Audiovox 2004 Annual Report Download - page 17

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We could spend or invest the net proceeds from the sale of the Cellular business
in ways with which Audiovox stockholders may not agree, including the possible
pursuit of other market opportunities, including acquisitions.
The investment of these net proceeds may not yield a favorable return. In
addition, because the market for the Company's remaining businesses is often
evolving, in the future, we may discover new opportunities that are more
attractive. As a result, we may commit resources to these alternative market
opportunities, including acquisitions. This action may require the Company to
limit or abandon its currently planned focus on the current businesses. If we
change the business focus, we may face risks that may be different from the
risks associated with our current business.
The asset purchase agreement with UTSI exposes the Company to contingent
liabilities.
Under the asset purchase agreement for the sale of the Cellular business to
UTSI we agreed to indemnify UTSI for any breach or violation of ACC's and its
representations, warranties and covenants contained in the asset purchase
agreement and for other matters, subject to certain limitations. Significant
indemnification claims by UTSI could have a material adverse effect on the
Company's financial condition and results of operations.
We will be unable to compete in the Cellular business for five years from the
date of the sale of our former Cellular business.
The asset purchase agreement with UTSI provided that for a period of five
years after the closing on November 1, 2004, we will not compete, directly or
indirectly, in the Cellular business or, without the prior written consent of
UTSI, directly or indirectly, own an interest in, manage, operate, control, as a
partner, stockholder or otherwise, any person that competes in the Cellular
business, subject to certain exceptions.
Our success will depend on a less diversified line of business.
The sale of the Cellular business constituted a significant portion of the
Company's assets and revenues. As such, the Company's asset base and revenues
have changed significantly from those existing prior to the divestiture.
Currently, we generate substantially all of our sales from the Consumer and
Mobile Electronics businesses. We cannot assure you that we can grow the
revenues of our Electronics business or maintain profitability. As a result, the
Company's revenues and profitability will depend on our ability to maintain and
generate additional customers. A reduction in demand for the products and
services would have a material adverse effect on our business. The
sustainability of current levels of our Electronics business and the future
growth of such revenues, if any, will depend on, among other factors:
o the overall performance of the economy,
o competition within key markets,
o customer acceptance of products and services, and
o the demand for other products and services.
We cannot assure you that we will maintain or increase our current level of
revenues or profits from the Electronics business in future periods.
14