---

---

U.S. Securities and Exchange CommissionWashington, D.C. 20549

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Form 10-Q

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 25, 2001,

or

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 000-25866

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PHOENIX GOLD INTERNATIONAL, INC.(Exact name of registrant as specified in its charter)

OREGON(State or other jurisdiction of incorporation or organization)

93-1066325(I.R.S. Employer Identification Number)9300 NORTH DECATUR STREET, PORTLAND, OREGON(Address of principal executive offices)

97203(Zip code)


(503) 286-9300(Registrant's telephone number, including area code)

---

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 /x/  No / /

There
were 3,026,945 shares of the issuer's common stock outstanding as of April 30, 2001.

---

---

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PHOENIX GOLD INTERNATIONAL, INC.
Form 10-Q for the Quarter Ended March 31, 2001

INDEX

|                  |  |                       |  |                                                                                                 |  | Page
|----------------- |  | --------------------- |  | ----------------------------------------------------------------------------------------------- |  | ----
|Part I.           |  | FINANCIAL INFORMATION |  |                                                                                                
|                  |  | Item 1.               |  | Financial Statements                                                                            |  |     
|                  |  |                       |  | Balance Sheets at March 31, 2001 and September 30, 2000 (unaudited)                             |  | 3   
|                  |  |                       |  | Statements of Operations for the Three and Six Months Ended March 31, 2001 and 2000 (unaudited) |  | 4   
|                  |  |                       |  | Statements of Cash Flows for the Six Months Ended March 31, 2001 and 2000 (unaudited)           |  | 5   
|                  |  |                       |  | Notes to Financial Statements                                                                   |  | 6   
|                  |  | Item 2.               |  | Management's Discussion and Analysis of Financial Condition and Results of Operations           |  | 9   
|                  |  | Item 3.               |  | Quantitative and Qualitative Disclosure About Market Risk                                       |  | 11  
|Part II.          |  | OTHER INFORMATION     |  |                                                                                                
|                  |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                             |  | 12  
|                  |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                                |  | 12  
|SIGNATURES        |  | 13                   
|INDEX TO EXHIBITS |  | 14                   

2

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PHOENIX GOLD INTERNATIONAL, INC.

BALANCE SHEETS

(Unaudited)

|                                     |                                                                                                                | March 31,
2001                             |         | September 30,
2000
|------------------------------------ | -------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------------
|ASSETS                               |                                                                                                                |                                            |         |                   
|Current assets:                      |                                                                                                                |                                            |         |                   
|                                     | Cash and cash equivalents                                                                                      |                                            | $       | 1,001             
|                                     | Accounts receivable, net                                                                                       |                                            |         | 3,811,478         
|                                     | Inventories                                                                                                    |                                            |         | 6,650,415         
|                                     | Prepaid expenses                                                                                               |                                            |         | 374,487           
|                                     | Deferred taxes                                                                                                 |                                            |         | 390,000           
|                                     |                                                                                                                |                                            |         |                   
|                                     |                                                                                                                | Total current assets                       |         |                   
|Property and equipment, net          |                                                                                                                |                                            | 850,402 |                   
|Goodwill, net                        |                                                                                                                |                                            | 304,572 |                   
|Deferred taxes                       |                                                                                                                |                                            | 620,000 |                   
|Other assets                         |                                                                                                                |                                            | 520,948 |                   
|                                     |                                                                                                                |                                            |         |                   
|                                     |                                                                                                                | Total assets                               |         | $                 
|                                     |                                                                                                                |                                            |         |                   
|LIABILITIES AND SHAREHOLDERS' EQUITY |                                                                                                                |                                            |         |                   
|Current liabilities:                 |                                                                                                                |                                            |         |                   
|                                     | Accounts payable                                                                                               |                                            | $       | 661,444           
|                                     | Accrued payroll and benefits                                                                                   |                                            |         | 439,259           
|                                     | Other accrued expenses                                                                                         |                                            |         | 409,892           
|                                     | Income taxes payable                                                                                           |                                            |         |                  
|                                     |                                                                                                                |                                            |         |                   
|                                     |                                                                                                                | Total current liabilities                  |         |                   
|Deferred gain on sale of facility    |                                                                                                                |                                            | 809,139 |                   
|Commitments and contingencies        |                                                                                                                |                                            |        |                   
|Shareholders' equity:                |                                                                                                                |                                            |         |                   
|                                     | Preferred stock;
Authorized5,000,000 shares; none outstanding                                                 |                                            |         |                  
|                                     | Common stock, no par value;
Authorized20,000,000 shares
Issued and outstanding3,026,945 and 3,026,945 shares |                                            |         | 6,550,928         
|                                     | Retained earnings                                                                                              |                                            |         | 4,652,641         
|                                     |                                                                                                                |                                            |         |                   
|                                     |                                                                                                                | Total shareholders' equity                 |         |                   
|                                     |                                                                                                                |                                            |         |                   
|                                     |                                                                                                                | Total liabilities and shareholders' equity |         | $                 
|                                     |                                                                                                                |                                            |         |                   

See Notes to Financial Statements

3

---

PHOENIX GOLD INTERNATIONAL, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

|                                             |                              | Three Months Ended
March 31 |           | Six Months Ended
March 31 |  
|-------------------------------------------- | ---------------------------- | --------------------------- | --------- | ------------------------- | -
|
|Net sales                                    |                              | $                           | 6,045,836 |                           | $
|Cost of sales                                |                              |                             | 4,640,786 |                           |  
|                                             |                              |                             |           |                           |  
|                                             | Gross profit                 |                             |           | 1,405,050                 |  
|Operating expenses:                          |                              |                             |           |                           |  
|                                             | Selling                      |                             |           | 1,050,788                 |  
|                                             | General and administrative   |                             |           | 606,609                   |  
|                                             |                              |                             |           |                           |  
|                                             | Total operating expenses     |                             |           | 1,657,397                 |  
|                                             |                              |                             |           |                           |  
|Income (loss) from operations                |                              |                             | (252,347  | )                         |  
|Other income (expense):                      |                              |                             |           |                           |  
|                                             | Interest income              |                             |           | 193                       |  
|                                             | Interest expense             |                             |           | (3,732                    | )
|                                             | Other income, net            |                             |           | 4                         |  
|                                             |                              |                             |           |                           |  
|                                             | Total other income (expense) |                             |           | (3,535                    | )
|                                             |                              |                             |           |                           |  
|Earnings (loss) before income taxes          |                              |                             | (255,882  | )                         |  
|Income tax benefit (expense)                 |                              |                             | 99,000    |                           |  
|                                             |                              |                             |           |                           |  
|Net earnings (loss)                          |                              | $                           | (156,882  | )                         | $
|                                             |                              |                             |           |                           |  
|Earnings (loss) per sharebasic and diluted  |                              | $                           | (0.05     | )                         | $
|                                             |                              |                             |           |                           |  
|Average shares outstandingbasic and diluted |                              |                             | 3,026,945 |                           |  
|                                             |                              |                             |           |                           |  

See Notes to Financial Statements

4

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PHOENIX GOLD INTERNATIONAL, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

|                                               |                                                                                                      | Six Months Ended
March 31                                              |                    
|---------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | -------------------
|
|Cash flows from operating activities:          |                                                                                                      |                                                                        |                    
|                                               | Net earnings (loss)                                                                                  |                                                                        | $                  
|                                               | Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: |                                                                        |                    
|                                               |                                                                                                      | Depreciation and amortization                                          |                    
|                                               |                                                                                                      | Deferred taxes                                                         |                    
|                                               |                                                                                                      | Changes in operating assets and liabilities (net of amounts acquired): |                    
|                                               |                                                                                                      |                                                                        | Accounts receivable
|                                               |                                                                                                      |                                                                        | Inventories        
|                                               |                                                                                                      |                                                                        | Prepaid expenses   
|                                               |                                                                                                      |                                                                        | Other assets       
|                                               |                                                                                                      |                                                                        | Accounts payable   
|                                               |                                                                                                      |                                                                        | Accrued expenses   
|                                               |                                                                                                      |                                                                        |                    
|                                               | Net cash provided by operating activities                                                            |                                                                        |                    
|Cash flows from investing activities:          |                                                                                                      |                                                                        |                    
|                                               | Capital expenditures, net                                                                            |                                                                        |                    
|                                               | Purchase of AudioSource assets                                                                       |                                                                        |                    
|                                               |                                                                                                      |                                                                        |                    
|                                               | Net cash used in investing activities                                                                |                                                                        |                    
|Cash flows from financing activities:          |                                                                                                      |                                                                        |                    
|                                               | Purchase of common stock                                                                             |                                                                        |                    
|                                               |                                                                                                      |                                                                        |                    
|                                               | Net cash used in financing activities                                                                |                                                                        |                    
|                                               |                                                                                                      |                                                                        |                    
|Decrease in cash and cash equivalents          |                                                                                                      |                                                                        | (1,652,682         
|Cash and cash equivalents, beginning of period |                                                                                                      |                                                                        | 1,653,683          
|                                               |                                                                                                      |                                                                        |                    
|Cash and cash equivalents, end of period       |                                                                                                      | $                                                                      | 1,001              
|                                               |                                                                                                      |                                                                        |                    
|Supplemental disclosures:                      |                                                                                                      |                                                                        |                    
|                                               | Cash paid for interest                                                                               |                                                                        | $                  
|                                               | Cash paid for income taxes                                                                           |                                                                        |                    

See Notes to Financial Statements

5

---

PHOENIX GOLD INTERNATIONAL, INC.

Notes to Financial Statements

(Unaudited)

Note 1UNAUDITED FINANCIAL STATEMENTS

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the
United States of America have been omitted from these unaudited financial statements. These unaudited financial statements should be read in conjunction with the financial statements and notes
included in the Company's Annual Report on Form 10-K for the year ended September 24, 2000 filed with the Securities and Exchange Commission. The results of operations for
the three- and six-month periods ended March 31, 2001 are not necessarily indicative of the operating results for the full year. In the opinion of management, all adjustments,
consisting only of normal recurring accruals, have been made to present fairly the Company's financial position at March 31, 2001 and the results of its operations for the three- and
six-month periods ended March 31, 2001 and 2000 and its cash flows for the six-months ended March 31, 2001 and 2000.

Note 2REPORTING PERIODS

The Company's fiscal year is the 52-week or 53-week period ending the last Sunday in September. Fiscal 2001 is a 53-week
year. The quarters ended December 31, 2000 and March 31, 2001 were a 14-week period and a 12-week period, respectively. The quarters ending June 30, 2001
and September 30, 2001 are a 13-week period and a 14-week period, respectively. Fiscal 2000 was a 52-week year and all quarters were 13-week
periods. For presentation convenience, the Company has indicated in these financial statements that its fiscal year ended on September 30 and that the three and six months presented ended on
March 31.

Note 3RECLASSIFICATION

During 2000, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board issued EITF 00-10: Accounting for Shipping and Handling Fees and Costs. Beginning October 1, 2000, the Company adopted EITF 00-10 and classified all
amounts billed to a customer in a sale transaction related to shipping and handling to net sales. Net sales and cost of sales amounts reported in prior periods have been reclassified to conform to the
current presentation. The reclassification had no effect on previously reported gross profit, net earnings or shareholders' equity.

Note 4PURCHASE OF AUDIOSOURCE ASSETS

Effective December 15, 2000, the Company acquired for $2.5 million in cash certain assets of AudioSource, Inc., an unrelated,
privately-held corporation based in Burlingame, California ("AudioSource"). The assets acquired included certain accounts receivable, inventories, tangible personal property, intellectual
property and other assets used in the home theater and home audio market. No liabilities of AudioSource were assumed by the Company. In addition, AudioSource agreed not to compete with the Company in
the home theater and home audio market for four years. The purchase price was paid from available cash reserves and from a drawdown under the Company's revolving line of credit.

The
Company accounted for the acquisition of assets under the purchase method of accounting and has included the results of operations of the assets since the date acquired. The
Company recorded approximately $1.1 million of accounts receivable, $900,000 of finished goods inventories, $56,000 of tangible personal property, $150,000 of intellectual property, $144,000
for the covenant not to compete

6

---

and $186,000 for goodwill. The tangible personal property will be depreciated using the straight-line method over three years. The intellectual property and goodwill will be amortized
using the straight-line method over five years. The covenant not to compete will be amortized using the straight-line method over four years.

The
following unaudited pro forma combined results of operations accounts for the acquisition as if it had occurred at the beginning of fiscal 2000 or at the beginning of the
six-month period ended March 31, 2001. The pro forma results give effect to the amortization of intellectual property, goodwill and the covenant not to compete and the effects on
interest income, interest expense and income taxes.

Six months
ended
March 31,
2001

Year ended
September 30,
2000Net sales

$
13,024,048

$
32,186,613Net earnings (loss)


(351,537
)

581,373Earnings (loss) per sharebasic and diluted


(0.12
)

0.19


The
proforma results may not be indicative of the results of operations that would have occurred if the acquisition had been effective on the date indicated or of the results that may
be obtained in the future. The pro forma statements should be read in conjunction with the financial statements and notes thereto of the Company included in the Company's Annual Report of
Form 10-K for the fiscal year ended September 24, 2000.

Note 5INVENTORIES

Inventories are stated at the lower of cost or market and consist of the following:

March 31,
2001

September 30,
2000Raw materials and work-in-process

$
2,905,444

$
2,598,709Finished goods and supplies


3,744,971


3,146,151Total inventories

$
6,650,415

$
5,744,860


7

---

Note 6PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

March 31,
2001

September 30,
2000Machinery and equipment

$
3,437,452

$
3,205,936Office equipment and furniture


1,717,139


1,638,315Leasehold improvements


78,036


75,2665,232,627


4,919,517Less accumulated depreciation and amortization


(4,382,225
)

(4,112,378
)Total property and equipment, net

$
850,402

$
807,139


Note 7LINE OF CREDIT

During January 2001, the Company renewed its revolving operating line of credit through January 2002 on terms similar to those contained in the
prior agreement. As of March 31, 2001, the Company was eligible to borrow $5.0 million under the line of credit. No borrowings were outstanding under the line of credit as of that date.

Note 8NEW ACCOUNTING STANDARD

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities. The new statement requires recognition of all derivatives as either assets or liabilities
on the balance sheet at fair value. The new statement is effective for the year ending September 30, 2001, as deferred by SFAS No. 137,Accounting for Derivative
Instruments and Hedging ActivitiesDeferral of the Effective Date of FASB Statement No. 133. The Company adopted SFAS No. 133 effective
October 1, 2000. Adoption of SFAS No. 133 had no material effect on the financial statements.

8

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Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

All statements in this report that are not statements of historical results should be considered "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements as to expectations, beliefs and future financial performance, and are based on current
expectations and are subject to certain risks, trends and uncertainties that could cause actual results to vary from those projected, which variances may have a material adverse effect on the Company.
Among the factors that could cause actual results to differ materially are the following: competitive factors; potential fluctuations in quarterly results and seasonality; the adverse effect of
reduced discretionary consumer spending; dependence on a significant customer; the need for the introduction of new products and product enhancements; dependence on suppliers; control by current
shareholders; high inventory requirements; business conditions in international markets; the Company's dependence on key employees; the need to protect intellectual property; environmental regulation;
and the potential delisting of the Company's common stock, as well as other factors discussed in Exhibit 99.1 to the Phoenix Gold International, Inc. Annual Report on
Form 10-K for the fiscal year ended September 24, 2000 which exhibit is hereby incorporated by reference. Given these uncertainties, readers are cautioned not to place undue
reliance on the forward-looking statements. The Company does not intend to update its forward-looking statements.

Results of Operations

Net sales decreased $542,000, or 8.2%, to $6.0 million for the three months ended March 31, 2001 from $6.6 million for the three months
ended March 31, 2000 due principally to decreased international sales. Sales of electronics, speakers and accessories decreased 8.1%, 15.2% and 7.5%, respectively, for the three months ended
March 31, 2001 compared to the corresponding quarter in fiscal 2000. International sales decreased $425,000, or 25.5%, to $1.24 million from $1.67 million in the comparable 2000
period. The decrease resulted primarily from a 30.4% decrease in sales to Europe, a 2.6% decrease in sales to Asia and a 32.6% decrease in sales to other international markets. International sales
represented 20.6% and 25.3% of net sales for the three months ended March 31, 2001 and 2000, respectively. Domestic sales decreased $117,000, or 2.4%, to $4.8 million for the three
months ended March 31, 2001 compared to $4.9 million for the three months ended March 31, 2000. The Company expects international sales for fiscal 2001 to remain at levels lower
than historically achieved due to current world-wide economic conditions.

Net
sales for the six months ended March 31, 2001 decreased $1.9 million, or 13.9%, to $11.7 million from $13.6 million for the six months ended
March 31, 2000 due to decreased domestic and international sales and decreased sales to a significant customer. Sales of electronics to a significant customer decreased $699,000, or 37.8%, to
$1.2 million for the six months ended March 31, 2001 compared to $1.9 million for the comparable period in fiscal 2000. Domestic sales decreased $1.0 million, or 10.2%, to
$9.1 million for the six months ended March 31, 2001 compared to $10.1 million for the six months ended March 31, 2000. For the six months ended March 31, 2001,
international sales decreased 25.0% to $2.6 million from $3.4 million in the comparable 2000 period. The decrease resulted primarily from a 26.0% decrease in sales to Europe, a 16.5%
decrease in sales to Asia and a 30.0% decrease in sales to other international markets. International sales represented 22.0% and 25.3% of net sales for the six months ended March 31, 2001 and
2000, respectively.

Gross
profit decreased to 23.2% of net sales for the three months ended March 31, 2001 from 28.6% for the three months ended March 31, 2000. Gross profit decreased to
23.6% of net sales for the six months ended March 31, 2001 from 27.2% for the comparable prior period. The decrease was primarily due to sales mix and decreased sales volume which caused fixed
labor and manufacturing overhead to increase as a percentage sales.

9

---

Operating expenses consist of selling, general and administrative expenses. Total operating expenses increased $170,000, or 11.4%, to $1,657,000 for the three months ended
March 31, 2001 compared to $1,487,000 for the three months ended March 31, 2000. Operating expenses were 27.4% and 22.6% of net sales in the respective three-month periods. Operating
expenses increased $85,000, or 2.9%, to $3,031,000 for the six months ended March 31, 2001 compared to $2,945,000 for the comparable period in fiscal 2000. Operating expenses were 26.0% and
21.7% of net sales in the respective six-month periods.

Selling
expenses increased $137,000, or 15.0%, to $1,051,000 for the three months ended March 31, 2001 compared to $914,000 for the comparable 2000 period. Selling expenses
were 17.4% and 13.9% of net sales in the respective three-month periods. Selling expenses were $1.8 million for both the first half of fiscal 2001 and the first half of fiscal 2000. Selling
expenses were 15.8% and 13.6% of net sales in the respective six month periods. The increased selling expenses for the three months ended March 31, 2001 were due to increased personnel and
consulting expenses in connection with the acquisition of AudioSource.

General
and administrative expenses increased $33,000, or 5.8%, to $607,000 for the three months ended March 31, 2001 compared to $574,000 for the comparable 2000 period.
General and administrative expenses were 10.0% and 8.7% of net sales in the respective three-month periods. General and administrative expenses increased $79,000, or 7.2% in the first half of fiscal
2001, to $1,184,000, compared to $1,105,000 for the first half of fiscal 2000. General and administrative expenses were 10.1% and 8.1% of net sales in the respective six-month periods. The
increased general and administrative expenses were primarily due to increased engineering expenses related to new product development activities.

Other
income (expense) decreased by $7,000 to $4,000 of other expense for the three months ended March 31, 2001, compared to $3,000 of other income for the three months ended
March 31, 2000. Other income increased by $15,000 to $26,000 for the first half of fiscal 2001 compared to $12,000 for the first half of fiscal 2000. The decrease in other income for the three
months ended March 31, 2001 was due to the reduction of interest income earned from cash equivalents and the increase of interest expense from the temporary use of the operating line of credit
for the acquisition of AudioSource assets. The increase of other income for the six months ended March 31, 2001 was due to increased interest income from increased average balances of cash
equivalents invested prior to the acquisition of certain AudioSource assets on December 15, 2000.

The
net loss was $157,000, or $0.05 per sharebasic and diluted (based on 3.0 million shares outstanding), for the three months ended March 31, 2001,
compared to net earnings of $241,000, or $0.08 per sharebasic and diluted (based on 3.0 million shares outstanding), for the three months ended March 31, 2000. The net loss
was $151,000, or $0.05 per sharebasic and diluted (based on 3.0 million shares outstanding), for the six months ended March 31, 2001, compared to net earnings of $453,000,
or $0.15 per sharebasic and diluted (based on 3.1 million shares outstanding), for the comparable 2000 period. The net loss was due to decreased sales and gross margin and
increased operating expenses.

Liquidity and Capital Resources

The Company's primary needs for funds are for working capital and, to a lesser extent, for capital expenditures. The Company financed its operations during the
six months ended March 31, 2001 from cash generated from operating activities. Net cash provided by operating activities was $1.1 million for the six months ended March 31, 2001.
When cash flow from operations is less than current needs, the Company increases the balance owing on its operating line of credit. When cash flow from operations exceeds current needs, the Company
pays down in part the balance owing on its operating line of credit rather than investing and accumulating excess cash, resulting in low reported cash balances.

10

---

Effective December 15, 2000, the Company acquired for $2.5 million in cash certain assets of AudioSource, Inc., an unrelated, privately-held
corporation based in Burlingame, California ("AudioSource"). The assets acquired included certain accounts receivable, inventories, tangible personal property, intellectual property and other assets
used in the home theater and home audio market. No liabilities of AudioSource were assumed by the Company. The purchase price was paid from available cash reserves and from a drawdown under the
Company's revolving line of credit which has since been repaid.

Cash
and cash equivalents decreased by $1,653,000 during the six months ended March 31, 2001 due principally to the AudioSource acquisition. Accounts receivable decreased by
$1.5 million net of amounts acquired from AudioSource due to collections of the accounts receivable acquired from
AudioSource and due to decreased international sales. Inventories increased by $35,000 net of amounts acquired from AudioSource due to raw materials acquired for the manufacture of new products.
Prepaid expenses increased $145,000 primarily due to trade show deposits and insurance costs incurred in the beginning of the Company's fiscal year. Accounts payable decreased $136,000 due to the
timing of payment due dates. Accrued expenses decreased $95,000 due to lower accrued payroll and benefits at March 31, 2001. Overall, net working capital decreased $655,000 during the first
half of fiscal 2001 due to the AudioSource acquisition and the net loss.

The
Company made capital expenditures of $265,000 during the six months ended March 31, 2001. Management anticipates that discretionary capital expenditures for the remainder
of fiscal 2001 will be approximately $300,000. These anticipated expenditures will be financed from available cash, cash provided from operations and, if necessary, proceeds from the line of credit.

During
January 2001, the Company renewed its revolving operating line of credit through January 2002 on terms similar to those contained in the prior agreement. As of
March 31, 2001, the Company was eligible to borrow $5.0 million under the line of credit. No borrowings were outstanding under the line of credit as of that date.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

The Company has assessed its exposure to market risks for its financial instruments and has determined that its exposures to such risks are not material. As of
March 31, 2001, the Company had cash and cash equivalents of $1,000 compared to $1,654,000 as of September 30, 2000. The Company invests its excess cash in highly liquid marketable
securities with maturities of three months or less at date of purchase. The Company's cash equivalents are generally commercial paper and money market accounts. The Company does not invest in
derivative securities.

The
Company sells its products and purchases its inventories primarily in United States dollars, therefore its exposure to currency exchange rate fluctuations is not material. The
Company does not engage in foreign currency hedging activities.

The
Company borrows from time to time under its revolving line of credit. Any borrowings outstanding under the line of credit bear interest at a variable rate based on the prime rate
or LIBOR plus 1.75%. The Company has not engaged in interest rate swaps or caps.

11

---

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

The Company held its annual meeting of shareholders on February 13, 2001. Voting common shareholders took the following actions at the meeting:

1.  The
shareholders elected the following nominees to the Company's Board of Directors to serve until the next annual meeting of shareholders or until their successors
are elected and qualified:

Name

Shares
Voted for

Shares
Withheld

Shares
Abstaining

Broker
Non-votesKeith A. Peterson

2,643,377

335,600

0

0Timothy G. Johnson

2,972,877

6,304

0

0Robert A. Brown

2,972,877

6,304

0

0Edward A. Foehl

2,972,877

6,304

0

0Frank G. Magdlen

2,972,877

6,304

0

0


2.  The
shareholders voted to ratify management's selection of auditors for fiscal 2001 by the affirmative vote of 2,970,952 shares, with 4,475 shares voting against
ratification and 3,754 shares abstaining. There were no broker non-votes with respect to this proposition.

Item 6. Exhibits and Reports on Form 8-K



10.18

Nonstatutory Stock Option Agreement dated February 13, 2001 between the Company and Robert A. Brown10.19

Nonstatutory Stock Option Agreement dated February 13, 2001 between the Company and Edward A. Foehl10.20

Nonstatutory Stock Option Agreement dated February 13, 2001 between the Company and Frank G. Magdlen






12

---





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

| |  | PHOENIX GOLD INTERNATIONAL, INC.
| |  | --------------------------------
| |  | By:                             

Dated:
May 8, 2001

13

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INDEX TO EXHIBITS

|Exhibit |  |                                                                                                      |  | Page
|------- |  | ---------------------------------------------------------------------------------------------------- |  | ----
|10.18   |  | Nonstatutory Stock Option Agreement dated February 13, 2001 Between the Company and Robert A. Brown  |  | 15  
|10.19   |  | Nonstatutory Stock Option Agreement dated February 13, 2001 Between the Company and Edward A. Foehl  |  | 20  
|10.20   |  | Nonstatutory Stock Option Agreement dated February 13, 2001 Between the Company and Frank G. Magdlen |  | 25  

14

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