##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 for the quarterly period ended June 30, 2009
 or
 o
    
    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 0-22982
 NAVARRE CORPORATION
  Minnesota
    
    41-1704319(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer
Identification No.)
 7400 49th Avenue North, New Hope, MN 55428
 (763) 535-8333
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ
  Class
    
    Outstanding at August 11, 2009Common Stock, No Par Value
    
    36,260,116 shares




---



##### 



NAVARRE CORPORATION
 Index
 PagePART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements. (Unaudited)Consolidated Balance Sheets  June 30, 2009 and March 31, 2009 (Audited)
    
    
    3Consolidated Statements of Operations  Three Months ended June 30, 2009 and 2008
    
    
    4Consolidated Statements of Cash Flows  Three Months ended June 30, 2009 and 2008
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    29PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3. Defaults Upon Senior Securities
    
    
    29Item 4. Submission of Matters to a Vote of Security Holders
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
   30SIGNATURES
    
    
   31EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Consolidated Financial Statements.
 NAVARRE CORPORATION
 
 Consolidated Balance Sheets
(In thousands, except share amounts)
 June 30,
    
    
    March 31,2009
    
    
    2009(Unaudited)
    
    
    (Note)Assets:Current assets:Marketable securities
    
    $
    1,030
    
    
    $
    1,024Accounts receivable, less allowances of $19,035 and $19,010, respectively
    
    
    57,314
    
    
    
    72,817Inventories
    
    
    34,427
    
    
    
    26,732Prepaid expenses and other current assets
    
    
    11,252
    
    
    
    11,090Income tax receivable
    
    
    4,620
    
    
    
    4,866Deferred tax assets  current, net
    
    
    4,074
    
    
    
    6,219Total current assets
    
    
    112,717
    
    
    
    122,748Property and equipment, net of accumulated depreciation of $17,943 and $16,704, respectively
    
    
    14,959
    
    
    
    15,957Software development costs
    
    
    1,103
    
    
    
    677Other assets:Intangible assets, net of amortization of $25,913 and $25,364, respectively
    
    
    2,855
    
    
    
    3,406License fees, net of amortization of $23,789 and $21,570, respectively
    
    
    17,664
    
    
    
    17,728Production costs, net of amortization of $13,160 and $12,223, respectively
    
    
    9,112
    
    
    
    8,408Deferred tax assets  non-current, net
    
    
    10,556
    
    
    
    10,299Other assets
    
    
    3,685
    
    
    
    3,946Total assets
    
    $
    172,651
    
    
    $
    183,169Liabilities and shareholders equity:Current liabilities:Note payable  line of credit
    
    $
    23,229
    
    
    $
    24,133Capital lease obligation  short term
    
    
    82
    
    
    
    90Accounts payable
    
    
    91,880
    
    
    
    106,708Checks written in excess of cash balance
    
    
    153
    
    
    
    297Deferred compensation
    
    
    1,951
    
    
    
    2,149Accrued expenses
    
    
    12,569
    
    
    
    11,504Total current liabilities
    
    
    129,864
    
    
    
    144,881Long-term liabilities:Capital lease obligation  long-term
    
    
    101
    
    
    
    115Income taxes payable
    
    
    1,260
    
    
    
    1,166Total liabilities
    
    
    131,225
    
    
    
    146,162Commitments and contingencies (Note 18)Shareholders equity:Common stock, no par value:Authorized shares  100,000,000; issued and outstanding shares  36,260,116 at
both June 30, 2009 and March 31, 2009
    
    
    161,391
    
    
    
    161,134Accumulated deficit
    
    
    (119,965
    )
    
    
    (124,126
    )Accumulated other comprehensive loss
    
    
    
    
    
    
    (1
    )Total shareholders equity
    
    
    41,426
    
    
    
    37,007Total liabilities and shareholders equity
    
    $
    172,651
    
    
    $
    183,169
 
 Note: The balance sheet at March 31, 2009 has been derived from the audited consolidated financial
statements at that date but does not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America for complete consolidated
financial statements. See accompanying notes to consolidated financial statements.
 3




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NAVARRE CORPORATION
 
 Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 Three Months EndedJune 30,2009
    
    
    2008Net sales
    
    $
    134,306
    
    
    $
    142,025Cost of sales (exclusive of depreciation and amortization)
    
    
    110,742
    
    
    
    119,899Gross profit
    
    
    23,564
    
    
    
    22,126Operating expenses:Selling and marketing
    
    
    5,155
    
    
    
    5,715Distribution and warehousing
    
    
    2,076
    
    
    
    2,884General and administrative
    
    
    8,028
    
    
    
    8,453Depreciation and amortization
    
    
    1,789
    
    
    
    2,321Total operating expenses
    
    
    17,048
    
    
    
    19,373Income from operations
    
    
    6,516
    
    
    
    2,753Other income (expense):Interest expense
    
    
    (719
    )
    
    
    (1,615
    )Interest income
    
    
    7
    
    
    
    15Other income (expense), net
    
    
    451
    
    
    
    (98
    )Net income before income tax
    
    
    6,255
    
    
    
    1,055Income tax expense
    
    
    (2,094
    )
    
    
    (428
    )Net income
    
    $
    4,161
    
    
    $
    627Earnings per common share:Basic
    
    $
    0.11
    
    
    $
    0.02Diluted
    
    $
    0.11
    
    
    $
    0.02Weighted average shares outstanding:Basic
    
    
    36,237
    
    
    
    36,186Diluted
    
    
    36,347
    
    
    
    36,250
 See accompanying notes to consolidated financial statements.
 4




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NAVARRE CORPORATION
 
 Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 Three Months EndedJune 30,2009
    
    
    2008Operating activities:Net income
    
    $
    4,161
    
    
    $
    627Adjustments to reconcile net income to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    1,789
    
    
    
    2,321Amortization of debt acquisition costs
    
    
    109
    
    
    
    72Write-off of debt acquisition costs
    
    
    
    
    
    
    490Amortization of license fees
    
    
    2,219
    
    
    
    1,052Amortization of production costs
    
    
    936
    
    
    
    781Change in deferred revenue
    
    
    92
    
    
    
    525Share-based compensation expense
    
    
    257
    
    
    
    288Deferred income taxes
    
    
    1,888
    
    
    
    1,165Deferred compensation expense
    
    
    (198
    )
    
    
    208Other
    
    
    20
    
    
    
    (2
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    15,503
    
    
    
    (11,722
    )Inventories
    
    
    (7,695
    )
    
    
    (9,392
    )Prepaid expenses
    
    
    (162
    )
    
    
    (1,753
    )Income taxes receivable
    
    
    246
    
    
    
    (1,206
    )Other assets
    
    
    227
    
    
    
    201Production costs
    
    
    (1,640
    )
    
    
    (1,579
    )License fees
    
    
    (2,155
    )
    
    
    (2,389
    )Accounts payable
    
    
    (14,828
    )
    
    
    13,991Income taxes payable
    
    
    94
    
    
    
    67Accrued expenses
    
    
    973
    
    
    
    (3,692
    )Net cash (used in) provided by operating activities
    
    
    1,836
    
    
    
    (9,947
    )Investing activities:Purchases of property and equipment
    
    
    (242
    )
    
    
    (2,444
    )Purchases of intangible assets
    
    
    
    
    
    
    (239
    )Purchases of software development
    
    
    (426
    )
    
    
    Proceeds from sale of intangible assets
    
    
    2
    
    
    
    Sale of marketable equity securities
    
    
    
    
    
    
    1,654Net cash used in investing activities
    
    
    (666
    )
    
    
    (1,029
    )Financing activities:Proceeds from note payable, line of credit
    
    
    68,141
    
    
    
    59,545Payments on note payable, line of credit
    
    
    (69,045
    )
    
    
    (42,128
    )Repayments of note payable
    
    
    
    
    
    
    (9,744
    )Payment of deferred compensation
    
    
    
    
    
    
    (1,654
    )Checks written in excess of cash
    
    
    (144
    )
    
    
    524Debt acquisition costs
    
    
    (100
    )
    
    
    Repayments of capital lease obligations
    
    
    (22
    )
    
    
    (24
    )Other
    
    
    
    
    
    
    12Net cash (used in) provided by financing activities
    
    
    (1,170
    )
    
    
    6,531Net decrease in cash
    
    
    
    
    
    
    (4,445
    )Cash at beginning of period
    
    
    
    
    
    
    4,445Cash at end of period
    
    $
    
    
    
    $
    Supplemental cash flow information:Cash paid for (received from):Interest
    
    $
    546
    
    
    $
    1,372Income taxes, net of refunds
    
    
    (113
    )
    
    
    412Supplemental schedule of non-cash investing and financing activities:Debt acquisition costs included in accounts payable
    
    
    
    
    
    
    200
 See accompanying notes to consolidated financial statements.
 5




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NAVARRE CORPORATION
 
 Notes to Consolidated Financial Statements
(Unaudited)
 Note 1  Organization and Basis of Presentation
     Basis of Consolidation
  Revenue Recognition
    Accounting by
Producers or Distributors of Films.
 6




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Recently Issued Accounting Pronouncements
 Subsequent Events
 Accounting for Transfers of Financial Assets an amendment to SFAS No. 140
 Consolidation of Variable Interest Entities an amendment to FIN 46(R)
 The
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles. The Hierarchy of Generally Accepted Accounting
Principles
 Note 2  Marketable Securities
  
    
    Level 1  quoted prices in active markets for identical assets and liabilities.
    
    Level 2  observable inputs other than quoted prices in active markets for identical
assets and liabilities.
    
    Level 3  unobservable inputs in which there is little or no market data available,
which require the reporting entity to develop its own assumptions.
 7




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As of June 30, 2009Gross
    
    
    GrossEstimated fair
    
    
    unrealized
    
    
    unrealizedvalue
    
    
    holding gains
    
    
    holding lossesAvailable-for-sale:Corporate bonds
    
    $
    411
    
    
    $
    
    
    
    $
    Money market fund
    
    
    619
    
    
    
    
    
    
    
    $
    1,030
    
    
    $
    
    
    
    $
    
 As of March 31, 2009Gross
    
    
    GrossEstimated fair
    
    
    unrealized
    
    
    unrealizedvalue
    
    
    holding gains
    
    
    holding lossesAvailable-for-sale:Government agency and corporate bonds
    
    $
    712
    
    
    $
    1
    
    
    $
    2Money market fund
    
    
    312
    
    
    
    
    
    
    
    $
    1,024
    
    
    $
    1
    
    
    $
    2
  Note 3  Share-Based Compensation
  8




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Stock Options
  WeightedaverageNumber of
    
    
    exerciseoptions
    
    
    priceOptions outstanding, beginning of period:
    
    
    3,165,528
    
    
    $
    5.74Granted
    
    
    63,000
    
    
    
    0.66Exercised
    
    
    
    
    
    
    Canceled
    
    
    (225,495
    )
    
    
    6.69Options outstanding, end of period
    
    
    3,003,033
    
    
    $
    5.56Options exercisable, end of period
    
    
    1,922,006
    
    
    $
    7.72Shares available for future grant, end of period
    
    
    1,441,667
     Restricted Stock
   Weightedaveragegrant dateShares
    
    
    fair valueUnvested, beginning of period:
    
    
    445,155
    
    
    $
    1.18Granted
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Forfeited
    
    
    (5,583
    )
    
    
    1.10Unvested, end of period
    
    
    439,572
    
    
    $
    1.18
 9




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Restricted Stock Units  Performance Based
  Share-Based Compensation Valuation and Expense Information
  Three Months EndedJune 30,2009
    
    2008Expected life (in years)
    
    
    5.0
    
    
    
    5.0Expected volatility
    
    
    71
    %
    
    
    65
    %Risk-free interest rate
    
    
    1.65-2.93
    %
    
    
    2.65
    %Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
   10




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Note 4  Earnings Per Share
   Three Months EndedJune 30,2009
    
    
    2008Numerator:Net income
    
    $
    4,161
    
    
    $
    627Denominator:Denominator for basic earnings per shareweighted-average shares
    
    
    36,237
    
    
    
    36,186Dilutive securities: Employee stock options and warrants
    
    
    110
    
    
    
    64Denominator for diluted earnings per shareadjusted weighted-average shares
    
    
    36,347
    
    
    
    36,250Net earnings per share:Basic earnings per share
    
    $
    0.11
    
    
    $
    0.02Diluted earnings per share
    
    $
    0.11
    
    
    $
    0.02
   Note 5  Shareholders Equity
   Note 6  Accounts Receivable
  June 30,
    
    
    March 31,2009
    
    
    2009Trade receivables
    
    $
    70,850
    
    
    $
    86,345Vendor receivables
    
    
    2,758
    
    
    
    2,894Other receivables
    
    
    2,741
    
    
    
    2,58876,349
    
    
    
    91,827Less: allowance for doubtful accounts and sales discounts
    
    
    5,874
    
    
    
    7,043Less: allowance for sales returns, net margin impact
    
    
    13,161
    
    
    
    11,967Total
    
    $
    57,314
    
    
    $
    72,817
 11




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Note 7  Inventories
  June 30,
    
    
    March 31,2009
    
    
    2009Finished products
    
    $
    29,199
    
    
    $
    20,437Consigned inventory
    
    
    1,813
    
    
    
    1,868Raw materials
    
    
    3,415
    
    
    
    4,427Total
    
    $
    34,427
    
    
    $
    26,732
  Note 8  Prepaid Expenses and Other Current Assets
  June 30,
    
    
    March 31,2009
    
    
    2009Prepaid royalties
    
    $
    9,284
    
    
    $
    9,826Other
    
    
    1,968
    
    
    
    1,264Total
    
    $
    11,252
    
    
    $
    11,090
 Note 9  Property and Equipment
  June 30,
    
    
    March 31,2009
    
    
    2009Furniture and fixtures
    
    $
    1,306
    
    
    $
    1,306Computer and office equipment
    
    
    17,825
    
    
    
    17,782Warehouse equipment
    
    
    10,116
    
    
    
    10,116Production equipment
    
    
    1,346
    
    
    
    1,296Leasehold improvements
    
    
    2,086
    
    
    
    2,081Construction in progress
    
    
    223
    
    
    
    80Total
    
    
    32,902
    
    
    
    32,661Less: accumulated depreciation and amortization
    
    
    17,943
    
    
    
    16,704Net property and equipment
    
    $
    14,959
    
    
    $
    15,957
 Note 10  Capitalized Software Development Costs
 Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed
 12




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Note 11  Intangible Assets
  As of June 30, 2009Gross carrying
    
    
    Accumulatedamount
    
    
    amortization
    
    
    NetMasters
    
    $
    8,084
    
    
    $
    8,084
    
    
    $
    License relationships
    
    
    20,078
    
    
    
    17,798
    
    
    
    2,280Domain name
    
    
    70
    
    
    
    31
    
    
    
    39Trademarks (not amortized)
    
    
    536
    
    
    
    
    
    
    
    536$
    28,768
    
    
    $
    25,913
    
    
    $
    2,855
 As of March 31, 2009Gross carrying
    
    
    Accumulatedamount
    
    
    amortization
    
    
    NetMasters
    
    $
    8,086
    
    
    $
    7,986
    
    
    $
    100License relationships
    
    
    20,078
    
    
    
    17,350
    
    
    
    2,728Domain name
    
    
    70
    
    
    
    28
    
    
    
    42Trademarks (not amortized)
    
    
    536
    
    
    
    
    
    
    
    536$
    28,770
    
    
    $
    25,364
    
    
    $
    3,406
   Remainder of fiscal 2010
    
 
    
    $ 1,3542011
    
    
 
    4252012
    
    
 
    2372013
    
    
 
    303Thereafter
    
    
 
    
 Debt issuance costs
  Note 12  License Fees
  June 30,
    
    
    March 31,2009
    
    
    2009License fees
    
    $
    41,453
    
    
    $
    39,298Less: accumulated amortization
    
    
    23,789
    
    
    
    21,570Total
    
    $
    17,664
    
    
    $
    17,728
   13




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Note 13  Production Costs
  June 30,
    
    
    March 31,2009
    
    
    2009Production costs
    
    $
    22,272
    
    
    $
    20,631Less: accumulated amortization
    
    
    13,160
    
    
    
    12,223Total
    
    $
    9,112
    
    
    $
    8,408
    Note 14  Accrued Expenses
  June 30,
    
    
    March 31,2009
    
    
    2009Compensation and benefits
    
    $
    4,227
    
    
    $
    3,263Royalties
    
    
    3,054
    
    
    
    3,056Rebates
    
    
    1,898
    
    
    
    1,264Rent
    
    
    1,241
    
    
    
    1,249Deferred revenue
    
    
    395
    
    
    
    303Interest
    
    
    103
    
    
    
    39Other
    
    
    1,651
    
    
    
    2,330Total
    
    $
    12,569
    
    
    $
    11,504
 Note 15  Bank Financing and Debt
   14




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Letter of Credit
  Note 16  Private Placement Warrants
  Note 17  Income Taxes
      15




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Note 18  Commitments and Contingencies
 Leases
   Remainder of fiscal 2010
    
    $
    2,1942011
    
    
    2,5432012
    
    
    2,5182013
    
    
    2,5162014
    
    
    2,502Thereafter
    
    
    10,198$
    22,471
 Litigation and Proceedings
  SEC Investigation
  Note 19  Capital Leases
  June 30, 2009
    
    
    March 31, 2009Computer and office equipment
    
    $
    314
    
    
    $
    314Less: accumulated amortization
    
    
    144
    
    
    
    113Net property and equipment
    
    $
    170
    
    
    $
    201
 16




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Minimum LeaseCommitmentsRemainder of fiscal 2010
    
    $
    802011
    
    
    552012
    
    
    472013
    
    
    23Total minimum lease payments
    
    $
    205Less: amounts representing interest at rates ranging from 6.9% to 31.6%
    
    
    22Present value of minimum capital lease payments, reflected in the
balance sheet as current and noncurrent capital lease obligations of
$82 and $101, respectively
    
    $
    183
 Note 20  Related Party Transactions
 Employment/Severance Agreements
     Employment Agreement  FUNimation
  17




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Note 21  Business Segments
   Publishing
    
    Distribution
    
    Eliminations
    
    ConsolidatedThree months ended June 30, 2009Net sales
    
    $
    24,865
    
    
    $
    121,396
    
    
    $
    (11,955
    )
    
    $
    134,306Income from operations
    
    
    6,152
    
    
    
    364
    
    
    
    
    
    
    
    6,516Net income, before income tax
    
    
    5,587
    
    
    
    668
    
    
    
    
    
    
    
    6,255Depreciation and amortization expense
    
    
    732
    
    
    
    1,057
    
    
    
    
    
    
    
    1,789Capital expenditures
    
    
    99
    
    
    
    143
    
    
    
    
    
    
    
    242Total assets
    
    
    57,984
    
    
    
    120,819
    
    
    
    (6,152
    )
    
    
    172,651
 Publishing
    
    Distribution
    
    Eliminations
    
    ConsolidatedThree months ended June 30, 2008Net sales
    

    $
    27,418
    
    
    $
    133,095
    
    
    $
    (18,488
    )
    
    $
    142,025Income (loss) from operations
    
    
    3,444
    
    
    
    (691
    )
    
    
    
    
    
    
    2,753Net income (loss), before income tax
    
    
    2,431
    
    
    
    (1,376
    )
    
    
    
    
    
    
    1,055Depreciation and amortization expense
    
    
    1,386
    
    
    
    935
    
    
    
    
    
    
    
    2,321Capital expenditures
    
    
    242
    
    
    
    2,202
    
    
    
    
    
    
    
    2,444Total assets
    
    
    161,021
    
    
    
    143,189
    
    
    
    (1,021
    )
    
    
    303,189
 Note 22  Subsequent Events
  18




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
   anime
  Executive Summary
      19




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Working Capital and Debt
    Forward-Looking Statements / Risk Factors
   anime
 20




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##### Table of Contents



Critical Accounting Policies
 Managements Discussion and
Analysis of Financial Condition and Results of Operations
 Reconciliation of GAAP Net Sales to Net Sales Before Inter-Company Eliminations
   Three Months EndedJune 30,(Unaudited)(In thousands)
    
    2009
    
    
    2008Net sales:Publishing
    
    $
    24,865
    
    
    $
    27,418Distribution
    
    
    121,396
    
    
    
    133,095Net sales before inter-company eliminations
    
    
    146,261
    
    
    
    160,513Inter-company sales
    
    
    (11,955
    )
    
    
    (18,488
    )Net sales as reported
    
    $
    134,306
    
    
    $
    142,025
 21




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##### Table of Contents



Results of Operations
  Three Months EndedJune 30,(Unaudited)2009
    
    
    
    2008Net sales:Publishing
    
    
    18.5
    %
    
    
    19.4
    %Distribution
    
    
    90.4
    
    
    
    93.6Inter-company sales
    
    
    (8.9
    )
    
    
    (13.0
    )Total net sales
    
    
    100.0
    
    
    
    100.0Cost of sales, exclusive of amortization and depreciation
    
    
    82.5
    
    
    
    84.4Gross profit
    
    
    17.5
    
    
    
    15.6Operating expensesSelling and marketing
    
    
    3.8
    
    
    
    4.0Distribution and warehousing
    
    
    1.5
    
    
    
    2.0General and administrative
    
    
    6.0
    
    
    
    6.0Depreciation and amortization
    
    
    1.3
    
    
    
    1.6Total operating expenses
    
    
    12.6
    
    
    
    13.6Income from operations
    
    
    4.9
    
    
    
    2.0Interest expense
    
    
    (0.5
    )
    
    
    (1.1
    )Other income (expense), net
    
    
    0.3
    
    
    
    (0.1
    )Net income  before taxes
    
    
    4.7
    
    
    
    0.8Income tax expense
    
    
    (1.6
    )
    
    
    (0.3
    )Net income
    
    
    3.1
    %
    
    
    0.5
    %
 22




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##### Table of Contents



Publishing Segment
  Fiscal 2010 First Quarter Results Compared To Fiscal 2009 First Quarter
 Net Sales
 anime
 Gross Profit
  Operating Expenses
     Operating Income
  23




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##### Table of Contents



Distribution Segment
  Fiscal 2010 First Quarter Results Compared To Fiscal 2009 First Quarter
 Net Sales
  Gross Profit
  Operating Expenses
      24




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##### Table of Contents



Operating Income (Loss)
  Consolidated Other Income and Expense
  Consolidated Income Tax Expense
    Consolidated Net Income
  Market Risk
   25




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##### Table of Contents



Seasonality and Inflation
  Liquidity and Capital Resources
 Cash Flow Analysis
 Operating Activities
    Investing Activities
    26




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##### Table of Contents



Financing Activities
     Capital Resources
      27




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##### Table of Contents



Liquidity
    Contractual Obligations
  Less
    
    
    
    
    
    
    
    
    
    
    Morethan 1
    
    
    1  3
    
    
    3  5
    
    
    than 5Total
    
    
    Year
    
    
    Years
    
    
    Years
    
    
    YearsOperating leases
    
    $
    23,616
    
    
    $
    2,162
    
    
    $
    5,083
    
    
    $
    5,200
    
    
    $
    11,171Capital leases
    
    
    205
    
    
    
    80
    
    
    
    102
    
    
    
    23
    
    
    
    License and distribution agreement
    
    
    15,246
    
    
    
    7,464
    
    
    
    6,582
    
    
    
    1,200
    
    
    
    Deferred compensation
    
    
    1,951
    
    
    
    1,951
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    41,018
    
    
    $
    11,657
    
    
    $
    11,767
    
    
    $
    6,423
    
    
    $
    11,171
  
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
 Managements Discussion and Analysis of Financial Condition and Results of Operations  Market
Risk
 28




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##### Table of Contents



Item 4.
    
    Controls and Procedures
      
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
 Managements Discussion and Analysis of
Financial Condition and Results of Operations  Forward-Looking Statements / Risk Factors
 
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    Submission of Matters to a Vote of Securities Holders
  
 Item 5.
    
    Other Information
  29




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##### Table of Contents



Item 6.
    
    Exhibits
  31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)31.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)32.1
    
    Certification of the Chief Executive Officer pursuant Section 906 of the Sarbanes-Oxley Act
of 2002 (18 U.S.C. Section 1350)32.2
    
    Certification of the Chief Financial Officer pursuant Section 906 of the Sarbanes-Oxley Act
of 2002 (18 U.S.C. Section 1350)
 30




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##### Table of Contents



SIGNATURES
  Navarre Corporation
(Registrant)Date: August 13, 2009

/s/ Cary L. DeaconCary L. DeaconPresident and Chief Executive
Officer(Principal Executive Officer)Date: August 13, 2009
    /s/ J. Reid PorterJ. Reid PorterExecutive Vice President and Chief Financial Officer (Principal
Financial and Accounting Officer) 31