##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 WASHINGTON, 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, 2006oro

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
  o o þ
  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, 2006
  INDEX
  PagePART IItem 1.


Business


2Item 1A.


Risk
    Factors


5Item 1B.


Unresolved Staff
    Comments


10Item 2.


Properties


10Item 3.


Legal
    Proceedings


10Item 4.


Submission of
    Matters to a Vote of Securities Holders


11PART IIItem 5.


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


11Item 6.


Selected Financial
    Data


13Item 7.


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


13Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


22Item 8.


Financial
    Statements and Supplementary Data


23Item 9.


Changes in and
    Disagreements With Accountants on Accounting and Financial
    Disclosure


48Item 9A.


Controls and
    Procedures


48Item 9B.


Other
    Information


48PART IIIItem 10.


Directors and
    Executive Officers of the Registrant


48Item 11.


Executive
    Compensation


48Item 12.


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


48Item 13.


Certain
    Relationships and Related Transactions


48Item 14.


Principal
    Accountant Fees and Services


48PART IVItem 15.


Exhibits, Financial
    Statement Schedules


49Signatures


50EXHIBIT 10.29EXHIBIT 10.30EXHIBIT 10.31EXHIBIT 10.32EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1   1




---



##### 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, 2006, 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
  ® ® ® ® ® ® ® ®
        1-for-5 1-for-5
    tm
 2




---



##### Table of Contents



tm tm
        Marketing
    Our Major
    Brands
              Distribution
    and Sales
   3




---



##### Table of Contents



Customer
    Support
      Research
    and Development
    Competition
    Proprietary
    Technologies
   4




---



##### Table of Contents



Manufacturing
    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  Sales Concentration.
  Liquidity and Debt Obligations.
  
    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; 5




---



##### Table of Contents




    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.        Competition.
  Acquisitions and Business Combinations.
 6




---



##### Table of Contents




    difficulties, as a result of distance, language, legal or
    cultural differences, in developing, staffing and managing
    foreign operations;
    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;
    differences in regulatory requirements that may make it
    difficult to offer all of our services;
    unexpected changes in regulatory requirements;
    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.    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. 7




---



##### Table of Contents



Rapid Technological Change.
  Product Liability.
  Use of Contract Distribution Centers.
  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; 8




---



##### Table of Contents




    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.
    Protection of Intellectual Property.
      Dependence on Key Personnel.
 9




---



##### Table of Contents



Sarbanes-Oxley Compliance. Form 10-Q Form 10-K
  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties      Area Leased


LeaseType

Location

(sq. feet)


ExpirationWarehouse

Woodinville, WA


80,000


July 31, 2011Corporate headquarters and
    warehouse

Woodinville, WA


90,000


December 31, 2011Manufacturing plant

Whitinsivlle, MA


220,285


May 31, 2007Warehouse

St. Louis, MO


46,000


June 30, 2009Office space and warehouse

St. Louis, MO


93,000


March 5, 2008   Item 3.
    Legal
    Proceedings     10




---



##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Securities Holders   PART II  Item 5.
    Market
    for Registrants Common Equity and Related Shareholder
    Matters  tm tm tm
    Common StockHigh


LowYear Ended December 31, 2006:Fourth Quarter

$
17.50


$
9.25Third Quarter

$
19.20


$
14.50Second Quarter

$
18.73


$
13.53First Quarter

$
19.80


$
12.25Year Ended December 31, 2005:Fourth Quarter

$
16.00


$
10.00Third Quarter

$
15.75


$
13.25Second Quarter

$
18.25


$
13.75First Quarter

$
17.00


$
9.00     Sales
    of Unregistered Securities
      Equity
    Compensation Plan Information
   11




---



##### Table of Contents



(a)


(b)


(c)Number of Securities RemainingNumber of Securities to be


Weighted-Average


Available for Future IssuanceIssued Upon Exercise of


Exercise Price of


Under Equity Compensation PlansOutstanding Options,


Outstanding Options,


(Excluding Securities Reflected inPlan Category

Warrants and Rights


Warrants and Rights


Column (a))Equity compensation plans approved
    by security holders


562,264



14.94



927,207Total


562,264



14.94



927,207      12




---



##### Table of Contents



Item 6.
    Selected
    Consolidated Financial Data  Form 10-K.
  Years Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share data)Consolidated Statements of
    Operations Data(a):Net sales

$
215,033


$
204,328


$
123,276


$
130,766


$
159,362Gross profit


71,452



65,324



41,349



29,310



37,860Operating expenses(b)


62,671



56,816



40,043



44,974



69,512Net income (loss) from continuing
    operations


625



930



(2,291
)


(15,412
)


(30,050
)Net income (loss) from
    discontinued operations






2,827







(6,383
)


(7,878
)Net income (loss)


625



3,757



(2,291
)


(21,795
)


(37,928
)Basic net income (loss) per share:Net income (loss) from continuing
    operations

$
0.13


$
0.20


$
(0.52
)

$
(3.94
)

$
(12.03
)Net income (loss) from
    discontinued operations






0.59







(1.63
)


(3.15
)Basic net income (loss) per share

$
0.13


$
0.79


$
(0.52
)

$
(5.57
)

$
(15.18
)Diluted net income (loss) per
    share:Net income (loss) from continuing
    operations

$
0.13


$
0.19


$
(0.52
)

$
(3.94
)

$
(12.03
)Net income (loss) from
    discontinued operations






0.57







(1.63
)


(3.15
)Diluted net income (loss) per share

$
0.13


$
0.76


$
(0.52
)

$
(5.57
)

$
(15.18
)   December 31,2006


2005


2004


2003


2002(In thousands)Consolidated Balance Sheets
    Data:Working capital

$
27,548


$
27,305


$
1,764


$
2,582


$
14,890Total assets

$
105,756


$
95,545


$
60,795


$
50,422


$
123,955Long-term debt(c)

$
40,105


$
40,944


$
11,612


$
16,262


$
20,266Shareholders equity

$
10,205


$
9,087


$
3,320


$
832


$
17,236     (a)
    
    The consolidated statements of operations data for years ended
    2003 and 2002 have been restated for discontinued operations.(b)
    
    Included in operating expenses for the year ended
    December 31, 2002, is a $15.8 million non-cash charge
    relating to the impairment of goodwill and other long-lived
    assets.(c)
    
    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
 13




---



##### Table of Contents



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. 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
    1-for-5
  Critical
    Accounting Policies and Estimates
      Inventory Valuation. first-in,
 14




---



##### Table of Contents



Allowance for Doubtful Accounts.
  Long-lived Assets.
  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.
 15




---



##### Table of Contents



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, 2006 Compared to Year Ended
    December 31, 2005
  Net
    Sales
    Gross
    Profit
    Selling,
    General and Administrative
   16




---



##### Table of Contents



Research
    and Development
    Other
    Expense
      Income
    Tax Expense
      Gain on
    Discontinued Operations
    Year
    Ended December 31, 2005 Compared to Year Ended
    December 31, 2004
  Net
    Sales
    Gross
    Profit
   17




---



##### Table of Contents



Selling,
    General and Administrative
    Research
    and Development
    Other
    Expense
          Income
    Tax Expense
  non-U.S. subsidiaries.
   18




---



##### Table of Contents



Gain on
    Discontinued Operations
    Liquidity
    and Capital Resources
           19




---



##### Table of Contents



Net
    Cash Provided by (Used in) Operating Activities
      Net
    Cash Used in Investing Activities
      Net
    Cash Provided by (Used in) Financing Activities
    Payments
    and Proceeds from Long-term Debt, Line of Credit and Other
    Short-term Borrowings
      Ability
    to stay in compliance with debt covenants
   20




---



##### Table of Contents



Commitments
    Payments Due by PeriodTotal


Less Than 1 Year


1-3 Years


3-5 Years


5-7 YearsOperating leases

$
7,366


$
2,276


$
2,946


$
2,144Line of credit


14,210



14,210Payable to former Italian
    subsidiary


700



700Future commitment to pay former
    shareholders of St. Louis Music, Inc., including interest


3,188



3,188Short-term and long-term debt,
    including interest


60,294



5,867



16,445



22,888



15,094Total

$
85,758


$
26,241


$
19,391


$
25,032


$
15,094         Recent
    Accounting Pronouncements
  Accounting for
    Uncertainty in Income Taxes  An Interpretation of
    FASB Statement No. 109
  Considering the Effects of Prior Year
    Misstatements when Quantifying Current Year Misstatements.
  06-3, How
    Taxes Collected from Customers and Remitted to Governmental
    Authorities Should Be Presented in the Income Statement (That
 21




---



##### Table of Contents



06-3 06-3. 06-3
  7A.
    Qualitative
    and Quantitative Disclosures About Market Risk        Item 8.
    Consolidated
    Financial Statements and Supplementary Data   22




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm           Share-Based Payment.
    23




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
    AND SUBSIDIARIESConsolidated Balance Sheets
    December 31, 2006 and 2005
  2006


2005(In thousands, except for share amounts)ASSETSCurrent assets:Cash

$
311


$
468Accounts receivable, net of
    allowances of $2,258 and $2,224, respectively


26,230



28,224Inventories


54,844



39,290Prepaid expenses and other current
    assets


1,504



1,859Total current assets


82,889



69,841Property, plant and equipment, net


6,543



7,863Goodwill


2,248



2,248Other intangible assets, net


11,367



12,198Deferred financing costs, net


2,692



3,378Other assets


17



17Total assets

$
105,756


$
95,545LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Short-term borrowings

$
14,210


$
9,595Accounts payable


23,023



16,133Accrued liabilities


11,187



10,009Taxes payable


1,559



1,293Current portion of long-term debt


1,500



3,306Current portion of payable to
    former Italian subsidiary


700



2,200Other current liabilities


3,162



Total current liabilities


55,341



42,536Long-term debt, excluding current
    portion


40,105



40,944Deferred tax liabilities


99



40Future commitment to pay






2,938Other liabilities


6



Total liabilities


95,551



86,458Commitments and contingencies






Shareholders equity: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
    4,575,022 and 4,566,202 shares at December 31, 2006
    and 2005, respectively


41,281



40,788Accumulated deficit


(31,076
)


(31,701
)Total shareholders equity


10,205



9,087Total liabilities and
    shareholders equity

$
105,756


$
95,545    24




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
    AND SUBSIDIARIESConsolidated Statements of Operations
     Years Ended December 31, 2006, 2005, and 2004
  2006


2005


2004(In thousands, except per share data)Net sales

$
215,033


$
204,328


$
123,276Cost of sales


143,581



139,004



81,927Gross profit


71,452



65,324



41,349Operating expenses:Selling, general, and
    administrative


49,313



46,561



32,259Research and development


11,754



10,255



7,784Restructuring costs


1,604







Total operating expenses


62,671



56,816



40,043Operating income


8,781



8,508



1,306Other income (expense):Interest income


147



322



13Interest expense


(6,693
)


(5,635
)


(2,947
)Management fee


(1,048
)


(1,161
)


(400
)Other


(131
)


(1,057
)


(251
)Total other expense


(7,725
)


(7,531
)


(3,585
)Income (loss) before income taxes
    and discontinued operations


1,056



977



(2,279
)Income tax expense


431



47



12Income (loss) from continuing
    operations


625



930



(2,291
)Gain on discontinued operations,
    net of income tax expense of $58






2,827



Net income (loss)

$
625


$
3,757


$
(2,291
)Per share dataBasic net income (loss) per share:Net income (loss) from continuing
    operations

$
0.13


$
0.20


$
(0.52
)Net income from discontinued
    operations






0.59



Basic net income (loss) per share

$
0.13


$
0.79


$
(0.52
)Diluted net income (loss) per
    share:Net income (loss) from continuing
    operations

$
0.13


$
0.19


$
(0.52
)Net income from discontinued
    operations






0.57



Diluted net income (loss) per share

$
0.13


$
0.76


$
(0.52
)Shares outstandingShares used in computing basic net
    income (loss) per share


4,807



4,758



4,383Shares used in computing diluted
    net income (loss) per share


4,979



4,957



4,383    25




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
    AND SUBSIDIARIESConsolidated Statements of Shareholders
    Equity
    Years Ended December 31, 2006, 2005, and 2004
  Common Stock


AccumulatedShares


Amount


Deficit


Total(In thousands)Balance at December 31, 2003


3,921



33,999



(33,167
)


832Conversion of debt to equity


496



4,837







4,837Exercise of stock options


10



1







1Additional offering costs for
    shares issued in private transaction






(115
)






(115
)Amortization of deferred stock
    compensation






56







56Net loss










(2,291
)


(2,291
)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
)


10,205    26




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
    AND SUBSIDIARIESConsolidated Statements of Cash Flows
    Years Ended December 31, 2006, 2005, and 2004
  2006


2005


2004(In thousands)Operating activities:Net income (loss)

$
625


$
3,757


$
(2,291
)Adjustments to reconcile net income
    (loss) to net cash provided by (used in) operating activities:Depreciation and amortization


4,598



4,513



3,307Amortization of deferred financing
    costs


686



1,064



506Gain on asset dispositions










(232
)Gain on discontinued operations






(2,885
)


Loss on conversion of debt to equity










400Stock based compensation


448



59



56Non-cash interest expense






57



88Changes in operating assets and
    liabilities, net of acquisition and disposition:Accounts receivable


1,994



664



(3,761
)Inventories


(15,554
)


7,365



(9,029
)Prepaid expenses and other current
    assets


355



813



(713
)Other assets






60



465Accounts payable, accrued expenses
    and payable to former Italian subsidiary


6,568



(5,402
)


9,836Taxes payable


325



(173
)


178Other liabilities


230



139



(39
)Net cash provided by (used in)
    operating activities


275



10,031



(1,229
)Investing activities:Proceeds from sales of property,
    plant and equipment










830Purchases of property, plant and
    equipment


(2,447
)


(1,726
)


(2,053
)Acquisition of St. Louis
    Music, Inc., including transaction fees paid






(35,288
)


Net cash used in investing
    activities


(2,447
)


(37,014
)


(1,223
)Financing activities:Payments on long-term debt


(2,645
)


(11,969
)


(1,698
)Issuance of long-term debt






44,250



Net proceeds on line of credit and
    short term borrowings


4,615



9,595



3,958Net payment of existing credit
    facility






(11,826
)


Payments on debt conversion costs










(115
)Financing costs associated with
    debt issuance






(3,810
)


Net proceeds from stock sales and
    exercise of stock options


45



761



Cash provided by financing
    activities


2,015



27,001



2,145Effect of exchange rate changes on
    cash










Increase (decrease) in cash and
    cash equivalents


(157
)


18



(307
)Cash at beginning of year


468



450



757Cash at end of year

$
311


$
468


$
450Supplemental schedule of noncash
    financing and investing
    activitiesCash paid for interest

$
5,864


$
4,732


$
1,655Cash paid (refunded) for income
    taxes

$
137


$
169


$
(329
)Conversion of note payable and
    accrued interest to equity

$



$



$
4,437Accrued interest converted to note
    payable

$



$



$
960Issuance of shares related to the
    acquisition of St. Louis Music

$



$
1,190


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

$



$
39,313


$
    27




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS

December 31,
    2006



(1)  Description
    of Business



We develop, manufacture, and sell high-quality, affordable
    digital and analog audio mixers, speakers, guitar and bass
    amplifiers, branded musical instruments and related accessories,
    and other professional audio equipment. Our products are used by
    professional and amateur musicians; school music programs; sound
    installation contractors and broadcast professionals in sound
    recordings, live presentations systems and installed sound
    systems. We distribute our products primarily through retail
    dealers, mail order outlets and installed sound contractors. We
    have our primary operations in the United States with smaller
    operations in the United Kingdom, Canada, China and Japan.



(2)  Summary
    of Significant Accounting Policies



a)  Basis
    of Presentation



The financial statements consolidate the accounts of LOUD
    Technologies Inc. and our wholly owned subsidiaries. The
    companies are collectively hereinafter referred to as the
    Company, LOUD, we, our
    and us. All significant intercompany accounts and
    transactions have been eliminated. Financial information for the
    year 2005 includes St. Louis Music, Inc. for the period
    March 5, 2005 through December 31, 2005.



b)  Use
    of Estimates



The preparation of financial statements in conformity with
    generally accepted accounting principles requires us to make
    estimates and assumptions that affect the reported amounts of
    assets and liabilities and disclosures of contingent assets and
    liabilities at the date of the financial statements and the
    reported amounts of revenues and expenses during the reporting
    period. Significant items subject to such estimates and
    assumptions include the allocation of purchase cost to assets
    acquired and liabilities assumed, the carrying amount of
    property and equipment and intangibles; valuation allowances for
    receivables, inventories, and deferred income tax assets and
    liabilities. Actual results may differ from those estimates.



c)  Revenue
    Recognition



Revenues from sales of products, net of sales discounts, returns
    and allowances, are generally recognized upon shipment under an
    agreement with a customer when risk of loss has passed to the
    customer, all significant contractual obligations have been
    satisfied, the fee is fixed or determinable and collection of
    the resulting receivable is considered probable. Products are
    generally shipped FOB shipping point with no right
    of return. We do have some dealers who finance their purchases
    through finance companies. We have manufacturers
    repurchase agreements with the finance companies and defer the
    revenue and related cost of goods sold of these sales at the
    time of the sale. We then recognize the revenue and related cost
    of goods sold from these sales when the repurchase obligation no
    longer exists. Sales with contingencies, such as rights of
    return, rotation rights, conditional acceptance provisions and
    price protection, are deferred until the contingencies have been
    satisfied or the contingent period has lapsed. We generally
    warrant our products against defects in materials and
    workmanship for periods of between one and six years, with the
    exception of Alvarez Yairi guitars, which have a limited
    lifetime warranty. The estimated cost of warranty obligations,
    sales returns and other allowances are recognized at the time of
    revenue recognition based on contract terms and prior claims
    experience.



d)  Advertising
    Expense



The cost of advertising included in selling, general and
    administrative expense is expensed as incurred. For 2006, 2005,
    and 2004 these expenses totaled $6.1 million,
    $7.1 million, and $4.2 million, respectively.

28




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   e)  Research
    and Development Costs
    f)  Foreign
    Currency
    g)  Accounts
    Receivable
      Balance at





Increase





Balance atBeginning of





From





End ofYear


Additions


Acquisition


Deductions


Year2006

$
2,224


$
1,180


$



$
(1,146
)

$
2,2582005

$
1,671


$
401


$
775


$
(623
)

$
2,2242004

$
2,163


$
609


$



$
(1,101
)

$
1,671   h)  Inventories
  first-in,
  i)  Property,
    Plant and Equipment
   29




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   j)  Deferred
    Financing Costs
      Year ending December 31:2007


6782008


6702009


6502010


4952011


1762012


23     k)  Goodwill
    and Other Intangible Assets
      l)  Impairment
    of Long-Lived Assets
   30




---



##### 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
  2006Cost of sales

$
27Selling, general and administrative


391Research and development


20Total stock based compensation

$
438    31




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       2006As


PreviousReported


MethodIncome before income taxes and
    discontinued operations

$
1,056


$
1,494Net income

$
625


$
1,063Basic net income per share

$
0.13


$
0.22Diluted net income per share

$
0.13


$
0.21     2005


2004Net income (loss):As reported

$
3,757


$
(2,291
)Add stock-based employee
    compensation expense included in reported net loss






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


(458
)


(840
)Pro forma

$
3,299


$
(3,131
)Basic net income (loss) per share:As reported

$
0.79


$
(0.52
)Pro forma


0.69



(0.71
)Diluted net income (loss) per
    share:As reported

$
0.76


$
(0.52
)Pro forma


0.67



(0.71
)   o)  Guarantees
        Balance,


Charged to


Increase


Applied


Balance,Beginning


Cost of


From


to


Endof Period


Sales


Acquisition


Liability


of Period2006

$
980


$
2,804


$



$
(2,624
)

$
1,1602005

$
978


$
2,456


$
290


$
(2,744
)

$
9802004

$
1,081


$
2,379


$



$
(2,482
)

$
978  32




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  p)  Segment
    Reporting
    q)  Income
    Taxes
      r)  Computation
    of Basic and Diluted Net Income (Loss) per Share
   33




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2006


2005


2004Numerator:Net income (loss) from continuing
    operations

$
625


$
930


$
(2,291
)Net income from discontinued
    operations






2,827



Numerator for basic and diluted
    net income (loss) per share

$
625


$
3,757


$
(2,291
)Denominator:Weighted average shares outstanding


4,807



4,758



4,383Dilutive potential common shares
    from outstanding warrants and options


172



192



Denominator for diluted net income
    (loss) per share


4,979



4,950



4,383   s)  Concentration
    of Credit and Supply Risk
      t)  Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes  An
    Interpretation of FASB Statement No. 109
  Considering the Effects of Prior Year Misstatements when
    Quantifying Current Year Misstatements.
  06-3, How
    Taxes Collected from Customers and Remitted to Governmental
    Authorities Should Be Presented in the Income Statement (That
    Is, Gross versus Net Presentation). 06-3 06-3.
 34




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  06-3
  u)  Reclassifications
    (3)  Discontinued
    Operations
      (4)  Restructuring
    Costs
    December 31,2006Balance at December 31, 2005

$
New charges


1,604Cash payments


(709
)Other adjustments


(15
)Balance at December 31, 2006

$
880  35




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (5)  Inventories
    December 31,2006


2005Raw materials

$
6,371


$
5,531Work in process


766



976Finished goods


47,707



32,783$
54,844


$
39,290   (6)  Intangible
    Assets
    December 31,2006


2005Developed technology

$
5,470


$
5,470Customer relationships


3,080



3,080Trademark


5,930



5,930Non-compete agreement


285



28514,765



14,765Less accumulated amortization


(3,398
)


(2,567
)$
11,367


$
12,198       Year ending December 31:2007

$
8162008


8162009


8162010


7712011


762  36




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (7)  Property,
    Plant and Equipment
    December 31,2006


2005Land and buildings

$
850


$
851Machinery, equipment and software


17,479



15,169Furniture and fixtures


1,358



1,293Leasehold improvements


1,860



1,73921,547



19,052Less accumulated depreciation and
    amortization


(15,004
)


(11,189
)$
6,543


$
7,863   (8)  Income
    Taxes
    2006


2005


2004U.S.

$
1,290


$
5,618


$
(1,229
)Foreign


(234
)


(1,756
)


(1,050
)Income (loss) before income taxes

$
1,056


$
3,862


$
(2,279
)     2006


2005


2004Current income taxes:U.S. federal

$
316


$



$
Foreign


56



65



12Total current


372



65



12Deferred income taxes:U.S. federal


59



40



State and local










Foreign










Total deferred


59



40



Total income tax expense

$
431


$
105


$
12    37




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2006


2005


2004Total income tax expense from
    continuing operations

$
431


$
47


$
12Total income tax expense from
    discontinued operations






58



Total income tax expense

$
431


$
105


$
12     December 31,2006


2005Deferred tax assets:Accrued expenses

$
832


$
947Bad debt allowance


734



494Inventory adjustments


1,759



1,311Net operating loss carryforwards


7,892



10,185Capital loss carryforwards


5,521



5,445Property, plant, and equipment


391



Tax credit carryforwards


1,216



706Other items, net


158



18,503



19,088Less valuation allowance


(16,972
)


(15,962
)Total deferred tax assets


1,531



3,126Deferred tax liabilities:Property, plant, and equipment






1,495Specifically identifiable
    intangible assets


1,630



1,671Total deferred tax liabilities


1,630



3,166Net deferred tax liabilities

$
(99
)

$
(40
)    38




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2006


2005


2004Tax at the statutory rate

$
359


$
1,313


$
(775
)Research and development tax credit


(353
)


(192
)


(100
)Change in reserve for tax
    uncertainties


200



(125
)


Nondeductible expenses and other
    permanent differences


74



259



123Foreign tax greater (less) than
    U.S. statutory rate


9



27



(5
)Increase (decrease) in valuation
    allowance


118



(1,362
)


1,085State taxes, net of federal impact


26



86



(186
)Other


(2
)


99



(130
)Income tax expense

$
431


$
105


$
12         (9)  Debt
    and Liquidity
       39




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (a)
    Short-Term
    Borrowings      (b)
    Long-Term
    Debt    2006


2005Term Loan A

$
12,500


$
15,000Term Loan B


14,355



14,500Subordinated note payable


14,750



14,75041,605



44,250Less current portion


(1,500
)


(3,306
)$
40,105


$
40,944      40




---



##### Table of Contents



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

$
1,5002008


4,7012009


3,7702010


6,5532011


10,3312012


14,750Total long-term debt

$
41,605   Classification of
    Short-Term Obligations Expected to Be Refinanced
  (10)  Related-Party
    Transactions
    (11)  Employee
    Benefit Plans
  5-year
  (12)  Shareholders
    Equity
     41




---



##### Table of Contents



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


WeightedSubject


Averageto Exercise


Exercise PriceOptions outstanding at
    December 31, 2003


817


$
18.35Granted


25



11.00Canceled


(94
)


20.80Exercised


(10
)


0.05Options 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


$
14.94         Options OutstandingWeightedAverage





Options ExercisableRemaining


Weighted





WeightedContractual


Average





AverageNumber


Life


Exercise


Number


ExerciseRange of Exercise Price

Outstanding


(Years)


Price


Exercisable


Price$5.10-8.85


281



5.5



5.27



219



5.26$11.30-23.75


104



6.6



16.48



57



18.31$25.30-32.50


153



2.0



28.64



153



28.64$33.44-43.75


24



2.1



34.06



24



34.06562



4.6


$
14.94



453


$
17.38    42




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2006


2005


2004Expected dividend yield


0
%


0
%


0
%Weighted average risk-free
    interest rate


5.0
%


4.0
%


3.1
%Expected volatility


80.0
%


85.0
%


90.0
%Expected lives (in years)


6.5



5.0



5.0       (13)  Commitments
    and Contingencies
  (a)
    Commitments    2007

$
2,2762008


1,6482009


1,2982010


1,1892011


955     (b)
    Contingencies      (14)  Geographic
    Information
   43




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2006


2005


2004Net sales:U.S.

$
141,711


$
128,681


$
71,590Europe


25,886



25,117



27,140Rest of the World


47,436



50,530



24,546$
215,033


$
204,328


$
123,276     2006


2005Gross ReceivablesU.S.

$
15,941


$
18,897Europe


8,676



5,201Rest of the World


3,871



6,350$
28,488


$
30,448InventoryU.S.

$
35,019


$
33,795Rest of the World


19,825



5,495$
54,844


$
39,290   (15)  Quarterly
    Financial Data (Unaudited)
  1-for-5
  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


(0.12
)


0.07



0.30



(0.11
)Diluted net income (loss) per share


(0.12
)


0.06



0.29



(0.11
)   44




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2005First


Second


Third


FourthNet sales

$
39,945


$
54,290


$
53,987


$
56,106Gross profit


13,335



15,648



18,206



18,135Net income (loss)


3,323



(1,690
)


379



1,745Basic net income (loss) per share


0.71



(0.36
)


0.08



0.36Diluted net income (loss) per share


0.68



(0.36
)


0.08



0.35     (16)  Business
    Combinations
      Allocation of purchase
    priceAccounts receivable


12,088Inventories


18,696Prepaid expenses and other current
    assets


287Property, plant and equipment


2,440Goodwill


2,248Trademarks (estimated life of
    20 years)


4,550Developed Technology (estimated
    life of 5 years)


270Customer Relationships (estimated
    life of 15 years)


3,080Other assets


17Total assets

$
43,676Accounts payable


2,610Accrued liabilities (including
    remaining amount due to sellers)


4,588Total liabilities

$
7,198Common stock issued


1,190Cash consideration paid, (net of
    $88 cash acquired and including $1,633 of transaction costs)

$
35,288  45




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      UNAUDITED
    PRO FORMA CONDENSED COMBINED
  Statement
    of Operations Data
  2005Pro FormaNet sales

$
220,916Gross profit


69,677Net income (loss)


2,277Basic net income (loss) per share

$
0.50     (17)  Subsequent
    Events
        2007

$
1,5002008


3,0002009


3,0002010


3,0002011


3,0002012


88,500Total long-term debt

$
102,000  46




---



##### Table of Contents



LOUD
    TECHNOLOGIES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Year ending December 31:2007


5862008


7422009


7792010


8192011


8642012


210      47




---



##### 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   PART III   48




---



##### Table of Contents



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules    Consolidated Financial Statements:
  PageNumberReport of
    Independent Registered Public Accounting Firm on Consolidated
    Financial StatementsConsolidated
    Balance Sheets at December 31, 2006 and 2005Consolidated
    Statements of Operations for each of the years in the three-year
    period ended December 31, 2006Consolidated
    Statements of Shareholders Equity for each of the years in
    the three-year period ended December 31, 2006Consolidated
    Statements of Cash Flows for each of the years in the three-year
    period ended December 31, 2006Notes to
    Consolidated Financial StatementsRefinancing loan agreement with
    Ableco Finance LLC, dated March 30, 2007Refinancing security agreement
    dated March 30, 2007, from Ableco Finance LLCRefinancing side letter dated
    April 10, 2007, from Ableco Finance LLCShare Purchase Agreement relating
    to the sale and purchase of the entire issued share capital of
    Martin Audio Limited, dated March 6, 2007      49




---



##### Table of Contents



SIGNATURES    LOUD TECHNOLOGIES INC.
  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/  Timothy
    P. ONeilTimothy
    P. ONeil

Chief Financial Officer, Senior
    Vice President, Secretary and Treasurer (Principal Financial and
    Accounting Officer)/s/  Kevin
    CalhounKevin
    Calhoun

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

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

Director and Vice President/s/  Case
    KuehnCase
    Kuehn

Director and Vice President/s/  Jason
    H. NeimarkJason
    H. Neimark

Director and Vice President/s/  T.
    Scott KingT.
    Scott King

Director and Vice President/s/  Jon
    W. GacekJon
    W. Gacek

Director/s/  George
    ReaGeorge
    Rea

Director/s/  C.
    Daryl HollisC.
    Daryl Hollis

Director  50




---



##### 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. 51




---



##### 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. 52




---



##### 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. 53




---



##### 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. Incorporated by reference
    to Exhibit 10.29 to Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005.10
.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.*10
.30

Refinancing security agreement
    dated March 30, 2007, from Ableco Finance LLC.*10
.31

Refinancing side letter dated
    April 10, 2007, from Ableco Finance LLC.*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.*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 54