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Technology Stocks : Audio and Radio on the Internet- NAVR -- Ignore unavailable to you. Want to Upgrade?

To: Craigoh who wrote (4879)	1/21/1999 9:01:00 PM
From: bodie	Read Replies (1) \| Respond to of 27722

For what it is worth. Copied from RagingBull This message is from NAVARRE investors relation web site To Our Shareholders This has been quite a year of change for Navarre. During the year we strengthened our management team with the appointment of Ian Warfield as Vice President/General Manager of Computer Products, Tom Lenaghan as Vice President/ General Manager of Alternative Retail Marketing, and Jim Chiado as Vice President/ General Manager of Music Distribution. All three came to us with great track records as industry veterans. We also formed a corporate marketing department and strengthened our financial controls. Subsequent to year end, Navarre completed the $20 million private offering of convertible preferred stock units. This has put Navarre in a stronger financial position. The management team was forced to make tough decisions due to the challenges of the previous fiscal year (1997). The losses of fiscal year 1997 caused a reduction of our shareholder equity and reduced our computer software/CD-ROM suppliers credit lines. While this caused a reduction in sales, we were able to dramatically improve our software gross margins by selling higher quality products to our customers. This reduction in software sales was partially offset by an increase in music sales as we purposely focused the growth on this less capital-intensive, higher margin business. Fiscal year 1998 marked the final stages of our music retail customers either returning to health or being consolidated into larger, more profitable competitors. A number of our customers were faced with financial difficulties and, in several cases, filed for protection under Chapter 11 or 7. All in all, sales for the Company decreased by two percent from $200.7 million in fiscal 1997 to $196.7 million in fiscal 1998. Net earnings after tax, however, dramatically improved from a loss of $6.2 million in fiscal 1997 to a loss of $974,000 for fiscal 1998. Results for 1998 included a one-time charge for the final writedown of Velvel Records, as well as the bankruptcies of Montgomery Ward, Lechmere and Alliance Entertainment. While I am disappointed in the consolidated loss for fiscal 1998, the entire loss is basically attributable to the performance of NetRadio. The future prospects for Navarre are bright. NetRadio continues to grow and we have introduced our audio music Cyber store, CDPoint™ (www.cdpoint.com)as well as our store for Software/CD-ROM, SoftwarePoint™ (www.softwarepoint.com). Navarre is the only national distribution company with an perational Internet strategy and NetRadio is the only audiocentric content provider on the Internet with a proprietary distribution strategy for servicing its commerce fulfillment. As NetRadio's business grows and traffic on our site continues to increase, we will take steps to enhance its value for all Navarre shareholders. Fiscal year 1999 will also mark our entrance into a new product line, Digital Versatile Disk (DVD), which is a natural convergence of our existing audio CD and interactive CD-ROM products. Also, we will expand geographically with the opening of our Canadian sales office this summer. I believe that Canada poses a great opportunity and is a market that needs our level of expertise. I remain very optimistic about the Company's long-term success, and I wish to thank you, our shareholders, for your continued confidence and support. Sincerely, Eric H. Paulson Chairman, President and CEO