareholders are Carl Korn and Ian
R. Miller. The Class I Director continuing in office until the 2008 Annual Meeting of Shareholders is James R. Bazet.



|Item 5. | Other Information
|------- | -----------------

Entry into a Material Definitive
Agreement. On August 10, 2006, the Company entered into Waiver and Amendment No. 8 (the Amendment) to the Loan and Security Agreement dated January 31, 2002 (as amended, the Loan Agreement) among the Company, LaSalle Bank
National Association, as lender and agent (the Agent) and the other lenders party thereto. The Loan Agreement was amended to modify certain financial covenants and address certain covenant violations that would have otherwise occurred
with respect to the quarter ended June 30, 2006 due to the asset write-down charges of $4.6 million.

Item 6. Exhibits



|   |  |                                                                                                                                                                                                                                 
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a) |  | Exhibit 10.1 Waiver and Amendment No. 8 to the Loan and Security Agreement dated as of August 10, 2006 by and among LaSalle Bank National Association, as Lender and As Agent for the
Lenders and Cobra Electronics Corporation.
|   | 
|b) |  | Exhibit 31.1 Rule 13a-14(a)/15(d)  14(a) Certification of the Chief Executive Officer.                                                                                                                                         
|   | 
|c) |  | Exhibit 31.2 Rule 13a-14(a)/15(d)  14(a) Certification of the Chief Financial Officer.                                                                                                                                         
|   | 
|d) |  | Exhibit 32.1 Section 1350 Certification of the Chief Executive Officer.                                                                                                                                                         
|   | 
|e) |  | Exhibit 32.2 Section 1350 Certification of the Chief Financial Officer.                                                                                                                                                         



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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



COBRA ELECTRONICS CORPORATIONBy

/s/    MICHAEL SMITHMichael SmithSenior Vice President andChief Financial Officer(Duly Authorized Officer and Principal Financial Officer)


Dated: August 11, 2006



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INDEX TO EXHIBITS



|               |  |                                                                                                                                                                                                                    
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Document                                                                                                                                                                                            
|10.1           |  | Waiver and Amendment No. 8 to the Loan and Security Agreement dated as of August 10, 2006 by and among LaSalle Bank National Association, as Lender and As Agent for the Lenders and Cobra
Electronics Corporation.
|               | 
|31.1           |  | Rule 13a  14(a)/15d  14(a) Certification of the Chief Executive Officer.                                                                                                                                         
|               | 
|31.2           |  | Rule 13a  14(a)/15d  14(a) Certification of the Chief Financial Officer.                                                                                                                                         
|               | 
|32.1           |  | Section 1350 Certification of the Chief Executive Officer.                                                                                                                                                         
|               | 
|32.2           |  | Section 1350 Certification of the Chief Financial Officer.                                                                                                                                                         



35