----

 

| Delaware(State      or other jurisdiction of incorporation or organization) 1706      Washington Ave., St. Louis, Missouri(Address      of principal executive offices) | 43-1256674(I.R.S.      Employer Identification No.) 63103(Zip      Code) |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|

| (Title of each      class)Common Stock $.40 Par Value | (Name of each      exchange on which Registered)New      York Stock Exchange |
|-------------------------------------------------------|------------------------------------------------------------------------------|

| Indicate by check      mark if the registrant is a well-known seasoned issuer, as defined in Rule      405 of the Securities Act.  |   | o        Yes       |   | x No |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|-----------|
| Indicate by check      mark if the registrant is not required to file reports pursuant to Section      13 or Section 15(d) of the Act.  |   | o        Yes  |   | x No |

| Indicate      by check mark whether the registrant (1) has filed all reports required to      be filed by Section 13 or 15(d) of      the Securities Exchange Act of 1934 during the preceding 12 months (or for      such shorter period that the registrant was      required to file such reports), and (2) has been subject to such filing      requirements for the past 90 days. |   | x        Yes |   | o No |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|-----------|

| Indicate      by check mark whether the registrant is a large accelerated filer, an      accelerated filer,  a non-accelerated filer or      a smaller reporting company.  See the definitions of “large      accelerated filer,”  “ accelerated filer” and “smaller      reporting      company” in Rule 12b-2 of the Exchange Act:  (Check      one):  |   Large accelerated      filerAccelerated filerNon-accelerated      filerSmaller reporting      company |   |   |   oxoo |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------|--------|--------|------------------|

| Indicate by check mark whether the registrant      is a shell company (as defined in Rule 12b-2 of the Act).  |   | o        Yes |   | x No |
|--------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|-----------|

----

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|          |   | Page                       |
|---------------|--------|----------------------------|
|          |   |                       |
| PART      I.  |   | FINANCIAL      INFORMATION |   |   |
|          |   |                       |   |   |
|          |   | Item      1.               |   | Financial      Statements: |   |   |
|          |   |                       |   |   |   |   |
|          |   |                       |   | Interim Condensed Consolidated Balance      Sheets |   |   |
|          |   |                       |   | July      19, 2008 (Unaudited) and February 2, 2008 |   | 1 |
|          |   |                       |   |   |   |   |
|          |   |                       |   | Interim Condensed Consolidated Statements      of Operations (Unaudited) |   |   |
|          |   |                       |   | 12      and 24 Weeks Ended July 19, 2008 and July 21, 2007    (Restated) |   | 3 |
|          |   |                       |   |   |   |   |
|          |   |                       |   | Interim Condensed Consolidated Statement of      Changes in Stockholders' |   |   |
|          |   |                       |   | Equity      (Unaudited) 24 Weeks Ended July 19, 2008 |   | 4 |
|          |   |                       |   |   |   |   |
|          |   |                       |   | Interim Condensed Consolidated Statements of Cash      Flow (Unaudited) |   |   |
|          |   |                       |   | 24      Weeks Ended July 19, 2008 and July 21, 2007 (Restated) |   | 5 |
|          |   |                       |   |   |   |   |
|          |   |                       |   | Notes to Interim Condensed Consolidated      Financial Statements (Unaudited) |   | 7 |
|          |   |                       |   |   |   |   |
|          |   | Item 2.                    |   | Management's      Discussion and Analysis of Financial Condition and Results |   |   |
|          |   |                       |   | of      Operations |   | 16 |
|          |   |                       |   |   |   |   |
|          |   | Item 3.                    |   | Quantitative      and Qualitative Disclosures about Market Risk |   | 24 |
|          |   |                       |   |   |   |   |
|          |   | Item 4.                    |   | Controls      and Procedures |   | 24 |
|          |   |                       |   |   |   |   |
| PART II.      |   | OTHER      INFORMATION     |   |   |
|          |   |                       |   |   |
|          |   | Item      4.               |   | Submission      of Matters to a Vote of Security Holders |   | 26 |
|          |   | Item      6.               |   | Exhibits |   | 26 |
|          |   |                       |
| SIGNATURES    |   |                       |   | 27 |
|          |   |                       |
| EXHIBIT INDEX |   |                       |   | 28 |
|          |   |                       |   |   |   |   |   |   |   |   |   |

| thousands                                                                                |   | July      19, 2008 |    |   | February      2, 2008 |   |
|------------------------------------------------------------------------------------------|--------|--------------------|---------|--------|-----------------------|--------|
|                                                                                     |   | (Unaudited)        |    |   |                  |   |
| ASSETS                                                                                   |   |               |    |   |                  |   |
| Current      assets:                                                                     |   |               |    |   |                  |   |
|           Cash and cash equivalents                                  |   | $                  | 19,277  |   |                  | $      | 59,177 |   |
|           Accounts receivable:                                       |   |               |    |   |                  |   |   |   |
|                Trade                        |   |               | 7,532   |   |                  |   | 7,469 |   |
|                Other                        |   |               | 1,851   |   |                  |   | 4,030 |   |
|           Inventories                                                |   |               | 11,528  |   |                  |   | 14,296 |   |
|           Prepaid expenses and other current assets                  |   |               | 6,529   |   |                  |   | 5,174 |   |
|           Deferred tax assets                                        |   |               | 5,204   |   |                  |   | 2,673 |   |
|                                                                                     |   |               |    |   |                  |   |   |   |
|           Total current assets                                       |   |               | 51,921  |   |                  |   | 92,819 |   |
|                                                                                     |   |               |    |   |                  |   |   |   |
| Property      and equipment:                                                             |   |               |    |   |                  |   |   |   |
|           Land                                                       |   |               | 5,065   |   |                  |   | 5,065 |   |
|           Building improvements                                      |   |               | 34,666  |   |                  |   | 34,666 |   |
|           Leasehold improvements                                     |   |               | 8,164   |   |                  |   | 5,426 |   |
|           Photographic, sales and manufacturing equipment            |   |               | 183,629 |   |                  |   | 166,404 |   |
|                Total                        |   |               | 231,524 |   |                  |   | 211,561 |   |
|           Less accumulated depreciation and amortization             |   |               | 164,300 |   |                  |   | 155,281 |   |
|                Property and equipment, net  |   |               | 67,224  |   |                  |   | 56,280 |   |
| Other      investments - supplemental retirement plan                                    |   |               | 3,455   |   |                  |   | 3,508 |   |
| Goodwill                                                                                 |   |               | 21,853  |   |                  |   | 18,049 |   |
| Intangible      assets, net                                                              |   |               | 43,093  |   |                  |   | 44,907 |   |
| Deferred      tax assets                                                                 |   |               | 13,242  |   |                  |   | 14,439 |   |
| Other      assets                                                                        |   |               | 6,712   |   |                  |   | 6,515 |   |
|                                                                                     |   |               |    |   |                  |   |   |   |
|           TOTAL ASSETS                                               |   | $                  | 207,500 |   |                  | $      | 236,517 |   |
|                                                                                     |   |               |    |   |                  |   |   |   |
| See      accompanying footnotes to the condensed consolidated financial      statements. |   |               |    |   |                  |   |   |   |

| thousands,      except share and per share data                                                           |   | July      19, 2008 |     |   | February      2, 2008 |   |
|-----------------------------------------------------------------------------------------------------------|--------|--------------------|----------|--------|-----------------------|--------|
|                                                                                                      |   | (Unaudited)        |     |   |                  |   |
| LIABILITIES                                                                                               |   |               |     |   |                  |   |
| Current      liabilities:                                                                                 |   |               |     |   |                  |   |
|           Current maturities of long-term debt                                        |   | $                  | 1,150    |   |                  | $      | 8,697 |    |
|           Accounts payable                                                            |   |               | 10,556   |   |                  |   | 14,369 |   |
|           Accrued employment costs                                                    |   |               | 10,102   |   |                  |   | 10,330 |   |
|           Customer deposit liability                                                  |   |               | 18,334   |   |                  |   | 21,255 |   |
|           Income taxes payable                                                        |   |               | -        |   |                  |   | 387 |   |
|           Sales taxes payable                                                         |   |               | 3,264    |   |                  |   | 4,884 |   |
|           Accrued advertising expenses                                                |   |               | 1,455    |   |                  |   | 1,266 |   |
|           Accrued expenses and other liabilities                                      |   |               | 16,137   |   |                  |   | 21,863 |   |
|                                                                                                      |   |               |     |   |                  |   |   |   |
|           Total current liabilities                                                   |   |               | 60,998   |   |                  |   | 83,051 |   |
|                                                                                                      |   |               |     |   |                  |   |   |   |
| Long-term      debt, less current maturities                                                              |   |               | 102,798  |   |                  |   | 103,022 |   |
| Accrued      pension plan obligations                                                                     |   |               | 9,918    |   |                  |   | 10,490 |   |
| Supplemental      retirement plan obligations                                                             |   |               | 3,485    |   |                  |   | 3,437 |   |
| Other      liabilities                                                                                    |   |               | 18,868   |   |                  |   | 19,543 |   |
|                                                                                                      |   |               |     |   |                  |   |   |   |
|           Total liabilities                                                           |   |               | 196,067  |   |                  |   | 219,543 |   |
|                                                                                                      |   |               |     |   |                  |   |   |   |
| CONTINGENCIES      (see Note 11)                                                                          |   |               |     |   |                  |   |   |   |
|                                                                                                      |   |               |     |   |                  |   |   |   |
| STOCKHOLDERS'      EQUITY                                                                                 |   |               |     |   |                  |   |   |   |
| Preferred      stock, no par value, 1,000,000 shares authorized; no shares      outstanding               |   |               | -        |   |                  |   | - |   |
| Preferred      stock, Series A, no par value, 200,000 shares authorized; no      shares                   |   |               |     |   |                  |   |   |   |
|           outstanding                                                                 |   |               | -        |   |                  |   | - |   |
| Common      stock, $0.40 par value, 50,000,000 shares authorized; 17,069,859 and      17,028,315          |   |               |     |   |                  |   |   |   |
|           shares outstanding at July 19, 2008 and February 2, 2008,      respectively |   |               | 6,828    |   |                  |   | 6,811 |   |
| Additional      paid-in capital                                                                           |   |               | 27,902   |   |                  |   | 27,872 |   |
| Retained      earnings                                                                                    |   |               | 216,518  |   |                  |   | 222,435 |   |
| Accumulated      other comprehensive loss                                                                 |   |               | (6,946   | )      |                  |   | (6,725 | ) |
|                                                                                                      |   |               | 244,302  |   |                  |   | 250,393 |   |
| Treasury      stock - at cost, 10,595,319 and 10,619,728 at July 19, 2008      and                        |   |               |     |   |                  |   |   |   |
|           February 2, 2008, respectively                                              |   |               | (232,869 | )      |                  |   | (233,419 | ) |
|                                                                                                      |   |               |     |   |                  |   |   |   |
|           Total stockholders' equity                                                  |   |               | 11,433   |   |                  |   | 16,974 |   |
|                                                                                                      |   |               |     |   |                  |   |   |   |
|           TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  |   | $                  | 207,500  |   |                  | $      | 236,517 |   |
|                                                                                                      |   |               |     |   |                  |   |   |   |
| See      accompanying footnotes to the condensed consolidated financial      statements.                  |   |               |     |   |                  |   |   |   |

| thousands,      except share and per share data                                                           |   | 12      Weeks Ended |      |   | 24      Weeks Ended |   |
|-----------------------------------------------------------------------------------------------------------|--------|---------------------|-----------|--------|---------------------|--------|
|                                                                                                      |   | July      19, 2008  |      |   | July      21, 2007  |   |   | July      19, 2008 |   |   | July      21, 2007 |   |
|                                                                                                      |   |                |      |   | (Restated)          |   |   |   |   |   | (Restated) |   |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |
| Net      sales                                                                                            |   | $                   | 89,630    |   |                | $      | 68,103 |   |   | $ | 193,074 |   |   | $ | 125,864 |   |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Cost      and expenses:                                                                                   |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
|           Cost of sales (exclusive of depreciation and amortization shown      below) |   |                | 8,495     |   |                |   | 7,982 |   |   |   | 18,987 |   |   |   | 13,000 |   |
|           Selling, general and administrative expenses                                |   |                | 79,853    |   |                |   | 58,315 |   |   |   | 163,764 |   |   |   | 103,514 |   |
|           Depreciation and amortization                                               |   |                | 5,585     |   |                |   | 6,177 |   |   |   | 13,096 |   |   |   | 9,590 |   |
|           Other charges and impairments                                               |   |                | 318       |   |                |   | 1,417 |   |   |   | 1,112 |   |   |   | 1,445 |   |
|                                                                                                      |   |                | 94,251    |   |                |   | 73,891 |   |   |   | 196,959 |   |   |   | 127,549 |   |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Loss      from operations                                                                                 |   |                | (4,621    | )      |                |   | (5,788 | ) |   |   | (3,885 | ) |   |   | (1,685 | ) |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense                                                                                     |   |                | 1,366     |   |                |   | 1,561 |   |   |   | 2,887 |   |   |   | 2,008 |   |
| Interest      income                                                                                      |   |                | 118       |   |                |   | 411 |   |   |   | 480 |   |   |   | 716 |   |
| Other      income (expense), net                                                                          |   |                | (2        | )      |                |   | 52 |   |   |   | 3 |   |   |   | 4 |   |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Loss      before income tax benefit                                                                       |   |                | (5,871    | )      |                |   | (6,886 | ) |   |   | (6,289 | ) |   |   | (2,973 | ) |
| Income      tax benefit                                                                                   |   |                | 2,270     |   |                |   | 2,390 |   |   |   | 2,432 |   |   |   | 1,032 |   |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss from continuing operations                                                                  |   |                | (3,601    | )      |                |   | (4,496 | ) |   |   | (3,857 | ) |   |   | (1,941 | ) |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss from discontinued operations                                                                |   |                | -         |   |                |   | (105 | ) |   |   | - |   |   |   | (105 | ) |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| NET      LOSS                                                                                             |   | $                   | (3,601    | )      |                | $      | (4,601 | ) |   | $ | (3,857 | ) |   | $ | (2,046 | ) |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| NET      LOSS PER COMMON SHARE                                                                            |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss per share from continuing operations - diluted                                              |   | $                   | (0.56     | )      |                | $      | (0.70 | ) |   | $ | (0.60 | ) |   | $ | (0.30 | ) |
| Net      loss per share from discontinued operations - diluted                                            |   | $                   | -         |   |                | $      | (0.02 | ) |   | $ | - |   |   | $ | (0.02 | ) |
| Net      loss per share - diluted                                                                         |   | $                   | (0.56     | )      |                | $      | (0.72 | ) |   | $ | (0.60 | ) |   | $ | (0.32 | ) |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss per share from continuing operations - basic                                                |   | $                   | (0.56     | )      |                | $      | (0.70 | ) |   | $ | (0.60 | ) |   | $ | (0.30 | ) |
| Net      loss per share from discontinued operations - basic                                              |   | $                   | -         |   |                | $      | (0.02 | ) |   | $ | - |   |   | $ | (0.02 | ) |
| Net      loss per share - basic                                                                           |   | $                   | (0.56     | )      |                | $      | (0.72 | ) |   | $ | (0.60 | ) |   | $ | (0.32 | ) |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Dividends      per share                                                                                  |   | $                   | 0.16      |   |                | $      | 0.16 |   |   | $ | 0.32 |   |   | $ | 0.32 |   |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average number of common and common equivalent                                              |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
|           shares outstanding - diluted                                                |   |                | 6,468,062 |   |                |   | 6,386,115 |   |   |   | 6,459,256 |   |   |   | 6,374,780 |   |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average number of common and common equivalent                                              |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
|           shares outstanding - basic                                                  |   |                | 6,468,062 |   |                |   | 6,386,115 |   |   |   | 6,459,256 |   |   |   | 6,374,780 |   |
|                                                                                                      |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |
| See      accompanying footnotes to the condensed consolidated financial      statements.                  |   |                |      |   |                |   |   |   |   |   |   |   |   |   |   |   |

| thousands,      except share and per share data                                          |   |   |   |   |       |   |   |     |   |   | Accumulated   |   |   |         |   |   |   |   |
|------------------------------------------------------------------------------------------|--------|--------|--------|--------|------------|--------|--------|----------|--------|--------|---------------|--------|--------|--------------|--------|--------|--------|--------|
|                                                                                     |   |   |   |   | Additional |   |   |     |   |   | other         |   |   | Treasury     |   |   |   |   |
|                                                                                     |   | Common |   |   | paid-in    |   |   | Retained |   |   | comprehensive |   |   | stock,       |   |   |   |   |
|                                                                                     |   | stock  |   |   | capital    |   |   | earnings |   |   | loss          |   |   | at      cost |   |   | Total  |   |
|                                                                                     |   |   |   |   |       |   |   |     |   |   |          |   |   |         |   |   |   |   |
| Balance      at February 2, 2008                                                         |   | $      | 6,811  |   |       | $      | 27,872 |     |   | $      | 222,435       |   |   | $            | (6,725 | )      |   | $      | (233,419 | ) |   | $ | 16,974 |   |
|                                                                                     |   |   |   |   |       |   |   |     |   |   |          |   |   |         |   |   |   |   |   |   |   |   |   |   |
| Net      loss                                                                            |   |   | -      |   |       |   | -      |     |   |   | (3,857        | )      |   |         | -      |   |   |   | - |   |   |   | (3,857 | ) |
| Total      other comprehensive loss                                                      |   |   | -      |   |       |   | -      |     |   |   | -             |   |   |         | (221   | )      |   |   | - |   |   |   | (221 | ) |
|                                                                                     |   |   |   |   |       |   |   |     |   |   |          |   |   |         |   |   |   |   |   |   |   |   |   |   |
|           Total comprehensive loss                                   |   |   |   |   |       |   |   |     |   |   |          |   |   |         |   |   |   |   |   |   |   |   | (4,078 | ) |
| Surrender      of employee shares to satisfy personal tax                                |   |   |   |   |       |   |   |     |   |   |          |   |   |         |   |   |   |   |   |   |   |   |   |   |
|           liabilities upon vesting (8,596 shares)                    |   |   | -      |   |       |   | -      |     |   |   | -             |   |   |         | -      |   |   |   | (175 | ) |   |   | (175 | ) |
| Issuance      of common stock to employee benefit plans and                              |   |   |   |   |       |   |   |     |   |   |          |   |   |         |   |   |   |   |   |   |   |   |   |   |
|           restricted stock awards (74,549 shares)                    |   |   | 17     |   |       |   | (220   | )        |   |   | -             |   |   |         | -      |   |   |   | 725 |   |   |   | 522 |   |
| Stock-based      compensation recognized                                                 |   |   | -      |   |       |   | 250    |     |   |   | -             |   |   |         | -      |   |   |   | - |   |   |   | 250 |   |
| Dividends      ($0.32 per common share)                                                  |   |   | -      |   |       |   | -      |     |   |   | (2,060        | )      |   |         | -      |   |   |   | - |   |   |   | (2,060 | ) |
|                                                                                     |   |   |   |   |       |   |   |     |   |   |          |   |   |         |   |   |   |   |   |   |   |   |   |   |
| Balance      at July 19, 2008                                                            |   | $      | 6,828  |   |       | $      | 27,902 |     |   | $      | 216,518       |   |   | $            | (6,946 | )      |   | $      | (232,869 | ) |   | $ | 11,433 |   |
|                                                                                     |   |   |   |   |       |   |   |     |   |   |          |   |   |         |   |   |   |   |   |   |   |   |   |   |
| See      accompanying footnotes to the condensed consolidated financial      statements. |   |   |   |   |       |   |   |     |   |   |          |   |   |         |   |   |   |   |   |   |   |   |   |   |

| thousands                                                                                           |   | 24      Weeks Ended |        |
|-----------------------------------------------------------------------------------------------------|--------|---------------------|-------------|
|                                                                                                |   | July      19, 2008  |        |   | July      21, 2007 |   |
|                                                                                                |   |                |        |   | (Restated) |   |
| Reconciliation      of net loss to cash flows (used in) provided by operating      activities: |   |                |        |   |   |   |
|                                                                                                |   |                |        |   |   |   |
| Net      loss                                                                                       |   | $                   | (3,857      | ) |   | $ | (2,046 | ) |
|                                                                                                |   |                |        |   |   |   |   |   |
| Adjustments      for items not requiring (providing) cash:                                          |   |                |        |   |   |   |   |   |
|        Depreciation and amortization                                                           |   |                | 13,096      |   |   |   | 9,590 |    |
|        Loss from discontinued operations                                                       |   |                | -           |   |   |   | 105 |   |
|        Stock-based compensation expense                                                        |   |                | 250         |   |   |   | 557 |   |
|        Loss on disposition of property and equipment                                           |   |                | 487         |   |   |   | 17 |   |
|   (Gain)      loss on sale of assets held for sale                                        |   |                | (2          | ) |   |   | 60 |   |
|        Deferred income tax provision                                                           |   |                | (2,719      | ) |   |   | (389 | ) |
|        Pension, supplemental retirement plan and profit sharing      expense                   |   |                | 995         |   |   |   | 1,143 |   |
|        Other                                                                                   |   |                | 307         |   |   |   | 249 |   |
|                                                                                                |   |                |        |   |   |   |   |   |
| Increase      (decrease) in cash flow from operating assets and    liabilities:                     |   |                |        |   |   |   |   |   |
|        Accounts receivable                                                                     |   |                | 2,318       |   |   |   | (808 | ) |
|        Inventories                                                                             |   |                |  2,772 |   |   |   |        756 |   |
|        Prepaid expenses and other current assets                                               |   |                | (1,141      | ) |   |   | (299 | ) |
|        Accounts payable                                                                        |   |                | (3,959      | ) |   |   | 3,007 |   |
|        Contribution to pension plan                                                            |   |                | (928        | ) |   |   | (771 | ) |
|        Supplemental retirement plan payments                                                   |   |                | (69         | ) |   |   | (120 | ) |
|        Accrued expenses and other liabilities                                                  |   |                | (8,452      | ) |   |   | (6,750 | ) |
|        Income taxes payable                                                                    |   |                | (692        | ) |   |   | (1,305 | ) |
|        Deferred revenues and related costs                                                     |   |                | (2,787      | ) |   |   | 5,058 |   |
|        Other                                                                                   |   |                | (569        | ) |   |   | 250 |   |
|                                                                                                |   |                |        |   |   |   |   |   |
| Cash      flows (used in) provided by operations                                                    |   |                | (4,950      | ) |   |   | 8,304 |   |
|                                                                                                |   |                |        |   |   |   |   |   |
| Cash      flows used in discontinued operations                                                     |   |                | -           |   |   |   | (105 | ) |
|                                                                                                |   |                |        |   |   |   |   |   |
| Cash      flows (used in) provided by operating activities                                          |   | $                   | (4,950      | ) |   | $ | 8,199 |   |
|                                                                                                |   |                |        |   |   |   |   |   |
| See      accompanying footnotes to the condensed consolidated financial      statements.            |   |                |        |   |   |   |   |   |

| thousands                                                                                                       |   | 24      Weeks Ended |    |
|-----------------------------------------------------------------------------------------------------------------|--------|---------------------|---------|
|                                                                                                            |   | July      19, 2008  |    |   | July      21, 2007 |   |
|                                                                                                            |   |                |    |   | (Restated) |   |
|                                                                                                            |   |                |    |   |   |   |
| Cash      flows (used in) provided by operating activities                                                      |   | $                   | (4,950  | ) |   | $ | 8,199 |   |
|                                                                                                            |   |                |    |   |   |   |   |   |
| Cash      flows (used in) provided by financing activities:                                                     |   |                |    |   |   |   |   |   |
|           Repayment of long-term debt                                                       |   |                | (8,122  | ) |   |   | (16,666 | ) |
|           Proceeds from long-term borrowings                                                |   |                | -       |   |   |   | 115,000 |   |
|           Release of restricted cash                                                        |   |                | -       |   |   |   | 1,000 |   |
|           Payment of debt issuance costs                                                    |   |                | -       |   |   |   | (2,646 | ) |
|           Surrender of employee shares to satisfy personal tax liability upon      vesting  |   |                | (175    | ) |   |   | (547 | ) |
|           Cash dividends                                                                    |   |                | (2,060  | ) |   |   | (2,037 | ) |
|           Other                                                                             |   |                | 45      |   |   |   | - |   |
|           Cash flows (used in) provided by financing activities                             |   |                | (10,312 | ) |   |   | 94,104 |   |
|                                                                                                            |   |                |    |   |   |   |   |   |
| Cash      flows (used in) provided by investing activities:                                                     |   |                |    |   |   |   |   |   |
|           Additions to property and equipment                                               |   |                | (24,990 | ) |   |   | (3,615 | ) |
|           Proceeds from sale of assets held for sale                                        |   |                | 2       |   |   |   | 65 |   |
|           Adjustments (payments) related to the acquisition of    certain                   |   |                |    |   |   |   |   |   |
|                net assets of Portrait Corporation of America, Inc. |   |                | 147     |   |   |   | (82,596 | ) |
|           Increase in assets held by Rabbi Trust                                            |   |                | (30     | ) |   |   | (88 | ) |
|           Proceeds from Rabbi Trust used for supplemental retirement plan      payments     |   |                | 83      |   |   |   | 124 |   |
|           Cash flows used in investing activities                                           |   |                | (24,788 | ) |   |   | (86,110 | ) |
|                                                                                                            |   |                |    |   |   |   |   |   |
| Effect      of exchange rate changes on cash and cash equivalents                                               |   |                | 150     |   |   |   | 154 |   |
|                                                                                                            |   |                |    |   |   |   |   |   |
| Net      (decrease) increase in cash and cash equivalents                                                       |   |                | (39,900 | ) |   |   | 16,347 |   |
|                                                                                                            |   |                |    |   |   |   |   |   |
| Cash      and cash equivalents at beginning of period                                                           |   |                | 59,177  |   |   |   | 26,294 |   |
|                                                                                                            |   |                |    |   |   |   |   |   |
| Cash      and cash equivalents at end of period                                                                 |   | $                   | 19,277  |   |   | $ | 42,641 |   |
|                                                                                                            |   |                |    |   |   |   |   |   |
| Supplemental      cash flow information:                                                                        |   |                |    |   |   |   |   |   |
|           Interest paid                                                                     |   | $                   | 3,866   |   |   | $ | 1,716 |   |
|                                                                                                            |   |                |    |   |   |   |   |   |
|           Income taxes paid                                                                 |   | $                   | 949     |   |   | $ | 828 |   |
|                                                                                                            |   |                |    |   |   |   |   |   |
| Supplemental      non-cash financing activities:                                                                |   |                |    |   |   |   |   |   |
|           Issuance of treasury stock under the employee Profit Sharing      Plan            |   | $                   | 521     |   |   | $ | 442 |   |
|                                                                                                            |   |                |    |   |   |   |   |   |
|           Issuance of restricted stock to employees and directors                           |   | $                   | 756     |   |   | $ | 1,644 |   |
|                                                                                                            |   |                |    |   |   |   |   |   |
| See      accompanying footnotes to the condensed consolidated financial      statements.                        |   |                |    |   |   |   |   |   |

| NOTE      1   - | DESCRIPTION      OF BUSINESS AND INTERIM CONDENSED CONSOLIDATED FINANCIAL      STATEMENTS |
|--------------------------------|-------------------------------------------------------------------------------------------|

| NOTE      2   - | ADOPTION      OF NEW ACCOUNTING STANDARDS |
|--------------------------------|-------------------------------------------|

|   | Level 1      - | Inputs were unadjusted, quoted prices in active markets      for identical assets or liabilities at the measurement  date. |
|--------|---------------------|----------------------------------------------------------------------------------------------------------------------------|

|   | Level      2 - | Inputs      (other than quoted prices included in Level 1) were either directly or      indirectly observable for the asset or liability through correlation with      market data at the measurement date and for the duration of the      instrument’s anticipated life. |
|--------|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level      3 - | Inputs      reflected management’s best estimate of what market participants would use      in pricing the asset or liability at the measurement date. Consideration      was given to the risk inherent in the valuation technique and the risk      inherent in the inputs to themodel. |
|--------|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                   |   | Fair      Value Measurements |   |
|----------------------------------------|--------|------------------------------|--------|
|                                   |   | Level      1                 |   |   | Level      2 |   |   | Level      3 |   |   | Total |   |
| Assets                                 |   |                         |   |   |   |   |   |   |   |   |   |   |
|        Short-term investments (1) |   | $                            | -      |   |   | $ | 13.4 |   |   | $ | - |   |   | $ | 13.4 |   |
| Liabilities                            |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Interest rate swap (2)     |   | $                            | -      |   |   | $ | 1.7 |   |   | $ | - |   |   | $ | 1.7 |   |

| (1) | The      Company classified its marketable securities as cash, which is reported at      fair market value, using the “market approach” valuation technique, which      uses prices and other relevant information observable in market      transactions involving identical or comparable assets or      liabilities. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The      total fair value of the interest rate swap is included in Other      Liabilities as of July 19, 2008.  This financial instrument was      valued using the “income approach” valuation technique.  This      method used valuation techniques to convert future amounts to a single      present amount.  The measurement was based on the value      indicated by current market expectations about those future      amounts.  The Company uses its interest rate swap as a means of      managing interest rates on its outstanding fixed-rate debt      obligations.  During the first half of 2008 a $1.2 million      decrease in the fair value was recorded on the interest rate swap,      reducing interest expense. The      Company also uses fair value measurements when it periodically evaluates      the recoverability of goodwill, acquired intangible assets and long-lived      assets. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE 3   - | BUSINESS      ACQUISITION |
|--------------------------------|---------------------------|

| Current      assets                              |   | $      | 10,448  |   |
|--------------------------------------------------|--------|--------|---------|--------|
| Property      and equipment                      |   |   | 34,986  |   |
| Goodwill                                         |   |   | 21,227  |   |
| Intangibles                                      |   |   | 46,779  |   |
| Other      assets                                |   |   | 6,762   |   |
|         Total assets acquired          |   | $      | 120,202 |   |
|                                             |   |   |    |   |
| Current      liabilities assumed                 |   |   | (27,666 | )      |
| Long-term      liabilities assumed               |   |   | (8,606  | )      |
|                                             |   |   |    |   |
|         Total allocated purchase price |   | $      | 83,930  |   |
|                                             |   |   |    |   |

|                               |   | Second      Quarter |   |   | First      Half |   |
|------------------------------------|--------|---------------------|--------|--------|-----------------|--------|
|                               |   | 2008                |   |   | 2007            |   |   | 2008 |   |   | 2007 |   |
|                               |   |                |   |   | (Restated)      |   |   |   |   |   | (Restated) |   |
| Revenue                            |   | $                   | 81,431 |   |            | $      | 90,397 |   |   | $ | 184,829 |   |   | $ | 208,646 |   |
|                               |   |                |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                      |   | $                   | (8,539 | )      |            | $      | (12,926 | ) |   | $ | (6,876 | ) |   | $ | (16,844 | ) |
|                               |   |                |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Basic      loss per common share   |   |                | (1.32  | )      |            |   | (2.02 | ) |   |   | (1.06 | ) |   |   | (2.64 | ) |
|                               |   |                |   |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      loss per common share |   |                | (1.32  | )      |            |   | (2.02 | ) |   |   | (1.06 | ) |   |   | (2.64 | ) |
|                               |   |                |   |   |            |   |   |   |   |   |   |   |   |   |   |   |

| NOTE      4   - | DISCONTINUED      OPERATIONS |
|--------------------------------|------------------------------|

| thousands                                  |   |
|--------------------------------------------|--------|
|                                       |   |
| Discontinued      operations:              |   |
|                                       |   |
| Net      sales                             |   | $ | 62 |   |
|                                       |   |   |   |   |
| Operating      loss                        |   | $ | (105 | ) |
| Tax      benefit                           |   |   | - |   |
|                                       |   |   |   |   |
| Net      loss from discontinued operations |   | $ | (105 | ) |

| NOTE      5   - | INVENTORIES |
|--------------------------------|-------------|

| thousands                                |   | July      19, 2008 |   |   | February      2, 2008 |   |
|------------------------------------------|--------|--------------------|--------|--------|-----------------------|--------|
|                                     |   |               |   |   |                  |   |
| Raw      materials - paper and chemicals |   | $                  | 3,465  |   |                  | $      | 4,902 |   |
| Portraits      in process                |   |               | 2,162  |   |                  |   | 2,244 |   |
| Finished      portraits pending delivery |   |               | 762    |   |                  |   | 1,187 |   |
| Frames      and accessories              |   |               | 516    |   |                  |   | 634 |   |
| Studio      supplies                     |   |               | 2,955  |   |                  |   | 3,636 |   |
| Equipment      repair parts and supplies |   |               | 1,175  |   |                  |   | 1,246 |   |
| Other                                    |   |               | 493    |   |                  |   | 447 |   |
|                                     |   |               |   |   |                  |   |   |   |
| Total                                    |   | $                  | 11,528 |   |                  | $      | 14,296 |   |
|                                     |   |               |   |   |                  |   |   |   |

|  NOTE 6   - | GOODWILL      AND INTANGIBLE ASSETS |
|--------------------------------------|-------------------------------------|

| thousands                                   |   | July      19, 2008 |   |   | February      2, 2008 |   |
|---------------------------------------------|--------|--------------------|--------|--------|-----------------------|--------|
|                                        |   |               |   |   |                  |   |
| PCA      acquisition                        |   | $                  | 21,227 |   |                  | $      | 17,338 |   |
|                                        |   |               |   |   |                  |   |   |   |
| Goodwill      from prior acquisitions       |   |               | 512    |   |                  |   | 512 |   |
|                                        |   |               |   |   |                  |   |   |   |
| Translation      impact on foreign balances |   |               | 114    |   |                  |   | 199 |   |
|                                        |   | $                  | 21,853 |   |                  | $      | 18,049 |   |
|                                        |   |               |   |   |                  |   |   |   |

|                         |   |   |   |   |         |   |   | Translation    |   |   |    |   |
|------------------------------|--------|--------|--------|--------|--------------|--------|--------|----------------|--------|--------|---------|--------|
|                         |   |   |   |   |         |   |   | Impact      of |   |   |    |   |
|                         |   | Gross  |   |   | Accumulated  |   |   | Foreign        |   |   | Net     |   |
| thousands                    |   | Amount |   |   | Amortization |   |   | Balances       |   |   | Balance |   |
|                         |   |   |   |   |         |   |   |           |   |   |    |   |
| Acquired      host agreement |   | $      | 43,710 |   |         | $      | 2,296  |           |   | $      | 407     |   |   | $ | 41,821 |   |
| Acquired      customer list  |   |   | 3,069  |   |         |   | 1,824  |           |   |   | 27      |   |   |   | 1,272 |   |
|                         |   | $      | 46,779 |   |         | $      | 4,120  |           |   | $      | 434     |   |   | $ | 43,093 |   |
|                         |   |   |   |   |         |   |   |           |   |   |    |   |   |   |   |   |

| NOTE 7   - | OTHER      ASSETS AND OTHER LIABILITIES |
|--------------------------------|-----------------------------------------|

| NOTE      8   - | STOCK-BASED      COMPENSATION PLANS |
|--------------------------------|-------------------------------------|

| thousands                           |   |   |    |   | Weighted-           |   |
|-------------------------------------|--------|--------|---------|--------|---------------------|--------|
|                                |   |   |    |   | Average             |   |
|                                |   | Shares |    |   | Exercise      Price |   |
|                                |   |   |    |   |                |   |
| Balance      at beginning of period |   |   | 35,046  |   |                | $      | 15.56 |   |
| Cancelled      or expired           |   |   | (20,000 | )      |                |   | 16.50 |   |
| End      of period balance          |   |   | 15,046  |   |                | $      | 14.30 |   |
|                                |   |   |    |   |                |   |   |   |

|                |   |   | Options      Outstanding and Exercisable |   |
|---------------------|--------|--------|------------------------------------------|--------|
|                |   |   |                                     |   |   | Weighted-Average |   |   |   |   |
|                |   |   |                                     |   |   | Remaining      Contractual |   |   | Weighted-Average |   |
| Exercise      Price |   |   | Shares                                   |   |   | Life      (Years) |   |   | Exercise      Price |   |
| $                   | 12.96  |   |                                     |   | 10,046 |   |   |   | 2.26 |   |   | $ | 12.96 |   |
|                | 17.00  |   |                                     |   | 5,000 |   |   |   | 1.74 |   |   |   | 17.00 |   |
|                |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Total               |   |   |                                     | 15,046 |   |   |   | 2.09 |   |   | $ | 14.30 |   |
|                |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |

|                                          |   | 24      Weeks Ended July 19, 2008 |    |
|-----------------------------------------------|--------|-----------------------------------|---------|
|                                          |   |                              |    |   | Weighted-Average |   |
|                                          |   | Shares                            |    |   | Grant-Date      Value |   |
| Nonvested      stock, beginning of period     |   |                              | 1,584   |   |   | $ | 18.95 |   |
| Granted                                       |   |                              | 43,015  |   |   |   | 18.11 |   |
| Forfeited                                     |   |                              | (1,471  | ) |   |   | 15.80 |   |
| Nonvested      stock, end of period           |   |                              | 43,128  |   |   | $ | 18.22 |   |
|                                          |   |                              |    |   |   |   |   |   |
| Stock-based      compensation expense related |   |                              |    |   |   |   |   |   |
|        to restricted stock               |   | $                                 | 249,926 |   |   |   |   |   |
|                                          |   |                              |    |   |   |   |   |   |

| NOTE      9   - | EMPLOYEE      BENEFIT PLANS |
|--------------------------------|-----------------------------|

|                                                 |   | 12      Weeks Ended |   |   | 12      Weeks Ended               |   |
|------------------------------------------------------|--------|---------------------|--------|--------|-----------------------------------|--------|
| thousands                                            |   | Pension      Plan   |   |   | Supplemental      Retirement Plan |   |
|                                                 |   | July      19, 2008  |   |   | July      21, 2007                |   |   | July      19, 2008 |   |   | July      21, 2007 |   |
| Components      of net periodic benefit costs:       |   |                |   |   |                              |   |   |   |   |   |   |   |
|         Service cost                       |   | $                   | 62     |   |                              | $      | 75 |   |   | $ | 16 |   |   | $ | 18 |   |
|         Interest cost                      |   |                | 691    |   |                              |   | 675 |   |   |   | 49 |   |   |   | 48 |   |
|         Expected return on plan assets     |   |                | (746   | )      |                              |   | (679 | ) |   |   | - |   |   |   | - |    |
|         Amortization of prior service cost |   |                | 10     |   |                              |   | 10 |   |   |   | 7 |   |   |   | 7 |   |
|         Amortization of net loss (gain)    |   |                | 161    |   |                              |   | 205 |   |   |   | (13 | ) |   |   | (8 | ) |
|                                                 |   |                |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| Net      periodic benefit cost                       |   | $                   | 178    |   |                              | $      | 286 |   |   | $ | 59 |   |   | $ | 65 |   |
|                                                 |   |                |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |

|                                                 |   | 24      Weeks Ended |   |   | 24      Weeks Ended               |   |
|------------------------------------------------------|--------|---------------------|--------|--------|-----------------------------------|--------|
| thousands                                            |   | Pension      Plan   |   |   | Supplemental      Retirement Plan |   |
|                                                 |   | July      19, 2008  |   |   | July      21, 2007                |   |   | July      19, 2008 |   |   | July      21, 2007 |   |
| Components      of net periodic benefit costs:       |   |                |   |   |                              |   |   |   |   |   |   |   |
|         Service cost                       |   | $                   | 124    |   |                              | $      | 150 |   |   | $ | 33 |   |   | $ | 36 |   |
|         Interest cost                      |   |                | 1,382  |   |                              |   | 1,350 |   |   |   | 98 |   |   |   | 96 |   |
|         Expected return on plan assets     |   |                | (1,492 | )      |                              |   | (1,358 | ) |   |   | - |   |   |   | - |   |
|         Amortization of prior service cost |   |                | 20     |   |                              |   | 20 |   |   |   | 14 |   |   |   | 14 |   |
|         Amortization of net loss (gain)    |   |                | 322    |   |                              |   | 410 |   |   |   | (28 | ) |   |   | (16 | ) |
|                                                 |   |                |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| Net      periodic benefit cost                       |   | $                   | 356    |   |                              | $      | 572 |   |   | $ | 117 |   |   | $ | 130 |   |
|                                                 |   |                |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |

| NOTE      10   - | INCOME      TAXES |
|---------------------------------|-------------------|

| ● | Unrecognized      tax benefits were approximately $2.7 million at each of July 19, 2008 and      February 2, 2008.  If these unrecognized tax benefits were      recognized, approximately $2.7 million would impact the effective tax      rate.  It is not expected that the amount of unrecognized tax      benefits will change in the next 12 months.                    |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ● | The      Company recognizes interest expense and penalties related to the      above-unrecognized tax benefits within income tax expense.  Due      to the nature of the unrecognized tax benefits, the Company had no accrued      interest and penalties as of July 19, 2008 or February 2,      2008.                                                                                |
| ● | The      Company and its subsidiaries file income tax returns in the U.S. federal      jurisdiction, many states, Mexican and Canadian      jurisdictions.  The Company is no longer subject to U.S. Federal      income tax examination for the years prior to      2003.   Ongoing examinations by various state taxing      authorities date back to February 1,2003. |

| NOTE      11   - | CONTINGENCIES |
|---------------------------------|---------------|

Item2.                 Management’sDiscussion and Analysis of Financial Condition and Results ofOperations

|                                               |                               | July      19, 2008 |                                                                                                                                                                | July      21, 2007 |
|----------------------------------------------------|------------------------------------|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|
| Within      Sears or Sears Grand Stores:           |                               |               |                                                                                                                                                                |               |
|                                               | United      States and Puerto Rico |               | 890                                                                                                                                                                 |               | 893 |
|                                               | Canada                             |               | 110                                                                                                                                                                 |               | 112 |
|                                               |                               |               |                                                                                                                                                                |               |
| Within      Wal-Mart Stores:                       |                               |               |                                                                                                                                                                |               |
|                                               | United      States and Puerto Rico |               | 1,657                                                                                                                                                               |               | 1,703 |
|                                               | Canada                             |               | 254                                                                                                                                                                 |               | 254 |
|                                               | Mexico                             |               | 117                                                                                                                                                                 |               | 107 |
|                                               | United      Kingdom                |               |                            - |               | 5 |
|                                               |                               |               |                                                                                                                                                                |               |
| Locations      not within Sears or Wal-Mart stores |                               | 33                 |                                                                                                                                                                | 33                 |
|                                               |                               |               |                                                                                                                                                                |               |
| Total                                              |                               | 3,061              |                                                                                                                                                                | 3,107              |
|                                               |                               |               |                                                                                                                                                                |               |   |   |   |   |

| thousands,      except per share data                                                                     |   | 12      Weeks Ended |   |   | 24      Weeks Ended |   |
|-----------------------------------------------------------------------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|
|                                                                                                      |   | July      19, 2008  |   |   | July      21, 2007  |   |   | July      19, 2008 |   |   | July      21, 2007 |   |
|                                                                                                      |   |                |   |   | (Restated)          |   |   |   |   |   | (Restated) |   |
|                                                                                                      |   |                |   |   |                |   |   |   |   |   |   |   |
| Net      sales                                                                                            |   | $                   | 89,630 |   |                | $      | 68,103 |   |   | $ | 193,074 |   |   | $ | 125,864 |   |
|                                                                                                      |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Cost      and expenses:                                                                                   |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
|           Cost of sales (exclusive of depreciation and amortization shown      below) |   |                | 8,495  |   |                |   | 7,982 |   |   |   | 18,987 |   |   |   | 13,000 |   |
|           Selling, general and administrative expenses                                |   |                | 79,853 |   |                |   | 58,315 |   |   |   | 163,764 |   |   |   | 103,514 |   |
|           Depreciation and amortization                                               |   |                | 5,585  |   |                |   | 6,177 |   |   |   | 13,096 |   |   |   | 9,590 |   |
|           Other charges and impairments                                               |   |                | 318    |   |                |   | 1,417 |   |   |   | 1,112 |   |   |   | 1,445 |   |
|                                                                                                      |   |                | 94,251 |   |                |   | 73,891 |   |   |   | 196,959 |   |   |   | 127,549 |   |
| Loss      from operations                                                                                 |   |                | (4,621 | )      |                |   | (5,785 | ) |   |   | (3,885 | ) |   |   | (1,685 | ) |
|                                                                                                      |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense                                                                                     |   |                | 1,366  |   |                |   | 1,561 |   |   |   | 2,887 |   |   |   | 2,008 |   |
| Interest      income                                                                                      |   |                | 118    |   |                |   | 411 |   |   |   | 480 |   |   |   | 716 |   |
| Other      income (expense), net                                                                          |   |                | (2     | )      |                |   | 52 |   |   |   | 3 |   |   |   | 4 |   |
|                                                                                                      |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Loss      before income tax benefit                                                                       |   |                | (5,871 | )      |                |   | (6,886 | ) |   |   | (6,289 | ) |   |   | (2,973 | ) |
| Income      tax benefit                                                                                   |   |                | (2,270 | )      |                |   | (2,390 | ) |   |   | (2,432 | ) |   |   | (1,032 | ) |
|                                                                                                      |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss from continuing operations                                                                  |   |                | (3,601 | )      |                |   | (4,496 | ) |   |   | (3,857 | ) |   |   | (1,941 | ) |
|                                                                                                      |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss from discontinued operations                                                                |   |                | -      |   |                |   | (105 | ) |   |   | - |   |   |   | (105 | ) |
|                                                                                                      |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| NET      LOSS                                                                                             |   | $                   | (3,601 | )      |                | $      | (4,601 | ) |   | $ | (3,857 | ) |   | $ | (2,046 | ) |
|                                                                                                      |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| NET      LOSS PER COMMON SHARE                                                                            |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                      |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss per share from continuing operations - diluted                                              |   | $                   | (0.56  | )      |                | $      | (0.70 | ) |   | $ | (0.60 | ) |   | $ | (0.30 | ) |
| Net      loss per share from discontinued operations - diluted                                            |   | $                   | -      |   |                | $      | (0.02 | ) |   | $ | - |   |   | $ | (0.02 | ) |
| Net      loss per share - diluted                                                                         |   | $                   | (0.56  | )      |                | $      | (0.72 | ) |   | $ | (0.60 | ) |   | $ | (0.32 | ) |
|                                                                                                      |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |

| ●  | Net      sales for the second quarter of 2008 increased $21.5 million, or 31.6%, to      $89.6 million from the $68.1 million reported in the second quarter of      2007.  The Company believes that both brands’ second quarter      results reflect a challenging economic environment including a substantial      rise in gasoline and food prices, which is affecting discretionary      purchases such as portraiture. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●  | Cost      of sales, excluding depreciation and amortization expense, was $8.5      million in the second quarter of 2008 compared with $8.0 million in the      comparable prior year period.   The increase in cost of      sales is attributable to the inclusion of twelve weeks of PMPS cost      of sales in the second quarter of 2008, compared to only six weeks for the      second quarter of 2007, partially offset by decreased production costs      resulting from lower overall manufacturing production levels,      additional gains in manufacturing productivity, improved product mix      and savings on film and shipping costs that result directly from the PMPS      digital conversion. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | Selling,      general and administrative (“SG&A”) expenses were $79.9 million and      $58.3 million for the second quarter of 2008 and 2007,      respectively.  The increase in second quarter 2008 SG&A      costs is primarily attributable to the inclusion of twelve weeks of PMPS      costs, compared to only six weeks for the second quarter of      2007.  The comparison is also affected by $1.8 million of      digital training and travel costs related to the conversion of PMPS      studios incurred during the quarter, the recording of contingent      commissions due to Sears as a result of the PMPS acquisition as well as      non-recurring reductions in SG&A in the prior year period of      approximately $4.4 million resulting from the deferred revenue purchase      accounting adjustment and $832,000 attributable to a change in the      Company’s vacation and sick pay policy.  These increases were      partially offset by a reduction in expense due to the elimination of      duplicate costs and the streamlining of operations related to the PMPS      brand, as well as reduced host sales commissions due to lower      sales. |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   ● | Depreciation      and amortization was $5.6 million in the second quarter of 2008, compared      to $6.2 million in the comparable quarter of 2007.        Depreciation expense declined as certain assets acquired for the 2004-2005      SPS digital conversion and with the 2007 PCA Acquisition are now fully      depreciated.  This is offset by the inclusion of twelve weeks of      PMPS costs compared to only six weeks in the second quarter of      2007. |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|        ● | In      the second quarter of 2008 and 2007, the Company recognized $318,000 and      $1.4 million, respectively, in other charges and impairments associated      with the PMPS Acquisition, which include severance costs, severance      accruals, cure costs related to contracts assumed and other      integration-related costs relative to the      PMPS Acquisition. |
|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●   | Net      sales for the first half of 2008 increased $67.1 million, or 53.3%, to $193.1 million      from the $126.0 million reported in the first half of      2007.   |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   ● | Cost      of sales, excluding depreciation and amortization expense, was $19.0      million in the first half of 2008 compared with $13.0 million in the      comparable prior year period.  The increase in cost of sales      is attributable to the inclusion of twenty-four weeks of PMPS      cost of sales in the second quarter of 2008, compared to only six weeks      for the second quarter of 2007, partially offset by decreased production      costs resulting from lower overall manufacturing production levels,      additional gains in manufacturing productivity, improved product      mix and savings on film and shipping costs that result directly from the      PMPS digital conversion. |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   ● | Selling,      general and administrative (“SG&A”) expenses were $163.8 million and      $103.5 million for the first half of 2008 and 2007,      respectively.    The increase in first half 2008      SG&A costs is primarily attributable to the inclusion of twenty-four      weeks of PMPS costs, compared to only six weeks in the first half of      2007.  The comparison is also affected by $3.0 million of      digital training and travel costs related to the conversion of PMPS      studios incurred during the first half, the recording of contingent      commissions due to Sears as a result of the PMPS acquisition as well as      non-recurring reductions in SG&A in the prior year period of      approximately $4.4 million from the deferred revenue purchase accounting      adjustment and $1.7 million attributable to a change in the Company’s      vacation and sick pay policy.  These increases were partially      offset by lower studio employment costs and reductions in expense due      to the elimination of duplicate costs and the streamlining of operations      related to the PMPS brand, as well as reduced host sales commissions due      to lower sales. |
|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   ● | Depreciation      and amortization was $13.1 million in the first half of 2008, compared to      $9.6 million in the comparable half of 2007. This increase is      attributable to the inclusion of twenty-four weeks of PMPS costs, compared      to only six weeks in the first half of 2007.  This was partially      offset by a decline in depreciation as certain assets acquired for the      2004-2005 SPS digital conversion and with the 2007 PCA Acquisition are now      fully depreciated. |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   ● | In      the first half of 2008 and 2007, the Company recognized $1.1 million and      $1.4 million, respectively, in other charges and impairments associated      with the PMPS Acquisition, which include severance costs, severance      accruals, cure costs related to contracts assumed and other      integration-related costs relative to the      PMPS Acquisition.    |
|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| thousands                                          |   | 24      Weeks Ended |    |
|----------------------------------------------------|--------|---------------------|---------|
|                                               |   | July      19, 2008  |    |   | July      21, 2007 |   |
|                                               |   |                |    |   | (Restated) |   |
| Net      cash (used in) provided by:               |   |                |    |   |   |   |
|           Operating activities |   | $                   | (4,950  | ) |   | $ | 8,199 |   |
|           Financing activities |   |                | (10,312 | ) |   |   | 94,104 |   |
|           Investing activities |   |                | (24,788 | ) |   |   | (86,110 | ) |
| Effect      of exchange rate changes on cash       |   |                | 150     |   |   |   | 154 |   |
|                                               |   |                |    |   |   |   |   |   |
| Net      (decrease) increase in cash               |   | $                   | (39,900 | ) |   | $ | 16,347 |   |
|                                               |   |                |    |   |   |   |   |   |

Item3

| Notional      amount        |   | $                       | 57,500,000 |   |
|-----------------------------|--------|-------------------------|------------|--------|
|                        |   |                    |       |   |
| Fixed      rate paid        |   |                    | 4.97       | %      |
|                        |   |                    |       |   |
| Variable      rate received |   |                    | 2.48       | %      |
|                        |   |                    |       |   |
| Effective      date         |   | September      17, 2007 |       |
|                        |   |                    |       |   |
| Expiration      date        |   | September      17, 2010 |       |

Item4.                      Controlsand Procedures

| a)   | Evaluation      of disclosure controls andprocedures |
|----------------|------------------------------------------------------|

|  ● | Implementing      effective controls over tax depreciation amounts, which include the timely      resolution of reconciling items between the Company’s tax returns, the      Company’s tax depreciation records, and the calculations of deferred taxes      and income tax expense. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  ● | Establishing      management monitoring controls to ensure those reconciliation controls are      designed and operating effectively. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------|

|  ● | Establishing      policies and procedures to ensure the fair value of the interest rate swap      is properly determined andrecorded. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------|

|  ● | Establishing      management monitoring controls to policies and procedures over determining      and recording of the interest rate swap is designed and operating      effectively. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  ● | Establishing      policies and procedures to ensure the accrual for unpaid advertising costs      is properly determined andrecorded. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------|

|  ● | Establishing      management monitoring controls for policies and procedures over the      determination and recording of the advertising accrual to ensure controls      are designed and operatingeffectively. |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

PART II. 

| Name                      |   | Shares      For |   | Shares      Withheld |   | Broker      Non-Votes                                                                                                                                                                                                                 |
|---------------------------|--------|-----------------|--------|----------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |   |            |   |                 |   |                                                                                                                                                                                                                                  |
| James      J. Abel        |   | 4,335,357       |   | 21,011               |   |                                       - |
| Peter      A. Feld *      |   | 4,335,068       |   | 21,299               |   |                                       - |
| Michael      S. Koeneke   |   | 4,016,949       |   | 339,419              |   |                                       - |
| David      M. Meyer       |   | 4,335,218       |   | 21,150               |   |                                       - |
| John      Turner White IV |   | 4,335,357       |   | 21,011               |   |                                       - |

|   | * | Mr.      Peter A. Feld was elected to replace Mr. Mark R. Mitchell.  Mr.      Mark R. Mitchell, Board member since 2004, chose not to stand for      re-election. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| For                                                                                                                                                             |   | Against                                                                              |   | Abstain                                                                                         |   | Broker      Non-Votes                                                                                                                                                     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                            |   |                                                                                 |   |                                                                                            |   |                                                                                                                                                                      |
|                          3,496,450 |   |              47,331 |   |                1,476 |   |                            811,109 |

| For                                                                                                                                                             |   | Against                                                                                         |   | Abstain                                                                                         |   | Broker      Non-Votes                                                                                                                                                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                            |   |                                                                                            |   |                                                                                            |   |                                                                                                                                                                                                                                  |
|                          4,353,639 |   |                1,321 |   |                1,406 |   |                                       - |

 

| 11.1   |   | Computation      of Per Common Share Loss - Diluted - for the 12 and 24 weeks ended July      19, 2008 and July 21, 2007 (Restated). |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                 |
| 11.2   |   | Computation      of Per Common Share Loss - Basic - for the 12 and 24 weeks ended July 19,      2008 and July 21, 2007 (Restated).   |
|   |   |                                                                                                                                 |
| 31.1   |   | Certification      Pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934      by the Chief Executive Officer.     |
|   |   |                                                                                                                                 |
| 31.2   |   | Certification      Pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934      by the Chief Financial Officer.     |
|   |   |                                                                                                                                 |
| 32.0   |   | Certification      Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of      the Sarbanes-Oxley Act of 2002     |
|   |   | by      the Chief Executive Officer and the Chief Financial    Officer.                                                              |