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                       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, 2002

                        COMMISSION FILE NUMBER 000-30138

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

            ARIZONA                                       86-0394353
(STATE OR OTHER JURISDICTION OF                (IRS EMPLOYER IDENTIFICATION NO.)
 INCORPORATION OR ORGANIZATION)

                            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)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                              Yes [X]        No [ ]

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

     Indicate by check mark whether the Registrant is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2).

                              Yes [ ]        No [X]

     The aggregate  market value of the voting stock held by  non-affiliates  of
the registrant was $30,500,187 as of March 1, 2003.

     There were  8,747,197  shares of Common Stock issued and  outstanding as of
January 31, 2003.

     Documents   Incorporated  by  Reference:   Portions  of  the   registrant's
definitive  Proxy Statement  relating to the 2003 Annual Meeting of Stockholders
to be held on April 23, 2003,  are  incorporated  by reference  into Part III of
this report.  Exhibit 99.9 to this report is also incorporated by reference into
Part I of this report.

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                              ROCKFORD CORPORATION
                                    FORM 10-K

                                DECEMBER 31, 2002


                                TABLE OF CONTENTS

SECURITIES AND EXCHANGE COMMISSION
ITEM NUMBER AND DESCRIPTION                                                 PAGE
---------------------------                                                 ----
PART I
  Item 1.   Business ......................................................    2
  Item 2.   Properties ....................................................   17
  Item 3.   Legal Proceedings .............................................   18
  Item 4.   Submission of Matters to a Vote of Security Holders ...........   18
PART II
  Item 5.   Market for Registrant's Common Equity and Related
              Stockholder Matters, including Equity Compensation
              Plan Information ............................................   18
  Item 6.   Selected Financial Data .......................................   19
  Item 7.   Management's Discussion and Analysis of Financial Condition
              and Results of Operations ...................................   20
  Item 7A.  Quantitative and Qualitative Disclosures About Market Risk ....   28
  Item 8.   Financial Statements and Supplementary Data ...................   30
  Item 9.   Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure ....................................   51
PART III
  Item 10.  Directors and Executive Officers of the Registrant ............   51
  Item 11.  Executive Compensation ........................................   51
  Item 12.  Security Ownership of Certain Beneficial Owners and
              Management and Related Stockholder Matters                      51
  Item 13.  Certain Relationships and Related Transactions ................   51
  Item 14.  Controls and Procedures........................................   51
PART IV
  Item 15.  Exhibits, Financial Statement Schedules and Reports
              on Form 8-K .................................................   51
Signatures ................................................................   55

     The market  value of our voting stock held by  non-affiliates  shown on the
cover page is based on:

     *    Our estimate of the number of shares held by non-affiliates; and

     *    $5.89  per  share,  the price at which  our  shares  were last sold on
          December 31, 2002, as reported by The NASDAQ Stock Market.

     Our  calculation of the number of shares held by affiliates is a good faith
estimate for this Annual  Report.  Shares held by affiliates  include all shares
beneficially  owned by our executive  officers and directors.  They also include
shares  held by any  shareholder  who  beneficially  owned  more than 10% of our
shares, as disclosed in this report,  except that we have not included in shares
held by affiliates the shares that may be  beneficially  owned by Quaker Capital
Management  Corporation in light of its disclaimer of beneficial  ownership.  We
are not bound by this figure for any other purpose.

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                                     PART I

ITEM 1. BUSINESS

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   (INCLUDING   THE   POSSIBILITY   OF  FUTURE
ACQUISITIONS),  CONTINUED  ACCEPTANCE AND GROWTH OF OUR PRODUCTS,  DEPENDENCE ON
SIGNIFICANT  CUSTOMERS AND  SUPPLIERS,  AND THE ADEQUACY OF OUR  AVAILABLE  CASH
RESOURCES. OUR STATEMENTS MAY CONTAIN PROJECTIONS OF RESULTS OF OPERATIONS OR OF
FINANCIAL   CONDITION.   YOU  MAY  IDENTIFY  THESE  STATEMENTS  BY  OUR  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 OUR FORWARD-LOOKING STATEMENTS, WHICH
SPEAK ONLY AS AT THE DATE ON WHICH THEY ARE MADE.  OUR ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE DESCRIBED IN OUR FORWARD-LOOKING  STATEMENTS.  WE DISCLAIM
ANY  OBLIGATION  OR  UNDERTAKING  TO UPDATE OUR  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 AND
IN EXHIBIT 99.9,  "RISK FACTORS THAT MAY AFFECT  ROCKFORD'S  OPERATING  RESULTS,
BUSINESS  PROSPECTS AND STOCK PRICE,"  WHICH IS  INCORPORATED  IN THIS REPORT BY
THIS REFERENCE.  THE RISK FACTORS NOTED THROUGHOUT THIS REPORT,  PARTICULARLY IN
THE  DISCUSSION  IN  EXHIBIT  99.9,  AND  OTHER  RISK  FACTORS  THAT WE HAVE NOT
ANTICIPATED OR DISCUSSED, COULD CAUSE OUR ACTUAL RESULTS TO DIFFER SIGNIFICANTLY
FROM THOSE ANTICIPATED IN OUR FORWARD-LOOKING STATEMENTS.

OUR BUSINESS

     Rockford  designs,  manufactures  and distributes  high  performance  audio
systems for the mobile,  professional and home theater audio markets. Our mobile
audio products are sold primarily in the worldwide  mobile audio  aftermarket to
consumers who want to improve the audio systems in their cars, trucks, boats and
airplanes.  We market our mobile  audio  products  under the  Rockford  Fosgate,
Lightning Audio, Q-Logic and MB Quart brand names, selling products that include
digital  and  analog  amplifiers,   speakers,  source  units,  CD  changers  and
accessories.  Based on dollar sales in 2002 of all our brands,  we rank first in
U.S.  market  share for mobile  audio  amplifiers  and  second for mobile  audio
speakers.

     We sell home theater products under the MB Quart, Fosgate Audionics and NHT
brands.  We also sell  professional  audio products under the MB Quart,  NHT and
Hafler brands.  We acquired the NHT brand as a result of an  acquisition  during
the fourth  quarter of 2002.  Additionally  during the fourth quarter of 2002 we
completed   an   investment   in   SimpleDevices   Inc.,   which   licenses  its
standards-based   SimpleWare  and  SimpleMedia  Services  software  to  consumer
electronics, PC, automotive and network equipment OEMs.

     We believe our ability to deliver innovative and  technologically  advanced
products  appeals  to  our  consumers'  desires  for  distinctive,  leading-edge
products and powerful,  high quality sound.  We continue to develop new products
to capitalize  on  improvements  in digital  technology.  Our Rockford  Fosgate,
Lightning Audio,  Q-Logic, MB Quart, NHT and Fosgate Audionics products have won
numerous consumer and industry awards.

OUR BRANDS

     Our marketing and product  development  efforts are designed to enhance our
brand images and generate  increased loyalty among our consumers in each segment
and among the retailers who sell our products.  We market our products under the
following brands:

     *    ROCKFORD  FOSGATE.  We  believe  Rockford  Fosgate  is one of the most
          preferred high  performance  mobile audio brands.  Under this brand we
          offer distinctive,  leading-edge  products and powerful,  high quality
          sound.  Our Rockford  Fosgate mobile audio products are marketed under
          three primary  brand names:  (1) Punch-- the brand for the majority of

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          our amplifiers, subwoofers, speakers and source units; (2) Power-- the
          brand for our higher performing amplifiers,  subwoofers, and speakers;
          and (3) Type RF-- our highest  performing mobile audio amplifiers.  We
          sell Rockford  Fosgate  products to Nissan for installation as part of
          the  factory  installed  audio  system  for  three  models  of  Nissan
          vehicles,  the Sentra SE-R, Xterra and Frontier Crew Cab. We also sell
          Rockford Fosgate products under the Connecting Punch brand (for a full
          line of mobile  audio  installation  accessories)  and the Punch Sport
          brand (for promotional items and clothing);

     *    LIGHTNING  AUDIO.  We  acquired  Lightning  Audio in 1999  with a view
          toward  marketing a line of mobile audio  products under the Lightning
          Audio  brand.  In  addition to  accessories  (which it sold before the
          acquisition),  we now sell  amplifiers,  subwoofers and speakers under
          our Storm,  Bolt and Strike  brands.  The  products  under these three
          Lightning  Audio brands are more  moderately  priced than our Rockford
          Fosgate  products.  Also  under  the  Lightning  Audio  brand  we have
          introduced the InstallEdge.com  business-to-business brand that offers
          back shop  supplies to mobile audio  installation  shops,  custom home
          audio installers and marine outfitters;

     *    FOSGATE  AUDIONICS AND HAFLER. We distribute home theater speakers and
          electronics  under the Fosgate  Audionics  brand through  conventional
          retail  channels.  We acquired  the Fosgate  Audionics  brand from its
          creators, Jim Fosgate and Charles Wood, pioneers in the development of
          surround sound  applications  for home theater use. Our target dealers
          for this brand are specialty  audio and home theater  stores.  We also
          distribute  professional  amplifiers  and  speakers  under our  Hafler
          brand;

     *    Q-LOGIC.  Audio Innovations,  a subsidiary  acquired in 2001, 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.  These
          products complement our existing Rockford Fosgate, Lightning Audio and
          MB  Quart  products,  since  many  consumers  will  purchase  an Audio
          Innovations  product as the "box" to hold Rockford Fosgate,  Lightning
          Audio or MB Quart speakers;

     *    MB QUART.  We acquired the MB Quart  business  and assets in 2001.  MB
          Quart is located in Obrigheim,  Germany, where it develops,  engineers
          and manufactures speaker products. We sell MB Quart speakers primarily
          for the mobile audio  market,  with  strength in tweeter,  coaxial and
          component  speakers,  the  speakers  used to reproduce  mid-range  and
          higher frequency  sounds.  The MB Quart mid-range and tweeter products
          are priced even higher than our Rockford  Fosgate brand speakers,  and
          offer German engineered precision to our customers. Our MB Quart brand
          appeals to consumers  who are willing to pay a premium  price for some
          of the best mobile audio speakers on the market. In addition to mobile
          audio speakers, we also manufacture and distribute home audio speakers
          and professional headphones under our MB Quart brand;

     *    SIMPLEDEVICES.  During the fourth  quarter of 2002,  we  completed  an
          investment  in  SimpleDevices  Inc.,  which  licenses  standards-based
          SimpleWare and SimpleMedia Services software to consumer  electronics,
          PC,  automotive and network  equipment  OEMs.  Its software  enables a
          variety of  digital  devices to access a  centralized  media  database
          through a unified interface and provides automation,  synchronization,
          scheduling,  and unified  interfaces and databases  across  compatible
          devices;

     *    OMNIFI.  Using  SimpleDevices'   technology,  we  introduced  our  new
          wireless digital media transfer products under the OmniFi brand at the
          2003 Consumer  Electronics  Show.  Co-designed by Rockford Fosgate and
          SimpleDevices,  OmniFi products are digital audio receivers that use a
          PC and home  wireless  network  to deliver  digital  media to the home
          stereo or to a storage  device  in the car.  We plan to market  OmniFi
          devices both as a stand-alone brand and under our Rockford Fosgate and
          Fosgate Audionics brands; and

     *    NHT.  During the fourth quarter of 2002, we acquired the NHT (Now Hear
          This) business and assets located in Benicia,  California. NHT designs
          high  quality  loudspeakers  for  the  home  theater,  stereo,  custom
          installation and  professional  audio markets under the brand names of
          NHT, Now Hear This, NHT Pro, Evolution, Super Audio and Architectural.
          NHT's  products are positioned to sell at premium price points through

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          high-end  specialty  audio  stores  and  custom   installation  design
          showrooms.  The  products  under our NHT  brands  are more  moderately
          priced than our Fosgate Audionics and MB Quart products.

GROWTH OF OUR BRANDS

     Our goal is to design,  produce and distribute the best engineered and most
recognized and respected brands of high performance audio products in the world.
Each  element of our  strategy is intended to enhance and  reinforce  the global
brand images of Rockford Fosgate,  Lightning Audio,  Fosgate Audionics,  Hafler,
Q-Logic, MB Quart, OmniFi and NHT among consumers and retailers. Key elements of
our growth strategy are to:

     *    Continue to introduce new and technologically innovative products;

     *    Acquire,  develop and expand additional audio brands, taking advantage
          of our technology and distribution strengths;

     *    Broaden our  distribution  by entering new  distribution  channels and
          increasing penetration of our existing distribution channels;

     *    Capitalize on our worldwide  brand  recognition  to increase  sales in
          international markets; and

     *    Expand our home theater and professional audio business.

     As a result of our strong  brands and  growth  strategy,  we believe we can
grow our  business  and become a larger  participant  in the  worldwide  mobile,
professional and home theater audio markets.

OUR PRODUCTS

PERCENT OF SALES BY PRODUCT CLASS

     Our sales since 2000 were divided  among our principal  product  classes as
shown in the following table:

                                              YEAR ENDED DECEMBER 31,
                                        -----------------------------------
                                         2000          2001          2002
                                        ------        ------        ------
     Product Class:
     Amplifiers .................         43.9%         41.9%         32.4%
     Speakers ...................         35.1          32.5          36.3
     Accessories ................         14.2          15.3          18.4
     Others(1) ..................          6.8          10.3          12.9
                                        ------        ------        ------
                 Total ..........        100.0%        100.0%        100.0%
                                        ======        ======        ======

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(1)  Includes source units, enclosures,  signal processors and other products of
     which no single  product class  accounted for more than 10% of our sales in
     any of these years.

     Financial  information about geographic segments may be found at Note 13 of
the Notes to our Consolidated Financial Statements, set forth at page 46 of this
report.

MOBILE AUDIO

     We  offer  high  performance  mobile  audio  products   consisting  of  the
following:

     *    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 and are typically  not part of a standard  factory
          installed  system.  We also include  signal  processors as part of the
          amplifier category. Signal processors accept input from a source unit,
          modify the signal to enhance  performance  and  deliver  the  modified

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          signal to one or more  amplifiers.  For specialized  applications,  we
          sell  stand-alone  signal  processors  that are not integrated into an
          amplifier;

     *    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 and are often the single most important  improvement consumers
          can make to their mobile audio systems;

     *    SOURCE UNITS.  Source units are the control  center for a mobile audio
          system. Typically mounted in the dash of the car, source units provide
          input signals, including AM/FM radio and compact disc players. Most of
          our source units also have the ability to control a separate CD or MP3
          changer;

     *    ACCESSORIES.   Accessories   include  amplifier   installation   kits,
          interconnect   and   speaker   cables,   carpet  and  fabric   surface
          applications, stiffening capacitors and battery clamps; 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,
          installation adapters and replacement kick panels for improved speaker
          placement.

     Under our Rockford Fosgate brand we currently offer the following products:

     Amplifiers:    *    28 power  amplifier  models under our Punch,  Power and
                         Type RF  brands,  with  rated  power  from 75 to  1,500
                         watts,  and minimum  advertised  prices from $179.99 to
                         $1,449.99.  Our  amplifiers  include 1, 2 and 4 channel
                         alternatives, giving consumers the ability to select an
                         optimum configuration for their system;

                    *    Four  models of stand  alone  signal  processors,  with
                         minimum advertised prices from $149.99 to $399.99.  One
                         of  these   processors,   a  surround  sound  processor
                         designed  by Jim  Fosgate,  was the first  commercially
                         available  "Dolby  Pro-Logic II" surround  sound device
                         and is able to produce  surround  sound in the car from
                         any 2 channel source;

     Speakers       *    75 models of speakers  and  subwoofers  under our Punch
                         and Power brands,  with minimum  advertised prices from
                         $59.99 to $1,799.99;

     Source Units:  *    Nine   models  of  source   units  with  MP3   playback
                         compatibility,  with  minimum  advertised  prices  from
                         $199.99 to $999.99;

     Accessories:   *    Over 400  different  accessories,  including  amplifier
                         installation  kits,  interconnect  and speaker  cables,
                         carpet/fabric/surface   applications   and   stiffening
                         capacitors under our Connecting Punch brand name; and

                    *    Various  promotional  materials and clothing  under our
                         Punch Sport brand.

     Under our Lightning Audio brand we currently offer the following products:

     Amplifiers:    *    15 power  amplifier  models under our Bolt,  Strike and
                         Storm  brands,  with rated power from 60 to 2,000 watts
                         and minimum advertised prices from $99.95 to $999.95;

     Speakers:      *    46 speakers and subwoofers  under our Bolt,  Strike and
                         Storm  brands,  with  minimum  advertised  prices  from
                         $29.95 to $599.95;

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     Accessories:   *    Over    1,000    different    accessories,    including
                         interconnect and speaker cables, stiffening capacitors,
                         battery clamps and installation kits;

                    *    Various  promotional  materials and clothing  under our
                         Urban Industrial Gear brand; and

                    *    Various   back   shop   supplies,   including   vehicle
                         harnesses, power distribution adapters,  batteries, RCA
                         connectors,  wire,  wiring  accessories and fuses under
                         our InstallEdge.com brand.

     Under our Q-Logic brand we currently offer 63 speaker  enclosure models (in
a variety of colors to match standard  factory  colors) in our Q-Logic,  Q-Forms
and Q-Customs  product  lines.  These models have  suggested  retail prices from
$29.95 to $319.95 for each enclosure.

     Under our MB Quart  brand in the U.S. we sell five  mobile  speaker  lines,
including:

     *    5 models of  Q-Series  speakers,  with  suggested  retail  prices from
          $649.00 to $1,499.00 per pair;

     *    14 models of Premium Series  speakers,  with  suggested  retail prices
          from $479.00 to $829.00 per pair;

     *    17 models of Reference Series  speakers,  with suggested retail prices
          from $249.00 to $449.00 per pair;

     *    12 models of Discus Series speakers, with suggested retail prices from
          $109.00 to $399.00 per pair; and

     *    5 models of Nautic Series speakers,  specifically  designed for use in
          boats, with suggested retail prices from $249.00 to $449.00 per pair.

OEM PRODUCTS

     Nissan North America offers a Rockford Fosgate branded OEM system for three
Nissan  vehicles for model year 2003.  Rockford  Fosgate systems are standard in
Nissan's  Xterra SE and  optional  in the  Xterra  XE,  the  Frontier  Crew Cab,
Supercharged  Frontier  Crew Cab and the Sentra  SE-R.  Rockford's  OEM  systems
installed  in  these  vehicles  include  a radio/  CD  player,  speakers  and an
amplifier.  For the 2004 model year Nissan has agreed to add a Rockford  Fosgate
enclosure to the Rockford Fosgate systems available in the Sentra.

HOME THEATER

     We sell home theater products under our Fosgate Audionics, MB Quart and NHT
brands.

     Our Fosgate Audionics products include two preamp/surround  processors, two
multi-channel  amplifiers,  four passive speakers and three powered  subwoofers,
with  electronics  retail prices from $2,995.00 to $12,995.00 and speaker retail
prices from $130.00 to $699.00.

     MB Quart sells bookshelf,  tower and in-wall speakers for use in home audio
and home theater  systems,  with suggested  retail prices ranging from $99.00 to
$1,799.00 per pair.

     Under our NHT brand we sell high performance  audio component systems under
the Evolution, Super Audio and Architectural brand series.

     *    Evolution's  modular  components  function as the  building  blocks to
          create  entirely   self-customized   high  performance   multi-channel
          loudspeaker   systems.   The  Evolution  collection  consists  of  two
          satellite  monitors  with  optional  matching  pedestals,   two  tower
          loudspeaker configurations with satellite-matched bass modules and two

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          freestanding  subwoofer  models.  Listeners  can  create  over a dozen
          system  configurations to get the utmost  performance from current and
          future digital entertainment media. Suggested retail prices range from
          $900.00 for a pair of satellite monitors to $9,900 for a full surround
          sound system.

     *    SuperAudio series offers bookshelf speakers,  center channel speakers,
          and powered  subwoofers.  Suggested  retail  prices range from $300 to
          $2,750.

     *    Architectural  is the brand  name for NHT's  in-wall  speaker  systems
          designed for  installation  as part of a custom home  theater  system.
          Suggested retail prices range from $200 to $1,000.

PROFESSIONAL AUDIO

     NHT sells powered  monitors to the professional  recording  studios market.
Suggested  retail  prices range from $500.00 for a pair of monitors to $6,600.00
for a surround sound monitoring system.

     MB Quart sells  headphones  for  professional  use, with  suggested  retail
prices ranging from $150.00 to $1,944.00 per pair.

     We sell professional  audio amplifiers and speakers under the Hafler brand,
with  amplifier  suggested  retail prices  ranging from $199.00 to $2,200.00 and
speaker  suggested  retail  prices  ranging from  $625.00 to $845.00.  Recording
studios,  broadcast studios,  movie theaters,  concert facilities,  stadiums and
touring bands use our professional audio products.

AWARDS

     Our branded  products  have won  numerous  consumer  and  industry  awards,
including  Autosound  Grand Prix  awards in every year from 1987  through  2002,
EIA/CES  Innovation Awards at the Consumer  Electronics Shows in every year from
1997 through  2003 and  European  Car Audio Press  awards in 1997 and 1998.  Our
Punch Power 1100a2 power  amplifier  was awarded the Car Sound 1999 Voice of the
People award by vote of the readers of Car Sound magazine.

     At the 2003 Consumer  Electronics Show, Lightning Audio won one Innovations
Design  and  Engineering  Award  for the  Storm X2  subwoofer,  MB Quart won two
Innovations  Design and  Engineering  Awards for the Vera Series  speakers,  and
Fosgate Audionics won one Innovation Design and Engineering Award for the FAP T1
home theater  processor.  In addition,  our OmniFi  digital  audio  receiver was
awarded the Consumer Electronic Association's Best of Innovations honoree in the
mobile  electronics  product  category  and Tech  TV's  Best of CES in the auto,
marine and RV category.

     Additionally  at the Consumer  Electronics  Show, our custom  demonstration
vehicles,  the  Nissan  Frontier  in 2001 and the  Nissan  Xterra in 2002,  were
awarded the prestigious "best of show" from United Entertainment Media.

     Pro Audio Review Magazine declared our Hafler 9505  professional  amplifier
"Best Amplifier of the 1990's" during 2001. Hafler products also won awards from
Pro Audio  Review  Magazine in 1996 and 1997,  Mix Magazine in 1996 and 1998 and
Electronic Musician Magazine Editor's Choice Award in 1999, 2000 and 2001.

     NHT  has won  many  awards  including  three  CES  Innovations  Design  and
Engineering Awards in 1999, three Audio Video  International  Awards in 2001 and
the Electronic House-Product of the Year in 2002.

NEW BUSINESSES

     On December  26,  2002,  we acquired  the NHT (Now Hear This)  business and
assets located in Benicia, California from Recoton Corporation. NHT designs high
quality  loudspeakers  for the home theater,  stereo,  custom  installation  and
professional audio markets under the brand names of NHT, Now Hear This, NHT Pro,
Evolution, Super Audio and Architectural.  NHT's products are positioned to sell
at premium  price  points  through  high-end  specialty  audio stores and custom
installation  design  showrooms.  NHT is sold through an established  network of

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approximately  200  dealers  and  custom  installers.  We  plan  to use  the NHT
distribution network to sell our Fosgate Audionics and MB Quart home products.

     On October 17, 2002,  we completed the purchase of 51% of the fully diluted
common stock of SimpleDevices, Inc, which is 76% of the outstanding common stock
as at December 31, 2002.  SimpleDevices is a software company that has developed
connected digital device applications for home, automobile and portable devices.
Its  standards-based  SimpleWare and  SimpleMedia  Services  software  leverages
industry standards,  such as 802.11b and Universal Plug and Play, to extend home
networking technology beyond the PC or home gateway to a wide variety of digital
device applications. Its software enables a variety of digital devices to access
a  centralized   media  database  through  a  unified   interface  and  provides
automation,  synchronization,  scheduling,  and unified interfaces and databases
across  compatible  devices.  Our new wireless  digital media  transfer  system,
OmniFi,  was introduced at the 2003 Consumer  Electronics  Show.  Co-designed by
Rockford Fosgate and SimpleDevices,  OmniFi products are digital audio receivers
that use a PC and home  wireless  network to deliver  digital  media to the home
stereo or to a storage device in the car.

     In August,  2002, we signed a licensing  agreement with  Universal  Studios
Consumer  Products  Group  that will  allow us to use the  Universal  trademarks
relating  to the  movie,  THE  FAST AND THE  FURIOUS,  and  Universal  Pictures'
upcoming sequel THE FAST AND THE FURIOUS 2, in connection with selected Rockford
Fosgate and  Lightning  Audio  products.  In addition,  we have agreed to permit
Universal to use our Rockford  Fosgate and Lightning Audio products in cars that
are expected to be featured in THE FAST AND THE FURIOUS 2, scheduled for release
in Summer 2003.

     During  2001,  we  entered  into an  agreement  to  license  the use of our
Rockford Fosgate brand and our proprietary "Punch" bass equalization  circuit to
Milwaukee Electric Tool Corporation.  Milwaukee is one of the leading sellers in
the U.S. of professional power tools. Our license agreement authorizes Milwaukee
to produce a portable  radio boom box,  capable of being  powered by the battery
packs that also power Milwaukee's  professional  tools. The product carries both
the Milwaukee and the Rockford Fosgate brands. Milwaukee distributes the product
through its  distribution  network,  which  sells  portable  electric  tools and
accessories   through  retail  stores  that  sell  tools  to  professional   and
non-professional  users.  We do not bear  any of the  costs  of  manufacture  or
distribution,  but receive a small  royalty for each unit sold.  We believe this
product offers professional  users,  especially  construction  workers, a higher
quality mobile audio experience even in environments where they are limited to a
simple boom box. We started to generate  revenues  from this  agreement in 2002.
Sales of this portable radio were approximately 155,000 units in 2002.

ENGINEERING AND DEVELOPMENT

     Research and development is a primary focus of our business  because of the
heavy  demand by our core  consumers  for  leading-edge  products.  We focus our
research and development  efforts  primarily on enhancing  current  products and
developing new products.  Our  expenditures  for research and  development  were
approximately  $2.8  million,  $3.3 million and $6.0  million in 2000,  2001 and
2002, respectively.

     As at December 31, 2002, our research and development  staff (including the
recently  acquired  SimpleDevices and NHT staff as well as our other businesses)
consisted of approximately 35 design engineers,  as well as other support staff,
dedicated to the  development  of our technology  platform for future  products.
They coordinate their efforts with:

     *    Our  sales  group  to  identify   features   consistent   with  market
          requirements and our brand image;

     *    Our   manufacturing   staff  to  develop  and  build   products   more
          efficiently;

     *    Our product  support  staff to  identify  weaknesses  in our  existing
          products and to help re-design them; and

     *    Our  customers,  both at the retailer and consumer  level,  to help us
          better  understand  their needs and preferences  and incorporate  them
          into our products

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<PAGE>
     As  a  result  of  these  efforts,  we  have  reduced  product  development
time-to-market  from up to 24 months to an  average  of six to nine  months.  By
contrast,  we believe that most of our competitors  average over 12 months.  Our
objective  is to  introduce  new products or  re-engineer  over  one-half of our
existing product line annually. In 2002, approximately 47% of our net sales were
generated by sales of new or re-engineered products.

     Part of our research and development  efforts seek to create a reserve base
of technologies  and innovations  that are available to our engineers for use in
the product development  process. As a result, we believe we can readily respond
to changing  demand and  effectively  execute our marketing plans by introducing
new  products  and by adding  features  to our  existing  products.  Examples of
product  innovations  that have been or are being  developed  from this  reserve
technology base include:

     *    Software  technology  to allow  consumers to schedule and  synchronize
          wireless media delivery to mobile and home audio devices;

     *    Powered  speakers,  which are  speakers  that  include  an  integrated
          amplifier;

     *    Remote bass and speaker controls;

     *    Active  crossovers  that allow  consumers to tailor our  amplifiers to
          their systems' needs;

     *    Digital amplifiers that incorporate a more efficient circuit design;

     *    Surround sound processors for the car and home;

     *    Materials improvements that increase the durability and performance of
          our products;

     *    Digital signal processing technology;

     *    Speaker enclosures; and

     *    Innovative speaker component materials.

SALES, MARKETING AND DISTRIBUTION

     Our sales and  marketing  efforts  are  designed  to enhance  our brands by
projecting  an image that appeals to consumers who  appreciate  high quality and
value. We believe the combination of our hard-hitting advertising campaigns with
our rugged and durable product offerings has created  worldwide  recognition and
loyalty among our core consumers.  Our products are promoted with advertisements
in mobile  audio  magazines,  newspapers  and other  publications  as well as on
television,  radio and the Internet. We participate in trade and consumer shows,
support users of our products in auto sound  competitions and supply promotional
prizes and giveaways.

     Our primary sales and marketing activities are listed below:

     *    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 our potential
          consumers;

     *    Training  dealer  sales and  installation  personnel  at our  Rockford
          Technical Training Institute;

     *    Participating in related professional and consumer trade shows; and

     *    Maintaining  product and brand information for consumers and retailers
          on our web sites.

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<PAGE>
     We consider our advertising to be hard-hitting  because our  advertisements
are intense,  frequent and intended to excite our core  consumer.  We use visual
advertisements  and  booming  sound  bites in our audio  campaign to promote the
power, quality and intensity of our products.

     Our  corporate  web site,  located at  WWW.ROCKFORDCORP.COM,  and our brand
sites  WWW.ROCKFORDFOSGATE.COM,   WWW.LIGHTNINGAUDIO.COM,   WWW.INSTALLEDGE.COM,
WWW.FOSGATEAUDIONICS.COM,          WWW.AIRESEARCH.COM,          WWW.MBQUART.COM,
WWW.SIMPLEDEVICES.COM,  WWW.HAFLER.COM and  WWW.NHTHIFI.COM  offer consumers and
retailers reliable and comprehensive information about our product offerings and
consumer  services.  Because our core mobile audio  consumers are among the most
enthusiastic users of the Internet, we believe expanded Internet-based marketing
will broaden our consumer  reach,  enhance our brand image and direct  potential
consumers  to our  retailers.  Consumers  can  currently  purchase  Punch  Sport
promotional materials and clothing from our corporate web site.

MOBILE AUDIO DISTRIBUTION

     DOMESTIC  DISTRIBUTION.  We currently sell our mobile audio products in the
U.S. to  approximately  2,450  independent  retail  stores.  These 2,450  stores
include  independent  specialty  dealers and audio/video  retailers,  who we may
appoint  to sell some or all of our  mobile  audio  brands.  These  stores  also
include  consumer  electronics  chains and catalog  merchants.  We sell MB Quart
products only in independent specialty dealers and audio/video retailers.

     We  sell  directly  to most  of our  authorized  retail  dealers  using  44
independent  sales  representative  firms  who  identify,  recruit  and  sell to
retailers in their regions.  We have entered into one-year  agreements with each
of these  sales  representative  firms  under  which we  appoint  them our sales
representative  for a specific  territory  and specific  products  under varying
terms. We pay our independent sales  representatives  commissions based on sales
of our products to independent retailers in their territory.  Commission amounts
range from 1% to 9.5% of sales  depending  upon (1)  product  category,  (2) the
retailer  involved  in the  purchase  and (3)  achievement  of  quarterly  sales
targets.

     We also permit some of our Rockford Fosgate brand sales  representatives to
stock a small  quantity of our Rockford  Fosgate  products for resale to smaller
dealers.  These  smaller  dealers  are  generally  located  in rural  areas,  or
otherwise have very small volume potential,  so that it is not economical for us
to  appoint  them as  direct  retailers.  They  nevertheless  provide  a  useful
extension  of our  distribution  system into more remote  regions.  Our stocking
representative  program allows us to serve these dealers  efficiently.  In a few
instances  where a sales  representative  is not  available,  we have  appointed
independent distributors to handle smaller dealers in a particular territory.

     We support our  independent  sales  representative  firms using an in-house
staff of 8 U.S. regional managers and 8 sales support staff members.

     INTERNATIONAL DISTRIBUTION.  We currently sell our mobile audio products in
76 other countries using  independent  distributors  and sales  representatives.
Independent  distributors purchase products from us and resell them to retailers
in  their   designated   territories.   They  assume  inventory  risk  and  take
responsibility for warranty service in their territory.

     In Canada,  Germany,  Austria,  Switzerland  and Italy we sell our Rockford
Fosgate,  Lightning  Audio,  and MB Quart  products  through  independent  sales
representatives. Independent sales representatives do not purchase products from
us, but instead sell products on our behalf. We remain responsible for inventory
until an independent  retailer  purchases it, we are  responsible for collecting
accounts receivable from our retailers and we retain responsibility for warranty
service.  We are generally  able to increase our  penetration  in these markets,
compared  to  an  independent   distribution   model,   because  commissions  to
independent  sales  representatives  are  less  than  the  distributor  mark-up,
allowing  us to  reduce  prices  to the  consumer  while we keep a higher  gross
margin.  Because  relatively high sales volumes are needed to justify the use of
independent  sales  representatives,  we  anticipate  continuing  to  distribute
through distributors in smaller territories.

     We support our international  distributors and sales  representatives using
an in-house staff of four international sales managers.

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<PAGE>
HOME THEATER AND PROFESSIONAL AUDIO DISTRIBUTION

     We distribute  NHT,  Fosgate  Audionics and MB Quart home theater  products
through a mix of conventional  independent retail stores and custom installation
firms.   We  sell  to  these   customers   using  a  network  of   manufacturers
representatives. Our dealers for the Fosgate Audionics brand are specialty audio
and  home  theater  dealers,  particularly  those  who  follow  a  Home  Theater
Specialists  of America  buying  profile.  We sell NHT  through  an  established
network of approximately 200 dealers and believe we will be able to sell Fosgate
Audionics and MB Quart home theater products through many of these same stores.

     In the U.S., we sell NHT and Hafler  professional  audio products primarily
through sales  representatives,  who sell to small specialty musical  instrument
and pro audio dealers and to larger retail chains, such as Guitar Center. Larger
recording  studios,  sports arenas and large  commercial  installations  tend to
bypass  traditional  retail  channels and  purchase  from  contractors  or audio
engineers  responsible  for the  design of  systems  for these  large  projects.
Similarly,  retail stores and home  contractors  often sell  professional  audio
equipment for installation in larger home-theater applications.

COMPETITION

     Our markets are very competitive,  highly fragmented,  rapidly changing and
characterized  by price  competition  and, in the mobile and home theater  audio
markets,  rapid product  obsolescence.  We compete in the mobile audio market on
the  basis  of  brand  recognition,   innovation  and  technology,  quality  and
reliability,  breadth  of product  line,  distribution  capabilities  and price.
Competition comes predominantly from two categories:

     *    SPECIALTY  AUDIO  SUPPLIERS.  These  companies  generally  compete  in
          specific  market  niches  on the  basis of brand  image,  quality  and
          technology.  However,  many of these  companies are  undercapitalized,
          lack the buying power necessary to develop cost  efficiencies and lack
          the  infrastructure to efficiently  source raw materials,  manufacture
          components and systems and distribute finished products; and

     *    LARGE CONSUMER  ELECTRONICS  SUPPLIERS.  These  companies offer mobile
          audio products as part of their broad consumer electronics lines. They
          have  efficient  operations but are volume driven and generally do not
          respond as quickly to  changing  consumer  preferences,  as do smaller
          specialty  suppliers.  Consumer  perception  of the  quality  of their
          products  is often not as high,  frequently  resulting  in lower brand
          image and profit margins.  These companies tend to focus on the larger
          market  segments,  such as source units, and generally do not focus on
          the smaller market segments, such as amplifiers and subwoofers.

     Some  of our  competitors  have  greater  financial,  technical  and  other
resources than we do and many seek to offer lower prices on competing  products.
To remain competitive,  we believe we must regularly introduce new products, add
performance  features to existing products and limit increases in prices or even
reduce  prices.  Our principal  competitors  within our product lines are listed
below:

     *    MOBILE AUDIO AMPLIFIERS:  Alpine,  Jensen, JL Audio, Kenwood,  Kicker,
          MTX, Pioneer and Sony;

     *    MOBILE AUDIO SPEAKERS: Boston Acoustics,  Infinity,  Jensen, JL Audio,
          Kenwood, Kicker, MTX, Pioneer and Sony;

     *    MOBILE  AUDIO  SOURCE  UNITS:   Alpine,   Fujitsu  Eclipse,   Kenwood,
          Panasonic, Pioneer and Sony;

     *    MOBILE AUDIO ACCESSORIES: Monster Cable, Phoenix Gold and Stinger;

     *    PROFESSIONAL  AUDIO  AMPLIFIERS AND SPEAKERS:  Crest,  Crown,  Eastern
          Acoustic Works, Mackie Designs, Peavy, QSC, KRK and Tannoy; and

     *    HOME  THEATER:   Adcom,   Audio  Products  Int'l,  B&W,  Bose,  Boston
          Acoustics, Harman Kardon, Infinity, JBL, Klipsh, Paradign, Polk Audio,
          and Rotel.

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<PAGE>
     According to NPD Intelect  Market  Tracking,  based on U.S. dollar sales in
2002 of all our brands, we rank:

     *    First among our competitors in mobile audio amplifiers; and

     *    Second among our competitors in mobile audio speakers.

     The addition of our NHT brand and introduction of new products under our MB
Quart and Fosgate  Audionics  brands  should  increase our market share for home
theater  products,  but our current market share is very small. Our professional
amplifiers  and playback  monitors have received  broad  acceptance in recording
studios  and  postproduction   houses,   however  market  share  information  is
unavailable in this category.

     We also compete indirectly with automobile  manufacturers,  who may improve
the quality of original equipment sound systems, reducing demand for aftermarket
mobile  audio  products.  They may also change the designs of their cars to make
installation of our products more difficult or expensive.

     SimpleDevices  is  competing in a brand new market that has  attracted  the
attention of many potential  competitors.  A number of companies have introduced
software and hardware  products that seek to play audio or video downloaded from
the Internet  through  consumers'  home audio  systems.  Because this is a newly
emerging market, it is difficult to identify key competitors for  SimpleDevices'
products;  however,  it is  clear  that  there  will be a  number  of  competing
solutions that will vie for widespread consumer acceptance.  Although we believe
SimpleDevices' products offer a number of significant advantages compared to the
alternatives  announced  to date,  it is too  early to say  confidently  whether
consumers will prefer SimpleDevices' technology over the alternatives.

MANUFACTURING

     We believe our efficient production, sourcing and distribution capabilities
make us one of the preferred suppliers in the mobile audio aftermarket industry.

     We manufacture amplifiers, signal processors and various accessories at our
facilities in Tempe, Arizona, and mid-range speakers,  woofers and subwoofers at
our facility in Grand Rapids,  Michigan.  We manufacture  Q-Logic  enclosure and
kick panel products at our facilities in  Stillwater,  Oklahoma.  We manufacture
most of our MB Quart  products,  and have  begun to  manufacture  some  Rockford
Fosgate speakers, at our facility in Obrigheim, Germany.

     Hyundai  Electronics  supplies  all of the source units we resell under the
Rockford Fosgate brand. Hyundai manufactures source units in accordance with our
specifications.  We develop  these units  jointly with Hyundai and then purchase
them from Hyundai on an exclusive basis. Our agreement with Hyundai obligates us
to place  monthly  purchase  orders with Hyundai and is subject to  cancellation
charges for partially or totally  cancelled  orders.  Our agreement with Hyundai
commenced  April 8, 1999,  and expires  July 31, 2003.  After July 31, 2003,  we
anticipate continuing to purchase source units from Hyundai, which has indicated
a willingness to continue supply source units to us. For the year ended December
31, 2002, we paid Hyundai approximately $3.4 million under the agreement.  Other
third parties  manufacture our full-range  speakers,  home theater  products and
various components according to our design specifications.

     Most  of our  products  use  standard  parts  and  components  that  can be
purchased  from multiple  sources.  In a few instances,  however,  components or
products are sourced from one or a small number of suppliers to leverage dollars
and  volumes.  We also  relied  on Avnet,  Inc.  for  approximately  8.4% of our
inventory  purchases during 2002. We believe  alternative  sources are available
for all of our products.  While we do not have  guaranteed  supply  arrangements
with many of our  suppliers,  we have never  experienced  an inability to obtain
necessary  components or other raw  materials.  We believe that our sourcing and
supply of components and other raw materials are adequate for our needs.

     We use cellular manufacturing  processes and just-in-time supply management
in all our manufacturing facilities. Cellular manufacturing provides flexibility
and efficiency because any cell can manufacture any product, depending on market
demand.  Lot sizes are small and  feedback  from the  manufacturing  process  is
quick.

                                       12
<PAGE>
     We use advanced surface mount technology in our electronics  manufacturing.
Surface  mount  technology  is accurate,  increases  the density of circuits and
reduces  labor  content.  Our flexible  manufacturing  and in-house  engineering
capabilities are a key part of our efforts to shorten lead times from concept to
production,  respond rapidly to changing demand and reduce our raw materials and
finished  goods  inventory.   Each  of  our  facilities  focuses  on  continuous
improvement,  with quality control embedded in the  manufacturing  process.  The
result has been improved flexibility,  increased efficiency and greatly improved
cycle times.

INTELLECTUAL PROPERTY

     We  rely  upon  a  combination   of  trade  secret  and   trademark   laws,
non-disclosure agreements and patents to protect our proprietary rights. We have
registered many trademarks and trade names both in the U.S. and  internationally
and are committed to maintaining and protecting  them. We believe our trademarks
and trade names are material to our business and are well known among  consumers
in our principal markets.  Our principal trademarks and trade names include, but
are not limited to:

        ROCKFORD FOSGATE(R)                         LIGHTNING AUDIO(R)
        *  Our "Diamond R" logo(R)                  *  Strike(TM)
        *  The Punch(R)                             *  Storm(TM)
        *  Type RF(TM)                              *  Bolt(TM)
                                                    *  Dead Skin(TM)

        AUDIO INNOVATIONS(TM)                       OMNIFI(TM)
        *  Q-Logic(TM)

        FOSGATE AUDIONICS(R)                        NHT(R)
                                                    Now Hear This(R)
        INSTALLEDGE.COM(R)

        MB QUART(R)                                 HAFLER(R)

OUR GROWTH STRATEGY

     Our goal is to design,  produce and distribute the best engineered and most
recognized and respected  brands of high  performance  mobile,  professional and
home  theater  audio  products  in the world.  Each  element of our  strategy is
intended to enhance and reinforce  the global brand images of Rockford  Fosgate,
Lightning Audio,  Q-Logic,  MB Quart,  Hafler,  Fosgate  Audionics and NHT among
consumers and retailers. Key elements of our growth strategy are to:

     INTRODUCE NEW AND INNOVATIVE  PRODUCTS.  We must remain on the forefront of
technological  development  because our consumers  demand high  performance  and
technologically  advanced features in their audio products. We intend to enhance
the  strength  of our  brands by  continuing  to  introduce  new and  innovative
products.  We believe our ability to deliver innovative products to market, with
a product design process that allows us to begin selling new products within six
to nine months after initial design work begins,  appeals to consumers'  desires
for leading-edge products and provides a significant competitive advantage.

     In January  2003,  at the  Consumer  Electronics  Show,  we  announced  the
redesign and launch of nearly 47% of our brand product lines.  Highlights of the
new products and technology include:

     For Rockford Fosgate:

     *    Type RF amplifiers;

     *    Six new source units;

     *    New technology or cosmetic upgrades for all amplifiers;

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<PAGE>
     *    A redesign of key subwoofer products for our Punch brand;

     *    A relaunch of the Punch brand full-range coaxial speakers; and

     For Lightning Audio:

     *    A redesign of Bolt amplifiers;

     *    A redesign of Bolt and Storm woofers; and

     *    New Bolt amplifier model and a new Bolt full range speaker.

     ACQUIRE,  DEVELOP AND EXPAND  ADDITIONAL AUDIO BRANDS.  We continue to look
for opportunities to add new brands through acquisition or internal development.
During the 4th quarter of 2002,  we completed  acquisitions  of the NHT business
and of a majority  interest  in  SimpleDevices.  We believe we have  substantial
opportunities to acquire mobile,  home and  professional  audio brands that will
complement  our  existing  brand  portfolio.  We  believe  the  introduction  or
acquisition  of  additional  brands  will  enable  us to take  advantage  of our
distribution  capabilities and our strengths in advanced  technology  design and
development.  We also believe that  offering  additional  brands with  different
price  points and target  market  segments  will enable us to extend our product
range,  complement our existing  distribution  channels and broaden our customer
base.

     We have acquired a number of brands as part of this strategy, including:

     *    Lightning Audio, acquired in June 1999;

     *    Fosgate Audionics, acquired in 2000;

     *    Audio Innovations and its Q-Logic brand, acquired in 2001;

     *    MB Quart, acquired in 2001;

     *    SimpleDevices, acquired in 2002;

     *    NHT (Now Hear This). acquired in 2002.

     BROADEN  OUR  DISTRIBUTION.  We intend to broaden the  distribution  of our
products by entering new distribution channels and increasing penetration of our
existing  distribution  channels.  We  intend to  increase  our  penetration  of
specialty  dealer,  audio/video  retailer,  consumer  electronics  retailer  and
catalog  retailer  channels by expanding  the breadth of our products that these
retailers sell and by selectively  adding new dealers within these channels.  As
we broaden the  distribution of our products,  we will adhere to our strategy of
selective  distribution  for our premium  brands  while  selectively  developing
products  for broader  distribution  using our lower priced  brands.  We believe
selective  distribution  of premium  brands  fosters  retailers'  loyalty to our
brands,  enhances retailers' profit margins and encourages  retailers to carry a
broad range of our products.  In furtherance of this strategy,  during the first
quarter of 2003 we have agreed to distribute  selected  Lightning Audio products
in Wal-Mart and Pep Boys stores in the United States.

     CAPITALIZE ON INTERNATIONAL OPPORTUNITIES.  We believe the Rockford Fosgate
and MB Quart brand names are recognized in many foreign countries as well as the
U.S.  We  intend to  aggressively  expand  Rockford  Fosgate,  Lightning  Audio,
Q-Logic, MB Quart, and Fosgate Audionics in international markets.

     In 2000 we initiated a strategy of moving to a one-step distribution system
for Rockford  Fosgate  products in larger  international  markets by  converting
selected  distributors  into independent sales  representatives,  allowing us to
sell  directly to retailers.  We expect these  measures to increase our sales in
these markets by allowing us to better compete through lower  distribution costs
and reduced  prices to the  consumer.  We currently  sell our  Rockford  Fosgate

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<PAGE>
mobile  audio  products  directly  to  retailers  in Canada,  Germany,  Austria,
Switzerland and Italy, and through independent distributors in other countries.

EXPAND OUR PROFESSIONAL AUDIO BUSINESS AND ENTER THE HOME THEATER MARKET.

     The NHT acquisition, which was completed in December 2002, brings diversity
and strength to our home audio family of brands. NHT gives us critical mass with
200  dealers for our home  group.  These  dealers  provide an  immediate  retail
channel for MB Quart and Fosgate  Audionics home products.  We sell home theater
products  under our MB Quart brand and we have  developed a line of home theater
products  under our  Fosgate  Audionics  brand,  including  two  preamp/surround
processors,  two  multi-channel  amplifiers,  four  passive  speakers  and three
powered  subwoofers.  We sell our MB Quart and Fosgate  Audionics  home  theater
audio products through traditional retail channels.

SIGNIFICANT CUSTOMER AND SEASONALITY

     Best Buy is a significant customer. We began selling a limited selection of
our  products to Best Buy in early 1999 and  currently  sell to each of its more
than 450 stores  nationwide.  Best Buy is one of the  largest  volume  specialty
retailers of consumer electronics and entertainment  software in the U.S. During
2002 Rockford was Best Buy's second largest  supplier of mobile audio equipment,
representing  over 10% of Best Buy's mobile audio sales.  Best Buy accounted for
16.3% of our sales for 2001 and 21.1% of our sales for 2002. We anticipate  that
Best Buy will continue to account for a significant portion of our sales for the
foreseeable future.

     Best  Buy  also  generally   helps  us  to  smooth  out  our  normal  sales
seasonality.  For our specialty and audio-video dealers, our peak-selling season
is in the spring and summer and our slowest  season is  typically  in the fourth
quarter.  We believe that we experience this seasonality  because our core 16-24
year old  consumers  tend to buy  mobile  audio  products  during the spring and
summer  when they are on  semester  breaks  and when  generally  more  favorable
weather facilitates  installation of our products.  Best Buy sales, while strong
in May and June, are not as  concentrated  among our core consumers and are also
strong in the fourth quarter.

     Best Buy is not  obligated to any  long-term  purchases of our products and
has considerable  discretion to reduce, change or terminate its purchases of our
products.  The loss of Best Buy as a customer or  significant  reductions in its
purchases of our products would materially reduce our sales.

     We believe our acquisition of NHT will also moderate the seasonality of our
sales in future years, since its sales tend to be more concentrated in the third
and fourth  quarters of the year,  which is a typical  seasonality  for the home
audio business.

PRODUCT SUPPORT

     To maintain  and  enhance  our  relationships  with  retailers,  we provide
numerous support services,  including product and installation  training,  sales
training and  technical  and customer  service  support.  Our web site  provides
comprehensive and valuable  information for dealers and distributors,  including
product schematics, ad layouts and logos.

     Our  Rockford  Technical  Training  Institute,  one of the  first  and most
advanced of its kind in our industry,  trains  approximately  2,450 retail sales
and  installation  personnel  per  year on  installation,  sales  and  marketing
techniques  that  help  them  sell  mobile  audio  products.  In  addition,  our
instructors  and   demonstration   vehicles  travel  worldwide   hosting  dealer
instruction seminars.

     Our products  carry  standard  warranties  against  defects in material and
workmanship, and we will either repair or replace any product that fails to meet
this warranty.  We offer repair services for products that are no longer covered
under the original warranty.  For our U.S. customers,  we have in-house customer
service,  repair and technical  support  personnel who provide  general  company
information, installation support, troubleshooting and system design assistance.
We provide a factory  direct  repair  program  that  repairs and ships  products
rapidly,  reducing  retailer and consumer  inconvenience if our products fail to
perform properly.

                                       15
<PAGE>
     For our international  customers,  we provide warranty and customer service
to consumers in the countries where we sell direct to retailers. These countries
include Canada, Germany, Austria, Switzerland and Italy. In other countries, our
distributors provide customer service and warranty support.

INFORMATION SYSTEMS

     Our  information  systems are designed to respond quickly to inquiries from
our managers,  employees,  suppliers and customers. They are designed to support
our efforts to:

     *    Produce high quality products;

     *    Reduce working capital requirements;

     *    Decrease the time to market for new products;

     *    Deliver orders faster;

     *    Provide accurate and timely information; and

     *    Facilitate integration of new acquisitions.

     Our  information  systems  assist us in  producing  high  quality  products
quickly and  affordably by providing  immediate  quality  information  about our
business.  Our advanced messaging systems collect feedback about product quality
from our customer  service  department  that we send directly to our engineering
and   manufacturing   groups.   This  early  customer  feedback  permits  prompt
adjustments  and  serves  as an  immediate  indicator  of our  products'  market
acceptance.  Data on our servers is accessible  to authorized  employees for new
product  information  and  timely  updates.  Management  has  access to  secured
databases  regarding  the status,  cost and  projections  for pending  projects,
enabling quick adjustments to scheduling and use of resources.

     We have  implemented  Internet  systems  to  provide  accurate  and  timely
information and allow our representatives, dealers and distributors to check the
status of their  orders at our  secure  Internet  site.  We also have  developed
systems to accept orders from  consumers over the Internet for  distribution  of
promotional accessories such as clothing.

     We have also  implemented  Internet  systems to provide accurate and timely
information to our suppliers in support of  just-in-time  delivery of components
to our  manufacturing  floor.  These systems help us reduce cost by reducing our
inventory requirements and providing better information about our suppliers.

EMPLOYEES

     As at December 31, 2002, we had 788 total  employees.  At that date, in the
U.S., 367 were engaged in manufacturing,  70 in research and development,  66 in
sales and marketing and 118 in administration. We also had 167 employees working
outside of the U.S. in various functions.  We have never had a work stoppage and
none  of our  U.S.  employees  are  unionized.  The  employees  at MB  Quart  in
Obrigheim, Germany, are unionized and, in accordance with German law and custom,
are subject to an industry wide collective bargaining agreement.  We believe our
employee relations are good.

     Subsequent  to  December  31,  2002,  we  restructured   several   business
processes,  which we believe will result in improved  efficiencies  and customer
service. This restructuring resulted in the reduction of approximately 8% of our
salaried staff in Arizona and Michigan.

ENVIRONMENTAL COMPLIANCE

     Whenever  possible,  we avoid using  hazardous  materials in our production
processes.  Two chemicals  used in our basic  processes,  lacquer and flux,  are
listed as hazardous substances by the U.S.  Environmental  Protection Agency. We

                                       16
<PAGE>
use them in limited  quantities in our production  facility,  taking care to see
that they are stored, used and disposed of in the proper manner. We believe that
compliance  with federal,  state,  local and foreign  provisions  regulating the
discharge  of  materials  into the  environment,  or  otherwise  relating to the
protection of the environment,  will not have a material effect upon our capital
expenditures,  earnings and competitive  position. We do not anticipate material
capital  expenditures for environmental  control facilities for the remainder of
the current fiscal year or the succeeding fiscal year.

ITEM 2. PROPERTIES

     Our corporate  headquarters  and electronics  manufacturing  facilities are
located in Tempe,  Arizona. In the U.S. we manufacture  speakers at our facility
in  Grand  Rapids,  Michigan  and  enclosures  at our  facility  in  Stillwater,
Oklahoma.  We use warehouses  strategically  located in the U.S.,  Germany,  and
Singapore.  We believe these facilities enhance our ability to serve our markets
faster and more cost effectively than many of our competitors. MB Quart operates
and manufactures product in owned facilities in Obrigheim, Germany.

     The  following  table  contains  information  about  our  facilities  as at
December 31, 2002,  all of which are leased  except for the MB Quart  facilities
that we own:

<TABLE>
<CAPTION>
                                                                                  APPROXIMATE
                                                                  APPROXIMATE     2002 ANNUAL
FUNCTION                                       LOCATION         SQUARE FOOTAGE  RENTAL EXPENSE       LEASE EXPIRATION
---------                                      --------         --------------  --------------       ----------------
<S>                                    <C>                           <C>          <C>              <C>
Corporate headquarters and research
   and development..................   Tempe, Arizona                30,000       $   291,000      September 30, 2004
Information systems and RTTI .......   Tempe, Arizona                15,000           162,000      September 30, 2004
Manufacturing and purchasing........   Tempe, Arizona                22,000           147,000      December 31, 2004(1)
Warehousing, sales and customer
   service..........................   Tempe, Arizona                25,000           167,000      December 31, 2004(1)
Warehousing ........................   Gilbert, Arizona              54,000           408,000      July 31, 2005
Manufacturing, research and
   development, purchasing and
   administration ..................   Grand Rapids, Michigan        81,000           246,000      March 31, 2003(2)
Warehousing ........................   Grand Rapids, Michigan        45,000           201,000      November 30, 2003
Manufacturing, research and
   development, warehousing and
   administration ..................   Stillwater, Oklahoma          69,000           109,000      June 30, 2006
Warehousing ........................   Stillwater, Oklahoma          25,000            72,000      December 31, 2003
Research and development, sales and
   administration...................   San Mateo, California          3,300            26,000      January 31, 2004
Warehousing and sales...............   Mishima, Japan                 7,500           110,000      April 30, 2011
Warehousing.........................   Singapore                      9,000           147,000      January 31, 2004
Warehousing and sales...............   Bremen, Germany               20,000           109,000      December 30, 2006
Manufacturing, research and
   development, sales, warehousing,
   customer service, purchasing and
   administration ..................   Obrigheim, Germany            70,500                --      Owned
                                                                    -------        ----------
           Total ...................                                476,300        $2,195,000
                                                                    =======        ==========
</TABLE>

----------
(1)  We have  the  right  to  extend  each of these  leases  for one  additional
     one-year term.
(2)  We have the right to extend this lease for one additional one-year term.

     Subsequent  to December 31, 2002, we began the process of  negotiating  the
termination  of the  lease  of our  Japan  location  due to the  closure  of our
Japanese operations.

                                       17
<PAGE>
ITEM 3. LEGAL PROCEEDINGS

     Since the date of our Annual  Report for the year 2001,  filed with the SEC
on March 29, 2002,  the Fiori patent  claim  described in the Legal  Proceedings
section of that Annual Report has  continued  into an intensive  fact  discovery
phase of proceedings.  The products at issue in the case are now 16 of our Punch
brand amplifiers,  which the plaintiff contends include circuitry that infringes
on his patents. We have incurred substantial costs of defense, at a rate greater
than we expected,  which  contributed to our increased  research and development
costs during the year. We anticipate that discovery and motions in the case will
continue  for at  least  the  next  two  quarters  and  will  cause  us to incur
additional  defense costs during that period.  A trial is likely  sometime after
the second  quarter of 2003.  We continue to believe that the claim  involved in
the case is without merit and that we should ultimately prevail in this matter.

     We are and may continue to be a party to various  lawsuits and arbitrations
from time to time.  As at December  31,  2002,  we were not a party to any legal
proceedings  that we  believe  are  likely  to  have a  material  effect  on our
business,  other than the effect of the expense associated with the Fiori patent
matter described above.

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

     We did not submit  any  matters  to a vote of our  shareholders  during the
fourth quarter of Fiscal Year 2002.

                                     PART II

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

     Our common stock has traded on The NASDAQ  National Market System under the
symbol  "ROFO" since April 20, 2000,  the date of our initial  public  offering.
Prior to that  time,  there was no  public  market  for our  common  stock.  The
following table sets forth the range of high and low sales prices for our common
stock for the periods indicated:

                                                     HIGH        LOW
                                                     ----        ---
       For the quarter ended:
         December 31, 2002 ......................   $  6.59    $ 5.00
         September 30, 2002 .....................   $ 10.75    $ 5.70
         June 30, 2002 ..........................   $ 10.35    $ 8.50
         March 31, 2002 .........................   $  9.53    $ 8.20
         December 31, 2001 ......................   $  8.58    $ 6.31
         September 30, 2001 .....................   $  7.48    $ 6.26
         June 30, 2001 ..........................   $  8.35    $ 5.90
         March 31, 2001 .........................   $  7.75    $ 4.75

     As at February 12, 2003, there were  approximately  1,562 holders of record
of our common stock.

     We have never declared,  nor have we paid, any cash dividends on our common
stock. We currently  intend to retain our earnings to finance future growth and,
therefore,  do not  anticipate  paying cash dividends on our common stock in the
foreseeable future.

     We have not made any sales of unregistered securities during the past three
years,  except for (1) sales of our common stock to employees  exercising  their
stock options  during the period prior to the  effectiveness  of a  registration
statement  on form S-8 relating to such sales and (2) the sale during March 2002
of 215,000  shares to  Grisanti,  Galef & Goldress,  Inc.  pursuant to the stock
options we granted to that firm in 1992.

                                       18
<PAGE>
EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
                                                                                              NUMBER OF SECURITIES
                               NUMBER OF SECURITIES TO BE                                   REMAINING AVAILABLE FOR
                                ISSUED UPON EXERCISE OF     WEIGHTED AVERAGE EXERCISE     FUTURE ISSUANCE UNDER EQUITY
                                  OUTSTANDING OPTIONS,         PRICE OF OUTSTANDING       COMPENSATION PLANS (EXCLUDING
                                        WARRANTS                     OPTIONS,                      SECURITIES
        PLAN CATEGORY                  AND RIGHTS              WARRANTS AND RIGHTS           REFLECTED IN COLUMN (a))
        -------------                  ----------              -------------------          ------------------------
                                          (a)                          (b)                            (c)
<S>                                     <C>                           <C>                           <C>
Equity compensation plans
approved by security holders            1,478,016                     4.9254                        604,358
   Stock Options
   ESPP
   Stock Awards
                                        ---------                     ------                        -------
   Total                                1,478,016                     4.9254                        604,358

Equity compensation plans
not approved by security holders          None                         None                           None
</TABLE>

ITEM 6. SELECTED FINANCIAL DATA

     The  following  selected  consolidated  financial  data  should  be read in
conjunction  with Item 7,  "Management's  Discussion  and  Analysis of Financial
Condition  and Results of  Operations"  and Item 8,  "Financial  Statements  and
Supplementary Data." The table contains selected consolidated financial data for
the years ended December 31, 1998, 1999,  2000, 2001 and 2002,  derived from our
audited consolidated financial statements.

     The  selected  financial  information  for the  years  prior to 2002 do not
reflect  financial results of the acquisitions of the NHT brand or SimpleDevices
business,  which were completed in the fourth quarter of 2002. In addition,  the
selected  financial  information  for the  years  prior  to 2001 do not  reflect
financial  results of the acquisitions of the Q-Logic or MB Quart brands,  which
were completed in 2001.

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                  -------------------------------------------------------------
                                                     1998         1999         2000         2001         2002
                                                  ---------    ---------    ---------    ---------    ---------
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                               <C>          <C>          <C>          <C>          <C>
Consolidated Statements of Income:
Net sales ....................................    $  87,577    $ 123,889    $ 144,640    $ 157,752    $ 168,918
Cost of goods sold ...........................       55,146       75,014       92,533      103,904      107,747
                                                  ---------    ---------    ---------    ---------    ---------
Gross profit .................................       32,431       48,875       52,107       53,848       61,171
Operating expenses:
    Sales and marketing ......................       14,821       20,602       22,709       24,228       27,370
    General and administrative ...............       10,211       13,465       13,036       15,771       17,718
    Research and development .................        1,876        2,277        2,831        3,322        6,014
                                                  ---------    ---------    ---------    ---------    ---------
         Total operating expenses ............       26,908       36,344       38,576       43,321       51,102
                                                  ---------    ---------    ---------    ---------    ---------
Operating income .............................        5,523       12,531       13,531       10,527       10,069
Interest and other expense (income), net .....        1,501        1,946          807          548          (74)
                                                  ---------    ---------    ---------    ---------    ---------
Income before tax ............................        4,022       10,585       12,724        9,979       10,143
Income tax expense ...........................        1,717        4,088        4,714        3,756        3,903
Minority interest ............................           --           --           --           --          (40)
                                                  ---------    ---------    ---------    ---------    ---------
Net income ...................................    $   2,305    $   6,497    $   8,010    $   6,223    $   6,280
                                                  =========    =========    =========    =========    =========
Net income per share:
    Basic ....................................    $    0.52    $    1.40    $    1.17    $    0.77    $    0.74
                                                  =========    =========    =========    =========    =========
    Diluted ..................................    $    0.41    $    1.04    $    1.00    $    0.70    $    0.68
                                                  =========    =========    =========    =========    =========
Shares used to calculate net income per share:
    Basic ....................................        4,412        4,641        6,864        8,109        8,540
                                                  =========    =========    =========    =========    =========
    Diluted ..................................        5,951        6,289        8,009        8,913        9,301
                                                  =========    =========    =========    =========    =========
</TABLE>

                                       19
<PAGE>
<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                --------------------------------------------------------
                                                  1998        1999        2000        2001        2002
                                                --------    --------    --------    --------    --------
                                                                     (IN THOUSANDS)
<S>                                             <C>         <C>         <C>         <C>         <C>
Consolidated Balance Sheet Data:
Working capital ............................    $ 13,488    $ 21,219    $ 37,179    $ 45,913    $ 52,354
Total assets ...............................      37,307      52,147      66,918      85,954     101,190
Current portion of long-term debt ..........       2,393       1,420         935         879       1,253
Long-term debt and capital lease obligations      14,292      17,342         434      10,553      10,027
Total liabilities ..........................      32,369      39,390      20,586      32,997      34,711
Shareholders' equity .......................       4,907      12,757      46,332      52,957      65,546
</TABLE>

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

OVERVIEW

HISTORY

     Rockford was  incorporated  in 1980 to continue a high  performance  mobile
audio business founded in 1973 by mobile audio enthusiast Jim Fosgate.  Rockford
developed and has consistently maintained a reputation for technical excellence.

     Rockford's  management  team,  led by Gary Suttle,  our President and Chief
Executive Officer:

     *    Is  focused  on  profitability,  having  established  and  implemented
          specific financial  objectives through improved business processes and
          sophisticated management information systems;

     *    Has  increased the number of new product  introductions  while keeping
          the number of design engineers relatively constant;

     *    Implemented  new sourcing  and  manufacturing  strategies,  increasing
          product  reliability,  reducing product  development time and reducing
          product costs; and

     *    Implemented  a more  focused  advertising  and  marketing  strategy to
          enhance Rockford's brand images.

     We  believe  that we have the  people,  processes  and  systems in place to
enable us to continue to grow profitably.

BUSINESS

     We generated over 97% of our sales in 2002 from our mobile audio  products.
We  anticipate  that the  addition  of  SimpleDevices  and  NHT,  as well as the
development of our other home theater  products,  will cause home audio products
to capture a significantly greater percentage of our sales in 2003.

     In  the  U.S.,  we  sell  our  mobile  audio  products  using  commissioned
independent  sales  representative  firms  who  are  supported  by our  employee
regional managers. Internationally, we sell products in 76 countries. In Germany
we sell through wholly owned subsidiaries  using commissioned  independent sales
representatives.  In  Canada,  Austria,  Switzerland  and Italy we sell  through
commissioned independent sales representatives.  In other countries, we sell our
products to independent distributors who resell them to retailers. We are in the
process of closing our Japanese subsidiary effective during the first quarter of
2003  and,  after  its  closing,  will  sell  our  products  to  an  independent
distributor who will sell them to Japanese retailers.

     Best Buy is a significant  customer and accounted for 16.7% of our sales in
2000, 16.3% in 2001 and 21.1% in 2002. Our business plan  contemplates that Best
Buy will  continue  to account  for a  significant  portion of our sales for the
foreseeable  future. No other single customer accounted for more than 10% of our
sales in any year since 1999.

                                       20
<PAGE>
RESULTS OF OPERATIONS

     The following table shows, for the periods indicated, selected consolidated
statements of income data expressed as a percentage of net sales:

                                                     YEAR ENDED DECEMBER 31,
                                                 ------------------------------
                                                  2000        2001        2002
                                                 ------      ------      ------
Net sales ..................................      100.0%      100.0%      100.0%
Cost of goods sold .........................       64.0        65.9        63.8
                                                 ------      ------      ------
Gross profit ...............................       36.0        34.1        36.2
Operating expenses:
      Sales and marketing ..................       15.7        15.4        16.2
      General and administrative ...........        9.0        10.0        10.4
      Research and development .............        2.0         2.1         3.6
                                                 ------      ------      ------
              Total operating expenses .....       26.7        27.5        30.2
                                                 ------      ------      ------
Operating income ...........................        9.3         6.6         6.0
Interest and other expense, net ............        0.5         0.3         0.0
                                                 ------      ------      ------
Income before tax ..........................        8.8         6.3         6.0
Income tax expense .........................        3.3         2.4         2.3
                                                 ------      ------      ------
Minority interest ..........................         --          --          --
Net income .................................        5.5%        3.9%        3.7%
                                                 ======      ======      ======

     Cost of goods sold primarily  consists of raw  materials,  direct labor and
manufacturing  costs  associated  with  production  of our  products  as well as
warranty, warehousing and customer service expenses.

     Sales  and  marketing  expenses   primarily  consist  of  salaries,   sales
commissions,   costs  of  advertising,   trade  shows,   distributor  and  sales
representative conferences and freight.

     General  and   administrative   expenses  primarily  consist  of  salaries,
facilities and other costs of our accounting,  finance,  management  information
systems,  administrative and executive departments, as well as legal, accounting
and other professional fees and expenses associated with our business.

     Research and development  expenses primarily consist of salaries associated
with our  research  and  development  personnel  and legal costs  related to our
intellectual property.

GEOGRAPHIC DISTRIBUTION OF SALES

     Since 2000, our sales by geographic region were as follows:

                                      YEAR ENDED DECEMBER 31,
                               ------------------------------------         %
REGION(1)                        2000          2001          2002         2002
---------                      --------      --------      --------      ------
                                                 (IN THOUSANDS)
United States ...........      $121,375      $130,459      $135,830        80.4%
Other Americas ..........         7,289         9,469         7,871         4.7
Europe ..................         7,687        10,278        17,413        10.3
Asia ....................         8,289         7,546         7,804         4.6
                               --------      --------      --------      ------
       Total sales ......      $144,640      $157,752      $168,918       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 our
     sales.

                                       21
<PAGE>
     IN THE FOLLOWING DISCUSSION,  CERTAIN INCREASES OR DECREASES MAY DIFFER DUE
TO ROUNDING.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     NET SALES. Sales increased by $11.1 million, or 7.1%, to $168.9 million for
2002 from $157.8 million for 2001.  Excluding currency effects,  sales increased
by $10.5 million, or 6.6%, to $169.5 million for 2002. The increase in sales was
primarily  attributable  to the  addition of sales from our MB Quart and Q-Logic
brands,  increased  sales of our Lightning  Audio and Install Edge brands at big
box retailers and strong sales from our OEM business.  The increase in sales was
partially offset by a decrease in Rockford  Fosgate sales during the period.  We
believe the decrease in Rockford  Fosgate sales  reflected  the  continued  weak
retail environment for the mobile audio market and the resulting pressure on our
independent specialty dealer channel.  Additionally, in an effort to build brand
image and solidify our relationships with core dealers, we discontinued shipping
to several of our Rockford  Fosgate  brand  dealers who were not  operating in a
manner  consistent with our policies.  We elected to forego these sales in order
to improve the  quality of our dealer  base and, if our efforts are  successful,
anticipate  increased  sales to dealers who comply with our policies will,  over
time, offset the forgone sales to these terminated  dealers.  Until the consumer
market  strengthens,  we are planning for sales of our flagship Rockford Fosgate
brand to be flat,  compared to anticipated  declines for the mobile audio market
as a whole,  and expect that most of our sales growth will continue to come from
our newer brands.

     U.S. sales  increased by $5.3 million,  or 4.1%, to $135.8 million for 2002
from $130.5  million for 2001,  with the  increase  attributable  to the factors
discussed  above.  International  sales increased by $5.8 million,  or 21.2%, to
$33.1 million for 2002 from $27.3 million for 2001.  This increase was primarily
due to increased sales in Europe, Canada and Asia offset by a slight decrease in
sales in Latin America,  due in part to the  termination  and replacement of our
Rockford Fosgate distributor in Latin America.

     COST OF GOODS SOLD. Cost of goods sold increased by $3.8 million,  or 3.7%,
to $107.7  million for 2002 from $103.9 million for 2001.  Substantially  all of
the increase was attributable to sales of our MB Quart and Q-Logic brands.  As a
percent of sales,  cost of goods sold decreased to 63.8% for 2002 from 65.9% for
2001. The primary  reasons for the decrease as a percent of sales included a mix
shift toward higher margined products and cost reductions  related to the direct
sourcing of our Connecting Punch accessories product.

     SALES AND MARKETING  EXPENSES.  Sales and marketing  expenses  increased by
$3.1 million,  or 13.0%,  to $27.4 million for 2002 from $24.2 million for 2001.
As a percent of sales,  sales and marketing expenses increased to 16.2% for 2002
from 15.4% for 2001.  This increase was primarily due to higher cost  structures
for our acquired MB Quart and Q-Logic brands,  including higher freight costs as
a percent of sales  associated with shipping  Q-Logic product and increased duty
costs on shipping product to Canada.

     GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative  expenses
increased  by $1.9  million,  or 12.3%,  to $17.7  million  for 2002 from  $15.8
million  for  2001.  The  primary  reasons  for  the  increase  in  general  and
administrative  expenses were higher  overhead cost  structures for our MB Quart
and Q-Logic brands and our acquired  SimpleDevices  business and increased legal
costs. This increase was partially offset by the reduction of  performance-based
compensation  expense.  Additionally,  abandoned  acquisition costs of less than
$0.1 million were written off during the first  quarter of 2002 and $0.6 million
were written off in 2001. These were previously capitalized costs for a proposed
acquisition,  which was  abandoned  and  accordingly  expensed.  As a percent of
sales,  general and  administrative  expenses  increased  to 10.5% for 2002 from
10.0% for 2001.

     RESEARCH  AND  DEVELOPMENT  EXPENSES.  Research  and  development  expenses
increased by $2.7 million,  or 81.0%, to $6.0 million for 2002 from $3.3 million
for 2001. As a percent of sales,  these expenses increased to 3.6% for 2002 from
2.1%  for  2001.  The  increase  was  primarily  due to  increased  legal  costs
associated  with the  defense  of a patent  matter  and  personnel  and  product
development  costs  relating to our MB Quart and Q-Logic brands and our acquired
SimpleDevices business.

     OPERATING INCOME.  Operating income decreased by $0.4 million,  or 4.4%, to
$10.1  million  for 2002 from  $10.5  million  for 2001.  As a percent of sales,
operating income decreased to 6.1% for 2002 from 6.6% for 2001. This decrease is
primarily   attributable  to  increased  general  and  administrative   expenses

                                       22
<PAGE>
associated  with higher  overhead cost  structures  for our MB Quart and Q-Logic
brands and our  acquired  SimpleDevices  business  and  increased  research  and
development  expenses  associated  with legal costs relating to the defense of a
patent matter.

     INTEREST AND OTHER EXPENSE, NET. Interest and other expense, net, primarily
consists of interest  expense and currency gains and losses.  Interest and other
expense,  net, decreased by $0.6 million to result in income of $0.1 million for
2002  compared to expense of $0.5 million for 2001.  The decrease was  primarily
due to foreign currency gains, which were partially offset by increased interest
expense due to the increased balance of our line of credit resulting from the MB
Quart,   Q-Logic  and  NHT  brand   acquisitions  and   SimpleDevices   business
acquisition.

     INCOME TAX  EXPENSE.  Income tax expense  increased by $0.1 million to $3.9
million for 2002 from $3.8 million for 2001. The effective income tax rates were
38.5% for 2002 and 37.6% for 2001.  The primary  reason for this increase in the
effective  tax rate was a decrease  in foreign  tax  benefits  from  foreign net
operating losses.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

     NET SALES. Sales increased by $13.2 million, or 9.1%, to $157.8 million for
2001 from $144.6 million for 2000.  Excluding currency effects,  sales increased
by $14.5  million,  or 10.0%,  to $159.1 million for 2001. The increase in sales
was  primarily  attributable  to sales in the amount of $9.3  million  under the
brands  acquired  in 2001,  Q-Logic  and MB  Quart.  Additionally,  OEM sales to
Nissan,  which  began in the  third  quarter  of 2001,  and  increased  sales by
Lightning Audio and  InstallEdge.com,  contributed to the increase in sales. The
increase in sales was partially  offset by a decrease in Rockford  Fosgate sales
during the period,  reflective of the soft consumer  market.  Until the consumer
market  strengthens,  we are planning for sales of our flagship Rockford Fosgate
brand to be flat,  compared to anticipated  declines for the mobile audio market
as a whole,  and  expect  that most of our sales  growth  will come from our new
brands.

     U.S. sales  increased by $9.1 million,  or 7.5%, to $130.5 million for 2001
from $121.4  million for 2000,  with the  increase  attributable  to the factors
discussed  above.  International  sales increased by $4.0 million,  or 17.2%, to
$27.3 million for 2001 from $23.3 million for 2000.  This increase was primarily
due to increased sales in Europe,  Latin America and Canada,  offset by a slight
decrease in sales in Asia.

     COST OF GOODS  SOLD.  Cost of goods sold  increased  by $11.4  million,  or
12.3%, to $103.9 million for 2001 from $92.5 million for 2000. This increase was
primarily  due to  increased  sales.  As a percent of sales,  cost of goods sold
increased  to 65.9% for 2001 from 64.0% for 2000.  The  increase as a percent of
sales  resulted  from  a mix  shift  toward  lower  margined  products,  a  more
aggressive stance on pricing and promotional programs aimed at increasing market
share  and  end-of-life  discounts  on  source  units.  Additionally,  based  on
Accounting Principles Board (APB) Opinion No. 16, BUSINESS COMBINATIONS, cost of
goods  sold  relating  to  the  finished  goods   inventory   purchased  in  the
acquisitions  of Audio  Innovations  and MB Quart was higher  than we expect our
manufactured  cost to be. Once the finished goods  inventory  purchased  through
these  acquisitions  is  sold  and  we  begin  selling  our  newly  manufactured
inventory,  we believe  cost of goods sold  relating to these  acquired  product
lines will decrease.

     SALES AND MARKETING  EXPENSES.  Sales and marketing  expenses  increased by
$1.5  million,  or 6.6%,  to $24.2 million for 2001 from $22.7 million for 2000.
This  increase  was  primarily  due to  increased  headcount  in our  sales  and
marketing   departments   principally  related  to  the  acquisitions  of  Audio
Innovations and MB Quart and increased  freight expense.  As a percent of sales,
sales and  marketing  expenses  decreased to 15.4% for 2001 from 15.7% for 2000.
The decrease as a percent of sales was  primarily  because some expenses in this
category are fixed and do not fluctuate with sales.

     GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative expenses,
including abandoned  acquisition costs,  increased by $2.8 million, or 21.5%, to
$15.8  million  for 2001  from  $13.0  million  for  2000.  Excluding  abandoned
acquisition  costs,  general  and  administrative  expenses  increased  by  $2.2
million,  or 16.9%,  to $15.2 million for 2001 from $13.0 million for 2000.  The
primary reason for the increase in general and administrative  expenses was cost
structures in our two acquired businesses,  Audio Innovations and MB Quart, that
did not yet  reflect  synergies  we  expect  to  create  over the  next  several
quarters. Additionally, abandoned acquisition costs of $0.6 million were written
off during the third quarter of 2001.  These were previously  capitalized  costs
for a proposed  acquisition,  which was abandoned and accordingly expensed. As a
percent of sales,  general  and

                                       23
<PAGE>
administrative  expenses,  including abandoned  acquisition costs,  increased to
10.0%  for 2001  from  9.0% for 2000.  Excluding  abandoned  acquisition  costs,
general and administrative expenses increased to 9.6% of sales for 2001.

     RESEARCH  AND  DEVELOPMENT  EXPENSES.  Research  and  development  expenses
increased by $0.5 million,  or 17.3%, to $3.3 million for 2001 from $2.8 million
for 2000.  This increase was  primarily  due to increased  personnel and product
development  costs. As a percent of sales,  these expenses increased to 2.1% for
2001 from 2.0% for 2000.

     OPERATING INCOME.  Operating income decreased by $3.0 million, or 22.2%, to
$10.5 million for 2001 from $13.5 million for 2000. This decrease  primarily was
attributable to a mix shift toward lower margined products and a more aggressive
stance on pricing and promotional programs aimed at increasing market share, the
expensing of abandoned  acquisition  costs and  end-of-life  discounts on source
units. As a percent of sales,  operating  income decreased to 6.6% for 2001 from
9.3% for 2000. The primary reasons for this decrease are mentioned above.

     INTEREST AND OTHER EXPENSE, NET. Interest and other expense, net, primarily
consists of interest expense. Interest and other expense, net, decreased by $0.3
million, or 32.1%, to $0.5 million for 2001 from $0.8 million for 2000. Interest
expense  decreased in 2001 primarily due to substantially  lower market interest
rates.

     INCOME TAX  EXPENSE.  Income tax expense  decreased by $0.9 million to $3.8
million for 2001 from $4.7 million for 2000 due primarily to the decrease in our
taxable income. The effective income tax rates were 37.6% for 2001 and 37.0% for
2000.  The  primary  reason for this  increase in the  effective  tax rate was a
decrease in foreign tax benefits from foreign net operating losses.

QUARTERLY RESULTS OF OPERATIONS

     Our sales on a quarterly  basis reflect the seasonality of the mobile audio
aftermarket  business.  Sales are generally  greater during the second and third
quarters of each calendar  year and lower during the first and fourth  quarters,
with our lowest sales typically  occurring during the fourth quarter.  Our newly
acquired NHT business has seasonality  that somewhat offsets this core business,
with  higher  sales  in the 3rd  and  4th  quarters.  Because  NHT is a  smaller
business, we expect our business to remain seasonal for the foreseeable future.

     The following  tables show selected  consolidated  quarterly  statements of
income data that were derived from our unaudited  financial  statements for each
of the eight quarters ended December 31, 2002, and also show that data expressed
as a percent of sales for the  periods  indicated.  We believe  these  unaudited
financial results were prepared on a basis consistent with our audited financial
statements  and include all  adjustments,  consisting  only of normal  recurring
adjustments,  necessary for a fair  presentation of our consolidated  results of
operations for those periods.  The results of operations for any quarter are not
necessarily indicative of the results of any future period.

                                       24
<PAGE>
                      CONSOLIDATED STATEMENT OF INCOME DATA

<TABLE>
<CAPTION>
                                                                             THREE MONTHS ENDED
                                          ---------------------------------------------------------------------------------------
                                          MAR. 31,   JUN. 30,   SEP. 30,    DEC. 31,   MAR. 31,   JUN. 30,    SEP. 30,   DEC. 31,
                                            2001       2001       2001        2001       2002       2002        2002       2002
                                          --------   --------   --------    --------   --------   --------    --------   --------
                                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                       <C>        <C>        <C>         <C>        <C>        <C>         <C>        <C>
Net sales .............................   $ 37,363   $ 44,803   $ 36,562    $ 39,024   $ 43,734   $ 51,228    $ 40,583   $ 33,373
Cost of goods sold ....................     24,083     29,306     24,577      25,938     27,212     31,199      26,315     23,021
                                          --------   --------   --------    --------   --------   --------    --------   --------
Gross profit ..........................     13,280     15,497     11,985      13,086     16,522     20,029      14,268     10,352
Operating expenses:
  Sales and marketing .................      5,780      6,235      5,962       6,251      7,244      7,594       6,302      6,231
  General and administrative ..........      3,374      4,326      3,823       4,248      4,651      5,925       4,539      2,601
  Research and development ............        770        691        925         936        976      1,148       1,805      2,086
                                          --------   --------   --------    --------   --------   --------    --------   --------
    Total operating expenses ..........      9,924     11,252     10,710      11,435     12,871     14,667      12,646     10,918
                                          --------   --------   --------    --------   --------   --------    --------   --------
Operating income (loss) ...............      3,356      4,245      1,275       1,651      3,651      5,362       1,622       (566)
Interest and other
expense (income), net .................        204         96        (67)        315        184       (337)        278       (199)
                                          --------   --------   --------    --------   --------   --------    --------   --------
Income (loss) before tax ..............      3,152      4,149      1,342       1,336      3,467      5,699       1,344       (367)
Income tax expense ....................      1,160      1,563        489         544      1,289      2,112         519        (17)
                                          --------   --------   --------    --------   --------   --------    --------   --------
Net income (loss) before
minority interest .....................      1,992      2,586        853         792      2,178      3,587         825       (350)
Minority interest .....................         --         --         --          --         --         --          --        (40)
                                          --------   --------   --------    --------   --------   --------    --------   --------
Net income (loss) .....................   $  1,992   $  2,586   $    853    $    792   $  2,178   $  3,587    $    825   $   (310)
                                          ========   ========   ========    ========   ========   ========    ========   ========
Net income (loss) per share:
  Basic ...............................   $   0.25   $   0.32   $   0.10    $   0.10   $   0.26   $   0.42    $   0.10   $  (0.04)
                                          ========   ========   ========    ========   ========   ========    ========   ========
  Diluted .............................   $   0.23   $   0.29   $   0.10    $   0.09   $   0.24   $   0.38    $   0.09   $  (0.03)
                                          ========   ========   ========    ========   ========   ========    ========   ========
Shares used to calculate net
income per share:
  Basic ...............................      8,007      8,082      8,172       8,174      8,275      8,508       8,656      8,712
                                          ========   ========   ========    ========   ========   ========    ========   ========
  Diluted .............................      8,834      8,925      8,957       8,935      9,216      9,384       9,406      9,117
                                          ========   ========   ========    ========   ========   ========    ========   ========

                                                                PERCENT OF SALES FOR THE THREE MONTHS ENDED
                                          ---------------------------------------------------------------------------------------
                                          MAR. 31,   JUN. 30,   SEP. 30,    DEC. 31,   MAR. 31,   JUN. 30,    SEP. 30,   DEC. 31,
                                            2001       2001       2001        2001       2002       2002        2002       2002
                                          --------   --------   --------    --------   --------   --------    --------   --------
Net sales .............................    100.0%     100.0%     100.0%      100.0%     100.0%     100.0%      100.0%     100.0%
Cost of goods sold ....................     64.5       65.4       67.2        66.5       62.2       60.9        64.8       69.0
                                           -----      -----      -----       -----      -----      -----       -----      -----
Gross profit ..........................     35.5       34.6       32.8        33.5       37.8       39.1        35.2       31.0
Operating expenses:
  Sales and marketing .................     15.4       13.9       16.3        16.0       16.6       14.8        15.5       18.6
  General and administrative ..........      9.0        9.7       10.5        10.9       10.7       11.6        11.2        7.8
  Research and development ............      2.1        1.5        2.5         2.4        2.2        2.2         4.5        6.3
                                           -----      -----      -----       -----      -----      -----       -----      -----
    Total operating expenses ..........     26.5       25.1       29.3        29.3       29.5       28.6        31.2       32.7
                                           -----      -----      -----       -----      -----      -----       -----      -----
Operating income (loss) ...............      9.0        9.5        3.5         4.2        8.3       10.5         4.0       (1.7)
Interest and other
expense (income), net .................      0.6        0.2       (0.2)        0.8        0.4       (0.6)        0.7       (0.6)
                                           -----      -----      -----       -----      -----      -----       -----      -----
Income (loss) before tax ..............      8.4        9.3        3.7         3.4        7.9       11.1         3.3       (1.1)
Income tax expense ....................      3.1        3.5        1.4         1.4        2.9        4.1         1.3       (0.1)
                                           -----      -----      -----       -----      -----      -----       -----      -----
Net income (loss) before
minority interest .....................      5.3%       5.8%       2.3%        2.0%       5.0%       7.0%        2.0%      (1.0)
Minority interest .....................      0.0        0.0        0.0         0.0        0.0        0.0         0.0       (0.1)
                                           -----      -----      -----       -----      -----      -----       -----      -----
Net income (loss) .....................      5.3%       5.8%       2.3%        2.0%       5.0%       7.0%        2.0%      (0.9)%
                                           =====      =====      =====       =====      =====      =====       =====      =====
</TABLE>

                                       25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     We have financed our business  primarily  using existing  working  capital,
cash flows from operations,  the proceeds from our initial public offering,  and
bank  borrowings.  On June 28, 2001, we entered into a $30.0  million  revolving
credit  facility  with Bank of America,  N.A. and Bank One,  Arizona,  N.A. This
credit facility replaced a $20.0 million line previously maintained with another
financial  institution.  We had working capital of $52.4 million at December 31,
2002,  compared to $45.9  million at December 31, 2001. At December 31, 2002, we
maintained $0.3 million of cash and cash equivalent balances.

     As at  December  31,  2002,  we had a balance of $8.5  million on our $30.0
million bank credit facility,  which is  collateralized  by substantially all of
our  assets and  consists  of a swing  line of credit  and a  revolving  line of
credit.  The swing  line of credit  has a  variable  interest  rate per annum of
Prime.  The  revolving  line of credit has a blended  variable  interest rate of
LIBOR plus 150 basis points.  As at December 31, 2002, the bank credit  facility
had a weighted average interest rate of 3.1% per annum. The bank credit facility
is  scheduled  to mature on June 28,  2004.  The bank credit  facility  contains
provisions  that,  among other things,  require that we maintain certain minimum
levels of EBITDA  and debt  service  coverage  and also limit the amount of debt
incurred and capital expenditures annually.

     During the second  quarter of 2002 we  extended  our $5.0  million  capital
lease credit  facility  under which we can fund leases  until June 28, 2003,  at
which time the availability to enter into additional leases expires.  We use the
capital  lease  credit  facility  for the  purchase of capital  equipment  under
agreements  structured as three-year capital lease  obligations.  As at December
31, 2002, the capital lease credit  facility had an outstanding  balance of $2.4
million with a weighted average interest rate of 5.72% per annum.

     Net cash provided by operating  activities  was $4.9 million for the twelve
months ended  December 31,  2002,  and $7.5 million for the twelve  months ended
December 31, 2001.  Net cash  provided by  operating  activities  for the twelve
months  ended  December  31,  2002,  was lower than net  income for the  period,
primarily due to increases in accounts receivable and inventory.

     Net cash used in  investing  activities  was $9.7  million  for the  twelve
months ended  December 31, 2002,  and $16.5  million for the twelve months ended
December 31, 2001.  Net cash used in investing  activities for the twelve months
ended  December  31,  2002,  was  primarily   related  to  the  acquisitions  of
SimpleDevices  and  NHT in the  fourth  quarter  of  2002  and to  purchases  of
property,  plant and  equipment.  Net cash used in investing  activities for the
twelve months ended December 31, 2001, was primarily related to the acquisitions
of Audio  Innovations and MB Quart in the third quarter of 2001 and to purchases
of property, plant and equipment.

     Net cash provided by financing  activities  was $1.2 million for the twelve
months ended  December 31,  2002,  and $9.0 million for the twelve  months ended
December 31, 2001.  Net cash  provided by  financing  activities  for the twelve
months ended  December 31, 2002, was primarily a result of the proceeds from the
exercise of stock options,  which was partially  offset by net repayments of our
bank credit facility.

     We  believe  our  existing   resources  and  anticipated  cash  flows  from
operations, coupled with availability on our credit facility, will be sufficient
to meet our cash needs for the next twelve months.  However, should we pursue an
acquisition larger than our existing resources can support,  we may need to seek
additional debt or equity resources.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The methods,  estimates  and  judgments  we use in applying our  accounting
policies have a significant  impact on the results we report in our consolidated
financial  statements.  We evaluate our  estimates  and judgments on an on-going
basis. We base our estimates on historical experience and on assumptions that we
believe to be reasonable under the circumstances. Our experience and assumptions
form the  basis  for our  judgments  about  the  carrying  value of  assets  and
liabilities that are not readily apparent from other sources. Actual results may
vary from what we anticipate and different  assumptions  or estimates  about the
future could change our reported  results.  We believe the following  accounting
policies  are the  most  critical  to us,  in that  they  are  important  to the

                                       26
<PAGE>
portrayal  of our  financial  statements  and they  require our most  difficult,
subjective or complex judgments in the preparation of our consolidated financial
statements:

     REVENUE  RECOGNITION.  We recognize  revenue  pursuant to Staff  Accounting
Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS.  Accordingly,  we
recognize  revenue and record sales, net of related  discounts,  when all of the
following criteria are met:

     *    Persuasive evidence of an arrangement exists;
     *    Ownership has transferred to the customer;
     *    The price to the customer is fixed or determinable; and
     *    Collectability is reasonably assured.

     We sell  almost  all of our  products  F.O.B.  our  facility,  so that upon
shipment of  products,  the above  criteria  are met and revenue is  recognized.
Additionally,   Rockford  recognizes  revenue  from  the  sale  of  software  in
accordance with SOP 97-2, SOFTWARE REVENUE RECOGNITION. Revenue is recorded from
packaged  software and license fees when  persuasive  evidence of an arrangement
exists,  the  software  product  has  been  shipped,  the  fees  are  fixed  and
determinable, collectibility is reasonably assured and vendor-specific objective
evidence  of fair  value  exists  for any  undeliverable  products  or  services
("elements") of the arrangement.

     We also record  reductions  to revenue for estimated  customer  returns and
additional sales incentive offerings such as growth and volume incentive rebates
and prompt pay discounts based on historical rates.  Should a greater proportion
of customers return product or redeem  incentives than we estimate,  we may need
to make additional reductions to revenue.

     INTANGIBLE  ASSETS.  On January 1, 2002, we adopted  Statement of Financial
Accounting  Standards (SFAS) No. 141, BUSINESS  COMBINATIONS,  and SFAS No. 142,
GOODWILL AND OTHER INTANGIBLE ASSETS. When we account for acquired businesses as
purchases, we allocate purchase prices to the assets,  definite-lived intangible
assets,  and  liabilities  acquired  based on the  estimated  fair values on the
respective  acquisition  dates. Based on these values, any excess purchase price
over the fair value of the net assets acquired is allocated to goodwill

     Prior to January 1, 2002, we amortized goodwill over the useful life of the
underlying  asset,  not to  exceed  15  years.  On  January  1,  2002,  we began
accounting  for goodwill  under the  provisions  of SFAS Nos. 141 and 142. As at
December  31,  2002,  we  had  gross  goodwill  of  $7,291,000  and  accumulated
amortization  of $401,000.  For the year ended  December  31,  2002,  we did not
recognize   amortization   expense   related  to  goodwill.   We  completed  two
acquisitions  in the third  quarter of 2001and  two  acquisitions  in the fourth
quarter of 2002 and have not recorded any amortization for these acquisitions on
amounts  allocated to goodwill in accordance  with SFAS No. 141.  Application of
the  non-amortization  provisions  of SFAS No. 142  resulted  in an  increase in
income from continuing operations before income taxes of approximately  $168,000
for the year ended December 31, 2002.

     In assessing the recoverability of our goodwill and other  intangibles,  we
must make  assumptions  about  estimated  future cash flows and other factors to
determine the fair value of the respective  assets.  If these estimates or their
related  assumptions  change  in  the  future,  we  may be  required  to  record
impairment  charges for these assets not  previously  recorded.  Some factors we
consider  important  which  could  trigger  an  impairment  review  include  the
following:

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

     We  have  tested  goodwill  for  impairment   using  the  two-step  process
prescribed in SFAS No. 142. The first step is a screen for potential impairment,
while the  second  step  measures  the  amount  of the  impairment,  if any.  We
performed the first of the required impairment tests for goodwill as at December
31,  2002,  and  determined  that our  goodwill  is not  impaired  and it is not
necessary to undertake the second step in the two-step process.  During the year
ended  December 31, 2002,  we did not record any  impairment  losses  related to
goodwill and other intangible assets.

                                       27
<PAGE>
     ALLOWANCE  FOR DOUBTFUL  ACCOUNTS.  We maintain an  allowance  for doubtful
accounts,  based on historical  rates,  for estimated  losses resulting from the
inability of our customers to make required payments. If the financial condition
of our  customers  were to  deteriorate,  resulting  in an  impairment  of their
ability to make payments, additional allowances might be required.

     EXCESS  AND  OBSOLETE  INVENTORY.  We  maintain  a  reserve  for  estimated
obsolescence or unmarketable  inventory equal to the difference between the cost
of inventory and the estimated market value based upon assumptions  about future
demand and market  conditions.  If actual future demand or market conditions are
less favorable than those we project,  additional inventory write-downs might be
required. Any change to the reserve arising from forecast revisions is reflected
in cost of sales in the period the revision is made.

     WARRANTY.  We maintain a warranty  reserve,  based on historical rates, for
costs  associated  with the repair or  replacement of product that fails to meet
our standard warranty against defects in material and workmanship. Should actual
product  failure  rates differ from our  estimates,  revisions to our  estimated
accruals would be required.

     NEW  ACCOUNTING  STANDARDS.  In  December  2002,  FASB issued SFAS No. 148,
ACCOUNTING FOR STOCK-BASED  COMPENSATION-TRANSITION AND DISCLOSURE. SFAS No. 148
amends FASB  Statement No. 123,  ACCOUNTING  FOR  STOCK-BASED  COMPENSATION,  to
provide alternative methods of transition to SFAS No. 123's fair value method of
accounting for stock-based employee compensation.  Statement 148 also amends the
disclosure  provisions of SFAS No. 123 and APB Opinion No. 28, INTERIM FINANCIAL
REPORTING,  to  require  disclosure  in the  summary of  significant  accounting
policies  of the  effects  of an  entity's  accounting  policy  with  respect to
stock-based employee  compensation on reported net income and earnings per share
in annual and interim  financial  statements.  While SFAS No. 148 does not amend
SFAS No. 123 to require  companies to account for employee  stock  options using
the fair value method, the disclosure  provisions of SFAS No. 148 are applicable
to all companies with stock-based employee  compensation,  regardless of whether
they account for that  compensation  using the fair value method of SFAS No. 123
or the intrinsic value method of APB Opinion No. 25. As allowed by SFAS No. 123,
we have  elected to  continue to use the  accounting  method  prescribed  by APB
Opinion No. 25 and had adopted the disclosure  requirements  of SFAS No. 123. We
do not expect the adoption of this statement to have an impact on our results of
operations or financial position.

     In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED
WITH EXIT OR DISPOSAL  ACTIVITIES.  SFAS No. 146 supersedes Emerging Issues Task
Force (EITF) No. 94-3,  LIABILITY  RECOGNITION FOR CERTAIN EMPLOYEE  TERMINATION
BENEFITS AND OTHER COSTS TO EXIT AN ACTIVITY  (INCLUDING  CERTAIN COSTS INCURRED
IN A  RESTRUCTURING).  SFAS No. 146  eliminates  the provisions of EITF No. 94-3
that  required  a  liability  to be  recognized  for  certain  exit or  disposal
activities  at the date an  entity  committed  to an exit  plan.  SFAS  No.  146
requires a liability for costs  associated with an exit or disposal  activity to
be recognized when the liability is incurred. SFAS No. 146 is effective for exit
or disposal  activities  that are initiated  after  December 31, 2002. We do not
expect  the  adoption  of this  statement  to have an impact on our  results  of
operations or financial position.

     INFLATION.  Inflation  has not had a significant  impact on our  operations
since we operate in a market that requires continuing price decreases. We do not
anticipate that inflation will not have a significant impact on our operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our primary  market risk  exposures  are in the areas of interest rate risk
and foreign  currency  exchange  rate risk. We do not use  derivative  financial
instruments.  Our  holdings of cash  equivalents  are  subject to interest  rate
fluctuations,  but we  believe  this risk is  immaterial  due to the  short-term
nature of these  investments and the relatively small cash balances we carry. At
December 31, 2002,  we had a balance of $8.5  million  outstanding  on our $30.0
million  bank  credit   facility,   which  is  also  subject  to  interest  rate
fluctuations.

     The value of the U.S.  dollar  affects our  financial  results.  Changes in
exchange rates may positively or negatively affect our revenues,  gross margins,
operating  expenses  and  shareholders'  equity as  expressed  in U.S.  dollars.
Historically, our exposure to currency exchange rate fluctuations was modest due
to the fact that we sold our products  primarily in U.S. dollars and held only a
small  percentage of our assets outside the U.S.  However,  we conduct a growing
portion of our business in foreign  currency and are  increasing our billings in

                                       28
<PAGE>
local  currencies  in Japan,  Canada and Europe.  During 2002,  $22.9 million or
13.5% of our sales were denominated in a currency other than U.S. dollars.

     At December 31, 2002,  we had not engaged in any foreign  currency  hedging
activities,  but instead  have  attempted  to minimize  currency  exposure  risk
through "natural hedges," which balance foreign  denominated assets with foreign
denominated liabilities. There can be no assurance that such an approach will be
successful,  especially if a significant  and sudden decline occurs in the value
of local  currencies.  During the first  quarter of 2003 our Board of  Directors
approved and we began to implement a new foreign  currency  hedging policy.  The
goal of the  program  is to  provide  stability  to the U.S.  Dollar  values  of
non-function  currency  cash flows.  Although it is  impossible to eliminate all
currency  risk,  implementation  of this  program  should  mitigate  the risk of
significant   changes  in  our  earnings  due  to  short-term  foreign  exchange
fluctuations.

                                       29
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

<TABLE>
<S>                                                                                                          <C>
Consolidated Financial Statements of Rockford Corporation and Subsidiaries
Report of Independent Auditors ............................................................................  31
Consolidated Balance Sheets as at December 31, 2001 and 2002 ..............................................  32
Consolidated Statements of Income for the years ended December 31, 2000, 2001 and 2002 ....................  33
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2000, 2001 and 2002 ......  34
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002 ................  35
Notes to Consolidated Financial Statements ................................................................  36
Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts..............................  52
</TABLE>

                                       30
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Rockford Corporation

     We have audited the  accompanying  consolidated  balance sheets of Rockford
Corporation  and  subsidiaries  (Rockford) as of December 31, 2002 and 2001, and
the related  consolidated  statements of income,  shareholders'  equity and cash
flows for the years ended  December  31,  2002,  2001 and 2000.  Our audits also
included the financial  statement  schedule  listed in the Index to Consolidated
Financial  Statements and Schedule.  These financial statements and schedule are
the responsibility of Rockford's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all  material  respects,  the  consolidated  financial  position  of Rockford
Corporation and subsidiaries at December 31, 2002 and 2001, and the consolidated
results of their  operations  and their cash flows for the years ended  December
31, 2002,  2001 and 2000, in conformity  with  accounting  principles  generally
accepted in the United  States.  Also,  in our  opinion,  the related  financial
statement  schedule,   when  considered  in  relation  to  the  basic  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.

                                        /s/ ERNST & YOUNG LLP

Phoenix, Arizona
February 7, 2003, except for Note 15 for which the date is February 19, 2003

                                       31
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                                                    --------------------
                                                                                      2001        2002
                                                                                    --------    --------
                                                                                       (IN THOUSANDS,
                                                                                      EXCEPT SHARE DATA)
<S>                                                                                 <C>         <C>
ASSETS
Current assets:
   Cash and cash equivalents .....................................................  $  2,411    $    304
   Accounts receivable, less allowances of $2,613 and $2,996 at
     December 31, 2001 and 2002, respectively ....................................    28,036      32,890
   Inventories, net ..............................................................    28,165      32,445
   Deferred income taxes .........................................................     4,500       5,160
   Income taxes receivable .......................................................     1,874       1,844
   Prepaid expenses and other ....................................................     3,371       4,395
                                                                                    --------    --------
Total current assets .............................................................    68,357      77,038
Property and equipment, net ......................................................     9,976      15,262
Deferred income taxes ............................................................       394         292
Goodwill, net ....................................................................     6,303       6,890
Other assets .....................................................................       924       1,708
                                                                                    --------    --------
Total assets .....................................................................  $ 85,954    $101,190
                                                                                    ========    ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable ..............................................................  $  9,089    $ 10,753
   Accrued salaries and incentives ...............................................     2,451       1,978
   Accrued warranty ..............................................................     4,815       4,595
   Other accrued expenses ........................................................     5,210       6,105
   Current portion of notes payable, long-term debt and capital
     lease obligations ...........................................................       879       1,253
                                                                                    --------    --------
Total current liabilities ........................................................    22,444      24,684
Notes payable and long-term debt, less current portion ...........................     9,720       8,611
Capital lease obligations, less current portion ..................................       833       1,416
Minority interest ................................................................        --         933
SHAREHOLDERS' EQUITY
   Common stock, $.01 par value. Authorized shares -- 40,000,000
     Issued shares -- 8,196,619 and 8,747,197 shares at December 31,
     2001 and 2002, respectively .................................................        82          87
   Additional paid-in capital ....................................................    30,341      35,131
   Retained earnings .............................................................    22,918      29,198
   Accumulated other comprehensive income (loss) .................................      (384)      1,130
                                                                                    --------    --------
Total shareholders' equity .......................................................    52,957      65,546
                                                                                    --------    --------
Total liabilities and shareholders' equity .......................................  $ 85,954    $101,190
                                                                                    ========    ========
</TABLE>

                             See accompanying notes.

                                       32
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                   ---------------------------------
                                                      2000        2001        2002
                                                   ---------   ---------   ---------
                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                <C>         <C>         <C>
Net sales .......................................  $ 144,640   $ 157,752   $ 168,918
Cost of goods sold ..............................     92,533     103,904     107,747
                                                   ---------   ---------   ---------
Gross profit ....................................     52,107      53,848      61,171
Operating expenses:
  Sales and marketing ...........................     22,709      24,228      27,370
  General and administrative ....................     13,036      15,771      17,718
  Research and development ......................      2,831       3,322       6,014
                                                   ---------   ---------   ---------
Total operating expenses ........................     38,576      43,321      51,102
                                                   ---------   ---------   ---------
Operating income ................................     13,531      10,527      10,069
Other (income) expense:
  Interest ......................................        793         455         528
  Other (income) expense ........................         14          93        (602)
                                                   ---------   ---------   ---------
Income before income taxes ......................     12,724       9,979      10,143
Income tax expense ..............................      4,714       3,756       3,903
                                                   ---------   ---------   ---------
Income before minority interest .................      8,010       6,223       6,240
Minority interest ...............................         --          --         (40)
                                                   ---------   ---------   ---------
Net income ......................................  $   8,010   $   6,223   $   6,280
                                                   =========   =========   =========
Net income per common share:
  Basic .........................................  $    1.17   $    0.77   $    0.74
                                                   =========   =========   =========
  Diluted .......................................  $    1.00   $    0.70   $    0.68
                                                   =========   =========   =========
Weighted average shares:
  Basic .........................................      6,864       8,109       8,540
                                                   =========   =========   =========
  Diluted .......................................      8,009       8,913       9,301
                                                   =========   =========   =========
</TABLE>

                             See accompanying notes.

                                       33
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                        ACCUMULATED
                                                       COMMON STOCK          ADDITIONAL                    OTHER
                                                  ----------------------      PAID-IN       RETAINED   COMPREHENSIVE
                                                   SHARES        AMOUNT       CAPITAL       EARNINGS    INCOME (LOSS)    TOTAL
                                                  --------      --------      --------      --------    -------------   --------
                                                                                  (IN THOUSANDS)
<S>                                               <C>           <C>           <C>           <C>        <C>              <C>
Balance at December 31, 1999 ...................     4,753            48         3,686         8,685           338        12,757
  Currency translation .........................        --            --            --            --          (285)         (285)
  Net income ...................................        --            --            --         8,010            --         8,010
                                                                                                                        --------
  Comprehensive income .........................                                                                           7,725
                                                                                                                        --------
  Issuance of shares from
    Initial Public Offering ....................     2,543            25        24,077            --            --        24,102
  Conversion of subordinated debt to
    common stock ...............................       400             4           972            --            --           976
  Exercise of stock options ....................       190             2           535            --            --           537
  Issuance of shares for employee
    stock purchase plan ........................        33            --           135            --            --           135
  Exercise of warrants .........................        78             1            99            --            --           100
                                                  --------      --------      --------      --------      --------      --------
Balance at December 31, 2000 ...................     7,997            80        29,504        16,695            53        46,332
  Currency translation .........................        --            --            --            --          (437)         (437)
  Net income ...................................        --            --            --         6,223            --         6,223
                                                                                                                        --------
  Comprehensive income .........................                                                                           5,786
                                                                                                                        --------
  Exercise of stock options ....................       149             1           440            --            --           441
  Issuance of shares for employee
    stock purchase plan ........................        51             1           397            --            --           398
                                                  --------      --------      --------      --------      --------      --------
Balance at December 31, 2001 ...................     8,197      $     82      $ 30,341      $ 22,918      $   (384)     $ 52,957
  Currency translation .........................        --            --            --            --         1,514         1,514
  Net income ...................................        --            --            --         6,280            --         6,280
                                                                                                                        --------
  Comprehensive income .........................                                                                           7,794
                                                                                                                        --------
  Exercise of stock options ....................       500             5         1,039            --            --         1,044
  Tax benefit related to
    non-qualified option exercises .............        --            --         3,453            --            --         3,453
  Issuance of shares for employee
    stock purchase plan ........................        50            --           298            --            --           298
                                                  --------      --------      --------      --------      --------      --------
Balance at December 31, 2002 ...................     8,747      $     87      $ 35,131      $ 29,198      $  1,130      $ 65,546
                                                  ========      ========      ========      ========      ========      ========
</TABLE>

                             See accompanying notes.

                                       34
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED DECEMBER 31,
                                                                                 --------------------------------
                                                                                   2000        2001        2002
                                                                                 --------    --------    --------
                                                                                          (IN THOUSANDS)
<S>                                                                              <C>         <C>         <C>
OPERATING ACTIVITIES
Net income ....................................................................  $  8,010    $  6,223    $  6,280
Adjustments to reconcile net income to net cash provided by
  (used in) operating activities:
    Depreciation and amortization .............................................     3,396       3,880       4,475
    Gain on sale of property and equipment ....................................        (3)         (6)        (10)
    Deferred income tax .......................................................      (251)        834         (95)
    Provision for doubtful accounts ...........................................       249         969         861
    Provision for inventory allowances ........................................       616       1,332       1,490
    Minority interest .........................................................        --          --         (40)
    Changes in operating assets and liabilities:
      Accounts receivable .....................................................    (7,656)      2,359      (4,757)
      Inventories .............................................................    (6,096)     (3,403)     (4,616)
      Prepaid expenses and other ..............................................       657        (522)        782
      Accounts payable ........................................................      (324)      1,093        (105)
      Accrued salaries and incentives .........................................    (2,507)     (1,743)       (473)
      Accrued warranty ........................................................     1,109        (113)       (265)
      Income taxes payable (receivable) .......................................       130      (2,334)      1,045
      Other accrued expenses ..................................................       181      (1,020)        343
                                                                                 --------    --------    --------
Net cash provided by (used in) operating activities ...........................    (2,489)      7,549       4,915

INVESTING ACTIVITIES
Purchases of property and equipment ...........................................    (3,851)     (5,300)     (6,751)
Proceeds from sale of property and equipment ..................................         3           6          10
Acquisitions of business, net of cash acquired ................................        --     (11,292)     (2,413)
Decrease (increase) in other assets ...........................................      (252)        123        (572)
                                                                                 --------    --------    --------
Net cash used in investing activities .........................................    (4,100)    (16,463)     (9,726)

FINANCING ACTIVITIES
Net proceeds from notes payable and long-term debt ............................       249       1,122       1,723
Proceeds from (payments on) notes payable
  and long-term debt ..........................................................   (15,719)      7,910      (1,109)
(Payments on) capital lease obligations .......................................      (697)       (859)       (766)
Proceeds from initial public offering .........................................    24,102          --          --
Proceeds from employee stock purchase plan ....................................       135         398         298
Proceeds from exercise of stock options and warrants ..........................       637         441       1,044
                                                                                 --------    --------    --------
Net cash provided by financing activities .....................................     8,707       9,012       1,190
Effect of exchange rate changes on cash .......................................      (285)       (437)      1,514
                                                                                 --------    --------    --------
Net increase (decrease) in cash and cash equivalents ..........................     1,833        (339)     (2,107)
Cash and cash equivalents at beginning of year ................................       917       2,750       2,411
                                                                                 --------    --------    --------
Cash and cash equivalents at end of year ......................................  $  2,750    $  2,411    $    304
                                                                                 ========    ========    ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Conversion of subordinated debt to common stock ...............................  $    976    $     --    $     --
                                                                                 ========    ========    ========
</TABLE>

                             See accompanying notes.

                                       35
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ACCOUNTING POLICIES

ORGANIZATION AND DESCRIPTION OF BUSINESS

     Rockford   Corporation   and   subsidiaries   (Rockford)   is  a  designer,
manufacturer and distributor of high performance  mobile audio systems under the
Rockford Fosgate, Lightning Audio, Q-Logic, MB Quart and NHT brand names for the
worldwide  mobile audio  aftermarket.  Rockford  also sells  professional  audio
products  under the NHT, MB Quart and Hafler brand names and home theater  audio
products under the NHT, MB Quart and Fosgate Audionics brand names. Rockford was
organized  and  incorporated  under the laws of the State of Arizona on July 22,
1980.  Corporate  headquarters  are  located  in Tempe,  Arizona.  Manufacturing
facilities are located in Tempe, Arizona;  Grand Rapids,  Michigan;  Stillwater,
Oklahoma; and Obrigheim, Germany. Rockford uses warehouses located in the United
States, Germany, Singapore and Japan.

     During  April 1999,  the Board of Directors  authorized  Rockford to file a
registration  statement for an initial  public  offering of shares of its common
stock. On June 28, 1999, the shareholders  approved an increase in the number of
authorized  common  shares to  40,000,000.  Effective  August 2, 1999,  Rockford
executed a 4.3-for-1 common stock split. All share  information in the financial
statements has been restated to reflect the effect of the stock split.  On April
20, 2000, Rockford completed its initial public offering.

PRINCIPLES OF CONSOLIDATION

     The consolidated  financial statements include the accounts of Rockford and
its wholly owned  subsidiaries  in the United  States,  Germany,  Singapore  and
Japan.  Significant  intercompany accounts and transactions have been eliminated
in consolidation.

CASH AND CASH EQUIVALENTS

     Cash and cash  equivalents  consist of cash and highly  liquid  investments
with  remaining  maturities  of three months or less when  acquired.  Rockford's
investments  have consisted of commercial  paper,  certificates  of deposit with
original maturities of three months or less and money market accounts.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     At December 31, 2002,  Rockford has the  following  financial  instruments:
cash  and cash  equivalents,  accounts  receivable,  accounts  payable,  accrued
expenses,  notes  payable,  long-term  debt and capital lease  obligations.  The
carrying  value of cash  and cash  equivalents,  accounts  receivable,  accounts
payable  and  accrued  expenses  approximates  their  fair  value  based  on the
liquidity of these financial  instruments or based on their  short-term  nature.
The carrying  value of capital  lease  obligations,  notes payable and long-term
debt  approximates  fair value based on the market  interest rates  available to
Rockford for debt of similar risk and maturities.

REVENUE RECOGNITION

     Rockford  recognizes  revenue and records sales, net of related  discounts,
when all of the following criteria are met:

     *    Persuasive evidence of an arrangement exists;
     *    Ownership has transferred to the customer;
     *    The price to the customer is fixed or determinable; and
     *    Collectability is reasonably assured.

Upon shipment of products, the above criteria are met and revenue is recognized.

                                       36
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Additionally,  Rockford  recognizes  revenue  from the sale of  software in
accordance with SOP 97-2, SOFTWARE REVENUE RECOGNITION. Revenue is recorded from
packaged  software and license fees when  persuasive  evidence of an arrangement
exists,  the  software  product  has  been  shipped,  the  fees  are  fixed  and
determinable, collectibility is reasonably assured and vendor-specific objective
evidence  of  fair  value  exists  for  any  undelivered  products  or  services
("elements") of the arrangement.

     Rockford also records  reductions to revenue for estimated customer returns
and additional  sales  incentive  offerings such as growth and volume  incentive
rebates and prompt pay  discounts  based on historical  rates.  Should a greater
proportion of customers  return product or redeem  incentives  than estimated by
Rockford, Rockford may be required to make additional reductions to revenue.

SHIPPING AND HANDLING COSTS

     Rockford  records product shipping costs as freight expense in direct sales
and marketing expense. Customers are billed for shipping, which is then recorded
as a recovery of freight,  or reduction of freight expense.  However,  customers
are often eligible for a freight discount, depending on the size of the order or
payment  terms.  Freight  discounts  taken by  customers  reduce the recovery of
freight  expense.  Handling  costs  charged to customers  are  minimal.  Freight
expense for the years ended December 31, 2000,  2001 and 2002 was  approximately
$3,061,000, $3,978,000 and $5,469,000, respectively.

ACCOUNTS RECEIVABLE

     Rockford sells its products  principally to mobile audio,  home audio,  and
professional audio dealers primarily in North America, South America, Europe and
Asia. Rockford also sells certain portions of its product line to a large retail
reseller of consumer  electronics in the United States. At December 31, 2001 and
2002, net accounts receivable includes approximately  $4,580,000 and $7,436,000,
respectively, due from overseas businesses.

     Rockford maintains an allowance for doubtful accounts,  based on historical
rates,  for estimated  losses  resulting  from the inability of its customers to
make  required  payments.  Rockford has included in the  allowance  for accounts
receivable  at  December  31,  2001  and  2002,   approximately  $1,812,000  and
$2,262,000,  respectively,  for doubtful accounts. If the financial condition of
Rockford's  customers were to  deteriorate,  resulting in an impairment of their
ability to make payments, additional allowances might be required.

     Rockford also maintains  allowances  for prompt pay and freight  discounts,
based on historical  rates for discounts  offered to customers for invoices paid
under 40 to 60 days of  issuance.  Rockford has  included in its  allowance  for
accounts  receivable at December 31, 2001 and 2002,  approximately  $673,000 and
$734,000, respectively, with respect to customers expected to use such discounts
after year-end. Should a greater proportion of customers take advantage of these
discounts than estimated by Rockford,  additional reductions to revenue might be
required.

INVENTORIES

     Inventories   consist  principally  of  raw  materials  of  electronic  and
mechanical components used in the manufacturing of amplifier and speaker systems
and finished goods. Inventories are carried at the lower of cost or market.

     Rockford  maintains a reserve for estimated  obsolescence  or  unmarketable
inventory  equal  to the  difference  between  the  cost  of  inventory  and the
estimated  market value based upon  assumptions  about future  demand and market
conditions. If actual future demand or market conditions are less favorable than
those Rockford projected, additional inventory write-downs might be required.

                                       37
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PROPERTY AND EQUIPMENT

     Property and equipment is stated at cost. Depreciation and amortization are
computed  principally  on  the  straight-line  method  for  financial  reporting
purposes  over a two to ten year life.  The  building  acquired  in the MB Quart
acquisition,  located in Obrigheim,  Germany, is being depreciated over a period
of 25 years.  Leasehold  improvements are amortized on the straight-line  method
over the shorter  period of the lease term or the  estimated  useful life of the
asset.

IMPAIRMENT OF LONG-LIVED ASSETS

     In  accordance  with  the  Financial   Accounting  Standards  Board  (FASB)
Statement of Financial  Accounting  Standards (SFAS) No. 144, ACCOUNTING FOR THE
IMPAIRMENT OF  LONG-LIVED  ASSETS AND FOR  LONG-LIVED  ASSETS TO BE DISPOSED OF.
Rockford records  impairment losses on long-lived assets used in operations when
events and  circumstances  indicate  that the assets  might be impaired  and the
undiscounted  cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets. Impairment, if any, is based on the excess
of the  carrying  amount over the fair value of those  assets and is recorded in
the period in which the determination is made.

INTANGIBLE ASSETS

     On January 1, 2002,  Rockford adopted SFAS No. 141,  BUSINESS  COMBINATION,
and SFAS No. 142,  GOODWILL  AND OTHER  INTANGIBLE  ASSETS.  Purchase  prices of
acquired  businesses  that are accounted for as purchases have been allocated to
the assets and  liabilities  acquired  based on the estimated fair values on the
respective  acquisition dates. Based on these values, the excess purchase prices
over the fair value of the net assets acquired were allocated to goodwill.

     Prior to January 1, 2002,  Rockford amortized goodwill over the useful life
of the underlying  asset,  not to exceed 15 years. On January 1, 2002,  Rockford
began  accounting for goodwill under the provisions of SFAS Nos. 141 and 142 and
discontinued the amortization of goodwill. As at December 31, 2002, Rockford had
gross goodwill of $7,291,000 and accumulated  amortization of $401,000.  For the
year ended December 31, 2002,  Rockford did not recognize  amortization  expense
related to goodwill. Rockford completed two acquisitions in the third quarter of
2001 and two acquisitions in the fourth quarter of 2002 and has not recorded any
amortization  for  these  acquisitions  on  amounts  allocated  to  goodwill  in
accordance with SFAS No. 141. Application of the non-amortization  provisions of
SFAS No. 142 resulted in an increase in income from continuing operations before
income taxes of approximately $168,000 for the year ended December 31, 2002.

     In  assessing  the   recoverability   of  Rockford's   goodwill  and  other
intangibles,  Rockford must make  assumptions  regarding  estimated  future cash
flows and other factors to determine the fair value of the respective assets. If
these estimates or their related assumptions change in the future,  Rockford may
be  required  to record  impairment  charges  for these  assets  not  previously
recorded.  Some factors  considered  important which could trigger an impairment
review include the following:

     *    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;
     *    Rockford's market capitalization relative to net book value; and
     *    Significant negative industry or economic trends.

     Rockford has tested  goodwill  for  impairment  using the two-step  process
prescribed in SFAS No. 142. The first step is a screen for potential impairment,
while the second step measures the amount of the  impairment,  if any.  Rockford
performed the first of the required impairment tests for goodwill as of December
31, 2002 and determined that goodwill is not impaired and it is not necessary to
record any impairment losses related to goodwill and other intangible assets.

                                       38
<PAGE>
                     ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Net income, basic earnings per share and diluted earnings per share for the
years ended December 31, 2000, 2001 and 2002, respectively,  adjusted to exclude
amortization expense no longer required due to the adoption of SFAS No. 142, are
as follows (net of tax, in thousands, except per share data):

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                       ---------------------------------------
                                                          2000           2001           2002
                                                       ---------      ---------      ---------
                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                    <C>            <C>            <C>
   Reported net income ..............................  $   8,010      $   6,223      $   6,280
     Add back: goodwill amortization ................        102            107             --
                                                       ---------      ---------      ---------
   Adjusted net income ..............................  $   8,112      $   6,330      $   6,280
                                                       =========      =========      =========

   Reported earnings per share - basic ..............  $    1.17      $    0.77      $    0.74
     Add back: goodwill amortization ................       0.01           0.01             --
                                                       ---------      ---------      ---------
   Adjusted earnings per share - basic ..............  $    1.18      $    0.78      $    0.74
                                                       =========      =========      =========

   Reported earnings per share - diluted ............  $    1.00      $    0.70      $    0.68
     Add back: goodwill amortization ................       0.01           0.01             --
                                                       ---------      ---------      ---------
   Adjusted earnings per share - diluted ............  $    1.01      $    0.71      $    0.68
                                                       =========      =========      =========
</TABLE>

ADVERTISING

     Rockford  expenses  advertising  as incurred.  Advertising  expense for the
years ended  December  31,  2000,  2001 and 2002 was  approximately  $1,948,000,
$1,912,000 and $2,365,000, respectively.

INCOME TAXES

     Rockford  accounts for income taxes under the  provisions  of SFAS No. 109,
ACCOUNTING FOR INCOME TAXES.  Under this method,  deferred  income taxes reflect
the net tax effects of temporary  differences  between the  carrying  amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes.

NET INCOME PER COMMON SHARE

     Rockford  reports net income per common share in  accordance  with SFAS No.
128,  EARNINGS  PER SHARE.  Diluted net income per share  includes  the dilutive
effects of options, warrants and convertible securities.

SIGNIFICANT CUSTOMER

     Rockford has sales to one customer  representing 16.7 percent, 16.3 percent
and 21.1 percent of net sales for the years ended  December  31, 2000,  2001 and
2002, respectively.

                                       39
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FOREIGN CURRENCY TRANSLATION

     The financial  statements of foreign subsidiaries have been translated into
U.S. dollars in accordance with SFAS No. 52, FOREIGN CURRENCY  TRANSLATION.  All
balance sheet accounts have been translated  using the current exchange rates at
the balance sheet date.  Income statement amounts have been translated using the
average  exchange  rate for the year.  The gains and losses  resulting  from the
change in exchange rates from  year-to-year  have been reported  separately as a
component of  stockholders'  equity.  The effect on the  statements of income of
transaction gains and losses is insignificant.

STOCK BASED COMPENSATION

     Rockford  grants  stock  options for a fixed  number of shares to employees
with an  exercise  price equal to the fair value of the shares at date of grant.
Fair value of the  underlying  shares is  determined  by the market price at the
date of the  grant.  Rockford  accounts  for stock  options in  accordance  with
Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and related Interpretations. Rockford has adopted the disclosure-only
provisions  of SFAS  No.  123,  ACCOUNTING  FOR  STOCK-BASED  COMPENSATION,  and
accordingly,  recognizes no  compensation  expense for the employee stock option
grants.  Stock option grants to non-employees  are charged to expense based upon
the fair value of the options granted.

     The following  table  represents  the effect on net income and earnings per
share if  Rockford  had  applied  the fair value  based  method and  recognition
provisions  of  SFAS  No.  123,  ACCOUNTING  FOR  STOCK-BASED  COMPENSATION,  to
stock-based employee compensation:

                                                YEAR ENDED DECEMBER 31,
                                             -----------------------------
                                               2000       2001       2002
                                             -------    -------    -------
                                                 (IN THOUSANDS, EXCEPT
                                                    PER SHARE DATA)

     Net income as reported ...............  $ 8,010    $ 6,223    $ 6,280
     Proforma SFAS No. 123 expense ........     (248)      (327)      (327)
                                             -------    -------    -------
     Proforma net income ..................  $ 7,762    $ 5,896    $ 5,953
                                             =======    =======    =======
     Proforma income per common share
       Basic ..............................  $  1.13    $  0.74    $  0.70
                                             =======    =======    =======
       Diluted ............................  $   .97    $  0.66    $  0.64
                                             =======    =======    =======

     For  purposes  of proforma  disclosures,  the  estimated  fair value of the
options is amortized to expense over the option's vesting period. See Note 8 for
further discussion of Rockford's stock-based employee compensation.

USE OF ESTIMATES

     The  preparation of  consolidated  financial  statements in conformity with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts  reported in the consolidated  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

RECLASSIFICATIONS

     Certain  reclassifications have been made to the 2000 and 2001 consolidated
financial statements to conform them to the 2002 presentation.

                                       40
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS

     In December  2002,  FASB issued SFAS No. 148,  ACCOUNTING  FOR  STOCK-BASED
COMPENSATION-TRANSITION  AND DISCLOSURE.  SFAS No. 148 amends FASB Statement No.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION,  to provide alternative methods of
transition  to SFAS No. 123's fair value method of  accounting  for  stock-based
employee  compensation.  Statement 148 also amends the disclosure  provisions of
SFAS No. 123 and APB Opinion No. 28,  INTERIM  FINANCIAL  REPORTING,  to require
disclosure in the summary of significant  accounting  policies of the effects of
an entity's accounting policy with respect to stock-based employee  compensation
on reported net income and  earnings  per share in annual and interim  financial
statements.  While SFAS No. 148 does not amend SFAS No. 123 to require companies
to  account  for  employee  stock  options  using  the fair  value  method,  the
disclosure  provisions  of SFAS No. 148 are  applicable  to all  companies  with
stock-based employee  compensation,  regardless of whether they account for that
compensation  using the fair value method of SFAS No. 123 or the intrinsic value
method of APB Opinion No. 25. As allowed by SFAS No. 123,  Rockford  has elected
to continue to use the  accounting  method  prescribed by APB Opinion No. 25 and
had adopted the disclosure requirements of SFAS No. 123.

     In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED
WITH EXIT OR DISPOSAL  ACTIVITIES.  SFAS No. 146 supersedes Emerging Issues Task
Force (EITF) No. 94-3,  LIABILITY  RECOGNITION FOR CERTAIN EMPLOYEE  TERMINATION
BENEFITS AND OTHER COSTS TO EXIT AN ACTIVITY  (INCLUDING  CERTAIN COSTS INCURRED
IN A  RESTRUCTURING).  SFAS No. 146  eliminates  the provisions of EITF No. 94-3
that  required  a  liability  to be  recognized  for  certain  exit or  disposal
activities  at the date an  entity  committed  to an exit  plan.  SFAS  No.  146
requires a liability for costs  associated with an exit or disposal  activity to
be recognized when the liability is incurred. SFAS No. 146 is effective for exit
or disposal activities that are initiated after December 31, 2002. Rockford does
not expect the  adoption of this  statement  to have an impact on its results of
operations or financial position.

2.   ACQUISITIONS

     NOW HEAR THIS (NHT). On December 26, 2002,  Rockford  acquired the NHT (Now
Hear This) business and assets from Recoton Corporation. The assets acquired and
liabilities  assumed  were  recorded  at their  fair  values  at the date of the
acquisition.  The  remaining  portion  of the  purchase  price was  assigned  to
goodwill in the amount of $261,000.  The acquisition was accounted for using the
purchase method of accounting, and accordingly, the results of operations of NHT
were  included  in  Rockford's  consolidated  results  of  operations  beginning
December 26, 2002. The acquisition was not significant under the requirements of
the Securities and Exchange Commission.

     SIMPLEDEVICES,  INC. On October 17,  2002,  Rockford  purchased  63,336,955
shares  of  common  stock  of   SimpleDevices,   Inc.  These  shares   represent
approximately 76% of SimpleDevices'  outstanding common stock as at December 31,
2002.  Rockford's  investment of $3.5 million was paid to SimpleDevices,  not to
its  shareholders,  and is being  used for  working  capital,  the  payment of a
convertible promissory note and for other corporate purposes.  Rockford financed
the  investment  price  using  borrowings  from its line of  credit.  The assets
acquired and liabilities  assumed were recorded at their fair values at the date
of  acquisition.  The  remaining  portion of the purchase  price was assigned to
goodwill in the amount of $563,000.  The acquisition was accounted for using the
purchase  method of accounting,  and  accordingly,  the results of operations of
SimpleDevices  were  included in Rockford's  consolidated  results of operations
effective October 1, 2002, excluding minority interest.  The acquisition was not
significant under the requirements of the Securities and Exchange Commission.

                                       41
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     MB QUART.  On  September  1,  2001,  Rockford  acquired  MB Quart GmbH as a
subsidiary of  Rockford's  existing  German  subsidiary,  Rockford  Europe GmbH.
Through  MB Quart  GmbH,  Rockford  entered  into  agreements  with  Dr.  Werner
Schreiber,  a  receiver  appointed  under  German  bankruptcy  law to manage the
business  of MB Quart  Akustik  GmbH.  Under  these  agreements,  MB Quart  GmbH
acquired substantially all of the operating assets of MB Quart Akustik GmbH, and
Rockford directly acquired all of the stock of the U.S.  subsidiary,  M.B. Quart
Electronics  (USA), Inc. Rockford paid approximately $6 million for all of these
assets.  Rockford  financed  the  purchase  price,  as well as  working  capital
requirements  for this  acquired  business,  using  borrowings  from its line of
credit. The assets acquired and liabilities  assumed were recorded at their fair
values at the date of acquisition.  The remaining  portion of the purchase price
was assigned to property and equipment with $248,000 being assigned to goodwill.
The  acquisition  was accounted for using the purchase  method of accounting and
accordingly,  the results of  operations of MB Quart were included in Rockford's
consolidated   results  of  operations  beginning  on  September  1,  2001.  The
acquisition  was not  significant  under the  requirements of the Securities and
Exchange Commission.

     AUDIO  INNOVATIONS.   On  August  1,  2001,  Rockford  acquired  the  Audio
Innovations business by purchasing all of the outstanding shares of common stock
of  Audio  Innovations,  Inc.,  an  Oklahoma  corporation.   Rockford  paid  the
shareholders of Audio Innovations $4 million ($3.8 million cash and $0.2 million
payable to the selling  shareholders) at the closing and paid approximately $1.9
million to settle outstanding Audio Innovations debt.  Rockford also anticipates
making  payments of $500,000  to the selling  shareholders  over the three years
after the closing if Audio Innovations meets agreed upon profitability and sales
goals; during 2002 Rockford paid $161,000 of this amount.  Rockford financed the
purchase price using borrowings from its line of credit. The assets acquired and
liabilities  assumed  were  recorded  at  their  fair  values  at  the  date  of
acquisition  with  $3.9  million  recorded  as  goodwill.  The  acquisition  was
accounted  for using the purchase  method of  accounting  and  accordingly,  the
results  of  operations  of  Audio   Innovations  were  included  in  Rockford's
consolidated  results of operations beginning on August 1, 2001. The acquisition
was not  significant  under the  requirements  of the  Securities  and  Exchange
Commission.

     LIGHTNING AUDIO. On June 30, 1999, Rockford completed an acquisition of all
of the common  stock of  Lightning  Audio.  Under the terms of the  acquisition,
Rockford paid $1,550,000 in cash and recorded an additional  $50,000 of purchase
consideration  obligations for a total purchase price of $1.6 million. Under the
terms of the  acquisition,  Rockford paid  $600,000 of additional  consideration
over two years  subsequent  to the  purchase  of  Lightning  Audio  based on the
achievement of certain performance goals.  Through December 31, 1999, the former
owners of Lightning Audio had earned $274,000 in additional  consideration.  The
remaining  $326,000 was earned in the year ending  December  31, 2000.  Rockford
recorded  approximately  $2,027,000  of  goodwill  with  respect to the  initial
purchase  and the  additional  consideration  paid  during  1999 and 2000.  This
goodwill was being  amortized over 15 years until January 1, 2002, at which time
Rockford began accounting for the goodwill under the provisions of SFAS Nos. 141
and 142. The  acquisition  has been  accounted for under the purchase  method of
accounting and,  accordingly,  the results of operations of Lightning Audio have
been included in Rockford's  consolidated results of operation beginning on July
1, 1999. The  acquisition  was not  significant  under the  requirements  of the
Securities and Exchange Commission.

3.   INVENTORIES

     Inventories consisted of the following:

                                       DECEMBER 31,
                                  --------------------
                                    2001        2002
                                  --------    --------
                                     (IN THOUSANDS)

     Raw materials .............  $  9,361    $  9,053
     Work in progress ..........     1,424       2,330
     Finished goods ............    20,263      24,386
                                  --------    --------
                                    31,048      35,769
     Less allowances ...........    (2,883)     (3,324)
                                  --------    --------
                                  $ 28,165    $ 32,445
                                  ========    ========

                                       42
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4.   PROPERTY AND EQUIPMENT

     Property and equipment consisted of the following:

                                                                DECEMBER 31,
                                                           --------------------
                                                             2001        2002
                                                           --------    --------
                                                              (IN THOUSANDS)

     Land ...............................................  $    398    $    421
     Building ...........................................     1,138       1,195
     Machinery and equipment ............................    16,050      19,500
     Tooling equipment ..................................     7,839       9,331
     Leasehold improvements .............................     2,822       3,152
     Furniture and fixtures .............................     1,617       2,249
     Computer software ..................................        --       2,663
     Construction in process ............................     1,592       2,846
                                                           --------    --------
                                                             31,456      41,357
     Less accumulated depreciation and amortization .....   (21,480)    (26,095)
                                                           --------    --------
                                                           $  9,976    $ 15,262
                                                           ========    ========

     Unamortized computer software of $2,663,000 was acquired in connection with
the  SimpleDevices  acquisition.  Amortization  expense of $78,000 was  incurred
since the effective date of acquisition of October 1, 2002.

5.   NOTES PAYABLE AND LONG-TERM DEBT

     Notes payable and long-term debt consisted of the following:

                                                                DECEMBER 31,
                                                             ------------------
                                                               2001       2002
                                                             -------    -------
                                                               (IN THOUSANDS)
     $30,000,000 line of credit with a lender
       collateralized by substantially all assets.
       Swing line and revolving line interest payments
       at Prime and LIBOR plus 150 basis points,
       respectively. All remaining principal and interest
       is due and payable June 2004. Borrowings under
       this line of credit are limited to a borrowing
       base as defined and adjusted in the agreement ......  $ 9,300    $ 8,461
     Other ................................................      500        339
                                                             -------    -------
                                                               9,800      8,800
     Less current portion .................................      (80)      (189)
                                                             -------    -------
                                                             $ 9,720    $ 8,611
                                                             =======    =======

     Annual  maturities of notes  payable and long-term  debt for the five years
succeeding  December 31,  2002,  are  $189,000 in 2003 and  $8,611,000  in 2004.
Interest  payments were  approximately  $793,000,  $455,000 and $571,000 for the
years ended December 31, 2000, 2001 and 2002, respectively.

     At December 31, 2002, Rockford had $21,539,000 available on its $30,000,000
bank credit facility. This credit facility contains covenants that place various
restrictions  on  financial   ratios,   levels  of   indebtedness   and  capital
expenditures, among other things. Management believes Rockford was in compliance
with all debt covenants at December 31, 2002.

                                       43
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.   LEASES

     Rockford  leases  equipment  under  capital  leases.  Rockford  also leases
certain  manufacturing,  warehouse and office facilities,  and computer hardware
and software under  noncancelable  operating leases that expire in various years
through August 2007.

     Property and equipment  includes the following amounts for leases that have
been capitalized:

                                                           DECEMBER 31,
                                                     ----------------------
                                                       2001           2002
                                                     -------        -------
                                                         (IN THOUSANDS)

     Equipment ....................................  $ 5,571        $ 7,179
     Less accumulated amortization ................   (3,785)        (5,038)
                                                     -------        -------
                                                     $ 1,786        $ 2,141
                                                     =======        =======

     Amortization of leased assets is included in depreciation  and amortization
expense.

     During  the years  ended  December  31,  2001 and 2002,  Rockford  acquired
approximately  $1,276,000  and  $1,608,000 of equipment  under  capital  leases,
respectively.

     Future minimum  payments under capital leases and  noncancelable  operating
leases with  initial  terms of one year or more  consisted  of the  following at
December 31, 2002:

                                                     CAPITAL       OPERATING
                                                     LEASES         LEASES
                                                     -------        -------
                                                        (IN THOUSANDS)

     2003 .........................................  $ 1,147        $ 2,521
     2004 .........................................      938          1,670
     2005 .........................................      582            708
     2006 .........................................       --            344
     2007 .........................................       --            595
                                                     -------        -------
     Total minimum lease payments .................    2,667        $ 5,838
                                                                    =======
     Less amounts representing interest ...........     (187)
                                                     -------
     Present value of net minimum lease ...........    2,480
     Less current portion .........................   (1,064)
                                                     -------
                                                     $ 1,416
                                                     =======

     Total rental expense for all operating leases was approximately $2,032,000,
$2,545,000 and $2,800,000 for the years ended December 31, 2000,  2001 and 2002,
respectively.

                                       44
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7.   INCOME TAXES

     Significant components of Rockford's deferred tax assets are:

                                                            DECEMBER 31,
                                                        -------------------
                                                         2001         2002
                                                        ------       ------
                                                          (IN THOUSANDS)
     Deferred tax assets:
       Inventory basis ..........................       $  728       $1,382
       Basis in receivables .....................          829        1,243
       Book over tax depreciation ...............          394          292
       Accrued warranty .........................        1,790        1,646
       Net operating loss carryforward ..........          280          284
       Accrued liabilities and other ............          954          605
                                                        ------       ------
     Total deferred tax assets ..................       $4,894       $5,452
                                                        ======       ======

     At December 31, 2002, Rockford had federal net operating loss carryforwards
for federal income tax purposes of approximately  $1,927,000 which will begin to
expire in 2011 if not  previously  utilized.  All of the net  operating  loss is
attributable to Rockford's  acquisition of M.B. Quart Electronics  (USA), Inc in
2001.  As such,  it is limited for tax  purposes  under  Internal  Revenue  Code
section 382, which limits the annual  utilization of net operating  losses.  The
deferred  tax asset  relating  to the net  operating  losses is shown net of the
estimated amount that will expire as a result of this annual limitation.

     Significant  components  of  the  federal  and  state  income  tax  expense
(benefit) are:

                                                YEAR ENDED DECEMBER 31,
                                             -----------------------------
                                               2000       2001       2002
                                             -------    -------    -------
                                                    (IN THOUSANDS)
     Current:
       Federal expense ...................   $ 4,472    $ 3,060    $ 3,693
       State expense .....................       423         59        326
       Foreign expense (benefit) .........        70        (88)       206
                                             -------    -------    -------
     Total current expense ...............     4,965      3,031      4,225
     Deferred:
       Federal expense (benefit) .........      (233)       671       (305)
       State expense (benefit) ...........       (18)        54        (17)
                                             -------    -------    -------
     Total deferred expense (benefit) ....      (251)       725       (322)
                                             -------    -------    -------
                                             $ 4,714    $ 3,756    $ 3,903
                                             =======    =======    =======

                                       45
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     A  reconciliation  of Rockford's  effective  income tax rate to the federal
statutory rate follows:

                                                YEAR ENDED DECEMBER 31,
                                             -----------------------------
                                               2000       2001       2002
                                             -------    -------    -------
                                                    (IN THOUSANDS)
     Federal statutory rate ..............   $ 4,453    $ 3,493    $ 3,550
     State tax net of federal benefit ....       273         64        178
     Nondeductible items .................       231        148        103
     Higher (lower) foreign tax rates ....       (99)       267        149
     ETI benefit .........................      (107)      (129)       (31)
     Other, net ..........................       (37)       (87)       (46)
                                             -------    -------    -------
                                             $ 4,714    $ 3,756    $ 3,903
                                             =======    =======    =======

     Rockford's  income (loss)  attributable to foreign  operations  amounted to
approximately $285,000, $(969,000) and $164,000 for the years ended December 31,
2000, 2001 and 2002, respectively.

     For the years ended  December 31, 2000,  2001 and 2002,  Rockford  made tax
payments of $5,305,000 (net of $524,000 in refunds),  $5,266,000 (net of $14,000
in refunds) and $870,000 respectively.

8.   COMMON STOCK GRANTS AND OPTIONS

     Rockford   has   elected  to  follow  APB   Opinion   No.  25  and  related
Interpretations  in  Accounting  for its  employee  stock  options  because,  as
discussed below,  the alternative fair value accounting  provided for under SFAS
No.  123,  ACCOUNTING  FOR  STOCK-BASED  COMPENSATION,  requires  use of  option
valuation  models  that were not  developed  for use in valuing  employee  stock
options.  Under APB  Opinion  No.  25,  when the  exercise  price of  Rockford's
employee stock options  equals the market price of the  underlying  stock on the
date of grant, no compensation expense is recognized.

     Rockford  has  provided  stock  option  plans  for  certain  employees  and
directors. Under the plans, options to purchase common stock of Rockford will be
granted to certain  employees and directors at the fair value of the  underlying
common  stock.  The  options  generally  have a term  of ten  years  and  become
exercisable  over  three  years  commencing  on the date of the  grant.  Options
granted  prior to December  31,  1996,  vested 100 percent  upon  completion  of
Rockford's   initial   public   offering  on  April  20,  2000.   Under  certain
circumstances,  Rockford has the right to repurchase common stock acquired under
the options at the fair value price.

                                       46
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Proforma  information  regarding  net  income  and  earnings  per  share is
required by SFAS No. 123, which also requires that the information be determined
as if Rockford has accounted for its employee stock options  granted  subsequent
to December 31, 1994,  under the fair value method of that  Statement.  The fair
value  for  these  options  was  estimated  at the date of  grant  using a Black
Scholes-pricing model with the following weighted average assumptions:

                                         2000         2001            2002
                                       ---------   -----------   --------------
     Expected life of the award ....     5 years       5 years   Not applicable
     Dividend yield ................   0 percent     0 percent   Not applicable
     Risk-free interest rate .......   6 percent   4.5 percent   Not applicable
     Expected volatility ...........         .97           .75   Not applicable

     As Rockford did not grant stock  options in 2002,  the  assumptions  stated
above are not applicable for the year ended December 31, 2002.

     Option activity under the stock option plan during the years ended December
31, 2000, 2001 and 2002 is as follows:

<TABLE>
<CAPTION>
                                                                OUTSTANDING OPTIONS
                                                           -----------------------------
                                         SHARES AVAILABLE               WEIGHTED AVERAGE
                                           UNDER OPTION      SHARES      EXERCISE PRICE
                                           ------------    ----------    --------------
<S>                                        <C>             <C>           <C>
Outstanding at December 31, 1999 .......       336,984      1,772,381       $ 3.55
Granted ................................       (81,500)        81,500        10.83
Exercised ..............................            --       (192,352)        2.42
Expired or cancelled ...................        43,163        (43,163)        4.76
                                            ----------     ----------       ------
Outstanding at December 31, 2000 .......       298,647      1,618,366         4.06
Granted ................................      (302,814)       302,814         6.61
Exercised ..............................            --       (149,325)        3.12
Expired or cancelled ...................         4,225         (4,225)        6.02
                                            ----------     ----------       ------
Outstanding at December 31, 2001 .......            58      1,767,630         4.55
Authorized .............................       600,000             --           --
Exercised ..............................            --       (285,314)        2.52
Expired ................................         4,300         (4,300)        4.19
                                            ----------     ----------       ------
Outstanding at December 31, 2002 .......       604,358      1,478,016       $ 4.93
                                            ==========     ==========       ======
</TABLE>

     The weighted  average fair value of options  granted during the years ended
December 31, 2000 and 2001, was $2.85 and $4.24,  respectively.  No options were
granted during 2002.

     The Board of Directors of Rockford prior to 1995 granted a consulting firm,
which provided executive and other consulting  services to Rockford,  options to
purchase  215,000 shares of its authorized but unissued  common stock at a price
of $1.51 per share,  protected  against  dilution,  as defined,  and expiring in
August 2002.  Rockford determined that the $1.51 price per share was equal to or
more than the fair value at the date of the grant.  The stock options were fully
vested at December 31, 1999 and fully  exercised  on March 5, 2002.  These stock
options were not included in the table above.

                                       47
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table  summarizes  information  about stock options under the
plans outstanding at December 31, 2002:

<TABLE>
<CAPTION>
                                           OPTIONS OUTSTANDING                         OPTIONS EXERCISABLE
                             -----------------------------------------------      ------------------------------
                                                     WEIGHTED
                                                     AVERAGE        WEIGHTED                            WEIGHTED
                                  NUMBER            REMAINING        AVERAGE           NUMBER           AVERAGE
                              OUTSTANDING AT       CONTRACTUAL      EXERCISE       OUTSTANDING AT       EXERCISE
RANGE OF EXERCISE PRICES     DECEMBER 31, 2002         LIFE           PRICE       DECEMBER 31, 2002      PRICE
------------------------     -----------------         ----           -----       -----------------      -----
<C>                          <C>                   <C>              <C>           <C>                   <C>
$1.51 .................             173,100         2.0 years        $ 1.51            173,100          $  1.51
$2.44-- $3.45 .........             303,752         3.6 years          2.82            303,752             2.82
$4.19-- $5.81 .........             460,475         5.1 years          4.51            459,975             4.51
$6.00-- $6.68 .........             294,189         6.4 years          6.62            143,282             6.62
$7.67-- $11.00 ........             246,500         8.6 years          8.68            244,000             8.66
                                 ----------                                         ----------
                                  1,478,016                                          1,324,109
</TABLE>

9.   EARNINGS PER SHARE

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                                    ------------------------
                                                                     2000     2001     2002
                                                                    ------   ------   ------
                                                                     (IN THOUSANDS, EXCEPT
                                                                         PER SHARE DATA)
<S>                                                                 <C>      <C>      <C>
Numerator:
  Net income ....................................................   $8,010   $6,223   $6,280
  Effect of dilutive securities interest impact of
    convertible debentures ......................................       18       --       --
                                                                    ------   ------   ------
Numerator for diluted net income per share, income available
  to common stockholders after assumed conversions ..............   $8,028   $6,223   $6,280
                                                                    ======   ======   ======
Denominator:
  Denominator for basic net income per share, weighted
    average shares ..............................................    6,864    8,109    8,540
  Effect of dilutive securities:
  Employee stock options ........................................      949      799      755
  Warrants ......................................................       11        5        6
  Convertible debentures ........................................      185       --       --
                                                                    ------   ------   ------
  Dilutive potential common shares ..............................    1,145      804      761
                                                                    ------   ------   ------
Denominator for diluted net income per share, adjusted
  weighted average shares and assumed conversions ...............    8,009    8,913    9,301
                                                                    ======   ======   ======
Basic net income per share ......................................   $ 1.17   $ 0.77   $ 0.74
                                                                    ======   ======   ======
Diluted net income per share ....................................   $ 1.00   $ 0.70   $ 0.68
                                                                    ======   ======   ======
</TABLE>

                                       48
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10.  CONTINGENCIES

     Since the date of our Annual  Report for the year 2001,  filed with the SEC
on March 29, 2002,  the Fiori patent  claim  described in the Legal  Proceedings
section of that Annual Report has  continued  into an intensive  fact  discovery
phase of proceedings.  The products at issue in the case are now 16 of our Punch
brand amplifiers,  which the plaintiff contends include circuitry that infringes
on his patents. We have incurred substantial costs of defense, at a rate greater
than we expected,  which  contributed to our increased  research and development
costs during the year. We anticipate that discovery and motions in the case will
continue  for at  least  the  next  two  quarters  and  will  cause  us to incur
additional  defense costs during that period.  A trial is likely  sometime after
the second  quarter of 2003.  We continue to believe that the claim  involved in
the case is without merit and that we should ultimately prevail in this matter.

     Rockford  is a party  to legal  proceedings,  which  arise in the  ordinary
course of business. Based upon advice from outside legal counsel,  management is
of the opinion  that these  matters will have no material  effect on  Rockford's
consolidated financial position, results of operations or cash funds.

11.  BENEFIT PLAN

     Rockford has a 401(k) Retirement Savings Plan (Plan) covering substantially
all  employees  who have  completed six  consecutive  months of service  without
regard to hours of  service.  Under the  terms of the Plan,  employees  may make
voluntary  contributions,  subject  to  Internal  Revenue  Service  limitations.
Rockford will match employee contributions up to three percent of the employee's
annual  compensation.  Additional  contributions  to the Plan can be made at the
discretion of the Board of Directors.  Contributions to the Plan during the year
ended December 31, 2000, 2001 and 2002, were  approximately  $388,000,  $395,000
and $484,000, respectively.

12.  STOCK PURCHASE PLAN

     On May 17, 1999, the  shareholders of Rockford  approved the Employee Stock
Purchase Plan. A total of 361,200 shares of Rockford's common stock are reserved
for issuance under the plan, which became effective September 1, 1999. Employees
will  be  eligible  to  participate  if  they  are  employed  by  Rockford  or a
participating  subsidiary  for at  least 20 hours  per week and more  than  five
months in any  calendar  year.  Each  employee  will be able to  purchase  up to
$25,000  worth of  shares,  up to a maximum  of 1,000  shares in each  six-month
purchase period.  The price per share purchased under the plan will generally be
85 percent of the fair  market  value of the shares.  A total of 134,000  shares
have been issued since inception of this plan.

13.  SEGMENT INFORMATION

     Rockford  operates its business  under the mobile audio,  professional  and
home theater audio and OEM segments.  For each of the periods ended December 31,
2000,  2001 and 2002, the  professional  and home theater audio and OEM segments
were not significant and, accordingly,  no additional  disclosures of operations
information about the segments are required. Below is geographic information for
revenues of Rockford:

REGION(1)                                       2000         2001         2002
---------                                     --------     --------     --------
                                                        (IN THOUSANDS)
United States ...........................     $121,375     $130,459     $135,830
Other Americas ..........................        7,289        9,469        7,871
Europe ..................................        7,687       10,278       17,413
Asia ....................................        8,289        7,546        7,804
                                              --------     --------     --------
Total sales from external customers .....     $144,640     $157,752     $168,918
                                              ========     ========     ========

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

                                       49
<PAGE>
                      ROCKFORD CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     For the years ended December 31, 2000, 2001 and 2002, sales to one customer
accounted for 16.7 percent,  16.3 percent and 21.1 percent of those periods' net
sales,  respectively.  Rockford's long-lived assets outside of the United States
consist of the land and building  used in  Rockford's  MB Quart  operations  and
located in Obrigheim, Germany.

14.  INTERIM FINANCIAL RESULTS (UNAUDITED)

     The following  tables set forth certain  unaudited  consolidated  financial
information  for each of the four quarters in the years ended  December 31, 2001
and 2002. In management's opinion, this unaudited quarterly information has been
prepared on the same basis as the audited consolidated  financial statements and
include  all  necessary   adjustments,   consisting  only  of  normal  recurring
adjustments that management  considers  necessary for a fair presentation of the
unaudited  quarterly  results  when read in  conjunction  with the  consolidated
financial  statements  and  notes.  Rockford  believes  that  quarter-to-quarter
comparisons of its financial  results are not necessarily  meaningful and should
not be relied upon as an indication of future performance.

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31, 2002
                                       -----------------------------------------------------------
                                       MARCH 31     JUNE 30    SEPTEMBER 30  DECEMBER 31     TOTAL
                                       --------     -------    ------------  -----------     -----
<S>                                    <C>          <C>          <C>          <C>           <C>
Net Sales .........................    $ 43,734     $ 51,228     $ 40,583     $ 33,373      $168,918
Gross Profit ......................      16,522       20,029       14,268       10,352        61,171
Operating Income (Loss) ...........       3,651        5,362        1,622         (566)       10,069
Net Income (Loss) .................       2,178        3,587          825         (310)        6,280
Basic Income (Loss) Per Share .....        0.26         0.42         0.10        (0.04)         0.74
Diluted Income(Loss) Per Share ....        0.24         0.38         0.09        (0.03)         0.68

                                                        YEAR ENDED DECEMBER 31, 2001
                                       -----------------------------------------------------------
                                       MARCH 31     JUNE 30    SEPTEMBER 30  DECEMBER 31     TOTAL
                                       --------     -------    ------------  -----------     -----
Net Sales .........................    $ 37,363     $ 44,803     $ 36,562     $ 39,024      $157,752
Gross Profit ......................      13,280       15,497       11,985       13,086        53,848
Operating Income ..................       3,356        4,245        1,275        1,651        10,527
Net Income ........................       1,992        2,586          853          792         6,223
Basic Income Per Share ............        0.25         0.32         0.10         0.10          0.77
Diluted Income Per Share ..........        0.23         0.29         0.10         0.09          0.70
</TABLE>

15.  SUBSEQUENT EVENTS

     On February 19, 2003,  Rockford  announced its  intentions  to  discontinue
operations and dissolve its Japan  subsidiary by mid-2003.  Rockford  intends to
sell its products in Japan using an independent distributor.  Management has not
determined  the  impact of this  dissolution  on its  results of  operations  or
financial position.

     On February 19,  2003,  Rockford  announced  the  restructuring  of several
business  processes,  which are expected to result in improved  efficiencies and
customer service. This restructuring  resulted in the reduction of approximately
8% of Rockford's salaried staff in Arizona and Michigan.

                                       50
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  information  required by this item is incorporated by reference to the
sections entitled "Executive Officers and Board of Directors" and "Section 16(A)
Beneficial Ownership Reporting Compliance" in our definitive Proxy Statement for
our Annual Meeting of Stockholders to be held April 23, 2003.

ITEM 11. EXECUTIVE COMPENSATION

     The  information  required by this item is incorporated by reference to the
sections entitled  "Executive  Compensation,"  "Executive  Officers and Board of
Directors  -- Director  Compensation,"  "Related  Party  Transactions  -- Suttle
Employment  Agreement"  and "Stock Price  Performance  Graph" in our  definitive
Proxy  Statement  for our Annual  Meeting of  Stockholders  to be held April 23,
2003.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

     The  information  required by this item is incorporated by reference to the
section  entitled  "Principal  Shareholders  and  Shareholdings  of Officers and
Directors"  in  our  definitive  Proxy  Statement  for  our  Annual  Meeting  of
Stockholders to be held April 23, 2003.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  required by this item is incorporated by reference to the
section entitled "Related Party  Transactions" in our definitive Proxy Statement
for our Annual Meeting of Stockholders to be held April 23, 2003.

ITEM 14. CONTROLS AND PROCEDURES

     (a) Under the  supervision  and with the  participation  of our management,
including our principal  executive officer and principal  financial officer,  we
conducted an evaluation of our disclosure controls and procedures,  as such term
is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), within 90 days of the filing date of this
report. Based on their evaluation, our principal executive officer and principal
financial  officer  concluded  that our  disclosure  controls and procedures are
effective.

     (b) There have been no significant  changes  (including  corrective actions
with regard to significant  deficiencies or material weaknesses) in our internal
controls or in other  factors that could  significantly  affect  these  controls
subsequent to the date of the evaluation referenced in paragraph (a) above.

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

CONSOLIDATED FINANCIAL STATEMENTS

     See Index to Consolidated Financial Statements on page 28 of this report.

                                       51
<PAGE>
FINANCIAL STATEMENT SCHEDULE

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                              ROCKFORD CORPORATION

<TABLE>
<CAPTION>
       COLUMN A                     COLUMN B    COLUMN C                 COLUMN D                 COLUMN E
      -----------                   --------    --------     -----------------------------     -------------
                                   BALANCE AT  CHARGED TO
                                  BEGINNING OF  COSTS AND      CHARGED TO                       BALANCE AT
      DESCRIPTION                    PERIOD     EXPENSES     OTHER ACCOUNTS     DEDUCTIONS     END OF PERIOD
      -----------                    ------     --------     --------------     ----------     -------------
                                                              (IN THOUSANDS)
<S>                                  <C>         <C>            <C>              <C>              <C>
December 31, 2002 ................
  Receivable allowances ..........   $2,613      $  861         $5,108(3)        $5,586(1)        $2,996
  Inventory reserve ..............    2,883       1,490            354(4)         1,403(2)         3,324
December 31, 2001
  Receivable allowances ..........    1,427      $  969         $2,966(3)        $2,749(1)        $2,613
  Inventory reserve ..............    1,446       1,332          1,431(4)         1,326(2)         2,883
December 31, 2000
  Receivable allowances ..........    1,830         249          3,010(3)         3,662(1)         1,427
  Inventory reserve ..............    1,649         616             --              819(2)         1,446
</TABLE>

(1)  Deductions  taken by customers  for prompt  payment and freight  discounts.
     Includes accounts written off net of recoveries.
(2)  Reserved inventory sold or scrapped.
(3)  Amounts netted against sales.
(4)  Inventory  reserves  relating  to  inventory  acquired in  connection  with
     acquisitions.

     Other financial  statement  schedules have not been presented,  as they are
not applicable.

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           Specimen Common Stock Certificate+
 4.2           Reference is made to the Articles of  Incorporation,  as amended,
               and the Restated Bylaws, as amended,  filed as Exhibits 3.1, 3.2,
               3.3, 3.4, 3.5 and 3.7 for a description of the rights of the
               holders of Common Stock.
 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          Employment Agreement of W. Gary Suttle+
 10.5          Indemnity Agreement of W. Gary Suttle+
 10.6          Letter Agreement by and between Rockford Corporation and Best Buy
               Corporation**+
 10.7          Joint Development and Supply Agreement by and between Rockford
               Corporation and Hyundai Electronics Industries Co., Ltd.**+
 10.8          Form of Dealership Agreements+
 10.9          Standard Industrial Commercial Multi-Tenant Lease-- Gross
               American Industrial Real Estate Association Lease, and amendments
               and addendum thereto, by and between Rockford River LLC and
               Rockford Corporation+

                                       52
<PAGE>
EXHIBIT
NUMBER                           DESCRIPTION OF DOCUMENT
------                           -----------------------
 10.9.1        Amendment to Standard Industrial Commercial Multi-Tenant Lease--
               Gross American Industrial Real Estate Association Lease, by and
               between Rockford River LLC and Rockford Corporation+
 10.10         Standard Industrial Lease-- Gross, and amendments and addendum
               thereto, by and between Cloyce Clark and Rockford Corporation+
 10.10.1       Amendment to Standard Industrial Lease-- Gross by and between
               Cloyce Clark and Rockford Corporation+
 10.11         Lease Agreement, and addenda thereto, by and between Carbonneau
               Industries, Inc. and Rockford Corporation+
 10.11.1       Amendment to Lease Agreement by and between Carbonneau
               Industries, Inc. and Rockford Corporation+
 10.12         Master Lease Agreement and amendments thereto, by and between
               Banc One Leasing Corporation and Rockford Corporation+
 10.14         Employee 401(k) Deferred Compensation Plan and amendments
               thereto+
 10.16         Product Sales Agreement by and between Rockford Corporation and
               Avnet Electronics Marketing**+
 10.24         Services and Option Agreement by and between W. Gary Suttle,
               Caroline S. Bartol, individually and as representative of the
               estate of John G. Bartol and Rockford Corporation+
 10.25         Amendment of Services and Option Agreement by and between W. Gary
               Suttle, Monument Investors Limited Partnership as successor to
               Caroline S. Bartol and the estate of John G. Bartol and Rockford
               Corporation+
 10.26         Amendment of Services and Option Contract by and between W. Gary
               Suttle, Monument Investors Limited Partnership as successor to
               Caroline S. Bartol and the estate of John G. Bartol and Rockford
               Corporation+
 10.27         Consulting and Option Contract by and between Rockford
               Corporation and Grisanti, Galef & Goldress, Inc.+
 10.28         Amendment and Renewal of Consulting and Option Contract by and
               between Rockford Corporation and Grisanti, Galef & Goldress,
               Inc.+
 10.29         Amendment of Consulting and Option Contract by and between
               Rockford Corporation and Grisanti, Galef & Goldress, Inc.+
 10.35         Form of Indemnification Agreement+
 10.35.1       Schedule for Indemnification Agreement+
 10.39         Financing Lease Schedule No. 1000100950 by and between Banc One
               Leasing Corporation and Rockford Corporation+
 10.40         Sublease Agreement by and between Cerprobe Corporation and
               Rockford Corporation+++
 10.41         Sublease Agreement by and between Van's Delivery Service, Inc.
               and Rockford Acoustic Designs, Inc.+++
 10.42         Asset Purchase Agreement among James and Norma Fosgate and
               Rockford Corporation**+++
 10.43         Credit Agreement among Rockford Corporation, the Subsidiaries of
               Rockford Corporation, Bank One, Arizona, N.A., and Bank of
               America, N.A. (previously numbered Exhibit 10.39)#
 10.44         Stock Purchase Agreement among Rockford Corporation, Audio
               Innovations, Inc., and the shareholders of Audio Innovations,
               Inc. (previously numbered Exhibit 10.40)**#
 10.45         English translation of the Asset Purchase Agreement between a
               subsidiary of Rockford Corporation and Dr. Werner Schreiber, a
               receiver under German bankruptcy law. Under this deed, the
               subsidiary acquired the assets of MB Quart Akustik GmbH
               (previously numbered Exhibit 10.41)##
 10.46         English translation of the Deed between a subsidiary of Rockford
               Corporation and Dr. Werner Schreiber, a receiver under German
               bankruptcy law. Under this deed, the subsidiary acquired the 1
               real estate assets of MB Quart Akustik GmbH (previously numbered
               Exhibit 10.42)##
 10.47         English translation of the Deed between Rockford Corporation and
               Dr. Werner Schreiber, a receiver under German bankruptcy law.
               Under this Deed, Rockford acquired the shares of M.B. Quart
               Electronics (USA), Inc. (the U.S. Subsidiary of MB Quart Akustik
               GmbH) (previously numbered Exhibit 10.43)##
 10.48         2002 Stock Option Plan ###
 10.49         License Agreement between Rockford Corporation and Milwaukee
               Electric Tool Corporation ###

                                       53
<PAGE>
EXHIBIT
NUMBER                           DESCRIPTION OF DOCUMENT
------                           -----------------------
 10.50         Stock Purchase Agreement between Rockford and SimpleDevices,
               Inc., dated as of October 16, 2002.####**
 10.51         Second Amended and Restated Voting Agreement among Rockford,
               SimpleDevices, Inc., and the Shareholders of SimpleDevices, dated
               as of October 16, 2002. ####**
 10.52         Master Merchandising License Agreement between Rockford and
               Universal Studios Licensing LLLP, dated as of August 16, 2002.
               ####**
 10.53         Product Placement Agreement between Rockford and Universal
               Pictures, a division of Universal City Studios LLLP, dated as of
               August 16, 2002. ####**
 21            List of Subsidiaries of Rockford Corporation
 23.1          Consent of Independent Auditors
 99.1          Certification pursuant to 18 U.S.C. Section 1350, as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for W.
               Gary Suttle.
 99.2          Certification pursuant to 18 U.S.C. Section 1350, as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for
               James M. Thomson.
 99.9          RISK FACTORS THAT MAY AFFECT ROCKFORD'S OPERATING RESULTS,
               BUSINESS PROSPECTS AND STOCK PRICE

----------
**   Portions of the document  have been omitted and filed  separately  with the
     Commission under a request for confidential treatment.
+    Previously  filed with  registration  statement  effective  April 19,  2000
     and/or amendments
++   Previously  filed on August 11, 2000 with our Quarterly Report on Form 10-Q
     for the quarter ended June 30, 2000.
+++  Previously  filed on March 13, 2001 with our Annual Report on Form 10-K for
     the year ended December 31, 2000.
#    Previously  filed on August 14, 2001 with our Quarterly Report on Form 10-Q
     for the quarter ended June 30, 2001.
##   Previously  filed on November  14, 2001 with our  Quarterly  Report on Form
     10-Q for the quarter ended September 30, 2001.
###  Previously  filed on March 29, 2002 with our Annual Report on Form 10-K for
     the year ended December 30, 2001.
#### Previously  filed on November  12, 2002 with our  Quarterly  Report on Form
     10-Q for the quarter ended September 30, 2002.

                                       54
<PAGE>
                                   SIGNATURES

     Pursuant to the  requirements of the Section 13 or 15(d),  as amended,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned,  thereunto  duly  authorized,  in the  City of  Phoenix,  State  of
Arizona, on March 7, 2003.

                                       ROCKFORD CORPORATION

                                       By: /s/ W. GARY SUTTLE
                                           -------------------------------------
                                           W. Gary Suttle
                                           President and Chief Executive Officer


     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended,  this Report has been signed by the following persons in the capacities
and on the dates indicated:

<TABLE>
<CAPTION>
           NAME                               TITLE                            DATE
           ----                               -----                            ----

<S>                            <C>                                         <C>
    /s/ W. GARY SUTTLE         President, Chief Executive Officer and      March 7, 2003
--------------------------     Director (Principal Executive Officer)
     W. Gary Suttle


                               Vice President of Finance and Chief         March 7, 2003
   /s/ JAMES M. THOMSON        Financial Officer, Secretary
--------------------------     (Principal Financial Officer)
    James M. Thomson


  /s/ JERRY E. GOLDRESS        Director                                    March 7, 2003
--------------------------
    Jerry E. Goldress


  /s/ TIMOTHY C. BARTOL        Director                                    March 7, 2003
--------------------------
    Timothy C. Bartol


  /s/ NICHOLAS G. BARTOL       Director                                    March 7, 2003
--------------------------
   Nicholas G. Bartol


   /s/ RALPH B. GODFREY        Director                                    March 7, 2003
--------------------------
    Ralph B. Godfrey


    /s/ JOHN P. LLOYD          Director                                    March 7, 2003
--------------------------
      John P. Lloyd
</TABLE>

                                       55
<PAGE>
CERTIFICATIONS

I, W. Gary Suttle, certify that:

     1.   I  have   reviewed  this  annual  report  on  Form  10-K  of  Rockford
          Corporation;

     2.   Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  of  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this annual report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and we have:

          a)   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               annual report is being prepared;

          b)   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c)   presented  in this  quarterly  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent function):

          a)   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in the internal controls; and

          b)   any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this annual report whether of not there were any  significant  changes
          in internal  controls  or in other  factors  that could  significantly
          affect  internal  controls  subsequent  to the date of our most recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.

Date: March 7, 2003

                                        /s/ W. Gary Suttle
                                        ----------------------------------------
                                        W. Gary Suttle
                                        President and CEO
                                        Principal Executive Officer

                                       56
<PAGE>
I, James M. Thomson, certify that:

     1.   I  have   reviewed  this  annual  report  on  Form  10-K  of  Rockford
          Corporation;

     2.   Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  of  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this annual report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and we have:

          a)   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               annual report is being prepared;

          b)   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c)   presented  in this  quarterly  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent function):

          a)   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in the internal controls; and

          b)   any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this annual report whether of not there were any  significant  changes
          in internal  controls  or in other  factors  that could  significantly
          affect  internal  controls  subsequent  to the date of our most recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.

Date: March 7, 2003

                                        /s/ James M. Thomson
                                        ----------------------------------------
                                        James M. Thomson
                                        Chief Financial Officer
                                        Principal Financial Officer

                                       57