COBRA ELECTRONICS CORP, DEF 14A, 1999-04-16

COBRA ELECTRONICS CORP
DEF 14A, 1999-04-16
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the registrant [X]

Filed by a party other than the registrant [ ]

Check the appropriate box:

[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))

[X] Definitive proxy statement

[ ] Definitive additional materials

[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Cobra Electronics Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Cobra Electronics Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of filing fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction applies:

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

(2) Aggregate number of securities to which transaction applies:

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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

[ ] Fee paid previously with preliminary materials.

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

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

(1) Amount previously paid:

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

(2) Form, schedule or registration statement no.:

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(3) Filing party:

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(4) Date filed:

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<PAGE> 2

COBRA LETTERHEAD

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 11, 1999

To the Shareholders:

The Annual Meeting of Shareholders of Cobra Electronics Corporation (the
"Company") will be held at the offices of Sidley & Austin, One First National
Plaza, 55th Floor, Room 2-C, Chicago, Illinois on Tuesday, May 11, 1999 at 11:00
a.m. to:

1. Elect three Class I directors of the Company to hold office until the
2002 Annual Meeting of Shareholders;

2. To transact such other business as may properly come before the meeting
or any adjournments thereof.

Only shareholders of record at the close of business on April 2, 1999 are
entitled to notice of and to vote at the meeting or any adjournments thereof. A
complete, alphabetic list of such shareholders showing their addresses and the
number of shares registered for each will be kept open at the offices of the
Company, 6500 West Cortland Street, Chicago, Illinois 60707, for examination by
any shareholder during ordinary business hours for a period of ten days prior to
the meeting.

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.

A copy of the Summary Annual Report for the year ended December 31, 1998, a
Proxy Statement and proxy card accompany this notice.

By order of the Board of Directors,

GERALD M. LAURES
Secretary

Chicago, Illinois
April 16, 1999
<PAGE> 3

COBRA ELECTRONICS CORPORATION
6500 WEST CORTLAND STREET
CHICAGO, ILLINOIS 60707

PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 11, 1999

This Proxy Statement is furnished in connection with a solicitation of
proxies by the Board of Directors of Cobra Electronics Corporation (the
"Company") to be voted at the Company's 1999 Annual Meeting of Shareholders to
be held on Tuesday, May 11, 1999 at the offices of Sidley & Austin, One First
National Plaza, 55th Floor, Room 2-C, Chicago, Illinois at 11:00 a.m. The
principal executive offices of the Company are located at 6500 West Cortland
Street, Chicago, Illinois 60707. This Proxy Statement, the accompanying proxy
card and the 1998 Summary Annual Report were first mailed to shareholders on or
about April 16, 1999.

RECORD DATE AND OUTSTANDING VOTING SECURITIES

Only shareholders of record at the close of business on April 2, 1999 are
entitled to notice of and to vote at the meeting. On that date the Company had
outstanding 6,057,916 shares of Common Stock, par value $.33 1/3 per share.
Owners of Common Stock are entitled to one vote for each share held. The Company
has no other outstanding voting securities.

REVOCATION OF PROXIES AND OTHER VOTING INFORMATION

Proxies given pursuant to this solicitation may be revoked at any time
prior to the voting thereof (by giving written notice to the Secretary of the
Company, by executing a proxy card bearing a later date which is voted at the
meeting or by attending the 1999 Annual Meeting of Shareholders and voting in
person); once voted, however, proxies may not be retroactively revoked.

With respect to the election of directors, a shareholder may (i) vote for
the election of all three nominees designated below as Class I directors, (ii)
withhold authority to vote for all director nominees or (iii) vote for the
election of all director nominees other than a nominee with respect to whom the
shareholder withholds authority to vote by striking a line through the nominee's
name on the proxy. All outstanding shares of Common Stock represented by
properly executed and unrevoked proxies received in time for the meeting will be
voted as instructed in the accompanying proxy. If no instructions are given, the
shares will be voted for the election of all nominees designated below to serve
as Class I directors.

A proxy card submitted by a shareholder may indicate that all or a portion
of the shares represented by such proxy are not being voted by such shareholder
with respect to a particular matter (the "non-voted shares"). Non-voted shares
will be considered shares not present and entitled to vote on such matter,
although such shares may count for purposes of determining the presence of a
quorum. If a quorum is present at the meeting, the three persons receiving the
greatest number of votes will be elected to serve as Class I directors.
Accordingly, non-voted shares and withholding authority to vote for a director
nominee will not affect the outcome of the election of directors.

PROPOSAL I -- ELECTION OF DIRECTORS

The Company's Certificate of Incorporation classifies the Board of
Directors into three classes, as nearly equal in number as possible, each of
whom serves for three years. The term of office of one class of directors
expires each year in rotation so that one class is elected at each annual
meeting for a full three-year term. The terms of three of the present directors
will expire at the 1999 Annual Meeting of Shareholders. Mr. James R. Bazet,
President and Chief Executive Officer of the Company, Mr. Jerry Kalov, Vice
Chairman of the Company, and Mr. Harold D. Schwartz, appointed a director in
1983, have been nominated for election as

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<PAGE> 4

Class I directors for three-year terms expiring at the 2002 Annual Meeting of
Shareholders and until their successors are elected and qualified. The terms of
the other four directors will continue as indicated below.

Unless otherwise specified on a proxy card, it is the present intention of
the persons named in the accompanying proxy card to vote such proxy for the
election of James R. Bazet, Jerry Kalov, and Harold D. Schwartz, the three
nominees designated below, to serve as Class I directors. Management is not
aware of any nominee for director to be proposed by others. If on account of
death or unforeseen contingencies, any of Messrs. Bazet, Kalov or Schwartz
should not be available for election, the persons named in the accompanying
proxy reserve the right to vote such proxy card for such other person or persons
as may be nominated to serve as a Class I director by the management of the
Company. Management has no reason to believe that any Class I nominee will be
unable to serve if elected.

The names of the Company's directors and director nominees, their principal
occupations and certain biographical information relating to such persons are
set forth below.

<TABLE>
<CAPTION>
NOMINEES AND DIRECTORS AGE PRINCIPAL OCCUPATION
---------------------- --- --------------------
<S> <C> <C>
James Bazet, Class I 51 President and Chief Executive Officer of the
(Nominee, term, if elected, Company, January 1998 to present; Executive Vice
expiring in 2002) President and Chief Operating Officer of the
Company, July 1997 to December 1997; President and
Chief Executive Officer, Ryobi Motor Products Floor
Care Division, 1995-1997; President and Chief
Executive Officer, Code-A-Phone Corporation,
1991-1994. Director since May 1997.
William P. Carmichael, Class III 55 Senior Vice President & Chief Accounting Officer,
(Term expiring in 2001) Sara Lee Corporation, 1991-1993; retired 1993;
Senior Vice President and Chief Financial Officer,
Beatrice Company, 1988-1990. Director since 1994.
Samuel B. Horberg, Class II 72 Vice President, Secretary and Treasurer of the
(Term expiring in 2000) Company, 1985-1986; retired 1986; Vice
President-Finance, Secretary and Treasurer of the
Company, 1961-1985. Director since 1961.
Jerry Kalov, Class I 63 Director of Wells-Gardner Electronics since 1998.
(Nominee, term, if elected, Vice Chairman of the Board of the Company, May 1997
expiring in 2002) to present; President and Chief Executive Officer
of the Company, August 1986 to January 1, 1998,
retired January 1, 1998; President and Chief
Operating Officer of the Company, April 1985 to
August 1986; President, Kalov & Associates, Inc.,
management consultants 1983-1985; President, Harman
International Industries, Inc., 1980-1983. Director
since 1985.
Carl Korn, Class III 77 Chairman of the Board of the Company, 1961 to
(Term, expiring in 2001) present; President and Chief Executive Officer of
the Company, 1961-1985. Director since 1961.
Gerald M. Laures, Class II 51 Vice President-Finance of the Company, since March
(Term expiring in 2000) 1994; Corporate Secretary of the Company, 1989 to
present; Corporate Controller of the Company
1988-1994. Director since 1994.
Harold D. Schwartz, Class I 73 President, Chez & Schwartz, Inc., marketing and
(Nominee, term, if elected, sales consultants, 1973 to present. Director since
expiring in 2002) 1983.
</TABLE>

MEETINGS AND COMMITTEES OF THE BOARD

The Board of Directors of the Company held four meetings during fiscal year
1998. Each member of the Board of Directors attended at least 75% of all the
meetings of the Board of Directors and committees of which they are members. The
Board of Directors has four committees: the Audit Committee, the Finance
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<PAGE> 5

Committee, the Compensation Committee and the Stock Option Plan Committee.
During fiscal year 1998, these committees met four times, one time, three times
and one time, respectively.

The members of the Audit Committee are: Harold D. Schwartz (Chairman),
William P. Carmichael, Samuel B. Horberg and Carl Korn. The Audit Committee
assists the Board of Directors in fulfilling its responsibility for the
accounting practices of the Company and reviews the selection of, and
recommendations by, the Company's independent auditors.

The members of the Finance Committee are: William P. Carmichael (Chairman),
James R. Bazet, Jerry Kalov and Gerald M. Laures. The Finance Committee reviews
and recommends financing plans and agreements.

The members of the Compensation Committee are: Samuel B. Horberg
(Chairman), Jerry Kalov and Harold D. Schwartz. The Compensation Committee
reviews the compensation of the Company's executive officers, except for options
issued under the Company's stock option plans.

The members of the Stock Option Plan Committee are: William P. Carmichael
(Chairman) and Harold D. Schwartz. The Stock Option Plan Committee administers
the Company's stock option plans.

The Company has no nominating or similar committee.

COMPENSATION OF DIRECTORS

Mr. Korn in his capacity as Chairman of the Board of the Company currently
receives an annual retainer of $25,000. Messrs. Carmichael, Horberg, Kalov and
Schwartz, who are not employees of the Company, currently receive annual
retainers of $10,000 and a fee of $1,000 for each Board meeting and $500 for
each committee meeting attended, not to exceed one Board meeting and one
committee meeting or two committee meetings on any one day. When a committee
meeting occurs on the same day as a Board meeting or another committee meeting,
the fee for the committee meeting or meetings is reduced to $400 for each such
meeting. In addition, Messrs. Carmichael, Horberg and Schwartz, each of whom
serves as a chairman of a committee of the Board, receives a $1,000 annual
retainer. At the present time, the other directors of the Company who serve on
the Board or any committee thereof receive no compensation for doing so.

Under the terms of an agreement entered into while Mr. Kalov was President
and Chief Executive Officer of the Company, the Company is obligated to make
payments through 2012 to him in an amount equal to $253,938 annually. The
obligation to make such payments is irrevocable in the case of death or
permanent disability.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

As indicated above, the members of the Compensation Committee are: Samuel
B. Horberg (Chairman), Jerry Kalov and Harold D. Schwartz. Mr. Horberg served as
Vice President, Secretary and Treasurer of the Company from 1961 until his
retirement in 1986. Mr. Kalov served as President and Chief Executive Officer of
the Company from August 1986 to January 1, 1998.

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<PAGE> 6

BENEFICIAL OWNERSHIP OF COMMON STOCK

The following table sets forth information as to the beneficial ownership
of Common Stock, as of February 1, 1999, of each of the Company's directors and
director nominees, each person named in the summary compensation table below and
the Company's directors and executive officers as a group.

<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF OUTSTANDING
NAME OWNERSHIP(1) COMMON STOCK
---- ----------------- ----------------------
<S> <C> <C>
James R. Bazet.......................... 40,250(2) *
William P. Carmichael................... 10,000 *
Samuel B. Horberg....................... 8,900 *
Jerry Kalov............................. 529,143(3) 8.0%
Carl Korn............................... 334,298 5.2%
Gerald M. Laures........................ 69,275(4) 1.1%
Anthony A. Mirabelli.................... 37,500(5) *
Harold D. Schwartz...................... 20,354(6) *
All directors, director nominees and
executive officers as a group (8
persons).............................. 1,049,720(7) 14.7%
</TABLE>

- ------------
* Less than 1% of the outstanding Common Stock.

(1) Except as otherwise disclosed, beneficial ownership includes both sole
investment and voting power with respect to the shares indicated.

(2) The amount includes 37,500 shares, which Mr. Bazet may acquire pursuant to
the exercise of stock options.

(3) The amount includes 321,000 shares, which Mr. Kalov may acquire pursuant to
the exercise of stock options.

(4) The amount includes 50,375 shares, which Mr. Laures may acquire pursuant to
the exercise of stock options.

(5) The amount includes 37,500 shares, which Mr. Mirabelli may acquire pursuant
to the exercise of stock options.

(6) The amount shown represents 18,195 shares owned by Chez & Schwartz, Inc.
Profit Sharing Trust and 2,000 shares held by the Chez & Schwartz Pension
Plan, as to both of which Mr. Schwartz is the sole beneficiary, and 159
shares owned by Chez & Schwartz, Inc., of which Mr. Schwartz is President
and sole shareholder.

(7) The amount includes 446,375 shares, which directors and executive officers
may acquire pursuant to the exercise of stock options.

Other than Mr. Kalov and Mr. Korn, 6500 West Cortland Street, Chicago,
Illinois 60707, to the knowledge of the Company, as of December 31, 1998, the
only beneficial owners of more than 5% of the outstanding shares of Common Stock
are as follows:

<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF OUTSTANDING
NAME AND ADDRESS OWNERSHIP(1) COMMON STOCK
---------------- ----------------- ----------------------
<S> <C> <C>
Dimensional Fund Advisors............... 482,650 8.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Fidelity Investments.................... 500,000 8.2%
82 Devonshire Street
Boston, MA 02109-3614
</TABLE>

- ------------
(1) Beneficial ownership includes both sole investment and voting power with
respect to the shares indicated.

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<PAGE> 7

EXECUTIVE COMPENSATION

The following table sets forth the compensation for services in all
capacities to the Company for the fiscal years ended December 31, 1998, 1997 and
1996 for (i) the chief executive officer of the Company and (ii) each other
executive officer of the Company whose annual salary and bonus exceeded $100,000
during 1998 (the "Named Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- ------------
SECURITIES ALL
OTHER ANNUAL UNDERLYING OTHER
SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)(2)
--------------------------- ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James R. Bazet................. 1998 353,558 70,000 -0- 150,000 3,423
President and 1997 152,212 32,127 -0- 150,000 -0-
Chief Executive Officer
Jerry Kalov.................... 1998 1,154 -0- 253,938(1) -0- -0-
Vice Chairman of the Board 1997 300,000 142,403 -0- -0- 11,150
and Former President and 1996 300,000 34,474 -0- -0- 6,000
Chief Executive Officer
Gerald M. Laures............... 1998 142,000 9,940 -0- 10,000 9,842
Vice President-Finance 1997 130,000 12,927 -0- 15,000 9,917
and Corporate Secretary 1996 125,000 10,000 -0- 10,000 5,620
Anthony A. Mirabelli........... 1998 182,000 12,740 -0- 75,000 11,400
Senior Vice President, 1997 152,052 49,710 -0- 75,000 10,585
Marketing and Sales
</TABLE>

- ------------
(1) Amount relates to retirement benefits under Mr. Kalov's employment
agreement.

(2) Represents the Company's matching contributions under profit sharing and
401(k) plan.

STOCK OPTION GRANTS IN 1998

Shown below is information with respect to grants during 1998 to the Named
Officers of options to purchase Common Stock. No stock appreciation rights
("SARs") were granted in 1998.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF ASSUMED
PERCENTAGE OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#) 1998 ($/SHARE) DATE 5%($) 10%($)
---- ------------ ------------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
James R. Bazet........... 150,000(1) 52.2% 5.625 07/27/03 233,112 515,118
Gerald M. Laures......... 10,000(1) 3.5% 8.000 03/11/03 22,103 48,841
Anthony A. Mirabelli..... 75,000(1) 26.1% 6.875 02/10/03 142,458 314,794
</TABLE>

- ------------
(1) Options become exercisable in annual 25% increments commencing twelve months
after the date of grant.

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<PAGE> 8

AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES

Shown below is information with respect to options exercised during fiscal
year 1998 and unexercised options to purchase Common Stock held by the Named
Officers.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 1998
NUMBER OF SHARES VALUE DECEMBER 31, 1998(#) ($)(1)(2)
UNDERLYING OPTIONS RECEIVED ---------------------------- ----------------------------
NAME EXERCISED (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James R. Bazet........... -- -- 37,500 262,500 -- --
Jerry Kalov.............. -- -- 321,000 -- 260,973 --
Gerald M. Laures......... 14,500 41,000 41,625 28,875 63,138 33,236
Anthony A. Mirabelli..... -- -- 18,750 131,250 24,619 73,859
</TABLE>

- ------------
(1) No SARS were outstanding as of December 31, 1998.

(2) Based on the closing price on the Nasdaq National Market on December 31,
1998.

REPORT ON EXECUTIVE COMPENSATION

The members of the Compensation Committee of the Board of Directors and the
Stock Option Plan Committee have furnished the following report on executive
compensation:

The Compensation Committee administers the Company's various incentive
plans, including its annual bonus plan and stock incentive plans, other than the
Company's stock option plans. In addition, the Compensation Committee reviews
with the Board of Directors in detail the compensation of the Named Officers.
The Stock Option Plan Committee administers the Company's stock option plans.

The compensation policy of the Company, which is endorsed by each
Committee, is designed to align the interests of the Company's executive
officers and key employees with that of the Company's shareholders and to
advance the interests of the Company and its shareholders by attracting and
retaining well-qualified executive officers and key employees. Therefore, it is
the Company's policy that a substantial portion of the incentive compensation of
each Named Officer relates to and must be contingent upon the performance of the
Company, as well as the individual contribution of each officer. When
considering the compensation of the Company's executive officers, each Committee
considers, as applicable, the following factors: (a) Company performance; (b)
the individual performance of each executive officer; (c) compensation levels
for similar positions at comparable companies; (d) the recommendations of the
Chief Executive Officer; (e) in the case of Mr. Kalov, the terms of his
employment agreement that expired on January 1, 1998, (f) in the case of Mr.
Bazet, the terms of his employment agreement dated April 18, 1997; and (g) in
the case of Mr. Mirabelli, the terms of his employment dated January 31, 1997.

Mr. Bazet's salary and bonus are determined pursuant to his employment
agreement. During the period commencing July 28, 1998 and ending July 31, 1999,
Mr. Bazet's annual salary is $360,000. At July 31, 1999 his contract is expected
to be renewed with substantially the same provisions. The employment agreement
provides that Mr. Bazet will be paid an annual bonus targeted at 20% of his base
salary if the Company meets specified net income targets under the Approved
Profit Plan relating to 1998. The bonus can exceed 20% if the net income targets
are exceeded. The Company did not meet the performance criteria for 1998.
However, the Compensation Committee awarded Mr Bazet a discretionary bonus for
1998 of $70,000.

Mr. Mirabelli's salary and bonus are determined pursuant to his employment
agreement. The agreement provides that Mr. Mirabelli's annual salary is $182,000
with an annual bonus targeted at 35% of his salary for any year during which the
Company meets or exceeds specified net income targets under the Approved Profit
Plan relating to 1998. The Company did not meet the performance criteria for
1998. However, the Compensation Committee awarded Mr. Mirabelli a discretionary
bonus of $12,740.

Mr. Kalov retired as President and Chief Executive Officer on January 1,
1998. Accordingly, his salary reflects a pro rated payment and no bonus was paid
to Mr. Kalov in 1998.

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<PAGE> 9

For the other executive officers, base salaries are set at competitive
levels. Salary increases and bonuses are paid based upon both the performance of
the entire Company and individual performance. The Compensation Committee does
not assign any specific weight to any measure of Company or individual
performance.

The Stock Option Plan Committee may grant options to purchase Common Stock
under the Company's stock option plans to certain key employees. The
Compensation Committee may recommend to the Board of Directors that certain key
employees be granted options to purchase Common Stock under all other stock
incentive plans. The exercise price of each option granted is generally equal to
100% of the fair market value of the shares on the date of grant and options
granted are generally exercisable commencing twelve months after the grant date,
generally in an amount equal to 25% of the total number of shares covered during
each successive twelve-month period. The Committees believe that such grants are
an important way to link directly the financial interests of key employees with
those of the Company's shareholders. In fiscal year 1998, Mr. Bazet received
options to purchase 150,000 shares at the exercise price of $5.625 per share,
Mr. Laures received options to purchase 10,000 shares at the exercise price of
$8.000 per share, Mr. Mirabelli received options to purchase 75,000 shares at
the exercise price of $6.875 per share, and Mr. Kalov was not granted any
options.

The foregoing report has been furnished by:

Mr. Horberg (Chairman of Compensation Committee)
Mr. Carmichael (Chairman of Stock Option Plan Committee)
Mr. Kalov
Mr. Schwartz

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<PAGE> 10

PERFORMANCE GRAPH

The following Performance Graph compares the yearly percentage change in
the Company's cumulative total shareholder return on the Company's Common Stock
for the five-year period, December 31, 1993 to December 31, 1998, with the
percentage change in the cumulative total return for The Nasdaq Stock Market
(U.S. Companies), which includes the Company, a peer group of companies selected
by the Company (the "Peer Group"), and what remains of the former peer group,
Koss Corporation.

Companies used to construct the Peer Group index are Koss Corporation,
Audiovox Corporation and Recoton Corporation. Zenith Electronics Corporation was
deleted from the Peer Group because its stock is no longer publicly traded.
Audiovox and Recoton were added to the peer group as only Koss remained from the
original group. Koss, as the last remaining original peer group member, is shown
by itself on the performance chart. In selecting companies for the Peer Group,
the Company focused on publicly traded companies that design and market
electronics products, which have characteristics similar to that of the
Company's in terms of one or more of the following: type of product, end market,
distribution channels, sourcing or sales volume.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN

<TABLE>
<CAPTION>
COBRA NASDAQ PEER GROUP KOSS
----- ------ ---------- ----
<S> <C> <C> <C> <C>
1993 100.000 100.000 100.000 100.000
1994 71.430 114.796 104.500 78.180
1995 114.288 112.214 93.768 43.632
1996 128.574 158.699 85.423 49.086
1997 240.498 195.192 95.793 83.628
1998 178.594 239.527 109.731 79.990
</TABLE>

The graph assumes $100 invested on December 31, 1993 in each of the
Company's Common Stock, The Nasdaq Stock Market (U.S. Companies) and the Peer
Group. Reinvestment of dividends, if any, has been assumed. The graph was
plotted using the following data:

<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cobra........................... $100.000 $ 71.430 $114.288 $128.574 $240.498 $178.594
Nasdaq.......................... 100.000 97.752 138.256 170.015 208.580 293.209
Peer Group...................... 100.000 104.500 93.768 85.423 95.793 109.731
Koss............................ 100.000 78.180 43.632 49.086 83.628 79.990
</TABLE>

Note: Sources include The Nasdaq Stock Market, CDA Investment Technologies,
Inc., Standard & Poor's Corporation, and the Securities and Exchange
Commission's EDGAR database.

8
<PAGE> 11

EMPLOYMENT AGREEMENTS

Mr. Bazet's agreement became effective July 28, 1997 and runs through July
31, 1999, at which time it is expected to be renewed with substantially the same
provisions. Mr. Bazet's salary is $360,000. A bonus targeted at 20% of base
salary will be earned if the Company meets specified performance targets. The
bonus can exceed 20% pro-ratably if performance targets are exceeded.

AUDITORS

Deloitte & Touche LLP has been selected by the Board of Directors to serve
as the Company's independent auditors for 1999. The Company expects a
representative of Deloitte & Touche LLP to be present at the 1999 Annual Meeting
of Shareholders and the representative will be given an opportunity to make a
statement and to respond to appropriate questions from shareholders.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based solely on a review of copies of reports of ownership, reports of
changes of ownership and written representations under Section 16(a) of the
Securities Exchange Act of 1934 which were furnished to the Company by persons
who were, at any time during 1998, directors or executive officers of the
Company or beneficial owners of more than 10% of the outstanding shares of
Common Stock, no such persons failed to file on a timely basis reports required
by such Section 16 during or with respect to 1998.

SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING

In order to be considered for inclusion in the Company's proxy materials
for the 2000 Annual Meeting of Shareholders, a shareholder proposal must be
received by the Company no later than December 18, 1999. In addition, regardless
of whether a shareholder nominee for director or other proposal is included in
the Company's 2000 Proxy Statement as a nominee or proposal to be considered by
shareholders, the Company's Bylaws establish an advance notice procedure for
shareholder nominees and proposals to be brought before the annual meeting of
shareholders. Shareholders at the 2000 Annual Meeting of Shareholders may
consider a nomination or proposal brought by a shareholder of record on April 2,
1999 who is entitled to vote at the 1999 Annual Meeting and who has given the
Company timely written notice, in proper form, of the shareholder's proposal or
nomination. A shareholder nomination or proposal intended to be brought before
the 1999 Annual Meeting must have been received by the Company after the close
of business on February 1, 1999 and prior to the close of business on February
26, 1999. The Company did not receive notice of any shareholder nomination or
proposal relating to the 1999 Annual Meeting. The 2000 Annual Meeting of
Shareholders is expected to be held on May 9, 2000. A shareholder nomination or
proposal intended to be brought before the 2000 Annual Meeting must be received
by the Company after the close of business on February 1, 2000 and prior to the
close of business on February 26, 2000. All nominations and proposals should be
directed to the attention of Gerald M. Laures, Corporate Secretary, 6500 West
Cortland Street, Chicago, Illinois 60707.

REQUEST TO VOTE, SIGN AND RETURN PROXIES

Whether or not you plan to attend the Annual Meeting of Shareholders on May
11, 1999, please mark, sign, date and return the enclosed proxy card as soon as
possible in the enclosed postage-paid envelope.

OTHER MATTERS

At the date of this Proxy Statement, the Board of Directors is not aware of
any matters, other than the election of Class I directors, that may be brought
before the 1999 Annual Meeting. However, if any other matters properly come
before the Meeting, it is the intention of the persons named in the enclosed
proxy card to vote such proxy in accordance with their judgment on such matters.
In addition to use of the mails, the Company may also solicit proxies by
telephone, telegraph or similar means. The Company's registrar and

9
<PAGE> 12

transfer agent, American Stock Transfer & Trust Company, will assist the Company
in its solicitation of proxies and will not receive any additional fee for its
services. Other than American Stock Transfer & Trust Company, no specially
engaged employees or paid solicitors will be used in this solicitation, the
expenses of which will be paid by the Company (such expenses are not expected to
exceed the amount normally expended for an uncontested solicitation in
connection with an election of directors). Officers and other regular employees
of the Company will not receive any additional compensation in connection with
this solicitation.

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 1998 AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE REQUIRED FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULE, WILL BE FURNISHED WITHOUT CHARGE,
BY FIRST CLASS MAIL, UPON THE WRITTEN OR ORAL REQUEST OF ANY SHAREHOLDER,
INCLUDING ANY BENEFICIAL OWNER ENTITLED TO VOTE AT THE MEETING DIRECTED TO THE
ATTENTION OF GERALD M. LAURES, CORPORATE SECRETARY, 6500 WEST CORTLAND STREET,
CHICAGO, ILLINOIS 60707, TELEPHONE: (773) 889-8870.

By order of the Board of Directors,

GERALD M. LAURES
Secretary
Cobra Electronics Corporation

Chicago, Illinois
April 16, 1999

10
<PAGE> 13

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

CORPORATE OVERVIEW

Strong domestic sales -- up 14 percent from the prior year -- helped offset
a substantial decline in international detector sales because of the poor
Russian economy. Domestic sales were driven by sales of new MicroTALK(TM)
two-way radios and 6 Band(TM) radar detectors. Sales of higher-margin new
products led to a significant improvement in gross margin, which hit its highest
level in the 1990s. The increase in gross margin and a one-time income tax
benefit of $10.4 million resulted in net income of $14.2 million for 1998.
Excluding the effects of the 1998 income tax benefit and a 1997 one-time gain of
$1.1 million on the sale of a building, net income per diluted share increased
7.3 percent in 1998.

The tax benefit was due to the elimination of the company's deferred tax
valuation allowance. This valuation allowance had substantially offset the
company's net deferred tax asset, a significant portion of which related to the
company's net operating loss carryforwards. In the fourth quarter of 1998, due
to the continued positive trend in earnings and the successful launch of the
company's new products, management determined that this valuation allowance was
no longer needed because the company expects to fully utilize its remaining net
operating loss carryforwards and other deferred tax assets, arising from
temporary differences between financial and tax reporting, to offset future
taxable income. At December 31, 1998, the company had net operating loss
carryforwards of $26.3 million.

RESULTS OF OPERATIONS

1998 COMPARED TO 1997

Net income for 1998 increased to $14.2 million or $2.20 per diluted share
from $4.7 million or $0.73 per diluted share in 1997. Included in net income for
1998 and 1997 were a $10.4 million income tax benefit and a $1.1 million
one-time gain on the sale of a building, respectively. Excluding the tax benefit
and the prior year's one-time gain, net income and net income per diluted share
for 1998 increased $237,000 (or 6.7 percent) and $0.04 (or 7.3 percent),
respectively.

Net sales for 1998 remained relatively flat at $103.4 million compared to
$104.1 million in 1997. However, domestic sales, boosted by increased retail
distribution and strong demand for the new MicroTALK FRS two-way radios and the
company's proprietary 6 Band radar detectors, were up 14 percent from 1997. This
helped offset a $11.7 million drop in international sales, primarily because of
lower sales of radar detectors into Russia as a result of that country's ongoing
severe economic problems.

Strong sales of FRS two-way radios and domestic radar detectors were
partially offset by an $11 million decline in sales of radar detectors into
Russia because of that country's ongoing economic problems. FRS two-way radio
sales benefitted from the new MicroTALK line, which the company began shipping
in September 1998. This new line has helped the company add several new
customers, expand placement among existing major retail accounts and add
sporting goods and office supply as new channels of distribution. The increase
in domestic radar detector sales was due to the popularity of the company's
proprietary six-band technology. These new models, which began shipping at the
end of the first quarter of 1998, enabled the company to achieve steady market
share gains during the year. Sales of cordless telephones decreased $5.8
million, or 36 percent. This decline reflected lower sales of 25-channel
products as the company shifts its business to the new line of 900 MHz cordless
telephones, which it began shipping in the third quarter of 1998. Gross margin
for 1998 improved to 23.8% from 20.7% in 1997 primarily due to a greater portion
of higher-margin SoundTracker(R) CB radios, MicroTALK two-way radios and 6 Band
radar detectors in the sales mix.

Selling, general and administrative expense increased $3.1 million during
1998 and, as a percentage of net sales, increased to 19.1% from 16.0% in 1997.
Much of the increase was due to higher selling and marketing costs. One reason
for the increase was a shift in sales mix in 1998 to more domestic sales, which
have much higher selling expenses associated with them compared to the selling
expenses associated with international sales. Also, selling and marketing
expenses increased as the company continued to invest significantly in new

F-1
<PAGE> 14

product development, retail account expansion and distribution channel gains.
These investments have resulted in increased placement of Cobra products as well
as gross margin improvement. Also contributing to the increase in selling,
general and administrative costs was consulting expense incurred to make the
company's data processing systems year 2000 compliant and higher legal and
related costs incurred to register and protect the company's trademarks world
wide. Offsetting some of the increase was the fact that 1997 selling, general
and administrative expense included a charge of $1.1 million to reduce
advertising credits to their net realizable value.

Interest expense for 1998 decreased slightly to $1.2 million from $1.3
million, primarily due to a more favorable banking agreement, entered into in
early 1998, and lower overall interest rates. In 1997, the company sold a
building that was not needed for operations and was being leased to an outside
party for approximately $2 million, resulting in a one-time gain of $1.1
million.

Other income was $87,000 in 1998 compared to other expense of $60,000 in
1997. The net favorable change was due to decreased bank fees resulting from the
new bank agreement mentioned above.

In 1998 the company recorded an income tax benefit of $10.4 million. The
tax benefit was due to the elimination of the company's deferred tax valuation
allowance. This valuation allowance had substantially offset the company's net
deferred tax asset, a significant portion of which related to the company's net
operating loss carryforwards. Prior to 1996, the company had a history of net
losses resulting in a significant net deferred tax asset and a corresponding
valuation allowance. Under SFAS No. 109, a history of operating losses in recent
years generally requires recognition of such an allowance. Accordingly, the
company recorded a valuation allowance for substantially all of the net deferred
tax asset. However, SFAS No. 109 requires management to periodically access the
need for a valuation allowance. In the fourth quarter of 1998, due to the
continued positive trend in earnings and the successful launch of the company's
new products, management concluded that there was no need for a valuation
allowance because it is more likely than not that all of the net deferred tax
assets will be realized through future taxable earnings. In the future, the
company will report a tax provision since the deferred tax valuation allowance
no longer exists to offset any tax expense. At December 31, 1998, the company
had net operating loss carryforwards of $26.3 million.

1997 COMPARED TO 1996

Net income for 1997 increased to $4.7 million from $601,000 in 1996.
Included in net income for 1997 was a $1.1 million gain on the sale of a
building during the third quarter that the company did not need for its
operations and was leasing to an outside party. Net income, excluding the gain
on the sale of the building, increased $3.0 million to $3.6 million in 1997 from
$601,000 in 1996. Net sales increased $13.8 million, or 15.2%, to $104.1 million
from $90.3 million in 1996. Selling, general and administrative expense
increased to $16.7 million from $14.4 million, but, as a percentage of net
sales, remained substantially unchanged at 16%.

Sales of CB radios increased 28% mainly because of strong demand for radios
with the company's exclusive, patent-pending SoundTracker technology, introduced
early in the year. Additionally, an all-new radar detector lineup helped drive
sales volume in the U.S., while internationally the company capitalized on the
strong demand in Russia for radar detectors. In total, international sales,
which consisted principally of radar detector sales, increased $9.8 million in
1997.

Sales of 25-channel cordless phones and integrated cordless phone answering
systems decreased $10 million because of lower sales to several large retail
customers. Also contributing to the sales decrease was lower sales of factory
reconditioned products as a result of agreements with some of the company's
vendors that allow product returned from the company's customers to be returned
to the vendor for partial credit towards future purchases. Prior to these
agreements, which were entered into in 1996, the company repaired and resold
this returned merchandise as factory reconditioned product. The company also
restricted expanding distribution for its 25-channel cordless phones as it
sought to de-emphasize this product line in favor of the rapidly growing 900 MHz
segment which the company introduced in the Fall of 1998 with several 900 MHz
cordless phone models.

F-2
<PAGE> 15

Gross margin for 1997 increased to 20.7% from 18.1% in 1996 primarily due
to an improvement in sales mix of higher margin CB and radar detector products.
Sales of these products increased as a percentage of total sales from 67% in
1996 to approximately 81% in 1997. In addition, gross margin on radar detectors
increased due to the new radar detector lineup, which included lower cost models
that replaced higher cost models. Also contributing to the gross margin
improvement was lower repair costs on returned products, which declined because
of return to vendor agreements discussed above. Partially offsetting the
favorable impact of these items was $555,000 of increased air freight expense
mainly to satisfy the strong demand for CB radios with the SoundTracker system.
Normally the company uses significantly less expensive ocean freight to import
its products.

Selling, general and administrative expense increased $2.3 million during
1997 and, as a percentage of net sales, remained relatively unchanged from 1996.
Sales and marketing expenses increased due to: higher variable expenses
resulting from the increase in sales volume; the addition of a senior vice
president of marketing and sales, a newly created position, in February 1997;
and increased promotional spending mainly to promote the new SoundTracker
technology. In addition, higher bonus and bad debt expense in 1997 also
contributed to the increase in selling, general and administrative expenses. Bad
debt expense increased because of the bankruptcy of a small customer and a
potential preference payment issue for a prior year's bankruptcy. In addition,
prior year's bad debt expense reflected a favorable reserve adjustment because
of improvement in the quality of the receivable portfolio and favorable
collections experience. As in 1996, 1997 included a charge for the write-down of
advertising barter credits to estimated net realizable value amounting to $1.1
million in 1997 compared to a charge of $1.2 million in 1996.

Interest expense for 1997 decreased to $1.3 million from $1.7 million. Debt
levels declined due to lower average inventory and receivable levels.

The company sold a building, which was not needed for operations and was
being leased to an outside party, in the third quarter of 1997 for approximately
$2 million. The sale resulted in a $1.1 million gain.

Other expense was $60,000 in 1997 compared to other income of $275,000 in
1996. In 1996 there was a gain of $373,000 from a suit against a former
distributor for violation of a licensing agreement and $217,000 of royalty
income from Safety Alert licensing agreements, offset by a $384,000 writedown of
a building related to a discontinued operation.

LIQUIDITY AND CAPITAL RESOURCES

On February 3, 1998, the company entered into a new $35 million secured
credit agreement with two financial institutions for a three-year revolving
credit facility, replacing an existing $30 million credit agreement. Loans
outstanding under the new agreement bear interest, at the company's option, at
the prime rate or LIBOR plus 2 percent. Additionally, the new agreement provides
for higher advance rates on eligible inventory and receivables and eliminates
the 2 percent per annum charge that the company was obligated to pay on its
average outstanding balance of letters of credit under the previously existing
agreement.

On October 10, 1998, the company and its lenders signed an amendment
increasing the credit line from $35 million to $38.7 million. This increase
reflected a separate line of credit under which borrowings are secured by the
cash surrender value of certain life insurance policies owned by the company. To
date, there have been no borrowings under this amendment, which expires on
August 31, 1999.

The credit agreement specifies that the company may not pay cash dividends
and contains a material adverse change clause, which, under certain
circumstances, could accelerate the payment of the debt. The company classifies
the debt as short-term for financial reporting purposes. At December 31, 1998,
the company had approximately $8 million available under the credit line.

Net cash flows used by operating activities were $2.9 million for the year
ended December 31, 1998. Operating cash flows were generated principally from
net income of $14.2 million, depreciation of $1.6 million and a $5.6 million
reduction in inventories, offset by the elimination of the income tax valuation
allowance of $10.4 million, an $11.4 million increase in accounts receivable,
and a $1.0 million increase in other assets. Receivables increased compared to
the prior year because of higher fourth quarter sales volume and an overall
F-3
<PAGE> 16

increase in average payment terms. Inventories decreased mainly because of the
strong fourth quarter sales and lower inventories of 25-channel phone products,
which are being phased out to make way for the new 900 MHz products. Accrued
liabilities decreased due to lower product warranty costs as a result of the
lower mix of 25-channel products and decreased accrued salaries and commissions
due to a lower bonus accrual.

Investing activities required cash of $1.6 million in 1998, principally for
the purchase of tooling and equipment and an increase in the cash surrender
value of officers' life insurance.

Financing activities provided cash flows of $2.7 million in 1998,
reflecting changes in the company's borrowing requirements under its
line-of-credit agreement, offset by the repurchase of 179,500 shares of company
common stock for an aggregate cost of $683,000. In August 1998, the company's
Board of Directors authorized a repurchase of up to $1 million of the company's
common stock.

At December 31, 1998, the company had no material commitments, other than
approximately $29.1 million in outstanding purchase orders for products compared
with $21.1 million at the end of the prior year.

The company believes that cash generated from operations and from
borrowings under its credit agreement will be sufficient in 1999 to fund its
working capital needs. In addition, the majority of any taxable income in 1999
and the foreseeable future will be offset by net operating loss carryforwards
that totaled $26.3 million at December 31, 1998. Until the company has utilized
its net operating loss carryforwards, the cash payment of federal income taxes
will be minimal.

YEAR 2000

The company initiated the process of preparing its computer systems and
applications for the Year 2000 in 1997. This process primarily involved two
parts: replacing certain company hardware and modifying software maintained by
the company, as well as inquiring into the Year 2000 compliance of the company's
major customers and vendors. In February 1999, the replacement of hardware and
software modifications were completed by an outside consulting firm. The company
has tested the hardware and modified software for Year 2000 compliance. The
company believes its hardware and software are Year 2000 compliant, but it will
continue testing during 1999. The company has also queried all major customers
and vendors as to their preparedness. The responses received to date indicate
that the company's major customers and vendors are or will be Year 2000
compliant by year end.

The final total cost to the company of these Year 2000 compliance
activities is approximately $818,000 and is not expected to be material to its
financial position or results of operations in any given year.

The failure to correct a Year 2000 problem could interrupt, or result in a
failure of, normal business operations and consequently materially affect the
company's financial position or results of operations. While the company
believes its own hardware and software are Year 2000 compliant, the Year 2000
readiness of the company's customers and vendors is inherently uncertain and
beyond the company's control. Accordingly, the company cannot determine at this
time whether the consequences of Year 2000 interruptions or failures will
materially affect the company's financial position or results of operations.

The company has not developed formal contingency plans to date. However,
the company has a network of suppliers and the company does not enter into
long-term supply contracts. The company believes that, if necessary, other
suppliers could be found. As stated above, customer responses to company
inquiries indicate that the company's major customers are or will be Year 2000
compliant by year-end. In the event a major customer is not Year 2000 compliant,
the company believes that such non-compliance is unlikely to materially affect
the company's financial condition or results of operations.

MARKET RISK AND FINANCIAL INSTRUMENTS

The company is subject to market risk associated principally with changes
in interest rates. Interest rate exposure is principally limited to the $14.3
million of debt of the company outstanding at December 31, 1998.

F-4
<PAGE> 17

The debt is priced at interest rates that float with the market, which therefore
minimizes interest rate exposure. A 50 basis point movement in the interest rate
on the floating rate debt would result in an approximately $70,000 increase or
decrease in interest expense and cash flows. The company does not use derivative
financial or commodity instruments for trading or other purposes.

The company's suppliers are located in foreign countries, principally in
the Far East, and the company made approximately 7.2% of its sales outside the
United States in 1998, however, the company minimizes its foreign currency
exchange rate risk by conducting all of its transactions in US dollars.

FORWARD-LOOKING STATEMENTS

In addition to the historical information presented in this annual report,
the company has made and will make certain forward-looking statements in this
report, other reports filed by the company with the Securities and Exchange
Commission, reports to stockholders and in certain other contexts relating to
future net sales, costs of sales, other expenses, profitability, financial
resources, or products and production schedules. Statements relating to the
foregoing or that predict or indicate future events and trends and which do not
relate solely to historical matters identify forward-looking statements.
Forward-looking statements are made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 and are based on management's beliefs as well as
assumptions made by and information currently available to management.
Accordingly, the company's actual results may differ materially from those
expressed or implied in such forward-looking statements due to known and unknown
risks and uncertainties that exist in the company's operations and business
environment, including, among other factors, the failure by the Company to
produce anticipated cost savings or improve productivity, the failure by the
Company or its suppliers or customers to achieve Year 2000 compliance, the
timing and magnitude of capital expenditures and acquisitions, currency exchange
rates, economic and market conditions in the United States and the rest of the
world, changes in customer spending levels, the demand for existing and new
products, the continuing availability of suppliers, and other risks associated
with the Company's operations. Although the Company believes that its
forward-looking statements are based on reasonable assumptions, there can be no
assurance that actual results, performance or achievements will not differ

F-5
<PAGE> 18

materially from any future results, performance or achievements expressed or
implied by such forward-looking statements. Readers are cautioned not to place
undue reliance on forward-looking statements.

QUARTERLY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------------ ------------------ ------------------ ------------------
QUARTER ENDED 1998 1997 1998 1997 1998 1997 1998 1997
------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.................... $21,172 $17,915 $22,440 $29,472 $26,223 $31,353 $33,579 $25,358
Cost of sales................ 16,921 14,403 16,976 23,776 19,720 24,585 25,136 19,783
Gross profit................. 4,251 3,512 5,464 5,696 6,503 6,768 8,443 5,575
Selling, general and
administrative expense..... 3,737 3,134 4,096 4,147 5,300 5,022 6,614 4,352
Operating income............. 514 378 1,368 1,549 1,203 1,746 1,829 1,223
Gain on sale of building..... -- -- -- -- -- 1,132 -- --
Tax provision (benefit)...... -- -- -- -- -- -- (10,403) --
Net income................... 237 93 1,265 1,249 678 2,625 12,020 725
Net income per share (a):
Basic...................... 0.04 0.01 0.20 0.20 0.11 0.43 1.98 0.12
Diluted.................... 0.04 0.01 0.19 0.20 0.11 0.39 1.92 0.11
Weighted average shares
outstanding:
Basic...................... 6,218 6,242 6,235 6,242 6,210 6,170 6,066 6,173
Diluted.................... 6,625 6,332 6,539 6,308 6,383 6,652 6,273 6,643
Stock Price:
High....................... 8 5/8 3 5/8 6 3/4 3 3/8 5 5/8 8 7/8 6 1/4 10 7/8
Low........................ 5 5/8.. 2 1/2 4 3/4 2 1/2 3 1/2 2 13/16 3 5/8 5 1/4
End of Quarter............. 6 1/4 2 7/8 5 1/16 3 5/32 3 3/4 7 3/8 4 11/16 6 5/16
Trading Volume............... 2,931 704 2,050 583 1,684 9,402 1,304 4,966
</TABLE>

- ------------
(a) The total quarterly income per share may not equal the annual amount because
net income per share is calculated independently for each quarter.

F-6
<PAGE> 19

FIVE YEAR FINANCIAL SUMMARY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Data:
Net sales.......................... $103,414 $104,098 $90,324 $90,442 $82,131
Gross profit....................... 24,661 21,551 16,370 16,577 14,466
Selling, general and administrative
expense......................... 19,747 16,655 14,374 16,097 14,602
Operating income (loss)............ 4,914 4,896 1,996 480 (136)
Gain on sale of building........... -- 1,132 -- -- --
Tax provision (benefit)............ (10,403) -- -- -- --
Net income (loss).................. 14,200 4,692 601 (1,145) (1,515)
Net Income (loss) per share:
Basic.............................. 2.30 0.76 0.10 (0.18) (0.24)
Diluted............................ 2.20 0.73 0.10 (0.18) (0.24)
As of December 31:
Total assets....................... 64,419 48,279 42,596 50,081 40,342
Short-term debt.................... 14,316 10,995 13,277 19,368 11,461
Shareholders' equity............... 37,496 23,673 18,713 18,174 19,429
Book value per share............... 6.18 3.81 3.29 3.20 3.38
Shares outstanding................. 6,066 6,218 6,242 6,227 6,227
</TABLE>

F-7
<PAGE> 20

COBRA ELECTRONICS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales................................................... $103,414 $104,098 $90,324
Cost of sales............................................... 78,753 82,547 73,954
-------- -------- -------
Gross profit................................................ 24,661 21,551 16,370
Selling, general and administrative expense................. 19,747 16,655 14,374
-------- -------- -------
Operating income....................................... 4,914 4,896 1,996
Other income (expense):
Interest expense.......................................... (1,204) (1,276) (1,670)
Gain on sale of building.................................. -- 1,132 --
Other income (expense), net............................... 87 (60) 275
-------- -------- -------
Income before income taxes.................................. 3,797 4,692 601
Tax provision (benefit)..................................... (10,403) -- --
-------- -------- -------
Net income.................................................. $ 14,200 $ 4,692 601
======== ======== =======
Net income per common share:
Basic..................................................... $ 2.30 $ .76 $ 0.10
Diluted................................................... $ 2.20 $ .73 $ 0.10
Weighted average shares outstanding:
Basic..................................................... 6,181 6,207 6,231
Diluted................................................... 6,469 6,459 6,285
</TABLE>

See notes to consolidated financial statements.

F-8
<PAGE> 21

COBRA ELECTRONICS CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
AT DECEMBER 31
-----------------------
1998 1997
---- ----
<S> <C> <C>
ASSETS:
Current assets:
Cash...................................................... $ 100 $ 1,815
Receivables, less allowance for doubtful accounts of $985
in 1998 and $958 in 1997............................... 27,055 15,685
Inventories, primarily finished goods..................... 14,213 19,830
Deferred income taxes..................................... 6,945 --
Other current assets...................................... 1,747 1,337
-------- --------
Total current assets........................................ 50,060 38,667
-------- --------
Property, plant and equipment, at cost:
Land...................................................... 330 330
Buildings and improvements................................ 3,614 3,553
Tooling and equipment..................................... 12,765 11,264
-------- --------
16,709 15,147
Accumulated depreciation and amortization................. (11,960) (10,436)
-------- --------
Net property, plant and equipment......................... 4,749 4,711
-------- --------
Other assets:
Deferred income taxes..................................... 4,089 406
Cash surrender value of officers' life insurance
policies............................................... 4,553 3,930
Other..................................................... 968 565
-------- --------
Total other assets........................................ 9,610 4,901
-------- --------
Total assets................................................ $ 64,419 $ 48,279
======== ========
</TABLE>

See notes to consolidated financial statements.

F-9
<PAGE> 22

COBRA ELECTRONICS CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
AT DECEMBER 31
---------------------
1998 1997
---- ----
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable.......................................... $ 3,145 $ 3,637
Accrued salaries and commissions.......................... 844 1,307
Accrued advertising and sales promotion costs............. 1,804 1,093
Accrued product warranty costs............................ 2,211 4,173
Other accrued liabilities................................. 2,283 1,170
Short-term debt........................................... 14,316 10,995
------- -------
Total current liabilities................................... 24,603 22,375
Deferred compensation....................................... 2,320 2,231
------- -------
Total liabilities........................................... 26,923 24,606
------- -------
Commitments and Contingencies
Shareholders' equity:
Preferred stock, $1 par value, shares
authorized -- 1,000,000; none issued................... -- --
Common stock, $.33 1/3 par value, 12,000,000 shares
authorized, 7,039,100 issued for 1998 and 1997......... 2,345 2,345
Paid-in capital........................................... 20,799 20,681
Retained earnings......................................... 20,472 6,272
------- -------
43,616 29,298
Treasury stock, at cost (973,184 shares for 1998 and
821,309 shares for 1997)............................... (6,120) (5,625)
------- -------
Total shareholders' equity.................................. 37,496 23,673
------- -------
Total liabilities and shareholders' equity.................. $64,419 $48,279
======= =======
</TABLE>

See notes to consolidated financial statements.

F-10
<PAGE> 23

COBRA ELECTRONICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 14,200 $ 4,692 $ 601
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization....................... 1,541 3,198 3,080
Deferred taxes...................................... (10,403) -- --
Gain on sale of fixed assets........................ (1) (1,132) (123)
Changes in assets and liabilities:
Receivables....................................... (11,370) (3,371) 3,447
Inventories....................................... 5,617 (4,412) 2,287
Other current assets.............................. (410) (686) 138
Other Assets...................................... (1,026) (754) 666
Accounts payable.................................. (492) 302 (2,735)
Accrued liabilities............................... (601) 2,465 571
Deferred compensation............................. 89 238 231
-------- -------- --------
Net cash flows from (used by) operating activities..... (2,856) 540 8,163
-------- -------- --------
Cash flows from investing activities:
Proceeds from sale of fixed assets..................... 1 1,999 1,086
Capital expenditures................................... (1,579) (1,316) (1,789)
-------- -------- --------
Net cash flows from (used in) investing activities..... (1,578) 683 (703)
-------- -------- --------
Cash flows from financing activities:
Net borrowings (repayments) under the line-of-credit
agreement........................................... 3,321 (2,282) (6,091)
Transactions related to exercise of stock options,
net................................................. 81 268 (62)
Transactions related to stock repurchase............... (683) -- --
-------- -------- --------
Net cash flows from (used in) financing
activities........................................ 2,719 (2,014) (6,153)
-------- -------- --------
Net increase (decrease)in cash........................... (1,715) (791) 1,307
Cash at beginning of year................................ 1,815 2,606 1,299
-------- -------- --------
Cash at end of year...................................... $ 100 $ 1,815 $ 2,606
======== ======== ========
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest............................................ $ 1,230 $ 1,274 $ 1,716
Income Taxes........................................ -- 338 83
Non-cash investing and financing activities:
Tax benefit related to stock options................ 225 -- --
</TABLE>

See notes to consolidated financial statements.

F-11
<PAGE> 24

COBRA ELECTRONICS CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE YEARS ENDED DECEMBER 31, 1998
---------------------------------------------------------
NOTE
COMMON PAID-IN RETAINED TREASURY RECEIVABLE
STOCK CAPITAL EARNINGS STOCK FROM OFFICER
------ ------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Balance -- January 1, 1996.................... $2,345 $22,118 $ 979 $5,545 $ 1,723
Net income............................... -- -- 601 -- --
Note receivable interest................. -- -- -- -- 101
Transactions related to exercise of
options, net........................... --... (56) -- (95) --
------ ------- ------- ------ -------
Balance -- December 31, 1996.................. 2,345 22,062 1,580 5,450 1,824
Net income............................... -- -- 4,692 -- --
Note receivable interest................. -- -- -- -- 81
Exchange of note receivable for common
stock (Note 9)......................... -- -- -- 1,905 (1,905)
Transactions related to exercise of options,
net......................................... -- (1,381) -- (1,730) --
------ ------- ------- ------ -------
Balance -- December 31, 1997.................. 2,345 20,681 6,272 5,625 --
Net income............................... -- -- 14,200 -- --
Treasury stock purchase.................. -- -- -- 683 --
Transactions related to exercise of
options, net........................... -- (107) -- (188) --
Tax benefit related to stock options..... -- 225 -- -- --
------ ------- ------- ------ -------
Balance -- December 31, 1998.................. $2,345 $20,799 $20,472 $6,120 $ --
====== ======= ======= ====== =======
</TABLE>

See notes to consolidated financial statements.

F-12
<PAGE> 25

COBRA ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

The company designs and markets consumer electronics products, which it
sells under the COBRA brand name principally in the United States. A majority of
the company's products are purchased from overseas suppliers, primarily in
China, Thailand, Korea, Hong Kong and Japan. 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, if necessary, other suppliers could be found.
Production delays or a change in suppliers, however, could cause a delay in
obtaining inventories and a possible loss of sales, which could adversely affect
operating results.

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.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

INVENTORIES

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

DEPRECIATION

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

<TABLE>
<CAPTION>
CLASSIFICATION LIFE
- -------------- ----------
<S> <C>
Buildings................................................... 30 years
Building improvements....................................... 20 years
Motor vehicles.............................................. 3-5 years
Equipment................................................... 5-10 years
Tools, dies and molds....................................... 2 years
</TABLE>

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 an impairment, the carrying amount of such assets is reduced
to estimated recoverable value.

RESEARCH, ENGINEERING AND PRODUCT DEVELOPMENT EXPENDITURES

Research, engineering and product development expenditures are expensed as
incurred and amounted to $0.9 million in 1998 and $0.8 million in 1997 and 1996.

F-13
<PAGE> 26
COBRA ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1998 (CONTINUED)

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.
Obligations for sales returns and allowances and product warranties are
recognized at the time of sale on an accrual basis.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and displaying
comprehensive income and its components (net income with non-owner sources of
other comprehensive income) in a full set of financial statements. SFAS No. 130
did not have an effect on the company's financial statements because the company
has no items of "other comprehensive income."

In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information," which changes the way public companies
report information about operating segments. This Statement, which is based on
the management approach to segment reporting, establishes requirements to report
selected segment information. Management of the company considers the company to
have one reportable segment, consumer electronics, and assesses performance on a
single segment basis. Therefore, the adoption of this new standard did not have
an effect on the content of the company's disclosures.

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." This Statement revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans. The adoption of
this new standard did not have an effect on the company's financial statements
because the company had no such benefit plans.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure these instruments
at fair value. This statement is effective on the first day of the first fiscal
year beginning after June 15, 1999, or January 1, 2000 in the case of the
company. The company is in the process of assessing the impact that adopting
SFAS No. 133 will have on its financial position and results of operations when
such statement is adopted.

RECLASSIFICATION

Certain amounts for prior years have been reclassified to conform with 1998
financial statement presentations.

2. TAXES ON INCOME

The components of income tax expense consist of the reversal of the
valuation allowance of $10.4 million. In addition to the 1998 income tax benefit
of $10.4 million, the company received tax benefits of $225,000,

F-14
<PAGE> 27
COBRA ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1998 (CONTINUED)

which were credited to shareholders' equity, from the disqualifying disposition
of common shares by an employee after the exercise of stock options.

Deferred tax assets (liabilities) by component at December 31, 1998 and
1997 were:

<TABLE>
<CAPTION>
1998 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Net operating loss carryforwards............................ $10,207 $12,006
Investment tax credit carryforwards......................... 134 1,938
Alternative minimum tax credit carryforwards................ 1,159 1,298
Tax lease income............................................ (6,872) (7,354)
Receivable reserves......................................... 218 202
Warranty reserves........................................... 1,108 1,444
Inventory reserves.......................................... 416 901
Accrued promotion expenses.................................. 2,144 1,824
Sales related reserves...................................... 681 634
Compensation reserves....................................... 1,047 1,153
Other, net.................................................. 792 116
------- -------
Net deferred tax assets..................................... 11,034 14,162
Valuation allowance......................................... -- (13,756)
------- -------
Net deferred tax assets..................................... $11,034 $ 406
======= =======
</TABLE>

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
economic value of these leases was not impaired by the Tax Reform Act of 1986.
The company realizes temporary tax savings from accelerated depreciation and
permanent tax savings from credits associated with the leases, subject to
statutory limitations. These savings offset current taxes payable which would
otherwise have been due on income from normal operations.

Prior to 1996, the company had a history of net losses resulting in a
significant net deferred tax asset and a corresponding valuation allowance.
Under SFAS No. 109, a history of operating losses in recent years generally
requires recognition of such an allowance. Accordingly, the company recorded a
valuation allowance for substantially all of the net deferred tax asset as of
December 31, 1997. However, SFAS No. 109 requires management to periodically
assess the need for a valuation allowance. In the fourth quarter of 1998, due to
the continued positive trend in earnings and the successful launch of the
company's new products, management concluded that there was no need for a
valuation allowance because it is more likely than not that all of the net
deferred tax assets will be realized through future taxable earnings.

At December 31, 1998, the company has net operating loss
carryforwards("NOL") available to offset future taxable income, and both
investment tax credit ("ITC")and alternative minimum tax credit carryforwards to
offset future income tax payments. The alternative minimum tax credit
carryforwards, amounting to $1,159,000, do not expire. During 1998, $1,804,000
of investment tax credit carryforwards expired.

F-15
<PAGE> 28
COBRA ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1998 (CONTINUED)

The net operating loss and investment tax credit carryforwards expire as
follows (in thousands):

<TABLE>
<CAPTION>
YEAR OF EXPIRATION NOL ITC
------------------ --- ---
<S> <C> <C>
1999................................................... $ -- $112
2000................................................... -- 22
2002................................................... -- --
2006................................................... 1,498 --
2007................................................... 11,575 --
2008................................................... 9,920 --
2009................................................... 3,355 --
------- ----
Total.................................................. $26,348 $134
======= ====
</TABLE>

Until the company has utilized its significant NOL carryforwards, the cash
payment of Federal income taxes will be minimal.

The statutory federal income tax rates are reconciled to the effective
income tax rates as follows: (in thousands)

<TABLE>
<CAPTION>
DESCRIPTION 1998 1997 1996
----------- ---- ---- ----
<S> <C> <C> <C>
Income taxes at statutory federal income tax rate......... $ 1,291 $ 1,595 $ 204
State taxes, net of federal income tax benefits........... 178 221 28
Utilization of net operating loss carryforwards........... (1,527) (1,816) (232)
Reversal of the valuation allowance....................... (10,403) -- --
Other..................................................... 58 -- --
-------- ------- -----
Income tax expense (benefit).............................. $(10,403) $ -- $ --
======== ======= =====
</TABLE>

3. FINANCING ARRANGEMENTS

The company had a $30 million secured credit facility that included a fixed
term loan. In October, 1996 the agreement for this credit facility was extended
to March 31, 1998. Borrowings and letters of credit issued under this agreement
were collateralized by the company's assets, and usage of the non-term loan
portion was limited to certain percentages of accounts receivable and inventory.
Interest was payable monthly at prime (8.50% at December 31, 1997) plus one and
one-half percent.

On February 3, 1998, the company entered into a new $35 million secured
credit agreement with two financial institutions for a three-year revolving
credit facility, replacing the existing $30 million credit agreement with
another lender. Loans outstanding under the new agreement bear interest, at the
company's option, at the prime rate or at LIBOR plus 2 percent. Outstanding
borrowings at December 31, 1998 bear interest at 7.61%.

Additionally, the new agreement provides for higher advance rates on
eligible inventory and receivables and eliminates the 2 percent per annum charge
that the company was obligated to pay on its average outstanding balance of
letters of credit under the previously existing agreement.

Maximum borrowings outstanding at any month-end were $27.5 million and
$15.7 million in 1998 and 1997, respectively. The maximum value of letters of
credit outstanding at any month end were $7.4 million and $11.0 million in 1998
and 1997, respectively. At December 31, 1998, the company had approximately $8
million available under its unused credit line.

F-16
<PAGE> 29
COBRA ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1998 (CONTINUED)

Aggregate average borrowings outstanding were $15 million during 1998 and
$12 million during 1997 with weighted average interest rates thereon of 8.2% and
10.3% during 1998 and 1997, respectively.

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The company's financial instruments include cash, accounts receivable,
accounts payable, short 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 are subject to fees competitively determined in the
marketplace. The contract value/fair value of the letters of credit at December
31, 1998 and 1997 was $5.7 million and $8 million, respectively. These letters
of credit are only executed with major financial institutions, and full
performance is anticipated.

5. LEASE TRANSACTIONS

The company leases facilities and equipment under noncancellable leases
with remaining terms of one year or more. The terms of these agreements provide
that the company 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,
1998 are as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES TOTAL
--------- ------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
1999......................................... $ 7 $118 $125
2000......................................... 7 104 111
2001......................................... 1 -- 1
--- ---- ----
Total........................................ $15 $222 $237
=== ==== ====
</TABLE>

Total rental expense amounted to $7,000 in 1998, $6,000 in 1997 and $16,000
in 1996. Future capital lease rental payments include executory costs of
$71,000, interest expense of $10,000 and principal payments of $141,000, which
are included in other accrued liabilities in the consolidated balance sheet.

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

F-17
<PAGE> 30
COBRA ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1998 (CONTINUED)

resolutions providing for the issue of such stock adopted by the Board of
Directors. No preferred stock has been issued.

EARNINGS PER SHARE

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income:
Income available to common
shareholders (thousands).......... $ 14,200 $ 4,692 $ 601
Basic Earnings Per Share:
Weighted-Average Shares
Outstanding....................... 6,180,592 6,206,812 6,231,075
Basic Earnings Per Share............ $ 2.30 $ 0.76 $ 0.10
========= ========= =========
Diluted Earnings Per Share:
Weighted-Average Shares
Outstanding....................... 6,180,592 6,206,812 6,231,075
Dilutive Shares issuable in
connection with Stock option
plans............................. 706,750 739,375 298,375
Less: Shares purchasable With
proceeds.......................... (418,645) (487,363) (244,182)
--------- --------- ---------
Total............................... 6,468,697 6,458,824 6,285,268
========= ========= =========
Diluted Earnings Per Share $ 2.20 $ 0.73 $ 0.10
========= ========= =========
</TABLE>

7. STOCK OPTION PLANS

The company has seven Stock Option Plans -- 1998, 1997, 1995, 1988, 1987,
1986 and 1985 ("the Plans"). 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 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.

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 income and net income per
common share would have been adjusted to the pro forma amounts indicated below
(in thousands, except per share amounts):

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income:
As reported............................... $14,200 $4,692 $ 601
Pro forma................................. 13,545 4,366 467
Net income per common share:
Basic:
As reported............................ $ 2.30 $ 0.76 $0.10
Pro forma.............................. 2.19 0.70 0.07
Diluted:
As reported............................ $ 2.20 $ 0.73 $0.10
Pro forma.............................. 2.09 0.68 0.07
</TABLE>

F-18
<PAGE> 31
COBRA ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1998 (CONTINUED)

The fair value of each option 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 of 48 percent; risk-free
interest rate of 5 percent; and expected lives of 5 years.

A summary of certain provisions and amounts related to the Plans follows:

<TABLE>
<CAPTION>
1998 1997 1995 1988 1987 1986 1985
PLAN PLAN PLAN PLAN PLAN PLAN PLAN
------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Authorized, unissued shares
originally available for
grant...................... 310,000 300,000 300,000 500,000 150,000 225,000 525,000
Shares granted............... 150,000 259,625 283,875 500,000 150,000 225,000 525,000
Shares available for grant at
December 31, 1998.......... 160,000 40,375 16,125 -0- -0- -0- -0-
Options exercisable at
December 31, 1998.......... -0- 37,500 67,875 324,250 12,563 50,500 25,188
</TABLE>

A summary of the status of the Plans as of December 31, 1998, 1997 and
1996, and changes during the years ended on those dates is presented below:

<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE
FIXED OPTIONS (000) PRICE (000) PRICE (000) PRICE
------------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........... 914 $3.82 935 $3.06 855 $3.06
Granted.................................... 288 6.36 374 4.46 114 2.88
Exercised.................................. (28) 2.88 (328) 2.63 (16) 2.56
Cancellations and Expirations.............. (50) 6.13 (67) 2.65 (18) 2.68
----- ----- ------
Outstanding at end of year................. 1,124 4.39 914 3.82 935 3.06
===== ===== ======
Options exercisable at year end............ 518 388 584
Weighted-average fair value of options
granted during the year.................. $3.07 $2.20 $ 1.29
</TABLE>

The following table summarizes information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- -----------------------
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
NUMBER AVERAGE REMAINING NUMBER AVERAGE
RANGE OF OUTSTANDING EXERCISE CONTRACTUAL EXERCISABLE EXERCISE
EXERCISE PRICES (000) PRICE LIFE (000) PRICE
--------------- ----------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Less than $2.............................. 36 $1.88 1.3 19 $1.88
$2.01 to $3.00............................ 221 2.78 2.3 94 2.67
$3.01 to $4.00............................ 434 3.72 0.7 367 3.80
$4.01 to $5.00............................ -- -- -- -- --
$5.01 to $6.00............................ 300 5.63 4.1 38 5.63
$6.01 to $7.00............................ 95 6.80 4.1 -- --
$7.01 to $8.00............................ 38 8.00 4.2 -- --
----- ---
1,124 4.39 2.4 518 3.65
===== ===
</TABLE>

F-19
<PAGE> 32
COBRA ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1998 (CONTINUED)

8. RETIREMENT BENEFITS

The only qualified retirement plan for employees is the Cobra Electronics
Corporation Profit Sharing and 401(k) Incentive Savings Plan (the "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 1998, 1997 and 1996 was $179,000, $169,000 and
$55,000, respectively.

As of December 31, 1998 and 1997, deferred compensation of $2.3 million and
$2.2 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 $253,000 at December 31, 1998 and 1997.
Deferred compensation obligations arise pursuant to outstanding key executive
employment agreements, the majority of which relates to the former president and
chief executive officer.

9. RELATED PARTY TRANSACTIONS

In August 1997, the company exchanged its note receivable from the
company's former president and chief executive officer, of approximately $1.9
million, for 300,000 common shares owned by the executive. In 1990, pursuant to
an employment agreement, the executive exercised options on 375,000 common
shares by executing a note with the company in the amount of $1.25 million. The
face amount of the note plus accrued interest amounted to $1.9 million at the
date of exchange.

10. COMMITMENTS

At December 31, 1998 and 1997, the company had outstanding inventory
purchase orders with suppliers totaling approximately $29.1 million and $21.1
million, respectively.

11. INDUSTRY 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. Excluding company-owned
tooling at suppliers with a net book value of $1.2 million at December 31, 1998,
assets located outside the United States are not material. International sales
were $7.4 million, $19.1 million and $10.1 million in 1998, 1997 and 1996,
respectively. For 1997, approximately 64% of the international sales were to
customers in Russia. For 1998 and 1996, sales to one particular country were not
material. For 1998, sales to two customers totaled 12.9% and 11.9% of
consolidated net sales. For 1996, sales to one customer totaled 10.7% of
consolidated net sales. There were no sales in excess of 10% of consolidated net
sales to a single customer or a group of entities under common control in 1997.
The company does not believe that the loss of any one customer would have a
material adverse effect on its results of operations or financial condition.

12. ADVERTISING BARTER CREDITS

During 1992, the company received $3.8 million of advertising credits in
exchange for certain discontinued products. These credits can be used to reduce
the cash cost of a variety of media services (by 30 to 50 percent) prior to
their expiration date, which has been extended to December 1999. The company is
exploring opportunities to exchange a portion of the credits for various goods
and services used by the company as well as the outright sale of the credits to
third parties. During 1998, 1997, and 1996, the company utilized credits of
approximately $6,000, $10,000, and $20,000, respectively. In 1997 and 1996 the
company recorded charges of $1.1 million and $1.2 million, respectively, to
reduce the credits to their estimated net realizable value. The credits had no
net carrying value at December 31, 1998 and 1997.

F-20
<PAGE> 33
COBRA ELECTRONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1998 (CONTINUED)

13. OTHER ASSETS

Other assets at December 31, 1998 and 1997 included the cash surrender
value of officers' life insurance policies. The cash value of officers' life
insurance policies is pledged as collateral for the company's secured lending
agreement and is maintained to fund deferred compensation obligations (see Notes
3 and 8).

14. 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.

During 1996, the company received notice from the Internal Revenue Service
asserting deficiencies in federal excise tax. The excise tax relates to the use
of ozone-depleting chemicals ("ODC'S"). The company had protested the
deficiencies and had filed an environmental excise tax protest. During the first
quarter of 1998, the company was notified by the Internal Revenue Service that
there are no deficiencies in the company's federal excise tax returns and the
contingency has been eliminated. Also in 1996, the company recognized $373,000
of income related to a lawsuit against a former distributor for violation of a
licensing agreement.

F-21
<PAGE> 34

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of Cobra Electronics Corporation
Chicago, Illinois

We have audited the accompanying consolidated balance sheets of Cobra
Electronics Corporation and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1998. Our
audits also included the financial statement schedule for the three years ended
December 31, 1998. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements and financial statement schedule
based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Cobra Electronics Corporation and
subsidiaries at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in relation to
the consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

DELOITTE & TOUCHE LLP
Chicago, Illinois
February 24, 1999

F-22
<PAGE> 35

PROXY

COBRA ELECTRONICS CORPORATION

6500 WEST CORTLAND, CHICAGO, IL 60707

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints William P. Carmichael and Gerald M. Laures
as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side,
all the shares of common stock of Cobra Electronics Corporation held of record
by the undersigned on April 2, 1999 at the Annual Meeting of Shareholders to be
held on May 11, 1999, or any adjournments thereof.

(TO BE SIGNED ON REVERSE SIDE)
<PAGE> 36

PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!

ANNUAL MEETING OF SHAREHOLDERS
COBRA ELECTRONICS CORPORATION

MAY 11, 1999

V Please Detach and Mail in the Envelope Provided V
- --------------------------------------------------------------------------------
|
Please mark your |
A [X] votes as in this |
example. ------

WITHHOLD AUTHORITY
FOR VOTE TO VOTE FOR
1. Election of
Directors. [ ] [ ]

NOMINEES: JAMES R. BAZET
JERRY KALOV
HAROLD D. SCHWARTZ

(INSTRUCTIONS: To withhold authority to vote for any person, strike a line
through the nominee's name.)

2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.

This proxy, when properly executed below, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy
will be voted FOR the election of the nominees listed in Item (1).

The Directors recommend a vote FOR the election of the Board's nominees to the
Board of Directors.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.

SIGNATURE
SIGNATURE __________ DATE ________ (if held jointly)___________ DATE__________
Note: Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or as guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized person, if a partnership, please sign in the partnership name
by an authorized person.