##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, DC
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number 0-26524
  LOUD TECHNOLOGIES
    INC.
 (Exact name of registrant as
    specified in its charter)
  Washington


91-1432133(State or other jurisdiction
    of
    incorporation or organization)


(I.R.S. Employer
    Identification No.
)    16220 Wood-Red Road, N.E., Woodinville, Washington 98072
 (Address of Principal Executive
    Offices)
  Registrants telephone number, including area code:
    (425) 487-4333
  Securities registered pursuant to Section 12(b) of the
    Act:
   Title of Each Class

Name of Each Exchange on Which RegisteredNone


None   Securities registered pursuant to Section 12(g) of the
    Act: Common Stock, no par value
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer þ

Smaller reporting
    company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
  1-for-5
    DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K




---



##### 





LOUD
    TECHNOLOGIES INC.FORM 10-K
  For the
    Year Ended December 31, 2007
 INDEX
   
 PagePART IItem 1.


Business


2Item 1A.


Risk Factors


5Item 1B.


Unresolved Staff Comments


11Item 2.


Properties


11Item 3.


Legal Proceedings


12Item 4.


Submission of Matters to a Vote of Securities
    Holders


12PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


13Item 6.


Selected Financial Data


16Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operation


16Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


25Item 8.


Financial Statements and Supplementary Data


26Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


52Item 9A.


Controls and Procedures


52Item 9B.


Other Information


52PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


53Item 11.


Executive Compensation


53Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


53Item 13.


Certain Relationships and Related Transactions,
    and Directors Independence


53Item 14.


Principal Accountant Fees and Services


53PART IVItem 15.


Exhibits, Financial Statement Schedules


53Signatures


54EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1   1




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##### Table of Contents



PART I  Certain statements set forth in or incorporated by reference
    into this Annual Report on
    Form 10-K
    for the year ended December 31, 2007, particularly
    including but not limited to the section entitled
    Managements Discussion and Analysis of Financial Condition
    and Results of Operations, contain forward-looking
    statements within the meaning of Section 21D of the
    Securities Exchange Act of 1934, as amended. Such statements are
    based on currently available operating, financial and
    competitive information and are subject to various risks and
    uncertainties. Such forward-looking statements include among
    others, those statements including the words expect,
    anticipate, intend, believe
    and similar expressions. Actual results could differ materially
    and adversely from those discussed in this report. Factors that
    could cause or contribute to such differences include but are
    not limited to the risks discussed in the Risk
    Factors section in Item 1A. Readers are cautioned not
    to place undue reliance on these forward-looking statements, and
    should recognize that these statements are accurate only as of
    the date of this report and will not be updated to reflect
    future developments.
  Item 1.
    Business  Overview
  ® ® ® ® ® ® ® ® ®
           2




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tm
    Marketing
    Our Major
    Brands
              Distribution
    and Sales
     3




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Customer
    Support
      Research
    and Development
    Competition
    Proprietary
    Technologies
    Manufacturing
   4




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Employees
    Website
    Access to Reports
  www.loudtechinc.com. Form 10-K, Form 10-Q, Form 8-K, http://www.sec.gov
  Item 1A.
    Risk
    Factors  Controlled Company.
    Liquidity and Debt Obligations.
 5




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##### Table of Contents




    we will be required to use a substantial portion of our cash
    flow from operations to pay interest on our debt, thereby
    reducing cash available to fund working capital, capital
    expenditures, strategic acquisitions, investments and alliances,
    and other general corporate requirements;
    our leverage may increase our vulnerability to general economic
    downturns and adverse competitive and industry conditions and
    may place us at a competitive disadvantage compared to those of
    our competitors that are less leveraged;
    our debt service obligations may limit our flexibility to plan
    for, or react to, changes in our business and in the industry in
    which we operate; and
    our level of debt may make it difficult for us to raise
    additional financing on satisfactory terms, if at all.       6




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Related Party Transactions.
        Sales Concentration.
  Acquisition Matters.
 7




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##### Table of Contents




    difficulties in integrating acquired technologies and operations
    into our business while maintaining uniform standards, controls,
    policies and procedures;
    obligations imposed on us by counterparties in such transactions
    that limit our ability to obtain additional financing, our
    ability to compete in geographic areas or specific lines of
    business, or other aspects of our operational flexibility;
    increasing cost and complexity of assuring the implementation
    and maintenance of adequate internal control and disclosure
    controls and procedures, and of obtaining the reports and
    attestations required under the Securities Exchange Act of 1934;
    difficulties in consolidating and preparing our financial
    statements due to poor accounting records, weak financial
    controls and, in some cases, procedures at acquired entities not
    based on U.S. GAAP particularly those entities in which we
    lack control; and
    inability to predict or anticipate market developments and
    capital commitments relating to the acquired company, business
    or technology.    
    difficulties, as a result of distance, language, legal or
    cultural differences, in developing, staffing and managing
    foreign operations;
    lack of control over our equity investees and other business
    relationships;
    currency exchange rate fluctuations;
    longer payment cycles;
    credit risk and higher levels of payment fraud;
    foreign exchange controls that might limit our control over, or
    prevent us from repatriating, cash generated outside the United
    States;
    potentially adverse tax consequences;
    expropriation or nationalization of assets;
    difficulties in foreign corporate law that have and may create
    additional administrative burdens and legal risks;
    increased management time and resources to manage overseas
    operations;
    trade barriers and import and export restrictions; and
    political or social unrest and economic instability.    Competition.
 8




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Variability in Quarterly Operating
    Results.
    
    increased competition in niche markets;
    timing of new product announcements;
    product releases and pricing changes by us or our competitors;
    market acceptance or delays in the introduction of new products;
    production constraints;
    the timing of significant orders;
    customers budgets; and
    changes in foreign currency exchange rates.    Rapid Technological Change.
  Product Liability.
  Use of Contract Distribution Centers.
 9




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Use of Contract Manufacturers.
  
    reduction in control over the manufacturing process;
    longer lead times for transitions of newly released products
    from engineering to full release;
    lead times for transitions of existing products to new contract
    manufacturers;
    reduced flexibility in reacting to demand changes;
    increased transportation cost and delivery times;
    fluctuations in currency exchange rates (specifically the
    floating currency rate in China);
    delays or inability to source parts on reasonable payment
    terms; and
    concentration of production by certain key manufacturers.  Manufacturing in China.
  International Operations.
  
    changes in regulatory requirements;
    tariffs and taxes;
    increases in freight costs, or damage or loss in shipment;
    difficulties in staffing and managing foreign operations;
    longer average payment cycles and difficulty in collecting
    accounts receivable;
    fluctuations in foreign currency exchange rates;
    product safety and other certification requirements; and
    political and economic instability, wars and terrorist activity.  Consumer Products Regulations.
   10




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Protection of Intellectual Property.
      Dependence on Key Personnel.
  Sarbanes-Oxley Compliance. Form 10-Q Form 10-K
  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties   11




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Area LeasedType

Location

(Sq. Feet)


Lease ExpirationWarehouse

Woodinville, WA


80,000


July 31, 2011Corporate headquarters and warehouse

Woodinville, WA


90,000


December 31, 2011R&D facility

Whitinsville, MA


66,000


May 31, 2010Warehouse

St. Louis, MO


46,000


June 30, 2009Office space and warehouse

St. Louis, MO


93,000


Month to monthOffice space and manufacturing facility

High Wycombe, UK


33,000


September 26, 2011   Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Securities Holders   12




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PART II  Item 5.
    Market
    for Registrants Common Equity and Related Shareholder
    Matters  tm tm tm
    Common StockHigh


LowYear Ended December 31, 2007:Fourth Quarter

$
8.94


$
5.53Third Quarter

$
10.35


$
7.00Second Quarter

$
11.78


$
5.25First Quarter

$
15.80


$
10.30Year Ended December 31, 2006:Fourth Quarter

$
17.50


$
9.25Third Quarter

$
19.20


$
14.50Second Quarter

$
18.73


$
13.53First Quarter

$
19.80


$
12.25     Sales
    of Unregistered Securities
     13




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Equity
    Compensation Plan Information
      (a)

(b)

(c)Number of Securities to be

Weighted-Average

Number of Securities RemainingIssued Upon Exercise of

Exercise Price of

Available for Future Issuance UnderOutstanding Options,

Outstanding Options,

Equity Compensation Plans (ExcludingPlan Category

Warrants and Rights

Warrants and Rights

Securities Reflected in Column(a))Equity compensation plans approved by security holders


365,216



15.22



1,080,335Total


365,216



15.22



1,080,335      14




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##### Table of Contents



Stock
    Performance Graph
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
    
  *
    $100 invested on 12/31/02 in stock or index-including
    reinvestment of dividends. Fiscal year ending December 31. 15




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Item 6.
    Selected
    Consolidated Financial Data  Form 10-K.
  Years Ended December 31,2007


2006


2005


2004


2003(In thousands, except per share data)Consolidated Statements of Operations Data(a):Net sales

$
208,253


$
215,033


$
204,328


$
123,276


$
130,766Gross profit


59,985



71,452



65,324



41,349



29,310Operating expenses


59,301



62,671



56,816



40,043



44,974Net income (loss) from continuing operations


(12,586
)


625



930



(2,291
)


(15,412
)Net income (loss) from discontinued operations










2,827







(6,383
)Net income (loss)


(12,586
)


625



3,757



(2,291
)


(21,795
)Basic net income (loss) per share:Net income (loss) from continuing operations

$
(2.60
)

$
0.13


$
0.20


$
(0.52
)

$
(3.94
)Net income (loss) from discontinued operations










0.59







(1.63
)Basic net income (loss) per share

$
(2.60
)

$
0.13


$
0.79


$
(0.52
)

$
(5.57
)Diluted net income (loss) per share:Net income (loss) from continuing operations

$
(2.60
)

$
0.13


$
0.19


$
(0.52
)

$
(3.94
)Net income (loss) from discontinued operations










0.57







(1.63
)Diluted net income (loss) per share

$
(2.60
)

$
0.13


$
0.76


$
(0.52
)

$
(5.57
)   December 31,2007


2006


2005


2004


2003(In thousands)Consolidated Balance Sheets Data:Working capital

$
39,211


$
27,559


$
27,305


$
1,764


$
2,582Total assets

$
143,578


$
105,756


$
95,545


$
60,795


$
50,422Long-term debt(b)

$
92,358


$
40,105


$
40,944


$
11,612


$
16,262Shareholders equity (deficit)

$
(1,717
)

$
10,205


$
9,087


$
3,320


$
832     (a)
    
    The consolidated statements of operations data for the year
    ended 2003 has been restated for discontinued operations.(b)
    
    Long-term debt excludes current portion.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion and analysis should be read in
    conjunction with Selected Consolidated Financial
    Data and the Consolidated Financial Statements and Notes
    thereto included elsewhere in this Annual Report. This
    discussion contains certain forward-looking
    statements within the meaning of the Private Securities
    Litigation Reform Act of 1995 that involve risks and
    uncertainties, such as statements of our plans, objectives,
    expectations and intentions. Actual results could differ
    materially from those discussed here.
 16




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The cautionary statements made in this Annual Report should
    be read as being applicable to all forward-looking statements
    wherever they appear. Factors that could cause or contribute to
    such differences include those discussed in Risk
    Factors, as well as those discussed elsewhere herein. We
    undertake no obligation to publicly release the result of any
    revisions to these forward-looking statements that may be
    required to reflect events or circumstances after the date
    hereof or to reflect the occurrence of unanticipated events.
  General
      Critical
    Accounting Policies and Estimates
      Inventory Valuation. first-in,
 17




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Allowance for Doubtful Accounts.
  Long-lived Assets. and/or
  Goodwill and Other Intangible Assets.
  
    Poor economic performance relative to historical or projected
    future operating results;
    Significant negative industry, economic or company specific
    trends;
    Changes in the manner of our use of the assets or the plans for
    our business; and
    Loss of key personnel.    Revenue Recognition.
 18




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Income Taxes.
  Accounting for Acquisitions.
  
    the potential impact on operating results of the revenue
    estimates for customers acquired through the acquisition based
    on an assumed customer attrition rate; and
    estimated costs to be incurred to purchase the capabilities
    gained through the developed technology and appropriate discount
    rates based on the particular businesss weighted average
    cost of capital.    Year
    Ended December 31, 2007 Compared to Year Ended
    December 31, 2006
  Net
    Sales
    Gross
    Profit
    Selling,
    General and Administrative
   19




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Research
    and Development
    Other
    Expense
      Income
    Tax Expense
      Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
  Net
    Sales
   20




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##### Table of Contents



Gross
    Profit
    Selling,
    General and Administrative
    Research
    and Development
    Other
    Expense
      Income
    Tax Expense
      Gain on
    Discontinued Operations
   21




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##### Table of Contents



Liquidity
    and Capital Resources
                 22




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##### Table of Contents



Net
    Cash Provided by Operating Activities
    Net
    Cash Used in Investing Activities
    Net
    Cash Provided by Financing Activities
   23




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##### Table of Contents



Payments
    and Proceeds from Long-term Debt, Line of Credit and Other
    Short-term Borrowings
      Ability
    to stay in compliance with debt covenants
      Commitments
    Payments Due by PeriodTotal


Less than 1 Year


1-3 Years


3-5 Years


5+ YearsOperating leases

$
7,981


$
2,514


$
4,270


$
1,197


$
Line of credit


1,318



1,318











Short-term and long-term debt


142,500



17,213



24,037



101,250



Total

$
151,799


$
21,045


$
28,307


$
102,447


$
      24




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##### Table of Contents



Recent
    Accounting Pronouncements
  Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities
  Business Combinations
 7A.
    Qualitative and Quantitative Disclosures About Market
    Risk    Interest
    Rate Risk
    Foreign
    Currency Risk
   25




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Item 8.
    Consolidated
    Financial Statements and Supplementary Data   26




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Report of
    Independent Registered Public Accounting Firm           Share-Based Payment
    
 27




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
    AND SUBSIDIARIES
 Consolidated
    Balance Sheets
    December 31, 2007 and 2006  2007


2006(In thousands, except for share amounts)ASSETSCurrent assets:Cash

$
3,589


$
311Accounts receivable, net of allowances of $3,537 and $3,197,
    respectively


25,204



26,230Inventories


56,804



54,844Prepaid expenses and other current assets


1,915



1,521Total current assets


87,512



82,906Property, plant and equipment, net


5,744



6,543Goodwill


19,726



2,248Other intangible assets, net


27,975



11,367Deferred financing costs, net


2,621



2,692Total assets

$
143,578


$
105,756LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)Current liabilities:Short-term borrowings

$
1,318


$
14,210Accounts payable


25,830



23,023Accrued liabilities


11,020



11,193Current deferred tax liabilities


299



Taxes payable


1,834



1,559Current portion of long-term debt


8,000



1,500Current portion of payable to former Italian subsidiary






700Other current liabilities






3,162Total current liabilities


48,301



55,347Long-term debt, excluding current portion


92,358



40,105Deferred tax liabilities


4,636



99Total liabilities


145,295



95,551Commitments and contingencies






Shareholders equity (deficit):Preferred stock, no par value. Authorized 5,000,000 shares,
    no shares issued and outstanding






Common stock, no par value. Authorized 40,000,000 shares,
    issued and outstanding 4,618,942 and 4,575,022 shares at
    December 31, 2007 and 2006, respectively


41,810



41,281Accumulated deficit


(43,662
)


(31,076
)Accumulated other comprehensive income


135



Total shareholders equity (deficit)


(1,717
)


10,205Total liabilities and shareholders equity (deficit)

$
143,578


$
105,756    28




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##### Table of Contents



LOUD
    TECHNOLOGIES INC.
    AND SUBSIDIARIESConsolidated Statements of Operations and
    Comprehensive Income (Loss)
    Years ended December 31, 2007, 2006, and 2005
  2007


2006


2005(In thousands, except per share data)Net sales

$
208,253


$
215,033


$
204,328Cost of sales


148,268



143,581



139,004Gross profit


59,985



71,452



65,324Operating expenses:Selling, general, and administrative


45,768



49,313



46,561Research and development


11,559



11,754



10,255Restructuring costs


1,974



1,604



Total operating expenses


59,301



62,671



56,816Operating income


684



8,781



8,508Other income (expense):Interest income


91



147



322Interest expense


(10,577
)


(6,693
)


(5,635
)Management fee


(948
)


(1,048
)


(1,161
)Other


(2,272
)


(131
)


(1,057
)Total other expense


(13,706
)


(7,725
)


(7,531
)Income (loss) before income taxes and discontinued operations


(13,022
)


1,056



977Income tax expense (benefit)


(436
)


431



47Income (loss) from continuing operations


(12,586
)


625



930Gain on discontinued operations, net of income tax expense of $58










2,827Net income (loss)

$
(12,586
)

$
625


$
3,757Per share dataBasic net income (loss) per share:Net income (loss) from continuing operations

$
(2.60
)

$
0.13


$
0.20Net income from discontinued operations










0.59Basic net income (loss) per share

$
(2.60
)

$
0.13


$
0.79Diluted net income (loss) per share:Net income (loss) from continuing operations

$
(2.60
)

$
0.13


$
0.19Net income from discontinued operations










0.57Diluted net income (loss) per share

$
(2.60
)

$
0.13


$
0.76Shares outstandingShares used in computing basic net income (loss) per share


4,850



4,807



4,758Shares used in computing diluted net income (loss) per share


4,850



4,979



4,950Comprehensive income (loss):Net income (loss)

$
(12,586
)

$
625


$
3,757Foreign currency translation gain


135







Comprehensive income (loss)

$
(12,451
)

$
625


$
3,757    29




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##### Table of Contents



LOUD
    TECHNOLOGIES INC.
    AND SUBSIDIARIESConsolidated Statements of Shareholders
    Equity (Deficit)
    Years ended December 31, 2007, 2006, and 2005
  AccumulatedCommon Stock


Accumulated


Other ComprehensiveShares


Amount


Deficit


Income


Total(In thousands)Balance at December 31, 2004


4,427



38,778



(35,458
)






3,320Shares issued  acquisition of St. Louis
    Music, Inc.


79



1,190











1,190Exercise of stock options


8



11











11Issuance in connection with debt refinance


52



750











750Amortization of deferred stock compensation






59











59Net income










3,757







3,757Balance at December 31, 2005


4,566



40,788



(31,701
)






9,087Exercise of stock options


9



45











45Stock based compensation






448











448Net income










625







625Balance at December 31, 2006


4,575



41,281



(31,076
)






10,205Exercise of stock options


44



224











224Stock based compensation






305











305Net loss










(12,586
)






(12,586
)Foreign currency translation adjustment














135



135Balance at December 31, 2007


4,619



41,810



(43,662
)


135



(1,717
)    30




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##### Table of Contents



LOUD
    TECHNOLOGIES INC.
    AND SUBSIDIARIESConsolidated Statements of Cash Flows
    Years ended December 31, 2007, 2006, and 2005
  2007


2006


2005(In thousands)Operating activities:Net income (loss)

$
(12,586
)

$
625


$
3,757Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Depreciation and amortization


4,976



4,598



4,513Amortization and write-offs of deferred financing costs


3,084



686



1,064Gain on asset dispositions


(526
)






Gain on discontinued operations










(2,885
)Stock based compensation


305



448



59Non-cash interest expense


322







57Changes in operating assets and liabilities, net of acquisition
    and disposition:Accounts receivable


5,601



1,994



664Inventories


4,076



(15,554
)


7,365Prepaid expenses and other current assets


289



355



873Accounts payable, accrued liabilities and payable to former
    Italian subsidiary


(3,864
)


6,568



(5,402
)Taxes payable


(1,439
)


325



(173
)Other liabilities


19



230



139Net cash provided by operating activities


257



275



10,031Investing activities:Proceeds from sales of property, plant and equipment


1,239







Purchases of property, plant and equipment


(2,422
)


(2,447
)


(1,726
)Acquisition of St. Louis Music, Inc., including transaction
    fees paid


(3,181
)






(35,288
)Acquisition of Martin Audio, Ltd., net of cash acquired of $3,696


(31,966
)






Net cash used in investing activities


(36,330
)


(2,447
)


(37,014
)Financing activities:Payments on previous credit facility


(41,605
)


(2,645
)


(11,969
)Payments on long-term debt


(1,964
)






(11,826
)Issuance of long-term debt


102,000







44,250Net proceeds (payments) on line of credit and short term
    borrowings


(12,892
)


4,615



9,595Net payment on debt and credit facility acquired in acquisition
    of Martin Audio, Ltd.


(3,030
)






Financing costs associated with debt issuance


(3,013
)






(3,810
)Net proceeds from stock sales and exercise of stock options


224



45



761Cash provided by financing activities


39,720



2,015



27,001Effect of exchange rate changes on cash


(369
)






Increase (decrease) in cash and cash equivalents


3,278



(157
)


18Cash at beginning of year


311



468



450Cash at end of year

$
3,589


$
311


$
468Supplemental disclosure of cash flow informationCash paid for interest

$
7,459


$
5,864


$
4,732Cash paid for income taxes

$
1,087


$
137


$
169Cash paid for acquisition related expenses

$
2,059


$



$
1,633Issuance of shares related to the acquisition of St. Louis
    Music

$



$



$
1,190Other supplemental disclosuresPayoff on existing line of credit relating to St. Louis
    Music, Inc. by borrowings under line of credit

$



$



$
39,313    31




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  December 31,
    2007
  (1)
    Description
    of Business    (2)
    Summary
    of Significant Accounting Policies  a)
    Basis
    of Presentation    b)
    Use of
    Estimates    c)
    Revenue
    Recognition   32




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  d)
    Advertising
    Expense    e)
    Research
    and Development Costs    f)
    Foreign
    Currency  non-U.S. subsidiaries,
    g)
    Accounts
    Receivable      Balance at








Balance atBeginning of








End ofYear


Additions


Deductions


Year2007

$
3,197


$
13,796


$
(13,456
)

$
3,5372006

$
3,169


$
15,640


$
(15,612
)

$
3,1972005

$
1,761


$
8,458


$
(7,050
)

$
3,169   h)
    Inventories  first-in,
 33




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    i)
    Property,
    Plant and Equipment    j)
    Deferred
    Financing Costs      Year ending December 31:2008


5522009


5892010


6322011


6802012


168   k)
    Goodwill      l)
    Impairment
    of Long-Lived Assets   34




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    m)
    Fair
    Value of Financial Instruments    n)
    Stock-Based
    Compensation        Share Based Payment: An
    Amendment of SFAS No. 123
  2007


2006Cost of sales

$
5


$
27Selling, general and administrative


287



391Research and development


13



20Total stock based compensation

$
305


$
438  35




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        2005Net income (loss):As reported

$
3,757Add stock-based employee compensation expense included in
    reported net loss


Less stock-based employee compensation expense determined under
    fair value based method


(458
)Pro forma

$
3,299Basic net income (loss) per share:As reported

$
0.79Pro forma


0.69Diluted net income (loss) per share:As reported

$
0.76Pro forma


0.67   o)
    Guarantees        Balance,


Charged to


Applied


Balance,Beginning


Cost of


to


Endof Period


Sales


Liability


of Period2007

$
1,160


$
3,121


$
(3,216
)

$
1,0652006

$
980


$
2,804


$
(2,624
)

$
1,1602005

$
978


$
2,746


$
(2,744
)

$
980   p)
    Segment
    Reporting   36




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  q)
    Income
    Taxes        r)
    Computation
    of Basic and Diluted Net Income (Loss) per Share      2007


2006


2005Numerator:Net income (loss) from continuing operations

$
(12,586
)

$
625


$
930Net income from discontinued operations










2,827Numerator for basic and diluted net income (loss) per share

$
(12,586
)

$
625


$
3,757Denominator:Weighted average shares outstanding


4,850



4,807



4,758Dilutive potential common shares from outstanding warrants and
    options






172



192Denominator for diluted net income (loss) per share


4,850



4,979



4,950  37




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  s)
    Concentration
    of Credit and Supply Risk      t)
    Recent
    Accounting Pronouncements  Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities
  Business Combinations
  u)
    Reclassifications    (3)
    Discontinued
    Operations   38




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (4)
    Restructuring
    Costs    Balance at December 31, 2005

$
New charges


1,604Cash payments


(709
)Other adjustments


(15
)Balance at December 31, 2006

$
880New charges


1,974Cash payments


(2,437
)Other adjustments


45Balance at December 31, 2007

$
462   (5)
    Inventories    December 31,2007


2006Raw materials

$
7,580


$
6,371Work in process


65



766Finished goods


49,159



47,707$
56,804


$
54,844  39




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (6)
    Intangible
    Assets    Gross


AccumulatedAmount


Amortization


NetCustomer and distributor relationships

$
13,865


$
1,101


$
12,764Trademark


12,721



1,425



11,296Developed technology


6,149



2,266



3,883Non-compete agreement


50



18



32Total intangible assets, December 31, 2007

$
32,785


$
4,810


$
27,975Total intangible assets, December 31, 2006

$
14,765


$
3,398


$
11,367       Year ending December 31:2008

$
2,0352009


2,0172010


1,9652011


1,9562012


1,858   (7)
    Goodwill    Balance, December 31, 2006

$
2,248Increase related to acquisition of Martin Audio


17,231Effects of foreign currency translation


247Balance, December 31, 2007

$
19,726  40




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (8)
    Property,
    Plant and Equipment    December 31,2007


2006Land and buildings

$



$
850Machinery, equipment and software


20,796



17,479Furniture and fixtures


1,968



1,358Leasehold improvements


2,299



1,86025,063



21,547Less accumulated depreciation and amortization


(19,319
)


(15,004
)$
5,744


$
6,543   (9)
    Income
    Taxes    2007


2006


2005U.S.

$
(12,060
)

$
1,290


$
5,618Foreign


(962
)


(234
)


(1,756
)Income (loss) before income taxes

$
(13,022
)

$
1,056


$
3,862     2007


2006


2005Current income taxes:U.S. federal

$
259


$
316


$
Foreign


360



56



65Total current


619



372



65Deferred income taxes:U.S. federal


54



59



40State and local










Foreign


(1,109
)






Total deferred


(1,055
)


59



40Total income tax expense (benefit)

$
(436
)

$
431


$
105    41




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2006


2005Total income tax expense (benefit) from continuing operations

$
(436
)

$
431


$
47Total income tax expense from discontinued operations










58Total income tax expense (benefit)

$
(436
)

$
431


$
105     December 31,2007


2006Deferred tax assets:Accrued expenses

$
927


$
832Bad debt allowance


683



734Inventory adjustments


1,325



1,759Net operating loss carryforwards


11,482



7,892Capital loss carryforwards


5,554



5,521Property, plant, and equipment


823



391Tax credit carryforwards


629



1,216Other items, net


269



15821,692



18,503Less valuation allowance


(20,128
)


(16,972
)Total deferred tax assets


1,564



1,531Deferred tax liabilities:Specifically identifiable intangible assets


6,499



1,630Total deferred tax liabilities


6,499



1,630Net deferred tax liabilities

$
(4,935
)

$
(99
)    42




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2006


2005Tax at the statutory rate

$
(4,427
)

$
359


$
1,313Research and development tax credit


(262
)


(353
)


(192
)Change in reserve for tax uncertainties


250



200



(125
)Nondeductible expenses and other permanent differences


(45
)


74



259Foreign tax greater than U.S. statutory rate


43



9



27Increase (decrease) in valuation allowance


4,260



118



(1,362
)State taxes, net of federal impact


(267
)


26



86Other


12



(2
)


99Income tax expense

$
(436
)

$
431


$
105            43




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Balance, January 1, 2007

$
1,415Decreases related to prior year tax positions


(156
)Increases related to current year tax positions


254Balance, December 31, 2007

$
1,513   (10)
    Debt and
    Liquidity          (a)
    Short-Term
    Borrowings   44




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (b)
    Long-Term
    Debt    2007


2006Merrill Term Loan A

$



$
12,500Merrill Term Loan B






14,355Oaktree Subordinated note payable






14,750Ableco Term Loan A


19,203



Ableco US Term Loan B


39,333



Ableco UK Term Loan B


29,500



Ableco Term Loan C


12,322



100,358



41,605Less current portion


(8,000
)


(1,500
)$
92,358


$
40,105       2008

$
8,0002009


3,0002010


3,0002011


3,0002012


83,358Total long-term debt

$
100,358   (11)
    Related-Party
    Transactions   45




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (12)
    Employee
    Benefit Plans  5-year
  (13)
    Shareholders
    Equity      Shares


WeightedSubject


Averageto Exercise


Exercise PriceOptions outstanding at December 31, 2004


738


$
18.05Granted


79



14.85Canceled


(180
)


27.00Exercised


(8
)


1.52Options outstanding at December 31, 2005


629



15.27Granted


3



15.00Canceled


(61
)


19.79Exercised


(9
)


5.10Options outstanding at December 31, 2006


562



14.94Granted


30



9.51Canceled


(183
)


15.85Exercised


(44
)


5.10Options outstanding at December 31, 2007


365


$
15.22      46




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Options Outstanding


Options ExercisableWeightedAverageRemaining


Weighted





WeightedContractual


Average





AverageNumber


Life


Exercise


Number


ExerciseRange of Exercise Price

Outstanding


(Years)


Price


Exercisable


Price$5.10-9.51


179



5.9



6.06



130



5.34$11.30-23.75


81



5.3



16.92



56



18.30$25.30-31.25


81



2.2



28.13



81



28.13$33.44-38.75


24



1.1



34.06



24



34.06365



4.6


$
15.22



291


$
16.53       2007


2006


2005Expected dividend yield


0
%


0
%


0
%Weighted average risk-free interest rate


4.9
%


5.0
%


4.0
%Expected volatility


57.4
%


80.0
%


85.0
%Expected lives (in years)


6.5



6.5



5.0       (14)
    Commitments
    and Contingencies  (a)
    Commitments    2008


2,5142009


2,3062010


1,9642011


1,197    47




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (b)
    Contingencies      (15)
    Geographic
    Information      2007


2006


2005Net sales:U.S.

$
110,381


$
141,711


$
128,681Europe


53,244



25,886



25,117Rest of the World


44,628



47,436



50,530$
208,253


$
215,033


$
204,328     2007


2006Gross ReceivablesU.S.

$
13,237


$
16,740Europe


8,934



8,816Rest of the World


6,570



3,871$
28,741


$
29,427InventoryU.S.

$
39,429


$
35,019Rest of the World


17,375



19,825$
56,804


$
54,844  48




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (16)
    Business
    Combinations  (a)
    Martin
    Audio      Allocation of purchase priceCash

$
3,696Accounts receivable


4,524Inventories


5,971Prepaid expenses and other current assets


777Property, plant and equipment


749Goodwill


17,231Trademarks (estimated life of 20 years)


6,695Developed Technology (estimated life of 5 years)


669Customer Relationships (estimated life of 15 years)


1,182Distributor Relationships (estimated life of 15 years)


9,452Non compete agreement (estimated life of 2 years)


49Total assets

$
50,995Accounts payable


3,653Accrued liabilities


2,090Income taxes payable


632Deferred income taxes


5,928Debt


3,030Total liabilities

$
15,333Cash consideration paid, net of $2,059 of transaction costs

$
35,662      49




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    UNAUDITED
    PRO FORMA CONDENSED COMBINED
  Statement
    of Operations Data
  2007 Pro Forma


2006 Pro FormaNet sales

$
216,580


$
243,836Net loss


(7,812
)


(6,795
)Basic net loss per share

$
(1.61
)

$
(1.41
)     (b)
    St. Louis
    Music, Inc.    (17)
    Quarterly
    Financial Data
    (Unaudited)(In thousands, except per share data)  2007First


Second


Third


FourthNet sales

$
50,953


$
50,583


$
53,094


$
53,623Gross profit


13,605



14,534



15,140



16,706Net loss


(5,965
)


(2,735
)


(1,911
)


(1,975
)Basic and diluted net loss per share


(1.24
)


(0.56
)


(0.39
)


(0.41
)   2006First


Second


Third


FourthNet sales

$
58,564


$
53,547


$
53,445


$
49,477Gross profit


19,629



17,776



18,203



15,844Net income (loss)


(595
)


320



1,448



(548
)Basic net income (loss) per share(1)


(0.12
)


0.07



0.30



(0.11
)Diluted net income (loss) per share(1)


(0.12
)


0.06



0.29



(0.11
)  50




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (1)
    
    The sum of the quarterly net income (loss) per share will not
    necessarily equal the net income per share for the year due to
    the effects of rounding.  (18)
    Subsequent
    Events        2008

$
8,0002009


3,0002010


3,0002011


3,0002012


90,858Total long-term debt

$
107,858      51




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Rules 13a-15(e) 15(d)-15(e)
  Rules 13a-15(b) 15d-15(b)
  Rules 13(a)-15(f)
  Item 9B.
    Other
    Information   52




---



##### 



PART III   PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules    Consolidated Financial Statements:
   
 PageNumberReport of Independent Registered Public
    Accounting Firm on Consolidated Financial Statements


27Consolidated Balance Sheets at December 31, 2007
    and 2006


28Consolidated Statements of Operations and
    Comprehensive Income (Loss) for each of the years in the
    three-year period ended December 31, 2007


29Consolidated Statements of Shareholders
    Equity (Deficit) for each of the years in the three-year period
    ended December 31, 2007


30Consolidated Statements of Cash Flows for each of
    the years in the three-year period ended December 31, 2007


31Notes to Consolidated Financial Statements


32       53




---



##### Table of Contents



SIGNATURES      By:
    /s/  James
    T. Engen   Chairman, President, Chief
    Executive Officer and Director
      Signature

Title/s/  James
    T. EngenJames
    T. Engen

Chairman, President, Chief Executive Officer and Director/s/  Gerald
    Y. NgGerald
    Y. Ng

Chief Financial Officer, Senior Vice President, Secretary and
    Treasurer (Principal Financial and Accounting Officer)/s/  Jason
    H. NeimarkJason
    H. Neimark

Director and Vice President/s/  Clarence
    E. TerryClarence
    E. Terry

Director and Vice President/s/  R.
    Lynn SkillenR.
    Lynn Skillen

Director/s/  Mark
    KuchenritherMark
    Kuchenrither

Director/s/  Kevin
    J. CalhounKevin
    J. Calhoun

Director/s/  Thomas
    V. TaylorThomas
    V. Taylor

Director/s/  Jon
    W. GacekJon
    W. Gacek

Director/s/  George
    ReaGeorge
    Rea

Director/s/  C.
    Daryl HollisC.
    Daryl Hollis

Director  54




---



##### Table of Contents



INDEX TO
    EXHIBITS
  Exhibits

Description2
.1

Stock Purchase Agreement, dated as of January 16, 2003, by
    and among Sun Mackie, LLC, Mackie Designs Inc., Gregory Mackie,
    on behalf of himself and as the sole trustee of the Clair Mackie
    Irrevocable Trust, the Nathalia Mackie Irrevocable Trust, the
    Kathleen Staples Irrevocable Trust and the Christine Radke
    Irrevocable Trust, and C. Marcus Sorenson and Judith B.
    Sorenson, as co-trustees of the Children of Matthew Adam
    Sorenson Irrevocable Trust, the Children of Karen Marie Lopez
    Irrevocable Trust, the Children of Kimberly Kaye Parker
    Irrevocable Trust, the Matthew Adam Sorenson Irrevocable Trust,
    the Karen Marie Lopez Irrevocable Trust, the Kimberly Kaye
    Parker Irrevocable Trust and the Sorenson Family Trust.
    Incorporated by reference to Exhibit 2.1 to Current Report
    on
    Form 8-K
    dated January 16, 2003.2
.2

First Amendment to Stock Purchase Agreement, dated as of
    February 7, 2003, by and among Sun Mackie, LLC, Mackie
    Designs Inc., Gregory Mackie, on behalf of himself and as the
    sole trustee of the Clair Mackie Irrevocable Trust, the Nathalia
    Mackie Irrevocable Trust, the Kathleen Staples Irrevocable Trust
    and the Christine Radke Irrevocable Trust, and C. Marcus
    Sorenson and Judith B. Sorenson, as co-trustees of the Children
    of Matthew Adam Sorenson Irrevocable Trust, the Children of
    Karen Marie Lopez Irrevocable Trust, the Children of Kimberly
    Kaye Parker Irrevocable Trust, the Matthew Adam Sorenson
    Irrevocable Trust, the Karen Marie Lopez Irrevocable Trust, the
    Kimberly Kaye Parker Irrevocable Trust and the Sorenson Family
    Trust. Incorporated by reference to Exhibit 2.1 to Current
    Report on
    Form 8-K
    dated February 21, 2003.2
.3

Second Amendment to Stock Purchase Agreement, dated as of
    February 13, 2003, by and among Sun Mackie, LLC, Mackie
    Designs Inc., Gregory Mackie, on behalf of himself and as the
    sole trustee of the Clair Mackie Irrevocable Trust, the Nathalia
    Mackie Irrevocable Trust, the Kathleen Staples Irrevocable Trust
    and the Christine Radke Irrevocable Trust, and C. Marcus
    Sorenson and Judith B. Sorenson, as co-trustees of the Children
    of Matthew Adam Sorenson Irrevocable Trust, the Children of
    Karen Marie Lopez Irrevocable Trust, the Children of Kimberly
    Kaye Parker Irrevocable Trust, the Matthew Adam Sorenson
    Irrevocable Trust, the Karen Marie Lopez Irrevocable Trust, the
    Kimberly Kaye Parker Irrevocable Trust and the Sorenson Family
    Trust. Incorporated by reference to Exhibit 2.2 to Current
    Report on
    Form 8-K
    dated February 21, 2003.2
.4

Third Amendment to Stock Purchase Agreement, dated as of
    February 21, 2003, by and among Sun Mackie, LLC, Mackie
    Designs Inc., Gregory Mackie, on behalf of himself and as the
    sole trustee of the Clair Mackie Irrevocable Trust, the Nathalia
    Mackie Irrevocable Trust, the Kathleen Staples Irrevocable Trust
    and the Christine Radke Irrevocable Trust, and C. Marcus
    Sorenson and Judith B. Sorenson, as co-trustees of the Children
    of Matthew Adam Sorenson Irrevocable Trust, the Children of
    Karen Marie Lopez Irrevocable Trust, the Children of Kimberly
    Kaye Parker Irrevocable Trust, the Matthew Adam Sorenson
    Irrevocable Trust, the Karen Marie Lopez Irrevocable Trust, the
    Kimberly Kaye Parker Irrevocable Trust and the Sorenson Family
    Trust. Incorporated by reference to Exhibit 2.3 to Current
    Report on
    Form 8-K
    dated February 21, 2003.2
.5

Management Services Agreement, dated as of February 21,
    2003 by and between Mackie Designs Inc. and Sun Capital Partners
    Management, LLC. Incorporated by reference to Exhibit 2.4
    to Current Report on
    Form 8-K
    dated February 21, 2003.2
.6

Post-Closing Funding Agreement, dated as of February 21,
    2003, by and between Mackie Designs Inc. and Sun Mackie, LLC.
    Incorporated by reference to Exhibit 2.5 to Current Report
    on
    Form 8-K
    dated February 21, 2003.2
.7

Agreement by and among LOUD Technologies Inc., Mackie Designs
    (Netherlands) B.V. and Knight Italia S.p.A. Incorporated by
    reference to Exhibit 2.8 to Current Report on
    Form 8-K
    dated December 10, 2003.2
.8

Irrevocable Offer Letter from Knight Italia S.p.A. Incorporated
    by reference to Exhibit 2.9 to Current Report on
    Form 8-K
    dated December 10, 2003.2
.9

Irrevocable Offer Letter from LOUD Technologies Inc.
    Incorporated by reference to Exhibit 2.10 to Current Report
    on
    Form 8-K
    dated December 10, 2003.2
.10

Concordato Preventivo Petition dated as of December 6,
    2003, by Mackie Designs (Italy) S.p.A. Incorporated by reference
    to Exhibit 2.11 to Current Report on
    Form 8-K
    dated December 10, 2003. 55




---



##### Table of Contents



Exhibits

Description2
.11

Acquisition Agreement dated March 4, 2005 by and among SLM
    Merger Corp., SLM Holding Corp., LOUD Technologies Inc. and
    St. Louis Music, Inc. Incorporated by reference to
    Exhibit 2.1 to Current Report on
    Form 8-K
    dated March 7, 2005.3
.1

Restated Articles of Incorporation. Incorporated by reference to
    Exhibit 3.1 to Registration Statement filed under the
    Securities Act of 1933 on
    Form S-1,
    as amended, Registration
    No. 33-93514.3
.2

Articles of Amendment to Article of Incorporation. Incorporated
    by reference to Exhibit 3.1.1 to Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2003.3
.3

Second Amended and Restated Bylaws. Incorporated by reference to
    Exhibit 3.2 to Annual Report as
    Form 10-K
    for the fiscal year ended December 31, 2002.4
.1

See Articles II, III, IV, IX, X and XI of
    Exhibit 3.1 and Articles I, V, VI and VII of
    Exhibit 3.2 confirming the rights of the holders of Common
    Stock.10
.1

Mackie Designs Inc. Third Amended and Restated 1995 Stock Option
    Plan. Incorporated by reference to Exhibit 10.1 to Annual
    Report on
    Form 10-K
    for the fiscal year ended December 31, 2001.10
.2

Mackie Designs Inc. 2003 Stock Option Plan. Incorporated by
    reference to Exhibit 10.1.1 to Registration Statement filed
    under the Securities Act of 1933 on
    Form S-8
    dated July 15, 2003.10
.3

Industrial Lease, dated December 15, 1994, by and between
    Mackie Holdings, L.L.C. and Mackie Designs Inc. Incorporated by
    reference to Exhibit 10.3 to Registration Statement filed
    under the Securities Act of 1933 on
    Form S-1,
    as amended, Registration
    No. 33-93514.10
.4

Amendment to Industrial Lease dated December 12, 2001 by
    and between Mackie Holdings, L.L.C. and Mackie Designs Inc.
    Incorporated by reference to Exhibit 10.2.1 to Annual
    Report on
    Form 10-K
    for the fiscal year ended December 31, 2001.10
.5

Industrial Real Estate Lease dated April 28, 1995, by and
    between Woodinville II LLC, successor in interest to
    Intrawest Properties Partnership U.S. and Mackie Designs Inc.
    Incorporated by reference to Exhibit 10.4 to Registration
    Statement filed under the Securities Act of 1933 on
    Form S-1,
    as amended, Registration
    No. 33-93514.10
.6

Mackie Designs Inc. 401(k) Profit Sharing Plan dated
    December 20, 1993. Incorporated by reference to
    Exhibit 10.15 to Registration Statement filed under the
    Securities Act of 1933 on
    Form S-1,
    as amended, Registration
    No. 33-93514.10
.7

Loan and Security Agreement, dated March 31, 2003, by and
    among Mackie Designs Inc. and Mackie Designs UK Plc, as
    borrowers, Mackie Designs Manufacturing, Inc., SIA Software
    Company, Inc. and Mackie Investment Co., as guarantors, and
    Congress Financial Corporation, as agent for and on behalf of
    the financial institutions which are parties thereto as lenders,
    and the financial institutions named from time to time as
    parties thereto as lenders. Incorporated by reference to
    Exhibit 10.1 to Current Report on
    Form 8-K
    dated March 31, 2003.10
.8

Amendment No. 2 and Waiver to Loan and Security Agreement,
    dated April 16, 2004, by and among LOUD Technologies Inc.
    and LOUD Technologies (Europe) Plc, as borrowers; Mackie Designs
    Inc., SIA Software Company, and Mackie Investment Co. as
    guarantors; and Congress Financial Corporation, as agent for and
    on behalf of the financial institutions which are parties
    thereto and the parties to the Loan Agreement as lenders.
    Incorporated by reference to Exhibit 10.5.1 to Annual
    Report on
    Form 10-K
    for fiscal year ended December 31, 2003.10
.9

Amendment No. 3 and Waiver to Loan and Security Agreement,
    dated August 3, 2004, by and among LOUD Technologies Inc.
    and LOUD Technologies (Europe) Plc, as borrowers; Mackie Designs
    Inc., SIA Software Company, and Mackie Investment Co. as
    guarantors; and Congress Financial Corporation, as agent for and
    on behalf of the financial institutions which are parties
    thereto and the parties to the Loan Agreement as lenders.
    Incorporated by reference to Exhibit 10.5.2 to Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended September 30, 2004. 56




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##### Table of Contents



Exhibits

Description10
.10

Amendment No. 4 and Waiver to Loan and Security Agreement,
    dated October 25, 2004, by and among LOUD Technologies Inc.
    and LOUD Technologies (Europe) Plc, as borrowers; Mackie Designs
    Inc., SIA Software Company, and Mackie Investment Co. as
    guarantors; and Congress Financial Corporation, as agent for and
    on behalf of the financial institutions which are parties
    thereto and the parties to the Loan Agreement as lenders.
    Incorporated by reference to Exhibit 10.5.3 to Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended September 30, 2004.10
.11

Term Promissory Note, dated March 31, 2003, made by Mackie
    Designs Inc. to the order of Congress Financial Corporation in
    the principal amount of $2,500,000. Incorporated by reference to
    Exhibit 10.2 to Current Report on
    Form 8-K
    dated March 31, 2003.10
.12

Pledge and Security Agreement, dated March 31, 2003, made
    by Mackie Designs Inc. to and in favor of Congress Financial
    Corporation, in its capacity as agent pursuant to the Loan
    Agreement acting for and on behalf of the financial institutions
    which are parties thereto as lenders. Incorporated by reference
    to Exhibit 10.3 to Current Report on
    Form 8-K
    dated March 31, 2003.10
.13

Patent Collateral Assignment and Security Agreement, dated
    March 31, 2003, by and between Mackie Designs Inc. and
    Congress Financial Corporation, in its capacity as agent
    pursuant to the Loan Agreement acting for and on behalf of the
    financial institutions which are parties thereto as lenders.
    Incorporated by reference to Exhibit 10.4 to Current Report
    on
    Form 8-K
    dated March 31, 2003.10
.14

Copyright Collateral Assignment and Security Agreement, dated
    March 31, 2003, by and between Mackie Designs Inc. and
    Congress Financial Corporation, in its capacity as agent
    pursuant to the Loan Agreement acting for and on behalf of the
    financial institutions, which are parties thereto as lenders.
    Incorporated by reference to Exhibit 10.5 to Current Report
    on
    Form 8-K
    dated March 31, 2003.10
.15

Trademark Collateral Assignment and Security Agreement, dated
    March 31, 2003, by and between Mackie Designs Inc. and
    Congress Financial Corporation, in its capacity as agent
    pursuant to the Loan Agreement acting for and on behalf of the
    financial institutions, which are parties thereto as lenders.
    Incorporated by reference to Exhibit 10.6 to Current Report
    on
    Form 8-K
    dated March 31, 2003.10
.16

Guarantee, dated March 31, 2003, made by Mackie Designs
    Manufacturing, Inc., SIA Software Company, Inc. and Mackie
    Investment Co. for and on behalf of Mackie Designs Inc. in favor
    of Congress Financial Corporation, in its capacity as agent
    pursuant to the Loan Agreement acting for and on behalf of the
    financial institutions which are parties thereto as lenders, and
    the financial institutions which are parties to the Loan
    Agreement as lenders. Incorporated by reference to
    Exhibit 10.7 to Current Report on
    Form 8-K
    dated March 31, 2003.10
.17

Guarantee, dated March 31, 2003, made by Mackie Designs
    Inc., Mackie Designs Manufacturing, Inc., SIA Software Company,
    Inc. and Mackie Investment Co. for and on behalf of Mackie
    Designs UK Plc in favor of Congress Financial Corporation, in
    its capacity as agent pursuant to the Loan Agreement acting for
    and on behalf of the financial institutions which are parties
    thereto as lenders, and the financial institutions which are
    parties to the Loan Agreement as lenders. Incorporated by
    reference to Exhibit 10.8 to Current Report on
    Form 8-K
    dated March 31, 2003.10
.18

Second Amended and Restated Subordination Credit Agreement,
    dated March 31, 2003, between and among U.S. Bank National
    Association, as lender, Mackie Designs Inc., as borrower, and
    Mackie Designs Manufacturing, Inc., SIA Software Company, Inc.,
    and Mackie Investment Co., as guarantors. Incorporated by
    reference to Exhibit 10.9 to Current Report on
    Form 8-K
    dated March 31, 2003.10
.19

Intercreditor and Subordination Agreement, dated March 31,
    2003, by and among Congress Financial Corporation, in its
    capacity as agent pursuant to the Loan Agreement acting for and
    on behalf of the financial institutions which are parties
    thereto as lenders, and the financial institutions from time to
    time party to the Senior Loan Agreement as lenders, and U.S.
    Bank National Association. Incorporated by reference to
    Exhibit 10.10 to Current Report on
    Form 8-K
    dated March 31, 2003.10
.20

Stock Purchase Warrant, dated March 31, 2003, issued by
    Mackie Designs Inc. to Sun Mackie, LLC for the right to purchase
    1,179,429 shares of common stock. Incorporated by reference
    to Exhibit 10.11 to Current Report on
    Form 8-K
    dated March 31, 2003. 57




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##### Table of Contents



Exhibits

Description10
.21

Subordinated Promissory Note, dated March 31, 2003, made by
    Mackie Designs Inc. to the order of Sun Mackie, LLC in the
    principal amount of $3,931,429. Incorporated by reference to
    Exhibit 10.12 to Current Report on
    Form 8-K
    dated March 31, 2003.10
.22

Loan Agreement dated October 21, 1999 between James T.
    Engen and Mackie Designs, Inc. in the amount of $250,000.
    Incorporated by reference to Exhibit 10.20 to Annual Report
    on
    Form 10-K
    for the fiscal year ended December 31, 1999.10
.23

Exchange Agreement dated August 3, 2004, among LOUD
    Technologies Inc., Sun Mackie, LLC, Randolph Street
    Partners V, and H.I.G. Partners, Inc. Incorporated by
    reference to Exhibit 10.19 to current Report on
    Form 8-K
    dated August 3, 2004.10
.24

Credit Agreement, dated August 29, 2005, among Loud
    Technologies, Inc., St. Louis Music, Inc., the financial
    institutions of other entities from time to time parties
    thereto, each as a Lender, Merrill Lynch Capital, a
    division of Merrill Lynch Business Financial Services Inc.,
    individually as a Lender, as Administrative Agent, Sole
    Bookrunner and Sole Lead Arranger, and ING CAPITAL LLC, as
    Syndication Agent. Incorporated by reference to
    Exhibit 10.1 to Current Report on
    Form 8-K
    dated August 29, 2005.10
.25

Securities Purchase Agreement, dated August 29, 2005, among
    Loud Technologies, Inc., St. Louis Music, Inc., the
    other guarantors from time to time party thereto, and OCM
    Mezzanine Fund, L.P. Incorporated by reference to
    Exhibit 10.2 to Current Report on
    Form 8-K
    dated August 29, 2005.10
.26

Subordination Agreement, dated August 29, 2005, among Loud
    Technologies, Inc., St. Louis Music, Inc., and certain of
    their subsidiaries, and Merrill Lynch Capital, a division of
    Merrill Lynch Business Financial Services Inc., as
    Administrative Agent, and OCM Mezzanine Fund, L.P. Incorporated
    by reference to Exhibit 10.3 to Current Report on
    Form 8-K
    dated August 29, 2005.10
.27

Commercial Lease dated December 20, 2001, by and between
    Eugene M. Kornblum, Trustee of The Eugene M. Kornblum
    Trust Agreement Dated July 18, 1997, as to an
    undivided 25% interest as tenants in common; Helen H. Kornblum,
    Trustee of The Helen H. Kornblum Trust Agreement Dated
    July 11, 1997, as to an undivided 25% interest as tenants
    in common; and Carole A. Simon and Robert S. Simon, Trustees of
    The Carole A. Simon and Robert S. Simon Revocable
    Trust U/T/A dated November 27, 1991, as to an
    undivided 50% interest as tenants in common, as landlord, and
    St. Louis Music, Inc. as tenant.10
.28

Lease dated November 8, 2000, as amended to date, by and
    between Cornerstone Industrial Fund I, L.L.C., as landlord,
    and Loud Technologies Inc., as tenant. Incorporated by reference
    to Exhibit 10.30 to Annual Report on Form 10-K for the
    fiscal year ended December 31, 2005.10
.29

Refinancing loan agreement dated March 30, 2007, from
    Ableco Finance LLC. Incorporated by reference to Annual Report
    on Form 10-K for the fiscal year ended December 31,
    2006.10
.30

Refinancing security agreement dated March 30, 2007, from
    Ableco Finance LLC. Incorporated by reference to Annual Report
    on Form 10-K for the fiscal year ended December 31,
    2006.10
.31

Refinancing side letter dated April 10, 2007, from Ableco
    Finance LLC. Incorporated by reference to Annual Report on
    Form 10-K for the fiscal year ended December 31, 2006.10
.32

Share Purchase Agreement by and between Grace Acquisition Co
    Limited, LOUD Technologies, Inc., Vendors set forth in
    Part 1 of Schedule 1 to the Share Purchase Agreement
    and persons set forth in Part 2 of Schedule 1 to the
    Share Purchase Agreement, dated March 6, 2007. Incorporated
    by reference to Annual Report on Form 10-K for the fiscal
    year ended December 31, 2006.10
.33

Amendment No. 1 to Financing Agreement by and among LOUD
    Technologies Inc., Grace Acquisition Co. Limited, as the
    borrowers, each subsidiary of the Parent listed on the signature
    pages thereto, the lenders from time to time party thereto,
    Ableco Finance LLC, as collateral agent for the lenders, and
    GMAC Commercial Finance LLC, as administrative agent for the
    lenders, dated as of May 24, 2007. Incorporated by
    reference to Exhibit 10.1 to Current Report on
    Form 8-K
    dated May 24, 2007. 58




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##### Table of Contents



Exhibits

Description10
.34

Waiver and Amendment No. 2 to Financing Agreement dated as
    of October 17, 2007, by and among LOUD Technologies Inc., a
    Washington corporation, Grace Acquisition Co. Limited, a company
    incorporated under the laws of England and Wales, certain
    subsidiaries of LOUD Technologies, certain lenders, Ableco
    Finance LLC, a Delaware limited liability company
    (Ableco), as collateral agent for the lenders, and
    GMAC Commercial Finance LLC (GMAC), as
    administrative agent for the lenders. Incorporated by reference
    to Exhibit 10.1 to Current Report on
    Form 8-K
    dated October 17, 2007.10
.35

Waiver and Amendment No. 3 to Financing Agreement by and
    among LOUD Technologies Inc., Grace Acquisition Co. Limited, as
    the borrowers, each subsidiary of the Parent listed on the
    signature pages thereto, the lenders from time to time party
    thereto, Ableco Finance LLC, as collateral agent for the
    lenders, and GMAC Commercial Finance LLC, as administrative
    agent for the lenders, dated as of March 6, 2008.
    Incorporated by reference to Exhibit 10.1 to Current Report
    on
    Form 8-K
    dated March 7, 2008.10
.36

Convertible Senior Subordinated Secured Promissory Note in favor
    of Sun Mackie, LLC, a Delaware limited liability company, in the
    amount of $7,500,000, dated as of March 18, 2008.
    Incorporated by reference to Exhibit 10.1 to Current Report
    on
    Form 8-K
    dated March 20, 2008.10
.37

Security Agreement by and among LOUD Technologies Inc., a
    Washington corporation, the other Grantors listed on the
    signature pages thereto and those additional entities that
    hereafter become parties thereto by executing the form of
    Supplement attached thereto as Annex 1, and Sun Mackie,
    LLC, a Delaware limited liability company, dated as of
    March 18, 2008. Incorporated by reference to
    Exhibit 10.2 to Current Report on
    Form 8-K
    dated March 20, 2008.*21
.1

Subsidiaries of LOUD Technologies Inc.*23
.1

Consent of KPMG LLP,-Independent Registered Public Accounting
    Firm.*31
.1

Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*31
.2

Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*32
.1

Certification pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.     *
    
    Filed herewith 59