**Exhibit 99.1****RISK FACTORS**      *You should carefully consider the risk factors describedbelow as well as the other information in our SEC filings beforemaking an investment in The Sportsman’s Guide, Inc. commonstock.***Risks Related to Our Business**     We have two reportable business segments, The Sportsman’sGuide, or TSG, a catalog and online retailer of value-pricedoutdoor gear and general merchandise, and The Golf Warehouse, orTGW, an online and catalog retailer of golf equipment andaccessories. We acquired TGW on June 29, 2004.**We are subject to multiple risks and uncertainties associatedwith our catalog and online retailing businesses, any of whichcould materially impact our operating results and cash flows.**     Our business is subject to a number of risks and uncertaintiesassociated with our catalog and Internet retailing businesses,some of which are beyond our control, including the following: •     lower and less predictable response rates for catalogs and    emails sent to prospective and existing customers;  •     increases in U.S. Postal Service rates, paper costs and    printing costs resulting in higher catalog production costs and    lower gross profits;  •     failures to properly design, print and mail our catalogs in a    timely manner;  •     failures to timely fill customer orders;  •     changes in consumer preferences, willingness to purchase goods    through catalogs or the Internet, weak economic conditions and    economic uncertainty, and unseasonable weather in key geographic    markets;  •     increases in software filters that may inhibit our ability to    market our products through email messages to our customers and    increases in consumer privacy concerns relating to the Internet;  •     changes in applicable federal and state regulation, such as the    Federal Trade Commission Act, the Children’s Online Privacy    Act, the Fair Credit Reporting Act and the Gramm-Leach-Bliley    Act;  •     breaches of Internet security; and  •     failures in our Internet infrastructure or the failure of    systems of third parties, such as telephone or electric power    service, resulting in website downtime, call center closures or    other problems.     Any one or more of these factors could result inlower-than-expected sales for our business. These factors couldalso result in increased costs, increased merchandise returns,slower turning inventories, inventory write-downs and workingcapital constraints. Any of these performance shortcomings wouldlikely materially harm our operating results and cash flows.**We must successfully anticipate changing consumer preferencesand buying trends, order and manage our inventory to reflectcustomer demand and manage backorders or our net sales andprofitability will be adversely affected.**     Our success depends upon our ability to anticipate and respondto merchandise trends and customer demands in a timely mannerand successfully manage our inventory. We cannot predictconsumer preferences with certainty and they may change overtime. We usually must order merchandise well in advance of theapplicable selling season. The extended lead times for many ofour purchases may make it difficult for us to respond rapidly tonew or changing product trends or changes in prices. If wemisjudge
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either the market for our merchandise or our customers’purchasing habits, our net sales may decline significantly andwe may not have sufficient quantities of merchandise to satisfycustomer demand or we may be required to mark down excessinventory, either of which would result in lower profit margins.     TSG’s average customer order is approximately three items.Backorders frequently result in our shipping the customer twopackages, but we charge the customer shipping only for the firstpackage. Effectively managing our level of backorders depends onboth our ability to accurately forecast customer demand andproduct availability from our vendors. Higher backorder levelsincrease our shipping costs and negatively impact our operatingresults.**We depend on vendors and service providers to operate ourbusiness and any disruption of their supply of products andservices could have an adverse impact on our net sales andprofitability.**     We depend on a number of vendors and service providers tooperate our business, including: •     vendors to supply our merchandise in sufficient quantities at    competitive prices in a timely manner;  •     outside printers and catalog production vendors to print and    mail our catalogs;  •     shipping companies, such as United Parcel Service, the    U.S. Postal Service and common carriers, for timely    delivery of our catalogs, shipment of merchandise to our    customers and delivery of merchandise from our vendors to us;  •     telephone companies to provide telephone service to our in-house    and outside call centers;  •     outside call centers to handle inbound customer telephone orders;  •     communications providers to provide our Internet users with    access to our websites; and  •     factory direct vendors for timely fulfillment of merchandise    orders.     Any disruption in these services could have a negative impact onour ability to market and sell our products, and serve ourcustomers. We are also subject to risks, such as theunavailability of raw materials, labor disputes, unionorganizing activity, strikes, inclement weather, naturaldisasters, war and terrorism, and adverse general economic andpolitical conditions, that might limit our vendors’ abilityto provide us with quality merchandise or services that we relyupon on a timely basis. We may not be able to developrelationships with new vendors, and products or services fromalternative sources, if available at all, may be of a lesserquality and more expensive than those we currently purchase. Anydelay or failure in offering products to our customers couldhave an adverse impact on our net sales and profitability. Inaddition, if the cost of fuel continues to rise or remains atcurrent levels, the cost to deliver merchandise to our customersfrom our distribution center may rise which could have anadverse impact on our profitability.**Because we do not have long-term contracts with oursuppliers, we may not have continued access to necessaryproducts and our net sales may suffer.**     Our financial performance depends on our ability to purchase ourproducts in sufficient quantities at competitive prices. Weoffer a changing mix of products and, therefore, our buyers mustdevelop and maintain relationships with vendors to locatesources for high-quality, low price, name brand merchandise theybelieve will interest our customers. We purchase our productsfor TSG from over 1,450 domestic and foreign manufacturers. Onthe other hand, TGW’s top ten suppliers accounted for 76.2%of its purchases in 2004. We have no long-term purchasecontracts with any of these suppliers, and therefore, have nocontractual assurances of continued supply, access to productsor favorable pricing. We also cannot ensure that we will be ableto locate sources for or maintain ongoing access tomanufacturers’ close-outs, military surplus and other itemsfeatured by us or that such merchandise will be available to usat the times or prices or in the quantities desired. Any vendorcould increase prices or discontinue selling to us at any time.If we are unable to maintain these supplier relationships, ourability to offer high-quality, favorably-priced products to ourcustomers may be impaired, and our net sales and gross profitscould decline.
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**We will consider acquisitions as part of our growth strategy,and failure to adequately evaluate or integrate any acquisitionscould harm our business.**     We actively seek and evaluate opportunities to develop oracquire businesses within our core outdoor focus area; however,we have limited experience in acquiring other businesses. InJune 2004, we acquired TGW. We expect to continue to consideropportunities to acquire pure-play ecommerce companies that donot fully utilize the catalog channel and intend to leverage ouroperating expertise, vendor relationships and balance sheet tocreate value through acquisition opportunities. Even if wesucceed in acquiring or developing any such businesses, thosenew businesses will face a number of risks and uncertainties,including: •     difficulties in integrating newly acquired or newly developed    businesses into existing operations;  •     our current and planned facilities, computer systems and    personnel and controls may not be adequate to support our future    operations;  •     problems maintaining uniform standards, procedures, controls and    policies;  •     unanticipated costs associated with the acquisition;  •     diversion of management’s attention from our existing    business;  •     adverse effects on existing business relationships with    suppliers and customers;  •     risks associated with entering product categories in which we    have no or limited prior experience;  •     the risk that we will face competition from established or    larger competitors in the new markets we may enter; and  •     potential loss of key employees of acquired organizations.     We may not realize the anticipated benefits of any acquisitionor development of a new business, in which event we will not beable to achieve an attractive return on our investment. Further,if we fail to properly evaluate and execute future acquisitions,our management team may be distracted from our day-to-dayoperations, our business may be disrupted and our operatingresults may suffer.**We source our private label merchandise internationally,which subjects us to tariffs, duties and currency fluctuationsas well as other risks and could increase our costs and,therefore, decrease our gross profits as well as decrease ourability to ship our merchandise in a timely manner.**     We source our private label merchandise from importers abroad.We expect to source an increasing amount of merchandise directlyfrom vendors abroad, particularly in Asia, which will subject usto risks and uncertainties, including: •     burdens associated with doing business overseas, including    tariffs and import duties, import/export controls or regulations    and quotas;  •     if shipping is delayed, backorders may result or orders may be    cancelled;  •     difficulty in identifying and supervising vendors in foreign    countries;  •     declines in the value of the U.S. dollar relative to    foreign currencies, which could negatively affect the ability of    foreign vendors to provide merchandise at favorable    prices; and  •     changing or uncertain economic conditions in foreign countries    and, in certain countries, political unrest, war or health    epidemics.     Any of these factors may disrupt the ability of foreign vendorsto supply merchandise in a timely manner or could substantiallyincrease our costs to source merchandise through foreign vendors.
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**Due to the seasonality of our business, our annual operatingresults would be adversely affected if our net sales during thethird and fourth quarters were substantially belowexpectations.**     We experience seasonal fluctuations in our sales and operatingresults. Historically, we have realized a significant portion ofour net sales and a significant portion of our earnings for theyear during the third and fourth quarters. In 2004, we generatedapproximately 24.3% and 39.8% of our net sales, and 22.1% and42.6% of our gross profit, in the third and fourth quarters,respectively. In addition, TGW also experiences higher salesvolumes leading up to and during Father’s Day. We incursignificant additional expenses in the third and fourth quartersdue to higher customer purchase volumes and increased staffing.In addition, abnormally warm weather conditions during the thirdand fourth quarters can reduce sales of many of the productsnormally sold during this time period. If we miscalculate thedemand for our products generally or for our product mix, ournet sales could decline, which would harm our financialperformance.**A decline in discretionary consumer spending could reduce oursales.**     Our sales depend on discretionary consumer spending, which maydecrease due to a variety of factors beyond our control,including: •     unfavorable general business conditions;  •     increases in interest rates;  •     increases in inflation;  •     war, terrorism or fears of war or terrorism;  •     increases in consumer debt levels and decreases in the    availability of consumer credit;  •     adverse or unseasonable weather conditions;  •     adverse changes in applicable laws and regulations;  •     increases in taxation;  •     adverse unemployment trends; and  •     other factors that adversely influence consumer confidence and    spending.     Our customers’ purchases of discretionary items, includingour products, could decline during periods when disposableincome is lower or periods of actual or perceived unfavorableeconomic conditions. If this occurs, our net sales and our grossprofit would decline.**If we fail to develop and maintain our proprietary mailinglist, our sales and operating results would suffer.**     We mail catalogs to individuals whose names are in ourproprietary customer database and to potential customers, whosenames we obtain from rented or exchanged mailing lists. Namesderived from rented or exchanged lists generate lower responserates, while requiring the same or greater advertising expensesthan names in our in-house database. Consequently, overallresponse rates could decline while expenses would increase if wewere to increase our use of rented or exchanged lists relativeto the use of names in our customer database.     Attrition reduces the number and quality of names in our mailinglist. We must constantly develop and maintain our mailing listby identifying new prospective customers and tracking purchasesby existing customers. We use internally developed customerselection models to identify prospective and existing customersto whom a catalog will be mailed. Incorrect modeling assumptionsor our failure to update our mailing list could negativelyimpact our net sales and operating results. Additionally, it hasbecome more difficult for direct retailers to obtain qualityprospecting mailing lists, which may limit our ability tomaintain the size of our mailing list.
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**The loss of our senior management or other key personnelcould harm our current and future operations and prospects.**     Our performance is substantially dependent on the continuedservices of our senior management and other key personnel,particularly Gregory R. Binkley, President and Chief ExecutiveOfficer, John M. Casler, Executive Vice President ofMerchandising, Marketing and Creative Services, Dale D. Monson,Vice President of Information Systems and Technology and ChiefInformation Officer, Douglas E. Johnson, Vice President ofMarketing, Mark S. Marney, Chief Executive Officer of TGW, R.Michael Marney, President of TGW, and Charles B. Lingen,Executive Vice President, Finance and Administration and ChiefFinancial Officer. The loss of the services of these executivesor other key employees for any reason could harm our business,financial condition and operating results. Our future successalso depends on our ability to identify, attract, hire, train,retain and motivate other highly-skilled technical, managerial,editorial, merchandising, marketing and customer supportpersonnel. Competition for such personnel is intense and wecannot ensure that we will be able to successfully attract,assimilate or retain sufficiently qualified personnel.**If use of the Internet, particularly with respect to onlinecommerce, declines or does not continue to increase as rapidlyas we anticipate, our sales may not grow to desired levels.**     In 2004, online orders represented 44.9% of our total orders.Our future sales and profits depend upon the widespreadacceptance and use of the Internet as an effective medium ofcommerce. Rapid growth in the use of the Internet is a recentphenomenon. We cannot ensure that a large base of consumers willadopt and continue to use the Internet for commerce nor can weensure that Internet usage will not decline from current levels.Demand for recently introduced services and products over theInternet is subject to a high level of uncertainty. In addition,the Internet may not be accepted as a viable long-termcommercial marketplace for a number of reasons, including: •     actual or perceived lack of security of information or privacy    protection;  •     possible disruptions, computer viruses or other damage to the    Internet servers or to users’ computers; and  •     excessive governmental regulations.     If the Internet fails to continue to grow as a commercialmarketplace in the future, our net sales may not increase.**Intense competition in the outdoor recreation and golfmarkets could reduce our sales and profitability.**     The market for outdoor recreation products and equipment ishighly fragmented and competitive. We have significantcompetitors within each merchandise category and may facecompetition from new entrants or existing competitors who shiftfocus to markets we serve. Our competitors include: •     other outdoor/hunting mail order catalogs, including Bass Pro    Shops Inc. and Cabela’s Inc.;  •     large-format sporting goods stores and chains, such as    Dick’s Sporting Goods, Inc.;  •     other specialty off-course retailers of golf equipment such as    Golfsmith International, Inc., Edwin Watts Golf, Golf Galaxy and    Pro Golf Discount;  •     mass merchandisers, warehouse clubs, discount stores and    department stores, such as Wal-Mart Stores, Inc., Target    Corporation and Amazon.com;  •     online retailers of footwear, clothing, outdoor gear and golf    equipment such as Overstock.com and Sierra Trading Post,    Inc.; and  •     on-course pro shops.     Many of our competitors have substantially greater marketpresence, name recognition and financial, distribution,marketing and other resources, than we have. Our competitors maybe able to secure products
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from vendors on more favorable terms, fulfill customer ordersmore efficiently and adopt more aggressive pricing or inventoryavailability policies than we can. Our competitors may developproducts or services that are equal or superior to our solutionsor achieve greater market acceptance than ours. Traditionalstore-based retailers also enable customers to see and feelproducts in a manner that is not possible in catalogs or overthe Internet. As a result of this competition, we may need tospend more on advertising and promotion. If we are unable tocompete effectively in our markets, our business, financialcondition and operating results may suffer.**Our success depends on the continued popularity of outdoorrecreation, particularly camping, golf and hunting, and thegrowth of the market for these products. If these activitiesdecline in popularity, our sales could materially decline.**     We generate a substantial portion of our net sales from the saleof outdoor recreation equipment, in particular camping, golf andhunting products and related equipment. Any substantial decreasein the popularity of these activities could have an adverseeffect on our results of operations and financial condition.     The demand for golf products is directly related to thepopularity of golf, the number of golf participants and thenumber of rounds being played by these participants. If golfparticipation decreases, sales of TGW’s products wouldlikely decline substantially. TGW depends on the exposure of theproduct brands it sells to increase brand recognition, qualityand acceptance of its merchandise offerings. Any significantreduction in television coverage of PGA Tour or other golftournaments, or other significant decreases in either attendanceat or viewership of golf tournaments, will reduce the visibilityof its products and could materially affect our net sales. We donot believe there has been any material increase in golfparticipation or number of rounds played in recent years. TheNational Golf Foundation has reported that total rounds playedincreased only slightly, by 0.7%, in 2004 after trendingdownward in 2003 and 2002. These trends may continue in thefuture and could negatively impact our sales and growth.**TGW’s sales and products may be adversely affected ifits vendors fail to successfully develop and introduce newproducts.**     TGW’s future success depends, in part, upon itsvendors’ continued ability to develop and introduceinnovative products in the golf equipment market. The success ofnew products depends in part upon the subjective preferences ofgolfers, including a golf club’s look and “feel,”and the level of acceptance a golf club has among professionaland recreational golfers. These subjective preferences aredifficult to predict and may be subject to rapid andunanticipated changes. If TGW’s vendors fail tosuccessfully develop and introduce innovative products, our netsales and gross profits may suffer.**Temporary or permanent disruption at our fulfillmentfacilities could prevent timely shipment of customer orders andhurt our sales.**     We assemble, package, and ship substantially all of our orders,and process all product returns, at our South St. Paul,Minnesota and Wichita, Kansas fulfillment and distributionfacilities. Our ability to receive, process and fulfill customerorders depends on the effective operation of our telephonelines, operational and management information systems, andwarehouse and distribution facilities. Any material disruptionin our order receipt, processing or fulfillment systemsresulting from internal or external telephone system failure,electrical problems, failure of our information systems or othertechnical problems could cause significant delays in our abilityto receive and fill orders and may cause orders to be lost,shipped or delivered late or cancelled by the customer. Ifeither facility were destroyed or significantly damaged by fireor other disaster, we would need to obtain alternativefacilities and replenish our inventory, either of which wouldresult in significantly increased operating costs and delays infulfilling customer orders.
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**We intend to increase our reliance on our vendors to fulfillorders, which may increase the risks associated with ourfulfillment process and decrease our ability to control thetiming of shipments and customer satisfaction.**     We intend to increase our reliance on vendors to fulfill ourcustomers’ orders. Shipment from TSG’s factory-directvendors to TSG’s customers accounted for approximately 3.8%of TSG’s net sales in 2004, which we intend to continue toincrease. Any failure by our vendors to sell and ship suchproducts to our customers in a timely manner will have anadverse effect on our ability to fulfill customer orders andharm our business and results of operations. Our vendors, inturn, rely on third-party carriers to ship directly to ourcustomers. Our vendors’ and third-party carriers’failure to deliver products to our customers in a timely manneror to otherwise adequately serve our customers would damage ourreputation and brand and substantially harm our business andresults of operations.**Our systems may not be able to support increased online andcatalog sales, which would harm our business and operatingresults.**     Growth in our sales volume or in the number of users of ourwebsites may strain or exceed the capacity of our computersystems and lead to declines in performance or systems failure.We believe that we will need to continually improve and enhancethe functionality and performance of our ecommerce, customertracking and other technical systems. We intend to upgrade ourexisting systems and implement new systems as we anticipate newdemand. Failure to implement these systems effectively or withina reasonable period of time would cause decreased levels ofcustomer service and satisfaction.**Technological risks related to the Internet, includingsecurity and reliability issues, are largely outside our controland may hurt our reputation or sales.**     Our online business is subject to numerous technological risksand uncertainties associated with the Internet. These risksinclude changes in required technology interfaces, websitedowntime or slowdowns, security breaches and other technicalfailures or human errors.     We host and manage all of our ecommerce websites utilizingcomputer systems at our corporate offices. System failures or anevent or disaster at our offices could lead to disruption inservice on our sites. Further, our servers may also bevulnerable to computer viruses, physical or electronic break-insand similar disruptions. We may need to expend significantadditional capital and other resources to protect against asecurity breach or to alleviate problems caused by securitybreaches. Our business may be harmed if our security measures donot prevent security breaches. We cannot assure protectionagainst all security breaches. Our failure to respondsuccessfully to these risks and uncertainties might adverselyaffect the net sales through our online business, as well asdamage our reputation and increase our selling and marketing andgeneral and administrative expenses. In addition, our successwill depend, in large part, upon third parties maintaining theInternet infrastructure to provide a reliable network backbonewith the speed, data capacity, security and hardware necessaryfor reliable Internet access and services. Any significantreliability, data capacity or connectivity problems experiencedby the Internet or its users could harm our net sales andprofitability.**Our failure to protect confidential information of ourcustomers and our network against security breaches could damageour reputation and brands and subject us to legal liability.**     A significant barrier to online commerce and communications isthe secure transmission of confidential information over publicnetworks. Currently, a large portion of our online and catalogsales are billed to our customers’ credit card accountsdirectly. We rely on encryption and authentication technologylicensed from third parties to effect secure transmission ofconfidential information, including credit card numbers.Advances in computer capabilities, new discoveries in the fieldof cryptography or other developments may result in a compromiseor breach of the technology we use to protect customertransaction data. Any compromise of our security could damageour reputation and brands and expose us to a risk of lost sales,or litigation and possible legal liability. In addition, anyonewho is able to circumvent our security measures couldmisappropriate proprietary information or cause interruptions inour
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operations. We may need to expend significant resources toprotect against security breaches or to address problems causedby breaches.**If we are unable to provide satisfactory telephone-basedcustomer support, we could lose customers.**     Our ability to provide satisfactory levels of customer supportalso depends, to a large degree, on the efficient anduninterrupted operation of our call centers. Any materialdisruption or slowdown in our telephone order processing systemsresulting from labor disputes, telephone or Internet failures,power or service outages, natural disasters or other eventscould make it difficult or impossible to provide adequatetelephone-based customer support. Further, we may be unable toattract and retain an adequate number of competent customersupport representatives, which is essential in creating afavorable customer experience. If we are unable to continuallyprovide adequate staffing for our customer support operations,our reputation could be seriously harmed. In addition, we cannotensure that call volumes will not exceed our present systemcapacities. If this occurs, we could experience delays inaccepting orders, responding to customer inquiries andaddressing customer concerns. Because our success depends inlarge part on keeping our customers satisfied, any failure toprovide satisfactory levels of customer support would likelyimpair our reputation and we could lose customers.**In order to increase our online sales and to sustain orincrease profitability, we must attract online customers in acost-effective manner.**     Our success depends on our ability to attract online customersin a cost-effective manner. We have relationships with providersof online marketing services to provide content and other linksthat direct customers to our websites. We rely on theserelationships as significant sources of traffic to our websites.If we are unable to develop or maintain these relationships onacceptable terms, our ability to attract new online customerswould be harmed. In addition, the parties with which we haveonline-marketing arrangements could provide marketing servicesto other online or traditional retailers, including retailerswith whom we compete. As a result, these parties may bereluctant to enter into or maintain relationships with us.Without these relationships, traffic to our websites could bereduced, which would substantially harm our business and resultsof operations.**Fluctuations in the price of paper and a rise in postagerates may increase our operating costs and make our expensesdifficult to predict.**     Our catalog business is vulnerable to fluctuations in the priceof paper stock and both our catalog and Internet businesses arevulnerable to increases in the cost of postage. Increases inpostal rates and paper costs have a significant impact on thecost of production and mailing of our catalogs and the shipmentof customer orders. Postage prices increase periodically, and wehave no control over increases that may occur in the future.Paper prices historically have been cyclical and we haveexperienced significant increases in the past. Significantincreases in postal rates or paper costs could negatively impactour operating results, particularly to the extent we are unableto pass on increases directly to our customers or offset theincreases by reducing other costs.     In addition, we are dependent upon the availability of paper toprint our catalogs. Paper shortages have occurred in the pastand may occur in the future. Any paper shortage may increase ourpaper costs and cause us to reduce our catalog circulation,change to a different weight or grade of paper or reduce thenumber of pages per catalog. These increased costs or responsiveactions could negatively impact our net sales and operatingresults.**We guarantee lifetime returns for TSG purchases and morelimited returns of TGW merchandise. Excessive merchandisereturns could harm our operating results.**     TSG maintains a policy of making refunds or exchanges for allmerchandise returned by customers for any reason, and we placeno time limit on this return policy. TGW offers a 30-dayplayability guarantee that permits customers to return clubs forfull in-store credit and a 30-day money back
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guarantee on new unused merchandise. While we make allowances inour financial statements for anticipated merchandise returnsbased on historical return rates, actual merchandise returnscould exceed our reserves. Any significant increase inmerchandise returns or merchandise returns that exceed ourreserves could negatively impact our operating results.**Our failure to address risks associated with credit cardfraud could damage our reputation and brands.**     Under current credit card practices, we are liable forfraudulent credit card transactions conducted online or over thephone because we do not obtain a cardholder’s signature. Wedo not currently carry insurance against this risk. To date, wehave experienced minimal losses from credit card fraud, but weface the risk of significant losses from this type of fraud asour net sales increase. Such losses could impair our results ofoperations. In addition, any failure to adequately controlfraudulent credit card transactions could damage our reputationand brands, and reduce our net sales.**We may incur costs from litigation or increased regulationrelating to products that we sell, which could adversely affectour sales and profitability.**     We may incur damages due to lawsuits relating to products wesell. Our products include black powder firearms, ammunition,air guns, paintball guns, blank firing firearms, bows,slingshots, knives, stun guns, blowguns, crossbows, certainnon-lethal and chemical spray devices and other potentiallydangerous products. We also sell tree stands for use by hunters.Sales of potentially dangerous products representedapproximately 10.0% of TSG’s sales for the year endedDecember 31, 2004. We may incur losses due to lawsuits,including potential class actions in connection with our failureto comply with federal or state laws relating to the products wesell. We may also incur losses from lawsuits relating to theimproper use of potentially dangerous products sold by us,including lawsuits by municipalities or other organizationsattempting to recover costs from manufacturers and retailers ofpotentially dangerous products. Our insurance coverage and theinsurance provided by our vendors for certain products they sellto us may be inadequate to cover claims and liabilities relatedto products that we sell. In addition, claims related toproducts that we sell or the unavailability of insurance forproduct liability claims at acceptable rates, could result inthe elimination of these products from our product line reducingsales. If one or more successful claims against us are notcovered by or exceed our insurance coverage, or if insurancecoverage is no longer available, our available working capitalmay be impaired and our operating results could be adverselyaffected. Even unsuccessful claims could result in theexpenditure of funds and management time and could have anegative impact on our profitability and on future premiums wewould be required to pay for our insurance coverage.**Current and future government regulation may negativelyimpact demand for our products and our ability to conduct ourbusiness.**     Federal, state and local laws and regulations can affect ourbusiness and the demand for products. These laws and regulationsinclude: •     Federal Trade Commission regulations governing the manner in    which orders may be solicited and prescribing other obligations    in fulfilling orders and consummating sales;  •     laws and regulations that prohibit or limit the sale, in certain    states and localities, of certain items we offer such as black    powder firearms, ammunition, bows, knives and similar products;  •     The Bureau of Alcohol, Tobacco, Firearms and Explosives    governing the manner in which we sell ammunition;  •     laws and regulations governing hunting and fishing;  •     laws and regulations relating to the collecting and sharing of    non-public customer information; and  •     customs laws and regulations pertaining to proper item    classification, quotas, payment of duties and tariffs, and    maintenance of documentation and internal control programs.
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     Changes in these laws and regulations or additional regulationcould cause the demand for and sales of our products todecrease. Moreover, complying with increased or changedregulations could cause our operating expenses to increase. Thiscould adversely affect our net sales and profitability.**Assertions by third parties of infringement by us of theirintellectual property rights could result in significant costsand substantially harm our business and results ofoperations.**     Other parties have, and may in the future, assert that we haveinfringed their technology or other intellectual propertyrights. We cannot predict whether any such assertions or claimsarising from such assertions will substantially harm ourbusiness and results of operations. If we are forced to defendagainst any infringement claims, whether they are with orwithout merit or are determined in our favor, we may face costlylitigation, diversion of technical and management personnel orproduct shipment delays. Furthermore, the outcome of a disputemay be that we would need to develop non-infringing technologyor enter into royalty or licensing agreements. Royalty orlicensing agreements, if required, may be unavailable on termsacceptable to us, or at all.**Our sales may decrease if we are required to collect taxes onpurchases.**     We do not collect sales, use or other taxes related to theproducts we sell, except for certain corporate-level taxes andsales taxes with respect to purchases by customers located inthe states of Minnesota and Kansas. However, one or more statesmay seek to impose sales, use or other tax collectionobligations on us in the future. A successful assertion by oneor more states that we should be collecting sales, use or othertaxes on the sale of our products could result in substantialtax liabilities and penalties in connection with past sales. Inaddition, if we are required to collect these taxes we will loseone of our current cost advantages, which may decrease ourability to compete with traditional retailers and substantiallyharm our net sales.     We have based our policies for sales tax collection on ourinterpretation of certain decisions of the U.S. SupremeCourt that restrict the imposition of obligations to collectstate and local sales and use taxes with respect to sales madethrough catalogs or over the Internet. However, implementationof the restrictions imposed by these Supreme Court decisions issubject to interpretation by state and local taxing authorities.While we believe that these Supreme Court decisions currentlyrestrict state and local taxing authorities outside the statesof Minnesota and Kansas from requiring us to collect sales anduse taxes from purchasers located within their jurisdictions,taxing authorities outside of Minnesota and Kansas coulddisagree with our interpretation of these decisions. Moreover, anumber of states, as well as the U.S. Congress, have beenconsidering various initiatives that could limit or supersedethe Supreme Court’s position regarding sales and use taxeson Internet sales. If any state or local taxing jurisdictionwere to disagree with our interpretation of the SupremeCourt’s current position regarding state and local taxationof Internet sales, or if any of these initiatives were toaddress the Supreme Court’s constitutional concerns andresult in a reversal of its current position, we could berequired to collect sales and use taxes from purchasers locatedin states other than Minnesota and Kansas. The imposition bystate and local governments of various taxes upon Internetcommerce could create administrative burdens for us and coulddecrease our future net sales.
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**Government regulation of the Internet and online commerce isevolving and unfavorable changes could substantially harm ourbusiness and results of operations.**     In addition to general business regulations and laws, we aresubject to regulations and laws that specifically govern theInternet and online commerce. Existing and future regulationsand laws may impede the growth of the Internet or other onlineservices. These regulations and laws may cover taxation,restrictions on imports and exports, customs, tariffs, userprivacy, data protection, pricing, content, copyrights,distribution, electronic contracts and other communications,consumer protection, the provision of online payment services,broadband residential Internet access and the characteristicsand quality of products and services. It is not clear howexisting laws and regulations governing issues such as propertyownership, sales and other taxes, libel and personal privacyapply to the Internet and online commerce. Unfavorableresolution of these issues may slow the growth of onlinecommerce and, in turn, our business.
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