Internet usage and online commerce continue to grow worldwide. According to the U.S. Census Bureau, online retail sales grew 25% in 2003, 24% in 2004 and 25% for the first six months of 2005 as compared to the first six months of 2004. According to the U.S. Department of Commerce, the total value of U.S. online retail sales represented 2.2% of all U.S. retail sales in the first quarter of 2005, up from 1.9% for the first quarter of 2004 and 1.7% for all of 2003.

According to the Consumer Electronics Association, or CEA, the consumer electronics market, including digital cameras and accessories, grew by 11% in 2004 to $113.5 billion in net sales and is forecast to exceed $125 billion in 2005. The market for digital cameras has been expanding more rapidly than the overall consumer electronics market due to the introduction of new products and technologies, as well as the growth of multimedia content, including photos and video in digital formats. According to the Photo Marketing Association International, or PMA, the $4.8 billion digital camera market grew 40% in 2004, based on unit sales, reaching 18.2 million units and representing 73% of total 2004 camera sales excluding camcorders.

The Company’s network of individually branded and marketed websites currently offers a broad and deep selection of approximately 35,000 SKUs of digital cameras and other photography products and marine, boating and fishing and other lifestyle products. Each of the Company’s websites leverages the same core technology and business infrastructure while maintaining its own brand identity.

The Company’s flagship websites in this lifestyle category, RitzCamera.com and WolfCamera.com, has strong established brands that have built into a successful, e-commerce network. In addition to its primary websites, the Company also operates CameraWorld.com, Photography.com, PhotoAlley.com, Inkleys.com, CameraShopInc.com and KitsCamera.com. Within each of these sites, the Company offers a high quality selection of digital and traditional cameras and other photographic products and accessories. Major brands offered on the Company’s network of websites include Nikon, Canon and Sony in digital cameras and other photography products.

In addition to the Company’s easy-to-use websites, its knowledgeable customer’s service staff is available 24 hours a day, 365 days a year to provide assistance to the Company’s customers with product information and ordering, creating a customer experience that instills trust and facilitates informed purchasing decisions. The Company’s experienced team of 15 customer’s service representatives is housed in its Irvine facility and handles support and incoming calls during normal business hours. All of the Company’s overflow traffic during peak periods, after hour’s calls and weekend calls are handled by two outsourced call centers. The Company’s websites also contain helpful features such as in-depth and comparative product information, order status, frequently asked questions, technical specifications and product availability.

The Company’s principal website in Marine, Boating and Fishing category, BoatersWorld.com, offers a broad selection of high quality marine, boating and fishing products. The Company also manages the content-based websites FishingOnly.com and BoatingOnly.com, as well as offers products through other websites in its network, including eAngler.com and OuterBanksOutfitters.com. Major brands offered on the Company’s websites include Garmin, B&M, Raymarine and Penn Tackle in marine, boating and fishing products. The Company manages other websites in early stages of growth, including, among others, Shark.com, ShopAtShark.com and RitzElectronics.com, which offer products ranging from golf apparel to consumer electronics.

Gross margin on merchandise sales increased to 25.5% in the first six months of 2005 from 24.2% in the same period of 2004.

Cost of goods sold from product sales increased $78.0 million or 106.8% to $151.0 million in the six months ended June 30, 2005 from $73.0 million in the comparable period of 2004.

General and administrative expenses increased $479.0 thousand or 26.7% to $2.3 million in the six months ended June 30, 2005 from $1.8 million in the comparable period of 2004.