2K Sports 2009 Annual Report Download - page 23

Our business and products are subject to potential legislation. The adoption of such proposed legislation could limit
the retail market for our products.
Several proposals have been made for federal legislation to regulate our industry. Such proposals seek to
prohibit the sale of products containing content included in some of our games. If any such proposals are
enacted into law, it may limit the potential market for some of our games in the United States, and
adversely affect our operating results. Other countries, such as Germany, have adopted laws regulating
content both in packaged games and those transmitted over the Internet that are stricter than current
United States laws. In the United States, proposals have also been made by numerous state legislators to
regulate and prohibit the sale of interactive entertainment software products containing certain types of
violent or sexual content to under 17 or 18 audiences. While such legislation to date has been enjoined by
industry and retail groups, the adoption into law of such legislation in federal and/or in state jurisdictions
in which we do significant business could severely limit the retail market for some of our games.
We may need to raise additional capital if we continue to incur losses.
We incurred losses in the year ended October 31, 2009, and we may continue to incur losses. If we incur
losses in the future, we may be required to raise additional capital in order to fund our operations. We
could seek to raise capital in a number of ways, including through the issuance of debt or equity, or
through other financing arrangements. During the year ended October 31, 2007, we entered into a senior
secured line of credit agreement (and expanded the line of credit in November 2007), which requires us to
make periodic interest or other debt service payments. In addition, during the year ended October 31, 2009
we issued convertible senior notes, which require us to make periodic interest payments to the holders of
the convertible senior notes. If we borrow additional funds, further debt service payments would probably
be necessary. In addition, the terms of additional debt may impose significant restrictions on our ability to
operate our business. If we seek financing through the sale of equity or equity-based securities (such as our
convertible senior notes), our current stockholders will suffer dilution in their percentage ownership of
common stock. We cannot be certain as to our ability to raise additional capital in the future or under what
terms capital would be available, particularly in light of the current economic downturn which has, among
other consequences, led to the depression of stock prices and the tightening of credit. If we need to raise
capital and are not successful in doing so, we will have to consider other options that may include, but are
not limited to, a reduction in our expenditures for internal and external new product development,
reductions in overhead expenses, and sales of intellectual property and other assets. These actions, should
they become necessary, will likely result in a reduction in the size of our operations and could materially
affect the prospects of our business.
Continued turmoil in the credit markets may affect our ability to raise additional capital.
Ongoing turmoil in the credit markets may make it difficult for us to obtain financing, on acceptable terms
or at all, for working capital, capital expenditures, acquisitions and other investments. Liquidity in credit
markets has contracted significantly, making terms for certain financings less attractive. These difficulties
could adversely affect our operations and financial performance.
We are subject to risks and uncertainties of international trade, including fluctuations in the values of local foreign
currencies against the dollar.
Sales in international markets, primarily in Europe, have accounted for a significant portion of our net
revenue. We have also recently expanded our Asian operations in an effort to increase our geographical
scope and diversify our revenue base. Sales in international markets accounted for approximately 32.5%,
40.7% and 31.3%, respectively, of our net revenue for the years ended October 31, 2009, 2008 and 2007,
respectively. We are subject to risks inherent in foreign trade, including increased credit risks, tariffs and
duties, fluctuations in foreign currency exchange rates, shipping delays, and international political,
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