UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

 

 

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 May 17, 2004, 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 AND NINE MONTH PERIODS

ENDED MARCH 31, 2004

 

INDEX

 

PART I. Financial Information (Unaudited):
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets as of March 31, 2004 and June 30, 2003
		Condensed Consolidated Statements of Operations for the Three and Nine Month Periods Ended March 31, 2004 and 2003
		Condensed Consolidated Statements of Cash Flows for the Nine Month Periods Ended March 31, 2004 and 2003
		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)

 

		March 31, 2004			June 30, 2003
ASSETS
Current Assets:
Cash and equivalents		$	113		$	1,219
Accounts receivable, net of allowance for doubtful accounts of $15 and $25		1,558			1,559
Inventories		626			520
Royalty advances		177			235
Prepaid expenses and other		366			304
Total Current Assets		2,840			3,837
Property and equipment, net of accumulated depreciation and amortization of $1,496 and $1,506		100			101
Owned catalog masters, net of accumulated amortization of $2,898 and $2,755		690			819
		$	3,630		$	4,757
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities:
Notes payable to affiliate and other		$	11,250		$	11,515
Accounts payable		980			1,162
Accrued royalties		2,272			2,333
Reserve for returns		133			213
Net liabilities of discontinued operations		63			116
Total Current Liabilities		14,698			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		(32,311		)	(31,759		)
Accumulated other comprehensive loss		(185		)	(251		)
Total Shareholders’ Deficit		(11,068		)	(10,582		)
		$	3,630		$	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 March 31,						Nine Months Ended March 31,
		2004			2003			2004			2003
Net Sales		$	1,647		$	1,923		$	5,024		$	5,295
Costs and Expenses:
Cost of goods sold		798			990			2,327			2,486
Advertising		13			81			88			146
Selling, general and administrative		1,027			1,026			2,847			2,936
Total Costs and Expenses		1,838			2,097			5,262			5,568
Operating Loss		(191		)	(174		)	(238		)	(273		)
Other Expense:
Interest expense		(129		)	(130		)	(366		)	(399		)
Other		(8		)	(75		)	(19		)	(190		)
Total Other Expense