10-Q

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 June 25, 2005

or

¨ Transition Report pursuant Section 13 or 15 (d) of the Securities Exchange Act of 1934

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)

(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 4,234,512 shares of Common Stock issued and outstanding as of August 9, 2005.

Boston Acousti cs, Inc.

Index

		Page
Part I:       Financial Information
Item 1.	Financial Statements
	Consolidated Balance Sheets (Unaudited)- March 26, 2005 and June 25, 2005	4
	Consolidated Statements of Income (Unaudited)- Three months ended June 26, 2004 and June 25, 2005	6
	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	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.	Controls and Procedures	16
Part II:       Other Information
	Items 1 through 6	17
	Signatures	18
	Exhibits	19
	Exhibits 31.1 and 31.2 Certifications pursuant to Section 302 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

2

PART I: FINANCI AL INFORMATION

Item 1: Financial Statements

3

Boston Acoustics , Inc. and Subsidiaries

Consolidated Balance Sheets

Assets

	March 26, 2005		June 25, 2005
			(Unaudited)
Current Assets:
Cash and cash equivalents	$	6,784,588	$	7,913,293
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		12,243,617		11,565,831
Deferred income taxes		2,099,000		2,099,000
Prepaid income taxes		858,000		858,000
Prepaid expenses and other current assets		1,028,474		907,028
Total current assets		34,247,769		35,190,936
Property and Equipment, at Cost:
Machinery and equipment		18,942,568		18,977,096
Building and improvements		8,795,567		8,795,567
Office equipment and furniture		6,352,829		6,401,375
Land		1,815,755		1,815,755
Motor vehicles		209,950		236,569
		36,116,669		36,226,362
Less-Accumulated depreciation and amortization		25,883,928		26,366,255
		10,232,741		9,860,107
Other Assets, Net
Other assets, net		788,825		791,323
Deferred income taxes		486,000		486,000
	$	45,755,335	$	46,328,366

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

4

Boston Acoustics, Inc. and Subsidiaries

Consolidated Balance Sheets

Liabilities and Stockholders’ Equity

	March 26, 2005		June 25, 2005
			(Unaudited)
Current Liabilities:
Accounts payable	$	7,454,464	$	6,823,473
Accrued payroll and payroll- related expenses		701,931		607,201
Accrued income taxes		603,307		1,057,851
Dividends payable		355,174		—
Other accrued expenses		949,168		1,041,821
Current maturity of line of credit		9,432		—
Total current liabilities		10,073,476		9,530,346
Stockholders’ Equity:
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
Additional paid-in capital		—		192,300
Retained earnings		35,640,074		36,563,735
Total stockholders’ equity		35,681,859		36,798,020
	$	45,755,335	$	46,328,366

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

5

B oston Acoustics, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended
	June 26, 2004			June 25, 2005
Net sales	$	12,619,951		$	17,951,953
Cost of goods sold		7,131,958			10,486,445
Gross profit		5,487,993			7,465,508
Selling and marketing expenses		2,619,638			3,099,098
General and administrative expenses		1,030,172			1,220,531
Engineering and development expenses		1,206,654			1,140,854
Total operating expenses		4,856,464			5,460,483
Income from operations		631,529			2,005,025
Interest income		13,887			30,209
Interest expense		(7,986	)		(8,017	)
Other income (expense), net		46,297			(567,556	)
Income before provision for income taxes		683,727			1,459,661
Provision for income taxes		223,000			536,000
Net income	$	460,727		$	923,661
Net income per share
Basic	$	.11		$	.22
Diluted	$	.11		$	.21
Weighted-average common shares outstanding (Note 4):
Basic		4,166,845			4,199,147
Diluted		4,190,446			4,316,794
Dividends per share	$	.085		$	—

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

6

Boston Acoustics, Inc. and Subsidiar ies

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	June 26, 2004			June 25, 2005
Operating activities
Net income	$	460,727		$	923,661
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		530,561			482,327
Provision for bad debt		2,753			25,261
Changes in assets and liabilities:
Accounts receivable		(235,657	)		(638,955	)
Inventories		535,468			677,786
Prepaid expenses and other current assets		134,072			121,446
Accounts payable		(552,724	)		(630,991	)
Accrued payroll and other accrued expenses		(47,897	)		452,467
Net cash provided by operating activities		827,303			1,413,002
Investing activities
Purchases of property and equipment		(205,046	)		(109,693	)
Increase in other assets		(2,499	)		(2,498	)
Net cash used in investing activities		(207,545	)		(112,191	)
Financing activities
Proceeds from exercise of stock options		—			192,500
Net payments on line of credit		(299,917	)		(9,432	)
Dividends paid		(354,182	)		(355,174	)
Net cash used in financing activities		(654,099	)		(172,106	)
Net increase (decrease) in cash and cash equivalents		(34,341	)		1,128,705
Cash and cash equivalents, beginning of period		7,552,054			6,784,588
Cash and cash equivalents, end of period	$	7,517,713		$	7,913,293
Supplemental Disclosure of Noncash Financing and Investing Activities
Dividends payable	$	354,182		$	—
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes	$	255,250		$	81,456
Cash paid for interest	$	7,986		$	8,017

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

7

B 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-month period ended June 25, 2005 are not 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 financial statements filed with its Annual Report on Form 10-K for the fiscal year ended March 26, 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 accounts for its stock-based compensation under SFAS No. 123 Accounting for Stock-Based Compensation. The Company continues to apply APB No. 25 for employee stock option awards and elected the disclosure-only alternative for the same under SFAS No. 123. The Company follows the disclosure provisions of Statement of Financial Accounting Standards No. 148 (SFAS 148), Accounting for Stock-Based Compensation - Transition and Disclosure, and amendment of FASB Statement No. 123. SFAS 148 requires prominent disclosures in both annual and interim financial statements regarding the method of accounting for stock-based employee compensation and the effect of the method used to report 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 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-month periods ended June 26, 2004 and June 25, 2005, respectively, using the Black-Scholes option-pricing model prescribed by SFAS No. 123.

8

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
	June 26, 2004		June 25, 2005
Net income, as reported	$	460,727	$	923,661
Less: fair value of all employee stock-based compensation awards		90,192		20,354
Pro forma net income	$	370,535	$	903,307
Net income per share, as reported:
Basic	$	0.11	$	0.22
Diluted	$	0.11	$	0.21
Net income per share, pro forma:
Basic	$	0.09	$	0.22
Diluted	$	0.09	$	0.21

(3) Inventories

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

	March 26, 2005		June 25, 2005
Raw materials	$	3,339,019	$	3,171,568
Work-in-process		1,467,862		1,245,497
Finished goods		7,436,736		7,148,766
	$	12,243,617	$	11,565,831

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

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(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 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 ending June 25, 2005 and June 26, 2004, cooperative advertising and other similar credits included as sales adjustments were approximately $162,000 and $116,000, respectively.

(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.

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(7) 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 18% and 19% of net sales for the three-month periods ended June 25, 2005 and June 26, 2004, respectively.

(8) 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 26, 2005	$	200,000
Plus: amounts accrued related to new sales		17,000
Less: amounts charged against warranty reserve		(17,000	)
Warranty reserve as of June 25, 2005	$	200,000

(9) Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment—An Amendment of FASB Statements No. 123 and 95 (“SFAS No. 123R”), which 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.

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ITE M 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 periods ended June 26, 2004 and June 25, 2005 expressed as percentages of net sales.

	Three Months Ended
	June 26, 2004		June 25, 2005
Net sales	100.0	%	100.0	%
Cost of goods sold	56.5		58.4
Gross profit	43.5		41.6
Selling and marketing expenses	20.7		17.3
General and administrative expenses	8.2		6.8
Engineering and development expenses	9.6		6.3
Total operating expenses	38.5		30.4
Income from operations	5.0		11.2
Interest income (expense), net	—		0.1
Other income (expense), net	0.4		(3.2	)
Income before provision for income taxes	5.4		8.1
Provision for income taxes	1.7		3.0
Net income	3.7	%	5.1	%

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.

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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 quarter increased from approximately $12,620,000 to approximately $17,952,000 during the first quarter of fiscal 2006. The overall sales increase during the quarter was driven by continued sales increases in the OEM automotive business in partnership with Visteon Corporation. The Company’s premium audio systems sold to the Chrysler Group through this partnership included the automotive systems for the Chrysler 300 vehicles, the Dodge Magnum vehicles, the 2005 Jeep Cherokee family of vehicles and as announced in June 2005, will now include the 2006 Dodge Charger vehicles. In addition, sales for the current quarter reflect increases in the aftermarket car speaker systems, as well as in the integrated product categories of speaker systems, which include the MicroSystem CD miniature stereo radio/CD music system.

During the three-month period ended June 25, 2005, the Company launched the new S Series of aftermarket car speaker systems. The 11-model series includes two component and nine coaxial configurations, replacing the FS and FX Series models. With suggested retails ranging from $69.95 to $219.95 per pair, the systems are designed to complement factory system upgrades and pair with any Boston speaker system.

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.

The Company’s gross margin for the three-month period ended June 25, 2005 decreased as a percentage of net sales from 43.5% to 41.6% due primarily to a larger portion of total sales being derived from product categories that reflect lower margins as compared to the same period a year ago.

Total operating expenses decreased as a percentage of net sales, but increased in absolute dollars by approximately $604,000 during the three-month period ended June 25, 2005, as compared to the corresponding period a year ago. Selling and marketing expenses have increased in absolute dollars (approximately $479,000) primarily due to increases in marketing consulting and outside services (approximately $35,000), advertising and trade show costs (approximately $145,000), sales commission expenses (approximately $188,000), and payroll and payroll-related expenses (approximately $106,000), as compared to the same period a year ago. General and administrative expenses increased in absolute dollars (approximately $190,000) due to increases in payroll and payroll-related expenses (approximately $39,000), audit, tax and legal fees (approximately $36,000), consulting fees and outside services (approximately $98,000), and doubtful accounts expense (approximately $17,000), as compared to the same three-month period a year ago. Engineering and development expenses have decreased in absolute dollars (approximately $66,000) due to decreases in consulting fees and outside services (approximately $41,000), and payroll and payroll-related expenses (approximately $31,000) as compared to the corresponding period in fiscal 2005.

The 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.

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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.

In connection with the Merger, the company incurred expenses of approximately $580,000 during the three-month period ended June 25, 2005. These expenses, reflected as other expenses, included fees and out of pocket expenses totaling approximately $261,000 paid to the Company’s financial advisor for rendering its opinion to the Boston Acoustics board of directors, legal fees of approximately $296,000, and approximately $23,000 for audit and accounting services.

The Company’s effective income tax rate increased to 36.7% for the three-month period ended June 25, 2005 from 32.6% for the three-month period ended June 26, 2004. The increase in the Company’s effective income tax rate for fiscal 2006 is primarily due to expected research and development tax credits being lower as a percentage of income before provision for income taxes for the current fiscal year.

The Company posted net income of approximately $924,000 for the three-month period ended June 25, 2005 as compared to approximately $461,000 for the same period a year ago, while diluted earnings per share were $.21 per share compared to $.11 for the same period a year ago. The change is primarily attributable to the increase in net sales partially offset by the increase in cost of goods sold and the increase in operating expenses during the quarter.

Liquidity and Capital Resources

As of June 25, 2005, the Company’s working capital was approximately $25,661,000, an increase of $1,486,000 since the end of fiscal 2005. Current assets increased by approximately $943,000 due to an increase in cash and cash equivalents and accounts receivable, offset by a decrease in inventory and prepaid expenses. Current liabilities decreased by approximately $543,000 due to decreases in accounts payable, and dividends payable, offset by an increase in accrued income taxes. The Company’s cash and cash equivalents were approximately $7,913,000 at June 25, 2005, an increase of $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 June 25, 2005, the Company did not have any borrowings under either of these USD lines of credit.

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

One customer accounted for approximately 33% of net sales for the three-month period ended June 25, 2005 as compared to approximately 16% of net sales for the corresponding period a year ago. Another customer accounted for less than 10% of net sales for the three-month period ended June 25, 2005 as compared to approximately 23% of net sales for the corresponding 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.

Proposed Merger

On June 8, 2005, we entered into an Agreement and Plan of Merger with D&M Holdings U.S., Inc., a Delaware corporation (“D&M”), and Allegro Acquisition Corp., a wholly-owned subsidiary of D&M. Upon consummation of the proposed 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 proposed merger is subject to customary conditions, such as regulatory approvals and approval by our shareholders. Until the proposed merger closes, we are 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.

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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.

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Ite m 3. Quantitative and Qualitative Disclosures About Market Risk

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

As of June 25, 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 June 25, 2005 and June 26, 2004, foreign currency translations gains were approximately $13,000 and $46,000, respectively, as a result of consolidating the foreign currencies of the Company’s subsidiaries. During the three-month period ended June 25, 2005, the Company did not engage in any foreign currency hedging activities.

Item 4. Controls and Procedu res

a.) Evaluation of disclosure controls and procedures. Based on their evaluation of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934) as of June 25, 2005, the last day of the fiscal quarter covered by this Quarterly Report on Form 10-Q, our President and CEO (principal executive officer) and our Vice President - Finance (principal financial officer) have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or 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 our internal control over financial reporting that occurred during the fiscal quarter ended June 25, 2005 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PA RT II: OTHER INFORMATION

Ite m 1. Legal Proceedings

None

Item 2. Changes in Securities and Issuer Purchases of 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

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

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SI GNATURES

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

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

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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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EX-31.1

Exhibit 31.1

Certifications

I, Moses A. Gabbay, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Boston Acoustics, Inc.;

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-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2005

/s/ Moses A. Gabbay

Moses A. Gabbay

President and Chief Executive Officer

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EX-31.2

Exhibit 31.2

I, Debra A. Ricker, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Boston Acoustics, Inc.;

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-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2005

/s/ Debra A. Ricker

Debra A. Ricker

Vice President – Finance

(Principal Financial Officer)

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EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the

Sarbanes - Oxley Act of 2002

In connection with the Quarterly Report of Boston Acoustics, Inc. (the “Company”) on Form 10-Q for the period ending June 25, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Moses A. Gabbay, the President and Chief Executive Officer of the Company, certify, solely pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) as applicable of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Moses A. Gabbay

Moses A. Gabbay

President and

Chief Executive Officer

August 9, 2005

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in the typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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EX-32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the

Sarbanes - Oxley Act of 2002

In connection with the Quarterly Report of Boston Acoustics, Inc. (the “Company”) on Form 10-Q for the period ending June 25, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Debra A. Ricker, Principal Financial Officer of the Company, certify, solely pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) as applicable of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Debra A. Ricker

Debra A. Ricker

Vice President - Finance

(Principal Financial Officer)

August 9, 2005

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in the typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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