Internet usage and online commerce continue to grow worldwide. According to U.S. eCommerce Overview: 2003 to 2008, Forrester Research, Inc., online purchases by U.S. consumers are expected to grow from $114 billion in 2003 to approximately $230 billion by 2008. This increase can be attributed to factors such as a growing awareness of the convenience of online shopping, an expanded range of products available online, improvements in security and electronic payment technology and increased access to broadband Internet connections which facilitate online shopping.

In addition to the benefits available to consumers, online commerce also offers a significant number of advantages to retailers. Managing and maintaining an online retailing website is generally less costly than operating multiple physical storefronts. Online retailers can efficiently market to a large and geographically diverse customer base while fulfilling sales from a single centralized location. Online retailers can also quickly react to changing consumer tastes and preferences by efficiently adjusting their featured selections, editorial content, shopping interfaces, pricing and visual presentations. Online retailers can more easily compile demographic and behavioral data about their customers that increase opportunities for direct marketing and personalized services. These benefits must be evaluated against a number of challenges such as drawing visitors to websites and converting them to customers, the inability for customers to physically inspect, try on or use the offered product and concerns about security and privacy.

The retail sale of jewelry and watches market is estimated at approximately $54.0 billion in 2003 by the U.S. Department of Commerce. The Jewelers of America 2003 Cost of Doing Business Survey estimated that the diamond and diamond jewelry market represented approximately 47% of retail jewelry sales and according to MarketLooks, the domestic watch and clock market represents $7.6 billion in retail sales annually.

www.diamond.com is a leading online retailer of independently certified diamonds, precious and semi-precious jewelry and brand name watches. On www.diamond.com, customers can search for independently certified diamonds using criteria such as carat, clarity, color and cut, and can use the “Design Your Ring” feature to customize their purchase.

www.ashford.com provides a comprehensive online selection of brand name luxury goods, including watches, jewelry, designer handbags and accessories, home accents, fragrances, sunglasses and fine writing instruments. Brands featured on the Company’s website include Prada, Gucci, and Fendi. The Company’s initial line of Ashford branded products will include fine watches, handbags and accessories. These products will be consistent in style and quality with the Company’s other brand name luxury product offerings, but at lower prices.

www.worldofwatches.com sells designer brand name watches such as Tag Heuer, Omega and Movado. This website provides detailed product information regarding automatic and quartz movements, water and scratch resistance, shock proofing, strap and case materials, warranties and maintenance.

Gross profit for the three months ended March 31, 2004 increased 47.2% to $3.1 million from $2.1 million for the three months ended March 31, 2003 due to increases in sales volume.

General and administrative expenses for the three months ended March 31, 2004 increased 8.3% to $2.0 million from $1.8 million for the three months ended March 31, 2003.

Depreciation and amortization expense for the three months ended March 31, 2004 increased 12.3% to $749,000 from $667,000 for the three months ended March 31, 2003.