Sharper Image Corporation (The Sharper Image) is a specialty retailer of products in electronics, recreation and fitness, personal care, houseware, travel, toy, gifts and other categories. The Company designs and develops its Sharper Image Design products, while Sharper Image branded products are generally designed by the Company with third parties. The Sharper Image markets and sells merchandise primarily through three integrated sales channels: The Sharper Image stores, The Sharper Image catalog, which includes revenue from all direct marketing activities and television infomercials, and the Internet. The Sharper Image Stores The Company has two store formats, The Sharper Image store and outlet stores. As of January 31, 2006, The Sharper Image operated 186 The Sharper Image stores and four outlet stores for a total of 190 stores in 37 states and the District of Columbia. Store sales represented 60.9% of total revenues of the Company during the fiscal the year ended January 31, 2006 (fiscal 2005). The Sharper Image stores present an interactive selling environment that emphasizes the features and functionality of the Company's products, and allows the customer to interact with and experience the product while shopping. During fiscal 2005, The Sharper Image opened 20 stores and closed five stores. The Sharper Image stores typically have 2,500 to 4,000 square feet of selling space, and approximately 1,200 to 2,000 square feet of storage and administrative space. Outlet stores typically consist of between 2,100 to 3,200 square feet of selling space and are used to sell slow moving, discontinued, reconditioned and regular merchandise. The Sharper Image Catalog and Direct Marketing The Sharper Image catalog is a full-color catalog that is mailed to an average of 5 to 6 million individuals each month, with an increase to 6 to 8 million individuals during the Father's Day and graduation months, and an increase to 7 to 18 million individuals during the holiday season. The catalog is the primary advertising vehicle for the Company's retail stores and Internet business. During fiscal 2005, it mailed approximately 98 million The Sharper Image catalogs per year to over 21 million households. The Sharper Image direct marketing operations, including revenues generated directly from the Company's full-color monthly catalog, single product mailers, print ads and infomercials, generated 13.1% of the Company's total revenues in fiscal 2005. The Sharper Image catalog design uses visuals, and problem solving and benefit-oriented product descriptions. The number of items featured each month ranges between 200 and 250 products, increasing to more than 300 products during the holiday shopping season. The Sharper Image catalog is designed and produced by the Company's small in-house staff of writers and production artists, supplemented by outside freelancers. During fiscal 2005, The Sharper Image catalog contained between 88 and 96 pages for non-peak months and between 100 and 124 pages for Father's Day, graduation and the peak holiday shopping season The Sharper Image has developed a customer database of more than 21 million names, which it utilizes regularly. The Company collects customer names through its catalog and Internet order processing, as well as electronic point-of-sale registers in the retail stores. Internet Operations The Sharper Image products are marketed through its Internet operations, primarily through its own Website, www.sharperimage.com. The Company's Internet operations generated 16% of its total revenues in fiscal 2005. The Company sends out periodic e-mail marketing campaigns to its list of Internet shoppers. These e-mails include sneak previews of newly released products and special offers. The Company also offers international Websites where Internet shoppers are able to get local delivery of Sharper Image Design and Sharper Image branded products, which in some cases have been specifically adapted for use throughout Europe. The Company's home page includes a marketing area at the bott