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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 10-Q

(Mark One)

|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|[X] |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2003

or

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[  ] |  | 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:  0-29583

Loudeye Corp.

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 91-1908833
(I.R.S. Employer Identification No.)

1130 Rainier Avenue South, Seattle, WA 98144
(Address of principal executive offices) (Zip Code)

206-832-4000
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes     [X]    
                No    
[  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) Yes  o    No þ

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date.

|        |  |                                
|------- |  | -------------------------------
|Common  |  | 45,688,718                     
|        |  |                                
|(Class) |  | (Outstanding at April 30, 2003)

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TABLE OF CONTENTS



|                             |                                                                                               |                                            |  |  |  |  |  | 
|---------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                             | ITEM I FINANCIAL STATEMENTS                                                                  
|                             |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                             |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                             |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                             |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                             | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                             | Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            
|                             | Item 4 DISCLOSURE CONTROLS AND PROCEDURES                                                    
|PART II. OTHER INFORMATION  
|                             | ITEM 1: LEGAL PROCEEDINGS                                                                    
|                             | ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                             | ITEM 3: DEFAULTS UPON SENIOR SECURITIES                                                      
|                             | ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY SHAREHOLDERS                             
|                             | ITEM 5: OTHER INFORMATION                                                                    
|                             | ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                  
|EXHIBIT 10.38               
|EXHIBIT 10.39               
|EXHIBIT 99.1                
|EXHIBIT 99.2                



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Loudeye Corp.

Form 10-Q Quarterly Report
For the Quarter Ended March 31, 2003

TABLE OF CONTENTS

|     |  |      |  |                                   |  |                                                                                       |  |     
|---- |  | ---- |  | --------------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|     |  |      |  |                                   |  |                                                                                       |  | Page
|     |  |      |  |                                   |  |                                                                                       |  |     
|PART |  | I.   |  | Financial Information (unaudited) |  |                                                                                      
|     |  | Item |  | 1                                 |  | Financial Statements                                                                  |  |     
|     |  |      |  |                                   |  | Consolidated Balance Sheets                                                           |  | 3   
|     |  |      |  |                                   |  | Consolidated Statements of
Operations                                                 |  | 4   
|     |  |      |  |                                   |  | Consolidated Statements of Cash
Flows                                                 |  | 6   
|     |  |      |  |                                   |  | Notes to Consolidated Financial
Statements                                            |  | 7   
|     |  | Item |  | 2                                 |  | Managements Discussion and Analysis of Financial Condition and Results
of Operations |  | 14  
|     |  | Item |  | 3                                 |  | Quantitative and Qualitative Disclosures About Market
Risk                            |  | 33  
|     |  | Item |  | 4                                 |  | Disclosure Controls and
Procedures                                                    |  | 33  
|PART |  | II.  |  | Other Information                 |  |                                                                                      
|     |  | Item |  | 1                                 |  | Legal Proceedings                                                                     |  | 35  
|     |  | Item |  | 2                                 |  | Changes in Securities and Use of Proceeds                                             |  | 35  
|     |  | Item |  | 3                                 |  | Defaults Upon Senior Securities                                                       |  | 36  
|     |  | Item |  | 4                                 |  | Submission of Matters to a Vote of Security Holders                                   |  | 36  
|     |  | Item |  | 5                                 |  | Other Information                                                                     |  | 36  
|     |  | Item |  | 6                                 |  | Exhibits and Reports on Form 8-K                                                      |  | 36  

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PART I  FINANCIAL INFORMATION




ITEM  I     FINANCIAL STATEMENTS




LOUDEYE CORP.
CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)


|                                     |  |                                                                                                                                                                                                                                  |                           |   |           |        |              |   |         |        | 
|------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | - | --------- | ------ | ------------ | - | ------- | ------ | 
|                                     |  |                                                                                                                                                                                                                                  |                           |   | March 31, |        | December 31,
|                                     |  |                                                                                                                                                                                                                                  |                           |   | 2003      |        | 2002        
|                                     |  |                                                                                                                                                                                                                                  |                           |   |           |        |             
|ASSETS                               |  |                                                                                                                                                                                                                                  |                           |   |           |        |              |  
|                                     |  | Cash and cash equivalents                                                                                                                                                                                                        |                           | $ | 3,643     |        |              | $ | 1,889   |       
|                                     |  | Short-term investments                                                                                                                                                                                                           |                           |   | 4,698     |        |              |   | 9,978   |       
|                                     |  | Accounts receivable, net of allowances of $262 and $290                                                                                                                                                                          |                           |   | 2,890     |        |              |   | 2,501   |       
|                                     |  | Notes receivable from related parties                                                                                                                                                                                            |                           |   | 949       |        |              |   | 1,187   |       
|                                     |  | Prepaid expenses and other                                                                                                                                                                                                       |                           |   | 643       |        |              |   | 914     |       
|                                     |  |                                                                                                                                                                                                                                  |                           |   |           |        |              |  
|                                     |  |                                                                                                                                                                                                                                  | Total current assets      |   |           | 12,823 |              |   |         | 16,469 | 
|                                     |  | Restricted investments                                                                                                                                                                                                           |                           |   | 576       |        |              |   | 1,500   |       
|                                     |  | Property and equipment, net                                                                                                                                                                                                      |                           |   | 2,857     |        |              |   | 3,590   |       
|                                     |  | Goodwill                                                                                                                                                                                                                         |                           |   |          |        |              |   | 5,307   |       
|                                     |  | Intangible assets, net                                                                                                                                                                                                           |                           |   | 576       |        |              |   | 1,758   |       
|                                     |  | Other assets                                                                                                                                                                                                                     |                           |   | 877       |        |              |   | 905     |       
|                                     |  |                                                                                                                                                                                                                                  |                           |   |           |        |              |  
|                                     |  |                                                                                                                                                                                                                                  | Total assets              |   | $         | 17,709 |              |   | $       | 29,529 | 
|                                     |  |                                                                                                                                                                                                                                  |                           |   |           |        |              |  
|LIABILITIES AND STOCKHOLDERS EQUITY |  |                                                                                                                                                                                                                                  |                           |   |           |        |              |  
|                                     |  | Accounts payable                                                                                                                                                                                                                 |                           | $ | 1,987     |        |              | $ | 1,203   |       
|                                     |  | Accrued compensation and benefits                                                                                                                                                                                                |                           |   | 1,123     |        |              |   | 904     |       
|                                     |  | Other accrued expenses                                                                                                                                                                                                           |                           |   | 1,471     |        |              |   | 1,421   |       
|                                     |  | Accrued special charges                                                                                                                                                                                                          |                           |   | 2,697     |        |              |   | 2,903   |       
|                                     |  | Accrued acquisition consideration                                                                                                                                                                                                |                           |   | 1,062     |        |              |   | 1,062   |       
|                                     |  | Deposits and deferred revenues                                                                                                                                                                                                   |                           |   | 1,064     |        |              |   | 305     |       
|                                     |  | Current portion of long-term debt                                                                                                                                                                                                |                           |   | 749       |        |              |   | 788     |       
|                                     |  |                                                                                                                                                                                                                                  |                           |   |           |        |              |  
|                                     |  |                                                                                                                                                                                                                                  | Total current liabilities |   |           | 10,153 |              |   |         | 8,586  | 
|                                     |  | Long-term debt, net of current portion                                                                                                                                                                                           |                           |   | 448       |        |              |   | 591     |       
|                                     |  |                                                                                                                                                                                                                                  |                           |   |           |        |              |  
|                                     |  |                                                                                                                                                                                                                                  | Total liabilities         |   |           | 10,601 |              |   |         | 9,177  | 
|                                     |  | Commitments and contingencies                                                                                                                                                                                                    |                           |   |          |        |              |   |        |       
|STOCKHOLDERS EQUITY                 |  |                                                                                                                                                                                                                                  |                           |   |           |        |              |  
|                                     |  | Preferred stock, $0.001 par value, 41,000 shares authorized, none
outstanding                                                                                                                                                    |                           |   |          |        |              |   |        |       
|                                     |  | Common stock, additional paid-in capital and warrants, $0.001 par value,
100,000 shares authorized; issued March 31, 2003 and December 31, 2002
- 53,871; and outstanding March 31, 2003 - 46,385 and December 31,
2002  47,158 |                           |   | 193,968   |        |              |   | 194,195 |       
|                                     |  | Deferred stock compensation                                                                                                                                                                                                      |                           |   | (88       | )      |              |   | (130    | )     

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| |  |                     |                                            |  |           |        |              |  |          |        | 
| |  | ------------------- | ------------------------------------------ |  | --------- | ------ | ------------ |  | -------- | ------ | 
| |  |                     |                                            |  | March 31, |        | December 31,
| |  |                     |                                            |  | 2003      |        | 2002        
| |  |                     |                                            |  |           |        |             
| |  | Accumulated deficit |                                            |  | (186,772  | )      |              |  | (173,713 | )     
| |  |                     |                                            |  |           |        |              | 
| |  |                     | Total stockholders equity                 |  |           | 7,108  |              |  |          | 20,352 | 
| |  |                     |                                            |  |           |        |              | 
| |  |                     | Total liabilities and stockholders equity |  | $         | 17,709 |              |  | $        | 29,529 | 
| |  |                     |                                            |  |           |        |              | 

See accompanying notes

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LOUDEYE CORP.




CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited, in thousands, except per share amounts)


|                                                                           |                                              |                        |         |                    |       |      |        |       |       | 
|-------------------------------------------------------------------------- | -------------------------------------------- | ---------------------- | ------- | ------------------ | ----- | ---- | ------ | ----- | ----- | 
|                                                                           |                                              |                        |         | Three Months Ended
|                                                                           |                                              |                        |         | March 31,         
|                                                                           |                                              |                        |         |                   
|                                                                           |                                              |                        |         | 2003               |       | 2002
|                                                                           |                                              |                        |         |                    |       |     
|REVENUES                                                                   |                                              | $                      | 3,310   |                    |       | $    | 3,260  |      
|COST OF REVENUES                                                           |                                              |                        |         |                    |       |      |        |      
|                                                                           | Cost of revenues, excluding depreciation     |                        |         | 2,325              |       |      |        | 2,410 |      
|                                                                           | Depreciation                                 |                        |         | 216                |       |      |        | 835   |      
|                                                                           |                                              |                        |         |                    |       |      |        |      
|                                                                           |                                              | Total cost of
revenues |         |                    | 2,541 |      |        |       | 3,245 | 
|                                                                           |                                              | Gross profit           |         |                    | 769   |      |        |       | 15    | 
|OPERATING EXPENSES                                                         |                                              |                        |         |                    |       |      |        |      
|                                                                           | Research and development                     |                        |         | 577                |       |      |        | 1,290 |      
|                                                                           | Sales and marketing                          |                        |         | 1,547              |       |      |        | 2,216 |      
|                                                                           | General and administrative                   |                        |         | 2,753              |       |      |        | 3,475 |      
|                                                                           | Amortization of intangibles and other assets |                        |         | 525                |       |      |        | 696   |      
|                                                                           | Stock-based compensation                     |                        |         | 42                 |       |      |        | (656  | )    
|                                                                           |                                              |                        |         |                    |       |      |        |      
|                                                                           |                                              |                        | 5,444   |                    |       |      | 7,021  |      
|                                                                           |                                              |                        |         |                    |       |     
|                                                                          
|                                                                           | Special charges                              |                        |         | 8,437              |       |      |        | 748   |      
|                                                                           |                                              |                        |         |                    |       |      |        |      
|OPERATING LOSS                                                             |                                              |                        | (13,112 | )                  |       |      | (7,754 | )    
|OTHER INCOME (EXPENSE), net                                                |                                              |                        |         |                    |       |      |        |      
|                                                                           | Interest income                              |                        |         | 85                 |       |      |        | 333   |      
|                                                                           | Interest expense                             |                        |         | (50                | )     |      |        | (217  | )    
|                                                                           | Other                                        |                        |         | 18                 |       |      |        |      |      
|                                                                           |                                              |                        |         |                    |       |      |        |      
|                                                                           |                                              | Total other income     |         |                    | 53    |      |        |       | 116   | 
|                                                                           |                                              |                        |         |                    |       |      |        |      
|Net loss                                                                   |                                              | $                      | (13,059 | )                  |       | $    | (7,638 | )    
|                                                                           |                                              |                        |         |                    |       |      |        |      
|Basic and diluted net loss per share                                       |                                              | $                      | (0.28   | )                  |       | $    | (0.19  | )    
|                                                                           |                                              |                        |         |                    |       |      |        |      
|Weighted
average shares outstanding
 basic and diluted net loss per share |                                              |                        | 46,487  |                    |       |      | 40,432 |      
|                                                                           |                                              |                        |         |                    |       |      |        |      

See accompanying notes.

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LOUDEYE CORP.




CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited, in thousands)


|                                                                            |                                                                                               |                                                   |                                                      |         |                    |        |        |        |       |        |  
|--------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------- | ---------------------------------------------------- | ------- | ------------------ | ------ | ------ | ------ | ----- | ------ | -
|                                                                            |                                                                                               |                                                   |                                                      |         | Three Months Ended
|                                                                            |                                                                                               |                                                   |                                                      |         | March 31,         
|                                                                            |                                                                                               |                                                   |                                                      |         |                   
|                                                                            |                                                                                               |                                                   |                                                      |         | 2003               |        | 2002  
|                                                                            |                                                                                               |                                                   |                                                      |         |                    |        |       
|Operating Activities                                                        |                                                                                               |                                                   |                                                      |         |                    |        |        |       
|                                                                            | Net loss                                                                                      |                                                   | $                                                    | (13,059 | )                  |        | $      | (7,638 | )    
|                                                                            | Adjustments to reconcile net loss to net cash used in operating activities:                   |                                                   |                                                      |         |                    |        |        |        |      
|                                                                            |                                                                                               | Depreciation and amortization                     |                                                      |         | 812                |        |        |        | 1,733 |       
|                                                                            |                                                                                               | Special charges                                   |                                                      |         | 6,593              |        |        |        | 20    |       
|                                                                            |                                                                                               | Stock-based compensation                          |                                                      |         | 42                 |        |        |        | (656  | )     
|                                                                            | Changes in operating assets and liabilities, net
of amounts acquired in purchase of business: |                                                   |                                                      |         |                    |        |        |        |      
|                                                                            |                                                                                               | Accounts receivable                               |                                                      |         | (389               | )      |        |        | (135  | )     
|                                                                            |                                                                                               | Prepaid expenses and other assets                 |                                                      |         | 1,195              |        |        |        | 830   |       
|                                                                            |                                                                                               | Accounts payable                                  |                                                      |         | 784                |        |        |        | 316   |       
|                                                                            |                                                                                               | Accrued compensation, benefits and other expenses |                                                      |         | 351                |        |        |        | (791  | )     
|                                                                            |                                                                                               | Accrued special charges                           |                                                      |         | (206               | )      |        |        | (524  | )     
|                                                                            |                                                                                               | Deposits and deferred revenues                    |                                                      |         | 759                |        |        |        | (305  | )     
|                                                                            |                                                                                               |                                                   |                                                      |         |                    |        |        |       
|                                                                            |                                                                                               |                                                   | Net cash used in operating activities                |         |                    | (3,118 | )      |        |       | (7,150 | )
|Investing Activities                                                        |                                                                                               |                                                   |                                                      |         |                    |        |        |       
|                                                                            | Purchases of property and equipment and other                                                 |                                                   |                                                      | (43     | )                  |        |        | (915   | )    
|                                                                            | Cash paid for acquisition of business and technology, net                                     |                                                   |                                                      | (82     | )                  |        |        |       |      
|                                                                            | Loans made to related party and related interest                                              |                                                   |                                                      |        |                    |        |        | (350   | )    
|                                                                            | Payments received on loans made to related party and related interest                         |                                                   |                                                      | 238     |                    |        |        |        |      
|                                                                            | Purchases of short-term investments                                                           |                                                   |                                                      |        |                    |        |        | (1,121 | )    
|                                                                            | Sales of short-term investments                                                               |                                                   |                                                      | 5,280   |                    |        |        | 1,149  |      
|                                                                            |                                                                                               |                                                   |                                                      |         |                    |        |        |       
|                                                                            |                                                                                               |                                                   | Net cash provided by (used in) investing activities  |         |                    | 5,393  |        |        |       | (1,237 | )
|Financing Activities                                                        |                                                                                               |                                                   |                                                      |         |                    |        |        |       
|                                                                            | Proceeds from sale of stock and exercise of stock options                                     |                                                   |                                                      |        |                    |        |        | 6      |      
|                                                                            | Principal payments on long-term debt and capital lease obligations                            |                                                   |                                                      | (294    | )                  |        |        | (232   | )    
|                                                                            | Repurchase of common stock                                                                    |                                                   |                                                      | (227    | )                  |        |        |       |      
|                                                                            |                                                                                               |                                                   |                                                      |         |                    |        |        |       
|                                                                            |                                                                                               |                                                   | Net cash used in financing activities                |         |                    | (521   | )      |        |       | (226   | )
|                                                                            |                                                                                               |                                                   | Net increase (decrease) in cash and cash equivalents |         |                    | 1,754  |        |        |       | (8,613 | )
|Cash and cash equivalents, beginning of period                              |                                                                                               |                                                   | 1,889                                                |         |                    |        | 37,159 |       
|                                                                            |                                                                                               |                                                   |                                                      |         |                    |        |        |       
|Cash and cash equivalents, end of period                                    |                                                                                               | $                                                 | 3,643                                                |         |                    | $      | 28,546 |       
|                                                                            |                                                                                               |                                                   |                                                      |         |                    |        |        |       
|Supplemental disclosures:                                                   |                                                                                               |                                                   |                                                      |         |                    |        |        |       
|Cash paid for interest                                                      |                                                                                               | $                                                 | 60                                                   |         |                    | $      | 217    |       
|Assets acquired under capital lease obligations                             |                                                                                               |                                                   | 112                                                  |         |                    |        | 74     |       
|Reversal of deferred stock compensation as a result of option cancellations |                                                                                               |                                                   |                                                     |         |                    |        | 1,170  |       

See accompanying notes.

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LOUDEYE CORP.




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)


1.     ORGANIZATION, RISKS, and GOING CONCERN

The Company

Loudeye
Corp. (the Company) provides the business infrastructure and services
for managing, promoting, and distributing digital content for the
entertainment and corporate markets. The Company is
headquartered in Seattle, Washington with offices in New York, NY,
Hollywood, CA, and Washington D.C., and conducts business in two business
segments, digital media services and media restoration services.

Risks

The Company is subject to a number of risks similar to other companies in
a comparable stage of development, including reliance on key personnel,
successful marketing of its services in an emerging market, competition from
other companies with greater technical, financial, management and marketing
resources, successful development of new services, successful integration of
acquired businesses and technology, the enhancement of existing services, and
the ability to secure adequate financing to support future operations.

Going Concern

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has incurred losses since inception, has an
accumulated deficit of approximately $186.8 million at March 31, 2003, has
experienced negative cash flows from operations since inception and the
expansion and development of the Companys business will require additional
capital. These matters raise substantial doubt about the Companys ability to
continue as a going concern.

Management has restructured the Companys operations, reduced its work
force, renegotiated leases, and taken other actions to limit the Companys
expenditures. However, there can be no assurance that the Companys cash
balances will be sufficient to sustain its operations until profitable
operations and positive cash flows are achieved. Consequently, the Company may
require additional capital to fund its operations. There can be no assurance
that capital will be available to the Company on acceptable terms, or at all.

If the Company fails to generate positive cash flows or fails to obtain
additional capital when required, the Company could continue to modify, delay
or abandon some or all of the Companys business and expansion plans. The
accompanying consolidated financial statements do not include any adjustments
that may result from the outcome of this uncertainty.

Basis of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.

Unaudited Interim Financial Data

The interim consolidated financial statements are unaudited and have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted

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accounting principles have been condensed or omitted pursuant to such
rules and regulations. These consolidated financial statements should be read
in conjunction with the audited financial statements and notes thereto included
in the Companys Annual Report on Form 10-K as filed with the Securities and
Exchange Commission on April 15, 2003. The financial information included
herein reflects all adjustments (consisting only of normal recurring
adjustments) that are, in the opinion of management, necessary for a fair
presentation of the results for interim periods. The results of operations for
the quarters ended March 31, 2003 and 2002 are not necessarily indicative of
the results to be expected for the full years.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and that affect
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and assumptions. The
recoverability of long-lived assets, which include property and equipment
($2.9 million) and intangible assets ($576,000), is a sensitive accounting
estimate for which changes could result in additional charges in the near term.
Additional impairment analyses could be required in a number of circumstances,
including if the Companys plans for the assets change, if operating results
decline further, or if the price of the Companys stock declines.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposits and money market
accounts maintained with financial institutions and certain other investment
grade instruments. The Company considers all cash deposits and highly liquid
investments with an original maturity at the date of acquisition of three
months or less to be cash equivalents.

Short Term Investments

The Company has invested amounts in investment-grade government
obligations, institutional money market funds and other obligations with FDIC
insured U.S. banks. Short-term investments are generally held to maturity and
are accounted for as available for sale. These securities all mature within one
year and reported amounts approximate fair value due to the relatively short
maturities of these investments.

Restricted Investments

The Company has approximately $576,000 of short-term investments which are
utilized as collateral for certain irrevocable standby letters of credit. These
securities all mature within one year and reported amounts approximate fair
value due to the relatively short maturities of these investments.

Impairment of Long-lived Assets

The Company assesses the recoverability of long-lived assets whenever
events or changes in business circumstances indicate that the carrying value of
an asset may not be recoverable. An impairment loss is recognized when the sum
of the expected undiscounted future net cash flows over the remaining useful
life is less than the carrying amount of the asset.

Stock based Compensation

The Company accounts for stock-based employee compensation plans under the
recognition and measurement principles of Accounting Principles Board Opinion
No. 25, Accounting for Stock Issues to Employees, (APB 25), as interpreted by
Financial Accounting Standards Board Interpretation No. 44,

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Accounting for Certain Transactions Involving Stock Compensation, and
Interpretation of APB 25 (FIN 44), and related interpretations. Under APB 25,
compensation expense is based on the difference between the exercise price of
employee stock options granted and the fair value of the Companys common stock
at the date of grant. Deferred compensation, if any, is amortized over the
vesting period of the related options, which is generally four and one-half
years.

Equity instruments issued to non-employees are accounted for in accordance
with the provisions of Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (FAS 123) and Emerging Issues Task
Force Issue No. 96-18, Accounting for Equity Investments that are Issued to
Other than Employees for Acquiring or in Conjunction with Selling Goods or
Services (EITF 96-18), and related interpretations.

Stock compensation was $42,000 for the quarter ended March 31, 2003,
consisting of the amortization deferred stock compensation, and a credit of
approximately $656,000 for the quarter ended March 31, 2002, consisting of the
reversal of expense related to accelerated amortization for options that were
cancelled.

The Company records stock-based compensation charges as a separate
component of operating expenses. These amounts can be allocated to the other
expense categories in the accompanying consolidated statements of operations as
follows for the three months ended March 31 (in thousands):

|                           |  |      |    |      |  |   |      |  
|-------------------------- |  | ---- | -- | ---- |  | - | ---- | -
|                           |  | 2003 |    | 2002
|                           |  |      |    |     
|Cost of revenues           |  | $    | 4  |      |  | $ | (55  | )
|Research and development   |  |      | 2  |      |  |   | (35  | )
|Sales and marketing        |  |      | 6  |      |  |   | (91  | )
|General and administrative |  |      | 30 |      |  |   | (475 | )
|                           |  |      |    |      |  |   |      |  
|                           |  | $    | 42 |      |  | $ | (656 | )
|                           |  |      |    |      |  |   |      |  

The following table illustrates the effect on net loss and loss per share
if the Company had applied the fair value recognition provisions of FAS 123 to
stock-based employee compensation for the three months ended March 31 (in
thousands):

|                                                                                                          |                                 |   |         |       |      |   |        |       |  
|--------------------------------------------------------------------------------------------------------- | ------------------------------- | - | ------- | ----- | ---- | - | ------ | ----- | -
|                                                                                                          |                                 |   | 2003    |       | 2002
|                                                                                                          |                                 |   |         |       |     
|Net loss, as reported                                                                                     |                                 | $ | (13,059 | )     |      | $ | (7,638 | )    
|Add: stock-based employee compensation
expense (credit) under APB 25 included in
reported net loss        |                                 |   | 42      |       |      |   | (656   | )    
|Deduct: total stock-based employee
compensation expense determined under fair
value method for all awards |                                 |   | (589    | )     |      |   | (509   | )    
|                                                                                                          |                                 |   |         |       |      |   |        |      
|Pro forma net loss                                                                                        |                                 | $ | (13,606 | )     |      | $ | (8,803 | )    
|                                                                                                          |                                 |   |         |       |      |   |        |      
|Loss per share:                                                                                           |                                 |   |         |       |      |   |        |      
|                                                                                                          | Basic and diluted  as reported |   | $       | (0.28 | )    |   | $      | (0.19 | )
|                                                                                                          | Basic and diluted  pro-forma   |   | $       | (0.29 | )    |   | $      | (0.22 | )

To determine compensation expense under FAS 123, the Company used the
following assumptions:

|                             |  |         |          |         |  |  |           |  
|---------------------------- |  | ------- | -------- | ------- |  |  | --------- | -
|                             |  | 2003    |          | 2002   
|                             |  |         |          |        
|   Risk-free interest
rates |  |         | 3.0-5.71 | %       |  |  | 3.93-5.71 | %
|   Expected lives           |  | 5 years |          | 5 years
|   Expected dividend
yields |  |         | 0        | %       |  |  | 0         | %
|   Expected volatility      |  |         | 75       | %       |  |  | 75        | %

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Reclassifications

Certain information reported in previous periods has been reclassified to
conform to the current period presentation.

3.      SPECIAL CHARGES

The Company has recorded Special Charges related to ongoing corporate
restructuring, facilities consolidations and the impairment of assets in
accordance with its long-lived asset policy (see Note 2). The following table
summarizes such charges recorded in the consolidated statements of operations
for the three months ended March 31 (in thousands):

|                                            |  |      |       |      |  |   |     | 
|------------------------------------------- |  | ---- | ----- | ---- |  | - | --- | 
|                                            |  | 2003 |       | 2002
|                                            |  |      |       |     
|Goodwill impairment                         |  | $    | 5,307 |      |  | $ |    | 
|Intangible assets impairment                |  |      | 685   |      |  |   |    | 
|Property and equipment impairment           |  |      | 601   |      |  |   |    | 
|Employee severance and termination benefits |  |      | 501   |      |  |   | 748 | 
|Facilities related charges                  |  |      | 465   |      |  |   |    | 
|Other restructuring charges                 |  |      | 878   |      |  |   |    | 
|                                            |  |      |       |      |  |   |     | 
|                                            |  | $    | 8,437 |      |  | $ | 748 | 
|                                            |  |      |       |      |  |   |     | 

Quarter ended March 31, 2003

On February 4, 2003, the Companys Chairman and Chief Executive Officer, John
T. Baker, resigned and the Company engaged Regent Pacific Management
Corporation
to provide management services to the Company. On March 7, 2003, Regent
Pacifics engagement concluded and Jeffrey M. Cavins was elected President and
Chief Executive Officer. These events are described more fully in the
Companys Annual Report on Form 10-K for the year ended December 31, 2002.
During and subsequent to Regent Pacifics engagement, the Company undertook a
strategic and operational analysis of its business and product lines. This
analysis resulted in the development of a new strategic and operational plan,
under which the Company will restructure itself to focus on its core
competencies in digital media services and on core strategic customers and
markets for its enterprise communications services. A revised corporate
forecast was developed in connection with this plan. The revised forecast also
considered that the Company had learned that revenue from a significant
customer in its Media Restoration Services segment would be less than
originally anticipated. Utilizing the revised forecast, the Company performed
a reassessment of the carrying value of all of its assets, both tangible and
intangible. The revised forecast demonstrated that certain tangible and
intangible assets and goodwill related to its media restoration services and
enterprise communications services businesses were impaired, as the projected
undiscounted discernible cash flows did not exceed the carrying value of the
assets over their estimated useful lives. The fair values of each of these assets were
estimated using primarily a discounted cash flow method. The estimated fair
values of each of the assets were then compared to their carrying values to measure the
impairments. As a result of this analysis, the Company recorded impairment
charges for goodwill, intangible assets, and property and equipment related to
its enterprise communication services and media restoration services businesses
of $5.3 million, $685,000, and $601,000, respectively.

In addition to the impairment charges above, the Company recorded severance and
termination benefits of $204,000 associated with a reduction in force announced
on March 14, 2003 of approximately 35% of its consolidated staffing. In
addition, the Company recorded $297,000 of severance and termination benefits
with respect to certain changes in senior management in the first quarter of
2003. The Company incurred costs of approximately $465,000 related to the
termination or renegotiation of certain facilities leases in connection with
its ongoing facilities consolidation. The other restructuring charges of
$878,000 represent

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fees and costs paid to Regent Pacific Management Corporation with respect to
interim management services provided to the Company in connection with its
management and operational restructuring.

In March 2003, the Company reduced by approximately half the space it occupies
for its principal operating facility on Rainier Avenue, Seattle, Washington
from a base rent of approximately $108,000 per month with a term expiring on
November 30, 2005 to a base rent of approximately $33,000 per month for the
remainder of the term which has been shortened to June 30, 2003. The Company
has the option of extending the term for two 3-month periods at a base rent of
$100,000 and pre-paid utility expenses of $60,000 for each 3-month extension.
As consideration for the reduction of space and lease term, the Company allowed
its landlord to retain its security deposit in the amount of $218,500
and made cash payments of $276,000.

On April 28, 2003, the Company entered into a lease termination agreement with
the landlord of its unoccupied facility on Fourth Avenue, Seattle, Washington.
Under the terms of the agreement, the Company paid a lease termination fee of
$200,000. As a result, all of the Companys obligations under the
lease were terminated effective April 30, 2003. In accordance
with EITF 94-3, the lease termination fee was
included in accrued special charges at December 31, 2002 and
March 31, 2003. The Company
had been paying approximately $29,000 per month under this lease.

On May 19, 2003, the Company
entered into a lease termination agreement with the landlord of its
unoccupied facility in Ardsley, New York. Under the terms of the
agreement, the Company paid a lease termination fee of approximately
$114,000 which included its security deposit of $29,000. As a result,
all of the Companys obligations under the lease were terminated
effective May 19, 2003. In accordance with EITF 94-3, the
lease termination fee was included in accrued special charges at
December 31, 2002 and March 31, 2003. The Company had been
paying approximately $19,000 per month under this lease.

Quarter ended March 31, 2002

The Company recorded special charges in the first quarter of 2002 associated
with a reduction in force announced March 8, 2002 of approximately 12% of
consolidated staffing. The special charge of $748,000 was for severance and
related termination benefits paid during the quarter.

The following table summarizes the activity in accrued special charges during
the three months ended March 31, 2003 (in thousands):

|                            |  |              |       |            |  |          |       |      |  |           |        |   |  |   |       | 
|--------------------------- |  | ------------ | ----- | ---------- |  | -------- | ----- | ---- |  | --------- | ------ | - |  | - | ----- | 
|                            |  | December 31, |       | Additional |  |          |       |      |  | March 31,
|                            |  | 2002         |       | Accruals   |  | Payments |       | 2003
|                            |  |              |       |            |  |          |       |     
|Employee severance          |  | $            | 104   |            |  | $        | 501   |      |  | $         | (100   | ) |  | $ | 505   | 
|Facilities related charges  |  |              | 2,799 |            |  |          | 465   |      |  |           | (1,072 | ) |  |   | 2,192 | 
|Other
restructuring charges |  |              |      |            |  |          | 878   |      |  |           | (878   | ) |  |   |      | 
|                            |  |              |       |            |  |          |       |      |  |           |        |   |  |   |       | 
|Total                       |  | $            | 2,903 |            |  | $        | 1,844 |      |  | $         | (2,050 | ) |  | $ | 2,697 | 
|                            |  |              |       |            |  |          |       |      |  |           |        |   |  |   |       | 

4.     NET LOSS PER SHARE

Basic earnings per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period. Diluted
earnings per share is computed by dividing net loss by the weighted average
number of common and dilutive common equivalent shares outstanding during the
period. Common equivalent shares consist of shares of common stock issuable
upon the exercise of stock options and warrants (using the treasury stock
method); common equivalent shares are excluded from the calculation if their
effect is antidilutive. The Company has excluded the following numbers of
shares using this method (in thousands):

|         |  |  |       | 
|-------- |  |  | ----- | 
|Options  |  |  | 4,653 | 
|Warrants |  |  | 263   | 
|         |  |  |       | 
|         |  |  | 4,916 | 
|         |  |  |       | 

The Company had 905 and 38,021 shares outstanding that were subject to
repurchase at March 31, 2003 and 2002, respectively. The weighted average
repurchase price of these options subject to repurchase was

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$0.18 and $0.21, at
March 31, 2003 and 2002, respectively. The impact of these unvested but
exercised options has been removed from the calculation of weighted average shares
outstanding for purposes of determining basic and diluted net loss per share.

The following table presents a reconciliation of shares used to calculate basic
and diluted earnings per share:

|                                                                           |  |                              |            |      |  |  |            |  
|-------------------------------------------------------------------------- |  | ---------------------------- | ---------- | ---- |  |  | ---------- | -
|                                                                           |  | Three-months ended March 31,
|                                                                           |  |                             
|                                                                           |  | 2003                         |            | 2002
|                                                                           |  |                              |            |     
|Weighted average shares outstanding                                        |  |                              | 46,487,808 |      |  |  | 40,494,947 |  
|Weighted average shares subject to repurchase                              |  |                              | (926       | )    |  |  | (63,215    | )
|                                                                           |  |                              |            |      |  |  |            |  
|Weighted
average shares outstanding  basic
and diluted earnings per share |  |                              | 46,486,882 |      |  |  | 40,431,732 |  
|                                                                           |  |                              |            |      |  |  |            |  

5.      SEGMENT INFORMATION


The Company operates in two business segments, Digital Media Services and Media
Restoration Services. The following information summarizes the Companys
segments for the three months ended March 31 (in thousands):

|                           |  |      |         |      |  |   |        |  
|-------------------------- |  | ---- | ------- | ---- |  | - | ------ | -
|                           |  | 2003 |         | 2002
|                           |  |      |         |     
|Revenues                   |  |      |         |      |  |   |        |  
|Digital Media Services     |  | $    | 2,660   |      |  | $ | 2,498  |  
|Media Restoration Services |  |      | 650     |      |  |   | 762    |  
|                           |  |      |         |      |  |   |        |  
|                           |  | $    | 3,310   |      |  | $ | 3,260  |  
|                           |  |      |         |      |  |   |        |  
|Gross Profit               |  |      |         |      |  |   |        |  
|Digital Media Services     |  | $    | 620     |      |  | $ | (332   | )
|Media Restoration Services |  |      | 149     |      |  |   | 347    |  
|                           |  |      |         |      |  |   |        |  
|                           |  | $    | 769     |      |  | $ | 15     |  
|                           |  |      |         |      |  |   |        |  
|Net Loss                   |  |      |         |      |  |   |        |  
|Digital Media Services     |  | $    | (12,349 | )    |  | $ | (7,595 | )
|Media Restoration Services |  |      | (710    | )    |  |   | (43    | )
|                           |  |      |         |      |  |   |        |  
|                           |  | $    | (13,059 | )    |  | $ | (7,638 | )
|                           |  |      |         |      |  |   |        |  
|Total Assets               |  |      |         |      |  |   |        |  
|Digital Media Services     |  | $    | 15,765  |      |  | $ | 69,024 |  
|Media Restoration Services |  |      | 1,944   |      |  |   | 2,174  |  
|                           |  |      |         |      |  |   |        |  
|                           |  | $    | 17,709  |      |  | $ | 71,198 |  
|                           |  |      |         |      |  |   |        |  

The Company had sales to a significant customer that represented 13% and 12% of
total revenue in each of the first quarters of 2003 and 2002, respectively.
The revenue from this customer was reported primarily in the Media Restoration
Services segment.

6.     CONTINGENCIES

Between July 26, 2001 and August 30, 2001, four substantially similar
class action complaints were filed in the Untied States District Court for the
Southern District of New York against the Company and certain of its former
officers and directors, as well as against certain underwriters who handled its
March

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15, 2000 initial public offering of common stock. The various complaints
were purportedly filed on behalf of a class of persons who purchased the
Companys common stock during the time period beginning on March 15, 2000 and ending on December 6, 2000. The complaints together
allege violations of the Securities Act of 1933 and the Securities Exchange Act
of 1934, primarily based on the allegation that there was undisclosed
compensation received by the Companys underwriters in connection with its
initial public offering and the allegation that the underwriters entered into
undisclosed arrangements with some investors that were designed to distort
and/or inflate the market price for the Companys common stock in the
aftermarket following the initial public offering. These actions have all been
consolidated before the same judge for pretrial purposes. No specific amount of
damages has been claimed. The individual defendants and the Company have
demanded to be indemnified by the underwriter defendants pursuant to the
underwriting agreement entered into at the time of the initial public offering.
Presently, all claims against the former officers have been withdrawn without
prejudice. The Company, along with the many other issuer defendants, moved to
dismiss the claims in the complaint. By decision dated February 19, 2003 the
court denied the Companys motion. We believe that we have meritorious defenses
to the claims made in the foregoing complaint and we intend to defend the
actions vigorously. However, there can be no assurance that we will be
successful on our defenses or in our assertion of indemnification, and an
adverse resolution of the lawsuit could have a material adverse affect on our
financial position and results of operation in the period in which the lawsuit
is resolved. The plaintiffs have made a settlement proposal to the defendants.
We have indicated a willingness to support the proposal, subject to review and
acceptance of a definitive settlement agreement. An estimate of the range of
possible loss for this matter cannot be made.

On or about January 8, 2003 a company known as Dominion Venture Finance,
L.L.C. commenced an action against the Company and John Doe defendants in the
Superior Court of the State of California, County of San Francisco. In its
complaint, plaintiff alleges that pursuant to a loan and security agreement and
a master lease agreement (the liabilities for which agreement, plaintiff
alleges, were acquired by the Company when the Company merged with an entity
known as DiscoverMusic.com, Inc.) the Company failed to make certain required
payments to plaintiff. Plaintiff asserts causes of action of breach of loan and
security agreement, claim and delivery, money lent, breach of master lease
agreement and book account. Plaintiff seeks relief in the form of money
damages, interest, attorneys fees and costs. The Company has filed an answer
to the complaint denying the material allegations. The Company believes that it
has meritorious defenses to the claims made in the foregoing complaint and
intends to defend the action vigorously. However, there can be no assurance
that the Company will be successful on its defenses. An estimate of the range
of possible loss for this matter cannot be made.

On February 3, 2003, the Company entered into an agreement (Agreement)
with Regent Pacific Management Corporation (Regent Pacific) pursuant to which
Regent Pacific would provide management services to the Company. The Agreement
was terminable by either party under certain circumstances. On March 11, 2003,
this engagement concluded. Under the Agreement, the Company paid certain fees
to Regent Pacific. In addition, Regent Pacific was to receive stock options to
purchase up to 4,000,000 shares of the Companys common stock based on Regent Pacifics length of
service. These options were to be granted at various times throughout
their engagement at exercise prices based on the closing market price
on each grant date. The amount of stock
options to be issued to Regent Pacific has not yet been finalized and is
currently under discussion between the Company and Regent Pacific.

In April 2003, the landlord of one of our unoccupied facilities filed suit
against us for breach of its lease and is seeking an unspecified amount of
damages. The Company intends to vigorously defend this suit and may also bring
certain counterclaims against the landlord.

The Company becomes involved from time to time in various other claims and
lawsuits incidental to the ordinary course of its operations, including such
matters as contract and lease disputes and complaints alleging employment
discrimination The Company believes that the outcome of any such pending
claims or proceedings individually or in the aggregate, will not have a
material adverse effect upon its business or
financial condition, cash flows, or results of operations.

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LOUDEYE TECHNOLOGIES INC. 10-Q




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The following discussion of our financial condition and results of
operations contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and are made under the safe harbor
provisions thereof. In some cases, you can identify forward-looking statements
by terminology such as may, will, should, expect, plan, anticipate,
believe, estimate, predict, potential or continue, the negative of
terms like these or other comparable terminology. These forward-looking
statements are only predictions and actual events or results may differ
materially from those projected. Specific factors that could cause actual
results to differ materially from those projected include, but are not limited
to, uncertainties related to our early stage; uncertainties related to the
effectiveness of our technology and development of our products and services;
dependence on and management of existing and future corporate relationships;
dependence on licensed content and technology; dependence on proprietary
technology and uncertainty of patent protection; management of growth; history
of operating losses; future capital needs and uncertainty of additional
funding; dependence on key personnel; competition; existing governmental
regulations and changes in, or the failure to comply with, government
regulations, and other risks detailed below, including the Risk Factors in Item
7 of Part II Managements Discussion and Analysis of financial Condition and
Results of Operations, and those included from time to time in the Companys
other reports with the SEC and press releases, copies of which are available
from the company upon request. All forward-looking statements included in this
document are based on information available to us on the date hereof, and we
assume no obligation to publicly release any revisions of the forward-looking
statements contained herein to reflect events or circumstances after the date
hereof. Readers are cautioned not to place undue reliance on these
forward-looking statements, as our business and financial performance are
subject to substantial risks and uncertainties.

Results of Operations

Three Months Ended March 31, 2003 and 2002

Revenues.Revenues totaled $3.3 million for the first quarter of 2003 and
2002, an respectively.

We recorded approximately $2.7 million of revenue from our Digital Media
Services segment in the first quarter of 2003 compared to $2.5 million in the
first quarter of 2002. This increase was due primarily to the acquisition of
Streampipe in November of 2002.

Media restoration revenues totaled $650,000 in the first quarter of 2003
compared to $762,000 in the first quarter of 2002. This decrease was primarily
the result of decreased spending by our customers on discretionary projects due
to current economic conditions.

Cost of Revenues.Cost of revenues decreased to $2.5 million for the
first quarter of 2003 from $3.2 million for the first quarter of 2002. Cost of
revenues include the cost of production including personnel, and an allocated
portion of facilities and equipment and other supporting functions related to
the delivery of digital media services and applications. Excluding
depreciation, cost of revenues decreased to $2.3 million for the first quarter
of 2003 from $2.4 million for the first quarter of 2002. Cost of revenues in
the first quarter of 2003 includes the impact of the acquisition of Streampipe
in November 2002.

Depreciation included in cost of revenues decreased to approximately $200,000
in the first quarter of 2003 from $800,000 in the first quarter of 2002. This
decrease is due primarily to impairment charges recorded in the fourth quarter
of 2002 for certain assets of our Digital Media Services segment. These
charges decreased the cost basis of the assets, resulting in lower depreciation
charges.

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LOUDEYE TECHNOLOGIES INC. 10-Q

Research and Development.Research and development expenses totaled
$577,000 and $1.3 million in the first quarter of 2003 and 2002, respectively.
This decrease is due primarily to the reduction in the number of development
personnel as a result of the corporate restructurings. Research and Development
consists of costs of enhancing webcasting offerings, including the recently
announced Loudeye Express, the continued support of our music offerings and the
development of internal operational solutions necessary to fully integrate
previous acquisitions comprised a majority of our research and development
expenses in 2003.

We believe that continued investment in research and development is critical to
attaining our strategic objectives. However, due to our operational
restructurings and a sharper focus on opportunities which we believe will
result in near term results, development headcount was significantly reduced as
compared to 2002 and, as a result, research and development expenses declined
in 2003 as compared to 2002. We expect research and development expenses to
remain relatively stable in the foreseeable future. Accordingly, the research
and development expenses for the remainder of 2003 should continue to be lower
than 2002.

Sales and Marketing.Sales and marketing expenses totaled $1.5 million
and $2.2 million in the first three months of 2003 and 2002, respectively.
Sales and marketing expenses consist primarily of salaries, commissions,
product branding costs, advertising, trade show expenses, and cost of marketing
collateral. The decrease in sales and marketing expenses was primarily due to
the decreased personnel subsequent to our reductions in force in the first and
second quarters of 2002.

General and Administrative.General and administrative expenses decreased
to $2.8 million for the first quarter of 2003 from $3.5 million for the first
quarter of 2002. This decrease was due primarily to the decrease in personnel
subsequent to our reductions in force in the first and second quarters of 2002,
and related cost reduction initiatives. General and administrative expenses
consist primarily of rent, facilities and information technology charges,
salaries, legal expenses, investor relation costs, and other costs associated
with being a public company. We expect future levels of general and
administrative expenses to decrease slightly from 2002 as the full impact of
our restructuring is realized.

Amortization of Intangible and Other Assets.Amortization of intangibles
and other assets totaled $525,000 and $696,000 for the first three months of
2003 and 2002, respectively, and includes amortization of identified intangible
assets related to past acquisitions. The decrease was due primarily to the
impairment charges recorded fourth quarter of 2002, which resulted in lower
amortization charges during the first quarter of 2003. This decrease was offset
partially by amortization of intangible assets acquired from Streampipe in
November 2002.

Stock-Based Compensation.Stock-based compensation charges for 2003
consisted of the amortization of deferred stock compensation. For the first
quarter of 2002, stock compensation was a credit of $656,000, resulting from
reversals of previously recorded deferred stock compensation associated with
the terminated employees in connection with our restructuring initiatives. The
balance of deferred stock compensation was $88,000 at March 31, 2003 and will
be fully amortized by the end of 2003.

Special Charges.We have recorded Special Charges related to ongoing
corporate restructuring, facilities consolidations and the impairment of assets
in accordance with our long-lived asset policy. Following is a summary of
special charges for the quarters ended March 31, 2003 and 2002:

Quarter ended March 31, 2003



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On February 4, 2003, our Chairman and Chief Executive Officer, John T.
Baker, resigned and the we engaged Regent Pacific Management Corporation to
provide management. On March 7 2003, Regent Pacifics engagement concluded
and Jeffrey M. Cavins was elected President and Chief Executive Officer.
These events are described more fully in our Annual Report on Form 10-K for
the year ended December 31, 2002. During and subsequent to Regent Pacifics
engagement, we undertook

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LOUDEYE TECHNOLOGIES INC. 10-Q



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a strategic and operational analysis of our business and product lines.
This analysis resulted in the development of a new strategic and
operational plan, under which we will restructure our business to focus on
our core competencies in digital media services and on core strategic
customers and markets for our enterprise communications services. We
developed a revised corporate forecast in connection with this plan. The
revised forecast also considered that we had learned that revenue from a
significant customer in our Media Restoration Services segment would be less
than originally anticipated. Utilizing the revised forecast, we performed a
reassessment of the carrying value of all of our assets, both tangible and
intangible. The revised forecast demonstrated that certain tangible and
intangible assets and goodwill related to our media restoration services and
enterprise communications services businesses were impaired, as the
projected undiscounted discernible cash flows did not exceed the carrying
value of the assets over their estimated useful lives. The fair value
of each of these assets were estimated using primarily a discounted cash flow method.
The estimated fair values of each of the assets were then compared to their carrying
values to measure the impairments. As a result of this analysis, we
recorded impairment charges for goodwill, intangible assets, and property
and equipment related to our enterprise communication services and media
restoration services businesses of $5.3 million, $685,000, and $601,000,
respectively.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In addition to the impairments above, we recorded severance and
termination benefits of $204,000 associated with a reduction in force
announced on March 14, 2003 of approximately 35% of our consolidated
staffing. In addition, we recorded $297,000 of severance and termination
benefits with respect to certain changes in senior management in the first
quarter of 2003. We incurred costs of approximately $465,000 related to the
termination or renegotiation of certain facilities leases in connection
with its ongoing facilities consolidation. The other restructuring charges
of $878,000 represent fees and costs paid to Regent Pacific Management
Corporation with respect to interim management services provided to us in
connection with our management and operational restructuring.



| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We will continue to review the carrying value of our long-lived assets
for impairments. Future adverse developments in our business could result
in additional impairments.



| |                             
| | ----------------------------
| | Quarter ended March 31, 2002



| |                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We recorded special charges in the quarter ended March 31, 2002
associated with a reduction in force announced March 8, 2002 of
approximately 12% of consolidated staffing. The special charge of $748,000
was for severance and related termination benefits paid during the quarter

The following table summarizes the activity in accrued special charges during
the three months ended March 31, 2003 (in thousands):

|                            |  |              |       |            |  |          |       |      |  |           |        |   |  |   |       | 
|--------------------------- |  | ------------ | ----- | ---------- |  | -------- | ----- | ---- |  | --------- | ------ | - |  | - | ----- | 
|                            |  | December 31, |       | Additional |  |          |       |      |  | March 31,
|                            |  | 2002         |       | Accruals   |  | Payments |       | 2003
|                            |  |              |       |            |  |          |       |     
|Employee severance          |  | $            | 104   |            |  | $        | 501   |      |  | $         | (100   | ) |  | $ | 505   | 
|Facilities related charges  |  |              | 2,799 |            |  |          | 465   |      |  |           | (1,072 | ) |  |   | 2,192 | 
|Other
restructuring charges |  |              |      |            |  |          | 878   |      |  |           | (878   | ) |  |   |      | 
|                            |  |              |       |            |  |          |       |      |  |           |        |   |  |   |       | 
|Total                       |  | $            | 2,903 |            |  | $        | 1,844 |      |  | $         | (2,050 | ) |  | $ | 2,697 | 
|                            |  |              |       |            |  |          |       |      |  |           |        |   |  |   |       | 

Interest Income.Interest income totaled $85,000 and $333,000 in the first
three months of 2003 and 2002, respectively. The decrease was due primarily to
the lower average cash and investment balances in 2003 resulting from the
voluntary prepayment of our credit facility in the third quarter of 2002,
utilization of cash to fund operations, and lower interest rates in 2003. We
expect that our interest income will decrease in the future as our cash
balances are used to fund our operations.

Interest Expense.Interest expense consists of interest expense related to
our debt instruments, including capital lease obligations. Interest expense
totaled $50,000 and $217,000 in the first three months of 2003 and 2002,
respectively. The decrease was due primarily to lower average debt balances in
2003 due to the voluntary repayment of our credit facility in the third quarter
of 2002 and lower interest rates in 2003.

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LOUDEYE TECHNOLOGIES INC. 10-Q

Liquidity and Capital Resources

As of March 31, 2003, we had approximately $8.9 million of cash, cash
equivalents, short-term investments, and restricted investments. Of these
funds, $576,000 is held in an investment account that serves as collateral for
standby letters of credit for certain of our capital lease obligations

Net cash used in operating activities was $3.1 million and $7.2 million in the
quarters ended March 31, 2003 and 2002, respectively. For 2003, cash used in
operating activities resulted primarily from a net loss of
$13.1 million partially offset by non-cash charges for depreciation, amortization, special
charges, and stock compensation expense aggregating $7.5 million and other
working capital changes totaling $2.5 million. For 2002, cash used in
operating activities resulted primarily from a net loss of $7.6 million,
working capital and other changes totaling $85,000, partially offset by
non-cash charges totaling $1.1 million related to stock-based compensation,
depreciation and amortization and other. Additional uses of cash related to the
approximately $1.0 million in severance related payments and approximately
$524,000 in rent and other payments for previously accrued special charges

Net cash provided by investing activities was $5.4 million in the first quarter
of 2003, consisting principally of the proceeds from sales of short-term
investments and payments received on notes receivable from related parties.
For the first quarter of 2002, net cash used in investing activities of $1.2
million was primarily related to purchases of property and equipment, including
tenant improvements at the Activate offices prior to facilities consolidation.

Net cash used in financing activities
was $521,000 and $226,000 in the first
quarter of 2003 and 2002, respectively. The cash used in financing activities
in 2003 resulted primarily from principal payments of our long-term debt and
capital lease obligations totaling $294,000, as well as the repurchase of
common stock from a major stockholder totaling $227,000. The cash used in
financing activities in 2002 consisted principally of payments of our long-term
debt and capital lease obligations.

As of March 31, 2003, our principal commitments consisted of obligations
outstanding under operating and capital leases. We have other credit facilities
and leasing arrangements that, in general, are not prepayable without penalty.
Total principal amounts outstanding under these arrangements were $1.2 million
at March 31, 2003. These instruments bear interest ranging from approximately
6.9% to 9.7% and mature at various times through 2005. Letters of credit of
approximately $576,000 collateralize certain of these capital lease
obligations. We have $576,000 of short-term investments that are utilized as
collateral for certain irrevocable letters of credit. These short-term
investments have been classified as restricted investments on the accompanying
balance sheets. In addition, we have notes payable aggregating approximately
$1.1 million with respect to our acquisition of Streampipe in November, 2002.

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LOUDEYE TECHNOLOGIES INC. 10-Q

Contractual Obligations and Commercial Commitments

The following table provides aggregated information about the Companys
contractual obligations as of March 31, 2003.

|                                     |  |                        |        |        |  |           |       |           |  |         |       |  |  |   |     |       |  |   |       | 
|------------------------------------ |  | ---------------------- | ------ | ------ |  | --------- | ----- | --------- |  | ------- | ----- |  |  | - | --- | ----- |  | - | ----- | 
|                                     |  | Payments Due by Period
|                                     |  |                        |        |        |  | Less      |       |           |  |         |       |  |  |   |     |       |  |  
|                                     |  |                        |        |        |  | than      |       |           |  |         |       |  |  |   |     | After
|                                     |  | Total                  |        | 1 year |  | 1-3 years |       | 4-5 years |  | 5 years
|                                     |  |                        |        |        |  |           |       |           |  |        
|Long-term debt                       |  | $                      | 155    |        |  | $         | 155   |           |  | $       |      |  |  | $ |    |       |  | $ |      | 
|Capital lease obligations (1)        |  |                        | 1,061  |        |  |           | 586   |           |  |         | 475   |  |  |   |    |       |  |   |      | 
|Operating leases (2)                 |  |                        | 8,554  |        |  |           | 2,244 |           |  |         | 2,786 |  |  |   | 938 |       |  |   | 2,586 | 
|Other purchase obligations           |  |                        | 239    |        |  |           | 239   |           |  |         |      |  |  |   |     |       |  |   |       | 
|Accrued acquisition consideration(3) |  |                        | 1,062  |        |  |           | 1,062 |           |  |         |      |  |  |   |    |       |  |   |      | 
|                                     |  |                        |        |        |  |           |       |           |  |         |       |  |  |   |     |       |  |   |       | 
|Total contractual obligations        |  | $                      | 11,071 |        |  | $         | 4,286 |           |  | $       | 3,261 |  |  | $ | 938 |       |  | $ | 2,586 | 
|                                     |  |                        |        |        |  |           |       |           |  |         |       |  |  |   |     |       |  |   |       | 



---

|(1) |  | Capital lease obligations represent the total minimum future obligations,
including interest.                                                                                                                                                                                                             
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Reflects operating leases that were renegotiated or terminated as
described below.                                                                                                                                                                                                                        
|   
|(3) |  | Accrued acquisition consideration represents promissory notes related to
the acquisition of Streampipe. The notes contain an equity redemption
option pursuant to which the Company may, at its option, satisfy its
obligation under the Notes by issuing additional shares of the Companys
common stock.

In March 2003, we reduced by approximately half the space we occupy for our
principal operating facility on Rainier Avenue, Seattle, Washington from a base
rent of approximately $108,000 per month with a term expiring on November 30,
2005 to a base rent of approximately $29,000 per month for the remainder of the
term which has been shortened to June 30, 2003. We have the option of extending
the term for two 3-month periods at a base rent of $100,000 and pre-paid
utility expenses of $60,000 for each 3-month extension. As consideration for
the reduction of space and lease term, we have allowed our landlord to
retain our security deposit in the amount of $218,500 and made cash
payments of $276,000.

In April 2003, we entered into a lease termination agreement with the
landlord of our unoccupied facility on Fourth Avenue, Seattle, Washington.
Under the terms of the agreement, we paid a lease termination fee of
$200,000. As a result, all of our obligations under the lease were terminated effective April
30, 2003. In accordance with EITF 94-3, the lease termination
fee was included in accrued special charges at December 31, 2002
and March 31, 2003. We had been paying approximately $29,000 per month
under this lease.

In May 2003, we entered into
a lease termination agreement with the landlord of our unoccupied
facility in Ardsley, New York. Under the terms of the agreement, we
paid a lease termination fee of approximately $114,000, which
included our security deposit of $29,000. As a result, all of our
obligations under the lease were terminated effective May 19,
2003. In accordance with EITF 94-3, the lease termination fee
was included in accrued special charges at December 31, 2002 and
March 31, 2003. We had been paying approximately $19,000 per
month under this lease.

Since inception, we have sustained substantial net losses. Beginning in 2001,
we commenced a variety of cost reduction initiatives to reduce costs. For 2003,
we will continue to focus on reducing costs and increasing sales. We expect the
following items may represent significant uses of cash in the foreseeable
future:



| |  |  | We have commitments under leases for certain facilities which we no
longer occupy. These leases extend past 2003. Scheduled payments under
these leases for 2003 total $1.6 million. We are presently negotiating
lease reduction or termination agreements that we believe will result in
a substantial reduction to future obligations under certain of these
leases. However, there can be no assurance that we will be able to do
so. In addition, we may have to make up-front cash payments to terminate
or reduce our obligations under these leases. At March 31, 2003, accrued
special charges includes amounts accrued for rent obligations which
meet the criteria for accrual under FAS 146.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The balance of severance payments resulting from workforce reductions
in 2002 and in the first quarter of 2003, including certain of our
former executives, are estimated to be $501,000 and are expected to
be paid in cash over the remainder of 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | Acquisition consideration resulting from the Streampipe acquisition
in November 2002, totaling $1.1 million plus accrued interest, is due
January 1, 2004. The notes contain an equity redemption option pursuant
to which we may, at our option, satisfy our obligation by issuing
additional shares of our common stock. However, if certain events occur,
such as our stock no longer being listed on a principal securities
exchange or trading market, we may be required to pay a portion of this                                                                                                                                                                                                 

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LOUDEYE TECHNOLOGIES INC. 10-Q



| |   |  | consideration in cash. This amount is included in accrued acquisition
consideration in the accompanying balance sheets.                                                                                                                                             
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We have certain commitments under existing arrangements with certain
licensors of copyrighted materials that may require payments estimated
to be approximately $607,000 in 2003. These amounts are included in
accrued expenses in the accompanying balance sheets.
|
| |  |  | We may enter into future transactions where we acquire complementary
businesses. Such acquisitions may require the use of our capital
resources.                                                                                                                    
|
| |  |  | We do not have significant capital
spending plans for 2003, other than approximately $200,000 to
$500,000 to move our media restoration services business unit to a
new operating facility.                                                                         

There can be no assurance that our existing cash, cash equivalents, and
short-term investments will be sufficient to fund our operations and meet our
working capital and capital expenditure requirements for 2003. Accordingly, if
we are unable to fund operating and other expenses, working capital and capital
expenditures from our operations, we may find it necessary to secure additional
financing, sell assets or reduce expenditures further. In the event additional
financing is required, there can be no assurance that we will be able to obtain
such financing on acceptable terms, or at all.

Going Concern

The accompanying consolidated financial statements have been prepared
under the assumption that we will continue to operate as a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. We have incurred losses since inception, have an
accumulated deficit, and have experienced negative cash flows from operations
since our inception and the expansion and development of our business will
require additional capital. These matters raise substantial doubt about our
ability to continue as a going concern. Our audited consolidated financial
statements for the year ended December 31, 2002 contain a going concern
opinion issued by our independent accountants.

Management has restructured our operations, reduced our work force,
renegotiated leases, and taken other actions to limit our expenditures.
However, there can be no assurance that our cash balances will be sufficient to
sustain our operations until profitable operations and positive cash flows are
achieved. Consequently, we may require additional capital to fund our
operations. There can be no assurance that capital will be available to us on
acceptable terms, or at all.

If we
fail to generate positive cash flows or obtain additional capital
when required, we could continue to notify, delay or abandon some or
all of our business and expansion plans. The accompanying consolidated financial statements do not include any
adjustments that may result from the outcome of this uncertainty.

Recent Management Changes

In January 2003, we engaged Regent Pacific Management Corporation (Regent
Pacific) to provide certain management consulting and advisory services. This
agreement contemplated the payment to Regent Pacific of $200,000 for a two
month consulting engagement.

On February 3, 2003, our former Chairman and Chief Executive Officer, John
T. Baker IV, resigned. Simultaneous with Mr. Bakers resignation, we entered
into a new agreement with Regent Pacific, expanding its role. Pursuant to the
Regent Pacific agreement, we agreed to pay Regent Pacific $60,000 per week, and
four weeks of payments in advance. This agreement provided for a minimum term
of six months, with a review and restructuring of fees after three months. The
agreement also provided for the issuance to Regent Pacific of stock options to
purchase up to 4,000,000 shares of our common stock, based upon length of
service. These options were to be granted at various times throughout
their engagement at exercise prices based on the closing market price
on each grant date. The agreement was terminable by either
party under certain circumstances. In connection with that agreement, we
appointed Philip J. Gioia, a principal of Regent Pacific, to serve as our
President and Chief Executive Officer and agreed to have selected Regent
Pacific principals, including Mr. Gioia,

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LOUDEYE TECHNOLOGIES INC. 10-Q

serve as part of our executive management team. Additionally, Mr. Gary J.
Sbona, the chairman and Chief Executive Officer of Regent Pacific, was elected
to our board of directors and Charles P. Waite, Jr., a member of our board of
directors and a partner of OVP Venture Partners, was elected as Chairman.

On March 11, 2003, the engagement of Regent Pacific, and the involvement
of Regent Pacific principals as part of our executive management team
concluded. As a result, Mr. Gioia resigned as President and Chief Executive
Officer, and Mr. Sbona resigned from his seat on our board of directors. On
March 11, 2003, the our board of directors appointed Jeffrey M. Cavins, who had
been the Senior Vice President of Sales, as our President and Chief Executive
Officer, and elected him to our board of directors. Our board of directors
appointed Anthony J. Bay, a three-year member of the board, as chairman of the
board, replacing Mr. Waite, who resigned. We entered into an Employment
Agreement dated as of April 1, 2003 with Mr. Cavins. The agreement provides for
a base salary of $250,000 and the granting of options to purchase 1,500,000
shares of our common stock. The agreement also provides for the opportunity to
receive bonuses based upon the achievement of certain performance criteria by
the Company and in the event of a sale of all of our stock or all or
substantially all of our assets.

We entered into an Employment Agreement dated as of April 1, 2003 with
Jerold J. Goade, Jr., our Vice President and Chief Financial Officer. The
agreement provides for a base salary of $161,000 and the granting of options to
purchase 350,000 shares of our common stock. The agreement also provides for
the opportunity to receive bonuses based upon the achievement of certain
performance criteria by the Company and in the event of a sale of all of our
stock or all or substantially all of our assets.

We entered into a Consulting Agreement dated as of April 1, 2003 with
Anthony Bay, our Chairman. The agreement provides for a base compensation of
$100,000 and the granting of options to purchase 500,000 shares of our common
stock. The agreement provides for the opportunity to receive bonuses based upon
the achievement of certain performance criteria by the Company and in the event
of a sale of all of our stock or all or substantially all of our assets.

Critical Accounting Policies and Estimates

We have identified the most critical accounting policies and estimates
used in the preparation of our financial statements by considering accounting
policies and estimates that involve the most complex or subjective decisions or
assessments.

Long-lived assets.Management periodically evaluates the recoverability
of our long-lived assets in accordance with SFAS No. 144. When doing so,
management is required evaluate the recoverability of an assets (or group of
assets) carrying value through estimates of undiscounted future cash flows. If
the assets are deemed impaired, the assets are written down to estimated fair
value. Estimates of fair value may differ from the actual amount that could be
realized if we were to sell our assets.

Managements assessments of the impairment of property and equipment,
intangible assets and goodwill are sensitive accounting estimates that could
result in additional impairment charges in the near term. Factors that impact
these estimates include, but are not limited to, possible changes in business
plans, market price of our common stock and declining financial results. Net
long-term assets subject to impairment review in the future totaled $4.3
million at March 31, 2003. We will continue to review the carrying value of our
long-lived assets for impairments. Future adverse developments in
our business will result in additional charges.

Exit costs.We have followed the provisions of EITF 94-3 (before December
31, 2002) and SFAS 146 (after December 31, 2002) to record the costs
associated with exit activities. Management is required to make its best
estimates of exit costs such as remaining lease obligations and/or termination
fees, these estimates be different than the actual amounts that will be paid
under existing lease arrangements. As noted above, beginning January 1, 2003,
we adopted the provisions of FAS 146 to record the costs associated with exit
activities. Future adverse changes in our business could result in additional
exit activities and charges.

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LOUDEYE TECHNOLOGIES INC. 10-Q

Revenue Recognition.We generate revenues primarily from two sources:
(1) digital media services, licensing and selling digital media applications
and (2) media restoration services.

Digital media services and other. We recognize Enterprise Webcasting
Services revenues as services are rendered. We recognize encoding services
revenues when the services have been rendered and we have no continuing
involvement in the goods and services delivered, which is generally the date
the finished media is shipped to our customer. Other revenues are generated
from our music samples service business. We sell digital media
applications in application service provider arrangements. We are required
to host the applications and the customer does not have the ability to have the
application hosted by another entity without penalty to the customer. Billings
are made based upon quantity of content streamed, and revenue is recognized as
the services are delivered.

Media restoration services. We recognize revenues as services are
rendered and we have no continuing involvement in the goods and services
delivered, which generally is the date the finished media is shipped to the
customer.

RISK FACTORS

We have incurred losses and negative cash flows since inception and have an
accumulated deficit at March 31, 2003, raising substantial doubt about our
ability to continue as a Going Concern

The accompanying consolidated financial statements have been prepared
under the assumption that the Company will continue to operate as a going
concern. The Company has incurred losses from inception, has an accumulated
deficit, and has experienced negative cash flows from operations since its
inception. These matters raise substantial doubt about the companys ability to
continue as a going concern and our audited consolidated financial statements
for the year ended December 31, 2002 contain a going concern qualification from
our independent accountants.

Management has restructured the Companys operations, reduced its work
force, renegotiated leases, and taken other actions to limit the Companys
expenditures. However, there can be no assurance that Companys cash balances
will be sufficient to sustain its operations until profitable operations and
positive cash flows are achieved. Consequently, the Company may require
additional capital to fund its operations. There can be no assurance that
capital will be available to the Company on acceptable terms, or at all.

If we
fail to generate positive cash flows or obtain additional capital
when required, we could continue to modify, delay or abandon some or
all of our business and expansion plans. The accompanying consolidated financial statements do not include any
adjustments that may result from the outcome of this uncertainty.

We have a limited operating history, making it difficult for you to evaluate
our business and your investment

Loudeye was formed as a limited liability company in August 1997 and
incorporated in March 1998. Following our acquisition of Activate in 2001, we
began to place greater emphasis on our enterprise Webcasting services. We
therefore still have a very limited operating history upon which an investor
may evaluate our operations and future prospects, as well as limited insight
into trends that may emerge and affect our business. In addition, the revenue
and income potential of our business and market are unproven. Because of the
emerging nature of the industry, our executives have limited experience in it.
As a young company operating in an emerging industry, we face risks and
uncertainties relating to our ability to implement our business plan
successfully. Our potential for future profitability must be considered in
light of these risks, uncertainties and difficulties.

Our quarterly financial results will continue to fluctuate making it difficult
to forecast our operating results

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LOUDEYE TECHNOLOGIES INC. 10-Q

Our quarterly operating results have fluctuated in the past and we expect
our revenues and operating results may vary significantly from quarter to
quarter due to a number of factors, many of which are beyond our control,
including:



| |  |  | Variability in demand for our Webcasting services and our other
digital media services and applications;                                                                                                              
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Market acceptance of new Webcasting and other digital media services
and applications offered by us and our competitors;                                                                                              
|
| |  |  | Ability of our customers to procure necessary intellectual property
rights for the digital media content they intend to utilize in their
businesses;                                                                  
|
| |  |  | Willingness of our customers to enter into longer-term volume digital
media and applications service agreements and purchase orders in light
of the economic and legal uncertainties related to their business
models;
|
| |  |  | Governmental regulations affecting use of the Internet, including
regulations concerning intellectual property rights and security
measures; or                                                                       
|
| |  |  | Competition from other companies entering our markets.                                                                                                                                                                

Our limited operating history and unproven business model further
contribute to the difficulty of making meaningful quarterly comparisons and
forecasts. Our current and future levels of operating expenses and capital
expenditures are based largely on our growth plans and estimates of expected
future revenues. These expenditure levels are, to a large extent, fixed in the
short term and our sales cycle can be lengthy. Thus, we may not be able to
adjust spending or generate new revenue sources in a timely manner to
compensate for any shortfall in revenues and any significant shortfall in
revenues relative to planned expenditures could have an immediate adverse
effect on our business and results of operations. If our operating results fall
below the expectations of securities analysts and investors in some future
periods, our stock price will likely decline significantly.

We may need to raise additional capital in the future, and if we are unable to
secure adequate funds on terms acceptable to us, we may be unable to execute
our business plan and current stockholders may experience significant dilution

As of March 31, 2003, we had approximately $8.9 million in cash and cash
equivalents, short-term investments, and restricted investments. There can be
no assurance that our existing cash, cash equivalents, short-term investments
and restricted investments will be sufficient to fund our operations and meet
our working capital and capital expenditure requirements for 2003. Accordingly,
if we are unable to fund operating and other expenses, working capital and
capital expenditures from our operations, we may find it necessary to secure
additional financing, sell assets or reduce expenditures further. In the event
additional financing is required, there can be no assurance that we will be
able to obtain such financing on acceptable terms, or at all. If adequate funds
are not available or are not available on acceptable terms, we may not be able
to pursue our business objectives. This inability could seriously harm our
business, results of operations and financial condition.

If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of our current
stockholders will be reduced and these securities may have rights and
preferences superior to that of our current stockholders. If we raise capital
through debt financing, we may be forced to accept restrictions affecting our
liquidity, including restrictions on our ability to incur additional
indebtedness or pay dividends.

Because we expect to continue to incur net losses, we may not be able to
implement our business strategy and the price of our stock may
decline

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LOUDEYE TECHNOLOGIES INC. 10-Q

As of March 31, 2003, we had an accumulated deficit of $186.8 million. We
have incurred net losses quarterly from August 12, 1997 (inception) through
March 31, 2003, and we expect to continue to incur net losses for the
foreseeable future.

Accordingly, our ability to operate our business and implement our
business strategy may be hampered by negative cash flows in the future, and the
value of our stock may decline as a result. Our capital requirements may vary
materially from those currently planned if, for example, we incur unforeseen
capital expenditures, unforeseen operating expenses or make investments to
maintain our competitive position. If this is the case, we may have to delay or
abandon some or all of our development plans or otherwise forego market
opportunities. We will need to generate significant additional revenues to be
profitable in the future and we may not generate sufficient revenues to be
profitable on either a quarterly or annual basis in the future. To address the
risks an uncertainties facing our business strategy, we must, among other
things:



| |  |  | Achieve broad customer adoption and acceptance of our products and
services;                       
| | - |  | ---------------------------------------------------------------------------------------------------
|
| |  |  | Successfully integrate our acquisition of TT Holdings and execute our
Webcasting services strategy;
|
| |  |  | Successfully integrate, leverage and expand our sales force;                                       
|
| |  |  | Successfully scale our current operations;                                                         
|
| |  |  | Implement and execute our business and marketing strategies;                                       
|
| |  |  | Address copyright issues that effect our business;                                                 
|
| |  |  | Develop and maintain strategic relationships to enhance our products and services;                 
|
| |  |  | Respond to competitive developments in the digital media infrastructure industry;                  

We might not be successful in achieving any or all of these objectives in
a cost-effective manner, if at all, and the failure to achieve these could have
a serious adverse impact on our business, results of operations and financial
position. Each of these objectives may require significant additional
expenditures on our part. Even if we ultimately do achieve profitability, we
may not be able to sustain or increase profitability on a quarterly or annual
basis.

If we are unable to comply with NASDAQs continued listing requirements, our
common stock could be desisted from the Nasdaq SmallCap Market

Since July 30, 2001, our common stock has failed to maintain a minimum bid
price of $1.00 per share for at least 10 consecutive days, which caused our
stock price to fail to meet one of the minimum standards required by the Nasdaq
Stock Market for continued listing as a Nasdaq National Market security. In
order to avoid delisting from Nasdaq entirely, we voluntarily applied to Nasdaq
to have our listing transferred to the SmallCap Market. On July 16, 2002 our
application was approved to transfer the listing of our common stock to the
Nasdaq SmallCap Market. The Nasdaq SmallCap Market also requires compliance
with a minimum bid price of $1.00 per share for at least 10 consecutive days.
We were notified that we must be in compliance with this requirement by March
28, 2003 (including all grace periods) or face delisting from Nasdaq. On March
31, 2003 we were notified by Nasdaq that we will be provided an additional 90
calendar days, or until June 26, 2003 to regain compliance. On March 11, 2003,
we received an affirmative vote at a special meeting of stockholders permitting
our board of directors, should it deem beneficial, to effect a reverse stock
split at one of three ratios at any time prior to December 31, 2003. The
purpose of this reverse split would be to achieve compliance with the Nasdaq
SmallCap Markets minimum bid price of $1.00 per share for at least 10
consecutive days.

There can be no assurance that we will be able to satisfy all requirements
for continued listing of our common stock on the Nasdaq SmallCap Market,
including the minimum bid price requirement and

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LOUDEYE TECHNOLOGIES INC. 10-Q

minimum tangible assets or stockholders equity requirements. If we are
unable to meet Nasdaq requirements in the future, our stock will be subject to
delisting, which may have a material adverse effect on the price of our common
stock and the levels of liquidity currently available to our stockholders.
Delisting may also make it more difficult for us to raise capital in the
future. If our common stock is removed from the Nasdaq SmallCap Market, an
investor could find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, our common shares. Additionally, our
stock may then be subject to penny stock regulations.

Our success is dependent on the performance and retention of our executive
officers and key employees

Our business and operations are substantially dependent on the performance
of our executive officers and key employees, all of whom are employed on an
at-will basis and have worked together for only a relatively short period of
time. We do not maintain key person life insurance on any of our executive
officers. In addition, we have hired or named new employees in 2003 in key
executive positions, including Jeffrey Cavins, our Chief Executive. The loss of
one or several key executives could seriously harm our business. Any
reorganization or reduction in the size of our employee base could harm our
ability to attract and retain other valuable employees critical to the success
of our business.

Acquisitions we have made or may make could disrupt our business and harm our
financial condition

We expect to continue to evaluate and acquire businesses, technologies,
services, or products that we believe are a strategic fit with our business. In
June 2000 we acquired VidiPax, Inc., in June 2001 we acquired Addition Systems,
Inc., in March 2001 we acquired DiscoverMusic, and in September 2001 we
acquired Activate and we have also acquired certain assets and technology from
OnAir and theDial.com.

Pursuant to an Asset Purchase Agreement dated as of May 29, 2002, the
Company acquired certain assets of EncodeThis!, Inc. Pursuant to the Asset
Purchase Agreement, the Company acquired certain assets of EncodeThis!, Inc. in
exchange for cash and common stock, as well as a warrant to purchase common
stock of the Company.

On November 19, 2002, the Company, TenTV Acquisition Corp., a Delaware
corporation wholly-owned by the Company, and TT Holding Corp. (Holding), a
Delaware corporation and sole shareholder of Technology Education Network, Inc.
(TenTV) entered into an Agreement and Plan of Reorganization (the Merger
Agreement). Pursuant to the Merger Agreement, TenTV Acquisition Corp. was
merged into Holding and the former stockholders of Holding received, subject to
the Merger Agreement and certain Unsecured Promissory Notes with Equity
Redemption Option (the Notes), 7,900,165 newly issued unregistered shares of
the Companys common stock and Notes in the aggregate original principal amount
of $1,062,329. At December 31, 2002, 7,559,306 shares had been issued and
340,859 shares are being held in escrow until January 1, 2004, pursuant to the
terms of the Merger Agreement. Subject to the terms of each Note, which provide
in part that there is not an event of default and that the Company is listed on
a principal exchange excluding the over-the-counter market, the Notes may be
redeemed, at the option of the Company and subject to shareholder approval, for
common stock of the Company. In the event that the Company elects to redeem the
Notes for Common Stock, the number of shares issuable upon redemption shall be
calculated by dividing (i) the principal amount and all accrued interest due
under the Notes as of the date of redemption, by (ii) the average of the last
sale price of the common stock for the thirty (30) trading days preceding
January 1, 2004. In such event, the aggregate number of shares of common stock
issued in connection with the transactions contemplated by the Merger Agreement
will be in excess of twenty percent (20%) of the issued and outstanding common
stock of the Company. Nasdaq rules require that the a majority of the companys
stockholders approve any transaction resulting in the issuance of twenty
percent (20%) or more of the Companys common stock.

We have limited operating history as a combined company and therefore
limited experience in addressing emerging trends that may affect our combined
business. The integration of these and any future

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LOUDEYE TECHNOLOGIES INC. 10-Q

acquisitions into our operations may place a significant strain on our
employees, systems and other resources. If any acquisition fails to integrate
well, our operations and financial position could be harmed.

Acquisitions require integrating the business, personnel, technology and
products of the acquired entity and may result in unforeseen operating
difficulties and expenditures. In addition, acquisitions may absorb significant
management attention that would otherwise be available for ongoing development
of our business. Moreover, we cannot assure you that the anticipated benefits
of any acquisition will be realized. Acquisitions could result in potentially
dilutive issuances of equity securities, the incurrence of debt, the assumption
of known and unknown liabilities associated with the acquired business, or
amortization expenses related to goodwill and other intangible assets and the
incurrence of large and immediate write-offs, any of which could seriously harm
our business, results of operations and financial condition.

We are dependent on the development and rate of adoption of digital media and
the delay or failure of this development would seriously harm our business

We are dependent on the development and rate of adoption of digital media
services and applications and the delay or failure of this development would
seriously harm our business. The development of commercial services and
applications for digital media content is in its relatively early stages. If
the Internet does not develop as an effective medium for the distribution of
digital media content to consumers or if businesses predicated on the
distribution of digital media content are not profitable or are unable to raise
necessary operating capital, then we may not succeed in executing our business
plan. Many factors could inhibit the growth of the distribution of digital
media content, including concerns about the profitability of Internet-related
businesses, uncertainty about intellectual property rights associated with
music and other digital media, bandwidth constraints, piracy and privacy.

Our success depends on users having access to the necessary hardware,
software and bandwidth, or data transmission capability, to receive and
broadcast high quality digital media over the Internet. Congestion over the
Internet and data loss may interrupt audio and video streams, resulting in
unsatisfying user experiences. The success of digital media distribution over
the Internet depends on the continued rollout of broadband access to consumers
on an affordable basis. Widespread adoption of digital media technology depends
on overcoming obstacles to the deployment and use of digital media software,
identifying additional viable revenue models for digital media-based
businesses, improving audio and video quality and educating customers and users
in the use of digital media technology. If digital media technology fails to
overcome these obstacles, our business could be seriously harmed.

Because digital recorded music formats, such as MP3, do not always contain
mechanisms for tracking the source or ownership of digital recordings, users
are able to download and distribute unauthorized or pirated copies of
copyrighted recorded music over the Internet. This piracy is a significant
concern to record companies and artists, and is the reason many record
companies and artists are reluctant to digitally deliver their recorded music
over the Internet. As long as pirated recordings are available, many consumers
will choose free pirated recordings rather than paying for legitimate
recordings. Accordingly, if this issue is not addressed, our business might be
harmed.

We depend on a limited number of customers for a majority of our revenues so
the loss of, or delay in payment from, one or a small number of customers could
have a significant impact on our revenues and operating results

A limited number of customers have accounted for a majority of our
revenues and may continue to do so for the foreseeable future. During the year
ended December 31, 2002, two of our customers accounted for 23% of our revenues
and during the year ended December 31, 2001, one of our customers accounted for
approximately 17% of our revenues. During each of the first quarters of 2003
and 2002, one customer accounted for approximately 13% and 12% of our revenues,
respectively. We believe that a small number of customers may continue to
account for a significant percentage of our revenues for the foreseeable
future. Due to high revenue concentration among a limited number of customers,
the cancellation, reduction or delay of a large customer order or our failure
to timely complete or deliver a project during a given quarter is likely to
significantly reduce revenues. In addition, if any significant customer fails
to pay

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LOUDEYE TECHNOLOGIES INC. 10-Q

amounts it owes us, or does not pay those amounts on time, our revenues
and operating results could suffer. If we are unsuccessful in increasing and
broadening our customer base, our business could be harmed.

Average selling prices of our products and services may decrease, which may
harm our gross margins

The average selling prices of our products and services may be lower than
expected as a result of competitive pricing pressures, promotional programs and
customers who negotiate price reductions in exchange for longer term purchase
commitments or otherwise. The pricing of services sold to our customers depends
on the duration of the agreement, the specific requirements of the order,
purchase volumes, the sales and service support and other contractual
agreements. We have experienced and expect to continue to experience pricing
pressure and anticipate that the average selling prices and gross margins for
our products will decrease over product life cycles. We may not be successful
in developing and introducing on a timely basis new products with enhanced
features that can be sold at higher gross margins.

We may be liable or alleged to be liable to third parties for music, software,
and other content that we encode, distribute, or make available on to our
customers

We may be liable or alleged to be liable to third parties for the content
that we encode, distribute or make available to our customers:



| |  |  | If the content or the performance of our services violates third
party copyright, trademark, or other intellectual property rights;              
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | If our customers violate the intellectual property rights of others
by providing content to us or by having us perform digital media
services; or
|
| |  |  | If content that we encode or otherwise handle for our customers is
deemed obscene, indecent, or defamatory.                                      

Any alleged liability could harm our business by damaging our reputation,
requiring us to incur legal costs in defense, exposing us to awards of damages
and costs and diverting managements attention which could have an adverse
effect on our business, results of operations and financial condition. Our
customers for encoding services generally agree to hold us harmless from claims
arising from their failure to have the right to encode the content given to us
for that purpose. However, customers may contest this responsibility or not
have sufficient resources to defend claims and we have limited insurance
coverage for claims of this nature.

Because we host, stream and Webcast audio and video content on or from our
Web site and on other Web sites for customers and provide services related to
digital media content, we face potential liability or alleged liability for
negligence, infringement of copyright, patent, or trademark rights, defamation,
indecency and other claims based on the nature and content of the materials we
host. Claims of this nature have been brought, and sometimes successfully
pressed, against content distributors. In addition, we could be exposed to
liability with respect to the unauthorized duplication of content or
unauthorized use of other parties proprietary technology. Any imposition of
liability that is not covered by insurance or is in excess of insurance
coverage or any alleged liability could harm our business.

We cannot assure you that third parties will not claim infringement by us
with respect to past, current, or future technologies. The music industry in
particular has recently been the focus of infringement claims. We expect that
participants in our markets will be increasingly subject to infringement claims
as the number of services and competitors in our industry segment grows. In
addition, these risks are difficult to quantify in light of the continuously
evolving nature of laws and regulations governing the Internet. Any claim
relating to proprietary rights, whether meritorious or not, could be
time-consuming, result in costly litigation, cause service upgrade delays or
require us to enter into royalty or licensing agreements, and we can not assure
you that we will have adequate insurance coverage or that royalty or licensing
agreements will be available on terms acceptable to us or at all.

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We cannot be certain that we will be able to protect our intellectual property,
and we may be found to infringe on proprietary rights of others, which could
harm our business

Our intellectual property is important to our business, and we seek to
protect our intellectual property through copyrights, trademarks, patents,
trade secrets, confidentiality provisions in our customer, supplier and
strategic relationship agreements, nondisclosure agreements with third parties,
and invention assignment agreements with our employees and contractors. We
cannot assure you that measures we take to protect our intellectual property
will be successful or that third parties will not develop alternative solutions
that do not infringe upon our intellectual property.

In addition, we could be subject to intellectual property infringement
claims by others. Potential customers may be deterred from distributing content
over the Internet for fear of infringement claims. The music industry in
particular has recently been the focus of heightened concern with respect to
copyright infringement and other misappropriation claims, and the outcome of
developing legal standards in that industry is expected to impact music, video
and other content being distributed over the Internet. If, as a result,
potential customers forego distributing traditional media content over the
Internet, demand for our digital media services and applications could be
reduced which would harm our business. The music industry in the U.S. is
generally regarded as extremely litigious in nature compared to other
industries and we could become engaged in litigation with others in the music
industry. Claims against us, and any resultant litigation, should it occur in
regard to any of our digital media services and applications, could subject us
to significant liability for damages including treble damages for willful
infringement. In addition, even if we prevail, litigation could be
time-consuming and expensive to defend and could result in the diversion of our
time and attention. Any claims from third parties may also result in
limitations on our ability to use the intellectual property subject to these
claims. Further, we plan to offer our digital media services and applications
to customers worldwide including customers in foreign countries that may offer
less protection for our intellectual property than the United States. Our
failure to protect against misappropriation of our intellectual property, or
claims that we are infringing the intellectual property of third parties could
have a negative effect on our business, revenues, financial condition and
results of operations.

A class action lawsuit has been filed against us which may result in litigation
that is costly to defend and the outcome of which is uncertain and may harm our
business

We and certain of our current or former officers and directors, as well as
certain underwriters who handled our March 15, 2000 initial public offering of
common stock, are named as defendants in a purported class action complaint
which has been filed allegedly on behalf of certain persons who purchased our
common stock during the time period beginning on March 15, 1999 and ending on
December 6, 2000. The complaint alleges violations of the Securities Act of
1933 and the Securities Exchange Act of 1934. Primarily it alleges that there
was undisclosed compensation received by our underwriters in connection with
our initial public offering. We can provide no assurance as to the outcome of
this matter. Any resolution of this matter in a manner adverse to us could have
a material adverse affect on our financial position and results of operation.
In addition, the costs to us of defending any litigation or other proceeding,
even if resolved in our favor, could be substantial. Such litigation could also
substantially divert the attention of our management and our resources in
general. Uncertainties resulting from the initiation and continuation of any
litigation or other proceedings could harm our ability to compete in the
marketplace. In addition, because class action litigation has often been
brought against companies following periods of volatility in their stock
prices, we could become involved in additional litigation. The plaintiffs have
made a settlement proposal to the defendants. We have indicated a willingness
to support the proposal, subject to review and acceptance of a definitive
settlement agreement.

We rely on strategic relationships to promote our services and for access to
licensed technology; if we fail to maintain or enhance these relationships, our
ability to serve our customers and develop new services and applications could
be harmed

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Our ability to provide our services to users of multiple technologies and
platforms depends significantly on our ability to develop and maintain our
strategic relationships with key streaming media technology companies and
content providers. We rely on these relationships for licensed technology and
content. We also rely on relationships with major recording labels for our
music content licensing strategy. Obtaining comprehensive music content
licenses is challenging, as doing so may require us to obtain copyright
licenses with various third parties in the fragmented music recording and
publishing industries. These copyrights often address differing activities
related to the delivery of digital media, including reproduction and
performance, some of which may require separate licensing arrangements from
various rights holders such as publishers, artists and record labels. The
effort to obtain the necessary rights by such third parties is often
significant, and could disrupt, delay, or prevent us from executing our
business plans. Because of the large number of potential parties from which we
must obtain licenses, we may never be able to obtain a sufficient number of
licenses to allow us to provide services that will meet our customers
expectations.

Due to the evolving nature of our industry, we will need to develop
additional relationships to adapt to changing technologies and standards and to
work with newly emerging companies with whom we do not have pre-existing
relationships. We cannot be certain that we will be successful in developing
new relationships or that our partners will view these relationships as
significant to their own business or that they will continue their commitment
to us in the future. If we are unable to maintain or enhance these
relationships, we may have difficulty strengthening our technology development
and increasing the adoption of our brand and services.

Our music content licenses could result in operational complexity that may
divert resources or make our business more expensive to conduct

The large number of licenses that we need to maintain in order to expand
our music-related services creates operational difficulties in connection with
tracking the rights that we have acquired and the complex royalty structures
under which we must pay. In addition, our licensing agreements typically allow
the third party to audit our royalty tracking and payment mechanisms to ensure
that we are accurately reporting and paying the royalties owed. If we are
unable to accurately track the numerous parties that we must pay in connection
with each delivery of digital music services and deliver the appropriate
payment in a timely fashion, we may risk termination of certain licenses.

Competition may decrease our market share, revenues, and gross margins

We face intense and increasing competition in the digital media services
market. If we do not compete effectively or if we experience reduced market
share from increased competition, our business will be harmed. In addition, the
more successful we are in the emerging market for digital media services, the
more competitors are likely to emerge. We believe that the principal
competitive factors in our market include:



| |  |  | Service functionality, quality and performance;                        
| | - |  | -----------------------------------------------------------------------
|
| |  |  | Ease of use, reliability, scalability and security of services;        
|
| |  |  | Establishing a significant base of customers and distribution partners;
|
| |  |  | Ability to introduce new services to the market in a timely manner;    
|
| |  |  | Customer service and support;                                          
|
| |  |  | Attracting third-party web developers; and                             
|
| |  |  | Pricing.                                                               

Although we do not currently compete against any one entity with respect
to all aspects of our digital media services, there are two principal types of
companies we do compete with: enterprise Webcasting companies and digital media
services companies.

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Enterprise Webcasting Competition. Our primary competitors are content
distribution networks, such as Akamai, and Internet broadcasters, such as
Yahoo!Broadcast. Each of these companies provide services similar to ours and
each has a well-established market presence. We also compete with providers of
traditional communications technologies, such as teleconferencing and
videoconferencing, as well as applications software and tools companies, such
as Centra Software, Lotus (SameTime), Microsoft (NetMeeting and Placeware).
There are also smaller competitors that focus on certain of our individual
market segments, such as investor relations webcasts.

Other Digital Media Services Competition. There are a number of companies
that provide outsourced digital media services. As the digital media services
market continues to develop, we expect to see increased competition from
traditional telecommunication service providers or resellers of those services.
We also face competition from the in-house encoding services, streaming
networks and content management systems and encoding services.

Many of our competitors have substantially more capital, longer operating
histories, greater brand recognition, larger customer bases and significantly
greater financial, technical and marketing resources than we do. These
competitors may also engage in more extensive development of their
technologies, adopt more aggressive pricing policies and establish more
comprehensive marketing and advertising campaigns than we can. Our competitors
may develop products and service offerings that we do not offer or that are
more sophisticated or more cost effective than our own. For these and other
reasons, our competitors products and services may achieve greater acceptance
in the marketplace than our own, limiting our ability to gain market share and
customer loyalty and to generate sufficient revenues to achieve a profitable
level of operations. Our failure to adequately address any of the above factors
could harm our business and operating results.

Our industry is experiencing consolidation that may intensify competition

The Internet and digital media services industries are undergoing
substantial change that has resulted in increasing consolidation and a
proliferation of strategic transactions. Many companies in these industries
have been going out of business or are being acquired by larger entities. As a
result, we are increasingly competing with larger competitors that have
substantially greater resources than we do. We expect this consolidation and
strategic partnering to continue. Acquisitions or strategic relationships could
harm us in a number of ways. For example:



| |  |  | Competitors could acquire or enter into relationships with companies
with which we have strategic relationships and discontinue our
relationship, resulting in the loss of distribution opportunities for
our products and services or the loss of certain enhancements or
value-added features to our products and services;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Competitors could obtain exclusive access to desirable multimedia
content and prevent that content from being available in certain
formats, thus decreasing the use of our products and services to
distribute and experience the content that audiences most desire, and
hurting our ability to attract customers;          
|
| |  |  | Suppliers of important or emerging technologies could be acquired by
a competitor or other company which could prevent us from being able to
utilize such technologies in our offerings, and disadvantage our
offerings relative to those of competitors;                                                                    
|
| |  |  | A competitor could be acquired by a party with significant resources
and experience that could increase the ability of the competitor to
compete with our products and services; and                                                                                                                                         
|
| |  |  | Other companies with related interests could combine to form new,
formidable competition, which could preclude us from obtaining access to
certain markets or content; or which could dramatically change the
market for our products and services.                                                                          

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Any of these results could put us at a competitive disadvantage that could
cause us to lose customers, revenue and market share. They could also force us
to expend greater resources to meet the competitive threat, which could also
harm our operating results.

If we fail to enhance our existing services and applications products or
develop and introduce new digital media services, applications and features in
a timely manner to meet changing customer requirements and emerging industry
trends or standards, our ability to grow our business will suffer

The market for digital media service solutions is characterized by rapidly
changing technologies and short product life cycles. These market
characteristics are heightened by the emerging nature of the Internet and the
continuing trend of companies from many industries to offer Internet-based
applications and services. The widespread adoption of the new Internet,
networking, streaming media, or telecommunications technologies or other
technological changes could require us to incur substantial expenditures to
modify or adapt our operating practices or infrastructure. Our future success
will depend in large part upon our ability to:



| |  |  | Obtain the necessary intellectual property rights from music
companies and other content owners to be able to legally provide our
services;     
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Identify and respond to emerging technological trends in the market;                                                                            
|
| |  |  | Enhance our products by adding innovative features that differentiate
our digital media services and applications from those of our
competitors;
|
| |  |  | Acquire and license leading technologies;                                                                                                       
|
| |  |  | Bring digital media services and applications to market and scale our
business on a timely basis at competitive prices; and                     
|
| |  |  | Respond effectively to new technological changes or new product
announcements by others.                                                        

We will not be competitive unless we continually introduce new services
and applications or enhancements to existing services and applications that
meet evolving industry standards and customer needs. In the future, we may not
be able to address effectively the compatibility and interoperability issues
that arise as a result of technological changes and evolving industry
standards. The technical innovations required for us to remain competitive are
inherently complex, require long development schedules and are dependent in
some cases on sole source suppliers. We will be required to continue to invest
in research and development in order to attempt to maintain and enhance our
existing technologies and products, but we may not have the funds available to
do so. Even if we have sufficient funds, these investments may not serve the
needs of customers or be compatible with changing technological requirements or
standards. Most development expenses must be incurred before the technical
feasibility or commercial viability of new or enhanced services and
applications can be ascertained. Revenue from future services and applications
or enhancements to services and applications may not be sufficient to recover
the associated development costs.

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The technology underlying our services and applications is complex and may
contain unknown defects that could harm our reputation, result in product
liability or decrease market acceptance of our services and applications

The technology underlying our digital media services and applications is
complex and includes software that is internally developed and software
licensed from third parties. These software products may contain errors or
defects, particularly when first introduced or when new versions or
enhancements are released. We may not discover software defects that affect our
current or new services and applications or enhancements until after they are
sold. Furthermore, because our digital media services are designed to work in
conjunction with various platforms and applications, we are susceptible to
errors or defects in third-party applications that can result in a lower
quality product for our customers. Because our customers depend on us for
digital media management, any interruptions could:



| |  |  | Damage our reputation;                                                 
| | - |  | -----------------------------------------------------------------------
|
| |  |  | Cause our customers to initiate product liability suits against us;    
|
| |  |  | Increase our product development resources;                            
|
| |  |  | Cause us to lose sales; and                                            
|
| |  |  | Delay market acceptance of our digital media services and applications.

We do not possess product liability insurance, and our errors and
omissions coverage is not likely to be sufficient to cover our complete
liability exposure.

Our business will suffer if our systems fail or our operations facilities
become unavailable

A reduction in the performance, reliability and availability of our
systems and network infrastructure may harm our ability to distribute our
products and services to our customers and other users, as well as harm our
reputation and ability to attract and retain customers and content providers.
Our systems and operations are susceptible to, and could be damaged or
interrupted by, outages caused by fire, flood, power loss, telecommunications
failure, Internet breakdown, earthquake and similar events. We do not have any
redundancy in our Webcasting facilities and therefore any damage or destruction
to these would significantly harm our Webcasting business. Our systems are also
subject to human error, security breaches, power losses, computer viruses,
break-ins, denial of service attacks, sabotage, intentional acts of vandalism
and tampering designed to disrupt our computer systems, Web sites and network
communications. A sudden and significant increase in traffic on our Web sites
could strain the capacity of the software, hardware and telecommunications
systems that we deploy or use. This could lead to slower response times or
system failures.

Our operations also depend on receipt of timely feeds from our content
providers, and any failure or delay in the transmission or receipt of such
feeds could disrupt our operations. We also depend on Web browsers, ISPs and
online service providers to provide access over the Internet to our product and
service offerings. Many of these providers have experienced significant outages
or interruptions in the past, and could experience outages, delays and other
difficulties due to system failures unrelated to our systems. These types of
interruptions could continue or increase in the future.

Our digital distribution activities are managed by sophisticated software
and computer systems. We must continually develop and update these systems over
time as our business and business needs grow and change, and these systems may
not adequately reflect the current needs of our business. We may encounter
delays in developing these systems, and the systems may contain undetected
errors that could cause system failures. Any system error or failure that
causes interruption in availability of products or content or an increase in
response time could result in a loss of potential or existing business services
customers, users, advertisers or content providers. If we suffer sustained or
repeated interruptions, our products, services and Web sites could be less
attractive to such entities or individuals and our business could be harmed.

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Significant portions of our business are dependent on providing customers
with efficient and reliable services to enable customers to broadcast content
to large audiences on a live or on-demand basis. Our operations are dependent
in part upon transmission capacity provided by third-party telecommunications
network providers. Any failure of such network providers to provide the
capacity we require may result in a reduction in, or interruption of, service
to our customers. If we do not have access to third-party transmission
capacity, we could lose customers and if we are unable to obtain such capacity
on terms commercially acceptable to us, our business and operating results
could suffer.

Our computer and communications infrastructure is located at a single
leased facility in Seattle, Washington, an area that is at heightened risk of
earthquake and volcanic events. We do not have fully redundant systems, and we
may not have adequate business interruption insurance to compensate us for
losses that may occur from a system outage. Despite our efforts, our network
infrastructure and systems could be subject to service interruptions or damage
and any resulting interruption of services could harm our business, operating
results and reputation.

Because our principal stockholders and management may have the ability to
control a significant percentage of stockholder votes , the premium over market
price that an acquiror might otherwise pay may be reduced and any merger or
takeover may be prevented or delayed

Our officers and directors beneficially own or control the voting of
approximately 14% of our outstanding common stock. Martin Tobias, our former
chief executive officer and former member of the board of directors, has given
the board of directors, an irrevocable proxy to vote all of the approximately
2.8 million shares of our Common Stock that he owns. See Note 18 to the Notes
to Consolidated Financial Statements included in our Form 10-K for the year
ended December 31, 2002 and our Report on Form 8-K as filed with the Securities
and Exchange Commission on October 30, 2001 for a more complete description of
the proxy. As a result, these stockholders, acting together, have the ability
to substantially influence all matters submitted to our stockholders for
approval, including:



| |  |  | Election or removal of our board of directors;                                                                                               
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Amendment of our certificate of incorporation or bylaws; and                                                                                 
|
| |  |  | Adoption of measures that could delay or prevent a change in control
or impede a merger, takeover or other business combination involving us.

These stockholders have substantial influence over our management and our
affairs. Accordingly, this concentration of ownership may have the effect of
impeding a merger, consolidation, takeover or other business consolidation
involving us, or discouraging a potential acquirer from making a tender offer
for our shares. This concentration of ownership could also adversely affect our
stocks market price or lessen any premium over market price that an acquiror
might otherwise pay.

Certain provisions of our certificate of incorporation and bylaws and the
provisions of Delaware law could also have the effect of delaying, deferring or
preventing an acquisition of Loudeye, even if an acquisition would be
beneficial to our stockholders. See Description of Capital Stock for more
information on our charter and by-law provisions.

Government regulation could adversely affect our business prospects

We do not know with certainty how existing laws governing issues such as
property ownership, copyright and other intellectual property issues, taxation,
illegal or obscene content, retransmission of media, personal privacy and data
protection will apply to the Internet or to the distribution of music and other
proprietary content over the Internet. Most of these laws were adopted before
the advent of the Internet and related technologies and therefore do not
address the unique issues associated with the Internet and related
technologies. Depending on how these laws developed and are interpreted by the
judicial system, they could have the effect of:

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LOUDEYE TECHNOLOGIES INC. 10-Q



| |  |  | Limiting the growth of the Internet;                                                                                       
| | - |  | ---------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Creating uncertainty in the marketplace that could reduce demand for our products and services;                            
|
| |  |  | Increasing our cost of doing business;                                                                                     
|
| |  |  | Exposing us to significant liabilities associated with content
distributed or accessed through our products or services; or
|
| |  |  | Leading to increased product and applications development costs, or
otherwise harm our business.                           

Specifically with respect to one aspect of copyright law, on October 28,
1998, the Digital Millennium Copyright Act (or DMCA) was enacted. The DMCA
includes statutory licenses for the performance of sound recordings and for the
making of recordings to facilitate transmissions. Under these statutory
licenses, depending on our future business activities, we and our customers may
be required to pay licensing fees in connection with digital sound recordings
we deliver or our customers provide on their web site and through
retransmissions of radio broadcasts and/or other audio content. A Copyright
Arbitration Royalty Panel has determined that, for eligible non-subscription
services, sound recording performance rates should be $0.0014 per performance
for the period October 1998-2000, with a surcharge of 9% of the total
performance fee for the ephemeral copies used to facilitate such performances.
However, that decision is subject to review and revision by the U.S. Copyright
Office, and several appeal petitions have been filed. Furthermore, the
Copyright Offices review is subject to an appeal to a Federal Court of
Appeals. The fees for the same types of transmissions offered on a subscription
basis have not been determined and will be the subject of another Copyright
Arbitration Royalty Panel proceeding, as will fees for digital phono-record
deliveries pursuant to the mechanical license provisions of the U.S.
Copyright Act. Depending on the rates and terms adopted for the statutory
licenses, our business could be harmed both by increasing our own cost of doing
business, and by increasing the cost of doing business for our customers.

Because of this rapidly evolving and uncertain regulatory environment,
both domestically and internationally, we cannot predict how existing or
proposed laws and regulations might affect our business. In addition, these
uncertainties make it difficult to ensure compliance with the laws and
regulations governing digital music. These laws and regulations could harm us
by subjecting us to liability or forcing us to change our business.




Item 3    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We provide Internet media infrastructure services and applications. Our
financial results could be affected by factors such as changes in interest
rates and fluctuations in the stock market. As substantially all sales are
currently made in U.S. dollars, a strengthening of the dollar could make our
services less competitive in foreign markets. We do not use derivative
instruments to hedge our risks. Our interest income is sensitive to changes in
the general level of U.S. interest rates, particularly since substantially all
of our investments are in short-term instruments with original maturities of
less than six months. Due to the limited duration of our short-term investments
and their investment grade level, we anticipate no material market risk
exposure. Therefore, no quantitative tabular disclosures are presented.

We invest in investment-grade government obligations, institutional money
market funds and other obligations with FDIC insured US banks. Concentration is
limited to 10% in any one instrument or issuer. Our primary investment focus is
to preserve capital and earn a market rate of return on our investments. We do
not speculate nor invest in publicly traded equity securities and therefore do
not believe that our capital is subject to significant market risk. The average
portfolio balance must remain under one year in duration.




Item 4    DISCLOSURE CONTROLS AND PROCEDURES

We maintain a set of disclosure controls and procedures designed to ensure
that information required to be disclosed by us in the reports filed under the
Securities Exchange Act, is recorded, processed,

33



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LOUDEYE TECHNOLOGIES INC. 10-Q

summarized and reported within the time periods specified by the SECs
rules and forms. Disclosure Controls are also designed with the objective of
ensuring that this information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.

Within 90 days prior to the date of filing this report, we carried out an
evaluation of our disclosure controls and procedures under the supervision and
with the participation of management including the Chief Executive Officer and
Chief Financial Officer. Based upon that evaluation, the Chief Executive
Officer and the Chief Financial Officer concluded that our disclosure controls
and procedures are effective in timely alerting us to material information
relating to the Company required to be included in our periodic SEC filings.

Subsequent to the date of that evaluation, there have been no significant
changes in our internal controls or in other factors that could significantly
affect internal controls, nor were any corrective actions required with regard
to significant deficiencies and material weaknesses. However, we were unable to
file our Form 10-K for the fiscal year ended December 31,
2002 and our Form 10-Q for the quarter ended March 31, 2003 within the
prescribed timeframe due to additional time required by us to close our annual
accounting records and adequately prepare our financial statements and related
disclosures, as we had recently made changes in management and staffing,
including the appointment of the Companys third Chief Executive Officer since
December 31, 2002, a restructuring of the Company and a reduction-in-force in
March, 2003.

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LOUDEYE TECHNOLOGIES INC. 10-Q




PART II.         OTHER INFORMATION




ITEM 1:          LEGAL PROCEEDINGS

Between July 26, 2001 and August 30, 2001, four substantially similar
class action complaints were filed in the Untied States District Court for the
Southern District of New York against the Company and certain of its former
officers and directors, as well as against certain underwriters who handled its
March 15, 2000 initial public offering of common stock. The various complaints
were purportedly filed on behalf of a class of persons who purchased the
Companys common stock during the time period beginning on March 15, 2000 and
ending on December 6, 2000. The complaints together allege violations of the
Securities Act of 1933 and the Securities Exchange Act of 1934, primarily based
on the allegation that there was undisclosed compensation received by the
Companys underwriters in connection with its initial public offering and the
allegation that the underwriters entered into undisclosed arrangements with
some investors that were designed to distort and/or inflate the market price
for the Companys common stock in the aftermarket following the initial public
offering. The allegations set forth in these complaints are substantially
similar to those made in class actions filed against over 300 other companies
that issued securities within the past four years. These actions have all been
consolidated before the same judge for pretrial purposes. No specific amount of
damages has been claimed. The individual defendants and the Company have
demanded to be indemnified by the underwriter defendants pursuant to the
underwriting agreement entered into at the time of the initial public offering.
Presently, all claims against the former officers have been withdrawn without
prejudice. The Company, along with the many other issuer defendants, moved to
dismiss the claims in the complaint. By decision dated February 19, 2003 the
court denied the Companys motion. We believe that we have meritorious defenses
to the claims made in the foregoing complaint and we intend to defend the
actions vigorously. However, there can be no assurance that we will be
successful on our defenses or in our assertion of indemnification, and an
adverse resolution of the lawsuit could have a material adverse affect on our
financial position and results of operation in the period in which the lawsuit
is resolved. The plaintiffs have made a settlement proposals to the
defendants. We have indicated a willingness to support the proposal, subject
to review and acceptance of a definitive settlement agreement.

On or about January 8, 2003 a company known as Dominion Venture Finance,
L.L.C. commenced an action against the Company and John Doe defendants in the
Superior Court of the State of California, County of San Francisco. In its
complaint, plaintiff alleges that pursuant to a loan and security agreement and
a master lease agreement (the liabilities for which agreement, plaintiff
alleges, were acquired by the Company when the Company merged with an entity
known as DiscoverMusic.com, Inc.) the Company failed to make certain required
payments to plaintiff. Plaintiff asserts causes of action of breach of loan and
security agreement, claim and delivery, money lent, breach of master lease
agreement and book account. Plaintiff seeks relief in the form of money
damages, interest, attorneys fees and costs. The Company has filed an answer
to the complaint denying the material allegations. We believe that we have
meritorious defenses to the claims made in the foregoing complaint and we
intend to defend the action vigorously. However, there can be no assurance that
we will be successful on our defenses.

In April 2003, the landlord of one of our unoccupied facilities filed suit
against us for breach of its lease and is seeking an unspecified amount of
damages. We intend to vigorously defent this suit and may also bring certain
counterclaims against the landlord.

The Company becomes involved from time to time in various other claims and
lawsuits incidental to the ordinary course of its operations, including such
matters as contract and lease disputes and complaints alleging employment
discrimination The Company believes that the outcome of any such pending
claims or proceedings individually or in the aggregate, will not have a
material adverse effect upon its business or
financial condition, results of operations, or cash flows.






|ITEM 2: |  | CHANGES IN SECURITIES AND USE OF PROCEEDS
|------- |  | -----------------------------------------



| | (c) |  | Recent Sales of Unregistered Securities
| | --- |  | ---------------------------------------

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LOUDEYE TECHNOLOGIES INC. 10-Q



| |  | None
| |  | ----






|ITEM 3: |  | DEFAULTS UPON SENIOR SECURITIES
|------- |  | -------------------------------
|        |  |                                
|        |  | None.                          






|ITEM 4: |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY SHAREHOLDERS                                                                                 
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|        |  |                                                                                                                                          
|        |  | On March 11, 2003, we held Special Meeting of Stockholders. At the
meeting the following matter was approved by the vote specified
below:
|       
|        |  | (a)                                                                                                                                      






|ITEM 5: |  | OTHER INFORMATION
|------- |  | -----------------
|        |  |                  
|        |  | None.            






|ITEM 6: |  | EXHIBITS AND REPORTS ON FORM 8-K
|------- |  | --------------------------------

|              |  |                                                                                                                                                                            
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) Exhibits. |  |                                                                                                                                                                            
|              |  |                                                                                                                                                                            
|2.1(1)        |  | Agreement and Plan of Reorganization dated November 19, 1999 between Loudeye Corp. and Alive.com, Inc.                                                                     
|              |  |                                                                                                                                                                            
|2.2(5)        |  | Agreement and Plan of Merger among Loudeye.Corp., DiscoverMusic.com, Inc. and Santa Acquisition,
Inc. dated January 30, 2001.                                              
|              |  |                                                                                                                                                                            
|3.1(1)        |  | Fifth Amended and Restated Certificate of Incorporation of Loudeye Corp.                                                                                                   
|              |  |                                                                                                                                                                            
|3.2(1)        |  | Form of Amended and Restated Certificate of Incorporation of Loudeye Corp                                                                                                  
|              |  |                                                                                                                                                                            
|3.4(8)        |  | Amended Bylaws of Loudeye Corp.. dated January 18, 2002                                                                                                                    
|              |  |                                                                                                                                                                            
|10.1(1)       |  | Form of Indemnification Agreement between Loudeye Corp.. and each of its officers and directors.                                                                           
|              |  |                                                                                                                                                                            
|10.2(1)       |  | 1998 Stock Option Plan, as amended.                                                                                                                                        
|              |  |                                                                                                                                                                            
|10.3(1)       |  | Alive.com, Inc. 1998 Stock Option Plan.                                                                                                                                    
|              |  |                                                                                                                                                                            
|10.4(1)       |  | 2000 Stock Option Plan.                                                                                                                                                    
|              |  |                                                                                                                                                                            
|10.5(1)       |  | 2000 Director Stock Option Plan.                                                                                                                                           
|              |  |                                                                                                                                                                            
|10.6(1)       |  | 2000 Employee Stock Purchase Plan.                                                                                                                                         
|              |  |                                                                                                                                                                            
|10.7(1)       |  | Amended and Restated Investors Rights Agreement dated December 14, 1999 among Loudeye Corp. and
certain holders of our preferred stock.                                   
|              |  |                                                                                                                                                                            
|10.8(1)       |  | Agreement dated August 10, 1999 between Loudeye Corp. and Times Square Building L.L.C. for
offices at Times Square Building, 414 Olive Way, Suite 300, Seattle, Washington.
|              |  |                                                                                                                                                                            
|10.9(1)       |  | Lease Agreement dated September 1, 1998 between Loudeye Corp. and Martin Tobias for offices at 3406
E. Union Street, Seattle, Washington.                                  
|              |  |                                                                                                                                                                            
|10.10(1)      |  | Lease Agreement dated October 28, 1999 between Loudeye Corp. and Westlake Park Associates for
offices at Centennial Building, 1904 Fourth Avenue, Seattle, Washington.     

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LOUDEYE TECHNOLOGIES INC. 10-Q

|           |  |                                                                                                                                                                                                                                          
|---------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.11(1)   |  | Lease Agreement dated November 9, 1999 between Loudeye Corp. and Downtown Entertainment Associates,
LP for offices at 1424 Second Street, Santa Monica, California.                                                                      
|           |  |                                                                                                                                                                                                                                          
|10.12(1)   |  | Loan and Security Agreement with Dominion Venture Finance L.L.C. dated June 15, 1999 between Loudeye
Corp. and Dominion Venture Finance L.L.C.                                                                                           
|           |  |                                                                                                                                                                                                                                          
|10.16(1)   |  | Services Agreement between Loudeye Corp. and Akamai Technologies, Inc. dated as of February 15, 2000.                                                                                                                                    
|           |  |                                                                                                                                                                                                                                          
|10.17(2)   |  | Amended and Restated Loan and Security Agreement between Imperial Bank and Loudeye Corp. dated May
17, 2000.                                                                                                                             
|           |  |                                                                                                                                                                                                                                          
|10.18(2)   |  | Amended and Restated Services Agreement between Valley Media, Inc. and Loudeye Corp. dated April 2000.                                                                                                                                   
|           |  |                                                                                                                                                                                                                                          
|10.20(2)   |  | First Amendment of Office Lease Agreement dated April 3, 2000 between Times Square Building L.L.C.
and Loudeye Corp.                                                                                                                     
|           |  |                                                                                                                                                                                                                                          
|10.21(2)   |  | Second Amendment of Office Lease Agreement dated May 1, 2000 between Times Square Building L.L.C. and
Loudeye Corp.                                                                                                                      
|           |  |                                                                                                                                                                                                                                          
|10.22(2)   |  | Lease Agreement dated June 14, 2000 between Brown Bear Realty Corporation and Loudeye Corp.                                                                                                                                              
|           |  |                                                                                                                                                                                                                                          
|10.23(3)  |  | Volume Purchase Order dated July 19, 2000 by and between MusicBank and Loudeye Corp.                                                                                                                                                     
|           |  |                                                                                                                                                                                                                                          
|10.25(4)   |  | Underlease Agreement and Agreement to Lease dated December 21, 2000 between WCRS Limited and Loudeye
Corp.                                                                                                                               
|           |  |                                                                                                                                                                                                                                          
|10.26(4)  |  | Encoding Services and Compact Disc Purchase Agreement between XM Satellite Radio, Inc., and Loudeye
Corp., dated August 25, 2000.                                                                                                        
|           |  |                                                                                                                                                                                                                                          
|10. 27(4) |  | First Addendum to Encoding Services and Compact Disc Purchase Agreement between XM Satellite Radio,
Inc., and Loudeye Corp., dated October 10, 2000.                                                                                     
|           |  |                                                                                                                                                                                                                                          
|10.28(6)   |  | 2000 Employee Stock Option Plan as amended March 5, 2001.                                                                                                                                                                                
|           |  |                                                                                                                                                                                                                                          
|10.29(6)   |  | Offer Letter to Joel McConaughy dated March 14, 2001.                                                                                                                                                                                    
|           |  |                                                                                                                                                                                                                                          
|10.30(6)   |  | Offer Letter to John Shaw dated April 4, 2001.                                                                                                                                                                                           
|           |  |                                                                                                                                                                                                                                          
|10.31(6)   |  | Offer Letter to John Baker dated February 23, 2001.                                                                                                                                                                                      
|           |  |                                                                                                                                                                                                                                          
|10.32(5)   |  | Registration Rights Agreement among Loudeye Corp. and the former stockholders of DiscoverMusic.                                                                                                                                          
|           |  |                                                                                                                                                                                                                                          
|10.33(7)   |  | Credit Agreement between US Bank National Association and Loudeye Corp., dated as of August 22, 2001.                                                                                                                                    
|           |  |                                                                                                                                                                                                                                          
|10.34(7)   |  | First Amendment to Credit Agreement between US Bank National Association and Loudeye Corp., dated as
of October 25, 2001.                                                                                                                
|           |  |                                                                                                                                                                                                                                          
|10.35(8)   |  | Martin Tobias Credit Arrangement.                                                                                                                                                                                                        
|           |  |                                                                                                                                                                                                                                          
|10.36(9)   |  | Agreement and Plan of Reorganization with TT Holding Corp.                                                                                                                                                                               
|           |  |                                                                                                                                                                                                                                          
|10.37(10)  |  | Retainer Agreement with Regent Pacific Management Corporation.                                                                                                                                                                           
|           |  |                                                                                                                                                                                                                                          
|10.38      |  | Fifth Amendment and Assignment of Lease dated April 1, 2003 among 1130 Rainier, LLC, Activate.Net
Corporation, and Loudeye Enterprise Communications, Inc. for offices at 1130 Rainier Avenue South,
Seattle, Washington, filed herewith.
|           |  |                                                                                                                                                                                                                                          
|10.39      |  | Lease Termination Agreement dated April 28, 2003 between Westlake Park Associates and Loudeye
Corporation with respect to offices at 1904 Fourth Avenue, Seattle, Washington, filed herewith.                                            
|           |  |                                                                                                                                                                                                                                          
|21.1(11)   |  | Subsidiaries of Loudeye Corp.                                                                                                                                                                                                            
|           |  |                                                                                                                                                                                                                                          
|99.1       |  | Certification of Jeffrey M. Cavins, President and Chief Executive Officer of Loudeye Corp., Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                     
|           |  |                                                                                                                                                                                                                                          
|99.2       |  | Certification of Jerold J. Goade Jr., Vice President and Chief Financial Officer of Loudeye Corp.,
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002                              



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LOUDEYE TECHNOLOGIES INC. 10-Q



|    |  | Confidential treatment has been requested as to certain portions of this
Exhibit.                     
|---- |  | ------------------------------------------------------------------------------------------------------
|    
|(1)  |  | Incorporated by reference to Loudeye Corp.s registration statement on
Form S-1 file number 333-93361.
|    
|(2)  |  | Incorporated by reference to Loudeye Corp.s Form 10-Q, for the period
ending June 30, 2000.          
|    
|(3)  |  | Incorporated by reference to Loudeye Corp.s Form 10-Q, for the period
ending September 30, 2000.     
|    
|(4)  |  | Incorporated by reference to Loudeye Corp.s Form 10-K, for the period
ending December 31, 2000.      
|    
|(5)  |  | Incorporated by reference to Loudeye Corp.s Report on Form 8-K dated
March 13, 2001.                 
|    
|(6)  |  | Incorporated by reference to Loudeye Corp.s Form 10-Q, for the period
ending March 31, 2001.         
|    
|(7)  |  | Incorporated by reference to Loudeye Corp.s Form 10-Q, for the period
ending September 30, 2001.     
|    
|(8)  |  | Incorporated by reference to Loudeye Corp.s Form 10-K for the period
ended December 31, 2001.        
|    
|(9)  |  | Incorporated by reference to Loudeye Corp.s Form 8-K dated November 19,
2002                         
|    
|(10) |  | Incorporated by reference to Loudeye Corp.s Form 8-K dated February 3,
2003                          
|    
|(11) |  | Incorporated by reference to Loudeye Corp.s Form 10-K dated April 15,
2003.                          



| | (b) | Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     | On February 12, 2003, we filed a Report on Form 8-K that announced
certain changes management and the board of directors, including the
resignation of our former chief executive officer and the engagement of
Regent Pacific Management Corporation to provide management services to
the Company.                                                                                                                                                                                                                                                                                          
|
| |     | On March 19, 2003, we filed a Report on Form 8-K that announced that on
March 11, 2003 Regent Pacific Management Corporations engagement for
management services concluded and Jeffrey M. Cavins was appointed as our
new President and Chief Executive Officer. In addition, we reported that we received
an affirmative vote at a special meeting of stockholders permitting our
Board of Directors, should it deem beneficial, to effect a reverse stock
split at one of three ratios at any time prior to December 31, 2003.
Finally, we reported certain corporate strategy initiatives.

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LOUDEYE TECHNOLOGIES INC. 10-Q

CERTIFICATIONS

I, Jeffrey M. Cavins, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Loudeye Corp.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)   designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
|
| | b)   evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                  
|
| | c)   presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)   all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and



| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | b)   any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officer and I have indicated in this
quarterly report whether or not there
were significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard

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LOUDEYE TECHNOLOGIES INC. 10-Q

to significant
deficiencies and material weaknesses.

|                     |  |                                      
|-------------------- |  | -------------------------------------
|Date:   May 19, 2003 |  | / s /  Jeffrey M. Cavins             
|                     |  |                                      
|                     |  | Jeffrey M Cavins                     
|                     |  | President and Chief Executive Officer
|                     |  |                                      
|                     |  | (Principal Executive Officer)        

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LOUDEYE TECHNOLOGIES INC. 10-Q

CERTIFICATIONS

I, Jerold J. Goade Jr., certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Loudeye Corp.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)   designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;



| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b)   evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and



| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c)   presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)   all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and



| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | b)   any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officer and I have indicated in this
quarterly report whether or not

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LOUDEYE TECHNOLOGIES INC. 10-Q

there
were significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

|                     |  |                                             
|-------------------- |  | --------------------------------------------
|Date:   May 19, 2003 |  | / s /  Jerold J. Goade Jr.                  
|                     |  |                                             
|                     |  | Jerold J. Goade Jr.                         
|                     |  | Vice President and Chief Financial Officer  
|                     |  |                                             
|                     |  | (Principal Financial and Accounting Officer)

42





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##### Table of Contents



LOUDEYE TECHNOLOGIES INC. 10-Q




SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Seattle, State of Washington, May 14, 2003

| |  |               |                                              |     |  |                     
| |  | ------------- | -------------------------------------------- | --- |  | --------------------
| |  | LOUDEYE CORP.
| |  |               |                                              |     |  |                     
| |  | BY:           |                                              | /s/ |  | JEFFREY M. CAVINS   
| |  |               |                                             
| |  |               | Jeffrey M. Cavins                           
| |  |               | President
and Chief
Executive Officer       
|
| |  |               | (Principal
Executive Officer)               
| |  |               |                                              |     |  |                     
| |  | BY:           |                                              | /s/ |  | JEROLD J. GOADE, JR.
| |  |               |                                             
| |  |               | Jerold J. Goade Jr.                         
| |  |               | Vice President and Chief Financial Officer  
| |  |               | (Principal Financial and Accounting Officer)

43