CompUSA 2013 Annual Report Download - page 16

From time to time, we are involved in lawsuits or other legal proceedings arising in the ordinary course of our business. These may
relate to, for example, patent, trademark or other intellectual property matters, employment law matters, states sales tax claims on
internet/ecommerce transactions, product liability, commercial disputes, consumer sales practices, or other matters. In addition, as a
public company we could from time to time face claims relating to corporate or securities law matters. The defense and/or outcome
of such lawsuits or proceedings could have a material adverse affect on our business. See “Legal Proceedings”.
Changes in our income tax expense due to changes in the mix of U.S. and non-
U.S. revenues and profitability, changes in tax rates
or exposure to additional income tax liabilities could affect our profitability. We are subject to income taxes in the United States
and various foreign jurisdictions. Our effective tax rate has been in the past and could be in the future adversely affected by
changes in the mix of earnings in countries with differing statutory tax rates, restrictions on utilization of tax benefits, changes in
the valuation of deferred tax assets and liabilities, changes in tax laws or by material audit assessments. The carrying value of our
deferred tax assets is dependent on our ability to generate future taxable income in those jurisdictions. In addition, the amount of
income taxes we pay is subject to audit in our various jurisdictions and a material assessment by a tax authority could affect our
profitability. During 2013 the Company recorded non-
cash valuation allowances against its deferred tax assets of approximately
$28.9 million, including $20.5 million against its U.S. federal deferred tax assets.
A change in accounting standards or practices can have a significant effect on our reported results of operations. New accounting
pronouncements and interpretations of existing accounting rules and practices have occurred and may occur in the future. Changes
to existing rules may adversely affect our reported financial results.
Richard Leeds, Robert Leeds, and Bruce Leeds (each are brothers and directors and executive officers of the Company), together
with trusts for the benefit of certain members of their respective families and other entities controlled by them, control
approximately 70% of the voting power of our outstanding common stock. Due to such holdings, the Leeds brothers together with
these trusts and entities are able to determine the outcome of virtually all matters submitted to stockholders for approval, including
the election of directors, the appointment of management, amendment of our articles of incorporation, significant corporate
transactions (such as a merger or other sale of our company or our assets), the payments of dividends on our common stock and the
entering into of extraordinary transactions. Further, a s a "controlled company" under NYSE rules, the Company has elected to opt-
out of certain New York Stock Exchange listing standards that, among other things, require listed companies to have a majority of
independent directors on their board; the Company does however currently have an independent Audit, Compensation Committee
and Corporate Governance and Nominating Committees.
Our common stock is currently listed on the NYSE and is thinly traded. Volatility of thinly traded stocks is typically higher than
the volatility of more liquid stocks with higher trading volumes. The trading of relatively small quantities of shares of common
stock by our stockholders may disproportionately influence the price of those shares in either direction. This may result in volatility
in our stock price and could exacerbate the other volatility-
inducing factors described below. The market price of our common
stock could be subject to significant fluctuations as a result of being thinly traded.
Item 1B. Unresolved Staff Comments.
None.
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Table of Contents
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We are subject to litigation risk due to the nature of our business, which may have a material adverse effect on our results of
operations and business.
•
Our profitability can be adversely affected by changes in our income tax exposure due to changes in tax rates or laws, changes in
our effective tax rate due to changes in the mix of earnings among different countries, restrictions on utilization of tax benefits and
changes in valuation of our deferred tax assets and liabilities.
•
Changes in accounting standards or practices, as well as new accounting pronouncements or interpretations, may require us to
account for and report our financial results in a different manner in the future, which may be less favorable than the manner used
historically.
• Concentration of Ownership and Control Limits Stockholders Ability to Influence Corporate Actions
•
Risk of Thin Trading and Volatility of our Common Stock Could Impact Stockholder Value