911650--6/16/2008--NAVARRE_CORP

related topics

{debt, indebtedness, cash}

{product, market, service}

{stock, price, share}

{capital, credit, financial}

{condition, economic, financial}

{customer, product, revenue}

{operation, natural, condition}

{system, service, information}

{provision, law, control}

{gas, price, oil}

{control, financial, internal}

{financial, litigation, operation}

{acquisition, growth, future}

{interest, director, officer}

{regulation, change, law}

{personnel, key, retain}

{property, intellectual, protect}

Pending SEC investigation or litigation may subject us to significant costs, judgments or penalties and could divert management s attention. Revenues are dependent on consumer preferences and demand. Our business is seasonal and variable in nature and, as a result, the level of sales and payment terms during our peak season could adversely affect our results of operations and liquidity. A substantial portion of FUNimation s revenues typically are derived from a small number of licensed properties and a small number of licensors and FUNimation s content is highly concentrated in the FUNimation s revenues are substantially dependent on television exposure for its licensed properties. Technology developments, particularly in the electronic downloading arena, may adversely affect our net sales, margins and results of operations. Increased counterfeiting or piracy may negatively affect the demand for our home entertainment products. We may not be able to successfully protect our intellectual property rights. The loss of key personnel could affect the depth, quality and effectiveness of our management team. In addition, if we fail to attract and retain qualified personnel, the depth, quality and effectiveness of our management team and employees could be negatively affected. If we fail to meet our significant working capital requirements or if our working capital requirements increase substantially, our business and prospects could be adversely affected. Product returns or inventory obsolescence could reduce our sales and profitability or negatively impact our liquidity. We are subject to the risk that our inventory values may decline due to, among other things, changes in demand and that protective terms under our supplier agreements may not adequately cover the decline in values, which could result in lower gross margins or inventory write-downs. We have significant credit exposure and negative product demand trends or other factors could cause us significant credit loss. We may not be able to adequately adjust our cost structure in a timely fashion in response to a decrease in net sales, which may cause our profitability to suffer. Our distribution and publishing businesses operate in highly competitive industries and compete with large national firms. Further competition, among other things, could reduce our sales volume and margins. We depend on third party shipping and fulfillment companies for the delivery of our products. We depend on a variety of systems for our operations, and a failure of these systems could disrupt our business and harm our reputation and net sales and negatively impact our results of operations. We are implementing a new warehouse and transportation management system. Failure to implement the new system in an effective and a timely fashion could adversely affect our results of operations and timely reporting of financial results. Future acquisitions could result in disruptions to our business by, among other things, distracting management time and diverting financial resources. Further, if we are unsuccessful in integrating acquired companies into our business, it could materially and adversely affect our financial condition and operating results. Interruption of our business or catastrophic loss at any of our facilities could lead to a curtailment or shutdown of our business. Future terrorist or military actions could result in disruption to our operations or loss of assets, in certain markets or globally. Legislative actions, higher director and officer insurance costs and potential new accounting pronouncements are likely to cause our general and administrative expenses to increase and impact our future financial condition and results of operations. The level of our indebtedness could adversely affect our financial condition. Our outstanding indebtedness bears interest at variable rates. Any increase in interest rates will reduce funds available to us for our operations and future business opportunities and will adversely affect our leveraged capital structure. We may be unable to generate sufficient cash flow to service our debt obligations. We may be able to incur additional indebtedness, which could further exacerbate the risks associated with our current indebtedness level. Our credit agreement contains significant restrictions that limit our operating and financial flexibility. Risks Relating to Our Common Stock Our common stock price has been volatile. Fluctuations in our stock price could impair our ability to raise capital and make an investment in our securities undesirable. The exercise of outstanding warrants and options may adversely affect our stock price. Our anti-takeover provisions, our ability to issue preferred stock and our staggered board may discourage takeover attempts that could be beneficial for our shareholders. We currently do not intend to pay dividends on our common stock and, consequently, there will be no opportunity for our shareholders to achieve a return on their investment through dividend payments. Our directors may not be held personally liable for certain actions, which could discourage shareholder suits against them.

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911650--6/16/2008--NAVARRE_CORP_/MN/