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K-Tel shares rise from the ashes

The strange and unpredictable saga of K-Tel International Inc. (Nasdaq: KTEL) took another twist Wednesday when its shares moved up 3 1/8, or 65 percent, to 7 15/16 after it reported its first-quarter earnings.

Although the company's press release hails the quarterly results a return to profitability, K-Tel actually lost money again this quarter.

There was no First Call consensus estimate for K-Tel this quarter because there are no analysts interested in covering this once promising Internet stock. It wasn't too long ago that K-Tel was on the verge of being delisted from the Nasdaq exchange.

But the Minneapolis-based company said it reported "net income" of $2.9 million, or 30 cents a share, on sales of $18.1 million.

However, that net income includes a $4.3 million gain from the sale of its subsidiary in Finland and a $600,000 charge related to repurchase of more than 465,000 shares its common stock.

In reality, K-Tel lost $709,000 in the quarter.

Also, total sales fell from $18.7 million in the year-ago quarter to $18.1 million this time around. In the year-ago quarter, it lost $3.1 million, or 37 cents a share.

Company officials said its domestic music division reported sales of $9.4 million, up 18 percent from the $8 million it recorded in the year-ago quarter.

"In the first quarter, K-Tel continued to aggressively execute the actions we outlined earlier this year," said CEO Philip Kives in a prepared release. "While revenues declined marginally, operating expenses were down, gross margins increased and our operating loss was significantly reduced."

Believe it or not, K-Tel shares moved up to an all-time high of 39 1/8 in November before collapsing to a low of 4 1/2 in October.