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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



(Mark One)

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



For the fiscal year ended December 31, 2004



OR



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



Commission File Number 0-511



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COBRA ELECTRONICS CORPORATION

(Exact name of Registrant as specified in its Charter)



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



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



Securities registered pursuant to Section 12(g) of the Act:



Common Stock, Par Value $.331/3Per Share



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 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 Rule 12b-2 of the Exchange Act).    YES ̈NO  x



The aggregate market value of the voting and non-voting common equity (only Common Stock)
held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on The NASDAQ Stock Market on June 30, 2004, was $58,325,576.



The number of shares of Registrants Common Stock outstanding as of March 4, 2005 was 6,444,815.



Portions of the Registrants Definitive Proxy Statement relating to the Annual Meeting of Shareholders, scheduled to be held on May 10,
2005, are incorporated by reference into Part III of this Report.



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##### Table of Contents

TABLE OF CONTENTS



|           |  |                                                                                                                  |  |        
|---------- |  | ---------------------------------------------------------------------------------------------------------------- |  | -------
|           |  |                                                                                                                  |  | Page(s)
|           |  | PART I                                                                                                           |  |        
|Item 1:    |  | BUSINESS                                                                                                         |  | 1-6    
|           |  | GENERAL                                                                                                          |  | 1      
|           |  | RECENT DEVELOPMENTS                                                                                              |  | 1-2    
|           |  | SUPPLIERS                                                                                                        |  | 2      
|           |  | PRODUCTS                                                                                                         |  | 2-5    
|           |  | COMPETITION                                                                                                      |  | 5      
|           |  | SALES AND DISTRIBUTION                                                                                           |  | 6      
|           |  | EMPLOYEES                                                                                                        |  | 6      
|           |  | AVAILABLE INFORMATION                                                                                            |  | 6      
|Item 2:    |  | PROPERTIES                                                                                                       |  | 7      
|Item 3:    |  | LEGAL PROCEEDINGS                                                                                                |  | 7      
|Item 4:    |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                              |  | 7      
|Item 4A:   |  | EXECUTIVE OFFICERS OF THE REGISTRANT                                                                             |  | 7      
|           |  |                                                                                                                 
|           |  | PART II                                                                                                          |  |        
|Item 5:    |  | MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 7-8    
|Item 6:    |  | SELECTED FINANCIAL DATA                                                                                          |  | 8      
|Item 7:    |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                            |  | 8-14   
|Item 7A:   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                       |  | 14-15  
|Item 8:    |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                      |  | 16-36  
|Item 9:    |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                             |  | 37     
|Item 9A:   |  | CONTROLS AND PROCEDURES                                                                                          |  | 37     
|Item 9B:   |  | OTHER INFORMATION                                                                                                |  | 37     
|           |  |                                                                                                                 
|           |  | PART III                                                                                                         |  |        
|Item 10:   |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                               |  | 37     
|Item 11:   |  | EXECUTIVE COMPENSATION                                                                                           |  | 37     
|Item 12:   |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                   |  | 38     
|Item 13:   |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                   |  | 38     
|Item 14:   |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                           |  | 39     
|           |  |                                                                                                                 
|           |  | PART IV                                                                                                          |  |        
|Item 15:   |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                       |  | 39     
|Signatures |  | 40                                                                                                              



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##### Table of Contents

PART I



Item 1.Business



General



Cobra Electronics Corporation (the
Company or Cobra), incorporated in Delaware in 1961, is a public company traded on The NASDAQ Stock Market under the symbol COBR. The Company is a leading manufacturer of two-way mobile communications products in
the United States, Canada and Europe, holding the number one or strong number two-position in each of its longstanding product lines and targeting a similar position for businesses recently entered into, namely portable mobile navigation systems,
marine VHF radios and marine power inverters. The Company has a 40-year track record of innovation and the development of award-winning products, and is an industry leader in developing technology applications that serve consumers needs.
Management believes that the Companys future success depends upon its ability to predict and respond in a timely and effective manner to changes in the markets it serves. Product performance, reliability, price, availability and service are
the main competitive factors. Also, sales are dependent upon timely introduction of new products, which incorporate new features desired by consumers, at competitive prices. Cobra is the number one brand in Citizens Band radios and radar detectors
and a strong number two in the worldwide Family Radio Service/General Mobile Radio Service (FRS/GMRS) two-way radio category.



In 2003, Cobra introduced a line of hand-held GPS devices for recreational use and a line of marine radios and power inverters. In 2004, Cobra entered the mobile
navigation market with the introduction of its Plug and Go mobile navigation devices.



Recent Developments



Innovation remains the
hallmark of Cobras success, as demonstrated by just a few of its recent product introductions and other recent developments.



In the third quarter of 2004, Cobra began selling the NAV ONE 3000, a Plug and Go mobile navigation system incorporating industry-leading features that eliminate the need to download maps from
computers. This event marked a milestone for the Company, as it made the jump from selling hardware to selling technology. The product was introduced at the January 2004 International Consumer Electronics Show where it won two International CES
Innovations Awards from the Consumer Electronics Association for the products groundbreaking features. These innovative features include an infrared port which allows users to beam an address directly to the unit from a Palm® or Pocket PC® PDA, eliminating the need to key in an address, the largest high-resolution screen in
its class (at 5.2 inches with ultra-bright color display) and an internal gyroscope which tracks the vehicles position even when the satellite signal is temporarily lost while traveling in an urban area or through dense foliage.



After introducing the GPS 100 and GPS 500 in 2003, Cobra began selling the GPS 1000 DLX
during the third quarter of 2004. This marked Cobras most advanced entry into the hand-held GPS market to date, as the model comes preprogrammed with Rand McNally Street Finder software for street-level mapping detail. This unit also uses the next generation of iA.S.A.P technology for accelerated acquisition times and is
memory card compatible for expanded memory.



Following up on the success of
Cobras 2003 line of microTALK® FRS/GMRS
two-way radios, that included the PR 4000-2 WX (selected to receive Popular Mechanics prestigious Editors Choice award at the 2003 International Consumer Electronics Show), the 2004 line provided the consumer with the
industrys longest available range in the FRS/GMRS two-way radio category. Cobra offered seven 22-channel radios during 2004, making it the first manufacturer to offer a full line of extended range two-way radios.



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Cobra radar detection products incorporate industry leading detection technology that increases range and detects the new
K and Ka POP Modes as well as exclusive features that reduce false alerts, warn drivers about emergency vehicles and preserve power. This combination of features, performance and safety is unmatched by any other radar detector manufacturer and has
made Cobra the clear market leader.



In the first quarter of 2004, Cobra made
its first line of entry-level and professional-grade marine products available to retailers nationwide and in England. The Cobra Marine line features handheld and fixed dual power VHF marine transceivers, and marine power inverters. This product line is distinguished by premium features
and industry firsts focused on usability and safety.



Cobra will introduce
three new mobile navigation products in late 2005. The NAV ONE 2750 will provide consumers with a more affordable alternative to the NAV ONE 3000, while still providing the plug and go capabilities. The NAV ONE 4000 will have a new
design, featuring touch-screen capability and a new user interface. The NAV ONE 4500, in addition to the design upgrades of the NAV ONE 4000, will feature real-time traffic information, providing drivers in up to 50 metropolitan areas with warnings
of accidents, traffic congestion or other delays and offering users an opportunity to reroute their trip.



Building upon its award-winning heritage of intuitively designed and solid performing products, Cobras 2005 line of microTALK two-way radios will feature extended communication ranges of up to 4, 8, 10 and an
industry-leading 12 miles. As the first and only two-way radio on the market with 22 channels, 38 privacy codes and 83 DCS codes, the top-of-the-line PR 4700 WX offers users unparalleled privacy code options. The complete line of new two-way radios
will be available at major retailers beginning in the second quarter of 2005.



Suppliers



One of the Companys fundamental
strengths is its product sourcing ability. Substantially all of the Companys products are manufactured to its specifications and engineering designs by a number of suppliers, primarily in China, Hong Kong and the Philippines. The Company
maintains control over the design and production quality of its products through its wholly owned subsidiary in Hong Kong which seeks out new suppliers, monitors technological changes, performs source inspection of key suppliers, provides selected
engineering services and expedites shipments from suppliers.



Over a period of
years, the Company has developed a network of suppliers for its products. To maintain flexibility in product sourcing, all of the Companys supply contracts with its suppliers can be terminated by the Company at will. While it is
the Companys goal to maintain strong relationships with its current suppliers, management believes that, if necessary, alternate suppliers could be found. The extent to which a change in a supplier would have an adverse effect on the
Companys business depends upon the timing of the change, the product or products that the supplier produces for the Company and the volume of that production. The Company also maintains insurance coverage that would, under certain limited
circumstances, reimburse the Company for lost profits resulting from a suppliers inability to fulfill its commitments to the Company. The Company negotiates substantially all of its purchases in U.S. dollars to protect itself from currency
fluctuations. Assets located outside of the United States, principally Company-owned tooling at suppliers, had a net book value of $2.2 million at December 31, 2004.



Research, engineering and product development expenditures are expensed as incurred. These expenditures amounted to approximately $2.4
million in 2004, $2.0 million in 2003 and $1.5 million in 2002.



Products



The Company operates only in the
consumer electronics industry. Principal products include:



| |  |  | microTALK FRS and GMRS, PMR two-way radios
| | - |  | ------------------------------------------



| |  |  | 9 Band, 10 Band and 11
Band radar detectors with exclusive Strobe
Alert technology
| | - |  | --------------------------------------------------------------------------------------



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| |  |  | Citizens Band radios, including those with exclusive SoundTracker® and NightWatch technologies
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | HighGear accessories
| | - |  | ---------------------



| |  |  | GPS hand-held receivers
| | - |  | -----------------------



| |  |  | Marine VHF radios and power inverters
| | - |  | -------------------------------------



| |  |  | NAV ONE mobile navigation devices
| | - |  | ----------------------------------



The
Company competes primarily in the United States with various manufacturers and distributors of consumer electronics products, principally on the basis of product features and price, and expects the market for its products to remain highly
competitive. The Company also markets its products in over 30 countries around the world through distributors.



Other than for mobile navigation and hand-held GPS products, the Company does not believe that patents and other intellectual property are of material importance to its products. However, when the Company develops a
unique technology (such as VibrAlert vibrating
technology for two-way radios), patents are applied for to preserve exclusivity, wherever possible. The Company has entered into agreements with various providers and/or developers of intellectual property used in connection with its GPS products,
including Horizon Navigation, Inc. and AtBrain Corporation. The Company has negotiated agreements with these parties that guarantee exclusivity with respect to certain product categories and distribution channels, which management believes protects
the Companys rights to the underlying intellectual property. The Companys microTALK FRS/GMRS two-way radios, 9 Band, 10 Band, and 11 Band detectors with exclusive Strobe Alert technology, SoundTracker and NightWatch Citizens Band radios,
HighGear accessories, GPS receivers, marine products and mobile navigation devices are marketed under the Cobra brand name.



The Company introduced the NAV ONE 3000 at the 2004 International Consumer Electronics Show where it won two 2004 International CES Innovations Awards from the Consumer
Electronics Association for its innovative features. The NAV ONE 3000 began selling in the third quarter of 2004, and marked a milestone for the Company, as it made the leap from selling hardware to selling technology. The model contains several
innovative features including an infrared port which allows users to beam an address directly to the unit from a Palm® or Pocket PC® PDA eliminating the need to key in an address, the largest high-resolution screen in its class (at 5.2 inches with ultra-bright color display) and an internal gyroscope which tracks the
vehicles position even when the satellite signal is temporarily lost while traveling in an urban area or through dense foliage. The Company estimates that the domestic market for mobile navigation in factory net sales during 2004 was
approximately $280 million compared to $228 million in 2003 (based on data from Frost & Sullivan).



In 1997, the Company entered the FRS two-way radio market and in the fall of 1998 began selling its new microTALK line. The Company has attained a strong number two market position in the domestic FRS/GMRS two-way
radio market. The Company estimates that the domestic market for FRS/GMRS two-way radios in factory net sales in 2004 was approximately $140 million compared to $180 million in 2003 (based on Consumer Electronics Association data).



FRS/GMRS two-way radios operate on UHF FM frequencies, which allow for an extremely small
hand-held radio and exceptionally clear sound that penetrates through buildings and other obstacles. Unlike cellular phones, these radios require no monthly fee and provide coverage even in the most remote areas. Because of their rangeup to
twelve-miles (for certain 2005 GMRS models, which require a license)and exceptionally clear sound quality, the radios enable families and friends to easily keep in touch in the many situations where they typically get separated and are out of
earshot, such as in shopping malls, amusement parks and ski resorts. FRS/GMRS two-way radios also provide parents with an easy way to maintain contact with children when they are outside playing.



In 2001, GMRS two-way radios started to become more of a factor in the market place as
consumers demanded a greater operating range than conventional FRS radios could provide. GMRS radios provide a range of up to



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twelve miles. Another key to Cobras success in the FRS/GMRS market has been its emphasis on value packs, which include battery chargers, rechargeable
batteries and other accessories along with the radios.



The Companys
microTALK two-way radios have innovative features, including incoming call alert that lets one user ring another user and talk confirmation tones that subtly let users know when the other party is done talking. Certain models even have a
patented VibrAlert feature that works like a silent vibrating pager, which makes it perfect for situations where noiseless operation is important or where a ring alert cannot be easily heard. Also, certain models incorporate a ten-channel NOAA all
hazards alert radio, which warns of weather, chemical and other civilian emergencies.



In 1999, the Company launched its European line of microTALK PMR radios in the United Kingdom, France, Spain, Germany, Sweden and Finland, and now holds a leading share in the European market. In 2000, as part of its European strategy to be
closer to its customers, the Company formed an Irish subsidiary, Cobra Electronics Europe Limited, which is headquartered in Dublin, Ireland. As of December 31, 2004, the Company had 11 distributors serving approximately 22 countries in Europe.



In the second quarter of 2000, Cobra began selling its microTALK FRS radios in
Canada, which approved the technology in March 2000, and now holds the number one share of this market. Additionally, the Canadian government approved the sale of GMRS radios in 2004. Cobra holds the number one share of this market as well.



Cobra is the number one brand in the domestic market for integrated
radar/laser detectors. In factory net sales, the Company estimates that the U.S. market for integrated radar/laser detectors was approximately $64 million in 2004 and $59 million in 2003 (based on CEA data). Cobra commands the number one market
share by offering innovative products with the latest technology.



The Company
has been a leader in applying laser detection technology, including introducing the industrys first laser-signal detector and the industrys first integrated radar/laser detector with 360 degree laser detection capability. The Company was
also the first to introduce to the retail channel intelligent detection systems capable of alerting drivers with a differentiated signal for each of the frequencies emitted by the Companys patented, FCC-approved Safety Alert transmitter. The Companys Safety Alert Traffic
Warning System is designed to help drivers avoid potentially serious accidents with police, fire, EMS and public utility vehicles.



In late 1999, the Company introduced the worlds first and, then, only line of 9 Band radar detection systems. This line provided detection of two laser systems,
Ultra Lyte and ProLaser. In addition, this line was the first to incorporate the exclusive Strobe Alert feature. This technology alerts drivers to the presence of high-speed emergency vehicles equipped with strobe transmitters to control traffic
signals. In 2000, the Company introduced the worlds first 10 Band radar detection system, which features a high-speed RISC processor and offers 10 bands of protection, including Cobras patented Safety Alert warning system and exclusive
Strobe Alert detection. Unlike competing radar detection systems, 10 Band radar detectors enable motorists to detect eight speed-monitoring systems and distinguish between four types of laser systems on the road today, including, LTI 20/20, Ultra
Lyte, ProLaser and ProLaser III. In 2001, Cobra introduced the worlds first radar detector incorporating a 10-channel weather radio.



In 2002, the Company introduced the innovative SmartMute feature that is standard on Cobras 10 Band and 11 Band radar/laser detectors. An enhanced SmartMute feature called Intellimute was introduced in 2004. This technology automatically
mutes unwanted audible alerts below a driver-set speed, based on engine revolutions per minute.



In 2003, the Company introduced the markets first 11 Band models, which alert drivers to the Spectre devices used to detect the presence of radar detectors in vehicles. These models also employ SmartPower technology, which avoids inadvertent car battery
draining that could occur in certain automobiles by not turning the detector off when the vehicle has been turned off.



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In 2004, the Company introduced a new line of radar detectors that incorporates industry-leading technology that
increases range and detects the new K and Ka POP Modes. The line also includes IntelliShield software that significantly reduces false alerts in densely populated urban areas. The city mode has three settings for enhanced false signal rejection.



Cobra is the leading brand in the domestic Citizens Band radio market, which the Company
estimates to be approximately $38 million in factory net sales (based on Industrial Marketing Research (IMR) data) in 2004 and $44 million in 2003 (based on IMR data). Approximately 90 percent of this market is for mobile Citizens Band radios, most
of which are purchased by professional truck drivers. The remaining part of the domestic market is for hand-held Citizens Band radios used for sport and recreational activities.



The Company has a history of being the technology leader in the Citizens Band radio market. The Company was the first Citizens Band radio
marketer to combine a National Weather Service receiver with a mobile Citizens Band radio, enabling motorists to obtain weather and travel information broadcasts. As a major enhancement of this feature, the Company also introduced the
industrys first mobile Citizens Band radio that incorporated an automatic alert feature to warn of National Weather Service emergency advisories. In 1997, the Company introduced its SoundTracker technology. This patented noise reduction
technology, which dramatically improved the sound quality of the Citizens Band radios when the Citizens Band radio is in receiving mode, was the first significant product innovation in this category in several years. Additionally, SoundTracker
technology allows the users voice to break through cluttered airwaves and to be more easily heard when transmitting.



In 1999, the Company introduced a new line of Citizens Band radios featuring an adjustable illuminated front panel. The NightWatch line enhanced drivers safety by
making it dramatically easier for them to see and adjust their Citizens Band radio controls at night. The vast majority of the nine million mobile Citizens Band radios used by professional truck drivers today are not illuminated despite the fact
that these drivers spend a significant amount of time driving at night.



Additionally, in 2000 Cobra started its HighGear accessories division to develop and market high quality Citizens Band radio microphones and external speakers.



In 2003, Cobra introduced a new line of hand-held GPS models incorporating the industrys first truly user-friendly features, which
addressed what has traditionally been the primary barrier to consumer acceptance. The Company estimates that the domestic market for hand-held GPS receivers in factory net sales in 2004 was $375 million and approximately $325 million in 2003 (based
on data from Allied Business and Frost & Sullivan).



The GPS 100 and GPS
500 models include Cobras exclusive A.S.A.P, a technology that accesses 18 channels, as opposed to the category standard of 12, to locate a users position up to twice as fast as any other GPS technology in the consumer market. The recently introduced GPS
1000 DLX uses iA.S.A.P technology, which matches the performance of 18 channel technology, but only requires 12 channels, thus reducing power requirements and extending battery life. In addition, Cobras GPS 500 and GPS 1000 DLX models include
Rand McNally mapping software, with worldwide
city and state coordinates, Canadian province and European national boundaries. Both models allow users to download points of interest from a personal computer using the optional Rand McNally software and the GPS 1000 DLX allows users to download street-level detail.



In the fourth quarter of 2003, Cobra introduced its first line of entry-level
and professional-grade marine electronics. The new product line is distinguished by premium features and industry firsts focused on usability and safety. The marine product line consists of fixed and hand-held dual power marine VHF transceivers, as
well as marine power inverters.



Competition



Major competitors of the Company are
Garmin and Magellan (Mobile Navigation and GPS receivers); Motorola, Audiovox and Uniden (FRS/GMRS); Whistler and Escort/Beltronics (Detectors); Uniden, Midland and Radio Shack (Citizens Band radios); Icom, Uniden and Standard Radio (Marine
products).



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Sales and Distribution



Demand for consumer
electronics products is somewhat seasonal and varies according to channel of distribution. Historically, sales in the last half of the year are significantly greater than in the first half, reflecting increasing purchases by retailers for various
promotional activities that begin mainly in the second quarter and culminate with the holiday selling season. Also, because mass retail accounts make up an increasing portion of the Companys business, the Company has experienced a shift in
orders from the third quarter to the fourth quarter when the mass retailers normally begin their load-in for the holiday selling season. In 2005, the Company will continue to focus on developing new customers in the marine/outdoor channel that will
over time, reduce the fourth quarter seasonality, as sales in this channel tend to peak in the first and second quarters.



Cobra products are distributed through a strong, well-established network of nearly 300 retailers and distributors located primarily in the United States. Approximately
70 percent of the Companys sales are made directly to mass marketers, such as consumer electronics specialty stores, large department store-chains, warehouse clubs, office supply chains, television home-shopping, direct-response merchandisers,
home centers and specialty stores. Most of the remaining sales are through two-step wholesale distributors that carry Cobra products to fill orders for travel centers, truck stops, small department stores, appliance dealers, duty-free shops on
cruise lines and for export. Cobras primary sales force is composed of independent sales representatives who work on a straight commission basis. They do not sell products of the Companys competitors. The Company now estimates that its
products are available in nearly 40,000 retail outlets in the U.S. In both Canada and Europe, the Company utilizes distributors, which sell primarily to retailers.



Customers which exceeded 10% of net sales in any one year are as follows: In 2004, sales to Wal-Mart and Best Buy were 17.7 percent and 14.2
percent, respectively. In 2003, sales to Wal-Mart and Best Buy were 22.3 percent and 13.0 percent of net sales, respectively. In 2002, sales to Best Buy and Wal-Mart were 14.3 percent and 13.3 percent of net sales, respectively.



International sales, primarily in Canada and Europe, were $18.2 million, $14.4 million and
$15.1 million in 2004, 2003 and 2002, respectively. For additional financial information about geographic areas, see Note 11 to the Consolidated Financial Statements.



The Companys return policies and payment terms are similar to those of other companies serving the consumer electronics market. The
Companys products generally must be shipped within a short time after an order is received and, as a result, order backlog is not significant.



The Company has registered the Cobra trademark in the U.S., most European countries and various other jurisdictions. The Company believes the Cobra trademark, which is
indefinitely renewable by the Company, is a significant factor in the successful marketing of its products.



Employees



As of December 31, 2004, the Company
employed 135 persons in the U.S. and 16 in its international operations. None of the Companys employees is a member of a union.



Available Information



The Companys
website address is www.cobra.com. The Companys annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge through our website, as soon
as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (the SEC).



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Item 2.Properties



The Company owns one building in Chicago, Illinois containing a total of approximately 93,000 sq. feet of office and warehouse space. The Company has approximately 7,000 sq. feet of leased office space in Hong Kong for its international
operations and 1,650 sq. feet of leased office space in Dublin, Ireland for its European operations. The Company believes that these facilities are adequate to meet its current needs.



Item 3.Legal Proceedings



The Company is subject to various unresolved legal actions and proceedings, which arise, in the normal course of its business. None of these actions is expected to have a material adverse effect on the Companys
financial condition or results of operations.



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



No matters were submitted during the fourth quarter of 2004.



Item 4A.Executive Officers of the Registrant



The executive officers of the Company are as follows:



|                                                                     |  |                                |  |                                                                       
|-------------------------------------------------------------------- |  | ------------------------------ |  | ----------------------------------------------------------------------
|Name, Age and Present
Position                                       |  | Has Held PresentPosition Since |  | Prior Business Experience in Past Five Years                          
|James R. Bazet, 57,                                                  |  | Jan. 1998                      |  |                                                                       
|President and Chief Executive Officer*                               |  |                                |  |                                                                       
|                                                                     |  |                               
|Carl Korn, 83,                                                       |  | Nov. 1961                      |  |                                                                       
|Chairman*                                                            |  |                                |  |                                                                       
|                                                                     |  |                               
|Anthony Mirabelli, 63,                                               |  | Feb. 1997                      |  |                                                                       
|Senior Vice President, Marketing and Sales                           |  |                                |  |                                                                       
|                                                                     |  |                               
|Michael Smith, 51, Senior Vice President and Chief Financial Officer |  | Jan. 2001                      |  | Managing Director-CorporateFinance, Mesirow Financial, Inc.,1997-2001.
|                                                                     |  |                               
|Gerald M. Laures, 57,                                                |  | Mar. 1994                      |  |                                                                       
|Vice President-Finance and Corporate Secretary                       |  |                                |  |                                                                       

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|* | Is also a director.
|- | -------------------



PART II



Item 5.Market for the Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities



The Companys common stock trades on The NASDAQ Stock Market under the symbol COBR. As of March 4, 2005, the Company had approximately
757 shareholders of record and approximately 1,711 shareholders for whom securities firms acted as nominees. The Companys common stock is the only class of equity securities outstanding.



Under the terms of its credit agreement, the Company may not pay cash dividends.



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STOCK PRICE DATA



|        |  |                   |        |      |   |       |  |     |       |      |   |       |  |   |       |  |   |      
|------- |  | ----------------- | ------ | ---- | - | ----- |  | --- | ----- | ---- | - | ----- |  | - | ----- |  | - | -----
|        |  | STOCK PRICE RANGE
|        |  | 2004              |        | 2003 |   | 2002 
|Quarter |  | High              |        | Low  |   | High  |  | Low |       | High |   | Low  
|First   |  | $                 | 11.540 |      | $ | 7.400 |  | $   | 7.200 |      | $ | 5.840 |  | $ | 8.250 |  | $ | 6.040
|Second  |  |                   | 9.250  |      |   | 8.110 |  |     | 7.100 |      |   | 5.950 |  |   | 9.250 |  |   | 7.400
|Third   |  |                   | 8.920  |      |   | 6.020 |  |     | 7.340 |      |   | 5.760 |  |   | 8.420 |  |   | 6.180
|Fourth  |  |                   | 9.250  |      |   | 7.020 |  |     | 7.560 |      |   | 6.250 |  |   | 7.000 |  |   | 5.800
|Year    |  |                   | 11.540 |      |   | 6.020 |  |     | 7.560 |      |   | 5.760 |  |   | 9.250 |  |   | 5.800



Note: Data compiled from The NASDAQ
Stock Market Monthly Summary of Activity Reports.



Item 6.Selected Financial Data



FIVE-YEAR FINANCIAL SUMMARY



|                                                 |  |                                          |         |      |   |         |  |      |         |      |   |         |  |   |        
|------------------------------------------------ |  | ---------------------------------------- | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|Years Ended December 31                          |  | 2004                                     |         | 2003 |   | 2002    |  | 2001 |         | 2000
|                                                 |  | (in thousands, except per share amounts)
|Operating Data:                                  |  |                                          |         |      |   |         |  |      |         |      |   |         |  |   |        
|Net sales                                        |  | $                                        | 122,877 |      | $ | 114,811 |  | $    | 135,840 |      | $ | 150,031 |  | $ | 143,204
|Gross profit                                     |  |                                          | 32,225  |      |   | 30,655  |  |      | 34,277  |      |   | 38,989  |  |   | 39,421 
|Selling, general and administrative expense      |  |                                          | 28,337  |      |   | 27,515  |  |      | 31,074  |      |   | 28,404  |  |   | 26,600 
|Expenses for the terminated Lowrance acquisition |  |                                          |        |      |   |        |  |      |        |      |   | 1,402   |  |   |       
|Operating income                                 |  |                                          | 3,888   |      |   | 3,140   |  |      | 3,203   |      |   | 9,183   |  |   | 12,821 
|Tax provision                                    |  |                                          | 1,496   |      |   | 1,302   |  |      | 1,346   |      |   | 3,594   |  |   | 4,132  
|Net earnings                                     |  |                                          | 2,381   |      |   | 1,841   |  |      | 1,720   |      |   | 4,685   |  |   | 7,189  
|                                                 |  |                                          |         |      |  
|Net earnings per share:                          |  |                                          |         |      |   |         |  |      |         |      |   |         |  |   |        
|Basic                                            |  |                                          | 0.37    |      |   | 0.29    |  |      | 0.27    |      |   | 0.75    |  |   | 1.17   
|Diluted                                          |  |                                          | 0.36    |      |   | 0.28    |  |      | 0.26    |      |   | 0.73    |  |   | 1.12   
|                                                 |  |                                          |         |      |  
|As of December 31:                               |  |                                          |         |      |   |         |  |      |         |      |   |         |  |   |        
|Total assets                                     |  |                                          | 82,494  |      |   | 76,233  |  |      | 74,782  |      |   | 89,592  |  |   | 77,761 
|Short-term debt                                  |  |                                          |        |      |   |        |  |      |        |      |   |        |  |   | 13,376 
|Long-term debt                                   |  |                                          |        |      |   |        |  |      |        |      |   | 15,378  |  |   |       
|Shareholders equity                             |  |                                          | 60,127  |      |   | 57,701  |  |      | 55,879  |      |   | 53,972  |  |   | 48,626 
|Book value per share                             |  | $                                        | 9.33    |      | $ | 8.99    |  | $    | 8.70    |      | $ | 8.56    |  | $ | 7.89   
|Shares outstanding                               |  |                                          | 6,445   |      |   | 6,420   |  |      | 6,420   |      |   | 6,303   |  |   | 6,166  



Item 7.Managements Discussion and Analysis of FinancialConditionand Results of Operations



Executive Summary



Net sales in 2004 increased 7.0% to $122.9 million for the year ended December 31, 2004,
compared to $114.8 million in 2003 as a result of higher sales of newer products, including mobile navigation, handheld GPS and marine electronics as well as increased Detection and International sales. Gross margin decreased from 26.7% to 26.2%
driven primarily by sales earlier in the year of certain end-of-life inventory and $614,000 of increased amortization expense on intangible assets associated with a change in estimated economic useful life for certain handheld GPS models. Selling,
general and administrative expenses increased by $822,000 or 3.0%, but declined as a percentage of net sales from 24.0% to 23.1%, reflecting increased sales, higher research and development (R&D) expenses for new products, expenses
related to the Companys new Enterprise Resource Planning (ERP) system and higher deferred compensation expense, partially offset by lower bad debt expenses and a reserve reduction.



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Net earnings in 2004 were $2.4 million, or $0.36 per diluted share, compared to $1.8 million, or $0.28 per diluted share
for 2003. Income tax expense in 2004 reflected additional tax expense for the establishment of a valuation allowance for the deferred net operating loss carry-forward tax asset related to Cobra Electronics Europe Limited.



The declining trend in the two-way radio market is expected to continue in 2005. The Company
anticipates that this revenue decline will be offset by increased sales in mobile navigation, Citizens Band radios and marine products and increased sales in Europe. The Company also expects improvements in gross margins and operating margins,
resulting in higher net earnings in 2005 versus 2004.



Results of Operations



2004 Compared to
2003



The $8.1 million increase in net sales resulted from higher sales of
newer products, including mobile navigation, marine electronics as well as increased Detection and International sales. A significant decline in sales in the two-way radio category in 2004, both in units and in price per unit, reflected market
trends. This resulted in lower sales for the year to the Companys largest customer, Wal-Mart. However, sales of mobile navigation products drove an increase in sales to Best Buy, the Companys second largest customer.



The declining trend in the two-way radio market is expected to continue in 2005. The Company
anticipates that this revenue decline will be offset by increased sales in mobile navigation, Citizens Band radios and marine products and increased sales in Europe. The Company also expects improvements in gross margins and operating margins,
resulting in higher net earnings in 2005 versus 2004.



Gross margin decreased
from 26.7% to 26.2% driven primarily by sales earlier in the year of certain end-of-life inventory and $614,000 of increased amortization expense on intangible assets in the fourth quarter of 2004, associated with a change in estimated economic
useful life for certain handheld GPS models. These were partially offset by a favorable impact from a stronger euro in 2004.



Selling, general and administrative expenses increased by $822,000 or 3.0%, but declined as a percentage of net sales from 24.0% to 23.1%, reflecting increased R&D
expenses for new products, expenses related to the Companys new ERP system and higher deferred compensation expense, partially offset by lower bad debt expenses and a reserve reduction.



R&D expense was higher by $434,000, which reflected headcount additions for new product
development, both in the U.S. and Hong Kong. The Company anticipates that R&D costs will continue to increase as resources are acquired to support the anticipated growth of the Companys navigation and marine products. Expenses related to
the Companys new ERP system amounted to approximately $290,000 and included consulting and temporary help, travel, meals and training. The $245,000 increase in deferred compensation expense was due to additional years of service for the
Companys President and CEO, who entered into a new five-year contract in 2004.



These increases were partially offset by a decrease in bad debt expense. The lower bad debt expense included a reduction of $308,000 in the allowance for doubtful accounts, based on the Companys write-off history in the last five
years and specifically identified accounts that might be at risk.



Interest
expense of $110,000 for 2004 was $52,000 lower than 2003, due to lower average debt outstanding during 2004 and lower unused line fees that resulted from a reduction in the Companys credit line from $55 million to $45 million.



Other income decreased by $66,000 compared to 2003 primarily due to a lower gain on the cash
surrender value of life insurance policies.



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Income tax expense increased $194,000 to $1.5 million in 2004 due to an increase in pretax income and the establishment
of a valuation allowance for the deferred net operating loss carry-forward tax asset related to Cobra Electronics Europe Limited. The effective tax rate was 38.6% in 2004 compared to 41.4% in 2003.



2003 Compared to 2002



The $21.0 million decrease in net sales primarily reflected a significant decline in sales
in the two-way radio category, both in units and in price per unit. Nearly three-quarters of the decline in Cobras two-way radio sales was due to a decline in units sold, mirroring the overall market trends in the category. The remainder of
the decline was due to continued declines in average selling prices, again reflecting market trends. Management believes that the industry decline in average selling price was offset somewhat by Cobras product mix and merchandising
initiatives, including the introduction of longer range GMRS units and the use of value packs.



Certain customers also contributed to the decline in two-way radio sales. Merchandising choices by Costco Wholesale, which selected a competitor for placement in 2003, and Best Buy, which selected certain low-price
point models from competitors, contributed to a decline in sales from 2002 of $10.8 million. Additionally, sales to K-Mart declined by $3.1 million, as Cobra imposed credit restrictions subsequent to this companys bankruptcy filing. Partially
offsetting these declines and providing a market share gain was an increase in two-way radio sales to Wal-Mart, with unit sales increasing by approximately 10%.



Partially offsetting the decline in sales of two-way radios was an increase in sales of Citizens Band radios, driven by the Harley Davidson® and Dale Earnhardt® limited edition models, and sales from Cobras new product categories, hand-held
GPS and marine VHF radios and power inverters.



Gross margin for 2003 was 26.7%
compared to 25.2% in 2002. The increase primarily reflected improved Detection and Citizens Band radio margins on newer models, as well as lower defective return rates for both two-way radios and Detection products. Additionally, the 2002 gross
margin was negatively impacted by the Federal Communication Commissions (FCCs) decision to limit radar detector emissions in the frequency band used by VSAT satellite communications providers as some non-compliant Detection
products had to be sold off more quickly at lower prices. Finally, a stronger euro favorably impacted gross margin in 2003.



Selling, general and administrative expense decreased $3.6 million, or 11.5%, and as a percentage of net sales, increased to 24.0% in 2003 from 22.9% in 2002. The
decrease reflected lower overall sales, a shift in customer mix to customers using fewer programs, a decline in advertising programs at certain customers and the reversal of $1.2 million of unused program funds from 2002. This decrease was partially
offset by increases in bad debt and R&D expenses. The higher bad debt expense resulted from a one-time reduction of $772,000 in the allowance for claims and doubtful accounts in 2002. The Company purchased insurance on a portion of the
outstanding accounts receivable balance beginning in 2000. In 2002, the Company increased the insurance coverage, which resulted in the large reduction in the allowance for claims and doubtful accounts. R&D expense was higher by $478,000, which
reflected headcount additions for new product development, both in the U.S. and Hong Kong.



Interest expense for 2003 was $162,000, which was $66,000 lower than 2002, because of significantly lower average debt in 2003.



Other income increased by $74,000 compared to 2002 primarily due to a higher gain on the cash surrender value of life insurance policies.



Income tax expense decreased $44,000 to $1.3 million in 2003 due to higher deductible
permanent items. The effective tax rate was 41.4% in 2003 compared to 43.9% in 2002.



Liquidity and Capital Resources



On
January 31, 2002, the Company executed a new three-year revolving credit agreement for $55 million with three financial institutions. Borrowings and letters of credit issued under the agreement are secured by



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substantially all of the assets of the Company, with the exception of real property and the cash surrender value of certain life insurance policies owned by
the Company. The credit agreement was amended as of February 18, 2003 to address certain covenant violations then existing and decrease the earnings requirements for each calendar quarter through March 31, 2004 and to provide for increased permitted
capital expenditures in 2003. The credit agreement was further amended on February 18, 2004 to extend the term of the agreement to January 31, 2006, address certain covenant violations that would otherwise have occurred, reduce the cost of the
credit facility by reducing its size to $45 million and reducing the applicable interest rates, and modify the earnings requirements for each calendar quarter through January 31, 2006. As of September 30, 2004, the Company obtained a waiver letter
to cover an increase in the permitted capital expenditures for the year 2004. Loans outstanding under the credit agreement, as amended, bear interest, at the Companys option, at 25 basis points below the prime rate or at LIBOR plus 175 basis
points. The credit agreement specifies that the Company may not pay cash dividends and contains certain financial and other covenants, including a requirement that James R. Bazet continue as CEO of the Company. At December 31, 2004, the Company
had no interest bearing debt outstanding and approximately $32.0 million available under this credit line based on asset advance formulas.



Net cash flows generated in operating activities were $2.9 million for the year ended December 31, 2004. Operating cash flows generated included the following: net
earnings of $2.4 million, depreciation and amortization of $3.4 million, an increase in accounts payable of $1.7 million, an increase in accrued income taxes of $1.7 million and a decrease in inventory of $1.2 million. The above inflows were
partially offset by an increase in accounts receivable of $4.7 million and an increase in intangible assets of $2.8 million. The increase in accounts payable reflected longer payment terms during 2004 for selected vendors. Accrued income taxes
increased due to significantly increased income tax liabilities. The increase in accounts receivable was primarily driven by the increase in sales, offset in part by an overall reduction in the number of days sales outstanding. The increase in
intangible assets was due principally to new product software development expenditures for both mobile navigation and hand-held GPS devices, which are also expected to continue in 2005 and beyond. The amortization of these assets is also expected to
grow in future years.



Working capital requirements are seasonal, with demand
for working capital being higher later in the year as customers begin purchasing for the holiday selling season. The Company believes that cash generated from operations and from borrowings under its credit agreement will be sufficient in 2005 to
fund its working capital needs.



Alternative minimum tax (AMT)
credit carry-forwards were fully utilized as of December 31, 2004. The Company is currently making federal income tax payments at the statutory income tax rate.



Investing activities required cash of $4.8 million in 2004, principally for the implementation of a new ERP system, the purchase of tooling and equipment and the
installation of building improvements, funds loaned to Horizon Navigation (see note 10 to the consolidated financial statements) and the annual premiums paid for officers life insurance. In addition, during 2004 the Company retired $6.4
million of fully depreciated tooling fixed assets that were deemed obsolete. There was no net cash used in financing activities in 2004, as the Company did not have any debt outstanding at the end of each year.



The Company believes that for the foreseeable future, it will be able to continue to fund its
operations with cash generated from operations using existing or similar future bank credit agreements to fund its seasonal working capital needs.



Total outstanding commitments at December 31, 2004 were as follows: (in thousands)



|                          |  |       |        |                  |   |              |  |              |       |               |   |     |  |   |      
|------------------------- |  | ----- | ------ | ---------------- | - | ------------ |  | ------------ | ----- | ------------- | - | --- |  | - | -----
|                          |  | Total |        | Less than 1 year |   | 1 to 3 years |  | 3 to 5 years |       | After 5 years
|Capital Lease (a)         |  | $     | 306    |                  | $ | 72           |  | $            | 144   |               | $ | 90  |  | $ |     
|Operating leases          |  |       | 962    |                  |   | 119          |  |              | 131   |               |   | 121 |  |   | 591  
|Purchase obligations      |  |       | 17,226 |                  |   | 17,226       |  |              |      |               |   |    |  |   |     
|Letters of credit         |  |       | 4,378  |                  |   | 4,378        |  |              |      |               |   |    |  |   |     
|Deferred compensation (a) |  |       | 5,818  |                  |   | 254          |  |              | 762   |               |   | 508 |  |   | 4,294
|                          |  |       |        |                  |   |              |  |              |       |               |   |     |  |   |      
|Total                     |  | $     | 28,690 |                  | $ | 22,049       |  | $            | 1,037 |               | $ | 719 |  | $ | 4,885
|                          |  |       |        |                  |   |              |  |              |       |               |   |     |  |   |      



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|(a) | Included on the Consolidated Balance Sheets on pages 17-18.
|--- | -----------------------------------------------------------



The Company does not have any other significant long-term obligations, contractual obligations, lines of credit, standby letters of credit, guarantees, standby repurchase
obligations or other commercial commitments.



Critical
Accounting Policies



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



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



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



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



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



Liquidation Reserve    The Company maintains a reserve representing the write-down of returned product to net realizable value.
Returned inventory is either sold to various liquidators or returned to vendors for credit against similar, new models and depends upon the estimated future demand for the models. Judgments are made as to whether various models are to be liquidated
or returned to vendor and, for the former, the liquidation prices expected to be received. This reserve can fluctuate significantly from quarter to quarter depending upon quantities of returned inventory on hand and the estimated liquidation price
or vendor credit per unit.



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



Deferred Compensation    Obligations under the
deferred compensation plans (most of which are non-qualified defined benefit plans) and annual deferred compensation expense are determined by a number of assumptions. Key assumptions in the determination of obligations under the plans and annual
deferred compensation expenses include the discount rate and anticipated compensation for each individual covered by the plans, which in part is dependent upon the anticipated future profitability of the Company. The rate is also dependent on rates
used for qualified defined benefit plans. The discount rate used approximates the fixed rate of return the Company earns on the cash surrender value of an insurance policy purchased to fund payments to the retired president and CEO, which
represented approximately half of the total obligation of the plans at December 31, 2004. This discount rate was 7% in both 2004 and 2003 and 8% in 2002. The compensation increase assumptions are based on historical experience and anticipated future
performance.



Net Realizable Value
Reserve    The Company maintains a reserve to write-down certain inventory, except for that covered by the liquidation reserve discussed above, below cost, as necessary. The reserve includes models where it is determined that
net realizable value is less than cost. Thus, judgments must be made about which slow-moving, excess or non-current models are to be included and the estimated net realizable value. This reserve will vary depending upon the specific models selected,
the estimated net realizable value for each model and quantities of each model that are determined will be sold below cost from quarter to quarter.



Software related to products to be sold    The Company purchases and/or incurs costs in connection with the development of
software to be used in products that the Company intends to sell. Such costs are capitalized and deferred as intangible assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 86, Accounting for Costs of
Computer Software to be Sold, Leased or Otherwise Marketed. Such costs consist of expenditures incurred after technological feasibility of the software has been established and a working model of the product developed and consist principally
of coding and related costs. Such costs are charged to earnings based on the ratio of actual product sales during the reporting period to expected product sales over the life of the product life cycle.



The above listing is not intended to be a comprehensive list of all of the Companys
accounting policies. In most cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States. See Note 1 to Cobras consolidated financial statements included
under Item 8, which is incorporated herein by reference, for a complete description of the Companys significant accounting policies.



New Accounting Pronouncements



On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the Act). The Act provides a deduction for income from qualified domestic
production activities, which will be phased in from 2005 through 2010. In return, the Act also provides for a two-year phase-out (except for certain pre-existing binding contracts) of the existing Extraterritorial Income (ETI) exclusion
tax benefit for foreign sales which the World Trade Organization (WTO) ruled was an illegal export subsidy. The European Union (EU) believes that the Act fails to adequately repeal the illegal export subsidies because of the
transitional provisions



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and has asked the WTO to review whether these transitional provisions are in compliance with their prior ruling. This will have no material impact on the
Company. Additionally, the Act creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85% dividend received deduction for certain dividends from controlled foreign corporations. The impact
on the Company in the future will not be material.



On December 21, 2004, the
Financial Accounting Standards Board (FASB) Staff Position (FSP) FAS 109-1, Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the
American Jobs Creation Act of 2004, was issued. FSP FAS 109-1 clarifies that this tax deduction should be accounted for as a special deduction in accordance with Statement 109. As such, the special deduction has no effect on deferred tax
assets and liabilities existing at the date of enactment. Rather, the impact of this deduction would be reported in the period in which the deduction is claimed on our tax return beginning in 2005. As regulations are still pending, the Company has
not been able to quantify the impact, however, but believes that the impact will not be material.



On December 21, 2004, FSP FAS 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004, was issued. FSP 109-2 provides
companies additional time, beyond the financial reporting period during which the Act took effect, to evaluate the Acts impact on a companys plan for reinvestment or repatriation of certain foreign earnings for purposes of applying
Statement 109. FSP 109-2 was effective upon issuance. As of December 31, 2004, based on managements analysis of the Act, although not yet finalized, it is unlikely that under the repatriation provision of the Act the Company had any foreign
earnings to repatriate and accordingly, the financial statements do not reflect any provisions for taxes on unremitted foreign earnings.



In November 2004, the FASB issued Statement 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4 to clarify that abnormal amounts of idle facility
expense, freight, handling costs and spoilage should be recognized as current period expenses. Also, Statement 151 requires fixed overhead costs to be allocated to inventory based on normal production capacity. Normal production capacity includes a
range of production levels. It is the production an enterprise expects to achieve over a number of periods under normal circumstances, considering reductions in capacity from planned maintenance. The Company believes that its current accounting
policies adhere to the specifications of Statement 151.



In December 2004, the
FASB issued Statement 123 (R) Share-Based Payment. This statement will require the Company to recognize the fair value of granted options and shares as compensation cost over the service (vesting) period in its financial statements,
beginning in the first interim or annual reporting period after June 15, 2005. Accordingly, the Company will reflect the adjustment to its 2005 earnings for the impact of this accounting pronouncement in the interim reporting period ending September
30, 2005.



Item 7A.Quantitative and Qualitative Disclosures About Market Risk



The Company is subject to market risk associated principally with changes in interest rates and foreign exchange rates. The Company does not have any interest rate
exposure at December 31, 2004, as there is no outstanding debt. Debt incurred is priced at interest rates that float with the market and therefore the fair value of the Companys debt is not significantly affected by changes in market interest
rates.



The Companys suppliers are located in foreign countries,
principally in Asia. In 2004, approximately 14.8% of the Companys sales were outside the United States, principally in Europe and Canada, compared to 12.6% in 2003. The Company minimizes its foreign currency exchange rate risk by conducting
all of its transactions in U.S. dollars, except for some of the billings of its European business, which are conducted in euros. The Company does not use derivative financial or commodity instruments for trading or speculative purposes, however
forward contracts are occasionally used for hedging some euro denominated transactions for the Companys European business. Please refer to Note 4 in the financial statements, which are incorporated herein



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by reference. A 10% movement in the U.S. dollar/euro exchange rate on the forward contracts outstanding at December 31, 2004 would result in approximately a
$569,000 annual increase or decrease in cost of sales and cash flows.



Forward-Looking Statements



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



Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified based on current expectations. Consequently,
future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements contained in this report or in other Company filings, press releases, or otherwise. Factors that could
contribute to or cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas:



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



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



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



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



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



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



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



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



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



15



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##### Table of Contents

Item 8.Financial Statements and Supplementary Data



Financial statements and quarterly financial data are included in this Annual Report on Form 10-K, as indicated in the index on page 39.



CONSOLIDATED STATEMENTS OF EARNINGS



Cobra Electronics Corporation



|                                            |  |                                          |         |   |      |   |         |      |  |   |         |  
|------------------------------------------- |  | ---------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|Years Ended December 31                     |  | 2004                                     |         |   | 2003 |   |         | 2002 | 
|                                            |  | (in thousands, except per share amounts) |        
|Net sales                                   |  | $                                        | 122,877 |   |      | $ | 114,811 |      |  | $ | 135,840 |  
|Cost of sales                               |  |                                          | 90,652  |   |      |   | 84,156  |      |  |   | 101,563 |  
|                                            |  |                                          |         |   |      |   |         |      |  |   |         |  
|Gross profit                                |  |                                          | 32,225  |   |      |   | 30,655  |      |  |   | 34,277  |  
|                                            |  |                                          |        
|Selling, general and administrative expense |  |                                          | 28,337  |   |      |   | 27,515  |      |  |   | 31,074  |  
|                                            |  |                                          |         |   |      |   |         |      |  |   |         |  
|Operating income                            |  |                                          | 3,888   |   |      |   | 3,140   |      |  |   | 3,203   |  
|                                            |  |                                          |        
|Other income (expense):                     |  |                                          |         |   |      |   |         |      |  |   |         |  
|Interest expense                            |  |                                          | (110    | ) |      |   | (162    | )    |  |   | (228    | )
|Other income, net                           |  |                                          | 99      |   |      |   | 165     |      |  |   | 91      |  
|                                            |  |                                          |         |   |      |   |         |      |  |   |         |  
|Income before income taxes                  |  |                                          | 3,877   |   |      |   | 3,143   |      |  |   | 3,066   |  
|Tax provision                               |  |                                          | 1,496   |   |      |   | 1,302   |      |  |   | 1,346   |  
|                                            |  |                                          |         |   |      |   |         |      |  |   |         |  
|Net earnings                                |  | $                                        | 2,381   |   |      | $ | 1,841   |      |  | $ | 1,720   |  
|                                            |  |                                          |         |   |      |   |         |      |  |   |         |  
|                                            |  |                                          |        
|Net earnings per common share:              |  |                                          |         |   |      |   |         |      |  |   |         |  
|Basic                                       |  | $                                        | 0.37    |   |      | $ | 0.29    |      |  | $ | 0.27    |  
|Diluted                                     |  | $                                        | 0.36    |   |      | $ | 0.28    |      |  | $ | 0.26    |  
|                                            |  |                                          |        
|Weighted average shares outstanding:        |  |                                          |         |   |      |   |         |      |  |   |         |  
|Basic                                       |  |                                          | 6,439   |   |      |   | 6,420   |      |  |   | 6,373   |  
|Diluted                                     |  |                                          | 6,603   |   |      |   | 6,495   |      |  |   | 6,505   |  



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



16



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##### Table of Contents

CONSOLIDATED BALANCE SHEETS



Cobra Electronics Corporation



|                                                                                               |  |                |         |   |      |   |         |  
|---------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|At December 31                                                                                 |  | 2004           |         |   | 2003 |  
|                                                                                               |  | (in thousands) |        
|ASSETS:                                                                                        |  |                |         |   |      |   |         |  
|Current assets:                                                                                |  |                |         |   |      |   |         |  
|Cash                                                                                           |  | $              | 2,600   |   |      | $ | 4,736   |  
|Receivables, less allowances for claims and doubtful accounts of $270 in 2004 and $577 in 2003 |  |                | 27,181  |   |      |   | 22,437  |  
|Inventories, primarily finished goods.                                                         |  |                | 19,551  |   |      |   | 20,668  |  
|Deferred income taxes                                                                          |  |                | 5,209   |   |      |   | 5,265   |  
|Loan receivable                                                                                |  |                | 2,465   |   |      |   |        |  
|Other current assets                                                                           |  |                | 3,487   |   |      |   | 3,285   |  
|                                                                                               |  |                |         |   |      |   |         |  
|Total current assets                                                                           |  |                | 60,493  |   |      |   | 56,391  |  
|                                                                                               |  |                |         |   |      |   |         |  
|Property, plant and equipment, at cost:                                                        |  |                |         |   |      |   |         |  
|Buildings and improvements                                                                     |  |                | 4,939   |   |      |   | 4,464   |  
|Tooling and equipment                                                                          |  |                | 16,318  |   |      |   | 21,379  |  
|                                                                                               |  |                |         |   |      |   |         |  
|                                                                                               |  |                | 21,257  |   |      |   | 25,843  |  
|Accumulated depreciation                                                                       |  |                | (14,792 | ) |      |   | (19,466 | )
|Land                                                                                           |  |                | 330     |   |      |   | 330     |  
|                                                                                               |  |                |         |   |      |   |         |  
|Net property, plant and equipment                                                              |  |                | 6,795   |   |      |   | 6,707   |  
|                                                                                               |  |                |         |   |      |   |         |  
|Other assets:                                                                                  |  |                |         |   |      |   |         |  
|Cash surrender value of officers life insurance policies                                      |  |                | 7,024   |   |      |   | 6,564   |  
|Intangible assets                                                                              |  |                | 8,182   |   |      |   | 4,846   |  
|Loan receivable                                                                                |  |                |        |   |      |   | 1,725   |  
|                                                                                               |  |                |         |   |      |   |         |  
|Total other assets                                                                             |  |                | 15,206  |   |      |   | 13,135  |  
|                                                                                               |  |                |         |   |      |   |         |  
|Total assets                                                                                   |  | $              | 82,494  |   |      | $ | 76,233  |  
|                                                                                               |  |                |         |   |      |   |         |  



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



17



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##### Table of Contents

CONSOLIDATED BALANCE SHEETS (cont.)



Cobra Electronics Corporation



|                                                                                                |  |                                  |        |   |      |   |        |  
|----------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | - | ---- | - | ------ | -
|At December 31                                                                                  |  | 2004                             |        |   | 2003 |  
|                                                                                                |  | (in thousands, exceptshare data) |       
|LIABILITIES AND SHAREHOLDERS EQUITY:                                                           |  |                                  |        |   |      |   |        |  
|Current liabilities:                                                                            |  |                                  |        |   |      |   |        |  
|Accounts payable                                                                                |  | $                                | 4,785  |   |      | $ | 3,073  |  
|Accrued salaries and commissions                                                                |  |                                  | 1,074  |   |      |   | 1,189  |  
|Accrued advertising and sales promotion costs                                                   |  |                                  | 2,470  |   |      |   | 2,766  |  
|Accrued product warranty costs                                                                  |  |                                  | 1,277  |   |      |   | 1,524  |  
|Accrued income taxes                                                                            |  |                                  | 1,896  |   |      |   | 157    |  
|Other accrued liabilities                                                                       |  |                                  | 1,696  |   |      |   | 1,296  |  
|                                                                                                |  |                                  |        |   |      |   |        |  
|Total current liabilities                                                                       |  |                                  | 13,198 |   |      |   | 10,005 |  
|Non-current liabilities:                                                                        |  |                                  |        |   |      |   |        |  
|Deferred compensation                                                                           |  |                                  | 5,564  |   |      |   | 4,556  |  
|Deferred income taxes                                                                           |  |                                  | 3,206  |   |      |   | 3,836  |  
|Other long term liabilities                                                                     |  |                                  | 399    |   |      |   | 135    |  
|                                                                                                |  |                                  |        |   |      |   |        |  
|Total non-current liabilities                                                                   |  |                                  | 9,169  |   |      |   | 8,527  |  
|                                                                                                |  |                                  |        |   |      |   |        |  
|Total liabilities                                                                               |  |                                  | 22,367 |   |      |   | 18,532 |  
|                                                                                                |  |                                  |        |   |      |   |        |  
|Shareholders equity:                                                                           |  |                                  |        |   |      |   |        |  
|Preferred stock, $1 par value, shares authorized-1,000,000; none issued                         |  |                                  |       |   |      |   |       |  
|Common stock, $.331/3par value, 12,000,000 shares authorized, 7,039,100issued for 2004 and 2003 |  |                                  | 2,345  |   |      |   | 2,345  |  
|Paid-in capital                                                                                 |  |                                  | 19,650 |   |      |   | 19,772 |  
|Retained earnings                                                                               |  |                                  | 42,271 |   |      |   | 39,890 |  
|Accumulated comprehensive (loss) income                                                         |  |                                  | (17    | ) |      |   | 16     |  
|                                                                                                |  |                                  |        |   |      |   |        |  
|                                                                                                |  |                                  | 64,249 |   |      |   | 62,023 |  
|Treasury stock, at cost (594,285 shares for 2004 and 619,323 shares for 2003)                   |  |                                  | (3,722 | ) |      |   | (3,922 | )
|Officers note receivable                                                                       |  |                                  | (400   | ) |      |   | (400   | )
|                                                                                                |  |                                  |        |   |      |   |        |  
|Total shareholders equity                                                                      |  |                                  | 60,127 |   |      |   | 57,701 |  
|                                                                                                |  |                                  |        |   |      |   |        |  
|Total liabilities and shareholders equity                                                      |  | $                                | 82,494 |   |      | $ | 76,233 |  
|                                                                                                |  |                                  |        |   |      |   |        |  



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



18



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##### Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS



Cobra Electronics Corporation



|                                                                                   |  |                |        |   |      |   |        |      |  |   |         |  
|---------------------------------------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------- | -
|Years Ended December 31                                                            |  | 2004           |        |   | 2003 |   |        | 2002 | 
|                                                                                   |  | (in thousands) |       
|Cash flows from operating activities:                                              |  |                |        |   |      |   |        |      |  |   |         |  
|Net earnings                                                                       |  | $              | 2,381  |   |      | $ | 1,841  |      |  | $ | 1,720   |  
|Adjustments to reconcile net earnings to net cash flows from operating activities: |  |                |        |   |      |   |        |      |  |   |         |  
|Depreciation and amortization                                                      |  |                | 3,369  |   |      |   | 2,732  |      |  |   | 2,738   |  
|(Gain) loss on cash surrender value (CSV) of life insurance                        |  |                | (203   | ) |      |   | (306   | )    |  |   | 79      |  
|Tax benefit from stock options exercised                                           |  |                | 78     |   |      |   |       |      |  |   | 43      |  
|Deferred income taxes                                                              |  |                | (574   | ) |      |   | 1,450  |      |  |   | 407     |  
|Loss on sale of fixed assets                                                       |  |                | 91     |   |      |   | 2      |      |  |   | 3       |  
|Changes in assets and liabilities:                                                 |  |                |        |   |      |   |        |      |  |   |         |  
|Receivables                                                                        |  |                | (4,687 | ) |      |   | 2,463  |      |  |   | 17,014  |  
|Inventories                                                                        |  |                | 1,176  |   |      |   | 312    |      |  |   | 1,234   |  
|Other current assets                                                               |  |                | (355   | ) |      |   | 77     |      |  |   | (1,049  | )
|Intangible assets                                                                  |  |                | (2,818 | ) |      |   | (2,408 | )    |  |   | (1,514  | )
|Accounts payable                                                                   |  |                | 1,693  |   |      |   | (1,251 | )    |  |   | 1,357   |  
|Accrued income taxes                                                               |  |                | 1,739  |   |      |   | (441   | )    |  |   | 207     |  
|Accrued liabilities                                                                |  |                | (297   | ) |      |   | 173    |      |  |   | (2,648  | )
|Deferred compensation                                                              |  |                | 1,009  |   |      |   | 771    |      |  |   | 457     |  
|Other long term liabilities                                                        |  |                | 264    |   |      |   | 135    |      |  |   |        |  
|                                                                                   |  |                |        |   |      |   |        |      |  |   |         |  
|Net cash flows from operating activities                                           |  |                | 2,866  |   |      |   | 5,550  |      |  |   | 20,048  |  
|                                                                                   |  |                |        |   |      |   |        |      |  |   |         |  
|Cash flows used in investing activities:                                           |  |                |        |   |      |   |        |      |  |   |         |  
|Capital expenditures                                                               |  |                | (2,043 | ) |      |   | (1,500 | )    |  |   | (2,333  | )
|ERP system                                                                         |  |                | (1,808 | ) |      |   |       |      |  |   |        |  
|Premiums on CSV life insurance                                                     |  |                | (257   | ) |      |   | (292   | )    |  |   | (292    | )
|Loan receivable                                                                    |  |                | (740   | ) |      |   | (1,725 | )    |  |   |        |  
|                                                                                   |  |                |        |   |      |   |        |      |  |   |         |  
|Net cash flows used in investing activities                                        |  |                | (4,848 | ) |      |   | (3,517 | )    |  |   | (2,625  | )
|                                                                                   |  |                |        |   |      |   |        |      |  |   |         |  
|Cash flows used in financing activities:                                           |  |                |        |   |      |   |        |      |  |   |         |  
|Net borrowings (repayments) under the line-of-credit agreement                     |  |                |       |   |      |   |       |      |  |   | (15,378 | )
|Transactions related to exercise of stock options, net                             |  |                |       |   |      |   |       |      |  |   | 509     |  
|Transactions related to officers note receivable                                  |  |                |       |   |      |   |       |      |  |   | (400    | )
|                                                                                   |  |                |        |   |      |   |        |      |  |   |         |  
|Net cash flows used in financing activities                                        |  |                |       |   |      |   |       |      |  |   | (15,269 | )
|                                                                                   |  |                |        |   |      |   |        |      |  |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                       |  |                | (154   | ) |      |   | (126   | )    |  |   |        |  
|                                                                                   |  |                |        |   |      |   |        |      |  |   |         |  
|Net (decrease) increase in cash                                                    |  |                | (2,136 | ) |      |   | 1,907  |      |  |   | 2,154   |  
|Cash at beginning of year                                                          |  |                | 4,736  |   |      |   | 2,829  |      |  |   | 675     |  
|                                                                                   |  |                |        |   |      |   |        |      |  |   |         |  
|Cash at end of year                                                                |  | $              | 2,600  |   |      | $ | 4,736  |      |  | $ | 2,829   |  
|                                                                                   |  |                |        |   |      |   |        |      |  |   |         |  
|                                                                                   |  |                |       
|Supplemental disclosure of cash flow information:                                  |  |                |        |   |      |   |        |      |  |   |         |  
|                                                                                   |  | 2004           |        |   | 2003 |   |        | 2002 | 
|Cash paid during the year for:                                                     |  |                |        |   |      |   |        |      |  |   |         |  
|Interest                                                                           |  | $              | 110    |   |      | $ | 162    |      |  | $ | 277     |  
|Income taxes, net of refunds                                                       |  | $              | 364    |   |      | $ | 530    |      |  | $ | 600     |  



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



19



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##### Table of Contents

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY



Cobra Electronics Corporation



|                                                                                     |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   |        |  
|------------------------------------------------------------------------------------ |  | ---------------------- | ----- | -------------- | - | ------ | ---------------- |  | ------------- | ------ |  | ------------------------------------ | ------ | - | ---------------- | - | --- | ----- |  | - | ---- | - |  | - | ------ | -
|Three Years Ended December 31,
2004                                                  |  | CommonStock            |       | Paid-InCapital |   |        | RetainedEarnings |  | TreasuryStock |        |  | AccumulatedComprehensiveIncome(loss) |        |   | OfficersLoanRec |   |     | Total | 
|                                                                                     |  | (dollars in thousands) |      
|BalanceJanuary 1, 2002                                                              |  | $                      | 2,345 |                | $ | 19,899 |                  |  | $             | 36,329 |  | $                                    | (4,601 | ) |                  |   |    |       |  |   |     |   |  | $ | 53,972 |  
|Comprehensive Income:                                                                |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   |        |  
|Net earnings                                                                         |  |                        |      |                |   |       |                  |  |               | 1,720  |  |                                      |       |   |                  |   |    |       |  |   |     |   |  |   | 1,720  |  
|Accumulated other comprehensive incomeforeign currency translation adjustment       |  |                        |      |                |   |       |                  |  |               |       |  |                                      |       |   |                  |   | 35  |       |  |   |     |   |  |   | 35     |  
|                                                                                     |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   |        |  
|Total comprehensive income                                                           |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   | 1,755  |  
|Transactions related to exercise of options, net                                     |  |                        |      |                |   | (170   | )                |  |               |       |  |                                      | 679    |   |                  |   |    |       |  |   |     |   |  |   | 509    |  
|Tax benefit from stock options exercised                                             |  |                        |      |                |   | 43     |                  |  |               |       |  |                                      |       |   |                  |   |    |       |  |   |     |   |  |   | 43     |  
|Officers loan receivable.                                                           |  |                        |      |                |   |       |                  |  |               |       |  |                                      |       |   |                  |   |    |       |  |   | (400 | ) |  |   | (400   | )
|                                                                                     |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   |        |  
|BalanceDecember 31, 2002                                                            |  | $                      | 2,345 |                | $ | 19,772 |                  |  | $             | 38,049 |  | $                                    | (3,922 | ) |                  | $ | 35  |       |  | $ | (400 | ) |  | $ | 55,879 |  
|Comprehensive Income:                                                                |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   |        |  
|Net earnings                                                                         |  |                        |      |                |   |       |                  |  |               | 1,841  |  |                                      |       |   |                  |   |    |       |  |   |     |   |  |   | 1,841  |  
|Accumulated other comprehensive income(loss)foreign currency translation adjustment |  |                        |      |                |   |       |                  |  |               |       |  |                                      |       |   |                  |   | (19 | )     |  |   |     |   |  |   | (19    | )
|                                                                                     |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   |        |  
|Total comprehensive income                                                           |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   | 1,822  |  
|                                                                                     |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   |        |  
|BalanceDecember 31, 2003                                                            |  | $                      | 2,345 |                | $ | 19,772 |                  |  | $             | 39,890 |  | $                                    | (3,922 | ) |                  | $ | 16  |       |  | $ | (400 | ) |  | $ | 57,701 |  
|Comprehensive Income:                                                                |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   |        |  
|Net earnings                                                                         |  |                        |      |                |   |       |                  |  |               | 2,381  |  |                                      |       |   |                  |   |    |       |  |   |     |   |  |   | 2,381  |  
|Accumulated other comprehensive income(loss)foreign currency translation adjustment |  |                        |      |                |   |       |                  |  |               |       |  |                                      |       |   |                  |   | (33 | )     |  |   |     |   |  |   | (33    | )
|                                                                                     |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   |        |  
|Total comprehensive income                                                           |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   | 2,348  |  
|                                                                                     |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   |        |  
|Transactions related to exercise of options, net                                     |  |                        |      |                |   | (200   | )                |  |               |       |  |                                      | 200    |   |                  |   |    |       |  |   |     |   |  |   |       |  
|Tax benefit from stock options exercised                                             |  |                        |      |                |   | 78     |                  |  |               |       |  |                                      |       |   |                  |   |    |       |  |   |     |   |  |   | 78     |  
|                                                                                     |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   |        |  
|BalanceDecember 31, 2004                                                            |  | $                      | 2,345 |                | $ | 19,650 |                  |  | $             | 42,271 |  | $                                    | (3,722 | ) |                  | $ | (17 | )     |  | $ | (400 | ) |  | $ | 60,127 |  
|                                                                                     |  |                        |       |                |   |        |                  |  |               |        |  |                                      |        |   |                  |   |     |       |  |   |      |   |  |   |        |  



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



20



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Cobra Electronics Corporation



Years ended
December 31, 2004, 2003 and 2002



(1)  Summary of Significant
Accounting Policies



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



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



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



Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period that are largely based on the current business conditions, including economic climate, revenue growth, sales returns rates, net realizable value of returned products and changes in certain working capital amounts. The
Company believes its estimates and assumptions are reasonable. However, actual results and the timing of the recognition of such amounts could differ from those estimates.



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



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



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



Advertising and Sales Promotion ExpensesThese costs reflect amounts provided to
retailers and distributors for advertising and sales promotions and are expensed as incurred. Customer programs, agreed to at the



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beginning of each year, are mainly variable programs dependent on sales and may be revised during the course of the year, based upon a customers
projected sales and other factors, such as new promotional opportunities. Advertising and sales promotion expenses for the years ended December 31, 2004, 2003 and 2002 totaled $5.9 million, $5.7 million, and $9.2 million, respectively.



Comprehensive Income (loss)The Company reports comprehensive income under the
provisions of SFAS No. 130, Reporting Comprehensive Income. Comprehensive income is defined as the change in equity of a business enterprise from transactions and other events from non-owner sources. Comprehensive income
includes net earnings and other non-owner changes in equity that bypass the statement of operations and are reported in a separate component of equity. For the years ended December 31, 2004, 2003 and 2002, other comprehensive income includes only
one component, which is the change in the foreign currency translation adjustment.



Concentration of Credit RiskThe Company places temporary cash investments with institutions of high credit quality. The Company has a broad customer base doing business in all regions of the United States as well as other areas
of North America and Europe. In addition, the Company maintains credit insurance for over 48% of its customer base.



At December 31, 2004 and 2003, the Company had approximately $2.6 million and $4.7 million, respectively, on deposit with financial institutions, of which $2.5 million
and $4.6 million, respectively, was in excess of amounts insured by the Federal Deposit Insurance Corporation. The Company performs periodic evaluations of these institutions for relative credit standing and has not experienced any losses as a
result of this concentration. Consequently, no significant concentration of credit risk is considered to exist.



DepreciationDepreciation of buildings, improvements, tooling and equipment is computed using the straight-line method over the following estimated useful
lives:



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



Long-Lived
AssetsLong-lived assets are reviewed for possible impairment whenever events indicate that the carrying amount of such assets may not be recoverable. If such a review indicates impairment, the carrying amount of such assets is reduced to
an estimated fair value. In addition, during 2004 the Company retired $6.4 million of fully depreciated tooling fixed assets that were deemed obsolete.



Loan ReceivableThe Company evaluates the collectibility of its loan receivable from Horizon Navigation, Inc. (Horizon) based on the
Companys security interest in substantially all of Horizons assets and the anticipated revenue stream from royalties due to Horizon from the Company. In addition, an independent valuation specialist performed a valuation analysis of the
value of Cobras security interest in Horizons assets. On the basis of this analysis, management concluded that the value of the Companys security interest in Horizons assets was greater than the outstanding loan receivable
amount at December 31, 2004.



Research, Engineering and Product Development
ExpendituresResearch, engineering and product development expenditures are expensed as incurred and amounted to $2.4 million in 2004, $2.0 million in 2003 and $1.5 million in 2002.



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



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Software Related to Products to be SoldThe Company purchases and/or incurs costs in connection with the
development of software to be used in products that the Company intends to sell. Such costs are capitalized and deferred as intangible assets in accordance with SFAS No. 86, Accounting for Costs of Computer Software to be Sold, Leased or
Otherwise Marketed. Such costs consist of expenditures incurred after technological feasibility of the software has been established and a working model of the product developed and consist principally of coding and related costs. Such costs
are charged to earnings based on the ratio of actual product sales during the reporting period to expected product sales over the estimated product life cycle. Software related intangible assets are reviewed for possible impairment whenever events
indicate that the carrying amount of such assets may not be recoverable. If such a review indicates impairment, the carrying amount of such assets is reduced to an estimated fair value.



Stock OptionsThe Company applies Accounting Principles Board Opinion No. 25 and related Interpretations in accounting for the
Plans. Accordingly, no compensation cost has been recognized as options are granted with an exercise price equal to the fair market value of the Companys common stock on the date of grant. Had compensation cost been determined consistent with
SFAS No. 123, Accounting for Stock-Based Compensation, which requires measuring compensation cost at the fair value of the options granted, the Companys net earnings and net earnings per common share would have been adjusted to the
pro forma amounts indicated below (in thousands, except per share amounts):



|                                                                                                                                            |  |                        |       |   |      |   |       |      |  |   |       |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                                                                                                            |  | Year Ended December 31 |      
|                                                                                                                                            |  | 2004                   |       |   | 2003 |   |       | 2002 | 
|Net earnings, as reported                                                                                                                   |  | $                      | 2,381 |   |      | $ | 1,841 |      |  | $ | 1,720 |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                        | (90   | ) |      |   | (153  | )    |  |   | (245  | )
|                                                                                                                                            |  |                        |       |   |      |   |       |      |  |   |       |  
|Pro forma net earnings                                                                                                                      |  | $                      | 2,291 |   |      | $ | 1,688 |      |  | $ | 1,475 |  
|                                                                                                                                            |  |                        |       |   |      |   |       |      |  |   |       |  
|Net earnings per common share:                                                                                                              |  |                        |       |   |      |   |       |      |  |   |       |  
|Basicas reported                                                                                                                           |  | $                      | 0.37  |   |      | $ | 0.29  |      |  | $ | 0.27  |  
|Basicpro forma                                                                                                                             |  |                        | 0.36  |   |      |   | 0.26  |      |  |   | 0.23  |  
|                                                                                                                                            |  |                        |      
|Dilutedas reported                                                                                                                         |  | $                      | 0.36  |   |      | $ | 0.28  |      |  | $ | 0.26  |  
|Dilutedpro forma                                                                                                                           |  |                        | 0.35  |   |      |   | 0.26  |      |  |   | 0.23  |  



The fair value of each option, for
each year, is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used: no dividends; expected volatility ranging from 42 to 45 percent; risk-free interest rate ranging from 4.1
to 4.9 percent; and expected lives of 10 years.



Income TaxesThe
Company provides for income taxes under the asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are recorded based on the expected tax effects of future taxable income or deductions resulting from
differences in the financial statement and tax bases of assets and liabilities. A valuation allowance is recorded when necessary to reduce net deferred tax assets to the amount considered more likely than not to be realized.



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



Erp System CostsThe Company capitalizes certain costs
associated with ERP software developed or obtained for internal use in accordance with Statement of Position No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The Companys policy
provides for the capitalization of



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external direct costs of materials and services associated with developing or obtaining internal use ERP software. Costs associated with preliminary project
activities and training are expensed as incurred. Capitalized costs related to ERP software developed or obtained for internal use will be amortized over a seven year period on a straight-line basis when the relevant ERP software is placed in
service.



ReclassificationCertain previously reported amounts have
been reclassified to conform to the current period presentation.



New Accounting Pronouncements



On October 22, 2004, the
President signed the American Jobs Creation Act of 2004 (the Act). The Act provides a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010. In return, the Act also provides
for a two-year phase-out (except for certain pre-existing binding contracts) of the existing Extraterritorial Income (ETI) exclusion tax benefit for foreign sales which the World Trade Organization (WTO) ruled was an illegal
export subsidy. The European Union (EU) believes that the Act fails to adequately repeal the illegal export subsidies because of the transitional provisions and has asked the WTO to review whether these transitional provisions are in
compliance with their prior ruling. This will have no material impact on the Company. Additionally, the Act creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85% dividend received
deduction for certain dividends from controlled foreign corporations. The impact on the Company in the future will not be material.



On December 21, 2004, the Financial Accounting Standards Board (FASB) Staff Position (FSP) FAS 109-1, Application of FASB Statement No. 109,
Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004, was issued. FSP FAS 109-1 clarifies that this tax deduction should be accounted for as a special deduction
in accordance with Statement 109. As such, the special deduction has no effect on deferred tax assets and liabilities existing at the date of enactment. Rather, the impact of this deduction would be reported in the period in which the deduction is
claimed on the Companys tax return beginning in 2005. As regulations are still pending, the Company has not been able to quantify the impact, however, but believes that the impact will not be material.



On December 21, 2004, FSP FAS 109-2, Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs Creation Act of 2004, was issued. FSP 109-2 provides companies additional time, beyond the financial reporting period during which the Act took effect, to evaluate the Acts impact
on a companys plan for reinvestment or repatriation of certain foreign earnings for purposes of applying Statement 109. FSP 109-2 was effective upon issuance. As of December 31, 2004, based on managements analysis of the Act, although
not yet finalized, it is unlikely that under the repatriation provision of the Act the Company had any foreign earnings to repatriate and accordingly, the financial statements do not reflect any provisions for taxes on unremitted foreign earnings.



In November 2004, the FASB issued Statement 151, Inventory Costs, an
amendment of ARB No. 43, Chapter 4 to clarify that abnormal amounts of idle facility expense, freight, handling costs and spoilage should be recognized as current period expenses. Also, Statement 151 requires fixed overhead costs to be
allocated to inventory based on normal production capacity. Normal production capacity includes a range of production levels. It is the production an enterprise expects to achieve over a number of periods under normal circumstances, considering
reductions in capacity from planned maintenance. The Company believes that its current accounting policies adhere to the specifications of Statement 151.



In December 2004, the FASB issued Statement 123 (R) Share-Based Payment. This statement will require the Company to recognize the fair value of granted
options and shares as compensation cost over the service (vesting) period in its financial statements, beginning in the first interim or annual reporting period after June 15, 2005. Accordingly, the Company will reflect the adjustment to its 2005
earnings for the impact of this accounting pronouncement in the interim reporting period ending September 30, 2005.



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(2)  Income Taxes



The provision for income taxes on earnings for the years ended December 31, 2004, 2003 and 2002 consists of:



|                              |  |                |       |   |      |   |       |      |  |   |       |  
|----------------------------- |  | -------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                              |  | 2004           |       |   | 2003 |   |       | 2002 | 
|                              |  | (in thousands) |      
|Current Provision (Benefit):  |  |                |       |   |      |   |       |      |  |   |       |  
|Federal                       |  | $              | 1,579 |   |      | $ | (124  | )    |  | $ | 610   |  
|State                         |  |                | 491   |   |      |   | (24   | )    |  |   | 329   |  
|                              |  |                |       |   |      |   |       |      |  |   |       |  
|                              |  |                | 2,070 |   |      |   | (148  | )    |  |   | 939   |  
|Deferred Provision (Benefit): |  |                |       |   |      |   |       |      |  |   |       |  
|Federal                       |  |                | (505  | ) |      |   | 1,177 |      |  |   | 446   |  
|State                         |  |                | (249  | ) |      |   | 314   |      |  |   | 3     |  
|Foreign                       |  |                | 180   |   |      |   | (41   | )    |  |   | (42   | )
|                              |  |                |       |   |      |   |       |      |  |   |       |  
|                              |  |                | (574  | ) |      |   | 1,450 |      |  |   | 407   |  
|                              |  |                |       |   |      |   |       |      |  |   |       |  
|Total                         |  | $              | 1,496 |   |      | $ | 1,302 |      |  | $ | 1,346 |  
|                              |  |                |       |   |      |   |       |      |  |   |       |  



Deferred tax assets and liabilities by
type at December 31, 2004 and 2003 are as follows:



|                                                                  |  |                |        |   |      |   |        |  
|----------------------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                                                  |  | 2004           |        |   | 2003 |  
|                                                                  |  | (in thousands) |       
|Deferred tax assets:                                              |  |                |        |   |      |   |        |  
|Sales/receivables reserves                                        |  | $              | 973    |   |      | $ | 1,022  |  
|Inventory reserves                                                |  |                | 836    |   |      |   | 753    |  
|Compensation reserves                                             |  |                | 2,247  |   |      |   | 1,850  |  
|Accrued promotion expenses                                        |  |                | 1,553  |   |      |   | 1,449  |  
|Warranty reserves                                                 |  |                | 496    |   |      |   | 587    |  
|Property, plant and equipment                                     |  |                | 447    |   |      |   | 344    |  
|AMT credit carry-forwards                                         |  |                |       |   |      |   | 305    |  
|Cobra Electronics Europe Limitednet operating loss carry-forward |  |                | 207    |   |      |   | 168    |  
|Other                                                             |  |                | 118    |   |      |   | 116    |  
|                                                                  |  |                |        |   |      |   |        |  
|Deferred tax assets                                               |  |                | 6,877  |   |      |   | 6,594  |  
|Less: Valuation allowance                                         |  |                | (207   | ) |      |   |       |  
|                                                                  |  |                |        |   |      |   |        |  
|Deferred tax assets, net of allowance                             |  |                | 6,670  |   |      |   | 6,594  |  
|                                                                  |  |               
|Deferred tax liabilities:                                         |  |                |        |   |      |   |        |  
|Tax lease income                                                  |  |                | (2,012 | ) |      |   | (3,139 | )
|R & D expenditures                                                |  |                | (1,774 | ) |      |   | (1,326 | )
|Prepaid expenses                                                  |  |                | (881   | ) |      |   | (700   | )
|                                                                  |  |                |        |   |      |   |        |  
|Deferred tax liabilities                                          |  |                | (4,667 | ) |      |   | (5,165 | )
|                                                                  |  |                |        |   |      |   |        |  
|Net deferred tax asset                                            |  | $              | 2,003  |   |      | $ | 1,429  |  
|                                                                  |  |                |        |   |      |   |        |  



Reconciliation of net deferred tax
asset to Consolidated Balance Sheets:



|                         |  |   |       |  |   |      
|------------------------ |  | - | ----- |  | - | -----
|Current Assets:          |  |   |       |  |   |      
|Deferred income taxes    |  | $ | 5,209 |  | $ | 5,265
|Non-current liabilities: |  |   |       |  |   |      
|Deferred income taxes    |  |   | 3,206 |  |   | 3,836
|                         |  |   |       |  |   |      
|Net deferred tax asset   |  | $ | 2,003 |  | $ | 1,429
|                         |  |   |       |  |   |      



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The tax lease income resulted from the purchase of several 1983 tax lease agreements to acquire tax benefits under the
provisions of the Economic Recovery Tax Act of 1981. The total cash price paid by the Company was $12.4 million. The Tax Reform Act of 1986 has not impaired the economic value of these leases. The Company realizes temporary tax savings from
accelerated depreciation and permanent tax savings from credits associated with the leases, subject to statutory limitations. Currently, annual reversals of the temporary tax savings are included in the current provision for income taxes.



At December 31, 2004, the Company utilized its remaining AMT credit
carry-forwards. The AMT credit is included as a reduction in the Federal taxes currently payable for the year ended December 31, 2004.



At December 31, 2004, the total valuation allowance recognized on deferred tax assets was $207,000, which was due to the establishment of a valuation allowance for the
deferred net operating loss carry-forward tax asset related to Cobra Electronics Europe Limited. The $207,000 was also the net change in the total valuation allowance during the year.



The statutory federal income tax rate (34%) is reconciled to the effective income tax rate as follows:



|                                                         |  |      |   |  |      |   |  |      |  
|-------------------------------------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|Description                                              |  | 2004 |   |  | 2003 |   |  | 2002 |  
|Income taxes at statutory federal income tax rate        |  | 34.0 | % |  | 34.0 | % |  | 34.0 | %
|State taxes, net of federal income tax benefit           |  | 4.8  |   |  | 4.5  |   |  | 4.7  |  
|Non-deductible Cobra Electronics Europe Limited net loss |  | 1.9  |   |  | 2.7  |   |  | 3.1  |  
|Permanent items                                          |  | (1.4 | ) |  | (0.7 | ) |  | 1.1  |  
|Other                                                    |  | (0.7 | ) |  | 0.9  |   |  | 1.0  |  
|                                                         |  |      |   |  |      |   |  |      |  
|Income tax expense                                       |  | 38.6 | % |  | 41.4 | % |  | 43.9 | %
|                                                         |  |      |   |  |      |   |  |      |  



(3)  Financing
Arrangements



The Company is party to a revolving credit agreement for $45
million with three financial institutions, which extends until January 31, 2006. As of September 30, 2004, the Company obtained a waiver letter to cover an increase in the permitted capital expenditures for the year 2004. Borrowings and letters of
credit issued under the agreement are secured by substantially all of the assets of the Company, with the exception of real property and the cash surrender value of certain life insurance policies owned by the Company. Loans outstanding under the
credit agreement, as amended, bear interest, at the Companys option, at 25 basis points below the prime rate or at LIBOR plus 175 basis points.



Maximum borrowings outstanding at any month end were $1.5 million and $4.4 million in 2004 and 2003, respectively. The maximum values of letters of credit outstanding at
any month end were $7.6 million and $9.7 million in 2004 and 2003, respectively. At December 31, 2004, the Company had no interest bearing debt outstanding and approximately $32.0 million available under this credit line based on asset advance
formulas. Aggregate average daily borrowings outstanding were $135,000 during 2004 and $1.1 million during 2003, with weighted average interest rates thereon of 4.9% and 4.3% during 2004 and 2003, respectively.



The credit agreement specifies that the Company may not pay cash dividends and contains
certain financial and other covenants, including a requirement that James R. Bazet continue as CEO of the Company.



(4)  Fair Value of Financial Instruments and Derivatives



The Companys financial instruments include cash, accounts receivable, accounts payable, long-term debt and letters of credit. The carrying values of cash, accounts
receivable and accounts payable approximate their fair value because of the short maturity of these instruments. The carrying amounts of the Companys bank borrowings under its credit facility approximate fair value because the interest rates
are reset periodically to reflect current market rates. The letters of credit reflect fair value as a condition of their underlying purpose and



26



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##### Table of Contents

are subject to fees competitively determined in the marketplace. The contract value/fair value of the letters of credit at December 31, 2004 was $4.4 million
and at December 31, 2003 was $3.4 million. These letters of credit are only executed with major financial institutions, and full performance is anticipated.



The Company operates globally with various manufacturing and distribution facilities and product sourcing locations around the world. The Company may reduce its exposure
to fluctuations in foreign exchange rates by creating offsetting positions through derivative financial instruments. The Company currently does not use derivative financial instruments for trading or speculative purposes. The Company regularly
monitors foreign exchange exposures and ensures hedge contract amounts do not exceed the amounts of the underlying exposures.



The Companys current hedging activity is limited to foreign currency purchases. The purpose of the Companys foreign currency hedging activities is to protect
the Company from the risk that eventual settlement of foreign currency transactions will be adversely affected by changes in exchange rates. The Company hedges these exposures by entering into various short-term foreign exchange forward contracts.
Under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, the instruments are carried at fair value in the Consolidated Balance Sheets as a component of current liabilities. Changes in the fair value of foreign
exchange forward contracts that meet the applicable hedging criteria of SFAS No. 133 are recorded as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings.
Changes in the fair value of foreign exchange forward contracts that do not meet the applicable hedging criteria of SFAS No. 133 are recorded currently in income as cost of sales. Hedging activities did not have a material impact on results of
operations or financial condition during the year ended December 31, 2004. To manage foreign currency risk, as of December 31, 2004, the Company had entered into foreign exchange forward contracts for the sale of euros and the purchase of U.S.
dollars with a total notional value of $5.7 million. These contracts were originally purchased at exchange rates ranging from 1.2329 dollars per euro to 1.339 dollars per euro and mature periodically during 2005 and early 2006. The fair value of
these contracts at December 31, 2004 is the carrying amount.



(5)  Lease Transactions



The Company leases
facilities and equipment under non-cancelable leases with remaining terms of one year or more. The terms of these agreements provide that the Company will pay certain operating expenses. Some of these lease agreements also provide the Company with
the option to purchase the related assets at the end of the respective initial lease terms.



Total minimum rental amounts committed in future years as of December 31, 2004 are as follows:



|           |  |                 |     |              |   |       |  |   |      
|---------- |  | --------------- | --- | ------------ | - | ----- |  | - | -----
|           |  | OperatingLeases |     | CapitalLease |   | Total
|           |  | (in thousands) 
|2005       |  | $               | 119 |              | $ | 72    |  | $ | 191  
|2006       |  |                 | 70  |              |   | 72    |  |   | 142  
|2007       |  |                 | 61  |              |   | 72    |  |   | 133  
|2008       |  |                 | 61  |              |   | 72    |  |   | 133  
|2009       |  |                 | 60  |              |   | 18    |  |   | 78   
|Thereafter |  |                 | 591 |              |   |      |  |   | 591  
|           |  |                 |     |              |   |       |  |   |      
|Total      |  | $               | 962 |              | $ | 306   |  | $ | 1,268
|           |  |                 |     |              |   |       |  |   |      



Total rental expense amounted to
$430,000 in 2004, $429,000 in 2003 and $361,000 in 2002.



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(6)  Shareholders Equity



Preferred StockPreferred stock is issuable from time to time in one or more series, each of which may have such voting powers,
designations, preferences, relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions providing for the issue of such stock
adopted by the Board of Directors. No preferred stock has been issued.



EARNINGS PER SHARE



|                                                               |  |      |           |   |      |   |           |      |  |   |           |  
|-------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                               |  | 2004 |           |   | 2003 |   |           | 2002 | 
|Basic earnings per share:                                      |  |      |           |   |      |   |           |      |  |   |           |  
|Net Earnings available to Common shareholders (thousands)      |  | $    | 2,381     |   |      | $ | 1,841     |      |  | $ | 1,720     |  
|Weighted-average shares outstanding                            |  |      | 6,439,274 |   |      |   | 6,419,777 |      |  |   | 6,373,112 |  
|                                                               |  |      |           |   |      |   |           |      |  |   |           |  
|Basic earnings per share                                       |  | $    | 0.37      |   |      | $ | 0.29      |      |  | $ | 0.27      |  
|                                                               |  |      |           |   |      |   |           |      |  |   |           |  
|Diluted earnings per share:                                    |  |      |           |   |      |   |           |      |  |   |           |  
|Weighted-average shares outstanding                            |  |      | 6,439,274 |   |      |   | 6,419,777 |      |  |   | 6,373,112 |  
|Dilutive shares issuable in connection with stock option plans |  |      | 626,348   |   |      |   | 442,900   |      |  |   | 687,900   |  
|Less: shares purchasable with option proceeds                  |  |      | (462,800  | ) |      |   | (367,449  | )    |  |   | (556,404  | )
|                                                               |  |      |           |   |      |   |           |      |  |   |           |  
|Total                                                          |  |      | 6,602,822 |   |      |   | 6,495,228 |      |  |   | 6,504,608 |  
|                                                               |  |      |           |   |      |   |           |      |  |   |           |  
|Diluted earnings per share                                     |  | $    | 0.36      |   |      | $ | 0.28      |      |  | $ | 0.26      |  
|                                                               |  |      |           |   |      |   |           |      |  |   |           |  



Additionally, there were 23,250
anti-dilutive shares at December 31, 2004, 245,182 anti-dilutive shares at December 31, 2003, and 69,250 anti-dilutive shares at December 31, 2002.



Changes in shares of common stock and treasury stock for the years ended December 31, 2004, 2003 and 2002 were as follows:



|                                                                |  |                                     |   |  |               |  
|--------------------------------------------------------------- |  | ----------------------------------- | - |  | ------------- | -
|                                                                |  | Common Stock(Net of Treasury Stock) |   |  | TreasuryStock |  
|                                                                |  | (Shares in thousands)               |  
|Shares outstandingJanuary 1, 2002                              |  | 6,303                               |   |  | 736           |  
|Exercise of stock options.                                      |  | 122                                 |   |  | (122          | )
|Common stock surrendered in connection with exercise of options |  | (5                                  | ) |  | 5             |  
|                                                                |  |                                     |   |  |               |  
|Shares outstandingDecember 31, 2002                            |  | 6,420                               |   |  | 619           |  
|Exercise of stock options.                                      |  |                                    |   |  |              |  
|                                                                |  |                                     |   |  |               |  
|Shares outstandingDecember 31, 2003                            |  | 6,420                               |   |  | 619           |  
|Exercise of stock options.                                      |  | 25                                  |   |  | (25           | )
|                                                                |  |                                     |   |  |               |  
|Shares outstandingDecember 31, 2004                            |  | 6,445                               |   |  | 594           |  
|                                                                |  |                                     |   |  |               |  



(7)  Stock Option Plans



The Company has six Stock Option Plans2002 Outside Directors Plan,
2000, 2000 Outside Directors Plan, 1998, 1997, 1995 (the Plans). The 1995 Plan was terminated in accordance with its terms on March 17, 2005. Under the terms of the Plans, the consideration received by the Company upon exercise of the
options may be paid in cash or by the surrender and delivery to the Company of previously owned shares of its common stock, or by a combination thereof. The optionee is credited with the fair market value of any stock surrendered and delivered as of
the exercise date. Options become exercisable in annual 25% increments commencing twelve months after the date of grant.



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A summary of certain provisions and amounts related to the Plans follows (in thousands):



|                                                           |  |          |  |           |  |          |  |          |  |         
|---------------------------------------------------------- |  | -------- |  | --------- |  | -------- |  | -------- |  | --------
|                                                           |  | 2002Plan |  | 2000Plans |  | 1998Plan |  | 1997Plan |  | 1995Plan
|Authorized, unissued shares originally available for grant |  | 25       |  | 325       |  | 310      |  | 300      |  | 300     
|Shares granted                                             |  | 12       |  | 185       |  | 310      |  | 242      |  | 280     
|Shares available for grant at December 31, 2004            |  | 13       |  | 140       |  |         |  | 58       |  | 20      
|Options exercisable at December 31, 2004.                  |  | 6        |  | 115       |  | 262      |  | 163      |  | 14      



A summary of the status of the Plans
as of December 31, 2004, 2003 and 2002, and changes during the years ended on those dates is presented below:



|                                                               |  |             |   |      |                              |      |             |     |   |                              |   |             |  |      |                              |  |   |     
|-------------------------------------------------------------- |  | ----------- | - | ---- | ---------------------------- | ---- | ----------- | --- | - | ---------------------------- | - | ----------- |  | ---- | ---------------------------- |  | - | ----
|                                                               |  | 2004        |   | 2003 |                              | 2002
|Fixed Options                                                  |  | Shares(000) |   |      | WeightedAverageExercisePrice |      | Shares(000) |     |   | WeightedAverageExercisePrice |   | Shares(000) |  |      | WeightedAverageExercisePrice
|Outstanding at beginning of year                               |  | 688         |   |      | $                            | 6.00 |             | 757 |   |                              | $ | 6.12        |  | 775  |                              |  | $ | 5.70
|Granted                                                        |  | 10          |   |      |                              | 9.55 |             | 12  |   |                              |   | 7.01        |  | 105  |                              |  |   | 7.29
|Exercised                                                      |  | (48         | ) |      |                              | 4.13 |             |    |   |                              |   |            |  | (122 | )                            |  |   | 4.48
|Cancellations and expirations                                  |  |            |   |      |                              |     |             | (81 | ) |                              |   | 7.28        |  | (1   | )                            |  |   | 2.88
|                                                               |  |             |   |      |                              |      |             |     |   |                              |   |             |  |      |                              |  |   |     
|Outstanding at end of year                                     |  | 650         |   |      |                              | 6.19 |             | 688 |   |                              |   | 6.00        |  | 757  |                              |  |   | 6.12
|Options exercisable at year end                                |  | 560         |   |      |                              |      |             | 532 |   |                              |   |             |  | 507  |                              |  |   |     
|Weighted-average fair value of options granted during the year |  |             |   |      | $                            | 5.68 |             |     |   |                              | $ | 4.15        |  |      |                              |  | $ | 4.30



The following table summarizes
information about stock options outstanding at December 31, 2004:



|                         |  |                        |  |                                |  |                                         |  |                        |  |                                |     
|------------------------ |  | ---------------------- |  | ------------------------------ |  | --------------------------------------- |  | ---------------------- |  | ------------------------------ | ----
|                         |  | Options Outstanding    |  | Options Exercisable           
|Range of Exercise Prices |  | NumberOutstanding(000) |  | WeightedAverage Exercise Price |  | WeightedAverageRemainingContractualLife |  | NumberExercisable(000) |  | WeightedAverage Exercise Price
|$4.01 to $5.00           |  | 52                     |  | $4.13                          |  | 4.6                                     |  | 52                     |  | $                              | 4.13
|$5.01 to $6.00           |  | 241                    |  | 5.63                           |  | 3.3                                     |  | 241                    |  |                                | 5.63
|$6.01 to $7.00           |  | 223                    |  | 6.48                           |  | 5.3                                     |  | 202                    |  |                                | 6.48
|$7.01 to $8.00           |  | 111                    |  | 7.23                           |  | 6.8                                     |  | 58                     |  |                                | 7.30
|$8.01 to $9.00           |  | 13                     |  | 8.37                           |  | 7.3                                     |  | 7                      |  |                                | 8.38
|$9.01 to $10.00          |  | 10                     |  | 9.55                           |  | 9.1                                     |  |                       |  |                                |    
|                         |  |                        |  |                                |  |                                         |  |                        |  |                                |     
|Total                    |  | 650                    |  | $6.19                          |  | 4.9                                     |  | 560                    |  | $                              | 6.00
|                         |  |                        |  |                                |  |                                         |  |                        |  |                                |     



(8)  Retirement Benefits



The only qualified retirement plan for employees is the Cobra Electronics
Corporation Profit Sharing and 401(k) Incentive Savings Plan. The Company may make a discretionary annual profit sharing contribution that is allocated among accounts of persons employed by the Company for more than one year, prorated based on the
compensation paid to such persons during the year. Profit sharing expense for 2004, 2003 and 2002 was $129,000, $149,000 and $144,000, respectively. Company match 401(k) expense for 2004, 2003 and 2002 was $205,000, $208,000 and $129,000,
respectively.



As of December 31, 2004 and 2003, deferred compensation of $5.6
million and $4.6 million, respectively, was recorded as a long-term liability. The current portion of the deferred compensation liability was included in accrued salaries and commissions, and amounted to $254,000 at both December 31, 2004 and 2003.
Deferred



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compensation obligations arise pursuant to outstanding key executive deferred compensation plans, most of which are non-qualified defined benefit
arrangements, the majority of which relate to the former president and chief executive officer. The liability is based on discounted future cash flows related to these arrangements. The discount rate used at December 31, 2004 and 2003 was 7%.



Other assets at December 31, 2004 and 2003 included primarily the cash
surrender value of officers life insurance policies. The cash value of officers life insurance policies is maintained to fund deferred compensation obligations.



(9)  Commitments



At December 31, 2004 and 2003, the Company had outstanding inventory purchase orders with suppliers totaling approximately $17.2 million and $15.1 million, respectively.



(10)  Loan Receivable



On January 8, 2003, the Company entered into a loan agreement with Horizon, a California
corporation and vendor to the Company, that was subsequently modified on February 6, 2003. The outstanding loan receivable balance as of December 31, 2004 was $2,465,000, which includes approximately $215,000 of accrued interest. Horizon may borrow
up to $2,000,000 per annum, at Cobras discretion, up to an aggregate amount of $6,000,000 at December 31, 2005. The loan accrues interest at a variable rate at a fixed margin above the prime rate. The loan agreement provides that the interest
will be added to the principal amount of the loan. The outstanding principal amount, together with all accrued and unpaid interest, will be due on December 31, 2005. The loan is secured by substantially all of the assets of Horizon. In addition, an
independent valuation specialist performed a valuation analysis of the value of Cobras security interest in Horizons assets. On the basis of this analysis, management concluded that the value of the Companys security interest in
Horizons assets was greater than the outstanding loan receivable amount at December 31, 2004.



Certain amounts of callable and non-callable warrants to purchase shares of common stock of Horizon are issued to the Company each time the Company makes loans to Horizon in excess of specified amounts and the Company
has assigned no value to these warrants. If the Company converted all of its warrants at December 31, 2004, its ownership percentage would be 14.9%.



(11)  Segment Information



The Company operates in only one business segmentconsumer electronics (see Note 1). The Company has a single sales department and distribution channel, which
provides all product lines to all customers. In 2004, sales to Wal-Mart and Best Buy totaled 17.7% and 14.2% of consolidated net sales, respectively. In 2003, sales to Wal-Mart and Best Buy totaled 22.3% and 13.0% of consolidated net sales,
respectively. In 2002, sales to Best Buy and Wal-Mart totaled 14.3% and 13.3% of consolidated net sales, respectively.



The tabular presentation below sets forth certain financial information regarding the Companys net sales and long-lived assets by geographic area for the years
ended December 31, 2004, 2003 and 2002 (in thousands).



|                  |  |                        |         |      |   |         |  |   |        
|----------------- |  | ---------------------- | ------- | ---- | - | ------- |  | - | -------
|                  |  | Year Ended December 31
|                  |  | 2004                   |         | 2003 |   | 2002   
|Net sales         |  |                        |         |      |   |         |  |   |        
|Domestic          |  | $                      | 104,683 |      | $ | 100,395 |  | $ | 120,740
|Foreign           |  |                        | 18,194  |      |   | 14,416  |  |   | 15,100 
|Long-lived assets |  |                        |         |      |   |         |  |   |        
|Domestic          |  | $                      | 19,772  |      | $ | 17,238  |  | $ | 13,774 
|Foreign           |  |                        | 2,229   |      |   | 2,604   |  |   | 2,419  



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For 2004, approximately 49% of international sales were to a customer in Canada and 9% were to a customer in Sweden. For
2003, approximately 53% of international sales were to a customer in Canada and 11% were to a customer in Sweden. For 2002, approximately 66% of international sales were to a customer in Canada and 8% were to a customer in the United Kingdom.



(12)  Intangible Assets



Intangible assets consist of the following at December 31, 2004 and December 31, 2003 (in
thousands):



|                              |  |                   |        |   |                   |   |        |  
|----------------------------- |  | ----------------- | ------ | - | ----------------- | - | ------ | -
|                              |  | December 31, 2004 |        |   | December 31, 2003 |  
|                              |  |                  
|Internal use software         |  | $                 | 1,657  |   |                   | $ | 1,562  |  
|Less accumulated amortization |  |                   | (1,545 | ) |                   |   | (1,450 | )
|                              |  |                   |        |   |                   |   |        |  
|                              |  |                   | 112    |   |                   |   | 112    |  
|                              |  |                  
|ERP internal software system  |  |                   | 1,808  |   |                   |   |       |  
|Less accumulated amortization |  |                   |       |   |                   |   |       |  
|                              |  |                   |        |   |                   |   |        |  
|                              |  |                   | 1,808  |   |                   |   |       |  
|                              |  |                  
|Trademarks and patents        |  |                   | 1,486  |   |                   |   | 1,316  |  
|Less accumulated amortization |  |                   | (455   | ) |                   |   | (405   | )
|                              |  |                   |        |   |                   |   |        |  
|                              |  |                   | 1,031  |   |                   |   | 911    |  
|                              |  |                  
|Software License              |  |                   | 450    |   |                   |   | 450    |  
|Less accumulated amortization |  |                   | (125   | ) |                   |   | (22    | )
|                              |  |                   |        |   |                   |   |        |  
|                              |  |                   | 325    |   |                   |   | 428    |  
|                              |  |                  
|Product Software              |  |                   | 6,123  |   |                   |   | 3,529  |  
|Less accumulated amortization |  |                   | (1,217 | ) |                   |   | (134   | )
|                              |  |                   |        |   |                   |   |        |  
|                              |  |                   | 4,906  |   |                   |   | 3,395  |  
|                              |  |                   |        |   |                   |   |        |  
|                              |  | $                 | 8,182  |   |                   | $ | 4,846  |  
|                              |  |                   |        |   |                   |   |        |  



Internal use software is generally
amortized over its weighted average estimated life, which is 3 years. The Companys new ERP internal software system will be amortized over its weighted average estimated life of seven years beginning when it is placed in service in 2005.
Trademarks are generally amortized over their weighted average estimated life of 20 years and patents are amortized over their weighted average estimated life of 17 years. The software license asset is amortized according to units sold during the
contract period based on the contract royalty rate as the software license waives royalties on the initial sale of products using the software, up to the cost of the software license. The product software assets are amortized based on the percentage
of revenues generated in each reporting period to the total revenues expected over the weighted average estimated product life cycle. Total amortization expense was $1.3 million in 2004 (includes $614,000 for the change in hand-held GPS estimated
economic useful life), $400,000 in 2003 and $297,000 in 2002. The total anticipated amortization expense over the next 5 years is $1.6 million in 2005, $1.0 million in 2006, $1.3 million in 2007, $1.5 million in 2008 and $1.7 million in 2009.
Management believes that the reported intangible assets values are without impairment and reflect the fair value of the Companys intangible assets as of December 31, 2004.



(13)  Contingencies



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



The Company warrants to the consumer who purchases its products that it will repair or
replace, without charge, defective products within a specified time period, generally one year. The Company also has a return policy for



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its customers that allow them to return, to the Company, products returned to them by their customers for full or partial credit based on when the
Companys customer last purchased these products. Consequently, it maintains a warranty reserve, which reflects historical warranty returns rates by product category multiplied by the most recent six months of unit sales of that model and the
unit standard cost of the model. A roll-forward of the warranty reserve is as follows (in thousands):



|                                            |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                            |  | 2004 |        |   | 2003 |   |        | 2002 | 
|Accrued product warranty costs, January 1   |  | $    | 1,524  |   |      | $ | 2,137  |      |  | $ | 2,721  |  
|Warranty provision                          |  |      | 3,448  |   |      |   | 4,446  |      |  |   | 4,895  |  
|Warranty expenditures                       |  |      | (3,695 | ) |      |   | (5,059 | )    |  |   | (5,479 | )
|                                            |  |      |        |   |      |   |        |      |  |   |        |  
|Accrued product warranty costs, December 31 |  | $    | 1,277  |   |      | $ | 1,524  |      |  | $ | 2,137  |  
|                                            |  |      |        |   |      |   |        |      |  |   |        |  



(14)  Stockholder Rights
Plan



The Company maintains a Stockholder Rights Plan (the
Plan) designed to deter coercive or unfair takeover tactics, to prevent a person or group from gaining control of the Company without fair value to all shareholders and to deter other abusive takeover tactics that are not in the best
interest of shareholders. The Company has designated 120,000 of the 1 million authorized shares of the preferred stock as Series A Junior Participating preferred stock.



Under the terms of the Plan, each share of common stock is accompanied by one right; each right entitles the shareholder to purchase from
the Company one one-hundredth of a newly issued share of Series A Junior Preferred Stock, par value $1 per share, of the Company at an exercise price of $35. The rights become exercisable 10 days after a public announcement that an Acquiring Person
(as defined in the Plan) has become the beneficial owner of 15% or more of the outstanding shares of the Company (the Stock Acquisition Date) or 10 business days after the commencement of a tender or exchange offer that would result in a
person beneficially owning 15% or more of such shares. The Company can redeem the rights for $0.01 per right at any time until the earlier of 10 days following the Stock Acquisition Date or the final expiration of the rights. The rights will expire
on November 5, 2011, unless redeemed earlier by the Company.



In the event that
any person becomes an Acquiring Person, each right will entitle the holder thereof, upon payment of the current exercise price, to receive shares of common stock of the Company, which at the time of such person becoming an Acquiring Person, have a
market value equal to two times the then current exercise price. If, after the public announcement has been made that any person has become an Acquiring Person, (i) the Company merges into or consolidates with another person (with limited
exceptions), (ii) another person (with limited exceptions) merges into or consolidates with the Company and shares of common stock of the Company are converted into securities of another person, cash or property or (iii) the Company transfers 50% or
more of its consolidated assets, cash flow or earning power to another person (with limited exceptions), each right will entitle the holder thereof to receive, upon payment of the current exercise price, the number of shares of common stock of the
Acquiring Person (or of another person affiliated therewith) which, at the time of consummation of the transaction, have a market value equal to two times the then current exercise price.



(15)  Related Party Transactions



On July 17, 2002, the President and Chief Executive Officer of the Company, James R. Bazet, borrowed $399,938 from the Company pursuant to a full recourse term
promissory note. The proceeds of the loan were used to exercise incentive stock options for 71,100 shares of common stock. The loan accrues interest at the prime rate. The entire principal indebtedness, together with all accrued and unpaid interest,
will be due and payable on July 18, 2006. Interest will be payable on July 18 in each year, commencing on July 18, 2003.



On October 6, 1999, the Company made a bridge loan to Mr. Bazet in the aggregate principal amount of $80,000 for the purpose of purchasing a residence. The loan accrues
interest at the greater of the prime rate or the



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Companys average weighted interest rate on its indebtedness for borrowed money. Accrued interest is added to the principal amount of the loan. The note
evidencing the loan was amended in March 2002, to extend the due date to March 31, 2004, and to provide for repayment of $30,000 of the principal amount of the note by March 31, 2002, $30,000 of the principal amount of the note by March 31, 2003,
and the balance of the outstanding principal and accrued interest under the note by March 31, 2004. On February 20, 2004, Mr. Bazet paid the remaining balance on the note, including the accrued interest.



(16)  Allowance for Claims and Doubtful Accounts



The following table shows the activity in the allowance for claims and doubtful accounts:



|                                           |  |                                |      |   |      |   |       |      |  |   |       |  
|------------------------------------------ |  | ------------------------------ | ---- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                           |  | For the Years EndedDecember 31 |     
|                                           |  | 2004                           |      |   | 2003 |   |       | 2002 | 
|                                           |  | (in thousands)                 |     
|Balance at beginning of period             |  | $                              | 577  |   |      | $ | 1,179 |      |  | $ | 2,518 |  
|Provision for claims and doubtful accounts |  |                                | 263  |   |      |   | 118   |      |  |   |      |  
|Reserve reduction                          |  |                                | (308 | ) |      |   |      |      |  |   | (772  | )
|Account write-offs, less recoveries        |  |                                | (262 | ) |      |   | (720  | )    |  |   | (567  | )
|                                           |  |                                |      |   |      |   |       |      |  |   |       |  
|Balance at end of period                   |  | $                              | 270  |   |      | $ | 577   |      |  | $ | 1,179 |  
|                                           |  |                                |      |   |      |   |       |      |  |   |       |  



(17)  Subsequent Events



On February 19, 2005, the Company accumulated non-callable warrants on
the Horizon Loan Receivable representing approximately a 22.7% ownership stake. The Company is currently evaluating whether the Equity Method of Accounting, as defined in Accounting Principles Board Opinion 18, The Equity Method of Accounting
for Investments in Common Stock, applies to this business arrangement in the first quarter of 2005 along with any related financial impact, including past history for comparative purposes. Horizon has a history of net operating losses.



In early March 2005, a former executive of the Company, on whose life the
Company held life insurance policies, passed away. As a result, the Company estimates that it will receive life insurance proceeds totaling approximately $11.2 million. The cash surrender value of these life insurance policies, amounting to
approximately $4.0 million at December 31, 2004, was included in Cash surrender value of officers life insurance policies in the Consolidated Balance Sheets. The excess of the proceeds over the recorded cash surrender value will be
recognized as a gain on the income statement during the quarter ending March 31, 2005. The Company is uncertain as to the timing, amount and use of the proceeds to be received and the impact on its consolidated financial statements in the first
quarter of 2005.



On March 30, 2005, the Company sold vacant land with a book
value of approximately $100,000 for $2 million, resulting in a gain on sale of approximately $1.9 million in the first quarter of 2005.



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Quarterly Financial Data (Unaudited)



|                                               |  |                                          |        |   |         |   |              |      |             |      |        |      |   |        |  |      |        |      |   |        |  |   |        |  |   |       
|---------------------------------------------- |  | ---------------------------------------- | ------ | - | ------- | - | ------------ | ---- | ----------- | ---- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ------ |  | - | ------ |  | - | ------
|                                               |  | Quarter Ended                           
|                                               |  | March 31                                 |        |   | June 30 |   | September 30 |      | December 31
|                                               |  | 2004                                     |        |   | 2003    |   |              | 2004 |             | 2003 |        | 2004 |   | 2003   |  | 2004 |        | 2003
|                                               |  | (in thousands, except per share amounts)
|Net sales                                      |  | $                                        | 22,666 |   |         | $ | 20,554       |      |             | $    | 25,186 |      | $ | 26,622 |  | $    | 31,014 |      | $ | 26,304 |  | $ | 44,010 |  | $ | 41,331
|Cost of sales (a)                              |  |                                          | 17,525 |   |         |   | 15,440       |      |             |      | 18,351 |      |   | 18,866 |  |      | 22,874 |      |   | 19,232 |  |   | 31,901 |  |   | 30,618
|Gross profit                                   |  |                                          | 5,141  |   |         |   | 5,114        |      |             |      | 6,835  |      |   | 7,756  |  |      | 8,140  |      |   | 7,072  |  |   | 12,109 |  |   | 10,713
|Selling, general and administrativeexpense (b) |  |                                          | 5,919  |   |         |   | 5,810        |      |             |      | 6,057  |      |   | 7,057  |  |      | 7,312  |      |   | 6,615  |  |   | 9,049  |  |   | 8,033 
|Operating income(loss)                         |  |                                          | (778   | ) |         |   | (696         | )    |             |      | 778    |      |   | 699    |  |      | 828    |      |   | 457    |  |   | 3,060  |  |   | 2,680 
|Tax provision (benefit) (c)                    |  |                                          | (309   | ) |         |   | (306         | )    |             |      | 285    |      |   | 272    |  |      | 335    |      |   | 261    |  |   | 1,186  |  |   | 1,075 
|Net earnings(loss)                             |  |                                          | (542   | ) |         |   | (453         | )    |             |      | 501    |      |   | 407    |  |      | 571    |      |   | 391    |  |   | 1,851  |  |   | 1,496 
|Net earnings(loss) per share (d):              |  |                                          |        |   |         |   |              |      |             |      |        |      |   |        |  |      |        |      |   |        |  |   |        |  |   |       
|Basic                                          |  |                                          | (0.08  | ) |         |   | (0.07        | )    |             |      | 0.08   |      |   | 0.06   |  |      | 0.09   |      |   | 0.06   |  |   | 0.29   |  |   | 0.23  
|Diluted                                        |  |                                          | (0.08  | ) |         |   | (0.07        | )    |             |      | 0.08   |      |   | 0.06   |  |      | 0.09   |      |   | 0.06   |  |   | 0.28   |  |   | 0.23  
|Weighted average shares outstanding:           |  |                                          |        |   |         |   |              |      |             |      |        |      |   |        |  |      |        |      |   |        |  |   |        |  |   |       
|Basic                                          |  |                                          | 6,423  |   |         |   | 6,420        |      |             |      | 6,445  |      |   | 6,420  |  |      | 6,445  |      |   | 6,420  |  |   | 6,445  |  |   | 6,420 
|Diluted                                        |  |                                          | 6,630  |   |         |   | 6,479        |      |             |      | 6,625  |      |   | 6,487  |  |      | 6,559  |      |   | 6,506  |  |   | 6,589  |  |   | 6,511 
|Stock Price:                                   |  |                                          |        |   |         |   |              |      |             |      |        |      |   |        |  |      |        |      |   |        |  |   |        |  |   |       
|High                                           |  |                                          | 11.540 |   |         |   | 7.200        |      |             |      | 9.250  |      |   | 7.100  |  |      | 8.920  |      |   | 7.340  |  |   | 9.250  |  |   | 7.560 
|Low                                            |  |                                          | 7.400  |   |         |   | 5.840        |      |             |      | 8.110  |      |   | 5.950  |  |      | 6.020  |      |   | 5.760  |  |   | 7.020  |  |   | 6.250 
|End of Quarter                                 |  |                                          | 8.151  |   |         |   | 6.020        |      |             |      | 9.050  |      |   | 6.930  |  |      | 7.210  |      |   | 6.840  |  |   | 8.110  |  |   | 7.550 
|Trading Volume                                 |  |                                          | 2,113  |   |         |   | 388          |      |             |      | 559    |      |   | 845    |  |      | 531    |      |   | 550    |  |   | 706    |  |   | 644   

---

|(a) | The fourth quarter of 2004 included $614,000 of increased amortization expense associated with a change in estimated economic useful life for certain handheld GPS intangible assets.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | The fourth quarter of 2004 included a reduction of $308,000 in the allowance for doubtful accounts, based on the Companys write-off history in the last five years and
specifically identified accounts that might be at risk.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Income tax expense in the fourth quarter of 2004 reflected a $207,000 valuation allowance for the deferred net operating loss carry-forward tax asset related to Cobra Electronics
Europe Limited.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | The sum of the quarterly net earnings per share amounts may not equal the annual amount because net earnings per share are calculated independently for each quarter.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



34



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##### Table of Contents

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Board of Directors and Stockholders of

Cobra Electronics Corporation



We have audited the accompanying consolidated balance sheet of Cobra Electronics Corporation and its subsidiaries, Cobra Electronics
Europe Limited and Cobra Electronics Hong Kong Limited, as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders equity, and cash flows for the years then ended. These financial statements are the
responsibility of the Corporations management. Our responsibility is to express an opinion on the financial statements based on our audit.



We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (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. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our
audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in
all material respects, the financial position of Cobra Electronics Corporation and its subsidiaries at December 31, 2004 and 2003, and the consolidated results of their operations and their consolidated cash flows for the years ended December
31, 2004 and 2003, in conformity with accounting principles generally accepted in the United States of America.



/s/    GRANT THORNTON LLP



Chicago, Illinois

February 11, 2005

Except for Notes 7 and 17, which are dated March 31, 2005





35



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of

Cobra Electronics Corporation

Chicago, Illinois



We have audited the accompanying consolidated statements of income, shareholders equity
and cash flows for year ended December 31, 2002 of Cobra Electronics Corporation and subsidiaries (the Corporation). These financial statements are the responsibility of the Corporations management. Our responsibility is to express
an opinion on the financial statements based on our audit.



We conducted our
audit in accordance with the standards of the Public Company Accounting Oversight Board (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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.



In our opinion, such consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of Cobra Electronics Corporation
and subsidiaries for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.



/s/    DELOITTE & TOUCHE LLP



Chicago, Illinois

February 18, 2003



36



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##### Table of Contents

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



There were no changes in or disagreements with the Companys auditors regarding accounting or financial disclosure matters.



Item 9A.Controls and Procedures



The Company has established disclosure controls and procedures to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. The Companys disclosure controls and procedures have also been designed to ensure that information required to be disclosed in the reports
that the Company files or submits under the Securities and Exchange Act of 1934 is accumulated and communicated to the Companys management, including the principal executive officer and principal financial officer, to allow timely decisions
regarding required disclosure.



During 2004, the Company carried out an
evaluation, under the supervision and with the participation of the Companys management, including the Companys principal executive officer and principal financial officer, of the effectiveness of the Companys disclosure controls
and procedures. Based on this evaluation, the principal executive officer and principal financial officer of the Company have concluded that the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities and Exchange Act of 1934) are effective as of December 31, 2004.



There has been no change in the Companys internal control over financial reporting that occurred during the fourth quarter of 2004 that has materially affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting.



Item 9B.Other Information



None.



PART III



Item 10.Directors and Executive Officers of the Registrant



Information in response to this item will be set forth in a definitive proxy statement to be filed by the Company pursuant to Regulation 14A within 120 days after the end
of the Companys 2004 fiscal year, and such information is hereby incorporated by reference.



Additional information concerning Cobras executive officers is included under Executive Officers of the Registrant in Part I, Item 4A.



Item 11.Executive Compensation



Information in response to this item will be set forth in a definitive proxy statement to be filed by the Company pursuant to Regulation 14A within 120 days after the end of the Companys 2004 fiscal year, and
such information, other than the information required by Item 402(k) (Board Compensation Committee Report on Executive Compensation) and Item 402(l) (Performance Graph) under Regulation S-K adopted by the SEC, is hereby
incorporated by reference.



37



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##### Table of Contents

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



Equity Compensation Plan Information



The following table provides information about stock options outstanding and shares available for future awards under all of Cobras
equity compensation plans. The information is as of December 31, 2004. Cobra Electronics has not made any grants outside of its equity compensation plans.



|                                                           |  |                                                                                          |  |                                                                           |      |                                                                                                                                        |         |    
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------- | ---- | -------------------------------------------------------------------------------------------------------------------------------------- | ------- | ---
|                                                           |  | (a)                                                                                      |  | (b)                                                                       |      | (c)                                                                                                                                    |        
|Plan Category                                              |  | Number of securities to beissued upon exercise ofoutstanding options, warrantsand rights |  | Weighted-average exercise price ofoutstanding options,warrants and rights |      | Number of securitiesremaining available forfuture issuance underequity compensationplans (excluding securitiesreflected in
column (a)) |        
|Equity compensation plans approved by security holders     |  | 612,598                                                                                  |  | $                                                                         | 6.13 |                                                                                                                                        | 217,943 | (1)
|Equity compensation plans not approved by security holders |  | 37,000                                                                                   |  |                                                                           | 7.28 |                                                                                                                                        | 13,000  |    
|                                                           |  |                                                                                          |  |                                                                           |      |                                                                                                                                        |         |    
|Total                                                      |  | 649,598                                                                                  |  | $                                                                         | 6.19 |                                                                                                                                        | 230,943 |    

---

|(1) | Includes 19,875 shares from the 1995 Plan, 58,068 from the 1997 Plan and 140,000 from the 2000 Plan.
|--- | ----------------------------------------------------------------------------------------------------



Set forth below is a brief description of the material features of each of the Companys equity compensation plans that was adopted
without the approval of the Companys stockholders and that were in effect at December 31, 2004.



2002 Outside Directors Stock Option Plan



This plan includes a total of 25,000 non-qualified stock options to be granted to Directors who are not officers or employees of the Company. The stock option committee,
designated by the Companys Board of Directors, has the authority to select persons who will receive options and determine the number of shares of common stock subject to each option and all other terms and conditions of each option. The period
for the exercise of each option and the exercise price for an option will also be determined by the committee. An option may be exercised by giving written notice to the Company specifying the number of whole shares of common stock to be purchased.



2000 Outside Directors Stock Option Plan



This plan includes a total of 25,000 non-qualified stock options to be granted to Directors
who are not officers or employees of the Company. The stock option committee, designated by the Companys Board of Directors, has the authority to select persons who will receive options and determine the number of shares of common stock
subject to each option and all other terms and conditions of each option. The period for the exercise of each option and the exercise price for an option will also be determined by the committee. An option may be exercised by giving written notice
to the Company specifying the number of whole shares of common stock to be purchased.



***



Other information in response to this item
will be set forth in a definitive proxy statement to be filed by the Company pursuant to Regulation 14A within 120 days after the end of the Companys 2004 fiscal year, and such information is hereby incorporated by reference.



Item 13.Certain Relationships and Related Transactions



Information in response to this item will be set forth in a definitive proxy statement to be filed by the Company pursuant to Regulation 14A within 120 days after the end
of the Companys 2004 fiscal year, and such information is hereby incorporated by reference.



38



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##### Table of Contents

Item 14.Principal Accountant Fees and Services



Information in response to this item will be set forth in a definitive proxy statement to be filed by the Company pursuant to Regulation 14A within 120 days after the end of the Companys 2004 fiscal year, and
such information is hereby incorporated by reference.



PART IV



Item 15.Exhibits and Financial Statement Schedules



|[a] | Index to Consolidated Financial Statements and Schedules
|--- | --------------------------------------------------------



|   |  |                                                                                             |  |                      
|-- |  | ------------------------------------------------------------------------------------------- |  | ---------------------
|   |  | Description                                                                                 |  | Page orScheduleNumber
|1. |  | Consolidated Statements of Earnings for the three years ended December 31, 2004             |  | 16                   
|   |  | Consolidated Balance Sheets as of December 31, 2004 and 2003                                |  | 17-18                
|   |  | Consolidated Statements of Cash Flows for the three years ended December 31, 2004           |  | 19                   
|   |  | Consolidated Statements of Shareholders Equity for the three years ended December 31, 2004 |  | 20                   
|   |  | Notes to Consolidated Financial Statements                                                  |  | 21-33                
|   |  | Quarterly Financial Data                                                                    |  | 34                   
|   |  | Independent Auditors Reports                                                               |  | 35-36                
|   |  |                                                                                            
|2. |  | Exhibits:  See Index to Exhibits on pages 41 through 43.                                    |  |                      



39



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##### Table of Contents

SIGNATURES



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



COBRA ELECTRONICS CORPORATION/s/    MICHAEL SMITHMichael SmithSenior Vice President andChief Financial Officer




Dated: March 31, 2005



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



|                                                  |  |                                                                                
|------------------------------------------------- |  | -------------------------------------------------------------------------------
|                                                  | 
|/s/    JAMES R. BAZETJames R. Bazet               |  | Director, President and Chief Executive Officer (Principal Executive Officer)  
|                                                  | 
|/s/    CARL KORNCarl Korn                         |  | Director and Chairman of the Board                                             
|                                                  | 
|/s/    WILLIAM P. CARMICHAELWilliam P. Carmichael |  | Director                                                                       
|                                                  | 
|/s/    ROBERT P. ROHLEDERRobert P. Rohleder       |  | Director                                                                       
|                                                  | 
|/s/    GERALD M. LAURESGerald M. Laures           |  | Vice PresidentFinance and Corporate Secretary (Principal Accounting Officer)  
|                                                  | 
|/s/    IAN R. MILLERIan R. Miller                 |  | Director                                                                       
|                                                  | 
|/s/    HAROLD D. SCHWARTZHarold D. Schwartz       |  | Director                                                                       
|                                                  | 
|/s/    HENRY G. CHIARELLIHenry G. Chiarelli       |  | Director                                                                       
|                                                  | 
|/s/    BARRY S. ROSENSTEINBarry S. Rosenstein     |  | Director                                                                       
|                                                  | 
|/s/    MICHAEL SMITHMichael Smith                 |  | Senior Vice President and Chief Financial Officer (Principal Financial Officer)



Dated: March 31, 2005



40



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##### Table of Contents

INDEX TO EXHIBITS



|               |  |                                                                                                                                                                                                                                                                                                                                                     
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                                                                                                             
|3(i)           |  | Restated Certificate of Incorporation, as amended October 28, 1998-Filed as Exhibit No. 3(i) to the Registrants Form 10-K for the year ended December 31, 1998 (File No. 0-511), and
hereby incorporated by reference.                                                                                                                             
|               | 
|3(ii)          |  | Amended and Restated Bylaws, as amended October 28, 1998-Filed as Exhibit No. 3(ii) to the Registrants Form 10-K for the year ended December 31, 1998 (File No. 0-511), and hereby
incorporated by reference.                                                                                                                                      
|               | 
|3(iii)         |  | Certificate of Designation of Series A Junior Participating Preferred Stock of Cobra Electronics Corporation pursuant to Section 151 of the General Corporation Law of the State of
Delaware Filed as Exhibit No. 3(iii) to the Registrants Form 10-K for the year ended December 31, 2001 (File No. 0-511), and hereby incorporated by reference.
|               | 
|4              |  | Rights Agreement dated as of October 24, 2001 between Cobra and American Stock Transfer & Trust Company, as Rights AgentFiled as Exhibit 4 of the Registrants Form 8-K dated
October 25, 2001 (File No. 0-511), and hereby incorporated by reference.                                                                                             
|               | 
|10-1 #         |  | 1988 Key Employees Nonqualified and Incentive Stock Option PlanFiled as Exhibit No. 10-8 to the Registrants Form 10-K for the year ended December 31, 1990 (File No. 0-511), and
hereby incorporated by reference.                                                                                                                                
|               | 
|10-2 #         |  | Deferred Compensation Plan dated as of December 23, 1992Filed as Exhibit No. 10-19 to the Registrants Form 10-K for the year ended December 31, 1992 (File No. 0-511), and hereby
incorporated by reference.                                                                                                                                      
|               | 
|10-3 #         |  | 1995 Key Employees Nonqualified and Incentive Stock Option PlanFiled as Exhibit No. 10-23 to the Registrants Form 10-K for the year ended December 31, 1995 (File No. 0-511), and
hereby incorporated by reference.                                                                                                                               
|               | 
|10-4           |  | Non-Exclusive License Agreement between Cobra Electronics Corporation and Yupiteru Industries Co., Ltd. dated as of May 21, 1996Filed as Exhibit No. 10-27 to the Registrants Form
10-K for the year ended December 31, 1996 (File No. 0-511), and hereby incorporated by reference.                                                              
|               | 
|10-5           |  | Non-Exclusive License Agreement between Cobra Electronics Corporation and Sunkyong America, Inc. Dated as of May 1, 1996Filed as Exhibit No. 10-28 to the Registrants Form 10-K for
the year ended December 31, 1996 (File No. 0-511), and hereby incorporated by reference.                                                                      
|               | 
|10-6 #         |  | Employment Agreement between Cobra Electronics Corporation and Anthony Mirabelli dated January 31, 1997Filed as Exhibit No. 10-29 to the Registrants Form 10-K for the year ended
December 31, 1996 (File No. 0-511), and hereby incorporated by reference.                                                                                       
|               | 
|10-7           |  | Termination of Safe Harbor Lease between Cobra Electronics Corporation and the Department of Transportation of Maryland dated as of November 15, 1996Filed as Exhibit No. 10-30 to the
Registrants Form 10-K for the year ended December 31, 1996 (File No. 0-511), and hereby incorporated by reference.                                         
|               | 
|10-8 #         |  | Employment Agreement between Cobra Electronics Corporation and James R. Bazet dated May 11, 1999Filed as Exhibit No. 10-16 to the Registrants Form 10-Q for the quarter ended June
30, 1999 (File No. 0-511), and hereby incorporated by reference.                                                                                               
|               | 
|10-9 #         |  | 1998 Stock Option Plan, as amendedFiled as Exhibit 99.1 to the Registration Statement on Form S-8 of the Registrant dated September 16, 1998 (File No. 333-63501), and hereby
incorporated by reference.                                                                                                                                           
|               | 
|10-10 #        |  | Cobra Electronics Corporation Executive Deferred Compensation Plan dated May 11, 1999Filed as Exhibit No. 10-14 to the Registrants Form 10-K in the year ended December 31,
1999 (File No. 0-511), and hereby incorporated by reference.                                                                                                          



41



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##### Table of Contents

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10-11 #        |  | Cobra Electronics Corporation Deferred Compensation Plan For Select Executives dated December 21, 1999Filed as Exhibit No. 10-15 to the Registrants Form 10-K for the year ended
December 31, 1999 (File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                           
|               | 
|10-12 #        |  | Cobra Electronics Corporation Executive Retirement Trust dated May 11, 1999 between Cobra Electronics Corporation and Gerald Laures, as trustee, for the benefit of James Bazet dated May 11,
1999Filed as Exhibit No. 10-16 to the Registrants Form 10-K for the year ended December 31, 1999 (File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                                                               
|               | 
|10-13 #        |  | Employment Agreement addendum between Cobra Electronics Corporation and Anthony Mirabelli dated April 22, 1999Filed as Exhibit No. 10-17 to the Registrants Form 10-Q for the
quarter ended March 31, 2000 (File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                   
|               | 
|10-14 #        |  | 2000 Stock Option PlanFiled as Exhibit 4.3 of the Registration Statement on Form S-8 of the Registrant dated July 25, 2000 (File No. 333-42164), and hereby incorporated by
reference.                                                                                                                                                                                                                                                                                                                                                                                                
|               | 
|10-15 #        |  | 2000 Outside Directors Stock Option PlanFiled as Exhibit 4.3 of the Registration Statement on Form S-8 of the Registrant dated July 25, 2000 (File No. 333-42166), and hereby
incorporated by reference.                                                                                                                                                                                                                                                                                                                                                                              
|               | 
|10-16 #        |  | Employment Agreement between Cobra Electronics Corporation and Michael Smith dated January 17, 2001Filed as Exhibit No. 10-20 to the Registrants Form 10-K for the year ended
December 31, 2000 (File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                              
|               | 
|10-17          |  | Loan and Security Agreement dated January 31, 2002, by and among, LaSalle Bank National Association as Agent, the Financial Institution from time to time a party hereto, as lenders, and Cobra
Electronics Corporation as BorrowerFiled as Exhibit No. 10-20 to the Registrants Form 10-K for the year ended December 31, 2001 (File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                              
|               | 
|10-18          |  | Term Loan Promissory Note between James R. Bazet and Cobra Electronics Corporation dated July 17, 2002Filed as Exhibit No. 10-21 to the Registrants Form 10-Q for the quarter ended
June 30, 2002 (File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                            
|               | 
|10-19          |  | Cobra Electronics Corporation 2002 Deferred Compensation Plan for Select ExecutivesFiled as Exhibit No. 10-22 to the Registrants Form 10-Q for the quarter ended June 30, 2002
(File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                                               
|               | 
|10-20          |  | 2002 Outside Directors Stock Option PlanFiled as Exhibit 4.3 of the Registration Statement on Form S-8 of the Registrant dated June 24, 2002 (File No. 333-91078), and hereby
incorporated by reference.                                                                                                                                                                                                                                                                                                                                                                              
|               | 
|10-21          |  | Second Amendment to the Loan and Security Agreement dated January 31, 2002, by and among LaSalle Bank National Association, as Agent, the Financial Institutions from time to time a party
thereto, as Lenders, and the Company, as BorrowerFiled as Exhibit 10-1 of the Registrants Form 8-K dated February 25, 2003 (File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                                        
|               | 
|10-22          |  | Development and License Agreement dated January 8, 2003, by and between Horizon Navigation, Inc. and the CompanyFiled as Exhibit No. 10-22 to the Registrants Form 10-K for the
year ended December 31, 2002 (File No. 0-511), and hereby incorporated by reference. (Confidential material appearing in this document was omitted and filed separately with the Securities and Exchange Commission in accordance with Section 24(b) of
the Securities and Exchange Act of 1934, as amended, and Rule 24b-2 promulgated thereunder. Omitted information was replaced with asterisks.)
|               | 
|10-23          |  | Supplemental Agreement to Development and License Agreement dated February 20, 2003, by and between Horizon Navigation, Inc. and the CompanyFiled as Exhibit No. 10-23 to the
Registrants Form 10-K for the year ended December 31, 2002 (File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                                                                                                                     



42



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##### Table of Contents

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10-24          |  | Amended and Restated Loan Agreement, dated February 6, 2003, between Horizon Navigation, Inc., as Borrower, and the Company, as LenderFiled as Exhibit No. 10-24 to the Registrants
Form 10-K for the year ended December 31, 2002 (File No. 0-511), and hereby incorporated by reference. (Confidential material appearing in this document was omitted and filed separately with the Securities and Exchange Commission in accordance with
Section 24(b) of the Securities and Exchange Act of 1934, as amended, and Rule 24b-2 promulgated thereunder. Omitted information was replaced with asterisks.)
|               | 
|10-25 #        |  | Employment Agreement between Cobra Electronics Corporation and Michael Smith dated December 20, 2002Filed as Exhibit No. 10-25 to the Registrants Form 10-K for the year ended
December 31, 2002 (File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                                                   
|               | 
|10-26          |  | Amendment No. 3 to the Loan and Security Agreement dated as of January 31, 2002 among LaSalle Bank National Association, as a Lender and As Agent for the Lenders, the Lenders and Cobra
Electronics CorporationFiled as Exhibit No. 10-26 to the Registrants Form 10 - Q for the quarter ended June 30, 2003 (File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                                                                      
|               | 
|10-27          |  | License Agreement, dated May 10, 2002, by and between Rand McNally & Company and the Company, including Amendment No. 1 theretoFiled as Exhibit No. 10-27 to the Registrants
Form 10-Q for the quarter ended September 30, 2003 (File No. 0-511), and hereby incorporated by reference. (Confidential material appearing in this document was omitted and filed separately with the Securities and Exchange Commission in accordance
with Section 24(b) of the Securities and Exchange Act of 1934, as amended, and Rule 24b-2 promulgated thereunder. Omitted information was replaced with asterisks.)   
|               | 
|10-28          |  | Amendment No. 4 to the Loan and Security Agreement Dated As of January 31, 2002 Among LaSalle Bank National Association, As a Lender and As Agent for the Lenders, the Lenders and Cobra
Electronics CorporationFiled as Exhibit No. 10.1 to the Registrants current report on Form 8-K dated February 18, 2004 (File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                                                                    
|               | 
|10-29 #        |  | Employment Agreement between Cobra Electronics Corporation and James R. Bazet dated May 25, 2004Filed as Exhibit No. 10-29 to the Registrants Form 10-Q for the quarter ended June
30, 2004 (File No. 0-511), and hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                                                        
|               | 
|23.1  *        |  | Consent of Deloitte & Touche LLP dated March 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|               | 
|23.2  *        |  | Consent of Grant Thornton LLP dated March 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|               | 
|31.1  *        |  | Rule 13a14(a)/15d14(a) Certification of the Chief Executive                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|               | 
|               |  | Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|               | 
|31.2  *        |  | Rule 13a14(a)/15d14(a) Certification of the Chief Financial                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|               | 
|               |  | Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|               | 
|32.1  *        |  | Section 1350 Certification of the Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|               | 
|32.2  *        |  | Section 1350 Certification of the Chief Financial Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

---

|* | Filed herewith.
|- | ---------------

|# | Executive compensation plan or arrangement.
|- | -------------------------------------------



43