Nautilus 2008 Annual Report Download - page 14

Table of Contents
Item 1A. Risk Factors
Special Note Regarding Forward
-Looking Statements
This Form 10-K, including Item 1 of Part I and Items 7 and 7(A) of Part II, contains forward-looking statements. Forward-looking statements
include any statements related to our expectations regarding future performance or conditions, including any statements regarding anticipated
sales growth across markets, distribution channels, and product categories, expenses and gross margins, expense as a percentage of revenue,
anticipated earnings, new product introductions, manufacturing plans and activities, future capital expenditures, our turnaround plan, financing
and working capital requirements and resources. These forward-looking statements, and others we make from time to time, are subject to a
number of risks and uncertainties. Many factors could cause actual results to differ materially from those projected in forward-looking
statements, including the risks described in Item 1(A), Risk Factors, of this Form 10-K. We do not undertake any duty to update forward-
looking
statements after the date they are made or to conform them to actual results or to changes in circumstances or expectations.
A continued decline in consumer spending likely would negatively affect our product revenues and earnings.
Success of each of our products depends substantially on the amount of discretionary funds available to our consumers. Global credit and
financial markets have been experiencing extreme disruptions in recent months, including severely diminished liquidity and credit availability,
declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There
can be no assurance that there will not be further deterioration in these conditions. A continued decline in general economic conditions could
further depress consumer spending, especially spending for discretionary consumer products such as ours. Higher interest rates could increase
monthly payments for consumer products financed through one of our monthly payment plans.
These poor economic conditions could in turn lead to substantial further decreases in our net sales or have a material adverse effect on our
operating results, financial condition and cash flows.
We rely on our loan agreement to provide us with sufficient working capital to operate our business.
We rely on our existing $30 million asset-
based loan agreement to provide us with adequate working capital to operate our business. We are able
to borrow the lesser of $30 million or the borrowing capacity, which is based primarily on the domestic value of inventory and accounts
receivable, as adjusted for certain items identified in the credit facility. Seasonal changes in our inventory and accounts receivable balances may
cause a decline in our borrowing capacity, which would limit the amount that can be borrowed against the facility below the $30 million.
If we default under the loan agreement with our lender, and they reduce or terminate our access to amounts under our credit facility, we may not
have sufficient capital to fund our working capital needs and/or we may need to secure additional capital or financing to fund our working capital
requirements or to repay outstanding debt under our credit facilities. We can make no assurance that we will be successful in ensuring our
availability to amounts under our credit facilities. If we are not able to maintain our borrowing availability under our credit facilities and/or raise
additional capital when needed, we may be forced to sharply curtail our efforts to manufacture and promote the sale of our products or to curtail
operations.
We may need to raise additional financing if our financial results do not improve.
We sustained significant operating losses during 2008 and 2007, contributing to a decrease in cash and net working capital. If we continue to
experience significant operating losses and reductions in net working capital, we will need to obtain additional debt or equity financing to
continue operating. There is no guarantee that we will be able to raise additional funds on favorable terms, if at all, or that any amount raised will
be sufficient to meet our cash requirements. If we are not able to raise needed capital, we would be forced to sharply curtail our operations,
including efforts to manufacture and promote the sale of products.
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