93542--3/31/2006--ENESCO_GROUP

related topics

{debt, indebtedness, cash}

{product, market, service}

{customer, product, revenue}

{property, intellectual, protect}

{personnel, key, retain}

{cost, operation, labor}

{acquisition, growth, future}

{stock, price, share}

{operation, international, foreign}

{control, financial, internal}

{stock, price, operating}

{system, service, information}

We have had a history of losses and may not be profitable in the future. Our failure to successfully refinance or amend our current credit facility could cause us to incur significant additional bank fees and would impair our ability to conduct our normal business operations. Our failure to generate sufficient cash to meet our liquidity needs may affect our ability to service our indebtedness and grow our business. Our existing credit facility contains, and any new credit facility will most likely contain, various covenants which limit our management s discretion in the operation of our business and the failure to comply with such covenants could have a material adverse effect on our business, financial condition and results of operations. Our indebtedness imposes constraints and requirements on our business and financial performance and our compliance and performance in relationship to these could materially adversely affect our financial condition and operations. We have received a delisting notice from the New York Stock Exchange, and if we are unable to comply with the conditions of our plan to meet the continued listing standards, we will be delisted, which would result in decreased liquidity and increased volatility for our common stock. The market price of our common stock has historically fluctuated and is likely to fluctuate in the future. If we undergo a change in control, including the resignation or termination of our CEO and President, we may be unable to maintain our strategic alliance with Jim Shore Designs, Inc. We are highly dependent upon the ability of our senior management and Keystone Consulting Group to effectively run our operations. If we cannot develop products that will appeal to customers and enter into favorable licensing agreements, we may not be able to compete effectively. If we fail to adequately protect our intellectual property rights, competitors may manufacture and market products similar to ours, which could adversely affect our market share and results of operations. We have, in the past, experienced problems managing our supply chain and business processes, and our future success is dependent upon our ability to improve these functions. We are dependent upon the ability of NDC, a third-party logistics company, to manage our U.S. distribution and warehouse operations. Competition in our markets may hinder our ability to execute our business strategy, achieve profitability, or maintain relationships with existing customers. If the trend toward retail store consolidation in the independent gift channel in the U.S. continues, our revenues may decline unless we can grow share in our core gift channel or grow revenues in alternate channels. Because we do not have long-term commitments from many of our customers, we must estimate customer demand, and errors in our estimates could have negative effects on our inventory levels and revenues. We are dependent upon third-party suppliers whose failure to perform adequately could disrupt our business operations. Our reliance on manufacturing facilities and suppliers in China could make us vulnerable to supply interruptions related to the political, legal and cultural environment in China.

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93542--3/31/2006--ENESCO_GROUP_INC