UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

 

K-TEL INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

 

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 ý       No o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act).

Yes o       No ý

 

As of November 14, 2003, there were 13,653,738 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

 

 

K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES

FORM 10-Q

 

FOR THE THREE MONTH PERIOD

ENDED SEPTEMBER 30, 2003

 

INDEX

 

PART I.	Financial Information (Unaudited):
		Item 1.	Financial Statements
			Condensed Consolidated Balance Sheets as of September 30, 2003 and June 30, 2003
			Condensed Consolidated Statements of Operations for the Three Month Periods Ended September 30, 2003 and 2002
			Condensed Consolidated Statements of Cash Flows for the Three Month Periods Ended September 30, 2003 and 2002
			Notes to Condensed Consolidated Financial Statements
		Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
		Item 3.	Quantitative and Qualitative Disclosures About Market Risk
		Item 4.	Controls and Procedures
PART II.	Other Information:
		Item 1.	Legal Proceedings
		Item 6.	Exhibits and Reports on Form 8-K
Signatures
Index to Exhibits

 

Important Factors Relating to Forward Looking Statements

 

Certain statements of a non-historical nature under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by the use of terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “should,” or “continue” or the negative thereof or other variations thereon or comparable terminology. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or from those results currently anticipated or projected. Such factors include, among other things, the following: changes in consumer purchasing; demand for and market acceptance of new and existing products; the impact from competition for recorded music; the outcome of legal proceedings; dependence on suppliers and distributors; the outcome of our subsidiaries’ bankruptcy and liquidation; success of marketing and promotion efforts; technological changes and difficulties; availability of financing; foreign currency variations; general economic, political and business conditions; and other matters. We undertake no obligation to release publicly the result of any revisions to these forward-looking statements, except as required by law.

 

2

 

K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(in thousands – except share data)

 

		September 30, 2003			June 30, 2003
ASSETS
Current Assets:
Cash and cash equivalents		$	200		$	1,219
Accounts receivable, net of allowance for doubtful accounts of $20 and $25		1,538			1,559
Inventories		467			520
Royalty advances		219			235
Prepaid expenses and other		216			304
Total Current Assets		2,640			3,837
Property and equipment, net of accumulated depreciation and amortization of $1,451 and $1,506		95			101
Owned catalog masters, net of accumulated amortization of $2,798 and $2,755		768			819
		$	3,503		$	4,757
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities:
Notes payable to affiliate and other		$	10,470		$	11,515
Accounts payable		1,080			1,162
Accrued royalties		2,330			2,333
Reserve for returns		200			213
Net liabilities of discontinued operations		134			116
Total Current Liabilities		14,214			15,339
Shareholders’ Deficit:
Common stock – 50,000,000 shares authorized; par value $.01; 13,653,738 issued and outstanding		136			136
Additional paid-in capital		21,292			21,292
Accumulated deficit		(31,888		)	(31,759		)
Accumulated other comprehensive loss		(251		)	(251		)
Total Shareholders’ Deficit		(10,711		)	(10,582		)
		$	3,503		$	4,757

 

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

 

3

 

K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

(in thousands - except per share data)

 

		Three Months Ended September 30,
		2003			2002
Net Sales		$	1,618		$	1,498
Costs and Expenses:
Cost of goods sold		669			599
Advertising		43			46
Selling, general and administrative		866			951
Total Costs and Expenses		1,578			1,596
Operating Income (Loss)		40			(98		)
Other Expense:
Interest expense		(117		)	(136		)
Other		(11		)	(64		)
Total Other Expense		(128		)	(200		)
Loss from Continuing Operations		(88		)	(298		)
Loss from Discontinued Operations		(41		)	(210		)
Net Loss		$	(129	)	$	(508	)
Loss per Share - Basic and Diluted:
Continuing Operations		$	(.01	)	$	(.02	)
Discontinued Operations		—			(.02		)
Net Loss		$	(.01	)	$	(.04	)