##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES AND EXCHANGE ACT OF 1934


FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005


Commission File Number 000-30138





ROCKFORD CORPORATION


(Exact name of Registrant as Specified in Its Charter)


|                                                                           |  |                                                 
|-------------------------------------------------------------------------- |  | ------------------------------------------------
|Arizona(State or Other Jurisdiction of
     Incorporation or Organization) |  | 86-0394353(IRS Employer
     Identification No.)

600 South Rockford Drive


Tempe, Arizona 85281


(480) 967-3565


(Address and Telephone Number of Principal Executive
Offices)





Securities Registered Pursuant to Section 12(b) of the
Act:


None


Securities Registered Pursuant to Section 12(g) of the
Act:


Common Stock ($.01 Par Value)


o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2).


o o þ


12b-2) o þ




10-K.










---



##### 










ROCKFORD CORPORATION


FORM 10-K


DECEMBER 31, 2005


TABLE OF CONTENTS


|                                   |  |                                                                                                                       |    |  |    | 
|---------------------------------- |  | --------------------------------------------------------------------------------------------------------------------- | -- |  | -- | 
|Securities and Exchange Commission |  |                                                                                                                      
|Item Number and Description        |  |                                                                                                                      
|                                   |  |                                                                                                                      
|                                   |  | Page                                                                                                                  |   
|                                   |  |                                                                                                                       |   
|PART I                            
|Item 1.                            |  | Business                                                                                                              |    |  | 3  | 
|Item 1A                            |  | Risk Factors                                                                                                          |    |  | 10 | 
|Item 2.                            |  | Properties                                                                                                            |    |  | 16 | 
|Item 3.                            |  | Legal Proceedings                                                                                                     |    |  | 17 | 
|Item 4.                            |  | Submission of Matters to a Vote of Security
    Holders                                                               |    |  | 18 | 
|                                  
|PART II                           
|Item 5.                            |  | Market for Registrants Common Equity,
    Related Stockholder Matters, and Issuer Purchases of Equity
    Securities |    |  | 18 | 
|Item 6.                            |  | Selected Financial Data                                                                                               |    |  | 20 | 
|Item 7.                            |  | Managements Discussion and Analysis
    of Financial Condition and Results of Continuing Operations                  |    |  | 21 | 
|Item 7A                            |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                        |    |  | 31 | 
|Item 8.                            |  | Financial Statements and Supplementary
    Data                                                                       |    |  | 32 | 
|Item 9.                            |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                              |    |  | 57 | 
|Item 9A.                           |  | Controls and Procedures                                                                                               |    |  | 57 | 
|                                  
|PART III                          
|Item 10.                           |  | Directors and Executive Officers of the
    Registrant                                                                |    |  | 57 | 
|Item 11.                           |  | Executive Compensation                                                                                                |    |  | 57 | 
|Item 12.                           |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                    |    |  | 58 | 
|Item 13.                           |  | Certain Relationships and Related
    Transactions                                                                    |    |  | 58 | 
|Item 14.                           |  | Principal Accountant Fees and Services                                                                                |    |  | 58 | 
|                                  
|PART IV                           
|Item 15.                           |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                                                   |    |  | 58 | 
|Signatures                         |  |                                                                                                                       | 61 | 
|EX-10.4                           
|EX-10.70                          
|EX-21                             
|EX-23.1                           
|EX-31.1                           
|EX-31.2                           
|EX-32                             







| |   |                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Rockfords estimate of the number of shares held by
    non-affiliates as of March 13, 2006; and                                                                                                                                                      
|
| |  | $3.70 per share, the price at which Rockfords shares
    were last sold as of June 30, 2005, as reported by The
    NASDAQ Stock Market. June 30, 2005, is the last business
    day of Rockfords most recently completed second fiscal
    quarter.



1



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##### Table of Contents



Forward-Looking Statements And Risk Factors


We make forward-looking statements in this report including,
without limitation, statements concerning the future of our
industry, product development, business strategy, continued
acceptance and growth of our products, dependence on significant
customers and suppliers, and the adequacy of our available cash
resources. Statements may contain projections of results of
operations or of financial condition. These statements may be
identified by the use of forward-looking terminology such as
may, will, believe,
expect, anticipate,
estimate, continue or other similar
words.


Forward-looking statements are subject to many risks and
uncertainties. We caution you not to place undue reliance on
these forward-looking statements, which speak only as at the
date on which they are made. Actual results may differ
materially from those described in these forward-looking
statements. We disclaim any obligation or undertaking to update
these forward-looking statements to reflect changes in our
expectations or changes in events, conditions, or circumstances
on which our expectations are based.


When considering our forward-looking statements, you
should keep in mind the risk factors and other cautionary
statements identified in this report. The risk factors noted
throughout this report, particularly in the discussion in
Item 1A, and other risk factors that Rockford has not
anticipated or discussed, could cause our actual results to
differ significantly from those anticipated in our
forward-looking statements.


2



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##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

Rockford Business






Q-Logic


Rockfords Brands






| |   |                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Rockford Fosgate. Under the Rockford Fosgate brand,
    Rockford offers distinctive product lines that produce powerful,
    high quality sound. Rockford Fosgate mobile audio products are
    marketed under two primary product lines:



| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | Punch Series  the line for the majority of
    Rockfords amplifiers, subwoofers, speakers and enclosures;
|
| |  | Power Series  the line for Rockfords higher
    performing amplifiers, subwoofers, and speakers; and     



| |                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rockford also sells Rockford Fosgate products, or licenses its
    brand and technology, to Nissan and Mitsubishi for installation
    as part of factory installed audio systems. Rockford also sells
    Rockford Fosgate products under the Connecting Punch brand, for
    a full line of mobile audio installation accessories;



| |   |                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Rockford Acoustic Design. Rockford recently introduced
    Rockford Acoustic Design as a new premium brand, primarily for
    OEM products. Mitsubishi will introduce a car later in 2006 with
    a Rockford Acoustic Design branded audio system; and
|
| |  | Lightning Audio. Rockford sells amplifiers, subwoofers,
    speakers, and accessories under the Lightning Audio brand.
    Lightning Audio products are generally more moderately priced
    than Rockford Fosgate products.                           





| |   |                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Q-Logic. Under the Q-Logic brand, Rockford develops and
    markets Q-Logic speaker enclosures,
    Q-Forms kick panels and
    Q-Customs enclosures. Each of these products is designed to hold
    mobile audio speakers, providing an effective and convenient
    method for installing improved speakers in cars, trucks and
    SUVs; and

3



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##### Table of Contents





| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | InstallEdge.com. Rockford uses the InstallEdge.com
    business-to business brand to offer installation-shop supplies
    to mobile audio installation shops, custom home audio installers
    and marine outfitters.

Strategy for Rockfords Brands






| |   |                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Continue to introduce new and technologically innovative mobile
    audio products that embody distinctive Rockford sound qualities;                                                           
|
| |  | Expand Rockfords mobile audio OEM business; and                                                                                                                                               
|
| |  | Broaden Rockfords distribution by entering new
    distribution channels and increasing penetration of
    Rockfords existing distribution channels both in the U.S.
    and internationally.



Rockford Products




| |                                  
| | ---------------------------------
| | Percent of Sales by Product Class



|               |       |                         |      |       |      |  |      |       |   |  |      |       |  
|-------------- | ----- | ----------------------- | ---- | ----- | ---- |  | ---- | ----- | - |  | ---- | ----- | -
|               |       | Year Ended December 31, |     
|               |       |                         |     
|               |       | 2003                    |      |       | 2004 |  |      | 2005  |  
|               |       |                         |      |       |      |  |      |       |  
|Product Class: |       |                         |      |       |      |  |      |       |   |  |      |      
|Amplifiers     |       |                         | 41.1 | %     |      |  | 39.3 | %     |   |  | 43.8 | %    
|Speakers       |       |                         | 37.3 |       |      |  | 39.4 |       |   |  | 35.4 |      
|Accessories    |       |                         | 12.1 |       |      |  | 10.7 |       |   |  | 10.7 |      
|Others(1)      |       |                         | 9.5  |       |      |  | 10.6 |       |   |  | 10.1 |      
|               |       |                         |      |       |      |  |      |       |  
|               | Total |                         |      | 100.0 | %    |  |      | 100.0 | % |  |      | 100.0 | %
|               |       |                         |      |       |      |  |      |       |  






|    |                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes source units, enclosures, signal processors, digital
    media products, and other products. No single product class in
    this group accounted for more than 10% of Rockfords sales
    in any of these years.

10-K.




| |                         
| | ------------------------
| | Aftermarket Mobile Audio





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Amplifiers. Power amplifiers increase the voltage and
    current coming from the source unit, providing more power than
    possible from a source unit alone. Power amplifiers are
    essential for a high performance mobile audio system,
    particularly for consumers who desire strong bass performance;                                                                                                                                                                                                                                 
|
| |  | Speakers. Speakers accept a signal from a source unit or
    amplifier and translate it into sound. There are two categories
    of speakers: those eight inches or greater in diameter are
    considered subwoofers and are designed to play lower
    (bass) frequencies; and those less than eight inches in
    diameter are considered speakers and are designed for higher
    frequencies. Aftermarket speakers and subwoofers provide
    dramatically improved sound quality compared to most factory
    installed mobile audio systems

4



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##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | and are often the single most important improvement consumers
    can make to their mobile audio systems;                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Accessories. Accessories are the additional items
    required to install and use mobile audio products. Accessories
    include amplifier wiring kits, fuses, circuit breakers,
    interconnect cables, speaker cables, stiffening capacitors,
    battery clamps, connectors and adaptors, and
    carpet/fabric/surface applications that make Rockfords
    products compatible with factory-installed components and
    improve the performance of a mobile audio system; and
|
| |  | Enclosures. Enclosures are used to enhance the bass sound
    of subwoofers and to position higher frequency speakers in
    locations that produce better sound. Enclosures include boxes
    for subwoofers and replacement kick panels for improved speaker
    placement.                                                                                                                                                                                                        





|             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Amplifiers:  |  |  Power amplifiers under the Punch Series and Power
    Series lines, with rated power from 200 to 4,000 watts, and
    minimum advertised prices from $200 to $2,500. Rockfords
    amplifiers include 1, 2 and 4 channel alternatives, giving
    consumers the ability to select an optimum configuration for
    their system. In this category, at the 2006 CES, Rockford
    introduced a Hybrid Technology 15,000-watt amplifier, the
    limited edition HT15kW, at a minimum advertised price of
    $20,000, and the new 3Sixty Interactive Signal Processors in two
    models at minimum advertised prices of $399 and $699;
|            
|Speakers:    |  |  Speakers and subwoofers under Rockfords Punch
    Series and Power Series lines, with minimum advertised prices
    from $60 to $1,800; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            
|Accessories: |  |  Accessories under Rockfords Connecting Punch
    line, including amplifier installation kits, interconnect and
    speaker cables, carpet/fabric/surface applications and
    stiffening capacitors.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|            
|Enclosures:  |  |  Enclosures are used to enhance the bass sound of
    subwoofers and to position higher frequency speakers in
    locations that produce better sound.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  





|             |  |                                                                                                                               
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------
|Amplifiers:  |  |  Power amplifier models with rated power from 60 to
    2,000 watts and minimum advertised prices from $100 to $1,000;       
|            
|Speakers:    |  |  Speakers and subwoofers with minimum advertised
    prices from $30 to $600; and                                            
|            
|Accessories: |  |  Accessories, including interconnect and speaker
    cables, stiffening capacitors, battery clamps and installation
    kits.







5



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| |             
| | ------------
| | OEM Products







| |             
| | ------------
| | New Products



Engineering And Product Development






Sales, Marketing And Distribution








| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Making regular calls to dealers and providing them with
    demonstration products,
    point-of-purchase
    displays and other marketing materials;
|
| |  | Initiating targeted advertising in periodicals read by potential
    consumers;                                                                      
|
| |  | Training dealer sales and installation personnel;                                                                                                    
|
| |  | Regular interaction with industry press editors who are often
    the opinion makers for salespeople at the retail level as well
    as end users;   
|
| |  | Participation in professional and consumer trade shows; and                                                                                          
|
| |  | Maintaining product and brand information for consumers and
    retailers on its web sites.                                                          

www.rockfordcorp.com, www.rockfordfosgate.com, www.lightningaudio.com,
www.installedge.com, www.qlogic.ws, and
www.rockfordacousticdesign.com


6



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##### Table of Contents





| |             
| | ------------
| | Distribution

Domestic Distribution.








International Distribution.










Competition






7



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##### Table of Contents





Mobile Audio Amplifiers:


Mobile Audio Speakers:


Mobile Audio Accessories:




Manufacturing










Intellectual Property




8



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##### Table of Contents





|                                   |  |                       
|---------------------------------- |  | ----------------------
| Rockford
    Fosgate®            |  |  InstallEdge.com®    
| Rockfords Diamond R
    logo® |  |                       
| The
    Punch®                   |  |  Lightning
    Audio®
| Type
    RF®                     |  |  Strike®             
| Rockford Acoustic
    Designtm   |  |  Storm®              
| 3Sixtyotm                        |  |  Bolt®               
|                                   |  |  Dead
    Skin®      
| Audio
    Innovationstm          |  |                       
| Q-Logic®                         |  |                       

Significant Customers and Seasonality










Product Support








9



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##### Table of Contents





Information Systems


just-in


Employees




Environmental Compliance







Item 1A.     Risk
Factors


RISK FACTORS THAT MAY AFFECT ROCKFORDS OPERATING
RESULTS, BUSINESS PROSPECTS AND STOCK PRICE


Before you buy or sell Rockford stock, you should be aware
that there are risks, including those described below and others
Rockford has not anticipated or discussed. You should consider
carefully these and other risk factors, together with all of the
other information included in Rockfords filings with the
SEC and Rockfords periodic press releases, before you
decide to buy or sell shares of Rockfords common stock.


As you consider these risk factors, Rockford also calls your
attention to Rockfords statements about Forward Looking
Statements and Risk Factors before Part I of this Annual
Report.




| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | Rockfords products may not satisfy shifting consumer
    demand or compete successfully with competitors
    products.



10



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##### Table of Contents







| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | Rockford may lose market share and its brand image may
    erode as Rockford changes distribution channels for its mobile
    audio products.









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Rockford may alienate its specialty dealer base. Some
    specialty dealers or audio/video retailers may react to
    Rockfords new strategies by reducing their purchases or
    even replacing Rockfords products with competing product
    lines. Reduced specialty dealer or audio/video retailer loyalty
    could reduce Rockfords market share because specialty
    dealers and audio/video retailers continue to hold a large share
    of the market and contribute substantially to Rockfords
    brand image among its core consumers; and
|
| |  | Rockfords brand image may erode. Selling in
    less-specialized distribution channels or through car dealers
    may erode Rockfords brand image, which could decrease
    Rockfords product prices and profit margins.                                                                                                                                                                                                                                                                                                                                





| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | Rockford could suffer from internal control deficiencies
    that may result in a reduction in its stock price.





| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | Any decrease in demand for Rockford amplifiers or speakers
    could significantly decrease sales.



11



---



##### Table of Contents





| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | The loss of Best Buy or Nissan as a customer or
    significant reductions in their purchases of Rockfords
    products would reduce sales.





| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | Rockford may lose market share if it is unable to compete
    successfully against current and future competitors.







| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | If Rockford does not continue to develop, introduce and
    achieve market acceptance of new and enhanced products, sales
    may decrease.









| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | Seasonality of mobile audio sales causes Rockfords
    quarterly sales to fluctuate and may affect the trading price of
    its stock.



12



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##### Table of Contents







| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rockfords quarterly financial results may fluctuate
    significantly, making financial forecasting difficult and making
    Rockfords stock price volatile.





| |   |                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The level of product, price and dealer competition;                                                                                                                
|
| |  | Size and timing of product orders and shipments, particularly by
    customers such as Best Buy,
    Wal-Mart, Nissan and
    Mitsubishi;                          
|
| |  | Rockfords ability to develop new products and product
    enhancements that respond to changes in technology and consumer
    preferences while controlling costs;
|
| |  | Weather conditions, which affect consumers willingness to
    install products;                                                                                   
|
| |  | Capacity and supply constraints or difficulties; and                                                                                                               
|
| |  | Timing of Rockfords marketing programs and those of its
    competitors.                                                                                          





| |                                                                              
| | -----------------------------------------------------------------------------
| | A decline in discretionary spending likely would reduce
    Rockfords sales.







| |   |                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | General business conditions;                                                                                                                                                        
|
| |  | Employment levels, especially among Rockfords core
    consumers (who tend to be less experienced workers and are
    particularly subject to layoff if employment levels decline);
|
| |  | Consumer confidence in future economic conditions;                                                                                                                                  
|
| |  | Energy prices; and                                                                                                                                                                  
|
| |  | Interest and tax rates.                                                                                                                                                             



13



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| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | If Rockford fails to execute its strategy successfully,
    its financial condition could be seriously harmed.





| |   |                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| |  | Retain and hire skilled, competent employees;                                                                                    
|
| |  | Improve coordination among Rockfords technical, product
    development, manufacturing, sales and financial
    departments; and
|
| |  | Maintain Rockfords financial, operational and managerial
    systems and controls.                                              



| |                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rockford relies upon debt financing for a substantial part
    of its working capital; defaults on its debt or the
    unavailability of additional financing could make it impossible
    to carry out Rockfords business as currently
    structured.





| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | If Rockford fails to manage its inventory effectively,
    Rockford could incur additional costs or lose sales.





| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rockfords international operations could be harmed
    by factors including political instability, currency exchange
    rates and changes in regulations that govern international
    transactions.





| |   |                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |  | Changes in tariff regulations;                                                                                                          
|
| |  | Political instability, war, terrorism and other political risks;                                                                        
|
| |  | Foreign currency exchange rate fluctuations;                                                                                            
|
| |  | Establishing and maintaining relationships with local
    distributors and dealers;                                                     
|
| |  | Transitioning its direct sales to local distributors;                                                                                   
|
| |  | Lengthy shipping times and accounts receivable payment cycles;                                                                          
|
| |  | Import and export licensing requirements;                                                                                               
|
| |  | Compliance with a variety of foreign laws and regulations,
    including unexpected changes in taxation and regulatory
    requirements;
|
| |  | Greater difficulty in safeguarding intellectual property than in
    the U.S.; and                                                      
|
| |  | Difficulty in staffing and managing geographically dispersed
    operations.                                                            



14



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##### Table of Contents





| |                                                                       
| | ----------------------------------------------------------------------
| | Loss of an international distributor may disrupt
    Rockfords sales.





| |                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rockford may incur additional costs or reduced sales as it
    transitions from a direct distribution system to local
    distributors in its international markets





| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Currency fluctuations may reduce the profitability of
    Rockfords foreign sales.





| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | If Rockfords supply of finished goods or components
    are interrupted, it may be unable to deliver its products to its
    customers.









| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | Rockford may be unable to retain and attract key
    employees, which could impair Rockfords business.



15



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##### Table of Contents





| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | If Rockford is unable to enforce or defend its ownership
    and use of intellectual property, Rockfords business may
    decline.







| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rockfords executive officers and directors retain
    substantial control of Rockford, which may limit the liquidity
    and market price of its common stock.





| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Many of Rockfords shares are available for resale
    without significant restrictions. Their sale or potential sale
    may reduce Rockfords stock price.





| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Rockfords anti-takeover provisions could affect the
    value of Rockfords stock.








|        |           
|------- | ----------
|Item 2. | Properties



16



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|                                                                            |       |          |                        |             |                |  |         |                  |  |  |                    |     | 
|--------------------------------------------------------------------------- | ----- | -------- | ---------------------- | ----------- | -------------- |  | ------- | ---------------- |  |  | ------------------ | --- | 
|                                                                            |       |          |                        | Approximate |                |  |        
|Function                                                                    |       | Location |                        |             | Square Footage |  |         | Lease Expiration | 
|                                                                            |       |          |                        |             |                |  |         |                  | 
|Corporate headquarters and research and development                         |       |          | Tempe, Arizona         |             |                |  | 30,000  |                  |  |  | September 30, 2009 |    
|Information systems                                                         |       |          | Tempe, Arizona         |             |                |  | 10,000  |                  |  |  | September 30, 2010 |    
|Manufacturing and purchasing                                                |       |          | Tempe, Arizona         |             |                |  | 22,000  |                  |  |  | December 31, 2008  |    
|Warehousing, sales and customer service                                     |       |          | Tempe, Arizona         |             |                |  | 25,000  |                  |  |  | December 31, 2008  |    
|Warehousing                                                                 |       |          | Gilbert, Arizona       |             |                |  | 79,000  |                  |  |  | July 31, 2006      | (1)
|Manufacturing, research and development, purchasing and
    administration  |       |          | Grand Rapids, Michigan |             |                |  | 163,000 |                  |  |  | March 31, 2009     |    
|Manufacturing, research and development, warehousing and
    administration |       |          | Stillwater, Oklahoma   |             |                |  | 69,000  |                  |  |  | May 31, 2006       |    
|Warehousing and sales                                                       |       |          | Singapore              |             |                |  | 21,000  |                  |  |  | July 31, 2006      | (2)
|Warehousing                                                                 |       |          | Achim, Germany         |             |                |  | 20,000  |                  |  |  | December 31, 2011  | (3)
|Sales                                                                       |       |          | Griesheim, Germany     |             |                |  | 3,000   |                  |  |  | December 31, 2009  |    
|                                                                            |       |          |                        |             |                |  |         |                  | 
|                                                                            | Total |          |                        |             |                |  |         | 442,000          |  |  |                    |     | 
|                                                                            |       |          |                        |             |                |  |         |                  | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In January 2006 Rockford added an additional 12,000 square
    feet of warehouse space and extended the lease to July 31,
    2007.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(2) | In January 2006 Rockford vacated the warehouse portion of the
    building which is approximately 19,000 square feet.
    Rockford will lease the remaining space as a sales office
    through July 2006.                                                                                                                                                                                                                                                                                                                                                                        
|   
|(3) | Future lease commitments on this lease are approximately
    $1.3 million. Rockford believes it will not utilize this
    warehouse after the first half of 2006 and is engaged in efforts
    to sublease or terminate this lease. If Rockford is unable to
    sublease or otherwise terminate the lease agreement more
    favorably, the early termination of the lease will result in a
    one-time charge affecting operating results for the period when
    Rockford terminates the lease and returns the building to the
    owner, which is expected to be in mid-2006.






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings





17



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






PART II







|        |                                                                                                                        
|------- | -----------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



|                       |                    |      |   |      |     |  |   |      | 
|---------------------- | ------------------ | ---- | - | ---- | --- |  | - | ---- | 
|                       |                    | High |   |      | Low | 
|                       |                    |      |   |      |     | 
|For the quarter ended: |                    |      |   |      |     |  |   |     
|                       | December 31, 2005  |      | $ | 3.49 |     |  | $ | 2.55 | 
|                       | September 30, 2005 |      | $ | 3.86 |     |  | $ | 2.61 | 
|                       | June 30, 2005      |      | $ | 3.92 |     |  | $ | 2.14 | 
|                       | March 31, 2005     |      | $ | 3.07 |     |  | $ | 1.97 | 
|                       | December 31, 2004  |      | $ | 4.10 |     |  | $ | 1.88 | 
|                       | September 30, 2004 |      | $ | 5.00 |     |  | $ | 3.23 | 
|                       | June 30, 2004      |      | $ | 7.00 |     |  | $ | 4.10 | 
|                       | March 31, 2004     |      | $ | 7.06 |     |  | $ | 5.11 | 





Sales of Unregistered Securities




18



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S-3




Equity Compensation Plan Information


|                                                           |  |                            |           |  |                      |                      |      |                                     |  |  |         | 
|---------------------------------------------------------- |  | -------------------------- | --------- |  | -------------------- | -------------------- | ---- | ----------------------------------- |  |  | ------- | 
|                                                           |  |                            |           |  |                      | Number of Securities |     
|                                                           |  | Number of Securities to be |           |  | Weighted Average     |                      |      | Remaining Available for             | 
|                                                           |  | Issued Upon Exercise of    |           |  | Exercise Price of    |                      |      | Future Issuance Under Equity        | 
|                                                           |  | Outstanding Options,       |           |  | Outstanding Options, |                      |      | Compensation Plans (Excluding       | 
|                                                           |  | Warrants and Rights        |           |  | Warrants and Rights  |                      |      | Securities Reflected in Column (a)) | 
|Plan Category                                              |  | (a)                        |           |  | (b)                  |                      |      | (c)                                 | 
|                                                           |  |                            |           |  |                      |                      |      |                                     | 
|Equity compensation plans approved by security holders     |  |                            | 1,582,264 |  |                      | $                    | 4.70 |                                     |  |  | 436,285 | 
|Equity compensation plans not approved by security holders |  |                            | 59,073    |  |                      |                      | 3.73 |                                     |  |  |        | 
|                                                           |  |                            |           |  |                      |                      |      |                                     | 
|                                                           |  |                            | 1,641,337 |  |                      | $                    | 4.67 |                                     |  |  | 436,285 | 
|                                                           |  |                            |           |  |                      |                      |      |                                     | 

19



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |         |         |        |         |         |        |        |        |  
|---------------------------------------- | ------------------------------------------------------------ | --------------------------------------- | ----------------- | ------ | ------ | ----- | ------- | ------ | ------ | ----- | ------- | ------ | ------ | ------ | ------- | ------- | ------ | ------- | ------- | ------ | ------ | ------ | -
|                                         |                                                              | Years Ended December 31,                |                  
|                                         |                                                              |                                         |                  
|                                         |                                                              | 2001                                    |                   |        | 2002   |       |         | 2003   |        |       | 2004    |        |        | 2005   |        
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|                                         |                                                              | (In thousands, except per share data)   |                  
|Consolidated Statements of Operations:   |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |         |         |        |         |         |       
|Net sales                                |                                                              | $                                       | 155,822           |        |        | $     | 162,805 |        |        | $     | 157,728 |        |        | $      | 160,857 |         |        | $       | 135,682 |       
|Cost of goods sold                       |                                                              |                                         | 102,398           |        |        |       | 105,079 |        |        |       | 109,446 |        |        |        | 129,092 |         |        |         | 96,231  |       
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|                                         | Gross profit                                                 |                                         |                   | 53,424 |        |       |         | 57,726 |        |       |         | 48,282 |        |        |         | 31,765  |        |         |         | 39,451 |       
|Operating expenses:                      |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |         |         |        |         |         |       
|                                         | Sales and marketing                                          |                                         |                   | 24,393 |        |       |         | 27,268 |        |       |         | 28,823 |        |        |         | 27,265  |        |         |         | 22,383 |       
|                                         | General and administrative                                   |                                         |                   | 15,272 |        |       |         | 15,509 |        |       |         | 17,470 |        |        |         | 24,439  |        |         |         | 14,851 |       
|                                         | Research and development                                     |                                         |                   | 3,168  |        |       |         | 4,735  |        |       |         | 7,149  |        |        |         | 6,611   |        |         |         | 3,285  |       
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|                                         |                                                              | Total operating expenses                |                   |        | 42,833 |       |         |        | 47,512 |       |         |        | 53,442 |        |         |         | 58,315 |         |         |        | 40,519 |       
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|Operating income (loss)                  |                                                              |                                         | 10,591            |        |        |       | 10,214  |        |        |       | (5,160  | )      |        |        | (26,550 | )       |        |         | (1,068  | )     
|Interest and other expense, net          |                                                              |                                         | 599               |        |        |       | 52      |        |        |       | 252     |        |        |        | 4,169   |         |        |         | 1,655   |       
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|                                         | Income (loss) from continuing operations before income taxes |                                         |                   | 9,992  |        |       |         | 10,162 |        |       |         | (5,412 | )      |        |         | (30,719 | )      |         |         | (2,723 | )     
|Income tax expense (benefit)             |                                                              |                                         | 3,756             |        |        |       | 3,837   |        |        |       | (2,483  | )      |        |        | 4,597   |         |        |         |        |       
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|                                         | Income (loss) from continuing operations                     |                                         |                   | 6,236  |        |       |         | 6,325  |        |       |         | (2,929 | )      |        |         | (35,316 | )      |         |         | (2,723 | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|Discontinued operations:                 |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |         |         |        |         |         |       
|                                         | Loss from disposal of discontinued operations, net of taxes  |                                         |                   |       |        |       |         |       |        |       |         |       |        |        |         | (70     | )      |         |         | (1,019 | )     
|                                         | Loss from discontinued operations, net of taxes              |                                         |                   | (13    | )      |       |         | (45    | )      |       |         | (2,735 | )      |        |         | (3,469  | )      |         |         | (345   | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|                                         |                                                              | Total loss from discontinued operations |                   |        | (13    | )     |         |        | (45    | )     |         |        | (2,735 | )      |         |         | (3,539 | )       |         |        | (1,364 | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|                                         |                                                              |                                         | Net income (loss) |        | $      | 6,223 |         |        | $      | 6,280 |         |        | $      | (5,664 | )       |         | $      | (38,855 | )       |        | $      | (4,087 | )
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|Income (loss) per common share:          |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |         |         |        |         |         |       
|Income (loss) from continuing operations |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |         |         |        |         |         |       
|                                         | Basic                                                        |                                         | $                 | 0.77   |        |       | $       | 0.74   |        |       | $       | (0.33  | )      |        | $       | (3.90   | )      |         | $       | (0.29  | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|                                         | Diluted                                                      |                                         | $                 | 0.70   |        |       | $       | 0.68   |        |       | $       | (0.33  | )      |        | $       | (3.90   | )      |         | $       | (0.29  | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|Loss from discontinued operations        |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |         |         |        |         |         |       
|                                         | Basic                                                        |                                         | $                 | (0.00  | )      |       | $       | (0.01  | )      |       | $       | (0.31  | )      |        | $       | (0.39   | )      |         | $       | (0.15  | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|                                         | Diluted                                                      |                                         | $                 | (0.00  | )      |       | $       | (0.00  | )      |       | $       | (0.31  | )      |        | $       | (0.39   | )      |         | $       | (0.15  | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|Net income (loss):                       |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |         |         |        |         |         |       
|                                         | Basic                                                        |                                         | $                 | 0.77   |        |       | $       | 0.74   |        |       | $       | (0.64  | )      |        | $       | (4.29   | )      |         | $       | (0.44  | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|                                         | Diluted                                                      |                                         | $                 | 0.70   |        |       | $       | 0.68   |        |       | $       | (0.64  | )      |        | $       | (4.29   | )      |         | $       | (0.44  | )     
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|Weighted average shares:                 |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |         |         |        |         |         |       
|                                         | Basic                                                        |                                         |                   | 8,109  |        |       |         | 8,540  |        |       |         | 8,866  |        |        |         | 9,066   |        |         |         | 9,258  |       
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        
|                                         | Diluted                                                      |                                         |                   | 8,913  |        |       |         | 9,301  |        |       |         | 8,866  |        |        |         | 9,066   |        |         |         | 9,258  |       
|                                         |                                                              |                                         |                   |        |        |       |         |        |        |       |         |        |        |        |        

20



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|                                                                |  |                                       |        |  |      |   |         |      |  |   |         |  |  |      |        |  |  |   |        | 
|--------------------------------------------------------------- |  | ------------------------------------- | ------ |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------ |  |  | - | ------ | 
|                                                                |  | Years Ended December 31,              |       
|                                                                |  |                                       |       
|                                                                |  | 2001                                  |        |  | 2002 |   |         | 2003 |  |   | 2004    |  |  | 2005 |       
|                                                                |  |                                       |        |  |      |   |         |      |  |   |         |  |  |      |       
|                                                                |  | (In thousands, except per share data) |       
|Consolidated Balance Sheet Data:                                |  |                                       |        |  |      |   |         |      |  |   |         |  |  |      |        |  |  |   |        | 
|Working capital                                                 |  | $                                     | 45,913 |  |      | $ | 52,354  |      |  | $ | 38,138  |  |  | $    | 25,776 |  |  | $ | 23,217 | 
|Total assets                                                    |  |                                       | 86,611 |  |      |   | 101,774 |      |  |   | 112,083 |  |  |      | 80,353 |  |  |   | 52,298 | 
|Current portion of long-term debt and capital lease obligations |  |                                       | 879    |  |      |   | 1,253   |      |  |   | 24,382  |  |  |      | 18,204 |  |  |   | 6,109  | 
|Long-term debt and capital lease obligations                    |  |                                       | 10,553 |  |      |   | 10,027  |      |  |   |        |  |  |      | 11,937 |  |  |   | 9,187  | 
|Total liabilities                                               |  |                                       | 33,654 |  |      |   | 35,295  |      |  |   | 48,393  |  |  |      | 57,768 |  |  |   | 33,667 | 
|Shareholders equity                                            |  |                                       | 52,957 |  |      |   | 65,546  |      |  |   | 63,207  |  |  |      | 22,585 |  |  |   | 18,631 | 






|        |                                                                                                     
|------- | ----------------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Continuing Operations

10-K,


Results of Operations




| |                      
| | ---------------------
| | Strategic Realignment











21



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| |         
| | --------
| | Overview





| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | focus on higher margin product lines and elimination of lower
    margin lines (particularly source units);
|
| |  | the relaunch and initial production issues associated with the
    2004 Rockford Fosgate product line; and 
|
| |  | continuing distribution channel shifts.                                                                    







|                                |                                                     |                                         |       |      |      |   |       |       |      |   |       |      |      |  
|------------------------------- | --------------------------------------------------- | --------------------------------------- | ----- | ---- | ---- | - | ----- | ----- | ---- | - | ----- | ---- | ---- | -
|                                |                                                     | Year Ended December 31                  |      
|                                |                                                     |                                         |      
|                                |                                                     | 2003                                    |       |      | 2004 |   |       | 2005  |     
|                                |                                                     |                                         |       |      |      |   |       |       |     
|Net sales                       |                                                     |                                         | 100.0 | %    |      |   | 100.0 | %     |      |   | 100.0 | %   
|Cost of goods sold              |                                                     |                                         | 69.4  |      |      |   | 80.3  |       |      |   | 70.9  |     
|                                |                                                     |                                         |       |      |      |   |       |       |     
|                                | Gross profit                                        |                                         |       | 30.6 |      |   |       | 19.7  |      |   |       | 29.1 |     
|Operating expenses:             |                                                     |                                         |       |      |      |   |       |       |      |   |       |     
|                                | Sales and marketing                                 |                                         |       | 18.3 |      |   |       | 16.9  |      |   |       | 16.5 |     
|                                | General and administrative                          |                                         |       | 11.1 |      |   |       | 15.2  |      |   |       | 11.0 |     
|                                | Research and development                            |                                         |       | 4.5  |      |   |       | 4.1   |      |   |       | 2.4  |     
|                                |                                                     |                                         |       |      |      |   |       |       |     
|                                |                                                     | Total operating expenses                |       |      | 33.9 |   |       |       | 36.2 |   |       |      | 29.9 |  
|                                |                                                     |                                         |       |      |      |   |       |       |     
|Operating loss                  |                                                     |                                         | (3.3  | )    |      |   | (16.5 | )     |      |   | (0.8  | )   
|Interest and other expense, net |                                                     |                                         | 0.1   |      |      |   | 2.6   |       |      |   | 1.2   |     
|                                |                                                     |                                         |       |      |      |   |       |       |     
|                                | Loss from continuing operations before income taxes |                                         |       | (3.4 | )    |   |       | (19.1 | )    |   |       | (2.0 | )   
|Income tax expense (benefit)    |                                                     |                                         | (1.5  | )    |      |   | 2.9   |       |      |   |      |     
|                                |                                                     |                                         |       |      |      |   |       |       |     
|                                | Loss from continuing operations                     |                                         |       | (1.9 | )    |   |       | (22.0 | )    |   |       | (2.0 | )   
|Discontinued operations:        |                                                     |                                         |       |      |      |   |       |       |      |   |       |     
|                                | Loss from disposal of discontinued operations       |                                         |       |     |      |   |       |      |      |   |       | (0.7 | )   
|                                | Loss from discontinued operations                   |                                         |       | (1.7 | )    |   |       | (2.2  | )    |   |       | (0.3 | )   
|                                |                                                     |                                         |       |      |      |   |       |       |     
|                                |                                                     | Total loss from discontinued operations |       |      | (1.7 | ) |       |       | (2.2 | ) |       |      | (1.0 | )
|                                |                                                     |                                         |       |      |      |   |       |       |     
|Net loss                        |                                                     |                                         | (3.6  | )%   |      |   | (24.2 | )%    |      |   | (3.0  | )%  
|                                |                                                     |                                         |       |      |      |   |       |       |     

22



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| |                                 
| | --------------------------------
| | Geographic Distribution of Sales



|               |             |                         |         |         |      |   |         |         |  |   |         |         |  |  |      |       |  
|-------------- | ----------- | ----------------------- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- |  |  | ---- | ----- | -
|               |             | Year Ended December 31, |        
|               |             |                         |        
|               |             |                         |         | %       |     
|Region(1)      |             | 2003                    |         |         | 2004 |   |         | 2005    |  |   | 2005    |        
|               |             |                         |         |         |      |   |         |         |  |   |         |        
|               |             | (In thousands)          |        
|United States  |             | $                       | 130,546 |         |      | $ | 133,682 |         |  | $ | 112,657 |         |  |  | 83.0 | %    
|Other Americas |             |                         | 8,880   |         |      |   | 9,295   |         |  |   | 9,438   |         |  |  | 7.0  | %    
|Europe         |             |                         | 13,489  |         |      |   | 12,544  |         |  |   | 9,042   |         |  |  | 6.7  | %    
|Asia           |             |                         | 4,813   |         |      |   | 5,336   |         |  |   | 4,545   |         |  |  | 3.3  | %    
|               |             |                         |         |         |      |   |         |         |  |   |         |        
|               | Total sales |                         | $       | 157,728 |      |   | $       | 160,857 |  |   | $       | 135,682 |  |  |      | 100.0 | %
|               |             |                         |         |         |      |   |         |         |  |   |         |        






|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Sales are attributed to geographic regions based on the location
    of customers. No single foreign country accounted for greater
    than 10% of Rockfords sales.

In the following discussion, certain increases or decreases
may differ due to rounding.


Year Ended December 31, 2005 Compared to Year Ended
December 31, 2004


Net Sales.




Gross Profit.


Sales and Marketing Expenses.


23



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##### Table of Contents





General and Administrative Expenses.


Research and Development Expenses.


Operating Loss From Continuing Operations.


Interest and Other (Income) Expense, Net.


Income Tax (Benefit) Expense.


Year Ended December 31, 2004 Compared to Year Ended
December 31, 2003


Net Sales.




Gross Profit.


Sales and Marketing Expenses.


24



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##### Table of Contents



General and Administrative Expenses.


Research and Development Expenses.


Operating Loss From Continuing Operations.


Interest and Other Expense (Income), Net.


Income Tax Expense (Benefit).


Quarterly Results of Operations




25



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Consolidated Statement of Operations Data


|                                           |         |                                       |        |       |          |   |        |           |   |   |         |       |   |          |        |      |          |   |        |           |   |   |         |       |   |   |        |       |   |   |        |       |  
|------------------------------------------ | ------- | ------------------------------------- | ------ | ----- | -------- | - | ------ | --------- | - | - | ------- | ----- | - | -------- | ------ | ---- | -------- | - | ------ | --------- | - | - | ------- | ----- | - | - | ------ | ----- | - | - | ------ | ----- | -
|                                           |         | Three Months Ended                    |       
|                                           |         |                                       |       
|                                           |         | Mar. 31,                              |        |       | June 30, |   |        | Sept. 30, |   |   | Dec. 31 |       |   | Mar. 31, |        |      | June 30, |   |        | Sept. 30, |   |   | Dec. 31 |      
|                                           |         | 2004                                  |        |       | 2004     |   |        | 2004      |   |   | 2004    |       |   | 2005     |        |      | 2005     |   |        | 2005      |   |   | 2005    |      
|                                           |         |                                       |        |       |          |   |        |           |   |   |         |       |   |          |        |      |          |   |        |           |   |   |         |      
|                                           |         | (In thousands, except per share data) |       
|Net sales                                  |         | $                                     | 36,427 |       |          | $ | 50,707 |           |   | $ | 39,212  |       |   | $        | 34,511 |      |          | $ | 39,616 |           |   | $ | 37,917  |       |   | $ | 30,213 |       |   | $ | 27,936 |      
|Gross profit                               |         |                                       | 6,994  |       |          |   | 13,540 |           |   |   | 3,884   |       |   |          | 7,347  |      |          |   | 11,324 |           |   |   | 11,728  |       |   |   | 9,327  |       |   |   | 7,072  |      
|Income (loss) from continuing operations   |         |                                       | (4,120 | )     |          |   | (1,470 | )         |   |   | (24,262 | )     |   |          | (5,464 | )    |          |   | (491   | )         |   |   | (277    | )     |   |   | 687    |       |   |   | (2,642 | )    
|Income (loss) from discontinued operations |         |                                       | (1,283 | )     |          |   | (992   | )         |   |   | (7,124  | )     |   |          | 5,860  |      |          |   | (117   | )         |   |   | (26     | )     |   |   | (1,105 | )     |   |   | (116   | )    
|Net income (loss)                          |         | $                                     | (5,403 | )     |          | $ | (2,462 | )         |   | $ | (31,386 | )     |   | $        | 396    |      |          | $ | (608   | )         |   | $ | (303    | )     |   | $ | (418   | )     |   | $ | (2,758 | )    
|                                           |         |                                       |        |       |          |   |        |           |   |   |         |       |   |          |        |      |          |   |        |           |   |   |         |      
|Net income (loss) per common share(1)      |         |                                       |        |       |          |   |        |           |   |   |         |       |   |          |        |      |          |   |        |           |   |   |         |       |   |   |        |       |   |   |        |      
|                                           | Basic   |                                       | $      | (0.60 | )        |   | $      | (0.27     | ) |   | $       | (3.48 | ) |          | $      | 0.04 |          |   | $      | (0.07     | ) |   | $       | (0.03 | ) |   | $      | (0.05 | ) |   | $      | (0.30 | )
|                                           |         |                                       |        |       |          |   |        |           |   |   |         |       |   |          |        |      |          |   |        |           |   |   |         |      
|                                           | Diluted |                                       | $      | (0.60 | )        |   | $      | (0.27     | ) |   | $       | (3.48 | ) |          | $      | 0.04 |          |   | $      | (0.07     | ) |   | $       | (0.03 | ) |   | $      | (0.04 | ) |   | $      | (0.30 | )
|                                           |         |                                       |        |       |          |   |        |           |   |   |         |       |   |          |        |      |          |   |        |           |   |   |         |      






|    |                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The sum of quarterly net income (loss) per common share does not
    equal annual net income (loss) per common share due to changes
    in the weighted average number of common shares outstanding.

Liquidity and Capital Resources




3-year 4-year




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| |   |                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | There were no net cash and cash equivalents at December 31,
    2005 and 2004. Due to the daily sweep of cash by Wachovia,
    described below, Rockford has reclassified the cash and cash
    equivalents to net against its current debt balance.                                                                                       
|
| |  | Rockfords net accounts receivable were $24.7 million
    or 66.5 days sales outstanding (DSO) at
    December 31, 2005 compared to $31.7 million or 71.9
    DSO at December 31, 2004. The decrease in accounts
    receivable balances is due to lower sales and improved DSO from
    improved collection efforts;                      
|
| |  | Net inventory decreased $13.2 million, from
    $31.8 million at December 31, 2004 to
    $18.6 million at December 31, 2005. This inventory
    decrease was primarily due to improved inventory turns, lower
    sales and additional write-downs relating to excess and obsolete
    inventory; and                                     
|
| |  | Accounts payable decreased $4.7 million, from
    $14.9 million at December 31, 2004 to
    $10.2 million at December 31, 2005. This decrease was
    primarily due to lower inventory purchases and reestablishing
    normalized vendor payment terms compared to the extended vendor
    payment terms experienced at December 31, 2004.

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Balance Sheet
Classification of Borrowings Outstanding under Revolving Credit
Agreements That Include both a Subjective Acceleration Clause
and a Lock-Box Arrangement




Off Balance Sheet Arrangements




Contractual Obligations as of December 31, 2005




|                            |  |                        |        |           |        |   |       |           |           |   |           |  |  |         |       |  |  |  |   | 
|--------------------------- |  | ---------------------- | ------ | --------- | ------ | - | ----- | --------- | --------- | - | --------- |  |  | ------- | ----- |  |  |  | - | 
|                            |  | Payments Due by Period |       
|                            |  |                        |       
|                            |  |                        |        | Less Than |        |   |       |           | More Than |  
|Contractual Obligations     |  | Total                  |        |           | 1 Year |   |       | 1-3 Years |           |   | 3-5 Years |  |  | 5 Years |      
|                            |  |                        |        |           |        |   |       |           |           |   |           |  |  |         |      
|                            |  | (In thousands)         |       
|Asset-based credit facility |  | $                      | 7,209  |           |        | $ | 489   |           |           | $ | 6,720     |  |  |         |      |  |  |  |  | 
|Notes payable               |  | $                      | 10,996 |           |        | $ | 428   |           |           | $ | 10,569    |  |  |         |      |  |  |  |  | 
|Operating leases            |  | $                      | 7,806  |           |        | $ | 2,621 |           |           | $ | 3,842     |  |  | $       | 1,343 |  |  |  |  | 



Critical Accounting Policies and Estimates




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Revenue Recognition. Revenue
Recognition in Financial Statements.




| |   |                                                        
| | - | -------------------------------------------------------
| |  | Persuasive evidence of an arrangement exists;          
|
| |  | Ownership has transferred to the customer;             
|
| |  | The price to the customer is fixed or determinable; and
|
| |  | Collectibility is reasonably assured.                  





Intangible Assets. Business Combinations, Goodwill and Other Intangible
Assets.






| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | Significant underperformance relative to expected historical or
    projected future operating results;      
|
| |  | Significant changes in the manner of use of the acquired assets
    or the strategy for the overall business;
|
| |  | Market capitalization relative to net book value; and                                                        
|
| |  | Significant negative industry or economic trends.                                                            



Allowance for Doubtful Accounts.


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Inventory.


Warranty.


Income taxes.


Inflation.




| |                         
| | ------------------------
| | New Accounting Standards

Share-Based
Payment, Accounting for Stock Issued to
Employees,


Inventory Costs, an amendment of ARB 43, Chapter 4.


Exchanges of
Non-monetary Assets, an amendment of APB No. 29, Accounting
for Non-monetary Transactions.


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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk









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|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE


|                                                                                                             |  |  |    | 
|------------------------------------------------------------------------------------------------------------ |  |  | -- | 
|Consolidated Financial Statements of Rockford Corporation and
    Subsidiaries                               |  |  |    | 
|Report of Independent Registered Public
    Accounting Firm                                                  |  |  | 33 | 
|Consolidated Balance Sheets as at
    December 31, 2004 and 2005                                             |  |  | 34 | 
|Consolidated Statements of Operations for
    the years ended December 31, 2003, 2004 and 2005               |  |  | 35 | 
|Consolidated Statements of
    Shareholders Equity for the years ended December 31,
    2003, 2004 and 2005 |  |  | 36 | 
|Consolidated Statements of Cash Flows for
    the years ended December 31, 2003, 2004 and 2005               |  |  | 37 | 
|Notes to Consolidated Financial
    Statements                                                               |  |  | 38 | 
|Financial Statement Schedule:
    Schedule II  Valuation and Qualifying
    Accounts                        |  |  | 58 | 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                      
| | ---------------------
| | /s/ Ernst & Young LLP







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ROCKFORD CORPORATION AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS


(In thousands, except share data)


|                                                                                           |                                                                                                           |                                                                                                |        |         |      |   |        |         |    | 
|------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------ | ------- | ---- | - | ------ | ------- | -- | 
|                                                                                           |                                                                                                           | December 31,                                                                                   |       
|                                                                                           |                                                                                                           |                                                                                                |       
|                                                                                           |                                                                                                           | 2004                                                                                           |        |         | 2005 |  
|                                                                                           |                                                                                                           |                                                                                                |        |         |      |  
|ASSETS                                                                                    
|Current assets:                                                                            |                                                                                                           |                                                                                                |        |         |      |   |        |        
|                                                                                           | Cash and cash equivalents                                                                                 |                                                                                                | $      |        |      |   | $      |        |   
|                                                                                           | Accounts receivable, less allowances of $3,163 and $2,307 at
    December 31, 2004 and 2005, respectively |                                                                                                |        | 31,670  |      |   |        | 24,721  |   
|                                                                                           | Inventories                                                                                               |                                                                                                |        | 31,787  |      |   |        | 18,618  |   
|                                                                                           | Income taxes receivable                                                                                   |                                                                                                |        | 940     |      |   |        | 168     |   
|                                                                                           | Prepaid expenses and other                                                                                |                                                                                                |        | 2,638   |      |   |        | 3,901   |   
|                                                                                           | Current assets of discontinued operations                                                                 |                                                                                                |        | 4,572   |      |   |        | 289     |   
|                                                                                           |                                                                                                           |                                                                                                |        |         |      |  
|Total current assets                                                                       |                                                                                                           |                                                                                                | 71,607 |         |      |   | 47,697 |        
|Property and equipment, net                                                                |                                                                                                           |                                                                                                | 5,893  |         |      |   | 3,104  |        
|Other assets                                                                               |                                                                                                           |                                                                                                | 2,853  |         |      |   | 1,497  |        
|                                                                                           |                                                                                                           |                                                                                                |        |         |      |  
|Total assets                                                                               |                                                                                                           | $                                                                                              | 80,353 |         |      | $ | 52,298 |        
|                                                                                           |                                                                                                           |                                                                                                |        |         |      |  
|                                                                                          
|LIABILITIES AND SHAREHOLDERS EQUITY                                                      
|Current liabilities:                                                                       |                                                                                                           |                                                                                                |        |         |      |   |        |        
|                                                                                           | Accounts payable                                                                                          |                                                                                                | $      | 14,876  |      |   | $      | 10,182  |   
|                                                                                           | Accrued salaries and incentives                                                                           |                                                                                                |        | 1,402   |      |   |        | 1,317   |   
|                                                                                           | Accrued warranty                                                                                          |                                                                                                |        | 2,812   |      |   |        | 1,982   |   
|                                                                                           | Other accrued expenses                                                                                    |                                                                                                |        | 7,693   |      |   |        | 4,890   |   
|                                                                                           | Current portion of long-term debt                                                                         |                                                                                                |        | 18,204  |      |   |        | 6,109   |   
|                                                                                           | Current liabilities of discontinued operations                                                            |                                                                                                |        | 844     |      |   |        |        |   
|                                                                                           |                                                                                                           |                                                                                                |        |         |      |  
|Total current liabilities                                                                  |                                                                                                           |                                                                                                | 45,831 |         |      |   | 24,480 |        
|Notes payable, less unaccreted discount of $563 and $313 at
    December 31, 2004 and 2005 |                                                                                                           |                                                                                                | 11,937 |         |      |   | 9,187  |        
|                                                                                           |                                                                                                           |                                                                                                |        |         |      |  
|Total liabilities                                                                          |                                                                                                           |                                                                                                | 57,768 |         |      |   | 33,667 |        
|Shareholders equity                                                                       |                                                                                                           |                                                                                                |        |         |      |   |        |        
|                                                                                           | Common stock, $.01 par value. Authorized shares 
    40,000,000                                          |                                                                                                |        |         |      |   |        |         |   
|                                                                                           |                                                                                                           | Issued shares  9,204,992 and 9,384,220 shares at
    December 31, 2004 and 2005, respectively |        |         | 92   |   |        |         | 94 | 
|                                                                                           | Additional paid-in capital                                                                                |                                                                                                |        | 37,329  |      |   |        | 37,548  |   
|                                                                                           | Retained deficit                                                                                          |                                                                                                |        | (15,321 | )    |   |        | (19,408 | ) 
|                                                                                           | Accumulated other comprehensive income                                                                    |                                                                                                |        | 485     |      |   |        | 397     |   
|                                                                                           |                                                                                                           |                                                                                                |        |         |      |  
|Total shareholders equity                                                                 |                                                                                                           |                                                                                                | 22,585 |         |      |   | 18,631 |        
|                                                                                           |                                                                                                           |                                                                                                |        |         |      |  
|Total liabilities and shareholders equity                                                 |                                                                                                           | $                                                                                              | 80,353 |         |      | $ | 52,298 |        
|                                                                                           |                                                                                                           |                                                                                                |        |         |      |  



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ROCKFORD CORPORATION AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF OPERATIONS


(In thousands, except per share data)


|                                  |                                                             |                                         |         |        |        |   |         |         |        |   |         |        |        |  
|--------------------------------- | ----------------------------------------------------------- | --------------------------------------- | ------- | ------ | ------ | - | ------- | ------- | ------ | - | ------- | ------ | ------ | -
|                                  |                                                             | Year Ended December 31,                 |        
|                                  |                                                             |                                         |        
|                                  |                                                             | 2003                                    |         |        | 2004   |   |         | 2005    |       
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|Net sales                         |                                                             | $                                       | 157,728 |        |        | $ | 160,857 |         |        | $ | 135,682 |       
|Cost of goods sold                |                                                             |                                         | 109,446 |        |        |   | 129,092 |         |        |   | 96,231  |       
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|                                  | Gross profit                                                |                                         |         | 48,282 |        |   |         | 31,765  |        |   |         | 39,451 |       
|Operating expenses:               |                                                             |                                         |         |        |        |   |         |         |        |   |         |       
|                                  | Sales and marketing                                         |                                         |         | 28,823 |        |   |         | 27,265  |        |   |         | 22,383 |       
|                                  | General and administrative                                  |                                         |         | 17,470 |        |   |         | 24,439  |        |   |         | 14,851 |       
|                                  | Research and development                                    |                                         |         | 7,149  |        |   |         | 6,611   |        |   |         | 3,285  |       
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|Total operating expenses          |                                                             |                                         | 53,442  |        |        |   | 58,315  |         |        |   | 40,519  |       
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|                                  | Operating loss                                              |                                         |         | (5,160 | )      |   |         | (26,550 | )      |   |         | (1,068 | )     
|Interest expense                  |                                                             |                                         | 855     |        |        |   | 2,090   |         |        |   | 2,009   |       
|Other expense (income)            |                                                             |                                         | (603    | )      |        |   | 2,079   |         |        |   | (354    | )     
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|                                  | Loss from continuing operations before income taxes         |                                         |         | (5,412 | )      |   |         | (30,719 | )      |   |         | (2,723 | )     
|Income tax expense (benefit)      |                                                             |                                         | (2,483  | )      |        |   | 4,597   |         |        |   |        |       
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|                                  | Loss from continuing operations                             |                                         |         | (2,929 | )      |   |         | (35,316 | )      |   |         | (2,723 | )     
|Discontinued operations:          |                                                             |                                         |         |        |        |   |         |         |        |   |         |       
|                                  | Loss from disposal of discontinued operations, net of taxes |                                         |         |       |        |   |         | (70     | )      |   |         | (1,019 | )     
|                                  | Loss from discontinued operations, net of taxes             |                                         |         | (2,735 | )      |   |         | (3,469  | )      |   |         | (345   | )     
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|                                  |                                                             | Total loss from discontinued operations |         |        | (2,735 | ) |         |         | (3,539 | ) |         |        | (1,364 | )
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|Net loss                          |                                                             | $                                       | (5,664  | )      |        | $ | (38,855 | )       |        | $ | (4,087  | )     
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|Loss per common share:            |                                                             |                                         |         |        |        |   |         |         |        |   |         |       
|Loss from continuing operations   |                                                             |                                         |         |        |        |   |         |         |        |   |         |       
|                                  | Basic                                                       |                                         | $       | (0.33  | )      |   | $       | (3.90   | )      |   | $       | (0.29  | )     
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|                                  | Diluted                                                     |                                         | $       | (0.33  | )      |   | $       | (3.90   | )      |   | $       | (0.29  | )     
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|Loss from discontinued operations |                                                             |                                         |         |        |        |   |         |         |        |   |         |       
|                                  | Basic                                                       |                                         | $       | (0.31  | )      |   | $       | (0.39   | )      |   | $       | (0.15  | )     
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|                                  | Diluted                                                     |                                         | $       | (0.31  | )      |   | $       | (0.39   | )      |   | $       | (0.15  | )     
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|Net loss                          |                                                             |                                         |         |        |        |   |         |         |        |   |         |       
|                                  | Basic                                                       |                                         | $       | (0.64  | )      |   | $       | (4.29   | )      |   | $       | (0.44  | )     
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|                                  | Diluted                                                     |                                         | $       | (0.64  | )      |   | $       | (4.29   | )      |   | $       | (0.44  | )     
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|Weighted average shares:          |                                                             |                                         |         |        |        |   |         |         |        |   |         |       
|                                  | Basic                                                       |                                         |         | 8,866  |        |   |         | 9,066   |        |   |         | 9,258  |       
|                                  |                                                             |                                         |         |        |        |   |         |         |       
|                                  | Diluted                                                     |                                         |         | 8,866  |        |   |         | 9,066   |        |   |         | 9,258  |       
|                                  |                                                             |                                         |         |        |        |   |         |         |       



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ROCKFORD CORPORATION AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


(In thousands)


|                             |                                                         |                    |       |     |            |   |    |             |   |   |               |      |   |        |         |         |       |   |       |        |   |   |        |         |         |  
|---------------------------- | ------------------------------------------------------- | ------------------ | ----- | --- | ---------- | - | -- | ----------- | - | - | ------------- | ---- | - | ------ | ------- | ------- | ----- | - | ----- | ------ | - | - | ------ | ------- | ------- | -
|                             |                                                         |                    |       |     |            |   |    | Accumulated |   |   |              
|                             |                                                         | Common Stock       |       |     | Additional |   |    | Retained    |   |   | Other         |      |   |       
|                             |                                                         |                    |       |     | Paid-In    |   |    | Earnings    |   |   | Comprehensive |      |   |       
|                             |                                                         | Shares             |       |     | Amount     |   |    | Capital     |   |   | (Deficit)     |      |   | Income |         |         | Total |  
|                             |                                                         |                    |       |     |            |   |    |             |   |   |               |      |   |        |         |         |       |  
|Balance at December 31, 2002 |                                                         |                    | 8,747 |     |            | $ | 87 |             |   | $ | 35,131        |      |   | $      | 29,198  |         |       | $ | 1,130 |        |   | $ | 65,546 |        
|                             | Currency translation                                    |                    |       |    |            |   |    |            |   |   |               |     |   |        |         |        |       |   |       | 2,225  |   |   |        | 2,225   |        
|                             | Net loss                                                |                    |       |    |            |   |    |            |   |   |               |     |   |        |         | (5,664  | )     |   |       |       |   |   |        | (5,664  | )      
|                             |                                                         |                    |       |     |            |   |    |             |   |   |               |      |   |        |         |         |       |   |       |        |   |   |        |        
|                             |                                                         | Comprehensive loss |       |     |           |   |    |             |  |   |               |      |  |        |         |         |      |   |       |        |  |   |        |         | (3,439  | )
|                             | Exercise of stock options                               |                    |       | 174 |            |   |    | 2           |   |   |               | 575  |   |        |         |        |       |   |       |       |   |   |        | 577     |        
|                             | Tax benefit related to non-qualified option exercises   |                    |       |    |            |   |    |            |   |   |               | 126  |   |        |         |        |       |   |       |       |   |   |        | 126     |        
|                             | Issuance of shares for employee stock purchase plan     |                    |       | 90  |            |   |    | 1           |   |   |               | 396  |   |        |         |        |       |   |       |       |   |   |        | 397     |        
|                             |                                                         |                    |       |     |            |   |    |             |   |   |               |      |   |        |         |         |       |  
|Balance at December 31, 2003 |                                                         |                    | 9,011 |     |            |   | 90 |             |   |   | 36,228        |      |   |        | 23,534  |         |       |   | 3,355 |        |   |   | 63,207 |        
|                             | Currency translation                                    |                    |       |    |            |   |    |            |   |   |               |     |   |        |         |        |       |   |       | (2,870 | ) |   |        | (2,870  | )      
|                             | Net loss                                                |                    |       |    |            |   |    |            |   |   |               |     |   |        |         | (38,855 | )     |   |       |       |   |   |        | (38,855 | )      
|                             |                                                         |                    |       |     |            |   |    |             |   |   |               |      |   |        |         |         |       |   |       |        |   |   |        |        
|                             |                                                         | Comprehensive loss |       |     |           |   |    |             |  |   |               |      |  |        |         |         |      |   |       |        |  |   |        |         | (41,725 | )
|                             | Exercise of stock options, including tax benefit of $16 |                    |       | 151 |            |   |    | 2           |   |   |               | 300  |   |        |         |        |       |   |       |       |   |   |        | 302     |        
|                             | Issuance of shares for employee stock purchase plan     |                    |       | 43  |            |   |    |            |   |   |               | 152  |   |        |         |        |       |   |       |       |   |   |        | 152     |        
|                             | Warrants issued with convertible notes                  |                    |       |    |            |   |    |            |   |   |               | 649  |   |        |         |        |       |   |       |       |   |   |        | 649     |        
|                             |                                                         |                    |       |     |            |   |    |             |   |   |               |      |   |        |         |         |       |  
|Balance at December 31, 2004 |                                                         |                    | 9,205 |     |            |   | 92 |             |   |   | 37,329        |      |   |        | (15,321 | )       |       |   | 485   |        |   |   | 22,585 |        
|                             | Currency translation                                    |                    |       |    |            |   |    |            |   |   |               |     |   |        |         |        |       |   |       | (88    | ) |   |        | (88     | )      
|                             | Net loss                                                |                    |       |    |            |   |    |            |   |   |               |     |   |        |         | (4,087  | )     |   |       |       |   |   |        | (4,087  | )      
|                             |                                                         |                    |       |     |            |   |    |             |   |   |               |      |   |        |         |         |       |   |       |        |   |   |        |        
|                             |                                                         | Comprehensive loss |       |     |           |   |    |             |  |   |               |      |  |        |         |         |      |   |       |        |  |   |        |         | (4,175  | )
|                             | Exercise of stock options, including tax benefit of $0  |                    |       | 116 |            |   |    | 1           |   |   |               | 246  |   |        |         |        |       |   |       |       |   |   |        | 247     |        
|                             | Issuance of shares for employee stock purchase plan     |                    |       | 63  |            |   |    | 1           |   |   |               | 121  |   |        |         |        |       |   |       |       |   |   |        | 122     |        
|                             | Repurchase of warrants issued with convertible notes    |                    |       |    |            |   |    |            |   |   |               | (148 | ) |        |         |        |       |   |       |       |   |   |        | (148    | )      
|                             |                                                         |                    |       |     |            |   |    |             |   |   |               |      |   |        |         |         |       |  
|Balance at December 31, 2005 |                                                         |                    | 9,384 |     |            | $ | 94 |             |   | $ | 37,548        |      |   | $      | (19,408 | )       |       | $ | 397   |        |   | $ | 18,631 |        
|                             |                                                         |                    |       |     |            |   |    |             |   |   |               |      |   |        |         |         |       |  



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ROCKFORD CORPORATION AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                                                         |                                              |                                   |                                                                                     |       |        |        |         |       |         |        |         |       |        |         |  
|------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------- | --------------------------------- | ----------------------------------------------------------------------------------- | ----- | ------ | ------ | ------- | ----- | ------- | ------ | ------- | ----- | ------ | ------- | -
|                                                                                                                         |                                              | Year Ended December 31,           |                                                                                    
|                                                                                                                         |                                              |                                   |                                                                                    
|                                                                                                                         |                                              | 2003                              |                                                                                     |       | 2004   |        |         | 2005  |        
|                                                                                                                         |                                              |                                   |                                                                                     |       |        |        |         |       |        
|                                                                                                                         |                                              | (In thousands)                    |                                                                                    
|Cash flow from continuing operating activities:                                                                          |                                              |                                   |                                                                                     |       |        |        |         |       |         |        |         |      
|Net loss from continuing operations                                                                                      |                                              | $                                 | (2,929                                                                              | )     |        | $      | (35,316 | )     |         | $      | (2,723  | )    
|Adjustments to reconcile net loss from continuing operations to
    net cash provided by (used in) operating activities: |                                              |                                   |                                                                                     |       |        |        |         |       |         |        |         |      
|                                                                                                                         | Depreciation and amortization                |                                   |                                                                                     | 4,358 |        |        |         | 4,464 |         |        |         | 3,891 |       
|                                                                                                                         | Gain on sale of brand rights                 |                                   |                                                                                     |      |        |        |         |      |         |        |         | (844  | )     
|                                                                                                                         | Write-off of assets to fair market value     |                                   |                                                                                     |      |        |        |         |      |         |        |         | 814   |       
|                                                                                                                         | Net gain on buyback of notes and warrants    |                                   |                                                                                     |      |        |        |         |      |         |        |         | (112  | )     
|                                                                                                                         | Loss on sale of property and equipment       |                                   |                                                                                     | 5     |        |        |         | 1,343 |         |        |         | 44    |       
|                                                                                                                         | Deferred income taxes                        |                                   |                                                                                     | (437  | )      |        |         | 7,131 |         |        |         |      |       
|                                                                                                                         | Impairment of goodwill                       |                                   |                                                                                     |      |        |        |         | 5,017 |         |        |         |      |       
|                                                                                                                         | Provision for doubtful accounts              |                                   |                                                                                     | 627   |        |        |         | 1,841 |         |        |         | 388   |       
|                                                                                                                         | Provision for inventory                      |                                   |                                                                                     | 1,034 |        |        |         | 8,735 |         |        |         | 549   |       
|                                                                                                                         | Changes in operating assets and liabilities: |                                   |                                                                                     |       |        |        |         |       |         |        |         |       |       
|                                                                                                                         |                                              | Accounts receivable               |                                                                                     |       | (2,535 | )      |         |       | (1,502  | )      |         |       | 6,561  |        
|                                                                                                                         |                                              | Inventories                       |                                                                                     |       | (7,422 | )      |         |       | (10,119 | )      |         |       | 12,275 |        
|                                                                                                                         |                                              | Prepaid expenses and other        |                                                                                     |       | 315    |        |         |       | (355    | )      |         |       | (515   | )      
|                                                                                                                         |                                              | Accounts payable                  |                                                                                     |       | (879   | )      |         |       | 7,489   |        |         |       | (4,683 | )      
|                                                                                                                         |                                              | Accrued salaries and incentives   |                                                                                     |       | 111    |        |         |       | (472    | )      |         |       | (85    | )      
|                                                                                                                         |                                              | Accrued warranty                  |                                                                                     |       | 273    |        |         |       | (1,853  | )      |         |       | (830   | )      
|                                                                                                                         |                                              | Income taxes payable (receivable) |                                                                                     |       | (1,122 | )      |         |       | 1,895   |        |         |       | 772    |        
|                                                                                                                         |                                              | Other accrued expenses            |                                                                                     |       | (403   | )      |         |       | 2,115   |        |         |       | (2,804 | )      
|                                                                                                                         |                                              |                                   |                                                                                     |       |        |        |         |       |        
|                                                                                                                         |                                              |                                   | Net cash provided by (used in) operating activities                                 |       |        | (9,004 | )       |       |         | (9,587 | )       |       |        | 12,698  |  
|Cash flow from continuing investing activities:                                                                          |                                              |                                   |                                                                                     |       |        |        |         |       |         |        |         |      
|Purchases of property and equipment                                                                                      |                                              |                                   | (4,330                                                                              | )     |        |        | (2,213  | )     |         |        | (948    | )    
|Proceeds from sale of property and equipment                                                                             |                                              |                                   | 18                                                                                  |       |        |        | 18      |       |         |        | 125     |      
|Net proceeds from divestiture of businesses                                                                              |                                              |                                   |                                                                                    |       |        |        | 6,418   |       |         |        | 2,098   |      
|Proceeds from sale of brand rights and other assets                                                                      |                                              |                                   | 357                                                                                 |       |        |        |        |       |         |        | 843     |      
|Increase in other assets                                                                                                 |                                              |                                   | (2,333                                                                              | )     |        |        | (965    | )     |         |        | (313    | )    
|                                                                                                                         |                                              |                                   |                                                                                     |       |        |        |         |       |        
|                                                                                                                         |                                              |                                   | Net cash provided by (used in) investing activities                                 |       |        | (6,288 | )       |       |         | 3,258  |         |       |        | 1,805   |  
|Cash flow from continuing financing activities:                                                                          |                                              |                                   |                                                                                     |       |        |        |         |       |         |        |         |      
|Net proceeds from (payments on) notes payable and warrants                                                               |                                              |                                   |                                                                                    |       |        |        | 12,500  |       |         |        | (2,688  | )    
|Net proceeds from (payments on) bank debt and short term notes                                                           |                                              |                                   | 14,150                                                                              |       |        |        | (3,714  | )     |         |        | (12,096 | )    
|Payments on capital lease obligations                                                                                    |                                              |                                   | (1,047                                                                              | )     |        |        | (2,381  | )     |         |        |        |      
|Proceeds from employee stock purchase plan                                                                               |                                              |                                   | 298                                                                                 |       |        |        | 152     |       |         |        | 122     |      
|Proceeds from exercise of stock options                                                                                  |                                              |                                   | 802                                                                                 |       |        |        | 302     |       |         |        | 247     |      
|                                                                                                                         |                                              |                                   |                                                                                     |       |        |        |         |       |        
|                                                                                                                         |                                              |                                   | Net cash provided by (used in) financing activities                                 |       |        | 14,203 |         |       |         | 6,859  |         |       |        | (14,415 | )
|Effect of exchange rate changes on cash from continuing
    operations                                                   |                                              |                                   | 1,409                                                                               |       |        |        | (1,005  | )     |         |        | (88     | )    
|                                                                                                                         |                                              |                                   |                                                                                     |       |        |        |         |       |        
|                                                                                                                         |                                              |                                   | Net increase (decrease) in cash and cash equivalents from
    continuing operations |       |        | 320    |         |       |         | (475   | )       |       |        |        |  
|                                                                                                                         |                                              |                                   | Net increase (decrease) in cash flow from discontinued operations                   |       |        | 92     |         |       |         | (241   | )       |       |        |        |  
|Cash and cash equivalents at beginning of year                                                                           |                                              |                                   | 304                                                                                 |       |        |        | 716     |       |         |        |        |      
|                                                                                                                         |                                              |                                   |                                                                                     |       |        |        |         |       |        
|Cash and cash equivalents at end of year                                                                                 |                                              | $                                 | 716                                                                                 |       |        | $      |        |       |         | $      |        |      
|                                                                                                                         |                                              |                                   |                                                                                     |       |        |        |         |       |        
|Cash flow from discontinued operations:                                                                                  |                                              |                                   |                                                                                     |       |        |        |         |       |         |        |         |      
|Cash flow provided by (used in) operating activities                                                                     |                                              | $                                 | (696                                                                                | )     |        | $      | 1,816   |       |         | $      | 54      |      
|Cash flow provided by (used in) investing activities                                                                     |                                              |                                   | 9                                                                                   |       |        |        | (230    | )     |         |        | (54     | )    
|Cash flow provided by (used in) financing activities                                                                     |                                              |                                   | (37                                                                                 | )     |        |        | 37      |       |         |        |        |      
|Effect of exchange rate changes on cash                                                                                  |                                              |                                   | 816                                                                                 |       |        |        | (1,864  | )     |         |        |        |      
|                                                                                                                         |                                              |                                   |                                                                                     |       |        |        |         |       |        
|                                                                                                                         |                                              |                                   | Net increase (decrease) in cash flow from discontinued operations                   |       | $      | 92     |         |       | $       | (241   | )       |       | $      |        |  
|                                                                                                                         |                                              |                                   |                                                                                     |       |        |        |         |       |        



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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                    
|-- | -------------------
|1. | Accounting Policies



| |                                         
| | ----------------------------------------
| | Organization and Description of Business







| |                      
| | ---------------------
| | Basis of Presentation









| |                            
| | ---------------------------
| | Principles of Consolidation





| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments



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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                 
| | --------------------------------
| | Derivative Financial Instruments

Accounting for
Derivative Instruments and Hedging Activities,




| |                    
| | -------------------
| | Revenue Recognition





| |   |                                                        
| | - | -------------------------------------------------------
| |  | Persuasive evidence of an arrangement exists;          
|
| |  | Ownership has transferred to the customer;             
|
| |  | The price to the customer is fixed or determinable; and
|
| |  | Collectibility is reasonably assured.                  





| |                            
| | ---------------------------
| | Shipping and Handling Costs





| |                                   
| | ----------------------------------
| | Accounts Receivable and Allowances







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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |            
| | -----------
| | Inventories







| |                       
| | ----------------------
| | Property and Equipment

Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use.




| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets

Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of




| |         
| | --------
| | Goodwill

Goodwill. Business Combinations Goodwill and Other Intangible
Assets






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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | Significant underperformance relative to expected historical or
    projected future operating results;      
|
| |  | Significant changes in the manner of use of the acquired assets
    or the strategy for the overall business;
|
| |  | Market capitalization relative to net book value; and                                                        
|
| |  | Significant negative industry or economic trends.                                                            





| |            
| | -----------
| | Advertising





| |             
| | ------------
| | Income Taxes

Accounting for Income Taxes








| |                                          
| | -----------------------------------------
| | Product Warranty Cost and Service Returns



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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                 |                                      |      |       |        |      |   |       |        |  
|-------------------------------- | ------------------------------------ | ---- | ----- | ------ | ---- | - | ----- | ------ | -
|                                 |                                      | 2004 |       |        | 2005 |  
|                                 |                                      |      |       |        |      |  
|Balance at the beginning of year |                                      | $    | 4,789 |        |      | $ | 2,903 |       
|                                 | Provision for warranties issued      |      |       | 1,016  |      |   |       | 1,258  |  
|                                 | Net settlements made during the year |      |       | (2,993 | )    |   |       | (2,179 | )
|                                 |                                      |      |       |        |      |  
|Balance at the end of the year   |                                      | $    | 2,812 |        |      | $ | 1,982 |       
|                                 |                                      |      |       |        |      |  



| |                               
| | ------------------------------
| | Income (Loss) per Common Share

Earnings Per Share




| |                     
| | --------------------
| | Significant Customer





| |                             
| | ----------------------------
| | Foreign Currency Translation

Foreign Currency Translation year-to


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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                         
| | ------------------------
| | Stock Based Compensation

Accounting for Stock
Issued to Employees Accounting for Stock-Based
Compensation Accounting
for Stock-Based Compensation


|                               |         |                                |        |       |      |   |         |       |   |   |        |       |  
|------------------------------ | ------- | ------------------------------ | ------ | ----- | ---- | - | ------- | ----- | - | - | ------ | ----- | -
|                               |         | Year Ended December 31,        |       
|                               |         |                                |       
|                               |         | 2003                           |        |       | 2004 |   |         | 2005  |  
|                               |         |                                |        |       |      |   |         |       |  
|                               |         | (In thousands except per share |       
|                               |         | data)                          |       
|Net loss as reported           |         | $                              | (5,664 | )     |      | $ | (38,855 | )     |   | $ | (4,087 | )    
|Proforma SFAS No. 123 expense  |         |                                | (402   | )     |      |   | (378    | )     |   |   | (451   | )    
|                               |         |                                |        |       |      |   |         |       |  
|Proforma net loss              |         | $                              | (6,066 | )     |      | $ | (39,233 | )     |   | $ | (4,538 | )    
|                               |         |                                |        |       |      |   |         |       |  
|Proforma loss per common share |         |                                |        |       |      |   |         |       |   |   |        |      
|                               | Basic   |                                | $      | (0.68 | )    |   | $       | (4.33 | ) |   | $      | (0.49 | )
|                               |         |                                |        |       |      |   |         |       |  
|                               | Diluted |                                | $      | (0.68 | )    |   | $       | (4.33 | ) |   | $      | (0.49 | )
|                               |         |                                |        |       |      |   |         |       |  





| |                 
| | ----------------
| | Use of Estimates





| |                  
| | -----------------
| | Reclassifications





| |                              
| | -----------------------------
| | New Accounting Pronouncements

Share-Based
Payment, Accounting for Stock Issued to Employees


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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Inventory Costs, an amendment of ARB 43, Chapter 4


Exchanges of
Non-monetary Assets, an amendment of APB No. 29, Accounting
for Non-monetary Transactions




|   |                        
|-- | -----------------------
|2. | Discontinued Operations

SimpleDevices, Inc.




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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                         |  |                |       |   |      |   |        |  
|---------------------------------------- |  | -------------- | ----- | - | ---- | - | ------ | -
|                                         |  | December 31,   |      
|                                         |  |                |      
|                                         |  | 2003           |       |   | 2004 |  
|                                         |  |                |       |   |      |  
|                                         |  | (In thousands) |      
|Revenues                                 |  | $              | 351   |   |      | $ | 322    |  
|Cost of sales                            |  |                | 465   |   |      |   | 234    |  
|Operating expenses                       |  |                | 1,113 |   |      |   | 1,459  |  
|Interest and other expense (income), net |  |                | (12   | ) |      |   | 39     |  
|Income tax expense                       |  |                | 5     |   |      |   |       |  
|Minority interest                        |  |                | (450  | ) |      |   | (345   | )
|                                         |  |                |       |   |      |  
|Net loss                                 |  | $              | (770  | ) |      | $ | (1,065 | )
|                                         |  |                |       |   |      |  

MB Quart.




|                                         |  |                |        |   |      |   |        |      |  |   |     |  
|---------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | ---- |  | - | --- | -
|                                         |  | December 31,   |       
|                                         |  |                |       
|                                         |  | 2003           |        |   | 2004 |   |        | 2005 | 
|                                         |  |                |        |   |      |   |        |      | 
|                                         |  | (In thousands) |       
|Revenues                                 |  | $              | 5,330  |   |      | $ | 4,547  |      |  | $ |    |  
|Cost of sales                            |  |                | 3,159  |   |      |   | 2,840  |      |  |   |    |  
|Operating expenses                       |  |                | 5,089  |   |      |   | 3,317  |      |  |   | 63  |  
|Interest and other expense (income), net |  |                | 44     |   |      |   | 4      |      |  |   |    |  
|Income tax benefit                       |  |                | (572   | ) |      |   | (6     | )    |  |   |    |  
|                                         |  |                |        |   |      |   |        |      | 
|Net loss                                 |  | $              | (2,390 | ) |      | $ | (1,608 | )    |  | $ | (63 | )
|                                         |  |                |        |   |      |   |        |      | 

Rockford Home Group.




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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                         |  |                |       |   |      |   |       |      |  |   |       |  
|---------------------------------------- |  | -------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                         |  | December 31,   |      
|                                         |  |                |      
|                                         |  | 2003           |       |   | 2004 |   |       | 2005 | 
|                                         |  |                |       |   |      |   |       |      | 
|                                         |  | (In thousands) |      
|Revenues                                 |  | $              | 8,627 |   |      | $ | 8,698 |      |  | $ | 5,266 |  
|Cost of sales                            |  |                | 5,898 |   |      |   | 5,370 |      |  |   | 3,165 |  
|Operating expenses                       |  |                | 2,319 |   |      |   | 4,131 |      |  |   | 2,382 |  
|Interest and other expense (income), net |  |                | (15   | ) |      |   | (7    | )    |  |   | 1     |  
|                                         |  |                |       |   |      |   |       |      | 
|Net income (loss)                        |  | $              | 425   |   |      | $ | (796  | )    |  | $ | (282  | )
|                                         |  |                |       |   |      |   |       |      | 

Cash Flows from Discontinued Operations.




|   |            
|-- | -----------
|3. | Inventories



|                 |  |                |        |  |      |   |        | 
|---------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                 |  | December 31,   |       
|                 |  |                |       
|                 |  | 2004           |        |  | 2005 |  
|                 |  |                |        |  |      |  
|                 |  | (In thousands) |       
|Raw materials    |  | $              | 6,392  |  |      | $ | 6,126  | 
|Work in progress |  |                | 1,732  |  |      |   | 1,494  | 
|Finished goods   |  |                | 23,663 |  |      |   | 10,998 | 
|                 |  |                |        |  |      |  
|                 |  | $              | 31,787 |  |      | $ | 18,618 | 
|                 |  |                |        |  |      |  

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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                       
|-- | ----------------------
|4. | Property and Equipment



|                                               |  |                |         |   |      |   |         |  
|---------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                               |  | December 31,   |        
|                                               |  |                |        
|                                               |  | 2004           |         |   | 2005 |  
|                                               |  |                |         |   |      |  
|                                               |  | (In thousands) |        
|Machinery and equipment                        |  | $              | 19,843  |   |      | $ | 13,533  |  
|Tooling equipment                              |  |                | 7,095   |   |      |   | 5,068   |  
|Leasehold improvements                         |  |                | 3,466   |   |      |   | 2,823   |  
|Furniture and fixtures                         |  |                | 1,551   |   |      |   | 709     |  
|Computer software                              |  |                | 1,566   |   |      |   | 1,659   |  
|Construction in process                        |  |                | 275     |   |      |   | 113     |  
|                                               |  |                |         |   |      |  
|                                               |  |                | 33,796  |   |      |   | 23,905  |  
|Less accumulated depreciation and amortization |  |                | (27,903 | ) |      |   | (20,801 | )
|                                               |  |                |         |   |      |  
|                                               |  | $              | 5,893   |   |      | $ | 3,104   |  
|                                               |  |                |         |   |      |  





|   |                                 
|-- | --------------------------------
|5. | Notes Payable and Long-Term Debt



|                                                   |  |                |         |   |      |   |        |  
|-------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------ | -
|                                                   |  | December 31,   |        
|                                                   |  |                |        
|                                                   |  | 2004           |         |   | 2005 |  
|                                                   |  |                |         |   |      |  
|                                                   |  | (In thousands) |        
|$25,000,000 asset based facility                   |  | $              | 15,516  |   |      | $ | 6,109  |  
|4.5% convertible senior subordinated secured notes |  |                | 12,500  |   |      |   | 9,500  |  
|Other                                              |  |                | 2,688   |   |      |   |       |  
|                                                   |  |                |         |   |      |  
|                                                   |  |                | 30,704  |   |      |   | 15,609 |  
|Less debt discount                                 |  |                | (563    | ) |      |   | (313   | )
|Less current portion                               |  |                | (18,204 | ) |      |   | (6,109 | )
|                                                   |  |                |         |   |      |  
|                                                   |  | $              | 11,937  |   |      | $ | 9,187  |  
|                                                   |  |                |         |   |      |  



3-year 4-year


Balance Sheet Classification of Borrowings
Outstanding under Revolving Credit Agreements That Include both
a Subjective Acceleration Clause and a


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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Lock-Box Arrangement








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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                          |  |                           |        | 
|------------------------- |  | ------------------------- | ------ | 
|                          |  | Years Ending December 31, |       
|                          |  |                           |       
|                          |  | (In thousands)            |       
|2006                      |  | $                         |       | 
|2007                      |  |                           |       | 
|2008                      |  |                           | 6,109  | 
|2009                      |  |                           | 9,500  | 
|2010                      |  |                           |       | 
|                          |  |                           |       
|                          |  |                           | 15,609 | 
|Less: unaccreted discount |  |                           | 313    | 
|                          |  |                           |       
|                          |  | $                         | 15,296 | 
|                          |  |                           |       



|   |       
|-- | ------
|6. | Leases





|                             |  |                  |       | 
|---------------------------- |  | ---------------- | ----- | 
|                             |  | Operating Leases |      
|                             |  |                  |      
|                             |  | (In thousands)   |      
|2006                         |  | $                | 2,621 | 
|2007                         |  |                  | 2,077 | 
|2008                         |  |                  | 1,764 | 
|2009                         |  |                  | 812   | 
|2010                         |  |                  | 316   | 
|Thereafter                   |  |                  | 216   | 
|                             |  |                  |      
|Total minimum lease payments |  | $                | 7,806 | 
|                             |  |                  |      





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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |             
|-- | ------------
|7. | Income Taxes



|                          |                                        |                |         |       |      |   |         |        | 
|------------------------- | -------------------------------------- | -------------- | ------- | ----- | ---- | - | ------- | ------ | 
|                          |                                        | December 31,   |        
|                          |                                        |                |        
|                          |                                        | 2004           |         |       | 2005 |  
|                          |                                        |                |         |       |      |  
|                          |                                        | (In thousands) |        
|Deferred tax assets       |                                        |                |         |       |      |   |         |       
|                          | Inventory basis                        |                | $       | 4,408 |      |   | $       | 1,820  | 
|                          | Basis in receivables                   |                |         | 1,741 |      |   |         | 1,294  | 
|                          | Book over tax depreciation             |                |         | 78    |      |   |         | 222    | 
|                          | Accrued warranty                       |                |         | 1,074 |      |   |         | 733    | 
|                          | Net operating loss carryforward        |                |         | 5,285 |      |   |         | 11,233 | 
|                          | Federal and state credit carryforwards |                |         | 935   |      |   |         | 2,035  | 
|                          | Accrued liabilities and other          |                |         | 837   |      |   |         | 198    | 
|                          |                                        |                |         |       |      |  
|Gross deferred tax assets |                                        |                | 14,358  |       |      |   | 17,535  |       
|Valuation allowance       |                                        |                | (14,358 | )     |      |   | (17,535 | )     
|                          |                                        |                |         |       |      |  
|Net deferred tax assets   |                                        | $              |        |       |      | $ |        |       
|                          |                                        |                |         |       |      |  

Accounting for
Income Tax.




50



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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                 |                           |                         |        |        |      |   |       |       |   |   |   |   | 
|-------------------------------- | ------------------------- | ----------------------- | ------ | ------ | ---- | - | ----- | ----- | - | - | - | - | 
|                                 |                           | Year Ended December 31,
|                                 |                           |                        
|                                 |                           | 2003                    |        |        | 2004 |   |       | 2005 
|                                 |                           |                         |        |        |      |   |       |      
|                                 |                           | (In thousands)         
|Current:                         |                           |                         |        |        |      |   |       |       |   |   |   |  
|                                 | Federal expense (benefit) |                         | $      | (2,445 | )    |   | $     | (928  | ) |   | $ |  | 
|                                 | State expense (benefit)   |                         |        | (10    | )    |   |       |      |   |   |   |  | 
|                                 | Foreign expense           |                         |        | 69     |      |   |       |      |   |   |   |  | 
|                                 |                           |                         |        |        |      |   |       |       |  
|Total current expense (benefit)  |                           |                         | (2,386 | )      |      |   | (928  | )     |   |   |  |  
|Deferred:                        |                           |                         |        |        |      |   |       |       |   |   |   |  
|                                 | Federal expense (benefit) |                         |        | 126    |      |   |       | 4,900 |   |   |   |  | 
|                                 | State expense (benefit)   |                         |        | (209   | )    |   |       | 625   |   |   |   |  | 
|                                 | Foreign expense(benefit)  |                         |        | (581   | )    |   |       | 591   |   |   |   |  | 
|                                 |                           |                         |        |        |      |   |       |       |  
|Total deferred expense (benefit) |                           |                         | (664   | )      |      |   | 6,116 |       |   |   |  |  
|                                 |                           |                         |        |        |      |   |       |       |  
|Income tax expense (benefit)     |                           | $                       | (3,050 | )      |      | $ | 5,188 |       |   | $ |  |  
|                                 |                           |                         |        |        |      |   |       |       |  



|                                                   |  |                         |        |   |      |   |         |      |  |   |        |  
|-------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                   |  | Year Ended December 31, |       
|                                                   |  |                         |       
|                                                   |  | 2003                    |        |   | 2004 |   |         | 2005 | 
|                                                   |  |                         |        |   |      |   |         |      | 
|                                                   |  | (In thousands)          |       
|Federal statutory rate  continuing operations     |  | $                       | (1,696 | ) |      | $ | (10,715 | )    |  | $ | (1,022 | )
|Federal statutory rate  discontinued operations   |  |                         | (1,267 | ) |      |   | (732    | )    |  |   | (368   | )
|State tax net of federal benefit                   |  |                         | (206   | ) |      |   | 7       |      |  |   |       |  
|State tax operating loss carryforward              |  |                         |       |   |      |   | (570    | )    |  |   | (552   | )
|Nondeductible items                                |  |                         | (25    | ) |      |   | 16      |      |  |   | 178    |  
|Nondeductible goodwill                             |  |                         |       |   |      |   | 2,420   |      |  |   |       |  
|Foreign rate differential                          |  |                         | (137   | ) |      |   |        |      |  |   |       |  
|Federal and state tax credits                      |  |                         |       |   |      |   |        |      |  |   | (1,100 | )
|Other, net                                         |  |                         | (149   | ) |      |   | (205    | )    |  |   | (313   | )
|Increase in valuation allowance                    |  |                         | 575    |   |      |   | 13,409  |      |  |   | 3,177  |  
|Use of previously unbenefited net operating losses |  |                         | (457   | ) |      |   |        |      |  |   |       |  
|Write-off of affiliate deferred tax assets         |  |                         |       |   |      |   | 596     |      |  |   |       |  
|Affiliate unbenefited losses                       |  |                         | 312    |   |      |   | 962     |      |  |   |       |  
|                                                   |  |                         |        |   |      |   |         |      | 
|Income tax expense (benefit)                       |  | $                       | (3,050 | ) |      | $ | 5,188   |      |  | $ |       |  
|                                                   |  |                         |        |   |      |   |         |      | 





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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                
|-- | -------------------------------
|8. | Common Stock Grants and Options



out-of out-of




|                           |  |                         |         |   |      |  |         |      |  |  |         |  
|-------------------------- |  | ----------------------- | ------- | - | ---- |  | ------- | ---- |  |  | ------- | -
|                           |  | Year Ended December 31, |        
|                           |  |                         |        
|                           |  | 2003                    |         |   | 2004 |  |         | 2005 | 
|                           |  |                         |         |   |      |  |         |      | 
|Expected life of the award |  |                         | 5 years |   |      |  | 5 years |      |  |  | 5 years |  
|Dividend yield             |  |                         | 0       | % |      |  | 0       | %    |  |  | 0       | %
|Risk-free interest rate    |  |                         | 2.9     | % |      |  | 3.4     | %    |  |  | 4.5     | %
|Expected volatility        |  |                         | 0.73    |   |      |  | 0.46    |      |  |  | 0.46    |  

52



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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                 |            |                  |         |                     |        |  |                  |                |   |   |      |      | 
|-------------------------------- | ---------- | ---------------- | ------- | ------------------- | ------ |  | ---------------- | -------------- | - | - | ---- | ---- | 
|                                 |            |                  |         | Outstanding Options |       
|                                 |            |                  |         |                     |       
|                                 |            | Shares Available |         |                     |        |  | Weighted Average |               
|                                 |            | Under Option     |         |                     | Shares |  |                  | Exercise Price |  
|                                 |            |                  |         |                     |        |  |                  |                |  
|Outstanding at December 31, 2002 |            |                  | 615,983 |                     |        |  | 1,466,391        |                |   | $ | 4.92 |     
|                                 | Granted    |                  |         | (167,000            | )      |  |                  | 167,000        |   |   |      | 5.70 | 
|                                 | Exercised  |                  |         |                    |        |  |                  | (174,449       | ) |   |      | 3.32 | 
|                                 | Expired    |                  |         | 98,376              |        |  |                  | (98,376        | ) |   |      | 4.83 | 
|                                 |            |                  |         |                     |        |  |                  |                |  
|Outstanding at December 31, 2003 |            |                  | 547,359 |                     |        |  | 1,360,566        |                |   |   | 5.21 |     
|                                 | Granted    |                  |         | (482,050            | )      |  |                  | 482,050        |   |   |      | 3.53 | 
|                                 | Exercised  |                  |         |                    |        |  |                  | (151,300       | ) |   |      | 1.89 | 
|                                 | Expired    |                  |         | 9,764               |        |  |                  | (94,790        | ) |   |      | 5.02 | 
|                                 |            |                  |         |                     |        |  |                  |                |  
|Outstanding at December 31, 2004 |            |                  | 75,073  |                     |        |  | 1,596,526        |                |   |   | 5.03 |     
|                                 | Authorized |                  |         | 500,000             |        |  |                  |               |   |   |      |     | 
|                                 | Granted    |                  |         | (389,150            | )      |  |                  | 389,150        |   |   |      | 2.90 | 
|                                 | Exercised  |                  |         |                    |        |  |                  | (146,600       | ) |   |      | 2.42 | 
|                                 | Expired    |                  |         | 250,362             |        |  |                  | (256,812       | ) |   |      | 5.30 | 
|                                 |            |                  |         |                     |        |  |                  |                |  
|Outstanding at December 31, 2005 |            |                  | 436,285 |                     |        |  | 1,582,264        |                |   | $ | 4.70 |     
|                                 |            |                  |         |                     |        |  |                  |                |  





|                         |  |                     |           |  |                     |  |     |                |  |        |                |  |  |                |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- |  | ------------------- |  | --- | -------------- |  | ------ | -------------- |  |  | -------------- | --------- |  |  | - | ----- | 
|                         |  | Options Outstanding |           |  | Options Exercisable | 
|                         |  |                     |           |  |                     | 
|                         |  | Number              |           |  | Weighted            |  |     |                |  | Number |                |  | 
|                         |  | Outstanding at      |           |  | Average             |  |     | Weighted       |  |        | Outstanding at |  |  | Weighted       |          
|                         |  | December 31,        |           |  | Remaining           |  |     | Average        |  |        | December 31,   |  |  | Average        |          
|Range of Exercise Prices |  | 2005                |           |  | Contractual Life    |  |     | Exercise Price |  |        | 2005           |  |  | Exercise Price |          
|                         |  |                     |           |  |                     |  |     |                |  |        |                |  |  |                |          
|$2.15 - $2.90            |  |                     | 672,050   |  |                     |  | 9.5 |                |  | $      | 2.57           |  |  |                | 296,987   |  |  | $ | 2.54  | 
|$3.41 - $4.19            |  |                     | 256,550   |  |                     |  | 1.9 |                |  | $      | 4.01           |  |  |                | 255,050   |  |  | $ | 4.02  | 
|$5.70 - $7.68            |  |                     | 589,164   |  |                     |  | 5.5 |                |  | $      | 6.72           |  |  |                | 589,164   |  |  | $ | 6.72  | 
|$11.00                   |  |                     | 64,500    |  |                     |  | 4.3 |                |  | $      | 11.00          |  |  |                | 64,500    |  |  | $ | 11.00 | 
|                         |  |                     |           |  |                     |  |     |                |  |        |                |  |  |                |          
|                         |  |                     | 1,582,264 |  |                     |  |     |                |  |        |                |  |  |                | 1,205,701 |  |  |   |       | 
|                         |  |                     |           |  |                     |  |     |                |  |        |                |  |  |                |          

53



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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                        
|-- | -----------------------
|9. | Income (Loss) Per Share

|                                       |                                      |                                 |       |        |      |  |       |         |   |  |       |        |  
|-------------------------------------- | ------------------------------------ | ------------------------------- | ----- | ------ | ---- |  | ----- | ------- | - |  | ----- | ------ | -
|                                       |                                      | Year Ended December 31,         |      
|                                       |                                      |                                 |      
|                                       |                                      | 2003                            |       |        | 2004 |  |       | 2005    |  
|                                       |                                      |                                 |       |        |      |  |       |         |  
|                                       |                                      | (In thousands, except per share |      
|                                       |                                      | data)                           |      
|Numerator                              |                                      |                                 |       |        |      |  |       |         |   |  |       |       
|                                       | Loss from continuing operations      |                                 | $     | (2,929 | )    |  | $     | (35,316 | ) |  | $     | (2,723 | )
|                                       | Loss from discontinued operations    |                                 |       | (2,735 | )    |  |       | (3,539  | ) |  |       | (1,364 | )
|                                       |                                      |                                 |       |        |      |  |       |         |  
|                                       | Net loss                             |                                 | $     | (5,664 | )    |  | $     | (38,855 | ) |  | $     | (4,087 | )
|                                       |                                      |                                 |       |        |      |  |       |         |  
|Denominator:                           |                                      |                                 |       |        |      |  |       |         |   |  |       |       
|                                       | Denominator for basic loss per share |                                 |       | 8,866  |      |  |       | 9,066   |   |  |       | 9,258  |  
|                                       | Effect of dilutive securities:       |                                 |       |        |      |  |       |         |   |  |       |        |  
|                                       | Employee stock options               |                                 |       |       |      |  |       |        |   |  |       |       |  
|                                       | Warrants                             |                                 |       |       |      |  |       |        |   |  |       |       |  
|                                       |                                      |                                 |       |        |      |  |       |         |  
|                                       | Dilutive potential common shares     |                                 |       |       |      |  |       |        |   |  |       |       |  
|                                       |                                      |                                 |       |        |      |  |       |         |  
|Denominator for diluted loss per share |                                      |                                 | 8,866 |        |      |  | 9,066 |         |   |  | 9,258 |       
|                                       |                                      |                                 |       |        |      |  |       |         |  
|Loss per common share:                 |                                      |                                 |       |        |      |  |       |         |   |  |       |       
|Loss from continuing operations        |                                      |                                 |       |        |      |  |       |         |   |  |       |       
|                                       | Basic                                |                                 | $     | (0.33  | )    |  | $     | (3.90   | ) |  | $     | (0.29  | )
|                                       |                                      |                                 |       |        |      |  |       |         |  
|                                       | Diluted                              |                                 | $     | (0.33  | )    |  | $     | (3.90   | ) |  | $     | (0.29  | )
|                                       |                                      |                                 |       |        |      |  |       |         |  
|Loss from discontinued operations      |                                      |                                 |       |        |      |  |       |         |   |  |       |       
|                                       | Basic                                |                                 | $     | (0.31  | )    |  | $     | (0.39   | ) |  | $     | (0.15  | )
|                                       |                                      |                                 |       |        |      |  |       |         |  
|                                       | Diluted                              |                                 | $     | (0.31  | )    |  | $     | (0.39   | ) |  | $     | (0.15  | )
|                                       |                                      |                                 |       |        |      |  |       |         |  
|Net loss                               |                                      |                                 |       |        |      |  |       |         |   |  |       |       
|                                       | Basic                                |                                 | $     | (0.64  | )    |  | $     | (4.29   | ) |  | $     | (0.44  | )
|                                       |                                      |                                 |       |        |      |  |       |         |  
|                                       | Diluted                              |                                 | $     | (0.64  | )    |  | $     | (4.29   | ) |  | $     | (0.44  | )
|                                       |                                      |                                 |       |        |      |  |       |         |  





|    |              
|--- | -------------
|10. | Contingencies



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ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |             
|--- | ------------
|11. | Benefit Plan





|    |                    
|--- | -------------------
|12. | Stock Purchase Plan





|    |                    
|--- | -------------------
|13. | Segment Information





|                                  |  |                        |         |  |      |   |         |      |  |   |         |  |  |  |       |  
|--------------------------------- |  | ---------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  |  | ----- | -
|                                  |  | Year Ended December 31 |        
|                                  |  |                        |        
|Region(1)                         |  | 2003                   |         |  | 2004 |   |         | 2005 |  |   | % 2005  | 
|                                  |  |                        |         |  |      |   |         |      |  |   |         | 
|                                  |  | (In thousands)         |        
|United States                     |  | $                      | 130,546 |  |      | $ | 133,682 |      |  | $ | 112,657 |  |  |  | 83.0  | %
|Other Americas                    |  |                        | 8,880   |  |      |   | 9,295   |      |  |   | 9,438   |  |  |  | 7.0   | %
|Europe                            |  |                        | 13,489  |  |      |   | 12,544  |      |  |   | 9,042   |  |  |  | 6.7   | %
|Asia                              |  |                        | 4,813   |  |      |   | 5,336   |      |  |   | 4,545   |  |  |  | 3.3   | %
|                                  |  |                        |         |  |      |   |         |      |  |   |         | 
|Total sales to external customers |  | $                      | 157,728 |  |      | $ | 160,857 |      |  | $ | 135,682 |  |  |  | 100.0 | %
|                                  |  |                        |         |  |      |   |         |      |  |   |         | 






|    |                                                                                      
|--- | -------------------------------------------------------------------------------------
|(1) | Revenues are attributed to geographic regions based on the
    location of customers.





|    |                   
|--- | ------------------
|14. | Disposal of Assets



MB Quart.


55



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##### Table of Contents



ROCKFORD CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Q-Logic. Q-Logic


|                            |  |                              |       |          |            |  |               |            |  |          |          |   |  |   |       |  
|--------------------------- |  | ---------------------------- | ----- | -------- | ---------- |  | ------------- | ---------- |  | -------- | -------- | - |  | - | ----- | -
|                            |  | Year Ended December 31, 2005 |      
|                            |  |                              |      
|                            |  |                              |       | Pro Rata |            |  | Allocation of |            |  | Adjusted |         
|                            |  | Carrying                     |       |          | Allocation |  |               | Impairment |  |          | Carrying |  
|                            |  | Amount                       |       |          | Factor     |  |               | Loss       |  |          | Amount   |  
|                            |  |                              |       |          |            |  |               |            |  |          |          |  
|                            |  | (In thousands)               |      
|Account Receivable          |  | $                            | 1,216 |          |            |  |              | %          |  | $        |         |   |  | $ | 1,216 |  
|Inventories                 |  |                              | 1,269 |          |            |  | 42.4          |            |  |          | (345     | ) |  |   | 924   |  
|Property and Equipment, Net |  |                              | 469   |          |            |  | 57.6          |            |  |          | (469     | ) |  |   |      |  
|Current Liabilities         |  |                              | (571  | )        |            |  |              |            |  |          |         |   |  |   | (571  | )
|                            |  |                              |       |          |            |  |               |            |  |          |          |  
|                            |  | $                            | 2,383 |          |            |  | 100.0         | %          |  | $        | (814     | ) |  | $ | 1,569 |  
|                            |  |                              |       |          |            |  |               |            |  |          |          |  

56



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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes In and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures



| |                                                 
| | ------------------------------------------------
| | Evaluation of Disclosure Controls and Procedures

10-K. 10-K








| |                             
| | ----------------------------
| | Changes in Internal Controls








PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant

S-K









|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation



57



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##### Table of Contents








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services






PART IV







|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and Reports on
    Form 8-K

Consolidated Financial Statements




Financial Statement Schedule





SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS


ROCKFORD CORPORATION


|                  |                       |                |   |       |            |  |   |             |  |  |               |       |            |               |   |       |  |  |   |       | 
|----------------- | --------------------- | -------------- | - | ----- | ---------- |  | - | ----------- |  |  | ------------- | ----- | ---------- | ------------- | - | ----- |  |  | - | ----- | 
|Column A          |                       | Column B       |   |       | Column C   |  |   | Column D    |  |  | Column E      |      
|                  |                       |                |   |       |            |  |   |             |  |  |               |      
|                  |                       | Balance at     |   |       | Charged to |  |   | Charged to  |  |  |               |       |           
|                  |                       | Beginning of   |   |       | Costs and  |  |   | Other       |  |  |               |       | Balance at |              
|Description       |                       | Period         |   |       | Expenses   |  |   | Accounts(2) |  |  | Deductions(1) |       |            | End of Period |  
|                  |                       |                |   |       |            |  |   |             |  |  |               |       |            |               |  
|                  |                       | (In thousands) |  
|December 31, 2005 |                       |                |   |       |            |  |   |             |  |  |               |       |            |               |   |       |  |  |   |      
|                  | Receivable allowances |                | $ | 3,163 |            |  | $ | 388         |  |  | $             | 3,517 |            |               | $ | 4,761 |  |  | $ | 2,307 | 
|December 31, 2004 |                       |                |   |       |            |  |   |             |  |  |               |       |            |               |   |       |  |  |   |      
|                  | Receivable allowances |                | $ | 2,901 |            |  | $ | 1,841       |  |  | $             | 5,100 |            |               | $ | 6,679 |  |  | $ | 3,163 | 
|December 31, 2003 |                       |                |   |       |            |  |   |             |  |  |               |       |            |               |   |       |  |  |   |      
|                  | Receivable allowances |                | $ | 2,876 |            |  | $ | 627         |  |  | $             | 4,990 |            |               | $ | 5,592 |  |  | $ | 2,901 | 






|    |                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------
|(1) | Deductions taken by customers for prompt payment and freight
    discounts. Includes accounts written off net of recoveries.
|   
|(2) | Amounts netted against sales.                                                                                               



58



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Exhibits


|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | -- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|        | 3  | .1                      |  | Articles of Incorporation+                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 3  | .2                      |  | Restated Bylaws as amended through July 27, 2000++                                                                                                                                                                                                                                                                                                                                                            
|       
|        | 3  | .3                      |  | Amendment to Articles of Incorporation filed on January 12,
    1988+                                                                                                                                                                                                                                                                                                                                         
|       
|        | 3  | .4                      |  | Amendment to Articles of Incorporation filed on May 12,
    1999+                                                                                                                                                                                                                                                                                                                                             
|       
|        | 3  | .5                      |  | Amendment to Articles of Incorporation filed on May 17,
    1999+                                                                                                                                                                                                                                                                                                                                             
|       
|        | 3  | .7                      |  | Amendment to Articles of Incorporation filed on July 1,
    1999+                                                                                                                                                                                                                                                                                                                                             
|       
|        | 4  | .1                      |  | Conformed Copy of Indenture dated as of June 10, 2004
    between Rockford Corporation and BNY Western Trust Company###                                                                                                                                                                                                                                                                                       
|       
|        | 4  | .2                      |  | Form of 4.5% Convertible Senior Subordinated Secured
    Note Due 2009###                                                                                                                                                                                                                                                                                                                                     
|       
|        | 4  | .3                      |  | Form of Warrant to Purchase Common Stock###                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 4  | .4                      |  | Conformed Copy of Registration Rights Agreement dated as of
    June 10, 2004 by and among Rockford Corporation, Piper
    Jaffray & Co. and the Buyers as defined therein###                                                                                                                                                                                                                                 
|       
|        | 4  | .5                      |  | Conformed Copy of Warrant Agent Agreement dated as of
    June 10, 2004 between Rockford Corporation and BNY Western
    Trust Company###                                                                                                                                                                                                                                                                     
|       
|        | 4  | .6                      |  | Conformed Copy of Security Agreement dated as of June 10,
    2004 among Rockford Corporation, Audio Innovations, Inc. and BNY
    Western Trust Company###                                                                                                                                                                                                                                                   
|       
|        | 4  | .7                      |  | Conformed Copy of Intercreditor Agreement dated as of
    June 10, 2004 by and among Congress Financial Corporation
    (Western), BNY Western Trust Company, Rockford Corporation and
    Audio Innovations, Inc.###                                                                                                                                                                                         
|       
|        | 4  | .8                      |  | Conformed Copy of Global Amendment to Notes, Warrants,
    Indenture, Security Agreement, Warrant Agent Agreement and
    Registration Rights Agreement and Waiver of Event of Default
    dated as of November 12, 2004 by and among Rockford
    Corporation, Audio Innovations, Inc., BNY Western Trust Company
    and the persons listed on the Schedule of Holders attached
    thereto as Exhibit A####
|       
|        | 4  | .9                      |  | Conformed Copy of Amendment to Warrants, Warrant Agent Agreement
    and Registration Rights Agreement dated as of November 12,
    2004, by and among Rockford Corporation, BNY Western Trust
    Company and Piper Jaffray & Co####                                                                                                                                                                         
|       
|        | 10 | .1                      |  | 1994 Stock Option Plan*+                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10 | .2                      |  | 1997 Stock Option Plan*+                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10 | .3                      |  | 1999 Employee Stock Purchase Plan as amended and restated*+                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .4                      |  | Rockford Corporation 2005 Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .8                      |  | Form of Dealership Agreements+                                                                                                                                                                                                                                                                                                                                                                                
|       
|        | 10 | .14                     |  | Employee 401(k) Deferred Compensation Plan and amendments
    thereto*+                                                                                                                                                                                                                                                                                                                                       
|       
|        | 10 | .35                     |  | Form of Indemnification Agreement*+                                                                                                                                                                                                                                                                                                                                                                           
|       
|        | 10 | .35.1                   |  | Schedule for Indemnification Agreement*+                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10 | .48                     |  | 2002 Stock Option Plan*+++                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 10 | .54                     |  | Lease Agreement between Robert Grooters Development Company and
    Rockford Corporation#                                                                                                                                                                                                                                                                                                                     
|       
|        | 10 | .55                     |  | Warehouse Storage & Logistics Agreement between Titan
    Logistics, Inc. and Audio Innovations, Inc.#                                                                                                                                                                                                                                                                                                        
|       
|        | 10 | .56                     |  | Multi-tenant Industrial Net Lease between Calwest Industrial
    Holdings, LLC and Rockford Corporation, dated July 16, 2003#                                                                                                                                                                                                                                                                                 
|       
|        | 10 | .57                     |  | Supplier Agreement between Wal-Mart Stores, Inc. and Rockford
    Corporation, effective January 23, 2003#                                                                                                                                                                                                                                                                                                    
|        | 10 | .58                     |  | Direct Imports Supplier Agreement between Wal-Mart Stores, Inc.
    and Rockford Corporation, dated March 6, 2003#                                                                                                                                                                                                                                                                                            
|        | 10 | .59                     |  | Commercial Lease Agreements between David and Yvonne Cunningham
    and Rockford Corporation, as amended#                                                                                                                                                                                                                                                                                                     
|        | 10 | .60                     |  | Commercial Lease Agreement between William Basore and Rockford
    Corporation, as amended#                                                                                                                                                                                                                                                                                                                   
|        | 10 | .62                     |  | Loan and Security Agreement among Rockford Corporation, Audio
    Innovations, Inc., Congress Financial Corporation (Western), and
    various Financial Institutions, dated March 29, 2004##                                                                                                                                                                                                                 

59



---



##### Table of Contents



|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                  
|------- | -- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|        | 10 | .62.1                   |  | First Amendment to Loan and Security Agreement and Conditional
    Default Waiver among Congress Financial Corporation (Western),
    as a lender and as administrative and collateral agent for the
    lenders party to the Loan Agreement, Rockford Corporation, and
    Audio Innovations, Inc., dated as of June 10, 2004***
|        | 10 | .62.2                   |  | Second Amendment to Loan and Security Agreement among Congress
    Financial Corporation (Western) as a lender and as
    administrative and collateral agent for the lenders party to the
    Loan Agreement, Rockford Corporation and Audio Innovations,
    Inc., dated as of December 30, 2004***                            
|        | 10 | .63                     |  | Industrial Lease Agreement between Jerome A. and/or Cathy E.
    Reynolds and Rockford Corporation, dated as of May 1,
    2003***                                                                                                                                                                                               
|        | 10 | .64                     |  | Stock Purchase Agreement among SimpleDevices, Inc., the
    stockholders of SimpleDevices, Inc. and Universal Electronics
    Inc., dated as of October 1, 2004***                                                                                                                                                               
|        | 10 | .65                     |  | Agreement among Tobias Wahl, in his capacity as insolvency
    trustee of MB Quart GmbH, Rockford Corporation and Rockford
    Europe Vertriebs GmbH, dated as of March 11, 2005***                                                                                                                                              
|        | 10 | .66                     |  | Securities Purchase Agreement dated as of June 10, 2004
    between Rockford Corporation and the Buyers as defined
    therein#####                                                                                                                                                                                              
|        | 10 | .67                     |  | Third Amendment to Loan and Security Agreement, dated
    August 31, 2005, among Rockford, Rockfords wholly
    owned subsidiary Audio Innovations, Inc. (AII), and
    Wachovia Capital Finance Corporation (Western).**                                                                                                     
|        | 10 | .68                     |  | Asset Purchase Agreement between Rockford Corporation and NHT,
    Inc., effective as of October 18, 2005 and relating to the
    sale of the assets of Rockfords NHT business.**                                                                                                                                               
|        | 10 | .69                     |  | Assignment between Rockford and Maxxsonics Europe GmbH relating
    to the assignment of the MB Quart brand rights in North America
    to Maxxsonics.**                                                                                                                                                                         
|        | 10 | .70                     |  | Fourth amendment to Loan and Security Agreement and Consent,
    dated March 21, 2006, among Rockford, Rockfords
    wholly owned subsidiary Audio Innovations, Inc.
    (AII), and Wachovia Capital Finance Corporation
    (Western).                                                                                       
|        | 21 |                         |  | List of Subsidiaries of Rockford Corporation                                                                                                                                                                                                                                                                                     
|        | 23 | .1                      |  | Consent of Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                         
|        | 31 | .1                      |  | Certification pursuant to Exchange Act Rules 13a-14(a) and
    15d-14(a), as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 for W. Gary Suttle                                                                                                                                                            
|        | 31 | .2                      |  | Certification pursuant to Exchange Act Rules 13a-14(a) and
    15d-14(a), as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 for Richard G. Vasek                                                                                                                                                          
|        | 32 |                         |  | Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002                                                                                                                                                                                                   






|      |  |                                                                                                                                     
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------
|*     |  | Management contract or compensatory plan or arrangement                                                                             
|     
|+     |  | Previously filed with registration statement effective
    April 19, 2000 and/or amendments.                                        
|     
|++    |  | Previously filed on August 11, 2000 with Rockfords
    Quarterly Report on
    Form 10-Q for the
    quarter ended June 30, 2000.  
|     
|+++   |  | Previously filed on March 29, 2002 with Rockfords
    Annual Report on
    Form 10-K for the
    year ended December 30, 2001.     
|     
|#     |  | Previously filed on March 30, 2004 with Rockfords
    Annual Report on
    Form 10-K for the
    year ended December 30, 2003.     
|     
|##    |  | Previously filed on May 17, 2004 with Rockfords
    Quarterly Report on
    Form 10-Q for the
    quarter ended March 31, 2004.    
|     
|###   |  | Previously filed on June 15, 2004 with Rockfords
    Current Report on
    Form 8-K.                                               
|     
|####  |  | Previously filed on November 15, 2004 with Rockfords
    Current Report on
    Form 8-K.                                           
|     
|##### |  | Previously filed on June 15, 2004 as Exhibit 10.1 with
    Rockfords Current Report on
    Form 8-K.                               
|     
|**    |  | Previously filed on November 14, 2005 with Rockfords
    quarterly report on Form 10Q for the quarter ended
    September 30, 2005.
|     
|***   |  | Previously filed on April 15, 2005 with Rockfords
    Annual Report on Form 10-K for the year ended
    December 31, 2004.         

60



---



##### Table of Contents






SIGNATURES






| |                     
| | --------------------
| | ROCKFORD CORPORATION



| |     |                   
| | --- | ------------------
| | By: | /s/ W. GARY SUTTLE

| | 
| | 
| | 



| |                                      
| | -------------------------------------
| | W. Gary Suttle                       
| | President and Chief Executive Officer



|                                         |  |                                                                                                        |  |                |  | 
|---------------------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | -------------- |  | 
|Name                                     |  | Title                                                                                                  |  | Date          
|                                         |  |                                                                                                        |  |               
|                                        
|/s/ W. GARY SUTTLEW. Gary Suttle         |  | President, Chief Executive Officer and
    Director (Principal Executive Officer)                      |  | March 27, 2006
|                                        
|/s/ RICHARD G. VASEKRichard G. Vasek     |  | Vice President of Finance and Chief
    Financial Officer, Secretary (Principal
    Financial Officer) |  | March 27, 2006
|                                        
|/s/ MARK BARRIEREMark Barriere           |  | Corporate Controller (Principal Accounting Officer)                                                    |  | March 27, 2006
|                                        
|/s/ JERRY E. GOLDRESSJerry E. Goldress   |  | Director                                                                                               |  | March 27, 2006
|                                        
|/s/ TIMOTHY C. BARTOLTimothy C. Bartol   |  | Director                                                                                               |  | March 27, 2006
|                                        
|/s/ NICHOLAS G. BARTOLNicholas G. Bartol |  | Director                                                                                               |  | March 27, 2006
|                                        
|/s/ RALPH B. GODFREYRalph B. Godfrey     |  | Director                                                                                               |  | March 27, 2006
|                                        
|/s/ JOHN P. LLOYDJohn P. Lloyd           |  | Director                                                                                               |  | March 27, 2006

61



---



##### Table of Contents



EXHIBIT INDEX


|        |         |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | ------- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                        
|Number  |         | Description of Document
|        |         |                        
|        | 3.1     |                         |  | Articles of Incorporation+                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 3.2     |                         |  | Restated Bylaws as amended through July 27, 2000++                                                                                                                                                                                                                                                                                                                                                            
|       
|        | 3.3     |                         |  | Amendment to Articles of Incorporation filed on January 12,
    1988+                                                                                                                                                                                                                                                                                                                                         
|       
|        | 3.4     |                         |  | Amendment to Articles of Incorporation filed on May 12,
    1999+                                                                                                                                                                                                                                                                                                                                             
|       
|        | 3.5     |                         |  | Amendment to Articles of Incorporation filed on May 17,
    1999+                                                                                                                                                                                                                                                                                                                                             
|       
|        | 3.7     |                         |  | Amendment to Articles of Incorporation filed on July 1,
    1999+                                                                                                                                                                                                                                                                                                                                             
|       
|        | 4.1     |                         |  | Conformed Copy of Indenture dated as of June 10, 2004
    between Rockford Corporation and BNY Western Trust Company###                                                                                                                                                                                                                                                                                       
|       
|        | 4.2     |                         |  | Form of 4.5% Convertible Senior Subordinated Secured
    Note Due 2009###                                                                                                                                                                                                                                                                                                                                     
|       
|        | 4.3     |                         |  | Form of Warrant to Purchase Common Stock###                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 4.4     |                         |  | Conformed Copy of Registration Rights Agreement dated as of
    June 10, 2004 by and among Rockford Corporation, Piper
    Jaffray & Co. and the Buyers as defined therein###                                                                                                                                                                                                                                 
|       
|        | 4.5     |                         |  | Conformed Copy of Warrant Agent Agreement dated as of
    June 10, 2004 between Rockford Corporation and BNY Western
    Trust Company###                                                                                                                                                                                                                                                                     
|       
|        | 4.6     |                         |  | Conformed Copy of Security Agreement dated as of June 10,
    2004 among Rockford Corporation, Audio Innovations, Inc. and BNY
    Western Trust Company###                                                                                                                                                                                                                                                   
|       
|        | 4.7     |                         |  | Conformed Copy of Intercreditor Agreement dated as of
    June 10, 2004 by and among Congress Financial Corporation
    (Western), BNY Western Trust Company, Rockford Corporation and
    Audio Innovations, Inc.###                                                                                                                                                                                         
|       
|        | 4.8     |                         |  | Conformed Copy of Global Amendment to Notes, Warrants,
    Indenture, Security Agreement, Warrant Agent Agreement and
    Registration Rights Agreement and Waiver of Event of Default
    dated as of November 12, 2004 by and among Rockford
    Corporation, Audio Innovations, Inc., BNY Western Trust Company
    and the persons listed on the Schedule of Holders attached
    thereto as Exhibit A####
|       
|        | 4.9     |                         |  | Conformed Copy of Amendment to Warrants, Warrant Agent Agreement
    and Registration Rights Agreement dated as of November 12,
    2004, by and among Rockford Corporation, BNY Western Trust
    Company and Piper Jaffray & Co####                                                                                                                                                                         
|       
|        | 10.1    |                         |  | 1994 Stock Option Plan*+                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10.2    |                         |  | 1997 Stock Option Plan*+                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10.3    |                         |  | 1999 Employee Stock Purchase Plan as amended and restated*+                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10.4    |                         |  | Rockford Corporation 2005 Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10.8    |                         |  | Form of Dealership Agreements+                                                                                                                                                                                                                                                                                                                                                                                
|       
|        | 10.14   |                         |  | Employee 401(k) Deferred Compensation Plan and amendments
    thereto*+                                                                                                                                                                                                                                                                                                                                       
|       
|        | 10.35   |                         |  | Form of Indemnification Agreement*+                                                                                                                                                                                                                                                                                                                                                                           
|       
|        | 10.35.1 |                         |  | Schedule for Indemnification Agreement*+                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10.48   |                         |  | 2002 Stock Option Plan*+++                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 10.54   |                         |  | Lease Agreement between Robert Grooters Development Company and
    Rockford Corporation#                                                                                                                                                                                                                                                                                                                     
|       
|        | 10.55   |                         |  | Warehouse Storage & Logistics Agreement between Titan
    Logistics, Inc. and Audio Innovations, Inc.#                                                                                                                                                                                                                                                                                                        
|       
|        | 10.56   |                         |  | Multi-tenant Industrial Net Lease between Calwest Industrial
    Holdings, LLC and Rockford Corporation, dated July 16, 2003#                                                                                                                                                                                                                                                                                 
|       
|        | 10.57   |                         |  | Supplier Agreement between Wal-Mart Stores, Inc. and Rockford
    Corporation, effective January 23, 2003#                                                                                                                                                                                                                                                                                                    
|       
|        | 10.58   |                         |  | Direct Imports Supplier Agreement between Wal-Mart Stores, Inc.
    and Rockford Corporation, dated March 6, 2003#                                                                                                                                                                                                                                                                                            
|       
|        | 10.59   |                         |  | Commercial Lease Agreements between David and Yvonne Cunningham
    and Rockford Corporation, as amended#                                                                                                                                                                                                                                                                                                     
|       
|        | 10.60   |                         |  | Commercial Lease Agreement between William Basore and Rockford
    Corporation, as amended#                                                                                                                                                                                                                                                                                                                   
|       
|        | 10.62   |                         |  | Loan and Security Agreement among Rockford Corporation, Audio
    Innovations, Inc., Congress Financial Corporation (Western), and
    various Financial Institutions, dated March 29, 2004##                                                                                                                                                                                                                 



---



##### Table of Contents



|        |         |                         |  |                                                                                                                                                                                                                                                                                                                                  
|------- | ------- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                        
|Number  |         | Description of Document
|        |         |                        
|       
|        | 10.62.1 |                         |  | First Amendment to Loan and Security Agreement and Conditional
    Default Waiver among Congress Financial Corporation (Western),
    as a lender and as administrative and collateral agent for the
    lenders party to the Loan Agreement, Rockford Corporation, and
    Audio Innovations, Inc., dated as of June 10, 2004***
|       
|        | 10.62.2 |                         |  | Second Amendment to Loan and Security Agreement among Congress
    Financial Corporation (Western) as a lender and as
    administrative and collateral agent for the lenders party to the
    Loan Agreement, Rockford Corporation and Audio Innovations,
    Inc., dated as of December 30, 2004***                            
|       
|        | 10.63   |                         |  | Industrial Lease Agreement between Jerome A. and/or Cathy E.
    Reynolds and Rockford Corporation, dated as of May 1,
    2003***                                                                                                                                                                                               
|       
|        | 10.64   |                         |  | Stock Purchase Agreement among SimpleDevices, Inc., the
    stockholders of SimpleDevices, Inc. and Universal Electronics
    Inc., dated as of October 1, 2004***                                                                                                                                                               
|       
|        | 10.65   |                         |  | Agreement among Tobias Wahl, in his capacity as insolvency
    trustee of MB Quart GmbH, Rockford Corporation and Rockford
    Europe Vertriebs GmbH, dated as of March 11, 2005***                                                                                                                                              
|       
|        | 10.66   |                         |  | Securities Purchase Agreement dated as of June 10, 2004
    between Rockford Corporation and the Buyers as defined
    therein#####                                                                                                                                                                                              
|       
|        | 10.67   |                         |  | Third Amendment to Loan and Security Agreement, dated
    August 31, 2005, among Rockford, Rockfords wholly
    owned subsidiary Audio Innovations, Inc. (AII), and
    Wachovia Capital Finance Corporation (Western).**                                                                                                     
|       
|        | 10.68   |                         |  | Asset Purchase Agreement between Rockford Corporation and NHT,
    Inc., effective as of October 18, 2005 and relating to the
    sale of the assets of Rockfords NHT business.**                                                                                                                                               
|       
|        | 10.69   |                         |  | Assignment between Rockford and Maxxsonics Europe GmbH relating
    to the assignment of the MB Quart brand rights in North America
    to Maxxsonics.**                                                                                                                                                                         
|       
|        | 10.70   |                         |  | Fourth amendment to Loan and Security Agreement and Consent,
    dated March 21, 2006, among Rockford, Rockfords
    wholly owned subsidiary Audio Innovations, Inc.
    (AII), and Wachovia Capital Finance Corporation
    (Western).                                                                                       
|       
|        | 21      |                         |  | List of Subsidiaries of Rockford Corporation                                                                                                                                                                                                                                                                                     
|       
|        | 23.1    |                         |  | Consent of Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                         
|       
|        | 31.1    |                         |  | Certification pursuant to Exchange Act Rules 13a-14(a) and
    15d-14(a), as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 for W. Gary Suttle                                                                                                                                                            
|       
|        | 31.2    |                         |  | Certification pursuant to Exchange Act Rules 13a-14(a) and
    15d-14(a), as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 for Richard G. Vasek                                                                                                                                                          
|       
|        | 32      |                         |  | Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002                                                                                                                                                                                                   






|      |  |                                                                                                                                     
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------
|*     |  | Management contract or compensatory plan or arrangement                                                                             
|     
|+     |  | Previously filed with registration statement effective
    April 19, 2000 and/or amendments.                                        
|     
|++    |  | Previously filed on August 11, 2000 with Rockfords
    Quarterly Report on
    Form 10-Q for the
    quarter ended June 30, 2000.  
|     
|+++   |  | Previously filed on March 29, 2002 with Rockfords
    Annual Report on
    Form 10-K for the
    year ended December 30, 2001.     
|     
|#     |  | Previously filed on March 30, 2004 with Rockfords
    Annual Report on
    Form 10-K for the
    year ended December 30, 2003.     
|     
|##    |  | Previously filed on May 17, 2004 with Rockfords
    Quarterly Report on
    Form 10-Q for the
    quarter ended March 31, 2004.    
|     
|###   |  | Previously filed on June 15, 2004 with Rockfords
    Current Report on
    Form 8-K.                                               
|     
|####  |  | Previously filed on November 15, 2004 with Rockfords
    Current Report on
    Form 8-K.                                           
|     
|##### |  | Previously filed on June 15, 2004 as Exhibit 10.1 with
    Rockfords Current Report on
    Form 8-K.                               
|     
|**    |  | Previously filed on November 14, 2005 with Rockfords
    quarterly report on Form 10Q for the quarter ended
    September 30, 2005.
|     
|***   |  | Previously filed on April 15, 2005 with Rockfords
    Annual Report on Form 10-K for the year ended
    December 31, 2004.