Internet use and online commerce continue to grow worldwide. According to Forrester Research, Inc., an independent market research firm, online purchases by U.S. consumers are expected to grow from approximately $145 billion in 2004 to approximately $316 billion by 2010. It is believed several factors will contribute to this anticipated growth, including the growing awareness of the convenience of online shopping, increased product selection and availability, improvements in security and electronic payment technology, and increasing access to broadband Internet connections. According to Nielsen//NetRatings, broadband use at home has surpassed that of dial-up in the U.S., reaching 55% of residential Internet users in December 2004. In a January 2004 report, Jupiter Research, another independent market research firm, estimated that the percent of the U.S. population purchasing products online would increase from 34% in 2003 to approximately 50% in 2008, or to more than 150 million total individuals, and that the average annual online spending per buyer would grow from $540 in 2003 to $728 by 2007.

The markets for technology and consumer electronics goods are expanding rapidly due to the introduction of new products and technologies as well as the growth of multimedia content, including music, photos, movies and home video, in digital formats. Consumers are increasing their purchases of a variety of digital consumer electronics products, including portable digital music players, digital still cameras and digital video camcorders. The Consumer Electronics Association, or CEA, a trade association supporting the consumer technology industry, forecasts sales of MP3 players will increase from $1.2 billion in 2004 to $1.7 billion in 2005 and sales of digital cameras will increase from $4.5 billion in 2004 to $5.0 billion in 2005. With the proliferation of digital content, consumers are also increasingly focused on sharing their multimedia content between devices, resulting in increases in purchases of products such as PCs with media functionality, notebook computers, digital televisions, personal video recorders and home networking devices. The CEA forecasts that consumer electronics sales will reach $158 billion in 2008. The CEA defines consumer electronics to include consumer video products, home audio products and computers, peripherals, and computer software as well as video game hardware and software, portable audio products, mobile phones, home office products, and blank media and accessories.

The Company’s computer hardware and peripherals product category contains subcategories for desktops, notebooks, digital memory, storage, monitors and displays, printers and scanners, and accessories. The Company’s consumer electronics category contains subcategories for home audio, personal electronics, car audio and video, home electronics, and electronics accessories. The Company’s digital cameras category contains digital cameras and camcorders, camera memory and other accessories.

The Company’s home networking category contains subcategories for wireless networking, broadband networking, wired networking, Internet calling, as well as other types of networking. The Company’s software category contains subcategories for business software, education, gaming, home and hobbies, kid’s center, Macintosh and multimedia.

The Company’s cellular equipment and service category contains subcategories for accessories, no contract cell phones, cell phones and cell phone service plans. The Company’s entertainment category contains subcategories for DVDs, books, music CDs and game hardware and software.

The Company’s digital music download service, which was launched in July 2003, currently offers more than 500,000 songs from five major record labels as well as many independent labels.

The Company’s leisure category contains subcategories for toys, sporting goods and bags. The Company’s clearance category contains used and refurbished products. A majority of the products sold in this category are technology and consumer electronics products.

Gross profit increased to $29.8 million for the year ended December 31, 2004 from $28.9 million for the year ended December 31, 2003.

Fulfillment and customer support expenses remained relatively unchanged at $11.1 million for both of the years ended December 31, 2004 and 2003.

Marketing, merchandising and sales expenses decreased to $15.4 million for the year ended December 31, 2004 from $22.7 million for the year ended December 31, 2003.

Technology and web development expenses were approximately $6.5 million for both of the years ended December 31, 2004 and 2003.