Form 10-Q

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Number of shares of Common Stock of Registrant outstanding as of May 4, 2007: 6,454,520

The condensed consolidated financial statements included herein have been prepared by Cobra Electronics Corporation (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The Condensed Consolidated Balance Sheet as of December 31, 2006 has been derived from the audited consolidated balance sheet as of that date. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K for the year ended December 31, 2006. In the opinion of management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. Due to the seasonality of the Company’s business, the results of operations of any interim period are not necessarily indicative of the results that may be expected for a fiscal year.

BUSINESS — Cobra designs and markets consumer electronics products, which it sells primarily under the Cobra brand name principally in the United States, Canada and Europe. Effective October 20, 2006, the Company acquired Performance Products Limited (“PPL”) and sells PPL’s products under the Snooper tradename, principally in the United Kingdom, as well as elsewhere in Europe. A majority of the Company’s products are purchased from overseas suppliers, primarily in China, Hong Kong, Italy, the Philippines, South Korea and Thailand. The consumer electronics market is characterized by rapidly changing technology and certain products may have limited life cycles. Management believes that it maintains strong relationships with its current suppliers and that, if necessary, other suppliers could be found. The extent to which a change in a supplier would have an adverse effect on the Company’s business depends on the timing of the change, the product or products that the supplier produces for the Company and the volume of that production. The Company also maintains insurance coverage that would, in certain limited circumstances, reimburse the Company for lost profits resulting from a supplier’s inability to fulfill its commitments to the Company.

PRINCIPLES OF CONSOLIDATION — The consolidated financial statements include the accounts of the Company and its subsidiaries. Effective October 20, 2006, the consolidated financial statements also include a variable interest entity (“VIE”) of which Performance Products Limited is the primary beneficiary. Except as otherwise set forth herein, the consolidated entities are collectively referred to as the “Company”. All significant intercompany balances and transactions have been eliminated in consolidation.

TRANSLATION OF FOREIGN CURRENCY – Assets and liabilities of consolidated foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at quarter-end. Revenues and expenses are translated at average exchange rates prevailing during the quarter. Gains or losses on foreign currency transactions and the related tax effects are reflected in net earnings. The resulting translation adjustments are included in stockholders’ equity as accumulated comprehensive income.

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

ACCOUNTS RECEIVABLE — The majority of the Company’s accounts receivable are due from retailers and two-step distributors. Credit is extended based on an evaluation of a customer’s financial condition, including, at times the availability of credit insurance, and, generally, collateral is not required. Accounts receivable are due within various time periods specified in the terms applicable to the specific customer and are stated at amounts due from customers net of an allowance for claims and doubtful accounts.

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

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

ADVERTISING AND SALES PROMOTION EXPENSES – These costs reflect amounts provided to retailers and distributors for advertising and sales promotions and are expensed as incurred. Customer programs, generally agreed to at the beginning of each year, are mainly variable programs dependent on sales and special promotional events and may be revised during the course of the year, based upon a customer’s projected sales and other factors, such as new, or changes to existing, promotional programs. Advertising and sales promotion expenses for the three months ended March 31, 2007 and 2006 totaled $1.2 million and $1.1 million, respectively.

COMPREHENSIVE INCOME (LOSS) — The Company reports comprehensive income under the provisions of SFAS No. 130, “Reporting Comprehensive Income.” Comprehensive income is defined as the change in equity of a business enterprise from transactions and other events from non-owner sources. Comprehensive income includes net earnings and other non-owner changes in equity that bypass the statement of operations and are reported in a separate component of equity. For the three months ended March 31, 2007 and 2006, other comprehensive income is comprised of the change in the foreign currency translation adjustment and the interest rate swap which is reported net of tax.

CONCENTRATION OF CREDIT RISK — The Company has evaluated its concentration of credit risk as it applies both to customers and to the institutions with which it places cash investments.

The Company believes that its concentration of credit risk as it applies to customers is low due to its broad customer base in all regions of the United States, as well as other areas in North America and Europe. Currently, the Company is not using credit insurance for any of its accounts although such coverage is evaluated regularly in light of management’s judgment of credit risk and the expense to acquire such insurance.

The Company places temporary cash investments with institutions of high credit quality. At March 31, 2007 and December 31, 2006, the Company had approximately $3.6 million ($1.7 million of which was on deposit in foreign banks) and $1.9 million ($1.6 million of which was on deposit in foreign banks), respectively, on deposit with such financial institutions, of which $3.5 million and $1.8 million, respectively, were in excess of amounts insured by the Federal Deposit Insurance Corporation. The Company performs periodic evaluations of these institutions for relative credit standing and has not experienced any losses as a result of this concentration. Consequently, no significant concentration of credit risk is considered to exist.

DEPRECIATION — Depreciation of buildings, improvements, tooling and equipment is computed using the straight-line method over the following estimated useful lives. Depreciation expense for the three months ended March 31, 2007 and 2006 totaled $539,000 and $458,000, respectively.

LONG-LIVED ASSETS — Long-lived assets are reviewed for possible impairment whenever events indicate that the carrying amount of such assets may not be recoverable. If such a review indicates impairment, the carrying amount of such assets is reduced to an estimated fair value.

GOODWILL AND OTHER INTANGIBLE ASSETS — Pursuant to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”), the Company evaluates goodwill for impairment on an annual basis or if impairment indicators exist. For goodwill, the evaluation requires a comparison of the estimated fair value of PPL to which the goodwill has been assigned to the sum of the carrying value of the assets and liabilities of that unit. If the sum of the carrying value of the assets and liabilities of a reporting unit exceeds the fair value of that reporting unit, the carrying value of the reporting unit’s goodwill is reduced to its implied fair value through an adjustment to the goodwill balance, resulting in an impairment charge.

The fair values used in the SFAS 142 evaluation are estimated based upon discounted future cash flow projections. These cash flow projections are based on a number of assumptions, including risk-adjusted discount rates, future sales volumes, price levels and rates of increase in operating expenses. Management believes that the assumptions made in projecting future cash flows for the evaluations described above are reasonable. However, if future actual results do not meet expectations, the Company may be required to record an impairment charge, the amount of which could be material to its results of operations.

Intangible assets subject to amortization are evaluated for impairment pursuant to Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”), which requires impairment testing whenever events or circumstances indicate that the carrying amount of an amortizable intangible asset may not be recoverable. If impairment indicators exist for an amortizable intangible asset, the undiscounted future cash flows associated with the expected service potential of the asset are compared to the carrying value of the asset. If the projection of undiscounted future cash flows is in excess of the carrying value of the intangible assets, no impairment charge is recorded. If the projection of undiscounted cash flows is less than the carrying value of the intangible asset, an impairment charge is recorded to reduce the intangible asset to its fair value.

Amortization of intangible assets is computed using the straight-line method over the following estimated useful lives.

Amortization expense relating to intangible assets subject to amortization (excluding product software) totaled $477,000 and $170,000, respectively for the three months ended March 31, 2007 and 2006.

LOAN RECEIVABLE – On January 8, 2003, the Company entered into a loan agreement with Horizon Navigation, Inc. (“Horizon”) a California corporation and vendor to the Company, that was subsequently modified on February 6, 2003. Horizon was permitted to borrow up to $2 million per annum, at Cobra’s discretion, up to an aggregate amount of $6 million at December 31, 2005. The loan accrued interest at a variable rate at a fixed margin above the prime rate. The loan agreement provided that the interest would be added to the principal amount of the loan. The principal amount of the loan and all accrued interest were paid in full at maturity as of January 3, 2006.

RESEARCH, ENGINEERING AND PRODUCT DEVELOPMENT EXPENDITURES — Research and product development expenditures, as well as the non-capitalized engineering costs, are expensed as incurred. For three months ended March 31, 2007 and 2006, these expenditures amounted to $548,000 and $422,000, respectively.

SHIPPING & HANDLING — Shipping and handling costs are included in cost of goods sold, and the amounts invoiced to customers relating to shipping and handling are included in net sales.

SOFTWARE RELATED TO PRODUCTS SOLD – The Company purchases and/or incurs costs in connection with the development of software to be used in products that the Company intends to sell, mainly Mobile Navigation products. Such costs are capitalized and deferred as intangible assets in accordance with SFAS No. 86, Accounting for Costs of Computer Software to be Sold, Leased or Otherwise Marketed. Such costs consist of expenditures incurred after technological feasibility of the software has been established and a working model of the product developed and consist principally of coding and related costs. Such costs are charged to earnings based on the ratio of actual product sales during the reporting period to expected product sales over the estimated product life cycle. Software related intangible assets are reviewed at each balance sheet date for possible impairment as required by paragraph 10 of SFAS No. 86, and, accordingly, if such review indicates that the carrying amount of these assets may not be recoverable, the carrying amount is reduced to the estimated fair value.

ERP SYSTEM COSTS — The Company capitalizes certain costs associated with ERP software developed or obtained for internal use in accordance with Statement of Position No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The Company’s policy provides for the capitalization of external direct costs of materials and services associated with developing or obtaining internal use ERP software. Capitalized costs are classified as intangible assets. Costs associated with preliminary project activities and training are expensed as incurred. Capitalized costs related to ERP software developed or obtained for internal use are amortized over a seven year period on a straight-line basis when the relevant ERP software is placed in service. Capitalized costs are classified as intangible assets.

STOCK-BASED COMPENSATION — The Company has equity-based compensation plans from which stock-based compensation awards can be granted to eligible employees, officers or directors.

Prior to January 1, 2006, the Company accounted for its equity-based awards in accordance with the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related interpretations, as permitted by SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”). The Company did not recognize stock-based compensation cost in its Consolidated Statement of Operations prior to January 1, 2006, since the options granted had an exercise price equal to the market value of the common stock on the grant date.

Effective January 1, 2006, the Company adopted the fair value recognition provision of SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”) using the modified-prospective-transition method. Under this transition method, compensation cost recognized includes compensation costs for all share-based payments granted prior to, but not vested as of January 1, 2006 based on the fair value at grant date estimated in accordance with SFAS 123. The Company awarded 195,000 options with a fair value of $5.23 per share to employees in March 2007. The Company did not grant any stock-based awards during the twelve-month period ended December 31, 2006. The stock-based compensation expense for the three months ended March 31, 2007 and 2006 totaled $48,000 and $20,000, respectively.

In the first quarter of 2007, Michael Smith, Chief Financial Officer, exercised 12,466 options with an exercise price of $6.56 per share and market price of $10.75 per share.

The fair value of each option award is estimated on the grant date using the Black-Scholes-Merton option pricing model and the assumptions at March 31, 2007 and 2006 are shown in the following table:

INCOME TAXES — The Company provides for income taxes under the asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are recorded based on the expected tax effects of future taxable income or deductions resulting from differences in the financial statement and tax bases of assets and liabilities. A valuation allowance is recorded when necessary to reduce net deferred tax assets to the amount considered more likely than not to be realized. For the three-month period ending March 31, 2007, the Company recorded a tax benefit of $298,000 compared to a $535,000 benefit for the same period in 2006. The effective tax rate for 2007 was 29.5 percent versus the 32.2 percent tax rate for 2006. The lowered effective tax rate for 2007 was due to higher taxable income in foreign jurisdictions, as well as a lowered R&D tax credit.

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

DEFERRED INCOME — PPL’s subsidiary balance sheet includes $1.3 million of current and $557,000 of long-term deferred income for prepaid customer download fees related to subscriptions to its Enigma database (most commonly for 2.5 years worth of service) that will be recognized throughout 2007 and 2008. The current deferred income is classified as other accrued liabilities and the long-term deferred income is classified as other long-term liabilities on the balance sheet.

NEW ACCOUNTING PRONOUNCEMENTS — The Financial Accounting Standards Board (“FASB”) issued FASB Interpretation 48 Accounting for Uncertainty in Income Taxes (“FIN 48”) on July 13, 2006. FIN 48 clarifies SFAS No. 109, “Accounting for Income Taxes” by providing the criteria a tax position must satisfy for some or all of the tax benefit to be recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006.

FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measure of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

In the first quarter of 2007, the Company adopted FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes. The total amount of unrecognized tax benefits as of January 1, 2007 was approximately $230,000, all of which would impact the effective tax rate if recognized. A $28,000 decrease in the unrecognized tax liability was recorded as an increase to retained earnings as of January 1, 2007.

The total amounts of accrued interest and penalties as of January 1, 2007 were approximately $10,000 and $5,500, respectively. The Company’s policy is to include interest and penalties in income tax expense.

One of the Company’s uncertain tax positions, research and development credits from 2003-2005, will result in an additional tax expense of approximately $10,000 due to the close of the IRS audit exam of 2004-2005 in April 2007. This amount will be recorded as income tax expense during the year. No additional significant changes in the Company’s tax positions are expected in the next twelve months.

The IRS completed its examination of the 2004 and 2005 federal tax returns in April 2007. The 2003 tax year still remains open for examination. The tax years 2000 through 2006 remain open to examination by major state taxing jurisdictions. The major foreign jurisdiction in which the Company files income tax returns is the United Kingdom. The 2004 through 2006 tax years remain open to examination in this jurisdiction.

On October 20, 2006, Cobra Electronics UK Ltd., a wholly owned subsidiary of Cobra Electronics Corporation completed the acquisition of 100% of the issued and outstanding share capital of PPL. PPL is a provider of GPS-enabled speed camera detection systems and personal navigation devices to consumers and retail locations based in the United Kingdom, as well as other locations in Europe.

Under the acquisition agreement, the purchase price for the issued share capital of PPL consisted of $21.2 million paid in cash at the closing of the transaction. In addition, additional cash consideration of up to approximately $6.5 million will be payable upon achievement of certain performance targets by PPL for the twelve-month period ended March 31, 2007 and cash consideration of up to approximately $9.4 million will be payable upon achievement of certain performance targets by PPL for the fourteen month period ended May 31, 2008. Additional payment could be due depending on PPL’s performance in excess of cumulative targets for the periods ending March 31, 2007 and May 31, 2008 and amounts not earned in the first period can be recovered if performance in the second period exceeds certain specified performance levels.

The acquisition was funded from borrowings under an Amended and Restated Loan Agreement between LaSalle Bank, National Association, as agent for the lenders, and the Company dated October 19, 2006.

The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

At March 31, 2007 and 2006, the Company had outstanding inventory purchase orders with suppliers totaling approximately $35.2 million and $37.5 million, respectively.

The Company’s financial instruments include cash, cash surrender value of officers life insurance policies, accounts receivable, accounts payable, current portion of long-term debt, long-term debt and letters of credit. The carrying values of cash, accounts receivable and accounts payable approximate their fair value because of the short maturity of these instruments. The carrying amounts of the Company’s bank borrowings under its credit facility approximate fair value because the interest rates are reset periodically to reflect current market rates. The letters of credit reflect fair value as a condition of their underlying purpose and are subject to fees competitively determined in the marketplace. The contract value/fair value of the letters of credit at March 31, 2007 was $4.2 million and at December 31, 2006 was $3.7 million. These letters of credit are only executed with major financial institutions, and full performance is anticipated.

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

The Company’s current hedging activity is limited to foreign currency purchases and an interest rate swap. The purpose of the foreign currency hedging activities is to protect the Company from the risk that eventual settlement of foreign currency transactions will be adversely affected by changes in exchange rates. The purpose of the interest rate swap is to fix the interest rate for the loan term, thereby protecting the Company from future interest rate increases.

The Company hedges foreign exchange exposures by entering into various short-term foreign exchange forward contracts. Under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, the instruments are carried at fair value in the Consolidated Balance Sheets as a component of current liabilities. Changes in the fair value of foreign exchange forward contracts that meet the applicable hedging criteria of SFAS No. 133 are recorded as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings. Changes in the fair value of foreign exchange forward contracts that do not meet the applicable hedging criteria of SFAS No. 133 are recorded currently in income as cost of sales. For the first quarter of 2007 the foreign exchange gain totaled $116,000 for 2007 compared to a foreign exchange loss of $191,000 for same period in 2006.

Hedging activities did not have a material impact on results of operations or financial condition during the three-month period ended March 31, 2007. To manage foreign currency risk, as of March 31, 2007, the Company entered into foreign exchange forward contracts for the sale of pound sterling and euros and the purchase of U.S. dollars with a total notional value of $7.4 million. These contracts maturing during 2007 were originally purchased at exchange rates ranging from 1.90 dollars per pound sterling to 1.97 dollars per pound sterling and for 1.34 dollars per euro. The fair value of these contracts at March 31, 2007 is the carrying amount.

Intangible assets consist of the following at March 31, 2007 and December 31, 2006 (in thousands):

Internal use software is generally amortized over its average estimated life, which is three years. The Company’s ERP internal software system is being amortized over its average estimated life of seven years. Trademarks are generally amortized over their average estimated life of 20 years and patents are amortized over their average estimated life of 17 years. Product software assets are amortized based on the percentage of revenues generated in each reporting period to the total revenues expected over the weighted average estimated product life cycle.

Amortization expense for the three months ended March 31, 2007 and 2006 was $524,000 and $826,000, respectively. The amortization expense for the first quarter of 2006 included $486,000 impairment charge. Product software assets are reviewed for possible impairment at each balance sheet date as required by paragraph 10 of SFAS No. 86 or SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”) and, accordingly, if such review indicates that the carrying amount of these assets may not be recoverable, the carrying amount is reduced to the estimated fair value of such assets.

During the first quarter of 2006, the Company licensed intellectual property from Tele Atlas North America that provided additional capabilities for mobile navigation products. In connection with this new intellectual property, certain software developed for the launch of handheld products in 2003 will not be used in future products and accordingly the carrying value of certain handheld software was reduced by $486,000.

Management believes that the values of intangible assets are without impairment and all intangible assets are reflected at their fair values as of March 31, 2007.

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

The Company warrants to the consumer who purchases its products that it will repair or replace, without charge, defective products within a specified time period, generally one year. The Company also has a return policy for its customers that allows them to return to the Company products returned to them by their customers for full or partial credit based on when the Company’s customer last purchased these products. Consequently, it maintains a warranty reserve, which reflects historical warranty returns rates by product category multiplied by the most recent six months of unit sales of that model and the unit standard cost of the model. A roll-forward of the warranty reserve is as follows (in thousands):

The Company maintains a liquidation reserve representing the write-down of returned product from its customers to its net realizable value. Returned inventory is either sold to various liquidators or returned to vendors for partial credit against similar, new models. The decision to sell or return products to vendors depends upon the estimated future demand for the models. Judgments are made as to whether various models are to be liquidated or returned to the vendor, taking into consideration the liquidation prices expected to be received and the amount of the vendor credit. The amount of the reserve is determined by comparing the cost of each unit returned to the estimated amount to be realized upon each unit’s disposition, either from returning the unit to the vendor for partial credit towards the cost of new, similar product or liquidating the unit. This reserve can fluctuate significantly from quarter to quarter depending upon quantities of returned inventory on hand and the estimated liquidation price or vendor credit per unit. A roll-forward of the liquidation reserve is as follows (in thousands):

The Company maintains a net realizable value (“NRV”) reserve to write-down, as necessary, certain finished goods, except for that covered by the liquidation reserve discussed above, below cost. The reserve includes models where it is determined that the estimated realizable value is less than cost. Thus, judgments must be made about which slow-moving, excess or non-current models are to be included in the reserve and the NRV of such models. The estimated NRV of each model is the per unit price that is estimated to be received if the model were sold in the marketplace.

This reserve will vary depending upon the specific models selected, the estimated NRV for each model and quantities of each model that are determined will be sold below cost from quarter to quarter. A roll-forward of the NRV reserve is as follows (in thousands):

On January 8, 2003, the Company entered into a loan agreement with Horizon Navigation, Inc. (“Horizon”) a California corporation and vendor to the Company, that was subsequently modified on February 6, 2003. Horizon was permitted to borrow up to $2 million per annum, at Cobra’s discretion, up to an aggregate amount of $6 million at December 31, 2005. The loan accrued interest at a variable rate at a fixed margin above the prime rate. The loan agreement provided that the interest would be added to the principal amount of the loan. The principal amount of the loan and all accrued interest were paid in full at maturity as of January 3, 2006.

Other current assets consisted of the following at March 31, 2007 and December 31, 2006 (in thousands):

The following table shows the components of other income/expense (in thousands):

The Company operates in two business segments. The first segment which is designated Cobra Consumer Electronics (“Cobra”) is comprised of Cobra Electronics Corporation, Cobra Hong Kong and Cobra Electronics Europe Limited. The second segment which is designated as PPL includes Cobra Electronics U.K. Limited and its wholly-owned subsidiary Performance Products Limited. The Company has separate sales departments and distribution channels for each segment, which provide all segment exclusive product lines to all customers for that segment. Currently, there are no intersegment sales.

The tabular presentation below summarizes the financial information by business segment for the three months ended March 31, 2007.

There have been no differences in the basis of segmentation or basis of measurement of segment loss.

In the first quarter of 2007, the Company adopted FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes. FIN 48 clarifies SFAS No. 109, “Accounting for Income Taxes” by providing the criteria a tax position must satisfy for some or all of the tax benefit to be recognized in the financial statements. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measure of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

The total amount of unrecognized tax benefits as of January 1, 2007 was approximately $230,000, all of which would impact the effective tax rate if recognized. A $28,000 decrease in the unrecognized tax liability was recorded as an increase to retained earnings as of January 1, 2007.

On April 21, 2007, the Company entered into a waiver to the revolving credit agreement pursuant to which its lenders waived certain covenant violations that would have otherwise occurred with respect to the quarter ended March 31, 2007 due to the Company not achieving the required EBITDA level and Debt-to-EBITDA ratio, as defined in the revolving credit agreement.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

For the first quarter of 2007, the Company reported a 26.6 percent increase in net sales to $32.0 million from $25.3 million in 2006. The increase reflected strong performance in the Cobra business segment, particularly sales of its Two-Way radio, Citizens Band radio and Detection products, as well as sales at Cobra Electronics Products Europe Limited. Also contributing to the increase in net sales was $3.1 million from the Company’s other business segment, PPL, which the Company acquired in late October 2006.

The Company’s 2007 gross margin increased to 25.3 percent from 19.8 percent in 2006 mainly as a result of higher Cobra segment gross margin, which improved to 23.3 percent from 19.8 percent in the prior year’s quarter. This improvement reflected increased gross margin in several domestic product categories—Two-Way radios, Detection and Citizens Band radios—and at Cobra Electronics Europe Limited. A 43.3 percent gross margin at PPL also contributed to the Company’s gross margin increase.

The Company’s selling, general and administrative expenses increased $2.4 million to $9.0 million from $6.6 million in the prior year. As a percentage of net sales, selling, general and administrative expenses were 28.2 percent compared to 26.0 percent in 2006. $1.3 million, or 54.2 percent, of the increase was attributable to PPL. The remainder of the increase was attributable to the Cobra segment, which incurred higher professional fees for compliance with new auditing pronouncements, specifically FIN 48, tax consulting services and assistance with U.S. GAAP reporting at PPL.

Other income for the Company increased $319,000 in 2007 primarily due to a higher gain on the cash surrender value of life insurance. Interest expense increased by $285,000 in 2007 as a result of the debt incurred to acquire PPL.

The Company had a net loss in the first quarter of 2007 of $720,000, or a net loss of $0.11 per diluted share, compared to a net loss of $1.1 million, or a net loss of $0.17 per diluted share, for 2006. The income tax benefit for 2007 reflected a 29.5 percent effective tax rate compared to an effective tax rate of 32.2 percent for 2006’s tax benefit. The lower effective tax rate for 2007 was due to higher taxable income in foreign jurisdictions, as well as a lowered R&D tax credit.

The Company anticipates that there will be year-over-year increases in both revenue and net income for the second quarter of 2007, but some softening of gross margins is anticipated as production of the NAV ONE™ 2100 has been accelerated to ensure timely arrival at the Company’s retailers and additional expenses will be incurred to manage this placement.

The following table contains sales and pretax profit (loss) after eliminating intercompany accounts by business segment for the quarters ended March 31, 2007 and 2006.

Cobra’s net sales increased $3.6 million, or 14.4 percent, from the prior year. The increase reflected strong sales of domestic Two-Way radios, Citizens Band radios and Detection products and substantially higher sales at Cobra Electronics Europe Limited (“CEEL”), which increased 56.1 percent, 35.3 percent, 10.3 percent and 112.1 percent, respectively. Offsetting these increases were lower Mobile Navigation and other international sales, primarily into Canada, which declined 33.0 percent and 30.6 percent, respectively. The increase in Two-Way Radio sales was due to strong sales of lithium-ion powered radios, which had low sales in the first quarter of 2006 because of production delays. The introduction of a limited edition model for professional drivers was the main reason for the increase in Citizens Band radio sales while Detection sales increased primarily due to additional market penetration and a shift in mix towards higher priced models. CEEL’s sales benefited from the launch of a new line of Two-Way radios and strong demand for radar detectors in Eastern Europe. The decrease in Mobile Navigation sales was due to the timing of the launch for Cobra’s newest product, the NAV ONE 2100, with shipments scheduled for early in the second quarter, as well as the nonrecurrence in 2007 of a promotion with a large customer held in 2006. International sales declined primarily because of higher sales returns, reflecting a change in return policies that was accommodated through selected increases in selling prices.

For the first quarter of 2007, Cobra’s pre-tax segment loss decreased to $1.1 million from a pre-tax segment loss of $1.7 million in 2006. The decrease reflected the higher sales discussed above, as well as an increase in gross margin, offset in part by higher selling, general and administrative expenses and interest expense.

Cobra’s gross margin increased to 23.3 percent in 2007 from 19.8 percent in 2006. This improvement reflected increases in gross margin for domestic Two-Way radios, Detection and Citizens Band radios and for CEEL. Two-Way radio gross margin increased primarily because 2006 included both higher sales of older Two-Way radio models at a lower profit as new models were set to be launched and higher air freight expense as production delays for new lithium-ion powered radios required more expedited shipping of these models to meet customer commitments and demand. Detection gross margin increased because of more sales of higher-margin models. The increase in Citizens Band radio gross margin was due mainly to sales of a high-margin limited edition model for professional drivers. CEEL’s gross margin increased because of the launch of a new line of Two-Way radios and an increase in Detection sales. These increases were partially offset by a decrease in Mobile Navigation gross margin resulting from sales of certain older Mobile Navigation models at prices that approximated cost, as well as lower margins on more recent models. Also contributing to the decline in Mobile Navigation gross margin was a charge of $171,000 to adjust the cost of certain returned products to net realizable value.

Cobra’s selling, general and administrative expenses increased $1.1 million in the first quarter of 2007 to $7.7 million, or 26.7 percent of net sales, from $6.6 million, or 26.0 percent of net sales, for the prior year’s first quarter. The primary driver of this increase was higher general and administrative expense, due to higher professional fees for compliance with new auditing pronouncements, specifically FIN 48, tax consulting services in connection with a IRS audit and assistance with U.S. GAAP reporting at PPL. Also contributing to the increase were higher fixed sales and marketing costs, reflecting mainly higher compensation costs as an open position has been filled, and more sales bonus expense because of the higher sales. Additionally, $249,000 of the increase was due to a lower reversal in 2007 of accrued unused program funds from prior periods compared to 2006. The higher general and administrative expense was offset in part by lower general and domestic trademark legal fees.

Interest expense for Cobra increased $270,000 in 2007 primarily because of the debt relating to the purchase of PPL. Other income increased $202,000 in 2007 primarily due to a higher gain on cash surrender value life insurance.

For the first quarter of 2007, PPL had net sales of $3.1 million, which were less than expected because of lower sales of Satellite Navigation systems. The primary causes of this shortfall were the failure of a new vendor to produce the SNP 250, which reduced sales by approximately $1.0 million, as well as lower than expected average selling prices for two models, the Snooper Indago and the Snooper Syrius, in order to spur demand. Also contributing to the lower net sales was a charge of $242,000, reflecting intangible amortization, that reduced PPL’s Enigma data base download fee revenue recognized for the quarter. The remaining amount of the intangible amortization at March 31, 2007 amounted to $816,000, of which $491,000 will be amortized during the last nine months of 2007 with the remainder to be amortized during 2008.

For the first quarter of 2007, PPL had a pre-tax segment profit of $109,000, which reflected a gross margin of 43.3 percent. Gross margin was negatively affected by the lower prices noted above as well as by non-cash charges of $373,000 associated with the intangible amortization that increased cost of sales.

Selling, general and administrative expenses for PPL amounted to $1.3 million for the quarter and included $213,000 of non-cash charges associated with the intangible amortization. PPL also incurred additional expenses for temporary assistance in the finance and accounting area in order to comply with U.S. GAAP reporting requirements as well as for outside fees in connection with the parent company’s quarterly review by its independent public accountant.

PPL recorded other income of approximately $76,000 in the quarter, which reflected gains on forward exchange contracts.

On January 31, 2002, the Company executed a new three-year Revolving Credit Agreement (“Credit Agreement”) with three financial institutions. In November 2005, the term of the agreement was amended to January 31, 2007. In October 2006, in connection with the PPL acquisition, the Credit Agreement was amended and restated for a five-year term and maximum loan limit of $53.6 million, including the $40 million revolver, and a $7.0 million Term Loan. The balance of $6.6 million is for a Delayed-Draw Term Loan available until November 15, 2007 that can only be used to fund the first earn-out payment of up to approximately $6.5 million under the PPL purchase agreement which is contingent upon PPL’s operating performance for the twelve-month period ending March 31, 2007. At the Company’s option, the revolver may be increased to $50 million upon sixty days advance notice. Borrowings and letters of credit issued under the Credit Agreement are secured by substantially all of the assets of the Company.

The credit agreement continues to allow the Company to pay dividends and distributions on its stock, and repurchases of its stock, up to $1.2 million per calendar year.

The credit agreement contains certain financial and other covenants, including but not limited to, a Tangible Net Worth Minimum, a Fixed Charge Coverage Ratio and a Debt-to-EBITDA Ratio, which may cause the applicable interest rate to increase or decrease after September 30, 2007. The revolver portion of the credit agreement is also subject to an unused line fee of 37.5 basis points while the Delayed-Draw Term Loan is subject to a non-use fee of 62.5 basis points. Loans outstanding on the revolver currently bear interest, at the Company’s option, at prime rate plus 25 basis points or LIBOR plus 175 basis points. The Company has elected the LIBOR option on the $7.0 million Term Loan and entered into a 5-year interest rate swap in January 2007, as required by the credit agreement, which effectively fixes the total interest rate at 5.34 percent plus applicable basis points, currently 175 points, or a total interest rate of 7.09 percent. The $7.0 million Term Loan and the Delayed-Draw Term Loan are subject to quarterly installment payments and mandatory prepayments based on certain asset sales, excess cash flow and issuance of equity or debt.

At March 31, 2007, the Company had interest bearing debt outstanding of $16.5 million, consisting of the $6.7 million term loan and $9.8 million in the Revolver. As of March 31, 2007, availability was approximately $11.5 million under the revolving credit line based on asset advance formulas.

On October 20, 2006, Cobra Electronics UK Ltd., a wholly owned subsidiary of Cobra Electronics Corporation completed the acquisition of 100 percent of the issued and outstanding share capital of PPL. Under the acquisition agreement, the purchase price for the issued share capital of PPL consisted of $21.2 million paid in cash at the closing of the transaction. In addition, additional cash consideration of up to approximately $6.5 million will be payable upon achievement of certain performance targets by PPL for the twelve-month period ended March 31, 2007 and cash consideration of up to approximately $9.4 million will be payable upon achievement of certain performance targets by PPL

for the fourteen-month period ended May 31, 2008. An additional payment could be due depending on PPL’s performance in excess of the cumulative targets for the periods ending March 31, 2007 and May 31, 2008 and any shortfall in performance for the first period may be recovered in the second period if certain targets are exceeded. Actual earn-out payments will be based on a specified formula of gross profit less certain agreed upon sales and marketing costs. The Company is currently reviewing PPL’s results, and the amount, if any, of the earn-out payment for the year ending March 31, 2007 has not yet been determined.

For the first quarter ended March 31, 2007, net cash flows provided by operating activities were $2.6 million. Significant net cash inflows from operations included a reduction in accounts receivable of $4.0 million, an increase in accounts payable of $3.3 million and non-cash depreciation and amortization of $1.6 million. The decrease in accounts receivable resulted from collections on increased fourth quarter of 2006 sales. The increase in accounts payable was due to a net payable position with one of the Company’s major customers and increased inventory. Significant offsets to the inflows were a decrease in accrued liabilities of $1.8 million, a decrease in accrued income taxes of $1.5 million and an increase in inventory of $878,000. The decrease in accrued liabilities was due to payments for year-end accruals for professional fees and advertising and promotional funds. The increase in inventory represented a build-up resulting from normal seasonal requirements and forecasted sales for the second quarter.

Working capital requirements are seasonal, with demand for working capital being higher later in the year as customers begin purchasing for the holiday selling season. The Company believes that cash generated from operations and from borrowings under its credit agreement will be sufficient in 2007 to fund its working capital needs.

Investing activities used cash of $943,000 in the first three months of 2007 due to a $561,000 increase in intangible assets, primarily for Mobile Navigation product software, and $382,000 for capital expenditures, primarily for purchases of tooling.

At March 31, 2007 and 2006, the Company had outstanding inventory purchase orders with suppliers totaling approximately $35.2 million and $37.5 million, respectively.

The Company declared an annual dividend of $0.16 per share, payable on April 27, 2007 to shareholders of record as of April 13, 2006, which will utilize approximately $1 million.

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

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

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

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

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

Liquidation Reserve: The Company maintains a liquidation reserve representing the write-down of returned product from customers to its net realizable value. Returned inventory is either sold to various liquidators or returned to vendors for partial credit against similar, new models; this decision depends upon the estimated future demand for the models. Judgments are made as to whether various models are to be liquidated or returned to the vendor, taking into consideration the liquidation prices expected to be received and the amount of vendor credit. The amount of the reserve is determined by comparing the cost of each unit returned to the estimated amount to be realized upon each unit’s disposition, either from returning the unit to the vendor for credit towards the cost of new, similar product or liquidating the unit. This reserve can fluctuate significantly from quarter to quarter depending upon quantities of returned inventory on hand and the estimated liquidation price or vendor credit per unit.

Net Realizable Value Reserve: The Company maintains a net realizable value reserve to write-down below cost, as necessary, certain inventory not previously sold to customers where it is determined that net realizable value is less than cost. Thus, judgments must be made about which slow-moving, excess or non-current models are to be included in the reserve and the estimated net realizable value of such model (i.e., the per unit price that it is estimated can be received in the marketplace if the model was sold). This reserve will vary depending upon the specific models selected, the estimated net realizable value for each model and quantities of each model that are determined will be sold below cost from quarter to quarter.

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

Deferred Compensation: Obligations under the deferred compensation plans (most of which are non-qualified defined benefit plans) and annual deferred compensation expense are determined on the basis of a number of assumptions. Key assumptions in the determination of obligations under the deferred compensation plans and annual deferred compensation expense include the discount rate and anticipated compensation for each individual covered by the plans, which in part is dependent upon the anticipated future profitability of the Company. The discount rate for 2007 and 2006 was 7 percent. The compensation increase assumptions are based on historical experience and anticipated future performance. The Company maintains life insurance policies for certain current and former executives to provide funding for future obligations. As of March 31, 2007, the cash surrender value of the insurance policies in force for the Company’s president and chief executive officer was $993,000.

Software Related to Products to be Sold: The Company purchases and/or incurs costs in connection with the development of software to be used in products that the Company intends to sell, mainly Mobile Navigation products. Such costs are capitalized and deferred as intangible assets in accordance with SFAS No. 86. Such costs consist of expenditures incurred after technological feasibility of the software has been established either from a working model of the product developed, a detail design, or the purchase of computer software that has an alternative future use. Such costs, which consist principally of coding and related costs, are charged to earnings based on the ratio of actual product sales during the reporting period to expected product sales over the estimated product life cycle. Software related intangible assets are reviewed at each balance sheet date for possible impairment as required by paragraph 10 of SFAS No. 86, and, accordingly, if such review indicates that the carrying amount of these assets may not be recoverable, the carrying amount is reduced to the estimated fair value.

Goodwill and Other Intangible Assets: Pursuant to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”), the Company evaluates goodwill for impairment on an annual basis or if impairment indicators exist. For goodwill, the evaluation requires a comparison of estimated fair value of PPL to which the goodwill has been assigned to the sum of the carrying value of the assets and liabilities of that unit. If the sum of the carrying value of the assets and liabilities of a reporting unit exceeds the fair value of that reporting unit, the carrying value of the reporting unit’s goodwill is reduced to its implied fair value through an adjustment to the goodwill balance, resulting in an impairment charge.

The above listing is not intended to be a comprehensive list of all of the Company’s accounting policies. In most cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States. See Note 1 to Cobra’s consolidated financial statements included under Item 8 of the Annual Report on Form 10-K for the year ending December 31, 2006.

Market risks related to changes in foreign currency exchange risks and interest rates are inherent to the Company’s operations. Changes to these factors could cause fluctuations in the Company’s net earnings, cash flows and the fair values of financial instruments subject to market risks. The Company identifies these risks and mitigates the financial impact with hedging and interest rate swaps.

Debt incurred under the Company’s revolving credit agreement with a balance of $9.8 million as of March 31, 2007, is priced at an interest rate that floats with the market. Therefore, this debt is not significantly affected by changes in the interest rate market. Also, the Company has $6.7 million of debt as of March 31, 2007 with a fixed rate of interest. Accordingly, fair value of this fixed-rate debt can be significantly affected by changes in the interest rate market.

The Company’s suppliers are located in China, Hong Kong, Italy, the Philippines, South Korea and Thailand.

In the first quarter of 2007, approximately 22.3 percent of the Company’s sales were outside the United States, principally in Europe and Canada, compared to 11.3 percent in 2006. The Company minimizes the foreign currency exchange rate risk associated with relationships outside of the United States by conducting all of its transactions in U.S. dollars, except for some billings of its European business, which are conducted in euros and the billings of PPL which are primarily in pound sterling. The Company does not use derivative financial or commodity instruments for trading or speculative purposes; however, forward contracts are occasionally used for hedging a portion of the Company’s European business’ euro denominated transactions and hedging dollar purchases for PPL. Please refer to Note 6 in this Form 10-Q. A 10 percent movement in the U.S. dollar/pound sterling/euro exchange rate on the forward contracts outstanding at March 31, 2007 would result in approximately a $742,000 annual increase or decrease in cost of sales and cash flows.

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

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

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

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

As of March 31, 2007, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation, the principal executive officer and principal financial officer of the Company have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective as of March 31, 2007.

There has been no change in the Company’s internal control over financial reporting that occurred during the first quarter of 2007 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Except as noted below, there have been no material changes to the risk factors as previously disclosed under Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2006.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


COBRA ELECTRONICS CORPORATION

By		/s/ MICHAEL SMITH
		Michael Smith
		Senior Vice President and
		Chief Financial Officer
		(Duly Authorized Officer and Principal
		Financial Officer)


DELAWARE		36-2479991
(State of Incorporation)		(I.R.S. Employer Identification No.)

6500 WEST CORTLAND STREET CHICAGO, ILLINOIS		60707
(Address of principal executive offices)		(Zip Code)


	Three Months Ended (Unaudited)
	March 31 2007			March 31 2006
Net sales	$	32,036		$	25,307
Cost of sales		23,948			20,285

Gross profit		8,088			5,022
Selling, general and administrative expense		9,036			6,588

Loss from operations		(948	)		(1,566	)

Other expense		(62	)		(96	)

Loss before income taxes		(1,010	)		(1,662	)
Tax benefit		(298	)		(535	)
Minority interest		(8	)		—

Net loss	$	(720	)	$	(1,127	)

Net loss per common share:
Basic	$	(0.11	)	$	(0.17	)
Diluted	$	(0.11	)	$	(0.17	)

Weighted average shares outstanding:
Basic		6,438			6,489
Diluted		6,438			6,489
Dividends declared per common share	$	0.16		$	0.16


	(Unaudited)
	March 31 2007			December 31 2006
ASSETS
Current assets:
Cash and cash equivalents	$	3,561		$	1,878
Receivables, less allowance for claims and doubtful accounts of $245 in 2007 and $282 in 2006		24,339			28,320
Inventories, primarily finished goods		29,924			29,039
Deferred income taxes		6,342			7,196
Other current assets		7,441			6,810

Total current assets		71,607			73,243

Property, plant and equipment, at cost:
Buildings and improvements		5,436			5,433
Tooling and equipment		20,440			20,079

		25,876			25,512
Accumulated depreciation		(18,655	)		(18,117	)
Land		230			230

Net property, plant and equipment		7,451			7,625

Other assets:
Cash surrender value of officers’ life insurance policies		4,037			3,968
Goodwill		11,997			11,997
Intangible assets		19,558			19,503
Other assets		429			422

Total other assets		36,021			35,890

Total assets	$	115,079		$	116,758


	(Unaudited)
	March 31 2007			December 31 2006
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,414		$	6,097
Accrued salaries and commissions		696			760
Accrued advertising and sales promotion costs		1,525			2,292
Accrued product warranty costs		1,424			1,963
Accrued income taxes		262			1,650
Current maturities of long-term debt		1,370			1,060
Other accrued liabilities		4,727			5,279

Total current liabilities		20,418			19,101

Non-current liabilities:
Long-term bank debt		15,126			15,614
Deferred compensation		6,067			5,858
Deferred income taxes		4,246			5,337
Other long term liabilities		993			1,075

Total non-current liabilities		26,432			27,884

Total liabilities		46,850			46,985
Minority interest		5			4

Shareholders’ equity:
Preferred stock, $1 par value, shares authorized 1,000,000; none issued		—			—
Common stock, $.33¹/3 par value, 12,000,000 shares authorized, 7,039,100 issued for 2007 and 2006		2,345			2,345
Paid-in capital		19,891			19,824
Retained earnings		49,862			51,584
Accumulated other comprehensive income		39			11

		72,137			73,764
Treasury stock, at cost (593,196 shares for 2007 and 605,662 shares for 2006)		(3,913	)		(3,995	)

Total shareholders’ equity		68,224			69,769

Total liabilities and shareholders’ equity	$	115,079		$	116,758


	Three Months Ended (Unaudited)
	March 31 2007			March 31 2006
Cash flows from operating activities:
Net loss	$	(720	)	$	(1,127	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization		1,566			1,582
Deferred income taxes		(219	)		489
(Gain) loss on cash surrender value (CSV) life insurance		(69	)		204
Stock-based compensation		48			20
Tax benefit from stock options exercised		19			—

Changes in assets and liabilities:
Receivables		3,991			4,394
Inventories		(878	)		(2,796	)
Other current assets		(885	)		(830	)
Accounts payable		3,284			1,727
Accrued income taxes		(1,488	)		(1,086	)
Accrued liabilities		(1,848	)		(1,586	)
Deferred compensation		209			224
Deferred income		(243	)		—
Other long term liabilities		(155	)		(4	)

Net cash provided by operating activities		2,612			1,211


Cash flows from investing activities:
Capital expenditures		(382	)		(345	)
Loan receivable		—			3,374
Intangible assets		(561	)		(794	)

Net cash (used in) provided by investing activities		(943	)		2,235


Cash flows from financing activities:
Bank borrowings		(178	)		—
Transactions related to exercise of stock options, net		82			—

Net cash used in financing activities		(96	)		—


Effect of exchange rate changes on cash and cash equivalents		110			46

Net increase in cash		1,683			3,492
Cash at beginning of year		1,878			6,704

Cash at end of period	$	3,561		$	10,196

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	327		$	34
Income taxes, net of refunds	$	1,818		$	283


Classification		Life
Buildings		30 years
Building improvements		20 years
Motor vehicles		2-5 years
Equipment		5-10 years
Tools, dies and molds		1.5-4.5 years


Classification		Life
Trade Names and Trademarks		2-30 years
Enigma Database		5 years
Noncompetition Agreements		3 years
Customer Relationships		10 years
ERP System		7 years


	2007		2006
Risk-free interest rate	4.0 – 4.6	%	4.0 – 4.7	%
Expected life	10 years		10 years
Expected volatility	41 – 42	%	42 – 45	%


Accounts receivable	$	2,080
Inventory		2,343
Other current assets		760
Property, plant & equipment		1,062
Intangible assets		11,816
Goodwill		11,997

Total assets acquired		30,058

Accounts payable		1,530
Deferred income		616
Other current liabilities		1,660
Deferred income - long-term		344
Deferred income taxes		4,010

Total liabilities assumed		8,160

Net assets acquired	$	21,898

PURCHASE PRICE RECAP:
Cash	$	21,209
Assumed debt		36
Direct acquisition costs		1,831
Working capital adjustment		(1,178	)

Total purchase price	$	21,898


	Three Months Ended March 31, 2007			Year Ended December 31, 2006
Accrued product warranty costs, beginning of period	$	1,963		$	1,618
Warranty provision		497			3,873
Warranty expenditures		(1,036	)		(3,528	)

Accrued product warranty costs, end of period	$	1,424		$	1,963


	Three Months Ended March 31, 2007			Year Ended December 31, 2006
Liquidation reserve, beginning of period	$	1,112		$	874
Liquidation provision		1,349			4,115
Liquidation of models		(943	)		(3,877	)

Liquidation reserve, end of period	$	1,518		$	1,112


	Three Months Ended March 31, 2007			Year Ended December 31, 2006
NRV reserve, beginning of period	$	736		$	509
NRV provision		1,560			3,426
NRV write-offs		(888	)		(3,199	)

NRV reserve, end of period	$	1,408		$	736


	March 31, 2007		December 31, 2006
Vendor receivables	$	1,967	$	2,388
Prepaid packaging & design		738		774
Miscellaneous receivables		1,848		1,684
Prepaid assets		2,888		1,964

Total	$	7,441	$	6,810


	Three Months Ended March 31,
	2007			2006
Interest expense	$	(319	)	$	(34	)
Interest income		11			112
CSV gain (loss)		69			(204	)
Exchange gain (loss)		84			(4	)
Other – net		93			34

Total	$	(62	)	$	(96	)


	Three Months Ended March 31, 2007
	COBRA			PPL			TOTAL
	(in thousands)
STATEMENT OF OPERATIONS
Net sales	$	28,946		$	3,090		$	32,036
Cost of sales		22,197			1,751			23,948

Gross profit		6,749			1,339			8,088
Selling, general & administrative expense		7,730			1,306			9,036

Income (loss) from operations		(981	)		33			(948	)
Other expense (income)		138			(76	)		62

Income (loss) before income taxes		(1,119	)		109			(1,010	)
Tax (benefit) expense		(448	)		150			(298	)
Minority interest		—			8			8

Net loss	$	(671	)	$	(49	)	$	(720	)


	(Unaudited)
	March 31 2007			December 31 2006
Internal use software	$	1,815		$	1,813
Less accumulated amortization		(1,705	)		(1,684	)

		110			129

ERP internal software system		3,912			3,891
Less accumulated amortization		(925	)		(786	)

		2,987			3,105

Trademarks and patents		5,943			5,923
Less accumulated amortization		(727	)		(657	)

		5,216			5,266

Product software		5,424			4,890
Less accumulated amortization		(1,358	)		(1,312	)

		4,066			3,578

Enigma database		1,460			1,460
Less accumulated amortization		(132	)		(58	)

		1,328			1,402

Noncompetition agreements		254			254
Less accumulated amortization		(38	)		(17	)

		216			237

Customer relationships		5,902			5,902
Less accumulated amortization		(267	)		(116	)

		5,635			5,786

Total	$	19,558		$	19,503


	2007				2006				2007 vs. 2006 Increase (Decrease)
Business Segment	Net Sales		Profit (Loss)		Net Sales		Profit (Loss)		Net Sales		Profit (Loss)
Cobra	$	28,946	(1,119	)	$	25,307	(1,662	)	$	3,639	543
PPL		3,090	109			—	—			3,090	109

Total	$	32,036	(1,010	)	$	25,307	(1,662	)	$	6,729	652


Exhibit Number		Description of Document

10.1		Executive Bonus Structure for 2007

31.1		Rule 13a – 14(a)/15d–14(a) Certification of the Chief Executive Officer.

31.2		Rule 13a – 14(a)/15d–14(a) Certification of the Chief Financial Officer.

32.1		Section 1350 Certification of the Chief Executive Officer.

32.2		Section 1350 Certification of the Chief Financial Officer.