According to the U.S. Department of Commerce, in 2003, U.S. online retail sales (exclusive of sales of automobiles, travel and prescription drugs, and auctions) amounted to an estimated $55 billion, roughly ten times the $5.5 billion in such sales in 1998. This represents a compound annual growth rate of 59%. U.S. online retail sales currently constitute a small percentage (approximately 2% to 3% in 2003) of total U.S. retail sales, reflecting the reality that many people still prefer to shop in stores to see and touch items such as clothing and fashion goods before they buy them and to have confidence that they can return an item, if necessary, at minimal cost and with minimal hassle. Nonetheless, in a matter of roughly seven years, online shopping has supplanted catalog shopping as the largest remote buying channel. According to Jupiter Research, a leading industry analyst, online sales will reach $117 billion by 2008, which will represent 8% of total U.S. retail sales.

According to Jupiter Research, approximately 185 million individuals in the U.S., nearly 63% of the U.S. residential population, have access to the Internet. This represents an increase of 8% over the U.S. online population in 2003. By 2008, the U.S. online population is expected to reach approximately 225 million people, representing a compound annual growth rate of 5.7%. The projected growth rate is lower than that evidenced in the 1998 to 2003 period, reflecting the higher overall percentage of the U.S. population that is (or is expected to be) online. This is the single biggest factor in industry analysts’ general prediction of a slowing in the compound annual growth rate of online retail sales to approximately 17% to 19% during the 2003 to 2008 period.

The Company purchases products for resale both directly from manufacturers and indirectly through distributors and other sources. The Company seeks to purchase only high-end, brand-name, state-of-the-art merchandise.

The Company’s rapid order fulfillment model permits it to generally ship product within 24 to 48 hours of receiving an order. Virtually all of the orders placed on the Company’s websites are filled through its central distribution facility located in Brooklyn, New York.

Customers who purchase products on the Company’s websites may choose various shipping and third-party installation services, including basic ground delivery, overnight shipping and high-end, white glove service. Shipping costs are determined through a number of variables, including the type of delivery service requested, shipping distance, package dimensions and delivery location.

The Company offers customers a 10-day return policy on all purchases returned in the original manufacturer packaging. As is customary in the online discount consumer electronics industry, for any product returned that has been opened and is not in the original manufacturer packaging, a minimum 10% restocking fee is charged to the customer. Returns on defective items are accepted for exchange within 10 days of delivery without being subject to any restocking fees. The Company processes all product returns from its distribution warehouse in Brooklyn, New York.

The Company offers customers a variety of payment options, which include: credit card, wire transfer, or net 30-day payment terms for approved small business customers. The Company requires verification of receipt of payment or credit card authorization before any merchandise is shipped to the customer.

Gross profit for the year ended December 31, 2004 increased approximately $1.9 million, or 33.1%, to approximately $7.6 million, compared to $5.72 million for the year ended December 31, 2003.

Selling, general and administrative expenses for the year ended December 31, 2004 were approximately $5.9 million, an increase of $1.0 million, or 20.7%, compared to $4.87 million for the year ended December 31, 2003.

Income from operations was $1.73 million for the year ended December 31, 2004, compared to $845.6 thousand for the year ended December 31, 2003.