##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
 
 FORM 10-K/A  (Mark One) þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended March 31, 2005oro
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 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
(Address of principal executive offices) (763) 535-8333
(Registrants telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class
    
    Name of each exchange on which registeredCommon Stock, No par value
    
    NASDAQ National Market
 Securities registered pursuant to Section 12(g) of the Act:None 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
þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act
Rule 12b of the Act). Yes þ No o The aggregate market value of the voting stock held by non-affiliates of the Registrant at
September 30, 2004 was $347,525,175 based on the closing sale price on such date of $14.49 per
share. The Registrant had 29,752,166 shares of Common Stock, no par value, outstanding at June 9, 2005. DOCUMENTS INCORPORATED BY REFERENCE None.




---



##### 



EXPLANATORY NOTE We are filing this Amendment No. 1 to our
Annual Report on Form 10-K (the Annual Report)
originally filed on June 14, 2005 with the Securities and Exchange Commission, solely for the
purpose of including the Reconciliation of GAAP Net Sales to Net Sales before Inter-Company
Eliminations information in Item 7 of Part II, Managements Discussion and Analysis of Financial
Condition and Results of Operations. Except as described above, no other changes have been made
to Item 7 of Part II or are being made to the Annual Report. This Form 10-K/A does not reflect
events occurring after the June 14, 2005 filing of the Annual
Report nor does it modify or update
the disclosure contained in the Annual Report in any way other than described in this Explanatory
Note. This Amendment also includes, as did the Annual Report, the certifications of the
registrants executive officers required pursuant to Item 15 of the Annual Report. This Amendment
presents Item 7 of Part II, as amended, in its entirety.




---



##### 



NAVARRE CORPORATION
FORM 10-K/A(Amendment #1) TABLE OF CONTENTS PART II Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    1PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    11Signatures
    
    
    21Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




---



##### 



PART II 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations Overview Navarre Corporation, a Minnesota corporation formed in 1983, publishes and distributes a broad
range of home entertainment and multimedia products, including PC software, CD audio, DVD and VHS
video, video games and accessories. Our business is divided into two business segments 
Distribution and Publishing. Through these business segments we maintain and leverage strong
relationships throughout the publishing and distribution chain. Our broad base of customers includes: (i) wholesale clubs, (ii) mass merchandisers, (iii)
other third-party distributors, (iv) computer specialty stores, (v) music specialty stores, (vi)
book stores, (vii) office superstores, and (viii) electronic superstores. Our customer base
includes over 500 individual customers with over 18,000 locations, certain of which are
international locations. Through our distribution business we distribute and provide fulfillment services in connection
with a variety of finished goods that are provided by our vendors, which include PC software and
video game publishers and developers, independent and major music labels, and major motion picture
studios. These vendors provide us with PC software, CD audio, DVD and VHS video, and video games
and accessories, which we in turn distribute to our retail customers. Our distribution business
focuses on providing vendors and retailers with a range of value-added services, including
vendor-managed inventory, Internet-based ordering, electronic data interchange services,
fulfillment services, and retailer-oriented marketing services. Through our publishing business we own or license various PC software, CD audio, and DVD and
VHS video titles. Our publishing business packages, brands, markets and sells directly to
retailers, third-party distributors, and our distribution business. Our publishing business
currently consists of Encore, BCI and FUNimation. Encore,
which we acquired in July 2002, licenses and publishes personal productivity, genealogy, education
and interactive gaming PC products. BCI, which we acquired in November 2003, is a provider of
niche DVD and video products and in-house produced CDs and DVDs. FUNimation, acquired on May 11,
2005, is a leading animeand childrens animation content provider in the United States. Restatements In June 2005, our management, after consultation with the Audit Committee of the Board of
Directors, determined that our consolidated financial statements for the third fiscal quarter ended
December 31, 2003, year ended March 31, 2004, first fiscal quarter ended June 30, 2004, second
fiscal quarter ended September 30, 2004, and third fiscal quarter ended December 31, 2004 should no
longer be relied upon. As a result of the fiscal year 2005 audit, it was determined that expenses
related to the incentive-based deferred compensation of our Chief Executive Officer should have
been recorded in the third fiscal quarter of 2004 and first fiscal quarter of 2005. As a result,
additional expenses and accrued liabilities of $1.5 million and $2.2 million were recorded in these
quarters, respectively. These expenses were determined in accordance with the provisions of the
Chief Executive Officers 2001 employment agreement. It was also determined that our deferred tax benefit recorded in the third fiscal quarter of
2005 was improperly included in income and should have increased common stock. Consequently,
the tax benefit of 1




---



##### 



$2.4 million recognized during the third fiscal quarter of 2005 was reduced and
common stock increased by the same amount. The consolidated financial statements for our third fiscal quarter ended December 31, 2003,
year ended March 31, 2004, first fiscal quarter ended June 30, 2004, second fiscal quarter ended
September 30, 2004, and third fiscal quarter ended December 31, 2004 and notes thereto included in
this annual report on Form 10-K have been restated to include the effects of the expenses related
to the incentive-based deferred compensation of our Chief Executive Officer and the deferred tax
benefit recorded in income that should have increased common stock. Executive Summary Fiscal 2005 was another year of growth for Navarre Corporation. Our consolidated net sales
for fiscal 2005 increased 26.6% to $596.3 million compared to $470.9 million in fiscal 2004. This
growth was achieved through increases in all of our product groups. Our gross profit increased to
$91.1 million or 15.3% of net sales for fiscal 2005 compared with $58.0 million or 12.3% of net
sales for fiscal 2004. The increase in gross margin percent for 2005 was primarily due to the
continued expansion of our higher margin publishing segment. Total operating expenses for fiscal 2005 were $78.8 million or 13.2% of net sales, compared
with $50.3 million or 10.7% of net sales for fiscal 2004. We incurred an increase in expenses
during fiscal 2005 due to compensation expense of $5.8 million
that resulted from our acquisition of the remaining twenty
percent ownership position in Encore, incentive-based deferred compensation expense of $2.5 million
related to our CEOs employment agreement, expense of $1.2 million related to Sarbanes-Oxley Act of
2002 compliance, and FUNimation transaction expenses of $578,000. Additionally, certain operating
expenses (information technologies, warehouse expenses and freight charges) were approximately 0.6%
above our prior year percent of net sales. This increase was primarily due to the building of a
new warehouse and certain improvements to our warehouse operating systems during fiscal 2005. We
expect these certain operating expenses to trend to our historical averages and management intends
to focus on obtaining further efficiencies in fiscal 2006. Net income for fiscal 2005 increased to $12.5
million or $0.44 per diluted share compared to $7.4 million or $0.31 per diluted share for last
year. We acquired the general and limited partnership interests of FUNimation in May 2005. This
acquisition resulted in a substantial increase in our debt level, but has the potential to add
substantial revenues and profits to our publishing business in fiscal 2006. We expect this segment
to grow during fiscal 2006 with the addition of business generated through this acquisition. Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based
upon our consolidated financial statements, which have been prepared in conformity with accounting
principles generally accepted in the United States of America. The preparation of these
consolidated financial statements requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we review and evaluate our estimates,
including those related to customer programs and incentives, product returns, bad debt,
inventories, long-lived assets including intangible assets, goodwill, income taxes, contingencies
and litigation. We base our estimates on historical experience and various other assumptions that
are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results could differ from these estimates under different assumptions
or conditions. We believe the following critical accounting policies are affected by our judgment, estimates
and/or assumptions used in the preparation of our consolidated financial statements. Revenue Recognition We recognize revenue on products shipped when title and risk of loss transfers, delivery has
occurred, the price to the buyer is determinable and collectibility is reasonably assured. We
recognize service revenues upon delivery of the services. Service revenues have represented less
than 10% of total net sales for fiscal 2005, 2004 and 2003. Under specific conditions, we permit
our customers to return products. We record a general reserve for sales returns and allowances
against amounts due to reduce the net recognized receivables to the amounts we reasonably 2




---



##### 



believe
will be collected. These reserves are based on the application of the our average historical gross
profit percent against averages sales returns, sales discounts percent against average gross sales
and specific reserves for marketing programs. Our actual sales return rates have averaged between
13% to 17% over the past three years. Although our past experience has been a good indicator of
future reserve levels, there can be no assurance that our current reserve levels will be adequate
in the future. Our distribution customers at times qualify for certain price protection benefits from our
vendors. We serve as an intermediary to settle these amounts between vendors and customers. We
account for these amounts as reductions of revenues with
corresponding reductions in cost of sales. Our publishing business at times provides certain price protection, promotional monies, volume
rebates and other incentives to customers. We record these amounts as reductions in revenue. Allowance for Doubtful Accounts We perform periodic credit evaluations of our customers financial condition and generally do
not require collateral. We make estimates of the uncollectibility of our accounts receivable,
including advances and balances with independent labels. In determining the adequacy of our
allowances, we analyze customer financial statements, historical collection experience, aging of
receivables, substantial down-grading of credit scores, bankruptcy filings, and other economic and
industry factors. Although we utilize risk management practices and methodologies to determine the
adequacy of the allowance, it is possible that the accuracy of the estimation process could be
materially impacted by different judgments as to collectibility based on the information considered
and further deterioration of accounts. Our largest collection risks exist for retail customers
that are in bankruptcy, or at risk of bankruptcy. The occurrence of these events is infrequent and
has diminished slightly over the last few years, but can be material
when they occur. Although
credit losses relating to customers consistently have been within managements expectations, if
circumstances change (i.e., higher than expected defaults or an unexpected material
adverse change in a major customers ability to meet its financial obligations to us), our
estimates of the recoverability of amounts due could be reduced by a material amount. Goodwill Impairment We review goodwill for potential impairment annually for each reporting unit or when events or
changes in circumstances indicate the carrying value of the goodwill might exceed its current fair
value. We have no goodwill associated with our distribution segment, while our publishing segment
has goodwill. We determine fair value using widely accepted valuation techniques, including
discounted cash flow and market multiple analysis. These types of analyses require us to make
certain assumptions and estimates regarding industry economic factors and the profitability of
future business strategies. We conduct impairment testing at least once annually based on our most
current business strategy in light of present industry and economic conditions, as well as future
expectations. Our goodwill consisted of $ 9.8 million and $10.4 million as of March 31, 2005 and
2004, respectively. If the operating results for our publishing segment deteriorate considerably
and are not consistent with our assumptions and estimates, we may be exposed to a goodwill
impairment charge that could be material. Impairment of Long-Lived Assets In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property and equipment
and amortizable intangible assets, are evaluated for impairment whenever events or changes in
circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss
is recognized when estimated undiscounted cash flows expected to result from the use of the asset
plus net proceeds expected from disposition of the asset (if any) are less than the carrying value
of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced
to its estimated fair value. If our results from operations deteriorate considerably and are not
consistent with our assumptions, we may be exposed to a material impairment charge. Inventory Valuation Our
inventories are recorded at the lower of cost or market. We use certain
estimates and judgments to properly value inventory. We monitor our inventory to ensure that we
properly identify inventory items that are slow-moving and non-returnable, on a timely basis. The
primary risk in our distribution business is 3




---



##### 



product that has been purchased from vendors that
cannot be sold at full distribution prices and is not returnable to the vendors. The primary risk
in our publishing business is that certain products may run out of shelf life and be returned.
Generally, these products can be sold in bulk to a variety of liquidators. We establish reserves
for the difference between carrying value and estimated realizable value in the periods when we
first identify the lower of cost or market issue. If future demand or market conditions are less
favorable than current analyses, additional inventory write-downs or reserves may be required and
would be reflected in cost of sales in the period the determination is made. Income Taxes Income taxes are recorded under the liability method. Deferred income taxes are provided for
temporary differences between the financial reporting and tax basis of assets and liabilities. In
the preparation of our consolidated financial statements, management is required to estimate income
taxes in each of the jurisdictions in which we operate. This process involves estimating actual
current tax exposures together with assessing temporary differences resulting from differing
treatment of items for tax and accounting purposes. These differences result in deferred tax
assets and liabilities, which are included in our consolidated balance sheet. Management reviews
its deferred tax assets for recoverability on a quarterly basis and assesses the need for valuation
allowances. These deferred tax assets are evaluated by considering historical levels of income,
estimates of future taxable income streams and the impact of tax planning strategies. A valuation
allowance is recorded to reduce deferred tax assets when it is determined that it is more likely
than not that we would not be able to realize all or part of our deferred tax assets. We carried
no valuation allowance against our net deferred tax assets at March 31, 2005 and a valuation
allowance of $7.2 million at March 31, 2004. We expect to
operate on a fully taxable basis for
fiscal 2006. Contingencies and Litigation There are various claims, lawsuits and pending actions against us incidental to our
operations. If a loss arising from these actions is probable and can be reasonably estimated, we
record the amount of the estimated loss. If the loss is estimated using a range within which no
point is more probable than another, the minimum estimated liability is recorded. Based on current
available information, we believe that the ultimate resolution of these actions will not have a
material adverse effect on our consolidated financial statements (see Note 16 to our consolidated
financial statements). As additional information becomes available, we assess any potential
liability related to these actions and may need to revise our estimates. Future revisions of our
estimates could materially impact our consolidated results of operations, cash flows or financial
position. Reconciliation of GAAP Net Sales to Net Sales Before Inter-company Eliminations In evaluating our financial performance and operating trends, management considers information
concerning our net sales before inter-company eliminations that are not prepared in accordance with
generally accepted accounting principles (GAAP) in the United States. Management uses these
non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. The
method we use to produce non-GAAP results is not computed according to GAAP, is likely to differ
from the methods used by other companies and should not be regarded as a replacement for
corresponding GAAP measures. Net sales before inter-company eliminations has limitations as a
supplemental measure, and you should not consider it in isolation or as a substitute for analysis
of our results as reported under GAAP. The following table represents a reconciliation of GAAP net
sales to net sales before inter-company eliminations: Year Ended(Unaudited)
    
    March 31,
    
    
    March 31,
    
    
    March 31,(In thousands)
    
    2005
    
    
    2004
    
    
    2003Net salesDistribution
    
    $
    556,927
    
    
    $
    444,743
    
    
    $
    353,316Publishing
    
    
    95,777
    
    
    
    46,177
    
    
    
    14,715Net sales before inter-company eliminations
    
    
    652,704
    
    
    
    490,920
    
    
    
    368,031Inter-company eliminations
    
    
    (56,441
    )
    
    
    (20,043
    )
    
    
    (11,215
    )Net sales as reported
    
    $
    596,263
    
    
    $
    470,877
    
    
    $
    356,816
 Results of Operations The following table sets forth for the periods indicated, the percentage of net sales
represented by certain items included in our Consolidated Statements of Operations. Fiscal Years Ended March 31,2005
    
    

2004(Restated)
    
    
    2003Net sales:Distribution
    
    
    93.4
    %
    
    
    94.4
    %
    
    
    99.0
    %Publishing
    
    
    16.1
    
    
    
    9.8
    
    
    
    4.1Elimination of sales
    
    
    (9.5
    )
    
    
    (4.2
    )
    
    
    (3.1
    )Total net sales
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of sales  exclusive of depreciation
and amortization
    
    
    84.7
    
    
    
    87.7
    
    
    
    87.3Gross profit
    
    
    15.3
    
    
    
    12.3
    
    
    
    12.7Selling and marketing
    
    
    3.7
    
    
    
    3.6
    
    
    
    3.9Distribution and warehousing
    
    
    1.5
    
    
    
    1.3
    
    
    
    1.5General and administrative
    
    
    7.5
    
    
    
    5.4
    
    
    
    5.6Depreciation and amortization
    
    
    0.6
    
    
    
    0.4
    
    
    
    0.6Total operating expenses
    
    
    13.3
    
    
    
    10.7
    
    
    
    11.6
 4




---



##### 



Fiscal Years Ended March 31,2005
    
    

2004(Restated)
    
    
    2003Income from operations
    
    
    2.0
    
    
    
    1.6
    
    
    
    1.1Interest expense
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (0.1
    )Interest income
    
    
    0.1
    
    
    
    0.1
    
    
    
    Debt extinguishment
    
    
    
    
    
    
    (0.2
    )
    
    
    Other income (expense), net
    
    
    
    
    
    
    
    
    
    
    0.2Tax benefit
    
    
    0.1
    
    
    
    0.1
    
    
    
    Net income
    
    
    2.1
    %
    
    
    1.5
    %
    
    
    1.2
    %
 Certain information in this section contains forward-looking statements. Our actual
results could differ materially from the statements contained in the forward-looking statements as
a result of a number of factors, including risks and uncertainties inherent in our business,
dependency upon key employees, the seasonality of our business, dependency upon significant
customers and vendors, erosions in our gross profit margins, dependency upon bank borrowings,
obtaining additional financing when required, dependency upon software developers and
manufacturers, dependency upon recording artists, risks of returns and inventory obsolescence,
effect of technology developments, effect of free music downloads, change in retailers methods of
distribution and the possible volatility of our stock price. See Business  Forward-Looking
Statements / Important Risk Factors in Item 1 of this Form 10-K. Distribution Segment The distribution segment distributes PC software, video games, accessories, major label music,
and DVD video, as well as independent music. Fiscal 2005 Results Compared With Fiscal 2004 (Restated) Net Sales Net sales for the distribution segment were $556.9 million (before intercompany eliminations)
for fiscal 2005 compared to $444.7 million (before intercompany eliminations) for fiscal 2004. The
25.2% increase in net sales for fiscal 2005 was primarily due to increases in the software and
video games product groups. Sales increased in the software product group to $399.3 million for
fiscal 2005 compared to $311.9 million for fiscal 2004. The
increase in net sales in this product group was primarily due to continued increases in a
variety of software categories, including internet security utility products where sales remained
strong due to continued demand. Major label music and DVD video increased to $62.8 in fiscal 2005
compared to $49.3 in fiscal 2004. The increase in net sales in this product group was primarily
due to the addition of new customers and store openings of existing customers. Video games
increased to $30.1 million in fiscal 2005 compared to $21.8 million in fiscal 2004 due to an
increase in penetration of our existing customer base. Independent music increased to $64.7
million in fiscal 2005 compared to $61.7 million in fiscal 2004 due to additional growth from
catalog product sales as well as sales resulting from new label relationships. Future sales
increases will be dependent upon our ability to continue to add new, appealing products. Gross Profit Gross profit for the distribution segment was $59.8 million or 10.7% of net sales for fiscal
2005 compared to $48.7 million or 11.0% of net sales for fiscal 2004. The slight decrease in gross
profit as a percent of net sales for fiscal 2005 was due to higher sales of products with lower
gross margins, such as video games. We typically incur lower operating costs as a result of the
one-way terms of sales related to the video games category. As sales in the video games product
category increase, as a portion of our total net sales, we anticipate a continued reduction in our
overall gross margin. We expect gross profit to fluctuate depending upon the make-up of product
sold in each quarter. To the extent we continue to grow the distribution segments share of legacy
products from large vendors at 5




---



##### 



a rate faster than certain entertainment products from the smaller
vendors, we would expect an overall margin decrease. Operating Expenses Total operating expenses for the distribution segment were $61.4 million or 11.0% of net sales
for fiscal 2005 compared to $39.2 million or 8.8% of net sales for fiscal 2004. Overall, certain operating expenses increased in fiscal 2005; particularly, information
technology, freight and warehouse expenses related to the new warehouse and certain warehouse
operating systems. The increased expense incurred in these areas was due to movement of product
between warehouses, expedited freight to customers in connection with
the transition to the new warehouse and
information technology systems, warehouse labor costs related to
additional movement of product,
information technology programming labor and programming costs,
and the building of racks. These
operating expenses were approximately 0.6% higher during fiscal 2005 than during the prior fiscal
year. We expect these costs to trend down as a percentage of net sales as we focus on creating
overall efficiencies during fiscal 2006. Selling and marketing expenses for the distribution segment were $14.4 million or 2.6% of net
sales for fiscal 2005 compared to $10.4 million or 2.3% of net sales for fiscal 2004. The increase
in selling and marketing expenses for fiscal 2005 is primarily a result of costs increasing in
relation to increased net sales and higher freight costs incurred during the transition to the new
warehouse. Distribution and warehousing expenses for the distribution segment were $8.8 million or 1.6%
of net sales for fiscal 2005 compared to $6.0 million or 1.3% of net sales for fiscal 2004. The
increase in distribution and warehousing expense was primarily due to the new warehouse and
implementation of the new warehouse operating system. We expect to generate overall efficiencies
for fiscal 2006 as the new systems become further integrated into our operations. General and administration expenses for the distribution segment consist principally of
executive, accounting and administrative personnel and related expenses, including professional
fees. General and administration expenses for the distribution segment were $36.4 million or 6.5%
of net sales for fiscal 2005 compared to $21.4 million or 4.8% of net sales for fiscal 2004. The
increase in general and administration expenses was primarily due to compensation expense of $5.8
million to acquire the remaining twenty percent ownership position in Encore, incentive-based
deferred compensation expense of $2.5 million related to the CEOs employment agreement, expense of
$1.2 million related to Sarbanes-Oxley Act of 2002 compliance, and FUNimation transaction expenses
of $578,000. Depreciation and amortization for the distribution segment was $1.8 million for fiscal 2005
compared to $1.3 million for fiscal 2004. This increase is due to the new warehouse and warehouse
systems. We had a net operating loss for the distribution segment of $1.7 million for fiscal 2005
compared to net income of $9.6 million for fiscal 2004. Fiscal 2004 (Restated) Results Compared With Fiscal 2003 Net Sales Net sales for the distribution segment were $444.7 million (before intercompany eliminations)
for fiscal 2004 compared to $353.3 million (before intercompany eliminations) for fiscal 2003. The
25.9% increase in net sales for fiscal 2004 was principally due to strong increases in sales across
all of our distribution product groups. In particular, software sales continued to expand its
market share presence across all categories. Internet security and anti-virus products remained
strong in light of continued virus outbreaks. Sales increased in this product group to $311.9
million during fiscal 2004 from $260.6 million in fiscal 2003. Major label music, DVD video and
video games grew to $71.1 million in fiscal 2004 from $35.1 million in fiscal 2003, due to the
combinations of increased publisher and customer rosters and from strong releases throughout the
year. Independent music grew to 6




---



##### 



$61.7 million in fiscal 2004 from $57.6 million in fiscal 2003,
due to its increased label and artist roster and its continued focus on catalog sales. Gross Profit Gross profit for the distribution segment was $48.7 million or 11.0% as a percent of net sales
for fiscal 2004 compared to $39.7 million or 11.2% as a percent of net sales for fiscal 2003. The
decrease in gross profit as a percent of net sales for fiscal 2004 was due to lower margins from
the growth of our video game distribution segment. Video game distribution generally has a lower
margin throughout the industry, however, video games are sold on a one-way basis with no returns
permitted; therefore, the lower handling costs of the product offset some of the lower margins as
it relates to overall profitability. In addition, we experienced lower margins with the
continuation of the expansion of our market share in software categories such as business and
productivity which generally have lower gross margins as much of the product is considered legacy
product; however, these product categories tend to sell at higher dollar price points and generally
have fewer returns. We experienced higher margins from sales of independent music in fiscal 2004
due to our continuing efforts to sign new labels at higher distribution rates. Operating Expenses Total operating expenses for the distribution segment were $39.2 million or 8.8% as a percent
of net sales for fiscal 2004 compared to $35.7 million or 10.1% as a percent of net sales for
fiscal 2003. Selling and marketing expenses for the distribution segment were $10.4 million or 2.3% as a
percent of net sales for fiscal 2004 compared to $11.1 million or 3.2% as a percent of net sales
for fiscal 2003. The decrease for fiscal 2004 resulted from our improved efforts to reduce freight
costs. Freight cost, as a percent of sales, decreased to 1.4% in fiscal 2004 compared to 1.8% in
fiscal 2003. Additionally, we recorded an expense of $680,000 in fiscal 2003 in connection with
the write-off of specialty product display sales racks. Distribution and warehousing expenses for the distribution segment were $6.0 million or 1.3%
as a percent of net sales for fiscal 2004 compared to $5.5 million or 1.6% as a percent of net
sales for fiscal 2003. The decrease as a percentage of net sales resulted from overall improved
efficiency of warehousing expenses such as one-way video game business, higher priced software
categories such as business and productivity, and in part, efficiencies associated with a higher
level of sales. General and administrative expenses for the distribution segment consist principally of
executive, accounting and administrative personnel and related expenses, including professional
fees. General and administrative expenses for the distribution segment were $21.4 million or 4.8%
as a percent of net sales for fiscal 2004 compared to $17.8 million or 5.0% as a percent of net
sales for fiscal 2003. The increase in general and
administrative expenses for fiscal 2004 resulted from incentive-based deferred compensation
expense of $1.5 million related to the CEOs employment agreement, a non cash charge of $705,000
for stock-based compensation relating to the vesting of option shares exercisable under option
agreements for certain key employees, an increase in information technology expense of $476,000
which is allocated based on sales volume, and $891,000 for executive, accounting and administrative
personnel required as our segment grows. The decrease as a percent of net sales for general and
administrative expenses for fiscal 2004 was attributable to our continued increased efforts to
control expenses as a percent of net sales. Depreciation and amortization for the distribution segment remained flat at $1.3 million for
fiscal 2004 and for fiscal 2003. The net operating income for the distribution segment was $9.6 million for fiscal 2004
compared to $4.0 million for fiscal 2003. Publishing Segment The publishing segment includes Encore and BCI. We acquired the assets of BCI on November 3,
2003 and the assets of Encore on July 31, 2002. 7




---



##### 



Fiscal 2005 Results Compared With Fiscal 2004 (Restated) Net sales for the publishing segment were $95.8 million (before intercompany eliminations) for
fiscal 2005 and $46.2 million (before intercompany eliminations) for fiscal 2004.
Fiscal 2005 included a full year of Encore and BCI revenues, whereas fiscal 2004
only included a full year of Encore revenues and five months of BCI revenues.
Additionally, on April 1, 2004 Encore signed a multi-year, multi-license agreement with
Riverdeep Inc. The Riverdeep license significantly
increased its revenue during fiscal 2005. A significant portion of the net sales increase was
due to increased sales in our Encore business. Gross profit for the publishing segment was $31.4 million or 32.7% as a percent of net sales
for fiscal 2005 and $9.3 million or 20.1% as a percent of net sales for fiscal 2004. The lower
gross profit in fiscal year 2004 was primarily due to an impairment charge for $5.6 million related
to software development costs. Operating expenses for the publishing segment were $17.3 million, or 18.1% of net sales, for
fiscal 2005, including $7.1 million for sales and marketing expenses, $8.5 million for general and
administration expenses and $1.7 million for depreciation and amortization expense. For fiscal
2004, operating expenses were $11.2 million, or 24.2% of net sales, including $6.5 million for
sales and marketing expenses, $4.0 million for general and administration expenses and $673,000 for
depreciation and amortization expense. The 6.1% of net sales decrease is a result of operating
efficiencies. The publishing segment had operating income of $14.0 million for fiscal 2005 and operating
loss of $1.9 million for fiscal 2004. We expect this segments net sales and gross profit to
increase during fiscal 2006 as a result of the inclusion of FUNimations operations for
approximately 10 months. Fiscal 2004 (Restated) Results Compared With Fiscal 2003 Net sales for the publishing segment were
$46.2 million (before intercompany eliminations) for
fiscal 2004 and $14.7 million (before intercompany eliminations) for fiscal 2003. The addition of
BCI in November 2003 contributed $8.0 million of the
growth. Fiscal 2004 included  a full year of Encore revenues and approximately five
months of BCI revenues, compared to fiscal 2003 that included only
eight months of Encore revenues. Gross profit for the publishing segment was $9.3 million or 20.1% as a percent of net sales
for fiscal 2004 and $5.8 million or 39.4% as a percent of net sales for fiscal 2003. The gross
margin decrease was primarily due to a $5.6 million impairment charge for the capitalized product
development costs. Operating expenses for the publishing segment were $11.2 million, or 24.2% of net sales for
fiscal 2004, including $6.5 million for sales and marketing expenses, $4.0 million for general and
administration expenses and $673,000 for depreciation and amortization expense. For fiscal 2003,
operating expenses were $5.8 million or 39.1% of net sales, including $2.7 million for sales and
marketing expenses, $2.3 million for general and administration expenses and $822,000 for
depreciation and amortization expense, which included a charge of
$501,000 for certain intangible assets that were deemed impaired subsequent to the acquisition
of Encore. The expense increase in fiscal 2004 was due to the addition of BCIs operations in
November 2003. The publishing segment had an operating loss of $1.9 million for fiscal 2004 and operating
income of $41,000 for fiscal 2003. Market Risk The Companys exposure to market risk is primarily due to the fluctuating interest rate
associated with variable rate indebtedness. See Item 7a  Quantitative and Qualitative Disclosure
About Market Risk. Seasonality and Inflation Quarterly operating results are affected by the seasonality of our business. Specifically,
our third quarter (October 1December 31) typically accounts for our largest quarterly revenue
figures and a substantial portion of our earnings, although the percentage of net sales and
earnings has declined over the past fiscal years. As a distributor of products ultimately sold to retailers,
our business is affected by the pattern of seasonality common to other suppliers of retailers,
particularly during the holiday selling season. Inflation is not expected to have a significant
impact on our business, financial condition or results of operations since we can generally offset
the impact of inflation through a combination of productivity gains and price increases. 8




---



##### 



Liquidity and Capital Resources Cash Flow Analysis Operating Activities Cash used in operating activities for fiscal 2005 totaled $168,000. Cash provided from
operating activities totaled $9.2 million and $1.3 million in fiscal 2004 and fiscal 2003,
respectively. The net
    cash used in fiscal 2005 mainly reflected our net earnings, combined with
    various non-cash charges, including depreciation and amortization of $3.9 million
    and executive, stock compensation expense of $8.6 million, deferred
    taxes of $4.3 million, and tax benefit from employee stock plans of $2.4 million,
    offset by our working capital demands. Accounts receivable increased by $13.6 million,
    reflecting the growth in sales for fiscal 2005. Inventories increased by $10.5 million,
    reflecting the higher inventories required by the Companys increased
    sales activities. Prepaid expenses increased by $6.8 million, primarily
    reflecting royalty advances in the publishing business. Accounts payable increased
    $4.3 million, primarily as a result of increased inventory. Accrued expenses
    increased $5.6 million as a result of increased bonuses and royalties
    payable resulting from increased profitability and sales. The net
    cash provided in fiscal 2004 reflected our net earnings, combined with various
    non-cash charges, including depreciation and amortization of $2.1 million,
    executive and stock compensation expense of $2.2 million and impairment
    of capitalized software development costs of $5.6 million, partially offset
    by our working capital demands. Accounts receivable increased by $11.3 million,
    inventories increased by $4.3 million, and prepaids
increased by $4.2 million, which were offset by the increase
    in accounts payable of $13.0 million, which were a result of the Companys
    increased profitability and sales. The net
    cash provided in fiscal 2003 reflected our net earnings, combined with various
    non-cash charges, including depreciation and amortization of $2.2 million
    partially offset by our working capital demands. Accounts receivable increased
    by $10.4 million, inventories increased by $5.5 million, prepaid expenses
    and other assets increased by $5.9 million which were partially offset
    by the increase in accounts payable and accrued expenses of $16.4 million,
    which were a result of the Companys increased profitability and sales. Investing Activities Cash flows used in investing activities totaled $5.8 million, $17.0 million and $9.2 million
in fiscal 2005, 2004 and 2003, respectively. Loans to related parties totaled $2.2 million and $278,000 and $711,000 for fiscal 2005, 2004
and 2003, respectively. Acquisition of property and equipment totaled $9.3 million, $5.0 million and $1.0 million in
fiscal 2005, 2004 and 2003 respectively. Purchases of 2005 fixed assets were offset by $6.4
million in proceeds from the sale and leaseback of our new building. Purchase of intangible assets totaled $608,000 and $1.2 million for fiscal 2005 and 2004,
respectively. Acquisition of businesses totaled $10.5 million and $7.5 million for fiscal 2004 and 2003
respectively. In August, 2002 the Company completed the acquisition of the assets of Encore, an
interactive publisher in the video game and PC CD-ROM markets. This transaction was made to enable
the Company to more actively participate in the high growth video game industry and to extend our
direct distribution relationships with large retailers. In November, 2003 the Company completed
the acquisition of the assets of BCI, a provider of niche DVD/video and audio products. This
transaction was made to enhance the line of products and services to the Companys customers. Financing Activities Cash flows provided from financing activities totaled $7.0 million and $11.8 million for
fiscal 2005 and 2004, respectively. Cash flows used in financing activities for fiscal 2003
totaled $536,000 for repayment of notes payable. 9




---



##### 



The Company recorded proceeds from the exercise of common stock options and warrants of $8.2
million and $814,000 in fiscal 2005 and 2004, respectively and $11.7 million from the proceeds of the sale of common stock in fiscal 2004. Capital Resources In October 2001, we entered into a credit agreement with General Electric Capital Corporation
as administrative agent, agent and lender, and GECC Capital Markets Group, Inc. as Lead Arranger,
for a three year, $30.0 million revolving credit facility for use in connection with our working
capital needs. In June 2004, this credit agreement was amended and restated to, among other things,
provide for two senior secured revolving sub-facilities: a $10.0 million revolving acquisition
sub-facility, and a $40.0 million revolving working capital sub-facility. The revolving working
capital sub-facility allowed for borrowing up to $40.0 million, subject to a borrowing base
requirement, and required that we maintain a minimum excess availability of at least $10.0 million.
In addition to the provision for the two senior secured revolving sub-facilities, this credit
agreement allowed for up to $10.0 million of the revolving working capital facility to be used for
acquisitions, providing us with an aggregate revolving acquisition availability of up to $20.0
million, subject to a borrowing base requirement. The working capital revolving credit facility
included borrowing capacity available for letters of credit and for borrowings on same-day notice,
referred to as swing line loans. Under the amended and restated credit agreement, the maturity date
of the revolving working capital facility was December 2007 and the maturity date of the revolving
acquisition facility was June 2006. We were in compliance with the covenants related to our $40.0
million credit facility on March 31, 2005. The credit agreement was amended and restated in its entirety on May 11, 2005 in order to
provide the Company with funding to complete the FUNimation acquisition and was again amended and
restated in its entirety on June 1, 2005. The credit agreement currently provides a six-year
$115.0 million Term Loan B sub-facility, a $25.0 million five and one-half year Term Loan C
sub-facility, and a five-year revolving sub-facility for up to $25.0 million. The entire $115.0
million of the Term Loan B sub-facility has been drawn since May 11, 2005 and the entire $25.0
million of the Term Loan C sub-facility was drawn at June 1, 2005. The revolving sub-facility of up
to $25.0 million is available to the Company for its working capital and general corporate needs. The revolving sub-facility has no borrowing base requirement. The loans under our senior credit facilities are variable rate obligations and are guaranteed by our subsidiaries and are
secured by a first priority security interest in all of our assets and in all of the assets of our
subsidiary companies, as well as the capital stock of our subsidiary companies. Under the credit agreement we are required to meet certain financial and non-financial
covenants. The financial covenants include a variety of financial metrics that are used to
determine our overall financial stability and include limitations on our capital expenditures, a
minimum ratio of EBITDA to fixed charges, and a minimum of indebtedness to EBITDA. Liquidity On May 11, 2005 we acquired 100% of the general and limited partnership interests of
FUNimation Productions, Ltd. and The FUNimation Store, Ltd.
(together,FUNimation). As consideration for the acquisition
of FUNimation, the sellers of FUNimation received $100.4 million in cash, subject to post-closing
adjustments not to exceed $5.0 million and excess cash as defined in the purchase agreement, and
1,827,486 shares of Navarre common stock. In addition, during the five-year period following the
closing of the transaction, we may pay up to an additional $17.0 million in cash to the FUNimation
sellers if they achieve certain agreed-upon financial targets relating to the FUNimation business.
The FUNimation business is described in more detail at Business-FUNimation Business. During the last fiscal quarter of fiscal year 2005 we made a strategic decision to increase
our inventory levels of certain products that we sell to service a new major mass merchant retailer
customer. We determined that it was in our best interest to take extra precautions that would
allow us to provide a high level of service to this important new customer during the first holiday
season, which occurs during our fiscal 2005 third quarter. As a result, a higher than normal level
of inventory was purchased and maintained in order to ensure that we had the capacity to quickly
fill large orders of these products during the holiday sales season.



Additionally, as payment terms with the vendors that provide certain of
these products require us to pay for our inventory purchases more quickly than
we were able to collect our accounts receivable in connection with a sale of
these products to our customers, a significant amount of cash was utilized in
these purchases.



Now that we have greater
experience with this customers buying patterns, we do not currently anticipate that it will be
necessary to maintain an increased inventory level during future fiscal third quarter periods to
such a significant degree. 10




---



##### 



From time to time we are required to invest a significant amount of cash
in our publishing business in order to license content from third parties and
in our distribution business in order to sign exclusive distribution
agreements. Typically, these amounts are paid to third parties in connection
with the signing of the applicable agreement and are recouped from the proceeds
that we receive from the sale of products that result from these agreements.
During the third quarter of the fiscal year 2005 we invested approximately $5.0
million in connection with the licensing of new content in our publishing
business. In our publishing
business we must estimate the likely demand for the
products that we sell in order to ensure that we have enough of these products
ready for shipment to our customers. During the third and fourth quarters of
fiscal year 2005 we invested cash into our inventory in the publishing business
in order to ensure that we had sufficient products to meet expected demand for
the foreseeable future. The
cumulative effect of these events was that, at the end of our fiscal 2005 third quarter, we had
significantly higher inventory levels, reduced cash, and a significant amount of borrowings under
our working capital credit facility. Through the course of the fiscal 2005 fourth quarter these
increased inventory levels were reduced as a result of the sale of these products and by returning
certain inventories. The result at the end of the fiscal 2005 fourth quarter was that we had
reduced our inventory and accounts receivable by $21.6 million
and $24.0 million, respectively.
Cash at March 31, 2005 was $15.5 million and we had no borrowings under our credit agreement. While this strategy affected our liquidity and capital resources during the later portions of
the 2005 fiscal year, we believe that certain recent events have considerably enhanced our outlook
in these areas. Specifically, the acquisition of FUNimation is currently expected to provide
positive cash flow during the approximate ten months that its operations will be included in fiscal
2006. In addition, our historical business is expected to continue to generate positive cash flow.
Furthermore, the recent changes to our credit agreement with GE Commercial Finance have provided
us with approximately $35.0 million of additional cash as well as the ability to make borrowings
under a $25.0 million working capital revolving credit facility without reference to a borrowing
base availability requirement. We currently believe funds generated from the expected results of operations and available
cash and cash equivalents and borrowings under our existing credit facility will be sufficient to
satisfy our working capital requirements and to finance expansion plans and strategic initiatives
for this fiscal year and otherwise in the long-term absent significant acquisitions. We have
stated our plans to grow through acquisitions; however, such opportunities will likely require the
use of additional equity or debt capital, some combination thereof, or other financing. Contractual Obligations The following table presents information regarding contractual obligations that exist as of
March 31, 2005 by fiscal year (in thousands). Total
    
    
    Lessthan 1Year
    
    
    1  3Years
    
    
    4  5Years
    
    
    More than 5YearsOperating leases
    
    $
    22,988
    
    
    $
    2,234
    
    
    $
    3,916
    
    
    $
    3,825
    
    
    $
    13,013Capital leases
    
    
    430
    
    
    
    129
    
    
    
    229
    
    
    
    72
    
    
    
    License and distribution agreement
    
    
    7,287
    
    
    
    7,287
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    30,705
    
    
    $
    9,650
    
    
    $
    4,145
    
    
    $
    3,897
    
    
    $
    13,013
 
 PART IV 
 Item 15. Exhibits and Financial Statements Schedules  (a)
    Documents filed as part of this report -  (1)
    Financial Statements. Our following consolidated financial statements
and the Reports of Independent Registered Public Accounting Firms thereon are set forth at the end of this
document:  (i)
    Reports of Independent Registered Public Accounting Firms.(ii)
    Consolidated Balance Sheets as of March 31, 2005 and
2004 (Restated).(iii)
    Consolidated Statements of Operations for the years ended
March 31, 2005, 2004 (Restated) and 2003.(iv)
    Consolidated Statements of Shareholders Equity for the years
ended March 31, 2005, 2004 (Restated) and 2003. 11




---



##### 







| | (v)  | Consolidated Statements of Cash Flows for the years ended March
31, 2005, 2004 (Restated) and 2003.
| | ---- | ---------------------------------------------------------------------------------------------------
|
| | (vi) | Notes to Consolidated Financial Statements                                                         



| | (2) | Financial Statement Schedules
| | --- | -----------------------------



| | (i) | Schedule II  Valuation and Qualifying Accounts and Reserves
| | --- | ------------------------------------------------------------



| |  | Schedules other than those listed above have been omitted because they are
inapplicable or the required information is either immaterial or shown in the
Consolidated Financial Statements or the notes thereto.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Exhibits
| | --- | --------

ItemNo.
    
    Description2.1
    
    Asset Purchase Agreement dated November 3, 2003 between BCI
Eclipse Company, LLC and the Company (incorporated by reference
to Exhibit 2.1 to the Companys Form 10-Q for the quarter ended
September 30, 2003 (File No. 0-22982)).3.1
    
    Articles of Incorporation (incorporated by reference to Exhibit
3.1 to the Companys Annual Report on Form 10-K for the year
ended March 31, 2000 (File No. 0-22982)).3.2
    
    Bylaws of the Company (incorporated by reference to Exhibit 4.2
to the Companys Registration Statement on Form S-3 (File No.
333-111733)).3.3
    
    Certificate of Rights and Preferences of Series B Convertible
Preferred Stock (incorporated by reference to Exhibit 2 to the
Companys Form 8-K dated August 20, 1999 (File No. 0-22982)).3.4
    
    Form of Warrant Agreement (incorporated by reference to Exhibit
10.3 to the Companys Form 8-K dated December 16, 2003 (File No.
0-22982)).10.1 *
    
    Employment Agreement dated November 1, 2001 between the Company
and Eric H. Paulson (incorporated by reference to Exhibit 10.1 to
the Companys Form 10-Q for the quarter ended December 31, 2001
(File No. 0-22982)).10.2 *
    
    Amendment to Employment Agreement between the Company and Eric H.
Paulson (incorporated by reference to Exhibit 10.1.1 to the
Companys Form 10-Q for the quarter ended December 31, 2003 (File
No. 0-22982)).10.3 *
    
    Employment Agreement dated January 2, 2002 between the Company
and Charles E. Cheney (incorporated by reference to Exhibit 10.2
to the Companys Annual Report on Form 10-K for the year ended
March 31, 2002 (File No. 0-22982)).10.4 *
    
    Employment Agreement between Encore Software, Inc. and Michael
Bell (incorporated by reference to Exhibit 10.3 to the Companys
Annual Report on Form 10-K for the year ended March 31, 2003
(File No. 0-22982)).10.5 *
    
    Employment Agreement dated November 5, 2003, between BCI Eclipse
Company, LLC and Edward D. Goetz (incorporated by reference to
Exhibit 10.16 to the Companys Form 10-Q for the quarter ended
September 30, 2003 (File No. 0-22982)).


12



---



##### 





10.6 *
    
    1992 Stock Option Plan, amended and restated (incorporated by
reference to Exhibit 10.3 to the Companys Annual Report on Form
10-K for the year ended March 31, 2002 (File No. 0-22982)).10.7 *
    
    2003 Amendment to the Companys 1992 Stock Option Plan
(incorporated by reference to Exhibit 99.1 to the Companys
Registration Statement on Form S-8 (File No. 333-109056)).10.8 *
    
    Form of Individual Stock Option Agreement under 1992 Stock Option
Plan (incorporated by reference to Exhibit 10.4 to the Companys
Registration Statement on Form S-1 (No. 333-68392)).10.9 *
    
    Form of Termination Agreement for certain of the Companys
Executives (incorporated by reference to Exhibit 10.2 to the
Companys Form 10-Q for the quarter ended December 31, 2001 (File
No. 0-22982)).10.10
    
    Lease dated March 12, 1998 between the Company and Cambridge
Apartments, Inc. with respect to the corporate headquarters in
New Hope, MN (incorporated by reference to Exhibit 10.6 to the
Companys Annual Report on Form 10-K for the year ended March 31,
1999 (File No. 0-22982)).10.11
    
    Amendment No. 1 to Lease Agreement between the Company and
Cambridge Apartments, Inc. dated April 1, 1998 (incorporated by
reference to Exhibit 10.9.1 to the Companys Form 10-Q for the
quarter ended June 30, 2003 (File No. 0-22982)).10.12
    
    Amendment No. 2 to Lease Agreement between the Company and
Cambridge Apartments, Inc. dated July 14, 2003 (incorporated by
reference to Exhibit 10.9.2 to the Companys Form 10-Q for the
quarter ended June 30, 2003 (File No. 0-22982)).10.13
    
    Lease dated May 1, 1999 between the Company and Sunlite III, LLP
with respect to a second facility in Brooklyn Park, MN
(incorporated by reference to Exhibit 10.7 to the Companys
Annual Report on Form 10-K for the year ended March 31, 1999
(File No. 0-22982)).10.14
    
    Amendment Nos. 1, 2 and 3 to Lease Agreement (incorporated by
reference to Exhibit 10.10.1 to the Companys Annual Report on
Form 10-K for the year ended March 31, 2003 (File No. 0-22982)).10.15
    
    Lease dated December 17, 1999 between Encore and EastGroup
Properties L.P., with respect to a third facility in Gardena,
California (incorporated by reference to Exhibit 10.11 to the
Companys Annual Report on Form 10-K for the year ended March 31,
2003 (File No. 0-22982)).10.16
    
    First Amendment to Lease dated June 27, 2002 between Encore and
Eastgroup Properties L.P. (incorporated by reference to Exhibit
10.11.1 to the Companys Annual Report on Form 10-K for the year
ended March 31, 2003 (File No. 0-22982)).


13



---



##### 



10.17
    
    Credit Agreement dated October 3, 2001 between General Electric
Capital Corporation and the Company (incorporated by reference to
Exhibit 10.1 to the Companys Form 10-Q for the quarter ended
September 30, 2001 (File No. 0-22982)).10.18
    
    Amendment No. 1 and Limited Waiver with Respect to Credit
Agreement dated March 4, 2002 (incorporated by reference to
Exhibit 10.8.1 to the Companys Annual Report on Form 10-K for
the year ended March 31, 2002 (File No. 0-22982)).10.19
    
    Amendment No. 2 to Credit Agreement dated August 1, 2002
(incorporated by reference to Exhibit 10.1 to the Companys Form
10-Q for the quarter ended September 30, 2002 (File No.
0-22982)).10.20
    
    Amendment No. 3 to Credit Agreement dated March 30, 2003
(incorporated by reference to Exhibit 10.12.3 to the Companys
Annual Report on Form 10-K for the year ended March 31, 2003
(File No. 0-22982)).10.21
    
    Amendment No. 4 to Credit Agreement dated June 24, 2003
(incorporated by reference to Exhibit 10.12.4 to the Companys
Annual Report on Form 10-K for the year ended March 31, 2003
(File No. 0-22982)).10.22
    
    Amendment No. 5 to Credit Agreement dated October 23, 2003
(incorporated by reference to Exhibit 10.12.5 to the Companys
Form 10-Q for the quarter ended September 30, 2003 (File No.
0-22982)).10.23
    
    Amendment No. 6 to Credit Agreement dated November 5, 2003
(incorporated by reference to Exhibit 10.12.6 to the Companys
Form 10-Q for the quarter ended September 30, 2003 (File No.
0-22982)).10.24
    
    Separation Agreement dated as of March 1, 1999 between the
Company and NetRadio Corporation (incorporated by reference to
Exhibit 10.16 to NetRadio Corporations Form S-1/A Registration
Statement (File No. 333-73261)).10.25
    
    Term Note dated October 14, 1999, between the Company and
NetRadio Corporation (incorporated by reference to Exhibit 10.11
to the Companys Annual Report on Form 10-K for the year ended
March 31, 2000 (File No. 0-22982)).10.26
    
    Amendment No. 1 to Term Note dated March 26, 2001, between the
Company and NetRadio Corporation (incorporated by reference to
Exhibit 10.1 to NetRadio Corporations Form 10-Q for the quarter
ended March 31, 2001 (File No. 0-27575)).10.27
    
    Amendment No. 2 to Term Note dated March 30, 2001, between the
Company and NetRadio Corporation (incorporated by reference to
Exhibit 10.2 to NetRadio Corporations Form 10-Q for the quarter
ended March 31, 2001 (File No. 0-27575)).
 14




---



##### 



10.28
    
    Form of Warrant dated May 1, 1998 issued to investors in
connection with the Companys May 1, 1998 private placement of
Class A Convertible Preferred Stock (incorporated by reference to
Exhibit 4 to the Companys Form 8-K dated May 1, 1998 (File No.
0-22982)).10.29
    
    Amended and Restated Asset Purchase Agreement effective as of
July 10, 2002 by and between the Company and Encore Software,
Inc. (incorporated by reference to Exhibit 10.1 to the Companys
Form 8-K dated August 14, 2002 (File No. 0-22982)).10.30
    
    Amendment No. 1 to Asset Purchase Agreement effective as of July
31, 2002, by and among the Company, Encore Software, Inc. and
Encore Acquisition Corporation (incorporated by reference to
Exhibit 10.2 to the Companys Form 8-K dated August 14, 2002
(File No. 0-22982)).10.31
    
    Agreement of Reciprocal Easements, Covenants, Conditions and
Restrictions dated June 16, 2003 (incorporated by reference to
Exhibit 10.9.3 to the Companys Form 10-Q for the quarter ended
June 30, 2003 (File No. 0-22982)).10.32
    
    Incentive Stock Option Agreement dated September 6, 2002 between
Cary Deacon and the Company (incorporated by reference to Exhibit
10.17 to the Companys Form 10-Q for the quarter ended September
30, 2003 (File No. 0-22982)).10.33
    
    Addendum to Incentive Stock Option Agreement dated November 13,
2003 (incorporated by reference to Exhibit 10.17.1 to the
Companys Form 10-Q for the quarter ended September 30, 2003
(File No. 0-22982)).10.34
    
    Form of Securities Purchase Agreement dated as of December 15,
2003 among the Corporation and the various purchasers
(incorporated by reference to Exhibit 10.1 to the Companys Form
8-K dated December 16, 2003 (File No. 0-22982)).10.35
    
    Form of Registration Rights Agreement dated as of December 15,
2003 among the Corporation and the various purchasers
(incorporated by reference to Exhibit 10.2 to the Companys Form
8-K dated December 16, 2003 (File No. 0-22982)).10.36
    
    Form of Separation Agreement with Charles E. Cheney dated April
30, 2004 (incorporated by reference to Exhibit 10.41 to the
Companys Form 10-K for the year ended March 31, 2004 (File No.
0-22982)).10.37
    
    Form of Assignment of Lease between BCI Eclipse LLC and BCI
Eclipse Company, LLC dated November 3, 2003 (incorporated by
reference to Exhibit 10.42 to the Companys Form 10-K for the
year ended March 31, 2004 (File No. 0-22982)).
 15




---



##### 



10.38
    
    Form of Amendment No. 7 to Credit Agreement dated January 26,
2004 (incorporated by reference to Exhibit 10.43 to the Companys
Form 10-K for the year ended March 31, 2004 (File No. 0-22982)).10.39
    
    Form of Amendment No. 8 to Credit Agreement dated March 9,
2004 (incorporated by reference to Exhibit 10.44 to
the Companys Form 10-K for the year ended March 31, 2004 (File
No. 0-22982)).10.40
    
    Form of Amendment No. 9 to Credit Agreement dated March 30,
2004 (incorporated by reference to Exhibit 10.45
to the Companys Form 10-K for the year ended March 31, 2004
(File No. 0-22982)).10.41
    
    Form of Amended and Restated Credit Agreement with General
Electric Capital Corporation dated June 18, 2004
(incorporated by reference to Exhibit 10.46 to the Companys Form
10-K for the year ended March 31, 2004 (File No. 0-22982)).10.42
    
    Form of Lease Agreement between the Company and NL Ventures IV
New Hope, L.P. dated May 27, 2004 (incorporated by reference to
Exhibit 10.47 to the Companys Form 10-K for the year ended March
31, 2004 (File No. 0-22982)).10.43
    
    Form of Third Amendment to Office/Warehouse Lease between
Cambridge Apartments, Inc. and the Company dated February 23,
2004 (incorporated by reference to Exhibit 10.48 to the Companys
Form 10-K for the year ended March 31, 2004 (File No. 0-22982)).10.44
    
    Form of Fourth Amendment to Office/Warehouse Lease between
Cambridge Apartments, Inc. and the Company dated
June 2004 (incorporated by reference to Exhibit 10.49 to the
Companys Form 10-K for the year ended March 31, 2004 (File No.
0-22982)).10.45
    
    Amendment No. 2 to Lease Agreement between Airport One Limited
Partnership and the Company dated March 21, 2004 (incorporated by
reference to Exhibit 10.50 to the Companys Form 10-K for the
year ended March 31, 2004 (File No. 0-22982)).10.46
    
    Addendum to Lease Agreement between Cambridge Apartments, Inc.
and the Company dated May 27, 2004 (incorporated by reference to
Exhibit 10.51 to the Companys Form 10-K for the year ended March
31, 2004 (File No. 0-22982)).10.47
    
    Form of BCI Eclipse Lease Agreement effective October 1, 1999
(incorporated by reference to Exhibit 10.52 to the Companys Form
10-K for the year ended March 31, 2004 (File No. 0-22982)).10.48
    
    First Amendment to BCI Eclipse Lease Agreement made as of January
5, 2000 (incorporated by reference to Exhibit 10.53 to the
Companys Form 10-K for the year ended March 31, 2004 (File No.
0-22982)).
 16




---



##### 



10.49
    
    Amended and Restated Credit Agreement dated June 18, 2004 between
the Company and General Electric Capital Corporation
(incorporated by reference to Exhibit 10.54 to the Companys Form
10-Q for the quarter ended September 30, 2004 (File No.
0-22982)).10.50
    
    Amendment No. 1 and Limited Waiver with Respect to Amended and
Restated Credit Agreement dated August 25, 2004 (incorporated by
reference to Exhibit 10.55 to the Companys Form 10-Q for the
quarter ended September 30, 2004 (File No. 0-22982)).10.51
    
    Amendment No. 2 and Limited Waiver with Respect to Amended and
Restated Credit Agreement dated October 18, 2004 (incorporated by
reference to Exhibit 10.56 to the Companys Form 10-Q for the
quarter ended September 30, 2004 (File No. 0-22982)).10.52
    
    Lease dated October 8, 2004, between Encore Software, Inc. and
Kilroy Realty, L.P., with respect to a a office facility in El
Segundo, California (incorporated by reference to Exhibit 10.57
to the Companys Form 10-Q for the quarter ended September 30,
2004 (File No. 0-22982)).10.53
    
    Form of License and Distribution Agreement (Manufacturing Rights)
(2004-2005) between Riverdeep Inc. and Encore Software, Inc.
dated as of March 29, 2004 (incorporated by reference to Exhibit
10.1 to the Companys Form 10-Q/A for the quarter ended September
30, 2004 (File No. 0-22982)).10.54
    
    Form of License and Distribution Agreement (Manufacturing Rights)
(2005-2007) between Riverdeep Inc. and Encore Software, Inc.
dated as of March 29, 2004 (incorporated by reference to Exhibit
10.2 to the Companys Form 10-Q/A for the quarter ended September
30, 2004 (File No. 0-22982)).10.55
    
    Form of Addendum #1 to Licensing and Distribution Agreements
(2004-2005 and 2005-2007) between Riverdeep, Inc. and Encore
Software, Inc. dated as of April 13, 2004 (incorporated by
reference to Exhibit 10.3 to the Companys Form 10-Q/A for the
quarter ended September 30, 2004 (File No. 0-22982)).10.56
    
    Form of Addendum #2 to Licensing and Distribution agreements
(2004-2005 and 2005-2007) between Riverdeep, Inc. and Encore
Software, Inc. dated October 2004 (incorporated by reference to
Exhibit 10.4 to the Companys Form 10-Q/A for the quarter ended
September 30, 2004 (File No. 0-22982)).10.57 *
    
    Navarre Corporation 2004 Stock Plan (incorporated by reference to
Exhibit D to the Companys Proxy Statement filed July 27, 2004
(File No. 0-22982)).10.58*#
    
    Form of 2004 Stock Plan Incentive Stock Option Agreement.10.59*#
    
    Form of 2004 Stock Plan Non-Employee Director Stock Option
Agreement.
 17




---



##### 



10.60
    
    Form of Senior Debt Indenture (incorporated by reference to
Exhibit 4(a) to the Companys Registration Statement on Form S-3
filed September 28, 2004 (File No. 333-119260)).10.61
    
    Form of Senior Debt Indenture (incorporated by reference to
Exhibit 4(c) to the Companys Registration Statement on Form S-3
filed September 28, 2004 (File No. 333-119260)).10.62
    
    FUNimation Partnership Interest Purchase Agreement, dated January
10, 2005 (incorporated by reference to Exhibit 10.1 to the
Companys Form 8-K filed January 14, 2005 (File No. 0-22982)).10.63
    
    Form of Assignment and Assumption Agreement (incorporated by
reference to Exhibit 10.1(a) to the Companys Form 8-K filed
January 14, 2005 (File No. 0-22982)).10.64*
    
    Form of Gen Fukanaga Employment Agreement (incorporated by
reference to Exhibit 10.1(b) to the Companys Form 8-K filed
January 14, 2005 (File No. 0-22982)).10.65
    
    Form of Escrow Agreement (incorporated by reference to Exhibit
10.1(c) to the Companys Form 8-K filed January 14, 2005 (File
No. 0-22982)).10.66
    
    Form of Non-Competition Agreement (incorporated by reference to
Exhibit 10.1(d) to the Companys Form 8-K filed January 14, 2005
(File No. 0-22982)).10.67
    
    Form of Registration Rights Agreement (incorporated by reference
to Exhibit 10.1(e) to the Companys Form 8-K filed January 14,
2005 (File No. 0-22982)).10.68
    
    Form of Release (incorporated by reference to Exhibit 10.1(f) to
the Companys Form 8-K filed January 14, 2005 (File No.
0-22982)).10.69
    
    Limited Waiver and Third Amendment to Amended and Restated Credit
Agreement, filed January 14, 2005 (incorporated by reference to
Exhibit 10.1 to the Companys Form 8-K filed January 14, 2005
(File No. 0-22982)).10.70
    
    Amendment No. 3 to Lease Agreement between Airport One
Limited Partnership and the Company dated November 23,
2004 (incorporated by reference to Exhibit 10.1 to the Companys
Form 10-Q for the quarter ended December 31, 2005 (File No.
0-22982)).10.71
    
    Form of Addendum #3 to Licensing and Distribution Agreements
(2004-2005 and 2005-2007) between Riverdeep, Inc. and Encore
Software, Inc. dated November 2004 (incorporated by reference to
Exhibit 10.2 to the Companys Form 10-Q for the quarter ended
December 31, 2005 (File No. 0-22982)).
 18




---



##### 



10.72
    
    Amendment No. 1 to Lease Agreement between Encore Software, Inc.
and Kilroy Realty, L.P. dated December 29, 2004 (incorporated by
reference to Exhibit 10.3 to the Companys Form 10-Q for the
quarter ended December 31, 2005 (File No. 0-22982)).10.73
    
    Limited Waiver With Respect To Amended and Restated Credit
Agreement dated March 15, 2005 (incorporated by reference to
Exhibit 10.1 to the Companys Form 8-K filed March 17, 2005 (File
No. 0-22982)).10.74
    
    Stock Purchase Agreement between the Company and Michael Bell
dated March 14, 2005 (incorporated by reference to Exhibit 10.2
to the Companys Form 8-K filed March 17, 2005 (File No.
0-22982)).10.75
    
    Registration Rights Agreement between the Company and Michael
Bell dated March 14, 2005 (incorporated by reference to Exhibit
10.3 to the Companys Form 8-K filed March 17, 2005 (File No.
0-22982)).10.76
    
    Amendment to Stock Purchase Agreement between the Company and
Michael Bell dated March 31, 2005 (incorporated by reference to
Exhibit 10.1 to the Companys Form 8-K filed April 14, 2005 (File
No. 0-22982)).10.77
    
    Amendment to Registration Rights Agreement between the Company
and Michael Bell dated March 31, 2005 (incorporated by reference
to Exhibit 10.2 to the Companys Form 8-K filed April 14, 2005
(File No. 0-22982)).10.78
    
    Limited Waiver with Respect to Amended and Restated General
Electric Capital Corporation Credit Agreement dated March 31,
2005 (incorporated by reference to Exhibit 10.3 to the Companys
Form 8-K filed April 14, 2005 (File No. 0-22982)).10.79
    
    Pledge Agreement between the Company and General Electric Capital
Corporation related to Encore shares dated March 31, 2005
(incorporated by reference to Exhibit 10.4 to the Companys Form
8-K filed April 14, 2005 (File No. 0-22982)).10.80
    
    Amendment No. 1 to Partnership Interest Purchase Agreement dated
May 11, 2005 (incorporated by reference to Exhibit 10.1 to the
Companys Form 8-K filed May 17, 2005 (File No. 0-22982)).10.81
    
    Second Amended and Restated Credit Agreement dated as of May 11,
2005 between the Company and General Electric Capital Corporation
(incorporated by reference to Exhibit 10.2 to the Companys Form
8-K filed May 17, 2005 (File No. 0-22982)).10.82
    
    Form of Third Amended and Restated Credit Agreement with Lenders
and General Electric Capital Corporation dated June 1, 2005
(incorporated by reference to Exhibit 10.1 to the Companys Form
8-K filed June 3, 2005 (File No. 0-22982)).
 19




---



##### 



10.83
    
    Form of Limited Waiver to General Electric Capital Corporation
Second Amended and Restated Credit Agreement dated June 1, 2005
(incorporated by reference to Exhibit 10.2 to the Companys Form
8-K filed June 3, 2005 (File No. 0-22982)).10.84#
    
    Office Lease dated August 1, 2004 between Cocanaugher Asset #1,
Ltd. and FUNimation Productions, Ltd.10.85#
    
    Letter dated June 14, 2005 regarding Companys policy to use
straight-line method of depreciation from Grant Thorton LLP.14.1
    
    The Companys Code of Business Conduct and Ethics (incorporated
by reference to Exhibit 14.1 to the Companys Form 10-K for the
year ended March 31, 2004 (File No. 0-22982)).21.1#
    
    Subsidiaries of the Registrant.23.1#
    
    Consent of Independent Registered
Public Accounting Firm  Grant Thornton LLP23.2#
    
    Consent of Independent Registered
Public Accounting Firm  Ernst & Young LLP24.1#
    
    Power of Attorney, contained on signature page31.01Ö
    
    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)31.02Ö
    
    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)32.01Ö
    
    Certifications of the Chief Executive Officer pursuant Section
906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
Section 1350)32.02Ö
    
    Certifications of the Chief Financial Officer pursuant Section
906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
Section 1350)
 * Indicates management contract or compensatory plan or agreement.
# previously filedÖfiled herewith 20




---



##### 



SIGNATURES Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this amended report to be signed on its behalf by the undersigned,
thereunto duly authorized. Navarre Corporation
(Registrant)June 17, 2005
    By    /s/ Eric H. PaulsonEric H. PaulsonChairman of the Board, President
and Chief Executive Officer 21