54193--9/18/2006--K_TEL_INTERNATIONAL

related topics

{product, market, service}

{customer, product, revenue}

{capital, credit, financial}

{control, financial, internal}

{property, intellectual, protect}

{debt, indebtedness, cash}

Continuing losses could affect our ability to obtain additional working capital. The level of our indebtedness could adversely affect our financial condition. A substantial portion of our total net sales are from a small group of customers. A reduction in sales to any of these customers could have a material adverse effect on our net sales and profitability. The Company may not have the resources necessary to successfully compete in the music industry. Technology developments, particularly electronic downloading, may adversely affect our net sales, margins and results of operations. Increased counterfeiting or piracy may negatively affect the demand for our entertainment products. The Company may not be able to successfully protect its intellectual property rights. Product returns or inventory obsolescence could reduce our sales and profitability or negatively impact our liquidity. If the Company is unable to successfully remediate the material weaknesses in its internal controls, the Company s ability to report its financial results on a timely and accurate basis may be adversely affected.

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54193--9/18/2006--K_TEL_INTERNATIONAL_INC