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Quote: Direct Channel:  Direct channel sales decreased $2,387 or 25.4% to $7,008 for the three months ended  September  30, 2007 compared to $9,395 in the same period last year. In the current period the number of Direct orders decreased 3,000 or 13.0% and the average order value decreased $69.00 or 16.3% to $355.00 per order.  The decline in the number of direct orders is primarily due to a shift from the Direct channel sales to the UCM platform in which only commission revenue is recorded and an improved effort in managing product posted for auction.  The decrease in the average order value was primarily due to decreased selling prices for desktop computers. The decrease was partially offset by increases in sales of notebook computers and improved average order values in video and digital cameras.

The Direct channel gross profit increased $28 or 8.5% for the three months ended September 30, 2007 compared to the same period in the prior year. The Direct channel gross profit percentage increased 1.4% to 3.7% for the three months ended September 30, 2007 compared to 2.3% for the three months ended September 30, 2006. The increase was a result of an improved effort in managing product posted for auction.  The decreased order volume resulted in lower distribution and variable operating costs which offset the margin dollar loss and improved the overall profitability. Negatively impacting gross profit was an inventory write-down of $137 for the three months ended September 30, 2007 compared to a write-down of $804 in the same period of the prior year.

UCM Channel:  UCM revenues and gross profit increased $309 or 27.2% to $1,447 for the three months ended September 30, 2007 compared to revenue and gross profit of $1,138 in the same period of the prior year. In the current period the number of UCM orders increased 12,000 or 13.5% and the average order value increased $1.00 or 0.8% to $129.00 per order. The number of UCM vendors increased 1,605 or 93.5% to 3,321 vendors compared to 1,716 at September 30, 2006. The increase in UCM orders and the average order value is primarily due to the shift of revenue and volume from the Direct sales channel to the UCM channel along with an increase in the number of UCM vendors.