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| 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) |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------|

| Registrant’s telephone number, including area code: 314/231-1575 |
|------------------------------------------------------------------------|

| Securities registered pursuant to Section 12(b) of the Act:  |
|-------------------------------------------------------------------|
| Title of each classCommon Stock, par value $0.40 per share        | Name of each exchange on which registeredNew York Stock Exchange |

| Securities registered pursuant to Section 12(g) of the Act: None  |
|------------------------------------------------------------------------|

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| PART I.       |   | FINANCIAL INFORMATION |   | Page                                                                    |
|---------------|--------|-----------------------|--------|-------------------------------------------------------------------------|
|          |   |                  |   |                                                                    |
|          |   | Item 1.               |   | Financial Statements:                                                   |   |   |
|          |   |                  |   |                                                                    |   |   |
|          |   |                  |   | Interim Consolidated Balance Sheets                                     |   |   |
|          |   |                  |   | July 25, 2009 (Unaudited) and February 7, 2009                          |   | 1 |
|          |   |                  |   |                                                                    |   |   |
|          |   |                  |   | Interim Consolidated Statements of Operations (Unaudited)               |   |   |
|          |   |                  |   | 12 and 24 weeks Ended July 25, 2009 and July 19, 2008                   |   | 3 |
|          |   |                  |   |                                                                    |   |   |
|          |   |                  |   | Interim Consolidated Statement of Changes in Stockholders'              |   |   |
|          |   |                  |   | Equity (Unaudited) 24 weeks Ended July 25, 2009                         |   | 4 |
|          |   |                  |   |                                                                    |   |   |
|          |   |                  |   | Interim Consolidated Statements of Cash Flow (Unaudited)                |   |   |
|          |   |                  |   | 24 weeks Ended July 25, 2009 and July 19, 2008                          |   | 5 |
|          |   |                  |   |                                                                    |   |   |
|          |   |                  |   | Notes to Interim Consolidated Financial Statements (Unaudited)          |   | 7 |
|          |   |                  |   |                                                                    |   |   |
|          |   | Item 2.               |   | Management's Discussion and Analysis of Financial Condition and Results |   |   |
|          |   |                  |   | of Operations                                                           |   | 18 |
|          |   |                  |   |                                                                    |   |   |
|          |   | Item 3.               |   | Quantitative and Qualitative Disclosures about Market Risk              |   | 25 |
|          |   |                  |   |                                                                    |   |   |
|          |   | Item 4.               |   | Controls and Procedures                                                 |   | 26 |
|          |   |                  |   |                                                                    |   |   |
| PART II.      |   | OTHER INFORMATION     |   |                                                                    |
|          |   |                  |   |                                                                    |   |   |
|          |   | Item 4.               |   | Submission of Matters to a Vote of Security Holders                     |   | 27 |
|          |   |                  |   |                                                                    |   |   |
|          |   | Item 6.               |   | Exhibits                                                                |   | 27 |
|          |   |                  |
| SIGNATURES    |   |                  |   | 28                                                                      |
|          |   |                  |
| EXHIBIT INDEX |   |                  |   | 29                                                                      |

| PART I. |   | FINANCIAL INFORMATION |
|---------|--------|-----------------------|

| Item 1. |   | Financial Statements |
|---------|--------|----------------------|

Balance Sheets - Assets

| in thousands                                                                       |   | July 25, 2009 |    |   | February 7, 2009 |   |
|------------------------------------------------------------------------------------|--------|---------------|---------|--------|------------------|--------|
|                                                                               |   | (Unaudited)   |    |   |             |   |
| ASSETS                                                                             |   |          |    |   |             |   |
| Current assets:                                                                    |   |          |    |   |             |   |
|      Cash and cash equivalents                                 |   | $             | 15,052  |   |             | $      | 23,665 |   |
|      Accounts receivable:                                      |   |          |    |   |             |   |   |   |
|           Trade                       |   |          | 6,400   |   |             |   | 6,050 |   |
|           Other                       |   |          | 2,980   |   |             |   | 923 |   |
|      Inventories                                               |   |          | 8,200   |   |             |   | 8,489 |   |
|      Prepaid expenses and other current assets                 |   |          | 7,192   |   |             |   | 5,800 |   |
|      Refundable income taxes                                   |   |          | 709     |   |             |   | 357 |   |
|      Deferred tax assets                                       |   |          | 8,105   |   |             |   | 9,581 |   |
|      Assets held for sale                                      |   |          | 5,820   |   |             |   | 6,615 |   |
|                                                                               |   |          |    |   |             |   |   |   |
|      Total current assets                                      |   |          | 54,458  |   |             |   | 61,480 |   |
|                                                                               |   |          |    |   |             |   |   |   |
| Property and equipment:                                                            |   |          |    |   |             |   |   |   |
|      Land                                                      |   |          | 3,031   |   |             |   | 3,249 |   |
|      Buildings and building improvements                       |   |          | 28,751  |   |             |   | 32,377 |   |
|      Leasehold improvements                                    |   |          | 4,630   |   |             |   | 4,406 |   |
|      Photographic, sales and manufacturing equipment           |   |          | 178,485 |   |             |   | 178,732 |   |
|           Total                       |   |          | 214,897 |   |             |   | 218,764 |   |
|      Less accumulated depreciation and amortization            |   |          | 172,511 |   |             |   | 167,877 |   |
|           Property and equipment, net |   |          | 42,386  |   |             |   | 50,887 |   |
| Prepaid debt fees                                                                  |   |          | 2,776   |   |             |   | 2,262 |   |
| Goodwill                                                                           |   |          | 21,696  |   |             |   | 21,459 |   |
| Intangible assets, net                                                             |   |          | 39,894  |   |             |   | 40,206 |   |
| Deferred tax assets                                                                |   |          | 10,895  |   |             |   | 8,359 |   |
| Other assets                                                                       |   |          | 7,896   |   |             |   | 8,202 |   |
|                                                                               |   |          |    |   |             |   |   |   |
|      TOTAL ASSETS                                              |   | $             | 180,001 |   |             | $      | 192,855 |   |
|                                                                               |   |          |    |   |             |   |   |   |

| in thousands, except share and per share data                                                   |   | July 25, 2009 |    |   | February 7, 2009 |   |
|-------------------------------------------------------------------------------------------------|--------|---------------|---------|--------|------------------|--------|
|                                                                                            |   | (Unaudited)   |    |   |             |   |
| LIABILITIES                                                                                     |   |          |    |   |             |   |
| Current liabilities:                                                                            |   |          |    |   |             |   |
|      Current maturities of long-term debt                                   |   | $             | 10,000  |   |             | $      | 1,150 |   |
|      Accounts payable                                                       |   |          | 10,403  |   |             |   | 6,816 |   |
|      Accrued employment costs                                               |   |          | 10,608  |   |             |   | 10,146 |   |
|      Customer deposit liability                                             |   |          | 13,672  |   |             |   | 12,503 |   |
|      Sales taxes payable                                                    |   |          | 2,581   |   |             |   | 5,284 |   |
|      Accrued advertising expenses                                           |   |          | 2,719   |   |             |   | 978 |   |
|      Accrued expenses and other liabilities                                 |   |          | 10,643  |   |             |   | 18,133 |   |
|                                                                                            |   |          |    |   |             |   |   |   |
|      Total current liabilities                                              |   |          | 60,626  |   |             |   | 55,010 |   |
|                                                                                            |   |          |    |   |             |   |   |   |
| Long-term debt, less current maturities                                                         |   |          | 88,458  |   |             |   | 104,578 |   |
| Accrued pension plan obligations                                                                |   |          | 10,058  |   |             |   | 10,591 |   |
| Other liabilities                                                                               |   |          | 20,064  |   |             |   | 21,841 |   |
|                                                                                            |   |          |    |   |             |   |   |   |
|      Total liabilities                                                      |   |          | 179,206 |   |             |   | 192,020 |   |
|                                                                                            |   |          |    |   |             |   |   |   |
| CONTINGENCIES (see Note 13)                                                                     |   |          |    |   |             |   |   |   |
|                                                                                            |   |          |    |   |             |   |   |   |
| 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; 9,175,640 and 17,089,788           |   |          |    |   |             |   |   |   |
|      shares outstanding at July 25, 2009 and February 7, 2009, respectively |   |          | 3,670   |   |             |   | 6,836 |   |
| Additional paid-in capital                                                                      |   |          | 28,304  |   |             |   | 55,413 |   |
| Retained earnings                                                                               |   |          | 28,874  |   |             |   | 183,704 |   |
| Accumulated other comprehensive loss                                                            |   |          | (10,921 | )      |             |   | (13,114 | ) |
|                                                                                            |   |          | 49,927  |   |             |   | 232,839 |   |
| Treasury stock - at cost, 2,175,591 and 10,270,319 shares at July 25, 2009 and                  |   |          |    |   |             |   |   |   |
|      February 7, 2009, respectively                                         |   |          | (49,132 | )      |             |   | (232,004 | ) |
|                                                                                            |   |          |    |   |             |   |   |   |
|      Total stockholders' equity                                             |   |          | 795     |   |             |   | 835 |   |
|                                                                                            |   |          |    |   |             |   |   |   |
|      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             |   | $             | 180,001 |   |             | $      | 192,855 |   |
|                                                                                            |   |          |    |   |             |   |   |   |

Statements of Operations

| in thousands, except share and per share data                                                   |   | 12 Weeks Ended |      |   | 24 Weeks Ended |   |
|-------------------------------------------------------------------------------------------------|--------|----------------|-----------|--------|----------------|--------|
|                                                                                            |   | July 25, 2009  |      |   | July 19, 2008  |   |   | July 25, 2009 |   |   | July 19, 2008 |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |
| Net sales                                                                                       |   | $              | 81,377    |   |           | $      | 89,562 |   |   | $ | 174,844 |   |   | $ | 192,930 |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Cost and expenses:                                                                              |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
|      Cost of sales (exclusive of depreciation and amortization shown below) |   |           | 6,682     |   |           |   | 8,863 |   |   |   | 13,641 |   |   |   | 19,627 |   |
|      Selling, general and administrative expenses                           |   |           | 70,358    |   |           |   | 78,118 |   |   |   | 145,512 |   |   |   | 160,706 |   |
|      Depreciation and amortization                                          |   |           | 5,552     |   |           |   | 5,565 |   |   |   | 11,591 |   |   |   | 13,058 |   |
|      Other charges and impairments                                          |   |           | 2,187     |   |           |   | 1,334 |   |   |   | 2,607 |   |   |   | 2,853 |   |
|                                                                                            |   |           | 84,779    |   |           |   | 93,880 |   |   |   | 173,351 |   |   |   | 196,244 |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income from operations                                                                   |   |           | (3,402    | )      |           |   | (4,318 | ) |   |   | 1,493 |   |   |   | (3,314 | ) |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                                                |   |           | 1,928     |   |           |   | 1,366 |   |   |   | 3,418 |   |   |   | 2,887 |   |
| Interest income                                                                                 |   |           | 118       |   |           |   | 118 |   |   |   | 240 |   |   |   | 480 |   |
| Other income (expense), net                                                                     |   |           | 7         |   |           |   | (2 | ) |   |   | 16 |   |   |   | 3 |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Loss before income tax benefit                                                                  |   |           | (5,205    | )      |           |   | (5,568 | ) |   |   | (1,669 | ) |   |   | (5,718 | ) |
| Income tax benefit                                                                              |   |           | (1,776    | )      |           |   | (2,156 | ) |   |   | (570 | ) |   |   | (2,218 | ) |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Net loss from continuing operations                                                             |   |           | (3,429    | )      |           |   | (3,412 | ) |   |   | (1,099 | ) |   |   | (3,500 | ) |
| Net loss from discontinued operations                                                           |   |           | -         |   |           |   | (189 | ) |   |   | - |   |   |   | (357 | ) |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| NET LOSS                                                                                        |   | $              | (3,429    | )      |           | $      | (3,601 | ) |   | $ | (1,099 | ) |   | $ | (3,857 | ) |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| NET LOSS PER COMMON SHARE                                                                       |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Net loss per share from continuing operations - diluted                                         |   | $              | (0.49     | )      |           | $      | (0.53 | ) |   | $ | (0.16 | ) |   | $ | (0.54 | ) |
| Net loss per share from discontinued operations - diluted                                       |   |           | -         |   |           |   | (0.03 | ) |   |   | - |   |   |   | (0.06 | ) |
| Net loss per share - diluted                                                                    |   | $              | (0.49     | )      |           | $      | (0.56 | ) |   | $ | (0.16 | ) |   | $ | (0.60 | ) |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Net loss per share from continuing operations - basic                                           |   | $              | (0.49     | )      |           | $      | (0.53 | ) |   | $ | (0.16 | ) |   | $ | (0.54 | ) |
| Net loss per share from discontinued operations - basic                                         |   |           | -         |   |           |   | (0.03 | ) |   |   | - |   |   |   | (0.06 | ) |
| Net loss per share - basic                                                                      |   | $              | (0.49     | )      |           | $      | (0.56 | ) |   | $ | (0.16 | ) |   | $ | (0.60 | ) |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average number of common and common equivalent                                         |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
|      shares outstanding - diluted                                           |   |           | 7,005,244 |   |           |   | 6,468,062 |   |   |   | 6,977,021 |   |   |   | 6,459,256 |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average number of common and common equivalent                                         |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
|      shares outstanding - basic                                             |   |           | 7,005,244 |   |           |   | 6,468,062 |   |   |   | 6,977,021 |   |   |   | 6,459,256 |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |

Changes in Stockholders’ Equity

| in 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 7, 2009                                                                                            |   | $      | 6,836  |   |       | $      | 55,413  |     |   | $      | 183,704       |   |   | $        | (13,114 | )      |   | $      | (232,004 | ) |   | $ | 835 |   |
|                                                                                                                   |   |   |   |   |       |   |    |     |   |   |          |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                                               |   |   | -      |   |       |   | -       |     |   |   | (1,099        | )      |   |     | -       |   |   |   | - |   |   |   | (1,099 | ) |
| Total other comprehensive income                                                                                       |   |   | -      |   |       |   | -       |     |   |   | -             |   |   |     | 2,193   |   |   |   | - |   |   |   | 2,193 |   |
|                                                                                                                   |   |   |   |   |       |   |    |     |   |   |          |   |   |     |    |   |   |   |   |   |   |   |   |   |
|      Total comprehensive income                                                                    |   |   |   |   |       |   |    |     |   |   |          |   |   |     |    |   |   |   |   |   |   |   | 1,094 |   |
| Surrender of employee shares to satisfy       personal tax liabilities upon vesting of   |   |   |   |   |       |   |    |     |   |   |          |   |   |     |    |   |   |   |   |   |   |   |   |   |
|     formerly restricted shares (4,721)                                                                  |   |   | -      |   |       |   | -       |     |   |   | -             |   |   |     | -       |   |   |   | (30 | )  |   |   | (30 | ) |
| Retirement of treasury stock (8,000,000 shares, at      average  cost)                        |   |   | (3,200 | )      |       |   | (25,939 | )        |   |   | (151,527      | )      |   |     | -       |   |   |   | 180,666 |   |   |   | - |   |
| Issuance of common stock and restricted stock        awards, net of forfeitures (81,248) |   |   | 34     |   |       |   | (1,660  | )   |   |   | -             |   |   |     | -       |   |   |   | 2,236 |   |   |   | 610 |   |
| Stock-based compensation recognized                                                                                    |   |   | -      |   |       |   | 490     |     |   |   | -             |   |   |     | -       |   |   |   | - |   |   |   | 490 |   |
| Dividends ($0.32 per common share)                                                                                     |   |   | -      |   |       |   | -       |     |   |   | (2,204        | )      |   |     | -       |   |   |   | - |   |   |   | (2,204 | ) |
|                                                                                                                   |   |   |   |   |       |   |    |     |   |   |          |   |   |     |    |   |   |   |   |   |   |   |   |   |
| Balance at July 25, 2009                                                                                               |   | $      | 3,670  |   |       | $      | 28,304  |     |   | $      | 28,874        |   |   | $        | (10,921 | )      |   | $      | (49,132 | ) |   | $ | 795 |   |
|                                                                                                                   |   |   |   |   |       |   |    |     |   |   |          |   |   |     |    |   |   |   |   |   |   |   |   |   |

Cash Flows

| in thousands                                                                              |   | 24 Weeks Ended |   |
|-------------------------------------------------------------------------------------------|--------|----------------|--------|
|                                                                                      |   | July 25, 2009  |   |   | July 19, 2008 |   |
| Reconciliation of net loss to cash flows provided by (used in) operating activities:      |   |           |   |   |   |   |
|                                                                                      |   |           |   |   |   |   |
| Net loss                                                                                  |   | $              | (1,099 | ) |   | $ | (3,857 | ) |
|                                                                                      |   |           |   |   |   |   |   |   |
| Adjustments for items not requiring (providing) cash:                                     |   |           |   |   |   |   |   |   |
|      Depreciation and amortization                                    |   |           | 11,591 |   |   |   | 13,058 |   |
|      Loss from discontinued operations                                |   |           | -      |   |   |   | 357 |   |
|      Stock-based compensation expense                                 |   |           | 490    |   |   |   | 250 |   |
|      Loss on disposition of property and equipment                    |   |           | 234    |   |   |   | 487 |   |
|      Deferred income tax provision                                    |   |           | (537   | ) |   |   | (2,719 | ) |
|      Pension, supplemental retirement plan and profit sharing expense |   |           | 403    |   |   |   | 995 |   |
|      Other                                                            |   |           | 428    |   |   |   | 305 |   |
|                                                                                      |   |           |   |   |   |   |   |   |
| Increase (decrease) in cash flow from operating assets and liabilities:                   |   |           |   |   |   |   |   |   |
|      Accounts receivable                                              |   |           | (2,350 | ) |   |   | 2,318 |   |
|      Inventories                                                      |   |           | 453    |   |   |   | 2,772 |   |
|      Prepaid expenses and other current assets                        |   |           | (1,230 | ) |   |   | (1,141 | ) |
|      Accounts payable                                                 |   |           | 3,553  |   |   |   | (3,959 | ) |
|      Contribution to pension plan                                     |   |           | (626   | ) |   |   | (928 | ) |
|      Accrued expenses and other liabilities                           |   |           | (8,276 | ) |   |   | (8,452 | ) |
|      Income taxes payable                                             |   |           | (348   | ) |   |   | (692 | ) |
|      Deferred revenues and related costs                              |   |           | 814    |   |   |   | (2,787 | ) |
|      Other                                                            |   |           | (1,237 | ) |   |   | (638 | ) |
|                                                                                      |   |           |   |   |   |   |   |   |
| Cash flows provided by (used in) continuing operations                                    |   |           | 2,263  |   |   |   | (4,631 | ) |
|                                                                                      |   |           |   |   |   |   |   |   |
| Cash flows used in discontinued operations                                                |   |           | -      |   |   |   | (319 | ) |
|                                                                                      |   |           |   |   |   |   |   |   |
| Cash flows provided by (used in) operating activities                                     |   |           | 2,263  |   |   |   | (4,950 | ) |
|                                                                                      |   |           |   |   |   |   |   |   |

| in thousands                                                                                       |   | 24 Weeks Ended |    |
|----------------------------------------------------------------------------------------------------|--------|----------------|---------|
|                                                                                               |   | July 25, 2009  |    |   | July 19, 2008 |   |
|                                                                                               |   |           |    |   |   |   |
| Cash flows provided by (used in) operating activities                                              |   |           | 2,263   |   |   |   | (4,950 | ) |
|                                                                                               |   |           |    |   |   |   |   |   |
| Cash flows used in financing activities:                                                           |   |           |    |   |   |   |   |   |
|      Repayment of long-term debt                                               |   |           | (7,270  | ) |   |   | (8,122 | ) |
|      Payment of debt issuance costs                                            |   |           | (943    | ) |   |   | - |   |
|      Cash dividends                                                            |   |           | (2,204  | ) |   |   | (2,060 | ) |
|      Other                                                                     |   |           | (20     | ) |   |   | (130 | ) |
|      Cash flows used in financing activities                                   |   |           | (10,437 | ) |   |   | (10,312 | ) |
|                                                                                               |   |           |    |   |   |   |   |   |
| Cash flows (used in) provided by investing activities:                                             |   |           |    |   |   |   |   |   |
|      Additions to property and equipment                                       |   |           | (2,234  | ) |   |   | (24,990 | ) |
|      Proceeds from sale of property and equipment                              |   |           | 1,320   |   |   |   | 2 |   |
|      Adjustments related to the acquisition of certain net assets of Portrait  |   |           |    |   |   |   |   |   |
|           Corporation of America, Inc.                |   |           | -       |   |   |   | 147 |   |
|      Other                                                                     |   |           | 82      |   |   |   | 53 |   |
|      Cash flows used in investing activities                                   |   |           | (832    | ) |   |   | (24,788 | ) |
|                                                                                               |   |           |    |   |   |   |   |   |
| Effect of exchange rate changes on cash and cash equivalents                                       |   |           | 393     |   |   |   | 150 |   |
|                                                                                               |   |           |    |   |   |   |   |   |
| Net decrease in cash and cash equivalents                                                          |   |           | (8,613  | ) |   |   | (39,900 | ) |
|                                                                                               |   |           |    |   |   |   |   |   |
| Cash and cash equivalents at beginning of period                                                   |   |           | 23,665  |   |   |   | 59,177 |   |
|                                                                                               |   |           |    |   |   |   |   |   |
| Cash and cash equivalents at end of period                                                         |   | $              | 15,052  |   |   | $ | 19,277 |   |
|                                                                                               |   |           |    |   |   |   |   |   |
| Supplemental cash flow information:                                                                |   |           |    |   |   |   |   |   |
|      Interest paid                                                             |   | $              | 3,451   |   |   | $ | 3,866 |   |
|                                                                                               |   |           |    |   |   |   |   |   |
|      Income taxes paid, net                                                    |   | $              | 216     |   |   | $ | 949 |   |
|                                                                                               |   |           |    |   |   |   |   |   |
| Supplemental non-cash financing activities:                                                        |   |           |    |   |   |   |   |   |
|      Issuance of treasury stock under the Employee Profit Sharing Plan         |   | $              | 594     |   |   | $ | 521 |   |
|                                                                                               |   |           |    |   |   |   |   |   |
|      Issuance of restricted stock and stock options to employees and directors |   | $              | 728     |   |   | $ | 756 |   |
|                                                                                               |   |           |    |   |   |   |   |   |

Notes

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

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

| NOTE 3   - | FAIR VALUE MEASUREMENTS |
|---------------------------|-------------------------|

| 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 the model. |

|                   |   | Fair Value Measurements |   |
|------------------------|--------|-------------------------|--------|
|                   |   | Level 1                 |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Liabilities            |   |                    |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap (1) |   | $                       | -      |   |   | $ | 3.0 |   |   | $ | - |   |   | $ | 3.0 |   |
|                   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                         (1) | The total fair value of the interest rate swap is included in Other Liabilities as of July 25, 2009.  This financial instrument was valued using the “income approach” valuation technique.  This method used valuation techniques toconvert 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.  Accordingly, the fair marketvalue is estimated to approximate the recorded value of this instrument.  The fair value of the interest rate swap at July 25, 2009, and February 7, 2009, was $3.0 million and $3.5 million, respectively. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| in thousands                          |   | 12 Weeks Ended |   |   | 24 Weeks Ended |   |
|---------------------------------------|--------|----------------|--------|--------|----------------|--------|
|                                  |   | July 19, 2008  |   |   | July 19, 2008  |   |
| Discontinued operations:              |   |           |   |   |           |   |
|                                  |   |           |   |   |           |   |
| Net sales                             |   | $              | 68     |   |           | $      | 144 |   |
|                                  |   |           |   |   |           |   |   |   |
| Operating loss                        |   | $              | 303    |   |           | $      | 571 |   |
| Tax benefit                           |   |           | 114    |   |           |   | 214 |   |
|                                  |   |           |   |   |           |   |   |   |
| Net loss from discontinued operations |   | $              | 189    |   |           | $      | 357 |   |
|                                  |   |           |   |   |           |   |   |   |

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

| in thousands                              |   | July 25, 2009 |   |   | February 7, 2009 |   |
|-------------------------------------------|--------|---------------|--------|--------|------------------|--------|
|                                      |   |          |   |   |             |   |
| Raw materials - film, paper and chemicals |   | $             | 2,212  |   |             | $      | 2,724 |   |
| Portraits in process                      |   |          | 1,237  |   |             |   | 1,313 |   |
| Finished portraits pending delivery       |   |          | 274    |   |             |   | 261 |   |
| Frames and accessories                    |   |          | 429    |   |             |   | 426 |   |
| Studio supplies                           |   |          | 3,029  |   |             |   | 2,495 |   |
| Equipment repair parts and supplies       |   |          | 593    |   |             |   | 878 |   |
| Other                                     |   |          | 426    |   |             |   | 392 |   |
|                                      |   |          |   |   |             |   |   |   |
| Total                                     |   | $             | 8,200  |   |             | $      | 8,489 |   |
|                                      |   |          |   |   |             |   |   |   |

| NOTE 6   - | ASSETS HELD FOR SALE  |
|---------------------------|----------------------------|

| in thousands                        |   | July 25, 2009 |   |   | February 7, 2009 |   |
|-------------------------------------|--------|---------------|--------|--------|------------------|--------|
|                                |   |          |   |   |             |   |
| Land                                |   | $             | 1,493  |   |             | $      | 1,473 |   |
| Buildings and building improvements |   |          | 4,327  |   |             |   | 5,142 |   |
|                                |   |          |   |   |             |   |   |   |
| Assets held for sale                |   | $             | 5,820  |   |             | $      | 6,615 |   |
|                                |   |          |   |   |             |   |   |   |

| NOTE 7   - | GOODWILL AND INTANGIBLE ASSETS  |
|---------------------------|--------------------------------------|

| in  thousands                |   | July 25, 2009 |   |   | February 7, 2009 |   |
|----------------------------------------|--------|---------------|--------|--------|------------------|--------|
|                                   |   |          |   |   |             |   |
| PCA Acquisition                        |   | $             | 21,227 |   |             | $      | 21,227 |   |
|                                   |   |          |   |   |             |   |   |   |
| Goodwill from prior acquisitions       |   |          | 512    |   |             |   | 512 |   |
|                                   |   |          |   |   |             |   |   |   |
| Translation impact on foreign balances |   |          | (43    | )      |             |   | (280 | ) |
|                                   |   | $             | 21,696 |   |             | $      | 21,459 |   |
|                                   |   |          |   |   |             |   |   |   |

|  in thousands      |   | Net Balance at Beginning of Period |   |   | Amortization |   |   | Translation Impact of Foreign Balances |   |   | Net Balance at End of Period |   |
|-------------------------|--------|------------------------------------|--------|--------|--------------|--------|--------|----------------------------------------|--------|--------|------------------------------|--------|
|                    |   |                               |   |   |         |   |   |                                   |   |   |                         |   |
| Acquired host agreement |   | $                                  | 39,398 |   |         | $      | (923   | )                                      |   | $      | 780                          |   |   | $ | 39,255 |   |
| Acquired customer list  |   |                               | 808    |   |         |   | (183   | )                                      |   |   | 14                           |   |   |   | 639 |   |
|                    |   | $                                  | 40,206 |   |         | $      | (1,106 | )                                      |   | $      | 794                          |   |   | $ | 39,894 |   |
|                    |   |                               |   |   |         |   |   |                                   |   |   |                         |   |   |   |   |   |

| NOTE 8   - | OTHER ASSETS AND OTHER LIABILITIES  |
|---------------------------|------------------------------------------|

| NOTE 9   - | BORROWINGS  |
|---------------------------|------------------|

| NOTE 10   - | STOCK-BASED COMPENSATION PLANS AND STOCKHOLDERS' EQUITY  |
|----------------------------|---------------------------------------------------------------|

|                                                                                                                                                                                                |   | Options Outstanding and Exercisable                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|
| Range of Exercise Prices                                                                                                                                                                            |   | Number ofShares Outstanding                                                                                         |   | Weighted-AverageRemaining Contractual Life (Years) |   | Weighted-AverageExercise Price |   | Number ofShares Exercisable |   | Weighted-Average Exercise Price |
| $                               12.21 - 13.58 |   |                217,500                   |   |                                 7.72 |   |  $                                  13.04 |   |                             - |   |  $                                          - |
|                                                                                                                                                                                                |   |                                                                                                                |   |   |   |   |   |   |   |   |
| Total                                                                                                                                                                                               |   |                   217,500 |   |                                 7.72 |   |  $                                  13.04 |   |                                   - |   |  $                                          - |
|                                                                                                                                                                                                |   |                                                                                                                |   |   |   |   |   |   |   |   |   |   |

| Options Outstanding and Exercisable |   |
|-------------------------------------|--------|
|                                |   |   |   |   |   | Weighted-Average |   |   |   |   |
|                                |   |   |   |   |   | Remaining Contractual |   |   | Weighted-Average |   |
| Exercise Price                      |   |   | Shares |   |   | Life (Years) |   |   | Exercise Price |   |
| $                                   | 12.96  |   |   |   | 10,046 |   |   |   | 1.24 |   |   | $ | 12.96 |   |
|                                | 17.00  |   |   |   | 5,000 |   |   |   | 0.72 |   |   |   | 17.00 |   |
|                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                               |   |   |   | 15,046 |   |   |   | 1.07 |   |   | $ | 14.30 |   |
|                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                     |   | 24 Weeks Ended July 25, 2009 |    |
|------------------------------------------|--------|------------------------------|---------|
|                                     |   |                         |    |   | Weighted-Average |   |
|                                     |   | Shares                       |    |   | Grant-Date Value |   |
| Nonvested stock, beginning of period     |   |                         | 1,056   |   |   | $ | 18.95 |   |
| Granted                                  |   |                         | 88,701  |   |   |   | 8.21 |   |
| Vested                                   |   |                         | (19,903 | ) |   |   | 8.95 |   |
| Forfeited                                |   |                         | (5,252  | ) |   |   | 6.70 |   |
|                                     |   |                         |    |   |   |   |   |   |
| Nonvested stock, end of period           |   |                         | 64,602  |   |   | $ | 8.83 |   |
|                                     |   |                         |    |   |   |   |   |   |
| Stock-based compensation expense related |   |                         |    |   |   |   |   |   |
| to nonvested stock                       |   | $                            | 399,113 |   |   |   |   |   |
|                                     |   |                         |    |   |   |   |   |   |

| NOTE 11   - | EMPLOYEE BENEFIT PLANS  |
|----------------------------|------------------------------|

| in thousands                                                |   | 12 Weeks Ended |   |   | 12 Weeks Ended               |   |
|-------------------------------------------------------------|--------|----------------|--------|--------|------------------------------|--------|
|                                                        |   | Pension Plan   |   |   | Supplemental Retirement Plan |   |
|                                                        |   | July 25, 2009  |   |   | July 19, 2008                |   |   | July 25, 2009 |   |   | July 19, 2008 |   |
| Components of net periodic benefit costs:                   |   |           |   |   |                         |   |   |   |   |   |   |   |
|      Service cost                       |   | $              | -      |   |                         | $      | 62 |   |   | $ | - |   |   | $ | 16 |   |
|      Interest cost                      |   |           | 713    |   |                         |   | 691 |   |   |   | 19 |   |   |   | 49 |   |
|      Expected return on plan assets     |   |           | (725   | )      |                         |   | (746 | ) |   |   | - |   |   |   | - |   |
|      Amortization of prior service cost |   |           | -      |   |                         |   | 10 |   |   |   | - |   |   |   | 7 |   |
|      Amortization of net loss (gain)    |   |           | 59     |   |                         |   | 161 |   |   |   | (35 | ) |   |   | (13 | ) |
|                                                        |   |           |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |
|      Net periodic benefit cost          |   | $              | 47     |   |                         | $      | 178 |   |   | $ | (16 | ) |   | $ | 59 |   |
|                                                        |   |           |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |

| in thousands                                          |   | 24 Weeks Ended |   |   | 24 Weeks Ended               |   |
|-------------------------------------------------------|--------|----------------|--------|--------|------------------------------|--------|
|                                                  |   | Pension Plan   |   |   | Supplemental Retirement Plan |   |
|                                                  |   | July 25, 2009  |   |   | July 19, 2008                |   |   | July 25, 2009 |   |   | July 19, 2008 |   |
| Components of net periodic benefit costs:             |   |           |   |   |                         |   |   |   |   |   |   |   |
|     Service cost                       |   | $              | -      |   |                         | $      | 124 |   |   | $ | - |   |   | $ | 33 |   |
|     Interest cost                      |   |           | 1,427  |   |                         |   | 1,382 |   |   |   | 39 |   |   |   | 98 |   |
|     Expected return on plan assets     |   |           | (1,451 | )      |                         |   | (1,492 | ) |   |   | - |   |   |   | - |   |
|     Amortization of prior service cost |   |           | -      |   |                         |   | 20 |   |   |   | - |   |   |   | 14 |   |
|     Amortization of net loss (gain)    |   |           | 118    |   |                         |   | 322 |   |   |   | (70 | ) |   |   | (28 | ) |
|                                                  |   |           |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |
|      Net periodic benefit cost    |   | $              | 94     |   |                         | $      | 356 |   |   | $ | (31 | ) |   | $ | 117 |   |
|                                                  |   |           |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |

| NOTE 12   - | INCOME TAXES |
|----------------------------|--------------|

| ·  | Unrecognized tax benefits were approximately $2.7 million at both July 25, 2009, and February 7, 2009.  If these unrecognized tax benefits were recognized, approximately $2.7 million would impact the effective tax rate.  It is not expected the amount of these 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 $66,000 and $36,000 accrued interest and penalties as of July 25, 2009, and February 7, 2009, respectively.                       |
| ·  | 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.   There are currently no ongoing examinations by state taxing authorities. |

| NOTE 13   - | COMMITMENTS AND CONTINGENCIES |
|----------------------------|-------------------------------|

Legal Proceedings 

| Item 2. |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|---------|--------|---------------------------------------------------------------------------------------------|

|                                         |   | July 25, 2009 |   |   | July 19, 2008 |   |
|----------------------------------------------|--------|---------------|--------|--------|---------------|--------|
| Within Sears stores:                         |   |          |   |   |          |   |
| United States and Puerto Rico                |   |          | 876    |   |          |   | 890 |   |
| Canada                                       |   |          | 110    |   |          |   | 110 |   |
|                                         |   |          |   |   |          |   |   |   |
| Within Walmart stores:                       |   |          |   |   |          |   |   |   |
| United States and Puerto Rico                |   |          | 1,558  |   |          |   | 1,657 |   |
| Canada                                       |   |          | 259    |   |          |   | 254 |   |
| Mexico                                       |   |          | 114    |   |          |   | 117 |   |
|                                         |   |          |   |   |          |   |   |   |
| Locations not within Sears or Walmart stores |   |          | 28     |   |          |   | 33 |   |
|                                         |   |          |   |   |          |   |   |   |
| Total                                        |   |          | 2,945  |   |          |   | 3,061 |   |
|                                         |   |          |   |   |          |   |   |   |

| in thousands, except share and per share data                                                   |   | 12 Weeks Ended |      |   | 24 Weeks Ended |   |
|-------------------------------------------------------------------------------------------------|--------|----------------|-----------|--------|----------------|--------|
|                                                                                            |   | July 25, 2009  |      |   | July 19, 2008  |   |   | July 25, 2009 |   |   | July 19, 2008 |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |
| Net sales                                                                                       |   | $              | 81,377    |   |           | $      | 89,562 |   |   | $ | 174,844 |   |   | $ | 192,930 |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Cost and expenses:                                                                              |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
|      Cost of sales (exclusive of depreciation and amortization shown below) |   |           | 6,682     |   |           |   | 8,863 |   |   |   | 13,641 |   |   |   | 19,627 |   |
|      Selling, general and administrative expenses                           |   |           | 70,358    |   |           |   | 78,118 |   |   |   | 145,512 |   |   |   | 160,706 |   |
|      Depreciation and amortization                                          |   |           | 5,552     |   |           |   | 5,565 |   |   |   | 11,591 |   |   |   | 13,058 |   |
|      Other charges and impairments                                          |   |           | 2,187     |   |           |   | 1,334 |   |   |   | 2,607 |   |   |   | 2,853 |   |
|                                                                                            |   |           | 84,779    |   |           |   | 93,880 |   |   |   | 173,351 |   |   |   | 196,244 |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income from operations                                                                   |   |           | (3,402    | )      |           |   | (4,318 | ) |   |   | 1,493 |   |   |   | (3,314 | ) |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                                                |   |           | 1,928     |   |           |   | 1,366 |   |   |   | 3,418 |   |   |   | 2,887 |   |
| Interest income                                                                                 |   |           | 118       |   |           |   | 118 |   |   |   | 240 |   |   |   | 480 |   |
| Other income (expense), net                                                                     |   |           | 7         |   |           |   | (2 | ) |   |   | 16 |   |   |   | 3 |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Loss before income tax benefit                                                                  |   |           | (5,205    | )      |           |   | (5,568 | ) |   |   | (1,669 | ) |   |   | (5,718 | ) |
| Income tax benefit                                                                              |   |           | (1,776    | )      |           |   | (2,156 | ) |   |   | (570 | ) |   |   | (2,218 | ) |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Net loss from continuing operations                                                             |   |           | (3,429    | )      |           |   | (3,412 | ) |   |   | (1,099 | ) |   |   | (3,500 | ) |
| Net loss from discontinued operations                                                           |   |           | -         |   |           |   | (189 | ) |   |   | - |   |   |   | (357 | ) |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| NET LOSS                                                                                        |   | $              | (3,429    | )      |           | $      | (3,601 | ) |   | $ | (1,099 | ) |   | $ | (3,857 | ) |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| NET LOSS PER COMMON SHARE                                                                       |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Net loss per share from continuing operations - diluted                                         |   | $              | (0.49     | )      |           | $      | (0.53 | ) |   | $ | (0.16 | ) |   | $ | (0.54 | ) |
| Net loss per share from discontinued operations - diluted                                       |   |           | -         |   |           |   | (0.03 | ) |   |   | - |   |   |   | (0.06 | ) |
| Net loss per share - diluted                                                                    |   | $              | (0.49     | )      |           | $      | (0.56 | ) |   | $ | (0.16 | ) |   | $ | (0.60 | ) |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Net loss per share from continuing operations - basic                                           |   | $              | (0.49     | )      |           | $      | (0.53 | ) |   | $ | (0.16 | ) |   | $ | (0.54 | ) |
| Net loss per share from discontinued operations - basic                                         |   |           | -         |   |           |   | (0.03 | ) |   |   | - |   |   |   | (0.06 | ) |
| Net loss per share - basic                                                                      |   | $              | (0.49     | )      |           | $      | (0.56 | ) |   | $ | (0.16 | ) |   | $ | (0.60 | ) |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average number of common and common equivalent                                         |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
|      shares outstanding - diluted                                           |   |           | 7,005,244 |   |           |   | 6,468,062 |   |   |   | 6,977,021 |   |   |   | 6,459,256 |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
| Weighted-average number of common and common equivalent                                         |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |
|      shares outstanding - basic                                             |   |           | 7,005,244 |   |           |   | 6,468,062 |   |   |   | 6,977,021 |   |   |   | 6,459,256 |   |
|                                                                                            |   |           |      |   |           |   |   |   |   |   |   |   |   |   |   |   |

| ·   | Net sales for the fiscal 2009 second quarter decreased $8.2 million, or 9.2%, to $81.4 million from the $89.6 million reported in the second quarter of 2008.  Excluding impacts of net revenue recognition change of $3.0 million, foreign currency translation ($1.8 million), revenue deferral related to positive response to the Company’sloyalty programs ($1.5 million), store closures ($1.7 million) and other net adjustments of $300,000, comparable same-store sales decreased $6.5 million, or 7.5%. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Cost of sales, excluding depreciation and amortization expense, was $6.7 million in the second quarter of 2009, compared with $8.9 million in the second quarter of 2008.   The decrease is principally attributable to lower overall manufacturing production levels, improved product mix, increased manufacturing productivity,the elimination of film and related shipping costs stemming from the PMPS digital conversion, and decreased overhead costs resulting from the integration of the PMPS operations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Selling, general and administrative (“SG&A”) expenses were $70.3 million for the second quarter of 2009, compared with $78.1 million in the second quarter of 2008.  The decrease in SG&A expenses primarily relates to lower studio employment costs of $3.4 million due to scheduling improvements and selected operatinghour reductions; fiscal 2008 nonrecurring costs of $2.0 million associated with the PMPS digital conversion; favorable foreign exchange rate translation of $1.3 million; the elimination of duplicative costs in connection with the PMPS integration of $912,000; and reduced workers’ compensation expense of $758,000 due to improved claims management.  These decreases were offset in part by increases of $2.2 million in higher average hourly studio rates and increased sales incentives in connectionwith new studio and field initiatives. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Depreciation and amortization expense was  $5.6 million in the second quarter of 2009, unchanged from a year ago.  Depreciation expense increased as a result of the digital equipment purchased for the PMPS digital conversion throughout fiscal 2008; however, it was equally offset by a reduction in expense related to thestreamlining of manufacturing facilities and closure of unprofitable studios. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In the second quarter of 2009, the Company recognized $2.2 million in other charges and impairments, compared with $1.3 million recognized in the second quarter of 2008.  The current year charges are primarily associated with therecently completed proxy contest fees of $977,000, certain PMPS integration charges, including severance and lab closure costs, of $604,000, and litigation costs of $536,000.The prior-year charges are primarily associated with litigation costs of $612,000, certain fees incurred in conection with the settlement of the previous Sears license agreement of $472,000, and certain PMPS integration charges, including severance and lab closurecosts, of $114,000. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net sales for the first half of 2009 decreased $18.1 million, or 9.4%, to $174.8 million from the $192.9 million reported in the first half of 2008.  Excluding impacts of foreign currency translation ($4.6 million), revenue deferral related to positive  response to the Company’s loyalty programs ($3.7 million), store closures($3.3 million), net revenue recognition change ($800,000), and other net adjustments ($600,000), comparable same-store sales decreased $5.1 million, or 2.7%. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Cost of sales, excluding depreciation and amortization expense, was $13.6 million in the first half of 2009, compared with $19.6 million in the first half of 2008.   The decrease is principally attributable to lower overall manufacturing production levels, improved product mix, increased manufacturing productivity, the eliminationof film and related shipping costs stemming from the PMPS digital conversion, and decreased overhead costs resulting from the integration of the PMPS operations. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Selling, general and administrative (“SG&A”) expenses were $145.5 million for the first half of 2009, compared with $160.7 million in the first half of 2008.  The decrease in SG&A expenses primarily relates to lower studio employment costs of $8.1 million due to scheduling improvements and selected operating hourreductions; fiscal 2008 nonrecurring costs of $3.6 million associated with the PMPS digital conversion; favorable foreign exchange translation of $3.6 million; the elimination of duplicative costs in connection with the PMPS integration of $2.0 million; reduced workers’ compensation expense of $1.2 million due to improved claims management; and reduced employee insurance costs of $1.0 million related to changes in plan design and lower enrollment.  These decreases were offset in part by increasesof $4.2 million in higher average hourly studio rates and increased sales incentives in connection with new studio and field initiatives and an increase in marketing expense of $2.0 million due to additional promotional programs for the Easter holiday. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Depreciation and amortization decreased to $11.6 million in the first half of 2009 from $13.1 million in the first half of 2008.  The decrease in depreciation and amortization is primarily attributable to certain assets, acquired in connection with the 2007 acquisition of PCA, becoming fully depreciated subsequent to the prior-year first quarterand a reduction in expense related to the streamlining of manufacturing facilities and closure of unprofitable studios.  This decrease is offset in part by an increase in depreciation attributable to the equipment purchased for the PMPS digital conversion throughout fiscal year 2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In the first half of 2009, the Company recognized $2.6 million in other charges and impairments, compared with $2.9 million recognized in the first half of 2008.  The current year charges are primarily associated with certain PMPS integration charges, including severance and lab closure costs of $1.2 million, certain PMPS integrationcharges, including severance and lab closure costs of $1.2 million, proxy contest fees of $977,000, and litigation costs of $398,000.  The prior-year charges are primarily associated with certain fees incurred in connection with the settlement of the previous Sears license agreement of $978,000, litigation fees of $857,000, and certain PMPS integration charges, including severance and lab closure costs of $725,000. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| in thousands                            |   | 24 Weeks Ended |    |
|-----------------------------------------|--------|----------------|---------|
|                                    |   | July 25, 2009  |    |   | July 19, 2008 |   |
| Net cash provided by (used in):         |   |           |    |   |   |   |
| Operating activities                    |   | $              | 2,263   |   |   | $ | (4,950 | ) |
| Financing activities                    |   |           | (10,437 | ) |   |   | (10,312 | ) |
| Investing activities                    |   |           | (832    | ) |   |   | (24,788 | ) |
| Effect of exchange rate changes on cash |   |           | 393     |   |   |   | 150 |   |
| Net decrease in cash                    |   | $              | (8,613  | ) |   | $ | (39,900 | ) |
|                                    |   |           |    |   |   |   |   |   |

| Item 3. |   | Quantitative and Qualitative Disclosures About Market Risk |
|---------|--------|------------------------------------------------------------|

| Notional amount        |   | $                  | 57,500,000 |   |
|------------------------|--------|--------------------|------------|--------|
|                   |   |               |       |   |
| Fixed rate paid        |   |               | 4.97       | %      |
|                   |   |               |       |   |
| Variable rate received |   |               | 0.29       | %      |
|                   |   |               |       |   |
| Effective date         |   | September 17, 2007 |       |
|                   |   |               |       |   |
| Expiration date        |   | September 17, 2010 |       |
|                   |   |               |       |   |

| Item 4. |   | Controls and Procedures |
|---------|--------|-------------------------|

| a)   | Evaluation of Disclosure Controls and Procedures |
|----------------|--------------------------------------------------|

| b)   | Changes in Internal Control Over Financial Reporting |
|----------------|------------------------------------------------------|

PART II

| Item 4. |   | Submission of Matters to a Vote of Security Holders |
|---------|--------|-----------------------------------------------------|

| 1.   | The following individuals were elected to the Company’s Board of Directors (unless otherwise indicated): |
|----------------|----------------------------------------------------------------------------------------------------------------|

|                  |   |       |   |            |
|-----------------------|--------|------------|--------|-----------------|
| Name                  |   | Shares For |   | Shares Withheld |
|                  |   |       |   |            |
| James J. Abel         |   | 6,468,233  |   | 46,588          |
| Paul Finkelstein *    |   | 6,511,963  |   | 2,858           |
| Michael Glazer        |   | 6,511,909  |   | 2,912           |
| Michael Koeneke       |   | 3,921,032  |   | 10,063          |
| David Meyer           |   | 6,510,839  |   | 3,982           |
| Turner White          |   | 3,878,007  |   | 53,088          |
| Peter A. Feld **      |   | 2,582,724  |   | 1,002           |
| Joseph C. Izganics ** |   | 2,582,724  |   | 1,002           |

| *  |   |  Paul Finkelstein was elected to replace Peter A. Feld.                                        |
|----|--------|-----------------------------------------------------------------------------------------------------|
| ** |   |  Peter A. Feld and Joseph C. Izganics were nominees but not elected to the Board of Directors. |

| 2.   | Appointment of KPMG LLP to audit the Company’s financial statements for the fiscal year ending February 6, 2010: |
|----------------|------------------------------------------------------------------------------------------------------------------------|

| For                               |   | Against                                                                 |   | Abstain                                                                 |
|-----------------------------------|--------|-------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|
|                              |   |                                                                    |   |                                                                    |
|     6,510,656 |   |            3,149 |   |            1,017 |

| Item 6. |   | Exhibits |
|---------|--------|----------|

SIGNATURES

EXHIBIT INDEX

| 11.1   |   | Computation of Per Common Share Loss - Diluted - for the 12 and 24 weeks ended July 25, 2009, and July 19, 2008.       |
|--------|--------|------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                   |
| 11.2   |   | Computation of Per Common Share Loss - Basic - for the 12 and 24 weeks ended July 25, 2009, and July 19, 2008.         |
|   |   |                                                                                                                   |
| 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.                                                        |
|   |   |                                                                                                                   |