ROCKFORD CORP, S-1/A, 1999-07-28

ROCKFORD CORP
S-1/A, 1999-07-28
HOUSEHOLD AUDIO & VIDEO EQUIPMENT

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1999

REGISTRATION NO.333-79285
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2 TO

FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------

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

<TABLE>
<S> <C> <C>
ARIZONA 3651 86-0394353
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

546 SOUTH ROCKFORD DRIVE
TEMPE, ARIZONA 85281
(480) 967-3565 (800) 366-2349
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
------------------------

W. GARY SUTTLE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ROCKFORD CORPORATION
546 SOUTH ROCKFORD DRIVE
TEMPE, ARIZONA 85281
(480) 967-3565 (800) 366-2349
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------

COPIES TO:

<TABLE>
<S> <C>
KEVIN L. OLSON RONALD G. SKLOSS
STEPTOE & JOHNSON LLP BROBECK, PHLEGER & HARRISON LLP
40 N. CENTRAL AVENUE, SUITE 2400 301 CONGRESS AVENUE, SUITE 1200
PHOENIX, ARIZONA 85004 AUSTIN, TEXAS 78701
(602) 257-5275 (512) 477-5495
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for this same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for this same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED SHARE PRICE(1) REGISTRATION FEE(2)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share....... 3,895,998 $13 $50,647,974 $14,080.14
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act of 1933.

(2) All of which was previously paid.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED JULY 28, 1999

PROSPECTUS

3,387,824 SHARES
[ROCKFORD CORPORATION LOGO]

COMMON STOCK

Of the 3,387,824 shares of common stock offered, we are offering 2,500,000
shares and the selling shareholders, none of whom are involved in our day-to-day
operations, are offering 887,824 shares. We will not receive any of the proceeds
from the shares sold by the selling shareholders. This is our initial public
offering and no public market currently exists for our shares. We have applied
to have our common stock approved for quotation on The Nasdaq National Market
under the symbol "ROFO." We anticipate that the initial public offering price
will be between $11 and $13 per share.

<TABLE>
<CAPTION>
PER
SHARE TOTAL
--------- -------
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to Rockford...................... $ $
Proceeds, before expenses, to selling shareholders.......... $ $
</TABLE>

The underwriters have a 30-day option to purchase up to 508,174 additional
shares of common stock from us to cover over-allotments, if any.

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

INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. IT IS ILLEGAL FOR ANY PERSON TO TELL
YOU OTHERWISE.

<TABLE>
<S> <C>
DAIN RAUSCHER WESSELS NEEDHAM & COMPANY, INC.
a division of Dain
Rauscher Incorporated
</TABLE>

, 1999
<PAGE> 3
Inside front cover

Entire page: [Close up picture of Rockford wolf]

Upper left: [Diamond R and Rockford Fosgate Logo]

Down right margin: Pictures of Rockford Fosgate products:

2 channel/multi-channel amplifiers
Subwoofers
Source Units
Trunk Mount/In Dash Signal Processors
Coax/Full Range Speakers

Bottom left: [Vicious car audio trademark]

Inside gatefold of page 2:

Left margin: [Diamond R, Rockford Fosgate, and car audio for fanatics Logo]

Upper left: Independent Specialty Retailers, 5000 stores worldwide
[Photo of specialty retailer storefront and Rockford product display]

Middle left: Independent National Chains, 300+ Stores in the USA
[Photo of Best Buy store and Rockford product display]

Bottom left: Global Fanatics
[Photo of car audio contestants] Gen Y consumers show off car audio in
Israel
[Photo of vehicle with Rockford logos and wolf] Show cars with wolf
attitude in Germany
[Photo of boys with car audio trophy] Gen Y Americans fly Team RF colors
[Photo of vehicle with Rockford wolf] Japanese consumers using Rockford
Fosgate products from the USA

Upper center: Rockford Worldwide Distribution
[Map naming countries where Rockford Fosgate products are distributed]

Upper right: [Photo of Rockford Fosgate demo truck]
Rockford Fosgate Demo Truck and Car Audio System Layout
[Photos and description of specific products, including source unit,
crossovers, amplifiers, full-range speakers, and woofers]
Over 6000 watts

Lower right: www.rockfordfosgate.com
[images of wolf logo and product information from our website]

Text in center: In 1973, Fosgate, the first glimmer of hope in high performance
car audio, emerged from the primordial soup of 8 tracks and wax paper speakers.
In 1998, Rockford Fosgate redefined the evolution of the car audio industry. If
you haven't heard of us, you've HEARD us. If you haven't seen us, you've HEARD
us. If you haven't been annoyed by what we do, you'll be intrigued by how we do
it. To understand what Rockford Corporation is all about, you only need to
understand our customers. They are young adults who are passionate about their
lifestyle. Typically customers begin as hobbyists who become enthusiasts:
possessed by the dream of evolving to the fanatic fringe. They are loud, they
are proud, and most importantly, we believe they are brand loyal to the cult
extreme. They choose Rockford Fosgate!

<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 4
Risk Factors................................................ 8
Forward-Looking Statements.................................. 15
Ownership of Intellectual Property.......................... 15
Use of Proceeds............................................. 16
Capitalization.............................................. 17
Dilution.................................................... 18
Dividend Policy............................................. 19
Selected Consolidated Financial Data........................ 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Business.................................................... 32
Management.................................................. 45
Certain Relationships and Related Transactions.............. 52
Principal and Selling Shareholders.......................... 54
Description of Capital Stock................................ 57
Shares Eligible for Future Sale............................. 61
Underwriting................................................ 63
Legal Matters............................................... 64
Experts..................................................... 64
Where You Can Find More Information......................... 65
Index to Consolidated Financial Statements.................. F-1
</TABLE>

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE
YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE
UNDERWRITERS ARE NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS
PROSPECTUS MAY ONLY BE ACCURATE AS OF THE DATE OF THIS PROSPECTUS.

DEALER PROSPECTUS DELIVERY OBLIGATION

UNTIL 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
3
<PAGE> 5

PROSPECTUS SUMMARY

This summary highlights only selected information contained elsewhere in
this prospectus. Before investing in our common stock, you should read the
entire prospectus carefully, including the "Risk Factors" section and the
financial statements and the notes to those statements.

ROCKFORD

We are a leading American designer, manufacturer and distributor of
high-performance car audio systems. Our car audio products are sold in the
worldwide car audio aftermarket to consumers who want to improve their existing
car audio systems. We market our car audio amplifiers, speakers, source units
and accessories under our Rockford Fosgate brand name. We also sell professional
audio products under our Hafler brand name.

For nearly 20 years, Rockford Fosgate has been the brand of choice among
our core consumers, 16-24 year old males. We believe our core consumers, part of
the 10-24 year old demographic group known as Generation Y, perceive our
Rockford Fosgate brand as the "coolest" car audio brand. Many of our core
consumers are extremely, almost fanatically, loyal to our Rockford Fosgate
brand, and proudly display our logos on their cars, clothing and even their
bodies.

We enhance our brand image by using hard-hitting, "in your face" marketing
combined with cutting-edge technology and innovation. We believe our efforts
have generated loyalty among both our core consumers, who devote a significant
portion of their time and disposable income to their car audio systems, and
among the independent retailers who use our brand, products and distinctive
marketing programs to attract Generation Y and other consumers.

We believe our ability to quickly deliver innovative products to market
appeals to our core consumers' desire for distinctive, "leading edge" products
and powerful, high quality sound. To maintain and further enhance our unique
heritage, we continue to develop new products that are reliable, durable,
technologically advanced and designed to set industry standards in their product
categories. Our Rockford Fosgate and Hafler products have won numerous consumer
and industry awards.

We believe that total worldwide factory sales of car audio products were
approximately $14.7 billion in 1998, of which $6.3 billion represented
aftermarket sales. The international market for car audio products is more than
twice the size of the U.S. market.

We currently sell our car audio products in the U.S. through over 1,500
independent retail stores. Internationally, we sell our car audio products in
over 60 countries through independent distributors and sales representatives. We
distribute our car audio products to consumers primarily through specialty
dealers, audio/video retailers, national consumer electronics chains and catalog
merchants. Historically, specialty dealers have dominated the retail
distribution of car audio aftermarket products.

Over the last several years, as a result of changing consumer buying
patterns, the audio/ video and consumer electronics retailers have been the
fastest growing distribution channels for car audio products, increasing their
combined market share from 34.5% in 1987 to 50% in 1997. To capitalize on
changing industry dynamics, in early 1999, we began distributing our products
through Best Buy, one of the largest national consumer electronics chains, in
all of its more than 300 stores nationwide.

4
<PAGE> 6

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

- Expand Channels of Distribution. We intend to broaden the distribution
channels through which we market our products while maintaining our
strategy of selective distribution.

- Develop a Second Brand. We intend to introduce a line of moderately
priced, high-performance amplifiers and subwoofers under our recently
acquired Lightning Audio brand name in 2000.

- Capitalize on International Opportunities. We intend to aggressively
expand our marketing efforts and strengthen our distribution in order to
increase sales of Rockford Fosgate, Lightning Audio and Hafler products
in international markets.

- Introduce New and Innovative Products. In order to appeal to our
consumers' desire for "leading edge" products we intend to continue
introducing new products and re-engineering our existing product line.

- Promote Our Unique Brand Image. We intend to continue to enhance the
Rockford Fosgate, Lightning Audio and Hafler brands by emphasizing our
products' performance, value and authentic image.

As a result of our growth strategy, we believe we can significantly grow our
business and become a much larger participant in the $6.3 billion car audio
aftermarket industry worldwide.
------------------------

Our principal executive offices are located at 546 South Rockford Drive,
Tempe, Arizona 85281, and our telephone number is (480) 967-3565. Our corporate
Web site is located at www.rockfordcorp.com. Information contained on our Web
site does not constitute a part of this prospectus.

5
<PAGE> 7

THE OFFERING

Except as otherwise indicated, all information in this prospectus assumes a
4.3-for-1 split of the common stock to be effected prior to the completion of
this offering and assumes no exercise of the underwriters' over-allotment
option.

Common stock offered by Rockford.......... 2,500,000 shares

Common stock offered by selling
shareholders.............................. 887,824 shares

Use of proceeds........................... For repayment of debt, working
capital and other general
corporate purposes. See "Use of
Proceeds."

Proposed Nasdaq National Market symbol.... ROFO

OWNERSHIP AFTER THE OFFERING

After the offering, we will have 7,363,861 shares outstanding, including:

- 4,735,201 shares outstanding on June 30, 1999 and immediately before the
offering;

- 2,500,000 shares issued in the offering; and

- 128,660 shares we will issue to selling shareholders who currently own
our 8.5% convertible subordinated debentures or warrants and who will
convert them into shares in order to sell the shares in this offering.
The converted securities will include $278,953 of our debentures at a
conversion price of $2.44, which will convert into 114,236 shares, and
warrants for 14,424 shares at a weighted average exercise price of $2.81
per share.

In addition, we will have 2,437,515 shares reserved for issuance to holders
of outstanding options and convertible securities that may dilute the percentage
of common stock you own. These include:

- 293,123 shares of common stock that we will issue if the holders of the
8.5% convertible subordinated debentures exercise their conversion
rights, assuming conversion of $278,953 of debentures into 114,236 shares
in this offering. The conversion price for the debentures is $2.44 per
share;

- 1,995,981 shares of common stock that we will issue if the holders choose
to exercise outstanding options, with a weighted average exercise price
of $3.33 per share;

- 64,500 shares of common stock that we will issue if the holders choose to
exercise outstanding options, with an exercise price of the per share
price of this offering; and

- 83,911 shares of common stock that we will issue if the holders choose to
exercise outstanding warrants, with a weighted average exercise price of
$1.25 per share.

The following table shows ownership of our outstanding shares and of our
outstanding options and convertible securities immediately after the offering:

<TABLE>
<CAPTION>
OPTIONS AND
OUTSTANDING CONVERTIBLE
SHARES SECURITIES(1) TOTAL
----------- ------------- ---------
<S> <C> <C> <C>
Officers, directors and employees.............. 3,409,736 2,287,774 5,697,510
Other existing shareholders.................... 566,301 149,741 716,042
New shareholders............................... 3,387,824 0 3,387,824
--------- --------- ---------
Total........................................ 7,363,861 2,437,515 9,801,376
========= ========= =========
</TABLE>

- ---------------
(1) Includes all options and convertible securities, even if they are not then
exercisable.

6
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

You should read the following summary consolidated financial data in
conjunction with our financial statements and related notes and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. Set forth below are summary
consolidated statements of operations data for the years ended December 31,
1996, 1997 and 1998 and the six months ended June 30, 1998 and 1999. Also set
forth below is summary consolidated balance sheet data as at June 30, 1999, on
an actual, pro forma and pro forma as adjusted basis. The pro forma data gives
effect to the conversion of $278,953 of the 8.5% convertible subordinated
debentures into 114,236 shares of common stock and to the issuance of 14,424
shares upon exercise of warrants, both to occur upon completion of this
offering. The pro forma as adjusted data gives effect to the sale by us of
2,500,000 shares in this offering at an assumed initial public offering price of
$12 per share, our receipt of the estimated proceeds of that sale after
deducting underwriting discounts and commissions and estimated offering expenses
payable by us, and the application of the net proceeds therefrom. See
"Capitalization."

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Sales............................... $82,937 $87,423 $87,577 $45,923 $65,911
Cost of goods sold.................. 57,057 57,321 55,146 28,783 40,221
------- ------- ------- ------- -------
Gross profit........................ 25,880 30,102 32,431 17,140 25,690
Operating income.................... 725 4,646 5,523 3,114 7,071
Net income (loss)................... $ (932) $ 1,632 $ 2,305 $ 1,351 $ 3,820
======= ======= ======= ======= =======
Net income (loss) per share:
Basic............................. $ (0.23) $ 0.37 $ 0.52 $ 0.31 $ 0.85
======= ======= ======= ======= =======
Diluted........................... $ (0.23) $ 0.31 $ 0.41 $ 0.25 $ 0.62
======= ======= ======= ======= =======
Shares used to calculate net income
(loss) per share:
Basic............................. 4,114 4,401 4,412 4,411 4,508
======= ======= ======= ======= =======
Diluted........................... 4,114 5,688 5,951 5,725 6,274
======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................ $18,150 $18,191 $30,829
Total assets........................................... 52,859 52,900 64,108
Long-term debt and capital lease obligations........... 16,132 15,853 1,391
Total liabilities...................................... 42,977 42,698 27,066
Shareholders' equity................................... 9,882 10,202 37,042
</TABLE>

7
<PAGE> 9

RISK FACTORS

Before you invest in our common stock, you should be aware that there are
risks, including those described below. You should consider carefully these risk
factors, together with all of the other information included in this prospectus,
before you decide to purchase shares of our common stock.

THE CAR AUDIO INDUSTRY IS RAPIDLY EVOLVING AND OUR PRODUCTS MAY NOT SATISFY
SHIFTING CONSUMER DEMAND OR COMPETE SUCCESSFULLY WITH COMPETITORS' PRODUCTS.

Our business is based on the demand for car audio products and our ability
to introduce distinctive new products that anticipate and capitalize upon
emerging technologies and changing consumer demands. If we do not introduce new
products, misinterpret consumer preferences or fail to respond to changes in the
marketplace, consumer demand for our products could decrease and our brand image
could suffer. In addition, our competitors may introduce superior designs or
business strategies, undermining our distinctive image and our products'
desirability. Any of these events could cause our sales to decline.

WE MAY LOSE MARKET SHARE AND ERODE OUR BRAND IMAGE AS WE TRY TO ADAPT TO
CHANGING DISTRIBUTION CHANNELS FOR CAR AUDIO PRODUCTS.

We must successfully capitalize on new distribution strategies because the
principal distributors of our products are losing market share. We historically
distributed our products primarily through specialty dealers who sold only car
audio products. Over the last several years, specialty dealers have lost market
share to audio/video retailers and large consumer electronics retailers. We
believe this trend is likely to continue and we are now increasing distribution
of our products through these emerging distribution channels. This change in
distribution channels creates significant risks that:

- We may alienate our specialty dealer base. Some specialty dealers may
react to our new strategy by reducing their purchases or even replacing
our products with competing product lines. Reduced specialty dealer
loyalty could reduce our market share because specialty dealers continue
to hold a large share of the market and contribute substantially to our
brand image among our core consumers; and

- Our brand image may erode. Selling in less-specialized distribution
channels may erode our brand image, which could decrease our product
prices and profit margins.

Our inability to manage our new distribution channels in a way that mitigates
these risks may reduce our profitability.

ANY DECREASE IN DEMAND FOR OUR AMPLIFIERS OR SPEAKERS COULD SIGNIFICANTLY
DECREASE OUR SALES.

A significant portion of our future revenue depends upon sales of our
amplifier and speaker products. These two product lines collectively accounted
for approximately 78% of our sales in calendar year 1996, 79% in 1997 and 82% in
1998. If sales of either of these two product lines decline significantly, our
results of operations will be adversely affected.

THE LOSS OF BEST BUY AS A CUSTOMER OR SIGNIFICANT REDUCTIONS IN ITS PURCHASES OF
OUR PRODUCTS WOULD REDUCE OUR SALES.

Best Buy is a significant customer that we could lose at any time.
Including Best Buy's $4.4 million initial purchase of our products to stock its
distribution channel, Best Buy accounted for 22.7% of our sales for the six
months ended June 30, 1999. We anticipate that Best Buy will continue to account
for a significant portion of our sales for the foreseeable future. Best Buy is
not obligated to any long-term purchases of our products and has
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<PAGE> 10

considerable discretion to reduce, change or terminate its purchases of our
products. Further, our relationship with Best Buy is recent, as we shipped our
first products to Best Buy in January 1999. We cannot be certain that we will
retain this customer or maintain a relationship as favorable as currently
exists.

WE MAY LOSE MARKET SHARE IF WE ARE NOT ABLE TO COMPETE SUCCESSFULLY AGAINST OUR
CURRENT AND FUTURE COMPETITORS.

Competition could result in reduced margins on our products and loss of
market share. Our markets are very competitive, highly fragmented, rapidly
changing and characterized by price competition and, in the car audio market,
rapid product obsolescence. Our principal car audio competitors include Alpine,
Clarion, Fujitsu Eclipse, JL Audio, Kicker, MTX, Orion, Panasonic, Phoenix Gold,
Pioneer and Sony. We also compete indirectly with automobile manufacturers, who
may improve the quality of original equipment sound systems, reducing demand for
our aftermarket car audio products, or change the designs of their cars to make
installation of our products more difficult or expensive.

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

SEASONALITY OF CAR AUDIO SALES CAUSES OUR QUARTERLY SALES TO FLUCTUATE AND MAY
AFFECT THE TRADING PRICE OF OUR STOCK.

Our sales are generally greater during the second and third quarters of
each calendar year and lower during the first and fourth quarters, with our
lowest sales typically occurring during the fourth quarter. As a result, after
the announcement of our results of operations for the first and fourth quarters,
our stock price may be lower than at other times of the year. We experience this
seasonality because consumers tend to buy car audio products during the spring
and summer when students are on semester breaks and generally more favorable
weather facilitates installation of our products.

OUR QUARTERLY FINANCIAL RESULTS MAY FLUCTUATE SIGNIFICANTLY, MAKING FINANCIAL
FORECASTING DIFFICULT AND MAKING OUR STOCK PRICE VOLATILE.

Our quarterly results of operations are difficult to predict and may
fluctuate significantly from quarter to quarter. In some quarters, our operating
results may fall below the expectations of public market analysts and investors.
Our quarterly operating results are difficult to forecast for many reasons, some
of which are outside of our control, including:

- the level of product, price and dealer competition;

- size and timing of product orders and shipments, particularly by
significant customers such as Best Buy;

- our ability to develop new products and product enhancements that respond
to changes in technology and consumer needs and preferences while
controlling costs;

- weather conditions, which affect our consumers' ability to install our
products;

- capacity and supply constraints or difficulties; and

- timing of marketing programs.

As a result, you should not rely on historical results as an indication of our
future performance. In addition, some of our expenses are fixed and cannot be
reduced in the short term. Accordingly, if sales do not meet our expectations,
our results of operations are likely

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<PAGE> 11

to be negatively and disproportionately affected. In this event, our stock price
may fall dramatically.

A DECLINE IN DISCRETIONARY SPENDING WOULD LIKELY REDUCE OUR SALES.

Because car audio sales are highly discretionary, a recession in the
general economy or a general decline in consumer spending would likely have a
material adverse effect on our sales. Consumer spending is volatile and is
affected by certain economic conditions, such as:

- general business conditions;

- employment levels, especially among our core consumers;

- consumer confidence in future economic conditions; and

- interest and tax rates.

IF WE FAIL TO EXECUTE OUR GROWTH STRATEGY SUCCESSFULLY, OUR FINANCIAL CONDITION
COULD BE SERIOUSLY HARMED.

Our growth has placed, and our anticipated future growth would continue to
place, a significant strain on our resources and capacity. To manage our growth,
we must:

- retain and hire skilled, competent employees;

- continue to improve coordination among our technical, product
development, manufacturing, sales and financial departments; and

- maintain our financial, operational and managerial systems and controls.

We cannot be certain that we will achieve our objectives through internal
growth, acquisitions or other means. Acquisitions carry significant risks, since
negotiations of potential acquisitions and their subsequent integration could
divert management's time and resources from our core business. Potential
acquisitions could require us to issue dilutive equity securities, incur debt or
contingent liabilities, amortize goodwill and other intangible expenses or incur
other acquisition-related costs. Further, we may be unable to integrate
successfully any acquisition and we may not obtain the intended benefits of that
acquisition.

IF WE DO NOT CONTINUE TO DEVELOP, INTRODUCE AND ACHIEVE MARKET ACCEPTANCE OF NEW
AND ENHANCED PRODUCTS, OUR SALES MAY DECREASE.

In order to increase sales in current markets and gain footholds in new
markets we must maintain and improve existing products, while successfully
developing and introducing new products. Our new and enhanced products must
respond to technological developments and changing consumer needs and
preferences. We may experience difficulties that delay or prevent the
development, introduction or market acceptance of new or enhanced products.
Furthermore, despite extensive testing, we may not be able to detect and correct
defects in our products before we ship them to our customers. This may result in
loss of sales or delays in market acceptance. Even after we introduce them, our
new or enhanced products may not satisfy consumer preferences and product
failures may cause consumers to reject our products. As a result, these products
may not achieve market acceptance. In addition, our competitors' new products
and product enhancements may cause consumers to defer or forego purchases of our
products.

IF WE FAIL TO MANAGE OUR INVENTORY EFFECTIVELY, WE COULD INCUR ADDITIONAL COSTS
OR LOSE SALES.

Our dealers have many brands to choose from when they decide to order
products and if we cannot deliver products quickly and reliably, they will
likely order from one of our
10
<PAGE> 12

competitors. We must stock enough inventory to fill orders promptly, which
increases our financing requirements and the risk of inventory obsolescence.
Because competition has required us to shorten our product life cycle and more
rapidly introduce new and enhanced products, there is a growing and significant
risk that our inventory could become obsolete.

OUR INTERNATIONAL OPERATIONS COULD BE HARMED BY FACTORS INCLUDING POLITICAL
INSTABILITY, CURRENCY EXCHANGE RATES AND CHANGES IN REGULATIONS THAT GOVERN
INTERNATIONAL TRANSACTIONS.

The risks inherent in international trade may reduce our international
sales and harm the businesses of our distributors and suppliers. These risks
include:

- changes in tariff regulations;

- political instability, war, terrorism and other political risks;

- foreign currency exchange rate fluctuations;

- establishing and maintaining relationships with local distributors and
dealers;

- lengthy shipping times and accounts receivable payment cycles;

- import and export licensing requirements;

- compliance with a variety of foreign laws and regulations, including
unexpected changes in taxation and regulatory requirements;

- greater difficulty in safeguarding intellectual property than in the
U.S.; and

- difficulty in staffing and managing geographically dispersed operations.

These and other risks may increase the relative price of our products compared
to those manufactured in other countries, reducing the demand for our products.
Beginning in the last six months of 1997 and continuing into 1999, countries in
Asia and Latin America have experienced unstable local economies and significant
devaluations of local currencies. These instabilities may continue or worsen,
which could have a material adverse effect on our business, financial condition,
and results of operations. Our sales in Asia and Latin America, collectively,
constituted 10.7% of total sales for 1998 and 5.2% of sales for the six months
ended June 30, 1999.

LOSS OF AN INTERNATIONAL DISTRIBUTOR MAY DISRUPT OUR SALES.

International customers accounted for 27.9% of our sales in calendar year
1996, 26.5% in 1997 and 20.1% in 1998. To continue our growth and profitability,
we will need to expand our sales in international markets. We rely on
distributors, each of whom is responsible for one or more countries, to purchase
and resell our products in their territories. When we have disputes with a
distributor, or decide we must change our relationship with a distributor, we
may disrupt the market for our products in that country and lose sales. If we
change a relationship with a distributor, we may repurchase that distributor's
inventory, which would reduce our sales proportionately.

WE MAY INCUR ADDITIONAL COSTS AS WE CHANGE TO A "ONE-STEP" DISTRIBUTION SYSTEM
IN INTERNATIONAL MARKETS.

Recently, we initiated a strategy of moving to a "one-step" distribution
system in larger markets by converting selected distributors into independent
sales representatives, allowing us to sell directly to retailers. To the extent
we extend this one-step strategy into additional markets, we would incur higher
operating expenses than we would under our current distribution system because
we would be directly responsible for costs such as sales

11
<PAGE> 13

commissions, warranty costs, bad debt and customer service expenses. We would
also have higher working capital requirements and risks than we would under our
current distributor system because we, rather than our distributors, would have
to carry inventory and accounts receivable.

CURRENCY FLUCTUATIONS MAY REDUCE OUR PROFITABILITY OF FOREIGN SALES.

In early 1999, we began making sales to Canadian and German dealers in
their respective currencies. Previously, all our international sales were
denominated solely in U.S. dollars and, accordingly, we were not directly
exposed to fluctuations in foreign currency exchange rates. An increasing
portion of our international sales will likely be denominated in currencies
other than U.S. dollars, increasing our exposure to gains and losses on foreign
currency transactions. We currently do not trade in derivatives or other
financial instruments to reduce currency risks; however, we attempt to create
"natural" hedges when possible by matching our assets and liabilities in a given
currency. We may not be able to execute this strategy and it may not protect us
in the event of substantial currency fluctuations. We may in the future try to
limit our foreign currency exposure by engaging in more aggressive hedging
strategies.

IF OUR SUPPLY OF COMPONENTS IS INTERRUPTED, WE MAY BE UNABLE TO DELIVER OUR
PRODUCTS TO OUR CUSTOMERS.

Our manufacturing processes recently have become more dependent on
"just-in-time" suppliers who are globally sourced. Our exposure to supply
restrictions has increased because the just-in-time process does not provide a
backlog of components and materials to satisfy short lead-time orders, to
compensate for potential halts in supply, or to replace components that do not
conform to our quality standards. We do not have any long-term price commitments
from our suppliers and any cost increases may reduce our margins or require us
to raise our prices to protect our margins. We cannot be certain that we could
locate, within reasonable time frames, alternative sources of components and
materials at similar prices and quality levels of our current suppliers. This
failure could result in increased costs, delays to our manufacturing process, an
inability to fill purchase orders on a timely basis and a decrease in product
availability at the retail level. This could cause us to lose sales and damage
our customer relationships.

Starting in 1999, Hyundai Electronics, a large Korean company, began
supplying us with all of the source units we resell under the Rockford Fosgate
brand name. If Hyundai refuses or is unable to supply source units that meet our
quality standards and specified quantities, we believe we would require a
substantial amount of time to identify and begin receiving source units with
acceptable features and quality from another supplier. During the interim, we
would not have any supply of source units and our sales of source units would be
significantly reduced.

We rely on Avnet for over 10% of our purchases of electronic components and
parts. If Avnet refuses or is unable to continue to supply us, we would require
substantial time to identify an alternative supplier and could face a shortage
of electronic components and parts.

WE MAY BE UNABLE TO RETAIN AND ATTRACT KEY EMPLOYEES, WHICH COULD IMPAIR OUR
BUSINESS.

We operate in highly competitive employment markets and cannot guarantee
our continued success in retaining and attracting the employees we need to
develop, manufacture and market our products and manage our operations. Our
business strategy and operations depend, to a large extent, on our senior
management team, particularly Gary Suttle, our President and Chief Executive
Officer. We do not have key-person life insurance on or

12
<PAGE> 14

employment contracts with any of our key employees, other than Mr. Suttle. The
terms of Mr. Suttle's employment contract are limited and if Mr. Suttle or other
key members of our management team are unable or unwilling to continue in their
present positions, our ability to develop, introduce and sell our products could
be negatively impacted.

IF WE ARE UNABLE TO ENFORCE OR DEFEND OUR OWNERSHIP AND USE OF OUR INTELLECTUAL
PROPERTY, OUR BUSINESS MAY DECLINE.

Our future success will depend, in substantial part, on our intellectual
property. We seek to protect our intellectual property rights, but our actions
may not adequately protect the rights covered by our patents, patent
applications, trademarks and other proprietary rights, and prosecution of our
claims could be time consuming and costly. In addition, the intellectual
property laws of some foreign countries do not protect our proprietary rights as
do the laws of the U.S. Despite our efforts to protect our proprietary
information, third parties may obtain, disclose or use our proprietary
information without our authorization which could adversely affect our business.

From time to time, third parties have alleged that we infringe their
proprietary rights. In particular, we have exchanged correspondence with
Integrated Electronic Technologies regarding our alleged infringement of patents
held by that company. We believe that our products do not infringe any valid
patents cited in the correspondence. Nonetheless, these claims or similar future
claims could subject us to significant liability for damages, result in the
invalidation of our proprietary rights, limit our ability to use infringing
intellectual property or force us to license third-party technology rather than
dispute the merits of any infringement claim. Even if we prevail, any associated
litigation could be time-consuming and expensive and could result in the
diversion of our time and resources.

OUR SHARES HAVE NEVER BEEN PUBLICLY TRADED, SO WE CANNOT PREDICT THE EXTENT TO
WHICH A TRADING MARKET WILL DEVELOP FOR OUR SHARES.

This is our initial public offering and there has not been a public market
for our common stock. We cannot predict whether a trading market will develop or
how liquid that market may become. We and the selling shareholders will
establish the initial public offering price based on our negotiations with the
underwriters. That price may not be indicative of the price that will develop in
the trading market.

YEAR 2000 ISSUES MAY CAUSE US TO LOSE SALES, INCREASE OUR COSTS OR DISRUPT OUR
OPERATIONS.

If our computer and information technology systems, or those of any
material third party, are not Year 2000 compliant, their failure could have a
material adverse effect on our business, financial condition and results of
operations. We may fail to discover Year 2000 compliance problems, even though
we have tested most of our systems and have commenced a survey of our material
suppliers' Year 2000 compliance efforts. If there are compliance problems, our
systems may require substantial revisions or replacements and our third-party
suppliers may not be able to deliver products or services to us.

In addition, governmental agencies, utility companies, third-party service
providers and others outside our control may not be Year 2000 compliant. This
could result in a systemic failure beyond our control, including, for example, a
prolonged telecommunications or electrical failure, which could also prevent us
from communicating with our customers and manufacturing and shipping our
products. We are engaged in an ongoing Year 2000 assessment and have not
developed any contingency plans over and above our normal business operation
contingency plans. We will take into account the results of our Year 2000
simulation testing and the results of our third-party surveys in determining the
need for, and

13
<PAGE> 15

nature and extent of, any contingency plans. Our inability to correct a
significant Year 2000 problem, if one develops, could result in an interruption
in, or a failure of, our normal business activities or operations. Any material
Year 2000 problem could require us to incur significant unanticipated expenses
to remedy, could divert our management's time and attention and could have a
material adverse effect on our business, financial condition and results of
operations.

OUR CURRENT SHAREHOLDERS WILL RETAIN CONTROL WHICH MAY LIMIT THE LIQUIDITY AND
MARKET PRICE OF OUR COMMON STOCK.

After the offering, Mr. Suttle and various shareholders affiliated with or
related to two of our directors, Nicholas G. Bartol and Timothy C. Bartol, will
collectively hold 45.4% of our outstanding shares. These shareholders, if they
act together, will be able to control the outcome of all matters submitted for
shareholder action, including the election of our board of directors and the
approval of significant corporate transactions. Consequently, these shareholders
will effectively control our management and affairs, which may limit the
liquidity of our shares, discourage acquisition bids for Rockford and limit the
price some investors might be willing to pay for our shares.

OUR MANAGEMENT WILL HAVE BROAD DISCRETION IN THE USE OF PROCEEDS FROM THIS
OFFERING AND MAY NOT USE THE PROCEEDS EFFECTIVELY.

We plan to use approximately $11.5 million of the estimated net proceeds of
the offering for working capital and other general corporate purposes. Our
management will have broad discretion in the use of these proceeds and they may
be used for corporate purposes that do not increase our profitability or market
value. The ineffective use of these proceeds could lead to financial losses and
a drop in our stock price.

YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.

If you purchase shares from us in this offering, you will incur immediate
and substantial dilution in pro forma net tangible book value per share of
$7.21. You will pay a price per share which substantially exceeds the value of
our assets after subtracting our liabilities. You and the other investors in
this offering will contribute 89.3% of the total amount paid to us for our
common stock, but will own only 33.9% of our outstanding shares. To the extent
outstanding options or warrants to purchase our shares are exercised, you will
suffer further dilution.

AFTER THIS OFFERING, MANY OF OUR UNREGISTERED SHARES WILL BE AVAILABLE FOR
RE-SALE WITHOUT SIGNIFICANT RESTRICTIONS OTHER THAN A 180 DAY LOCK-UP AGREEMENT
WITH OUR UNDERWRITERS. THEIR SALE MAY NEGATIVELY AFFECT OUR STOCK PRICE.

We have been operating as a privately held company for a relatively long
period and have issued a large number of shares of our common stock to
individuals who are not affiliated with us. As a result, following this
offering, we will have a large number of shares of common stock outstanding and
available for resale immediately or upon the expiration of the 180 day lock-up
period imposed by lock-up agreements. The market price of our common stock could
decline as a result of sales of a large number of shares in the market following
this offering, or the perception that those sales could occur.

OUR ANTI-TAKEOVER PROVISIONS COULD AFFECT THE VALUE OF OUR STOCK.

Our articles of incorporation and bylaws and Arizona law contain provisions
which could discourage potential acquirors from attempting to acquire us. For
example, our board of directors may issue additional shares of common stock to
an investor that supports the incumbent directors in order to make a takeover
more difficult. This could deprive our
14
<PAGE> 16

shareholders of opportunities to sell our stock at above-market prices typical
in many acquisitions.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, including, without
limitation, statements concerning the future of our industry, product
development, business strategy (including the possibility of future
acquisitions), continued acceptance and growth of our products, dependence on
significant customers and suppliers, and the adequacy of our available cash
resources. These statements may be identified by the use of forward-looking
terminology such as "may," "will," "believe," "expect," "anticipate,"
"estimate," "continue" or other similar words. These statements discuss future
expectations, and may contain projections of results of operations or of
financial condition or state other forward-looking information. When considering
forward-looking statements, you should keep in mind the risk factors and other
cautionary statements in this prospectus. The risk factors noted above, and
other factors noted throughout this prospectus, could cause our actual results
to differ significantly from those contained in any forward-looking statement.

OWNERSHIP OF INTELLECTUAL PROPERTY

Rockford Fosgate(R), The Punch(R), Connecting Punch(R), Punch Sport(R),
Practice Safe Sound(R), Car Audio for Fanatics(R), Lightning Audio(R),
Storm(TM), Bolt(TM), Strike(TM), Hafler(R) and our "Diamond R" logo are
registered trademarks of Rockford. This prospectus also includes other trade
names, trademarks and service marks of Rockford and of other companies.

15
<PAGE> 17

USE OF PROCEEDS

The net proceeds to us from the sale of the 2,500,000 shares of common
stock offered by this prospectus are estimated to be $27.1 million, or $32.7
million if the underwriters' over-allotment option is exercised in full, in each
case assuming an initial public offering price of $12.00 per share and after
deducting underwriting discounts and commissions and estimated offering expenses
payable by us. We will not receive any proceeds from the sale of shares of
common stock by the selling shareholders.

We plan to use the net proceeds from this offering as follows:

- $15.6 million to fully repay the outstanding balance of our credit
facility; and

- $11.5 million for working capital and other general corporate purposes,
including new product development and marketing expansion. We may also
use a portion of these proceeds to acquire or invest in complementary
businesses, products or technologies; however, we have not at this time
identified a specific acquisition or allocated a specific amount for this
purpose.

Pending use of the net proceeds, we plan to invest them in short-term,
interest bearing investment-grade securities.

Our credit facility consists of a revolving line-of-credit, a term loan and
an equipment financing arrangement. The revolving line-of-credit has a blended
variable interest rate per annum of LIBOR plus 300 basis points and prime plus
75 basis points. The term loan has a fixed interest rate of 10.67% per annum.
The equipment financing arrangement has, at our option three days prior to the
time used, a fixed interest rate per annum based on five-year U.S. Treasury
Notes plus 425 basis points or a variable interest rate per annum based on the
bank's base rate plus 125 basis points. To date, we have not used this equipment
financing arrangement. As at June 30, 1999, the credit facility had a combined
interest rate of 8.31% per annum. The credit facility matures on June 20, 2001.

16
<PAGE> 18

CAPITALIZATION

The following table shows our capitalization as at June 30, 1999, on an
actual, pro forma and pro forma as adjusted basis. The pro forma data gives
effect to the conversion of $278,953 of the 8.5% convertible subordinated
debentures into 114,236 shares of common stock and the issuance of 14,424 shares
upon exercise of warrants, both to occur concurrently with this offering. The
pro forma as adjusted data gives effect to:

- the sale by us of 2,500,000 shares in this offering at an assumed initial
public offering price of $12.00 per share;

- our receipt of the estimated proceeds of that sale after deducting
underwriting discounts and commissions and estimated offering expenses
payable by us; and

- the application of the net proceeds.

<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long term debt and capital lease
obligations............................................ $ 2,588 $ 2,588 $ 1,418
======= ======= =======
Credit facility debt, less current portion............... $14,462 $14,462 $ 0
8.5% convertible subordinated debentures................. 995 716 716
Capital lease obligations, less current portion.......... 598 598 598
Other long-term debt..................................... 77 77 77
Shareholders' equity:
Common stock, $0.01 par value; 40,000,000 shares
authorized, 4,735,201 shares issued and outstanding
actual; 4,863,861 shares issued and outstanding pro
forma; and 7,363,861 shares issued and outstanding
pro forma as adjusted............................... 47 49 74
Additional paid-in capital............................. 3,642 3,960 31,035
Retained earnings(1)................................... 6,008 6,008 5,748
Accumulated other comprehensive income................. 185 185 185
------- ------- -------
Total shareholders' equity.......................... 9,882 10,202 37,042
------- ------- -------
Total capitalization........................... $26,014 $26,055 $38,433
======= ======= =======
</TABLE>

- ---------------
(1) If we terminate our credit facility after repaying the outstanding balance
with the proceeds of this offering, we would expense approximately $260,000
of deferred loan fees included in other assets as at June 30, 1999 which
were incurred at the time of the loan.

17
<PAGE> 19

DILUTION

Our pro forma net tangible book value as at June 30, 1999, after giving
effect to the conversion of $278,953 of the 8.5% convertible subordinated
debentures into 114,236 shares of common stock and the issuance of 14,424 shares
upon exercise of warrants, both to occur upon completion of this offering, was
$8.4 million, or $1.73 per share of common stock. Pro forma net tangible book
value is equal to total pro forma tangible assets less total liabilities. Pro
forma net tangible book value per share is determined by dividing the number of
outstanding shares of common stock into the pro forma net tangible book value.
Our pro forma net tangible book value as at June 30, 1999 would have been $35.3
million, or $4.79 per share, after giving effect to:

- the sale by us of 2,500,000 shares in this offering at an assumed initial
public offering price of $12.00 per share;

- our receipt of the estimated proceeds of that sale after deducting
underwriting discounts and commissions and estimated offering expenses
payable by us; and

- the application of the net proceeds.

This represents an immediate increase in pro forma tangible book value of $3.06
per share to existing shareholders and an immediate dilution of $7.21 per share
to new investors. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $12.00
Pro forma net tangible book value as at June 30,
1999................................................ $1.73
Increase in pro forma net tangible book value
attributable to new investors....................... 3.06
-----
Pro forma net tangible book value after this offering....... 4.79
------
Pro forma dilution per share to new investors............... $ 7.21
======
</TABLE>

The following table summarizes, on a pro forma basis as at June 30, 1999,
giving effect to the above conversions and warrant exercises, the total number
of shares of common stock purchased from us, the total consideration paid to us
and the average consideration paid per share by existing shareholders and by new
investors:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders........ 4,863,861 66.1% $ 3,584,000 10.7% $ 0.74
New investors................ 2,500,000 33.9 30,000,000 89.3 $12.00
--------- ----- ----------- -----
Total.............. 7,363,861 100.0% $33,584,000 100.0%
========= ===== =========== =====
</TABLE>

The above discussion and table assume no exercise of outstanding
debentures, options and warrants to purchase our common stock other than the
conversion of $278,953 of the 8.5% convertible subordinated debentures and
issuance of 14,424 shares upon exercise of warrants, both to occur upon
completion of this offering. As at June 30, 1999, there were outstanding:

- 293,123 shares of common stock that we will issue if the holders of the
8.5% convertible subordinated debentures exercise their conversion
rights, assuming conversion of 114,236 shares in this offering;

- 1,995,981 shares of common stock that we will issue if the holders choose
to exercise outstanding options, with a weighted average exercise price
of $3.33 per share;

18
<PAGE> 20

- 64,500 shares of common stock that we will issue if the holders choose to
exercise outstanding options, with an exercise price of the per share
price of this offering; and

- 83,911 shares of common stock that we will issue if the holders choose to
exercise outstanding warrants, with a weighted average exercise price of
$1.25 per share.

We have also reserved 336,984 shares of common stock for future issuance of
options under our 1994 and 1997 stock option plans and 361,200 shares of common
stock for future issuance under our 1999 employee stock purchase plan. To the
extent these dilutive securities are exercised or converted, new investors will
experience further dilution.

DIVIDEND POLICY

We have never paid any cash dividends. We currently intend to retain
earnings, if any, to fund the development and growth of our business and do not
anticipate declaring or paying cash dividends in the foreseeable future. Our
credit facility does not permit the payment of cash dividends. Our board of
directors will decide whether to pay future dividends, if any, at its discretion
taking into account various factors, including our financial condition,
operating results, current and anticipated cash needs and plans for expansion.

19
<PAGE> 21

SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected consolidated financial data in
conjunction with our financial statements and related notes and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The following table contains
our selected consolidated financial data for the years ended September 30, 1994
and 1995 derived from audited consolidated financial statements, which are not
included in this prospectus. The selected consolidated financial data for the
year ended September 30, 1996, the three months ended December 31, 1996, when we
changed our fiscal year-end to December 31, and the years ended December 31,
1997 and 1998 are derived from our audited consolidated financial statements,
which are included elsewhere in this prospectus. The selected consolidated
financial data for the year ended December 31, 1996 are derived from unaudited
financial statements, which are not included in this prospectus. The selected
financial data for the six months ended June 30, 1998 and 1999 are derived from
unaudited financial statements, which are included elsewhere in this prospectus.
The unaudited consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, that we consider necessary for
a fair presentation of our financial position and operating results for those
periods.

<TABLE>
<CAPTION>
THREE SIX MONTHS
MONTHS ENDED
YEAR ENDED SEPTEMBER 30, ENDED YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- DEC. 31, --------------------------- -----------------
1994 1995 1996 1996 1996 1997 1998 1998 1999
------- ------- ------- -------- ------- ------- ------- ------- -------
STATEMENTS OF CONSOLIDATED (IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................................ $63,051 $73,915 $81,144 $16,448 $82,937 $87,423 $87,577 $45,923 $65,911
Cost of goods sold................... 39,565 49,803 56,761 11,020 57,057 57,321 55,146 28,783 40,221
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit......................... 23,486 24,112 24,383 5,428 25,880 30,102 32,431 17,140 25,690
Operating expenses:
Sales and marketing................. 10,749 11,251 15,218 2,814 15,627 14,530 14,821 8,097 10,971
General and administrative.......... 6,439 7,659 8,552 1,983 8,156 9,350 10,211 5,059 6,675
Research and development............ 1,347 1,404 1,448 292 1,372 1,576 1,876 870 973
CEO option(1)....................... -- 644 -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses.......... 18,535 20,958 25,218 5,089 25,155 25,456 26,908 14,026 18,619
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss).............. 4,951 3,154 (835) 339 725 4,646 5,523 3,114 7,071
Interest and other expense, net...... 1,689 1,660 2,193 377 2,064 2,055 1,501 757 845
------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before tax............. 3,262 1,494 (3,028) (38) (1,339) 2,591 4,022 2,357 6,226
Income tax expense (benefit)......... (1,594) 379 (1,025) (19) (407) 959 1,717 1,006 2,406
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss).................... $ 4,856 $ 1,115 $(2,003) $ (19) $ (932) $ 1,632 $ 2,305 $ 1,351 $ 3,820
======= ======= ======= ======= ======= ======= ======= ======= =======
Net income (loss) per share:
Basic............................... $ 1.85 $ 0.35 $ (0.50) $ (0.01) $ (0.23) $ 0.37 $ 0.52 $ 0.31 $ 0.85
======= ======= ======= ======= ======= ======= ======= ======= =======
Diluted............................. $ 1.83 $ 0.33 $ (0.50) $ (0.01) $ (0.23) $ 0.31 $ 0.41 $ 0.25 $ 0.62
======= ======= ======= ======= ======= ======= ======= ======= =======
Shares used to calculate net income
(loss) per share:
Basic............................... 2,619 3,226 4,040 4,394 4,114 4,401 4,412 4,411 4,508
======= ======= ======= ======= ======= ======= ======= ======= =======
Diluted............................. 2,649 3,392 4,040 4,394 4,114 5,688 5,951 5,725 6,274
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, JUNE 30,
--------------------------- --------------------------- -----------------
1994 1995 1996 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- ------- ------- -------
CONSOLIDATED BALANCE SHEET DATA: (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Working capital...................... $ 7,407 $12,560 $11,063 $12,369 $ 9,592 $13,488 $12,724 $18,150
Total assets......................... 22,905 29,848 34,423 31,420 29,234 37,307 36,016 52,859
Long-term debt and capital lease
obligations......................... 10,829 15,352 16,033 16,720 12,230 14,292 13,479 16,132
Total liabilities.................... 22,700 28,054 33,644 30,629 26,766 32,369 32,074 42,977
Shareholders' equity................. 205 1,794 779 791 2,463 4,907 3,942 9,882
</TABLE>

(1) During 1995 our majority shareholder amended a stock option to our CEO,
extending its exercise period and creating a new date for measurement of
compensation expense. CEO option expense represents the difference between
the fair value of our common stock on the date of the amendment and the
exercise price for the extended option period.

20
<PAGE> 22

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

The following discussion of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the related notes included elsewhere in this prospectus.

OVERVIEW

History

Rockford was incorporated in 1980 to continue a high-performance car audio
business founded in 1973 by car audio enthusiast Jim Fosgate. While Rockford
developed a reputation for technical excellence, in the early 1990s, Rockford's
financial performance deteriorated for a variety of reasons. Inefficient
management and manufacturing resulted in high and volatile costs, excessive
inventory, obsolete materials and finished goods and significant delays in new
product development and delivery. In addition, Rockford had begun to diversify
into home and professional audio products. This diversification initially failed
to enhance Rockford's competitive position, adversely impacted financial
performance and distracted management away from its core business.

Beginning in 1992, Rockford recruited a new management team, including Gary
Suttle, our President and Chief Executive Officer. Mr. Suttle and his new
management team:

- hired a number of experienced senior executives and mid-level managers;

- focused on profitability by establishing and implementing specific
financial objectives through improved business processes and
sophisticated management information systems;

- increased the number of new product introductions from seven in 1991 to
67 in 1998 while keeping the number of design engineers relatively
constant;

- implemented new sourcing and manufacturing strategies, reducing product
development time-to-market from up to 24 months to approximately six to
nine months;

- implemented a more focused advertising and marketing strategy to further
enhance the Rockford Fosgate and Hafler brand images; and

- discontinued or redesigned a number of unprofitable and marginally
profitable product lines.

Primarily as a result of these initiatives, Rockford regained profitability in
the fiscal year ended September 30, 1994. For the fiscal years ended September
30, 1995 and 1996, we experienced decreases in both operating and net income.
These decreases were primarily related to warranty costs resulting from product
quality issues and investments in our infrastructure, including (1) the
reengineering of our speaker facility, (2) our system conversion to Oracle
applications and databases and (3) investments in personnel. In addition, for
the year ended September 30, 1996, sales and marketing expenses increased
significantly primarily due to (1) increased promotional expenses, (2) an
increase in bad debt expenses and (3) higher commissions resulting from
increased sales volume. Beginning in 1997, we began to realize the benefits of
our investments in our infrastructure, resulting in subsequent increases in both
operating and net income. We believe that we have the people, processes and
systems in place to enable us to continue to grow profitably.

Business

We generated over 95% of our sales in the first six months of 1999 from our
car audio products. We recognize revenues from sales when we ship products to
the distributor or

21
<PAGE> 23

dealer. Sales are reported net of discounts and returns. Related expenses, such
as commissions, bonuses, cooperative advertising allowances to dealers and other
program expenses, warranty expenses and bad debt expenses, are accrued when the
related sales are recognized. We have no significant obligations subsequent to
shipment, as we do not install our products, and returns have not been
significant to date.

In the U.S., we sell our car audio products using commissioned independent
sales representative firms who are supported by our employee regional managers.
Internationally, we sell products through a wholly owned subsidiary in Japan, in
over 60 other countries through distributors and, since the beginning of 1999,
through commissioned independent sales representatives in Canada and Germany.
Unlike in the U.S., we have established relationships with distributors in
international markets who purchase our products and resell them to retailers.

In 1999, we launched our distribution program with Best Buy. Including its
$4.4 million initial purchase of our products to stock its distribution channel,
Best Buy accounted for 22.7% of our sales for the six months ended June 30,
1999. Our growth plan contemplates that Best Buy will continue to account for a
significant portion of our sales for the foreseeable future.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------- --------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Sales........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.............................. 68.8 65.6 63.0 62.7 61.0
----- ----- ----- ----- -----
Gross profit.................................... 31.2 34.4 37.0 37.3 39.0
Operating expenses:
Sales and marketing........................... 18.8 16.6 16.9 17.6 16.7
General and administrative.................... 9.8 10.7 11.7 11.0 10.1
Research and development...................... 1.7 1.8 2.1 1.9 1.5
----- ----- ----- ----- -----
Total operating expenses................... 30.3 29.1 30.7 30.5 28.3
----- ----- ----- ----- -----
Operating income................................ 0.9 5.3 6.3 6.8 10.7
Interest and other expense, net................. 2.5 2.3 1.7 1.7 1.3
----- ----- ----- ----- -----
Income (loss) before tax........................ (1.6) 3.0 4.6 5.1 9.4
Income tax expense (benefit).................... (0.5) 1.1 2.0 2.2 3.6
----- ----- ----- ----- -----
Net income (loss)............................... (1.1)% 1.9% 2.6% 2.9% 5.8%
===== ===== ===== ===== =====
</TABLE>

Cost of goods sold primarily consists of raw materials, direct labor and
manufacturing costs associated with production of our products as well as
warranty, warehousing and customer service expenses. Sales and marketing
expenses primarily consist of salaries, sales commissions and costs of
advertising, trade shows, distributor and sales representative conferences and
freight. General and administrative expenses primarily consist of salaries,
facilities and other costs of our accounting, finance, management information
systems, administrative and executive departments, as well as legal, accounting
and other professional fees and expenses associated with the business. Research
and development expenses primarily consist of salaries associated with our
research and development personnel.

22
<PAGE> 24

Geographic Distribution of Sales

Since 1996, our sales by geographic region were as follows:

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales
United States.......................... $59,804 $64,252 $70,016 $36,545 $56,172
Other Americas......................... 5,866 7,005 4,905 3,732 3,355
Europe................................. 10,001 7,819 6,599 3,023 3,929
Asia................................... 7,266 8,347 6,057 2,623 2,455
------- ------- ------- ------- -------
Total sales(1).............................. $82,937 $87,423 $87,577 $45,923 $65,911
======= ======= ======= ======= =======
</TABLE>

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

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

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

Sales. Sales increased by $20.0 million, or 43.5%, to $65.9 million for
the six months ended June 30, 1999 from $45.9 million for the six months ended
June 30, 1998. The increase in sales was primarily attributable to our initial
sales to Best Buy. Including Best Buy's $4.4 million initial purchase of our
products to stock its distribution channel, Best Buy accounted for $15.0
million, or 22.7%, of our sales for the six months ended June 30, 1999. In
addition, sales to car audio specialty dealers increased by $3.6 million, or
9.2%, to $42.8 million for the six months ended June 30, 1999 from $39.2 million
for the six months ended June 30, 1998. This increase is due to improved market
conditions, enhanced incentive programs and the launch of a competitively priced
line of amplifiers and speakers.

U.S. sales increased by $19.6 million, or 53.7%, to $56.2 million for the
six months ended June 30, 1999 from $36.5 million for the six months ended June
30, 1998. International sales increased by $0.4 million, or 3.8%, to $9.7
million for the six months ended June 30, 1999 from $9.4 million for the six
months ended June 30, 1998. A decrease in sales to certain countries in Latin
America as a result of the region's deteriorating economic conditions was offset
by increased sales in Europe and Canada.

Cost of Goods Sold. Cost of goods sold increased by $11.4 million, or
39.7%, to $40.2 million for the six months ended June 30, 1999 from $28.8
million for the six months ended June 30, 1998. Substantially all of the
increase was due to increased sales. As a percent of sales, cost of goods sold
decreased to 61.0% for the six months ended June 30, 1999 from 62.7% for the six
months ended June 30, 1998. The primary reasons for the decrease as a percent of
sales included improvement in global sourcing of raw materials and leveraging of
fixed overhead due to increased production volume.

Sales and Marketing Expenses. Sales and marketing expenses increased by
$2.9 million, or 35.5%, to $11.0 million for the six months ended June 30, 1999
from $8.1 million for the six months ended June 30, 1998. The increase was
primarily related to increased sales commissions as a direct result of higher
U.S. sales. U.S. sales are direct to dealers and require commissions to be paid
to our independent sales representatives. International sales have a higher
portion of sales directly to resellers and, while those sales generally have a
lower gross margin, they do not require commission payments. As a percent of
sales, these expenses decreased to 16.7% for the six months ended June 30, 1999
from 17.6% for the six months

23
<PAGE> 25

ended June 30, 1998. The decrease as a percent of sales was primarily because
some expenses in this category are fixed and do not fluctuate with sales.

General and Administrative Expenses. General and administrative expenses
increased by $1.6 million, or 31.9%, to $6.7 million for the six months ended
June 30, 1999 from $5.1 million for the six months ended June 30, 1998. The
primary reason for the increase was an increase in our financial
performance-based employee incentive program. As a percent of sales, these
expenses decreased to 10.1% for the six months ended June 30, 1999 from 11.0%
for the six months ended June 30, 1998. The decrease as a percent of sales was
primarily because some expenses in this category are fixed and do not fluctuate
with sales.

Research and Development Expenses. Research and development expenses
increased by $0.1 million, or 11.8%, to $1.0 million for the six months ended
June 30, 1999 from $0.9 million for the six months ended June 30, 1998. As a
percent of sales, these expenses decreased to 1.5% for the six months ended June
30, 1999 from 1.9% for the six months ended June 30, 1998.

Operating Income. Operating income increased by $4.0 million, or 127.1%,
to $7.1 million for the six months ended June 30, 1999 from $3.1 million for the
six months ended June 30, 1998. This increase was primarily attributable to our
initial sales to Best Buy. As a percent of sales, operating income increased to
10.7% for the six months ending June 30, 1999 from 6.8% for the six months ended
June 30, 1998. The primary reasons for this increase are mentioned above.

Interest and Other Expense, Net. Interest and other expense, net primarily
consists of interest expense. These expenses remained level at $0.8 million for
the six months ended June 30, 1999 and 1998. Interest expense was similar for
both periods due to relatively constant levels of debt and interest rates. Upon
completion of this offering, we anticipate repaying all of the amounts due under
our credit facility which would result in recording approximately $260,000 of
expense relating to the deferred loan fees being amortized over the related loan
term.

Income Tax Expense (Benefit). Income tax expense increased by $1.4 million
to $2.4 million for the six months ended June 30, 1999 from $1.0 million for the
six months ended June 30, 1998. The effective income tax rates were 38.6% for
the six months ended June 30, 1999 and 42.7% for the six months ended June 30,
1998. The primary reason for the higher effective tax rate for the six months
ended June 30, 1998 was the impact of relatively fixed, non-deductible items for
income tax accounting purposes on a much lower amount of net income. The lower
effective tax rate for the six months ended June 30, 1999 was primarily
attributable to the lower effective tax rate in Michigan, where we experienced
significant increased income from operations without a corresponding increase in
tax expense.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Sales. Sales increased by $0.2 million, or 0.2%, to $87.6 million for 1998
from $87.4 million for 1997. U.S. sales increased by $5.8 million, or 9.0%, to
$70.0 million for 1998 from $64.3 million for 1997 due to market acceptance by
our dealers of our newly redesigned speakers. International sales decreased by
$5.6 million, or 24.2%, to $17.6 million for 1998 from $23.2 million for 1997,
primarily due to economic instability in Latin America and Asia and weakness in
business conditions in Europe.

Cost of Goods Sold. Cost of goods sold decreased by $2.2 million, or 3.8%,
to $55.1 million for 1998 from $57.3 million for 1997. Cost of goods sold as a
percent of sales decreased to 63.0% for 1998 from 65.6% for 1997. The primary
reasons for the decrease as a percent of sales included the launch of our raw
material global sourcing strategy, leveraging

24
<PAGE> 26

of fixed overhead due to increased production volume as we prepared for initial
shipments to Best Buy and shifting of sales away from lower margin source units.

Sales and Marketing Expenses. Sales and marketing expenses increased by
$0.3 million, or 2.0%, to $14.8 million for 1998 from $14.5 million for 1997.
The increase was primarily related to increased sales commissions as a direct
result of higher U.S. sales. As a percent of sales, these expenses increased to
16.9% for 1998 from 16.6% for 1997.

General and Administrative Expenses. General and administrative expenses
increased by $0.9 million, or 9.2%, to $10.2 million for 1998 from $9.4 million
for 1997. This increase was primarily due to the write-off of a $0.4 million
note from our German distributor in 1998 following the distributor's change in
ownership because of the owner's death. The new owner indicated the repayment
would be doubtful based upon deteriorating operating results and a desire to
terminate the relationship. As a percent of sales, these expenses increased to
11.7% for 1998 from 10.7% for 1997.

Research and Development Expenses. Research and development expenses
increased by $0.3 million, or 19.0%, to $1.9 million for 1998 from $1.6 million
for 1997. This increase primarily related to increased personnel and product
certification costs. As a percent of sales, these expenses increased to 2.1% for
1998 from 1.8% for 1997.

Operating Income. Operating income increased by $0.9 million, or 18.9%, to
$5.5 million for 1998 from $4.6 million for 1997. As a percent of sales,
operating income increased to 6.3% for 1998 from 5.3% for 1997. The primary
reasons for these increases are mentioned above.

Interest and Other Expense, Net. Interest and other expense, net decreased
by $0.6 million, or 27.0%, to $1.5 million for 1998 from $2.1 million for 1997.
This decrease primarily related to a decrease in interest expense resulting from
our June 1997 change in lenders, consolidation of various debt instruments and
lower overall effective interest rates, the impact of which was fully realized
in 1998.

Income Tax Expense (Benefit). Income tax expense increased by $0.8 million
to $1.7 million for 1998 from $1.0 million for 1997. Our effective income tax
rates were 42.5% in 1998 and 37.0% in 1997. The primary reason for the higher
effective rate in 1998 was higher effective foreign tax rates coupled with a
higher than expected credit for certain foreign sales in 1997 made through our
foreign sales corporation.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Sales. Sales increased by $4.5 million, or 5.4%, to $87.4 million for 1997
from $82.9 million for 1996. Substantially all of the increase in sales was due
to increased sales in the U.S., where we experienced favorable results from our
dealer incentive programs and the launch of a new speaker and amplifier design.
U.S. sales increased by $4.4 million, or 7.4%, to $64.3 million for 1997 from
$59.8 million for 1996. International sales remained relatively unchanged at
$23.2 million for 1997 and $23.1 million for 1996. However, within the
international regions, sales increased in Asia and Latin America, which were
offset by a decrease in sales to European customers due to less favorable
economic conditions in Europe and the strengthening of the U.S. dollar versus
European currencies.

Cost of Goods Sold. Cost of goods sold increased by $0.3 million, or 0.5%,
to $57.3 million for 1997 from $57.1 million for 1996. Substantially all of the
increase was due to increased sales. Cost of goods sold as a percent of sales
decreased to 65.6% for 1997 from 68.8% for 1996. The primary reasons for the
decrease as a percent of sales were the completion of our speaker plant
reengineering resulting in lower manufacturing costs.

25
<PAGE> 27

Sales and Marketing Expense. Sales and marketing expenses decreased by
$1.1 million, or 7.0%, to $14.5 million for 1997 from $15.6 million for 1996.
The decrease was primarily related to a planned reduction of marketing
expenditures, specifically advertising and trade shows, to lower our costs. As a
percent of sales, these expenses decreased to 16.6% for 1997 from 18.8% for
1996.

General and Administrative Expenses. General and administrative expenses
increased by $1.2 million, or 14.6%, to $9.4 million for 1997 from $8.2 million
for 1996. The primary reason for the increase was costs related to our financial
performance-based employee incentive program, which had no payouts in 1996. As a
percent of sales, these expenses increased to 10.7% for 1997 from 9.8% for 1996.

Research and Development Expenses. Research and development expenses
increased by $0.2 million, or 14.9%, to $1.6 million for 1997 from $1.4 million
for 1996. This increase was primarily related to increased personnel and product
certification costs. As a percent of sales, these expenses increased to 1.8% for
1997 from 1.7% for 1996.

Operating Income. Operating income increased by $3.9 million, or 540.8%,
to $4.6 million for 1997 from $0.7 million for 1996. As a percent of sales,
operating income increased to 5.3% for 1997 from 0.9% for 1996. The primary
reasons for these increases are mentioned above.

Interest and Other Expense, Net. Interest and other expense, net remained
flat at $2.1 million for both 1997 and 1996.

Income Tax Expense (Benefit). Income tax expense increased by $1.4 million
for 1997 to $1.0 million from an income tax benefit of $0.4 million in 1996. Our
effective tax rates were 37.0% in 1997 and 30.4% in 1996. The lower effective
tax rate in 1996 was due to the absence of a tax benefit for the portion of the
1996 loss relating to state taxes.

QUARTERLY RESULTS OF OPERATIONS

Our sales on a quarterly basis reflect the seasonality of the car audio
aftermarket business. Sales are generally greater during the second and third
quarters of each calendar year and lower during the first and fourth quarters,
with our lowest sales typically occurring during the fourth quarter. During the
first quarter of 1999, we launched our distribution program with Best Buy.
Including Best Buy's $4.4 million initial purchase of our products to stock its
distribution channel, Best Buy accounted for 26.5% of our sales in the three
months ended March 31, 1999 and 19.1% in the three months ended June 30, 1999.

The following tables show selected consolidated quarterly statements of
operations data that were derived from unaudited financial statements for each
of the nine quarters ended June 30, 1999, and also show that data expressed as a
percent of sales for the periods indicated. We believe these unaudited financial
results were prepared on a basis consistent with our audited financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of our consolidated results of
operations for those periods. The results of operations for any quarter are not
necessarily indicative of the results of any future period.

26
<PAGE> 28

CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------------------
JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30,
1997 1997 1997 1998 1998 1998 1998 1999 1999
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales.......................... $26,360 $21,533 $17,366 $20,504 $25,419 $22,564 $19,090 $31,798 $34,113
Cost of goods sold............. 17,007 14,481 11,718 13,148 15,635 13,693 12,670 19,567 20,654
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit................... 9,353 7,052 5,648 7,356 9,784 8,871 6,420 12,231 13,459
Operating expenses:
Sales and marketing.......... 4,038 3,887 2,835 3,873 4,224 3,976 2,748 5,388 5,583
General and administrative... 2,764 1,965 2,275 2,290 2,769 2,495 2,657 3,018 3,657
Research and development..... 413 409 421 404 466 498 508 501 472
------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............. 7,215 6,261 5,531 6,567 7,459 6,969 5,913 8,907 9,712
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income............... 2,138 791 117 789 2,325 1,902 507 3,324 3,747
Interest and other expense,
net.......................... 469 548 584 357 400 619 125 431 414
------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before tax....... 1,669 243 (467) 432 1,925 1,283 382 2,893 3,333
Income tax expense (benefit)... 618 90 (173) 174 832 548 163 1,091 1,315
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss).............. $ 1,051 $ 153 $ (294) $ 258 $ 1,093 $ 735 $ 219 $ 1,802 $ 2,018
======= ======= ======= ======= ======= ======= ======= ======= =======
Net income (loss) per share:
Basic........................ $ 0.24 $ 0.03 $ (0.07) $ 0.06 $ 0.25 $ 0.17 $ 0.05 $ 0.41 $ 0.44
======= ======= ======= ======= ======= ======= ======= ======= =======
Diluted...................... $ 0.19 $ 0.03 $ (0.07) $ 0.05 $ 0.19 $ 0.13 $ 0.04 $ 0.29 $ 0.32
======= ======= ======= ======= ======= ======= ======= ======= =======
Shares used to calculate net
income (loss) per share:
Basic........................ 4,395 4,403 4,412 4,412 4,412 4,412 4,412 4,412 4,602
======= ======= ======= ======= ======= ======= ======= ======= =======
Diluted...................... 5,575 5,659 4,412 5,725 5,957 6,051 6,051 6,275 6,270
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
PERCENT OF SALES FOR THE THREE MONTHS ENDED
------------------------------------------------------------------------------------------------
JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30,
1997 1997 1997 1998 1998 1998 1998 1999 1999
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales.......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............. 64.5 67.2 67.5 64.1 61.5 60.7 66.4 61.5 60.5
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit................... 35.5 32.8 32.5 35.9 38.5 39.3 33.6 38.5 39.5
Operating expenses:
Sales and marketing.......... 15.3 18.1 16.3 18.9 16.6 17.6 14.4 16.9 16.4
General and administrative... 10.4 9.1 13.1 11.2 10.9 11.1 13.9 9.5 10.7
Research and development..... 1.5 1.9 2.4 2.0 1.8 2.2 2.7 1.6 1.4
------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............. 27.4 29.1 31.8 32.1 29.3 30.9 31.0 28.0 28.5
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income............... 8.1 3.7 0.7 3.8 9.2 8.4 2.6 10.5 11.0
Interest and other expense,
net.......................... 1.8 2.6 3.4 1.7 1.6 2.7 0.6 1.4 1.2
------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before tax....... 6.3 1.1 (2.7) 2.1 7.6 5.7 2.0 9.1 9.8
Income tax expense (benefit)... 2.3 0.4 (1.0) 0.8 3.3 2.4 0.9 3.4 3.9
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income (loss).............. 4.0% 0.7% (1.7)% 1.3% 4.3% 3.3% 1.1% 5.7% 5.9%
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

27
<PAGE> 29

LIQUIDITY AND CAPITAL RESOURCES

Since 1995, we have financed our business primarily using cash flows from
operations, borrowings from shareholders and bank borrowings. We had working
capital of $18.2 million at June 30, 1999, compared with $13.5 million at
December 31, 1998. At June 30, 1999, we maintained minimal cash and cash
equivalent balances.

We currently have a $20.0 million credit facility which is collateralized
by substantially all of our assets, and consists of a revolving line-of-credit,
a term loan and an equipment financing arrangement. At June 30, 1999 the amounts
outstanding under the credit facility consisted of approximately $14.5 million
on the revolving line-of-credit, and approximately $1.2 million on the term
loan. The revolving line-of-credit has a blended variable interest rate per
annum of LIBOR plus 300 basis points and prime plus 75 basis points. The term
loan has a fixed interest rate of 10.67% per annum. The equipment financing
arrangement has, at our option three days prior to the time used, a fixed
interest rate per annum based on five-year U.S. Treasury Notes plus 425 basis
points or a variable interest rate per annum based on the bank's base rate plus
125 basis points. To date, we have not used this equipment financing
arrangement. As at June 30, 1999, the credit facility had a combined interest
rate of 8.31% per annum. The credit facility matures on June 20, 2001. The
credit facility requires that we:

- have $7.0 million in earnings before interest, taxes, depreciation and
amortization, computed monthly on a rolling 12 month basis. This will
increase to $8.0 million on December 31, 1999;

- maintain debt service coverage of 1 to 1 for total debt and 1.3 to 1 for
senior debt;

- incur no more than $2.0 million of indebtedness per year outside our
existing credit arrangements; and

- make capital expenditures of no more than $3.0 million per year. We may
also make an aggregate of $2.0 million capital expenditures in excess of
this limit using off-balance sheet financing.

We intend to pay off this credit facility using the proceeds from this offering.
These covenants will then no longer apply to us after this pay-off.

We also have a $2.0 million capital lease credit facility under which
leases can be funded up until September 30, 1999 at which time the availability
to enter into additional leases expires. We use the capital lease credit
facility for the purchase of capital equipment under agreements structured as
three-year capital lease obligations. As at June 30, 1999, the capital lease
credit facility had an outstanding balance of $1.1 million with a weighted
average interest rate of 8.0%.

We also have $995,000 of 8.5% convertible subordinated debentures
outstanding of which $278,953 will be converted into 114,236 shares of common
stock upon completion of the initial public offering. The remainder is due in
May 2002 with interest payable quarterly. These debentures are unsecured. We are
not permitted to repay the debentures prior to their due date unless our stock
becomes public and trades for 30 days at a price above $3.66 per share. The
debenture holders may convert the debt to common stock at any time prior to the
due date at the rate of $2.44 per share. We also assumed a $450,000
line-of-credit in our acquisition of Lightning Audio which was repaid after June
30, 1999.

Net cash provided by (used in) operating activities was $0.2 million for
1998, $6.5 million for 1997 and ($0.2) million for 1996. Net cash provided by
(used in) operating activities was $1.6 million for the six months ended June
30, 1999 and negligible for the six months ended June 30, 1998. The primary
contributing factor to the growth in our working capital requirements has been
the effect of adding Best Buy as a customer, which has increased our inventory
levels and accounts receivable.

28
<PAGE> 30

Net cash used in investing activities was $1.5 million for 1998, $1.6
million for 1997 and $1.8 million for 1996. Net cash used in investing
activities was $3.0 million for the six months ended June 30, 1999 and $0.6
million for the six months ended June 30, 1998. Net cash used in investing
activities was primarily related to purchases of property and equipment, and
during the six months ended June 30, 1999 for our acquisition of Lightning
Audio. We paid for the Lightning Audio acquisition with amounts available under
our line-of-credit.

Net cash provided by (used in) financing activities was $1.3 million for
1998, ($4.9) million for 1997 and $2.3 million for 1996. Net cash provided by
financing activities was $2.3 million for the six months ended June 30, 1999 and
$1.2 million for the six months ended June 30, 1998. Net cash provided by (used
in) financing activities was primarily related to borrowings and repayments of
our credit facilities and other debt obligations, including repayments of
various senior notes and other debt obligations during 1997, at the time our
$20.0 million credit facility was established.

We may pursue acquisitions of businesses, products or technologies that
could complement or expand our business and product offerings. Any material
acquisition could result in an increase in our working capital requirements
depending on the amount, timing and nature of the consideration to be paid.

We believe that the net proceeds to be received by us from this offering,
together with potential cash flows from operations, will be sufficient to meet
our anticipated cash needs for working capital, capital expenditures and other
activities for at least the next twelve months. Thereafter, if current sources
are not sufficient to meet our needs, we may seek additional equity or debt
financing. In addition, any material acquisition of complementary businesses,
products or technologies could require us to obtain additional equity or debt
financing. There can be no assurance that additional financing would be
available on acceptable terms, if at all.

IMPACT OF THE YEAR 2000

Readiness. We use and rely on a variety of information technologies,
computer systems and scientific and manufacturing equipment containing
computer-related components, such as programmable logic controllers and other
embedded systems. We have a Year 2000 project to address the impact of Year 2000
issues on our computer systems and scientific and manufacturing equipment and
the readiness of our critical third parties. Our Year 2000 project is designed
to:

- take inventory of and prioritize business critical systems;

- analyze each system's Year 2000 compliance;

- undertake remedial activities, including repairing or replacing
identified systems;

- test the effectiveness of any remedial activities;

- identify and analyze compliance of critical third parties that provide
goods and services to us; and

- develop contingency plans, if internal or external systems fail.

We believe that approximately 90% of our Year 2000 compliance work is complete
with the remaining work scheduled for completion by the end of the third quarter
of 1999.

Information and Operation Systems. In 1994, we invested in a new
Enterprise Resource Planning (ERP) system that was Year 2000 compliant. Since
1994, we have monitored our internal environment to evaluate whether all
products added to our system are also Year 2000 compliant. In 1997, we performed
a physical inventory of all process equipment
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<PAGE> 31

containing embedded chips, software products, operating systems,
telecommunications products and hardware products.

In June 1997, our information system department upgraded our business
applications to 10.7 of Oracle's ERP Application Suite, which Oracle has
certified as Year 2000 complaint. The Oracle business application suite is our
informational backbone. In May 1999, we upgraded to release 11 of the Oracle ERP
Application Suite and successfully performed a Year 2000 audit on the new
release. Additionally, we sponsored an external audit of the Oracle ERP
Application Suite which did not reveal any Year 2000 problems.

We use Novell Network Management Products 4.11 and 5.0 to manage our
telecommunications, and Novell has certified both products as Year 2000
compliant. Additionally, we run the software programs "Check 2000" and "Zen Y2K"
to monitor our desktop computers and test Year 2000 compliance in our network.
We have completed our analysis and testing of our information systems hardware
and software. We believe all of our existing systems are Year 2000 compliant in
all material respects.

Process Equipment and Embedded Chips. After our 1997 physical inventory,
we contacted each supplier of process equipment and embedded chips to confirm
whether the equipment was Year 2000 compliant. Most of our process equipment was
acquired after 1993 and was certified to be Year 2000 compliant. We have
completed our testing and remediation of our equipment and believe all of our
equipment is Year 2000 compliant. We have also confirmed that, if any of this
equipment has unforeseen Year 2000 compliance issues, we will be able to turn
back the date on this equipment without affecting product assembly processes. We
did not replace any of our equipment specifically because of Year 2000
compliance issues.

Ongoing Internal Year 2000 Compliance. Our continuing efforts relating to
internal Year 2000 compliance are focused on new acquisitions of, and
enhancements to, our existing hardware, software, and equipment. We require our
suppliers to certify that all new acquisitions and enhancements are Year 2000
compliant and we also test them for Year 2000 compliance before loading and
using them with our existing systems.

Third Party Year 2000 Compliance. We have taken the following steps to
assess the Year 2000 readiness of our third parties. For our suppliers, we sent
a general inquiry letter in March 1998 to which all of our critical suppliers
responded that they were or would be Year 2000 compliant before the Year 2000.
In June 1999, we sent a follow-up detailed questionnaire to our 51 critical
inventory suppliers requesting information of their Year 2000 assessment,
planning, testing, supply chain and contingency plans.

The following table summarizes the responses we have received to date:

<TABLE>
<CAPTION>
NO. RESPONSE
--- --------
<S> <C>
Fully Year 2000 compliant, no anticipated issues in supply
36 to Rockford
Still testing systems, but do not anticipate problems in
2 supply to Rockford
1 Not computerized and has not assessed Year 2000 readiness
12 No response
</TABLE>

We are contacting the 12 suppliers who have not responded to request a response.

For our equipment manufacturers, we sent written inquiries requesting
confirmation of Year 2000 compliance and received positive responses from each
major manufacturer. For communications, utilities, shipping vendors, financial
institutions and professional services, we have either contacted directly or
reviewed Web sites to confirm Year 2000 compliance of 90% of these entities. To
date, we have not discovered any third party Year 2000 compliance issues and
have targeted August 31, 1999 for our completion of this process.

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<PAGE> 32

Costs. To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. The total costs of the Year 2000 systems
assessments and conversions are currently funded through cash flows from
operating activities and we are expensing these costs as they are incurred. Most
of our expenses have related to, and are expected to continue to relate to, the
operating costs associated with time spent by employees in the evaluation
process and Year 2000 compliance matters in general. Most of these costs have
already been incurred and we do not anticipate significant future costs with
respect to the remaining efforts. To date, we have not deferred any information
technology initiatives as a result of our Year 2000 project.

Risks. We believe that the chance that our computer systems and
manufacturing equipment are not Year 2000 compliant is minimal. Third-party
goods or services incorporated into our products may need to be revised or
replaced, which could be time consuming and expensive. Our inability to fix any
Year 2000 compliance problems on a timely basis could result in lost sales,
increased operating costs and other business interruptions, any of which could
have a material adverse effect on our business, financial condition and results
of operations. In addition, governmental agencies, utility companies,
third-party service providers and others outside our control may not be Year
2000 compliant and their failures could result in an internal failure beyond our
control, which could have a material adverse effect on our business, financial
condition and results of operations. We believe the most likely worst-case
scenario would involve a complete failure by our electricity providers, since
all of our operations would be disrupted in that event.

Contingency Plan. We are engaged in an ongoing Year 2000 assessment and
intend to implement, during the 3rd Quarter of 1999, a contingency plan that
will:

- increase inventory of finished goods and of parts and raw materials, to
the extent we believe Year 2000 issues may jeopardize required supplies;

- secure secondary sources for critical inventory supplies, communications
and manufacturing equipment to the extent our review suggests a risk that
our primary suppliers have significant Year 2000 risks; and

- provide back-up computer and communication systems.

We will take into account the results of our Year 2000 simulation testing and
the results of our third-party surveys in determining the nature and extent of
our contingency plans.

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<PAGE> 33

BUSINESS

OUR BUSINESS

We design, manufacture and distribute high-performance car audio and
professional audio systems. Our car audio products include technologically
advanced amplifiers, speakers, source units and accessories marketed under our
Rockford Fosgate brand name. We sell these products in the car audio aftermarket
to consumers who are upgrading their car audio systems. We market our
professional audio amplifiers and speakers under our Hafler brand name.

Rockford Fosgate is one of the most preferred high-performance car audio
brands and for nearly 20 years, it has been the brand of choice among our core
consumers, particularly 16-24 year old males. We believe our brand appeals to
our Generation Y core consumers because they view Rockford Fosgate as the
"coolest" car audio brand. Many of our core consumers are extremely, almost
fanatically, loyal to our Rockford Fosgate brand, and proudly display our logos
on their cars, clothing and even their bodies.

Our marketing and product development efforts are designed to enhance our
brand image and generate increased loyalty among our core consumers and the
retailers who sell our products. We believe our core Generation Y consumers, who
devote much of their time and disposable income to their car audio systems,
desire distinctive "leading edge" products and powerful, high quality sound.

In addition, we believe our hard-hitting, "in your face" advertising
combined with cutting-edge technology and product innovation allows the
retailers who sell our products to appeal to Generation Y and other consumers
who are attracted by our brand, products and distinctive marketing programs. To
maintain and further enhance our unique heritage, we continue to develop new
products that are reliable, durable, technologically advanced and designed to
set industry standards in their product categories. Our Rockford Fosgate and
Hafler products have won numerous consumer and industry awards. We are committed
to maintaining our premier position in car and professional audio by working
closely with distributors, retailers and consumers to satisfy their needs and
preferences.

The chart below shows our corporate structure and the division of our
operations among us and our subsidiaries.
[SUBSIDIARY FLOW CHART]

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<PAGE> 34

OUR INDUSTRY

Car Audio

According to the Consumer Electronics Manufacturers Association, total
worldwide factory sales of car audio products were approximately $14.7 billion
in 1998, of which $6.3 billion represented aftermarket sales. We also believe
total factory sales of car audio products in the U.S. were approximately $4.4
billion in 1998, of which approximately $1.9 billion represented aftermarket
sales. The international car audio market is significantly larger, with
estimated factory sales of car audio products of approximately $10.3 billion in
1998, of which $4.4 billion represented aftermarket sales.

The U.S. car audio aftermarket industry is mature and highly fragmented
with many companies competing for market share. Competition comes predominantly
from specialty audio suppliers that generally compete in specific market niches
on the basis of brand image, quality and technology, and large consumer
electronics suppliers that offer car audio products as part of their broad
consumer electronics lines. The larger specialty audio suppliers and consumer
electronics suppliers have been increasing their market share at the expense of
the smaller specialty audio suppliers, who often lack the capital and other
resources necessary to satisfy the demands of retailers. As a result, industry
consolidation is accelerating, with more efficient vendors capturing incremental
market share and further leveraging costs.

Car audio aftermarket products are typically distributed to consumers
through the following channels:

- Specialty dealers: Retail stores specializing in car audio products;

- Audio/video retailers: Retail stores specializing in car audio, home
audio and video products;

- Consumer electronics retailers: National consumer electronics chains,
such as Best Buy and Circuit City;

- Catalog merchants: Mail order retailers, such as Crutchfield;

- Mass merchants: National mass merchandisers, such as K-Mart, Target and
Wal-Mart; and

- Automotive retailers: Auto parts retailers, such as AutoZone and Pep
Boys.

Historically, specialty dealers have dominated the retail distribution of car
audio aftermarket products. Over the last several years, as a result of changing
consumer buying patterns, the audio/video and consumer electronics retailers
have been the fastest growing distribution channels for car audio products
increasing their combined market share from 34.5% in 1987 to 50% in 1997.

Professional Audio

The professional audio market is focused on consumers who use audio
equipment in commercial applications. Professional audio products are used in
recording studios, movie theaters, concert facilities, stadiums, traveling bands
and broadcast studios. The professional audio market requires technical
information to assist buyers in the sales process and has become increasingly
price competitive. To reduce costs, many manufacturers have shifted to overseas
component suppliers.

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<PAGE> 35

OUR CONSUMERS

Car Audio

Historically, 16-24 year old males have been the primary consumers of
high-end car audio aftermarket products. They are part of Generation Y, the
10-24 year old age group that is one of the fastest growing segments of the U.S.
population. Generation Y consumers possess substantial disposable income and
devote much of their time and money to their music and cars. According to U.S.
Census Bureau, Generation Y is estimated to grow from 57.0 million in 1998 to
61.6 million in 2005. This growth rate would outpace the estimated general
population growth by 56.7%.

Today's 16-24 year old male consumers have an increasing preference for
brand names, durability and high-performance products and are more knowledgeable
about car audio products than prior generations. Consumer electronics retailers
devote significant square footage to car audio products because they have found
the category to be a very important traffic driver, particularly of Generation Y
consumers.

Our newly acquired Lightning Audio brand is positioned to offer our
consumers an alternative that is cool to own but more moderately priced than our
premium Rockford Fosgate brand. We believe this will enable us to sell to an
even larger number of consumers.

Professional Audio

Our professional audio consumers are typically more technically oriented
and drawn from a broader range of age groups. These consumers use our products
primarily for commercial applications and in their professional activities.

OUR GROWTH STRATEGY

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

Expand Channels of Distribution. We believe our selective distribution
increases brand loyalty, enhances retailers' profit margins and encourages
retailers to carry a broad range of our products. We have recently increased our
channels of distribution, focusing on some of the fastest growing and most
efficient retailers in the U.S. and selected international markets. For example,
in early 1999, we began distributing our car audio products through Best Buy, a
leading consumer electronics and car audio retailer, with more than 300 stores
in the U.S. Best Buy concentrates its in-store merchandising on a few high
quality suppliers in each of its product categories and has devoted selling
space and financial and operating resources to promote and sell our products. In
addition, in August 1998, we began selling our products to Crutchfield, a car
and home audio catalog retailer in the U.S., as well as continuing to sell
through the Autobacs and Yellow Hat consumer electronics chains in Japan.

Develop a Second Brand. In response to requests from our retailers and
international distributors, we intend to develop a second brand to be sold at
more moderate price points than our current products. Consistent with our
Rockford Fosgate and Hafler brand images, however, we expect that these products
will continue to offer the highest performance and quality standards in their
categories. In June 1999, we acquired Lightning Audio, a manufacturer and
distributor of car audio accessories. We intend to introduce a line of
moderately priced, high-performing amplifiers and subwoofers under the Lightning
Audio brand name in 2000. We believe the addition of a second brand will help us
enhance and expand our product offerings and increase our distribution
capabilities.

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<PAGE> 36

Capitalize on International Opportunities. We believe that the Rockford
Fosgate brand name is as widely recognized in many foreign countries as it is in
the U.S. We intend to aggressively expand Rockford Fosgate, Lightning Audio and
Hafler in international markets. We currently sell our car audio products
directly to retailers in Canada, Germany and Japan, and through independent
distributors, to over 60 other countries. Unlike in the U.S., we have
established relationships with distributors in international markets who
purchase our products and resell them to retailers. Recently, we initiated a
strategy of moving to a "one-step" distribution system in larger international
markets by converting selected distributors into independent sales
representatives, allowing us to sell directly to retailers. We expect these
measures to substantially increase our sales in these markets by allowing us to
better compete through lower distribution costs and reduced prices to the
consumer.

Introduce New and Innovative Products. We intend to take advantage of the
strength of the Rockford Fosgate and Hafler brands by continuing to introduce
new and innovative products. We believe our ability to quickly deliver
innovative products to market appeals to consumers' desire for "leading edge"
products and provides a significant competitive advantage. In recent years, this
strategy has been effective both in launching our new products and increasing
sales of our core products. For example, we recently introduced new source units
and mid-range speakers for the Rockford Fosgate brand, and are developing home
theater products under the Hafler brand.

Promote Our Unique Brand Image. We believe our core consumer, the
Generation Y 16-24 year old male, perceives our brand as the "coolest" in the
car audio product category. We intend to continue to enhance the Rockford
Fosgate, Lightning Audio and Hafler brands by projecting an image that appeals
to consumers who appreciate brand authenticity and value. We believe that the
combination of our hard-hitting advertising campaigns with our rugged and
durable products has created brand recognition and loyalty among our core
consumers. Many of our consumers proudly display our logos on their cars,
clothing and even on their bodies. In addition, we believe demand for our brand
and products provides retailers with a powerful tool to expand their customer
base by generating increased foot traffic of Generation Y and other consumers.

OUR PRODUCTS

Percent of Sales by Product Class

Our sales since 1996 were divided among our principal product classes as
shown in the following table:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
----------------------- JUNE 30,
1996 1997 1998 1999
----- ----- ----- ----------------
<S> <C> <C> <C> <C>
Amplifiers..................................... 51.3% 49.3% 49.9% 48.6%
Speakers....................................... 27.1 30.1 32.5 34.0
Others(1)...................................... 21.6 20.6 17.6 17.4
----- ----- ----- -----
Total..................................... 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>

- ---------------
(1) No other single product class accounted for more than 10% of our sales in
any of these periods.

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<PAGE> 37

Car Audio

We offer a full line of high-performance car audio products. The following
table provides examples of specific products within each of our product lines:

<TABLE>
<S> <C>
Amplifiers.............. Two channel amplifiers; multi-channel amplifiers; mono
(single channel) amplifiers; signal processors
Speakers................ Subwoofers; woofers; mid-range separates; full range
speakers; speaker enclosures; tweeters
Source Units............ AM/FM/CD players; compact disc changers
Accessories............. Amplifier installation kits; power, ground and speaker wire;
RCA cables; connectors; adaptors; stiffening caps;
miscellaneous electrical components; installation
accessories; Punch Sport brand promotional materials and
clothing
</TABLE>

Amplifiers. Amplifiers increase the voltage and current coming from the
source unit, providing more power than possible from a source unit alone.
Amplifiers are essential for a high-performance car audio system and are
typically not part of a standard factory installed system. We sell 21 different
models of amplifiers under our Punch brand, with rated power from 100 to 1,100
watts and with minimum advertised prices ranging from $179.95 to $1,329.95. Our
amplifiers provide 1, 2, 4 and 5 channel alternatives, giving consumers the
ability to select an optimum configuration for their system. For specialized
applications, we also sell stand-alone signal processors that accept input from
a source unit, modify the signal to provide the consumer with enhanced
performance and deliver the signal to one or more amplifiers.

Speakers. Speakers accept a signal from a source unit or amplifier and
translate it into sound. There are two categories of speakers: those eight
inches or greater in diameter are considered subwoofers and are designed to play
lower (bass) frequencies; and those less than eight inches in diameter are
considered speakers and are designed for higher frequencies. Aftermarket
speakers and subwoofers provide dramatically improved sound quality compared to
most factory installed car audio systems and are often the single most important
improvement consumers can make to their car audio sound system. We sell 88
different models of car audio speakers under our Punch brand with minimum
advertised prices ranging from $59.95 to $549.95.

Source Units. Source units are the control center for a car audio system.
Typically mounted in the dash of the car, source units provide input signals,
including AM/FM radio and compact disc players. Most of our units have the
ability to control a CD changer. We sell three different models of source units
under the Rockford Fosgate brand with minimum advertised prices ranging from
$249.95 to $349.95. Additionally, we sell 8-disc CD changers with a minimum
advertised price of $299.95.

Accessories. We sell over 400 different types of accessories under the
Connecting Punch brand, including amplifier installation kits, RCA cables and
carpet/fabric/surface applications. We also sell over 1,000 different types of
accessories under the Lightning Audio brand, including stiffening capacitors,
battery clamps, RCA and speaker cables. We also sell promotional materials and
clothing under the Punch Sport brand.

Our Rockford Fosgate products have won numerous consumer and industry
awards, including Autosound Grand Prix awards in every year from 1987 through
1999, Innovations awards at the Consumer Electronics Shows in 1997, 1998 and
1999 and European Car Audio Press awards in 1997 and 1998.

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<PAGE> 38

Professional Audio

We sell professional audio amplifiers and speakers under the Hafler brand
name. Suggested retail prices range from $569.00 to $2,200.00. Our professional
audio products are used in recording studios, movie theaters, concert
facilities, stadiums, traveling bands and broadcast studios. Due to
manufacturing and technical similarities with the Rockford Fosgate brand, many
processes and technologies are shared and developed across both brands. Our
Hafler products won awards from Pro Audio Review in 1996 and 1997, Mix Magazine
in 1996 and 1998 and Canadian Music-Music Week Magazine in 1999, as well as
receiving the EQ Award in 1997 and Electronic Musician Editor's Choice Award in
1999.

RESEARCH AND DEVELOPMENT

Research and development is a primary focus of our business because of the
heavy demand by our core consumers for leading-edge products. We focus our
research and development efforts primarily on enhancing current products and
developing new products. Our engineering processes involve a coordinated effort
across multiple areas of our company. As at June 30, 1999, our research and
development staff consisted of eleven design engineers, as well as other support
staff, dedicated to project development and who coordinate their efforts with:

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

- our manufacturing staff to develop and build products more efficiently;

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

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

As a result of these efforts, we have reduced product development
time-to-market from up to 24 months to an average of six to nine months, as
compared to over twelve months for many of our competitors. Our objective is to
introduce new products or re-engineer approximately one-third of our existing
product line annually. In 1998, more than 60% of our sales were generated from
new or re-engineered products.

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

- powered speakers, which are speakers that include an integrated
amplifier;

- remote bass and speaker controls;

- active cross-overs that allow consumers to tailor our amplifiers to their
systems' needs;

- class BD amplifiers that incorporate a more efficient circuit design;

- more reliable mechanical components;

- materials improvements that increase the durability and performance of
our products; and

- digital signal processing.

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<PAGE> 39

SALES, MARKETING AND DISTRIBUTION

Our sales and marketing efforts are designed to enhance our brands by
projecting an image that appeals to consumers who appreciate brand authenticity
and value. We believe that the combination of our hard-hitting advertising
campaigns with our rugged and durable product offerings has created worldwide
recognition and loyalty among our core consumers. We promote our products with
monthly, bi-monthly and quarterly full page advertisements in fourteen car audio
magazines and publications. We participate in six annual trade and consumer
shows and contests, and supply promotional prices and giveaways. We publish a
complete set of full color brochures and promotional literature detailing each
of our products. Our products also appear in advertisements on television,
newspapers and the Internet. We also help promote concerts and compact discs
produced using Hafler products.

Our sales and marketing activities are listed below in their order of
importance:

- making regular calls to dealers and providing them with demonstration
products, point-of-purchase displays and other marketing materials;

- initiating targeted advertising in periodicals read by our potential
consumers;

- training dealer installation personnel at our Rockford Technical Training
Institute;

- participating in rule making for, and providing technical and product
support to, auto sound competitions; and

- participating in related professional and consumer trade shows.

We consider our advertising to be both hard-hitting and "in your face"
because our advertisements are intense, frequent and intended to excite our core
consumer. We use the explosive imagery of the wolf in our visual advertisements
and booming sound bites in our audio campaign to promote the power, quality and
intensity of our products.

Our corporate Web site, located at www.rockfordcorp.com, offers consumers
and retailers reliable and comprehensive information about our product offerings
and consumer services. Because our core consumers are among the most
enthusiastic users of the Internet, we believe expanded Internet-based marketing
will broaden our consumer reach, enhance our brand image and direct potential
consumers to our retailers. Our Web site offers retailers, sales representatives
and distributors an efficient method to track order status, accounts receivable
and sales history and to access marketing and advertising materials. Consumers
can currently purchase Punch Sport promotional materials and clothing from our
corporate Web site. In addition, we intend to sell our upcoming Hafler home
theater products over the Internet.

Lightning Audio has a separate Web site at www.lightningaudio.com, which
features comprehensive information about Lightning products, dealers and
promotions.

Car Audio Distribution

We currently sell our Rockford Fosgate car audio products in the U.S.
through over 1,500 independent retail stores and 18 independent sales
representative firms who identify, recruit and sell to dealers in their regions.
Our representative firms, serviced by our three in-house regional managers,
employ a total of approximately 60 field personnel who make regular calls on
dealers in their region. We have entered into one-year agreements with each of
these firms under which we appoint them our sales representative for a specific
territory and specific products under varying terms. We pay our independent
sales representatives in the United States commissions based on sales of our
products to independent retailers in their territory.

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<PAGE> 40

Commission amounts range from 3% to 9% of sales depending upon product category,
retailer involved in the purchase and achievement of quarterly sales targets.

Our U.S. distribution system is composed of independent specialty dealers,
audio/video retailers, consumer electronics chains and catalog merchants. Our
dealers and distributors sign agreements under which we appoint them to serve a
specific territory to distribute our products under varying terms. In early
1999, we launched our distribution program with Best Buy, one of the larger
consumer electronics retailers. Best Buy sells our products in all of its more
than 300 stores nationwide. Our expansion into Best Buy represents an evolution
in our strategy to distribute through additional channels. We believe our
expansion into Best Buy will:

- further increase recognition of the Rockford Fosgate brand;

- distribute our products to a more diverse set of consumers, including
females and older males;

- expand market share among our core consumers since many of them shop at
Best Buy stores;

- expand our sales into geographic markets where we currently have little
presence; and

- allow our specialty dealers to grow their sales by taking advantage of
increased product visibility created by Best Buy's advertising programs.

Under our agreement, Best Buy provides to us (1) six-month rolling
forecasts, updated monthly, (2) commitments to purchase products within 60 days
and (3) purchase orders 30 days in advance of shipment. The payment terms
generally require payment of invoices within 60 days. We are obligated to
provide discounts varying by product. The agreement is terminable at will and
does not include any term or renewal provisions.

We currently sell our car audio products in over 60 other countries through
independent distributors and sales representatives. Independent distributors
purchase products from us and re-sell them to retailers in their designated
territories. They assume inventory risks and take responsibility for warranty
service in their territory. Selling through distributors has allowed us to
expand into international markets while minimizing cultural differences and
local marketing issues, such as warranty service. In Japan, we sell to
independent distributors through our wholly owned subsidiary.

During 1999, we initiated a program to convert selected foreign markets to
a "one-step" distribution system by switching to independent sales
representatives. Independent sales representatives do not purchase products from
us, but instead sell products on our behalf. We remain responsible for inventory
until an independent retailer purchases it and we retain responsibility for
warranty service. This system allows us to sell directly to retailers rather
than to distributors who further mark-up our products before selling them. We
expect this transition to substantially increase our penetration in these
markets because commissions to independent sales representatives are less than
the distributor mark-up, allowing us to reduce prices to the consumer while
providing us with a higher gross margin. Because relatively high sales volumes
are needed to justify the use of independent sales representatives, we
anticipate converting some higher volume territories over time while continuing
to distribute through distributors in smaller territories. To date, we have
successfully completed the conversion to the one-step distribution system in
Canada and Germany.

We sell Lightning Audio products in the United States through a network of
15 independent distributors and over 400 independent retailers. We also sell
Lightning Audio

39
<PAGE> 41

products internationally through 25 independent distributors who sell our
products in 30 countries.

Professional Audio Distribution

In the U.S., sales of professional audio products primarily are made
through sales representatives to small specialty dealers and larger retail
chains, such as Guitar Center and Sam Ash. Internationally, sales are primarily
made through approximately 28 independent distributors in over 30 countries. We
also plan to sell Hafler home theater products directly over the Internet in the
future.

PRODUCT SUPPORT

To maintain and enhance our relationships with retailers, we provide
numerous support services, including product and installation training, sales
training, technical and customer service support and advanced information
systems, including an interactive Web site. Our Web site provides comprehensive
and valuable information for dealers and distributors, including product
schematics, ad layouts and logos. Our Rockford Technical Training Institute, one
of the first and most advanced of its kind in our industry, trains over 700
retailer sales and installation personnel per year on our special methods and
unique culture. In addition, our instructors and demonstration vehicles travel
worldwide hosting dealer instruction seminars.

Our products carry standard warranties against defects in material and
workmanship, and we will either repair or replace any product that fails to meet
this warranty. Repair services are available for products which are no longer
covered under the original warranty. For our U.S. customers, we have in-house
customer service, repair and technical support personnel who provide general
company information, installation support, troubleshooting, and system design
assistance. We provide a unique rapid factory direct repair program that repairs
and ships products within 24 hours of receipt, reducing retailer and consumer
inconvenience if our products fail to perform properly. For our international
customers, our distributors provide customer service and warranty support.

MANUFACTURING

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

We manufacture amplifiers, signal processors and various accessories at our
facilities in Tempe, Arizona and mid-range speakers, woofers and subwoofers at
our facility in Grand Rapids, Michigan. In 1999, Hyundai Electronics signed a
four-year joint development agreement with us to supply all of the source units
we resell under the Rockford Fosgate brand name in accordance with our
specifications. Under the agreement, we agreed to develop jointly and then
purchase source units from Hyundai on an exclusive basis, provided that Hyundai
could demonstrate to us successful commercial production of the units. We set
development and production milestones which Hyundai successfully met. We paid to
Hyundai a development fee and agreed to provide, at Hyundai's expense, personnel
and equipment to assist Hyundai's development of the source units according to
our specifications. The agreement obligates us to place monthly purchase orders
with Hyundai and is subject to cancellation charges for partially or totally
cancelled orders. The agreement commenced April 8, 1999 and expires July 31,
2003. As at June 30, 1999, we had paid to Hyundai $3,903,206 under the agreement
which includes pre-contract development costs. Other third parties manufacture
our full-range speakers and various components according to our design
specifications.

We use cellular manufacturing processes and just-in-time supply management
in all our manufacturing facilities. Cellular manufacturing provides flexibility
and efficiency because any cell can manufacture any product, depending on market
demand. Lot sizes are small and
40
<PAGE> 42

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

We recently shifted from purchasing parts and materials solely in the U.S.
to purchasing from the best suppliers available to us worldwide. This global
sourcing initiative was a critical shift in our raw materials strategy, allowing
us to deliver high quality, low-cost goods that are competitive with those
offered by our U.S. and international competitors. Global sourcing of our
component parts provides us the best total cost suppliers and introduces us to
worldwide technologies and materials.

COMPETITION

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

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

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

- Car Audio Amplifiers: Alpine, Kenwood, Kicker, MTX, Orion, Phoenix Gold
and PPI;

- Car Audio Speakers: Blaupunkt, Boston Acoustics, Infinity, JBL, JL
Audio, Kenwood, Kicker, Pioneer and Polk;

- Car Audio Source Units: Alpine, Blaupunkt, Clarion, Fujitsu Eclipse,
Kenwood, Nakamichi, Pioneer and Sony;

- Car Audio Accessories: Monster Cable, Phoenix Gold and Stinger; and

- Professional Audio Amplifiers and Speakers: Cress, Crown, Eastern
Acoustic Works, Mackie Designs, Peavy, QSC and Tannoy.

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<PAGE> 43

Based on United States consumer brand preferences and market share (based
on dollar sales volume), we believe:

- we rank first or second among our competitors in car audio amplifiers;

- we are in the top six among our competitors in car audio speakers and
accessories;

- we are a relatively minor competitor in car audio source units.

We believe we have a significant share of the market for professional
amplifiers in recording studios and a very small share in the remainder of the
professional audio market, but do not have information allowing us to rank
ourselves in those markets. We are new to the professional audio speaker market.

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

INFORMATION SYSTEMS

We have a fully integrated system based on a Novell network, Oracle
applications and databases, Microsoft Office applications and a Cisco
infrastructure. Our information systems are designed to respond quickly to
inquiries from our managers, employees, suppliers and customers. They are
designed to support our efforts to:

- produce high quality products;

- reduce working capital requirements;

- decrease the time to market for new products;

- deliver orders faster; and

- provide accurate and timely information.

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

We have implemented Web-based systems to provide accurate and timely
information and allow our representatives, dealers and distributors to check the
status of their orders at our secure Internet site. We also have designed and
tested systems to accept orders from consumers over the Internet in preparation
for distribution of our Hafler home theater products.

INTELLECTUAL PROPERTY

We rely upon a combination of trade secret and trademark laws,
non-disclosure agreements and patents to protect our proprietary rights. We have
registered many trademarks and trade names both in the U.S. and internationally
and are committed to maintaining and protecting them. We believe our trademarks
and trade names are material to

42
<PAGE> 44

our business and are well known among consumers in our principal markets. Our
principal trademarks and trade names include:

- Rockford Fosgate(R);

- The Punch(R);

- Connecting Punch(R);

- Punch Sport(R);

- Practice Safe Sound(R);

- Car Audio for Fanatics(R);

- Lightning Audio(R);

- Storm(TM);

- Bolt(TM);

- Strike(TM);

- Hafler(R); and

- Our "Diamond R" logo.

EMPLOYEES

As at June 30, 1999, we had 428 total employees. At that date, in the U.S.,
288 were engaged in manufacturing, 34 in research and development, 39 in sales
and marketing and 49 in administration. We also had 18 employees working outside
of the U.S. in various functions. We have never had a work stoppage and none of
our employees are unionized. We believe our employee relations are good.

FACILITIES

Our corporate headquarters and electronics manufacturing facilities are
located in Tempe, Arizona. We manufacture speakers at our facility in Grand
Rapids, Michigan. We use warehouses strategically located in the U.S., Japan,
Singapore and Germany that enhance our ability to serve our markets faster and
more cost effectively than many of our competitors. The following table contains
information about our facilities, all of which are leased:

<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE 1999 ANNUAL
FUNCTION LOCATION SQUARE FOOTAGE RENTAL EXPENSE LEASE EXPIRATION
- --------------------------- -------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Corporate headquarters..... Tempe, Arizona 15,000 $ 150,000 December 31, 2000(1)
Manufacturing, research and
development, and
purchasing............... Tempe, Arizona 22,000 306,000(2) December 31, 2000(1)
Warehousing, sales and
customer service......... Tempe, Arizona 25,000 -- December 31, 2000(1)
Warehousing and sales...... Tempe, Arizona 6,600 52,000 December 31, 1999
Warehousing and sales...... Tempe, Arizona 29,000 127,000 July 15, 2001
Manufacturing, research and
development, purchasing
and administration....... Grand Rapids, 81,000 246,000 March 31, 2001
Michigan
Warehousing and sales...... Japan 6,400 106,000 March 29, 2004
Warehousing................ Singapore 10,000 145,000 November 15, 2000
Warehousing................ Germany 17,000 137,000 December 30, 2006
------- ----------
Total............ 212,000 $1,269,000
</TABLE>

- ---------------
(1) We have the right to extend these leases for two additional one-year terms.

(2) Rent for this facility includes rent for our warehousing, sales and customer
service facility in Tempe, Arizona.

43
<PAGE> 45

ENVIRONMENTAL COMPLIANCE

Whenever possible, we avoid using hazardous materials in our production
processes. Two chemicals used in our basic processes, lacquer and flux, are
listed as hazardous materials by the U.S. Environmental Protection Agency. We
use them in limited quantities in our production facility, taking care to see
that they are stored, used and disposed of in the proper manner. We believe that
compliance with federal, state, local and foreign provisions regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, will not have a material effect upon our capital
expenditures, earnings and competitive position. We do not anticipate material
capital expenditures for environmental control facilities for the remainder of
the current fiscal year, or the succeeding fiscal year.

LEGAL PROCEEDINGS

In 1998, Integrated Electronic Technologies (IET) alleged in correspondence
that our patented TOPAZ circuit design infringed a patent of IET. The TOPAZ
circuit is used in our higher-priced "Punch" line of car audio amplifiers and in
our Hafler professional amplifiers. We believe that IET's allegations are
without merit. IET has not initiated any legal proceedings relating to this
claim and has not communicated with us about it since September 1998.

In addition to the above, we are and may continue to be a party to various
lawsuits and arbitrations from time to time. As of June 30, 1999 we were not a
party to any legal proceedings that we believe are material.

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<PAGE> 46

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table contains information regarding our executive officers
and directors as of the date of this prospectus:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
W. Gary Suttle(1)......................... 59 President, Chief Executive Officer and Director
David A. Boshes........................... 45 Vice President of Operations
Daniel C. McLeod.......................... 45 Vice President of Sales
David L. Richards......................... 52 Vice President of Information Technology
James C. Strickland....................... 61 Vice President of Engineering
James M. Thomson.......................... 52 Vice President of Finance, Chief Financial
Officer and Secretary
Ronald N. Trout........................... 40 Vice President of New Products
Alan R. Zimmerman......................... 42 Vice President of Product Design and Development
Jerry E. Goldress(1)(2)(3)................ 68 Chairman of the Board
Nicholas G. Bartol........................ 45 Director
Timothy C. Bartol(1)(2)(3)................ 43 Director
Ralph B. Godfrey(2)....................... 59 Director
John P. Lloyd(3).......................... 47 Director
</TABLE>

- ---------------
(1) Member of the executive committee.

(2) Member of the nominating and compensation committee.

(3) Member of the audit and finance committee.

W. Gary Suttle has served as President and Chief Executive Officer since
August 1992. From that time through December 31, 1998, he simultaneously served
as a partner in Grisanti, Galef & Goldress, a turnaround, growth and profit
improvement firm and provided his services to us through that firm under a
consulting agreement. From 1982 until 1992, Mr. Suttle was a partner in
Grisanti, Galef & Goldress and was involved in consulting and management for
various manufacturing and retail firms. From 1980 to 1982, Mr. Suttle was a
consultant with The Boston Consulting Group. He also served as a captain in the
U.S. Marine Corps where he was involved in special operations. Mr. Suttle holds
a B.S. in Electrical Engineering from Auburn University, an M.S. in Electrical
Engineering from the Georgia Institute of Technology and an M.B.A. from The
Harvard Graduate School of Business Administration.

David A. Boshes has served as Vice President of Operations since 1996 and
has served us in various positions since 1993, beginning as Production
Engineering Manager. From 1976 until 1993, Mr. Boshes held various technical
positions with Digital Equipment, ranging from Product Test Engineer to Plant
Engineering Manager. Mr. Boshes holds a B.S. in Electrical Engineering from
Northern Arizona University.

Daniel C. McLeod has served as Vice President of Sales since 1991 and has
served us in various sales positions since 1985. From 1982 to 1985, Mr. McLeod
operated a manufacturers representative firm selling consumer electronics. From
1975 to 1982, Mr. McLeod was a retail store manager for the Minneapolis-based
chain of Team Electronics.

David L. Richards has served as Vice President of Information Technology
since 1996 and, prior to that, as Director of Information Technology beginning
in 1993. From 1976 until 1993, Mr. Richards held a number of MIS management
positions for Digital Equipment with

45
<PAGE> 47

responsibility for systems and programming implementation. Mr. Richards also
served in the U.S. Army.

James C. Strickland has served as Vice President of Engineering since 1992
and has served us in other engineering and research positions since 1987. Prior
to joining us in 1987, he served in various engineering capacities with Sony,
MCI, Acoustat and The David Hafler Company. Mr. Strickland holds a B.S. in
Mathematics from the University of Miami (Florida). Mr. Strickland holds seven
U.S. patents, three of which have been assigned to Rockford, involving circuitry
used in home and auto amplifiers.

James M. Thomson has served as Vice President of Finance and Chief
Financial Officer since joining us in 1993. Prior to 1993, Mr. Thomson held
positions as Operations Finance Manager, Corporate Controller of Corporate
Planning and Director of Finance and Customer Administration for The Toro
Company Worldwide Irrigation Division. He was also a Senior Financial Analyst
for Litton Industries and operated his own consulting company. Mr. Thomson also
served in the U.S. Navy. Mr. Thomson holds a B.S. and M.S. in Applied Economics
from the University of Wisconsin - Madison.

Ronald N. Trout has served as Vice President of New Products since 1991
and, since 1987, he has served us in various positions, beginning as Customer
Service Manager, where he developed our technical training school, Rockford
Technical Training Institute. Mr. Trout attended Arizona State University where
he studied Mass Communications.

Alan R. Zimmerman has served as Vice President of Product Design and
Development since 1998 and has served us in various positions since 1988. Mr.
Zimmerman was with Honeywell from 1980 to 1988 where he held various positions
in cost and inventory accounting, manufacturing financial analysis and business
planning. Mr. Zimmerman holds a B.S. in Accounting and an M.B.A. from Arizona
State University.

Jerry E. Goldress has served as Chairman of the Board since 1998. Mr.
Goldress served as an advisory director to us from 1992 until 1998. Since 1981,
Mr. Goldress has served as Chairman and Chief Executive Officer of Grisanti,
Galef & Goldress. Mr. Goldress is also a director of Applied Magnetics, a
publicly held supplier of magnetic recording heads and head stack assemblies for
disc drives, and of K2, Inc., a publicly held manufacturer of snow ski
equipment. Mr. Goldress has a B.S. and M.S. in Industrial Engineering from
Pennsylvania State University.

Nicholas G. Bartol has served as a director since 1985, except for a
two-year period from 1991 to 1993. Mr. Bartol was employed by EFW, a defense
contractor, from 1985 until April 1999. Mr. Bartol holds an A.B. from Brown
University, an M.B.A. from Southern Methodist University and a Master of
Theology from Dallas Theological Seminary. Mr. Bartol is the brother of Timothy
C. Bartol.

Timothy C. Bartol has served as a director since 1997 and served as our
Chairman in 1997 and 1998. Mr. Bartol has been employed since 1994 by Phillips
Publishing and, since 1997, has served as Director of Applications Development.
Mr. Bartol holds a B.A. from Stanford University, and an M.B.A. and M.S./M.I.S.
from Boston University. Mr. Bartol is the brother of Nicholas G. Bartol.

Ralph B. Godfrey has served as a director since April 1999. Mr. Godfrey has
been employed since 1990 by 3Com, a publicly held manufacturer of computer
networking products. He has held various sales positions including Senior Vice
President of Americas Sales. He is currently managing 3Com's electronic business
operations as Vice President of E-Business. Mr. Godfrey holds a B.S.E.E. and an
M.S. in Electrical Engineering from Auburn University.

46
<PAGE> 48

John P. Lloyd has served as a director since 1988. Mr. Lloyd has worked
since 1994 as a Managing Director in the Investment Management Group of Aetna.
Mr. Lloyd is a Chartered Financial Analyst and has a B.S. in Finance from
Villanova University and an M.B.A. in Investments from Drexel University.

COMMITTEES OF THE BOARD OF DIRECTORS

The executive committee of the board of directors meets periodically to
advise upon and approve Rockford's business and affairs that may arise between
the regularly scheduled board meetings. The current members of the executive
committee are Messrs. Goldress (Chair), T. Bartol and Suttle.

The nominating and compensation committee of the board of directors
recommends officers and directors to the board of directors and reviews and
approves the amount and type of compensation paid to senior management. The
current members of the nominating and compensation committee are Messrs. T.
Bartol (Chair), Godfrey and Goldress.

The audit and finance committee of the board of directors reviews our
accounting controls and recommends to the board of directors the engagement of
our outside auditors. The current members of the audit and finance committee are
Messrs. Lloyd (Chair), T. Bartol and Goldress.

DIRECTOR COMPENSATION

We compensate our non-executive directors by paying them $1,000 per
quarter. In addition to compensation, we reimburse directors for their
reasonable travel expenses incurred in attending board and committee meetings.

We have also customarily granted to our non-executive directors options
under our 1994 and 1997 Stock Option Plans. The following table sets forth all
information pertinent to such grants to our current board of directors.

<TABLE>
<CAPTION>
TERM
NAME NUMBER OF SHARES EXERCISE PRICE (YRS)
- ---- ---------------- ---------------- -----
<S> <C> <C> <C>
Jerry E. Goldress............................... 34,400 $2.44 10
John P. Lloyd................................... 73,100 $2.44 10
Nicholas G. Bartol.............................. 8,600 $2.44 5
Timothy C. Bartol............................... 8,600 $2.44 5
Ralph B. Godfrey(1)............................. -- -- --
</TABLE>

- ---------------
(1) On the effective date of this offering, we plan to grant to Mr. Godfrey an
option to purchase 64,500 shares at an exercise price equal to the price in
this offering.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 1998, executive compensation decisions were made by our board's
nominating and compensation committee which consisted of Messrs. T. Bartol,
Goldress and Suttle. During that time, Mr. Suttle was an executive officer of
Rockford and Mr. Goldress' firm of Grisanti, Galef & Goldress had a consulting
agreement with us. None of our directors serve on the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of our board of directors or nominating and compensation
committee.

47
<PAGE> 49

EMPLOYMENT AGREEMENTS

Except for Mr. Suttle, none of our executive officers has a written
employment agreement. See "Certain Relationships and Related
Transactions -- Suttle Employment Agreement" for a description of Mr. Suttle's
employment agreement. We maintain a $1.0 million key-person life insurance
policy on Mr. Suttle.

EXECUTIVE COMPENSATION

The following table shows all compensation earned during 1998 by our
President and Chief Executive Officer and our other four most highly compensated
executive officers whose salaries and bonuses in aggregate exceeded $100,000 in
1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------- ---------------------
SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY(1) BONUS STOCK OPTIONS
- --------------------------- --------- -------- ---------------------
<S> <C> <C> <C>
W. Gary Suttle................................. $360,000 $120,000 --
President and Chief Executive Officer(2)
David A. Boshes................................ 137,458 26,000 17,200
Vice President of Operations
Daniel C. McLeod............................... 175,107 23,000 24,725
Vice President of Sales
David L. Richards.............................. 136,964 26,000 17,200
Vice President of Information Technology
James M. Thomson............................... 137,500 23,000 21,500
Vice President of Finance and Chief Financial
Officer
</TABLE>

- ---------------
(1) Amounts listed are annual base salaries, with the exception of Mr. McLeod,
who is paid commissions based on our sales. Mr. McLeod's commissions are
included in the salary column. Amounts listed include amounts deferred under
any Rockford deferred salary plan.

(2) All compensation for Mr. Suttle's services was paid to Grisanti, Galef &
Goldress, under a consulting agreement with that firm. Mr. Suttle's services
under the consulting agreement ended and he became a Rockford employee on
January 1, 1999.

1998 STOCK OPTION GRANTS

The following table summarizes the stock options we granted to our officers
listed on the Summary Compensation Table for 1998. We have never granted any
stock appreciation rights.

The Securities and Exchange Commission requires that we use the assumed
annual compounded rates of stock price appreciation of 5% and 10% shown in this
table. These rates are only an illustration and are not based on our anticipated
results. Our stock price may increase or decrease, based on market conditions,
our performance and many other factors. You should not rely on the amounts in
this table as a projection of our performance over any time period.

48
<PAGE> 50

INDIVIDUAL GRANT(1)

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
PERCENT OF STOCK PRICE
TOTAL OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM(2)
NUMBER OF EMPLOYEES IN PRICE PER --------------------
NAME SHARES 1998 SHARE EXPIRATION DATE 5% 10%
- ---- --------- ------------- --------- --------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
W. Gary Suttle......... -- -- -- -- -- --
David A. Boshes........ 17,200 11.5% $5.81 8/31/08 $62,889 $159,400
Daniel C. McLeod....... 21,500 14.4 5.81 8/31/08 78,612 199,218
3,225 2.2 4.19 2/01/08 8,490 21,516
David L. Richards...... 17,200 11.5 5.81 8/31/08 62,889 159,374
James M. Thomson....... 21,500 14.4 5.81 8/31/08 78,612 199,218
</TABLE>

- ---------------
(1) All options were granted under our 1997 Stock Option Plan. 25% of the option
shares are exercisable on the day of the grant and 25% become exercisable on
each of the first three anniversaries of the grant date.

(2) This column represents the hypothetical gain if (1) the employee exercises
the options at the end of the option term, (2) the shares had a fair market
value on the date of grant equal to the option price and (3) the shares
appreciate at the assumed rates of compounded annual growth. The employee's
actual gain, if any, will depend on the performance of our stock and on
market conditions. It may be more or less than the assumed amounts.

1998 OPTION EXERCISES AND YEAR-END OPTION VALUES

The following table contains information concerning the exercise of stock
options during the fiscal year ended December 31, 1998 by our officers listed on
the Summary Compensation Table:

- the shares that our executive officers purchased during 1998 by
exercising their stock options; and

- the number and value of unexercised options our officers listed on the
Summary Compensation Table held at December 31, 1998. Value is determined
by subtracting the exercise price from our board's deemed fair market
value at that date.

<TABLE>
<CAPTION>
VALUE OF
1998 OPTION UNEXERCISED IN-THE-MONEY
EXERCISES UNEXERCISED OPTIONS AT OPTIONS AT
------------------- DECEMBER 31, 1998 DECEMBER 31, 1998
SHARES VALUE ----------------------------- -----------------------------
ACQUIRED REALIZED EXERCISABLE NOT EXERCISABLE EXERCISABLE NOT EXERCISABLE
-------- -------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
W. Gary Suttle........ -- -- 38,700 -- $202,446 $ --
David A. Boshes....... -- -- 64,500 21,500 349,091 55,151
Daniel C. McLeod...... -- -- 62,621 23,379 339,608 55,272
David L. Richards..... -- -- 60,200 25,800 307,097 70,145
James M. Thomson...... -- -- 63,425 22,575 343,593 53,650
</TABLE>

STOCK OPTION PLANS

We have two stock option plans, the 1994 Stock Option Plan and the 1997
Stock Option Plan. The plans are substantially similar. Both provide for the
grant of incentive stock options and non-qualified stock options to our
consultants, directors, officers and key employees. The purpose of the plans are
to:

- attract and retain skilled and qualified officers, directors and key
employees;

49
<PAGE> 51

- motivate them to achieve our long-range goals; and

- align their interests with the interests of our shareholders.

The board of directors adopted the 1994 Stock Option Plan on January 26,
1995 and the 1997 Stock Option Plan on April 22, 1998. The shareholders approved
the 1994 plan on April 25, 1995 and the 1997 plan on April 22, 1998.

We have reserved a total of 2,150,000 shares for issuance under both plans.
As at June 30, 1999, we had:

- issued 32,034 shares under the plans;

- outstanding options to purchase 1,780,981 shares under the plans at a
weighted average exercise price of $3.55 per share; and

- 336,984 shares still available for future grant.

Shares of common stock reserved for issuance upon the exercise of options under
a plan are available for future reissuance under the plan if the options expire
or terminate without being exercised. Under the 1997 plan, the maximum number of
shares any individual may receive during a calendar year is 430,000 shares.
There is no similar maximum under the 1994 plan. Under both plans, in the case
of incentive stock options, the aggregate fair market value of stock that is
exercisable for the first time by any individual during any calendar year may
not exceed $100,000.

The nominating and compensation committee of the board of directors
administers the plans. The committee has discretion to determine:

- who should receive options;

- how many shares to include in each grant;

- the exercise price for each option;

- whether an option should be an incentive option or a non-statutory option
under the federal tax laws (except that only our employees may receive
incentive options);

- the vesting schedule for each option;

- the term of each option; and

- other material terms of the options granted.

Option holders may pay the exercise price for options in cash or, at the
committee's discretion, in shares of common stock. Also at the committee's
discretion, option holders may exercise on a cashless basis through the same-day
sale of the purchased shares.

The vesting schedule for all options awarded to date provides for 25% of
the option shares granted to vest on the date of grant and 25% to vest on each
of the first three anniversaries of the grant date. The options also fully vest
if we agree to sell all or substantially all of our assets or shares or to merge
with another company if our shareholders do not have a controlling interest in
the surviving entity.

Prior to expiration of the 1994 plan on December 22, 2004 and the 1997 plan
on October 28, 2007, the board of directors may terminate, amend or modify
either plan at any time; however, no termination, amendment or modification may
adversely change the rights of holders of outstanding options without their
consent.

50
<PAGE> 52

OTHER OPTIONS

We also granted options to Grisanti, Galef and Goldress before the adoption
of the 1994 plan as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE EXPIRATION DATE
---------------- -------------- ---------------
<S> <C> <C>
215,000 $1.51 August 1, 2002
</TABLE>

1999 EMPLOYEE STOCK PURCHASE PLAN

Our board of directors adopted, and the shareholders approved on May 17,
1999, the 1999 Employee Stock Purchase Plan. A total of 361,200 shares of our
common stock are reserved for issuance under the plan, which will become
effective on September 1, 1999.

The plan is intended to qualify under Section 423 of the Internal Revenue
Code and provides for six-month offering periods. Each offering period includes
one purchase period.

Employees are generally eligible to participate if they are employed by us
or a participating subsidiary for at least 20 hours per week and more than five
months in any calendar year. However, the plan does not permit an employee to
participate if the employee either:

- immediately after the grant, owns shares controlling 5% or more of the
total combined voting power of our shares or

- has the right to purchase more than $25,000 worth of our shares under all
of our employee stock purchase plans in each calendar year.

The plan permits employees to purchase common stock through payroll deductions
of up to 10% of the employee's base earnings. The maximum number of shares an
employee may purchase during a single purchase period is 1,000 shares.

The price for shares purchased under the plan is generally 85% of the fair
market value of the shares (1) at the beginning of the offering period or (2) at
the end of the offering period, whichever is less. Employees may end their
participation at any time during a offering period, and we will repay their
payroll deductions as of the date they stop participating. Participation ends
automatically upon termination of employment with us.

Rights granted under the plan are generally not transferable by an employee
other than by will or the laws of descent and distribution. In the event that we
merge with or into another corporation and we are not the surviving corporation
or sell substantially all of our assets, each outstanding right under the plan
will be automatically exercised to the extent of existing payroll deductions as
of the effective date of the merger or asset sale.

The board of directors has the authority to terminate or amend the plan,
however, the shareholders must approve any amendment that will increase the
total number of shares for which rights may be granted. The shareholders must
also approve any amendment that is required by reason of section 423 of the
Internal Revenue Code. The plan will terminate automatically ten years from its
effective date unless it is terminated sooner by the board.

51
<PAGE> 53

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

GRISANTI, GALEF & GOLDRESS CONSULTING AGREEMENT

We initially retained Grisanti, Galef & Goldress to provide Mr. Suttle's
consulting services to us under a February 1992 letter agreement. Effective on
August 1, 1992, we named Mr. Suttle our President and Chief Executive Officer
and entered into a consulting agreement with Grisanti, Galef & Goldress. Under
the consulting agreement, we retained Grisanti, Galef & Goldress to provide
services for three years beginning on August 1, 1992. We agreed to pay
consulting fees of $360,000 per year and bonus fees of up to $120,000 per year.
In addition, we granted Grisanti, Galef & Goldress an option to purchase up to
215,000 shares of our common stock at an exercise price of $5.35 per share. In
October 1994, we agreed to reduce the exercise price of the option to $1.51 per
share.

We renewed our agreement with Grisanti, Galef & Goldress effective as of
August 1, 1995, extending the term for five more years. We agreed to continue
paying consulting fees of $360,000 per year and bonus fees up to $120,000 per
year. We paid bonus fees of $120,000 during 1997 and $120,000 during 1998. We
also agreed in 1995 to extend the 215,000-share stock option so that it now
expires on August 1, 2002.

Effective January 1, 1999, the consulting agreement was amended to
discharge our remaining obligation to pay consulting fees or bonuses to
Grisanti, Galef & Goldress, in exchange for a grant to Mr. Goldress of options
to purchase 21,500 shares of our common stock under our 1997 Stock Option Plan.
Also on that date, Mr. Suttle became a Rockford employee under the terms of a
formal employment agreement. The consulting agreement as amended January 1,
1999, gives us the right, but not the obligation, to retain Grisanti, Galef &
Goldress to provide consulting services.

SUTTLE/BARTOL OPTION AGREEMENT

Mr. Suttle holds an option to purchase 795,500 shares of our common stock
from Monument Investors Limited Partnership, a family partnership controlled by
two of our directors, Messrs. N. and T. Bartol. This option was originally
granted to Mr. Suttle effective August 1, 1992 and fully vested on August 1,
1995 as consideration for his agreement to serve as director, Chief Executive
Officer and President of Rockford for a period of not less than three years. On
August 1, 1995, the agreement was amended to extend the term of the option from
August 1, 1999 to August 1, 2002 and to increase the exercise price of the
options during the extended period. The exercise price of Mr. Suttle's options
increase over time on the following schedule:

<TABLE>
<S> <C>
$0.37 per share.......................... On or before August 1, 1995
$0.41 per share.......................... After August 1, 1995 and on or before
August 1, 1999
$0.70 per share.......................... After August 1, 1999 and on or before
August 1, 2002
</TABLE>

CAROLINE BARTOL NOTE

In March 1996, we borrowed $2.0 million from Caroline Bartol, the mother of
Messrs. N. and T. Bartol. On July 1, 1996, Mrs. Bartol converted $1.0 million of
this loan into 289,562 shares of common stock and extended the $1.0 million
balance of the loan in exchange for our grant of an option to convert this
balance into shares of our common stock at a purchase price of $3.45 per share.
Mrs. Bartol assigned the loan and the option to Boulder Investors Limited
Partnership, a partnership owned by the Bartol children, which exercised the
option and converted the note into 289,562 shares on May 1, 1999.

52
<PAGE> 54

SUTTLE EMPLOYMENT AGREEMENT

The principal terms of our agreement with Mr. Suttle are as follows:

- five-year term ending January 1, 2004;

- initial base salary of $400,000 per year, subject to increases at the
discretion of our nominating and compensation committee;

- bonus potential of up to 50% of salary at the discretion of the board of
directors and the compensation committee based upon our performance;

- participation in our stock option plan, with an initial grant of 86,000
shares at $7.67 per share as of January 1, 1999;

- payment by us of up to $36,000 per year in premiums on a "split dollar"
life insurance policy for Mr. Suttle's benefit; and

- we may terminate the agreement at any time after the first year.

If we terminate without good cause, or if Mr. Suttle terminates for good reason,
we must continue to pay Mr. Suttle's base salary for 18 months after the
termination. Mr. Suttle shall not compete with us, call on any of our customers
or induce any of our employees to work for another business during the term of
the agreement and for twelve months after the later of (1) the termination date
or (2) the day we stop paying severance payments under the employment agreement.

53
<PAGE> 55

PRINCIPAL AND SELLING SHAREHOLDERS

This table contains information with respect to the beneficial ownership of
our outstanding common stock as at June 30, 1999, both before and immediately
following this offering by:

- each of our directors and our officers listed on the Summary Compensation
Table;

- all executive officers and directors as a group;

- each person who is known by us to own beneficially more than five percent
of our outstanding common stock; and

- each of the selling shareholders.

The following calculation of the percentage of outstanding shares is based on
4,735,201 shares of common stock outstanding as at June 30, 1999. For beneficial
ownership after the offering, the following calculation assumes conversion of
$278,953 of the 8.5% convertible subordinated debentures into 114,236 shares to
occur upon completion of the offering, conversion of 14,424 of the warrants into
14,424 shares to occur upon completion of the offering, and the issuance of
64,500 options to Ralph Godfrey at the initial public offering price to occur
upon completion of the offering and no exercise of the underwriters' over-
allotment option. Beneficial ownership is determined in accordance with the
Securities and Exchange Commission's rules and generally includes voting or
investment power with respect to securities, subject to community property laws,
where applicable. Shares of common stock subject to options, warrants and
convertible debentures that are exercisable or convertible within 60 days of May
15, 1999 are deemed to be outstanding and beneficially owned by the person
holding the option, warrant or debenture for the purpose of computing the
percentage of ownership of that person, but they are not deemed outstanding for
the purpose of computing the percentage of ownership of any other person.

Except as otherwise noted, each of the persons or entities named in the
table below have sole voting and investment power with respect to all the shares
of common stock beneficially owned by them.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OFFERING NUMBER OF OWNED AFTER OFFERING
---------------------- SHARES ---------------------
NUMBER PERCENT OFFERED NUMBER PERCENT
---------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS, DIRECTORS AND 5%
SHAREHOLDERS:
Nicholas G. Bartol(1)................ 3,820,031 79.2% 399,439 3,420,592 45.9%
Timothy C. Bartol(2)................. 3,812,555 79.2 399,439 3,413,016 45.9
Monument Investors Limited
Partnership(3)..................... 3,154,016 66.6 3,154,016 42.8
W. Gary Suttle(4).................... 877,200 18.2 877,200 11.8
Boulder Investors Limited
Partnership(5)..................... 579,124 12.7 399,439 203,054 2.8
Jerry E. Goldress(6)................. 241,465 4.8 241,465 3.2
James M. Thomson(7).................. 90,082 1.9 90,082 1.2
David A. Boshes(8)................... 77,812 1.6 77,812 1.1
Daniel C. McLeod(9).................. 68,800 1.4 68,800 *
David L. Richards(10)................ 67,046 1.4 67,046 *
John P. Lloyd(11).................... 30,867 * 30,867 *
Ralph B. Godfrey(12)................. 0 * 16,125 *

ALL EXECUTIVE OFFICERS AND DIRECTORS
AS A GROUP (13 PERSONS)(13)........ 4,237,789 82.4% 399,439 4,254,375 52.2%
</TABLE>

54
<PAGE> 56

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OFFERING NUMBER OF OWNED AFTER OFFERING
---------------------- SHARES ---------------------
NUMBER PERCENT OFFERED NUMBER PERCENT
---------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
OTHER SELLING SHAREHOLDERS:
Glenn and Pamela Carrio(14)........ 216,435 4.4 119,174 97,261 1.3
Kathryn A. Coffey, Trustee and
Individually.................... 95,459 2.0 48,160 47,299 *
Will Hegarty....................... 64,500 1.4 60,200 4,300 *
Otto Shill......................... 54,966 1.2 54,966 0 *
Robert Langford.................... 37,410 * 37,410 0 *
Kevin Campbell..................... 28,380 * 25,800 2,580 *
Sidney Smith....................... 23,146 * 23,146 0 *
Darrell Chapman.................... 22,678 * 22,678 0 *
Vrolyk & Company................... 21,500 * 10,750 10,750 *
Franklin Richards.................. 20,566 * 20,566 0 *
Scott and Kathy Carter............. 20,329 * 20,329 0 *
David Nettleton.................... 10,279 * 10,279 0 *
Gordon MacInnes.................... 9,973 * 4,300 5,673 *
Robert S. Pothier.................. 8,995 * 8,995 0 *
Don Hammerle....................... 8,794 * 8,062 732 *
John P. Frank...................... 6,450 * 6,450 0 *
Larry Ulrich....................... 4,515 * 1,075 3,440 *
Rebecca P. Harris.................. 3,074 * 1,505 1,569 *
Brigham P. Herzfeld................ 3,074 * 1,531 1,543 *
Andy Szabo......................... 1,720 * 1,720 0 *
John Seaver........................ 860 * 860 0 *
Marion Szabo....................... 430 * 430 0 *
</TABLE>

- ---------------
* Represents less than 1%.

(1) Includes 3,154,016 shares held by Monument Investors Limited Partnership,
for which Mr. Bartol serves as general partner; 602,493 shares held by
Boulder Investors Limited Partnership, for which Mr. Bartol serves as
general partner; 31,782 shares held by GST Exempt Trust, a trust in which
Mr. Bartol has a beneficial interest; 15,971 shares underlying convertible
debentures; 4,095 shares underlying convertible debentures held by Mr.
Bartol's wife; and 8,600 shares underlying options. Mr. Bartol disclaims
beneficial ownership of the shares held by his wife. Mr. Bartol's address
is 239 Cove Drive, Coppell, Texas 75019.

(2) Includes 3,154,016 shares held by Monument Investors Limited Partnership,
for which Mr. Bartol serves as general partner; 602,493 shares held by
Boulder Investors Limited Partnership, for which Mr. Bartol serves as
general partner; 31,782 shares held by GST Exempt Trust, a trust in which
Mr. Bartol has a beneficial interest; 11,264 shares underlying convertible
debentures; 6,450 shares underlying options held by Mr. Bartol; and 6,450
shares underlying options held by Mr. Bartol's wife. Mr. Bartol disclaims
beneficial ownership of the shares held by his wife. Mr. Bartol's address
is 9200 Willow Pond Lane, Potomac, Maryland 20854.

(3) Monument Investors Limited Partnership's address is c/o Mr. T. Bartol, 9200
Willow Pond Lane, Potomac, Maryland 20854. It is controlled by Mr. T.
Bartol, Mr. N. Bartol, Pamela Carrio and Ann Farr Butterfield, the four
natural children of John and Caroline Bartol.

55
<PAGE> 57

(4) Includes 21,500 shares underlying convertible debentures; 795,500 shares
underlying options granted by Monument Investors Limited Partnership; and
60,200 shares underlying options granted under our stock option plans. Mr.
Suttle's address is c/o Rockford Corporation, 546 Rockford Drive, Tempe,
Arizona 85281.

(5) Includes 23,369 shares that we will issue upon exercise of warrants.
Boulder Investors Limited Partnership's address is c/o Mr. T. Bartol, 9200
Willow Pond Land, Potomac, Maryland 20854. It is controlled by Mr. T.
Bartol, Mr. N. Bartol, Pamela Carrio and Ann Farr Butterfield, the four
natural children of John and Caroline Bartol.

(6) Includes 8,190 shares underlying convertible debentures and 233,275 shares
underlying options.

(7) Includes 20,476 shares underlying convertible debentures and 69,066 shares
underlying options.

(8) Includes 8,206 shares underlying convertible debentures and 69,066 shares
underlying options.

(9) Includes 68,800 shares underlying options.

(10) Includes 1,740 shares underlying convertible debentures and 65,306 shares
underlying options.

(11) Includes 6,142 shares underlying convertible debentures and 24,725 shares
underlying options.

(12) Includes 16,125 shares underlying options to be granted and vested upon
completion of this offering.

(13) Includes 113,220 shares underlying convertible debentures, 55,337 shares
underlying warrants and 727,220 shares underlying options.

(14) Includes 207,835 shares underlying convertible debentures. 204,761 of these
shares are held by Carrio Cabling Corporation, a corporation owned by Mr.
and Mrs. Carrio.

We will bear all of the expenses of this offering, other than the
underwriting discounts and commissions, stock transfer and other taxes
attributable to the shares of common stock sold by the selling shareholders, and
legal and other advisors' fees and expenses incurred by the selling
shareholders, which will be borne by the selling shareholders.

56
<PAGE> 58

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

As at June 28, 1999, we increased our authorized capital stock to
40,000,000 shares of common stock, $.01 par value per share. The following
summary is qualified in its entirety by reference to our articles of
incorporation and bylaws, copies of which are filed as exhibits to the
registration statement of which this prospectus is a part.

COMMON STOCK

Holders of our common stock are entitled to one vote per share on all
matters to be voted upon by the shareholders, except for the election of
directors. The holders of common stock have cumulative voting rights with
respect to the election of directors and, as a result, minority shareholders may
be able to elect directors on the basis of their votes alone. Holders of common
stock are entitled to receive pro rata dividends as may be declared by the board
of directors out of funds legally available as dividends. In the event of our
liquidation, dissolution or winding up, holders of common stock are entitled to
share pro rata in all assets remaining after payment of liabilities. Holders of
our common stock have no preemptive, conversion or other rights to subscribe for
additional securities. There are no redemption or sinking fund provisions
applicable to our common stock. All outstanding shares of common stock are, and
all shares of common stock to be outstanding upon completion of the offering
will be, validly issued, fully paid and nonassessable.

As at June 30, 1999, assuming the conversion of $278,953 of the 8.5%
convertible subordinated debentures into 114,236 shares and the issuance of
14,424 shares upon exercise of warrants, both to occur upon completion of this
offering, there were outstanding 4,863,861 shares of common stock, options to
purchase 1,995,981 shares of common stock, warrants to purchase 83,911 shares of
common stock and debentures convertible into 293,123 shares of common stock.
Upon completion of this offering, 7,363,861 shares of common stock will be
outstanding, assuming no exercise of the underwriters' over-allotment option and
no exercise or conversion of options, warrants or convertible debentures after
June 30, 1999.

WARRANTS

As of the date of this prospectus, warrants to purchase 76,835 shares of
common stock at an exercise price of $0.93 per share and warrants to purchase
21,500 shares of common stock at an exercise price of $3.45 per share were
outstanding. The common stock that we will issue upon exercise of the 76,835
warrants is subject to registration rights, which are described below.

DEBENTURES

As of the date of this prospectus, holders of the 8.5% convertible
subordinated debentures had the right to convert their debentures into 407,359
shares of our common stock at a conversion price of $2.44 per share. The common
stock that we will issue upon conversion of these debentures is subject to
registration rights, which are described below.

REGISTRATION RIGHTS

The holders of approximately 76,835 shares of common stock, that we will
issue upon exercise of outstanding warrants, have registration rights for those
shares. The conditions imposed on these registration rights include "piggyback"
registration rights relating to any public offering we conduct and demand
registration rights exercisable on one occasion. In order to require a demand
registration, holders of at least 50% of the warrants or of common

57
<PAGE> 59

stock obtained by prior conversion of the warrants must request registration and
the proposed offering must be expected to raise proceeds of at least $7.5
million.

The holders of approximately 407,359 shares of common stock, that we will
issue if the holders of the 8.5% convertible subordinated debentures exercise
their conversion rights, have registration rights for those shares. Their rights
are subject to conditions that are typically imposed on registration rights.
They include "piggyback" registration rights relating to any public offering we
conduct and demand registration rights exercisable on one occasion. In order to
require a demand registration, holders of at least 50% of the debentures or of
common stock issued upon conversion of the debentures must request registration
and the proposed offering must be expected to raise proceeds of at least $15.0
million.

ANTI-TAKEOVER PROVISIONS IN OUR ARTICLES OF INCORPORATION AND BYLAWS AND OPT-OUT
FROM THE ARIZONA CONTROL SHARE ACQUISITION AND BUSINESS COMBINATION STATUTE

Articles of Incorporation and Bylaws. Our board of directors may issue
additional shares of common stock without shareholder approval, to the extent
shares are authorized for issuance in our articles of incorporation. This may
protect the continuity of management because it gives the board of directors
power to discourage an acquisition. The board of directors may exercise this
power, subject to compliance with fiduciary duties, even if our shareholders
would receive a premium over the market price for their shares. For example, if
the board of directors decides that a takeover proposal is not in our best
interest, the board of directors could issue shares that make completion of a
takeover more difficult and more costly by:

- diluting the voting or other rights of the proposed acquiror or insurgent
shareholder group;

- putting a substantial voting block in institutional or other hands that
support the incumbent board of directors; or

- effecting an acquisition that complicates or precludes the takeover.

Our articles of incorporation require approval of any amendments by a
two-thirds vote of the outstanding shares. This requirement limits the ability
of shareholders to change the restrictions described above by voting to amend
our articles of incorporation.

Our bylaws provide for our board to have from two to eleven directors.
Directors are elected at the annual shareholders meeting, with each director
holding office until his or her successor is elected. Our directors are not
classified and are elected annually. Our articles of incorporation require that:

- two-thirds of our board of directors approve any increase in the size of
our board of directors;

- the shareholders may remove a director only for cause; and

- only the board of directors may fill a vacancy on the board of directors.

These requirements may restrict the ability of a hostile bidder to gain control
of our board of directors by limiting the bidder's right to add new directors or
replace existing directors.

Our bylaws provide that special meetings of shareholders may be called only
by our President or a majority of the board of directors. Shareholders may not
call shareholders meetings and, under Arizona law, may act by written consent in
lieu of a meeting only if all shareholders sign the consent. Our bylaws require
that shareholders who wish to place an item on the agenda for a shareholders
meeting, or who wish to nominate a person for election as a director, must give
at least 30 days notice of the proposed agenda item or name of the

58
<PAGE> 60

person nominated. Together, these restrictions may limit proxy contests seeking
to control us by

- limiting shareholders' ability to call a special shareholders meeting,

- making shareholder action by written consent impossible as a practical
matter, and

- giving the board of directors advance notice of hostile annual meeting
proposals.

These provisions are intended to enhance the likelihood of continuity and
stability in the composition of our board of directors and in the policies
formulated by them and to discourage transactions that may involve an actual or
threatened change of control of Rockford. These provisions are designed to
reduce our vulnerability to an unsolicited proposal for takeover that does not
contemplate the acquisition of all of our outstanding shares, or an unsolicited
proposal for the restructuring or sale of all or part of Rockford. These
provisions, however, could discourage potential acquisition proposals and could
delay or prevent a change in control of Rockford. These provisions may also have
the effect of preventing changes in our management.

Opt-out from Arizona Control Share Acquisition and Business Combination
Statute. We have opted out of the Arizona statute regulating control share
acquisitions and business combinations, A.R.S. Title 10, Chapter 23. As a
result, potential bidders are not subject to the statute's restrictions on
control share acquisitions or business combinations with us.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

Our articles of incorporation limit, to the maximum extent permitted by
Arizona law, the liability of our directors for monetary damages arising from a
breach of their duties as directors. The limitation of liability does not affect
the availability of equitable remedies such as injunctive relief or rescission.

Our articles of incorporation require us to indemnify our directors and
officers, to the maximum extent permitted by Arizona law, against liability for
acts or omissions within the scope of their authority as directors or officers.
Indemnification is prohibited if our board of directors finds that the person's
action or omission was willful, grossly negligent, or with fraudulent or
criminal intent, or for liabilities under the Securities Act of 1933. Under
Arizona law, we may indemnify a director or officer against liability incurred
on account of service to us, if the director or officer:

- conducted himself or herself in good faith;

- reasonably believed that his or her conduct (1) if in an official
capacity, was in our best interests or (2) if in any other capacity, was
not opposed to our best interests;

- in the case of any criminal proceeding, had no reasonable cause to
believe that his or her conduct was unlawful; and

- did not improperly receive personal benefit.

Before completing this offering, we intend to enter into indemnification
agreements with each of our directors. These agreements will generally obligate
us to indemnify them for liability incurred by them as a result of their service
as directors, unless (1) their liability arises as a result of their fraud,
deliberate dishonesty or willful misconduct or (2) Arizona law prohibits
indemnification. Prior to completing this offering, we will obtain liability
insurance for our directors.

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<PAGE> 61

LISTING

We have applied for quotation of our common stock on The Nasdaq National
Market under the symbol "ROFO."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is First Chicago
Trust Company of New York and its address is 525 Washington Boulevard, Jersey
City, New Jersey 07310.

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<PAGE> 62

SHARES ELIGIBLE FOR FUTURE SALE

NO PRIOR MARKET

We have not had any public market for our common stock before this
offering. If our shareholders decide to sell many of their shares in the public
market, the price of our shares could go down and we could find it hard to raise
capital by selling more shares.

OUTSTANDING SHARES AND REGISTRATION

After this offering, we will have 7,363,861 shares of common stock
outstanding, assuming no exercise of the underwriters' over-allotment option and
no exercise or conversion of outstanding options, warrants and convertible
debentures after May 15, 1999 other than the conversion of $278,953 of the 8.5%
convertible subordinated debentures into 114,236 shares and the issuance of
14,424 shares upon exercise of warrants, both to occur upon completion of this
offering. Of these shares, the 3,387,824 shares sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act of 1933, except that shares held by our "affiliates" will be subject to the
restrictions of Rule 144 under the Securities Act of 1933 described below. The
remaining 3,967,037 outstanding shares of common stock will be "restricted
securities" under Rule 144.

LOCK-UP AGREEMENTS

Our directors, executive officers and other shareholders, holding 3,644,344
shares in the aggregate, have agreed that they will not sell, directly or
indirectly, any shares of common stock without the prior written consent of Dain
Rauscher Wessels for a period of 180 days after the date of this prospectus.
Subject to these lock-up agreements, our outstanding shares of common stock will
be eligible for sale in the public market as follows:

<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES ELIGIBLE FOR SALE AFTER EXPLANATION
- ---------------- ------------------------------------- -------------------------------------
<C> <S> <C>
3,719,517 Date of this prospectus - Freely tradeable shares sold in
this offering; and
- Shares saleable under Rule 144(k)
that are not subject to the 180-day
lock-up
0 Filing of a registration statement on Option shares that are not subject to
Form S-8 to register for resale the 180-day lock-up
shares issued upon exercise of stock
options
0 90 days from the date of this Shares saleable under Rule 144 that
prospectus are not subject to the 180-day lock-
up or eligible for sale under Rule
701
6,081,859 180 days from the date of this Shares saleable under:
prospectus - Rule 144 or Rule 701 (subject, in
some cases, to volume limitations);
- Rule 144(k); or
- Pursuant to a registration
statement to register for resale
shares of common stock issued upon
the exercise of stock options
0 Over 180 days from the date of this Restricted shares held for less than
prospectus one year and not yet saleable under
Rule 144
</TABLE>

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<PAGE> 63

SALES RESTRICTIONS

In general under Rule 144, if restricted shares were purchased from us (or
any affiliate of ours) more than one year ago, their owner may sell them in
"brokers' transactions" or to market makers. The owner may not sell, in any
three-month period, more than the greater of (1) one percent of our
then-outstanding shares of common stock (approximately shares
immediately after this offering), or (2) the average weekly trading volume in
our common stock during the four calendar weeks before a Form 144 notice of sale
is filed with the Securities Exchange Commission at its principal office in
Washington D.C. and to any national securities exchange on which such securities
are traded. The Form 144 shall be signed by the person for whose account the
securities are to be sold and shall be transmitted for filing concurrently with
either the placing with a broker of an order to execute a sale of securities in
reliance on Rule 144 or the execution directly with a market maker of such a
sale. Neither the filing of such notice nor the failure of the Commission to
comment thereon shall be deemed to preclude the Commission from taking any
action it deems necessary or appropriate with respect to the sale of the
securities referred to in such notice. The owner may make sales only if current
public information is available about us.

If the restricted shares were purchased from us (or any affiliate of ours)
more than two years ago, then their owner may sell them under Rule 144(k)
without regard to the volume limitations or manner of sale, public information
or notice of sale requirements of Rule 144. This does not apply if the owner was
an affiliate of ours at any time during the 90 days before the sale.

STOCK OPTION RESTRICTIONS

Under Rule 701 under the Securities Act of 1933 persons who purchase shares
from us upon exercise of options granted before the date of this prospectus may
sell their shares in the public markets beginning 90 days after the date of this
prospectus. They make the sales in reliance on Rule 144 without having to comply
with its holding period requirements and, if they are not affiliates, without
having to comply with the rule's volume limitations, public information and
notice of sale requirements.

We intend to file one or more registration statements under the Securities
Act of 1933, covering the shares of common stock reserved for issuance under our
1994 and 1997 stock option plans. We plan this filing within 90 days after the
date of this prospectus. The registration statements will become effective upon
filing, thus permitting the resale of option shares in the public markets,
without restriction under the Securities Act of 1933 other than the limitations
applicable to affiliates or the 180-day lock ups described above.

See "Description of Capital Stock -- Registration Rights" for a description
of registration rights with respect to our common stock.

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<PAGE> 64

UNDERWRITING

The underwriters named below, acting through their representatives, Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated, and Needham &
Company, Inc. have agreed, as described in the underwriting agreement, to
purchase from us and the selling shareholders the number of shares of common
stock listed opposite their names below. The underwriting agreement describes
the conditions on which the underwriters are committed to purchase and pay for
all such shares if any are purchased.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
<S> <C>
Dain Rauscher Wessels.......................................
Needham & Company, Inc. ....................................
---------

Total............................................. 3,387,824
---------
</TABLE>

The representatives have advised us and the selling shareholders that the
underwriters propose to offer the shares of common stock to the public at the
offering price set forth on the cover page of this prospectus and to selected
dealers at such price less a concession of not in excess of $ per share, of
which $ may be reallowed to other dealers. After this offering, the
public offering price concession and reallowance to dealers may be reduced by
the representatives. No such reduction will change the amount of proceeds to be
received by us and the selling shareholders as set forth on the cover page of
this prospectus.

The underwriting agreement contains covenants of indemnity among the
underwriters, us and the selling shareholders against civil liabilities,
including liabilities under the Securities Act and liabilities arising from
breaches of representations and warranties contained in the underwriting
agreement.

We have granted an option to the underwriters to purchase up to 508,174
additional shares of common stock. These options may be exercised at any time up
to 30 days after the date of this prospectus. The option entitles the
underwriters to purchase the additional shares of common stock at the same price
per share as the 3,387,824 shares being sold in this offering. If the
underwriters exercise the option, each of the underwriters must purchase
approximately the same percentage of additional shares from us that they
purchased in the primary offering. The underwriters may purchase these shares
only to cover over-allotments made in connection with this offering. If
purchased, the additional shares will be sold by the underwriters on the same
terms as those on which the 3,387,824 shares are being sold.

The price of the shares of common stock purchased by the underwriters will
be the public offering price set forth on the cover page of the prospectus less
the following underwriting discounts and commissions to be paid by us and the
selling shareholders.

<TABLE>
<CAPTION>
TOTAL WITHOUT TOTAL WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
By Rockford Corporation.......................... $0.84 $2,100,000 $2,526,866
By the selling shareholders...................... $0.84 $ 745,772 $ 745,772
</TABLE>

We will also pay the total expenses of this offering.

Our officers, directors and other shareholders have agreed not to sell,
transfer, grant any third party the right to purchase, or otherwise dispose of
any shares of common stock or other securities that they own or acquire, other
than shares of common stock acquired in open market transactions, for a period
of 180 days after the date of this prospectus without

63
<PAGE> 65

the prior written consent of the underwriters. This 180-day period is known as
the lock-up period. The representatives may, without notice and in their sole
discretion, allow any officer or director to dispose of common stock or other
securities prior to the expiration of the lock-up period. There are, however,
currently no agreements between the underwriters and any of our officers or
directors allowing any sale.

In addition, we have agreed that we will not issue, sell, offer to sell, or
otherwise dispose of any shares of our common stock or other securities during
the lock-up period without the prior consent of the underwriters. This agreement
does not include shares of common stock or other securities issued pursuant to
employee stock option plans, employee stock purchase plans, or common stock or
other securities outstanding on the date of this prospectus. However, we have
agreed that employee stock options issued during the lock-up period to our
officers and directors may not be exercised prior to the expiration of the
lock-up period. Any shares of common stock issued to our officers and directors
during the lock-up period pursuant to the exercise of stock options or other
securities outstanding on the date of this prospectus shall bear a restrictive
legend restricting the transfer of those shares during the lock-up period.

The underwriters have advised us that in connection with this offering,
some persons participating in this offering may engage in transactions that may
have the effect of stabilizing or maintaining the market price of the common
stock at a level above that which might otherwise prevail in the open market.
These transactions may include stabilizing bids, syndicate covering transactions
and the imposition of penalty bids. A "stabilizing bid" is a bid for or the
purchase of common stock on behalf of the underwriters for the purpose of
preventing or retarding a decline in the market price of the common stock. A
"syndicate covering transaction" is the bid for or the purchase of the common
stock on behalf of the underwriters to reduce a short position incurred by the
underwriters in connection with this offering. A "penalty bid" is an arrangement
permitting the representatives to reclaim the selling concession otherwise
accruing to an underwriter or syndicate member in connection with the offering
if the common stock originally sold by such underwriter or syndicate member is
purchased by the representatives in a syndicate covering transaction and has
therefore not been effectively placed by such underwriter or syndicate member.
The representatives have advised us that these transactions may be affected on
the Nasdaq SmallCap Market, Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.

LEGAL MATTERS

The validity of the common stock offered by this prospectus will be passed
upon for us by Steptoe & Johnson LLP, Phoenix, Arizona. Legal matters relating
to this offering will be passed upon for the underwriters by Brobeck, Phleger &
Harrison LLP, Austin, Texas.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule as at September 30, 1996, and December 31,
1996, 1997 and 1998, and for the year ended September 30, 1996, the three months
ended December 31, 1996, and for the years ended December 31, 1997 and 1998. We
have included our financial statements and schedule in the prospectus and
elsewhere in the registration statement in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.

64
<PAGE> 66

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1. This prospectus, which is part of the registration
statement, does not contain all the information included in this registration
statement. Some information is omitted and you should refer to the registration
statement and its exhibits. With respect to references made in this prospectus
to any contract, agreement or other document of ours, our descriptions are
summaries and you should refer to the exhibits attached to the registration
statement for copies of the actual contract, agreement or other document. You
may review a copy of our registration statement, including exhibits, at the
Securities and Exchange Commission's public reference room at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, or Seven World Trade Center,
13th Floor, New York, New York 10048 or Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information about the public
reference rooms.

We will also file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information on file at the public
reference rooms. You can also request copies of these documents, for a copying
fee, by writing to the Securities and Exchange Commission.

Our Securities and Exchange Commission filings and the registration
statement can also be reviewed by accessing the Securities and Exchange
Commission's Internet Web site at http://www.sec.gov, which contains reports,
proxy statements and information statements and other information regarding
registrants that file electronically with the Securities and Exchange
Commission.

65
<PAGE> 67

ROCKFORD CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS OF ROCKFORD CORPORATION AND SUBSIDIARIES

<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998
and June 30, 1999 (unaudited)............................. F-3
Consolidated Statements of Operations for the year ended
September 30, 1996, the three months ended December 31,
1996, the years ended December 31, 1997 and 1998, and the
six months ended June 30, 1998 and 1999 (unaudited)....... F-4
Consolidated Statements of Shareholders' Equity for the year
ended September 30, 1996, the three months ended December
31, 1996, the years ended December 31, 1997 and 1998, and
the six months ended June 30, 1999 (unaudited)............ F-5
Consolidated Statements of Cash Flows for the year ended
September 30, 1996, the three months ended December 31,
1996, the years ended December 31, 1997 and 1998, and the
six months ended June 30, 1998 and 1999 (unaudited)....... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 68

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Rockford Corporation

We have audited the accompanying consolidated balance sheets of Rockford
Corporation and subsidiaries (Rockford) as of December 31, 1997 and 1998, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for the year ended September 30, 1996, the three months ended
December 31, 1996, and the years ended December 31, 1997 and 1998. These
consolidated financial statements are the responsibility of Rockford's
management. Our responsibility is to express an opinion on these consolidated
financial statements 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Rockford Corporation and subsidiaries at December 31, 1997 and 1998, and the
consolidated results of their operations and their cash flows for the year ended
September 30, 1996, the three months ended December 31, 1996, and the years
ended December 31, 1997 and 1998, in conformity with generally accepted
accounting principles.

Ernst & Young LLP

Phoenix, Arizona
February 5, 1999, except for Note 13
as to which the date is July , 1999
- --------------------------------------------------------------------------------

The foregoing report is in the form that will be signed upon the completion of
restatement of the capital accounts described in Note 13 to the financial
statements.

/s/ Ernst & Young LLP

Phoenix, Arizona

July 28, 1999

F-2
<PAGE> 69

ROCKFORD CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1997 1998 1999
------- ------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................................. $ 260 $ 470 $ 1,254
Accounts receivable, less allowances of $918,000,
$1,043,000 and $1,796,000 (unaudited) at December
31, 1997, 1998 and June 30, 1999, respectively..... 11,089 15,097 24,110
Inventories, net...................................... 9,603 12,226 14,642
Prepaid expenses and other............................ 693 688 1,905
Income taxes receivable............................... 85 -- --
Deferred income taxes................................. 2,398 3,084 3,084
------- ------- -------
Total current assets.................................... 24,128 31,565 44,995
Property and equipment, net............................. 3,977 5,007 5,087
Goodwill, net........................................... -- -- 1,783
Other assets............................................ 1,129 735 994
------- ------- -------
Total assets............................................ $29,234 $37,307 $52,859
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 5,409 $ 6,492 $ 9,758
Accrued salaries and incentives....................... 1,773 1,948 2,724
Accrued warranty...................................... 2,911 3,625 3,812
Income taxes payable.................................. -- 30 704
Other accrued expenses................................ 2,710 3,589 7,259
Current portion of notes payable, long-term debt and
capital lease obligations.......................... 1,733 2,393 2,588
------- ------- -------
Total current liabilities............................... 14,536 18,077 26,845
Notes payable and long-term debt, less current
portion............................................... 12,220 13,596 15,534
Capital lease obligations, less current portion......... 10 696 598
Minority interest....................................... 5 31 --
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value
Authorized shares -- 40,000,000
Issued shares -- 4,432,775 shares at December 31,
1997 and 1998 and 4,735,201 at June 30, 1999
(unaudited)...................................... 44 44 47
Additional paid-in capital............................ 2,489 2,489 3,642
Retained earnings (deficit)........................... (117) 2,188 6,008
Accumulated other comprehensive income................ 99 238 185
------- ------- -------
2,515 4,959 9,882
Less treasury stock, 21,500 shares at cost at December
31, 1997 and 1998 and -0- at June 30, 1999
(unaudited)........................................ 52 52 --
------- ------- -------
Total shareholders' equity.............................. 2,463 4,907 9,882
------- ------- -------
Total liabilities and shareholders' equity.............. $29,234 $37,307 $52,859
======= ======= =======
</TABLE>

See accompanying notes.
F-3
<PAGE> 70

ROCKFORD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE YEAR ENDED SIX MONTHS ENDED
YEAR ENDED MONTHS ENDED DECEMBER 31, JUNE 30,
SEPTEMBER 30, DECEMBER 31, ----------------- -----------------
1996 1996 1997 1998 1998 1999
------------- ------------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net sales.......................... $81,144 $16,448 $87,423 $87,577 $45,923 $65,911
Cost of goods sold................. 56,761 11,020 57,321 55,146 28,783 40,221
------- ------- ------- ------- ------- -------
Gross profit....................... 24,383 5,428 30,102 32,431 17,140 25,690
Operating expenses:
Sales and marketing.............. 15,218 2,814 14,530 14,821 8,097 10,971
General and administrative....... 8,552 1,983 9,350 10,211 5,059 6,675
Research and development......... 1,448 292 1,576 1,876 870 973
------- ------- ------- ------- ------- -------
25,218 5,089 25,456 26,908 14,026 18,619
------- ------- ------- ------- ------- -------
Operating income (loss)............ (835) 339 4,646 5,523 3,114 7,071
Other income (expense):
Interest......................... (1,809) (439) (1,757) (1,434) (763) (779)
Other............................ 104 62 (294) (49) 4 (73)
------- ------- ------- ------- ------- -------
Income (loss) before extraordinary
item and income taxes............ (2,540) (38) 2,595 4,040 2,355 6,219
Income tax expense (benefit)....... (864) (19) 959 1,717 1,006 2,406
------- ------- ------- ------- ------- -------
Income (loss) before extraordinary
item and minority interest....... (1,676) (19) 1,636 2,323 1,349 3,813
Minority interest.................. -- -- (4) (18) 2 7
------- ------- ------- ------- ------- -------
Net income (loss) before
extraordinary item............... (1,676) (19) 1,632 2,305 1,351 3,820
Extraordinary item -- early
extinguishment of debt, net of
income tax benefit of $161,000... (327) -- -- -- -- --
------- ------- ------- ------- ------- -------
Net income (loss).................. $(2,003) $ (19) $ 1,632 $ 2,305 $ 1,351 $ 3,820
======= ======= ======= ======= ======= =======
Net income (loss) per common share:
Basic............................ $ (0.50) $ (0.01) $ 0.37 $ 0.52 $ 0.31 $ 0.85
======= ======= ======= ======= ======= =======
Diluted.......................... $ (0.50) $ (0.01) $ 0.31 $ 0.41 $ 0.25 $ 0.62
======= ======= ======= ======= ======= =======
Weighted average shares:
Basic............................ 4,040 4,394 4,401 4,412 4,411 4,508
======= ======= ======= ======= ======= =======
Diluted.......................... 4,040 4,394 5,688 5,951 5,725 6,274
======= ======= ======= ======= ======= =======
</TABLE>

See accompanying notes.

F-4
<PAGE> 71

ROCKFORD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL RETAINED OTHER
--------------- PAID-IN EARNINGS COMPREHENSIVE TREASURY
SHARES AMOUNT CAPITAL (DEFICIT) INCOME STOCK TOTAL
------ ------ ---------- --------- -------------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995.... 3,480 $35 $1,311 $ 273 $ 227 $(52) $ 1,794
Currency translation........... -- -- -- -- (162) -- (162)
Net loss....................... -- -- -- (2,003) -- -- (2,003)
-------
Comprehensive loss............. (2,165)
Conversion of subordinated debt
to common stock.............. 933 9 1,141 -- -- -- 1,150
----- --- ------ ------- ----- ---- -------
Balance at September 30, 1996.... 4,413 44 2,452 (1,730) 65 (52) 779
Currency translation........... -- -- -- -- 27 -- 27
Net loss....................... -- -- -- (19) -- -- (19)
-------
Comprehensive income........... 8
Exercise of stock options...... 3 -- 4 -- -- -- 4
----- --- ------ ------- ----- ---- -------
Balance at December 31, 1996..... 4,416 44 2,456 (1,749) 92 (52) 791
Currency translation........... -- -- -- -- 7 -- 7
Net income..................... -- -- -- 1,632 -- -- 1,632
-------
Comprehensive income........... 1,639
Exercise of stock options...... 17 -- 33 -- -- -- 33
----- --- ------ ------- ----- ---- -------
Balance at December 31, 1997..... 4,433 44 2,489 (117) 99 (52) 2,463
Currency translation........... -- -- -- -- 139 -- 139
Net income..................... -- -- -- 2,305 -- -- 2,305
-------
Comprehensive income........... 2,444
----- --- ------ ------- ----- ---- -------
Balance at December 31, 1998..... 4,433 44 2,489 2,188 238 (52) 4,907
Currency translation
(unaudited).................. -- -- -- -- (53) -- (53)
Net income (unaudited)......... -- -- -- 3,820 -- -- 3,820
-------
Comprehensive income
(unaudited).................. 3,767
Conversion of subordinated
promissory note to common
stock (unaudited)............ 289 3 997 -- -- -- 1,000
Exercise of stock options
(unaudited).................. 12 -- 42 -- -- -- 42
Issuance of treasury stock to
acquire minority interest
(unaudited).................. -- -- 113 -- -- 52 165
Exercise of warrants
(unaudited).................. 1 -- 1 -- -- -- 1
----- --- ------ ------- ----- ---- -------
Balance at June 30, 1999
(unaudited).................... 4,735 $47 $3,642 $ 6,008 $ 185 $ -- $ 9,882
===== === ====== ======= ===== ==== =======
</TABLE>

See accompanying notes.
F-5
<PAGE> 72

ROCKFORD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS
THREE MONTHS YEAR ENDED ENDED
YEAR ENDED ENDED DECEMBER 31, JUNE 30,
SEPTEMBER 30, DECEMBER 31, ----------------- -----------------
1996 1996 1997 1998 1998 1999
------------- ------------ ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................... $ (2,003) $ (19) $ 1,632 $ 2,305 $ 1,351 $ 3,820
Adjustments to reconcile net income (loss)
to net cash provided by
(used in) operating activities:
Depreciation and amortization........... 1,397 431 2,176 2,274 980 1,185
Loss (gain) on sale of fixed assets..... 127 -- -- (12) 9 (9)
Deferred income tax expense (benefit)... (691) 145 28 (686) -- --
Provision for doubtful accounts......... 653 247 540 561 243 721
Provision for inventory allowances...... 251 79 638 787 482 833
Minority interest....................... -- -- 4 18 4 (21)
Changes in operating assets and
liabilities:
Accounts receivable................... (1,969) 3,304 14 (4,569) (6,439) (8,789)
Inventories........................... (1,553) (1,174) 487 (3,410) (1,131) (2,400)
Prepaid expenses and other............ 305 (29) 121 5 303 (1,136)
Income taxes receivable............... -- (165) 242 85 -- --
Accounts payable...................... 2,929 (2,089) (2,454) 1,083 1,941 2,242
Accrued salaries and incentives....... (608) 421 996 175 (262) 832
Accrued warranty...................... 370 (7) 823 714 424 187
Income taxes payable.................. (158) (4) -- 30 412 671
Other accrued expenses................ 1,219 (1,296) 1,220 879 1,717 3,430
-------- ------- ------- ------- ------- -------
Net cash provided by (used in) operating
activities.............................. 269 (156) 6,467 239 34 1,566
INVESTING ACTIVITIES
Purchases of property and equipment....... (2,191) (36) (1,318) (1,728) (717) (1,131)
Proceeds from sale of property and
equipment............................... 362 -- 118 38 57 10
Acquisitions of business net of cash
acquired................................ -- -- -- -- -- (1,555)
Decrease (increase) in deposits........... 30 20 (425) 194 70 (330)
-------- ------- ------- ------- ------- -------
Net cash used in investing activities..... (1,799) (16) (1,625) (1,496) (590) (3,006)
FINANCING ACTIVITIES
Proceeds from notes payable and long-term
debt.................................... 20,406 5,290 160 1,791 1,455 2,904
Payments on notes payable and long-term
debt.................................... (17,874) (5,196) (3,550) (142) -- (415)
Debt issuance costs....................... -- -- (514) -- -- --
Payments on capital lease obligations..... (494) (134) (1,058) (321) (211) (255)
Proceeds from exercise of stock options... -- 4 33 -- -- 43
-------- ------- ------- ------- ------- -------
Net cash provided by (used in) financing
activities.............................. 2,038 (36) (4,929) 1,328 1,244 2,277
Effect of exchange rate changes on cash... (160) 27 7 139 35 (53)
-------- ------- ------- ------- ------- -------
Net increase (decrease) in cash........... 348 (181) (80) 210 723 784
Cash at beginning of period............... 173 521 340 260 260 470
-------- ------- ------- ------- ------- -------
Cash at end of period..................... $ 521 $ 340 $ 260 $ 470 $ 983 $ 1,254
======== ======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Conversion of subordinated debt to common
stock................................... $ 1,150 $ -- $ -- $ -- $ -- $ 1,000
======== ======= ======= ======= ======= =======
Issuance of common stock for minority
interest................................ $ -- $ -- $ -- $ -- $ -- $ 165
======== ======= ======= ======= ======= =======
</TABLE>

See accompanying notes.
F-6
<PAGE> 73

ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

1. ACCOUNTING POLICIES

Organization and Description of Business

Rockford Corporation and subsidiaries ("Rockford") is a designer,
manufacturer and distributor of high performance car audio systems under the
"Rockford Fosgate" brand name for the worldwide car audio aftermarket. Rockford
also sells professional audio products under the "Hafler" brand name. Rockford
was organized and incorporated under the laws of the State of Arizona on July
22, 1980, and has manufacturing facilities in Tempe, Arizona and Grand Rapids,
Michigan; warehousing operations in Germany and Singapore; and sales and
warehousing operations in Japan.

During April 1999, the Board of Directors authorized Rockford to file a
registration statement for an initial public offering of shares of its common
stock. On June 28, 1999 the shareholders approved an increase in the number of
authorized common shares to 40,000,000.

Interim Financial Information

The consolidated financial statements as of June 30, 1999 and for the six
months ended June 30, 1998 and 1999 are unaudited, but include all adjustments
(consisting only of normal recurring adjustments) that Rockford considers
necessary for a fair presentation of financial position as of such date and
results of operations and cash flows for such period. Operating results for the
six months ended June 30, 1999 are not necessarily indicative of the results
that may be expected for any future period.

Principles of Consolidation

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

Cash and Cash Equivalents

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

Fair Value of Financial Instruments

At December 31, 1998, Rockford has the following financial instruments:
cash and cash equivalents, accounts receivable, accounts payable, accrued
expenses, capital lease obligations, notes payable and long-term debt. The
carrying value of cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses approximates their fair value based on the
liquidity of these financial instruments or based on their short-term nature.
The carrying value of capital lease obligations, notes payable and long-term
debt approximates fair value based on the market interest rates available to
Rockford for debt of similar risk and maturities.

F-7
<PAGE> 74
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

Accounts Receivable

Rockford sells its products principally to car audio and professional audio
dealers primarily in North America, South America, Europe and Asia. At December
31, 1997, 1998 and June 30, 1999, net accounts receivable includes approximately
$3,213,000, $2,958,000 and $4,384,000, respectively, due from overseas
businesses.

In most cases, Rockford also offers a prompt pay discount for invoices paid
under 40 to 60 days of issuance and has included in its allowance for accounts
receivable at December 31, 1997, 1998 and June 30, 1999 approximately $162,000,
$262,000 and $418,000, respectively, with respect to accounts using such
discounts after the period-end.

Inventories

Inventories consist principally of raw materials of electronic and
mechanical components used in the manufacturing of amplifier and speaker
systems, and finished goods. Inventories are carried at the lower of cost or
market using the first-in, first-out (FIFO) method.

Property and Equipment

Property and equipment is stated at cost. Depreciation and amortization are
computed principally on the straight-line method for financial reporting
purposes over a three-to-five year life. Leasehold improvements are amortized on
the straight-line method over the shorter period of the lease term or the
estimated useful life of the asset.

Research and Development

During the year ended September 30, 1996, the three months ended December
31, 1996, and the years ended December 31, 1997 and 1998, research and
development expenses of approximately $1,448,000, $292,000, $1,576,000 and
$1,876,000, respectively, were charged to expense as incurred.

Advertising

Rockford expenses advertising as incurred. Advertising expenses for the
year ended September 30, 1996, the three months ended December 31, 1996, and the
years ended December 31, 1997 and 1998 were approximately $1,189,000, $313,000,
$1,008,000 and $1,201,000, respectively.

Income Taxes

Rockford accounts for income taxes under the provisions of Statement of
Financial Accounting Standard ("SFAS") No. 109, Accounting for Income Taxes.
Under this method, deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.

Net Sales

Sales are recorded at the time of shipment net of related discounts.

F-8
<PAGE> 75
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

Net Income per Common Share

Rockford reports net income per common share in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 128, Earnings Per Share.
Diluted net income per share includes the dilutive effects of options, warrants
and convertible securities.

Foreign Currency Translation

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

Stock Based Compensation

Rockford grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at date of grant.
Rockford has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation and
accordingly, recognizes no compensation expense for the employee stock option
grants. Stock option grants to non-employees are charged to expense based upon
the fair value of the options granted.

Use of Estimates

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

Comprehensive Income

Effective January 1, 1998, Rockford adopted SFAS No. 130, Reporting
Comprehensive Income. In adopting the new requirements for calculating income,
items of other comprehensive income have been presented in the equity section of
the statement of shareholders' equity.

Segments of an Enterprise and Related Information

Effective January 1, 1998, Rockford adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. SFAS No. 131 superseded FASB
Statement No. 14, Financial Reporting for Segments of a Business Enterprise.
SFAS No. 131 establishes standards for the way that business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. SFAS No. 131 also establishes standards for related
disclosures about products and services, geographic areas and major customers.

F-9
<PAGE> 76
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

Reclassifications

Certain reclassifications have been made to the prior period consolidated
financial statements to conform to the 1998 presentation.

2. ACQUISITIONS

On June 30, 1999 Rockford completed its acquisition of all of the common
stock of Lightning Audio. Under the terms of the acquisition Rockford paid
$1,550,000 in cash and recorded an additional $50,000 of purchase consideration
obligations for a total purchase price of $1.6 million. Under the terms of the
acquisition Rockford could pay up to $600,000 more over the next two years based
upon the subsequent performance of Lightning Audio. Rockford recorded
approximately $1,635,000 of goodwill which it plans to amortize over 15 years.
The purchase price allocation has been based on the best information available
at the time and may be subject to further revisions as management finalizes its
analysis of the assets acquired and liabilities assumed. The acquisition has
been accounted for under the purchase method of accounting and, accordingly, the
results of operations of Lightning Audio will be included in Rockford's
consolidated results of operation beginning on July 1, 1999. The acquisition was
not significant under the requirements of the Securities and Exchange
Commission.

On June 14, 1999 Rockford issued its 21,500 shares of treasury stock in
exchange for the 10% interest in its Japanese subsidiaries not held by Rockford.
The Company accounted for the acquired interest using the estimated fair value
of the common stock issued of $7.67 per share which resulted in the elimination
of minority interest and the recording of approximately $155,000 of goodwill.

3. INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1997 1998 1999
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials...................................... $ 3,749 $ 4,864 $ 5,689
Work in progress................................... 417 754 871
Finished goods..................................... 6,860 8,512 10,672
------- ------- -------
11,026 14,130 17,232
Less allowances.................................... (1,423) (1,904) (2,590)
------- ------- -------
$ 9,603 $12,226 $14,642
======= ======= =======
</TABLE>

F-10
<PAGE> 77
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Machinery and equipment......................... $ 9,251 $ 10,708 $ 10,323
Tooling equipment............................... 3,185 3,718 4,317
Leasehold improvements.......................... 1,312 1,368 1,382
Furniture and fixtures.......................... 354 905 1,132
In process...................................... 464 849 1,277
-------- -------- --------
14,566 17,548 18,431
Less accumulated depreciation and
amortization.................................. (10,589) (12,541) (13,344)
-------- -------- --------
$ 3,977 $ 5,007 $ 5,087
======== ======== ========
</TABLE>

F-11
<PAGE> 78
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

5. NOTES PAYABLE AND LONG-TERM DEBT

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

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1997 1998 1999
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
$17,000,000 revolving line of credit with a lender
collateralized by substantially all assets, interest
payments due monthly based upon a blended rate of LIBOR
plus 3.0 percent (approximately 8.2 percent at December
31, 1998 and 8.37 percent at June 30, 1999) and prime plus
0.75 percent (approximately 8.5 percent at December 31,
1998 and 8.75 percent at June 30, 1999) until June 2001
when all remaining principal and interest is due and
payable. Borrowings under this line of credit are limited
to the borrowing base defined substantially as a
percentage of inventory and accounts receivable, as
defined and adjusted in the agreement. ................... $ 9,410 $11,631 $14,462
$2,000,000 term note payable to a lender collateralized by
substantially all assets, monthly principal payments of
$33,333 plus interest at 10.67 percent until June 2000
when all principal and interest is due and payable. ...... 1,800 1,370 1,170
10.5 percent subordinated senior notes payable, unsecured,
interest payable quarterly until February 1999 when all
remaining principal and interest is due and was paid. In
connection with these senior notes, detachable warrants
were issued to purchase 76,835 shares of Rockford's common
stock at $0.93 per share, expiring February 2000. ........ 415 415 --
9.0 percent subordinated promissory note to related party,
unsecured, converted into 289,562 common shares on May 1,
1999. .................................................... 1,000 1,000 --
8.5 percent convertible subordinated debentures to related
parties, unsecured, interest payable quarterly until May
2002 when all remaining principal and interest is due and
payable, convertible into common shares at $2.44 per
share. ................................................... 995 995 995
$450,000 revolving line of credit with a bank collateralized
by substantially all of Lightning's assets, interest due
monthly at rate of prime plus 5.0 percent (approximately
13.5 percent at June 30, 1999), repaid in July 1999. ..... -- -- 354
Other....................................................... 169 26 647
------- ------- -------
13,789 15,437 17,628
Less current portion........................................ (1,569) (1,841) (2,094)
------- ------- -------
$12,220 $13,596 $15,534
======= ======= =======
</TABLE>

F-12
<PAGE> 79
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

Annual maturities of notes payable and long-term debt for the years
succeeding December 31, 1998 are $1,841,000 in 1999, $12,601,000 in 2000, $-0-
in 2001 and $995,000 in 2002. Interest payments were approximately $1,705,000
and $1,520,000 for the years ended December 31, 1997 and 1998, respectively.

At December 31, 1998, Rockford has $5,999,000 available under its revolving
line of credit and $1,000,000 available for financing equipment under its credit
arrangement with its primary lender.

Rockford's $17,000,000 revolving line of credit, its 10.5 percent
subordinated senior notes payable and its 8.5 percent convertible subordinated
debentures contain covenants which place various restrictions on financial
ratios, levels of indebtedness, and capital expenditures, among other things.
Rockford issued warrants in April of 1997 to purchase 21,500 shares of common
stock at $3.45 in conjunction with this credit facility which expire on June 1,
2007.

During 1996, the Company refinanced its line of credit prior to maturity.
Consequently, a loss on the early extinguishment of debt, consisting of
prepayment premiums, deferred loan costs, and related expenses of $327,000 (net
of tax benefit of approximately $161,000) is reflected as an extraordinary item
in the consolidated statements of operations.

6. LEASES

Rockford leases equipment under capital leases. Capital leases include
leases made under a two million dollar equipment leasing arrangement with a
bank. At December 31, 1998, $1,074,000 had been used under the arrangement and
$926,000 was available for future capital lease fundings through September 30,
1999. Rockford also leases certain manufacturing, warehouse and office
facilities, and computer hardware and software under noncancelable operating
leases that expire in various years through September 2006.

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

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1997 1998 1999
------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Equipment............................................ $2,002 $3,064 $ 3,169
Less accumulated amortization........................ (895) (955) (1,385)
------ ------ -------
$1,107 $2,109 $ 1,784
====== ====== =======
</TABLE>

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

During the year ended September 30, 1996, the three months ended December
31, 1996 and the years ended December 31, 1997 and 1998, Rockford acquired
approximately $949,000, $27,000, $68,000 and $1,394,000 of equipment under
capital leases, respectively.

F-13
<PAGE> 80
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

Future minimum payments under capital leases and noncancelable operating
leases with initial terms of one year or more consisted of the following at
December 31, 1998:

<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
1999........................................ $ 624 $1,140
2000........................................ 413 945
2001........................................ 398 381
2002........................................ -- 246
2003........................................ -- 137
Thereafter.................................. -- 412
------ ------
Total minimum lease payments................ 1,435 $3,261
======
Less amounts representing interest.......... (187)
------
Present value of net minimum lease.......... 1,248
Less current portion........................ (552)
------
$ 696
======
</TABLE>

Total rental expense for all operating leases was approximately $1,812,000,
$420,000, $2,309,000 and $1,957,000 for the year ended September 30, 1996, the
three months ended December 31, 1996 and the years ended December 31, 1997 and
1998, respectively.

7. INCOME TAXES

Significant components of Rockford's deferred tax assets are:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1998
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Inventory basis........................................ $ 629 $ 837
Basis in receivables................................... 48 251
Book over tax depreciation............................. 84 125
Accrued warranty....................................... 1,077 1,342
Accrued liabilities and other.......................... 233 529
Alternative minimum tax credit carryforward............ 212 --
Net operating loss carryforwards....................... 115 --
------ ------
Total deferred tax assets................................ $2,398 $3,084
====== ======
</TABLE>

F-14
<PAGE> 81
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

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

<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, --------------
1996 1996 1997 1998
------------- ------------ ---- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal expense (benefit)................. $ (433) $(195) $779 $1,883
State expense............................. 90 23 116 384
Foreign expense........................... 9 8 36 136
------- ----- ---- ------
Total current expense (benefit)............. (334) (164) 931 2,403
Deferred:
Federal expense (benefit)................. (643) 127 25 (719)
State expense (benefit)................... (48) 18 3 33
------- ----- ---- ------
Total deferred expense (benefit)............ (691) 145 28 (686)
------- ----- ---- ------
$(1,025) $ (19) $959 $1,717
======= ===== ==== ======
</TABLE>

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

<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, --------------
1996 1996 1997 1998
------------- ------------ ---- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Federal statutory rate...................... $(1,029) $(13) $881 $1,374
State tax, net of federal benefit........... 28 27 79 275
Nondeductible items......................... -- -- 36 45
Higher (lower) foreign tax rates............ (30) (17) (43) 17
Foreign sales corporation benefit........... -- -- (98) (65)
Other, net.................................. 6 (16) 104 71
------- ---- ---- ------
Total income tax expense.................... (1,025) (19) 959 1,717
Tax benefit of extraordinary item netted
therein................................... 161 -- -- --
------- ---- ---- ------
Tax expense in statement of operations...... $ (864) $(19) $959 $1,717
======= ==== ==== ======
</TABLE>

Rockford's income attributable to foreign operations amounted to
approximately $105,000 for the year ended September 30, 1996, $65,000 for the
three months ended December 31, 1996, $237,000 for the year ended December 31,
1997 and $350,000 for the year ended December 31, 1998.

For the year ended September 30, 1996, no tax payments were made and
$150,000 of net tax refunds were received. For the three months ended December
31, 1996, no tax payments were made nor were refunds received. For the years
ended December 31, 1997 and 1998, Rockford made tax payments of $694,000 (net of
$460,000 in refunds) and $2,082,000, respectively.

F-15
<PAGE> 82
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

8. COMMON STOCK GRANTS AND OPTIONS

The Board of Directors of Rockford prior to 1995 granted the consulting
firm of Grisanti, Galef & Goldress, which provided chief executive officer
services to Rockford until January 1, 1999, options to purchase 215,000 shares
of its authorized but unissued common stock at a price of $1.51 per share,
protected against dilution, as defined, and expiring in August 2002. The price
per share exceeded the fair value at the date of the grant. The stock options
are fully vested at December 31, 1998.

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

Rockford has provided stock option plans for certain employees and
directors under its 1994 and 1997 stock option plans. Under the plans, options
to purchase common stock of Rockford will be granted to eligible employees and
directors at the fair value of the underlying common stock. The options
generally have a term of ten years and become exercisable over three years
commencing on the date of the grant. Options granted prior to December 31, 1996
will vest 100 percent upon an initial public offering or merger or acquisition
of Rockford. Up to 2,150,000 shares are reserved and may be offered under these
plans. The stock option plans describe the circumstances under which Rockford
has the right to repurchase common stock acquired under the options at the fair
value price.

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

<TABLE>
<S> <C>
Expected life of the award............................... 5 years
Dividend yield........................................... 0 percent
Risk-free interest rate.................................. 6 percent
</TABLE>

F-16
<PAGE> 83
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Rockford's pro
forma information follows:

<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, ----------------
1996 1996 1997 1998
------------- ------------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income (loss) as reported..... $(2,003) $ (19) $1,632 $2,305
Pro forma Statement 123
expense......................... (25) (9) (76) (110)
------- ------ ------ ------
Pro forma net income (loss)....... $(2,028) $ (28) $1,556 $2,195
======= ====== ====== ======
Pro forma net income (loss) per
common share:
Basic........................... $ (0.50) $(0.01) $ 0.35 $ 0.50
======= ====== ====== ======
Diluted......................... $ (0.50) $(0.01) $ 0.29 $ 0.39
======= ====== ====== ======
</TABLE>

Option activity under the 1994 and 1997 stock option plans during the year
ended September 30, 1996, the three months ended December 31, 1996, the years
ended December 31, 1997 and 1998 and the six months ended June 30, 1999 follows:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
----------------------------
SHARES AVAILABLE WEIGHTED-AVERAGE
UNDER OPTION SHARES EXERCISE PRICE
---------------- --------- ----------------
<S> <C> <C> <C>
Outstanding at September 30, 1995..... 534,472 540,527 $1.51
Granted............................... (422,475) 422,475 2.44
Exercised............................. -- -- --
Expired or cancelled.................. 62,350 (62,350) 1.51
--------- --------- -----
Outstanding at September 30, 1996..... 174,347 900,652 1.95
Granted............................... (12,900) 12,900 3.45
Exercised............................. -- (3,225) 1.51
Expired or cancelled.................. -- -- --
--------- --------- -----
Outstanding at December 31, 1996...... 161,447 910,327 1.97
Reserve shares........................ 1,075,000 -- --
Granted............................... (672,103) 672,103 4.04
Exercised............................. -- (16,662) 1.99
Expired or cancelled.................. 62,888 (62,888) 2.15
--------- --------- -----
Outstanding at December 31, 1997...... 627,232 1,502,880 2.89
Granted............................... (158,025) 158,025 5.38
--------- --------- -----
Outstanding at December 31, 1998...... 469,207 1,660,905 3.12
Granted............................... (172,000) 172,000 7.67
Exercised............................. -- (12,147) 3.45
Expired or cancelled.................. 39,777 (39,777) 3.45
--------- --------- -----
Outstanding at June 30, 1999.......... 336,984 1,780,981 $3.55
========= ========= =====
</TABLE>

F-17
<PAGE> 84
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

The weighted-average fair value of options granted during the year ended
September 30, 1996, the three months ended December 31, 1996, the years ended
December 31, 1997 and 1998 and the six months ended June 30, 1999 was $0.67,
$0.90, $0.90, $1.08 and $1.99, respectively.

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

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- -----------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE NUMBER REMAINING AVERAGE NUMBER AVERAGE
OF EXERCISE OUTSTANDING AT CONTRACTUAL EXERCISE OUTSTANDING AT EXERCISE
PRICES DECEMBER 31, 1998 LIFE PRICE DECEMBER 31, 1998 PRICE
- ------------- ----------------- ----------- --------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
$1.51 465,277 6.0 years $1.51 465,277 $1.51
$2.44 - $3.45 552,550 7.6 years 2.90 442,900 $2.77
$4.19 526,978 9.1 years 4.19 255,695 $4.19
$5.81 116,100 9.3 years 5.81 -- --
</TABLE>

9. EARNINGS PER SHARE

<TABLE>
<CAPTION>
SIX MONTHS
THREE MONTHS YEAR ENDED ENDED
YEAR ENDED ENDED DECEMBER 31, JUNE 30,
SEPTEMBER 30, DECEMBER 31, --------------- ---------------
1996 1996 1997 1998 1998 1999
------------- ------------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Numerator:
Net income (loss).................. $(2,003) $ (19) $1,632 $2,305 $1,351 $3,820
Effect of dilutive securities
Interest impact of convertible
debentures.................... -- -- 110 110 55 46
------- ------ ------ ------ ------ ------
Numerator for diluted net income
(loss) per share -- income
available to common stockholders
after assumed conversions.......... $(2,003) $ (19) $1,742 $2,415 $1,406 $3,866
======= ====== ====== ====== ====== ======
Denominator:
Denominator for basic net income
(loss) per share -- weighted --
average shares.................. 4,040 4,394 4,401 4,412 4,411 4,508
Effect of dilutive securities
Employee stock options.......... -- -- 529 772 553 1,086
Warrants........................ -- -- 61 70 64 80
Convertible debentures.......... -- -- 697 697 697 600
------- ------ ------ ------ ------ ------
Dilutive potential common shares... 4,040 4,394 1,287 1,539 1,314 1,766
------- ------ ------ ------ ------ ------
</TABLE>

F-18
<PAGE> 85
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

10. CONTINGENCIES

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

11. EMPLOYEE BENEFIT PLANS

Rockford has a 401(k) Retirement Savings Plan (the Plan) covering
substantially all employees who have completed six consecutive months of service
without regard to hours of service. Under the terms of the Plan, employees may
make voluntary contributions, subject to Internal Revenue Service limitations.
Rockford will match employee contributions up to three percent of the employee's
annual compensation. Additional contributions to the Plan can be made at the
discretion of the Board of Directors. Contributions to the Plan during the year
ended September 30, 1996, the three months ended December 31, 1996 and the years
ended December 31, 1997 and 1998 were approximately $219,000, $46,000, $237,000
and $296,000, respectively.

On May 17, 1999 the shareholders approved the adoption of the 1999 Employee
Stock Purchase Plan to be effective September 1, 1999. Under the Plan, 361,200
shares of common stock have been reserved for issuance.

12. SEGMENT INFORMATION

Rockford operates its business under the car audio and professional audio
product lines. For each of the years ended December 31, 1997 and 1998, the
professional audio line was not

F-19
<PAGE> 86
ROCKFORD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(The information for the six months ended
June 30, 1998 and 1999 is unaudited)

significant and, accordingly, no additional disclosures of revenue information
about products are required. Below is geographic information for revenues of
Rockford:

<TABLE>
<CAPTION>
THREE
MONTHS YEAR ENDED SIX MONTHS ENDED
YEAR ENDED ENDED DECEMBER 31, JUNE 30,
SEPTEMBER 30, DECEMBER 31, ----------------- -----------------
1996 1996 1997 1998 1998 1999
------------- ------------ ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Sales from external
customers(a)
United States............ $58,977 $11,518 $64,252 $70,016 $36,545 $56,172
Export:
Americas.............. 4,880 1,560 7,005 4,905 3,732 3,355
Europe................ 10,326 1,503 7,819 6,599 3,023 3,929
Asia.................. 6,961 1,867 8,347 6,057 2,623 2,455
------- ------- ------- ------- ------- -------
Total sales from external
customers................ $81,144 $16,448 $87,423 $87,577 $45,923 $65,911
======= ======= ======= ======= ======= =======
</TABLE>

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

Rockford had no customers who accounted for more than 10 percent of net
sales for all periods presented except for the six months ended June 30, 1999 in
which sales to one customer accounted for 22.7 percent of that period's net
sales. Rockford's long-lived assets outside of the United States are not
significant.

13. SUBSEQUENT EVENTS

Effective , 1999, Rockford executed a 4.3-for-1 common stock
split. All share information in the financial statements has been restated to
reflect the effect of the stock split.

Effective with the successful completion of its initial public offering,
Rockford plans to grant options to purchase 64,500 shares of common stock at the
offering price to a newly elected member of its board of directors.

F-20
<PAGE> 87
Inside back cover

Upper half of page highlights Hafler:

Upper left: [Hafler logo]

Upper right: [Photo of Hafler studio monitor]

Middle right: [Photo of Hafler power amplifier]

Center: www.hafler.com
[Photo of Hafler website]

Text in upper left: There is a human filter in the world of music. Sitting
somewhere between the creative musician in the recording studio, and the
passionate listener in a living room or vehicle. That filter is the professional
sound engineer, the person that makes a living recording, mixing, or
broadcasting the music and movie soundtracks that we hear everyday. It is
Hafler's goal to be the brand of choice among these working professionals and
the aspiring professionals.

Moving beyond the amplifier niche, in 1996 Hafler introduced the TRM Series of
powered monitors and powered subwoofers. Amplifier electronics manufactured in
Tempe and speaker components in Grand Rapids.

Bottom half of page highlights Lightning Audio:

Center of page: [Lightning Audio logo]

Lower left: [male model using Lightning battery clamp to hold auto battery;
Lightning bolts coursing up arms and out of eyes]

Bottom left: www.lightningaudio.com
[Photo of Lightning Audio web site]

Bottom right: [Photos of Lightning Audio accessory products]

Text in middle right: Lightning Audio assaults the car audio accessory business
with battery clamps, capacitors, and speaker wire. Pretty boring stuff, but not
with Lightning Audio. Gen Y consumers now have a brand that is cool to own, but
less costly than Rockford Fosgate. We believe that Lightning Audio consumers
are proud to claim us as "their brand" and show off what is underneath carpets,
inside trunks, or under the hood of their car or truck.

We believe Lightning Audio will allow Rockford to grow by expanding the
Lightning Audio product mix into the amplifier and speaker categories at lower
price points than Rockford Fosgate and by capitalizing on new distribution
channels.

<PAGE> 88

3,387,824 SHARES

[ROCKFORD CORPORATION LOGO]

COMMON STOCK

-------------------------
PROSPECTUS
-------------------------

<TABLE>
<S> <C>
DAIN RAUSCHER WESSELS NEEDHAM & COMPANY, INC.
a division of Dain
Rauscher Incorporated
</TABLE>

---------------------------
, 1999
---------------------------
<PAGE> 89

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

We expect to incur the following estimated expenses (other than
underwriting discounts and commissions) in connection with the issuance and
distribution of the securities which we are registering under this statement:

<TABLE>
<S> <C>
SEC registration fee........................................ $ 14,080
NASD filing fee............................................. 5,565
Nasdaq National Market listing fee.......................... 48,750
Printing and engraving...................................... 153,000
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue sky fees and expenses (including legal fees)........... *
Transfer agent fees......................................... *
Miscellaneous............................................... *
--------
Total............................................. $800,000
========
</TABLE>

- ---------------
* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our articles of incorporation require us to indemnify our directors and
officers, to the maximum extent permitted by Arizona law, against liability
arising against them for acts or omissions within the scope of their authority
as directors or officers. Indemnification is prohibited if our board of
directors finds that the person's action or omission was willful, grossly
negligent, or with fraudulent or criminal intent, or for liabilities under the
Securities Act of 1933. Under Arizona law, we may indemnify a director or
officer against liability incurred on account of service to us, if the director
or officer:

- conducted himself or herself in good faith;

- reasonably believed that his or her conduct (1) if in an official
capacity, was in our best interests or (2) if in any other capacity, was
not opposed to our best interests;

- in the case of any criminal proceeding, had no reasonable cause to
believe that his or her conduct was unlawful; and

- did not improperly receive personal benefit.

Before completing this offering, we intend to enter into indemnification
agreements with each of our directors. These agreements will generally obligate
us to indemnify them for liability incurred by them as a result of their service
as directors, unless (1) their liability arises as a result of their fraud,
deliberate dishonesty or willful misconduct or (2) Arizona law prohibits
indemnification. Prior to completing this offering on the effective date of this
registration statement, we will have obtained liability insurance for our
directors.

Reference is made to Section 7 of the underwriting agreement to be filed as
an exhibit to the registration statement, indemnifying our officers and
directors against certain liabilities.
II-1
<PAGE> 90

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since May 1, 1996, we have issued and sold or otherwise transferred the
below listed unregistered securities. These issuances were deemed exempt from
registration under the Securities Act of 1933 in reliance on Regulation D or
Rule 701 under such Act or Section 4(2) of such Act because they were made
either under a written compensatory benefit plan established by us for the
participation of our employees or transactions by us not involving a public
offering. To the extent we relied on Section 4(2) of the Act, each of these
investors was sophisticated within the meaning of Section 4(2).

1. In 1996 and 1997, we issued 19,887 shares to several employees who
exercised stock options pursuant to our 1994 and 1997 Stock Option Plans.

2. In March 1996, we borrowed $2.0 million from Caroline Bartol. On
July 1, 1996 she converted $1.0 million of this loan into 289,562 shares of
Common Stock.

3. On May 1, 1999, we issued 289,562 shares of our Common Stock to an
entity controlled by two of our directors in connection with the conversion
of a $1,000,001 loan.

4. On April 23, 1997, we issued to Vrolyk Partnership 97-A a warrant
for 21,500 shares with an exercise price of $3.45 per share, as
compensation for services rendered in connection with arranging our $20.0
million credit facility.

5. During May and June, 1999 we issued 12,147 shares to two employees
who exercised stock options pursuant to our 1994 and 1997 stock option
plans.

6. During June 1999 we issued 748 shares to a warrantholder who
exercised his warrant conversion rights.

7. During June 1999 we issued 21,500 shares to the owner of 10% of
our Japanese subsidiary in order to purchase his interest. As a result of
this issuance, we now own 100% of our Japanese subsidiary.

8. We have, from time to time, granted stock options to employees.
The following table sets forth certain information regarding such grants:

<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
--------- ---------------
<S> <C> <C>
January 1, 1996 through December 31, 1996................... 64,500 $2.44 - $3.45
January 1, 1997 through December 31, 1997................... 672,103 $3.45 - $4.19
January 1, 1998 through December 31, 1998................... 158,025 $4.19 - $5.81
January 1, 1999 through the date of this prospectus......... 172,000 $7.67
</TABLE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

II-2
<PAGE> 91

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
5 Form of Opinion of Steptoe & Johnson LLP+
10.1 1994 Stock Option Plan+
10.2 1997 Stock Option Plan+
10.3 1999 Employee Stock Purchase Plan as amended and restated+
10.4 Employment Agreement by and between Rockford Corporation and
W. Gary Suttle+
10.5 Indemnity Agreement by and between Rockford Corporation and
W. Gary Suttle+
10.6 Letter Agreement by and between Rockford Corporation and
Best Buy Corporation**+
10.7 Joint Development and Supply Agreement by and between
Rockford Corporation and Hyundai Electronics Industries Co.,
Ltd.**+
10.8 Form of Dealership Agreements+
10.9 Standard Industrial Commercial Multi-Tenant Lease -- Gross
American Industrial Real Estate Association Lease, and
amendments and addendum thereto, by and between Rockford
River LLC and Rockford Corporation+
10.10 Standard Industrial Lease -- Gross, and amendments and
addendum thereto, by and between Cloyce Clark and Rockford
Corporation+
10.11 Lease Agreement, and addenda thereto, by and between
Carbonneau Industries, Inc. and Rockford Corporation+
10.12 Master Lease Agreement and amendments thereto, by and
between Banc One Leasing Corporation and Rockford
Corporation+
10.13 Loan and Security Agreement by and between Rockford
Corporation and FINOVA Capital Corporation+
10.14 Employee 401(k) Deferred Compensation Plan and amendments
thereto,+
10.15 Manufacturing and Distribution Agreement by and between Path
Group, Inc. Incorporated and Rockford Corporation**+
10.16 Product Sales Agreement by and between Rockford Corporation
and Avnet Electronics Marketing**+
10.17 Convertible Subordinated Debenture Amendment Agreement and
Agreement to Rename as Senior Notes+
10.18 Form of Senior Note due February 3, 1999 and Warrant+
10.19 Schedule for Senior Notes and Warrants+
10.20 Convertible Subordinated Debenture Purchase Agreement+
10.21 Form of 8.5% Convertible Subordinated Debenture due May 1,
2002+
10.22 Schedule for 8.5% Convertible Subordinated Debentures+
10.23 Warrant issued to the Vrolyk Partnership 97-A to expire June
1, 2007+
10.24 Services and Option Agreement by and between W. Gary Suttle,
Caroline S. Bartol, individually and as representative of
the estate of John G. Bartol and Rockford Corporation+
10.25 Amendment of Services and Option Agreement by and between W.
Gary Suttle, Monument Investors Limited Partnership as
successor to Caroline S. Bartol and the estate of John G.
Bartol and Rockford Corporation+
10.26 Amendment of Services and Option Contract by and between W.
Gary Suttle, Monument Investors Limited Partnership as
successor to Caroline S. Bartol and the estate of John G.
Bartol and Rockford Corporation+
10.27 Consulting and Option Contract by and between Rockford
Corporation and Grisanti, Galef & Goldress, Inc.+
10.28 Amendment and Renewal of Consulting and Option Contract by
and between Rockford Corporation and Grisanti, Galef &
Goldress, Inc.+
10.29 Amendment of Consulting and Option Contract by and between
Rockford Corporation and Grisanti, Galef & Goldress, Inc.+
10.30 Letter from Timothy Bartol, General Partner for the Boulder
Investors Partnership exercising rights under Bridge Loan
Conversion and Extension Agreement by and between Rockford
Corporation and Boulder Investors Ltd. Partnership, as
successor to Caroline S. Bartol+
</TABLE>

II-3
<PAGE> 92

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.31 Fifth Amendment to Bridge Loan Conversion and Extension
Agreement by and between Rockford Corporation and Boulder
Investors Ltd. Partnership, as successor to Caroline S.
Bartol+
10.32 Bridge Loan Conversion and Extension Agreement by and
between Rockford Corporation and Caroline S. Bartol+
10.33 Bridge Loan Agreement by and between Rockford Corporation
and Caroline S. Bartol+
10.34 1990 Restricted Stock Grant and Tax Loan Agreement and
Promissory Note+
10.35 Form of Indemnity Agreement*
10.36 FINOVA -- Schedule of Loan and Security Agreement+
10.37 Consent of Consumer Electronics Manufacturing Association
21 List of Subsidiaries of Rockford Corporation+
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Steptoe & Johnson, LLP*
24 Power of Attorney. Reference is made to the signature page
of this registration statement which includes the power of
attorney+
27.1 Financial Data Schedule for six months ended June 30, 1999+
27.2 Financial Data Schedule for year ended December 31, 1998+
</TABLE>

- ---------------
* To be filed by amendment

** Portions of the document have been omitted and filed separately with the
Commission under a request for confidential treatment.

+ Previously filed

Financial Statement Schedule: Schedule II -- Valuation and Qualifying
Accounts.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

ROCKFORD CORPORATION
(IN THOUSANDS)

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ------------ --------------------------- ---------- -------------
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND CHARGED TO BALANCE AT
DESCRIPTION PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS END OF PERIOD
- ----------------------------- ------------ ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1998
Receivable allowances...... $ 918 $561 $-- $436(1) $1,043
Inventory reserve.......... 1,423 787 -- 306(2) 1,904
December 31, 1997
Receivable allowances...... 699 540 -- 321(1) 918
Inventory reserve.......... 785 638 -- -- 1,423
December 31, 1996
Receivable allowances...... 551 247 -- 99(1) 699
Inventory reserve.......... 944 79 -- 238(2) 785
September 30, 1996
Receivable allowances...... 525 653 -- 627(1) 551
Inventory reserve.......... 914 251 -- 221(2) 944
</TABLE>

- ---------------
(1) Accounts written off net of recoveries.
(2) Reserved inventory sold or scrapped.

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

II-4
<PAGE> 93

ITEM 17. UNDERTAKINGS

We hereby undertake to provide to the underwriter at the closing specified
in the underwriting agreements certificates in such denominations and registered
in such names as required by the underwriter to permit prompt delivery to each
purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to our directors, officers and controlling
persons pursuant to the Act, our articles of incorporation or our bylaws, the
underwriting agreement or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by
one of our directors, officers or controlling persons in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered hereunder,
we will, unless in the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933, as amended, and will be governed by the
final adjudication of such issue.

We hereby undertake that for purposes of determining any liability under
the Securities Act of 1933, as amended, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by us pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933, as amended, shall
be deemed to be part of this registration statement as of the time it was
declared effective. We further undertake that for the purpose of determining any
liability under the Securities Act of 1933, as amended, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and this
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.

II-5
<PAGE> 94

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, we
have duly caused this amendment no. 1 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Phoenix, State of Arizona, on July 28, 1999.

ROCKFORD CORPORATION

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

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints W. Gary Suttle and James M. Thomson, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and to sign any registration statement for the
same offering covered by this registration statement that is to be effective
upon filing pursuant to Rule 462(b) promulgated under the Securities Act of
1933, as amended, and all post-effective amendments thereto, and to file the
same, with all exhibits thereto and all documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated:

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

/s/ W. GARY SUTTLE President, Chief Executive May 25, 1999
- --------------------------------------------------- Officer, and Director (Principal
W. Gary Suttle Executive Officer)

/s/ JAMES M. THOMSON Vice President of Finance and May 25, 1999
- --------------------------------------------------- Chief Financial Officer,
James M. Thomson Secretary (Principal Financial
Officer)

/s/ D. LYNN THROWER Corporate Controller (Principal May 25, 1999
- --------------------------------------------------- Accounting Officer)
D. Lynn Thrower

/s/ JERRY E. GOLDRESS Director May 25, 1999
- ---------------------------------------------------
Jerry E. Goldress

/s/ TIMOTHY C. BARTOL Director May 25, 1999
- ---------------------------------------------------
Timothy C. Bartol
</TABLE>

II-6
<PAGE> 95

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ NICHOLAS G. BARTOL Director May 25, 1999
- ---------------------------------------------------
Nicholas G. Bartol

/s/ RALPH B. GODFREY Director May 26, 1999
- ---------------------------------------------------
Ralph B. Godfrey

/s/ JOHN P. LLOYD Director May 25, 1999
- ---------------------------------------------------
John P. Lloyd
</TABLE>

II-7
<PAGE> 96

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1 Underwriting Agreement*
3.1 Articles of Incorporation+
3.2 Restated Bylaws+
3.3 Amendment to Articles of Incorporation filed on January 12,
1988+
3.4 Amendment to Articles of Incorporation filed on May 12,
1999+
3.5 Amendment to Articles of Incorporation filed on May 17,
1999+
3.6 Amendments to Bylaws adopted by the board of directors on
May 14, 1999+
3.7 Amendment to Articles of Incorporation filed on July 1, 1999
4.1 Specimen Common Stock Certificate+
4.2 Reference is made to the Articles of Incorporation, as
amended, and the Restated Bylaws, as amended, filed as
Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 for a description
of the rights of the holders of Common Stock.
5 Form of Opinion of Steptoe & Johnson LLP+
10.1 1994 Stock Option Plan+
10.2 1997 Stock Option Plan+
10.3 1999 Employee Stock Purchase Plan as amended and restated+
10.4 Employment Agreement by and between Rockford Corporation and
W. Gary Suttle+
10.5 Indemnity Agreement by and between Rockford Corporation and
W. Gary Suttle+
10.6 Letter Agreement by and between Rockford Corporation and
Best Buy Corporation**+
10.7 Joint Development and Supply Agreement by and between
Rockford Corporation and Hyundai Electronics Industries Co.,
Ltd.**+
10.8 Form of Dealership Agreements+
10.9 Standard Industrial Commercial Multi-Tenant Lease -- Gross
American Industrial Real Estate Association Lease, and
amendments and addendum thereto, by and between Rockford
River LLC and Rockford Corporation+
10.10 Standard Industrial Lease -- Gross, and amendments and
addendum thereto, by and between Cloyce Clark and Rockford
Corporation+
10.11 Lease Agreement, and addenda thereto, by and between
Carbonneau Industries, Inc. and Rockford Corporation+
10.12 Master Lease Agreement and amendments thereto, by and
between Banc One Leasing Corporation and Rockford
Corporation+
10.13 Loan and Security Agreement by and between Rockford
Corporation and FINOVA Capital Corporation+
10.14 Employee 401(k) Deferred Compensation Plan and amendments
thereto,+
10.15 Manufacturing and Distribution Agreement by and between Path
Group, Inc. Incorporated and Rockford Corporation**+
10.16 Product Sales Agreement by and between Rockford Corporation
and Avnet Electronics Marketing**+
10.17 Convertible Subordinated Debenture Amendment Agreement and
Agreement to Rename as Senior Notes+
10.18 Form of Senior Note due February 3, 1999 and Warrant+
10.19 Schedule for Senior Notes and Warrants+
10.20 Convertible Subordinated Debenture Purchase Agreement+
10.21 Form of 8.5% Convertible Subordinated Debenture due May 1,
2002+
10.22 Schedule for 8.5% Convertible Subordinated Debentures+
10.23 Warrant issued to the Vrolyk Partnership 97-A to expire June
1, 2007+
</TABLE>

<PAGE> 97

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.24 Services and Option Agreement by and between W. Gary Suttle,
Caroline S. Bartol, individually and as representative of
the estate of John G. Bartol and Rockford Corporation+
10.25 Amendment of Services and Option Agreement by and between W.
Gary Suttle, Monument Investors Limited Partnership as
successor to Caroline S. Bartol and the estate of John G.
Bartol and Rockford Corporation+
10.26 Amendment of Services and Option Contract by and between W.
Gary Suttle, Monument Investors Limited Partnership as
successor to Caroline S. Bartol and the estate of John G.
Bartol and Rockford Corporation+
10.27 Consulting and Option Contract by and between Rockford
Corporation and Grisanti, Galef & Goldress, Inc.+
10.28 Amendment and Renewal of Consulting and Option Contract by
and between Rockford Corporation and Grisanti, Galef &
Goldress, Inc.+
10.29 Amendment of Consulting and Option Contract by and between
Rockford Corporation and Grisanti, Galef & Goldress, Inc.+
10.30 Letter from Timothy Bartol, General Partner for the Boulder
Investors Partnership exercising rights under Bridge Loan
Conversion and Extension Agreement by and between Rockford
Corporation and Boulder Investors Ltd. Partnership, as
successor to Caroline S. Bartol+
10.31 Fifth Amendment to Bridge Loan Conversion and Extension
Agreement by and between Rockford Corporation and Boulder
Investors Ltd. Partnership, as successor to Caroline S.
Bartol+
10.32 Bridge Loan Conversion and Extension Agreement by and
between Rockford Corporation and Caroline S. Bartol+
10.33 Bridge Loan Agreement by and between Rockford Corporation
and Caroline S. Bartol+
10.34 1990 Restricted Stock Grant and Tax Loan Agreement and
Promissory Note+
10.35 Form of Indemnity Agreement*
10.36 FINOVA -- Schedule of Loan and Security Agreement+
10.37 Consent of Consumer Electronics Manufacturers Association
21 List of Subsidiaries of Rockford Corporation+
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Steptoe & Johnson, LLP*
24 Power of Attorney. Reference is made to the signature page
of this registration statement which includes the power of
attorney+
27.1 Financial Data Schedule for six months ended June 30, 1999+
27.2 Financial Data Schedule for year ended December 31, 1998+
</TABLE>

- ---------------
* To be filed by amendment

** Portions of the document have been omitted and filed separately with the
Commission under a request for confidential treatment.

+ Previously filed

<PAGE> 1
Exhibit 10.37

[LOGO] CEMA 2500 Wilson Boulevard Arlington, VA 22201-3834 USA Tel 703 907 7600
Fax 703 907 7601 www.CEMAcity.com Consumer Electronics Manufacturers Association

CONSENT FORM

The Consumer Electronics Manufacturers' Association (CEMA) authorizes
the use of its name in association with the data as shown in Rockford
Corporation's S-1 document filed with the Securities and Exchange Commission
(SEC).

Consumer Electronics Manufacturers Association

By /s/ Timothy J. Herbert Date 7-20-99

Title Senior Research Analyst

<PAGE> 1

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 5, 1999, except for Note 13 as to which the
date is July 7, 1999, with respect to the financial statements of Rockford
Corporation included in Amendment Number 2 to the Registration Statement (Form
S-1) and in the related Prospectus of Rockford Corporation for the registration
of shares of its common stock.

Our audit also included the financial statement schedule of Rockford
Corporation listed in Item 16. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

Phoenix, Arizona
July , 1999
- --------------------------------------------------------------------------------

The foregoing consent is in the form that will be signed upon the
completion of the restatement of the capital accounts described in Note 13 to
the financial statements.

/s/ERNST & YOUNG LLP

Phoenix, Arizona

July 28, 1999