(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

PART I.

Item 1.

Condensed Consolidated Statements of Operations

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Cash Flows

Notes to Condensed Consolidated Financial Statements

Item 2.

Item 3.

Item 4.

PART II.

Item 1.

Item 2.

Item 3.

Item 4.

Item 5.

Item 6.

Signatures

Certifications

Net sales

Costs and expenses:

Cost of sales

Fulfillment and order processing

Marketing and sales

Technology and content

General and administrative

Amortization of intangible assets

Stock-based compensation (1)(2)

Impairment of goodwill and other intangible assets

Total costs and expenses

Operating loss

Interest income, net

Net loss

Basic and diluted net loss per share

Weighted average shares outstanding used to compute basic and diluted net loss per share

(1)    As previously disclosed in our annual report on Form 10-K for the fiscal year ended December 28, 2003, the amounts for the three- and nine-month periods ended September 28, 2003 have been restated to include an additional $1.3 million in stock-based compensation recorded as a result of modifications of certain stock option grants for terminated employees.

(2)    Set forth below are the amounts of stock-based compensation that, if recorded by operating function, would be classified in the Statements of Operations as follows:

Fulfillment and order processing

Marketing and sales

Technology and content

General and administrative

Total

Current assets:

Cash and cash equivalents

Marketable securities

Accounts receivable, net of allowances

Inventories

Prepaid marketing expenses

Other current assets

Total current assets

Fixed assets, net

Goodwill, net

Other intangible assets, net

Prepaid marketing expenses

Deposits and other assets

Total assets

Current liabilities:

Accounts payable

Accrued compensation

Accrued marketing expenses

Other current liabilities

Current portion of capital lease obligations

Total current liabilities

Capital lease obligations, less current portion

Commitments and contingencies

Stockholders’ equity:

Preferred stock, $.0001 par value, 10,000,000 shares authorized, no shares outstanding

Common stock, $.0001 par value, stated at amounts paid in: 250,000,000 shares authorized; 80,568,989 and 77,361,026 shares issued and outstanding

Deferred stock-based compensation

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

Operating Activities:

Net loss

Adjustments to reconcile net loss to net cash used in operating activities:

Non-cash expenses:

Depreciation

Amortization of marketing and sales agreements

(Gain) loss on disposal of fixed assets

Amortization of intangible assets

Stock-based compensation

Impairment of goodwill and other intangible assets

Litigation settlement

Changes in:

Accounts receivable

Inventories

Prepaid marketing expenses

Other current assets

Accounts payable and accrued expenses

Other

Net cash used in operating activities

Investing Activities:

Purchases of marketable securities

Sales of marketable securities

Business acquisition, net of cash received

Purchase of fixed assets

Net cash provided by investing activities

Financing Activities:

Proceeds from exercise of stock options and employee stock purchase plan

Proceeds from asset financing

Principal payments on capital lease obligations

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period