##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the quarterly period ended June 30, 2008
 Or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the transition period from to
 Commission File Number: 0-26524
 LOUD TECHNOLOGIES INC.
  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)
    
    (Zip Code)
 (425) 487-4333
 N/A
 o þ
 o þ
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
  Common Stock, no par value
    
    4,858,941Class
    
    Number of Shares Outstanding(as of August 12, 2008)






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##### 



LOUD TECHNOLOGIES INC.
 FORM 10-Q
For the quarter ended June 30, 2008
INDEX
 PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007
    
    3Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)  for the six months ended June 30, 2008 and June 30, 2007
    
    4Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and June 30, 2007
    
    5Condensed Consolidated Statements of Shareholders' Equity (Deficit) for the six months ended June 30, 2008
    
    6Notes to Condensed Consolidated Financial Statements
    
    7Item 2.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    14Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    19Item 4.
    
    Controls and Procedures
    
    19PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    21Item 1A.
    
    Risk Factors
    
    21Item 6.
    
    Exhibits
    
    22SIGNATURES
    
    23EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  2




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##### Table of Contents



LOUD TECHNOLOGIES INC.
AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 (Unaudited)
 (In thousands, except for share amounts)
 June 30,
    
    
    December 31,2008
    
    
    2007AssetsCurrent assets:Cash
    
    $
    4,670
    
    
    $
    3,589Accounts receivable, net of allowances of $4,246 and $3,537, respectively
    
    
    28,639
    
    
    
    25,204Inventories
    
    
    46,631
    
    
    
    56,804Prepaid expenses and other current assets
    
    
    3,741
    
    
    
    1,915Total current assets
    
    
    83,681
    
    
    
    87,512Property, plant and equipment, net
    
    
    4,895
    
    
    
    5,744Goodwill
    
    
    19,709
    
    
    
    19,726Other intangible assets, net
    
    
    26,942
    
    
    
    27,975Deferred financing costs, net
    
    
    2,669
    
    
    
    2,621Total assets
    
    $
    137,896
    
    
    $
    143,578Liabilities and Shareholders Equity (Deficit)Current liabilities:Short-term borrowings
    
    $
    3,748
    
    
    $
    1,318Accounts payable
    
    
    20,216
    
    
    
    25,830Accrued liabilities
    
    
    10,278
    
    
    
    11,020Current deferred tax liabilities
    
    
    418
    
    
    
    299Taxes payable
    
    
    1,773
    
    
    
    1,834Current portion of long-term debt
    
    
    3,000
    
    
    
    8,000Total current liabilities
    
    
    39,433
    
    
    
    48,301Long-term debt, excluding current portion
    
    
    91,078
    
    
    
    92,358Convertible debt, net of discount
    
    
    1,490
    
    
    
    Deferred tax liabilities
    
    
    4,377
    
    
    
    4,636Total liabilities
    
    
    136,378
    
    
    
    145,295Commitments 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 4,858,941 and 4,618,942
shares at June 30, 2008 and December 31, 2007, respectively
    
    
    41,951
    
    
    
    41,810Additional paid in capital
    
    
    6,693
    
    
    
    Accumulated deficit
    
    
    (47,224
    )
    
    
    (43,662
    )Accumulated other comprehensive income
    
    
    98
    
    
    
    135Total shareholders equity (deficit)
    
    
    1,518
    
    
    
    (1,717
    )Total liabilities and shareholders equity (deficit)
    
    $
    137,896
    
    
    $
    143,578
  3




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##### Table of Contents



LOUD TECHNOLOGIES INC.
AND SUBSIDIARIES
 
 Consolidated Statements of Operations and Comprehensive Loss
 (Unaudited)
 (In thousands, except per share data)
 Three Months ended
    
    
    Six Months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    54,981
    
    
    $
    50,583
    
    
    $
    109,130
    
    
    $
    101,536Cost of sales
    
    
    37,870
    
    
    
    36,049
    
    
    
    76,203
    
    
    
    73,397Gross profit
    
    
    17,111
    
    
    
    14,534
    
    
    
    32,927
    
    
    
    28,139Operating expenses:Selling, general, and administrative
    
    
    11,533
    
    
    
    11,032
    
    
    
    23,523
    
    
    
    22,533Research and development
    
    
    2,583
    
    
    
    2,830
    
    
    
    5,615
    
    
    
    5,631Restructuring costs
    
    
    262
    
    
    
    536
    
    
    
    296
    
    
    
    1,554Total operating expenses
    
    
    14,378
    
    
    
    14,398
    
    
    
    29,434
    
    
    
    29,718Operating income (loss)
    
    
    2,733
    
    
    
    136
    
    
    
    3,493
    
    
    
    (1,579
    )Other income (expense):Interest income
    
    
    (10
    )
    
    
    22
    
    
    
    29
    
    
    
    22Interest expense
    
    
    (3,336
    )
    
    
    (2,758
    )
    
    
    (6,240
    )
    
    
    (4,608
    )Management fee
    
    
    (370
    )
    
    
    (324
    )
    
    
    (523
    )
    
    
    (485
    )Other
    
    
    89
    
    
    
    150
    
    
    
    (92
    )
    
    
    (2,055
    )Total other expense
    
    
    (3,627
    )
    
    
    (2,910
    )
    
    
    (6,826
    )
    
    
    (7,126
    )Loss before income taxes
    
    
    (894
    )
    
    
    (2,774
    )
    
    
    (3,333
    )
    
    
    (8,705
    )Income tax expense (benefit)
    
    
    156
    
    
    
    (39
    )
    
    
    229
    
    
    
    (5
    )Net loss
    
    $
    (1,050
    )
    
    $
    (2,735
    )
    
    $
    (3,562
    )
    
    $
    (8,700
    )Per share dataBasic and diluted net loss per share
    
    $
    (0.22
    )
    
    $
    (0.56
    )
    
    $
    (0.73
    )
    
    $
    (1.80
    )Shares used in computing basic and diluted net loss per share
    
    
    4,859
    
    
    
    4,855
    
    
    
    4,859
    
    
    
    4,841Comprehensive loss:Net loss
    
    $
    (1,050
    )
    
    $
    (2,735
    )
    
    $
    (3,562
    )
    
    $
    (8,700
    )Foreign currency translation loss (gain)
    
    
    4
    
    
    
    
    
    
    
    (37
    )
    
    
    Comprehensive loss
    
    $
    (1,046
    )
    
    $
    (2,735
    )
    
    $
    (3,599
    )
    
    $
    (8,700
    )
  4




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##### Table of Contents



LOUD TECHNOLOGIES INC.
AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 (Unaudited)
 (In thousands)
 Six Months endedJune 30,2008
    
    
    2007Operating activities:Net loss
    
    $
    (3,562
    )
    
    $
    (8,700
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    2,619
    
    
    
    2,259Amortization and write-offs of deferred financing costs
    
    
    283
    
    
    
    2,817Gain on asset dispositions
    
    
    
    
    
    
    (526
    )Stock based compensation
    
    
    140
    
    
    
    164Non-cash interest expense
    
    
    902
    
    
    
    106Changes in operating assets and liabilities:Accounts receivable
    
    
    (3,443
    )
    
    
    1,962Inventories
    
    
    10,171
    
    
    
    11,798Prepaid expenses and other current assets
    
    
    (1,829
    )
    
    
    (22
    )Accounts payable, accrued liabilities and
payable to former Italian subsidiary
    
    
    (6,349
    )
    
    
    (7,804
    )Taxes payable
    
    
    (198
    )
    
    
    (523
    )Other liabilities
    
    
    
    
    
    
    19Net cash (used)/provided by operating activities
    
    
    (1,266
    )
    
    
    1,550Investing activities:Proceeds from sales of property, plant and equipment
    
    
    
    
    
    
    1,239Purchases of property, plant and equipment
    
    
    (758
    )
    
    
    (1,323
    )Acquisition of St. Louis Music, Inc., including transaction fees paid
    
    
    
    
    
    
    (3,181
    )Acquisition of Martin Audio, Ltd., net of cash acquired of $3,696
    
    
    
    
    
    
    (31,964
    )Net cash used in investing activities
    
    
    (758
    )
    
    
    (35,229
    )Financing activities:Payments on long-term debt
    
    
    (6,500
    )
    
    
    (42,069
    )Issuance of long-term debt
    
    
    
    
    
    
    102,000Proceeds from issuance of convertible debt
    
    
    7,500
    
    
    
    Net proceeds (payments) on line of credit and short term borrowings
    
    
    2,430
    
    
    
    (14,210
    )Net payment on debt and credit facility acquired in acquition of Martin Audio, Ltd.
    
    
    
    
    
    
    (3,030
    )Financing costs associated with debt issuance
    
    
    (331
    )
    
    
    (2,946
    )Net proceeds from stock sales and exercise of stock options
    
    
    2
    
    
    
    224Cash provided by financing activities
    
    
    3,101
    
    
    
    39,969Effect of exchange rate changes on cash
    
    
    4
    
    
    
    87Increase (decrease) in cash and cash equivalents
    
    
    1,081
    
    
    
    6,377Cash at beginning of period
    
    
    3,589
    
    
    
    311Cash at end of period
    
    $
    4,670
    
    
    $
    6,688Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    4,886
    
    
    $
    3,422Cash paid for income taxes
    
    $
    441
    
    
    $
    536Accrued acquition related expenses
    
    $
    
    
    
    $
    1,397Cash paid for acquisition related expenses
    
    $
    
    
    
    $
    659
  5




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##### Table of Contents



LOUD TECHNOLOGIES INC.
AND SUBSIDIARIES
 
 Consolidated Statements of Shareholders Equity (Deficit)
 Six months ended June 30, 2008
 (Unaudited)
 (In thousands)
 Additional
    
    
    
    
    
    
    AccumulatedCommon stock
    
    
    Paid in
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    TotalBalance at December 31, 2007
    
    
    4,619
    
    
    
    41,810
    
    
    
    
    
    
    
    (43,662
    )
    
    
    135
    
    
    
    (1,717
    )Stock based compensation
    
    
    
    
    
    
    140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140Exercise of warrants
    
    
    240
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Convertible debt beneficial
conversion
    
    
    
    
    
    
    
    
    
    
    6,693
    
    
    
    
    
    
    
    
    
    
    
    6,693Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,562
    )
    
    
    
    
    
    
    (3,562
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    (37
    )Balance at June 30, 2008
    
    
    4,859
    
    
    
    41,951
    
    
    
    6,693
    
    
    
    (47,224
    )
    
    
    98
    
    
    
    1,518
  6




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##### Table of Contents



LOUD TECHNOLOGIES INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 June 30, 2008
 (Unaudited)
 1. Description of Business
 ® ® ® ® ® ® ® ® ®
   2. Summary of Significant Accounting Policies
 Basis of Presentation
     7




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##### Table of Contents



If breaches of the covenants of our senior secured credit facility occur, there is no
assurance that the lender would grant waivers or agree to restructure our debt or that we would be
able to obtain other financing. If we default on our debt, the lender has a variety of remedies
against us including accelerating all amounts so that they come due immediately and foreclosing on
their security interests, which would allow the creditor to take
possession of all of our assets. The accompanying financial
statements do not reflect any adjustments that might be required
should the Company default on debt agreements.
 Stock Based Compensation
  Three months
    
    
    Six months endedended June 30,
    
    
    June 30,2008
    
    
    2008Selling, general and administrative
    
    $
    67
    
    
    $
    135Research and development
    
    
    3
    
    
    
    5Total stock based compensation
    
    $
    70
    
    
    $
    140
  Use of Estimates
  Revenue Recognition
  8




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##### Table of Contents



Foreign Currency
   Income Taxes
       Balance, December 31, 2007
    
    $
    1,513Decreases related to prior year tax positions
    
    
    (50
    )Increases related to current year tax positions
    
    
    62Balance, June 30,2008
    
    $
    1,525
 9




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##### Table of Contents



Concentration of Credit and Supply Risk
    Recently Adopted Accounting Principles
    
    
    Level 1: Observable inputs such as quoted prices in active markets for identical assets
or liabilities
    
    Level 2: Inputs other than quoted prices that are observable for the asset or liability,
either directly or indirectly; these include quoted prices for similar assets or
liabilities in active markets and quoted prices for identical or similar assets or
liabilities in markets that are not active
    
    Level 3: Unobservable inputs that reflect the reporting entitys own assumptions
  Balance as of June 30, 2008Level I
    
    Level II
    
    Level IIIShort-term investment
    
    $
    2,652
  10




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##### Table of Contents



New Accounting Pronouncements
  3. Net Loss Per Share
   4. Restructuring Costs
  Balance at December 31, 2007
    
    $
    462New charges
    
    
    296Cash payments
    
    
    (413
    )Balance at June 30, 2008
    
    $
    345
 5. Inventories
  June 30,
    
    
    December 31,2008
    
    
    2007Raw materials
    
    $
    5,690
    
    
    $
    7,580Work in process
    
    
    101
    
    
    
    65Finished goods
    
    
    40,840
    
    
    
    49,159$
    46,631
    
    
    $
    56,804
 6. Other Intangible Assets
  11




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##### Table of Contents



Gross
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    NetCustomer and distributor relationships
    
    $
    13,855
    
    
    $
    1,562
    
    
    $
    12,293Trademark
    
    
    12,713
    
    
    
    1,742
    
    
    
    10,971Developed technology
    
    
    6,149
    
    
    
    2,491
    
    
    
    3,658Non-compete agreement
    
    
    50
    
    
    
    30
    
    
    
    20Total intangible assets, June 30, 2008
    
    $
    32,767
    
    
    $
    5,825
    
    
    $
    26,942Total intangible assets, December 31, 2007
    
    $
    32,785
    
    
    $
    4,810
    
    
    $
    27,975
  7. Goodwill
  Balance, December 31, 2007
    
    $
    19,726Effects of foreign currency translation
    
    
    (17
    )Balance, June 30, 2008
    
    $
    19,709
 8. Financing
   (a) Short-term borrowings
  (b) Long-term debt
  June 30,
    
    
    December 31,2008
    
    
    2007Convertible debt, net of discount
    
    
    1,490
    
    
    
    Ableco Term Loan A
    
    
    17,869
    
    
    
    19,203Ableco US Term Loan B
    
    
    34,668
    
    
    
    39,333Ableco UK Term Loan B
    
    
    29,000
    
    
    
    29,500Ableco Term Loan C
    
    
    12,541
    
    
    
    12,32295,568
    
    
    
    100,358Less: current portion
    
    
    (3,000
    )
    
    
    (8,000
    )Long-term portion of debt
    
    $
    92,568
    
    
    $
    92,358
 12




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##### Table of Contents



Face value of convertible debt(s)
    
    $
    7,500Less: unamortized debt discounts
    
    
    (6,339
    )Add: accreted interest
    
    
    329Total carrying value, net of debt discount June 30, 2008
    
    $
    1,490
   9. Guarantees
 Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others
   2008
    
    
    2007Balance at December 31, 2007
    
    $
    1,065
    
    
    $
    1,160Charged to cost of sales
    
    
    (941
    )
    
    
    1,516Applied to liability
    
    
    951
    
    
    
    (1,766
    )Foreign currency adjustment
    
    
    (1
    )
    
    
    Balance at June 30, 2008
    
    $
    1,074
    
    
    $
    910
 10. Commitments and Contingencies
  13




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis should be read in conjunction with our financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2007. This discussion
contains certain forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, which involve risks and uncertainties, such as statements of our
plans, objectives, expectations and intentions. Actual results may differ materially from those
discussed herein. The cautionary statements made in this Quarterly Report on Form 10-Q and the
Annual Report on Form 10-K may apply to all forward-looking statements wherever they appear. We
undertake no obligation to publicly release 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. Forward-looking statements include, without limitation, any
statement that may predict, forecast, indicate, or imply future results, performance, or
achievements, and may contain the words believe, anticipate, expect, estimate, project,
will be, will continue, will likely result, or words or phrases of similar meaning.
 Overview
 ® ® ® ® ® ® ® ® ®
      14




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##### Table of Contents



Critical Accounting Policies and Judgments
   Estimates and Assumptions Related to Financial Statements
 
 Results of Operations (in thousands)
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    54,981
    
    
    $
    50,583
    
    
    $
    109,130
    
    
    $
    101,536Gross profit
    
    
    17,111
    
    
    
    14,534
    
    
    
    32,927
    
    
    
    28,139Selling, general and administrative
    
    
    11,533
    
    
    
    11,032
    
    
    
    23,523
    
    
    
    22,533Research and development
    
    
    2,583
    
    
    
    2,830
    
    
    
    5,615
    
    
    
    5,631Restructuring costs
    
    
    262
    
    
    
    536
    
    
    
    296
    
    
    
    1,554Total operating expenses
    
    
    14,378
    
    
    
    14,398
    
    
    
    29,434
    
    
    
    29,718Operating income (loss)
    
    
    2,733
    
    
    
    136
    
    
    
    3,493
    
    
    
    (1,579
    )Other expense
    
    
    (3,627
    )
    
    
    (2,910
    )
    
    
    (6,826
    )
    
    
    (7,126
    )Provision for income taxes
    
    
    156
    
    
    
    (39
    )
    
    
    229
    
    
    
    (5
    )Net income (loss)
    
    $
    (1,050
    )
    
    $
    (2,735
    )
    
    $
    (3,562
    )
    
    $
    (8,700
    )
 15




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##### Table of Contents



Three Months Ended June 30, 2008 vs. Three Months Ended June 30, 2007
 Net Loss
  Net Sales
  Gross Profit
  Selling, General and Administrative
  Research and Development
  Restructuring Costs
  Other Expense
   16




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##### Table of Contents



Income Taxes
  Six Months Ended June 30, 2008 vs. Six Months Ended June 30, 2007
 Net Sales
  Gross Profit
  Selling, General and Administrative
  Research and Development
  Restructuring Costs
  Other Expense
  Income Taxes
  17




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##### Table of Contents



Liquidity and Capital Resources
  Net Cash Used in and Provided by Operating Activities
  Net Cash Used in Investing Activities
  Net Cash Provided by Financing Activities
  Ability to Stay in Compliance With Debt Covenants
    18




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##### Table of Contents



Commitments
  Payments due by PeriodLess thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5+ YearsOperating leases
    
    $
    6,708
    
    
    $
    2,455
    
    
    $
    3,756
    
    
    $
    497
    
    
    $
    Convertible debt,
including interest
    
    
    14,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,240Short-term and long-term
debt, including interest
    
    
    130,087
    
    
    
    12,242
    
    
    
    23,782
    
    
    
    94,063
    
    
    
    Total
    
    $
    151,035
    
    
    $
    14,697
    
    
    $
    27,538
    
    
    $
    94,560
    
    
    $
    14,240
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
     
 Item 4 and Item 4T. Controls and Procedures
  19




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##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
 
 1)
    
    Pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
the assets of the Company;2)
    
    Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management of the Company; and3)
    
    Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Companys
assets that could have a material effect on the financial statements.
 Internal ControlIntegrated Framework
  
 Changes in Internal Controls
  20




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Item 3. Defaults Upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    Our annual meeting of shareholders was held on June 30, 2008 (the Annual Meeting).(b)
    
    At the Annual Meeting, James T. Engen, Jon W. Gacek and R. Lynn Skillen were elected to serve
as Class 1 directors for a three-year term. Thomas V. Taylor, Jason H. Neimark, Kevin J.
Calhoun and Mark E. Kuchenrither continue to serve as Class 2 directors and will be up for
re-election at the 2009 annual meeting. C. Daryl Hollis, George R. Rea, and Clarence E. Terry
continue to serve as Class 3 directors and will be up for re-election at the 2010 annual
meeting.(c)
    
    Following are descriptions of and results of votes cast on matters voted upon by the
shareholders at the Annual Meeting.
 
    
    The results of the shareholder vote on the election of directors were as follows:
 Nominee
    
    For
    
    WithheldJames T. Engen
    
    
    4,535,846
    
    
    
    95,717Jon W. Gacek
    
    
    4,529,806
    
    
    
    101,757R. Lynn Skillen
    
    
    4,529,606
    
    
    
    101,957
 
    
    The results of the shareholder vote on the proposal to amend the Companys Restated
Articles of Incorporation to provide that the Companys Restated Articles of
Incorporation may be amended by the Board of Directors without shareholder action to
the extent permitted by Section 23B.10.020 of the Washington Business Corporation Act
were as follows:
 PercentageofVotes
    
    OutstandingFor
    
    
    4,434,411
    
    
    
    91.26Against
    
    
    196,932
    
    
    
    4.05Abstain
    
    
    220
    
    
    
    .00Broker Non-Votes
    
    
    0
    
    
    
    
 
    
    The results of the shareholder vote on the proposal to amend the Companys Restated
Articles of Incorporation to provide that the name of the Company is LOUD Technologies,
Inc. were as follows:
 21




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##### Table of Contents



PercentageofVotes
    
    OutstandingFor
    
    
    4,628,040
    
    
    
    95.25Against
    
    
    3,443
    
    
    
    .07Abstain
    
    
    80
    
    
    
    .00Broker Non-Votes
    
    
    0
    
    
    
    
 
    
    The results of the shareholder vote on the proposal to amend the Companys Restated
Articles of Incorporation to give effect to the adjustment of the Companys issued and
authorized common stock related to the Companys 2005 reverse split were as follows:
 PercentageofVotes
    
    OutstandingFor
    
    
    4,619,781
    
    
    
    95.08Against
    
    
    10,022
    
    
    
    .21Abstain
    
    
    1,760
    
    
    
    .04Broker Non-Votes
    
    
    0
    
    
    
    
 
    
    The results of the shareholder vote on the proposal to amend the Companys Restated
Articles of Incorporation to increase the number of the Companys authorized common
shares from 8 million to 12 million so as to provide additional authorized common
shares to be issued upon conversion of the Convertible Senior Subordinated Secured
Promissory Note issued to Sun Mackie, LLC on March 18, 2008, were as follows:
 PercentageofVotes
    
    OutstandingFor
    
    
    4,592,385
    
    
    
    94.51Against
    
    
    38,298
    
    
    
    .79Abstain
    
    
    880
    
    
    
    .02Broker Non-Votes
    
    
    0
    
    
    
    
 
    
    The results of the shareholder vote on the proposal to approve the Convertible
Senior Subordinated Secured
Promissory Note issued to Sun Mackie, LLC on March 18, 2008, the Security Agreement, and
the transactions contemplated therein, including but not limited to issuance of shares of
the Companys common stock upon conversion of the Note, were as follows:
 PercentageofVotes
    
    OutstandingFor
    
    
    4,574,160
    
    
    
    98.81Against
    
    
    55,203
    
    
    
    1.19Abstain
    
    
    2,200
    
    
    
    Broker Non-Votes
    
    
    0
    
    
    
    
 Item 5. Other Information
  
 Item 6. Exhibits
  31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
200231.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
200232.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 22




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##### Table of Contents



SIGNATURES
  LOUD Technologies Inc.(Registrant)Dated:  August 14, 2008
    By:
    /s/ James T. EngenJames T. EngenChairman, President and Chief Executive

OfficerDated:  August 14, 2008
    By:
    /s/ David E. OlsonDavid E. OlsonChief Financial Officer, Senior Vice
President, Secretary and Treasurer
(Principal
Financial and
Accounting Officer) 23




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EXHIBIT INDEX
 ExhibitNumber
    
    Document Description31.1
    
    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 Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
 24