JOE WALLACE: I'm Joe Wallace for Gearwire.Com. We're on the floor of Winter NAMM 2007 in Anaheim, California, and I'm here with Dave McCarthy. We're talking about Damage Control and a recent development for you guys with Peavey. Tell me a bit about that.

DAVE MCCARTHY: Sure. Damage Control is basically five guys, so we're a really small company trying to do sort of outrageous, next-generation category stuff, and being a small company is really hard for us to get the message out to the whole world. And so, to help us in our process, we've named Peavey as our global distributor, so they're going to help us with advertising and, you know, just the shipping logistics, helping us with some of our manufacturing issues so we can accelerate our product development, program, and that kind of stuff, so we've announced at the show a strategic partnership between Damage Control and Peavey where we'll do some consulting on their products and try to lend some of our DXP expertise to some of the products that they need help on, and they're helping us with our marketing and our distribution and that kind of stuff.

JOE WALLACE: Now this isn't really that interesting to the end user, but for small music companies, you know, you got people who are struggling right along with you guys with whatever product they're offering whether it's Daisy Rock or, you know, somebody who's building stompboxes in their garage like Effector 13, things like that. How did this all come about? Did you approach them? Did they approach you? Did you have a meeting of the minds in the middle somewhere? For somebody who's looking at what you did with very envious eyes, give me a little bit of the background there.

DAVE MCCARTHY: Well, I've worked for everybody at some point in my life that has ever existed, and I've worked for Alesis, Lexicon, Line 6 two times, Peavey I was the general manager, and I basically live close to where Peavey is and hardly walk down the treadmill next to mine at the gym and I would be expressing my frustrations, and he would be expressing, you know, the fact that he has some solutions to my problems and we found some synergy there. And I think what really these kind of developments, the benefit is to the end user is they'll be seeing more Damage Control products because we have helped with the infrastructure now, and so the end user will see next-generation-category products from Damage Control in a much more timely fashion.

JOE WALLACE: Now you say it's just you and four other people, so what was the culture change like when you're suddenly attached to Peavey with that vast amount of resources.

DAVE MCCARTHY: Um, you know, it basically meant that when we come to trade shows, we're not in the hall where all the funny stuff is. We're where at the people actually go to see stuff that they want to buy and stock in the store and that. And when it comes to point-of-purchase materials, you know, brochures, all the things that are sort of financially it's hard for a small company of five guys to accomplish, and it's -- You know, we've been alive for about maybe a year and a half and we've accomplished a lot, but we have designs that are going into a whole bunch of categories and we can't get there without some sort of funding. And you have, if you're a small company, you only have so many choices. One would be to go get venture capital, which basically means you got a bunch of sort of bean counter people grinding you to make stuff, which may or may not be in an artistic sort of format. You're now in sort of crisis mode, just trying to keep the money guys happy, and with the deal that we have with Peavey is only a strategic partnership so there's not like a banker guy going, "We loaned you money. We need it back. You know, make a thousand widgets that are like a thousand other widgets," and our goal as a company, our mandate as a company is to explore new levels of fidelity and expression to create new category, you know. There's plenty of guys knocking off each other. We want to do some different stuff.

JOE WALLACE: Now, how long has the ink drop been dry on this deal?

DAVE MCCARTHY: I guess October, so this is January. About three months.

JOE WALLACE: How long have you been public with it?

DAVE MCCARTHY: I think they just did a press release here at the show so it's pretty new stuff.

JOE WALLACE: Okay. Great. Any advice for somebody in a small company like Damage Control that wants to expand their reach they way you guys have with Peavey?

DAVE MCCARTHY: I would say what we did is we just thought about of the box and sort of went into like guerrilla marketing territory. It's like if you don't have any money -- The traditional way that you would market your stuff is by magazine ads, and if you don't have the money, you can't do that stuff, so a lot of little companies fail. But everybody who's in business needs to be able to grow their company, and Peavey is no exception. Peavey is really popular in sort of a commodity category, but when it comes to direct recording products or really high-end multi-effects stuff, we're new and unique and we can help grow their company as well, so their reps have new stuff to sell, and that's good for them, and we have reps that we didn't have before and that's good for us so it's about finding synergy, you know. It's the same thing with if you're in retail and you're trying to have a store, you need to do something different than the other guy is doing because otherwise everybody's just going to go head to head and not create anything new.

JOE WALLACE: Just one last question. Do you find that this is a trend in the industry? This sort -- It's not really consolidation, but as people kind of finding common goals and larger companies hooking up with the independents and making new alliances and making strategic partnerships. Is that the wave of the future you think for smaller companies?

DAVE MCCARTHY: I think it is, and I think like big companies, if they were to try to do this kind of thing themselves, they would have to fund real employees who need benefits and it's very expensive, and if you do it the way that we did, we're just basically just a strategic partnership, there is no rest for the big company, right? And so there's -- we’re incentivized to work our butts off because that's how we survive, so it's a very complementary kind of a thing. So instead of Peavey saying, "Let's hire a bunch of guys who feel like they're sort of entitled to have the job for a long time with or without performance," we want to perform and we're anxious to grow our company and it's a benefit to them because there's little risk.

JOE WALLACE: Well thanks very much. I've been talking with Dave McCarthy. I'm Joe Wallace for Gearwire.Com.