SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 December 25, 2004~~

For the quarterly period ended June 25, 2005

¨ Transition Report pursuant Section 13 or 15 (d) of the Securities Exchange Act of 1934 ~~for the transition period from to~~

For the transition period from to

Commission File No. 33-9875

BOSTON ACOUSTICS, INC.

(Exact name of registrant as specified in its charter)

Massachusetts		04-2662473
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)
300 Jubilee Drive Peabody, Massachusetts		01960
(Address of Principal Executive Offices)		(Zip Code)

300 Jubilee Drive Peabody, Massachusetts		01960
(Address of Principal Executive Offices)		(Zip Code)

(978) 538-5000

(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 Rule 12b-2 of the Act). Yes ¨ No x

There were 4,~~178~~234,512 shares of Common Stock issued and outstanding as of ~~February~~August 89, 2005.

Boston ~~Acoustics~~Acousti cs, Inc.

Index

		Page
Part I: Financial Information
Item 1.	Financial Statements
	Consolidated Balance Sheets (Unaudited)-March 27, 2004 and December 25, 2004	4
	Consolidated Balance Sheets (Unaudited)-March 26, 2005 and June 25, 2005	4
	Consolidated Statements of Income (Unaudited)-Three months and nine months ended December 27, 2003 and December 25, 2004	6
	Consolidated Statements of Income (Unaudited)-Three months ended June 26, 2004 and June 25, 2005	6
	Consolidated Statements of Cash Flows (Unaudited)-Nine months ended December 27, 2003 and December 25, 2004	7
	Consolidated Statements of Cash Flows (Unaudited)-Three months ended June 26, 2004 and June 25, 2005	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1412
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1816
Item 4.	Controls and Procedures	1816
Part II: Other Information
	Items 1 through 6	1917
	Signatures	2018
	Exhibits	2119
	Exhibit 31.1 and 31.2 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibits 31.1 and 31.2 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.1 and 32.2 Certifications pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibits 32.1 and 32.2 Certifications pursuant to 18 U.S.C Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

PART I: ~~FINANCIAL~~FINANCI AL INFORMATION

Item 1: Financial Statements

Boston Acoustics , Inc. and Subsidiaries

Consolidated Balance Sheets

Assets

	March 27,2004		December 25,2004
	March 26, 2005		June 25, 2005
			(Unaudited)
Current Assets:
Cash and cash equivalents	$	76,~~552~~784,~~054~~588	$	7,~~392~~913,~~250~~293
Accounts receivable, net of allowance for doubtful accounts of approximately $582,000 and $597,000 at March 27, 2004 and December 25, 2004, respectively		8,202,044		12,176,113
Accounts receivable, net of allowance for doubtful accounts of approximately $457,000 and $480,000 at March 26, 2005 and June 25, 2005, respectively		11,234,090		11,847,784
Inventories		12,~~240~~243,~~838~~617		1211,~~964~~565,~~521~~831
Deferred income taxes		2,~~492~~099,000		2,~~492~~099,000
Prepaid income taxes		~~480~~858,000		72858,000
Prepaid expenses and other current assets		~~956~~1,~~142~~028,474		~~902~~907,~~556~~028
Total current assets		3134,~~923~~247,~~078~~769		35,~~999~~190,~~440~~936
Property and Equipment, at Cost:
Machinery and equipment		1718,~~429~~942,~~279~~568		18,~~314~~977,~~374~~096
Building and improvements		8,795,567		8,795,567
Office equipment and furniture		56,~~902~~352,~~487~~829		6,~~066~~401,~~308~~375
Land		1,815,755		1,815,755
Motor vehicles		209,950		~~209~~236,~~950~~569
		34,153,038		35,201,954
		36,116,669		36,226,362
Less-Accumulated depreciation and amortization		2325,~~278~~883,~~695~~928		2526,~~423~~366,~~078~~255
		10,874,343		9,778,876
		10,232,741		9,860,107
Other Assets, Net
Other assets, net		~~754~~788,~~710~~825		~~786~~791,~~326~~323
Deferred income taxes		~~406~~486,000		~~406~~486,000
	$	4345,~~958~~755,~~131~~335	$	46,~~970~~328,~~642~~366

The accompanying notes are an integral part of these consolidated financial statements.

Boston Acoustics, Inc. and Subsidiaries

Consolidated Balance Sheets

Liabilities and Stockholders’ Equity

	March 27,2004		December 25,2004
	March 26, 2005		June 25, 2005
			(Unaudited)
Current Liabilities:
Accounts payable	$	7,~~322~~454,~~535~~464	$	86,~~274~~823,~~232~~473
Accrued payroll and payroll-related expenses		523,234		742,006
Accrued payroll and payroll- related expenses		701,931		607,201
Accrued income taxes		~~649~~603,~~512~~307		~~574~~1,057,851
Dividends payable		~~354~~355,~~182~~174		~~355,174~~—
Other accrued expenses		1949,~~081,361~~168		1,~~521~~041,~~276~~821
Current maturity of line of credit		~~309~~9,~~394~~432		~~183,224~~—
Total current liabilities		10,~~240~~073,~~218~~476		119,~~650~~530,~~763~~346
Stockholders’ Equity:
Common stock, $.01 par value-
Common stock, $.01 par value- Authorized — 8,000,000 shares Issued — 4,178,531 and 4,198,531 shares at March 26, 2005 and June 25, 2005, respectively		41,785		41,985
Authorized — 8,000,000 shares Issued — 5,161,514 and 4,178,531 shares at March 27, 2004 and December 25, 2004, respectively		51,615		41,785
Additional paid-in capital		—		192,300
Additional paid-in capital		1,789,689		1,501,232
Retained earnings		35,640,074		36,563,735
Retained earnings		43,409,158		33,776,862
Total stockholders’ equity		35,681,859		36,798,020
		45,250,462		35,319,879
	$	45,755,335	$	46,328,366
Less-Treasury stock, 994,650 and 0 shares at cost, at March 27, 2004 and December 25, 2004, respectively		11,532,549		—
Total stockholders’ equity		33,717,913		35,319,879
	$	43,958,131	$	46,970,642

The accompanying notes are an integral part of these consolidated financial statements.

B ~~Boston~~oston Acoustics, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

Three Months Ended

~~Nine Months Ended~~

December 27,2003

December 25,2004

December 27,2003

December 25,2004

June 26, 2004

June 25, 2005

Net sales

1512,~~377~~619,~~307~~951

17,~~899~~951,~~510~~953

~~41,085,416~~

~~42,769,972~~

Cost of goods sold

87,~~828~~131,~~722~~958

10,~~200~~486,~~084~~445

~~25,115,724~~

~~24,502,849~~

Gross profit

65,~~548~~487,~~585~~993

7,~~699~~465,~~426~~508

~~15,969,692~~

~~18,267,123~~

Selling and marketing expenses

2,~~804~~619,~~028~~638

3,~~011~~099,~~942~~098

~~7,245,720~~

~~8,144,559~~

General and administrative expenses

1,~~392~~030,~~165~~172

1,~~208~~220,~~632~~531

~~3,594,159~~

~~3,322,272~~

Engineering and development expenses

1,~~186~~206,~~143~~654

1,~~170~~140,~~919~~854

~~3,400,312~~

~~3,457,619~~

Total operating expenses

54,~~382~~856,~~336~~464

5,~~391~~460,~~493~~483

~~14,240,191~~

~~14,924,450~~

Income from operations

1631,~~166,249~~529

2,~~307~~005,~~933~~025

~~1,729,501~~

~~3,342,673~~

Interest income

5313,~~398~~887

1630,~~656~~209

~~117,275~~

~~47,825~~

Interest expense

(87,~~751~~986

)

(8,~~057~~017

)

~~(24,624~~

)

~~(24,029~~

)

Other income

209,275

216,842

207,538

238,841

Other income (expense), net

46,297

(567,556

)

Income before provision for income taxes

1683,~~420,171~~727

21,~~533~~459,~~374~~661

~~2,029,690~~

~~3,605,310~~

Provision for income taxes

~~404~~223,000

~~715~~536,000

~~661,000~~

~~1,086,000~~

Net income

1460,~~016,171~~727

1923,~~818,374~~661

~~1,368,690~~

~~2,519,310~~

Net income per share:

Net income per share

Basic

.2511

.4422

~~.32~~

~~.60~~

Diluted

.2511

.4321

~~.32~~

~~.60~~

Weighted-average common shares outstanding (Note 4):

Basic

4,~~105~~166,~~645~~845

4,~~174~~199,~~446~~147

~~4,279,825~~

~~4,169,379~~

Diluted

4,~~144~~190,~~156~~446

4,~~258~~316,~~083~~794

~~4,302,898~~

~~4,219,408~~

Dividends per share

.085

~~.085~~—

~~.255~~

The accompanying notes are an integral part of these consolidated financial statements.

Boston Acoustics, Inc. and ~~Subsidiaries~~Subsidiar ies

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	Three Months Ended
	December 27,2003			December 25,2004
	June 26, 2004			June 25, 2005
Operating activities
Net income	$	1460,~~368,690~~727		$	2923,~~519,310~~661
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2530,~~340,911~~561			2482,~~144,383~~327
Gain on sales of property and equipment		(3,643	)		—
Provision for bad debt		2,753			25,261
Deferred income taxes		293,000			—
Charge related to conversion of full recourse notes and forgiveness of subscription receivable		29,042			—
Provision for bad debt		220,376			17,798
Changes in assets and liabilities:
Accounts receivable		(2235,~~883,443~~657	)		(3638,~~991,867~~955	)
Inventories		~~269~~535,~~249~~468			~~(723~~677,~~683~~786	)
Prepaid expenses and other current assets		~~846~~134,~~527~~072			~~461~~121,~~586~~446
Accounts payable		2(552,~~911,222~~724	)		~~951~~(630,~~697~~991	)
Accrued payroll and other accrued expenses		~~720~~(47,~~278~~897	)		~~584~~452,~~026~~467
Net cash provided by operating activities		6827,~~112,209~~303			1,~~963~~413,~~250~~002
Investing activities
Purchases of property and equipment		(1205,~~284,060~~046	)		(1109,~~048,916~~693	)
Proceeds from sale of property and equipment		3,643			—
Increase in other assets		(2,499	)		(2,498	)
Increase in other assets		(8,410	)		(31,616	)
Net cash used in investing activities		(207,545	)		(112,191	)
Net cash used in investing activities		(1,288,827	)		(1,080,532	)
Financing activities
Proceeds from exercise of stock options		—			~~146~~192,~~194~~500
Net payments on line of credit		—(299,917	)		(~~126~~9,~~170~~432	)
Purchase of treasury stock		(3,271,386	)		—
Dividends paid		(354,182	)		(355,174	)
Dividends paid		(1,097,358	)		(1,062,546	)
Net cash used in financing activities		(654,099	)		(172,106	)
Net cash used in financing activities		(4,368,744	)		(1,042,522	)
Net increase (decrease) in cash and cash equivalents		(34,341	)		1,128,705
Net increase (decrease) in cash and cash equivalents		454,638			(159,804	)
Cash and cash equivalents, beginning of period		7,552,054			6,784,588
Cash and cash equivalents, beginning of period		6,941,222			7,552,054
Cash and cash equivalents, end of period	$	7,517,713		$	7,913,293
Cash and cash equivalents, end of period	$	7,395,860		$	7,392,250
Supplemental Disclosure of Noncash Financing and Investing Activities
Dividends payable	$	~~348~~354,~~980~~182		$	~~355,174~~—
Treasury shares deemed retired (Note 11)	$	—		$	11,532,549
Partial forgiveness of recourse notes	$	90,443		$	—
Conversion of recourse notes into non-recourse notes	$	140,474		$	—
Decrease in minority interest in foreign subsidiary	$	(632	)	$	—
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	~~313~~255,~~912~~250		$	181,~~020,750~~456
Cash paid for interest	$	247,~~624~~986		$	248,~~029~~017

The accompanying notes are an integral part of these consolidated financial statements.

B ~~Boston~~oston Acoustics, Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(1) Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared by Boston Acoustics, Inc. and subsidiaries (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of interim period results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. The Company believes, however, that its disclosures are adequate to make the information presented not misleading. The results for the three ~~and nine~~-month ~~periods~~period ended ~~December~~June 25, ~~2004~~2005 are not ~~necessarily~~ necessarily indicative of results to be expected for the full fiscal year. These financial statements should be read in conjunction with the Company’s ~~Annual~~annual ~~Report~~financial ~~included~~statements infiled with its Annual Report on Form 10-K for the fiscal year ended March 2726, ~~2004~~ 2005.

As previously announced on June 8, 2005, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with D&M Holdings U.S., Inc., a Delaware corporation (“D&M”), and Allegro Acquisition Corp., a wholly owned subsidiary of D&M (the “Merger”). Each share of our common stock will be converted into the right to receive $17.50 in cash, without interest. The consummation of the Merger is subject to shareholder approval and other customary conditions. The proposed Merger is discussed in a Current Report on a Form 8-K which we filed with the Securities and Exchange Commission on June 9, 2005, which Report included a copy of the Merger Agreement.

(2) Stock-Based Compensation

The Company ~~follows~~accounts ~~Accounting~~for ~~Principles~~its ~~Board~~stock-based ~~Opinion~~compensation under SFAS No. ~~25,~~ 123 Accounting for Stock-Based ~~Issued~~Compensation. toThe ~~Employees~~Company ~~(APB~~continues ~~25)~~to ~~and~~apply APB ~~related~~No. ~~interpretations,~~25 ~~in accounting~~ for ~~its~~employee stock~~-based~~ ~~compensation~~option ~~plans,~~awards ~~rather~~and ~~than~~elected the disclosure-only alternative ~~fair~~for ~~value~~the ~~accounting~~same ~~method provided for~~ under ~~Statement of Financial Accounting Standards (~~SFAS) No. 123~~, Accounting for Stock-Based Compensation~~. ~~Under~~The ~~APB~~Company ~~25,~~follows ~~when~~ the ~~exercise~~disclosure ~~price~~provisions of ~~options~~Statement ~~granted~~of ~~under~~Financial ~~these~~Accounting ~~plans~~Standards ~~equals~~No. ~~the~~148 ~~market~~(SFAS ~~price~~148), ofAccounting for ~~the~~Stock-Based ~~underlying~~Compensation ~~stock~~- onTransition ~~the~~and ~~date~~Disclosure, ofand ~~grant,~~amendment noof ~~compensation~~FASB ~~expense~~Statement ~~is required~~No. In123. ~~accordance~~SFAS ~~with~~148 ~~Emerging~~requires ~~Issues~~prominent ~~Task~~disclosures ~~Force~~in ~~(EITF)~~both ~~96-18,~~annual ~~the~~and ~~Company~~interim ~~records~~financial ~~compensation~~statements ~~expense~~regarding ~~equal to~~ the ~~fair~~method ~~value~~ of ~~options~~accounting ~~and~~for ~~warrants granted to non~~stock-~~employees~~based employee ~~over~~compensation and the ~~vesting~~effect ~~period,~~of ~~which~~the ismethod ~~generally~~used ~~the~~to ~~period~~report ~~of service~~results.

The following tables illustrate the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation. The Company has computed the pro forma disclosures required under SFAS No. 123 and ~~SFAS~~Statement of Financial Accounting Standards No.148 (SFAS 148), Accounting for Stock-Based Compensation— – Transition and Disclosure, for all stock options granted to employees of the Company for the three ~~and nine~~-month periods ended ~~December~~June 2726, ~~2003~~2004 and ~~December~~June 25, ~~2004~~2005, respectively, using the Black-Scholes option-pricing model prescribed by SFAS No. 123.

Pro forma disclosure. The pro forma effect on the Company’s financial statements of applying SFAS No. 123 for all options to purchase common stock of the Company would be as follows:

	For the three months ended
	December 27, 2003		December 25, 2004
	June 26, 2004		June 25, 2005
Net income, as reported	$	1460,~~016,171~~727	$	1923,~~818,374~~661
Less: fair value of all employee stock-based compensation awards		~~300~~90,~~919~~192		120,~~424~~354
Pro forma net income	$	~~715~~370,~~252~~535	$	1903,~~816,950~~307
Net income per share, as reported:
Basic	$	0.2511	$	0.4422
Diluted	$	0.2511	$	0.4321
Net income per share, pro forma:
Basic	$	0.1709	$	0.4422
Diluted	$	0.1709	$	0.4321
	For the nine months ended
	December 27, 2003		December 25, 2004
Net income, as reported	$	1,368,690	$	2,519,310
Less: fair value of all employee stock-based compensation awards		986,234		67,806
Pro forma net income	$	382,456	$	2,451,504
Net income per share, as reported:
Basic	$	0.32	$	0.60
Diluted	$	0.32	$	0.60
Net income per share, pro forma:
Basic	$	0.09	$	0.59
Diluted	$	0.09	$	0.58

(3) Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following:

	March 27, 2004		December 25, 2004
	March 26, 2005		June 25, 2005
Raw materials	$	23,~~017~~339,~~295~~019	$	3,~~556~~171,~~778~~568
Work-in-process		1,~~244~~467,~~599~~862		1,~~347~~245,~~157~~497
Finished goods		87,~~978~~436,~~944~~736		87,~~060~~148,~~586~~766
	$	12,~~240~~243,~~838~~617	$	1211,~~964~~565,~~521~~831

Work-in-process and finished goods inventories consist of purchased components and finished products purchased from third party suppliers and raw materials, labor and manufacturing overhead.

(4) Net Income Per Common Share

Net income per share is based upon the weighted-average number of common shares and common share equivalents outstanding each year. For the three-month periods ended June 25, 2005 and June 26, 2004, 28,000 and 127,338, options, respectively, have been excluded from the weighted-average number of common and dilutive potential shares outstanding, as their effect would be antidilutive.

The computation of basic and diluted shares outstanding is as follows:


	For the three months ended
	June 26, 2004	June 25, 2005
Basic weighted-average common shares outstanding	4,166,845	4,199,147
Dilutive effect of assumed exercise of stock options	23,601	117,647

Weighted-average common shares outstanding assuming dilution	4,190,446	4,316,794

(4) Net Income Per Common Share

Net income per share is based upon the weighted-average number of shares and share equivalents outstanding each year. For the three-month and nine-month periods ended December 25, 2004, there were 28,000 and 43,619 options, respectively, that have been excluded from the weighted-average number of common and dilutive potential shares outstanding, as their effect would be anti-dilutive. For the three-month and nine-month periods ended December 27, 2003, there were 239,350 and 391,465 options, respectively, that have been excluded from the weighted-average number of common and dilutive potential shares outstanding, as their effect would be anti-dilutive.

The computation of basic and diluted shares outstanding, as required by SFAS No. 128, is as follows:

	Three Months Ended		Nine Months Ended
	December 27,2003	December 25,2004	December 27,2003	December 25,2004
Basic weighted- average common shares outstanding	4,105,645	4,174,446	4,279,825	4,169,379
Dilutive effect of assumed exercise of stock options	38,511	83,637	23,073	50,029
Weighted-average common shares outstanding assuming dilution	4,144,156	4,258,083	4,302,898	4,219,408

(5) Revenue Recognition

The Company recognizes revenue in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin 104, Revenue Recognition (SAB 104).

Revenue is recognized when products are delivered to customers, provided that there are no uncertainties regarding customer acceptance, there is persuasive evidence of an arrangement, the sales price is fixed or determinable and collection of the related receivable is ~~reasonably assured~~probable.

At the time of revenue recognition, the Company provides reserves for sales returns, various sales rebates, timely pay discounts, and freight reserves.

The Company charges many of its customers shipping and freight costs related to the delivery of its products. Accordingly, the Company follows the provisions of Emerging Issues Task Force (EITF) Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs. Amounts charged to customers are included in net sales in the accompanying consolidated statements of income. The related shipping and handling costs are recorded in cost of sales in the accompanying consolidated statements of income.

The Company also follows the provisions of EITF Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products). The Company offers cooperative advertising and other similar programs to its largest customers whereby the customers can earn sales credits for approved advertisements involving the Company’s products. The Company records these credits as an adjustment to the selling price of its products. For the three-month periods ~~ended~~ending ~~December~~June 25, ~~2004~~2005 and ~~December~~June 2726, ~~2003~~2004, cooperative advertising and other similar credits included as sales adjustments were approximately $~~193~~162,000 and $~~707~~116,000, respectively. ~~For the nine-month periods~~

(6) Significant Customers and Concentration of Credit Risk


	Net Sales for the Three Months Ended				Accounts Receivable as of
	June 26, 2004		June 25, 2005		June 26, 2004		June 25, 2005
Customer A	23	%		*	29	%		*
Customer B	16	%	33	%	18	%	36	%

*Customer

does not exceed 10% of net sales or accounts receivable.

~~ended~~(7) ~~December~~International ~~25,~~Operations ~~2004 and December 27, 2003, cooperative advertising and other similar credits included as sales adjustments were approximately $537,000 and $1,804,000, respectively.~~

~~(6)~~The Company maintains sales concentrations in Europe, Canada and Asia/Pacific Rim, in addition to distributing product through three foreign subsidiaries. ~~Significant~~Export ~~Customers~~sales accounted for approximately 18% and ~~Concentration~~19% of ~~Credit~~net ~~Risk~~sales for the three-month periods ended June 25, 2005 and June 26, 2004, respectively.

	Net Sales for the Three Months Ended				Net Sales for the Nine Months Ended
	December 27, 2003		December 25,2004		December 27, 2003		December 25, 2004
Customer A	32	%		*	32	%	13	%
Customer B		*	28	%		*	23	%
Customer C		*		*	12	%		*

(8) Warranty Costs

*The ~~Customer~~Company’s ~~does~~products ~~not~~generally ~~exceed~~carry ~~10%~~a one to five-year warranty. The Company establishes a warranty reserve based on anticipated warranty claims at the time product revenue is recognized. Factors that affect the Company’s warranty reserve level include the number of ~~net~~sold ~~sales~~units, the anticipated cost of warranty repairs and historical and anticipated rates of warranty claims. The following table provides the detail of the change in the Company’s product warranty reserve, which is a component of other accrued expenses on the consolidated balance sheets.

	Accounts Receivable as of
	Total
	March 27, 2004			December 25, 2004
Warranty reserve as of March 26, 2005	$	200,000
Customer A	30	%		10	%
Plus: amounts accrued related to new sales		17,000
Customer B	15	%		28	%
Less: amounts charged against warranty reserve		(17,000	)
Customer C		*			*
Warranty reserve as of June 25, 2005	$	200,000

*(9) ~~Customer~~Recent ~~does~~Accounting ~~not exceed 10% accounts receivable.~~Pronouncements

In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment—An Amendment of FASB Statements No. 123 and 95 (7“SFAS No. 123R”), ~~Segment~~which ~~Reporting~~requires all companies to measure compensation cost for all share-based payments, including employee stock options, at fair value, effective for public companies for annual periods beginning after June 15, 2005. Generally, the approach in SFAS No. 123R is similar to the approach described in SFAS No. 123. However, SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The adoption of SFAS No. 123R may have a significant impact on the Company’s results of operations, although it will have no impact on the Company’s overall financial position. The Company is evaluating SFAS No. 123R and has not yet determined the amount of stock option expense which will be incurred in future periods.

In certain previous periods we managed our business in two operating segments: Core and OEM/Multimedia. Inasmuch as there has been a significant decline in our multimedia business, we now manage our business as a single operating segment. Manufacturing processes are largely the same for all product lines. Our chief operating decision makers’ use consolidated results to make operating and strategic decisions.

Three Months Ended December 27, 2003

Fiscal 2004	Core		OEM andMultimedia			Total
Net Sales	$	14,481,128	$	896,179		$	15,377,307
Gross profit	$	6,619,515	$	(70,930	)	$	6,548,585

~~Nine~~ITE M ~~Months~~2. ~~Ended~~MANAGEMENT’S ~~December~~DISCUSSION ~~27,~~AND ~~2003~~ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Fiscal 2004	Core		OEM andMultimedia		Total
Net Sales	$	36,202,097	$	4,883,319	$	41,085,416
Gross profit	$	15,642,187	$	327,505	$	15,969,692

(8) International Operations

The Company maintains sales concentrations in Europe, Canada, and Asia/Pacific Rim, in addition to distributing product through three foreign subsidiaries. Export sales accounted for approximately 19% and 21% of net sales for the three-month periods ended December 25, 2004 and December 27, 2003, respectively. For the nine-month periods ended December 25, 2004 and December 27, 2003, export sales accounted for approximately 20% and 18% of net sales, respectively.

(9) Warranty Costs

The Company’s products generally carry a one to five-year warranty. The Company establishes a warranty reserve based on anticipated warranty claims at the time product revenue is recognized. Factors that affect the Company’s warranty reserve level include the number of sold units, the anticipated cost of warranty repairs and historical and anticipated rates of warranty claims. The following table provides the detail of the change in the Company’s product warranty reserve, which is a component of other accrued expenses on the consolidated balance sheets.

	Total
Warranty reserve as of March 27, 2004	$	250,000
Plus: amounts accrued related to new sales		64,000
Less: amounts charged against warranty reserve		(64,000	)
Warranty reserve as of December 25, 2004	$	250,000

(10) Recent Accounting Pronouncements

In October 2004, the FASB concluded that the proposed Statement 123R, Share-Based Payment, which would require all companies to measure compensation cost for all share-based payments, including employee stock options, at fair value, would be effective for public companies (except small business issuer as defined in SEC Regulation S-B) for interim or annual periods beginning after June 15, 2005. Retroactive application of the requirements of Statement 123, not Statement 123R, to the beginning of the fiscal year that includes the effective date would be permitted, but not required and early adoption of Statement 123R is encouraged. The FASB issued its final statement in December 2004. The FASB concluded that companies could adopt the new standard in one of two ways: 1) Modified prospective transition method - A company would recognize share-based employee compensation cost from the beginning of the fiscal period in which the recognition provisions are first applied as if the fair-value-based accounting method had been used to account for all employee awards granted, modified, or settled after the effective date and to any awards that were not fully vested as of the effective date. Measurement and attribution of compensation cost for awards that are nonvested as of the effective date of the proposed

Statement would be based on the same estimate of the grant-date fair value and the same attribution method used previously under Statement 123 (either for recognition or pro forma purposes) and 2) Modified retrospective transition method. A company would recognize employee compensation cost for periods presented prior to the adoption of Statement 123R in accordance with the original provisions of Statement 123; that is, an entity would recognize employee compensation cost in the amounts reported in the pro forma disclosures provided in accordance with Statement 123. A company would not be permitted to make any changes to those amounts upon adoption of the proposed Statement unless those changes represent a correction of an error (and are disclosed accordingly). For periods after the date of adoption of Statement 123R, the modified prospective transition method described above would be applied. The Company is in the process of determining the impact of this statement on the financial statements.

(11) Stockholders’ Equity

Effective July 1, 2004, companies incorporated in Massachusetts became subject to the Massachusetts Business Corporation Act, Chapter 156D. Chapter 156D provides that shares that are reacquired by a company become authorized but unissued shares. As a result, Chapter 156D eliminates the concept of “treasury shares” and provides that shares reacquired by a company become “authorized but unissued” shares. Accordingly, at September 25, 2004, the Company has redesignated its existing treasury shares, at an aggregate cost of $11,532,549 as authorized but unissued and has allocated this amount to common stock, additional paid in capital and retained earnings.

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

Results of Operations

The following table sets forth the results of operations for the three-month ~~and nine-month~~ periods ended ~~December~~June 2726, ~~2003~~2004 and ~~December~~June 25, ~~2004~~2005 expressed as percentages of net sales.

	Three Months Ended				~~Nine Months Ended~~
	December 27,2003		December 25,2004		December 27,2003		December 25,2004
	June 26, 2004		June 25, 2005
Net sales	100.0	%	100.0	%	~~100.0~~	%	~~100.0~~	%
Cost of goods sold	5756.45		5758.04		~~61.1~~		~~57.3~~
Gross profit	4243.65		4341.06		~~38.9~~		~~42.7~~
Selling and marketing expenses	1820.27		1617.83		~~17.6~~		~~19.0~~
General and administrative expenses	98.12		6.8		~~8.8~~		~~7.8~~
Engineering and development expenses	79.76		6.53		~~8.3~~		~~8.1~~
	35.0		30.1		34.7		34.9
Total operating expenses	38.5		30.4
Income from operations	75.60		1211.92		~~4.2~~		~~7.8~~
Interest income (expense), net	~~0.2~~—		0.1		~~0.2~~		~~0.1~~
Other income	1.4		1.2		0.5		0.5
Other income (expense), net	0.4		(3.2	)
Income before provision for income taxes	95.24		148.21		~~4.9~~		~~8.4~~
Provision for income taxes	21.67		43.0		~~1.6~~		~~2.5~~
Net income	63.67	%	105.21	%	~~3.3~~	%	~~5.9~~	%

Net sales are net after deductions from revenue for sales returns, various sales rebates, timely pay discounts, and freight reserves.

Cost of goods sold consists of purchased components and finished products purchased from third party suppliers and raw materials, direct labor, freight, and indirect costs associated with the Company’s manufacturing operations.

Selling and marketing expenses include payroll and payroll-related costs, sales commissions, as well as corporate advertising and literature costs associated with the sale and marketing of the Company’s products.

~~General~~12 and administrative expenses include management and administrative payroll and all other expenses associated with the Company’s operations outside of manufacturing, research and development, and sales and marketing, and include professional services, consulting arrangements, and corporate expenses resulting from the Company being a publicly traded company.

General and administrative expenses include management and administrative payroll and all other expenses associated with the Company’s operations outside of manufacturing, research and development, and sales and marketing, and include professional services, consulting arrangements, and corporate expenses resulting from the Company being a publicly traded company.

Engineering and development expenses include payroll and payroll-related expenses attributed to the design and enhancement of existing products along with the creation of new products; associated expenses include supplies, samples, test equipment, and inventory consumed. In addition, all product development expenditures, with the exception of tooling costs, are expensed as incurred.

Net sales for the ~~third~~ quarter increased ~~16%,~~from to approximately $1712,~~900~~620,000 ~~for the current fiscal period as compared~~ to approximately $1517,~~377~~952,000 ~~for~~during the ~~same~~first ~~period~~quarter aof ~~year ago. For the nine-month period ended December 25, 2004, net sales increased 4% to approximately $42,770,000 as compared to approximately $41,085,000 during~~ fiscal ~~2004~~2006. The overall sales increase during the quarter was ~~propelled~~driven by ~~new~~continued ~~product~~sales ~~introductions~~increases in the ~~Company’s core product categories, as well as, an increase in the~~ OEM automotive business in partnership with Visteon Corporation. ~~During~~The ~~the three-month and nine-month periods ended December 25, 2004, the~~ Company’s premium audio systems sold to the Chrysler Group through this partnership, included the automotive systems for the Chrysler 300 vehicles, ~~(which~~the ~~began~~Dodge inMagnum ~~January 2004)~~vehicles, the ~~Dodge~~2005 ~~Magnum~~Jeep Cherokee family of vehicles ~~(which~~and ~~commenced~~as announced in ~~April~~June ~~2004)~~2005, ~~and~~will ~~the~~now ~~2005~~include ~~Jeep~~the ~~Cherokee~~2006 ~~family~~Dodge ofCharger vehicles. ~~(which~~In ~~commenced~~addition, insales ~~September~~for ~~2004).~~the ~~Sales~~current ofquarter ~~multimedia~~reflect ~~speaker~~increases ~~systems~~in ~~previously~~the ~~reported as~~aftermarket acar ~~separate~~speaker ~~operating~~systems, ~~segment~~as ~~were~~well ~~insignificant~~as ~~for~~in the ~~three-month~~integrated ~~and~~product ~~nine-month~~categories of ~~periods~~speaker ~~ended December 25~~systems, ~~2004~~which ~~and~~include ~~are~~the ~~expected~~MicroSystem toCD beminiature ~~immaterial~~stereo inradio/CD ~~fiscal~~music ~~2005~~system.

During the three-month period ended ~~December~~June 25, ~~2004~~2005, the Company ~~introduced~~launched the ~~MicroSystem~~new ~~CD,~~S aSeries ~~miniature stereo radio/CD music system that delivers the performance~~ of ~~precisely~~aftermarket ~~matched~~car ~~separate~~speaker ~~components in one small, easy to use unit~~systems. The ~~retail~~11-model ~~price~~series isincludes ~~$499.00~~two ~~each.~~component Inand ~~addition,~~nine ~~the~~coaxial ~~Company~~configurations, ~~introduced~~replacing the ~~Avidea™ 610 Home Theater System during the quarter. This completely integrated movie and music~~FS ~~home entertainment system is designed for high performance~~ and ~~ease~~FX ofSeries ~~use~~models. ~~The~~With suggested ~~retail~~retails ~~price~~ranging isfrom $~~1,199~~69.~~00.~~95 ~~Also~~to ~~during~~$219.95 ~~the~~per ~~quarter~~pair, the ~~Company~~systems ~~introduced the P4 Series of high performance loudspeakers for flat panels. These speakers~~ are designed to ~~fit~~complement ~~today’s~~factory ~~flat~~system ~~panel~~upgrades ~~TVs perfectly, both sonically~~ and ~~visually.~~pair ~~There~~with ~~are~~any 5Boston ~~models~~speaker ~~that have suggested retails between $400~~system.00 ~~and $1,500.00 each.~~

The Company introduced the G series of aftermarket automotive subwoofers. The G5 subwoofers are optimized for sound quality and high output. There are two 10-inch models with a suggested retail of $349.95 each and two 12-inch models with suggested retail of $399.95 each. The G2 subwoofers deliver high performance and high value. There are two 10-inch models with a suggested retail of $149.95 each and two 12-inch models with a suggested retail of $179.95 each. Introductions of upgraded versions of existing product offerings, while permitting the Company to remain competitive, are not likely to result in significant increases in revenue over the long term~~, because they are replacing products that are being phased out~~.

The Company’s ~~overall~~ gross margin for the three-month period ended ~~December~~June 25, ~~2004~~2005 ~~increased~~decreased ~~from 42.6% to 43.0%~~ as ~~compared to the same period~~ a ~~year~~percentage ~~ago.~~of ~~For~~net ~~the~~sales ~~nine-month period ended December 25, 2004, gross margin increased~~ from 3843.95% to 4241.76% ~~for~~due ~~the same period last year. The increases for both the three-month and nine-month periods were~~ primarily ~~due~~ to a larger portion of total sales being derived from product categories that reflect ~~higher~~ lower margins as compared to the same ~~periods~~period a year ago ~~and continued improvement in operational efficiencies~~.

Total operating expenses decreased as a percentage of net sales, ~~for~~but increased in absolute dollars by approximately $604,000 during the three-month period ended ~~December~~June 25, 2005, ~~2004~~as ~~while~~compared ~~increasing~~to ~~slightly~~the ascorresponding period a ~~percentage~~year ofago. ~~net~~Selling ~~sales~~and ~~for~~marketing ~~the~~expenses ~~nine-month~~have ~~period.~~increased Inin absolute dollars (approximately $479, ~~total~~000) ~~operating~~primarily ~~expenses~~due ~~increased~~to ~~for~~increases ~~the~~in ~~three-month~~marketing consulting and ~~nine-month~~outside ~~periods~~services ~~ended~~(approximately ~~December 25~~$35,000), advertising ~~2004~~and trade show costs (approximately $145,000), bysales commission expenses (approximately $9188,000), and payroll and payroll-related expenses (approximately $~~684~~106,000 ~~respectively~~), as compared to the ~~corresponding~~same ~~periods~~period a year ago. ~~Selling~~General and ~~marketing~~ administrative expenses ~~have decreased~~increased asin aabsolute ~~percentage~~dollars of(approximately ~~net~~$190,000) ~~sales~~due ~~for~~to ~~the~~increases ~~three-month~~in ~~period~~payroll ~~ended~~and ~~December~~payroll-related ~~25,~~expenses ~~2004~~(approximately ~~while~~$39,000), ~~increasing~~audit, astax aand ~~percentage~~legal offees ~~net~~(approximately ~~sales~~$36,000), ~~for~~consulting ~~the~~fees ~~nine-month period ended. Selling~~ and ~~marketing~~outside ~~expenses~~services ~~increased in absolute dollars~~ (approximately $~~208~~98,000 ~~and $899,000~~), ~~for the three-month~~ and ~~nine-month~~doubtful ~~periods~~accounts ~~ended~~expense ~~December~~(approximately 25$17,000), ~~2004~~ as compared to the same ~~periods~~three-month period a year ago. ~~Increases~~Engineering inand ~~marketing~~development ~~consulting~~expenses ~~and~~have ~~outside~~decreased ~~services~~in absolute dollars (approximately $2266,000) ~~and~~due ~~$373,000),~~to ~~corporate~~decreases ~~advertising~~in consulting fees and ~~literature~~outside ~~expenses~~services (approximately $8441,000), and ~~$244,000)~~payroll and ~~sales~~payroll-related ~~commission~~ expenses (approximately $7831,000 ~~and $272,000~~) ~~accounted for the overall increase~~ as compared to the ~~same~~corresponding period in fiscal 2005.

15The Company posted net interest income of approximately $22,000 for the three-month period ended June 25, 2005 compared to approximately $6,000 for the corresponding period last year. The increase is the result of higher interest rates and cash balances during the three-month period ended June 25, 2005.

~~periods~~As apreviously ~~year~~announced ~~ago.~~on ~~General~~June ~~and~~8, ~~administrative~~2005, ~~expenses~~we ~~decreased~~entered ~~both~~into asan aAgreement ~~percentage of net sales~~ and inPlan ~~absolute~~of ~~dollars~~Merger (~~approximately~~the ~~$184,000 and~~“Merger ~~$272,000~~Agreement”) ~~for~~with ~~the~~D&M ~~three-month~~Holdings ~~and nine-month periods~~U.S., ~~respectively~~Inc., ~~due to~~ a ~~net~~Delaware ~~decrease~~corporation ~~in tax consulting fees~~(“D&M”), ~~tax compliance fees~~ and ~~audit~~Allegro ~~fees~~Acquisition ~~(approximately $37~~Corp.,~~000~~ ~~and $155,000),~~ a ~~decrease~~wholly inowned ~~the~~subsidiary ~~provision~~of ~~for~~D&M ~~doubtful accounts~~ (~~approximately~~the ~~$177,000 and $196,000~~“Merger”),. ~~offset~~Each byshare aof ~~net~~our ~~increase~~common instock ~~outside~~will ~~services,~~be ~~consulting,~~converted ~~director~~into ~~and~~the right ~~legal~~to ~~fees~~receive ~~(approximately~~ $~~38,000~~17.50 ~~and~~in ~~$98~~cash,~~000).~~ ~~Engineering~~without ~~and~~interest. ~~development~~The ~~expenses~~consummation ~~have~~of ~~decreased~~the ~~both~~Merger asis asubject ~~percentage~~to ofshareholder ~~net~~approval ~~sales~~ and in ~~absolute~~other ~~dollars~~customary ~~(approximately $15,000) for the three-month period ended December 25, 2004~~conditions. ~~For~~The ~~the~~proposed ~~nine-month~~Merger ~~period,~~is ~~engineering~~discussed ~~and~~in ~~development~~a ~~expenses~~Current ~~have~~Report ~~decreased~~on as a ~~percentage~~Form of8-K ~~net~~which ~~sales,~~we ~~but~~filed ~~increased~~with ~~in absolute dollars~~the ~~(approximately~~Securities ~~$57,000) due to an increase in consulting fees~~ and ~~outside~~Exchange ~~services~~Commission ~~(approximately~~on ~~$116~~June 9,~~000)~~ ~~partially offset by decreases in depreciation expense (approximately $28~~2005,~~000),~~ ~~and~~which ~~R&D~~Report ~~supplies~~included ~~(approximately~~a ~~$21,000)~~copy asof ~~compared to~~ the ~~corresponding~~Merger ~~period in fiscal 2004~~Agreement.

~~The~~In ~~Company~~connection ~~posted~~with ~~net~~the ~~interest income~~Merger, the company incurred expenses of approximately $9580,000 ~~for~~during the three-month period ended ~~December~~June 25, ~~2004~~2005. ~~compared~~These ~~to approximately $45~~expenses,~~000~~ ~~for~~reflected ~~the~~as ~~corresponding~~other ~~period last year. For the nine-month period ended December 25~~expenses, ~~2004,~~included ~~the~~fees ~~Company~~and ~~reported~~out ~~net~~of ~~interest income~~pocket ofexpenses totaling approximately $24261,000 ~~compared~~paid to ~~approximately $93,000 for~~ the ~~same~~Company’s ~~period~~financial aadvisor ~~year~~for ~~ago.~~rendering ~~Last~~its ~~year,~~opinion ~~during~~to the ~~three-month~~Boston ~~and~~Acoustics ~~nine-month~~board ~~periods~~of ~~ended December 27~~directors, ~~2003,~~legal ~~the~~fees ~~Company received interest income~~ of approximately $41296,000, and approximately $6623,000~~, respectively,~~ asfor aaudit ~~result of amended tax returns filed to reflect research~~ and ~~development tax credits identified for previous fiscal years~~accounting services.

The Company’s ~~overall~~ effective ~~tax rate for the three-month period ended December 25, 2004 decreased to 28.2% from 28.4% for the corresponding period a year ago. The Company’s overall effective~~ income tax rate ~~decreased~~increased to 3036.17% for the ~~nine~~three-month period ended ~~December~~June 25, ~~2004~~2005 asfrom ~~compared to~~ 32.6% for the ~~nine~~three-month period ended ~~December~~June 2726, ~~2003. The income tax provision for the three-month and nine-month periods ended December 25,~~ 2004 ~~includes a non-recurring reduction to an income tax reserve of $192,000~~. The ~~specific~~increase ~~reserve~~in ~~was originally provided for during fiscal 2002 and related to~~ the Company’s ~~wholly-owned German subsidiary. The~~ effective income tax rate onfor ~~U.S.~~fiscal ~~operations~~2006 ~~during~~is ~~the~~primarily ~~three-month~~due ~~and nine-month periods ended December 25, 2004 before the non-recurring reduction~~ to anexpected ~~income~~research ~~tax reserve of $192,000, was 33.9%~~ and ~~33%,~~development ~~respectively as compared to 30.5% for the~~tax ~~three-month~~credits ~~and~~being ~~nine-month~~lower ~~periods~~as ~~ended~~a ~~December~~percentage ~~27,~~of ~~2003,~~income ~~respectively~~before ~~due~~provision ~~primarily~~for toincome ~~lower~~taxes ~~anticipated research and development tax credits~~ for the ~~2005~~current fiscal year.

~~Net~~The ~~income~~Company ~~for~~posted ~~the~~net ~~third~~income ~~quarter~~ of ~~fiscal 2005 increased from~~ approximately $~~1.0~~924,000 ~~million in fiscal 2004 to approximately $1.8 million while diluted earnings per share increased from $.25 to $.43 per share. Net income~~ for the ~~nine~~three-month period ended ~~December~~June 25, ~~2004~~2005 ~~increased~~as ~~from~~compared to approximately $~~1.4~~461,000 ~~million~~for inthe ~~fiscal~~same ~~2004~~period toa ~~approximately~~year ~~$2.5 million in fiscal 2005~~ago, while diluted earnings per share ~~increased~~were ~~from~~ $.3221 per share compared to $.6011 ~~per~~for ~~share.~~the ~~The~~same ~~increase~~period ina ~~diluted~~year ~~earnings~~ago. ~~per~~The ~~share~~change is primarily attributable to the increase in ~~gross~~net ~~profit,~~sales partially offset by the increase in ~~operating~~cost ~~expenses~~of ~~during~~goods ~~the~~sold ~~three-month~~ and ~~nine-month~~ ~~periods ended December 25, 2004, and~~ the ~~equivalent~~increase ofin ~~approximately~~operating ~~$0.05~~expenses ~~resulting~~during ~~from~~ the ~~non-recurring reduction to an income tax reserve of $192,000 reflected in the December 2004~~ quarter.

Liquidity and Capital Resources

As of ~~December~~June 25, ~~2004~~2005, the Company’s working capital was approximately $2425,~~349~~661,000, an an increase of ~~approximately~~ $21,~~666~~486,000 since the end of fiscal ~~2004~~2005. ~~The~~Current ~~Company’s~~assets ~~cash~~increased ~~and~~by ~~cash equivalents were~~ approximately $7943,~~392,~~000 atdue ~~December~~to ~~25,~~an ~~2004,~~increase ain ~~decrease~~cash ofand ~~approximately~~cash ~~$160,000~~equivalents ~~from~~and ~~March~~accounts 27receivable, ~~2004.~~offset ~~Current assets increased~~ by ~~approximately~~a ~~$4,076,000~~decrease ~~due to an increase~~ in ~~accounts~~inventory ~~receivable~~ and ~~inventories~~prepaid expenses. Current liabilities ~~increased~~decreased by approximately $1543,~~411,~~000 due to andecreases ~~increase~~ in accounts payable, ~~accrued payroll~~ and ~~payroll-related~~dividends ~~expenses~~payable, ~~and other accrued expenses~~ offset by aan ~~decrease~~increase in accrued income taxes. The Company’s cash and acash ~~foreign~~equivalents ~~subsidiary’s~~were ~~decrease~~approximately in$7,913,000 ~~working~~at ~~capital~~June ~~line~~25, 2005, an increase of ~~credit~~$1,129,000 since March 26, 2005. The Company has two lines of credit with two U.S. banking institutions totaling $26,500,000. At ~~December~~June 25, ~~2004~~2005, the Company did not have any borrowings under either of these USD lines of credit. ~~One foreign subsidiary, which has a Euro denominated working capital line of credit, had approximately $183,000 outstanding at December 25, 2004.~~

Given the Company’s historical profitability and its ability to manage expenses, the Company believes that its current resources are adequate to meet its requirements for working capital and capital expenditures through the foreseeable future.

Significant Customers

Because of the strategic phase out of the OEM/Multimedia business, net sales to an OEM/Multimedia customer, which in previous periods was reported as a separate operating segment were insignificant during the three-month and nine-month periods ended December 25, 2004. The Company expects this customer and related operating segment to be immaterial during fiscal 2005. The Company’s management has taken steps (including pursuit of additional OEM customers, expansion of the Company’s aftermarket automotive products offerings and renewed efforts to increase sales of the Company’s traditional products), which it believes will mitigate the consequences of the decrease in business from this customer. One customer accounted for ~~less than 10% and~~ approximately 1333% of ~~the Company’s~~ net sales for the three-month ~~and~~period ~~nine-month periods~~ ended ~~December~~June 25, ~~2004~~2005 ~~respectively~~ as compared to approximately 3216% of net sales for the corresponding ~~periods~~period a year ago. InAnother ~~March 2004 the Company announced that this particular~~ customer ~~would be reducing its annual purchases by approximately 50% beginning in May 2004. One customer~~ accounted for ~~approximately~~less ~~28%~~than ~~and 23~~10% of net sales for the three-month ~~and~~period ~~nine-month periods~~ ended ~~December~~June 25, ~~2004~~2005 ~~respectively~~ as compared to ~~less~~approximately ~~than 10~~23% of net sales for the corresponding ~~periods~~period a year ago. In addition to its strategy of expanding the Company’s product offerings, management believes its efforts to enlarge and diversify its customer base for all products will offset the decrease in business with this one customer.

~~Critical~~Proposed ~~Accounting~~Merger ~~Policies and Estimates~~

~~Critical~~On ~~accounting~~June ~~policies~~8, ~~are~~2005, ~~those~~we ~~policies~~entered ~~that~~into ~~affect~~an ~~our~~Agreement ~~significant~~and ~~judgments~~Plan ~~and estimates~~of ~~used~~Merger inwith ~~preparation~~D&M ofHoldings ~~our~~U.S., ~~consolidated~~Inc., ~~financial~~a ~~statements~~Delaware corporation (“D&M”), and Allegro Acquisition Corp., Wea ~~believe~~wholly-owned ~~that~~subsidiary ~~our~~of ~~most~~D&M. ~~critical~~Upon ~~accounting~~consummation ~~policies~~of ~~include~~the ~~revenue~~proposed ~~recognition~~merger, ~~reserve~~each ~~for~~share ~~bad~~of ~~debts~~our ~~and~~common ~~other~~stock ~~sales~~will ~~allowances,~~be ~~and~~converted ~~inventory~~into ~~related~~the ~~reserves~~right to receive $17.50 ~~For~~in acash, ~~more detailed~~without ~~discussion~~interest. The consummation of ~~our~~the ~~critical~~proposed ~~accounting~~merger ~~policies~~is subject to customary conditions, ~~please~~such ~~refer~~as toregulatory ~~our~~approvals ~~annual~~and ~~report~~approval onby ~~Form~~our ~~10-K~~shareholders. ~~for~~Until the ~~fiscal~~proposed ~~year~~merger ~~ended~~closes, ~~March~~we ~~27,~~are ~~2004.~~generally obligated to carry on our business in the ordinary course.

If the proposed merger is not completed, (i) the value of our common stock may decline and (ii) our prospects and other aspects of our business may be adversely affected.

For a more complete description of the proposed merger and the Agreement and Plan of Merger, refer to the Current Report on Form 8-K which we filed on June 9, 2005 with the Securities and Exchange Commission, and Proxy Statement relating to the Special Meeting of our Shareholders called for August 25, 2005, which is included in the Schedule 14A which we filed with the Securities and Exchange Commission on July 21, 2005.

Cautionary Statements

The Private Securities Litigation Reform Act of 1995 contains certain safe harbors regarding forward-looking statements. From time to time, information provided by the Company or statements made by its directors, officers, or employees may contain “forward-looking” information which involve risk and uncertainties. Any statements in this report that are not statements of historical fact are forward-looking statements (including, but not limited to, statements concerning the characteristics and growth of the Company’s market and customers, the Company’s objectives and plans for future operations, and the Company’s expected liquidity and capital resources). Such forward-looking statements are based on a number of assumptions and involve a number of risks and uncertainties, and accordingly, actual results could differ materially. Factors that may cause such differences include, but are not limited to: the continued and future acceptance of the Company’s products, the rate of growth in the audio industry; the presence of competitors with greater technical, marketing and financial resources; the Company’s ability to promptly and effectively respond to technological change to meet evolving consumer demands; capacity and supply constraints or difficulties; and the Company’s ability to successfully integrate new operations. The words “believe,” “expect,” “anticipate,” “intend” and “plan” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. For a further discussion of these and other significant factors to consider in connection with forward-looking statements concerning the Company, reference is made to Exhibit 99 of the Company’s Form 8-K filed on July 18, 1996.

1715

Ite ~~Item~~m 3. Quantitative and Qualitative Disclosures About Market Risk

(a) Derivative Financial Instruments, Other Financial Instruments, and Derivative Commodity Instruments

As of ~~December~~June 25, ~~2004~~2005, the Company did not participate in any derivative financial instruments, or other financial and commodity instruments for which fair value disclosure would be required under SFAS No. 107. All of the Company’s investments are considered cash equivalents and consist of money market accounts. Accordingly, the Company has no quantitative information concerning the market risk of participating in such investments.

(b) Primary Market Risk Exposures

The Company’s primary market risk exposures are in the areas of interest rate risk and foreign currency exchange rate risk. The Company’s investment portfolio of cash equivalents is subject to interest rate fluctuations, but the Company believes this risk is immaterial due to the short-term nature of these investments.

For the three-month periods ended ~~December~~June 25, ~~2004~~2005 and ~~December~~June 2726, ~~2003~~2004, ~~the Company recorded~~ foreign currency ~~translation~~translations gains of were approximately $~~217~~13,000 and $~~206~~46,000, respectively., ~~For~~as ~~the~~a ~~nine-month~~result ~~period~~of ~~ended~~consolidating ~~December~~the ~~25, 2004,~~ foreign ~~currency~~currencies ~~translation~~of ~~gains~~the ~~were~~Company’s ~~approximately $239,000 and $204,000, respectively~~subsidiaries. During the three-month ~~and~~period ~~nine-month periods~~ ended ~~December~~ June 25, ~~2004~~2005, the Company did not engage in any foreign currency hedging activities.

Item 4. Controls and ~~Procedures~~Procedu res

a.) Evaluation of disclosure controls and procedures. Based on their evaluation of the design and operation of ~~the~~our ~~Company’s~~ disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934) as of ~~December~~June 25, ~~2004~~2005, the last day of the fiscal quarter covered by this Quarterly Report on Form 10-Q, ~~the~~our ~~Company’s~~ President and CEO (principal executive officer) and ~~the~~our ~~Company’s~~ Vice President - Finance (principal financial officer) have concluded that ~~the~~our ~~Company’s~~ disclosure controls and procedures are effective to ensure that information required to be disclosed ~~by the Company~~ in the reports that ~~the~~we ~~Company~~file ~~files~~ or ~~submits~~submit under the Exchange Act is accumulated and communicated to management, including the President and CEO and the Vice President – Finance, as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

b.) Changes in Internal Controls. There were no changes in ~~the~~our ~~Company’s~~ internal control over financial reporting that occurred during the ~~Company’s~~ fiscal quarter ended ~~December~~June 25, ~~2004~~2005 that materially affected, or is reasonably likely to materially affect, ~~the~~our ~~Company’s~~ internal control over financial reporting.

1816

PA ~~PART~~RT II: OTHER INFORMATION

Ite ~~Item~~m 1. Legal Proceedings

None

Item 2. ~~Unregistered~~Changes ~~Sales of~~in ~~Equity~~ Securities and ~~Use~~Issuer Purchases of ~~Proceeds~~Equity Securities

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

(a) The following exhibits are filed herewith:

Exhibit 2.1		Agreement and Plan of Merger, dated as of June 8, 2005 among Boston Acoustics, Inc., D&M Holdings U.S., Inc., and Allegro Acquisition Corp.*
Exhibit 31.1 and 31.2		Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 and 32.2		Certifications pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

19* Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on June 9, 2005.

SI ~~SIGNATURES~~GNATURES

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

	Boston Acoustics, Inc.
	Registrant
Date: February 8, 2005	By:	/s/ Andrew G. Kotsatos
Date: August 9, 2005	By:	/s/ Andrew G. Kotsatos
		Andrew G. Kotsatos
		Director, Chairman of the Board and Treasurer
		Director, Chairman of the Board
Date: February 8, 2005	By:	/s/ Moses A. Gabbay
		and Treasurer
Date: August 9, 2005	By:	/s/ Moses A. Gabbay
		Moses A. Gabbay
		Director, President and Chief
		Executive Officer
Date: February 8, 2005	By:	/s/ Debra A. Ricker
Date: August 9, 2005	By:	/s/ Debra A. Ricker
		Debra A. Ricker
		Vice President and
		Chief Accounting Officer

2018

Index to Exhibits


Exhibit Number	Exhibit	Page

2.1	Agreement and Plan of Merger, dated as of June 8, 2005 among Boston Acoustics, Inc., D&M Holdings U.S., Inc., and Allegro Acquisition Corp.*	17

31.1	Certification of CEO pursuant to Rule 13a-14(a)	20

31.2	Certification of CFO pursuant to Rule 13a-14(a)	21

32.1	Certification of CEO pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350	22

32.2	Certification of CFO pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350	23

*	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on June 9, 2005.

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