In recent years, footwear manufacturers have increasingly offered more casual shoes in response to growing consumer demand. It is believed that the market for casual footwear is expanding and that several factors are driving this trend, including a desire for more comfortable and functional shoes, the incorporation of athletic features into casual shoes, and a general fashion trend towards more casual attire.

It is believed that continuing consolidation among retailers, as well as consumers\' demand for unique products at attractive prices, has resulted in an increasingly competitive environment for footwear retailers. Retailers continually strive to more efficiently stock limited floor space, improve their sales volumes and profit margins and reduce risk of over or under-stocked inventory. As a result, most footwear retailers seek unique and differentiated footwear products at attractive retail price points to increase consumer traffic and improve sales per square foot in their stores. Additionally, retailers seek footwear models that offer strong profit margins and have broad demographic appeal.

It is also believed that retailers have recently strategically reduced the number of footwear vendors with whom they work and have attempted to enhance their relationships with their remaining vendors. Specifically, retailers are looking to establish more efficient, just-in-time supplier relationships, allowing for more effective inventory management, increased inventory turns and reduced inventory risk.

The Company has combined the unique properties of its proprietary closed-cell resin with designs that are intended to be functional across a broad range of activities. Recently, the Company has further broadened its footwear line into new product categories, such as the Athens, a flip-flop with a soft footbed; the Nile, an open toe model designed for women; and the Islander, a deck shoe integrating a base made from the Company’s proprietary closed-cell resin with a stitched leather upper.

The Company currently sells its shoes in an assortment of colors, styles and sizes to provide consumers and retailers a wide variety of options at suggested retail prices ranging from $29.99 to $59.99. The Company has designed its shoes to offer a number of beneficial structural features to provide maximum comfort and functionality, such as Italian-designed orthotic heels, built-in arch supports and tarsal bars. The Company also offers models that are based on either general shoe sizing ranging from XS through XXL, or specific shoe sizing ranging from children\'s 8-9 through men\'s 13. The Company currently produces and markets seven footwear models.

The Company has introduced several accessory items that complement the fun styling, colors and image of its footwear. The Company has developed a line of sunglasses that it intends to market to larger retail customers. The Company also intends to develop additional accessories for certain targeted markets.

The Company has also introduced a line of branded logo apparel which is complementary to its footwear line and embodies the functional and fun aspects of the Company’s brand. These products include t-shirts, sweatshirts, hats, beanies and socks, all of which come in various colors.

The Company’s wholly owned subsidiary manufactures spa pillows for the home spa market, as well as seats and pads for use in kayaks and canoes. The Company’s proprietary closed-cell resin is also highly functional for other water sports products such as scuba diving fins and recreational flotation devices, and the Company currently produces these items for several original equipment manufacturers. These products employ the Company’s proprietary closed-cell resin.

Gross profit increased $6.5 million, to $6.8 million, in the three months ended March 31, 2005, from $279.0 thousand in the three months ended March 31, 2004.

Selling, general and administrative expense increased $2.8 million, to $4.1 million in the three months ended March 31, 2005, from $1.3 million in the three months ended March 31, 2004.

Interest expense was $37.0 thousand in the three months ended March 31, 2005, compared to $1.0 thousand in the three months ended March 31, 2004.

Other expense was $17.0 thousand in the three months ended March 31, 2005, compared to no recorded expense in the three months ended March 31, 2004.