10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

R	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	for the quarterly period ended December 31, 2012
or
£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	for the transition period from   __________  to __________

Commission File Number 0-22982

NAVARRE CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota	41-1704319
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

7400 49th Avenue North, Minneapolis, MN 55428

(Address of principal executive offices)

Registrant’s telephone number, including area code (763) 535-8333

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. R Yes      £ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R      No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer £	Accelerated filer R	Non-accelerated filer £	Smaller reporting company £
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). £ Yes     R No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Class	Outstanding at February 6, 2013
Common Stock, No Par Value	54,388,875 shares

NAVARRE CORPORATION

Index

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

Consolidated Balance Sheets — December 31, 2012 and March 31, 2012

Consolidated Statements of Operations and Comprehensive Loss— Three and Nine Months ended December 31, 2012 and 2011

Consolidated Statements of Cash Flows — Nine Months ended December 31, 2012 and 2011

Notes to Consolidated Financial Statements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Item 4. Controls and Procedures.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Item 3. Defaults Upon Senior Securities.

Item 4. Mine Safety Disclosures.

Item 5. Other Information.

Item 6. Exhibits.

SIGNATURES

1

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

NAVARRE CORPORATION

Consolidated Balance Sheets

(In thousands, except share amounts)

	December 31, 2012 (Unaudited)			March 31, 2012
Assets:
Current assets:
Cash and cash equivalents	$	62		$	5,600
Accounts receivable, net		123,251			47,935
Inventories		39,018			28,850
Prepaid expenses		2,482			2,198
Deferred tax assets — current, net		1,441			1,580
Other assets — current		139			13
Total current assets		166,393			86,176
Property and equipment, net		11,441			6,868
Software development costs, net		302			944
Other assets:
Intangible assets, net		24,535			1,547
Goodwill		30,940			-
Deferred tax assets — non-current, net		9,028			18,450
Non-current prepaid royalties		4,134			4,871
Other assets		3,251			2,520
Total assets	$	250,024		$	121,376
Liabilities and shareholders’ equity:
Current liabilities:
Revolving line of credit	$	17,432		$	-
Accounts payable		141,423			73,421
Checks written in excess of cash balances		11,363			-
Accrued expenses		7,372			6,576
Contingent payment obligation short-term - acquisition		1,824			-
Contingent share obligation  - acquisition		3,411			-
Other liabilities — short-term		895			66
Total current liabilities		183,720			80,063
Long-term liabilities:
Contingent payment obligation long-term - acquisition		2,189			-
Other liabilities — long-term		2,284			1,497
Total liabilities		188,193			81,560
Commitments and contingencies (Note 9)
Shareholders’ equity:
Common stock, no par value:
Authorized shares — 100,000,000; issued and outstanding shares — 54,388,875 at December 31, 2012 and 37,112,343 at March 31, 2012		186,127			164,196
Accumulated deficit		(124,446	)		(124,371	)
Accumulated other comprehensive income (loss)		150			(9	)
Total shareholders’ equity		61,831			39,816
Total liabilities and shareholders’ equity	$	250,024		$	121,376

See accompanying notes to consolidated financial statements.

2

NAVARRE CORPORATION

Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share amounts)

(Unaudited)

	Three months ended December 31,						Nine months ended December 31,
	2012			2011			2012			2011
Net sales
Distribution	$	156,856		$	151,298		$	340,476		$	359,167
Ecommerce and fulfillment services		21,428			2,199			33,212			4,914
Total net sales		178,284			153,497			373,688			364,081
Cost of sales
Distribution		143,045			144,137			306,280			325,900
Ecommerce and fulfillment services		18,238			1,832			28,384			4,658
Total cost of sales		161,283			145,969			334,664			330,558
Gross profit
Distribution		13,811			7,161			34,196			33,267
Ecommerce and fulfillment services		3,190			367			4,828			256
Total gross profit		17,001			7,528			39,024			33,523
Operating expenses:
Selling and marketing		5,312			5,701			13,805			15,749
Distribution and warehousing		2,394			2,685			5,907			7,623
General and administrative		4,544			5,016			10,653			14,162
Information technology		1,533			1,516			3,661			4,047
Depreciation and amortization		760			771			2,248			2,283
Goodwill and intangible impairment		-			5,996			-			5,996
Total operating expenses		14,543			21,685			36,274			49,860
Income (loss) from operations		2,458			(14,157	)		2,750			(16,337	)
Other income (expense):
Interest income (expense), net		(325	)		(292	)		(586	)		(873	)
Other income (expense), net		(503	)		(171	)		(602	)		(501	)
Income (loss) from operations, before income tax		1,630			(14,620	)		1,562			(17,711	)
Income tax benefit (expense)		(1,620	)		(14,457	)		(1,635	)		(13,242	)
Net income (loss)	$	10		$	(29,077	)	$	(73	)	$	(30,953	)
Earnings (loss) per common share:
Basic	$	-		$	(0.79	)	$	-		$	(0.84	)
Diluted	$	-		$	(0.79	)	$	-		$	(0.84	)
Weighted average shares outstanding:
Basic		44,883			36,977			39,749			36,805
Diluted		45,026			36,977			39,749			36,805
Other comprehensive income (loss):
Net unrealized gain (loss) on foreign exchange rate translation, net of tax		76			145			159			(122	)
Comprehensive income (loss)	$	86		$	(28,932	)	$	86		$	(31,075	)

See accompanying notes to consolidated financial statements.

3

NAVARRE CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine months ended December 31,
	2012			2011
Operating activities:
Net loss	$	(73	)	$	(30,953	)
Adjustments to reconcile net loss to net cash used in operating activities:
Contingent payment obligation — unearned		-			(526	)
Depreciation and amortization		2,885			2,782
Amortization of debt acquisition costs		118			448
Amortization of software development costs		744			1,876
Share-based compensation expense		705			933
Goodwill and intangible impairment		-			5,996
Deferred income taxes		412			13,420
Other		995			35
Changes in operating assets and liabilities less acquired assets and liabilities:
Accounts receivable		(63,936	)		(34,435	)
Inventories		(10,147	)		(8,006	)
Prepaid expenses		795			5,924
Income taxes receivable		(52	)		(20	)
Other assets		(135	)		151
Accounts payable		61,886			33,764
Income taxes payable		(58	)		(37	)
Accrued expenses and other liabilities		(896	)		(661	)
Net cash used in operating activities		(6,757	)		(9,309	)
Investing activities:
Proceeds from sale of discontinued operations		-			22,537
Cash paid for acquisition		(24,493	)		-
Repayment of note payable — acquisition		-			(1,009	)
Purchases of property and equipment, net		(1,558	)		(593	)
Investment in software development		(102	)		(905	)
Net cash provided by (used in) investing activities		(26,153	)		20,030
Financing activities:
Proceeds from revolving line of credit		133,114			34,902
Payments on revolving line of credit		(115,682	)		(34,902	)
Checks written in excess of cash balances		10,782			(8,790	)
Debt acquisition costs		(747	)		(165	)
Other		(95	)		116
Net cash provided by (used in) financing activities		27,372			(8,839	)
Net increase (decrease) in cash		(5,538	)		1,882
Cash and cash equivalents at beginning of period		5,600			-
Cash and cash equivalents at end of period	$	62		$	1,882

See accompanying notes to consolidated financial statements.

4

NAVARRE CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 — Organization and Basis of Presentation

Navarre Corporation (the “Company” or “Navarre”), a Minnesota corporation formed in 1983, is a distributor and provider of complete logistics solutions for traditional and e-commerce retail channels. The Company operates through two business segments — distribution and e-commerce and fulfillment services.

Through the distribution business, the Company distributes computer software, consumer electronics and accessories and video games. The distribution business focuses on providing a range of value-added services, including vendor-managed inventory, electronic and internet-based ordering and gift card fulfillment.

Through the e-commerce and fulfillment business, the Company provides web site development and hosting, customer care, e-commerce fulfillment and third party logistics services.

The accompanying unaudited consolidated financial statements of Navarre Corporation have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements.

All significant inter-company accounts and transactions have been eliminated in consolidation. In the opinion of the Company, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

During October 2011, the Company implemented a series of initiatives, including a reduction in workforce and simplification of business structures and processes across the Company’s operations.  In conjunction with the initiatives, the Company reviewed its portfolio of businesses to identify poor performing activities and areas where continued business investments would not meet its requirements for financial returns (collectively, “Restructuring Plan”).  This assessment resulted in the Company abandoning inventory and other investments that were determined to not meet its requirements for financial returns.  These actions are intended to increase operating efficiencies and provide additional resources to invest in product lines and service categories in order to execute the Company’s long-term growth strategy plan.  The Company’s restructuring activities were substantially complete by March 31, 2012.

On November 20, 2012, Navarre acquired all of the equity interests of SpeedFC, Inc. (a Delaware corporation), through a merger of that entity with and into a Navarre wholly-owned subsidiary, now named SpeedFC, Inc., a Minnesota corporation (“SpeedFC”)(the transaction, the “Acquisition”) pursuant to the terms of that certain Agreement and Plan of Merger dated September 27, 2012, as amended on October 29, 2012 (the “Merger Agreement”). SpeedFC is a leading provider of end-to-end e-commerce services to retailers and manufacturers and is part of the Company’s e-commerce and fulfillment segment. The Company completed the acquisition of SpeedFC on November 20, 2012. The results of SpeedFC are reflected in the e-commerce and fulfillment segment.

Please refer to Note 2 for further discussion of the Acquisition.

Because of the seasonal nature of the Company’s business, the operating results and cash flows for the three and nine month periods ended December 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2013. For further information, refer to the consolidated financial statements and footnotes thereto included in Navarre Corporation’s Annual Report on Form 10-K for the year ended March 31, 2012.

Basis of Consolidation

The consolidated financial statements include the accounts of Navarre Corporation and its wholly-owned subsidiaries (collectively referred to herein as the “Company”).

5

Fair Value of Financial Instruments

The carrying value of the Company’s financial assets and liabilities approximates fair value at December 31, 2012 and March 31, 2012.  The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash (Level 1), contingent payment obligation (Level 3) and contingent common stock obligation (Level 3).  See Note 2 for acquisition related assets fair value disclosures.

Revenue Recognition

Revenue on products shipped, including consigned products owned by the Company, is recognized when title and risk of loss transfers, delivery has occurred, the price to the buyer is determinable and collectability is reasonably assured. Under certain conditions, the Company permits its customers to return or destroy products. The Company records a reserve for sales returns, product destructions and allowances against amounts due to reduce the net recognized receivables to the amounts the Company reasonably believes will be collected. These reserves are based on the application of the Company’s historical or anticipated gross profit percent against average sales returns and product destructions, sales discounts percent against average gross sales and specific reserves for marketing programs.

The Company’s distribution customers, at times, qualify for certain price protection benefits from the Company’s vendors. The Company serves as an intermediary to settle these amounts between vendors and customers. The Company accounts for these amounts as reductions of revenue with corresponding reductions in cost of sales.

Service revenues are recognized upon delivery of the services.  The Company records amounts received from customers for out-of-pocket expenses, primarily freight and supplies, as revenue and the associated expense as a cost of sales.  All customer revenues are recorded net of discounts and allowances provided to customers.

A portion of the Company’s service revenue arrangements include multiple service elements, such as web implementation and migration, web site support, eCommerce services and additional services.  The Company has adopted the provisions of FASB ASC 605, “Revenue Recognition,” and the amendment to the Revenue Recognition – Multiple-Element Arrangements Subtopic of the FASB Accounting Standards Codification, as presented in ASU 200-13, Multiple-Deliverable Arrangements.  Under the provisions of FASB ASC 605, these deliverables are regarded as one unit of accounting and the revenue recognition pattern is determined for the combined unit.  The contracted value of the revenue and related costs for elements not quoted on a monthly basis, such as web site implementation and migration, are deferred and recognized ratably over the term of the arrangement, approximately three years, beginning when delivery has occurred. The revenues from the remaining service elements are recorded on a monthly basis as the services are provided. Costs associated with the web site implementation and migration are deferred and recognized ratably over the term of the arrangement consistent with the recognition of revenues.

Software development costs

The Company accounts for its software development costs in accordance with Accounting Standards Codification (“ASC”) 985, Costs of Computer Software to Be Sold, Leased or Marketed.  Capitalization of software development costs begins upon the establishment of technological feasibility. In the development of our products and our enhancements to existing products, technological feasibility is not established until substantially all product development is complete, including the development of a working model. The establishment of technological feasibility and the ongoing assessment of recoverability of capitalized software development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life, and changes in software and hardware technologies. Such costs are amortized using the straight-line method beginning when the product or enhancement is available for general release over the estimated economic life of the product or enhancement, generally three years. 

6

Note 2 — Acquisition

SpeedFC, Inc.

On November 20, 2012, the Company completed the Acquisition of SpeedFC, a leading provider of end-to-end e-commerce services. Total consideration included: $25.0 million in cash at closing, 17.1 million shares of the Company’s common stock plus performance payments (contingent consideration) up to an additional $5.0 million in cash (undiscounted) and up to 6.3 million shares of the Company’s common stock contingent upon SpeedFC’s achieving certain financial metrics for the 12 months ending December 31, 2012.  The cash paid at closing was funded by the Company's revolving line of credit.  If earned, the contingent cash payment of up to a maximum of $1.25 million is to be paid in early 2013 and up to a maximum of $3.75 million (before interest of five percent per annum) is to be paid in equal, quarterly installments beginning in late 2013 and ending on February 29, 2016. If earned, the contingent share payment of up to 2,215,526 shares are to be issued in early calendar 2013 and up to 4,071,842 shares are to be issued in late calendar 2013.  The combined fair value of the contingent consideration was estimated to be $7.4 million based upon Level 3 fair value valuation techniques (unobservable inputs that reflect the reporting entity’s own assumptions).  A financial model was applied to estimate the value of the contingent consideration that utilized the income approach and option pricing theory to compute expected values and probabilities of reaching the various thresholds in the agreement. Key assumptions included (1) a discount rate of 14%, (2) EBITDA operating results of between $6.0 and $10.0 million and (3) specific to the option pricing -interest rate of 0.15%, expected term of 0.11 years, dividend yield of 0.0% and volatility of 0%. However, we have not yet finalized the preliminary assessment of the fair value of tangible assets and intangible assets separate from goodwill.

The preliminary goodwill of $31.0 million arising from the Acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and SpeedFC. All goodwill was assigned to the Company’s e-commerce and fulfillment segment and is not deductible for tax purposes. This transaction qualified as an acquisition of a significant business pursuant to Regulation S-X and financial statements for the acquired business were filed. Operating results from the date of Acquisition are included within the e-commerce and fulfillment segment.

The purchase price was allocated based on preliminary estimates of the fair value of assets acquired and liabilities assumed as follows (in thousands):

Consideration:
Cash	$	24,493
Common stock		21,250
Contingent payment obligation		4,013
Contingent common stock obligation		3,411
Fair value of total consideration transferred	$	53,167
The SpeedFC purchase price was allocated as follows:
Accounts receivable	$	11,262
Prepaid expenses and other assets		623
Property and equipment		5,303
Purchased intangibles		23,590
Goodwill		30,940
Accounts payable		(6,133	)
Accrued expenses and other liabilities		(3,246	)
Deferred tax liability		(9,172	)
	$	53,167

Net sales of SpeedFC, included in net sales - Ecommerce and fulfillment services in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended December 31, 2012 were $13.6 million.  SpeedFC provided operating income of $1.4 million to the consolidated Company’s operating income for the three and nine months ended December 31, 2012.

Acquisition-related costs (included in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss)) for the three and nine months ended December 31, 2012 were $1.5 million and $1.9 million, respectively.

7

The following summary, prepared on a condensed pro forma basis presents the Company’s unaudited consolidated results from operations as if the acquisition of SpeedFC had been completed as of the beginning of fiscal 2012.  The pro forma presentation below does not include any impact of transaction costs or synergies.

	Three Months Ended December 31,					Nine Months Ended December 31,
	2012		2011			2012		2011
Net sales	$	189,804	$	171,455		$	416,074	$	404,009
Cost of sales		170,400		162,274			369,072		364,201
Gross profit		19,404		9,181			47,002		39,808
Operating expenses		14,099		23,749			39,881		55,162
Income from operations	$	5,305	$	(14,568	)	$	7,121	$	(15,354	)
Earnings (loss) per common share:
Basic	$	0.04	$	(0.54	)	$	0.05	$	(0.49	)
Diluted	$	0.04	$	(0.54	)	$	0.05	$	(0.49	)

Note 3 — Accounts Receivable

Accounts receivable consisted of the following (in thousands):

	December 31, 2012		March 31, 2012
Trade receivables	$	123,492	$	50,690
Vendor receivables		4,306		2,829
		127,798		53,519
Less: allowance for doubtful accounts and sales discounts		1,464		3,397
Less: allowance for sales returns, net margin impact		3,083		2,187
Total	$	123,251	$	47,935

Note 4 — Inventories

Inventories, net of reserves, consisted of the following (in thousands):

	December 31, 2012		March 31, 2012
Finished products	$	36,858	$	27,398
Consigned inventory		1,554		1,501
Raw materials		1,804		1,646
		40,216		30,545
Less: inventory reserve		1,198		1,695
Total	$	39,018	$	28,850

8

Note 5— Prepaid Expenses

Prepaid expenses consisted of the following (in thousands):

	December 31, 2012		March 31, 2012
Prepaid royalties	$	1,503	$	1,242
Other prepaid expenses		979		956
Current prepaid expenses		2,482		2,198
Non-current prepaid royalties		4,134		4,871
Total prepaid expenses	$	6,616	$	7,069

Note 6 — Property and Equipment

Property and equipment consisted of the following (in thousands):

	December 31, 2012		March 31, 2012
Furniture and fixtures	$	1,163	$	1,159
Computer and office equipment		21,209		17,986
Warehouse equipment		11,099		8,130
Leasehold improvements		2,324		2,211
Construction in progress		755		404
Total		36,550		29,890
Less: accumulated depreciation and amortization		25,109		23,022
Net property and equipment	$	11,441	$	6,868

Depreciation expense was $1.2 million and $2.8 million for the three and nine months ended December 31, 2012, respectively, and $751,000 and $2.4 million for the three and nine months ended December 31, 2011, respectively.

Note 7— Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	December 31, 2012		March 31, 2012
Compensation and benefits	$	2,951	$	1,233
Severance		42		1,232
Royalties		686		917
Rebates		1,206		1,364
Interest		144		21
Other		2,343		1,809
Total	$	7,372	$	6,576

Note 8 —Intangible Assets

Indefinite Lived Intangible Assets

Indefinite lived intangible assets include the Punch! trademark and the SpeedFC trademark, which are not amortized. The Company makes annual assessments, or as events or circumstances indicate that the asset might be impaired, to evaluate realizability of carrying values.

9

The fair value of the indefinite lived intangible assets is determined for the impairment test using the relief from royalty valuation technique, which is a variation of the income approach. The Company recorded pre-tax, non-cash impairment charges of $306,000 during the three and nine months ended December 31, 2011 which is included in goodwill and intangible impairment in the Consolidated Statements of Operations.

Definite Lived Intangible Assets

The Company evaluates its definite lived intangible amortizing assets for impairment when changes in events and circumstances indicate that the carrying value might exceed the current fair value. The Company determines fair value utilizing current market values and future market trends. There were no impairment charges recorded during the three and nine month periods ended December 31, 2012 and 2011.

Intangible assets

Other identifiable intangible assets, with zero residual value, are being amortized (except for the trademarks which have an indefinite life) over useful lives of five years for developed technology, eight to twelve years for customer relationships, three years for  customer list and seven years for the domain name and were valued as follows (in thousands):

	As of December 31, 2012
	Gross carrying amount		Accumulated amortization		Net
Developed technology	$	6,760	$	1,262	$	5,498
Customer relationships		15,260		125		15,135
Customer list		167		153		14
Domain name		70		66		4
Trademarks (not amortized)		3,884		—		3,884
Total intangible assets	$	26,141	$	1,606	$	24,535

	As of March 31, 2012
	Gross carrying amount		Accumulated amortization		Net
Developed technology	$	1,940	$	813	$	1,127
Customer relationships		80		23		57
Customer list		167		110		57
Domain name		70		58		12
Trademarks (not amortized)		294		—		294
Total intangible assets	$	2,551	$	1,004	$	1,547

Aggregate amortization expense for the three and nine months ended December 31, 2012 was $332,000 and $601,000, respectively. Aggregate amortization expense for the three and nine months ended December 31, 2011 was $131,000 and $395,000, respectively.

The following is a schedule of estimated future amortization expense (in thousands):

Remainder of fiscal 2013	$	688
2014		2,903
2015		3,949
2016		4,160
2017		3,296
Thereafter		5,655
Total	$	20,651

10

Debt issuance costs

Debt issuance costs are included in “Other Assets” and are amortized over the life of the related debt. Debt issuance costs consisted of the following (in thousands):

	December 31, 2012		March 31, 2012
Debt issuance costs	$	2,722	$	1,975
Less: accumulated amortization		1,444		1,327
Net debt issuance costs	$	1,278	$	648

Amortization expense for debt issuance costs is included in interest expense in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). Amortization expense was $49,000 and $118,000 for the three and nine months ended December 31, 2012.  Amortization expense was $149,000 and $448,000 for the three and nine months ended December 31, 2011.

Note 9 — Commitments and Contingencies

Leases

The Company leases its facilities and a portion of its office and warehouse equipment. The terms of the lease agreements generally range from month-to-month up to 15 years, with certain leases containing options to extend the leases up to an additional 10 years. The Company does not believe that exercise of the renewal options are reasonably assured at the inception of the lease agreements and, therefore, considers the initial base term to be the lease term.  The leases require payment of real estate taxes and operating costs in addition to base rent. Total straight line base rent expense was approximately $860,000 and $2.1 million for the three and nine months ended December 31, 2012, respectively and $613,000 and $1.8 million for the three and nine months ended December 31, 2011, respectively.  Lease terms vary, but generally provide for fixed and escalating payments which range from an additional $0.06 per square foot to a 3% annual increase over the life of the lease.

The following is a schedule of future minimum rental payments required under non-cancelable operating leases as of December 31, 2012 (in thousands):

Remainder of fiscal 2013	$	1,033
2014		3,356
2015		4,030
2016		5,594
2017		5,643
Thereafter		24,487
Total (1)	$	44,143

(1) Minimum rental payments have not been reduced by minimum sublease rentals of $135,000 due to the Company under noncancelable subleases.

Litigation and Proceedings

In the normal course of business, the Company is involved in a number of litigation/arbitration and administrative/regulatory matters that are incidental to the operation of the Company’s business. These proceedings generally include, among other things, various matters with regard to products distributed by the Company and the collection of accounts receivable owed to the Company.

On October 16, 2012, a purported class action lawsuit on behalf of Navarre shareholders relating to the transactions contemplated by the SpeedFC Merger Agreement was filed in the United States District Court for the District of Minnesota against the Company, the Board of Directors, the Company’s acquisition subsidiary and SpeedFC, Inc. entitled Helene Gottlieb v. Richard S. Willis, et al. The lawsuit generally alleged that the Board breached its fiduciary duties and violated disclosure requirements by, among other things, attempting to acquire SpeedFC by means of a proxy statement that fails to disclose material information concerning the proposed acquisition. The alleged misrepresentations and/or omissions of material facts in the proxy statement include a failure to include certain financial forecasts, financial information regarding the proposed transaction and related financing and information concerning the financial analysis performed by the Company’s financial advisor. The lawsuit further alleged that certain defendants aided and abetted these breaches. The lawsuit sought unspecified damages and equitable relief.

11

The plaintiff filed a motion for expedited discovery and a preliminary injunction on October 24, 2012 and a hearing occurred on November 1, 2012. On November 7, 2012, the court denied the plaintiff’s motion for a preliminary injuction.

On October 29, 2012, a second purported class action entitled Davin Pokoik v. Richard S Willis, et al. was filed in the United States District Court for the District of Minnesota against the Company, the Board of Directors, the Company’s acquisition subsidiary and SpeedFC, Inc. This suit asserts substantially similar claims and requests substantially similar relief as the Gottlieb matter.  By Court Order dated November 13, 2012, the Gottlieb and Pokoik matters were consolidated and plaintiffs were required to file an amended Complaint by December 20, 2012.  An Amended Complaint was filed alleging similar claims and Plaintiff Gottlieb submitted a notice of voluntary dismissal removing only herself from the consolidated action. The Company has moved to dismiss the Pokoik matter.  The Company believes that the allegations in this suit are without merit and intends to vigorously defend this matter.

The Company does not currently believe that the resolution of any pending matters will have a material adverse effect on the Company’s financial position or liquidity, but an adverse decision in more than one could be material to the Company’s consolidated results of operations.  No amounts were accrued with respect to proceedings as of December 31, 2012 and March 31, 2012, respectively as not probable or estimable.

Note 10 — Capital Leases

The Company leases certain equipment under non-cancelable capital leases. At December 31, 2012 and March 31, 2012, leased capital assets included in property and equipment were as follows (in thousands):

	December 31, 2012		March 31, 2012
Computer and office equipment	$	187	$	381
Less: accumulated amortization		82		311
Property and equipment, net	$	105	$	70

Future minimum lease payments, excluding additional costs such as insurance and maintenance expense payable by the Company under these agreements, by year and in the aggregate are as follows (in thousands):

	Minimum Lease Commitments
Remainder of fiscal 2013	$	17
2014		45
2015		32
2016		30
2017		5
Total minimum lease payments		129
Less: amounts representing interest at rates ranging from 6.9% to 9.4%		16
Present value of minimum capital lease payments, reflected in the balance sheet as current and non-current capital lease obligations of $45,000 and $68,000, respectively	$	113

Note11 — Bank Financing and Debt

On November 12, 2009, the Company entered into a three year, $65.0 million revolving credit facility (the “Credit Facility”) with Wells Fargo Foothill, LLC as agent and lender, and a participating lender. On December 29, 2011, the Credit Facility was amended to eliminate the participating lender, reduce the revolving credit facility limit to $50.0 million, provide for an additional $20.0 million under the Credit Facility under certain circumstances and extend the maturity date to December 29, 2016.   On November 20, 2012, 2012 the Credit Facility was amended to provide for the acquisition of SpeedFC, eliminate the additional $20.0 million available under the Credit Facility and extend the maturity date to November 20, 2017.

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The Credit Facility is secured by a first priority security interest in all of the Company’s assets, as well as the capital stock of its subsidiary companies. Additionally, the Credit Facility, as amended, calls for monthly interest payments at the bank’s base rate (as defined in the Credit Facility) plus 1.75%, or LIBOR plus 2.75%, at the Company’s discretion.

At December 31, 2012 and March 31, 2012 the Company had $17.4 million and zero, respectively, outstanding on the Credit Facility. Amounts available under the Credit Facility are subject to a borrowing base formula.  Changes in the assets within the borrowing base formula can impact the amount of availability.  Based on the Credit Facility’s borrowing base and other requirements at such dates, the Company had excess availability of $26.4 million and $30.4 million at December 31, 2012 and March 31, 2012, respectively.

In association with, and per the terms of the Credit Facility, the Company also pays and has paid certain facility and agent fees. Weighted-average interest on the Credit Facility was 5.38% and 4.25% at December 31, 2012 and March 31, 2012, respectively. Such interest amounts have been, and continue to be, payable monthly.

Under the Credit Facility, the Company is required to meet certain financial and non-financial covenants. The financial covenants include a variety of financial metrics that are used to determine the Company’s overall financial stability as well as limitations on capital expenditures, a minimum ratio of EBITDA to fixed charges and a minimum borrowing base availability requirement. At December 31, 2012, the Company was in compliance with all covenants under the Credit Facility. The Company currently believes it will be in compliance with all covenants in the Credit Facility during the next twelve months.

Letter of Credit

On April 14, 2011, the Company was released from the FUNimation office lease guarantee by providing a five-year, standby letter of credit for $1.5 million, which is reduced by $300,000 each subsequent year. The standby letter of credit can be drawn down, to the extent in default, if the full and prompt payment of the lease is not completed by FUNimation. No claims have been made against this financial instrument. There was no indication that FUNimation would not be able to pay the required future lease payments totaling $3.3 million and $3.5 million at December 31, 2012 and March 31, 2012, respectively. Therefore, at December 31, 2012 and March 31, 2012, the Company did not believe a future draw on the standby letter of credit was probable and an accrual related to any future obligation was not considered necessary at such times.

Note 12 — Shareholders’ Equity

The Company’s Articles of Incorporation authorize 10,000,000 shares of preferred stock, no par value. No preferred shares are issued or outstanding.

The Company issued 17.1 million common shares in connection with the acquisition of SpeedFC (Note 2) during the three and nine months ended December 31, 2012.

The Company did not repurchase any shares during either of the nine months ended December 31, 2012 or 2011.

Note 13 — Share-Based Compensation

The Company has two equity compensation plans: the Navarre Corporation 1992 Stock Option Plan and the Navarre Corporation 2004 Stock Plan (collectively, “the Plans”). The 2004 Plan provides for equity awards, including stock options, restricted stock and restricted stock units. Eligible participants under the 2004 Plan are all employees (including officers and directors), non-employee directors, consultants and independent contractors. The 1992 Plan expired on July 1, 2006, and no further grants are allowed under this Plan, however, there are outstanding options under this plan as of December 31, 2012. These Plans are described in detail in the Company’s Annual Report filed on Form 10-K for the fiscal year ended March 31, 2012.

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Stock Options

A summary of the Company’s stock option activity as of December 31, 2012 and changes during the nine months ended December 31, 2012 are summarized as follows:

	Number of options			Weighted average exercise price
Options outstanding, beginning of period:		2,289,334		$	2.12
Granted		1,186,030			1.74
Exercised		(36,500	)		0.64
Forfeited or expired		(296,668	)		2.52
Options outstanding, end of period		3,142,196		$	1.96
Options exercisable, end of period		1,204,670		$	2.27
Shares available for future grant, end of period		2,306,275

The weighted-average fair value of options granted during the nine months ended December 31, 2012 was $1.2 million and the total fair value of options exercisable was $1.7 million at December 31, 2012. The weighted-average remaining contractual term for options outstanding was 8.3 years and for options exercisable was 6.7 years at December 31, 2012.

The aggregate intrinsic value represents the total pretax intrinsic value, based on the Company’s closing stock price of $1.78 as of December 31, 2012, which theoretically could have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of stock options exercised during the nine months ended December 31, 2012 was $32,000. The aggregate intrinsic value for options outstanding was $221,000, and for options exercisable was $131,000 at December 31, 2012.

As of December 31, 2012, total compensation cost related to non-vested stock options not yet recognized was $1.7 million, which is expected to be recognized over the next 1.6 years on a weighted-average basis.

During each of the nine months ended December 31, 2012 and 2011, the Company received cash from the exercise of stock options totaling $20,000 and $184,000, respectively. There was no excess tax benefit recorded for the tax deductions related to stock options during either of the nine months ended December 31, 2012 or 2011.

Restricted Stock

Restricted stock granted to employees typically has a vesting period of three years and expense is recognized on a straight-line basis over the vesting period, or when the performance criteria have been met. The value of the restricted stock is established by the market price on the date of grant or if based on performance criteria, on the date it is determined the performance criteria will be met. Restricted stock awards vesting is based on service criteria or achievement of performance targets. All restricted stock awards are settled in shares of the Company’s common stock.

A summary of the Company’s restricted stock activity as of December 31, 2012 and of changes during the nine months ended December 31, 2012 is summarized as follows:

	Shares			Weighted average grant date fair value
Unvested, beginning of period:		432,415		$	1.74
Granted		313,853			1.74
Vested		(132,422	)		1.81
Forfeited		(36,333	)		1.72
Unvested, end of period		577,513		$	1.73

The weighted-average fair value of restricted stock awards granted during the nine months ended December 31, 2012 was $547,000.

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The weighted-average remaining vesting period for restricted stock awards outstanding at December 31, 2012 was 1.6 years.

As of December 31, 2012, total compensation cost related to non-vested restricted stock awards not yet recognized was $828,000, which amount is expected to be recognized over the next 1.6 years on a weighted-average basis. There was no excess tax benefit recorded for the tax deductions related to restricted stock during either of the nine month periods ended December 31, 2012 or 2011.

Share-Based Compensation Valuation and Expense Information

The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an option award. The fair value of options granted during the nine months ended December 31, 2012 and 2011 was calculated using the following assumptions:

	Nine Months Ended December 31,
	2012				2011
Expected life (in years)		5.0	-	6.5			5.0
Expected average volatility			65.64%				68%
Risk-free interest rate		0.62	-	1.09%		0.95	-	2.24%
Expected dividend yield			0.0%				0.0%

Expected life uses historical employee exercise and option expiration data to estimate the expected life assumption for the Black-Scholes grant-date valuation. The Company believes that this historical data is currently the best estimate of the expected term of a new option. The Company uses a weighted-average expected life for all awards and has identified one employee population. Expected volatility uses the Company stock’s historical volatility for the same period of time as the expected life. The Company has no reason to believe its future volatility will differ from the past. The risk-free interest rate is based on the U.S. Treasury rate in effect at the time of the grant for the same period of time as the expected life. Expected dividend yield is zero, as the Company historically has not paid dividends. The Company used a forfeiture rate of 4.63% during the three and nine months ended December 31, 2012 and 2011.

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Share-based compensation expense related to employee stock options, restricted stock and restricted stock units, net of estimated forfeitures, for the three and nine months ended December 31, 2012 was $245,000 and $705,000, respectively, and for the three and nine months ended December 31, 2011 was $509,000 and $933,000, respectively. These amounts were included in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss). No amount of share-based compensation was capitalized.

Note 14 —Earnings (loss) Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share data):

	Three Months Ended December 31,					Nine Months Ended December 31,
	2012		2011			2012			2011
Numerator:
Net income (loss)	$	10	$	(29,077	)	$	(73	)	$	(30,953	)
Denominator:
Denominator for basic income (loss) per share—weighted-average shares		44,883		36,977			39,749			36,805
Dilutive securities: Employee stock options and restricted stock		143		-			-			-
Denominator for diluted income (loss) per share—adjusted weighted-average shares		45,026		36,977			39,749			36,805
Earnings (loss) per common share:
Basic	$	-	$	(0.79	)	$	-		$	(0.84	)
Diluted	$	-	$	(0.79	)	$	-		$	(0.84	)

Approximately 2.4 million of the Company’s stock options and restricted stock were excluded from the calculation of diluted earnings per share for the three months ended December 31, 2012 because the exercise prices of the stock options and the grant date fair value of the restricted stock were greater than the average price of the Company’s common stock and therefore their inclusion would have been anti-dilutive.  Due to the Company’s net loss for the nine months ended December 31, 2012 diluted loss per share excludes 2.4 million of stock options and restricted stock awards because their inclusion would have been anti-dilutive.  Due to the Company’s net loss for the three and nine months ended December 31, 2011 diluted loss per share excludes 3.0 million and 2.9 million, respectively, stock options and restricted stock awards because their inclusion would have been anti-dilutive.

Note 15 — Income Taxes

For the three months ended December 31, 2012, the Company recorded income tax expense of $1.6 million, compared to income tax expense of $14.5 million for the three months ended December 31, 2011. The effective income tax rate for the three months ended December 31, 2012 was 99.4%, compared to negative 98.9% for the three months ended December 31, 2011.  For the nine months ended December 31, 2012, the Company recorded income tax expense of $1.6 million, compared to income tax expense of $13.2 million for the nine months ended December 31, 2011. The effective income tax rate for the nine months ended December 31, 2012 was 104.7%, compared to negative 74.8% for the nine months ended December 31, 2011.  The Company did not record a provision for or benefit from income taxes for our Canadian subsidiary because we have available net operating losses to offset future taxable income.  For the nine months ended December 31, 2012, the effective tax rate differs from the federal tax rate of 34% primarily due to state taxes, unrecognized income tax benefits and costs related to the acquisition of SpeedFC.

Deferred tax assets are evaluated by considering historical levels of income, estimates of future taxable income streams and the impact of tax planning strategies. A valuation allowance is recorded to reduce deferred tax assets when it is determined that it is more likely than not, based on the weight of available evidence, the Company would not be able to realize all or part of its deferred tax assets. An assessment is required of all available evidence, both positive and negative, to determine the amount of any required valuation allowance.

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As a result of the current market conditions and their impact on the Company’s future outlook, management has reviewed its deferred tax assets and concluded that the uncertainties related to the realization of some of its assets, have become unfavorable. As of both December 31, 2012 and March 31, 2012, the Company had a net deferred tax asset position before valuation allowance of $29.8 million and $38.9 million, respectively, which is composed of temporary differences, primarily related to net operating loss carryforwards, which will begin to expire in fiscal 2029. The Company also has foreign tax credit carryforwards which will begin to expire in 2016.  The Company has considered the positive and negative evidence for the potential utilization of the net deferred tax asset and has concluded that it is more likely than not that the Company will not realize the full amount of net deferred tax assets. Accordingly, a valuation allowance of $19.4 million and $18.9 million has been recorded as of December 31, 2012 and March 31, 2012, respectively, including a full valuation allowance against our Canada net operating loss.

The Company recognizes interest accrued related to unrecognized income tax benefits (“UTB’s”) in the provision for income taxes. At March 31, 2012, interest accrued was approximately $190,000, which was net of federal and state tax benefits and total UTB’s net of deferred federal and state tax benefits that would impact the effective tax rate if recognized were $518,000. During the nine months ended December 31, 2012, $89,000 of UTB’s were reversed due to statute lapses, which was net of $51,000 of deferred federal and state income tax benefits. At December 31, 2012, interest accrued was $219,000 and total UTB’s, net of deferred federal and state income tax benefits that would impact the effective tax rate if recognized, were $819,000.

The Company’s federal income tax returns for tax years ending in 2010 through 2012 remain subject to examination by tax authorities. The Company files in numerous state jurisdictions with varying statutes of limitations. The Company does not anticipate that the total unrecognized tax benefits will significantly change prior to March 31, 2013.

Note 16 — Business Segments

The Company identifies its segments based on its organizational structure, which is primarily by business activity. Operating profit represents earnings before interest expense, interest income and income taxes to the respective divisions.

Beginning in the quarter ended December 31, 2012, the Company changed its reporting segments in connection with the acquisition of SpeedFC. The Company previously reported segment information under two reporting segments including distribution and publishing.  Effective the quarter ended December 31, 2012, the Company’s segments are defined as follows:

Through the distribution business, the Company distributes computer software, consumer electronics and accessories and video games.

Through the e-commerce and fulfillment services business, the Company provides logistics, information technology and fulfillment services to customers.

       The distribution segment results as reported prior to the quarter ended December 31, 2012 included operating results of fee-based logistical services which is now included in the e-commerce & fulfillment services segment.   In addition, the results of the previously reported publishing segment are included in the distribution segment beginning the quarter ended December 31, 2012.

Financial information below has been recast to conform with the presentation change effective the quarter ended December 31, 2012 as discussed above.  Financial information by reportable segment is included in the following summary for the three and nine months ended  December 31, 2012 and 2011 (in thousands):

	Distribution			E-Commerce & Fulfillment Services		Consolidated
Three months ended December 31, 2012
Net sales	$	156,856		$	21,428	$	178,284
Income (loss) from operations		499			1,959		2,458
Income (loss) from operations, before income tax		(160	)		1,790		1,630
Depreciation and amortization expense		760			497		1,257
Capital expenditures		476			290		766
Total assets		164,836			85,188		250,024

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	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended December 31, 2011
Net sales	$	151,298		$	2,199		$	153,497
Income (loss) from operations		(13,980	)		(177	)		(14,157	)
Income (loss) from operations, before income tax		(14,337	)		(283	)		(14,620	)
Depreciation and amortization expense		771			112			883
Capital expenditures		14			4			18
Total assets		162,052			2,842			164,894

	Distribution			E-Commerce & Fulfillment Services		Consolidated
Nine months ended December 31, 2012
Net sales	$	340,476		$	33,212	$	373,688
Income (loss) from operations		21			2,729		2,750
Income (loss) from operations, before income tax		(669	)		2,231		1,562
Depreciation and amortization expense		2,248			637		2,885
Capital expenditures		1,023			530		1,553
Total assets		164,836			85,188		250,024

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Nine months ended December 31, 2011
Net sales	$	359,167		$	4,914		$	364,081
Income (loss) from operations		(15,045	)		(1,292	)		(16,337	)
Income (loss) from operations, before income tax		(16,110	)		(1,601	)		(17,711	)
Depreciation and amortization expense		2,283			499			2,782
Capital expenditures		589			4			593
Total assets		162,052			2,842			164,894

Segment results for the quarters ended June 30, 2011, September 30, 2011, March 31, 2012, June 30, 2012 and September 30, 2012 are re-stated below based on the Company’s reportable segments are as follows (in thousands):

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended June 30, 2011
Net sales	$	102,701		$	1,315		$	104,016
Income (loss) from operations		(65	)		(530	)		(595	)
Income (loss) from operations, before income tax		(335	)		(628	)		(963	)
Depreciation and amortization expense		761			211			972
Capital expenditures		252			—			252

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended September 30, 2011
Net sales	$	105,168		$	1,400		$	106,568
Income (loss) from operations		(1,000	)		(585	)		(1,585	)
Income (loss) from operations, before income tax		(1,438	)		(690	)		(2,128	)
Depreciation and amortization expense		750			177			927
Capital expenditures		323			—			323

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	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended March 31, 2012
Net sales	$	113,881		$	2,862		$	116,743
Income (loss) from operations		(5,694	)		(272	)		(5,966	)
Income (loss) from operations, before income tax		(5,627	)		(390	)		(6,017	)
Depreciation and amortization expense		741			101			842
Capital expenditures		296			—			296

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended June 30, 2012
Net sales	$	86,774		$	4,498		$	91,272
Income (loss) from operations		(584	)		90			(494	)
Income (loss) from operations, before income tax		(756	)		(74	)		(830	)
Depreciation and amortization expense		742			71			813
Capital expenditures		17			202			219

	Distribution		E-Commerce & Fulfillment Services		Consolidated
Three months ended September 30, 2012
Net sales	$	96,846	$	7,286	$	104,132
Income (loss) from operations		106		680		786
Income (loss) from operations, before income tax		247		515		762
Depreciation and amortization expense		745		69		814
Capital expenditures		530		38		568

____________

Product Line Data

 The following table provides net sales by product line for the distribution segment for the three and nine months ended December 31, 2012 and 2011 (in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
	2012		2011		2012		2011
Software	$	107,638	$	104,359	$	249,838	$	258,413
Consumer electronics and accessories		47,363		32,640		83,863		59,682
Video games		1,855		10,785		6,775		21,137
Home video		-		3,514		-		19,935
Consolidated	$	156,856	$	151,298	$	340,476	$	359,167

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Geographic Data

The following table provides net sales by geographic region for the three and nine months ended December 31, 2012 and 2011 and property, plant and equipment, net of accumulated depreciation by geographic region at December 31, 2012 and March 31, 2012 (in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
Net Sales	2012		2011		2012		2011
United States	$	144,666	$	127,904	$	311,268	$	318,857
International		33,618		25,593		62,420		45,224
Total net sales	$	178,284	$	153,497	$	373,688	$	364,081

Property, Plant and Equipment, Net	December 31, 2012		March 31,2012
United States	$	11,309	$	6,613
International		132		255
Total property, plant and equipment, net	$	11,441	$	6,868

Sales Channel Data

The following table provides net sales by sales channel for the three and nine months ended December 31, 2012 and 2011 (in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
	2012		2011		2012		2011
Retail sales channel	$	129,943	$	125,329	$	289,665	$	307,460
E-commerce sales channel		48,341		28,168		84,023		56,621
Total net sales	$	178,284	$	153,497	$	373,688	$	364,081

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We offer a vertically integrated, multi-channel platform of e-commerce services and distribution solutions to retailers and manufacturers. We offer retail distribution programs, website development and hosting, customer care, e-commerce fulfillment, and third party logistics services.

Since our founding in 1983, we have established retail distribution relationships with major retailers including Best Buy, Wal-Mart/Sam’s Club, Apple, Amazon, Costco Wholesale Corporation, Staples, Target, Office Depot and OfficeMax, and we distribute to nearly 31,000 retail and distribution center locations throughout the United States and Canada. In November 2012 we acquired SpeedFC, Inc.(“SpeedFC”), a leading provider of end-to-end e-commerce services. This acquisition allows us to provide a broad array of e-commerce services that includes website development and integration, web hosting, cross-channel order management and reporting, and fulfillment and customer care to online retailers and manufacturers.

Beginning in the quarter ended December 31, 2012, we changed our reporting segments in connection with the acquisition of SpeedFC, Inc. We previously reported segment information under two reporting segments including distribution and publishing. Effective the quarter ended December 31, 2012, our business operates through two business segments: Distribution and E-Commerce and Fulfillment Services.

Through our distribution business, we distribute computer software, consumer electronics and accessories and video games, and sell proprietary software products for the PC and Mac platforms.

Through our ecommerce and fulfillment services business, we provide web site development and hosting, customer care, e-commerce fulfillment and third party logistics services.

The distribution segment results as reported prior to the quarter ended December 31, 2012 included operating results of fee-based logistical services which is now included in the e-commerce & fulfillment services segment.   In addition, the results of the previously reported publishing segment are included in the distribution segment beginning the quarter ended December 31, 2012.

Recent events

On November 20, 2012, Navarre acquired all of the equity interests from all of the stock and option holders (the “SFC Equityholders”) of SpeedFC, Inc. (a Delaware corporation), through a merger of that entity with and into a Navarre wholly-owned subsidiary, now named SpeedFC, Inc., a Minnesota corporation (“SpeedFC”)(the transaction, the “Acquisition”) pursuant to the terms of that certain Agreement and Plan of Merger dated September 27, 2012, as amended on October 29, 2012 (the “Merger Agreement”). SpeedFC is a leading provider of end-to-end e-commerce services to retailers and manufacturers and is part of the Company’s e-commerce and fulfillment segment.

The aggregate Acquisition consideration consisted of initial consideration of $50.0 million in cash and shares of Navarre common stock, with additional contingent payments in cash and common stock available as described below, both payable to the SFC Equityholders proportionate to their prior ownership in SpeedFC, as adjusted pursuant to the Merger Agreement. The initial consideration paid at closing was comprised of: (i) $25.0 million in cash (less certain escrow and holdback amounts, and subject to certain net working capital and post-closing adjustments); and (ii) $25.0 million worth of shares of Navarre common stock, or 17,095,186 shares.

The contingent consideration payable to the SFC Equityholders is subject to the achievement of certain financial performance metrics by SpeedFC in the 2012 calendar year related to an adjusted EBITDA target, which, if met, would require: (i) the payment of up to a maximum of $5.0 million in cash consideration, with up to a maximum of $1.25 million payable in early 2013 and up to a maximum of $3.75 million (before interest of five percent per annum) payable in equal, quarterly installments beginning in late fiscal 2013 and ending on February 29, 2016 (the “Contingent Cash Payment”) and (ii) the issuance of up to 6,287,368 shares of Navarre common stock to the SFC Equityholders, with up to 2,215,526 (“First Equity Amount”) shares payable in early 2013, up to 738,509 shares (“Second Equity Amount”) payable in late 2013, and 3,333,333 shares payable at the same time as the Second Equity Amount (all equity amounts together, the “Contingent Equity Payment”). The Contingent Cash Payment and Contingent Equity Payment amounts are subject to certain escrow conditions and adjustments in connection with the measurement periods for evaluation of the achievement of financial performance metrics. If all contingent equity amounts are fully earned, a total of 23,382,554 shares of Navarre common stock could be issued in connection with the Acquisition.

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Executive Summary

Consolidated net sales for the third quarter of fiscal 2013 increased 16.1% to $178.3 million compared to $153.5 million for the third quarter of fiscal 2012. The $24.8 million increase in net sales was primarily due to an increase in net sales in the consumer electronics and accessories category of $14.7 million compared to the third quarter of fiscal 2012, due to distribution of new products to existing and new customers, and due to our recent acquisition of SpeedFC, which generated $13.6 million of net sales in the third quarter of fiscal 2013.  In addition, net sales increased $3.3 million in our software category due to expanded distribution to existing and new customers, partially offset by a decrease in net sales in the video game category of $8.9 million compared to the third quarter of fiscal 2012 and a decrease in net sales in the home video category of $3.5 million compared to the third quarter of fiscal 2012 due to our transition out of the home video product category.

Our gross profit increased to $17.0 million, or 9.5% of net sales, in the third quarter of fiscal 2013 compared to $7.5 million, or 4.9% of net sales, for the same period in fiscal 2012. The $9.5 million increase in gross profit was principally due to a higher volume of consumer electronics and accessories products of $1.2 million and the contribution of gross profit of $2.3 million from SpeedFC.  Additionally, the third quarter of fiscal 2012 includes restructure and impairment charges of $8.8 million.

Total operating expenses for the third quarter of fiscal 2013 were $14.5 million, or 8.2% of net sales, compared to $21.7 million, or 14.1% of net sales, in the same period for fiscal 2012. The third quarter of fiscal 2012 includes $8.2 million of restructure and impairment charges.  The remaining $500,000 decrease is primarily due to operating efficiencies resulting from the Restructuring Plan completed in fiscal 2012 offset by transaction and transition costs related to the acquisition of SpeedFC of $1.5 million.

Net income for the third quarter of fiscal 2013 was $10,000 or zero per diluted share compared to a net loss of $29.1 million or $0.79 per diluted share for the same period last year.

Consolidated net sales for the nine months ended December 31, 2012 increased 2.6% to $373.7 million compared to $364.1 million for the first nine months of fiscal 2012. This $9.6 million increase in net sales was primarily due to an increase in net sales in the consumer and electronics category of $24.2 million compared to the first nine months of fiscal 2012 and our recent acquisition of SpeedFC which generated $13.6 million of net sales for the first nine months of fiscal 2013.   The increase was partially offset by a decrease in net sales in the video game category of $14.4 million compared to the first nine months of fiscal 2012, a decrease in net sales in the software category of $8.6 million and a decrease in net sales in the home video category of $19.9 million compared to the first nine months of fiscal 2012 due to our transition out of the home video product category.

Our gross profit increased to $39.0 million, or 10.4% of net sales, for the first nine months of fiscal 2013 compared to $33.5 million, or 9.2% of net sales, for the same period in fiscal 2012. The $5.5 million increase in gross profit was principally due to a higher volume of fulfillment services of $2.3 million and the contribution of gross profit of $2.3 million from SpeedFC.  This increase was partially offset by the sale of lower gross profit margin software titles in the distribution segment.  Additionally, fiscal 2012 includes restructure and impairment charges of $8.8 million.

Total operating expenses for the first nine months of fiscal 2013 were $36.3 million, or 9.7% of net sales, compared to $49.9 million, or 13.7% of net sales, in the same period for fiscal 2012. Fiscal 2012 includes restructuring and impairment charges of $10.1 million.  The remaining $3.5 million decrease was primarily due to operating efficiencies resulting from the Restructuring Plan completed in fiscal 2012 offset by $1.9 million of transaction and transition costs and $854,000 of operating expenses related to the acquisition of SpeedFC.

Net loss for the first nine months of fiscal 2013 was $73,000 or zero per diluted share compared to net loss of $31.0 million or $0.84 per diluted share for the same period last year.

Working Capital and Debt

Our business is working capital intensive and requires significant levels of working capital primarily to finance accounts receivable and inventories. We finance our operations through cash and cash equivalents, funds generated through operations, accounts payable and our revolving credit facility. The timing of cash collections and payments to vendors may require usage of our revolving credit facility in order to fund our working capital needs. “Checks written in excess of cash balances” can occur from time to time, including period ends, and represent payments made to vendors that have not yet been presented by the vendor to our bank, and therefore a corresponding advance on our revolving line of credit has not yet occurred. On a terms basis, we extend varying levels of credit to our customers and receive varying levels of credit from our vendors. During the last twelve months, we have not had any significant changes in the terms extended to customers or provided by vendors which would have a material impact to the reported financial statements.

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On November 12, 2009, we entered into a three year, $65.0 million revolving credit facility (the “Credit Facility”) with Wells Fargo Foothill, LLC as agent and lender, and a participating lender. On December 29, 2011, the Credit Facility was amended to eliminate the participating lender, reduce the revolving credit facility limit to $50.0 million, provide for an additional $20.0 million under the Credit Facility under certain circumstances and extend the maturity date to December 29, 2016.   On November 20, 2012, 2012 the Credit Facility was amended to provide for the acquisition of SpeedFC, eliminate the additional $20.0 million available under the Credit Facility and extend the maturity date to November 20, 2017.

 The Credit Facility is secured by a first priority security interest in all of our assets, as well as the capital stock of our companies. Additionally, the Credit Facility, as amended, calls for monthly interest payments at the bank’s base rate (as defined in the Credit Facility) plus 1.75%, or LIBOR plus 2.75%, at our discretion.

At December 31, 2012 and March 31, 2012 we had $17.4 million and zero outstanding on the Credit Facility, respectively.   Amounts available under the Credit Facility are subject to a borrowing base formula. Changes in the assets within the borrowing base formula can impact the amount of availability. Based on the facility’s borrowing base and other requirements at such dates, we had excess availability of $26.4 million and $30.4 million at December 31, 2012 and March 31, 2012, respectively. At December 31, 2012, we were in compliance with all covenants under the Credit Facility and we currently believe that we will be in compliance with all covenants during the next twelve months.

In association with, and per the terms of the Credit Facility, we also pay and have paid certain facility and agent fees. Weighted-average interest on the Credit Facility was 5.38% and 4.25% at both December 31, 2012 and March 31, 2012, respectively. Such interest amounts have been, and continue to be, payable monthly.

Forward-Looking Statements / Risk Factors

We make written and oral statements from time to time regarding our business and prospects, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends, and other matters that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements containing the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimates,” “projects,” “believes,” “expects,” “anticipates,” “intends,” “target,” “goal,” “plans,” “objective,” “should” or similar expressions identify forward-looking statements, which may appear in documents, reports, filings with the SEC, including this Quarterly Report on Form 10-Q, news releases, written or oral presentations made by officers or other representatives made by us to analysts, shareholders, investors, news organizations and others and discussions with management and other representatives. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Our future results, including results related to forward-looking statements, involve a number of risks and uncertainties. No assurance can be given that the results reflected in any forward-looking statement will be achieved. Any forward-looking statement made by or on behalf of us speaks only as of the date on which such statement is made. Our forward-looking statements are based on assumptions that are sometimes based upon estimates, data, communications and other information from suppliers, government agencies and other sources that may be subject to revision. Except as required by law, we do not undertake any obligation to update or keep current either (i) any forward-looking statement to reflect events or circumstances arising after the date of such statement, or (ii) the important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement which may be made by or on behalf of us.

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In addition to other matters identified or described by us from time to time in filings with the SEC, there are several important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or results that are reflected from time to time in any forward-looking statement that may be made by or on behalf of us. Some of these important factors, but not necessarily all important factors, include the following: our revenues being derived from a small group of customers; our dependence on significant vendors and manufacturers and the popularity of their products; technological developments, particularly software as a service application, electronic transfer and downloading could adversely impact sales, margins and results of operations; inability to adapt to evolving technological standards; some revenues are dependent on consumer preferences and demand; our restructuring efforts may have unpredictable outcomes, including the possibility of us incurring additional restructuring charges;  a deterioration in businesses of significant customers could harm our business; the seasonality and variability in our business and decreased sales could adversely affect our results of operations; growth of non-U.S. sales and operations could increasingly subject us to additional risks that could harm our business; the extent to which our insurance does not mitigate the risks facing our business or our insurers are unable to meet their obligations, our operating results may be negatively impacted; increased counterfeiting or piracy may negatively affect demand for our home entertainment products; we may not be able to protect our intellectual property rights; the failure to diversify our business could harm us; the loss of key personnel could affect the depth, quality and effectiveness of the management team; our ability to meet our significant working capital requirements or if working capital requirements change significantly; product returns or inventory obsolescence could reduce sales and profitability or negatively impact our liquidity; the potential for inventory values to decline; impairment in the carrying value of our assets could negatively affect consolidated results of operations; our credit exposure or negative product demand trends or other factors could cause credit loss; our ability to adequately and timely adjust cost structure for decreased demand; our ability to compete effectively in distribution and e-commerce and fulfillment services, which are highly competitive industries; our dependence on third-party shipping and fulfillment for the delivery of our product; our reliance on third-party subcontractors for certain of our business services; developing software is complex, costly and uncertain and operational errors or defects in such products could result in liabilities and/or impair such products’ marketability; our dependence on information systems; future acquisitions or divestitures could disrupt business; future acquisitions could result in potentially unsuccessful integration of acquired companies; interruption of our business or catastrophic loss at any of our facilities could curtail or shutdown our business; future terrorist or military activities could disrupt our operations or harm assets; we may be subject to one or more jurisdictions asserting that we should collect or should have collected sales or other taxes; our ability to use net operating loss carryforwards to reduce future tax payments may be limited; we may be unable to refinance our debt facility; our debt agreement limits operating and financial flexibility; we may incur additional debt; changes to financial standards could adversely affect our reported results of operations; our e-commerce business has inherent cybersecurity risks that may disrupt our business; fluctuations in stock price could adversely affect our ability to raise capital or make our securities undesirable; the exercise of outstanding options could adversely affect our stock price; our anti-takeover provisions, our ability to issue preferred stock and our staggered board may discourage takeover attempts beneficial to shareholders; we do not intend to pay dividends on common stock, thus shareholders should not expect a return on investment through dividend payments; and our directors may not be personally liable for certain actions which may discourage shareholder suits against them.

A detailed statement of risks and uncertainties is contained in our reports to the SEC, including, in particular, our Annual Report on Form 10-K for the year ended March 31, 2012 and other public filings and disclosures.  We have identified additional risks under Item 1A. Risk Factors to this Form 10-Q.  Investors and shareholders are urged to read these documents carefully.

Critical Accounting Policies

We consider our critical accounting policies to be those related to revenue recognition, allowance for doubtful accounts, goodwill and intangible assets, impairment of long-lived assets, inventory valuation, share-based compensation, income taxes, restructuring charges, software development costs and contingencies and litigation. Other than the addition of the accounting policy related to software development costs and acquisitions and the addition to our revenue recognition accounting policy below, there have been no material changes to these critical accounting policies as discussed in greater detail under this heading in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended March 31, 2012.

Software development costs. Capitalization of software development costs begins upon the establishment of technological feasibility. In the development of our products and our enhancements to existing products, technological feasibility is not established until substantially all product development is complete, including the development of a working model. The establishment of technological feasibility and the ongoing assessment of recoverability of capitalized software development costs require considerable judgment by management with respect to certain external factors, including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life, and changes in software and hardware technologies. Such costs are amortized using the straight-line method beginning when the product or enhancement is available for general release over the estimated economic life of the product or enhancement, generally three years.

Acquisition. Initial consideration is recognized at fair value as of the acquisition date.  Any contingent consideration is recognized as a liability at fair value as of the acquisition date with subsequent fair value adjustments recorded in operations. Acquisition costs are generally expensed as incurred.

We allocate the purchase price of acquired entities to the underlying tangible and identifiable intangible assets acquired and liabilities based on their estimated fair values, with any excess recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. We determine the fair values of such assets, principally intangible assets, generally in consultation with third-party valuation advisors.

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Addition to revenue recognition accounting policy. A portion of the e-commerce and fulfillment services business revenue arrangements include multiple service elements, such as web implementation and migration, web site support, e-commerce services and additional services.  These deliverables are regarded as one unit of accounting and the revenue recognition pattern is determined for the combined unit.  The contracted value of the revenue and related costs for elements not quoted on a monthly basis, such as web site implementation and migration, are deferred and recognized ratably over the term of the arrangement, approximately three years, beginning when delivery has occurred. The revenues from the remaining service elements are recorded on a monthly basis as the services are provided. Costs associated with the web site implementation and migration are deferred and recognized ratably over the term of the arrangement consistent with the recognition of revenues.

Results of Operations

The following table sets forth for the periods indicated the percentage of net sales represented by certain items included in our Consolidated Statements of Operations and Comprehensive Income (Loss).

	Three Months Ended December 31, (Unaudited)						Nine Months Ended December 31, (Unaudited)
	2012			2011			2012			2011
Net sales:
Distribution		88.0	%		98.6	%		91.1	%		98.7	%
E-commerce and fulfillment services		12.0			1.4			8.9			1.3
Total net sales		100.0			100.0			100.0			100.0
Cost of sales:
Distribution		80.2			93.9			82.0			89.5
E-commerce and fulfillment services		10.3			1.2			7.6			1.3
Total cost of sales		90.5			95.1			89.6			90.8
Gross profit
Distribution		7.8			4.7			9.1			9.2
E-commerce and fulfillment services		1.7			0.2			1.3			-
Total gross profit		9.5			4.9			10.4			9.2
Operating expenses
Selling and marketing		3.0			3.7			3.6			4.4
Distribution and warehousing		1.3			1.7			1.6			2.1
General and administrative		2.5			3.3			2.9			3.9
Information technology		0.9			1.0			1.0			1.1
Depreciation and amortization		0.4			0.5			0.6			0.6
Goodwill and intangible impairment		-			3.9			-			1.6
Total operating expenses		8.1			14.1			9.7			13.7
Income (loss) from operations		1.4			(9.2	)		0.7			(4.5	)
Interest income (expense), net		(0.2	)		(0.2	)		(0.1	)		(0.2	)
Other income (expense), net		(0.3	)		(0.1	)		(0.2	)		(0.2	)
Income (loss)— before taxes		0.9			(9.5	)		0.4			(4.9	)
Income tax benefit		(0.9	)		(9.4	)		(0.4	)		(3.6	)
Net income (loss)		-	%		(18.9	)%		-	%		(8.5	)%

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Distribution Segment

The distribution segment distributes computer software, consumer electronics and accessories and video games.

Fiscal 2013 Third Quarter Results Compared To Fiscal 2012 Third Quarter

Net Sales

Net sales for the distribution segment increased $5.6 million, or 3.7%, to $156.9 million for the third quarter of fiscal 2013 compared to $151.3 million for the third quarter of fiscal 2012.  Net sales in the software product group increased $3.3 million to $107.6 million during the third quarter of fiscal 2013 from $104.4 million for the same period last year due to increased demand for our software products. Consumer electronics and accessories net sales increased $14.7 million to $47.4 million during the third quarter of fiscal 2013 compared to $32.6 million for the same period last year due to distribution of new products to existing and new customers.  Video games net sales decreased $8.9 million to $1.9 million in the third quarter of fiscal 2013 from $10.8 million for the same period last year, due to fewer video game releases. Home video net sales decreased to zero in the third quarter of fiscal 2013 from $3.5 million in the third quarter of fiscal 2012, due to our transition out of home video exclusive content.   We believe future net sales will be dependent upon our ability to continue to add new, appealing content and upon the strength of the retail environment and overall economic conditions.

Gross Profit

Gross profit for the distribution segment was $13.8 million, or 8.8% of net sales, for the third quarter of fiscal 2013 compared to $7.2 million, or 4.7% of net sales, for the third quarter of fiscal 2012. Fiscal 2012 includes restructure and impairment charges of $8.8 million.  Excluding the restructure and impairment charges, the $2.2 million decrease in gross profit was primarily due to an increase in sales of lower margin software products and the decline in volume of video games.  We expect gross profit rates to fluctuate depending principally upon the make-up of products sold; however, we anticipate experiencing similar margin blends going forward.

Operating Expenses

Total operating expenses for the distribution segment were $13.3 million, or 8.5% of net sales, for the third quarter of fiscal 2013 compared to $21.1 million, or 14.0% of net sales, for the third quarter of fiscal 2012. The third quarter of fiscal 2012 includes $8.3 million of restructure and impairment charges.  Excluding restructure and impairment charges, the $500,000 increase is the result of $1.5 million of transaction and transition costs related to the acquisition of SpeedFC partially offset by a reduction in personnel and related costs resulting from the Restructuring Plan completed in fiscal 2012.

Selling and marketing expenses for the distribution segment were $4.9 million, or 3.1% of net sales, for the third quarter of fiscal 2013 compared to $5.4 million, or 3.6% of net sales, for the third quarter of fiscal 2012.  The third quarter of fiscal 2012 includes $300,000 of restructure and impairment charges.  The remaining decrease is primarily a result of a reduction in personnel and related costs and advertising resulting from the Restructuring Plan completed in fiscal 2012.

Distribution and warehousing expenses for the distribution segment were $2.4 million, or 1.5% of net sales, for the third quarter of fiscal 2013 compared to $2.7 million, or 1.8% of net sales, for the third quarter of fiscal 2012. The $291,000 decrease was primarily a result of a reduction in rent expense due to vacating a warehouse facility during fiscal 2012, in addition to a reduction of personnel and related costs.

General and administrative expenses for the distribution segment consist principally of executive, accounting and administrative personnel and related expenses, including professional fees. General and administrative expenses for the distribution segment were $4.3 million, or 2.7% of net sales, for the third quarter of fiscal 2013 compared to $4.8 million, or 3.1% of net sales, for the third quarter of fiscal 2012. The third quarter of fiscal 2012 includes $1.8 million of restructure and impairment charges.  The remaining decrease in the third quarter of fiscal 2013 was primarily a result of decreased personnel and related costs and professional fees offset by $1.5 million in transaction and transition costs related to the acquisition of SpeedFC.

Information technology expenses for the distribution segment were $968,000, or 0.6% of net sales, for the third quarter of fiscal 2013 compared to $1.5 million, or 1.0% of net sales, for the third quarter of fiscal 2012.  The decrease is primarily a due to a reduction in personnel and related costs resulting from the Restructuring Plan completed in fiscal 2012.

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Depreciation and amortization expense for the distribution segment was $760,000 for the third quarter of fiscal 2013 compared to $771,000 for the second quarter of fiscal 2012.

Operating Income (Loss)

Net operating income for the distribution segment was $499,000 for the third quarter of fiscal 2013 compared to net operating loss of $14.0 million for the third quarter of fiscal 2012.

Fiscal 2013 Nine Months Results Compared With Fiscal 2012 Nine Months

Net Sales

Net sales for the distribution segment decreased $18.7 million, or 5.2%, to $340.5 million for the first nine months of fiscal 2013 compared to $359.2 million for the first nine months of fiscal 2012. Consumer electronics and accessories net sales increased $24.2 million to $83.9 million during the first nine months of fiscal 2013 from $59.7 million for the same period last year due to the distribution of new products to existing and new customers.  Net sales decreased $8.6 million in the software product group to $249.8 million for the first nine months of fiscal 2013 from $258.4 million for the same period last year primarily due to decreased demand for our software products. Video games net sales decreased $14.4 million to $6.8 million for the first nine months of fiscal 2013 from $21.1 million for the same period last year, due to fewer video game releases. Home video net sales decreased to zero for the first nine months of fiscal 2013 from $19.9 million for the first nine months of fiscal 2012, due to our transition out of home video exclusive content. We believe future net sales will be dependent upon our ability to continue to add new, appealing content and upon the strength of the retail environment and overall economic conditions.

Gross Profit

Gross profit for the distribution segment was $34.2 million, or 10.0% of net sales, for the first nine months of fiscal 2013 compared to $33.3 million, or 9.3% of net sales, for the first nine months of fiscal 2012. Fiscal 2012 includes restructure and impairment charges of $8.8 million. The decrease in gross profit is due to the decrease in sales volume and an increased mix of lower gross profit margin security and utility software products. We expect gross profit rates to fluctuate depending principally upon the make-up of products sold.

Operating Expenses

Total operating expenses for the distribution segment were $34.2 million, or 10.0% of net sales, for the first nine months of fiscal 2013 compared to $48.3 million, or 13.5% of net sales, for the same period of fiscal 2012. Fiscal 2012 includes $10.1 million of restructure and impairment charges.  The remaining $4.0 million decrease is primarily due to operating efficiencies as a result of the Restructuring Plan completed in fiscal 2012 offset by $1.9 million of transaction and transition costs related to the acquisition of SpeedFC.

Selling and marketing expenses for the distribution segment decreased $2.2 million to $12.9 million, or 3.8% of net sales, for the first nine months of fiscal 2013 compared to $15.1 million, or 4.2% of net sales, for the first nine months of fiscal 2012.  Fiscal 2012 includes $300,000 of restructure and impairment charges.  The remaining decrease was primarily due to a reduction in variable freight costs due to decreased net sales and efficiencies in addition to a reduction of personnel and related costs.

Distribution and warehousing expenses for the distribution segment were $5.9 million, or 1.7% of net sales, for the first nine months of fiscal 2013 compared to $7.6 million, or 2.1% of net sales, for the same period of fiscal 2012.  The $1.7 million decrease was primarily a result of a reduction in rent expense due to vacating a warehouse facility during fiscal 2012 in addition to a reduction of personnel and related costs.

General and administrative expenses for the distribution segment consist principally of executive, accounting and administrative personnel and related expenses, including professional fees. General and administrative expenses for the distribution segment were $10.1 million, or 3.0% of net sales, for the first nine months of fiscal 2013 compared to $13.3 million, or 3.7% of net sales, for the first nine months of fiscal 2012. Fiscal 2012 includes $3.3 million of restructure and impairment charges.  Further, expenses decreased in the first nine months of fiscal 2013 due to decreased compensation expense, offset by $1.9 million of transaction and transition costs related to the acquisition of SpeedFC.

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Information technology expenses for the distribution segment were $3.1 million, or 0.9% of net sales, for the first nine months of fiscal 2013 compared to $4.0 million, or 1.1% of net sales, for the first nine months of fiscal 2012, primarily a result of decreased personnel costs.

Depreciation and amortization for the distribution segment was $2.2 million for the first nine months of fiscal 2013 and $2.3 million the first nine months of fiscal 2012.

Operating (Loss) Income

Net operating income for the distribution segment was $21,000 for the first nine months of fiscal 2013 compared to net operating loss of $15.0 million for the same period of fiscal 2012.

E-commerce and Fulfillment Services Segment

The e-commerce and fulfillment business provides web site development and hosting, customer care, e-commerce fulfillment and third party logistics services.

Fiscal 2013 Third Quarter Results Compared To Fiscal 2012 Third Quarter

Net Sales

Net sales for the e-commerce and fulfillment services segment were $21.4 million for the third quarter of fiscal 2013 compared to $2.2 million for the third quarter of fiscal 2012. The $19.2 million, or 874.4% increase in net sales, was primarily due to organic growth of the existing e-commerce and fulfillment services business of $5.6 million and the acquisition of SpeedFC effective November 20, 2012, which generated net sales of $13.6 million during the third quarter of fiscal 2013.  We believe sales results in the future will be dependent upon our ability to continue to win new client relationships and generate new opportunities in our client pipeline.

Gross Profit

Gross profit for the e-commerce and fulfillment services segment was $3.2 million, or 14.9% of net sales, for the third quarter of fiscal 2013 compared to $367,000, or 16.7% of net sales, for the third quarter of fiscal 2012. The increase in gross profit is a result of growth of service revenue volume and the contribution of SpeedFC for the quarter of $2.3 million.  We expect gross profit rates to fluctuate depending principally upon the make-up of service revenue mix.

Operating Expenses

Total operating expenses for the e-commerce and fulfillment services segment increased to $1.2 million, or 5.7% of net sales, for the third quarter of fiscal 2013, compared to $544,000, or 41.4% of net sales, for the third quarter of fiscal 2012, all primarily related to the addition of SpeedFC in the quarter.

Selling and marketing expenses for the e-commerce and fulfillment services segment were $395,000, or 1.8% of net sales, for the third quarter of fiscal 2013 compared to $290,000, or 22.1% of net sales, for the third quarter of fiscal 2012.

General and administrative expenses for the e-commerce and fulfillment services segment consist principally of executive, accounting and administrative personnel and related expenses, including professional fees. General and administrative expenses for the e-commerce and fulfillment services segment were $271,000, or 1.3% of net sales, for the third quarter of fiscal 2013, compared to $254,000, or 19.3% of net sales, for the third quarter of fiscal 2012.

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Information technology expenses for the e-commerce and fulfillment services segment were $565,000, or 2.6% of net sales, for the third quarter of fiscal 2013 compared to zero for the third quarter of fiscal 2012.

Operating Income

The e-commerce and fulfillment services segment had a net operating income of $2.0 million for the third quarter of fiscal 2013 compared to net operating loss of $177,000 for the third quarter of fiscal 2012.

Fiscal 2013 Nine Months Results Compared With Fiscal 2012 Nine Months

Net Sales

Net sales for the e-commerce and fulfillment services segment were $33.2 million for the first nine months of fiscal 2013 compared to $4.9 million for the same period of fiscal 2012. The $28.3 million, or 576% increase in net sales, over the prior year nine months was primarily due to organic growth of the existing e-commerce and fulfillment services business of $14.7 million in addition to the acquisition of SpeedFC as of November 20, 2012 which contributed $13.6 million in net sales for the first nine months of fiscal 2013.  We believe sales results in the future will be dependent upon our ability to continue to win new client relationships and generate new opportunities in our client pipeline.

Gross Profit

Gross profit for the e-commerce and fulfillment services segment was $4.8 million, or 14.5% of net sales, for the first nine months of fiscal 2013 compared to $256,000, or 5.2% of net sales, for the first nine months of fiscal 2012. We expect gross profit rates to fluctuate depending principally upon the make-up of services provided to the e-commerce and fulfillment services customers.

Operating Expenses

Total operating expenses increased $551,000 for the e-commerce and fulfillment services segment to $2.1 million for the first nine months of fiscal 2013 from $1.5 million for the first nine months of fiscal 2012, primarily as a result of the acquisition of SpeedFC.

Selling and marketing expenses for the e-commerce and fulfillment services segment were $932,000, or 2.8% of net sales, for the first nine months of fiscal 2013 compared to $683,000, or 13.9% of net sales, for the first nine months of fiscal 2012.

General and administrative expenses for the e-commerce and fulfillment services segment consist principally of executive, accounting and administrative personnel and related expenses, including professional fees. General and administrative expenses for the e-commerce and fulfillment services segment decreased to $602,000, or 1.8% of net sales, for the first nine months of fiscal 2013 compared to $863,000, or 17.6% of net sales, for the first nine months of fiscal 2012.  The $261,000 decrease was primarily due to a decrease in personnel costs as a result of operating efficiencies offset by additional expenses incurred for the SpeedFC acquisition.

Information technology expenses for the e-commerce and fulfillment services segment were $565,000, or 1.7% of net sales, for the first nine months of fiscal 2013 compared to zero for the first nine months of fiscal 2012.

Operating Income

The e-commerce and fulfillment services segment had net operating income of $2.7 million for the first nine months of fiscal 2013 compared to net operating loss of $1.3 million for the first nine months of fiscal 2012.

Consolidated Other Income and Expense

Interest income (expense), net was expense of $325,000 for the third quarter of fiscal 2013 compared to expense of $292,000 for the third quarter of fiscal 2012. Interest income (expense), net was expense of $586,000 for the first nine months of fiscal 2013 compared to expense of $873,000 for the same period of fiscal 2012.  The decrease in interest expense for the first nine months of fiscal 2013 was a result of a reduction in borrowings.

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Other income (expense), net, which consists primarily of foreign exchange loss, for the three and nine months ended December 31, 2012 was expense of $503,000 and $602,000, respectively.  Other income (expense), net, which consists of foreign exchange loss, for the three and nine months ended December 31, 2011 was expense of $171,000 and $501,000, respectively.

Consolidated Income Tax Benefit

We recorded income tax expense of $1.6 million for the third quarter of fiscal 2013 or an effective tax rate of 99.4% compared to income tax expense of $14.5 million or an effective tax rate of negative 98.9% for the third quarter of fiscal 2012. We recorded income tax expense for the first nine months of fiscal 2013 of $1.6 million or an effective tax rate of 104.7% compared to income tax expense of $13.2 million or an effective tax rate of negative 74.8% for the first nine months of fiscal 2012.  We did not record a provision for or benefit from income taxes for our Canadian subsidiary because we have available net operating losses to offset future taxable income.  For the nine months ended December 31, 2012, the effective tax rate differs from the federal tax rate of 34% primarily due to state taxes, unrecognized income tax benefits and costs related to the acquisition of SpeedFC, Inc.

Deferred tax assets are evaluated by considering historical levels of income, estimates of future taxable income streams and the impact of tax planning strategies. A valuation allowance is recorded to reduce deferred tax assets when it is determined that it is more likely than not, based on the weight of available evidence, we would not be able to realize all or part of our deferred tax assets. An assessment is required of all available evidence, both positive and negative, to determine the amount of any required valuation allowance.

As a result of the current market conditions and their impact on our future outlook, management has reviewed its deferred tax assets and concluded that the uncertainties related to the realization of some of its assets, have become unfavorable. As of both December 31, 2012 and March 31, 2012, we had a net deferred tax asset position before valuation allowance of $29.8 million and $38.9 million, respectively, which is composed of temporary differences, primarily related to net operating loss carryforwards, which will begin to expire in fiscal 2029. The Company also has foreign tax credit carryforwards which will begin to expire in 2016.  We have considered the positive and negative evidence for the potential utilization of the net deferred tax asset and have concluded that it is more likely than not that we will not realize the full amount of net deferred tax assets. Accordingly, a valuation allowance of $19.4 million and $18.9 million has been recorded as of December 31, 2012 and March 31, 2012, respectively, including a full valuation allowance against our Canada net operating losses.

We recognize interest accrued related to unrecognized income tax benefits (“UTB’s”) in the provision for income taxes. At March 31, 2012, interest accrued was approximately $190,000, which was net of federal and state tax benefits, and total UTB’s net of federal and state income tax benefits that would impact the effective tax rate if recognized, were $518,000. During the nine months ended December 31, 2012, $89,000 of UTB’s were reversed due to statute lapses, which was net of $51,000 of deferred federal and state income tax benefits. At December 31, 2012, interest accrued was $219,000 and total UTB’s, net of deferred federal and state income tax benefits that would impact the effective tax rate if recognized, were $819,000.

Consolidated Net Income (Loss)

For the third quarter of fiscal 2013, we recorded net income of $10,000 compared to a net loss of $29.1 million for the same period last year.  For the first nine months of fiscal 2013, we recorded a net loss of $73,000, compared to net loss of $31.0 million for the same period last year.

Market Risk

At December 31, 2012, we had $17.4 million outstanding indebtedness subject to interest rate fluctuations. A 100-basis point change in the current LIBOR rate would cause our projected annual interest expense, based on current borrowed amounts, to change by approximately $174,000. The fluctuation in our debt service requirements, in addition to interest rate changes, may be impacted by future borrowings under our credit facility or other alternative financing arrangements.

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Our sales to customers in Canada are increasing. The majority of the sales and purchasing activity related to these customers results in receivables and accounts payables denominated in Canadian dollars. When these transactions are translated into U.S. dollars at the exchange rate in effect at the time of each transaction, gain or loss is recognized. These gains and/or losses are reported as a separate component within other income and expense.  During the three and nine months ended December 31, 2012 we had foreign exchange transaction loss of $388,000 and $493,000, respectively and foreign exchange transaction loss of $172,000 and $501,000, respectively, for the three and nine months ended December 31, 2011.

Additionally, our balance sheet pertaining to these foreign operations is translated into U.S. dollars at the exchange rate in effect on the last day of each month.  The net unrealized balance sheet translation gains and/or losses are excluded from income and are reported as accumulated other comprehensive income or loss.  At December 31, 2012 we had accumulated other comprehensive gain related to foreign translation of $150,000 compared to a loss of $9,000 at March 31, 2012.

Though changes in the exchange rate are out of our control, we periodically monitor our Canadian activities and attempt to reduce exposure from exchange rate fluctuations by limiting these activities or taking other actions, such as exchange rate hedging.  At this time, we do not engage in any hedging transactions to mitigate foreign currency effects, but we continually monitor our activities and evaluate such opportunities periodically.

Seasonality and Inflation

Quarterly operating results are affected by the seasonality of our business. Specifically, our third quarter (October 1-December 31) typically accounts for our largest quarterly revenue figures and a substantial portion of our earnings. As a supplier of products ultimately sold to retailers, our business is affected by the pattern of seasonality common to other suppliers of retailers, particularly during the holiday selling season. Poor economic or weather conditions during this period could negatively affect our operating results. Inflation is not expected to have a significant impact on our business, financial condition or results of operations since we can generally offset the impact of inflation through a combination of productivity gains and price increases.

Liquidity and Capital Resources

Cash Flow Analysis

Operating Activities

Cash used in operating activities for the first nine months of fiscal 2013 was $6.8 million compared to $9.3 million for the same period last year.

The net cash used in operating activities for the first nine months of fiscal 2013 mainly reflected our various non-cash charges, including depreciation and amortization of $3.7 million, share-based compensation of $705,000, a decrease in deferred income taxes of $412,000, offset by our working capital demands. The following are changes in the operating assets and liabilities during the first nine months of fiscal 2013: accounts receivable increased $63.9 million, resulting from the timing of sales and the addition of SpeedFC receivables; inventories increased $10.1 million, primarily reflecting additional inventory related to our growing consumer electronics and accessories product line; prepaid expenses decreased $795,000, primarily resulting from the timing of payments; accounts payable increased $61.9 million, primarily as a result of timing of payments and purchases and the addition of SpeedFC payables; and accrued expenses increased $896,000, net of various accrual payments.

The net cash used in operating activities for the first nine months of fiscal 2012 mainly reflected our net loss, combined with various non-cash charges, including the reversal of the first anniversary Punch! contingent payment accrual of $526,000 which was unearned, depreciation and amortization of $2.8 million, amortization of debt acquisition costs of $448,000, amortization of software development costs of $1.9 million, share-based compensation of $933,000, goodwill and intangibles impairment of $6.0 million, a decrease in deferred income taxes of $13.4 million, offset by our working capital demands. The following are changes in the operating assets and liabilities during the first nine months of fiscal 2012: accounts receivable increased $34.4 million, resulting from the timing of sales, net of decreased sales during the quarter; inventories increased $8.0 million, primarily reflecting additional inventory related to our growing consumer electronics and accessories product line; prepaid expenses decreased $5.9 million, primarily resulting from the write-down of prepaid expenses and recoupment of prepaid royalties; income taxes receivable increased $20,000, primarily due to the timing of required tax payments and tax refunds; accounts payable increased $33.8 million, primarily as a result of timing of payments and purchases; income taxes payable decreased $37,000 primarily due to the timing of required tax payments and tax refunds; and accrued expenses decreased $661,000, net of various accrual payments and a decrease in accrued wages due to timing of pay periods.

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Investing Activities

Cash flows used in investing activities totaled $26.2 million for the first nine months of fiscal 2013 and cash flows provided by investing activities totaled $20.0 million for the same period last year.

The Company used $24.5 million in cash for the acquisition of SpeedFC in the first nine months of fiscal 2013.

The Company made investments in software development of $102,000 and $905,000 for the first nine months of fiscal 2013 and 2012, respectively.

The purchases of property and equipment totaled $1.6 million and $593,000 in the first nine months of fiscal 2013 and 2012, respectively. Purchases of property and equipment in fiscal 2013 and 2012 consisted primarily of computer equipment.

Proceeds from the sale of discontinued operations totaled $22.5 million and payment of the note payable — acquisition totaled $1.0 million, both in the first nine months of fiscal 2012.

Financing Activities

Cash flows provided financing activities totaled $27.4 million for the first nine months of fiscal 2013 and cash flows used in  financing activities totaled $8.8 million for the first nine months of fiscal 2012.

For the first nine months of fiscal 2013, we had proceeds from and repayments of the revolving line of credit of $133.1 million and $115.7 million, respectively.  Checks written in excess of cash balances increased $10.8 million for the first nine months of fiscal 2013.

Proceeds from the sale of discontinued operations totaled $22.5 million and payment of the note payable — acquisition totaled $1.0 million, both in the first nine months of fiscal 2012.

For the first nine months of fiscal 2012, we had proceeds from and repayments of the revolving line of credit of $34.9 million and a decrease in checks written in excess of cash balances of $8.8 million.

Capital Resources

On November 12, 2009, we entered into a three year, $65.0 million revolving credit facility (the “Credit Facility”) with Wells Fargo Foothill, LLC as agent and lender, and a participating lender. On December 29, 2011, the Credit Facility was amended to eliminate the participating lender, reduce the revolving credit facility limit to $50.0 million, provide for an additional $20.0 million under the Credit Facility under certain circumstances and extend the maturity date to December 29, 2016.  On November 20, 2012, the Credit Facility was amended to provide for the acquisition of SpeedFC, eliminate the additional $20.0 million available under the Credit Facility and extend the maturity date to November 20, 2017.

The Credit Facility is secured by a first priority security interest in all of our assets, as well as the capital stock of our companies. Additionally, the Credit Facility, as amended, calls for monthly interest payments at the bank’s base rate (as defined in the Credit Facility) plus 1.75%, or LIBOR plus 2.75%, at our discretion.

Amounts available under the Credit Facility are subject to a borrowing base formula. Changes in the assets within the borrowing base formula can impact the amount of availability. At December 31, 2012, we had $17.4 million outstanding on the Credit Facility and based on the facility’s borrowing base and other requirements, we had excess availability of $26.4 million.

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In association with, and per the terms of the Credit Facility, we also pay and have paid certain facility and agent fees. Weighted-average interest on the Credit Facility was 5.38% and 4.25% at December 31, 2012 and March 31, 2012, respectively. Such interest amounts have been and continue to be payable monthly.

Under the Credit Facility we are required to meet certain financial and non-financial covenants. The financial covenants include a variety of financial metrics that are used to determine our overall financial stability and include limitations on our capital expenditures, a minimum ratio of adjusted EBITDA to fixed charges and a minimum borrowing base availability requirement. At December 31, 2012, we were in compliance with all covenants under the Credit Facility. We currently believe we will be in compliance with the Credit Facility covenants over the next twelve months.

Liquidity

We finance our operations through cash and cash equivalents, funds generated through operations, accounts payable and our revolving credit facility. The timing of cash collections and payments to vendors can require the usage of our revolving credit facility in order to fund our working capital needs. “Checks written in excess of cash balances” may occur from time to time, including period ends, and represent payments made to vendors that have not yet been presented by the vendor to our bank, and therefore a corresponding advance on our revolving line of credit has not yet occurred. On a terms basis, we extend varying levels of credit to our customers and receive varying levels of credit from our vendors. During the last twelve months, we have not had any significant changes in the terms extended to customers or provided by vendors which would have a material impact on the reported financial statements.

We continually monitor our actual and forecasted cash flows, our liquidity and our capital resources. We plan for potential fluctuations in accounts receivable, inventory and payment of obligations to creditors and unbudgeted business activities that may arise during the year as a result of changing business conditions or new opportunities. In addition to working capital needs for the general and administrative costs of our ongoing operations, we have cash requirements for among other things: (1) investments in inventory related to consumer electronics and accessories and other growth product lines; (2) investments to license content and develop software for established products; (3) legal disputes and contingencies (4) payments related to restructuring activities (5) equipment and facility needs for our operations; and (6) asset or company acquisitions.

During the first nine months of fiscal 2013, we invested approximately $1.9 million, before recoveries, in connection with the acquisition of licensed and exclusively distributed product in our publishing and distribution segments.

At December 31, 2012, we had $17.3 million outstanding on our $50.0 million Credit Facility.  Our Credit Facility is available for working capital and general corporate needs and amounts available are subject to a borrowing base formula. Changes in the assets within the borrowing base formula can impact the amount of availability.  At December 31, 2012, based on the facility’s borrowing base and other requirements at such dates, we had excess availability of $26.4 million. At December 31, 2012, we were in compliance with all covenants under the Credit Facility and currently believe we will be in compliance with all covenants throughout the next twelve months.

We currently believe cash and cash equivalents, funds generated from the expected results of operations, funds available under our Credit Facility and vendor terms will be sufficient to satisfy our working capital requirements, other cash needs, costs of restructuring and to finance expansion plans and strategic initiatives for at least the next twelve months. Additionally, with respect to long-term liquidity, we filed a Registration Statement on Form S-3 on October 22, 2012 to renew our shelf registration statement covering the offer and sale of up to $20.0 million of common and/or preferred shares, which registration statement was declared effective on February 4, 2013. Any further growth through acquisitions would likely require the use of additional equity or debt capital, some combination thereof, or other financing.

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Contractual Obligations

The following table presents information regarding contractual obligations that exist as of December 31, 2012 by fiscal year (in thousands):

	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating leases	$	44,143	$	3,634	$	8,077	$	8,940	$	23,492
Capital leases		129		53		64		12		—
License and distribution agreements		2,407		2,047		360		—		—
Total	$	46,679	$	5,734	$	8,501	$	8,952	$	23,492

________

We have excluded liabilities resulting from uncertain tax positions of $1.5 million from the table above because we are unable to make a reasonably reliable estimate of the period of cash settlement with the respective taxing authorities. Additionally, interest payments related to the Credit Facility have been excluded as future interest rates are uncertain.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information with respect to disclosures about market risk is contained in the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk in this Form 10-Q.

Item 4. Controls and Procedures

(a) Controls and Procedures

We maintain disclosure controls and procedures (“Disclosure Controls”), as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our Exchange Act reports, was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) and 15d-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the date of such evaluation.

(b) Change in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the most recently completed quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.

Part II.  OTHER INFORMATION

Item 1. Legal Proceedings

See Litigation and Proceedings disclosed in Note 9 to our consolidated financial statements included herein.

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Item 1A. Risk Factors

Information regarding risk factors appears in Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward-Looking Statements / Risk Factors in Part 1 — Item 2 of this Form 10-Q and in Part 1 — Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2012. Except as set forth below, there have been no other material changes from the risk factors previously disclosed in our Annual Report on Form 10-K.

Risk Factors Related to the SpeedFC Merger

Navarre shareholders who are not also SFC Equityholders have reduced ownership following the SpeedFC Merger, and may face future dilution due to the earn-out terms of the transaction. Additionally, two SFC Equityholders in particular obtained significant ownerships stakes and are in a position to exert control over the Company.

We issued 17,095,186 shares of our Common Stock to the SFC Equityholders upon the closing of the SpeedFC Merger and may issue up to 6,287,368 additional shares if all of the equity contingent payments related to the SpeedFC Merger are earned. Based on 54,388,875 shares outstanding as of February 6, 2013, the SFC Equityholders hold 31.4%, of the outstanding shares of Navarre Common Stock, and if all contingent equity amounts are earned, could own 38.5%.

In addition, SFC Equityholders Jeffrey B. Zisk and M. David Bryant, who were appointed to the Navarre Board of Directors, and Mr. Zisk was hired to serve as the president of SpeedFC, beneficially own significant amounts of Common Stock of the Company as a result of the transaction. In particular, and using the same outstanding share amounts outlined above, Mr. Zisk beneficially owns 10,198,639 shares of Navarre Common Stock or 18.8% of its outstanding shares, and will beneficially own 13,933,336 shares, or 23.0%, if all contingent amounts are earned, and Mr. Bryant beneficially owns 3,424,762 shares of Navarre common stock or 6.3% of its outstanding shares, and will beneficially own 4,674,062 shares, or 7.7%, if all contingent amounts are earned. Accordingly, the SFC Equityholders, and Messrs. Zisk and Bryant in particular, have significant voting power with respect to shares of Common Stock of the Company and may be able to exert substantial influence over our business and affairs.

If the contingent amounts are earned, the SFC Equityholders will become creditors of Navarre, and their interests may not be the same as those investors who are only Navarre shareholders.

If the contingent payments related to the SpeedFC Merger are earned, the SFC Equityholders will effectively become subordinated, unsecured creditorsof Navarre since the cash earn-out payments will be payable, with interest, quarterly over a period of approximately 3 years. If fully earned, the total amount payable could equal a maximum of $5.0 million in cash (before interest), with up to a maximum of $1.25 million due in early 2013, and up to a maximum of $3.75 million (bearing interest at 5% per annum) payable in equal, quarterly installments, due beginning in late 2013 and ending on February 29, 2016. While the SFC Equityholders are also shareholders of Navarre, there is no guarantee that they will remain so once their shares are saleable under Rule 144, or will remain so while they are also a creditor, and even if they remain shareholders, their position as creditors may mean that their interests conflict with those of Navarre shareholders.

The market price of our Common Stock may decline as a result of the SpeedFC Merger or the issuance of shares of our Common Stock.

The market price of our Common Stock may decline as a result of the SpeedFC Merger, or due to the dilution resulting from the share issuances. We may encounter additional transaction and integration-related costs, may fail to realize all of the benefits anticipated in the SpeedFC Merger or may be subject to other factors that affect preliminary cost estimates. In addition, we are unable to predict the potential effects of the share issuances on the trading activity and market price of our Common Stock. Sales of a substantial number of the shares issued in connection with the SpeedFC Merger will be permissible under Rule 144 six months after issuance.

In addition, we have granted registration rights to the SFC Equityholders for the resale of the shares of our Common Stock issued in connection with the SpeedFC Merger. These registration rights could facilitate the resale of such securities into the public market, and any such resale would increase the number of shares of our Common Stock available for public trading. Sales of a substantial number of shares of our Common Stock in the public market, or the perception that such sales might occur, could have a material adverse effect on the price of our Common Stock.

The SpeedFC Merger resulted in changes to our Board and management that may affect the strategy and operations of the combined company as compared to that of Navarre and SpeedFC.

Following the completion of the SpeedFC Merger, our Board added two seats, increasing from seven to nine seats, and appointed Jeffrey B. Zisk and M. David Bryant to such seats for an initial term of one year. The Merger Agreement also provides that the Board will nominate Messrs. Zisk and Bryant at the next regularly scheduled shareholder meeting so that they can serve for a total of three years. In addition, Jeffrey B. Zisk became the President of the subsidiary Surviving Corporation, SpeedFC. This new composition of our Board and management team may affect our business strategy and operating decisions going forward. In addition, there can be no assurance that the new board will function effectively as a team and that there will not be any adverse effects on our business as a result.

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Our ability to use our net operating loss carryforwards might be limited or eliminated.

We have net operating loss carryforwards of approximately $80.0 million, which are potentially available for U.S. federal tax purposes. These loss carryforwards begin to expire in 2029. To the extent these net operating loss carryforwards are available, we intend to use them to reduce any corporate income tax liability associated with our operations. Section 382 of the U.S. Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership. As a result, prior or future changes in ownership could put limitations on or eliminate the availability of our net operating loss carryforwards to offset any profit. Rules governing the use of net operating loss carryforwards are complex, and any use of our net operating loss carryforwards could be challenged. To the extent our use of net operating loss carryforwards is significantly limited or eliminated, any income generated by us could be subject to corporate income tax earlier than if we were able to use net operating loss carryforwards, which could result in lower profit.

The expected benefits of the SpeedFC Merger may not be realized.

To be successful after the SpeedFC Merger, we need to integrate the operations of SpeedFC. Integration will require substantial management attention and could detract attention from the day-to-day business of Navarre. We could encounter difficulties in the integration process, such as difficulties offering products and services across the increased facility portfolio, the need to revisit assumptions about reserves, revenues, capital expenditures and operating costs, including synergies, the loss of key employees or customers or the need to address unanticipated liabilities. If we cannot integrate our business and SpeedFC’s business successfully, we may fail to realize the expected benefits of the SpeedFC Merger. In addition, we cannot be assured that all of the goals and anticipated benefits of the SpeedFC Merger will be achievable, particularly as the achievement of the benefits are in many important respects subject to factors that we do not control. These factors would include such things as the reactions of third parties with whom we enter into contracts and do business and the reactions of investors and analysts.

We have incurred substantial expenses related to the SpeedFC Merger and expect to incur additional expense.

We have incurred substantial transaction costs associated with the SpeedFC Merger and expect to incur additional expense. While we have assumed that a high level of expense will be incurred, there are many factors beyond our control that could affect the total amount or the timing of the SpeedFC Merger expenses. Moreover, many of the expenses that could yet be incurred are, by their nature, difficult to estimate accurately. To the extent these SpeedFC Merger expenses are higher than anticipated, our future operating results and financial condition may be materially adversely affected and our ability to meet financial covenants included in the terms of our credit facilities may be impaired.

The escrow and contingent cash consideration may not be sufficient to cover all of the indemnification obligations owed to Navarre Corporation under the Merger Agreement.

Under the Merger Agreement, the SFC Equityholders are required to indemnify us for certain liabilities, costs and expenses, including liabilities, costs and expenses related to certain tax and litigation matters and a breach of the representations and warranties set forth in the Merger Agreement. In certain circumstances, the SFC Equityholders are not required to indemnify us for losses or expenses until such losses or expenses are in excess of $250,000 in the aggregate and, subject to certain adjustments, are not obligated to indemnify us for any losses or expenses in excess of $10,000,000 in the aggregate (or $20,000,000 for losses resulting from breaches of the non-intellectual property and intellectual property representations). The indemnification obligations may not provide adequate protection for any losses or expenses related to these matters. In addition, there may be unknown liabilities that are not covered by the indemnification provisions of the Merger Agreement for which we would not be entitled to indemnification. Finally, the indemnification obligations of the SFC Equityholders are largely expected to be funded out of $4,000,000 escrow and contingent cash consideration which amount may not be sufficient to cover all losses and expenses related to these indemnified matters.

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We may be unable to integrate SpeedFC’s business with our own successfully.

We are devoting significant management attention and resources to integrating SpeedFC’s business practices and operations with our own. Potential difficulties we may encounter as part of the integration process include the following:

• the potential inability to successfully combine SpeedFC’s business with our own in a manner that permits us to achieve the growth expected to be achieved and other benefits anticipated to result from the SpeedFC Merger;

• challenges leveraging the customer information and technology of the two companies;

• challenges achieving revenue growth from sales of each company’s products and services to the clients and customers of the other company;

• complexities associated with managing the combined businesses, including difficulty addressing possible differences in corporate cultures and management philosophies and the challenge of integrating complex systems, technology, networks and other assets of each of the companies in a seamless manner that minimizes any adverse impact on customers, clients, employees, lenders and other constituencies; and

• potential unknown liabilities and unforeseen increased expenses or delays associated with the SpeedFC Merger.

In addition, it is possible that the integration process could result in diversion of the attention of each company’s management which could adversely affect each company’s ability to maintain relationships with customers, clients, employees and other constituencies or our ability to achieve the anticipated benefits of the SpeedFC Merger, or could reduce each company’s earnings or otherwise adversely affect our business and financial results.

We incurred substantial additional indebtedness in connection with the SpeedFC Merger and may incur more.

In order to complete the SpeedFC Merger, the Company amended its credit facility to, among other things, permit borrowing up to $25.0 million to finance the cash consideration payable at closing (less certain holdback and escrow amounts), which amount was borrowed. Additionally, up to $10.0 million in contingent payments may be payable as a result of the SpeedFC Merger. As a result, following the SpeedFC Merger we have increased indebtedness. This higher level of indebtedness may: require us to dedicate a greater percentage of our cash flow from operations to payments on our debt, thereby reducing the availability of cash flow to fund capital expenditures, pursue other acquisitions or investments in new technologies, and for general corporate purposes; increase our vulnerability to general adverse economic conditions, including increases in interest rates if the borrowings bear interest at variable rates or if such indebtedness is refinanced at a time when interest rates are higher; and limit our flexibility in planning for, or reacting to, changes in or challenges relating to our business and industry, creating competitive disadvantages compared to other competitors with lower debt levels and borrowing costs.

We cannot assure you that cash flow from operations, combined with additional borrowings under the credit facility and any future credit facility, will be available in an amount sufficient to enable us to repay our indebtedness, or to fund other liquidity needs. We and our subsidiaries may incur substantial additional indebtedness in the future, which could cause the related risks to intensify. We may need to refinance all or a portion of our indebtedness on or before their respective maturities. We cannot assure you that we will be able to refinance any of our indebtedness, including our senior credit facility, on commercially reasonable terms or at all. If we are unable to refinance our debt, we may default under the terms of our indebtedness, which could lead to an acceleration of the debt. We do not expect that we could repay all of our outstanding indebtedness if the repayment of such indebtedness was accelerated.

Our future results will suffer if we do not effectively manage our expanded operations following the SpeedFC Merger.

Our future success depends, in part, upon our ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations in geographically dispersed locations and associated increased costs and complexity. There can be no assurances that we will be successful.

Our increased presence in foreign jurisdictions increases the possibility of foreign law violations or violation of the Foreign Corrupt Practices Act (“FCPA”).

We are subject to the FCPA, which generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business, and the anti-bribery laws of other jurisdictions. Any violation of the FCPA or similar laws and regulations could result in significant expenses, divert management attention, and otherwise have a negative impact on us. Any determination that we have violated the FCPA or laws of any other jurisdiction could subject Navarre to, among other things, penalties and legal expenses that could harm its reputation and have a material adverse effect on our financial condition and results of operation. Because our foreign presence expanded due to SpeedFC’s Mexican subsidiary, the possibility of violations of foreign law or the FCPA may increase.

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Risk Factors Related to SpeedFC’s Business

SpeedFC faces competition from many sources that could adversely affect its business.

Many companies offer, on an individual basis, one or more of the same services offered by SpeedFC, and SpeedFC faces competition from many different sources, depending upon the type and range of services requested by a potential client. SpeedFC’s competitors include vertical outsourcers, which are companies that offer a single function, such as call centers, public warehouses or credit card processors. It competes against transportation logistics providers who offer product management functions as an ancillary service to their primary transportation services. It also competes against other business process outsourcing providers, who perform many similar services as SpeedFC. Some of its competitors are PFSWeb, Inc., GSI Commerce Inc., Innotrac Corporation, and Demandware, Inc. Many of these companies have greater capabilities than SpeedFC does for the single or multiple functions the competitors provide. In many instances, SpeedFC’s competition is the in-house operations of its potential clients themselves. The in-house operations of potential clients often believe that they can perform the same services SpeedFC does, while others are reluctant to outsource business functions that involve direct customer contact. SpeedFC cannot be certain that it will be able to compete successfully against these or other competitors in the future.

SpeedFC’s service fee revenue and gross margin is dependent upon its clients’ business and transaction volumes and its costs; certain of SpeedFC’s client service agreements are terminable by the client at will; SpeedFC may incur financial penalties if it fails to meet contractual service levels under certain client service agreements.

SpeedFC’s service fee revenue is primarily transaction based and fluctuates with the volume of transactions or level of sales of the products by the clients for whom it provides transaction management services. If SpeedFC is unable to retain existing clients or attract new clients or if it dedicates significant resources to clients whose business does not generate sufficient revenue or whose products do not generate substantial customer sales, SpeedFC’s business may be materially adversely affected. Moreover, SpeedFC’s ability to estimate service fee revenue for future periods is substantially dependent upon its clients’ and SpeedFC’s own projections, the accuracy of which has been, and will continue to be, unpredictable. Therefore, SpeedFC’s planning for client activity and targeted goals for service fee revenue and gross margin may be materially adversely affected by incomplete, delayed or inaccurate projections. In addition, certain of SpeedFC’s service agreements with clients are terminable by the client at will. Therefore, SpeedFC cannot make assurances that any of its clients will continue to use its services for any period of time. The loss of a significant amount of service fee revenue due to client terminations could have a material adverse effect on SpeedFC’s ability to cover its costs and thus on its profitability. Certain of SpeedFC’s client service agreements contain minimum service level requirements and impose financial penalties if it fails to meet such requirements. The imposition of a substantial amount of such penalties could have a material adverse effect on SpeedFC’s business and operations.

SpeedFC’s revenue and margins may be materially impacted by client transaction volumes that differ from client projections and business assumptions.

SpeedFC’s pricing for client transaction services, such as call center and fulfillment, is often based upon volume projections and business assumptions provided by the client and SpeedFC’s anticipated costs to perform such work. In the event the actual level of activity or cost is substantially different from the projections or assumptions, SpeedFC may have insufficient or excess staffing, incremental costs or other assets dedicated for such client that may negatively impact SpeedFC’s margins and business relationship with such client. In the event SpeedFC is unable to meet the service levels expected by the client, its relationship with the client will suffer and may result in financial penalties and/or the termination of the client contract.

SpeedFC’s operating results are materially impacted by its client mix and the seasonality of such clients’ business.

SpeedFC’s business is materially impacted by its client mix and the seasonality of such clients’ businesses. Historically, the volume and activity have increased substantially during the holiday season, placing significant demand on SpeedFC’s operations during that period. Based upon SpeedFC’s current client mix and their current projected business volumes, SpeedFC anticipates its revenue will be at its lowest in our fiscal fourth quarter and at its highest in our fiscal third quarter. Failure to perform could cause SpeedFC to incur financial penalities due to, among other things, not meeting contractual service levels, which could cause loss of clients and/or revenue. In addition, SpeedFC is unable to predict how the seasonality of future clients’ business may affect SpeedFC’s quarterly revenue and whether the seasonality may change due to modifications to a client’s business. As such, SpeedFC believes that results of operations for a quarterly period may not be indicative of the results for any other quarter or for the full year.

38

SpeedFC’s business is subject to the risk of customer concentration.

From time to time, SpeedFC may lose clients, and such clients may represent a significant percentage of overall revenue. At the end of 2011, SpeedFC was notified that one of its top three clients was terminating its contract with SpeedFC and would cease using SpeedFC's services during the first half of calendar 2012. SpeedFC ceased providing services to this client in June 2012. For 2011, that customer represented approximately 21% of SpeedFC’s revenue. There can be no assurance that SpeedFC will be able to replace the revenue to SpeedFC from that client with revenues from new clients or increased revenues from existing clients. Unless SpeedFC is able to increase its revenue from other existing or new clients or adjust its operating costs, such reduction or termination of services could have a material adverse effect upon its business, results of operation and financial condition.

In addition, two other clients accounted for 45% and 50% of SpeedFC’s revenue for the calendar years ended December 31, 2011 and 2010, respectively. The loss of one or more of such clients, or non-payment of any material amount by these or any other client, would have a material adverse effect upon SpeedFC’s business, results of operations and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures.

 Not applicable.

Item 5. Other Information

None.

39

Item 6. Exhibits

(a) The following exhibits are included herein:

31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
101*	The following financial information from our Quarterly Report on Form 10-Q for the third quarter of fiscal 2013, filed with the SEC on February 11, 2013, is formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets at December 31, 2012 and March 31, 2012; (ii) the Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended December 31, 2012 and 2011; (iii) the Consolidated Statements of Cash Flows for the nine months ended December 31, 2012 and 2011; and (iv) the Notes to Consolidated Financial Statements (Unaudited)
		The XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, additionally the data shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under these sections.

40

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Navarre Corporation (Registrant)
Date: February 11, 2013	/s/ Richard S Willis
	Richard S Willis President and Chief Executive Officer (Principal Executive Officer)
Date: February 11, 2013	/s/ Diane D. Lapp
	Diane D. Lapp Chief Financial Officer (Principal Financial and Accounting Officer)

41

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Richard S Willis, certify that:

1. I have reviewed this report on Form 10-Q of Navarre Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 11, 2013

By:	/s/ Richard S Willis
	Richard S Willis
	President, Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Diane D. Lapp, certify that:

1. I have reviewed this report on Form 10-Q of Navarre Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 11, 2013

By:	/s/ Diane D. Lapp
	Diane D. Lapp
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Navarre Corporation (the “Company”) for the quarter ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof, (the “Quarterly Report”), I, Richard S Willis, President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 11, 2013

By:	/s/ Richard S Willis
	Richard S Willis
	President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Navarre Corporation (the “Company”) for the quarter ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof, (the “Quarterly Report”), I, Diane D. Lapp, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 11, 2013

By:	/s/ Diane D. Lapp
	Diane D. Lapp
	Chief Financial Officer

XML

Note 4 - Inventories (Detail) - Inventories, net of reserves: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Mar. 31, 2012
Finished products	$ 36,858	$ 27,398
Consigned inventory	1,554	1,501
Raw materials	1,804	1,646
	40,216	30,545
Less: inventory reserve	1,198	1,695
Total	$ 39,018	$ 28,850

XML

Note 12 - Shareholders' Equity (Detail)	1 Months Ended	3 Months Ended	9 Months Ended
	Nov. 20, 2012	Dec. 31, 2012	Dec. 31, 2012
Preferred Stock, Shares Authorized		10,000,000	10,000,000
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares	17,100,000	17,100,000	17,100,000

XML

Note 9 - Commitments and Contingencies (Detail) (USD $)	3 Months Ended		9 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Operating Leases, Rent Expense	$ 860,000	$ 613,000	$ 2.1	$ 1,800,000
Lease Terms, Additional Rent Per Square Foot	0.06		0.06
Annual Increase in Base Rent	3.00%		3.00%
Capital Leases, Future Minimum Sublease Rentals	$ 135,000		$ 135,000
Maximum [Member]
Lease Term	15 years		15 years
Optional Additional Terms [Member]
Lease Term	10 years		10 years

XML

Note 13 - Share-Based Compensation (Detail) (USD $)	3 Months Ended		9 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Share Based Compensation, Options, Grants in Period, Weighted Average Fair Value			$ 1,200,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Aggregate Fair Value	1,700,000		1,700,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term			8 years 109 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term			6 years 255 days
Closing Market Price (in Dollars per share)	$ 1.78		$ 1.78
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Total Intrinsic Value			32,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value	221,000		221,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value	131,000		131,000
Proceeds from Stock Options Exercised			20,000	184,000
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate			0.00%	0.00%
Share-based Compensation	245,000	509,000	705,000	933,000
Stock Options [Member]
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	1,700,000		1,700,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition			1 year 219 days
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate			0.00%
ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsForfeitureRate			4.63%
Restricted Stock [Member]
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	828,000		828,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition			1 year 219 days
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			3 years
Share Based Compensation, Restricted Stock, Grants In Period, Weighted Average Fair Value			$ 547,000

XML

Note 8 - Intangible Assets (Detail) - Estimated future amortization expense: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Remainder of fiscal 2013	$ 688
2014	2,903
2015	3,949
2016	4,160
2017	3,296
Thereafter	5,655
Total	$ 20,651

XML

Note 16 - Business Segments (Tables)

9 Months Ended

Dec. 31, 2012

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Distribution			E-Commerce & Fulfillment Services		Consolidated
Three months ended December 31, 2012
Net sales	$	156,856		$	21,428	$	178,284
Income (loss) from operations		499			1,959		2,458
Income (loss) from operations, before income tax		(160	)		1,790		1,630
Depreciation and amortization expense		760			497		1,257
Capital expenditures		476			290		766
Total assets		164,836			85,188		250,024

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended December 31, 2011
Net sales	$	151,298		$	2,199		$	153,497
Income (loss) from operations		(13,980	)		(177	)		(14,157	)
Income (loss) from operations, before income tax		(14,337	)		(283	)		(14,620	)
Depreciation and amortization expense		771			112			883
Capital expenditures		14			4			18
Total assets		162,052			2,842			164,894

	Distribution			E-Commerce & Fulfillment Services		Consolidated
Nine months ended December 31, 2012
Net sales	$	340,476		$	33,212	$	373,688
Income (loss) from operations		21			2,729		2,750
Income (loss) from operations, before income tax		(669	)		2,231		1,562
Depreciation and amortization expense		2,248			637		2,885
Capital expenditures		1,023			530		1,553
Total assets		164,836			85,188		250,024

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Nine months ended December 31, 2011
Net sales	$	359,167		$	4,914		$	364,081
Income (loss) from operations		(15,045	)		(1,292	)		(16,337	)
Income (loss) from operations, before income tax		(16,110	)		(1,601	)		(17,711	)
Depreciation and amortization expense		2,283			499			2,782
Capital expenditures		589			4			593
Total assets		162,052			2,842			164,894

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended June 30, 2011
Net sales	$	102,701		$	1,315		$	104,016
Income (loss) from operations		(65	)		(530	)		(595	)
Income (loss) from operations, before income tax		(335	)		(628	)		(963	)
Depreciation and amortization expense		761			211			972
Capital expenditures		252			—			252

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended September 30, 2011
Net sales	$	105,168		$	1,400		$	106,568
Income (loss) from operations		(1,000	)		(585	)		(1,585	)
Income (loss) from operations, before income tax		(1,438	)		(690	)		(2,128	)
Depreciation and amortization expense		750			177			927
Capital expenditures		323			—			323

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended March 31, 2012
Net sales	$	113,881		$	2,862		$	116,743
Income (loss) from operations		(5,694	)		(272	)		(5,966	)
Income (loss) from operations, before income tax		(5,627	)		(390	)		(6,017	)
Depreciation and amortization expense		741			101			842
Capital expenditures		296			—			296

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended June 30, 2012
Net sales	$	86,774		$	4,498		$	91,272
Income (loss) from operations		(584	)		90			(494	)
Income (loss) from operations, before income tax		(756	)		(74	)		(830	)
Depreciation and amortization expense		742			71			813
Capital expenditures		17			202			219

	Distribution		E-Commerce & Fulfillment Services		Consolidated
Three months ended September 30, 2012
Net sales	$	96,846	$	7,286	$	104,132
Income (loss) from operations		106		680		786
Income (loss) from operations, before income tax		247		515		762
Depreciation and amortization expense		745		69		814
Capital expenditures		530		38		568

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	Three Months Ended December 31,				Nine Months Ended December 31,
Net Sales	2012		2011		2012		2011
United States	$	144,666	$	127,904	$	311,268	$	318,857
International		33,618		25,593		62,420		45,224
Total net sales	$	178,284	$	153,497	$	373,688	$	364,081

Schedule of Disclosure on Geographic Areas, Long-Lived Assets in Individual Foreign Countries by Country [Table Text Block]

Property, Plant and Equipment, Net	December 31, 2012		March 31,2012
United States	$	11,309	$	6,613
International		132		255
Total property, plant and equipment, net	$	11,441	$	6,868

Schedule of Net Sales By Channel [Table Text Block]

	Three Months Ended December 31,				Nine Months Ended December 31,
	2012		2011		2012		2011
Retail sales channel	$	129,943	$	125,329	$	289,665	$	307,460
E-commerce sales channel		48,341		28,168		84,023		56,621
Total net sales	$	178,284	$	153,497	$	373,688	$	364,081

Distribution [Member]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended December 31,				Nine Months Ended December 31,
	2012		2011		2012		2011
Software	$	107,638	$	104,359	$	249,838	$	258,413
Consumer electronics and accessories		47,363		32,640		83,863		59,682
Video games		1,855		10,785		6,775		21,137
Home video		-		3,514		-		19,935
Consolidated	$	156,856	$	151,298	$	340,476	$	359,167

XML

Note 13 - Share-Based Compensation (Detail) - Restricted stock activity: (USD $)	9 Months Ended
	Dec. 31, 2012
Shares	432,415
Weighted Average Grant Date Fair Value (in Dollars per share)	$ 1.74
Granted	313,853
Granted (in Dollars per share)	$ 1.74
Vested	(132,422)
Vested (in Dollars per share)	$ 1.81
Forfeited	(36,333)
Forfeited (in Dollars per share)	$ 1.72
Shares	577,513
Weighted Average Grant Date Fair Value (in Dollars per share)	$ 1.73

XML

Note 5 - Prepaid Expenses (Tables)

9 Months Ended

Dec. 31, 2012

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Table Text Block]

	December 31, 2012		March 31, 2012
Prepaid royalties	$	1,503	$	1,242
Other prepaid expenses		979		956
Current prepaid expenses		2,482		2,198
Non-current prepaid royalties		4,134		4,871
Total prepaid expenses	$	6,616	$	7,069

XML

Note 10 - Capital Leases (Detail) - Leased capital assets included in property and equipment: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Mar. 31, 2012
Computer and office equipment	$ 187	$ 381
Less: accumulated amortization	82	311
Property and equipment, net	$ 105	$ 70

XML

Note 6 - Property and Equipment (Detail) - Property and equipment: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Mar. 31, 2012
Property, plant and equipment, gross	$ 36,550	$ 29,890
Less: accumulated depreciation and amortization	25,109	23,022
Net property and equipment	11,441	6,868
Furniture and Fixtures [Member]
Property, plant and equipment, gross	1,163	1,159
Computer Equipment [Member]
Property, plant and equipment, gross	21,209	17,986
Warehouse Equipment [Member]
Property, plant and equipment, gross	11,099	8,130
Leasehold Improvements [Member]
Property, plant and equipment, gross	2,324	2,211
Construction in Progress [Member]
Property, plant and equipment, gross	$ 755	$ 404

XML

Note 2 - Acquisition (Detail) - Pro forma results of SpeedFC as if the acquisition had been completed as of the beginning of fiscal 2012: (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Net sales	$ 189,804	$ 171,455	$ 416,074	$ 404,009
Cost of sales	170,400	162,274	369,072	364,201
Gross profit	19,404	9,181	47,002	39,808
Operating expenses	14,099	23,749	39,881	55,162
Income from operations	$ 5,305	$ (14,568)	$ 7,121	$ (15,354)
Basic (in Dollars per share)	$ 0.04	$ (0.54)	$ 0.05	$ (0.49)
Diluted (in Dollars per share)	$ 0.04	$ (0.54)	$ 0.05	$ (0.49)

XML

Note 10 - Capital Leases (Detail) - Future minimum capital lease commitments: (Parentheticals) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Current capital lease obligations (in Dollars) (in Dollars) (in Dollars)	$ 45,000
Non-current capital lease obligations (in Dollars) (in Dollars) (in Dollars)	$ 68,000
Minimum [Member]
Interest Rate	6.90%
Maximum [Member]
Interest Rate	9.40%

XML

Note 16 - Business Segments (Detail) - Net sales by sales channel: (USD $) In Thousands, unless otherwise specified	3 Months Ended							9 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2012	Dec. 31, 2011
Net sales	$ 178,284	$ 104,132	$ 91,272	$ 116,743	$ 153,497	$ 106,568	$ 104,016	$ 373,688	$ 364,081
Retail [Member]
Net sales	129,943				125,329			289,665	307,460
E-Commerce [Member]
Net sales	$ 48,341				$ 28,168			$ 84,023	$ 56,621

XML

Note 15 - Income Taxes (Detail) (USD $)	3 Months Ended		9 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Mar. 31, 2012
Income Tax Expense (Benefit)	$ 1,620,000	$ 14,457,000	$ 1,635,000	$ 13,242,000
Effective Income Tax Rate, Continuing Operations	99.40%		104.70%
Effective Income Tax Rate From Continuing Operations		three		nine
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate			34.00%
Deferred Tax Assets, Net, Before Valuation Allowance	29,800,000		29,800,000		38,900,000
Deferred Tax Assets, Valuation Allowance	19,400,000		19,400,000		18,900,000
Unrecognized Tax Benefits, Interest on Income Taxes Accrued	219,000		219,000		190,000
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	819,000		819,000		518,000
Unrecognized Tax Benefits, Period Increase (Decrease)			(89,000)
Deferred State and Local Income Tax Expense (Benefit)			$ (51,000)

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Note 8 - Intangible Assets (Detail) - Debt issuance costs: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Mar. 31, 2012
Debt issuance costs	$ 2,722	$ 1,975
Less: accumulated amortization	1,444	1,327
Net debt issuance costs	$ 1,278	$ 648

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Note 4 - Inventories

9 Months Ended

Dec. 31, 2012

Inventory Disclosure [Text Block]

Note 4 — Inventories

Inventories, net of reserves, consisted of the following (in thousands):

	December 31, 2012		March 31, 2012
Finished products	$	36,858	$	27,398
Consigned inventory		1,554		1,501
Raw materials		1,804		1,646
		40,216		30,545
Less: inventory reserve		1,198		1,695
Total	$	39,018	$	28,850

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Note 16 - Business Segments (Detail)	9 Months Ended
	Dec. 31, 2012
Number of Reportable Segments	2

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Note 7 - Accrued Expenses (Detail) - Accrued expenses: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Mar. 31, 2012
Compensation and benefits	$ 2,951	$ 1,233
Severance	42	1,232
Royalties	686	917
Rebates	1,206	1,364
Interest	144	21
Other	2,343	1,809
Total	$ 7,372	$ 6,576

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Note 9 - Commitments and Contingencies (Tables)

9 Months Ended

Dec. 31, 2012

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Remainder of fiscal 2013	$	1,033
2014		3,356
2015		4,030
2016		5,594
2017		5,643
Thereafter		24,487
Total (1)	$	44,143

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Note 8 - Intangible Assets (Tables)

9 Months Ended

Dec. 31, 2012

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	As of December 31, 2012
	Gross carrying amount		Accumulated amortization		Net
Developed technology	$	6,760	$	1,262	$	5,498
Customer relationships		15,260		125		15,135
Customer list		167		153		14
Domain name		70		66		4
Trademarks (not amortized)		3,884		—		3,884
Total intangible assets	$	26,141	$	1,606	$	24,535

	As of March 31, 2012
	Gross carrying amount		Accumulated amortization		Net
Developed technology	$	1,940	$	813	$	1,127
Customer relationships		80		23		57
Customer list		167		110		57
Domain name		70		58		12
Trademarks (not amortized)		294		—		294
Total intangible assets	$	2,551	$	1,004	$	1,547

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Remainder of fiscal 2013	$	688
2014		2,903
2015		3,949
2016		4,160
2017		3,296
Thereafter		5,655
Total	$	20,651

Schedule of Other Assets [Table Text Block]

	December 31, 2012		March 31, 2012
Debt issuance costs	$	2,722	$	1,975
Less: accumulated amortization		1,444		1,327
Net debt issuance costs	$	1,278	$	648

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Note 13 - Share-Based Compensation (Detail) - Stock option activity: (USD $)	9 Months Ended
	Dec. 31, 2012
Number of Options	2,289,334
Weighted Average Exercise Price (in Dollars per share)	$ 2.12
Options exercisable, end of period	1,204,670
Options exercisable, end of period (in Dollars per share)	$ 2.27
Shares available for future grant, end of period	2,306,275
Granted	1,186,030
Granted (in Dollars per share)	$ 1.74
Exercised	(36,500)
Exercised (in Dollars per share)	$ 0.64
Forfeited or expired	(296,668)
Forfeited or expired (in Dollars per share)	$ 2.52
Number of Options	3,142,196
Weighted Average Exercise Price (in Dollars per share)	$ 1.96

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Note 8 - Intangible Assets (Detail) (USD $)	3 Months Ended		9 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Indefinite-lived Intangible Assets, Impairment Losses		$ 306,000		$ 306,000
Amortization of Intangible Assets	332,000	131,000	601,000	395,000
Amortization of Financing Costs	$ 49,000	$ 149,000	$ 118,000	$ 448,000
Minimum [Member] | Customer Relationships [Member]
Finite-Lived Intangible Asset, Useful Life			8 years
Maximum [Member] | Customer Relationships [Member]
Finite-Lived Intangible Asset, Useful Life			12 years
Developed Technology [Member]
Finite-Lived Intangible Asset, Useful Life			5 years
Customer Lists [Member]
Finite-Lived Intangible Asset, Useful Life			3 years
Internet Domain Names [Member]
Finite-Lived Intangible Asset, Useful Life			7 years

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Note 10 - Capital Leases (Tables)

9 Months Ended

Dec. 31, 2012

Schedule of Capital Leased Assets [Table Text Block]

	December 31, 2012		March 31, 2012
Computer and office equipment	$	187	$	381
Less: accumulated amortization		82		311
Property and equipment, net	$	105	$	70

Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block]

	Minimum Lease Commitments
Remainder of fiscal 2013	$	17
2014		45
2015		32
2016		30
2017		5
Total minimum lease payments		129
Less: amounts representing interest at rates ranging from 6.9% to 9.4%		16
Present value of minimum capital lease payments, reflected in the balance sheet as current and non-current capital lease obligations of $45,000 and $68,000, respectively	$	113

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Note 13 - Share-Based Compensation (Tables)

9 Months Ended

Dec. 31, 2012

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of options			Weighted average exercise price
Options outstanding, beginning of period:		2,289,334		$	2.12
Granted		1,186,030			1.74
Exercised		(36,500	)		0.64
Forfeited or expired		(296,668	)		2.52
Options outstanding, end of period		3,142,196		$	1.96
Options exercisable, end of period		1,204,670		$	2.27
Shares available for future grant, end of period		2,306,275

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

	Shares			Weighted average grant date fair value
Unvested, beginning of period:		432,415		$	1.74
Granted		313,853			1.74
Vested		(132,422	)		1.81
Forfeited		(36,333	)		1.72
Unvested, end of period		577,513		$	1.73

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Nine Months Ended December 31,
	2012				2011
Expected life (in years)		5.0	-	6.5			5.0
Expected average volatility			65.64%				68%
Risk-free interest rate		0.62	-	1.09%		0.95	-	2.24%
Expected dividend yield			0.0%				0.0%

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Note 3 - Accounts Receivable

9 Months Ended

Dec. 31, 2012

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 3 — Accounts Receivable

Accounts receivable consisted of the following (in thousands):

	December 31, 2012		March 31, 2012
Trade receivables	$	123,492	$	50,690
Vendor receivables		4,306		2,829
		127,798		53,519
Less: allowance for doubtful accounts and sales discounts		1,464		3,397
Less: allowance for sales returns, net margin impact		3,083		2,187
Total	$	123,251	$	47,935

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Note 14 - Earnings (Loss) Per Share (Tables)

9 Months Ended

Dec. 31, 2012

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended December 31,					Nine Months Ended December 31,
	2012		2011			2012			2011
Numerator:
Net income (loss)	$	10	$	(29,077	)	$	(73	)	$	(30,953	)
Denominator:
Denominator for basic income (loss) per share—weighted-average shares		44,883		36,977			39,749			36,805
Dilutive securities: Employee stock options and restricted stock		143		-			-			-
Denominator for diluted income (loss) per share—adjusted weighted-average shares		45,026		36,977			39,749			36,805
Earnings (loss) per common share:
Basic	$	-	$	(0.79	)	$	-		$	(0.84	)
Diluted	$	-	$	(0.79	)	$	-		$	(0.84	)

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Note 5 - Prepaid Expenses (Detail) - Prepaid expenses: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Mar. 31, 2012
Prepaid royalties	$ 1,503	$ 1,242
Other prepaid expenses	979	956
Current prepaid expenses	2,482	2,198
Non-current prepaid royalties	4,134	4,871
Total prepaid expenses	$ 6,616	$ 7,069

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Note 11 - Bank Financing and Debt (Detail) (USD $)						9 Months Ended
	Dec. 31, 2012	Nov. 20, 2012	Mar. 31, 2012	Dec. 29, 2011	Nov. 12, 2009	Dec. 31, 2012 Release From FUNimation Office Lease Guarantee [Member]	Mar. 31, 2012 Release From FUNimation Office Lease Guarantee [Member]	Apr. 14, 2011 Release From FUNimation Office Lease Guarantee [Member]	Dec. 29, 2011 Bank's Base Rate [Member]	Dec. 29, 2011 LIBOR [Member]
Line of Credit Facility, Maximum Borrowing Capacity				$ 50,000,000	$ 65,000,000
Line of Credit Faciilty, Additional Borrowing Capacity Under Certain Circumstances				20,000,000
Line of Credit Facility, Increase (Decrease) in Additional Borrowing Capacity Under Certain Circumstances		(20,000,000)
Debt Instrument, Basis Spread on Variable Rate									1.75%	2.75%
Line of Credit Facility, Amount Outstanding	17,400,000		0
Line of Credit Facility, Remaining Borrowing Capacity	26,400,000		30,400,000
Line of Credit Facility, Interest Rate at Period End	5.38%		4.25%
Letters of Credit Outstanding, Amount								1,500,000
Annual Decrease in Letter of Credit						300,000
Guarantor Obligations, Maximum Exposure, Undiscounted						$ 3,300,000	$ 3,500,000

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Consolidated Balance Sheets (December 31, 2012 Unaudited) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Mar. 31, 2012
Cash and cash equivalents	$ 62	$ 5,600
Accounts receivable, net	123,251	47,935
Inventories	39,018	28,850
Prepaid expenses	2,482	2,198
Deferred tax assets — current, net	1,441	1,580
Other assets — current	139	13
Total current assets	166,393	86,176
Property and equipment, net	11,441	6,868
Software development costs, net	302	944
Intangible assets, net	24,535	1,547
Goodwill	30,940
Deferred tax assets — non-current, net	9,028	18,450
Non-current prepaid royalties	4,134	4,871
Other assets	3,251	2,520
Total assets	250,024	121,376
Revolving line of credit	17,432
Accounts payable	141,423	73,421
Checks written in excess of cash balances	11,363
Accrued expenses	7,372	6,576
Other liabilities — short-term	895	66
Total current liabilities	183,720	80,063
Contingent payment obligation long-term - acquisition	2,189
Other liabilities — long-term	2,284	1,497
Total liabilities	188,193	81,560
Commitments and contingencies (Note 9)
Authorized shares — 100,000,000; issued and outstanding shares — 54,388,875 at December 31, 2012 and 37,112,343 at March 31, 2012	186,127	164,196
Accumulated deficit	(124,446)	(124,371)
Accumulated other comprehensive income (loss)	150	(9)
Total shareholders’ equity	61,831	39,816
Total liabilities and shareholders’ equity	$ 250,024	$ 121,376

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Note 8 - Intangible Assets (Detail) - Identifiable intangible assets, value: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Mar. 31, 2012
Accumulated amortization, finite-lived intangible assets	$ 1,606	$ 1,004
Net, finite-lived intangible assets	20,651
Gross carrying amount, total intangible assets	26,141	2,551
Accumulated amortization, total intangible assets	1,606	1,004
Net, total intangible assets	24,535	1,547
Trademarks [Member]
Gross carrying amount, indefinite-lived intangible assets	3,884	294
Net indefinite-lived intangible assets	3,884	294
Developed Technology [Member]
Gross carrying amount, finite-lived intangible assets	6,760	1,940
Accumulated amortization, finite-lived intangible assets	1,262	813
Net, finite-lived intangible assets	5,498	1,127
Accumulated amortization, total intangible assets	1,262	813
Customer Relationships [Member]
Gross carrying amount, finite-lived intangible assets	15,260	80
Accumulated amortization, finite-lived intangible assets	125	23
Net, finite-lived intangible assets	15,135	57
Accumulated amortization, total intangible assets	125	23
Customer Lists [Member]
Gross carrying amount, finite-lived intangible assets	167	167
Accumulated amortization, finite-lived intangible assets	153	110
Net, finite-lived intangible assets	14	57
Accumulated amortization, total intangible assets	153	110
Domain Name [Member]
Gross carrying amount, finite-lived intangible assets	70	70
Accumulated amortization, finite-lived intangible assets	66	58
Net, finite-lived intangible assets	4	12
Accumulated amortization, total intangible assets	$ 66	$ 58

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Note 1 - Organization and Basis of Presentation

9 Months Ended

Dec. 31, 2012

Business Description and Basis of Presentation [Text Block]

Note 1 — Organization and Basis of Presentation

Navarre Corporation (the “Company” or “Navarre”), a Minnesota corporation formed in 1983, is a distributor and provider of complete logistics solutions for traditional and e-commerce retail channels. The Company operates through two business segments — distribution and e-commerce and fulfillment services.

Through the distribution business, the Company distributes computer software, consumer electronics and accessories and video games. The distribution business focuses on providing a range of value-added services, including vendor-managed inventory, electronic and internet-based ordering and gift card fulfillment.

Through the e-commerce and fulfillment business, the Company provides web site development and hosting, customer care, e-commerce fulfillment and third party logistics services.

The accompanying unaudited consolidated financial statements of Navarre Corporation have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements.

All significant inter-company accounts and transactions have been eliminated in consolidation. In the opinion of the Company, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

During October 2011, the Company implemented a series of initiatives, including a reduction in workforce and simplification of business structures and processes across the Company’s operations.  In conjunction with the initiatives, the Company reviewed its portfolio of businesses to identify poor performing activities and areas where continued business investments would not meet its requirements for financial returns (collectively, “Restructuring Plan”).  This assessment resulted in the Company abandoning inventory and other investments that were determined to not meet its requirements for financial returns.  These actions are intended to increase operating efficiencies and provide additional resources to invest in product lines and service categories in order to execute the Company’s long-term growth strategy plan.  The Company’s restructuring activities were substantially complete by March 31, 2012.

On November 20, 2012, Navarre acquired all of the equity interests of SpeedFC, Inc. (a Delaware corporation), through a merger of that entity with and into a Navarre wholly-owned subsidiary, now named SpeedFC, Inc., a Minnesota corporation (“SpeedFC”)(the transaction, the “Acquisition”) pursuant to the terms of that certain Agreement and Plan of Merger dated September 27, 2012, as amended on October 29, 2012 (the “Merger Agreement”). SpeedFC is a leading provider of end-to-end e-commerce services to retailers and manufacturers and is part of the Company’s e-commerce and fulfillment segment. The Company completed the acquisition of SpeedFC on November 20, 2012. The results of SpeedFC are reflected in the e-commerce and fulfillment segment.

Please refer to Note 2 for further discussion of the Acquisition.

Because of the seasonal nature of the Company’s business, the operating results and cash flows for the three and nine month periods ended December 31, 2012 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2013. For further information, refer to the consolidated financial statements and footnotes thereto included in Navarre Corporation’s Annual Report on Form 10-K for the year ended March 31, 2012.

Basis of Consolidation

The consolidated financial statements include the accounts of Navarre Corporation and its wholly-owned subsidiaries (collectively referred to herein as the “Company”).

Fair Value of Financial Instruments

The carrying value of the Company’s financial assets and liabilities approximates fair value at December 31, 2012 and March 31, 2012.  The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash (Level 1), contingent payment obligation (Level 3) and contingent common stock obligation (Level 3).  See Note 2 for acquisition related assets fair value disclosures.

Revenue Recognition

Revenue on products shipped, including consigned products owned by the Company, is recognized when title and risk of loss transfers, delivery has occurred, the price to the buyer is determinable and collectability is reasonably assured. Under certain conditions, the Company permits its customers to return or destroy products. The Company records a reserve for sales returns, product destructions and allowances against amounts due to reduce the net recognized receivables to the amounts the Company reasonably believes will be collected. These reserves are based on the application of the Company’s historical or anticipated gross profit percent against average sales returns and product destructions, sales discounts percent against average gross sales and specific reserves for marketing programs.

The Company’s distribution customers, at times, qualify for certain price protection benefits from the Company’s vendors. The Company serves as an intermediary to settle these amounts between vendors and customers. The Company accounts for these amounts as reductions of revenue with corresponding reductions in cost of sales.

Service revenues are recognized upon delivery of the services.  The Company records amounts received from customers for out-of-pocket expenses, primarily freight and supplies, as revenue and the associated expense as a cost of sales.  All customer revenues are recorded net of discounts and allowances provided to customers.

A portion of the Company’s service revenue arrangements include multiple service elements, such as web implementation and migration, web site support, eCommerce services and additional services.  The Company has adopted the provisions of FASB ASC 605, “Revenue Recognition,” and the amendment to the Revenue Recognition – Multiple-Element Arrangements Subtopic of the FASB Accounting Standards Codification, as presented in ASU 200-13, Multiple-Deliverable Arrangements.  Under the provisions of FASB ASC 605, these deliverables are regarded as one unit of accounting and the revenue recognition pattern is determined for the combined unit.  The contracted value of the revenue and related costs for elements not quoted on a monthly basis, such as web site implementation and migration, are deferred and recognized ratably over the term of the arrangement, approximately three years, beginning when delivery has occurred. The revenues from the remaining service elements are recorded on a monthly basis as the services are provided. Costs associated with the web site implementation and migration are deferred and recognized ratably over the term of the arrangement consistent with the recognition of revenues.

Software development costs

The Company accounts for its software development costs in accordance with Accounting Standards Codification (“ASC”) 985, Costs of Computer Software to Be Sold, Leased or Marketed.  Capitalization of software development costs begins upon the establishment of technological feasibility. In the development of our products and our enhancements to existing products, technological feasibility is not established until substantially all product development is complete, including the development of a working model. The establishment of technological feasibility and the ongoing assessment of recoverability of capitalized software development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, technological feasibility, anticipated future gross revenues, estimated economic life, and changes in software and hardware technologies. Such costs are amortized using the straight-line method beginning when the product or enhancement is available for general release over the estimated economic life of the product or enhancement, generally three years. 

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Note 14 - Earnings (Loss) Per Share (Detail) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2.4	3.0	2.4	2.9

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Note 2 - Acquisition (Detail) (USD $)	1 Months Ended	3 Months Ended							9 Months Ended
	Nov. 20, 2012	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2012	Dec. 31, 2011
Business Acquisition, Cost of Acquired Entity, Cash Paid	$ 24,493,000
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in Shares)	17,100,000	17,100,000							17,100,000
Business Acquisition, Contingent Consideration, Potential Cash Payment	5,000,000
Business Acquisition, Contingent Consideration, Shares Issuable (in Shares)	6,300,000
Business Acquisition, Contingent Consideration, at Fair Value	7,400,000
Business Acquisition, Purchase Price Allocation, Goodwill Amount	30,940,000
Revenue, Net		178,284,000	104,132,000	91,272,000	116,743,000	153,497,000	106,568,000	104,016,000	373,688,000	364,081,000
Operating Income (Loss)		2,458,000	786,000	(494,000)	(5,966,000)	(14,157,000)	(1,585,000)	(595,000)	2,750,000	(16,337,000)
Business Combination, Acquisition Related Costs		1,500,000							1,900,000
Payable in Early 2013 [Member]
Business Acquisition, Contingent Consideration, Potential Cash Payment	1,250,000
Business Acquisition, Contingent Consideration, Shares Issuable (in Shares)	2,215,526
Payable in Late 2013 [Member]
Business Acquisition, Contingent Consideration, Potential Cash Payment	3,750,000
Business Acquisition, Contingent Consideration, Shares Issuable (in Shares)	4,071,842
Assumption Used In Determining Combined Fair Value of Contingent Consideration For The Business Acquisition [Member] | Minimum [Member]
Fair Value Input, Probability Adjusted Level of Operating Results	6,000,000
Assumption Used In Determining Combined Fair Value of Contingent Consideration For The Business Acquisition [Member] | Maximum [Member]
Fair Value Input, Probability Adjusted Level of Operating Results	10,000,000
Assumption Used In Determining Combined Fair Value of Contingent Consideration For The Business Acquisition [Member]
Fair Value Inputs, Discount Rate	14.00%
Fair Value Assumptions, Risk Free Interest Rate	0.15%
Fair Value Assumptions, Expected Term	40 days
Fair Value Assumptions, Expected Dividend Rate	0.00%
Fair Value Assumptions, Expected Volatility Rate	0.00%
SpeedFC Inc. [Member]
Revenue, Net		13,600,000							13,600,000
Operating Income (Loss)		$ 1,400,000							$ 1,400,000

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Note 16 - Business Segments (Detail) - Net sales by geographic region: (USD $) In Thousands, unless otherwise specified	3 Months Ended							9 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2012	Dec. 31, 2011
Net sales	$ 178,284	$ 104,132	$ 91,272	$ 116,743	$ 153,497	$ 106,568	$ 104,016	$ 373,688	$ 364,081
United States [Member]
Net sales	144,666				127,904			311,268	318,857
International [Member]
Net sales	$ 33,618				$ 25,593			$ 62,420	$ 45,224

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Note 2 - Acquisition (Tables)

9 Months Ended

Dec. 31, 2012

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Consideration:
Cash	$	24,493
Common stock		21,250
Contingent payment obligation		4,013
Contingent common stock obligation		3,411
Fair value of total consideration transferred	$	53,167
The SpeedFC purchase price was allocated as follows:
Accounts receivable	$	11,262
Prepaid expenses and other assets		623
Property and equipment		5,303
Purchased intangibles		23,590
Goodwill		30,940
Accounts payable		(6,133	)
Accrued expenses and other liabilities		(3,246	)
Deferred tax liability		(9,172	)
	$	53,167

Business Acquisition, Pro Forma Information [Table Text Block]

	Three Months Ended December 31,					Nine Months Ended December 31,
	2012		2011			2012		2011
Net sales	$	189,804	$	171,455		$	416,074	$	404,009
Cost of sales		170,400		162,274			369,072		364,201
Gross profit		19,404		9,181			47,002		39,808
Operating expenses		14,099		23,749			39,881		55,162
Income from operations	$	5,305	$	(14,568	)	$	7,121	$	(15,354	)
Earnings (loss) per common share:
Basic	$	0.04	$	(0.54	)	$	0.05	$	(0.49	)
Diluted	$	0.04	$	(0.54	)	$	0.05	$	(0.49	)

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Note 2 - Acquisition (Detail) - Purchase price consideration based on estimates of fair value of assets acquired and liabilities assumed: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Nov. 20, 2012
Consideration:
Cash		$ 24,493
Common stock		21,250
Accounts receivable		11,262
Prepaid expenses and other assets		623
Property and equipment		5,303
Purchased intangibles		23,590
Goodwill		30,940
Accounts payable		(6,133)
Accrued expenses and other liabilities		(3,246)
Deferred tax liability		(9,172)
Acquisition cost		53,167
Payment Obligation [Member]
Consideration:
Contingent obligation	1,824	4,013
Share Obligation [Member]
Consideration:
Contingent obligation	$ 3,411	$ 3,411

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Note 4 - Inventories (Tables)

9 Months Ended

Dec. 31, 2012

Schedule of Inventory, Current [Table Text Block]

	December 31, 2012		March 31, 2012
Finished products	$	36,858	$	27,398
Consigned inventory		1,554		1,501
Raw materials		1,804		1,646
		40,216		30,545
Less: inventory reserve		1,198		1,695
Total	$	39,018	$	28,850

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Note 2 - Acquisition

9 Months Ended

Dec. 31, 2012

Business Combination Disclosure [Text Block]

Note 2 — Acquisition

SpeedFC, Inc.

On November 20, 2012, the Company completed the Acquisition of SpeedFC, a leading provider of end-to-end e-commerce services. Total consideration included: $25.0 million in cash at closing, 17.1 million shares of the Company’s common stock plus performance payments (contingent consideration) up to an additional $5.0 million in cash (undiscounted) and up to 6.3 million shares of the Company’s common stock contingent upon SpeedFC’s achieving certain financial metrics for the 12 months ending December 31, 2012.  The cash paid at closing was funded by the Company's revolving line of credit.  If earned, the contingent cash payment of up to a maximum of $1.25 million is to be paid in early 2013 and up to a maximum of $3.75 million (before interest of five percent per annum) is to be paid in equal, quarterly installments beginning in late 2013 and ending on February 29, 2016. If earned, the contingent share payment of up to 2,215,526 shares are to be issued in early calendar 2013 and up to 4,071,842 shares are to be issued in late calendar 2013.  The combined fair value of the contingent consideration was estimated to be $7.4 million based upon Level 3 fair value valuation techniques (unobservable inputs that reflect the reporting entity’s own assumptions).  A financial model was applied to estimate the value of the contingent consideration that utilized the income approach and option pricing theory to compute expected values and probabilities of reaching the various thresholds in the agreement. Key assumptions included (1) a discount rate of 14%, (2) EBITDA operating results of between $6.0 and $10.0 million and (3) specific to the option pricing -interest rate of 0.15%, expected term of 0.11 years, dividend yield of 0.0% and volatility of 0%. However, we have not yet finalized the preliminary assessment of the fair value of tangible assets and intangible assets separate from goodwill.

The preliminary goodwill of $31.0 million arising from the Acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and SpeedFC. All goodwill was assigned to the Company’s e-commerce and fulfillment segment and is not deductible for tax purposes. This transaction qualified as an acquisition of a significant business pursuant to Regulation S-X and financial statements for the acquired business were filed. Operating results from the date of Acquisition are included within the e-commerce and fulfillment segment.

The purchase price was allocated based on preliminary estimates of the fair value of assets acquired and liabilities assumed as follows (in thousands):

Consideration:
Cash	$	24,493
Common stock		21,250
Contingent payment obligation		4,013
Contingent common stock obligation		3,411
Fair value of total consideration transferred	$	53,167
The SpeedFC purchase price was allocated as follows:
Accounts receivable	$	11,262
Prepaid expenses and other assets		623
Property and equipment		5,303
Purchased intangibles		23,590
Goodwill		30,940
Accounts payable		(6,133	)
Accrued expenses and other liabilities		(3,246	)
Deferred tax liability		(9,172	)
	$	53,167

Net sales of SpeedFC, included in net sales - Ecommerce and fulfillment services in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended December 31, 2012 were $13.6 million.  SpeedFC provided operating income of $1.4 million to the consolidated Company’s operating income for the three and nine months ended December 31, 2012.

Acquisition-related costs (included in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss)) for the three and nine months ended December 31, 2012 were $1.5 million and $1.9 million, respectively.

The following summary, prepared on a condensed pro forma basis presents the Company’s unaudited consolidated results from operations as if the acquisition of SpeedFC had been completed as of the beginning of fiscal 2012.  The pro forma presentation below does not include any impact of transaction costs or synergies.

	Three Months Ended December 31,					Nine Months Ended December 31,
	2012		2011			2012		2011
Net sales	$	189,804	$	171,455		$	416,074	$	404,009
Cost of sales		170,400		162,274			369,072		364,201
Gross profit		19,404		9,181			47,002		39,808
Operating expenses		14,099		23,749			39,881		55,162
Income from operations	$	5,305	$	(14,568	)	$	7,121	$	(15,354	)
Earnings (loss) per common share:
Basic	$	0.04	$	(0.54	)	$	0.05	$	(0.49	)
Diluted	$	0.04	$	(0.54	)	$	0.05	$	(0.49	)

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Consolidated Balance Sheets (December 31, 2012 Unaudited) (Parentheticals) (USD $)	Dec. 31, 2012	Mar. 31, 2012
Common stock, authorized shares (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares)	100,000,000	100,000,000
Common stock, shares issued (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares)	54,388,875	37,112,343
Common stock, shares outstanding (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares) (in Shares)	54,388,875	37,112,343
Common stock, par value (in Dollars per share) (in Dollars per share) (in Dollars per share) (in Dollars per share) (in Dollars per share) (in Dollars per share) (in Dollars per share) (in Dollars per share) (in Dollars per share) (in Dollars per share)	$ 0	$ 0

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Note 12 - Shareholders' Equity

9 Months Ended

Dec. 31, 2012

Stockholders' Equity Note Disclosure [Text Block]

Note 12 — Shareholders’ Equity

The Company’s Articles of Incorporation authorize 10,000,000 shares of preferred stock, no par value. No preferred shares are issued or outstanding.

The Company issued 17.1 million common shares in connection with the acquisition of SpeedFC (Note 2) during the three and nine months ended December 31, 2012.

The Company did not repurchase any shares during either of the nine months ended December 31, 2012 or 2011.

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Document And Entity Information	9 Months Ended
	Dec. 31, 2012	Feb. 06, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	NAVARRE CORP /MN/
Document Type	10-Q
Current Fiscal Year End Date	--03-31
Entity Common Stock, Shares Outstanding		54,388,875
Amendment Flag	false
Entity Central Index Key	0000911650
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 31, 2012
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

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Note 13 - Share-Based Compensation

9 Months Ended

Dec. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 13 — Share-Based Compensation

The Company has two equity compensation plans: the Navarre Corporation 1992 Stock Option Plan and the Navarre Corporation 2004 Stock Plan (collectively, “the Plans”). The 2004 Plan provides for equity awards, including stock options, restricted stock and restricted stock units. Eligible participants under the 2004 Plan are all employees (including officers and directors), non-employee directors, consultants and independent contractors. The 1992 Plan expired on July 1, 2006, and no further grants are allowed under this Plan, however, there are outstanding options under this plan as of December 31, 2012. These Plans are described in detail in the Company’s Annual Report filed on Form 10-K for the fiscal year ended March 31, 2012.

Stock Options

A summary of the Company’s stock option activity as of December 31, 2012 and changes during the nine months ended December 31, 2012 are summarized as follows:

	Number of options			Weighted average exercise price
Options outstanding, beginning of period:		2,289,334		$	2.12
Granted		1,186,030			1.74
Exercised		(36,500	)		0.64
Forfeited or expired		(296,668	)		2.52
Options outstanding, end of period		3,142,196		$	1.96
Options exercisable, end of period		1,204,670		$	2.27
Shares available for future grant, end of period		2,306,275

The weighted-average fair value of options granted during the nine months ended December 31, 2012 was $1.2 million and the total fair value of options exercisable was $1.7 million at December 31, 2012. The weighted-average remaining contractual term for options outstanding was 8.3 years and for options exercisable was 6.7 years at December 31, 2012.

The aggregate intrinsic value represents the total pretax intrinsic value, based on the Company’s closing stock price of $1.78 as of December 31, 2012, which theoretically could have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of stock options exercised during the nine months ended December 31, 2012 was $32,000. The aggregate intrinsic value for options outstanding was $221,000, and for options exercisable was $131,000 at December 31, 2012.

As of December 31, 2012, total compensation cost related to non-vested stock options not yet recognized was $1.7 million, which is expected to be recognized over the next 1.6 years on a weighted-average basis.

During each of the nine months ended December 31, 2012 and 2011, the Company received cash from the exercise of stock options totaling $20,000 and $184,000, respectively. There was no excess tax benefit recorded for the tax deductions related to stock options during either of the nine months ended December 31, 2012 or 2011.

Restricted Stock

Restricted stock granted to employees typically has a vesting period of three years and expense is recognized on a straight-line basis over the vesting period, or when the performance criteria have been met. The value of the restricted stock is established by the market price on the date of grant or if based on performance criteria, on the date it is determined the performance criteria will be met. Restricted stock awards vesting is based on service criteria or achievement of performance targets. All restricted stock awards are settled in shares of the Company’s common stock.

A summary of the Company’s restricted stock activity as of December 31, 2012 and of changes during the nine months ended December 31, 2012 is summarized as follows:

	Shares			Weighted average grant date fair value
Unvested, beginning of period:		432,415		$	1.74
Granted		313,853			1.74
Vested		(132,422	)		1.81
Forfeited		(36,333	)		1.72
Unvested, end of period		577,513		$	1.73

The weighted-average fair value of restricted stock awards granted during the nine months ended December 31, 2012 was $547,000.

The weighted-average remaining vesting period for restricted stock awards outstanding at December 31, 2012 was 1.6 years.

As of December 31, 2012, total compensation cost related to non-vested restricted stock awards not yet recognized was $828,000, which amount is expected to be recognized over the next 1.6 years on a weighted-average basis. There was no excess tax benefit recorded for the tax deductions related to restricted stock during either of the nine month periods ended December 31, 2012 or 2011.

Share-Based Compensation Valuation and Expense Information

The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an option award. The fair value of options granted during the nine months ended December 31, 2012 and 2011 was calculated using the following assumptions:

	Nine Months Ended December 31,
	2012				2011
Expected life (in years)		5.0	-	6.5			5.0
Expected average volatility			65.64%				68%
Risk-free interest rate		0.62	-	1.09%		0.95	-	2.24%
Expected dividend yield			0.0%				0.0%

Expected life uses historical employee exercise and option expiration data to estimate the expected life assumption for the Black-Scholes grant-date valuation. The Company believes that this historical data is currently the best estimate of the expected term of a new option. The Company uses a weighted-average expected life for all awards and has identified one employee population. Expected volatility uses the Company stock’s historical volatility for the same period of time as the expected life. The Company has no reason to believe its future volatility will differ from the past. The risk-free interest rate is based on the U.S. Treasury rate in effect at the time of the grant for the same period of time as the expected life. Expected dividend yield is zero, as the Company historically has not paid dividends. The Company used a forfeiture rate of 4.63% during the three and nine months ended December 31, 2012 and 2011.

Share-based compensation expense related to employee stock options, restricted stock and restricted stock units, net of estimated forfeitures, for the three and nine months ended December 31, 2012 was $245,000 and $705,000, respectively, and for the three and nine months ended December 31, 2011 was $509,000 and $933,000, respectively. These amounts were included in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss). No amount of share-based compensation was capitalized.

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Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Net Sales	$ 178,284	$ 153,497	$ 373,688	$ 364,081
Cost of Sales	161,283	145,969	334,664	330,558
Gross Profit	17,001	7,528	39,024	33,523
Selling and marketing	5,312	5,701	13,805	15,749
Distribution and warehousing	2,394	2,685	5,907	7,623
General and administrative	4,544	5,016	10,653	14,162
Information technology	1,533	1,516	3,661	4,047
Depreciation and amortization	1,257	883	2,885	2,782
Goodwill and intangible impairment		5,996		5,996
Total operating expenses	14,543	21,685	36,274	49,860
Income (loss) from operations	2,458	(14,157)	2,750	(16,337)
Interest income (expense), net	(325)	(292)	(586)	(873)
Other income (expense), net	(503)	(171)	(602)	(501)
Income (loss) from operations, before income tax	1,630	(14,620)	1,562	(17,711)
Income tax benefit (expense)	(1,620)	(14,457)	(1,635)	(13,242)
Net income (loss)	10	(29,077)	(73)	(30,953)
Basic (in Dollars per share)		$ (0.79)		$ (0.84)
Diluted (in Dollars per share)		$ (0.79)		$ (0.84)
Basic (in Shares)	44,883	36,977	39,749	36,805
Diluted (in Shares)	45,026	36,977	39,749	36,805
Net unrealized gain (loss) on foreign exchange rate translation, net of tax	76	145	159	(122)
Comprehensive income (loss)	86	(28,932)	86	(31,075)
Distribution [Member]
Net Sales	156,856	151,298	340,476	359,167
Cost of Sales	143,045	144,137	306,280	325,900
Gross Profit	13,811	7,161	34,196	33,267
Depreciation and amortization	760	771	2,248	2,283
Income (loss) from operations	499	(13,980)	21	(15,045)
Income (loss) from operations, before income tax	(160)	(14,337)	(669)	(16,110)
Ecommerce and Fulfillment Services [Member]
Net Sales	21,428	2,199	33,212	4,914
Cost of Sales	18,238	1,832	28,384	4,658
Gross Profit	3,190	367	4,828	256
Excludes Depreciation and Amortization for the E-Commerce and Fullfillment Services [Member]
Depreciation and amortization	$ 760	$ 771	$ 2,248	$ 2,283

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Note 7 - Accrued Expenses

9 Months Ended

Dec. 31, 2012

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

Note 7— Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	December 31, 2012		March 31, 2012
Compensation and benefits	$	2,951	$	1,233
Severance		42		1,232
Royalties		686		917
Rebates		1,206		1,364
Interest		144		21
Other		2,343		1,809
Total	$	7,372	$	6,576

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Note 6 - Property and Equipment

9 Months Ended

Dec. 31, 2012

Property, Plant and Equipment Disclosure [Text Block]

Note 6 — Property and Equipment

Property and equipment consisted of the following (in thousands):

	December 31, 2012		March 31, 2012
Furniture and fixtures	$	1,163	$	1,159
Computer and office equipment		21,209		17,986
Warehouse equipment		11,099		8,130
Leasehold improvements		2,324		2,211
Construction in progress		755		404
Total		36,550		29,890
Less: accumulated depreciation and amortization		25,109		23,022
Net property and equipment	$	11,441	$	6,868

Depreciation expense was $1.2 million and $2.8 million for the three and nine months ended December 31, 2012, respectively, and $751,000 and $2.4 million for the three and nine months ended December 31, 2011, respectively.

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Note 3 - Accounts Receivable (Tables)

9 Months Ended

Dec. 31, 2012

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	December 31, 2012		March 31, 2012
Trade receivables	$	123,492	$	50,690
Vendor receivables		4,306		2,829
		127,798		53,519
Less: allowance for doubtful accounts and sales discounts		1,464		3,397
Less: allowance for sales returns, net margin impact		3,083		2,187
Total	$	123,251	$	47,935

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Note 14 - Earnings (Loss) Per Share

9 Months Ended

Dec. 31, 2012

Earnings Per Share [Text Block]

Note 14 —Earnings (loss) Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share data):

	Three Months Ended December 31,					Nine Months Ended December 31,
	2012		2011			2012			2011
Numerator:
Net income (loss)	$	10	$	(29,077	)	$	(73	)	$	(30,953	)
Denominator:
Denominator for basic income (loss) per share—weighted-average shares		44,883		36,977			39,749			36,805
Dilutive securities: Employee stock options and restricted stock		143		-			-			-
Denominator for diluted income (loss) per share—adjusted weighted-average shares		45,026		36,977			39,749			36,805
Earnings (loss) per common share:
Basic	$	-	$	(0.79	)	$	-		$	(0.84	)
Diluted	$	-	$	(0.79	)	$	-		$	(0.84	)

Approximately 2.4 million of the Company’s stock options and restricted stock were excluded from the calculation of diluted earnings per share for the three months ended December 31, 2012 because the exercise prices of the stock options and the grant date fair value of the restricted stock were greater than the average price of the Company’s common stock and therefore their inclusion would have been anti-dilutive.  Due to the Company’s net loss for the nine months ended December 31, 2012 diluted loss per share excludes 2.4 million of stock options and restricted stock awards because their inclusion would have been anti-dilutive.  Due to the Company’s net loss for the three and nine months ended December 31, 2011 diluted loss per share excludes 3.0 million and 2.9 million, respectively, stock options and restricted stock awards because their inclusion would have been anti-dilutive.

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Note 10 - Capital Leases

9 Months Ended

Dec. 31, 2012

Capital Leases in Financial Statements of Lessee Disclosure [Text Block]

Note 10 — Capital Leases

The Company leases certain equipment under non-cancelable capital leases. At December 31, 2012 and March 31, 2012, leased capital assets included in property and equipment were as follows (in thousands):

	December 31, 2012		March 31, 2012
Computer and office equipment	$	187	$	381
Less: accumulated amortization		82		311
Property and equipment, net	$	105	$	70

Future minimum lease payments, excluding additional costs such as insurance and maintenance expense payable by the Company under these agreements, by year and in the aggregate are as follows (in thousands):

	Minimum Lease Commitments
Remainder of fiscal 2013	$	17
2014		45
2015		32
2016		30
2017		5
Total minimum lease payments		129
Less: amounts representing interest at rates ranging from 6.9% to 9.4%		16
Present value of minimum capital lease payments, reflected in the balance sheet as current and non-current capital lease obligations of $45,000 and $68,000, respectively	$	113

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Note 14 - Earnings (Loss) Per Share (Detail) - Basic and diluted earnings (loss) per share schedule: (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Numerator:
Net income (loss) (in Dollars)	$ 10	$ (29,077)	$ (73)	$ (30,953)
Denominator:
Denominator for basic income (loss) per share—weighted-average shares	44,883	36,977	39,749	36,805
Dilutive securities: Employee stock options and restricted stock	143
Denominator for diluted income (loss) per share—adjusted weighted-average shares	45,026	36,977	39,749	36,805
Earnings (loss) per common share:
Basic (in Dollars per share)		$ (0.79)		$ (0.84)
Diluted (in Dollars per share)		$ (0.79)		$ (0.84)

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Note 8 - Intangible Assets

9 Months Ended

Dec. 31, 2012

Intangible Assets Disclosure [Text Block]

Note 8 —Intangible Assets

Indefinite Lived Intangible Assets

Indefinite lived intangible assets include the Punch! trademark and the SpeedFC trademark, which are not amortized. The Company makes annual assessments, or as events or circumstances indicate that the asset might be impaired, to evaluate realizability of carrying values.

The fair value of the indefinite lived intangible assets is determined for the impairment test using the relief from royalty valuation technique, which is a variation of the income approach. The Company recorded pre-tax, non-cash impairment charges of $306,000 during the three and nine months ended December 31, 2011 which is included in goodwill and intangible impairment in the Consolidated Statements of Operations.

Definite Lived Intangible Assets

The Company evaluates its definite lived intangible amortizing assets for impairment when changes in events and circumstances indicate that the carrying value might exceed the current fair value. The Company determines fair value utilizing current market values and future market trends. There were no impairment charges recorded during the three and nine month periods ended December 31, 2012 and 2011.

Intangible assets

Other identifiable intangible assets, with zero residual value, are being amortized (except for the trademarks which have an indefinite life) over useful lives of five years for developed technology, eight to twelve years for customer relationships, three years for  customer list and seven years for the domain name and were valued as follows (in thousands):

	As of December 31, 2012
	Gross carrying amount		Accumulated amortization		Net
Developed technology	$	6,760	$	1,262	$	5,498
Customer relationships		15,260		125		15,135
Customer list		167		153		14
Domain name		70		66		4
Trademarks (not amortized)		3,884		—		3,884
Total intangible assets	$	26,141	$	1,606	$	24,535

	As of March 31, 2012
	Gross carrying amount		Accumulated amortization		Net
Developed technology	$	1,940	$	813	$	1,127
Customer relationships		80		23		57
Customer list		167		110		57
Domain name		70		58		12
Trademarks (not amortized)		294		—		294
Total intangible assets	$	2,551	$	1,004	$	1,547

Aggregate amortization expense for the three and nine months ended December 31, 2012 was $332,000 and $601,000, respectively. Aggregate amortization expense for the three and nine months ended December 31, 2011 was $131,000 and $395,000, respectively.

The following is a schedule of estimated future amortization expense (in thousands):

Remainder of fiscal 2013	$	688
2014		2,903
2015		3,949
2016		4,160
2017		3,296
Thereafter		5,655
Total	$	20,651

Debt issuance costs

Debt issuance costs are included in “Other Assets” and are amortized over the life of the related debt. Debt issuance costs consisted of the following (in thousands):

	December 31, 2012		March 31, 2012
Debt issuance costs	$	2,722	$	1,975
Less: accumulated amortization		1,444		1,327
Net debt issuance costs	$	1,278	$	648

Amortization expense for debt issuance costs is included in interest expense in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). Amortization expense was $49,000 and $118,000 for the three and nine months ended December 31, 2012.  Amortization expense was $149,000 and $448,000 for the three and nine months ended December 31, 2011.

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Note 9 - Commitments and Contingencies

9 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Text Block]

Note 9 — Commitments and Contingencies

Leases

The Company leases its facilities and a portion of its office and warehouse equipment. The terms of the lease agreements generally range from month-to-month up to 15 years, with certain leases containing options to extend the leases up to an additional 10 years. The Company does not believe that exercise of the renewal options are reasonably assured at the inception of the lease agreements and, therefore, considers the initial base term to be the lease term.  The leases require payment of real estate taxes and operating costs in addition to base rent. Total straight line base rent expense was approximately $860,000 and $2.1 million for the three and nine months ended December 31, 2012, respectively and $613,000 and $1.8 million for the three and nine months ended December 31, 2011, respectively.  Lease terms vary, but generally provide for fixed and escalating payments which range from an additional $0.06 per square foot to a 3% annual increase over the life of the lease.

The following is a schedule of future minimum rental payments required under non-cancelable operating leases as of December 31, 2012 (in thousands):

Remainder of fiscal 2013	$	1,033
2014		3,356
2015		4,030
2016		5,594
2017		5,643
Thereafter		24,487
Total (1)	$	44,143

(1) Minimum rental payments have not been reduced by minimum sublease rentals of $135,000 due to the Company under noncancelable subleases.

Litigation and Proceedings

In the normal course of business, the Company is involved in a number of litigation/arbitration and administrative/regulatory matters that are incidental to the operation of the Company’s business. These proceedings generally include, among other things, various matters with regard to products distributed by the Company and the collection of accounts receivable owed to the Company.

On October 16, 2012, a purported class action lawsuit on behalf of Navarre shareholders relating to the transactions contemplated by the SpeedFC Merger Agreement was filed in the United States District Court for the District of Minnesota against the Company, the Board of Directors, the Company’s acquisition subsidiary and SpeedFC, Inc. entitled Helene Gottlieb v. Richard S. Willis, et al. The lawsuit generally alleged that the Board breached its fiduciary duties and violated disclosure requirements by, among other things, attempting to acquire SpeedFC by means of a proxy statement that fails to disclose material information concerning the proposed acquisition. The alleged misrepresentations and/or omissions of material facts in the proxy statement include a failure to include certain financial forecasts, financial information regarding the proposed transaction and related financing and information concerning the financial analysis performed by the Company’s financial advisor. The lawsuit further alleged that certain defendants aided and abetted these breaches. The lawsuit sought unspecified damages and equitable relief.

The plaintiff filed a motion for expedited discovery and a preliminary injunction on October 24, 2012 and a hearing occurred on November 1, 2012. On November 7, 2012, the court denied the plaintiff’s motion for a preliminary injuction.

On October 29, 2012, a second purported class action entitled Davin Pokoik v. Richard S Willis, et al. was filed in the United States District Court for the District of Minnesota against the Company, the Board of Directors, the Company’s acquisition subsidiary and SpeedFC, Inc. This suit asserts substantially similar claims and requests substantially similar relief as the Gottlieb matter.  By Court Order dated November 13, 2012, the Gottlieb and Pokoik matters were consolidated and plaintiffs were required to file an amended Complaint by December 20, 2012.  An Amended Complaint was filed alleging similar claims and Plaintiff Gottlieb submitted a notice of voluntary dismissal removing only herself from the consolidated action. The Company has moved to dismiss the Pokoik matter.  The Company believes that the allegations in this suit are without merit and intends to vigorously defend this matter.

The Company does not currently believe that the resolution of any pending matters will have a material adverse effect on the Company’s financial position or liquidity, but an adverse decision in more than one could be material to the Company’s consolidated results of operations.  No amounts were accrued with respect to proceedings as of December 31, 2012 and March 31, 2012, respectively as not probable or estimable.

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Note 11 - Bank Financing and Debt

9 Months Ended

Dec. 31, 2012

Debt Disclosure [Text Block]

Note11 — Bank Financing and Debt

On November 12, 2009, the Company entered into a three year, $65.0 million revolving credit facility (the “Credit Facility”) with Wells Fargo Foothill, LLC as agent and lender, and a participating lender. On December 29, 2011, the Credit Facility was amended to eliminate the participating lender, reduce the revolving credit facility limit to $50.0 million, provide for an additional $20.0 million under the Credit Facility under certain circumstances and extend the maturity date to December 29, 2016.   On November 20, 2012, 2012 the Credit Facility was amended to provide for the acquisition of SpeedFC, eliminate the additional $20.0 million available under the Credit Facility and extend the maturity date to November 20, 2017.

The Credit Facility is secured by a first priority security interest in all of the Company’s assets, as well as the capital stock of its subsidiary companies. Additionally, the Credit Facility, as amended, calls for monthly interest payments at the bank’s base rate (as defined in the Credit Facility) plus 1.75%, or LIBOR plus 2.75%, at the Company’s discretion.

At December 31, 2012 and March 31, 2012 the Company had $17.4 million and zero, respectively, outstanding on the Credit Facility. Amounts available under the Credit Facility are subject to a borrowing base formula.  Changes in the assets within the borrowing base formula can impact the amount of availability.  Based on the Credit Facility’s borrowing base and other requirements at such dates, the Company had excess availability of $26.4 million and $30.4 million at December 31, 2012 and March 31, 2012, respectively.

In association with, and per the terms of the Credit Facility, the Company also pays and has paid certain facility and agent fees. Weighted-average interest on the Credit Facility was 5.38% and 4.25% at December 31, 2012 and March 31, 2012, respectively. Such interest amounts have been, and continue to be, payable monthly.

Under the Credit Facility, the Company is required to meet certain financial and non-financial covenants. The financial covenants include a variety of financial metrics that are used to determine the Company’s overall financial stability as well as limitations on capital expenditures, a minimum ratio of EBITDA to fixed charges and a minimum borrowing base availability requirement. At December 31, 2012, the Company was in compliance with all covenants under the Credit Facility. The Company currently believes it will be in compliance with all covenants in the Credit Facility during the next twelve months.

Letter of Credit

On April 14, 2011, the Company was released from the FUNimation office lease guarantee by providing a five-year, standby letter of credit for $1.5 million, which is reduced by $300,000 each subsequent year. The standby letter of credit can be drawn down, to the extent in default, if the full and prompt payment of the lease is not completed by FUNimation. No claims have been made against this financial instrument. There was no indication that FUNimation would not be able to pay the required future lease payments totaling $3.3 million and $3.5 million at December 31, 2012 and March 31, 2012, respectively. Therefore, at December 31, 2012 and March 31, 2012, the Company did not believe a future draw on the standby letter of credit was probable and an accrual related to any future obligation was not considered necessary at such times.

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Note 16 - Business Segments (Detail) - Net sales by product line for the distribution segment: (USD $) In Thousands, unless otherwise specified	3 Months Ended							9 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2012	Dec. 31, 2011
Net Sales	$ 178,284	$ 104,132	$ 91,272	$ 116,743	$ 153,497	$ 106,568	$ 104,016	$ 373,688	$ 364,081
Distribution [Member] | Software Sales [Member]
Net Sales	107,638				104,359			249,838	258,413
Distribution [Member] | Consumer Electronics and Accessories [Member]
Net Sales	47,363				32,640			83,863	59,682
Distribution [Member] | Video Games [Member]
Net Sales	1,855				10,785			6,775	21,137
Distribution [Member] | Home Video [Member]
Net Sales					3,514				19,935
Distribution [Member] | Consolidated [Member]
Net Sales	156,856				151,298			340,476	359,167
Distribution [Member]
Net Sales	$ 156,856	$ 96,846	$ 86,774	$ 113,881	$ 151,298	$ 105,168	$ 102,701	$ 340,476	$ 359,167

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Note 16 - Business Segments (Detail) - Long lived assets by geographic area: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Mar. 31, 2012
Property, plant and equipment, net	$ 11,441	$ 6,868
United States [Member]
Property, plant and equipment, net	11,309	6,613
International [Member]
Property, plant and equipment, net	$ 132	$ 255

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Note 16 - Business Segments (Detail) - Financial information by reportable segment: (USD $) In Thousands, unless otherwise specified	3 Months Ended							9 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2012	Dec. 31, 2011
Net sales	$ 178,284	$ 104,132	$ 91,272	$ 116,743	$ 153,497	$ 106,568	$ 104,016	$ 373,688	$ 364,081
Income (loss) from operations	2,458	786	(494)	(5,966)	(14,157)	(1,585)	(595)	2,750	(16,337)
Income (loss) from operations, before income tax	1,630	762	(830)	(6,017)	(14,620)	(2,128)	(963)	1,562	(17,711)
Depreciation and amortization expense	1,257	814	813	842	883	927	972	2,885	2,782
Capital expenditures	766	568	219	296	18	323	252	1,553	593
Total assets	250,024			121,376	164,894			250,024	164,894
Distribution [Member]
Net sales	156,856	96,846	86,774	113,881	151,298	105,168	102,701	340,476	359,167
Income (loss) from operations	499	106	(584)	(5,694)	(13,980)	(1,000)	(65)	21	(15,045)
Income (loss) from operations, before income tax	(160)	247	(756)	(5,627)	(14,337)	(1,438)	(335)	(669)	(16,110)
Depreciation and amortization expense	760	745	742	741	771	750	761	2,248	2,283
Capital expenditures	476	530	17	296	14	323	252	1,023	589
Total assets	164,836				162,052			164,836	162,052
E-Commerce & Fulfillment Services [Member]
Net sales	21,428	7,286	4,498	2,862	2,199	1,400	1,315	33,212	4,914
Income (loss) from operations	1,959	680	90	(272)	(177)	(585)	(530)	2,729	(1,292)
Income (loss) from operations, before income tax	1,790	515	(74)	(390)	(283)	(690)	(628)	2,231	(1,601)
Depreciation and amortization expense	497	69	71	101	112	177	211	637	499
Capital expenditures	290	38	202		4			530	4
Total assets	$ 85,188				$ 2,842			$ 85,188	$ 2,842

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Note 1 - Organization and Basis of Presentation (Detail)	9 Months Ended
	Dec. 31, 2012
Number of Operating Segments	2
Revenue and Related Costs for Elements Not Quoted on a Monthly Basis [Member]
Recognition Period of Deferred Revenue	3 years
Software Development Costs [Member]
Finite-Lived Intangible Asset, Useful Life	3 years

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Note 10 - Capital Leases (Detail) - Future minimum capital lease commitments: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Remainder of fiscal 2013	$ 17
2014	45
2015	32
2016	30
2017	5
Total minimum lease payments	129
Less: amounts representing interest at rates ranging from 6.9% to 9.4%	16
Present value of minimum capital lease payments, reflected in the balance sheet as current and non-current capital lease obligations of $45,000 and $68,000, respectively	$ 113

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Note 16 - Business Segments

9 Months Ended

Dec. 31, 2012

Segment Reporting Disclosure [Text Block]

Note 16 — Business Segments

The Company identifies its segments based on its organizational structure, which is primarily by business activity. Operating profit represents earnings before interest expense, interest income and income taxes to the respective divisions.

Beginning in the quarter ended December 31, 2012, the Company changed its reporting segments in connection with the acquisition of SpeedFC. The Company previously reported segment information under two reporting segments including distribution and publishing.  Effective the quarter ended December 31, 2012, the Company’s segments are defined as follows:

Through the distribution business, the Company distributes computer software, consumer electronics and accessories and video games.

Through the e-commerce and fulfillment services business, the Company provides logistics, information technology and fulfillment services to customers.

       The distribution segment results as reported prior to the quarter ended December 31, 2012 included operating results of fee-based logistical services which is now included in the e-commerce & fulfillment services segment.   In addition, the results of the previously reported publishing segment are included in the distribution segment beginning the quarter ended December 31, 2012.

Financial information below has been recast to conform with the presentation change effective the quarter ended December 31, 2012 as discussed above.  Financial information by reportable segment is included in the following summary for the three and nine months ended  December 31, 2012 and 2011 (in thousands):

	Distribution			E-Commerce & Fulfillment Services		Consolidated
Three months ended December 31, 2012
Net sales	$	156,856		$	21,428	$	178,284
Income (loss) from operations		499			1,959		2,458
Income (loss) from operations, before income tax		(160	)		1,790		1,630
Depreciation and amortization expense		760			497		1,257
Capital expenditures		476			290		766
Total assets		164,836			85,188		250,024

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended December 31, 2011
Net sales	$	151,298		$	2,199		$	153,497
Income (loss) from operations		(13,980	)		(177	)		(14,157	)
Income (loss) from operations, before income tax		(14,337	)		(283	)		(14,620	)
Depreciation and amortization expense		771			112			883
Capital expenditures		14			4			18
Total assets		162,052			2,842			164,894

	Distribution			E-Commerce & Fulfillment Services		Consolidated
Nine months ended December 31, 2012
Net sales	$	340,476		$	33,212	$	373,688
Income (loss) from operations		21			2,729		2,750
Income (loss) from operations, before income tax		(669	)		2,231		1,562
Depreciation and amortization expense		2,248			637		2,885
Capital expenditures		1,023			530		1,553
Total assets		164,836			85,188		250,024

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Nine months ended December 31, 2011
Net sales	$	359,167		$	4,914		$	364,081
Income (loss) from operations		(15,045	)		(1,292	)		(16,337	)
Income (loss) from operations, before income tax		(16,110	)		(1,601	)		(17,711	)
Depreciation and amortization expense		2,283			499			2,782
Capital expenditures		589			4			593
Total assets		162,052			2,842			164,894

Segment results for the quarters ended June 30, 2011, September 30, 2011, March 31, 2012, June 30, 2012 and September 30, 2012 are re-stated below based on the Company’s reportable segments are as follows (in thousands):

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended June 30, 2011
Net sales	$	102,701		$	1,315		$	104,016
Income (loss) from operations		(65	)		(530	)		(595	)
Income (loss) from operations, before income tax		(335	)		(628	)		(963	)
Depreciation and amortization expense		761			211			972
Capital expenditures		252			—			252

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended September 30, 2011
Net sales	$	105,168		$	1,400		$	106,568
Income (loss) from operations		(1,000	)		(585	)		(1,585	)
Income (loss) from operations, before income tax		(1,438	)		(690	)		(2,128	)
Depreciation and amortization expense		750			177			927
Capital expenditures		323			—			323

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended March 31, 2012
Net sales	$	113,881		$	2,862		$	116,743
Income (loss) from operations		(5,694	)		(272	)		(5,966	)
Income (loss) from operations, before income tax		(5,627	)		(390	)		(6,017	)
Depreciation and amortization expense		741			101			842
Capital expenditures		296			—			296

	Distribution			E-Commerce & Fulfillment Services			Consolidated
Three months ended June 30, 2012
Net sales	$	86,774		$	4,498		$	91,272
Income (loss) from operations		(584	)		90			(494	)
Income (loss) from operations, before income tax		(756	)		(74	)		(830	)
Depreciation and amortization expense		742			71			813
Capital expenditures		17			202			219

	Distribution		E-Commerce & Fulfillment Services		Consolidated
Three months ended September 30, 2012
Net sales	$	96,846	$	7,286	$	104,132
Income (loss) from operations		106		680		786
Income (loss) from operations, before income tax		247		515		762
Depreciation and amortization expense		745		69		814
Capital expenditures		530		38		568

Product Line Data

 The following table provides net sales by product line for the distribution segment for the three and nine months ended December 31, 2012 and 2011 (in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
	2012		2011		2012		2011
Software	$	107,638	$	104,359	$	249,838	$	258,413
Consumer electronics and accessories		47,363		32,640		83,863		59,682
Video games		1,855		10,785		6,775		21,137
Home video		-		3,514		-		19,935
Consolidated	$	156,856	$	151,298	$	340,476	$	359,167

Geographic Data

The following table provides net sales by geographic region for the three and nine months ended December 31, 2012 and 2011 and property, plant and equipment, net of accumulated depreciation by geographic region at December 31, 2012 and March 31, 2012 (in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
Net Sales	2012		2011		2012		2011
United States	$	144,666	$	127,904	$	311,268	$	318,857
International		33,618		25,593		62,420		45,224
Total net sales	$	178,284	$	153,497	$	373,688	$	364,081

Property, Plant and Equipment, Net	December 31, 2012		March 31,2012
United States	$	11,309	$	6,613
International		132		255
Total property, plant and equipment, net	$	11,441	$	6,868

Sales Channel Data

The following table provides net sales by sales channel for the three and nine months ended December 31, 2012 and 2011 (in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
	2012		2011		2012		2011
Retail sales channel	$	129,943	$	125,329	$	289,665	$	307,460
E-commerce sales channel		48,341		28,168		84,023		56,621
Total net sales	$	178,284	$	153,497	$	373,688	$	364,081

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Note 6 - Property and Equipment (Tables)

9 Months Ended

Dec. 31, 2012

Property, Plant and Equipment [Table Text Block]

	December 31, 2012		March 31, 2012
Furniture and fixtures	$	1,163	$	1,159
Computer and office equipment		21,209		17,986
Warehouse equipment		11,099		8,130
Leasehold improvements		2,324		2,211
Construction in progress		755		404
Total		36,550		29,890
Less: accumulated depreciation and amortization		25,109		23,022
Net property and equipment	$	11,441	$	6,868

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Note 9 - Commitments and Contingencies (Detail) - Future minimum rental payments under non-cancelable operating leases: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Remainder of fiscal 2013	$ 1,033
2014	3,356
2015	4,030
2016	5,594
2017	5,643
Thereafter	24,487
Total (1)	$ 44,143	[1]

[1] Minimum rental payments have not been reduced by minimum sublease rentals of $135,000 due to the Company under noncancelable subleases.

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Note 6 - Property and Equipment (Detail) (USD $)	3 Months Ended		9 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Depreciation	$ 1,200,000	$ 751,000	$ 2,800,000	$ 2,400,000

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Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Operating activities:
Net loss	$ (73,000)	$ (30,953,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Contingent payment obligation — unearned		(526,000)
Depreciation and amortization	2,885,000	2,782,000
Amortization of debt acquisition costs	118,000	448,000
Amortization of software development costs	744,000	1,876,000
Share-based compensation expense	705,000	933,000
Goodwill and intangible impairment		5,996,000
Deferred income taxes	412,000	13,420,000
Other	995,000	35,000
Accounts receivable	(63,936,000)	(34,435,000)
Inventories	(10,147,000)	(8,006,000)
Prepaid expenses	795,000	5,924,000
Income taxes receivable	(52,000)	(20,000)
Other assets	(135,000)	151,000
Accounts payable	61,886,000	33,764,000
Income taxes payable	(58,000)	(37,000)
Accrued expenses and other liabilities	(896,000)	(661,000)
Net cash used in operating activities	(6,757,000)	(9,309,000)
Investing activities:
Proceeds from sale of discontinued operations		22,537,000
Cash paid for acquisition	(24,493,000)
Repayment of note payable — acquisition		(1,009,000)
Purchases of property and equipment, net	(1,558,000)	(593,000)
Investment in software development	(102,000)	(905,000)
Net cash provided by (used in) investing activities	(26,153,000)	20,030,000
Financing activities:
Proceeds from revolving line of credit	133,114,000	34,902,000
Payments on revolving line of credit	(115,682,000)	(34,902,000)
Checks written in excess of cash balances	10,782,000	(8,790,000)
Debt acquisition costs	(747,000)	(165,000)
Other	(95,000)	116,000
Net cash provided by (used in) financing activities	27,372,000	(8,839,000)
Net increase (decrease) in cash	(5,538,000)	1,882,000
Cash and cash equivalents at beginning of period	5,600,000
Cash and cash equivalents at end of period	$ 62,000	$ 1,882,000

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Note 5 - Prepaid Expenses

9 Months Ended

Dec. 31, 2012

Prepaid Expenses Disclosure [Text Block]

Note 5— Prepaid Expenses

Prepaid expenses consisted of the following (in thousands):

	December 31, 2012		March 31, 2012
Prepaid royalties	$	1,503	$	1,242
Other prepaid expenses		979		956
Current prepaid expenses		2,482		2,198
Non-current prepaid royalties		4,134		4,871
Total prepaid expenses	$	6,616	$	7,069

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Note 13 - Share-Based Compensation (Detail) - Stock option valuation assumptions:	9 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Expected life (in years)		5 years
Expected average volatility	65.64%	68.00%
Expected dividend yield	0.00%	0.00%
Minimum [Member]
Expected life (in years)	5 years
Risk-free interest rate	0.62%	0.95%
Maximum [Member]
Expected life (in years)	6 years 6 months
Risk-free interest rate	1.09%	2.24%

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Note 7 - Accrued Expenses (Tables)

9 Months Ended

Dec. 31, 2012

Schedule of Accrued Liabilities [Table Text Block]

	December 31, 2012		March 31, 2012
Compensation and benefits	$	2,951	$	1,233
Severance		42		1,232
Royalties		686		917
Rebates		1,206		1,364
Interest		144		21
Other		2,343		1,809
Total	$	7,372	$	6,576

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Note 3 - Accounts Receivable (Detail) - Accounts receivable: (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Mar. 31, 2012
Accounts Receivable	$ 127,798	$ 53,519
Less: allowance for doubtful accounts and sales discounts	1,464	3,397
Less: allowance for sales returns, net margin impact	3,083	2,187
Total	123,251	47,935
Trade Accounts Receivable [Member]
Accounts Receivable	123,492	50,690
Vendor Receivables [Member]
Accounts Receivable	$ 4,306	$ 2,829

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Note 15 - Income Taxes

9 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

Note 15 — Income Taxes

For the three months ended December 31, 2012, the Company recorded income tax expense of $1.6 million, compared to income tax expense of $14.5 million for the three months ended December 31, 2011. The effective income tax rate for the three months ended December 31, 2012 was 99.4%, compared to negative 98.9% for the three months ended December 31, 2011.  For the nine months ended December 31, 2012, the Company recorded income tax expense of $1.6 million, compared to income tax expense of $13.2 million for the nine months ended December 31, 2011. The effective income tax rate for the nine months ended December 31, 2012 was 104.7%, compared to negative 74.8% for the nine months ended December 31, 2011.  The Company did not record a provision for or benefit from income taxes for our Canadian subsidiary because we have available net operating losses to offset future taxable income.  For the nine months ended December 31, 2012, the effective tax rate differs from the federal tax rate of 34% primarily due to state taxes, unrecognized income tax benefits and costs related to the acquisition of SpeedFC.

Deferred tax assets are evaluated by considering historical levels of income, estimates of future taxable income streams and the impact of tax planning strategies. A valuation allowance is recorded to reduce deferred tax assets when it is determined that it is more likely than not, based on the weight of available evidence, the Company would not be able to realize all or part of its deferred tax assets. An assessment is required of all available evidence, both positive and negative, to determine the amount of any required valuation allowance.

As a result of the current market conditions and their impact on the Company’s future outlook, management has reviewed its deferred tax assets and concluded that the uncertainties related to the realization of some of its assets, have become unfavorable. As of both December 31, 2012 and March 31, 2012, the Company had a net deferred tax asset position before valuation allowance of $29.8 million and $38.9 million, respectively, which is composed of temporary differences, primarily related to net operating loss carryforwards, which will begin to expire in fiscal 2029. The Company also has foreign tax credit carryforwards which will begin to expire in 2016.  The Company has considered the positive and negative evidence for the potential utilization of the net deferred tax asset and has concluded that it is more likely than not that the Company will not realize the full amount of net deferred tax assets. Accordingly, a valuation allowance of $19.4 million and $18.9 million has been recorded as of December 31, 2012 and March 31, 2012, respectively, including a full valuation allowance against our Canada net operating loss.

The Company recognizes interest accrued related to unrecognized income tax benefits (“UTB’s”) in the provision for income taxes. At March 31, 2012, interest accrued was approximately $190,000, which was net of federal and state tax benefits and total UTB’s net of deferred federal and state tax benefits that would impact the effective tax rate if recognized were $518,000. During the nine months ended December 31, 2012, $89,000 of UTB’s were reversed due to statute lapses, which was net of $51,000 of deferred federal and state income tax benefits. At December 31, 2012, interest accrued was $219,000 and total UTB’s, net of deferred federal and state income tax benefits that would impact the effective tax rate if recognized, were $819,000.

The Company’s federal income tax returns for tax years ending in 2010 through 2012 remain subject to examination by tax authorities. The Company files in numerous state jurisdictions with varying statutes of limitations. The Company does not anticipate that the total unrecognized tax benefits will significantly change prior to March 31, 2013.